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The government withdrew restrictions on yarn imports from India through the land ports around two decades ago. Earlier, the restriction had been imposed on the pretext of infrastructure weakness, smuggling, and tax evasion at the land ports. The ban, effected on March 9, 2002, sparked a bitter rivalry between export-oriented clothing manufacturers and domestic yarn producers. Three years later, the government re-opened the land ports, allowing yarn imports from India.
Almost two decades later, the country is witnessing a similar situation as the government banned yarn imports through the Benapole, Bhomra, Banglabandha, Burimari, and Sonamasjid land ports on April 13 this year. The restrictive move came after India on April 8 cancelled the transhipment facility for Bangladeshi exports to third countries through India's land customs stations to ports and airports in containers or closed-body trucks. Indian authorities at that time mentioned that the transhipment facility had been withdrawn due to cargo congestion at Indian airports, which was affecting Indian exporters.
Actually, the Indian move is a calculated step to pressure the Yunus-led interim government, which is currently in a delicate position due to the ongoing political transition in Bangladesh. As New Delhi has yet to accept the reality of post-Hasina Bangladesh, it has been putting various pressures on the interim government. Indian media categorically linked the cancellation of the transhipment facility with the chief adviser Muhammad Yunus's comments on the north-eastern region of India. During his visit to China last month, Yunus said that seven sisters, the seven north-east states of India, are landlocked, and that the only access to the ocean is through Bangladesh. He also asked China to invest more in Bangladesh. Indian politicians, experts and the media labelled it as provocative remarks and blamed Yunus for inviting Chinese influence in a region that India considers vital to its security and territorial integrity.
After his visit to China, Yunus joined the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) summit in Bangkok, where he met with Indian prime minister Narendra Modi. The long-awaited bilateral meeting was a critical move to ease the strained relations between the two neighbouring countries. Since the fall of Sheikh Hasina's government on August 5, when she resigned as the country's prime minister and fled to New Delhi, relations between the two countries continued to deteriorate.
Yunus-Modi meeting actually took place amidst a concealed anxiety and discomfort, which was reflected in the varied official versions coming out from the two countries after the meeting. India's decision to cancel the transhipment facility for Bangladesh heightens the uneasiness further. Finally, on Thursday, the Indian external affairs ministry's spokesman mentioned that the cancellation of the transhipment was due to 'some of the developments' that took place earlier. He said, "I would urge you to look at some of the developments that preceded it so that you can get a full perspective on the issue." Though he did not elaborate or explain the developments, it is not difficult to understand what he meant.
Since the fall of the Hasina regime in the face of a student-led mass uprising, New Delhi has been expressing its disappointment and anger through a series of statements and steps, making it further clear that it has no respect for the choices and wishes of Bangladeshi people. The Indian government has allowed thousands of Hasina loyalists and leaders of the Bangladesh Awami League to stay in India, especially in the West Bengal. Most fled secretly crossing the borders on and after August 5, without any valid travel documents. The lack of documents does not bar them from staying safely in India, thanks to the BJP-led Indian government's generosity towards Hasina and her loyalists. New Delhi has also persistently raised the so-called 'minority issue' in Bangladesh to pressure the interim government. At the same time, a section of Indian media continues to spread hatred and disinformation in this regard. For the last couple of months Indian government has also started to harp on the string of 'inclusive and participatory elections' in Bangladesh.
So, the bilateral trade-related restrictions need to be viewed in the above-mentioned context. Equipped with a number of tools in hand to make the international trade of Bangladesh costlier, New Delhi is better positioned to exert pressure on the Yunus-led government further. So, it is not unlikely that Bangladesh will face more trade restrictions from India in the coming days. As the bilateral trade balance is heavily tilted towards India, it will be more challenging for Bangladesh to address such actions like the cancellation of the transhipment facility.
Motivated restrictive trade measures with its potential for sparking retaliatory action are a risky game that can exacerbate the situation. The recent ban on yarn imports from India through land ports is viewed as a retaliatory move for India's cancellation of the transhipment facility. This non-tariff barrier (NTB) is in place while imports through sea ports remain open. India has been a major supplier meeting 80 to 90 per cent of Bangladesh's annual demand for yarn for the export-oriented garment industries, particularly knit garments. The country imported yarn worth $3.22 billion in the last fiscal year, a 15 per cent increase from the previous year, indicating that local yarn manufacturers are unable to meet the entire demand. The geographic proximity has also been a key factor in the significant yarn imports from India over the years.
There is an allegation since long that India has been dumping low-quality yarn in Bangladesh. Bangladesh Textiles Mills Association (BTMA) recently demanded the imposition of anti-dumping duty on Indian yarn. The organisation made a similar demand before the ban on the import of Indian yarn in 2002. Nevertheless, the imposition of anti-dumping duty requires rigorous investigation to prove the dumping and proper compliance with the rules of the World Trade Organization (WTO). Once imposed, the affected party can challenge the duty through the respective government and drag the duty-imposing country into the dispute settlement platform of the WTO. To keep the duty, the imposing country has to prove that there is no violation of WTO rules, whereas the affected country needs to show that the imposition of anti-dumping duty breaches WTO rules. It, however, takes a long process.
The recent imposition of a non-tariff barrier (NTB) on yarn imports from India is expected to exert significant pressure on Bangladesh's export-oriented RMG industry. This comes at a time when exports to the United States, the leading market, are already facing a new challenge due to Donald Trump's tariff escalation. Although Trump has suspended the so-called reciprocal tariff on Bangladesh for three months, the future remains uncertain. India's cancellation of the transhipment facility has further compounded the pressure on RMG exports from Bangladesh.
However, the use of trade restrictive measures by two neighbouring countries to exert pressure on each other is not a win-win situation. If negotiations are not conducted in a balanced manner, the situation could worsen further in the coming days.