India is among the most protectionist countries in the world, said the US Secretary of Commerce Wilbur Ross while visiting New Delhi recently. Though not a revelation, his comment must have ruffled the feathers of the mandarins in South Bloc while reaffirming the concerns of many outside India.
Though the bilateral relations between India and America have picked up new momentum under President Trump paving the way for purchase of cutting-edge defence items by India, the state of normal commercial trading between the two countries has deteriorated all on a sudden. The climax came when America withdrew the Generalised System of Preferences (GSP) facilities enjoyed by India for many years. The reason: protectionist policy of India that puts up tariff barrier to the import of a wide range of American goods. Strict regulations over American companies like Walmart and Amazon have not endeared India to the Trump administration that is following a hawkish policy over trade and investment with trading partners.
Wilbur Ross, however, is the first high ranking member of the Trump administration to express displeasure in public over the protectionist measures adopted by India placing American exports at a disadvantage. Speaking on the sidelines of the India Economic Summit in New Delhi he said, "all that we are looking for is to level the playing field." Continuing he said, "America is the least protectionist country among major powers. But India is, if not the most protectionist, certainly one of the most protectionists." He cited lack of reciprocal market access in India for many American goods because of high level of tariff as the reason why American government has removed GSP facilities that allowed duty-free entry of Indian goods for up to $5.6 billion worth of annual exports to America. Expressing regret, he said Indian government far from trying to accommodate American interest has retaliated with higher tariff on 28 US products, including almonds, walnuts and apple. The US Commerce Secretary bluntly said that India was not eligible for GSP considering its economic status but American government was negotiating for a solution that was conducive to free trade.
The same day (October 04, 2019) that the above news appeared in a Bangladesh English daily, a report was published in the same paper that concluded after reviewing the latest situation regarding Bangladesh-India bilateral trade, "exports from Bangladesh to India remain dismal." For the umpteenth time, the testament to this view was given, quoting the huge deficit in the current account of Bangladesh's external trade with India. The most recent figures in this regard are for Bangladesh export of $1.0 billion worth of goods against India's volume of exports to Bangladesh valued at $7.0 billion, leaving a yawning gap of $6.0 billion. A more vivid idea of Bangladesh's share in the overall imports of India is given by the figure of 0.2 per cent or a little above $1.0 billion. This is in spite of duty facilities given to all Bangladesh export items except for 25 alcoholic and beverage items. The apparently liberal duty-free status to Bangladesh goods, however, has not resulted in reducing the chronic deficit in the current account of trade with India in any significant way.
In 2018-2019 fiscal Bangladesh's merchandise shipments to India were $1.24 billion crossing the $1.0 billion benchmark for the first time. The export items that contributed to this apparent breakthrough is garment products for which there is growing demand among Indian middle class. But when cotton yarn and fabrics required for making garment are taking into account it is seen that these being imported from India actually results in a lower earnings on this dominant item, contrary to what the overall figure indicates. Moreover, the nominal export earnings on garment products have to be adjusted by the fact that about 40 Indian companies are operating in Bangladesh and when they `export' there products to India, the earnings hardly accrue to Bangladesh accounts. According to analysts, this is the main reason behind the recent rise in export earnings of Bangladesh from India.
Of course, exports to India are seriously impeded by lack of diversification of goods from Bangladesh that could attract demand from more Indian buyers. But Bangladesh continues to have a limited number of goods for exports as two countries are competitive in the sense that they produce identical goods with more or less same costs and quality. The greatest impediment to increase the volume of exports to India is the absence of trade facilitation at the border of the two countries. About 50 per cent of bilateral trade between Bangladesh and India takes place through land ports. The border points between the two countries are not crossing points - they are control and check points. Goods have to be loaded and unloaded in no-man's land at the border leading to delay and cost escalation, not to speak of damages to goods. In the absence of mutual recognition agreements, goods have to wait for days until inspection results are made available from laboratories in distant testing centres. The cost of transporting goods from Bangladesh to India is prohibitively high because of this cumbersome process. The problem of trade facilitation is an old one, not only in the case of Bangladesh and India but also for many other countries. As an almost universal problem it had the dubious distinction of becoming the few areas over which member countries of World Trade Organisation (WTO) could agree to recommend a unanimous resolution. It is strange that this lingering problem as well as a major irritant in the bilateral trade relation does not get priority attention in negotiations that are made to improve the same from time to time.
In addition to the problems mentioned above that continue to hobble trade between the two countries, export items from Bangladesh face non-tariff barriers to trade (NTBs) from India from time to time. Whenever an export item from Bangladesh becomes competitive and is exported it invariably faces non-tariff barriers or anti-dumping tariff. In the recent past automobile battery exported from Bangladesh suffered from this obstacle, facing anti-dumping charges. More recently, jute goods exported to India faced the same fate. As it is, Bangladesh does not have many goods to export to India as a result of which the trade deficit has remained intractable. If the few items that become eligible for export on competitive ground are not qualified because of non-tariff barriers or anti-dumping charges the prospect for improving the bilateral trade relation will not change for better. The all-important trade issue should figure regularly and prominently in high-level meetings between the two countries.
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