Home ›› 02 Aug 2022 ›› Front
The Comprehensive Economic Partnership Agreement (CEPA) will increase the Bangladesh-India bilateral goods trade by $7-15 billion in the next seven to 10 years, estimates the feasibility study report jointly produced by Dhaka and New Delhi.
The report said Bangladesh’s export potential from CEPA ranges between $3 billion and $5 billion and this potential, in addition to the existing exports, could be achieved in seven to 10 years.
It also said India’s export potential from the proposed agreement ranges between $4 billion and $10 billion and this potential, in addition to the existing exports, could be achieved in seven to 10 years.
Bangladesh in FY22 imported goods worth around $9 billion from India while its exports to the country amounted to only $1.99 billion.
The feasibility study report was prepared based on the FY19 figures when Bangladesh’s exports to India were $1.24 billion and imports were $7.65 billion.
Investment and services will increase if the two countries sign the trade agreement, the report said.
At an inter-ministerial meeting past week, senior officials of different ministries agreed to start negotiations to ink the much-expected deal, saying signing it could be a win-win situation for both countries.
Officials of several important ministries, such as foreign, labour, commerce, and home affairs, as well as departments, agencies, and trade bodies attended the meeting at the commerce ministry. Tapan Kanti Ghosh, senior secretary to the ministry, chaired the meeting.
Commerce ministry Additional Secretary (FTA) Noor Md Mahbubul Haq told The Business Post the meeting had agreed to start negotiations to sign the agreement after reviewing the feasibility study report.
“However, there were reservations about some matters. Now feedback will be taken from various stakeholders. We will make the final decision after that,” he said.
He also said no South Asian Free Trade Area (SAFTA) meeting had been held after 2015, adding the SAFTA documents would serve as the baseline for goods trade under the CEPA.
“SAFTA is still at the negotiation stage when it comes to trade in services. In this situation, a bilateral agreement can now be signed to enjoy the benefits after the least developed country (LDC) graduation in 2026.
“Under the proposed agreement, benefits can be obtained in all fields, including trade, investment, and services. Bangladesh’s exports and investments also may grow under the initiative,” Mahbubul explained.
He added, “Indian companies are stronger than those in Bangladesh in some areas of services. In this case, protecting domestic companies will be considered as a priority.”
Trade agreements are crucial considering the LDC graduation of Bangladesh and CEPA can be signed for that, said Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue.
“We have to keep in mind that India is now unilaterally giving us zero-tariff facilities for Bangladeshi products in its market. But once we sign CEPA with a strong country like India, we should be careful. We will have to shift to reciprocity from the current non-reciprocity.
“In that case, if there is a two-track policy for Bangladesh as a relatively weaker economy with regard to trade and tariff liberalisation as well as compliance assurance under CEPA, it will be better for us,” he explained.
The economist added, “Not only tariff adjustment or reduction through CEPA, but we also need to focus on how to boost our investment in India’s north-eastern region. Moreover, we have to focus on attracting Indian investors to our economic zones.”
Dr Selim Raihan, executive director of South Asian Network on Economic Modeling, told The Business Post the feasibility study report has recommended Bangladesh start the negotiations.
He said CEPA would create opportunities for Bangladesh but there are some challenges as well. “If we sign the agreement, it will create opportunities for us to gain.”
The economist said non-tariff barriers should be emphasised more while signing CEPA and the agreement’s target would not be achieved without large-scale investments.
“If foreign investors invest in Bangladesh, they get opportunities to export to India. We need to consider this while signing the agreement.
“India is developed in the services sector, and that is why more studies are needed in that area. A sectoral negotiation team is required to review the agreement before signing it,” he added.
The feasibility study report said all bilateral tariff rates would become zero if CEPA is signed while bilateral trade costs will decline by 15 per cent for both goods and services trade. Also, India’s foreign direct investment in Bangladesh will increase the latter’s capital stock by 1 per cent.
The report said Bangladesh and India could explore new regional value chains or strengthen the existing ones in various sectors, such as agro-processing, chemicals, pharmaceuticals, readymade garments, textiles, leather, electric machinery, gems, and jewellery.
In addition, both countries may support each other in establishing design and fashion centres to produce high-value products in different sectors.
The study recommended CEPA negotiations be launched after receiving mandates from both governments. It said both governments can determine the time frame for CEPA negotiations at their convenience.
Moreover, the report said a formal institutional mechanism must be established and a joint committee set up for the negotiations.
Thematic working groups for different tracks of cooperation, including goods and services trade, customs cooperation, rules of origin, sanitary and phytosanitary measures, technical barriers to trade and investment, trade remedies and dispute settlement, and institutional provisions, have to be set up as well.
The report was jointly produced by Bangladesh Foreign Trade Institute and India’s Centre for Regional Trade.
CEPA negotiations with India are part of the government’s massive initiatives to sign trade deals with major trading partners to retain duty benefits after the LDC graduation.
CEPA is not a free trade agreement (FTA) or preferential trade agreement. It is a broader kind of trade deal which includes investment and employment.
Both Bangladesh and India agreed to sign CEPA in 2018.
The study report said if CEPA is signed, the potential export products from Bangladesh to India are marine product, textile and wearing apparel, pharmaceuticals, animals or vegetable fats or waxes, inorganic chemicals, flour or milk-based products etc.
Under the trade pact, potential exporting products from India to Bangladesh are food and food items, earth materials, mineral fuels, chemicals, plastic and plastic goods, wood products, cotton, woven fabrics, iron and steel, railway tram and locomotive and other vehicles.
Currently Bangladesh’s imports from India include cotton, machinery, mineral fuels & oils, electrical machinery & electronics, iron & steel, plastics, vehicles, man-made staple fibres, animal or vegetable fats & oils and cereals.
