India-Bangla Trade Set For CEPA Boost

Context:

Following a meeting with the visiting Prime Minister of Bangladesh, Prime Minister Narendra Modi said India and Bangladesh will soon commence negotiations on a Bilateral Comprehensive Economic Partnership Agreement (CEPA).

Relevance

GS Paper 2: India and its neighborhood- relations.

Dimensions of the Article:

1. About India’s CEPA agreements
2. Existing frameworks
3. Bangladesh-India Bilateral Relationship

About India’s CEPA agreements

• India has signed CEPAs with South Korea and Japan and the one with UAE  is expected to increase bilateral trade in goods to USD 100 billion within five years of the signed agreement and increase trade in services to USD 15 billion, leading to wider social and economic opportunities in both nations.
• CEPAs are a kind of free trade pacts but these agreements or cooperation agreements are more comprehensive than Free Trade Agreements.
• CEPA usually covers negotiation on the trade in services and investment, and other areas of economic partnership.
  • It may even consider negotiation on areas such as trade facilitation and customs cooperation, competition, and Intellectual Property Rights.
  • It also looks into the regulatory aspect of trade and encompasses an agreement covering the regulatory issues.

CEPA objectives

• The CEPA is likely to focus on trade in goods, services, and investment, with a key objective being the reduction of the trade gap between the two countries.
• As Bangladesh prepares to graduate into a developing nation by 2026 — after which it may no longer qualify for trade benefits that it currently enjoys as a least-developed country — it is keen to clinch the CEPA in a year.

Existing frameworks

• During the visit of Prime Minister Modi to Bangladesh in June 2015, the bilateral trade agreement between the two countries was renewed for a period of five years with a provision for auto renewal.
• Under the provisions of the South Asian Free Trade Area (SAFTA), Bangladesh extends preferential tariffs to Indian exports of products outside the ‘sensitive list’ of 993 items. In 2011, India announced duty-free, quota-free access to Bangladesh for all tariff lines except tobacco and alcohol.
• An Agreement on Promotion and Protection of Investments has been in force since 2011. Joint Interpretative Notes to the agreement were signed during the visit of the Indian Finance Minister to Bangladesh in October 2017.
• To facilitate trade and transit through inland waterways, a Protocol on Inland Waterways Trade and Transit (PIWTT) has been in place since 1972.
  • The PIWTT too was renewed for a period of five years with a provision for auto renewal during Modi’s visit to Bangladesh in 2015.
  • The protocol allows the movement of goods by barges/ vessels on eight routes between points in India and Bangladesh, as well as between points in India through Bangladesh.
• Direct sea movement of containerized/ bulk/ dry cargo began after the signing of a Memorandum of Understanding (MoU) on Coastal Shipping in June 2015. This has reduced the shipping time between India and Bangladesh from 30-40 days to 7-10 days, and has the potential to emerge as an economical mode of transportation for business communities on both sides.
• MoUs were signed in 2015 on the use of the Chittagong and Mongla Ports for Movement of Goods to and from India.
• The MoU on Border Haats on the India-Bangladesh border was renewed in April 2017 during the visit of Prime Minister Hasina to India.
  • Currently, four Border Haats — two each in Meghalaya (Kalaichar and Balat) and Tripura (Srinagar and Kamalasagar) — are functional.
  • Work on setting up two more haats on the Tripura-Bangladesh border and four on the Meghalaya-Bangladesh border is under way.
  • The two sides have also decided to identify locations for another six Border Haats.

Bangladesh-India Bilateral Relationship

• The India-Bangladesh relationship is founded on two pillars of Indian diplomacy:
  • the Neighbourhood First Policy
  • the Act East Policy.
• The spirit of friendship, understanding, and mutual respect that arose during Bangladesh’s liberation continues to pervade various aspects of this relationship.

Trade

• Bangladesh is India’s largest South Asian trade partner, and India is Bangladesh’s second largest trade partner.
• Bilateral trade between India and Bangladesh has steadily increased over the last decade, reaching $10.17 billion in fiscal year 2020-21.
• During this time period, Bangladesh exported $1.28 billion to India and imported $8.6 billion from India.
• Ready-made garments account for the majority of Bangladesh’s exports to India.
• In 2011, India offered duty-free and quota-free entry to Bangladeshi goods under the South Asian Free Trade Agreement (SAFTA).
• However, once Bangladesh is no longer classified as a Least Developed Country (LDC), it will no longer be eligible for this benefit. Bangladesh has been approved by the UN to graduate from LDC status by 2026.
• As a result, India and Bangladesh are thinking about signing a Comprehensive Economic Partnership Agreement (CEPA).

Connectivity

• The India-Bangladesh Friendship Bridge 1 (also known as the Feni Bridge) has been built, connecting Tripura to Bangladesh’s Chittagong port.
• In July 2019, a ship carrying cargo from Bhutan to Bangladesh was flagged off from Assam. It sailed along the Brahmaputra River and the Indo-Bangladesh Protocol Route.
• This was the first time an Indian waterway was used as a cargo transit channel between two countries.
• The Bangladesh-Bhutan-India-Nepal (BBIN) Motor Vehicles Agreement (MVA) was signed in June 2015 to improve sub-regional connectivity.
• In March 2022, India, Bangladesh, and Nepal signed an enabling Memorandum of Understanding for BBIN implementation

Cooperation in Energy

• The two sides’ energy cooperation has also been very positive.
• Tripura, an Indian state, has supplied a total of 160 MW of power to Bangladesh, in addition to the 500 MW received from West Bengal since 2013.
• In September 2018, the Indian Prime Minister and his Bangladeshi counterpart used video conferencing to jointly inaugurate the construction of a friendship pipeline project.
• The 130-kilometer India-Bangladesh Friendship Pipeline Project will connect Siliguri in West Bengal, India, and Parbatipur in Bangladesh’s Dinajpur district.

Indian Aid During the COVID-19 Pandemic

• India gave Bangladesh 100,000 hydroxychloroquine anti-malarial tablets and 50,000 surgical gloves. It also gave Bangladesh 30,000 COVID-19 test kits.
• India provided assistance to neighbouring countries, including Bangladesh, through the SAARC framework. It trained member countries’ medical staffs and was instrumental in establishing the SAARC COVID-19 emergency fund.
• As part of the Vaccine Maitri initiative, India provided 2 million doses of Made-in-India Covid-19 vaccines to Bangladesh in January 2021.
• Ahead of her four-day visit, Bangladesh Prime Minister Sheikh Hasina urged India to be more generous in sharing river waters.