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Transit, TIFA and Bangladesh
Several heated discussions have been revolving around the issues of "Transit" and the TIFA for years. But there was never a concrete outcome. While many are not in favour of "Transit and TIFA”, saying these agreements will go against national interest, some came up with the rationale that these treaties will bring positive outcomes for Bangladesh. I strongly believe it is time for us to take objective and dispassionate decisions based on cost-benefit analysis, backed by hard facts and figures.
We have been discussing transit since 1980. The fear that always prevails is that India will take over Bangladesh.
From that anticipation, previous political governments could not take any decision and we lost the economic benefits of having a "Trans-Asian railways” or "Asian highways". The critical point is that each time we have been holding back these decisions on account of the speculation that our national security will be at stake. Our government failed to come back with a detailed analysis on these concerns and compare them with an objective analysis of the potential economic benefit that we may gain.
We must acknowledge that things have changed in the era of globalisation and things have changed for the better. Now, countries do not fight against each other with guns and ammunition, rather countries outperform each other with economic bargaining power. We have to acknowledge this reality and change our outlook accordingly. We need to come forward and think objectively on how to benefit by leaguing up with others.
Let us look at how we lost out on economic opportunities by not stretching our hands towards friendship. From FY 2003 to 2007, Bangladesh received FDI of $43 million from India, whereas Nepal and Sri Lanka received FDI of $76 million and $358 million respectively. We lag behind out neighbouring countries because of our Indecisiveness and failure to foresee the benefits of an economic tie-up.
Now come the issues of trade deficit. In FY 2008, India exported goods worth $3.4 billion to Bangladesh and imported products worth only $358 million. Informal trade between the two countries is much more.The fear is
that our local industries will suffer if transit or a corridor is allowed. But we need to understand the extent to which we can reduce trade through informal channels? By allowing transit, we may be able to formalise a share of the informal trade.
Talks over transit cover several arenas. Firstly, export by India, Nepal or Bhutan to any third country, using Bangladeshi space and second, transportation of goods from one part of India to another. While the first is an issue of transit, the second is known as a corridor facility. Objections are greater against corridors than transit, as the latter involves other countries as well. But in terms of corridor, we have to realise that there arc small-scale road, rail and water transportation links between various cities of India and Bangladesh. So the corridor facility will only help streamline the network and enable Bangladesh to earn more fees and custom duties.
Bangladesh signed transit treaties with Nepal in 1976 and with Bhutan in 1980. But Bangladesh does not have any treaty with India regarding transit or corridor. Due to a lack of any treaty, trade between the two countries is presently carried out by transhipment or by transport Ing goods from the cargo of one
country to the cargo of another.
Again, goods that come to Bangladesh from Nepal or Bhutan by road have to travel through Indian territories. Exporters from Nepal and Bhutan have to face several challenges in terms of predesignated time for shipment, customs related complications and changing transport at different border areas.
This way, the transportation of goods had become an obstacle for both importers and exporters. As there is no tripartite treaty regarding transit for goods transportation between Bangladesh-India-Bhutan or Bangladcsh-lndia-Nepal, the trade bottleneck never resolved.
Our governments were mostly miser in maximising the benefits of our geographical location. The geographic location of our deep-sea ports may greatly influence trade expansion and Bangladesh has an immense opportunity to become a regional transport hub, not only for Saarc countries, but also for China and other Asian countries in future. A BIDS study shows Bangladesh could have earned $430 million from road, rail, and port services in FY 2006, if we had allowed transit to our neighbours.
Hence, the government should explore regional opportunities further. We should be well pre
pared for multilateral talks and strengthen our bargaining capacity while going for the transit nego-tiation, considering our geopolitical reality, which gives a privilege to Bangladesh. It appears that India will continue to do business with neighbouring countries with or without Bangladesh approving transit for its next-door neighbour.
If we are not pragmatic right now, we will lose out to our other neighbours. Hence, our policymakers must develop a focused and proactive “country-strategy” for our regional neighbours to maximise the economic co-operation and benefits and the transit issue should be resolved from that perspective.
Another hot topic is the anticipated signing of the “trade and Investment Framework Agreement (TIFA)" between Bangladesh and the US. Bangladesh and the US are discussing signing of the UFA agreement for more than seven years now. I he draft agreement changed few times during the last political regime and again by the caretaker government. It gained momentum during the very end of the caretaker government's regime and the draft was finalised. But in order to avoid controversy, the caretaker government refrained from signing the agreement and
left it for the next elected government.
The debate is revolving around TIFA's emphasis on Intellectual Property Rights (IPR) and reduction of non-tariff barriers. But in practice there are little non-tariff barriers to export of Bangladesh goods to the US market. As a least developed country (LDC), Bangladesh is entitled to certain /h benefits from the WTO, which the TIFA has not taken into consideration.
Moreover, the TIFA focused more on extending service related business rather than product trade. Again, it focused on non-tariff barriers rather than tariff barriers, which is not very relevant to our country.
• The main export item for Bangladesh to the US market is the ready-made garments (RMG) and there is no guarantee in the TIFA regarding duty free access of our RMG to the US. On the other hand, the US feels that in the absence of proper implementation of IPR, the US companies are suffering in business.
But as per the WTO. Bangladesh is insulated from the Patent act till 2016 and taking that advantage, the pharmaceutical industries of Bangladesh are manufacturing and exporting medicine in 72 countries around the world. And now if we have to follow the IPR. Bangladesh has to incur huge expenses, as big US companies license most patents. The IT expenditure will also be increased ^ to license software.
In signing theTIFA. Bangladesh should try to incorporate the advantages it is entitled to enjoy, being a LDC in the WTO. If tehTIFA contradicts with WTO, then it will undermine the special benefits that Bangladesh is entitled to.
We have to incorporate the benefits of the TIFA in line with the WTO and attempt to obtain market access in the US, particularly duty free access of RMG to the US. which Bangladesh could not achieve in the WTO. While FIFA is broadly related to US foreign policy objectives and geopolitical goals, Bangladesh should be aware of its bargaining capablli ties and take steps in a coherent manner to reach to a win-win destination.
The writer is a banker and economy analyst Ho can be reached al mamun1960@gmail com.