Turmoil over transit

Tanim Ahmed*, NewAge, July 24, 2008. Dhaka, Bangladesh

The suspicion with which Indian proposals are viewed in Bangladesh can only be done away with through prudent and generous gestures that would hardly cost an advanced developing country like India but provide much for a least developed country like ours. Transit is, therefore, quite rightly a sensitive issue and Bangladesh should not be asking what it would get in return. It should be the position of Bangladesh that trade and investment regulations in India should first reflect the same, if not better, openness and generosity that Dhaka has already shown

 IT WAS hardly surprising when an Indian High Commission communiqué to the finance ministry, prior to the July 17-18 foreign secretary-level talks between Bangladesh and India, stated that New Delhi would once again ask Dhaka for transit facilities at the talks. India has, on several occasions in the past, pressed Bangladesh for transit facilities. The reason is obvious. It takes more money and time for goods, products and machinery to travel from provinces like West Bengal to the Seven Sisters, seven north-eastern provinces of India, by going around Bangladesh than it would if Indian goods could go through Bangladesh. This time, according to reports, India asked for transit facilities for vehicles and people through Bangladesh into the provinces of Meghalaya, Tripura and Mizoram through three transit points — Tamabil, Bibirbazar and Khagrachari. There were quite naturally other complementary demands that included time periods that Indian vehicles would be permitted to stay within Bangladesh and so forth. New Delhi wanted to have a five-year agreement signed.

The economics behind asking for transit facilities are compelling and would only add to the welfare of people in one of India’s most troubled regions, which is generally perceived as the backwaters of one of the world’s strong economic powerhouses. Besides, transit facilities should exist between the countries of the SAARC region as a norm rather than an exception. The Indian external affairs minister, Pranab Mukherjee, told a SAARC conference in March 2007 in New Delhi, ‘We believe that the entire region stands to benefit if we end all restrictions on overland trade among the nations of the region.’ As he pointed out, quite rightly, the South Asian Association for Regional Cooperation, a regional grouping of Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka, stands to gain substantially from increased economic cooperation.

The Indian state minister for commerce, Jairam Ramesh, when inaugurating a Bangladesh Fair in Agartala in India’s Tripura state in 2007, meanwhile, assured Bangladesh that all non-tariff barriers on India’s imports from Bangladesh would be reduced to correct a huge imbalance in the two-way trade. He said, ‘India is also ready to consider a proposal to remove Bangladesh from the negative list of nations which are barred from investing in the country.’ Ramesh also brought up the transit issue quite forcefully during a visit to Bangladesh about a year ago. At the inauguration of India-Bangladesh Chamber of Commerce and Industry, it was pointed out that the trade gap between these two countries was extremely skewed in favour of India with Bangladeshi exports to its neighbour accounting for just over a tenth of the formal trade volume worth more than $2 billion at that time, as New Age reported on July 23, 2007. Ramesh said, ‘If Bangladesh wants to reduce the trade deficit with India quickly, I would once again request that you consider the long-standing issue of granting transit rights to India…Bangladesh is perfectly entitled to ask – what will we get in return for granting transit.’ Ramesh also suggested that if Bangladesh wanted more trade with India, reduced tariffs and such benefits it would have to be bold enough to say ‘yes’ to transit.

As before, the recent focus on the transit issue elicited sharp reactions from the political parties that indicated that India was trying to secure a concession that the incumbents did not have the mandate to give. While some indicated that our largest neighbour was unduly pressuring a weak government whose influence and acceptance was on the wane, others suggested that the military-controlled interim government was going out of its way to consider this issue more seriously than their predecessors only to appease certain quarters and strengthen its support base. Perhaps, it was meant to be a reply to such strong political reactions when the Indian high commissioner to Bangladesh, Pinak Ranjan Chakravarty, said on July 13, ‘We believe it [transit] is purely an economic issue, not a political issue at all. But here it is made a political issue although I do not see any reason for that.’

The reactions from political quarters regarding transit, as before, quite clearly belied the lack of objectivity with which successive governments of Bangladesh and political establishments have viewed cooperation with India. At the heart of this request from India is quite obviously economic rationale and hence, as the Indian high commissioner said, transit could be termed to be essentially an ‘economic’ issue. But the matter, as any decision relating to the nation state, is very much a political one. It is up to the political vision of the incumbents and how they interpret their responsibility to run the affairs of the state that eventually dictate how to approach this request and what to ask for in return. That there has been lack of objective negotiation or discussion in this regard within the political establishments may hold true; however, it still remains a political decision of the ruling Bangladesh government, just as it would be in India. 

There appears to be a common perception that transit facility to India would only provide benefits for India and not for Bangladesh. There is much to gain strategically as well as economically from giving India such a facility – it is merely a matter of constructive engagement and dynamic negotiations. Moreover, such a facility, as Mukherjee told the SAARC conference, would be beneficial for all the countries in the region. It would increase the scope for interaction between citizens and peoples of the countries and pave the way towards a more vibrant and integrated South Asia that has much potential to become a formidable trading bloc as a unit rather than as individual entities. Incidentally, India is also the only country in the region that has borders with four of the original SAARC members, the other two of the original seven being island nations, while none of the others have borders with each other. Thus, as far as transit goes, trade with third countries could only be facilitated if India is willing to allow transit through it. Be it a formidable trading bloc, be it trade with a third country through transit, the smaller nations like Bangladesh, Nepal or Bhutan have more to gain than does India, which is already considered an emerging economic superpower in the world along with countries like Brazil and China.

Indeed, even at the ongoing mini-ministerial meeting of the World Trade Organisation, which is being attended by 30 odd ministers, there were warnings on the eve of India’s ‘no confidence’ vote in parliament, which the ruling Congress party survived, that there would be no point in concluding a trade deal without Indian endorsement of a final outcome in the WTO where it has become one of the movers and shakers and a significant power broker. Currently, the developing countries are pushing for reduction of farm subsidies in the developed countries and protesting against the developed countries’ bid to secure reciprocal benefits from the large developing countries. The developing countries, including India, have rightly pointed out that reciprocity in this instance, particularly when it is between much stronger developed countries and emerging developing countries, is inherently unfair and undermines development. Unfortunately, however, it is not with the same spirit that India negotiates trade and economic matters with its smaller neighbours. Not only does India refrain from making more generous concessions to its neighbours, it does not even reciprocate the preferences and concessions accorded by its smaller neighbours to it.

In the case of Bangladesh, for instance, there are virtually no bars from Indian investment flowing into almost every sector, even sensitive ones including mineral resources, health services, educational institutions and so forth. There are no bars on Indian publications entering Bangladesh. Indeed, some of the Bengali publications from West Bengal thrive on Bangladeshi subscription and would find it rather difficult to sustain without their Bangladeshi readership. The markets are flush with consumer goods and industrial products manufactured in India. It only points to the fact that there hardly any effective trade barriers –tariff, non-tariff or para-tariff – for Indian products to enter Bangladesh.

However, the same is not true in the case of Bangladeshi products going into India. India’s arbitrary anti-dumping claim at the WTO regarding Rahimafrooz car batteries from Bangladesh comes to mind. Even according to competent Indian authorities in this matter, the case did not merit an anti-dumping claim as Rahimafrooz had at that time secured only a negligible portion of the Indian market. However, like other anti-dumping cases, the product did not quite regain its market once the complaint was withdrawn. Neither has India compensated Bangladesh for accrued losses in any way for that. As for investment, Bangladeshi investment has only recently been allowed by India but only on ‘case by case’ basis, almost the same treatment given to Pakistan. It is plain from the comments of Ramesh at Agartala that even till 2007, Indian regulations prevented flow of Bangladeshi investment, which was hardly the case in Bangladesh. There are myriad different barriers, in the form of permits and licenses and so forth, that effectively bar Bangladeshi products going into India although there are no such regulations in Bangladesh for like products from India. In this regard, Bangladesh, being a least developed country, has, in fact, overdone itself to appease its larger neighbour but received little in return.

Although India should have more than reciprocated Bangladesh’s gestures in trade and investment, those same preferences that Bangladesh rightly deserves are being linked with transit. India has indicated severally that reduction of tariffs could only happen once it is accorded transit facilities. India has obviously learnt well the game of cross-linking when bargaining and negotiating for trade preferences at the highest international levels. However, in this case, India is trying to bargain with preferences that it is in a way obligated to provide; a developing member of the regional association should accord privileges to a least developed member. Now it is transit. But very soon it will be India’s access to the service sector in exchange for tariff reduction and trade preferences. But even beyond that there should be such measures that allow Bangladesh an opportunity of securing comparable revenues from its exports to India.

It is not just an isolated case between Bangladesh and India. The largest country of the South Asian bloc has acrimonious relationships with almost all the smaller countries that it has borders with and the attitude of the Indian establishment has played a major role of creating such a discord out of a potentially friendly and peaceful region. When in 2006, Nepal’s transit facility through India — which is Nepal’s lifeline for international trade — was set to expire, the government of India, instead of automatically renewing it, extended it for three months and sat for bargaining. In the end, it was renewed but only days before those three additional months were about to expire as well and only after Nepal agreed to India’s terms.

The suspicion with which Indian proposals are viewed in Bangladesh can only be done away with through prudent and generous gestures that would hardly cost an advanced developing country like India but provide much for a least developed country like ours. Transit is, therefore, quite rightly a sensitive issue and Bangladesh should not be asking what it would get in return. It should be the position of Bangladesh that trade and investment regulations in India should first reflect the same, if not better, openness and generosity that Dhaka has already shown. Once trade barriers are at a comparable level offering Bangladesh similar opportunities of business in India should Bangladesh consider providing transit. And in case of transit, it must not be linked with those trade preferences, but with transit for Bangladesh through India to third countries like Nepal or Bhutan. The offer for the transit package for Bangladesh should be such that it has the potential of generating similar revenues and opportunities for Bangladesh in India or in third countries that Indian business would secure by means of transit through Bangladesh.

*Contact: tanimahmed@gmail.com


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