Beware of bilateral bullies

Tanim Ahmed*, NewAge, January 29, 2009

The interest of India and the United States to launch trade talks with Bangladesh provides the government with an opportunity to expand its export market. It would depend on how well the government negotiates and increased openness could only help the government strengthen its arguments. 

IN THE span of one week both the Indian and American ambassadors to Bangladesh indicated their respective governments’ interest to launch talks for trade and investment. These issues with both the countries have been pending for quite some time. Although early in the government’s tenure these issues were only bound to have surfaced at some point and probably sooner, rather than later, so that there would be a possibility of concluding the deals during the tenure of the current government. However, it does make things a little critical since indication of intent comes from the two of the most influential countries, as far as Bangladeshi politics is concerned.

Given the virtual stalemate at the global trade talks in the ongoing Doha Round under the World Trade Organisation, bilateral and regional trade pacts have become the new tools to further international trade and commerce. The situation has remained virtually unchanged since 2001 when the new trade round was launched in the Qatari capital. Of course, the new US administration, under Barack Obama, might give a new impetus, if their negotiating position is slightly more accommodative and sensitive; however, it is unlikely to happen in the near future. In the meantime, however, bilateral and regional treaties appear to have consolidated their position as the main tools for furthering trade and commerce and securing prosperity and opulence for the global north.

This deviation from the multilateral process and emergence of the bilateral and regional treaties came about once it was obvious that the developed countries would have a harder time opening up the markets of the developing world than they had previously thought. Instead, it is the bilateral treaties that have proved to be most effective in securing their desired concessions and preferences in the developing world. It is often the case that the more powerful and larger economies emerge as the outright winners in bilateral treaties. This inherent advantage is not only because a poor country, for instance Bangladesh, would not be able to summon enough courage to stand up to the more powerful country, for instance India or the United States, and argue its position from the other side of the table. But it is also because the Bangladesh lacks the resources, information, skills and human resources.

Consequently, it is the through such bilateral treaties and powerful countries are able to secure concessions furthering their commercial interests and forcing those countries to liberalise their markets thereby getting the field ready for corporations to enter into the fray. Bilateral treaties often contain far stronger provisions to open up markets in the developing countries than the multilateral agreements under the World Trade Organisation. As a result, they erode the preferences that Bangladesh is entitled to as a least developed country under the global trade forum.

Bilateral treaties, on which both India and the United States are interested to launch talks, treat both parties as ‘equals’ and stipulate full reciprocity, which is inherently unjust to the smaller and weaker economy because they presume a same level of efficiency and maturity of both economies and have little space for the recognition of special treatment of commodities and investment of the poorer countries. It is from this perspective that the government should be cautious and tactful when entering trade talks with either country, especially given their attitude towards Bangladesh.

There has already been a token, and predictable, protest from the main opposition in parliament, the Bangladesh Nationalist Party, cautioning the government about providing transit facilities to India, which has come to be an essential point of the Indian agenda as regards trade talks with Bangladesh. Presumably, there would be more from other political parties as well.

Almost any kind of bilateral discussions or negotiations with India invariably gives rise to scepticism and caution, and for good reason. It hardly plays with due responsibility the role of a ‘big brother’ that it has come to be, and surely intends to remain, in the subcontinent. Its hopes to become a regional superpower riding on its economic supremacy are not altogether far-fetched. But this advanced developing country has hardly shown a good gesture towards Bangladesh and this goes back several decades.

There was the case of exchanging enclaves in each other’s territories soon after Bangladesh’s war of independence. Although Bangladesh did its share the matter remains pending since 1974 as India pulled out, virtually at the last moment, claiming that it wanted to see changes in the agreement for redrawing maps. Then there was the Farakka Barrage a few years later, which India claimed was a small experiment and would not be a permanent feature. It remains. India has proceeded to build other dams on rivers that flow through Bangladesh for similar purposes and its river-linking project is still very much on. There was also the case of India’s unwarranted and illegal—according to the assessment of designated Indian authorities—imposition of anti-dumping duties on automobile batteries from Bangladesh.

Although at global negotiations India rightly points out to the developed industrialised countries that reciprocity, particularly when it is between much stronger developed countries and emerging developing countries, is unfair and undermines development, it does not approach trade negotiations with its smaller neighbours in the same spirit. It is not just that India fails to make generous concessions to its neighbours but it also fails to even reciprocate the preferences and concessions accorded to it.

In Bangladesh there are virtually no bars on Indian investment flowing into almost every sector, even sensitive ones including mineral resources, health services, educational institutions and so forth. Indeed, some of the Bengali publications from West Bengal thrive on Bangladeshi subscription and would perhaps fail to remain viable without their Bangladeshi readership. The local market is flooded with consumer goods and industrial products manufactured in India. It only points to the fact that there are hardly any trade barriers—tariff, non-tariff or para-tariff—for Indian products. However, the same is not true in the case of Bangladeshi products going into India.

Bangladeshi investment has only recently been allowed by India but only on ‘case by case’ basis, almost the same treatment given to Pakistan. There are numerous barriers—permits and licenses and so forth—that effectively bar Bangladeshi products going into India. Perhaps, in its bid to appease the larger neighbour, despite being a least developed country, Bangladesh appears to have overdone itself and received little in return.

India has indicated on several occasions that tariff reduction, and presumably improved market access, could only happen once it is accorded transit facilities. Such cross-linking of sectors and issues is a common ploy at the global level where India has become one of the key players and obviously learnt well from. Given its previous stance, India would try to bargain with preferences that it is in a way obligated to provide. As an advanced developing country, and member of the regional association, India should accord privileges to a least developed member. Right now transit is essential and will be pegged against tariff reduction and trade preferences. But if the pattern holds, then very soon, and once transit has been secured, it will be access to Bangladesh’s service sector in exchange for those same concessions pegged against transit.

However, India has only recently warmed to Bangladesh’s bid for improved market to the US market at the global trade forum, although it is accused of playing a villainous role at the last WTO summit instigating Pakistan and Sri Lanka to speak against Bangladesh receiving duty- and quota-free market access to developed countries. The United States in this regard has been staunchly opposed. Due to strong lobbying and internal pressure, the United States has repeatedly opposed a multilateral deal providing Bangladesh with a fully preferential market access. The United States Trade Representative’s office, which conducts negotiations for the United States, have time and again opposed Bangladesh’s bids to secure better market access which it deserves as a least developed country. The US has also objected to Bangladesh’s bid to increase and formalise temporary migration of low-skilled labour, which is one of the main sources of foreign exchange for Bangladesh.

In this regard the United States has not yet given indications that it would implement the concessions that least developed countries were given at the Hong Kong summit of the WTO, which guaranteed tariff-free market access of all goods originating from least developed countries without any quotas to all the developed countries. There is little likelihood that the American position would change as soon as they begin negotiating a bilateral deal. If anything, their position will be even more opposed to the kind of market access that might benefit Bangladesh and even if such access required reciprocity, meaning that American exporters get similar opportunities for business in Bangladesh. There would be added pressure on implementation of intellectual property rights and strong pressure for ‘full reciprocity’ insisting on reciprocal treatment, which would be very unjust.

A bilateral agreement with either of the countries makes sense only if the benefits arising out of it are clearly and surely more than those arising from the multilateral agreement. There must be clear and guaranteed potential for Bangladesh’s commerce and trade to expand. Otherwise, it becomes a mere political exercise and entry into such deals would only serve the government’s claim ‘success’ of having struck trade agreement with key countries and gather whatever political mileage that is on offer.

While there are high expectations from the fresh faces of the cabinet, there are also significant sections waiting to pounce upon the cabinet at its slightest sign of failure. That both the crucial ministries of commerce and foreign affairs are headed by comparatively inexperienced ministers does not help allay apprehensions either. Both Pranab Mukherjee and Kamal Nath would prove far more than Dipu Moni or Faruk Khan could handle on their own. It should give the government all the more reason to encourage pubic discussions and debates at the parliament. Whether successful at the negotiations or not, the government could at least use this opportunity to prove its transparency to the people.

*Tanim Ahmed works for NewAge, a leading national daily newspaper in Dhaka, Bangladesh. Contact:


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