Formal talks kick off this week for Cepa with India
Formal negotiations for signing a comprehensive economic partnership agreement (Cepa) with India are expected to begin this week during a visit of Tipu Munshi, the commerce minister of Bangladesh, to the neighbouring country.
Munshi is scheduled to leave today or tomorrow as prime ministers of both countries have agreed on signing this trade deal which not only includes matters pertaining to tariff but also bilateral investment and services.
"This is the beginning of the negotiations," Senior Commerce Secretary Tapan Kanti Ghosh told The Daily Star over the phone.
The initiative for negotiations has been taken in the interest of both countries, he said.
During the visit, Munshi is scheduled to discuss two more important issues.
One is the withdrawal of an anti-dumping duty on import of Bangladeshi jute and jute goods as India is a major export destination, Ghosh said.
The other is the import of seven to eight essential commodities like rice, lentil, wheat and sugar from this alternative source in times of crisis, he said.
The minister will also discuss issues related to non-tariff barriers, Ghosh said.
Leading a Bangladeshi delegation comprising some senior government officials, Munshi is scheduled to hold meetings with the Indian commerce and finance ministers to launch the Cepa negotiations.
During an earlier visit of Prime Minister Sheikh Hasina to India in September, she and Prime Minister Narendra Modi announced in a joint statement that the Cepa negotiations would start from December this year.
The Cepa is a detailed form of a free trade agreement (FTA) and India is a major source for imports.
For this, experts suggest maintaining a list of "sensitive" commodities so that the government can also generate a significant amount of revenue from import duties.
Last fiscal year, Bangladesh imported goods worth $16.19 billion from India, the second biggest source of imports after China.
Bangladesh also generated over Tk 15,000 crore from the import duty.
In August this year, a joint study said Bangladesh might not make a large gain from a Cepa.
This was due to the fact that Bangladesh would lose duty-free market access provided for it being a least developed country (LDC).
Comparatively, India will make a larger gain from the trade deal primarily through the removal of high tariff rates it currently faces in Bangladesh, said the study.
Bangladesh Foreign Trade Institute (BFTI) and the Centre for Regional Trade (CRT) of India jointly conducted the study last week based on trade data between 2015 and 2020.
If signed, the Cepa will be the first kind of an FTA as Bangladesh has till date signed only a preferential trade agreement with Bhutan in December 2020.
The Cepa is part of Bangladesh's preparations for retaining duty benefits once it makes the United Nations status graduation from an LDC to a developing nation in 2026.
Moreover, Bangladesh has the potential to benefit from the trade of services in tourism, transport and educational cooperation and also creation of jobs locally from Indian investment.
However, Bangladesh should slowly liberalise or maintain a list of sensitive products which is widely practised in signing such deals worldwide, said experts.
The trade relationship with India is dominated by imports, said the study.
If goods and services through informal channels are considered, imports from India will increase substantially. India is an important travel, education and health tourism destination for Bangladesh, it said.
Bangladesh is one of the most protected economies in the world with the nominal protection rate being as high as 27 per cent.
If Bangladesh signs an FTA with India leaving the current high tariff rates unchanged, trade diversion effects will be substantial, experts said earlier.
The proposed deal, which calls for a withdrawal of duties, is expected to boost Bangladesh's exports by 190.15 per cent and more if transaction costs are also reduced through improved connectivity, according to the study.
India's exports to Bangladesh are expected to increase by 188 per cent. The Cepa will increase Bangladesh's GDP by 1.72 per cent and India's by 0.03 per cent, the study found.
Currently, India is Bangladesh's second biggest trading partner after China.
In fiscal 2021-22, Bangladesh's exports to India hit $2 billion for the first time, while imports through the official channel stood at about $10 billion.
However, if imports through unofficial channels is factored in, the figure would stand at about $14 billion.
On average, imports from India are subjected to tariffs of about 20 per cent, fetching the state coffer about $2 billion.
It has been estimated that an FTA or agreements like the Cepa with India alone could result in trade diversion worth $700 million.
The signing of a Cepa was first announced in September 2018 by the then commerce ministers Tofail Ahmed and Suresh Prabhu of Bangladesh and India respectively at a dinner at a hotel in Dhaka.
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