Time to Negotiate Trade

There is much to be discussed to smoothen trade relations.

With the change of the Indian government the policies of this South Asian nation are likely to change significantly. India and Bangladesh are closed door neighbours sharing more than 4,096 kilometres of land boundary between them, not to mention the historic relationship between the two countries; the changes in policies will therefore be felt soon.
During the tenure of the immediate past Manmohan Singh administration, both countries tried to settle some strategic issues through negotiation, but were not successful in all issues. But the Singh government offered a very good trade opportunity to Bangladesh during his tenure. Singh offered duty free access of all Bangladeshi products except 25 which fell under alcohol and drugs, in November 2011. As a result, a good market has been created for Bangladesh in the Indian market, provided we take advantage of the opportunity.
Currently, the trade balance between the two countries, is heavily tilted towards India which is more than 86 percent, as Bangladesh is a net importer of different basic commodities. According to data from the Indian Embassy in Dhaka, in 2012-13 fiscal year, bilateral trade between the two countries was $5.34 billion, of which Bangladesh exported only $563million to India.
In addition to this, it is believed that India has nearly $4 billion worth of trade with Bangladesh through informal channels every year. On the other hand, Bangladesh has been failing to exploit the potential of the Indian market because of shortage of product diversity and for some non-tariff and para-tariff barriers in trade between the two countries.
Of the major barriers, withdrawal of 12.50 percent counterveiling duty (CVD) on ready-made garments (RMG) for Indian entrepreneurs is a discriminatory measure for Bangladeshi garment exporters to India. India has rationalized the withdrawal of such duty for Indian entrepreneurs saying that it is their internal matter, but at the same time India has given Bangladesh duty-free access for garment products. The level-playing field thus remains absent. So apart from the strategic issues, the Bangladesh government should negotiate with its Indian counterpart in order to resolve some outstanding trade issues for narrowing down the ever-swelling trade gap.
While better trade between India and Bangladesh should be the overall goal, there are specific issues that should be put forward for negotiation with the new Indian government.

Border Trade
Almost all trade between India and Bangladesh take place through bordering areas.
Nearly $10 billion worth of trade (including formal and informal channels) between the two countries take place every year, but the trade facilities in the bordering areas have remained neglected and poor. Improvement of infrastructures in bordering areas is a must. Introducing a banking system and modernization of customs is also urgent. Long queues in the land ports are frequent as the goods-laden trucks cannot be unloaded due to problems on roads and because there isn't enough space in the warehouses or some other trivial reason.
Most of the traded goods between India and Bangladesh are perishable. If such goods cannot be unloaded timely and properly, quality cannot be maintained. As a result, the cost of business increases substantially in the local market. Ultimately, either the businessmen feel discouraged in trade or charge higher for imported goods to cover the losses. The development of infrastructure in the bordering areas is crucial. Modernisation of Benapole Land Port is the main gateway for trade between India and Bangladesh.
Widening the roads and highways linked to Benapole is needed for smooth running of vehicles. Widening the connecting roads to Benapole is also urgent, so that the goods laden vehicles can travel easily all-over the country.
Regarding other land ports, the governments of both countries should take the same decision. Both governments should agree to set up testing labs in the land ports so that the procedures of certifications can be completed as soon as possible.

Basic Commodities
Many people can deny the importance of India in the supply of basic commodities. But the hard reality is that India is a major source for basic commodities to Bangladesh. Take the case of onion, an essential food product for Bangladeshis. Last year, when India stopped supplying onions to Bangladesh, the price of this vegetable went up more than Tk100 per kilogram within two or three days. The commerce ministry in Bangladesh held several meetings with other countries and tried to meet the supply gap through market monitoring.
The results were not good. Bangladesh had to wait until the harvesting of the new crop in India and withdrawal of the decision of India on export of onions to Bangladesh. This may be true for other commodities like foodstuff, cereals and other essential items.
The Bangladesh government should negotiate with the newly appointed Modi government in such a way, that the supply of basic commodities from India is not disrupted.
The Cotton Issue
Bangladesh is a major importer of Indian cotton. Bangladesh imports nearly 35 percent of its total demand from India each year. The annual demand for cotton in Bangladesh hovers around 4 million bales as Bangladesh is the second largest apparel supplier globally after China. But, sometimes, the Indian government imposes a ban on export of this basic item without any reason. As a result, the local spinners fall into trouble and export of garment items suffer.
The main raw material for RMG is cotton. Any disruption in supply of this raw material might be a big threat for the country's highest earning RMG sector.
Both India and Bangladesh have been in  negotiation over the last few years to sign an agreement for guaranteed supply of cotton so that Bangladesh does not suffer from the supply crunch of this item even during any global crisis. The government should continue the negotiation with Modi government for striking the deal.
North East Region (NER) of India and Investment Proposal
The NER comprises of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. The NER is very far away from the rest of India, especially from central India. NER is hence strategically located and can act as India's gateway to South East Asia for Bangladesh. This is an opportunity for Bangladesh to increase trade significantly with the NER region of India.
Currently, Bangladesh has been exporting cement and other construction materials to the NER. Bangladeshi company Pran RFL has been sending a substantial quantity of food items to the NER. Some Bangladeshi companies have been proposing to the government over the last many years to allow investment to the NER as this area is considered as the reservoir of rich natural resources. Bangladesh can therefore, consider the investment proposals as the area has the potential.
Meanwhile, the total investment of India in Bangladesh is more than $2.5 billion by several major Indian companies like Airtel, Tata, Sun Pharma, Asian Paints, Dabur, Marico, Aditya Birla, Godrej and so on. Bangladesh can attract more investment in power and energy sectors from India.

Product Diversification
Bangladesh needs to export diversity products to India. Garment is becoming a major product to the growing Indian middle income consumers. So, the government should negotiate how the garment items could be exported more to India as the products enjoy duty benefit to this market.

Business Visa
Easing business visas to India is a long demand from the Bangladesh side. Multiple business visas might help to increase the bilateral trade between the two countries. India is poised to become the third largest economy in the world. It will mean that Bangladesh can get access to its burgeoning middle class market, estimated between 350-400 million people.
Many studies have indicated that when a major economy coexists side by side with smaller countries, spill over effects of the major economy's growth on the smaller economies is often high. So Bangladesh will be immensely benefited from the Indian new government if trade issues can be negotiated effectively.