By N Chandra Mohan
The ruling NDA regime has of late revamped its strategy for free trade agreements largely due to the compulsions of boosting exports as an engine of growth. After not signing any major FTA in the last 10 years, India inked a Comprehensive Economic Partnership Agreement with UAE, besides an economic cooperation and trade agreement with Australia to be followed by a flurry of other deals.
The big question is after the fifth summit of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), how long will it take to flesh out an FTA of this grouping — comprising India, Bangladesh, Myanmar, Thailand, Bhutan, Nepal and Sri Lanka — that is a bridge between South Asia and Southeast Asia?
A BIMSTEC FTA no doubt will undergird economic integration and prosperity of this regional grouping. Interestingly, five of its members are also part of the South Asian Association for Regional Cooperation (Saarc), while Myanmar and Thailand are part of the Association of South East Asian Nations (Asean) and Regional Comprehensive Economic Partnership (RCEP). Saarc is a failed effort at regional integration due to India’s problems with Pakistan. India walked out of RCEP and is reviewing its FTA with Asean largely due to its concerns regarding China dumping its goods through other markets. The BIMSTEC FTA in the making thus will have to be sensitive to India’s concerns, especially on strict rules of origin of goods.
BIMSTEC’s diversity, however, is also a potential advantage as it serves as a bridge to RCEP, should India choose to rejoin later on. If BIMSTEC is to succeed where Saarc failed, India must draw the right lessons as the trade pact is being finalised. Besides India-Pakistan tensions, the process of South Asian integration proved to be difficult because the other member countries felt a resentment towards India’s dominance. Ensuring greater market access through unilateral trade liberalisation would have made a big difference and Saarc members would then have benefited from India’s rise as an economic power. Their resentment has only deepened as every member only registered trade deficits with India year after year. As India is also dominant within BIMSTEC, accounting for the bulk of its combined GDP of $4 trillion and population, an FTA will take off when its members develop a larger stake in India’s robust growth story. To defend its turf in South Asia, India must reduce its trade surplus by allowing BIMSTEC members to export all they can to its domestic market.
A BIMSTEC FTA, however, is an idea whose time has come as all the building blocks are in place. The 21st meeting of the BIMSTEC trade negotiating committee held in Dhaka four years ago made progress in finalising draft texts of trade in goods, agreement on cooperation and mutual assistance in customs matters and agreement on dispute settlement procedures. In January, Bangladesh hosted a working group meeting to flesh out rules of origin of goods. Implementing an FTA at the earliest will realise the full potential of the Bay of Bengal grouping.
(The writer is an economics and business commentator based in New Delhi. His views are personal)
