NEW DELHI: As the seven member states of the Bay of Bengal Initiative for Multi-Sectoral Technical & Economic Cooperation (BIMSTEC) ready for the fifth summit in Sri Lanka in August, the major takeaway of a free trade area (FTA) appears elusive. Discussions over the last 15 years have got nowhere, and under the present Indian government, there is an aversion for FTAs that are seen as exacerbating the trade deficit and diminishing local industry.
As an Indian diplomat told StratNews Global: “We have the same misgivings about the BIMSTEC FTA that we had about RCEP, that China will use this route to enter Indian markets. China has a liberal trade regime with all BIMSTEC members.”
According to Rajiv Bhatia, former ambassador to Myanmar: “What has been missing from recent deliberations is a reference to the lack of progress on the trade and economic dossier”. He said that a January 2018 study by FICCI had suggested that BIMSTEC urgently needed a comprehensive FTA to be a real game changer. “Ideally it should cover trade in goods, services and investment, promote regulatory harmonization, adopt policies that develop regional value chains and eliminate non-tariff barriers. Also lacking was an effort to enthuse and engage the vibrant business communities of these seven countries, and expand their dialogue, interactions and transactions. On this score, BIMSTEC remains a work in progress,” he said.
Expectations that an agreement on Trade in Goods would be inked by 2019 did not materialise. “Apparently the delay is due to lack of consensus on tariff reduction schedule and with respect to rules of origin, and the local value addition to the rules of origin,” said Dr Priyadarshi Dash of the Delhi-based think tank RIS. Nevertheless, External Affairs Minister S. Jaishankar underscored India’s support saying “India remains committed to further building the momentum of regional cooperation under the BIMSTEC framework and make the organisation stronger, vibrant, more effective and result-oriented. I am confident that BIMSTEC would scale new heights in the times to come with our collective efforts and spirit of cooperation.”
Other issues on the summit agenda would include taking forward the BIMSTEC Grid Interconnection, and signing of the BIMSTEC Convention on Mutual Legal Assistance in Criminal Matters. The Master Plan for Transport Connectivity has been finalised and is ready for adoption at the summit. Negotiations are still being held on the Coastal Shipping Agreement and Motor Vehicles Agreement that would put in place the legal framework for smooth connectivity in the region. The former would facilitate smaller ships to ply within 20 nautical miles of the coastline and allow easier access to the ports of member countries, instead of resorting to the deep sea shipping process which entails longer routes.
“The Motor Vehicles Agreement is more or less finalised, but each country has its own transport laws, so each country is trying to sort out the issues and come up with a common legal framework. Once that is finalised, along with the Master Plan on Transport Connectivity, would make road transportation clearer; and that would be one of the biggest achievements of BIMSTEC,” says Dash.
BIMSTEC countries are also working on a 3,000-km long power grid from Myanmar-Thailand to India. The bloc had signed an MoU for setting up a regional power grid in 2018. Similarly, Bangladesh is in talks with Nepal and Bhutan for trilateral power trade. The leaders’ summit is likely to take up Covid-related economic issues like loss of output and employment and whether there is any prospect of collaboration. The summit is most likely to focus on “how to ensure smooth recovery from Covid and strengthening the pillars of cooperation on vaccine distribution and improving health infrastructure,” said Dash.
A meeting of BIMSTEC think tanks last December identified new areas like digitalisation, fintech or financial technology, cross border payment cooperation, how to factor in new developments regarding global value chains, and if regional value chains too such as the food processing, and garments sector in Bangladesh. At the last summit in Kathmandu in 2018, Prime Minister Narendra Modi had proposed a BIMSTEC Startup Conclave, the first of which was held virtually in January 2021. “India would like to show certain areas as focus areas like Startups, the MSMEs sector, and harnessing the benefits of digital economy, sci-tech innovation, and also utilising the ocean resources of the Bay of Bengal,” said Dash. The general view is to pursue the BIMSTEC FTA and try to conclude the Trade in Goods agreement. These are seen as “low hanging fruit” that could pave the way for agreement on Trade in Services.
(The author is a senior journalist on the foreign policy beat. Views expressed in this article are personal)
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