BIMSTEC panel to revive FTA proposal next month

New Delhi: After a gap of four years, the trade-negotiating committee (TNC) of the seven-nation grouping BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) will be meeting next month to revive the languishing proposal for a free trade agreement (FTA).

Trade officials of India, Sri Lanka, Bangladesh, Nepal, Bhutan, Myanmar and Thailand will meet in Bangkok between 7-9 September.

While BIMSTEC has been an under-performer as the same countries are also engaged under more vibrant groupings such as the South Asian Association for Regional Cooperation (Saarc), the Association of Southeast Asian Nations (Asean) and the Regional Comprehensive Economic Partnership (RCEP), Indian officials say the meeting will provide the right opportunity to gauge the interest of other members in the proposed FTA.

“We do not expect making a significant breakthrough in negotiations in this round of talks. Since the TNC will be meeting after a long gap, we will try to gauge what is the level of ambition of other countries,” a government official said on condition of anonymity.

The framework agreement on the BIMSTEC FTA was signed in 2004, but it is not yet fully operational. A number of issues such as modalities of tariff reduction and elimination, size of the negative list, criteria for rules of origin, mechanism of dispute settlement, safeguard measures, customs operations and negotiations on the agreements on service and investment are yet to be finalized. The member countries established an institutional arrangement in TNC in 2004 for conducting negotiations to finalize these issues, as stipulated in the framework agreement. However, even after 19 rounds of negotiations stretching over 10 years, the members have not been able to reach a consensus over issues such as market access or a dispute settlement mechanism. This is in contrast to the FTA between Asean and India, which was proposed in 2003 and came into effect in 2010.

However, with the Narendra Modi government willing to redefine its engagements with its East Asian neighbours with the Act East slogan, and trade negotiations under the Saarc grouping languishing because of differences between India and Pakistan, analysts say BIMSTEC could drive regional integration in South Asia as five out of eight members of Saarc are part of BIMSTEC.

Biswajit Dhar, a professor of economics at Jawaharlal Nehru University, said India should promote sub-regional integration of its North-Eastern region with its eastern neighbours and then use BIMSTEC as a bridge between the Saarc and Asean regions.

“This may also act as an incentive for Pakistan to join in,” he added.

Regional integration sans Pakistan is already under way with four South Asian neighbours—Bangladesh, Bhutan, India and Nepal, now termed as BBIN—signing an agreement in June to open the roads for each others’ motor vehicles to boost trade and economic activity. Pakistan had earlier refused to sign a similar pact at the Saarc level.

The BIMSTEC trade negotiations are spread over the areas of tariff concessions on trade in goods, customs cooperation, services and investments. The third BIMSTEC summit was held in March, last year in Nay Pyi Taw, Myanmar’s capital. In the summit declaration, the leaders had directed the BIMSTEC TNC to expedite its work for the conclusion of the agreement on trade in goods by the end of 2014, and to continue its efforts for early finalization of the agreement on services and investments.

The share of India’s trade with BIMSTEC remains much below its potential for reasons such as poor connectivity and hurdles in trade facilitation leading to high trade costs, weak supply capabilities especially in least developed countries such as Myanmar, Nepal and Bangladesh.

India’s exports to the other six BIMSTEC countries jumped 16.6% in 2014-15 to $22.3 billion, while its imports from the same countries rose 8% to $9.3 billion during the year.

The initiative to establish Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC) was taken by Thailand in 1994 to explore economic cooperation on a sub-regional basis involving contiguous countries of South East and South Asia grouped around the Bay of Bengal. Myanmar was admitted in December 1997 and the initiative was renamed as BIMSTEC. The Bangkok summit in 2004 agreed to change the acronym of BIMSTEC to Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.