Non-tariff barriers and Bangladesh-India trade

Of course, very recent statistics on bilateral trade between Bangladesh and India point to a respectable growth in exports from Bangladesh. But compared to Indian exports to Bangladesh, the volume would, perhaps, continue to be a drop in the ocean. Therefore, any discussions on increased trade between the two countries should bring Bangladesh's concern at the forefront. The TFs addressed selected six issues: Bilateral Trade situation, Trade Related Infrastructure, Removal of Trade Disputes, Rising Indian Investment in Bangladesh, Non-tariff Barriers (NTBs) and activating programme of FBCCI-FICCI. The World Bank helped the TFs with knowledge support. In this column today, we shall try to shed some light on the NTBs from Indian side.

NTBs are generally the barriers of trade that operate outside the tariff regime. Thus, a zero tariff level in a country might not mean much if exporters to that country are faced with the barricades of NTBs. NTBs must be in tune with the WTO provisions but, again, compliance with the provisions may also prevent trade flows. As beauty is in the eyes of the beholders, so are NTBs in the eyes of the exporters. Sanitary and Phyto Sanitary regulations are WTO-compatible but could constrict trade if more than the required time is taken to clarify the position. A classic case of NTBs, until recently, was Bangladesh's decision to allow import of yarn from India through sea routes, instead of land routes. Likewise, a classic case of NTB on the Indian side could be interpreting HS codes differently than what exporters deemed fit or taking 15-20 days in testing exported food items and thus delaying the consignment to reach customers in India.

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Various empirical evidences tend to show that even the feeble exports of Bangladesh to India are faced with a battery of NTBs. If India sincerely shelves the NTBs, Bangladesh's exports could be up two to three folds. A number of items have potentials to be in Indian market e.g. fruit juices, ceramic and melamine products, garments, soap/detergent, electrical wire/cables, leather and footwear, edible oil, etc. over and above the traditional jute and Hilsha fish. But due to barriers created outside the tariff regime, such export potentials are yet to be realised.

The Petrapole land port itself stands out as a case of NTB. There is no warehouse facility there and trucks loaded with Bangladeshi products have to wait in open space for several

days before a customs clearance comes. A study by the National Council for Applied Economic Research (NCAER) shows that costs of some imported products from India, due to congestion, speed money at Petrapole and other problems, rise by 20-25 per cent of the total shipment costs. For exported items, the cost ranges from 15-20 per cent. On the Bangladesh side, Benapole seems to be better, as far as warehouse facilities are concerned. Therefore, Petrapole port -- accounting for roughly two-thirds of total inflows and outflows -- should be developed for increasing Bangladesh's exports.

As said earlier -- and allegedly -- Indian customs authority, sometimes, declines to accept classification declared by Indian importers. They having a propensity to place the products on a higher duty harmonized Code, especially those have a chance to capture a sizeable market in India. For example, fruit juices with HS code is changed from 2009.80 to 2202.90 which has a 20 per cent higher duty. Similar is the case with dry cell battery. There are also discrepancies between SAPTA notification and Customs Act. These are NTBs to block exports from Bangladesh.

Testing and certification is also compatible with WTO provisions. But the time taken to test and certify the items takes a long toll on exporters' transaction costs and time. Labeling of each and every unit for export of jute items is another NTB; so is the recently introduced Sanitary Import Policy (SIP) for the export of Hilsha fish. The technical standard requirement set by India is complex, costly and export constricting. For example, quality standards certificate for each and every shipment (from the Bureau of Indian Standards -- BIS) with inspection by Indian experts at Bangladeshi exporters' costs is anything but export-enhancing for Bangladesh. Ironically, while Bangladesh accepts certification from Indian organisations, India does not seem to accept certification from Bangladeshi organisations, although, Bangladeshi products are also exported to Europe and America. Hence, an Accreditation Council is called for but, until then, India should respect Bangladesh's certificate with due security safeguards.

The banks in Northeast India (NEI) where Bangladesh believes to have some better prospects for exports cannot directly transact with Bangladeshi banks, thus discouraging exporters and importers. It is complained that the L/C margin for imports from Bangladesh hovers around 100 per cent plus. Besides, the import licencing procedure is complex as importers have to wait for the permit from Kolkata -- roughly 1700 km away from NEI.

It is not to argue, however, that it is only India that puts up NTBs. Bangladesh also occasionally erects such walls. But the volume of Indian exports to Bangladesh compared to Bangladesh's exports to India would, perhaps, point to the pervasiveness of NTBs on Indian side. India should realise that a small reduction in tariff or NTBs in Bangladesh could flood Bangladesh with Indian goods but, on the contrary, even with zero tariff or NTBs in India, Bangladesh could at best make few millions from the Indian market. The supply side constraint is well-known.

The TFs are likely to present the NTBs to respective governments. It is expected that both governments would take up necessary measures to reduce the levels of NTBs. The onus lies more with India which exports $ 2 billion worth of goods to Bangladesh (unofficially another $ 2 billion) in exchange for roughly $ 100 million worth of goods from Bangladesh. Even if Bangladesh's exports rise to say $400 million, that still stands far behind India's. However it is not infeasible that Bangladesh's exports could rise substantially once NTBs on the other side of the border are drastically reduced. But for that to happen, India should open the gate for Bangladeshi goods and Bangladesh should pursue political and economic diplomacy to earn that. Both the countries should learn from other parts of the world.

Abdul Bayes is a Professor of Economics at Jahangrinagar University