One more flat tyre

Atal Behari Vajpayee’s South Asian ‘road transport’ diplomacy, begun with his much-hailed trip to Lahore, has been deflated, as it were, by the bangs of big guns going off in Kargil. Meanwhile, to the region’s east, it doesn’t at all appear that his second innings at bus diplomacy, this time with the Dhaka-Calcutta service, will smoothen out India-Bangladesh relations as some thought it would.

The recent trade talks between the two countries were a downbeat exchange, and as things stand, there is little chance of Bangladesh improving the balance of trade that continues to tilt massively towards India. The meeting between Sheikh Hasina and Vajpayee in Dhaka recorded discrepancies, reflecting political realities which both sides still don’t appear ready to deal with. Both leaders met exclusively for less than half an hour followed by the official meeting which lasted only 20 minutes.

The statements read out by India and Bangladesh on the issues discussed and decisions taken varied, further diminishing the value added to the meeting. Briefing the media, Vajpayee said that both sides had agreed on “multi-modal communication links which will facilitate free movement of traffic between both countries”. On trade, he said “India had in principle accepted the request for duty-free access on a non-reciprocal basis in selected items of export interest to Bangladesh”. Vajpayee mentioned agreement on developing a framework for border trade. But the Bangladeshi prime minister did not refer to any of these issues explicitly in her statement. She just said that discussions had been held on various issues. Vajpayee also stated that the issues would be discussed by the technical expert group due to meet soon. Sheikh Hasina did not mention that either.

Two agreements were signed during Vajpayee’s 19 June visit to Dhaka. One was on a INR 2 billion (USD 47 million) loan to Bangladesh over the next three years, while the other was on developing trade relations between the Indian and Bangladesh federations of chambers of commerce. Again, the two prime ministers gave varying accounts on how the loan was to be utilised. While Vajpayee said that the money would be used to enable supply of transport equipment and capital goods to improve infrastructural facilities in Bangladesh, Sheikh Hasina said that nothing had been finalised and the utilisation matter would be discussed at the next joint economic commission meeting.

An indication of the differing positions was best reflected when Vajpayee said that India had accepted that the export base of Bangladesh is limited and that it needs to be augmented by goods and services that are of interest to India. Obviously, the question then was whether that meant facilitating export of gas to India, a thorny political issue in Bangladesh. Hasina sitting next to Vajpayee immediately retorted, “Bangla-deshis will decide what Bangladesh wants to export, they [the Indians] can’t decide alone. There may be many thoughts on our mind but it is we who will first decide what we can export from here.”

All said, the trade imbalance between Indian and Bangladesh is becoming a political embarrassment and is putting pressure on the Bangladesh government and parties. It also projects India as an overbearing big brother, and the benefits are being reaped by the anti-India political Right. In the past eight years upto 1997-98, Bangladesh had run a cumulative trade deficit of 4.5 billion dollars, with a further 1 billion dollars trade imbalance expected by the end of this year. This is a statistic that is becoming more political than economic.

Bangladesh has been seeking zero tariff for 25 items such as jute and jute goods, leather products, plastic and ceramics, melamine, cosmetics, toiletries, processed foods, etc. But Indian experts say   these   sectors   can   barely influence the trade deficit. They say | Bangladesh should be looking  towards natural gas, and the transit facilities to Indian vehicles to the Northeast.

Bangladesh can earn more than BDT 10 million (USD 208,000) per day if transit rights are given to Indian vehicles, says Bhaskar Sen of the Bengal Chamber of Commerce and Industry. He also says that market studies should be done before the zero tariff items are selected because Bangladesh goods won’t be competitive in the interior states of India because of freight costs and other factors. For example, the generic medicine Paracetamol sells in Bangladesh for BDT 6 (USD 0.13), while in India the same sells for INR 2.50 (USD 0.05). It’s only Bangladeshi readymade garments that Sen sees as being a good export item to India.

Obviously, these are technical issues requiring non-political fixes. But before economics arrives, politics must leave the stage.