Following a meeting with the visiting Prime Minister of Bangladesh Sheikh Hasina, Prime Minister Narendra Modi said India and Bangladesh will soon commence negotiations on a Bilateral Comprehensive Economic Partnership Agreement (CEPA). “We both believe that by taking lessons from the Covid pandemic and recent global developments, we need to make our economies stronger,” Modi said.
Talks On CEPA:
Notably, the talks on CEPA began informally in 2018, against the backdrop of increasing Chinese investments in Bangladesh. It also received greater attention given that existing regional free trade arrangements, like the South Asian Free Trade Area (SAFTA), have become dysfunctional. To date, the countries have run a joint study after agreeing to terms of reference.
About The CEPA:
- The proposed CEPA between Bangladesh and India has three dimensions, namely trade in goods, trade in services, and investment. The main target of the proposed agreement is to reduce the huge trade gap between Bangladesh and India and open up new economic opportunities including connectivity, new markets, and cooperation and partnership. Moreover, the CEPA is planned to resolve the issues and challenges of anti-dumping duties and rules of origin through the perspective of multi-modal connectivity and deepening of cooperation in the context of the sub-regional cooperation.
- It recognizes the significant benefits of bilateral economic and commercial ties. According to an official statement released by India’s Ministry of Commerce and Industry, CEPA will incorporate a variety of issues of mutual interest, including the development of railway infrastructure, port infrastructure, border haats (trading posts), regional connectivity through multi-modal transportation, harmonization of standards, and a mutual recognition agreement. Further, the agreement looks to step up cooperation in new areas such as green technologies, renewables, and IT and digital platforms. CEPA will also strengthen the scope of investment as it includes the new areas and ways of cooperation. It will give a significant boost to two-way trade. In addition, the agreement focuses on four areas for strengthening India-Bangladesh partnership including connectivity and maintaining uninterrupted supply chain, joint production of defense equipment, the exploring of potential areas of investments, and joint manufacturing of vaccines and other medicines.
- Third, the agreement will create new venue for cooperation and partnership and open up opportunities for the creation of joint production hubs and uninterrupted supply chains, which will create new markets for both countries. Bangladesh has already set up three Special Economic Zones for Indian investors and Indian companies are investing in various sectors including telecommunications, pharmaceuticals, consumer goods, and automobile manufacturing in Bangladesh.
Benefits of CEPA:
CEPA could potentially provide many future benefits. First, against the backdrop of growing bilateral trade, the trading regime between the two countries, including imports, exports, and related rules and regulations, will get new momentum as the agreement has instruments to work jointly on trade, supply chains, and production. If CEPA is operationalized, bilateral trade potential could be $40 billion. After its withdrawal from the Regional Comprehensive Economic Partnership (RCEP), India is looking to settle several bilateral FTAs with neighboring countries. Second, the agreement will boost bilateral and sub-regional connectivity that Bangladesh has championed in its policy initiatives. The CEPA will produce a cluster of connectivity which will shape future trade through the Asian Highway Network routes (AH-1 and 2); the Bangladesh, Bhutan, India, Nepal Initiative; the Bangladesh, China, India and Myanmar Economic Corridor; and BIMSTEC – the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation.
The Connectivity Boost-up:
Growing connectivity will have some trickle-down effects on other connectivity projects in the region. For instance, the BIMSTEC Conclave of Ports agreement linking Thailand’s Ranong Port with ports in Chennai, Vishakhapatnam, and Kolkata, a BIMSTEC Coastal Shipping Agreement and a BIMSTEC Free Trade Agreement will bring more than 2 billion people – 22 percent of world’s population – together into a single economic region.