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.
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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.
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.
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.
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