A report by Indian think-tank CUTS International (Consumer Unity & Trust Society) has warned India about the potential effects of the proposed Free Trade Agreement (FTA) between Japan and Bangladesh on commerce with Bangladesh.
According to the paper, which is a quarterly analysis by CUTS Dossier on Preferential Trade Agreements and India, India should “exercise caution and closely monitor the progress of the Bangladesh-Japan EPA negotiations.”
CUTS International believes that if Bangladesh gives zero tariffs on all items to Japan under the FTA, which is expected to be concluded by December of this year, then India’s exports to Bangladesh may suffer.
“Several products in sectors such as automobiles, metals, electricals and textiles may be largely impacted by the Bangladesh-Japan FTA,” according to the CUTS International analysis of possible scenarios.
According to the CUTS assessment, India should evaluate the possible effects of Bangladesh’s trade expansion with Japan on its own economic interests and competitiveness in the area.
Based on the paper, to effectively manage the shifting trade dynamics, India may need to think about deepening its current trade ties with Bangladesh, expanding its export markets, boosting its competitiveness, and looking into collaboration options.
While there is the South Asian Free Trade Area (SAFTA) and the Preferential Trade Agreement (PTA) between India and Bangladesh, the report stated that resolving these issues is essential to sustaining India’s export performance in this market and mitigating the shocks caused by any future FTAs that Bangladesh may enter into.
“This calls for a comprehensive economic cooperation agreement between India and Bangladesh,” the report suggests.
Bangladesh is not a big competitor for India in terms of access to the Japanese market, as India already enjoys a tariff advantage in Japan due to its Comprehensive Economic Partnership Agreement (CEPA), according to CUTS International analysis.
The study does, however, issue a warning, advising India to consider the potential effects of Bangladesh’s rapidly expanding textile and apparel industry, which includes footwear and is gradually developing a competitive edge.
However, the CUTS International analysis using its SMART methodology suggests that India is unlikely to experience significant market share loss for textile and apparel products in Japan.
The analysis also suggests that any reduction in India’s exports of certain textiles, apparel, and footwear to Japan would likely be negligible.
Bangladesh’s export value to Japan is now less than that of India, but it is closing the difference as a result of the country’s increasing exports. Bangladesh’s exports to Japan increased from less than US $ 1 billion in 2013 to US $ 1.70 billion in 2022.
Various kinds of ready-made clothing and shoes for men and women account for the majority of Bangladesh’s exports to Japan – 55 per cent of total exports.