FTA Talks with BIMSTEC Needs Revival

General Studies Paper-2

Context: The business summit of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) was organized by the Confederation of Indian Industries (CII) and the Ministry of External Affairs.

Background

• BIMSTEC has been negotiating a proposed Free Trade Agreement (FTA) since 2004, with 22 rounds of talks held so far including the last round that was held in 2018.
• The Union Minister of Commerce & Industry that BIMSTEC members should re-examine the priorities of member nations so that the delayed Free Trade Agreement can be finalized.
• In 2004, Bimstec concluded the Framework Agreement on the Bimstec Free Trade Area.
  • The Framework Agreement encouraged the establishment of effective trade and investment facilitation measures, including simplification of customs procedures and development of mutual recognition arrangements

What is BIMSTEC?

• BIMSTEC is a regional organization that was established in 1997 with the signing of the Bangkok Declaration.
• Permanent Secretariat: Dhaka, Bangladesh
• Members: Bangladesh, Bhutan, Sri Lanka, Nepal, Thailand, Myanmar and India.
• Significance: The BIMSTEC countries are home to 22 percent of the total world population and have a combined gross domestic product (GDP) of about $3.6 trillion.

India’s trade with BIMSTEC

• India’s total trade with BIMSTEC countries amounted to $44.32 billion in 2023-24.
• Thailand was India’s largest trading partner within the bloc, with exports worth $5.04 billion and imports at $9.91 billion, resulting in a trade gap of $4.87 billion.
• Bangladesh followed, with exports of $11.06 billion and imports of $1.84 billion, creating a trade balance of $9.22 billion in India’s favor.

What Is a Free Trade Agreement (FTA)?

• A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them.
• Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
• India has signed 13 Regional Trade Agreements (RTAs)/Free Trade Agreements (FTAs) with various countries/regions namely, Japan, South Korea, countries of ASEAN region and countries of South Asian Association for Regional Cooperation (SAARC), Mauritius, United Arab Emirates and Australia.

Benefits of BIMSTEC free trade agreement

• Increased Trade Flows: An FTA would reduce tariffs, non-tariff barriers, and other restrictions on trade, thereby increasing the volume of goods and services exchanged among BIMSTEC countries.
• Economic Integration: The FTA could lead to deeper economic integration, fostering closer economic ties and enhancing regional stability.
• Market Access: Member states would gain access to each other’s markets, which could help smaller countries like Bhutan and Nepal integrate more effectively into the global economy.
• Attraction of Foreign Direct Investment (FDI): A more integrated market with reduced trade barriers would be more attractive to foreign investors, potentially increasing FDI flows into the region.

Way Ahead

• The business community of the countries and the governments will have to work together to find new pathways, new ways of engaging, and alternative solutions that are more practical to build up the momentum towards an FTA
• Payments in local currencies within this region along with better integration of custom borders, computerisation of border controls, and faster clearance of documents for imports and exports can help to improve the situation.