The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the bridge between South and Southeast Asia, a unique regional cooperation initiative in the Bay of Bengal with contiguous nations, high economic growth, and a large market with access to Indian Ocean has now celebrated its first quarter century. The grouping targets 7 priority sectors of cooperation, each with a different lead country: Trade, Investment and Development (Bangladesh), Environment and Climate Change (Bhutan), Security (India), Agriculture and Food Security (Myanmar), People-to-People Contact (Nepal), Science, Technology and Innovation (Sri Lanka) and Connectivity (Thailand).
Bangladesh is the country in charge of trade and investment in BIMSTEC. Despite several rounds of negotiations, a free trade agreement (FTA) remains elusive, but the scaling up of agri-food trade can serve as a strong economic catalyst for this partnership. Increased agri-food trade can foster strong cooperation in other areas as well. The limited agri-food market integration can be explained by the dominance of agri-food products in the trading portfolio where items are often put in the negative list that prevents imports altogether, and the inability to export agricultural commodities from domestic food stocks given constraints imposed by WTO rules. Furthermore, political economy considerations hinder greater liberalization.
With trade, roadblocks to connectivity like in the Motor Vehicles agreement, a Regulation of Passenger, Personal and Cargo Vehicular Traffic, would likely lessen (the effects would run both ways). Similarly, informal trade arrangements across Bangladesh-India and India-Myanmar in the form of border haats can have positive effects on employment and mainstream people-to-people contacts. The main inhibitors of agri-food trade in the region are not high tariffs, a problem that an FTA could solve, but the hidden barriers to trade such as logistical or bureaucratic obstacles. The lack of credible and mutually recognized systems for food safety and quality control also create significant trade barriers. Further, unstable and swiftly imposed domestic and trade policy measures such as India's onion export ban have set back greater trade integration in recent years.
Not surprisingly, BIMSTEC intra-regional agri-food trade has never reached its full potential. Just to put things in perspective, China's overall trade with Thailand alone is valued at $100 billion while within BIMSTEC India's trade with its two largest partners in the region, Bangladesh and Thailand--was just around $10 billion in 2019.As a lead on trade and investment and a rising trading power in the region, Bangladesh can shoulder the responsibility to spur significant changes in the area for BIMSTEC trade.
Bangladesh's successful growth and improved ability to cope with economic shocks have been facilitated by its liberal trade policies. Only a two-decade-old country, Bangladesh boldly liberalized food grain imports in the early 1990s and derived significant competitive benefits from these reforms. Thanks to liberal imports of inputs, Bangladesh now has the most mechanized agricultural sector in South Asia. Perhaps the most shining example is using liberal trade policies in successfully dealing with natural and climatic shocks. In 1998, during the so-called flood of the century, Bangladesh managed its food security exceptionally well through trade policies--defying expert analysis and predictions by popular media like BBC. Not a single death in these massive floods occurred due to food insecurity and hunger. As Bangladesh presides over the BIMSTEC trade and investment port folio, the country can offer important lessons for the increasingly climate-affected fellow BIMSTEC member states.
In addition to that, Bangladesh's successful experience in value chain integration in textiles and apparel can provide a useful blueprint for replication in the agri-food trade. Within BIMSTEC, manufacturing trade has embraced value chain integration substantively. Thailand, for instance, has imported organic chemicals from India and Myanmar and plastics from Bangladesh for further processing and exporting. Missing value chain integration in agri-food systems should be the main concern for BIMSTEC thinkers and policymakers.
As a lead of BIMSTEC in trade and investment, it is important for Bangladesh to incorporate the close parallels between how modern agriculture trade resembles the manufacturing and services trade. Greater product differentiation and improved delivery of quality and safety are vital for enhancing the still low levels of agri-food trade in BIMSTEC. Bangladesh should spearhead the establishment of credible certification and testing standards to facilitate mutual recognition agreements among BIMSTEC countries, in order to reduce the time and costs inherent to agri-food commerce. The untapped potential of agri-food trade could be the most important agenda for BIMSTEC's lead in trade and investment, and Bangladesh has a crucial role to play in advancing greater trade integration.
This article was originally published in The Daily Observer on March 6, 2023.