Effective negotiation is needed to save the ‘Shonali Aash’

Abdullah Sadi :

Over the last decade, diplomatic relations and bilateral trade between the two neighboring countries, Bangladesh and India, have reached a new height. Currently, India is Bangladesh’s second-largest trading partner after China. Meanwhile, the countries have facilitated several initiatives to foster bilateral trade and cooperation. In the last fiscal year, Bangladesh’s exports to India hit $2 billion for the first time. Amid the fastest growing trade, there are some issues arise between the two nations, which are yet to be resolved. Among them, anti-dumping duty on Bangladeshi jute products exported to India has become the major obstacle to trade expansion between the two countries.
Anti-dumping duties are taxes imposed by a domestic government on imports in order to compensate for the difference between their export price and their normal value, if dumping causes detriment to producers of competing products in the importing country. ‘Dumping’ refers to the practice of selling products in foreign markets at a price lower than what it typically charges in its domestic market. This works as a safeguard measure against a specific export product to protect domestic industry. All procedures of imposing any kind of dumping, for the signatories to the WTO, should be implemented following WTO’s Agreement on the Implementation of the Article VI of the GATT 1994.
In January 2017, India imposed anti-dumping duties ranging from $19 to $352 per tonne on imports of jute goods comprising of jute yarn or twine, hessian fabric, jute sacking bags, and jute sacking cloth from Bangladesh in accusation of dumping these jute products. Consequently, jute exports from Bangladesh slumped significantly.
The experience wasn’t new for Bangladesh. For the first time, Bangladesh faced anti-dumping duty by the USA on Bangladeshi cotton shop towels in 1992, though it was withdrawn later. Since 1996, Bangladesh faced 8 initiatives of AD from Argentina, Brazil, India, and Pakistan, among them only India imposed 5 times. Particle Board is another product before the Jute, that faced AD from India in 2009.
However, the AD on jute products has had a more adverse impact on the industry in Bangladesh than any other AD imposed before. 60 percent of the jute products exported from Bangladesh go to India. Since the imposition of anti-dumping duties in 2017, exports have started to decline. Jute and jute goods shipment to India stumbled for the anti-dumping duty, which varies based on the item from 5 percent to 30 percent. Prior to the AD, 140,000 metric tonnes (MT) of jute goods were being exported to India from Bangladesh. Among those, 110,000 MT were jute yarn. After the imposition of anti-dumping measures, export volume to India has come down to 55,000 MT. Many private jute mills were closed due to this.
Apparently, the trade volume between Bangladesh and India, through several initiatives, is increasing significantly every year. In this regard, Bangladesh’s preferential treatment through several agreements for duty-free trade is playing an important role. As a least-developed country, Bangladesh enjoys duty-free export facilities for all but 25 products to India under the South Asian Free Trade Area (SAFTA) agreement. However, the import growth rate from India exceeds the export volume. The imposition of AD on jute products, one of the major export products of Bangladesh, is one of the underlying reasons behind this.
The traders and the government of Bangladesh have repeatedly asked to remove the duty, but no positive response has been received from India till today. At last, Bangladesh has proposed to the Indian counterpart for the removal of the anti-dumping duty on Bangladeshi jute and jute goods once it expires on December 31. In response, the Indian side said the first 200,000 tonnes of Bangladeshi jute and jute goods, equal to the amount Bangladesh was exporting to India before imposing the duty, would be allowed to enter duty-free annually and any further amount would be subject to the duty.
Instead of implementing that, India has extended the anti-dumping duty on various jute products. On 30 December 2022, India renewed the AD in the range of $6.3 to $351.72 per tonne for the next five years. While Bangladesh’s exports and foreign earnings are undergoing a downward trend, India’s renewal of AD also affects it. Even though the market in India has decreased, the opportunity for diversification of the jute market in Bangladesh is also shrinking. Besides India, China and Turkey are the major exporters of Bangladeshi jute goods. Since 2017, China and Turkey have used the opportunity to reduce the prices of jute products since India imposed anti-dumping duties.
In recent years. the global economic slowdown, shrinking demand, increasing domestic production cost along with India’s persisting anti-dumping duty played a part in dragging exports down. Data from the Export Promotion Bureau says export earnings from jute goods slowed down by 21.22 percent year-on-year in the first seven months of FY 2022-23. The Covid-19 pandemic and the war in Ukraine have had an intense impact on jute export. Due to the two-folded crisis of fuel prices surge and power shortages on the one hand and the decreasing demand on the other, many jute mills have been forced to shut down in several years.
Also, the strategy of not imposing anti-dumping duty on raw jute is benefitting the Indian industries. Consequently, the export of raw jute to India has increased. It is seen that they are doing business smoothly with raw jute without any obstacles. By importing raw jute, they are processing it in their industries and exporting it to different countries. Although Bangladesh is the top jute producer, processed jute products in India are dominating the Western markets. On the contrary, despite of huge demand for Bangladeshi jute-made products all over the world, the country’s jute industries face losses every year.
Bangladesh has been trying to negotiate diplomatically for a long time, but nothing worked. Due to the historical and political ties, Bangladesh has shown patience by not appealing to the WTO against India’s imposition of AD. However, in order to save the golden fibers, effective diplomatic negotiations or appeals to WTA is an emergency. Last year, to boost trade and connectivity between the two neighboring countries, a Comprehensive Economic Partnership Agreement (CEPA) was proposed. Removal of trade barriers like anti-dumping duties is essential for the full implementation of SEPA. Moreover, initiatives should be taken to create alternative markets for Bangladesh’s jute industry by reducing the dependency on India.

Abdullah Sadi is a Researcher on South Asian political Economy and International Politics.