Amid Trump’s tariff war, BIMSTEC FTA can strengthen India’s access to markets abroad – Firstpost

In 2019, when Prime Minister Narendra Modi took oath for the second time, he invited leaders from BIMSTEC countries to the ceremony as special guests. At that time, there was little awareness in the public domain about this grouping. Although BIMSTEC (Bay of Bengal initiative for Multi-Sectoral Technical and Economic Cooperation) was first set up way back in 1997, its character as a formal organisation replete with a charter and a vision to integrate the region closely was missing. However, thanks to India’s quest to become a formidable economy along with the willingness of the current dispensation to take on a leading role in regional integration in the Bay of Bengal region, today BIMSTEC is finally acquiring a strategic significance with economic integration seeming to become the core of intra-countries cooperation.

This week BIMSTEC is having its sixth summit in Thailand where leaders from all the seven countries—India, Bangladesh, Bhutan, Nepal, Myanmar, Sri Lanka and Thailand—are present. While this is the first summit since a formal charter for the organisation was adopted in the year 2022, this time around there is no dearth of new initiatives. Key among this is a proposed Free Trade Agreement between BIMSTEC countries.

While speaking to an Indian media outlet, the secretary-general of BIMSTEC, Indra Mani Pandey has disclosed that a roadmap to a regional free trade agreement is going to be the part of the Bangkok Vision 2030 document, which will be adopted at the summit. Interestingly, the FTA roadmap is also accompanied by a maritime transport cooperation agreement between the member countries. Since Bay of Bengal is predominantly a maritime region with almost all countries except Bhutan and Nepal having access to the waters of the Indian Ocean, maritime connectivity can immensely benefit regional economic initiatives.

For the uninitiated, this is not the first time that a Free Trade Agreement at the BIMSTEC level is being considered by member countries. The discussions for the same have been going on for a long time for almost 21 years now, with the first proposal being accepted by the grouping in the year 2004 only. Last year, at the inaugural edition of the BIMSTEC Business Summit, India’s minister of commerce and industry, Piyush Goyal, had even called upon other countries to introspect regarding this unusual delay pointing out how the potential for trade in the region is high and yet the intraregional trade is so dismal. Even Bhutan, another member country, has come in support of an early conclusion of the FTA, pointing to the region’s status as one of the least integrated regions in the world.

BIMSTEC represents the Bay of Bengal region, which is known as one of the most dynamic and resource-rich regions in the world. It is home to more than 1.7 billion people with a combined economic strength of more than $5 trillion. It is also home to the fastest growing major economy like India, a dynamic economy like Bangladesh which, until Muhammad Yunus had arrived, was known as a miraculous case of development, as well as Thailand which is a manufacturing and export-driven economy and a flourishing ASEAN success story. These countries also enjoy a great geographical advantage, especially the coastal nations like India, Bangladesh, Sri Lanka, Myanmar and Thailand.

Despite this, the grouping has a terrible record on economic integration with intra-regional trade being only 6 per cent of their total trade. As per some exploratory studies, this percentage can easily be increased if the intraregional trade potential of $300-400 billion is realised annually and here an early concluded free trade agreement can be a real game-changer.

Although economic integration in the Bay of Bengal region has so far been a non-starter, the case for India to pursue it with an increased vigour is only becoming stronger each day. The country is currently looking to expand its manufacturing base and increase exports to external markets in order to realise the goal of becoming a $5 trillion economy and even more. Here the strategy of inking favourable free trade agreements, one where Indian products can get access to foreign markets is very important. If the decade between 2004 and 2014 was marked by ‘FTA-fetishism’ where India signed FTAs regardless of the benefits that it accrued to the economy, right now the focus is on reciprocal market access. BIMSTEC, thanks to its economic dynamism, offers a great chance for India to benefit from a more integrated region.

Currently, India’s trade with BIMSTEC is a meagre $45 billion, which can easily grow manifold with an FTA. This would also take some pressure off from India’s dependence on its traditional export markets, especially the United States. Recently, US President Donald Trump has imposed a 27 per cent tariff on Indian products making them relatively uncompetitive in the American markets. Currently, the US is one of the biggest export markets for India but in the long term India needs to diversify its trading partners where the BIMSTEC region can be of great potential. Also, as global manufacturers look for newer bases as part of the China+1 strategy, an FTA with BIMSTEC countries can be particularly helpful in making them choose India due to the allure of a larger market encompassing the entire Bay of Bengal region.

Besides the obvious economic logic for India to push for a BIMSTEC free trade area, there is also a sound geopolitical logic to it. This is because a rising India’s influence in its own backyard is threatened by the presence of an adversarial China. Unfortunately, despite the close geographic linkages that India enjoys with each of the countries in the grouping, it is China and not India which is their dominant economic partner. The overwhelming presence that China enjoys in their economic realms also provides it with a clear political heft. A sample of this is visible in Myanmar and Bangladesh where India shares a long contiguous boundary with both countries and hence security in its crucial border region of Northeastern states is also dependent on it.

Recently, Bangladesh’s Chief Advisor Muhammad Yunus had issued an open invitation to China to take advantage of Bangladesh’s maritime connectivity, while at the same time he had also highlighted the landlocked status of India’s northeastern region subtly pointing towards its vulnerability. While it is true that for decades, the seven sisters in the region have been a victim of the previous Indian government’s inattention but now the paradigm has shifted. A robust economic integration in the Bay of Bengal region would not only spur economic development in these states but also make India’s northeastern plank less vulnerable from a national security perspective. Thus the Modi government’s repeated efforts to make sure that a BIMSTEC free trade agreement becomes a reality is a welcome development.

India has come a long way by reimagining its neighbourhood beyond the territorial limitations of South Asia to include maritime domain as well as the dynamic region of Southeast Asia through the forum of BIMSTEC. History is testament to India’s great presence in the region during the various maritime empires of the past, now the need of hour is to reclaim that lost glory.

The writer is a New Delhi-based commentator on geopolitics and foreign policy. She holds a PhD from the Department of International Relations, South Asian University. She tweets @TrulyMonica. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views