Implications of Comprehensive Economic Partnership Agreement

On June 22, 2024, long back, India and Bangladesh agreed to initiate negotiations on a comprehensive trade agreement. Bangladesh has shown a strong desire to expedite the CEPA negotiations, hoping to finalise the deal within a year. The CEPA is anticipated to be activated by 2026, coinciding with Bangladesh's exit from the LDC classification. The Comprehensive Economic Partnership Agreement (CEPA) between Bangladesh and India is a proposed trade agreement aiming at increasing economic cooperation between the two adjacent countries. Despite the purpose and exploratory talks, there has been no obvious progress toward establishing a specific schedule for formal negotiations as of the most recent updates on July 11, 2024.  

CEPA intends to go beyond traditional free trade agreements by fostering deeper economic integration. It seeks to liberalise trade in goods and services, promote investments, and facilitate the cross-border movement of business professionals. For Bangladesh, CEPA offers opportunities to expand exports to India in sectors like textiles, pharmaceuticals, and agriculture, which UAE is already experiencing by implementing CEPA with India, effective from May 1, 2022. It also aims to attract Indian investments into Bangladesh, particularly in infrastructure and manufacturing.

However, some challenges concern about the potential impact on Bangladesh's domestic industries, especially small and medium enterprises (SMEs), due to increased competition from Indian counterparts. Additionally, issues related to tariff concessions and non-tariff barriers need careful negotiation. Above all, India is already one of Bangladesh's largest trading partners, and CEPA could further strengthen this economic relationship. It aligns with Bangladesh's strategy to diversify its trade relations and reduce dependency on a few markets. Formal negotiations began to address these complexities, aiming to finalise the agreement to mutual benefit. Both countries are keen to accelerate talks to capitalise on economic opportunities before Bangladesh's change in status from a Least Developed country (LDC).

It is to be hoped that the Comprehensive Economic Partnership Agreement (CEPA) holds significant potential for Bangladesh as it navigates its graduation from Least Developed Country (LDC) status. CEPA has some implications for Bangladesh's graduation: Trade Diversification and Growth: CEPA aims to enhance Bangladesh's access to larger markets, particularly in Asia, by reducing trade barriers as the Japan-India CEPA (JICEPA) and UAE-India CEPA removes duties on almost 90 percent of products traded between the two countries, facilitating smoother trade in various sectors. This diversification is crucial as Bangladesh seeks to reduce its dependence on traditional markets and expand its export base. Economic Integration: CEPA fosters deeper economic integration within the region, facilitating smoother trade flows and investment opportunities as India is actively engaging in trade negotiations with key Asian countries, including Southeast Asia and East Asia, to enhance economic integration. So, this integration is beneficial as Bangladesh transitions to a non-LDC status, providing a framework for sustained economic growth and stability.

Attracting Foreign Direct Investment (FDI): The agreement's (CEPA) provisions for investment protection and promotion are expected to attract more FDI into Bangladesh. This influx of capital can help modernise industries, improve infrastructure, and create employment opportunities, which are essential for sustainable development post-LDC graduation.

Enhanced Productivity and Competitiveness: CEPA encourages regulatory coherence and harmonisation of standards, making it easier for Bangladeshi firms to comply with international norms. By looking at the India-UAE CEPA, we can notice that the India-UAE CEPA is designed to significantly boost trade between the two countries, aiming to grow the total value of merchandise trade to $100 billion by 2027. The agreement provides enhanced market access for UAE's service providers across 11 sectors and more than 111 sub-sectors, promoting a non-discriminatory environment for cross-border trade. Similarly, discussions about deeper economic agreements with other countries, such as Japan and South Korea, indicate India's ongoing efforts to enhance productivity and competitiveness in the global market. This, in turn, boosts productivity and enhances the competitiveness of Bangladesh's exports in global markets. Capacity Building and Institutional Strengthening: The agreement includes provisions for technical assistance and capacity building, which are critical for Bangladesh to effectively implement and benefit from CEPA. Strengthening institutional frameworks will enable Bangladesh to navigate the complexities of international trade agreements more adeptly.

Mitigating Vulnerabilities: As Bangladesh prepares to graduate from LDC status, CEPA serves as a buffer against potential economic vulnerabilities. It provides a structured approach to mitigate risks and leverage opportunities arising from increased regional and global integration. Finally, Long-term Development Strategy: CEPA is aligned with Bangladesh's broader development goals beyond LDC graduation. It supports sustainable economic growth, poverty reduction, and inclusive development by fostering a conducive environment for trade and investment. As the CEPA between India and the UAE aims to boost bilateral trade to $100 billion over the next five years, it ensures a long-term development strategy. This agreement enhances market access, strengthens supply chains, and fosters economic growth for both nations. To gain these benefits, India and Canada are also engaged in negotiations for a CEPA.

As the Comprehensive Economic Partnership Agreement represents a pivotal strategy for Bangladesh as it prepares to graduate from LDC status, Bangladesh is also moving towards a Comprehensive Economic Partnership Agreement (CEPA) with China, Prime Minister Sheikh Hasina's visit to China on 8-11 July, aiming to significantly boost trade and investment, replacing talks on a Free Trade Agreement (FTA). Based on the findings of a joint feasibility study conducted on FTA, Bangladesh and China are now considering the CEPA approach to boosting economic ties.

Now the question arises: will it be feasible? By enhancing trade opportunities, attracting investments, and promoting economic integration, CEPA not only supports Bangladesh's immediate economic goals but also lays the foundation for long-term prosperity and resilience in a competitive global market. By considering these contributions of CEPA to LDC graduation in Bangladesh, Govt. should negotiate with India, China, and other countries as soon as possible to execute the CEPA trade pact, as we are very near to graduating from LDC. 

The writer is the lecturer at Rabindra Maitree University, Kushtia. He can be reached at: [email protected].