Free trade comes with freeing minds of historical baggage. Trade between India and Bangladesh has long been hostage to past prejudices and political rhetoric. There have been welcome signs of late that the two countries are finally emerging out of the shadows and beginning to see things with greater clarity. The heavens will not fall if the latest round of trade talks in Dhaka do not immediately lead to a free trade agreement. What is important is that both sides have finally awakened to the need for such an agreement. It is all of a piece with recent attempts by both New Delhi and Dhaka to reach out to new trade partners in the region. If India’s long endeavours to strike free trade deals with members of the Association of Southeast Asian Nations are succeeding at last; Bangladesh too has opened a new chapter with its own “Look East” policy. It would be unrealistic for the two neighbours not to redraw trade strategies between themselves. India’s offer of a free trade agreement with Bangladesh has not, therefore, come a day too soon. In fact, there are other compelling reasons for the two countries to reach an agreement soon to make up for lost time and advantages. Unlike in other parts of the world, where powerful trade blocs exist, south Asia seems to have lagged behind in the race. The south Asian free trade agreement has remained a non-starter, thanks largely to the ineffectiveness of the South Asian Association for Regional Cooperation.
Neither New Delhi nor Dhaka can, however, wish away the difficulties in reaching a mutually beneficial trade agreement. Dhaka has long been sceptical of Indian overtures for bilateral agreements, accusing the bigger neighbour of hegemonic ambitions. This was evident at last year’s meeting of the joint economic commission in which New Delhi agreed to allow duty-free access to 40 items of Bangladeshi goods to the Indian market.While India sought to project it as a long-awaited move to ease trade barriers, Bangladesh sulked at its limited gains. Dhaka was right then — and is right even now — in asking for the inclusion of a larger number of its trade items for duty-free access to India. But Dhaka’s argument over its large trade deficit with India looks flawed insofar as it ignores the fact that its own market has created this advantage for India. After all, free trade is all about respecting the mechanics of the market and offering the consumer a multiplicity of choices. There is hope, however, in the fact that the two sides have realized the importance of leaving politics out of trade talks.