Context: Recently, China has announced tariff exemption for 97% of exports from Bangladesh which showed their Economic diplomacy in the South Asian region.
Background

• Bangladesh imports around $ 15 billion worth Chinese goods but its exports to China have been very low in comparison.
• The leaders of the two countries had discussed enhancing bilateral relation in the background of the economic hardship triggered by the COVID-19 pandemic.

Benefits to Bangladesh

• The move will help Bangladesh to remove the economic impact of the pandemic and also emerge as a possible beneficiary alongside Vietnam and Chile of the U.S.-China trade war.
• The supply chain disruption caused by the U.S.-China trade war is likely to be filled by a boost in export of tariff-exempted goods from Bangladesh.
• It will also help Bangladesh to reduce its trade deficit with China.
• As a result of the latest announcement, a total of 8256 goods from Bangladesh will be exempted of Chinese tariffs.
• Earlier, Bangladesh used to receive tariff-exemption for 3095 items under the Asia Pacific Trade Agreement (APTA).

Concerns for India

• China’s heavy investment in India’s neighbourhood has increased its dominance in the Indian Ocean.
• Despite having cultural and historical relations with India, its neighbours are siding with China on diplomatic issues.
• Nepal is redrawing its map to include some Indian territories, presumably under a nudge from China.
• Earlier, Maldives and Sri Lanka have also expressed anti-India sentiment under the influence of China.

Earlier incidence of India-China Rivalry and Bangladesh

• Bangladesh has benefitted from the India-China rivalry. It has used the rivalry to increase its investment and strengthen its security.

Trade:

• In 2015, China became Bangladesh’s top trading partner, knocking India out of the position it had held for 40 years.
• As a member of China’s Belt and Road Initiative, Bangladesh has seen an influx of Chinese investment in recent times.
• To counter Chinese dominance in Bangladesh, India announced $5 billion in loans for Bangladesh in 2017, which is the largest amount ever invested by India in Bangladesh.

Security

• China has become Bangladesh’s top source for arms imports; and Bangladesh likewise is China’s second-largest arms export destination in the world, behind Pakistan.
• Most recently, in 2017 the Bangladesh Navy took delivery of two Chinese submarines at a minimum price.
• To counter this, India has expressed its interest in offering submarine training for the Bangladesh Navy.

Major Areas of bilateral cooperation between India and Bangladesh
International organisations

• Focusing on the growth and needs of Bangladesh has been an important component of India’s ‘Neighbourhood Policy’.
• India and Bangladesh are the members of sub-regional groupings like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) and the BBIN (Bangladesh, Bhutan, India, Nepal) Initiative and the South Asian Association for Regional Cooperation (SAARC).
• The two nations are also part of Indian Ocean Rim Association (IORA) working together in managing the crucial maritime region, and ensuring its stability which is also reflected in the Indian government’s SAGAR (Security and Growth for All in the Region) programme, which further aims to turn the region more inclusive.

Border Management

• India shares the longest international land boundary with Bangladesh which is more than 4000 kms long.
• The historic India-Bangladesh Land Boundary Agreement (LBA) came into force following the exchange of instruments of ratification in June 2015 under Modi and Hasina government, providing for exchange of enclaves between the two countries.
• This was a perfect example of amicable resolution of long standing boundary disputes between nations.

Economic Co-operation

• Bangladesh is India’s biggest trade partner in South Asia.
• India’s exports to Bangladesh for financial year 2018-19 (April-March) stood at US $ 9.21 BN and imports from Bangladesh for the same period stood at US $ 1.22 BN.
• To gap the trade imbalance India has done various investments in Bangladesh and has given several Lines of credit for its infrastructural development.
• India is the source of maximum FDI investment in Bangladesh which stands more than $ 300 MN as of now.
• India has signed over 24 Memorandum of Understandings (MoU) with Bangladesh on almost every important sector of bilateral cooperation including security, trade, connectivity, energy, civil nuclear agreement, defence and transportation.

Road Ahead

• India and Bangladesh must manage their geo-political realities through friendship and collaborations. They should appreciate and balance regional political realities for the interest of the people and should not trade off long-term interests for short-term gains.
• Pluralism has been the strength of the Indian subcontinent so that should be kept in mind to be able to celebrate South Asia’s diversities in religion, ethnicity and language.
• India and Bangladesh share a great relationship, areas of concern remain which need to be looked into holistically and ratified as soon as possible so that “best of the best” of ties between the two neighbours can be sustained forever.

About Asia Pacific Trade Agreement

• APTA is an initiative under United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) for trade expansion through exchange of tariff concessions among developing country members of Asia Pacific Region.
• It is preferential trade agreement (PTA), under which basket of items as well as extent of tariff concessions are enlarged during trade negotiating rounds which are launched from time to time.
• APTA was signed in 1975 and was formerly known as Bangkok agreement (renamed to present name in 2005).
• UNESCAP’s Trade and Investment Division in Bangkok, Thailand serves its secretariat.
• It is the first plurilateral and oldest preferential trade agreement among developing countries in Asia-Pacific .
• The six member countries of APTA are: Bangladesh, China, India, Laos, Korea and Sri Lanka.
• APTA aims to promote economic development through adoption of mutually beneficial trade liberalization measures that will contribute to intra-regional trade expansion and provides for economic integration through coverage of merchandise goods, services, investment and trade facilitation.