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Unlocking Bangladesh-India trade : emerging potential and the way forward

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  • De, Prabir
  • Raihan, Selim
  • Kathuria, Sanjay

Abstract

The primary objective of this study is to analyze the impact on Bangladesh of increased market access in India, both within a static production structure and also identifying dynamic gains. The study shows that Bangladesh and India would both gain by opening up their markets to each other. Indian investments in Bangladesh will be very important for the latter to ramp up its exports, including products that would broaden trade complementarity and enhance intra-industry trade, and improve its trade standards and trade-handling capacity. A bilateral Free Trade Agreement would lift Bangladesh's exports to India by 182 percent, and nearly 300 percent if transaction costs were also reduced through improved connectivity. These numbers, based on existing trade patterns, represent a lower bound of the potential increase in Bangladesh's exports arising from a Free Trade Agreement. A Free Trade Agreement would also raise India's exports to Bangladesh. India's provision of duty-free access for all Bangladeshi products (already done) could increase the latter's exports to India by 134 percent. In helping Bangladesh's economy to grow, India would stimulate economic activity in its own eastern and north-eastern states. Challenges exist, however, including non-tariff measures/barriers in both countries, excessive bureaucracy, weak trade facilitation, and customs inefficiencies. Trade in education and health care services offers valuable prospects, but also suffers from market access issues. To enable larger gains, Bangladesh-India cooperation should go beyond goods trade and include investment, finance, services trade, trade facilitation, and technology transfer, and be placed within the context of regional cooperation.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6155.

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Date of creation: 01 Aug 2012
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Handle: RePEc:wbk:wbrwps:6155

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Keywords: Free Trade; Trade Policy; Economic Theory&Research; Transport Economics Policy&Planning; Trade Law;

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  1. Raihan, Selim & Razzaque, Mohammad A, 2007. "WTO and regional trade negotiation outcomes: quantitative assessments of potential implications on Bangladesh," MPRA Paper 38475, University Library of Munich, Germany.
  2. Fukunari KIMURA & Izuru KOBAYASHI, 2009. "Why Is the East Asia Industrial Corridor Needed?," Working Papers, Economic Research Institute for ASEAN and East Asia (ERIA) p001, Economic Research Institute for ASEAN and East Asia (ERIA).
  3. Nilankan Banik & John Gilbert, 2008. "Regional Integration and Trade Cost in South Asia," IDB Publications 48978, Inter-American Development Bank.
  4. John Whalley, 1996. "Why Do Countries Seek Regional Trade Agreements?," NBER Working Papers 5552, National Bureau of Economic Research, Inc.
  5. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, Elsevier, vol. 12(2), pages 263-290.
  6. Ahmed, Sadiq, 2009. "Accelerating Growth and Job Creation in South Asia," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198060048 edited by Ghani, Ejaz, October.
  7. Shepherd, Ben, 2007. "Product standards, harmonization, and trade : evidence from the extensive margin," Policy Research Working Paper Series 4390, The World Bank.
  8. Raihan, Selim, 2011. "Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation," MPRA Paper 37883, University Library of Munich, Germany.
  9. Raychaudhuri, Ajitava & De, Prabir, 2012. "International Trade in Services in India: Implications for Growth and Inequality in a Globalizing World," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198079378, October.
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