Finding the best outcome

Following an investigation launched in October 2015 by the Directorate General of Anti-Dumping and Allied Duties (DGAD) under the Ministry of Commerce and Industry of India, on January 5, 2017, India imposed substantial 'anti-dumping duty' on imports of jute and jute goods from Bangladesh. The investigation was to see whether export prices of jute from Bangladesh were set 'below fair market prices', after the Indian Jute Mills Association accused Bangladeshi exporters, for the first time in 40 years, of selling jute products at prices lower than that in India's domestic market.

In response, the Dhaka Chamber of Commerce and Industry (DCCI), based on an investigation outcome, said that "there is no clear finding of injury caused by Bangladesh's export price and volume to Indian local finished products" (DCCI protests proposed anti-dumping duty on jute, The Daily Star, January 8). While the Indian market accounts for 20 percent of all Bangladeshi exports of jute and jute-made products, Bangladesh's jute exports to India is equivalent to only 8 percent of the entire Indian market share.

The argument, therefore, presented by the DCCI that the share of Bangladeshi jute products in the Indian market is too insignificant to manipulate prices there, is clearly a valid one. Meanwhile, the DCCI also said that "the proposed anti-dumping duty could result in adverse multiplier impacts on our local growers, producers, exporters and spur further trade imbalance with India", which is already massive and of significant concern.

Then why did the Indian authorities decide to levy such hefty duties on Bangladeshi jute, even when Indian importers and manufacturers of jute products themselves said in the past that the quality of jute from Bangladesh is the best that they get to work with? Clearly, the justification that it was done to protect domestic producers in India is shaky at best. And it gets even more tenuous when you take into consideration the fact that Indian businesses, as recently as 2015, urged the authorities of both countries to allow Bangladeshi jute to enter the Indian market as it "would help stabilise prices".

On the current issue, when talks of investigations started, the Jute Products Importers Association (JPIA) of India had even sent a letter to the commerce minister of Bangladesh on January 28, 2016, asking him to intervene and prevent the imposition of duties that may restrict the import of jute products from Bangladesh. The letter read: "The JPIA strongly feels that there is no case of imposing any duty on import of jute goods from Bangladesh into India" (Export to India at high risk, The Daily Star, February 7, 2016). And according to a joint secretary of JPIA at the time, "The demand for jute goods in India is higher than the supply" and the gap is in fact "met by the imports from Bangladesh." Finally, he said that the real intention behind the move was to give "a few Indian millers" the opportunity to create "a monopoly market".

As harmful as that would be for the overall Indian economy, the imposition of the export duty is surely going to hurt Bangladesh as jute is already our third largest export behind garment and leather and, India, the biggest market for jute export. Meanwhile, the setback also comes at a time when some believed that the Bangladeshi jute industry was on the cusp of making significant strides forward with the help of China, which had offered technology and finance to Bangladesh for building a plant to make viscose fibre from jute (Indian jute sector jittery as China offers Bangladesh help, Business Standard, December 13, 2016). Currently, Bangladesh imports around 33,737 tonnes of viscose fibre - a lot of it from India - and once established, the plant could help Bangladesh save somewhere between Tk. 700 and 800 crore annually from not having to import it.

Another justification given by India for the tax imposition is that the Bangladesh government is subsidising its jute sector. Again, Bangladeshi government officials have already argued that the subsidies are not very high, planned to be lowered and eventually phased out. So why slap the tax? Why not negotiate with the Bangladesh government and work out a deal if that was India's main concern?

In the past, when it came to working out sensitive issues, the Bangladesh government has shown time and again that it is willing to discuss the matter over with its Indian counterpart and make concessions, sometimes, more than what its citizens and critics felt was justified. Take the matter of allowing India to transport its goods through Bangladesh's territory for example, charging amounts way lower than what it would cost Bangladesh to allow India to do so, as experts had estimated.

There are plenty more examples of when the Bangladesh government has been very magnanimous in terms of what it has been willing to give to India, in its various dealings. And obviously so, given the history of its friendship with India. The current governments of Prime Minister Modi and the Awami League had also shown a willingness to rapidly strengthen that tie in the past, and yet, the Indian side simply went ahead with something that would badly hurt its next door neighbour.

It is all the more surprising given that the tax would not really help the Indian economy from a holistic perspective. Thus, the Bangladesh government should immediately look to initiate talks with the Indian government and try to resolve the matter quickly. The tax does seriously damage Bangladesh's vision for its own future, but it also hurts India. At a time when we rapidly see the emergence of a potential Eurasian century, of which, Asia is central, we cannot be making such poor decisions. Sometimes, dialogue is the best answer, and working together, the key to finding a better outcome. I believe that this is, quite obviously, one of those times.

The writer is a member of the Editorial team at The Daily Star.