India-Bangladesh Trade Spat Stings at a Time of Global Tariff Uncertainty

Dhaka's restrictions on Indian yarn imports will hurt both sides

- Nirmala Ganapathy

NEW DELHI - A global trade war would appear to be an opportune time to promote economic unity in South Asia.

Instead, Bangladesh and India are mired in a mini trade war, with the former having much more to lose, because of its greater reliance on exports.

On the recommendation of the country's commerce ministry made on March 27, Bangladesh's National Board of Revenue suspended the import of yarn from India through five land ports, including Benapole and Bhomra, from April 13. Indian yarn can now be imported only through sea routes, which is more expensive for yarn sent through northern India.

The decision by the Bangladesh government comes on the back of complaints by the country's textile millers of unfair competition from cheaper Indian yarn, as well as smuggling.

In response, India withdrew transshipment facilities for Bangladesh on April 8.

Unlike Asean, South Asia has struggled with economic integration, with the latest trade spat underlining how poor political ties among neighbours continue to hamper trade relations even at a time of global trade uncertainty brought on by impending US reciprocal tariffs.

Bangladesh is trying to negotiate its way out of a 37 per cent US reciprocal tariff, while India, which was hit with a 26 per cent tariff, hopes to negotiate a bilateral trade agreement with the Trump administration.

The transshipment facility, offered in 2020, allowed Bangladesh to export goods to other countries using Indian land Customs stations, ports and airports. The April 8 order exempts Bangladesh's exports to Nepal and Bhutan.

Mr Randhir Jaiswal, a spokesman for India's Ministry of External Affairs, said at a press briefing on April 17 that India had suspended the transshipment facility because of "congestion at our ports and our airports".