India Suspends Key Trade Transit for Bangladesh Amid Rising Concerns Over Chinese Influence

India's Trade Transit Suspension Explained

India has recently halted a significant trade transit arrangement with Bangladesh, shortly after a Bangladeshi official hinted at a potential increase in China's economic involvement in India's Northeast region.

Details of the Suspension

On April 8, the Central Board of Indirect Taxes and Customs (CBIC) in India issued a notice revoking a 2020 directive that permitted Bangladesh to utilize Indian land customs stations for exporting goods to third nations via Indian ports and airports.

This suspension is effective immediately, although shipments currently in transit will be permitted to proceed under the previous regulations.

Understanding Transshipment Facilities

A transshipment facility allows a nation to transport export goods through another country's territory to reach their final destination. For Bangladesh, the Indian route was crucial for trade with neighboring countries like Nepal, Bhutan, and Myanmar.

Concerns Arise from Yunus' Comments

This decision comes in the wake of remarks made by Professor Muhammad Yunus, a key advisor to Bangladesh’s interim government, during his visit to China from March 26 to 29.

Yunus stated, "The seven northeastern states of India, often referred to as the seven sisters, are landlocked and lack direct ocean access. We serve as the sole guardians of the ocean for this entire region, presenting a significant opportunity. This could evolve into an extension of the Chinese economy, facilitating production and marketing of goods for export to China and beyond."

Reactions from Assam's Chief Minister

Assam's Chief Minister, Himanta Biswa Sarma, expressed his discontent with Yunus’ statements, labeling them as 'offensive' and emphasizing India's vulnerability in the narrow Siliguri Corridor, which links mainland India to its Northeast.

He advocated for the development of alternative routes and enhanced infrastructure to bolster the region's connectivity.

Yunus' assertion that Bangladesh is the 'only guardian of the ocean' for India's landlocked Northeast and his suggestion of the region becoming an 'extension of the Chinese economy' were perceived in India as attempts to elevate China's role in a sensitive area.

Consequences for Regional Trade

Experts in trade caution that this suspension could hinder Bangladesh's cargo transport to Bhutan, Nepal, and Myanmar, as these landlocked nations depend on Indian infrastructure for access to Bangladeshi markets.

India has historically supported Bangladesh's exports, providing duty-free access to a majority of goods. Analysts suggest that Bangladesh's recent invitation to China for investment in the Lalmonirhat airbase, located near India's Siliguri Corridor, may have prompted this decision.

Potential WTO Implications

This action could raise issues concerning World Trade Organization (WTO) regulations, which ensure transit rights for landlocked countries. According to Article V of the GATT and Article 11 of the Trade Facilitation Agreement, WTO members are obligated to allow free transit and minimize trade barriers.