Vol. 5 Num 684 Wed. May 03, 2006  

Transit and free trade with India

"The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connection as possible."
-- George Washington

PRESUMABLY, winning power is more important for Bangladesh's politicians than the prosperity of the nation. It was different with Bangabandhu, who, at his peak, famously said that he "does not want the office of the Prime Minister but the rights of the people." Ever since then, there has been no politician following that example of putting the people's cause before personal political interest. Perhaps, this is why despite three elections since 1991, there has been neither stunning development nor ample reform in the country.

Our political course is one where parties shun serious issues other than those that are irrelevant to the people. Problems such as electricity generation have been the biggest failure of all governments but no mainstream political parties have any public policies on how to produce sufficient electricity. They keep these issues to sort out when, or if, elected to power, or in organising demonstrations to seize and burn electricity offices to show people they care, but without proposing effective solutions. Unless ideas are public and openly discussed and debated, it is difficult for any government or political party to solve national problems in the absence of informed public opinion.

Bureaucratic red tape and unfair business interests sabotage reforms when they are without the people's support. Through various means, vested groups dupe politicians into corruption and other regulative deceit. The energy sector, for example, is vast, and requires private FDI, in competition with World Bank money for the public sector, but the possibilities are blocked as there are no favourable options for liberal private investments in the severely under-performing but highly corrupt energy sector.

Free trade and transit to India is another subject that politicians do not address. The Awami League government in 1972 had a one-year agreement with India for the "use of their waterways, railways, and roadways for commerce between the two countries and for passage of goods between two places in one country through the territory of the other." The AL government under Sheikh Hasina in 1996-2001 also agreed to reopen the old Bongaon (India) and Jessore (Bangladesh) broad gauge railway line closed since the India-Pakistan war in 1965.

Earlier, the Ershad government signed a working agreement in 1990 with India to reopen the broad gauge. Begum Zia's government in 1993 made transit facilities conditional on the Farakka water issue. In 2006, it again snubbed Indian plea for transit on grounds of water sharing, national security, and domestic trade protection.

Thus, no agreement between Bangladesh and India went beyond official desks and long-standing issues between the two countries remains bottlenecked, as there is no public debate and discussion initiated by the leadership. The fear of unsupportive public opinion, of the establishment turning against them, and their own lack of credibility or acumen, keeps politicians away from necessary deliberations on issues as free trade and transit to India.

Bangladesh's politicians fanatically focus on winning or clutching to government power. Their heart is in nothing else. The party leadership, mostly, is unbearably clannish and the leaders pathological autocrats. The Awami League cannot be the alternative to BNP if people are aspiring for authentic democracy. Any student of political science would confirm that democracy in Bangladesh, where the ruling government enjoys "absolute power" that "corrupts absolutely," is not genuine.

The Awami alliance, non-stop, seeks reforms to the caretaker system solely for winning power but they never make an issue of important and long-standing political restructuring such as: decentralisation, judicial sovereignty, media independence, constitutionally mandatory internal party democracy, neutral police, or economic liberalisation. In the absence of these, no elections, even free and fair, can bring any good to the people.

Democracy in Bangladeshi is entirely a "winner takes all" disorder that make power struggle violent, bloody, and damaging for people and property. Our local laureates, instead of pursuing the impossible task of selecting honest parliamentary candidates, can begin a movement for genuine democracy to take place. The legal system, if democracy is real, is sufficient to penalize the corrupt, thereby deterring the dishonest.

Nevertheless, before the Indo-Pak war in 1965, rail links facilitating goods and people between India and Bangladesh existed since the British colonial times. One reason for Bangladesh's economy sliding backwards in the past few decades is its isolation that began in 1965 cutting off links to markets and commerce with neighbouring India. Bangladesh is historically, geographically, and commercially closer to India than to any other member of Saarc and normal trading is important for both the peoples.

Government's trade policies that restrict rural cross border trading with India or other neighbouring countries deprive Bangladesh's rural population, nearly 80% of the total, of secondary sources of income and livelihood. Farming, the world over, depends on favourable weather that is always unpredictable. Furthermore, agricultural input such as diesel, seed, and fertiliser are persistently erratic in supply and price. Cross border trading help farmers to sustain themselves and even to prosper, but complex rules and protectionist policies have made trading the exclusive domain of city dwellers queuing with banks and bureaucrats for permits and paperwork.

Some 200 years back, Adam Smith's endorsement of international division of labour, and after him, David Ricardo's theory of comparative advantage laid the principles of free trade between countries, but it took heroic efforts by men as Richard Cobden [1802-1865] to make it work as in Britain. Cobden was a parliamentarian and a successful cotton trader during the times of Sir Robert Peel, Lord Palmerston, and William Gladstone. He opposed laws that protected the rich farming aristocrats and his public agitation swept away protectionism with the repeal of the Corn Laws in the 1840s. Thereafter, the consumer prices of essentials as corn, barley, oat, and wheat, came within the reach of British people, but protectionist tendencies do not disappear unless fought consistently.

Similarly, it is necessary for Bangladeshi people to oppose the vested class favouring protectionism. However, our politicians, usually, do not have the dedication or the intellectual conviction to stand up for critical issues such as free trade and transit. Therefore, these matters are sadly in the hands of planners and schemers who freeze the liberalisation process with complex regulations and extended lobbying to protect their interests.

There are strong claims that India will swamp the Bangladeshi economy by its sheer size, as many theoreticians predict, and as the market nearly prove today, but one must only look to the example of Hong Kong, a free exporting and importing country that has been flourishing next to mainland China for years. Similar free trade system is in Taiwan and Singapore. They became strong economic powers by keeping their economies open. It is their liberal economic principles not their size or balanced trade accounts that have kept their economy healthy and rich.

Indisputably, Bangladesh's trade deficit with India means trade surplus with another, as with the US. America has trade deficit with China but a surplus with Hong Kong, and many others. We, as consumers, have trade deficit with our local shops, but we never expect the shops to buy something in return to balance our books. It is no different for national accounts. There should not be much hullabaloo over any bilateral deficit. No trader forces Indian goods upon Bangladeshi consumers: they are freely chosen and no one should disallow that individual choice and freedom.

To develop an economy, free trade must not be conditional or reciprocal with countries, but unilateral, as greater market freedom leads to greater wealth for people. The free market economy is not independent or self-reliant but inter-reliant and interdependent. Free market or free trade is an exchange and discovery process that views people as gifted and ingenious.

Transit rights are synchronous and unified with free trade, and India will have transit rights when Bangladesh is politically ready for liberalised trade. Until then, protectionism is wrong, an economic error sustained for unjust reward for a few manufacturers and traders.

The free trade and transit package with India, when actualised, will give us far more gains than it will to India. Transit without free trade would mean the movement of Indian goods through Bangladesh, but free trade would increase the possibility of Bangladeshi goods and services going across the border to the Indian side as well.

Nizam Ahmad is Director, Liberal Bangla, UK.