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BIMSTEC and China – An Overview ; By Nisha Saini

Updated: Aug 26, 2022

Image Courtesy: Wikimedia Commons

Article 15/2022


Introduction

The regional and sub-regional organization does impart a significant role in the domain of the international environment. There are many aspects due to which regional organization comes into existence. The reasons are:-

  1. Economic integration, trade, foreign direct investment.

  2. Socio-economic through people to people contact, import and export of goods.

  3. Geopolitical with their geographical location and governmental collaboration.

  4. Internal and external issues such as terrorism, no definite border, a continuous attempt of invading, hostile cooperation, history of war and policy also dual foreign policy.

  5. Collaboration of countries due to their presence in the same region.

  6. For better mutual understanding to work together on various subjects.

  7. To cooperate on maritime issues, air zone and military exercises for evident viewpoints of each other mechanism for equal level performance.

  8. Representing the region in the international summits and agreements.

  9. Lastly, not to forget for prosperity and development of the region together with the developed world.

Similarly, BIMSTEC is also a sub-regional organization that has risen to fame due to the geographical proximity of seven countries with each other; these countries are in regions of South Asia and South-East Asia surrounded by the Bay of Bengal. This southern region has proximity to the lithosphere of landmass; sea and air accept the two countries Nepal and Bhutan. These countries are also close by to ASEAN countries and the Indian Ocean too which makes the region more crucial. The member countries in BIMSTEC were already a part of SAARC countries and various other regional organizations such as BBIN, BCIM too.

However, besides these regional organizations, the south Asian countries make up India. These countries are also cooperating with China on various platforms such as China-South Asian Countries Poverty Alleviation and Cooperative Development Centre in Chongqing City, China-South Asia cultural forum, China-South Asia friendship organization, China-South Asia cooperation forum.

Therefore, further to understand china’s cooperation with the South Asian countries. First of all, let’s have a look at trade agreements and their types. Before, we do a deep study about the free trade agreement of South Asian and South-East Asian countries with China in BIMSTEC.

Trade Agreement and their types

Trade agreements are contractual agreements for the exchange of goods and services which can be between two, three, and more countries. It can be bilateral, trilateral or multilateral. These agreements are for boosting the economy too. In short, trade agreements are designed according to the economic interest of nations.

Types of the free trade agreements are: –

  1. Free Trade agreement

  2. Preferential Trade Agreement

  3. Comprehensive Economic Partnership Agreement

  4. Comprehensive Economic Cooperation Agreement

  5. Framework agreement

  6. Early Harvest Scheme.

Despite these trade agreements mentioned above, more agreements related to trade can come up anytime by the countries in the world for achieving their objectives.

 Free trade agreement of China with southern Asian countries

China- Nepal trade agreement

According to the Ministry of foreign affairs Nepal, the first “Agreement between China and Nepal on Economic Aid” was signed in October 1956. The assistance to Nepal by the Chinese comes in three categories of grants such as aid grants, interest-free loans and concessional loans. In one of the china briefings by Melissa Cyrill states that “Both countries had carried a study for potential FTA. China has also proposed the development of cross-border economic zones. Even before the finalization of FTA in the year 2017, Nepal is supported by China in a duty-free facility for 8,700 products. The reason behind this was Nepal’s lack of manufacturing capabilities.”

Further, in the year 2018, China and Nepal took a decision to finalise the Free Trade Agreement. Similarly, both countries had signed a trade and transit treaty that has come into effect since 1st January 2020.  This permits Nepal to utilize the railway of Tibet for exporting and importing through third countries by means of seaports on China’s east coast.

China- Bhutan trade agreement

According to Asia Regional integration centre, “Bhutan has four free trade agreements they are BIMSTEC free trade agreement, Bangladesh-Bhutan preferential trade agreement, Bhutan-India trade agreement and South Asian free trade agreement. Besides these agreements, China and Bhutan do import and export goods and services. As per the observatory of economic complexity in 2019, “Bhutan exported imitation jewellery ($30.8k), knit t-shirts ($6.31k), and collector’s items ($1.55k). The exports of Bhutan to China have increased from $ 20.7k in 1995 to $45k in 2019. Similarly, China export to Bhutan has also increased from $199k in 1995to $10.7 million in 2019.”  To have a clear picture of this, the graph below from trading economics shows the export of China to Bhutan from January 2021 to Jan 2022. One can analyse that they do cooperate in economic terms.

Bhutan is an open economy and trading is an essential dimension for generating revenue for its economy. On this note, there is another South Asian country Bangladesh that lies between the delta of the Padma (Ganges) and Jamuna (Brahmaputra) rivers in the north-eastern part of the Indian subcontinent. This country too has a trade agreement with China.

China- Bangladesh trade agreement

The journey of free trade agreement between China with Bangladesh began in the year 2014 and a memorandum of understanding was signed in 2016. According to Bangladesh Investment Development Authority, discussions, negotiations are going on for the free trade agreement. One of the statements that elucidate this is, “discussions were held on June 6, 2021, organised cooperatively by Economic Reporters’ Forum (ERF) and Bangladesh China Chamber of Commerce and Industry (BCCCI). Further, it was stated by H.E. Chinese Ambassador to Bangladesh Li Jiming that Bangladesh and China should consider an FTA combined with an investment deal.”

At the same time, Bangladesh is trading with China on a preferential trade agreements under the (Asia- Pacific Trade Agreement). Bangladesh mostly imports machinery, cotton, consumer products and chemical products from China, whereas it exports jute, jute products, readymade garments and processed leather to China. The current collaboration between the two countries is intended at increasing financial exchange, trade, construction of main missions in areas such as infrastructure, energy, electricity, transportation, information, telecom, agriculture, and strengthening practical assistance under the BCIM Economic Corridor between Bangladesh, China, India and Myanmar. Other trade agreements of which Bangladesh is part of South Asian Free trade Area (SAFTA), SAARC Preferential Trade Arrangement (SAPTA) and BIMSTEC trade negotiation committee.

Similarly, in the year 2020 China had announced 97 percent tariff exemption in trade with Bangladesh. With this percentage Bangladesh as least developed country will join “Zero-Tariff Club”. A total of 8,256 Bangladeshi produce is exempted from tariffs. During the Asian-African Conference that took place in Indonesia, Chinese President Xi Jinping proclaimed that China will grant duty-free market access for Least Developed Countries (LDC) within a year. This favourable market access scheme will be practical solitarily for imports from LDCs that have diplomatic relations with China. To further understand the south Asia engagement with China, we have to read about Sri Lanka and China.

China -Sri Lanka Trade Agreement

In accordance with the Ministry of foreign affairs Sri Lanka, “Historically, the economic links and formal diplomatic connections between China and Sri Lanka began in 1950s. The 1952 Sino-Sri Lankan rubber rice pact and first agreement on economic and technological operation in 1962 are substantial mark in official relations between them. The economic agreements signed in 1982, Sino-Lanka Joint Trade Committee and Sino-Lanka Economic and Trade Cooperation Committee, were incorporated in 1991 as the Sino-Lanka Joint Commission for Economic and Trade Cooperation. In 1994 the Sri Lanka – China Business Cooperation Council was formed and eight joint or bilateral agreements and Memorandum of Understanding (MOUs) were signed in 2007 on the occasion of golden jubilee celebrations of diplomatic relations between two countries. In 2009, banks of both the countries Sri Lanka and China (Central Bank of Sri Lanka) and (China Development Bank) signed an investment facilitation agreement with the objective of promoting investments between the two countries.

Sri Lanka has four trade agreements such as SAFTA (South- Asian free trade agreement), ISFTA (Indo- Sri Lanka free trade agreement), APTA (Asia-Pacific Trade Agreement) and PSFTA (Pakistan- Sri Lanka Free trade agreement). The free trade agreement between China and Sri Lanka negotiations went on board in the year 2014 that hoped to open a vast Chinese market for Sri Lankan products. In 2018 there were some obstacles in FTA of Sri Lanka and China. A Point to be noted is even though Sri Lanka doesn’t have FTA with China. Still, the import of Sri Lankan products is increasing by china then India.

China-Myanmar trade agreements

Myanmar is a country that is rich in natural resources such as oil and natural gas. It has regional trade agreements with China being a south East Asian country such as China – ASEAN free trade agreement established in 1998. Myanmar is a member of WTO and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).  Myanmar has border trade agreements with China, India, Bangladesh, Thailand, and Laos.

Besides this, according to Sumanth Samsani of ORF, stated in his paper that  2019 data about the bilateral trade between Myanmar and China stands at about USD 12 billion out of the nearly USD 36 billion trade . In 2019, China occupied a 31.7 % share in its exports and a 34.7 % share in its imports. Since 2001, Myanmar imports its largest share of goods from China. Imports from China mainly consist of machinery, metal products, vehicles, and telecommunication equipment.

On the contrary, Myanmar exports some necessary goods to China. For example, the refined tin that is utilised for purpose of circuit-board soldering.  About 30-35 % of the overall tin concentrate required to produce refined tin comes from Myanmar regardless of China having a large amount of tin resources in the world. The majority of the exports to China though consist of oil and gas takes up about 32% of the exports to China. This import and export between China and Myanmar show the strength of the economic dimension between both the countries. Similarly, another south East Asian country Thailand also has a trade agreement with China.

China-Thailand trade agreement

Thailand is a signatory to 15 Free Trade Agreements (of which 14 are implemented). About nine FTA’s are in negotiation. At the same time, Thailand has also signed bilateral trade agreements with China. The China-Thailand Free Trade Agreement (FTA) was signed in June 2003 and was upshot four months later, in October 2003. It is a “farm trade early crop agreement.” Both nations unlocked their agricultural marketplaces before the bigger China-ASEAN FTA took into effect in 2010 and tariffs on 188 diverse fruits and vegetables were reduced to zero as the objective of the agreement.

On the contrary, the negative impact of the China-Thailand Free Trade Agreement had been assessed by one of the NGOs, farmers’ groups, academia, and the media in Thailand. For example, Thai garlic, longan, and other fruit and vegetable growers, particularly in the north, have lost their livelihoods because of the cheap Chinese imports. Only Thai cassava exports increased, despite official pledges. In opposition, according to market research, Thai produce incoming China was left to get worse at the entry point by indigenous warehouse workers, preventing it from being commercialized.

At the same time, Thai people have criticized cheap Chinese fruits and vegetables for having too much pesticide remains levels. However, this has since encouraged both countries to make common private food safety standards (Thai-China GAP). Generally, the China-Thailand Free Trade Agreement has been destructive to small farmers on both sides of the border. It has profited only wholesalers who regulate the trade and can use it to grow their contract farming businesses, such as Thailand’s Charoen Pokphand Group, which is held by Chinese owners. After Malaysia and Singapore, Thailand is China’s third-largest trading partner in ASEAN. This gives us an insight that China and Thai FTA is not supported by all sections of people but a few. Also, nothing has been done to improve the FTA for the welfare of the small farmer. Finally, after focusing on these countries now comes the turn of Asia’s two large economies, dynamic societies and trendsetters in the international arena. They are China and India.

China- India trade agreement

In historical context, India and China trade agreement in 1975 talks about Asia-Pacific Trade Agreement (APTA), a preferential trade arrangement formerly known as the Bangkok Agreement. That was a brainchild of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), being a preferential trade arrangement among developing countries.  Similarly, in 2003, China and India established a Joint Study Group to inspect the potential of economic commitment between the two countries. In October 2007, the Joint Task Force confirmed its report on the feasibility of a China-India Regional Trading Arrangement (RTA). According to the probability information, China-India RTA will be mutually advantageous for both countries. In accordance with the study done India and China welcomed the conclusion on the RTA and agreed to explore the option of commencing negotiations on an RTA that meets the common objectives of both countries and will also benefit the region.

At the same time, even during pandemic India – China trade grew. According to the Indian Express, “Despite India’s effort to reduce the dependence on Chinese imports. The country’s bilateral trade with China has risen about 44 percent in 2021. On the other hand, India’s exports to China grew to $28.1 billion in the calendar year 2021, from 34.9 percent exports worth $20.9 billion in 2020. The reason for its impact is considered to be Covid-19 constraints, according to Chinese government data.”

Conclusion

To conclude, all the countries are engaged with China with some of the other Trade Agreements and even free trade agreements for their economic development, the prosperity of the country. One thing which becomes clear is that trade agreement goes through many stages of study, planning, discussions, negotiations, marking common goals with tariff and non-tariff barriers also duty-free zones if given by developed countries that are trading with them.  All want to gain profit and keep their import less and exports more but sometimes developed countries trade with the least developed countries for achieving their long-term benefit as well. So, we can say in one word that is “Trade Diplomacy”. The least developed countries cooperate because they need assistance for the development and growth of the country and its people. Hence, economic engagement is necessary for today’s globalization era.

(Nisha Saini is a research officer at the Chennai Centre for China Studies. She holds an M.Phil from the University of Madras. The views expressed are personal and does not reflect the views of C3S.)

Reference

  1. Cyrill, Melissa. 2017. China’s Free Trade Agreements in South Asia, China Briefing, (https://www.china-briefing.com/news/chinas-free-trade-agreements-in-south-asia/)

  2. Asia Regional Integration Centre-free trade agreement (https://aric.adb.org/fta-country).

  3. 2019. Company shipment records, China- Bhutan and vice-versa (https://oec.world/en/profile/bilateralcountry/chn/partner/btn#:~:text=M%20in%202019.,In%202019%2C%20Bhutan%20exported%20%2445k%20to%20China.,to%20%2445k%20in%202019).

  4. Ministry of foreign affairs, Government of Nepal, (https://mofa.gov.np/nepal-china-relations/).

  5. Kumar, Ramesh. 2020. Nepal-China agreements are stuck , Nepal Times , (https://www.nepalitimes.com/latest/nepal-china-agreements-are-stuck/).

  6. BIMSTEC,(https://bimstec.org/?page_id=189#:~:text=Setting,The%20Bay%20of%20Bengal%20Initiative%20for%20MultiSectoral%20Technical%20and,constituting%20a%20con).

  7. 2021.Bangladesh in FTA talks with China: minister , Investment News,  (https://bida.gov.bd/details/bangladesh-fta-talks-china  minister#:~:text=Chinese%20Ambassador%20to%20Bangladesh%20Li,for%20exports%20to%20this%20market).

  8. Siddiqui, M.S.2019. China-Bangladesh FTA— an overview, The financial express, (https://thefinancialexpress.com.bd/views/china-bangladesh-fta-an-overview-1552662271).

  9. The Economic Times. 2020. China Woos Bangladesh, provide tariff exemption for 97% of exports from Dhaka, (https://economictimes.indiatimes.com/news/defence/nepal-on-its-side-china-now-woos-bangladesh/articleshow/76477205.cms?from=mdr).

  10. Foreign Ministry Sri Lanka.2014. China-Sri Lanka economic affiliations: Trends and opportunities, ( https://mfa.gov.lk/china-sri-lanka-economic-affiliations-trends-and-opportunities/).

  11. Study on China- Sri Lanka free trade agreement, institute of policy studies of Sri Lanka, (https://www.ips.lk/images/docs/research/highlights/Executive%20Summary.pdf).

  12. 2021. Thailand –China Free Trade Agreement,   (https://mahanakornpartners.com/the-china-thailand-free-trade-agreement/).

  13. Singh, Karunjit .2022. Explained: India’s bilateral trade with China in 2021, The Indian Express, (https://indianexpress.com/article/explained/india-china-trade-explained7740518/#:~:text=India’s%20total%20trade%20with%20China,updated%20only%20till%20November%202021).

  14. Samsani, Sumanth .2021. Understanding the relations between Myanmar and China, ORF, ((https://www.orfonline.org/expert-speak/understanding-the-relations-between-myanmar-and-china/).

  15. India Briefing.2021. What’s Going on with India-China Preferential and Free Trade Agreements?, (https://www.india-briefing.com/news/whats-going-on-with-india-china-preferential-and-free-trade html/#:~:text=India%20and%20China%20do%20have,known%20as%20the%20Bangkok%20Agreement).

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