Bhutan Trade Agreements

Bhutan has been in the process of joining the WTO since 1999, but progress has stalled due to opposition from the previous government. Although Bhutan`s tariffs are not linked to the WTO, as of 2007 it has a high average tariff of 17.8% and many non-tariff barriers. However, little information is available on tariff and non-tariff barriers. Bhutan`s trade structure is dominated by its close ties with India. This very liberal bilateral free trade agreement (FTA) includes duty-free and quota-free trade and, therefore, trade with India is not limited by customs or rules of origin. Most of the trade takes place with India, accounting for almost 90% of net exports and 75% of imports (UNDP 2012). Exports beyond hydropower to India remain minimal and of little value. Most imported goods travel by land through India to Bhutan. (Bertelsmann Stiftung, 2014) The European Union`s Generalised System of Preferences (GSP) and Everything But Arms (EBA) programme have been extended to Bhutan, but the country has not yet been able to take full advantage of this opportunity. Bhutan is a member of the South Asian Free Trade Area (SAFTA), which is considered the most beneficial instrument of cooperation in the region.

However, small countries such as Bhutan, Maldives and Nepal have not increased their exports as a direct result of SAFTA, as the main export destination, India, has already liberalized imports from these countries and market access for agricultural products is still blocked by sensitive lists of non-LDC countries. Bangladesh`s exports to Bhutan could increase due to the bilateral trade deal signed last year, after deliveries to the South Asian country have already shown a significant upward trend. Trade between the two countries is part of the bilateral trade agreement signed in 1980. The PTA will serve as a formal legal document on trade between the two countries, according to the economy minister. «The agreement will help us improve our trade. It also helps us strengthen our relationships with our business partners,» said Lyonpo Loknath Sharma. The volume of trade with India has steadily increased over the years and India remains Bhutan`s largest trading partner. Currently, the trade balance is strongly in favour of India. In 2015, the total value of imports from India was Nu. 53.74 billion, while the total value of exports to India (including electricity) was Nu. 31.80 billion. The Bhutan Bureau of Standards is an umbrella institution that coordinates and monitors all standardization and related activities.

He is responsible for standards, metrology and certification. Bhutan is not only a corresponding member of the International Organization for Standardization, but also recognizes the mark of the Bureau of Indian Standards in accordance with the India-Bhutan Agreement on the Operation of the Certification System. In addition, the Bhutanese Agriculture and Food Regulatory Authority shall develop scientific testing facilities and procedures in accordance with international standards established by the Food and Agriculture Organization of the United Nations, the World Health Organization, the Codex Alimentarius, the World Organization for Animal Health, the International Plant Protection Convention and the Convention on Biological Diversity, of which Bhutan is a member. It accepts sanitary and phytosanitary (SANITARY) (DPC) measures from other countries that apply internationally recognized and accepted PLC approaches in practice. Since neighbouring countries tend to have similar pest and disease profiles, SPS trade barriers tend to be relatively low. However, SPS barriers to trade with developed countries can be very significant. The Government of India has been involved in the planned development of Bhutan since the beginning of the planned development of Bhutan, when the first five-year plan was launched in 1961, and remains our main development partner. Mutually beneficial economic relations have been at the heart of Bhutan-India relations. Currently, India is not only Bhutan`s most important development partner, but also its largest trading partner. Bangladesh concluded its first Preferential Trade Agreement (EPA) with Bhutan on December 6 last year.

Bhutan and Bangladesh have finalized draft conditions for the signing of a Preferential Trade Agreement (PTA), which is expected to increase trade between the two countries. The reciprocal trade balance is in Bhutan`s favour, as Bangladesh imports many fruits and stones. Under the agreement, 16 products from Bhutan and 10 products from Bangladesh would be duty-free. The product list focuses on goods with which the two countries already trade a lot, such as food and stone products for Bhutan and GMI and food products for Bangladesh. Nevertheless, the Economist Intelligence Unit expects the impact of the trade deal to be marginal due to the low volume of trade between the two countries (Bhutan accounts for just over 0.1% of Bangladesh`s total exports, while Bangladesh absorbs about 6% of Bhutan`s exports). The agreement was signed on 50 September. Anniversary of the recognition of Bangladesh`s separation from Pakistan (Bhutan was the first country to do so). It is also Bangladesh`s first PTA since independence. Bangladesh is expected to officially be granted «least developed country» status by the United Nations by 2024, which will result in a restriction of its duty-free access to various export destinations. To prepare for this eventuality, the Government of Bangladesh has taken a more active position to secure bilateral trade agreements that maintain the price competitiveness of its ready-to-wear (RMG) exports. A trade agreement with Bhutan is a modest but significant step in this direction. For Bhutan, in addition to facilitating access for some of its exports to Bangladesh, the agreement means continuous improvement in bilateral relations, which could facilitate its access to Bangladesh`s seaports.

This would benefit Bhutan`s internal trade and reduce its dependence on India. Although Bhutan grants Bangladesh duty-free access to more goods than usual, the economy minister said this would not affect the trade balance, which is now in Bhutan`s favor, mainly due to the export of rocks and minerals. Noor Md Mahbubul Haque, additional secretary of the free trade agreement of the Ministry of Commerce, said no one had complained that he did not enjoy the tariff advantage for Bhutan under the PTA, as the agreement has been in force since it was signed. There is a free trade regime between Bhutan and India. The framework for trade relations is the 2007 Indo-Bhutanese Treaty of Friendship. The Trade, Trade and Transit Agreement was first signed in 1972 and is renewed every 10 years. It was last renewed in July 2006 and the Bhutan-India meeting on the renewal of the Bhutan-India Agreement on Trade, Trade and Transit was held in New Delhi from 5 to 6 July 2016. Subsequently, the new Agreement on Trade, Commerce and Transit between India and the Royal Government of Bhutan was signed on 12 November 2016 by Smt.

Nirmala Sitharaman, Independent Trade and Industry Officer, Government of India, and Lyonpo Lekey Dorji, Minister of Economic Affairs, Royal Government of Bhutan. It is valid for 10 years until 2026. «Our industries should increase their production levels with the signing of the preferential trade agreement with Bangladesh,» he said. On December 6, Bangladesh`s Minister of Commerce, Tipu Munshi, and Bhutan`s Minister of Economy, Lyonpo Loknath Sharma, effectively signed a bilateral preferential trade agreement (PTA) that increases the number of goods with duty-free access. The Kingdom of Bhutan is considered a low- and middle-income country open to trade. Over the past 30 years, the economy has grown steadily at a rate of 7% per year. Over the past decade, Bhutan has taken steps to modernize its economic structure and reduce poverty. Hydropower is the backbone of its economy, accounting for more than 12% of its GDP, 40% of its total exports – nearly 90% of it to India. Industry generates 45% of government revenues. Exports of minerals and mineral products account for almost half of total exports. Bhutan`s economy remains dominated by state-owned enterprises, with the private sector accounting for only 8 per cent of total government revenues.

In order to promote private sector development, a number of guidelines and laws have been formulated in recent years (UNDP 2012; World Bank, 2013). There are various logistical and technical obstacles to trade development and diversification. However, the main obstacle is the underdevelopment of Bhutan`s supply chain. Market access and demand for Bhutan`s goods and services are very favourable due to Bhutan`s fully open access to the Indian market under one of the most liberal trade agreements in the world. It also has duty-free and quota-free access to the markets of Europe and the United States as a least developed country (LDC) (UNDP 2012). We do not expect the signing of LOMÉ between Bangladesh and Bhutan to have a significant impact on our foreign trade forecasts for either country due to underdeveloped trade relations. nevertheless, it reinforces our vision of strong bilateral relations between the two. Experts believe the signing of the PTA was a good start as the country negotiates trade agreements with key trading partners to ensure tariff benefits once Bangladesh completes the group of least developed countries in 2026. Mostofa Azad Chowdhury Babu, vice president of the Federation of Bangladesh Chambers of Commerce and Industry, also said that no one had filed a complaint with the main trade organization. The bilateral meeting on trade and transit between Bhutan and India to discuss trade-related issues is held regularly between the two sides. .