Bangladesh’s Formal and Informal Agricultural Trade with SAARC Countries Emerging Trends and Policy Challenges

Abstract

Bangladesh’s agricultural trade with SAARC countries, through formal channels, accounts for only about 2.4 percent of its global trade. However, formal trade movements do not reveal the actual picture concerning bilateral trade since a significant part of the agricultural trade takes place through informal channels. The nature and scale of trade through informal channels are driven by several factors including the cross border nature of production and supply chains, expectation of higher profit margin, social networks among local people, existing networks among informal traders across the border, and government’s border and trade-policy measures. This paper has attempted to (a) analyse Bangladesh’s agricultural trade pattern, trends and scale with SAARC countries, (b) highlight the related trade and non-trade barriers, (c) identify the concerns of transboundary plant and animal diseases originating from the high informal agricultural trade and, (d) come up with suggestions towards deepening Bangladesh agricultural trade with the SAARC countries. Analysis reveals that, amount of Bangladesh’s trade mis invoicing, on average, was about 32.6 percent of its recorded formal trade with SAARC countries, for the period 2013 to 2015. However, share of the amount due to trade misinvoicing varied across different time periods. The paper finds that, Bangladesh’s import duties on agricultural items are still significantly high. Also various non-trade barriers such as lengthy procedure, lack of harmonisation, absence of testing facilities and lack of mutual recognition arrangements as regards quality assurance, etc. encourage a part of the trade to take place through informal channels. A significant share of the informal trade was on account of informal cattle trade between Bangladesh and India. This was roughly estimated to be between USD 620 to 660 million per year with considerable volatility depending on border measures. The paper recommends that strengthening port capacity and customs facilities, harmonising customs rules and regulations, cross-border data sharing, pursuing strategic trade liberalisation policies for agricultural trade items and undertaking innovative border initiatives such as border haats could help reduce informal trade in agricultural goods.