In 2008 the world was rocked with the ‘Rice crisis’ when rising prices, some shortages and speculation led to rice exporting countries like India stopping the export of rice.
This also affected Bhutan, which imports the overwhelming majority of its rice from India. It was only after a special request from Bhutan’s government that the country was taken off the rice export ban list, for that particular period.
However, given the volatility of global agriculture and trade Bhutan could still fall victim to other potential export bans in the future from our largest source of imports, which is India.
To ensure this will no longer happen the new version of the Free Trade Agreement negotiated by the Bhutan government with India has a new clause which specifies that Bhutan will not be subject to any export bans by India. The only condition is that in case of such international bans Bhutan will not import and re-export those items to other countries.
This is also a follow up on the visit of Indian Prime Minister Narendra Modi in 2014 where it was said that Bhutan would be exempt from any ban on export of milk powder, wheat, edible oil, pulses and non-basmati rice. In the negotiation the Bhutan government used this then commitment from the Indian PM to get the clause included in the Trade Agreement.
The Freed Trade Agreement between Bhutan and India known as the ‘Agreement on Trade, Commerce and Transit between India and Bhutan’ is signed every 10 years since 1972 to enable both countries to trade with each other along with trade transit rights.
The last agreement which was signed on 29th July 2006 came to end on 29th July 2016, but was extended temporarily for a year until the negotiations got completed.
Another clause in the agreement that will be a relief to car importers is that third country vehicles, imported through Kolkata’s port will no longer have to come compulsorily on the back of trucks but can drive on their own power to Bhutan.
This was a problem earlier as even when only one or two cars were imported they had to wait till they could be enough in numbers to find a truck and then be loaded and unloaded.
Currently Bhutan and India have around 17 entry and exit point for trade. To facilitate trade for Bhutan India has agreed to add five more so that traders don’t necessarily have to come through points like Jaigaon and Phuntsholing.
Another change is that for excise duty refund a data base will be maintained for calculating the correct amount.
The ground work for the agreement was done by the Ministry of Economic Affairs (MoEA) and later other government agencies after which a government team consisting of the MoEA, Ministry of Finance and Foreign Ministry negotiated with their counterparts in India.
After the negotiations an agreement was drawn up. The agreement though agreed to by India was studied in greater detail by a cabinet sub-committee of four ministers in Bhutan relevant to the agreement. This was to avoid any unseen implications and to do a final check before a final go ahead by the cabinet.
The sub-committee has done it work and with no negative implications for Bhutan the cabinet will take a final call soon.
Bhutan is also inviting the Indian Commerce and Industry Minister, Nirmala Sitharaman to sign the agreement. After that it will be put up for ratification to Parliament.
The Agreement between the two countries has around 11 to 12 Articles.
The heart of the agreement is that there will be free trade and commerce between the territories of the Bhutan and India.
However, the Royal Government of Bhutan can impose non-tariff restrictions on the entry into Bhutan of certain goods of Indian origin as may be necessary for the protection of industries in Bhutan. Such restrictions, however, will not be stricter than those applied to goods of third country origin.
All exports and imports of Bhutan to and from countries other than India will be free from and not subject to customs duties and trade restrictions of the Indian government.
Notwithstanding the foregoing provisions, either contracting party may maintain or introduce such measures or restrictions as are necessary for the purpose of protecting public morals, human, animal and plant life, implementing laws relating to import and export of gold and silver bullion, safeguarding national treasures and safeguarding such other interests as may be mutually agreed upon.
The agreement will be applicable for a period of ten years.