Trade and Transit agreement with India comes through in NC

The National Council ratified the Agreement on Trade, Commerce and Transit between the Kingdom of Bhutan and Government of India in yesterday’s session, which was last revised in 2006.

Economic Affairs Minister Lekey Dorji, who presented the renewed agreement to the council, said the first trade agreement was signed in 1972 between Bhutan and India. “Since then, the agreement has been revised four times,” said Lyonpo Lekey Dorji.

The minister said the renewed agreement aims to further develop trade facilitation through improved procedures and transit facilities for both bilateral trade as well as Bhutan’s trade with third countries. The agreement is expected to further ensure the swift movements of goods and enhance trade and investment with India.

India is Bhutan’s largest and most significant trading partner and it has been reported there doubling of trade in the last ten years. This has been attributed to the Free Trade Agreement between the two countries. The Agreement also aided in strengthening Bhutan’s transit right for trade with third countries.

The Economic Affairs minister said the new Free Trade Agreement (FTA) consists of 12 articles comparing to the former 11 articles. Nine articles remained the same and two articles were amended.

Touching on some of the advantages of the Free Trade Agreement the minister said that existing and potential industries in Bhutan could take advantage of the facilities and the opportunities provided in the Agreement to source raw materials and inputs at competitive rates from India.

The FTA also ensures timely refund of excise duties imposed on goods imported from India, which will contribute at a larger scale to the national revenue. The FTA also provides Bhutan with open access to the seaports, air, and land routes in India to facilitate and promote Bhutan’s trade with other countries among lot of other advantages.

Two disadvantages due the FTA has also been listed: one being local producers and industries having to face competition from cheaper goods imported from India and imports from India will continue to exert pressure on the Rupee reserve in the country.

The protocol of the agreement states that the Government of India has agreed to include five additional entry/exit points from the existing 16 entry/exit points for Bhutan’s trade with other countries. The five new routes are Dalu, Gasupara, Loksan, Kulkuli and Nagarkata.

One major advantage of the agreement is that Bhutan will no longer be subject to any food export bans by India.