South Asia is now a laboratory for an iteration of 'beggar-thy-neighbour' economics, dressed in a language of reciprocity but animated by competitive appeasement
Just days ago, Prime Minister Narendra Modi was celebrating what his government framed as a diplomatic triumph: an 18 per cent tariff on Indian exports to the United States. It was presented as a victory over regional competitors, a testament to the “MAGA+MIGA” friendship — Make America Great Again merging with Make India Great Again.
That narrative lasted roughly 72 hours.
On February 9, the US signed a Reciprocal Trade Agreement with Bangladesh. In a single stroke, Washington handed Dhaka something it has denied New Delhi: zero-duty access for several categories of textiles and apparel, coupled with quotas and a preferential 19 per cent tariff wall for other goods. The celebratory tom-toms in New Delhi fell silent.
(Commerce Minister Piyush Goyal said today India will get textile-related trade benefits similar to Bangladesh from the US.)
Paradigm shift
What has unfolded in the past week is not merely a shuffling of trade preferences. It is a paradigm shift — and a dangerous one. South Asia is now the laboratory for a 21st-century iteration of “beggar-thy-neighbour” economics, dressed in the language of reciprocity but animated by the logic of competitive appeasement.
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Consider the terms Dhaka has accepted. In exchange for preferential access for its garments — a sector already commanding nearly $8 billion in annual exports to the US — Bangladesh has agreed to purchase $3.5 billion of American agricultural products and $15 billion of US energy products over 15 years.
It has committed to sweeping market access for American farm and industrial goods at zero tariff. It has surrendered policy space on digital trade, accepting that it will not impose digital services taxes that might discriminate against US technology giants. It has signed on to Washington’s demand for a permanent moratorium on customs duties for electronic transmissions at the World Trade Organization — a blank cheque for the GAFA constellation of Google, Amazon, Facebook and Apple.
It has, in short, agreed to constraints that few developing nations have ever accepted in bilateral trade pacts.
Was it equal trade?
And what of the vaunted US-India “framework agreement” announced with equal fanfare? Read the fine print. The 25 per cent “reciprocal tariff” on Indian goods has been reduced to 18 per cent — not eliminated. The position as on date is that while India will eliminate or reduce its tariffs on all US industrial goods and a wide range of US agricultural and food products, the US will keep all its MFN (Most Favoured Nation) tariffs intact and will only lower the so-called reciprocal tariffs, bringing them down from 25 per cent to 18 per cent.
In return, New Delhi has agreed to eliminate or reduce tariffs on a wide range of American industrial and agricultural products, including genetically modified commodities it had long resisted, such as soya oil containing 94% of GM elements, and dried distillers’ grains (DDG) that contain GM ingredients and are used to make ethanol.
The deeper story is not about who “won” or “lost” in this round of bilateral bargaining. It is about what these agreements represent for the multilateral trading system — and for the Global South.
It has signalled willingness to align with US national security concerns, including a commitment to halt purchases of Russian oil. The Russian foreign minister severely criticised the American threats on the sale of Russian oil, which is a reference to Trump’s order in the White House's fact sheet.
Also, India has opened the door to binding digital trade rules that would curtail its regulatory autonomy.
Also read: India-US interim trade pact: ‘Reciprocal’ deal or a surrender treaty?
Indonesia, one of the foremost opponents of the moratorium on levying customs duties on electronic transmissions, along with India and now Bangladesh, had agreed to the US’ demands to impose a permanent moratorium.
In one fell swoop
The Modi government’s submission, however diplomatically packaged, is unmistakable. But the deeper story is not about who “won” or “lost” in this round of bilateral bargaining. It is about what these agreements represent for the multilateral trading system — and for the Global South.
For three decades, the WTO has provided, however imperfectly, a set of rules designed to prevent precisely this kind of asymmetrical coercion. Developing countries were afforded special and differential treatment precisely because negotiators understood that not all economies enter trade negotiations on an equal footing.
The entire architecture of the GATT and its successor institution rested on the premise that reciprocity should not mean equivalence where none exists.
New definition of ‘reciprocal’
The Trump administration — and now, in essence, the Biden administration through continuity of policy — has shredded that premise. “Reciprocal” has been redefined to mean: whatever we demand, you must give.
The result is a series of agreements that systematically foreclose the policy space that allowed countries like China, South Korea, and earlier industrialisers to climb the development ladder.
The entire architecture of the GATT and its successor institution rested on the premise that reciprocity should not mean equivalence where none exists.
Bangladesh, a nation set to graduate from least-developed status this year, has just mortgaged its digital future. It has agreed not to tax the data flows that will increasingly constitute the backbone of its economy. It has accepted US motor vehicle safety standards, FDA pharmaceutical certifications, and intellectual property regimes calibrated to American commercial interests.
Also read: Trump lifts 25% tariff on India over Russian oil imports after trade deal
It has committed to “science-based” approval processes for genetically modified organisms — language that in trade agreements almost invariably functions as a crowbar to pry open agricultural markets.
None of this is to fault Dhaka’s negotiators. Faced with the choice between preferential access to the world’s largest consumer market and adherence to abstract principles of policy sovereignty, any developing nation would struggle to refuse. The United States remains the indispensable market for textiles, and Bangladesh’s garment industry sustains millions of workers — predominantly women — who have no margin for abstract principle.
But the precedent is devastating.
MEGA formula
What Washington has demonstrated is that it can secure, through bilateral pressure, concessions it could never obtain through multilateral negotiation. The permanent moratorium on electronic transmission duties — long sought by US technology companies and long resisted by developing countries at the WTO — has now been embedded in a bilateral agreement with Bangladesh. Once entrenched in enough such pacts, it becomes de facto global policy. The multilateral system is not being reformed; it is being destroyed.
For India, the humiliation is acute but also self-inflicted.
Also read: Trade boost or strategic retreat? India-US deal beyond the rhetoric
Having spent years positioning itself as the voice of the Global South and a champion of development sovereignty, New Delhi has now signed a framework agreement that implicitly endorses the US designation of China as a “non-market economy” and commits to cooperation on “outbound and inbound investment reviews” — diplomatic code for aligning with Washington’s technology containment strategy.
The slogan was MAGA plus MIGA equals MEGA. What has materialised is MEGA minus MIGA equals MAGA.
South Asia’s trade future
South Asia is now caught in a centripetal vortex. Each nation, seeking to secure its own preferential access, agrees to terms that diminish the bargaining power of all. Tariff sovereignty, regulatory autonomy, digital independence — these are not abstract ideals but tangible instruments of development.
A lose-lose-lose situation
America undermines the rules-based system that underpins its own prosperity
Bangladesh surrenders future policy space for present market access
India discovers that proximity to power is not the same as power itself
They are being traded away, one bilateral agreement at a time, for access that may prove ephemeral and concessions that are anything but.
The tragedy is that this race to the bottom benefits no one in the long term — not the United States, which undermines the rules-based system that underpins its own prosperity; not Bangladesh, which surrenders future policy space for present market access; and not India, which discovers that proximity to power is not the same as power itself.
Collective recalibration
What South Asia needs is not competitive appeasement but collective recalibration. The nations of this region share an interest in preserving the multilateral trading system, defending policy space for development, and resisting the fragmentation of global commerce into a patchwork of bilateral dictates. Yet no single country can achieve this alone.
Also read: 'India-US trade deal is a historic abdication of India’s sovereignty”
In the meantime, the February 9 agreement stands as a marker: the moment when “reciprocal” trade policy was revealed as a mechanism for the strong to extract maximum concessions from the weak, and for the weak to compete against each other for the privilege of submission.
The tom-toms have fallen silent. They should be replaced not by louder drums but by a more difficult conversation — among the nations of South Asia, and between the Global South and the powers that would divide it.(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the article are of the author and do not necessarily reflect the views of The Federal.)
