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China Accused of Using Free Trade Routes for Cheap Bike Export to India

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China Accused of Using Free Trade Routes for Cheap Bike Export to India
China is said to crash into Indian market through South Asian Free Trade Area of which Sri Lanka and Bangladesh are part. Pictured here is production in Bangladesh. – Photo Bike Europe

LUDHIANA, India – In India’s media reports are appearing on imports of China made bicycles and parts which are putting severe pressure on the country’s Ludhiana based bicycle industry. The cheap imports from China are allegedly entering India through a free trade agreement of which China is not even a part of.

India’s media are quoting Pradeep Wadhwan, Vice President of India’s United Cycle & Parts Manufacturers Association. He said that some 200 bicycle manufacturing units have had to shut shop in the face of the competition. He said owners of these units have either switched their business or have become dealers of bicycle parts.

South Asian Free Trade Area (SAFTA) pact

At the heart of bicycle manufacturers’ problems is how China has crashed into the Indian market through the South Asian Free Trade Area (SAFTA) pact, which came into effect in 2006. The agreement paved the way for the eight member countries to reduce customs duties of all goods traded among them to zero by 2016. China isn’t a party to the pact but is still reaping its benefits.

Dodging customs charges

Badish Jindal, President of the Federation of Punjab Small Industries Associations, has said that China has been placing its proxies in Bangladesh and Sri Lanka. He reported that the Asian superpower has been supplying its bicycles in India through these SAFTA countries, dodging the customs charges it would have had to add to the item’s cost. He further said that the tariff-free trade route has come as a curse for the bicycle industry of Ludhiana. “It is surprising and impossible that countries like Sri Lanka and Bangladesh, which had no or little cycle industry, started manufacturing every cycle part within a few years and their exports to India swelled to millions within a short duration of time.”

EU’s Generalized System of Preferences

This assumption is not entirely correct as in the two named countries various bike and bicycle parts makers are based. They are benefitting from EU’s Generalized System of Preferences (GSP) that offers Bangladesh and Sri Lanka import duty benefits for its export to EU member states. For that also India’s biggest in bikes – Hero Cycles – invested in Sri Lanka.

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