The European Union and the USA are two of the biggest export destinations for ‘Made in Bangladesh’ apparel items. Despite losing out on the preferential trade benefit in the wake of 2013 infamous Rana Plaza tragedy, Bangladesh’s performance in the US market has been pretty decent.
The country’s apparel exports to the United States in 2019 registered a reasonable growth riding on the excellent performance of readymade garment products in the first half of the year. As per the data of the Office of Textiles and Apparel (OTEXA) under the US Department of Commerce, apparel exports to the US in 2019 grew by 9.83 per cent to US $ 5.93 billion from US $ 5.40 billion in 2018.
Even in 2018, Bangladesh earned US $ 5.40 billion during the January-December period from apparel exports to the USA which was US $ 5.06 billion in the previous year.
What’s more, even in January-March period in 2020, Bangladesh fetched about US $ 1.67 billion from apparel exports to the US as against US $ 1.56 billion earnings during the corresponding period of 2019, which as per experts was primarily because Bangladesh had not been affected by the novel coronavirus till March. At that time, Chinese factories faced closures and supply chains had been disrupted due to the COVID-19 outbreak.
However, it was only till before the pandemic gripped the world with devastating implications for businesses – manufacturers, brands and retailers alike. The result, Bangladesh’s overall apparel export earnings witnessed over an 85 per cent decline to US $ 375 million in April 2020, which was US $ 2.54 billion in the same period last year. The US also witnessed a tough phase of the outbreak, resulting in retail store closures. As a result, their imports fell by 12.07 per cent to US $ 17.84 billion in the first quarter of 2020.
Such developments were enough for the exporters to gauge that Bangladesh’s apparel exports would witness a domino effect in the days to come and their observations were certainly on the mark, as Bangladesh’s apparel exports to the United States in January-May this year fell by 12.10 per cent. The country’s RMG export to the US market in the first 5 months of 2020 stood at US $ 2.24 billion, which is US $ 309 million lower than US $ 2.55 billion generated in the same period of last year. During the period, Bangladesh shipped 808 million square metres of apparel items which was 905 million square metres in the same period of last year.
Further, OTEXA data underlined that the total apparel imports of the US in the first 5 months of this calendar year declined by 27.76 per cent to US $ 23.92 billion which was US $ 33.11 billion in the same period of last year, which sort of impacted all the manufacturing hubs with China, the largest exporter to the US, witnessing a 49.23 per cent negative growth, with earnings of US $ 4.61 billion during the period in 2020 compared to that of US $ 9.08 billion during the same period of 2019. Even Vietnam’s export to the USA declined by 9.36 per cent to US $ 4.81 billion during the period which was US $ 5.30 billion in the corresponding period of 2019.
However, things have been difficult for Bangladesh, as apparel exports constitute more than 80 per cent of the country’s overall export earnings, and are considered the lifeline of Bangladesh’s economy and the principal employment generator.
The country’s overall RMG exports witnessed a negative trend during the just concluded fiscal year for a number of internal and external factors. The ongoing COVID-19 pandemic has made the situation worst, maintained Mohammad Hatem, Senior Vice President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), who went on to explain that the production remained almost suspended in April, while factories in May and June could not use their full capacity, and even now factories are running at only 50-55 per cent capacities due to maintaining safety requirements and shortage of fresh work orders.
Besides, demands were also slow due to the shutdown of retail shops followed by lockdown in the US, he added.
Meanwhile, speaking on the issue of apparel export decline in the important US market, Dr. Rubana Huq, President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), maintained that the USA’s apparel import has posted a drastic fall by 60.08 per cent in May.
While the USA’s import from Bangladesh was maintained on the positive side until January-April 2020, May 2020 had been an apocalyptic month for local exporters in the US market, as exports went down by 67.65 per cent in this single month, said Rubana, adding that the US import from Bangladesh has been worse than that from China and Vietnam.
“Bangladesh performed comparatively well during the initial phase of the COVID-19 outbreak as compared to China and Vietnam since the pandemic has hit those two countries earlier than Bangladesh,” she explained, adding, “These two countries have been extraordinarily successful in containing the contamination, so they were being able to make faster recovery of their economic activities.”
Though Bangladesh has reopened its industry since late April, it is being operated at a safe mode, as the infection is still on the rise here, pointed out the BGMEA President, underlining,“Such abnormal decline in imports is not a usual phenomenon and we hope import will bounce back, as sales are expected to pick up as lockdowns are being lifted.”
It’s not only Rubana; many others in the industry also think that there will be a rebound of apparel shipment to the US, but it will be slow and steady. Even though retail stores in the US have started opening up gradually, it will take a lot of time for normalcy to return, as consumers are still staying at home amidst the fear of contagion, exporters said, while underlining that the pandemic has badly impacted the US economy bringing down the sales of commodities including apparel items.
“Garment shipment from my factory to the US market might not pick up soon, although orders are coming back from the American buyers gradually,”AK Azad, Managing Director, Ha-Meem Group, told the media, adding, “Within December, I might get 70 per cent of the work orders I had received at the same time last year.”
The shipment to the American market will increase if the vaccine comes this year, he further added.
The export trend was positive in 2019, but after coronavirus broke out, orders from the US have nosedived, said Mostafa Sobhan Rubel, Managing Director, Dragon Sweaters, adding that almost half the products of his company are destined to the US, but many of his customers complained that their stores were not logging the expected sales even after the lockdown was withdrawn in most US states.
“I am fortunate that I work with some very good customers in the US and we did not face any order cancellations,” Mostafa claimed, adding, “However, we expect that the US market will rebound strongly in 2021, as American buyers and importers are looking for an alternative to China because of the political conflict between the two economic powerhouses.”
However, even though retail stores have opened in most of the United States, as per a survey report of Coresight Research, 60 per cent of people in the United States underlined that they were still avoiding malls.
Meanwhile, to tide over the challenges posed by COVID-19, Bangladesh recently requested the USA to provide duty-free market access for Bangladeshi garment products for 2 years, as the industry is bearing the brunt of the cancellation of orders by the US buyers. Bangladesh Foreign Minister Dr. AK Abdul Momen made the request to the US Secretary of State Michael R Pompeo during a telephonic conversation during which Pompeo reportedly reaffirmed the importance of the US-Bangladesh relationship and discussed continued cooperation of the US to Bangladesh to address the COVID-19 pandemic.
Now if the exporters’ hope of a rebound in the USA market will come true or not or if the USA agrees to offer duty free-market access for Bangladeshi garment products for 2 years, which is definitely going to give a fillip to Bangladesh’s overall exports as well those to the USA – only time will tell.