As you read this article, US Under-Secretary for Political Affairs Victoria Nuland has already left Bangladesh after participating in the much-awaited recent US-Bangladesh Partnership Dialogue.
The dialogue, apart from other reasons, has been in the news pertaining to the GSP issue.
Even if Bangladesh Foreign Secretary Masud Bin Momen called upon the US side to consider restoring GSP facilities for Bangladesh RMG exports in the said meeting, the issue failed to make much headway, as per reports!
The Generalized System of Preferences (GSP) provides duty-free tariff treatment to certain products imported from designated developing countries. The United States, the European Union and other developed countries implemented such programmes in the 1970s in order to promote economic growth in developing countries by stimulating their exports.
Although Bangladesh conceded the facility in US market long back, owing to some unfortunate events back home, continuation of the duty-free facility in the European Union (EU), now seems to have come under scanner as well.
US GSP: A saga of hopes, efforts and disappointments!
After two industrial disasters – Tazreen Fashions fire and Rana Plaza building collapse– the US suspended the GSP facility for Bangladesh in June 2013, citing serious shortcomings in labour rights and workplace safety.
If the fire incident at Tazreen Fashions Limited resulted in 110 deaths, Rana Plaza collapse, considered the worst industrial disaster in Bangladesh’s history, killed more than 1,100 people, mostly workers.
Subsequently, the US provided Bangladesh 16-point action plan which, if implemented, could provide a basis for reinstating the GSP trade benefit.
The actions prescribed by USA included improving labour standards, ensuring workers’ rights, repealing or overhauling of EPZ law to ensure protection of workers’ freedom of association, etc.
Claiming all conditions had been met, Bangladesh, time and again,kept knocking at US’ doors at various forums and bilateral talks but to no avail. Disappointed at repeated refusals regime after regime, Dhaka in 2018 decided not to formally request the US in this regard.
“…it has a significant impact on small manufacturers like us as we’re forced to stop exports to the US market due to absence of GSP privilege. We’ve a set-up of buyers in the US market and are waiting for the reinstatement of the GSP. As soon as the GSP is reinstated, we’ll start export of some basic items in bulk including T-shirts, polo shirts and denims,” underlined Director of Mirpur Apparels Ltd.,Jamal Uddin, speaking to Apparel Resources earlier.
For Bangladesh, the GSP withdrawal by USA has much wider ramifications than what meets the eye.
“The GSP denial by USA has created an image crisis for Bangladesh in the global market more than the financial loss. The BGMEA and our Government have fulfilled the US requirements in terms of safety and labour issues but unfortunately still they’re undone…,” repented Atiqul Islam, Managing Director of Islam Garments Ltd.,and the then President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Joe Biden taking over as the US President in 2020, rekindled the hopes again leading Bangladesh to once more request US authorities to give the trade facility back even as it cited the significant progress made towards improving labour standards and labour rights protection.
But not many are hopeful it would cut much ice!
“…the new GSP policy of the United States probably does not have any good news for Bangladesh,” observed Research Director at the Policy Research Institute (PRI) Abdur Razzak who went on to underline USA provides GSP benefits to African countries under the Africa Growth and Opportunity Act (AGOA) as well and even there, countries that are not compliant with workers’ rights, environmental protection, human rights and intellectual property rights, have had their GSP suspended.
“It is normal the new GSP policy will be tougher in this context,” claimed the PRI Research Director.
Glimmer of hope as AAFA gets into the equation…
Even as the GSP issue, more or less, remained unresolved during the latest round of US-Bangladesh Partnership Dialogue, Bangladesh garment industry has found a good partner to advocate their cause in the form of American Apparel & Footwear Association(AAFA) after the BGMEA has signed an MoU with AAFA, as part of which, AAFA will support Bangladesh in promoting its trade interests in US market, especially advocating for the withdrawal of GSP suspension.
“Together, we aim to unlock the potential of Bangladesh’s RMG sector by enhancing competitiveness through building capacities and embracing innovations and technologies, and facilitating trade access to the US market….,” claimed BGMEA President Faruque Hassan, after signing the deal.
So, as the all-powerful AAFA gets ready to take up the cudgels on behalf of Bangladesh apparel sector in the corridors of power, people in Bangladesh are hopeful, things might change for the better even if Bangladesh’s exports continue to perform well in the US market — despite the pandemic, Bangladesh fetched US $ 7.14 billion from apparel exports to the USA in 2021, keeping the market as its single-largest destination without any duty preferences — thanks to the changing market dynamics.
The US buyers, who were very ‘conservative’ in purchasing apparel items due to the pandemic, have placed increased orders with Bangladesh even if many of them have shifted from China and Vietnam due to the trade tension and pandemic-led factory closure, claimed industry insiders.
Now, if and how long Bangladesh manages to continue this good run in US (without the GSP facility) remains to be seen, even if continuation of duty facility in EU, has been gaining in relevance lately and,rightly so.
EU back in limelight!
If around 24 per cent of Bangladesh’s apparel shipments are destined for US, the EU accounts for a staggering more than 60 per cent. Bangladesh standing on the verge of making the LDC graduation now, which will come with its own share of challenges in terms of exports, losing the duty facility in Europe is something Bangladesh can ill afford.
Meanwhile, in what is seen by many as dropping broad hint, Charles Whiteley, the Head of Delegation of the European Union in Bangladesh, underlined achieving the GSP-Plus trade facility will be a challenging one for Bangladesh.
Charlesnoted Bangladesh’s aspiration for the GSP-Plus would require to be matched with a series of tough dos, including compliance with regulations on environmental rights, human rights and labour rights.
“…this will not be picnic,” he opined, while also appreciating Bangladesh for ratifying some regulations tagged with the facility.
The recent visit of the high-level, four-member EU delegation, to take stock of the progress Bangladesh has made on human rights and labour standards, as a part of the follow-up mission on EBA (Everything but Arms)/National Action Plan (NAP) progress, brought the spotlight back on the duty facility.
Apart from meeting the labour leaders and those from the trade bodies- the Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), the EU delegation also called on Commerce Secretary Tapan Kanti Ghosh as well even as it is said to have expressed concerns over the delay in implementing three of the nine labour rights actions, prescribed by EU to the Bangladesh Government in November 2019, to sustain the existing trade benefits under GSP facility.
“…of the nine suggested actions, the EBA delegation of EU was satisfied over the progress of six areas,” in the meanwhile claimed Commerce Ministry Joint Secretary Md Abdur Rahim, adding other three issues would also be addressed and soon.
Close on heels of this and keeping true to the commitment, Bangladesh ratified the much-talked about International Labour Organisation (ILO) Convention 138 to fix the minimum working age recently, a long time demand from the European Union to become eligible for the new GSP.
“Bangladesh has ratified all the core ILO conventions with the ratification of the Convention 138,” claimed the Labour and Employment Ministry, making clear its intentions that couple of other demands that are pending still, will be met soon.
These efforts put in by Bangladesh seems to have satisfied some of the stakeholders already after Australia recently committed to continue duty and quota-free treatment for Bangladeshi exportspost the LDC transition— Australia is a strongly emerging non-traditional market for Bangladesh, where, despite the pandemic, garment shipment was US $731.13 million in the last fiscal year, rising from US $601.14 million in fiscal year 2019-20 even if the amount stood at US $719.78 million in fiscal year 2018-19, as per BGMEA data — adding to the hopes, others will follow suit sooner than later.