The United Kingdom is the third largest apparel export destination for Bangladesh and accounts for around 10 per cent of the country’s total garment shipments.
And as the figures suggest, UK is a major export stronghold for Bangladesh and naturally so when the country was all set to leave the European Union in the wake of BREXIT, there was a lot of concern as to how things would pan out going forward, as far as exports were concerned. However, media reports then suggested the preferential trade benefits will continue for Bangladesh after the UK’s departure from the EU even as the UK’s Generalised Scheme of Preferences (GSP) will cover all the countries that are eligible for the trade preferences under the EU’s GSP, allowing businesses to trade as they do now without disruption.
This was announced by the British Government even as it was stated that imports from 47 of the world’s least developed countries, including Bangladesh and Malawi, will not face any tariffs – supporting their economic development through business and trade even as the trade preference scheme was supposed to cover any eligible countries that do not have their existing trade agreements transitioned into a new agreement with the UK.
In 2019, the UK imported approximately £ 8 billion-worth of textiles and apparel products from countries which are part of the EU GSP, which reportedly accounted for 30 per cent of all textile and apparel imports into the UK.
“Free trade helps businesses to grow, boosts the economy and creates new jobs. We are making sure that the world’s poorest countries can continue to take advantage of the opportunities that free trade offers them by allowing them to export their products to the UK at preferential rates,” International Trade Secretary Liz Truss said then, adding, “This will help developing economies to establish strong industries, creating jobs and helping them to reduce their reliance on overseas aid in the long term.”
“The scheme will also help British businesses to continue trading seamlessly after we leave the EU, as well as give British consumers continued access to some of their favourite products at affordable prices” she said further adding, “UK’s GSP will also help to make products from developing countries more attractive to UK importers, enabling businesses in developing countries to grow and prosper and support jobs in those economies.”
Meanwhile, Foreign Secretary Dominic Raab stated, “Global Britain is a partner of choice for developing countries…We take a liberal approach to trade, recognising that many developing countries want to trade their way to greater prosperity,” adding, “We back that up with the integrity of the investments UK businesses make, and our commitment to be a force for good in their communities through our support for green jobs, climate change mitigation and programmes to deliver girls’ education.”
It may be mentioned here that the UK’s Generalised Scheme of Preferences (like that of the EU) has three Frameworks: 1. The Least Developed Countries Framework will give duty-free quota-free access for all 47 countries classified by the UN as Least Developed Countries; this commitment is enshrined in law, in line with the UK’s commitment to the Global Goals; 2. The General Framework will reduce tariffs on certain product lines to Low-Income and Lower-Middle Income countries and, 3. The Enhanced Framework will remove tariffs on certain product lines for eight economically-vulnerable Low-Income and Lower-Middle Income Countries which meet conditions related to sustainable development.
It may be mentioned here that apart from an export destination, UK is also a substantial investor in Bangladesh and in 2019, the UK was the third-largest investor in Bangladesh.
“Trade and economic relations between Bangladesh and Britain are long. There are lots to further bilateral trade opportunities,” stated Bangladesh Commerce Minister Tipu Munshi who even expressed hopes that Bangladesh would get much attention in the UK’s new trade policy following the BREXIT even as Robert Chatterton Dickson, the British High Commissioner to Bangladesh, in a meeting with the Commerce Minister had stated: “The UK is looking to harness the opportunity presented by the exit from the EU to develop a future trade partnership with Bangladesh that will increase two-way trade and bring greater prosperity to both of our countries.”
However, as things stand now, even if Bangladesh would continue to enjoy duty-free access to the British market for all of its products except for arms and ammunition under the scheme’s Least Developed Country Framework until 2026, Bangladesh’s apparel products may lose duty-free access to the United Kingdom after it graduates to a developing country as regular tariffs will be applicable to any product when its import exceeds a set limit under the UK’s new Generalised Scheme of Preferences (GSP) even as the Bangladesh Commerce Ministry officials believe that such a provision in the UK GSP scheme’s public document, sent to the Ministry, could be detrimental to Bangladesh’s duty-free export facilities to UK.
It may be mentioned here that the UK has already started formulating its own GSP scheme after the BREXIT and Bangladesh will enjoy duty-free access to the British market for all of its products except for arms and ammunition under the scheme’s Least Developed Country Framework until 2026. However, the UK GSP scheme’s provision on product or goods graduation states that for textiles, apparel and clothing goods, graduation applies when the import ratio referred to exceeds 47.2 per cent even if the general threshold of 57 per cent applies to all other goods (for live plants and floricultural goods, vegetables, animal or vegetable oils, fats and waxes and mineral goods, graduation applies when the import ratio referred to exceeds 17.5 per cent) even if the UK will review the list of graduated goods every three years.
Goods graduation is the suspension of preferential rates of customs duty on certain imports following a goods graduation assessment and these imports are deemed highly competitive and no longer need preferences to compete in the UK market while these imports cannot benefit from preferential rates and the UK Global Tariff will apply instead even if suspensions can be applied to goods from countries in the General Framework, according to the document reportedly shared by the UK with Bangladesh’s Commerce Ministry.
It may be mentioned here that the proposed Enhanced Framework is similar to the EU’s GSP Plus to provide GSP benefits to low-income and lower middle-income countries, which are classified as economically vulnerable and have satisfied requirements relating to the 27 international conventions while under this, two-thirds of product lines will get duty-free facility even if under the General Framework and the Enhanced Framework, the UK market still includes Vietnam, India, Indonesia, Pakistan and Sri Lanka, which are exporters of readymade garments, of which Vietnam will reportedly not get the GSP benefit as it has a trade agreement with the UK.
Owing to the same, the export rate of Bangladesh’s major garment items under the GSP facility is likely to go over 47 per cent after its graduation to a developing country status and to get GSP benefits under the enhanced framework, Bangladesh will have to comply with 26 international conventions — in this context, the UK said the aim is to encourage compliance with human and labour rights, good governance and sustainability — even as the Enhanced Framework asks countries to ratify, accede to or otherwise consent to be bound by 27 international conventions and their reporting requirements.
Meanwhile, under the UK GSP scheme’s General Framework, low-income and lower middle income countries, as classified by the World Bank, will enjoy reduced tariffs on two-thirds of product lines while UK’s GSP is going to have a provision to cancel or suspend such facility for a country for various reasons, including violations of human and labour rights, violation of international conventions on anti-terrorism and money laundering, violation of UN Single Convention on Narcotic Drugs and the failure to prevent illicit trade even if the least developed countries are expected to request the UK to relax the conditions as it will be very difficult for them to comply with all the conditions, reportedly claimed Bangladesh Commerce Ministry officials interacting with the media.
If one would remember, the United States had suspended Bangladesh’s GSP facility in its market since June 2013 for alleged labour rights violations even if the European Union has sought a nine-point roadmap from Bangladesh to protect labour and human rights to remain eligible for the GSP benefit in its market.
According to Bangladesh’s Export Promotion Bureau, the UK is the third largest export market and in the last fiscal year, Bangladesh’s exports to UK amounted to US $ 3.7 billion, which was 9.68 per cent of Bangladesh’s total exports even as exports of woven items earned Bangladesh US $ 1.33 billion, knitwear US $ 2.11 billion and home textiles US $ 96 million in FY ’21.
Even though London has reportedly verbally promised Dhaka of maintaining the GSP facility for three more years after the LDC graduation while the UK High Commissioner in Dhaka has also reportedly confirmed it, officials in are still not sure whether Bangladesh will continue to enjoy market access preference in the United Kingdom for an extra three years till 2029 after moving out of the LDC status in 2026 even as the UK has already reportedly sent a questionnaire on its new GSP scheme and asked for position papers from various countries, including Bangladesh, which Bangladesh will reportedly send on time.
Meanwhile, speaking to the media, Research Director at the Centre for Policy Dialogue, Dr. Khandaker Golam Moazzem, reportedly stated that the post-Brexit UK would prioritise bilateral trade agreements and that UK will make free trade agreements with different countries, which may reduce the importance of the unilateral scheme even as he underlined that if Bangladesh’s competitors are among those who will sign an FTA with the UK, the country’s exports will suffer and hence advised Bangladesh should give importance to ensuring the existing GSP facility for an extra three years even after its graduation while Bangladesh will have to continue its efforts to waive tariffs considering its competitiveness in the countries with which the UK will sign FTAs.
The Commerce Ministry’s WTO Cell Director General Md Hafizur Rahman informed Bangladesh will send a position letter within the stipulated time and will also ask for some relaxation of the conditions in the GSP while the concerned officials have reportedly opined Bangladesh will try to get an unconditional GSP facility for the export of apparel items to UK, keeping with which Bangladesh will request the UK to relax the condition of ‘product graduation’ in the position paper.
Now, if the UK would agree to the same and if Bangladesh would continue to enjoy the duty benefits at its third-largest export destination, remains to be seen.
