In 2013, the United States took the significant step of suspending Bangladesh's Generalized System of Preferences (GSP). Initially, the decision was considered part of a comprehensive initiative to promote enhancements in the country's labour practices and safety standards.
Pressing concerns of international consumers of Bangladeshi garment products, global trade unions and Bangladeshi trade union bodies about labour rights and safety, particularly following tragic events like the Rana Plaza collapse and the Tazrin Fashions fire, which underscored the need for improved conditions within Bangladesh's garment sector.
In this context, the US emphasised the importance of reforming labour laws, strengthening safety standards, and ensuring respect for union rights as prerequisites for reinstating GSP benefits.
While unethical outsourcing has been a longstanding challenge within the global trade system, the suspension of the GSP in 2013 was astonishing despite its ambitious opportunity for positive change in the RMG sector’s working conditions.
To effectively address this situation, it was essential to develop a cohesive policy that rectifies the labour issues and invests in upgrading the RMG industry through enhanced logistical and financial support from the governmental levels rather than only depending on the brands’ initiatives such as Accord and Alliance which are private treaties were formed in 2013 after the Rana Plaza factory collapse.
Additionally, the GSP suspension played a role in broader international trade discussions. While it primarily impacted non-garment exports from Bangladesh to the US, given that garments were already subject to standard tariffs, it allowed Bangladesh to advance labour standards across its export sectors.
Such improvements aimed to enhance workers' welfare and position Bangladesh more favourably in the global marketplace. Moreover, this action has garnered support from US labour unions and manufacturers, who have expressed concerns about the effects of low-cost imports on the domestic industry.
Suspending the GSP can be a constructive step toward fostering a more equitable and sustainable trade relationship between Bangladesh and the US. However, since the GSP was suspended, examining how labour conditions, particularly the working conditions and minimum wages for RMG workers, have changed is essential. RMG workers frequently demonstrate in the streets of Dhaka, demanding payment of their wages and bonuses, which are necessary for their livelihoods.
The suspension of the GSP was an indirect message to the European Union (EU) and other developed economies, highlighting the significance of labour rights in international trade relations. In response to the US action, the EU increased its inspections of Bangladeshi factories and revised its GSP eligibility criteria, reinforcing the US stance and urging Bangladesh to implement reforms.
This approach illustrates how trade can be a diplomatic tool to influence social standards and governance in an economic partner, creating a ripple effect beyond the US-Bangladesh relationship.
From a politico-economic perspective, the GSP suspension represents a complex agenda that merges advocacy for labour rights with economic interests, emphasising how trade preferences can shape governance in developing countries. Several strategic factors indicate that the moratorium also served as a geo-economic tactic within the global trade environment.
It primarily impacted non-apparel exports from Bangladesh to the US, as Bangladeshi garments were already subject to standard tariffs due to GSP exclusion. Consequently, the moratorium had minimal effect on vital export sectors while simultaneously pressuring leaders to enhance labour standards. Another politico-economic agenda of the US government would be the US garnering support from labour unions and manufacturers concerned about low-cost Bangladeshi exports that threaten domestic production.
The GSP moratorium thus reflects a multidimensional agenda -- where labour rights advocacy intersects with economic interests and strategic positions, emphasizing the growing role of trade preferences in shaping governance in developing countries. 2022 Bangladesh exported $9.74 billion in goods to the United States, primarily apparel. However, Bangladeshi exporters face an average tariff rate of 15.62% on clothing due to the lack of a preferential trade agreement with the US.
The Pew Research Centre (PRC) reports that Bangladeshi exporters face the highest tariffs among 232 nations exporting to the US, mainly due to hefty import taxes on apparel and footwear. In comparison, Cambodia pays 14.1% in duties, Sri Lanka 11.9%, Pakistan 8.9%, and Vietnam 7.2%.
Other Asian countries benefit from lower export duties by diversifying their products. Bangladesh should consider exporting a broader range of goods to improve its trade balance with the US. This situation is burdensome compared to certain African nations that enjoy duty-free access under the African Growth and Opportunity Act (AGOA). Consequently, Bangladeshi apparel imports contributed $1.55 billion in duty revenue to the US in 2022.
In recent years, Bangladeshi apparel trade bodies, including the BGMEA, have advocated for reduced duties, especially for items made with US cotton, to enhance trade relations and reduce the tariff barrier. Despite these appeals, no duty-free arrangement has yet been granted, leaving Bangladeshi exports at a disadvantage compared to countries with more favourable trade terms.
It is crucial to acknowledge that Bangladesh, as a developing nation, has made a remarkable contribution to the global economy over the past five decades. Major corporations like Walmart have successfully gained significant market share by leveraging the abundant labour force in Bangladesh and other Asian countries. Consequently, Western and European governments must take action and support Bangladesh in maintaining seamless apparel production by ensuring that workers in the RMG sector receive a fair minimum wage. This commitment is achievable only if Western and European apparel brands are prepared to embrace higher production costs in Bangladesh.
The GSP program can significantly boost economic growth by improving trade access for developing countries. Restoring these benefits for Bangladesh could positively impact its economy and support development. With the current interim government’s strong ties to the US, now is an ideal time to advocate for GSP reinstatement, which is vital for the sustainability of Bangladesh's RMG sector. Moreover, Bangladesh must develop a strategic business and industrial plan for the future sustainability of the RMG sector within the highly competitive apparel market in the era of globalisation and neoliberalism.
Dr ASM Anam Ullah (PhD) is an Australian academic, human rights activist, political analyst, and OHS and industrial relations expert.
