The suspension of General System of Preference (GSP) came as a shock to both the government and the export industry, at a time when a number of initiatives are being taken to fix factory safety problems and address labour issues. However, both groups consider this as a last chance to set things right and regain trade privileges permanently.
Analysts feel the impact has more to do with image than with export figures, as 99% of the nation’s exports to the US have never enjoyed GSP benefits. The US decision might invite similar steps from the European Union, which currently allows duty-free access to all imports from Bangladesh.
All groups believe that recovery is difficult but not impossible, provided serious and visible efforts are taken by both the government and private sector.
The USTR action follows campaigning by a group of influential Congressmen, who pressurised the Obama administration to strip Bangladesh of preferential treatment in protest against lax monitoring of factory standards, leading to tragedies like the Tazreen factory fire and the Rana Plaza collapse.
Initiatives to improve factory safety and labour standards are currently being implemented, following the latest tragedy that killed 1,130 workers in Savar. Apart from amending the 2006 labour act, signing the ILO-led government-employer-worker tripartite agreement to implement time-bound decisions, and formation of a ministerial committee to monitor garment factories, the government has formed a wage commission and earmarked more than 500 acres of land near the capital city for planned “apparel villages.”
But industry analysts feel the foreign ministry team failed to sell the US Trade Representative office on current efforts, during the latest hearing on the complaint lodged by the US labour platform six years ago.
The readymade garment industry, which has, so far, ignored the call to relocate their factories to planned, well-equipped industrial estates, has now opted to create a fund to assist the move to said estates.
Trade analyst Mamun Rashid said the suspension has not come all of a sudden, and Bangladesh is not the only country to face such actions. More than a dozen countries in the past were stripped of US GSP privileges, and were able to regain the benefits after improving factory and other compliance with the help of USAID, and he hoped Bangladesh could do the same.
Mamun, also a professor of business, says a review of the labour law, reaching a consensus on rights to association in EPZs, and strictly enforcing building safety compliances will potentially give Bangladesh a way out of the situation. “It is a crisis situation and we must handle it with utmost care.”
He noted the government’s lack of seriousness about the murder of labour rights activist Aminul, might have been a vital factor behind the US decision.
He suggested a taskforce be formed under a command ministry incorporating commerce, foreign, home and land ministries, as well as apparel sector bodies BGMEA and BKMEA, to prioritise time-bound action plans and implement those urgently. “I believe aid agencies like USAID, DFID and GIZ will assist us in the combined efforts if we are serious.”
A leading garment exporter and former president of BGMEA, Anwar Ul Alam Chowdhury Parvez said the government has taken a series of initiatives to improve factory conditions. “Now it is the time to take visible steps [to implement these initiatives].”
“Such benefits are negotiated at a bilateral level. So both political and diplomatic parleys must continue,” the trade leader said as he observed that the Dhaka’s political and diplomatic relations with Washington are strained now.
He stressed the need to engage professional lobbyists to fight for Bangladesh’s causes in the US. “This is a common practice in the US. India, Sri Lanka and Pakistan also have lobbyists there.”
Immediate actions are needed to convince the EU against taking similar steps, which would be more significant, he pointed out.
Although the US government has suspended trade benefits for Bangladesh, many global retailers have already assured the local garment industry that they will continue to buy their products.
The US government yesterday postponed the General System of Preference (GSP) trade facility for Bangladesh for 60 days, through which Bangladesh exporters could export 5,000 items free of duty to the US market.
US retail giant Wal-Mart blacklisted more than 200 local factories after the Rana Plaza incident at Savar, but later placed orders at many of these factories. Japan’s clothing retailer Uniqlo recently said it will buy garment products from Bangladesh, as it believes adequate steps have been taken by the authorities to ensure safety.
Kihak Sung, chairman of the Korean Youngone Corporation, recently said his company plans to import $1bn worth of products from Bangladesh in the future.
“My business growth here is 10% year-on-year, but it should be 20%. So my targets are realistic,” Sung said in a recent interview.
US ambassador to Dhaka Dan W Mozena yesterday said Bangladesh may regain GSP facilities soon. He said Bangladesh must provide assurances that it will develop safety standards for garment factory workers. The government will have to ensure security in the workplace and develop the livelihood of the workers to get back the facility, he said.
Former caretaker government adviser Hossain Zillur Rahman told the Dhaka Tribune that the GSP suspension will definitely have a negative impact on the country’s image, and may result in EU countries putting harsh conditions on garment exports.
EU countries had cancelled trade facilities for the local shrimp industry, but later the issues were overcome, he pointed out.
President of Bangladesh Exporters Association Abdul Salam Murshedy told the Dhaka Tribune that global retailers are satisfied with the steps taken by concerned authorities.
“We hope that the local garment industry will bring back the GSP facility within six months, which will make the Bangladesh garment industry competitive for the next ten years,” he said.
Murshedy also said: “The growth of garment industry exports in EU countries is likely to be more uncertain as more than 60% export goes to those countries.”
Rashed Al Mahmud Titumir, chairman of research organisation Unnayan Onneshan, told the Dhaka Tribune the suspension of GSP facilities was a political decision and depended on Bangladesh signing the Trade and Investment Cooperation Forum Agreement (TICFA), which was not related to labour rights or factory safety.
US Trade Representative Michael Froman, in a statement about GSP suspension, said: “Despite our close engagement and our clear, repeated expressions of concern, the US government has not seen sufficient progress towards those reforms. The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh.
“While taking this action today, the administration is also initiating new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored, and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented. The Obama Administration is committed to reflecting American values in our trade policy, including with regard to the rights of workers worldwide,” he said.
In a statement issued by the foreign ministry, Bangladesh expressed deep concerns saying: “This harsh measure may bring in fresh obstacles in an otherwise flourishing bilateral trade.”