The US ambassador told a correspondents’ dinner this week that he believed Bangladesh’s RMG industry had made significant progress towards improving standards since the Rana Plaza disaster.
As the United States is the single biggest export destination for Bangladesh accounting for around US$5bn of exports, his remarks are an encouraging vote of confidence.
They add to HSBC’s recent trade forecast report which predicts that Bangladesh’s share of textile and garment exports to a cross section of 25 leading economies will rise from 2.8% in 2010 to 3.8% by 2020.
Although stakeholders are making valuable progress on safety initiatives, finding finance for developing new land and building safer, more productive factories remains a major challenge.
In this regard, there is considerable scope for the US as the industry’s leading trade partner, to provide practical support to transform the RMG sector.
It should act on the proposal made by the chief economist of the Bangladesh Bank for a Tariffs for Standards fund.
Bangladesh pays the second-highest rate of tariff duty (15.6%) for exports to the US market, amounting to over $828m in tariffs paid to the US government last year. This rate is almost twice that paid by Vietnam and roughly five times that by China and India.
The US should pay a portion of the excess rate paid by Bangladesh, say $200m, into a fund administered by a third party to finance factory upgrades and improvements in working standards.
Such a fund would not only level the playing field for exporters, but help stimulate new investment to drive further improvements.