The prices of men and boys cotton trousers produced by Bangladeshi RMG factories have gradually declined in US market over the years due to monopsony of the buyers, a study has revealed.
The study on “Prices and Development in the Global Apparel Industry: Bangladesh in Comparative Perspective” revealed the fact.
Mark Anner, associate professor, Penn State University, unveiled his study report at BGMEA headquarters yesterday.
According to the study, prices of men and boys cotton trousers exported to the US market declined by 40.89% in the last 14 years.
The prices of the clothing have been taken into account as Bangladesh is the number one exporter of those items to the US market.
In terms of square metre, China is the second exporter while Mexico is third.
The study was conducted over the prices from 200 to 2014.
“Monopsony helps big buyers put pressure on reducing prices,” said Mark Anner in his presentation.
The term ‘Monopsony’ refers to a market situation similar to monopoly except that a large buyer not seller controls a large proportion of the market and drives the prices down. Sometimes it is referred to the buyers’ monopoly.
If constantly improved, efficiency on the part of supplier results in constantly reduced prices, then the gains in efficiency will be captured at the top of the supply chain, he added.
Mark suggested sharing information among the market players and advocated for breaking up monopsony that occurs due to unfair competition.
He added that it is necessary to establish coordination among weaker actors to address power imbalance in supply chain.
“The US government has a role to play. It can help increase the prices of Bangladeshi RMG products as the buyers are paying lower prices to the manufacturers and selling the clothing at higher prices to the consumers,” said Nazneen Ahmed, senior research fellow of Bangladesh Institute of Development Studies (BIDS).
Since consumers are not getting the benefits of buying products at lower prices and the brands are making hefty profits, the US government should take the matter into account and can introduce slab, she added.
Naznin also urged the government not to change the rules of origin for Bangladesh as it would be a big challenge for the country.
“Considering the prevailing situation of the country, the government should revise the proposed source tax,” said FBCCI Senior Vice-President Shafiul Islam Mohiuddin.
If the sector can flourish, the government will get more tax indirectly, he added.
He also said a good number of SME factories are struggling to survive, which need support.
In his address, BGMEA President Atiqul Islam also urged the government to keep source tax at 0.30%.
“We should keep in mind that employment is needed to reach the goal of economic development.”
