The apparel industry in general will not be harmed by the recent suspension from the Generalised System of Preferences (GSP) imposed by USA, as it has been exporting apparels without any such advantage, according to analysts.
The GSP suspension would however increase US duties on an array of products, including tobacco, sporting equipment, porcelain china, plastic products and a small amount of textile products, which represents only 1% of Bangladesh’s total export to the US, analysts said.
In the wake of the tragic building collapse in Savar on April 24 this year, which killed more than 1100 people, mostly garment workers, the US administration on Thursday suspended trade benefits under the GSP programme for Bangladesh.
GSP is a trade privilege outlined by the World Trade Organisation (WTO) to provide preferential accesses for developing countries in the form of reduced tariffs for their goods into the markets of developed countries. In line with WTO trade rules, Bangladesh, as a developing country, enjoys on its exported goods to develop countries like USA and European Union (EU).
90% of Bangladesh’s exports that are clothing don’t receive these benefits, and face an average import duty of 15%. The $35m in Bangladeshi exports that have been penalised by this decision are less than 1% of its total $24bn export earnings.
“The recent withdrawal of GSP facilities by USA will not affect RMG exports of Bangladesh as these products did not enjoy GSP facilities in the form of trade concession previously,” said Lanka Bangla Securities in its analysis.
It is however a warning sign for Bangladesh to improve workplace conditions and security to prevent further punitive actions by major importers of apparel products, it said.
It said: “The suspension carries some other ramifications. It would seriously dent the image of Bangladesh in the global market.”
Last year, Bangladeshi RMG exporters paid $750m in duties against the entry of their products to the US market, according to Lanka Bangla.
It said: “The response of EU, the biggest destination of the country’s apparel goods, to the latest US action needs to be watched carefully.”
Bangladesh enjoys GSP facilities for 100% of apparel exports to the EU. EU buys more than $12bn in Bangladeshi garments each year, or roughly three-fifths of the country’s total apparel products.
EU imported roughly $12.13bn of goods from Bangladesh last year, according to data from the European Commission. Clothing and textile products ranging from towels and bedding accounted for those goods.
EU officials have threatened to kick Bangladesh out of the programme—a process that could take more a year—unless it improves workers’ safety conditions. “So, this is high time for Bangladesh to work on improving workplace conditions and ensure workers’ safety,” said Lanka Bangla.
