The commerce minister has rightly criticised the US ambassador in Dhaka this week for saying Bangladesh pays zero tariffs for RMG export to the US market.
From his remarks, it appears the envoy was noting that it was buyers and their customers in the US who ultimately pay this money, so arguably the dispute was only semantic.
Either way, it is the case that the tariff rate charged on Bangladeshi RMG exports to the US (15.6%) is highly discriminatory as it is almost twice the rate paid by Vietnam and roughly five times that charged on RMG exports from China and India. With Bangladesh as one of the largest suppliers to the US market, this amounted to over $828m in tariffs paid to the US government last year.
As we have noted before, finding finance for developing new land and building safer, more productive factories is the most important challenge facing the RMG industry. With the Accord setting strict requirements for the installation of fire safety equipment, the BGMEA estimates that that alone will cost RMG factories over Tk2,400 crore.
The US is in a unique position to help by following the proposal made by the chief economist of the Bangladesh Bank for a Tariffs for Standards fund.
It could 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. This would help to both level the playing field for Bangladeshi exporters and support the improvements stakeholders are seeking to ensure it sustains future growth.
