Suspension of GSP facility for Bangladesh by US administration, citing poor working conditions, came as a blow to its image and many have a long-term damaging effect
on the economy if the decision is not revoked soon.
Announcing the suspension of the trade benefits, US president Barack Obama said, “I have determined that it is appropriate to suspend (GSP facility for) Bangladesh because it’s not taking steps to offer internationally-recognised rights to workers in the country.”
Experts termed the US decision as Bangladesh’s diplomatic failure and said the government had failed to pre-empt the situation despite repeated warnings by the Americans in the last six month. The foreign office, headed by a globe-trotting minister, had apparently taken the situation lightly, they added.
Notwithstanding the US warnings, statements by the foreign office top brass had painted a rosy picture about Bangladesh-US relations in an apparent effort to assure the public that Washington would not take any drastic measure like suspending the trade facility.
The sanction does not directly affect the country’s multi-billion-dollar clothing exports to the US, but the long-term effect could be disastrous as it could influence the European Union, Canada, Australia and Japan to take similar action. The EU is the largest buyer of the country’s RMG products with a share of 57 per cent, experts said.
A foreign ministry statement on Friday termed the US decision as “unfortunate” and said it would affect trade relations between Bangladesh and the US. Interestingly, the statement promptly blamed “propaganda by certain people with vested interests” for the debacle.
On June 4, foreign minister Dr Dipu Moni had told a press briefing: “The review of the GSP facility for Bangladesh in the US market is continuing. The hearing on it has concluded. A Bangladeshi team comprising officials from the foreign ministry, labour and employment ministry, and commerce ministry have discussed the issue with the US authorities. I am hopeful that the USTR will take a positive decision on this.”
She had further said that Bangladesh and the US enjoyed “extensive and in-depth” ties.
Earlier, on May 23, the minister had said exports under GSP facility were very negligible and it was much less than one per cent of the total exports to US. But, it was important for Bangladesh because it was related to the image of the exporting country. “So, we want the GSP facility to continue and everything that is needed to be done will be done in this regard. It is necessary to ensure that it does not have any adverse effect on other markets,” she added.
The minister said Dhaka had apprised Washington of the government’s initiatives, including an amendment of the labour law and the US response appeared to be positive. “I believe that we have been able to make them understand that Bangladesh has taken effective measures to ensure labour rights and safety at workplaces,” she added.
New US trade representative Michael Froman told the media in Washington that the decision was taken after much consideration. “Our goal, of course, is not only to see Bangladesh restore its eligibility for (the trade) benefits, but to see Bangladeshi workers in safe and appropriate work situations,” he said.
The AFL-CIO labour federation had filed the petition with the US Congress to withdraw the facility for Bangladesh. Federation president Richard Trumka said the decision was an important message for countries that receive duty-free access to the US market under the generalized system of preferences (GSP) programme.
US ambassador Dan Mozen, however, mentioned that the suspension would be withdrawn if the labour environment improved. “Bangladesh has to show that incidents like Rana Plaza and Tazrin Fashions would never happen again,” Mozen told reporters after a function at a city hotel.
The decision also puts American companies on notice as they must take meaningful steps to improve conditions for Bangladeshi factory workers, Senate Foreign Relations Committee chairman Robert Menendez said in a statement.
“No one will want to wear clothing that is ‘Made in Bangladesh’ if it is made with the blood of workers. It’s time for the American industrialists to show leadership and work with their European counterparts on a global standard for safety,” he stated.
Suspending Bangladesh from the GSP programme will increase duties on an array of products the country exports to the US. The products to be affected include sporting equipment, porcelain china, plastic products and a small amount of textile goods.
In 2012, Bangladesh was spared about USD 2 million in US duties on about USD 35 million worth of goods under the GSP programme, but it paid about USD 732 million in US duties on USD 4.9 billion of clothing exports not covered by the programme, said Ed Gresser, a trade analyst with the GlobalWorks Foundation.
A European Union decision to suspend trade benefits would have far more impact since Bangladesh’s clothing and textiles exports receive duty-free treatment there, in contrast to average US duties of around
15 per cent.
EU officials raised the possibility of suspension in early May in the hope of prodding Bangladesh into action.
The EU imported goods worth roughly 9.2 billion euros (USD 12.13 billion) from Bangladesh last year, according to the European Commission, executive branch of the EU. Clothing and textile products, including towels and bedding, accounted for almost 93 per cent of those goods.
EU and Bangladeshi officials will meet in Geneva in July for talks aimed at improving safety conditions in Bangladesh and preserving the country’s trade benefits.
An EU spokesman in Brussels said the US action underscored the EU’s concerns. Experts said the suspension would have long-term negative impact on the country’s economy, though the direct effect would be nominal.
Former World bank economist Dr Ahsan Habib Mansur described the matter as partly a diplomatic failure. “Bilateral relations do not depend on a single issue. It has various aspects. I think other decisions, including the US concern over the Grameen Bank, might be a factor here,” he said.
When asked, Grameen Bank founder Dr Muhammad Yunus told The Independent that he does not want to comment on the issue at present.
Mirza Azizul Islam, former finance adviser to the caretaker government, said the GSP suspension would send a bad signal to the country’s economy. “However, the direct impact would not be much because less than 2 per cent of our exports gets the benefit,” he added.
He said after the US action, the EU may modify its duty-free facilities provided to Bangladeshi goods. “It would seriously hamper our exports,” he observed.
He pointed out that Bangladesh’s demand for a duty-free access of Bangladeshi goods to the US market would also be delayed. “It’s unlikely that the US would provide another facility after withdrawing a given benefit,” he added.
He blamed the government for not pursuing the country’s cause in time. He said the government should improve the labour conditions and go for renegotiation with the US after two to three years.
Abu Ahmed of Dhaka University observed that the country would face financial constraints if the US withdraws all benefits and if other countries follow suit. He also blamed the government’s foreign policy in this regard. The government and the BGMEA have failed to take proper action in this regard, he added.
Dr Golam Moazzem, a senior researcher of the Centre for Policy Dialogue, pointed out that the GSP cancellation would deepen the crisis in the RMG sector. “But it’s unlikely to create any major disaster in our export sector,” he said.
The US review on the GSP suspension issue dates back to 2007, when the AFL-CIO, the main US labour group, first filed a petition, asking that Bangladesh’s trade benefits be revoked.
Despite the relatively small volume of trade affected by the US decision, Froman said Bangladeshi officials put great value on remaining in the programme. “We will be staying very much in direct and continuous contact with the government of Bangladesh as they take additional actions on workers rights and workers safety. We’ll review their status at the appropriate time,” he added.
European retailers have responded to two recent tragedies in the country’s RMG sector by signing an agreement to promote workers’ safety in Bangladesh, but many US retailers have balked at the accord, saying it gives unions too much control over ensuring workplace safety.
They have been working instead with former Maine US senators George Mitchell, a Democrat, and Olympia Snowe, a Republican, on an alternative plan to improve fire and safety regulations in the garment factories of Bangladesh. The effort is being coordinated by the Bipartisan Policy Center, a Washington think tank.
U.S. Trade Representative Mike Froman said the U.S. will, however, start new discussions with Bangladesh on improving workers’ conditions so the duty-free benefits that cover some 5,000 products can be restored. He didn’t say when that might be, noting that it would depend on Bangladesh’s actions.
Affirming that it will remain engaged with all its trading partners to share ideas and collectively address factory safety issues, Bangladesh also hoped that the US-Bangladesh trade to grow further despite the suspension of GSP, a benefit a least developed country is supposed to receive in the developed countries as per the provisions of the World Trade Organization.
Thursday’s announcement was the culmination of a year long review of labor conditions in the impoverished country. Democratic lawmakers have been pushing for the step since the April 24 collapse of Rana Plaza in Dhaka that killed 1,129 people. In November, a fire at a garment factory killed more than 100 people.
The Generalised System of Preferences, which is designed to boost the economies of developing nations, covers less than 1 percent of Bangladesh’s nearly $5 billion in exports to the U.S., its largest market. The benefits don’t cover the lucrative garment sector but Bangladesh’s government was anxious to keep them.
The action may not exact a major and immediate economic toll, but it carries a reputational cost and might deter American companies from investing in the country.
House and Senate Democrats who had been calling for the U.S. benefits to be curtailed quickly welcomed Thursday’s
decision.
Lawmakers have criticized U.S. retailers that source garments from Bangladesh for not joining the more than 40 mostly European companies that have adopted a five-year, legally binding contract that requires them to help pay for fire safety and building improvements. The Bangladeshi garment manufacturers’ association says it stepping up inspections and has closed 20 factories.
The garment industry employs some 4 million people in Bangladesh, 80 percent of them women.
-With The Independent input
