Bangladesh’s readymade garment (RMG) exporters will miss US$4 billion in the European Union when the duty-free trade facility comes to an end after Bangladesh move out of LDC status, according to a new study by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Bangladesh currently enjoys duty-free, quota-free access for all products except arms and ammunition in the EU market as a least developed country under the EBA (Everything But Arms) facility.
European Union is the major export destination of Bangladesh. And the study said, Bangladesh’s shipment to the EU will face the worst impact after graduation as the bloc accounts for 61 percent of the duty-free export from the country.
The significance of the EU market is demonstrated by the rise of its share in Bangladesh’s total exports: it went up from 58 percent to 61 percent in the last decade.
The study also said, if Bangladesh can get the Standard Generalised System of Preferences (GSP) then it will lose $3.2 billion.
The EU offers Standard GSP for low and lower-middle-income countries. This means a partial or full removal of customs duties on two-third of tariff lines.
The country’s export to the EU has grown by 9.03 percent in the past 10 years to $17.15 billion.
Presently, $25 billion, or 73% of the external trade of Bangladesh, enjoys duty-free access as an LDC. This will come to an end as the LDC graduation takes effect.
Garment export rose from $12.49 billion in the fiscal year of 2009-10 to $27.95 billion in FY2019-20.
Applying the standard GSP of most favored nation (MEN) tariff will escalate the cost of sourcing from Bangladesh further. The EU’s global average import price dropped 4.35 percent from 2013 to 2018,
“While all competition discounts any imposition of tariff on Bangladeshi goods offering further price may proportionately competitiveness, the study said.
Bangladesh will have to negotiate strongly to meet the EU’s CSP eligibility criteria.
The GSP Plus is a special incentive arrangement for sustainable development and good governance. It slashes tariffs to zero for vulnerable low and lower-middle-income countries that implement 27 international conventions on labor rights human rights environmental protection and good governance.
Bangladesh has ratified almost all major conventions accept for a fundamental convention of the International Labour Organisations Minimum Age Convention.
Presently, $25 billion, or 73% of the external trade of Bangladesh, enjoys duty-free access as an LDC. This will come to an end as the LDC graduation takes effect.
The total imports of GSP eligible products into the EU shall have to be less than 7.4 percent of the total imports of the bloc from all GSP beneficiary countries on an average during the last three consecutive years.
The share of Bangladesh’s imports to the EU under the GSP facility was as high as 24.4 percent in 2018.
Besides, the rules of origin under both Standard GSP and GSP Plus require double transformation for textile and clothing items. Currently, Bangladesh enjoys a single transformation or one-stage work processing. I.e., fabric to garment Bangladesh received the benefit under the Everything But Arms (EBA) in 2011. Apparel export from Bangladesh to the EU was $11.38 billion. It rose to 13 billion in FY 19, up 86.6 percent.
Bangladesh’s export competitiveness will also be affected because the current subsidy program of the government may not continue in the post-LDC era.
The subsidy programs will have to be re-designed and re-purposed so that it fits in the post-LDC market access criteria and helps keep the industrial competitiveness and excellence in the country, the BGMEA study said.
The study suggested lobbying with the EU. Discussions with the European Commission need to be initiated for about 74 percent threshold for the GSP Plus scheme.
The EU is currently reviewing its GSP scheme for 2023, which will be finalized soon.
“It is important to have the issue of threshold addressed in the new CSP regulation. If we can successfully lobby with the Ell to re-fix its threshold criteria from import under EU GSP to overall import this may resolve the problem.”
Extension of the EBA and other preferential tariff schemes for at least 7-10 years on the ground of the high concentration of exports and the impact on employment and poverty was stated in the report.
