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Factories focused on transparency, worker and building-safety will win confidence of US brands

The United States is the single largest apparel export destination for Bangladesh.  In the year 2019, Bangladesh’s earnings from RMG exports to the United States were $6.02 billion. Although average U.S. tariff rates ranked among the lowest in the world according to 2016 World Bank data, U.S. duties on specific imported goods vary widely, and the highest U.S. tariff rates are levied on apparel and clothing accessories.  Because more than 85 percent of Bangladesh’s exports are ready-made garments, nearly all Bangladeshi exports to the United States are subject to relatively high duties.

Figure 1: Earl R. Miller, U.S. Ambassador to Bangladesh.

Recently, Textile Today sat with Earl R. Miller, U.S. Ambassador to Bangladesh, at his residence in Dhaka, to discuss bilateral trade issues between Bangladesh and the United States, including export tariffs, GSP, and opportunities for expanded investment in both countries.

Textile Today:  How do you see the economic growth of Bangladesh and how do you evaluate the contribution of the textile and apparel industry in Bangladesh’s economy?

Ambassador Miller:  Bangladesh has had a remarkable economic and development journey since its independence in 1971.  It has enjoyed consistent annual economic growth rate of upwards of 6% for the last decade, and is on track to graduate from Least Developed Country (LDC) status in 2024.

One of the things I would like to do as U.S. ambassador is help be a partner of Bangladesh in that economic journey.  And one of the ways we can really help in that regard is to work together on infrastructure development and improving the ease of doing business in Bangladesh.  It is a great way to attract more foreign direct investment (FDI) here.

We all know how important the apparel industry is in Bangladesh. It is the largest single industry, employing 3.5 million people – 60% of whom are women – making up around 90% of Bangladesh’s total exports.

I think there is an opportunity for a more diverse export basket, if you will.  Just five items:  shirts, T-shirts, trousers, sweaters, and jackets comprised 73% of last year’s $34.13 billion in apparel exports.  The country would benefit from diversifying its export portfolio beyond the RMG industry.

A recent USAID report mentioned there are 16 other potential industries that Bangladesh might consider expanding into, including agri-business, energy, ICT, health and pharmaceuticals, telecommunications, light industry, and tourism.

Textile Today:  Before leaving Bangladesh, the Alliance commented, “Bangladesh RMG industry is a model for other countries to follow.”  What is your viewpoint on workplace safety in the Bangladesh apparel industry?

Ambassador Miller:  There is some truth in that.  Bangladesh has made remarkable progress since 2013.  I recognize safety improvements require a significant investment and an organizational culture shift by factory owners.  That is no small feat when you consider many apparel factory owners employ hundreds if not thousands of workers.

Most of the really serious safety risks have been addressed in factories where international brands source.  But there is still a lot of work to be done, primarily in non-Nirapon and non-Accord factories, to keep workers safe.  We all recognize workplace safety cannot be accomplished overnight.  Factories have to maintain the systems they have established to ensure their staff’s safety.

Safety training has to be extended not just to workers but to security personnel, guards, and managers, so they can keep themselves and everyone else safe.

International brands tell me they want to stay in Bangladesh and are committed to staying.  But their confidence in the Bangladesh garment manufacturing market is increasingly influenced by workers’ safety and the independent verification of that safety.  When garment factory owners and manufacturers complain about the cost of setting up safety mechanisms, it shakes the confidence of people who would like to invest in Bangladesh or continue investing in this country.

Textile Today:  The majority of Bangladesh’s exports to the United States are RMG products. What is the reason to choose Bangladesh as a top sourcing destination for apparel products from your point of view?

Ambassador Miller:  Indeed, textiles and apparel account for more than 90% of Bangladesh’s exports to the United States.  And last year Bangladesh’s exports to the United States were $6.8 billion.

Initially, Bangladesh’s low labor costs and large skilled labor force attracted international brands.  But increasingly brands are showing more interest and attention to the garment factories that have a transparent supply chain and take workers’ safety seriously.

Reducing risk does not just mean reducing risk to individual workers; it also means reducing risk to the brands’ reputation.  So, they’re paying much more attention to that.  Factories and buying houses in Bangladesh that are more focused on transparency, safety, and complying with both international and Bangladeshi laws and workers’ rights will build the confidence of brands and are more likely to be rewarded with increased orders.

Some factories in Bangladesh have world-class safety standards—no question about that.  We certainly applaud and support them.  But other factories are not up to international standards.  They have either been slow or unwilling to guarantee workers’ rights and safety.  Those factories can hurt Bangladesh’s reputation with potential buyers or buyers who are already sourcing from the country.

Figure 2: Ambassador Miller visiting a Bangladeshi garment manufacturing factory.

Textile Today:  According to the Pew Research Center, Bangladeshi exporters are the highest tariff payers among the 232 nations exporting to the U.S.  You know, our manufacturers are taking all the necessary steps from their side to make happy brands and buyers.  But to do this, manufacturers are struggling to maintain their competitiveness.  In this situation, how can the U.S. government help to minimize tariffs for Bangladeshi RMG exporters?

Ambassador Miller:  U.S. tariffs on textile and apparel imports are higher than most other products for all countries.  Since over 90% of Bangladesh’s exports consist of textiles and apparel products, the average tariff on all Bangladeshi exports to the United States is higher.  If Bangladesh diversifies its export basket, as I mentioned, the average tariff across goods could be much lower than the existing level.

And let me emphasize Bangladeshi exporters are subject to the same tariffs as other countries that export into the United States.

Textile Today:  Can Bangladesh benefit from the U.S.-China trade war even after the two reached a Phase One trade deal?

Ambassador Miller:  The United States and China have reached a historic and enforceable agreement on a Phase One trade deal, requiring structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, agriculture, financial services, currency and foreign exchange, and China’s technology transfer policies.  The trade tensions between China and the U.S. – and any tensions between large economies – can be a real opportunity for a country like Bangladesh.  One of the advantages Bangladesh has is that it is a new opportunity for many investors.

One important thing Bangladesh could do better – and I’m sensing they’re working on it more and more – is branding itself.  Unless you’ve visited Bangladesh, you don’t really understand what the opportunities can be.

Factories and buying houses in Bangladesh that are more focused on transparency, safety, and complying with both international and Bangladeshi laws and workers’ rights will build the confidence of brands and are more likely to be rewarded with increased orders.

One of my most important jobs as U.S. ambassador is to promote U.S. investment in Bangladesh and Bangladeshi investment in the United States.  One of the ways I do that is to have trade delegations, trade missions, and CEOs visit this country.  One of the things I’ve been trying to do is encourage people to visit:  if you are going to be in South Asia or New Delhi, why not take a short trip over to Bangladesh with a potential market of upwards of 170 million consumers?

And I will tell you this, when we do have American companies come to Bangladesh, they leave here enormously enthusiastic about the potential here.  First of all, they are greeted very warmly and graciously.  They have access to government officials who are eager to talk about investment opportunities in this country.  They have access to think-tanks who give them a candid assessment of the economic environment.  And of course, the U.S. embassy is willing to help them navigate what may be a new culture and new environment for them.

We have the U.S. trade show coming the last week of February.  It was a huge success last year. You have all the iconic American brands here to talk about opportunities for commercial engagement between our two countries

Textile Today:  The Bangladesh apparel industry is the second-largest in the world.  What are the opportunities you see for the United States to invest in Bangladesh?

Ambassador Miller:  I think the opportunities are enormous.  American companies who are looking to engage further in Bangladesh or come into a new market here are greatly concerned about workers’ safety and workers’ rights, which is why I have been such an advocate for these things.  And my job as U.S. ambassador is to work for the betterment of the people of the United States and Bangladesh.

On a personal note, I was born and raised in Flint, Michigan and my father worked for 35 years in an automobile factory.  He was a labor activist, what they called a “committee man,” which means he ran a labor union in the factory.  So, I learned early on about the value of worker unions and how they can be used in a really effective way, not just for workers, but for management as well.  Unions and collective bargaining agreements are a way to have an open channel of communication to talk about and deal with issues that arise before they lead to misunderstanding, or strike, or something more serious.

Textile Today:  What are the challenges you see in the bilateral trade with Bangladesh and how can the challenges be overcome?

Ambassador Miller:  Thanks to the success of several U.S. companies, exports to Bangladesh for 2018 reached $2.1 billion, a 43% increase from 2017.  This shows how healthy our relationship is with Bangladesh.

As for the challenges, we have talked about some of those.  When I talk to American businesses looking at moving into Bangladesh, they don’t always understand the Bangladeshi market well enough to make informed decisions.  That’s why I think it’s important for them to come visit Bangladesh.  And we also have Bangladeshi trade missions and trade delegations go to the United States to talk about the opportunities here.

There are quite a few issues with the ease of doing business in Bangladesh.  I often say I would like to see Bangladesh roll out the red carpet and not the red tape for potential investors in this country.  Things that could be addressed include unfair trade barriers, corruption, and infrastructure, which are issues for many developing countries.  But I think the positives certainly outweigh the negatives here.

The one thing I think all potential investors who visit Bangladesh come away with is a great appreciation for the entrepreneurial energy and spirit in the country.  I think Bangladeshi workers can compete with any workers in the world.  You also see that with Bangladeshi students who study in the U.S.

Textile Today:  The United States revoked GSP facilities for Bangladesh on June 27, 2013.  Since then, Bangladesh has made considerable progress in improving the RMG factory environment and worked on other conditions, but the United States has not restored the GSP facilities.  Could you please explain why the United States has not restored the GSP facilities?

Ambassador Miller:  There are a couple of common misconceptions about GSP.  It is not linked to the Rana Plaza tragedy.  There was an extensive U.S. interagency review of the Government of Bangladesh’s progress on internationally recognized worker rights before the tragedy at Rana Plaza.

Most textile and apparel products are actually excluded from eligibility from duty-free treatment under GSP.  Importers in the United States pay the same tariffs for apparel and textiles now as they did before GSP was suspended.

It is true Bangladesh has made significant progress on factory safety since losing GSP benefits.  But there is still lots of work to be done in other areas.  The United States is looking forward to working with the Bangladesh government and the private sector to move forward.

GSP eligibility is set by the U.S. Congress, and the decision to suspend Bangladesh’s benefits was based on criteria applied to all GSP beneficiary countries equally.  The GSP criteria include whether a country has taken or is taking steps to afford workers internationally recognized rights, including the right of association, the right to organize and bargain collectively, freedom from compulsory labor, minimum employment age for children, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.

Bangladesh is working on these issues, but we cannot consider steps toward the reinstatement of GSP without seeing progress on workers’ rights.  I would love to see that happen, but there’s a lot more to our overall economic, commercial, and trade relationship than GSP.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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