The awful working condition in many of the textile and garment factories of the country at last starting to pay the toll. After several years of warning to act on Labor standards, the US has finally initiated actions that may take away Bangladeshi products’ duty-free access to the US. The United States Trade Representative on December 21, 2012 sent a letter to Commerce Minister GM Quader stating that, “We are beginning to consider options that would affect Bangladesh’s continued eligibility for benefits under the GSP”. The largest federation of unions in the United States AFL-CIO (American Federation of Labour and Congress of Industrial Organisations) mentioned that Bangladesh is not taking steps to afford to workers internationally recognised worker rights, specifically the right of association and the right to organise and bargain collectively. Something like that was predictable as Dan Mozena has given some clue a few months ago – details were analyzed in the last July, 2012 issue of BTT. Unless the government can say something meaningful to pacify resentment in the US against low labor standards in Bangladesh, the duty-free facility would be cancelled. US is going to have a public hearing on the cancellation of GSP in March and the government has to clear its position on the issue. To make it worse even the EU has arranged a talk in their parliament about the working conditions in the garment industries of Bangladesh and decided to ask Bangladesh to establish an efficient and impartial labor safety inspection system. Though it was on the card but the recent Tazreen fire have really fueled the inferno.
Existing GSP facility from USA
Bangladesh literally enjoys GSP facility from the US but the term enjoying does really go as a very small, 0.54 percent of Bangladesh’s total exports of $4.87 billion to the US now have duty-free status. The range of products that get the duty free access doesn’t include the prime export item of Bangladesh that is RMG. Bangladesh as a LDC gets GSP facility from the following part of the world for its RMG products:
Products such as tobacco, plastic bags and articles, golf equipment, sleeping bags, bone china and porcelain kitchen/ tableware, cereal based prepared foods, handloom woven cotton carpets and other textile floor coverings, spectacles and goggles, headgear other than rubber and plastics, etc. are eligible to enter duty-free under GSP in the US market. Export of sleeping bags rose high (from $0.17 million in 2008 to $5.82 million in 2011) due to the GSP but even it was withdrawn from January 2012. The US realises $720 million on average as duty on garments originating from Bangladesh. Bangladeshi RMG products need to pay a tariff of 15.03% on average to enter the US market. The president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA) Shafiul Islam said “the threat of GSP cancellation by Washington DC would have insignificant impact on apparel exports to USA as Dhaka does not enjoy GSP. We are not even getting any duty benefits, rather, we are exporting garments to the USA after paying taxes at the highest rates.”
Bangladesh is stingy benefited by the existing GSP facility comparing to the other beneficiary countries. The following chart shows the same:
Though this existing facility if withdrawn, would not hamper much to the garments export to US, but the issue of GSP cancellation goes beyond the monarchy of the small amount of duty-free exports or even the big amount of duty paid on apparels. It would give a very bad signal to the European and other buyers that Bangladesh is not a secure place to source garments. As the second largest garments exporter of the world it would not bring any good to the countries key industry.
Apparel Export to USA:
The USA is the largest market for woven garments export and the second largest market for knitwear export from Bangladesh.
USA is considered as the biggest market of woven wear, in fact only China is exporting more woven wear than Bangladesh. The growth rate is impressive for Bangladesh and it would boost up the woven wear export tremendously if the duty free facility is availed.
Leading woven wear exporter to USA, FY 2010-11 (in million USDs):
Progress or retreat towards US GSP:
A high official of the US embassy says, “the GSP is completely a political issue and it can only be resolved by negotiation between the two countries.” Don Mozena, Ambassador of US envoy have been criticizing Bangladesh for not signing the TICFA ( Trade and Investment Cooperation Framework Agreement) of-late and AFL-CIO now have filed a petition to the US govt alleging serious violations of labour rights in Bangladesh. Some of the allegations are for 1) the right of association, 2) the right to organise and bargain collectively, 3) freedom from compulsory labour , 4) minimum age for employing the children, and 5) acceptable conditions of work with respect to minimum wages, hours of work and occupational safety and health. However, the Labour Act 2006 has the provisions to allow workers the right to do the same but the execution of the laws are on the question mark.
The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a national trade union center, the largest federation of unions in the United States, made up of fifty-six national and international unions, together representing more than 11 million workers.
When asked about the AFL-CIO petition with the US Congress, BGMEA president Saiful Islam said “it is not new as the AFL-CIO makes such a petition almost every year before the Congress. We, (Bangladesh government) also participated in the hearing and explained our position”.
Regarding labour unrest and workplace safety, the issues raised in the hearing, the BGMEA president said that they are trying their best to solve the problems. “Whatever problem surfaced in RMG factories, we instantly try to address,” said Shafiul adding that the government is also monitoring the situation.
“The situation is improving, but you can not solve all the problems overnight,” said the BGMEA president terming it a continuous process.
BGMEA is working with the ministry of Labour, Ministry of Commerce as well as with ILO to improve the labour relations, welfare and all others rights.
It’s true that since the filing of the petition, the government of Bangladesh gave its explanations in defense of retaining GSP at two rounds of hearings: one in mid 2007 and the other in early 2012. The USTR put the Bangladesh case on hold first until June 2009 and then until for another two years. After the last round of hearing on January 24, 2012, the USTR put the Bangladesh case on review along with some other candidate nations including Georgia, Niger, the Philippines, and Uzbekistan.
Now the USTR wants Bangladesh immediately to show their initiatives to improve the working conditions before 31st January, specially to sign the TICFA (Trade and Investment Cooperation Framework Agreement) with Washington.
TICFA now awaits PM’s approval
The government of Bangladesh was reluctant to sign the TICFA as there are regulations that would not be easy for the industry to adopt immediately and tried to take time from USTR saying that improvement in the working conditions of the workers is a continuous process and continual steps are being taken towards the same. But now, as the US has rejected Bangladesh’s proposal seeking ‘gradual implementation of labour standards- freedom of association and effective recognition of workers’ right to engage in collective bargaining, as included in the draft of TICFA, seeing no way, the government has finally decided to sign the TICFA and the file is in the prime minister’s office for her approval.
The foreign ministry though preferring duty free access for apparel to the US as a pre-condition for signing the proposed deal. But as the deal is completely a political matter now it is up to our Prime Minister, how she would approach the deal to bring out the duty free access for garment export. The ministry in a letter sought the intervention of PM Sheikh Hasina to resolve the crisis with the US-GSP.
The effect of USA GSP facility
The USA GSP can really be a turning point for our industry. The 200 billion worth of apparel market in the US will be a great boost towards gratifying the McKinsey prediction to double the apparel market by 2020.Bangladesh at present doesn’t enjoy GSP from its produced textile and clothing in the USA. But at some stage it was near the gateway to GSP facilities, and still it may enjoy the facilities if she accept the terms and coditions proposed from the benefactor. In nacked eye, we can see 1.5% export loss in our export value, but several negative impacts will rise.
Keeping eye on the possibility of getting green signal to GSP in future, several investors might have invested or negostiated with prospective buyers of doing business in future.
- Red signal to GSP from the USA, not only would destroy 1.5% export value, but also retreat present investors and prospective investors.
- Red signal to GSP will signalize negetive image of our sector to the globe.
- Our compititors may use this
We need improvement in the legislation, protecting workers’ right, fire safety, security and conducive, minimum wage and other issues related to the workers working environment. The government and the concerned authorities can really implement them successfully as they did to eradicate children workers from the industry. But the recent fire at Tazreen has really made a strong issue for the USTR to fuel their petition to cancel the GSP facility from Bangladesh.
Bangladesh is still young in industrialization, and it has an impressive record of retaining constant economic growth with all those obstacles associated with a poor country of huge population. Almost all the developed countries are supporting this effort of a diminutive nation by providing trade facilities. USA perhaps is the last remaining exception. While retention of the GSP in the current format would not do any favour to us, the US really should open their doors for our apparel industry if they really have the mindset to support the efforts of this country.
It is the right time to respond to the vital issues and must take serious and faster initiative to avail every facilities sought our buyer’s countries, espcially the USA. Proposed terms and conditions forced by the USA are for our people and will certainly positively influence our existing textile and clothing industry. It is also the right time to employ the appropriate employ for the industry or Bangladesh should go first to form a consortium for trade, business and exports with experineced experts from home and abroad which will guide this multi-billion industry on trade and its related issues.
On the other hand, extensive labour unionism can really bring out a catastrophe in this socio-economic condition of the country. So, the government really have to move smartly and negotiate with the US authorities to find a way.