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Bangladesh needs to get back
US-GSP facility
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BY MD ABDUS SOBHAN
Bangladesh is a developing country that is classified as a next
eleven emerging market and one of the frontier five. According
to a recent opinion poll, Bangladesh has the second most
pro-capitalist population in the developing world.
Between 2004 and 2014, Bangladesh has averaged a GDP growth rate
of 6%. The economy is increasingly led by export-oriented
industrialization. The Bangladesh textile industry is the second
largest in the world. Other key sectors include pharmaceuticals,
shipbuilding, ceramics, leather goods and electronics. Being
situated in one of the most fertile regions on Earth,
agriculture plays a crucial role, with the principal cash crops
including rice, jute, tea, wheat, cotton and sugarcane.
Bangladesh ranks fourth in the global production of fish and
seafood. Remittances from the Bangladeshi Diaspora provide vital
foreign exchange for the country. The Bangladesh telecom
industry has witnessed rapid growth over the years and is mainly
dominated by foreign investors. The government has emphasized
the development of software services and hi-tech industries
under the Digital Bangladesh scheme. Bangladesh has substantial
reserves of natural gas and coal; and many international oil
companies are involved in production and exploration activities
in Bay of Bengal shore area. Regional neighbors are keen to use
Bangladeshi ports and railways for transshipment. Located at the
crossroads of SAARC, the ASEAN+3, BIMSTEC, and the Indian Ocean,
Bangladesh has the potential to emerge as a regional economic
and logistics hub. In 2015, per capita income stood at USD
1,314. While achieving significant macroeconomic stability,
Bangladesh continues to face challenges such as infrastructure
deficits and energy shortages. As a development partner, USA is
helping our country in different ways. But as a developing
nation, Bangladesh currently is facing a trade barrier problem
with USA-GSP facility where most of the countries are enjoying
this facility. It is mentioned that generalized system of
preference, (GSP) is a preferential tariff system which provides
a formal system of exemption from more general rules of the
World Trade Organization (WTO). Specifically, it's a system of
exemption from the most-favored-nation (MFN) principle that
obliges WTO member-countries to treat the imports of all other
WTO members in the way they treat the imports of their
'most-favored' trading partner. In essence, MFN requires WTO
member-countries to treat imports coming from all other members
equally, that is, by imposing equal tariffs on them, etc. GSP
exempts WTO member-countries from MFN status for the purpose of
lowering tariffs for the least developed countries (LDCs),
without also lowering tariffs for the rich countries. The GSP
was established to promote exports of low-income countries to
industrialized ones in order to support their economic growth
and development. However, the design of these schemes are rather
complex and aspect of GSP has been found to be controversial.
 US GSP promotes sustainable development in beneficiary countries
to increase and diversify their trade with the United States.
The program provides additional benefits for products from least
developed countries. According to a US Chamber of Commerce
study, it shows moving GSP imports from the docks of country of
origin to USA consumers, farmers, and manufacturers supports
tens of thousands of jobs in USA. It also boosts American
competitiveness by reducing costs of imported inputs used by USA
companies to manufacture goods in the country. GSP is especially
important to USA small businesses, many of which rely on the
programmer's duty savings to be competitive. In addition to
promote economic opportunity in developing countries, the GSP
program also supports progress by beneficiary countries by
affording workers' rights, in enforcing intellectual property
rights, and in supporting the rule of law.
The United States instituted GSP on January 01, 1976 as a means
of promoting growth in developing countries through preferential
access of their exports to USA market. It provides for duty-free
entry into USA for some 5,000 products of 122 countries. The
value of GSP exports stood at around $20 billion in 2012. The
largest beneficiaries are India, Thailand, Brazil and Indonesia.
The USA administration has renewed GSP facility for the
developing and least developed countries of the world after it
suspended it for the last two years on expiry of earlier
legislation. But surprisingly, Bangladesh is only country along
with Russia which was excluded from the list of 122 beneficiary
countries for duty-free market access of their exports to the
USA when the announcement of its renewal hit the global
capitals. The US Congress recently made new legislation for GSP
facility and Obama administration has put it back on track on
July 29 with retrospective effect from date of suspension two
years ago.
Bangladesh was entitled to enjoying GSP facility from 1980
although its major exports to the USA, including ready-made
garments, remained excluded from the benefit, denying the real
business opportunity Bangladesh could harvest under the
concessional trade access. USA suspended GSP facility to
Bangladesh after the Rana Plaza disaster in 2013.
The exclusion of Bangladesh resulted mainly from its apparent
failure to fulfill all of 16 conditions that the Obama
administration had laid out when it revoked the privilege two
years ago on grounds of poor workplace safety and labor rights.
But Bangladesh government claims that it has fulfilled many of
the including occupational safety & workers right's. It is
unfair for USA to single out Bangladeshi businesses and workers
for exclusion from GSP, when it maintains these privileges for
over one hundred twenty two different countries, many of which
hold similar concerns about labor conditions. Bangladesh
deserves USA support to build a stable economy. It is unjust
that USA as a major export destination not to recognize the
progress Bangladesh has been making. This is particularly not
favorable for Bangladesh at a time when other nations like
Vietnam are benefitting are benefitting from new trade deals
with the US such as Trans-Pacific trade partnership and EU
maintains duty and quota-free access for Bangladeshi goods. USA
should move forward on restoring GSP and improving trade
privileges for Bangladesh to give our exporters an opportunity
to compete fairly with comparable nations. The beneficiaries of
the new scheme include all South Asian countries such as India,
Pakistan, Nepal, Sri Lanka, Bhutan and Afghanistan. Only
Bangladesh remains excluded. It would pour in a damper on the
country's attempts to expand export basket and reduce its
reliance on garments. Suspending Bangladesh from the GSP program
would also increase US duties on an array of products the
country exports to the United States, such as tobacco, sporting
equipment, porcelain china, plastic products and a small
quantity of textile products.
The negative impact of the USA's GSP removal is speculated to be
a warning for future trade between Bangladesh and United States
including the prospect of retaining the MFN status which
benefits Bangladesh's economic growth. According to the
Bangladesh Economic Review (2014), during last three years,
there was no significant foreign direct investment inflow from
USA to Bangladesh. In such circumstances, the repeated attempts
of the Bangladesh government to regain the US GSP are crucial
for the country's continued economic growth.
 Bangladesh cares deeply about retaining GSP benefit because of
the countries extremely narrow and fragile export basket, link
between trade performance and human development and social
stability, and most importantly seeking negotiation as an
early-stage industrializing nation. Bangladesh's export sector
is extremely narrow in terms of both size of market and
diversity of export items. USA is Bangladesh's single largest
export destination that accounts for more than a quarter of
Bangladesh's exports. More than 95 per cent of the export
earnings are coming from USA, worth more than $4.5 billion, come
from just one single item which is garment. Given this excessive
dependence on one single item, Bangladesh remains extremely
serious about adding new items to its export basket. Herein lies
the essentiality and significance of the USA GSP. More
importantly, Bangladesh's image as a trade partner of USA is
tainted. This may discourage USA and other foreign investors,
new and old, from venturing into Bangladesh, which may have a
moderate effect on the prospect of future export growth of the
country, particularly in USA market.
The biggest short-run fear for the country is a similar action
adopted by European Union (EU). The EU had previously threatened
to remove preferential access of Bangladeshi RMG products in EU
market if the government did not take measures to improve the
working condition in factories. Bangladesh RMG export to EU grew
to about $11.37 billion as of June 2012. Hence, such an action
will be devastating for the country's RMG sector which exported
products worth $19 billion dollar in the last fiscal year and
employs about 4.5 million people at the bottom of the population
pyramid, 80 per cent of whom are women.
Thus, there will be increasing pressure on the government to
improve working conditions as EU will be closely observing
Bangladesh. Several European importers have already come forward
to help the country in improving safety features of RMG
factories, which is a good sign for the country.
The protection of workers' interest is not just a GSP issue.
This is essential for modernizing employment practices in
Bangladesh in line with good international practices; the
convergence of interests with the GSP is a win-win situation.
Some economists advised the government to improve the
political-level understanding with the US, avoid games of
blaming others, establishing a strong base corporate governance,
some areas that need to be improved where required, integrated
inter-ministerial coordination efforts, direct and continuous
contact with the governments of Bangladesh and USA, as they take
actions on workers' rights and safety, implementing the
commitments and suggestions by USA, EU and other development
partners' action plan, easing obstacles to investment,
strengthening negotiation skills and bargaining power and
quality of economic diplomacy.
 The sooner the country fulfils all the conditions, the better it
is not only for gaining the GSP but also for ensuring rights of
the workers as well as image- building and reputation of
Bangladesh.
Looking forward, Bangladesh needs to develop strong policies to
improve domestic competitiveness. With highly favorable
endowment of labor, Bangladesh has a huge comparative advantage
in labor-intensive manufacturing. Focusing on investment,
infrastructure, land availability and labor skills is the main
policy challenge. Apart from education and training, converting
labor to a productive and committed workforce will also require
strong social policies to protect the welfare of the workers.
This long-term development challenge, rather than access to GSP,
provides the imperative for adopting appropriate employment
policies for workers.
The United States has long-standing supportive relations with
Bangladesh & is a long trusted development partner. Bangladesh
as a small country cannot influence the political decision of
the US. The US GSP is not a political issue; it is an economic
and technical issue where Bangladesh's active participation
along with good relations with the US is more need's to get back
US-GSP facility and retain the GSP benefits to become a middle
income country by 2021 as soon as possible and without delay.
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