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Bangladesh calls US decision on GSP ‘harsh’

Before sanction, Bangladesh was allowed to export nearly 5,000 products duty-free to US

Image Credit: REUTERS
People rescue garment workers trapped under rubble at the Rana Plaza building after it collapsed, in Savar, 30 km outside Dhaka in this April 24, 2013 file photo.
Gulf News

Dhaka: Bangladesh on Friday described as “unfortunate” and “harsh” a United States decision to scrap its preferential trading status in US markets over poor working conditions in factories, calling it an outcome of a protracted negative campaign.

“Indeed a section of people, inside both Bangladesh and the USA, had long been campaigning to this effect,” said an official statement issued hours after Washington announced that it had suspended the Generalised System of Preferences (GSP) for Bangladesh.

The foreign office statement said Bangladesh was absolutely “respectful of a trading partner’s choice of decisions” but “expresses its deep concern that this harsh measure may bring in fresh obstacles in an otherwise flourishing bilateral trade”.

The statement did not name anyone for propagating the campaign but Prime Minister Shaikh Hasina and several senior leaders of her ruling Awami League earlier accused arch rival Khaleda Zia, from the main opposition Bangladesh Nationalist Party (BNP), of spearheading a campaign to suspend the United States facility.

Asked who the government actually blamed for the negative campaign, a senior foreign ministry official who requested anonymity told Gulf News that Zia wrote an article in the Washington Post in February, in which she suggested that Bangladesh be stripped of the facility.

US President Barack Obama in a statement late on Thursday (Friday UAE time) said the decision meant Bangladesh would now have to pay millions of dollars in duties for its products to access US markets.

“I have determined that it is appropriate to suspend Bangladesh ... because it is not taking steps to afford internationally recognised worker rights to workers in the country,” President Obama said.

Before the sanction was announced, Bangladesh was allowed to export nearly 5,000 products duty-free to the United States, which purchases about 25 per cent of the country’s $18 billion in annual apparel exports.

Bangladesh was among more than 125 countries to receive breaks on United States tariffs under a World Trade Organisation programme intended to promote economic growth around the globe.

The US decision comes two months after Bangladesh witnessed its worst-ever industrial disaster when an eight-story building, housing several garment factories, collapsed killing over 1,200 people. The incident sparked global concern about workers poor wages and safety in the impoverished country.

US Trade Representative Michael Froman said Washington “has not seen sufficient progress” toward basic safety standards, despite its “close engagement and clear, repeated expressions of concern” with the Bangladesh government over the past few years.

“No one will want to wear clothing that is ‘Made in Bangladesh’ if it is made on the blood of workers. It’s time for American industry to show leadership and work with their European counterparts on a global standard for safety,” he said.

The top US trade official hoped that suspending US trade benefits on a number of non-textile goods would be enough to encourage the Bangladeshi government to make needed reforms.

The move came after the US’ largest trade union, American Federation of Labour and Congress of Industrial Organisation (AFL-CIO), filed a petition with the USTR in 2007 questioning Bangladesh’s eligibility for GSP. A number of US senators put their weight behind their demand for the cancellation of the privilege.

“The government of Bangladesh has been too neglectful for too long, shirking its duty to protect the very workers who are the backbone of the Bangladeshi economy and make it grow,” Celeste Drake, trade and globalisation policy specialist at the AFL-CIO, said in a statement yesterday.

Bangladesh’s expectation

Bangladesh’s foreign office statement, however, said Dhaka hoped the US administration would restore soon its GSP status, saying it was a benefit “a least developed country is supposed to receive in the developed countries as per the provisions of the World Trade Organisation.”

“It (Bangladesh) enjoys an extensive partnership with the USA in multiple areas such as democratic institution building, empowering [of] grass roots people, protecting economically and socially vulnerable groups, countering terrorism, contribution to global peace, and most importantly, a lasting business-to-business connectivity,” the statement read.

It added: “It cannot be more shocking for the factory workers of Bangladesh that the decision to suspend GSP comes at a time when the Government of Bangladesh has taken concrete and visible measures to improve factory safety and protect workers’ rights”.

Fears of fresh danger

Financial analysts, however, said the US sanction would not have a huge effect on Bangladesh’s main export to the United States — billions of dollars worth of clothing — as apparel is not eligible for duty cuts under the GSP offered to the country.

Less than 1 per cent of $5 billion in annual exports were made under the GSP to the US market.

But they feared a possible identical action by the European Union, which the EU has warned may happen, could expose the country to a severe impact as European nations buy Bangladeshi garments worth more than $12 billion each year — roughly three-fifths of the country’s production.

EU officials last month said they hoped the threat of action would be enough to make Bangladesh change its laws in order to retain the market, which forms over a quarter of the south Asian state’s $40.5 billion annual exports in 2011.

“This is about firing a shot across the bows of Bangladesh to get them to engage on the issue ... We want to turn up the diplomatic heat on them and get them to sit down and discuss this with us,” an EU official in Brussels told reporters on May 1.

The EU at that time said the 27-country bloc would reconsider Bangladesh’s status unless it improved labour safety standards, after the Savar tragedy that came after a series of smaller factory disasters over the previous years.

Ahead of the US announcement, a EU official in Brussels said Washington’s expected sanction on Bangladesh also underscored the European Union’s concerns.

Bangladesh in recent months was engaged in hectic diplomatic negotiations with Washington on the GSP issue while it initiated a process to amend labour laws and ease conditions for trade unions in the garment sector.

After years of impasse Dhaka earlier this month also approved the Trade and Investment Cooperation Forum Agreement last week to hold talks to settle trade disputes with the US.