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Safeguards against trade barriers
1/15/2005
THE new year is starting off for Bangladesh with some welcome developments. First of all, contradicting the earlier dismaying speculation about impending disaster to occur in its ready-made garments (RMG) sector following withdrawal of the Multi Fibre Arrangement (MFA) from January 01, the sector appears to have its hands full with orders from buyers to last the whole year and beyond. The other good news is the decision of the US government to continue to extend the generalised system of preferences (GSP) facilities to Bangladesh. The GSP enabled the export of a variety of goods to the US market on favourable terms and conditions. It was also an incentive for foreign investors to invest in export-oriented ventures in this country to take advantage of the GSP facility. Its withdrawal, therefore, was very undesirable for Bangladesh.
Not only the GSP withdrawal, the threat of a sort of US trade embargo loomed over Bangladesh if the latter failed to provide trade union rights to workers in its export processing zones (EPZs) by a stipulated date. Non-imposition of such an embargo and non-withdrawal of the GSP seemed to depend on the immediate extension of such rights. The government was quick to respond to the situation by creating such rights for the EPZ workers while also protecting its interests of not giving such rights too freely or arbitrarily. The arrangement appears to have satisfied the US authorities and this is reflected in the extension of the GSP to Bangladesh.
Another good news could come for Bangladesh with the very likely passage of a bill in the US Congress that would allow this country duty-free facility of its RMG products to the US market. The government of Bangladesh and the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) have been jointly lobbying for the introduction and adoption of this bill since the US market has been traditionally the single biggest one for the Bangladeshi RMG products. Gaining duty free access to it in the post-MFA era would come as a big relief for the RMG industries by vitally enhancing their competitiveness in that all too important market.
While the external environment for the country's main export product, RMG, is seen as improving, there can be no ground for complacence either. The US and other western buyers are more and more insisting on compliance with labour and environmental standards. Trade union rights are only one such standard. There are others like working conditions in industries, safety and security of workers, wages paid to them, etc. Some of these may be considered as unreasonable to Bangladeshi entrepreneurs or appear like non-tariff barriers to the government.
But such standards are likely to be the facts of life in the external trade. The sooner the entrepreneurs and official authorities brace themselves to meet the new requirements, the more secure will be the country's external trade. Complying with labour and other standards of the importing countries may create some temporary difficulties for the Bangladeshi producers and exporters. But they should find comfort as well as business incentive from knowing that the steps they will take in these areas would be worthwhile longer-term investments in the security and profitability of their businesses.
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