Hard time ahead for exports

Enjoying five years grace period after graduating to developing country in 2024, Bangladesh products will face strong price competition in EU market after 2029 as an average 8.7 percent duty will be applicable on its exports.

In face of this, Bangladesh industry as well as policy people are concerned about tariff preference after LDC graduation as the present country condition is not in favour of getting GSP + facilities to the European markets. 

Leading economists and business leaders expressed concerns that Bangladesh’s relevant laws, though ratified under the UN conventions, are not strictly enforced. Referring to dissatisfactions of European and American buyers and EU leaders what they observe Bangladesh is reluctant to protecting the rights of workers, they stressed on immediate government measures to bring remarkable improvements in those areas for achieving the country’s eligibility for GSP + facilities after 2029.

Besides, experts and diplomats suggested for signing Free Trade Agreements (FTAs) with European countries to overcome the challenges of duties to get access to those markets.

Dr. Debapriya Bhattacharya, research fellow of the Centre for Policy Dialogue (CPD), said, Bangladesh is eligible for GSP+ in vulnerable criteria, as it accounts more than 75 percent GSP covered imports whereas Bangladesh covers 96 percent. 

The provision for exporting more than 7.4 percent of total imports into the EU is not in favour of Bangladesh as its comparable figure is 26 percent. Bangladesh needs to work further to resolve this. 

In third criteria, Bangladesh’s woven garments need to attain double transformation while the knit garments sector is doing sufficiently better, he mentioned. 

Apart from the technical part, other important criteria for achieving GSP+ are sustainability and good governance. The GSP+ talks about 27 conventions thankfully, Bangladesh has already ratified 26 of them. The one which is not yet ratified is minimum age of employment. Along with the ratifications the other most important issue is review and monitoring, not only Dhaka will have to sign up to the conventions we will also have to monitor them regularly. In many cases if we go through all the 26 conventions we have ratified we are not up to date with our own reporting. 

“GSP+ is not an easy subject. There are 71 countries are eligible for GSP+ scheme in Europe but only eight are accessing it. The scheme is very difficult to access as Bangladesh has to ensure good governance and rule of law,” said Dr. Debapriya said. 

The European Commission is now working on GSP plus scheme issues and that is why it is high time for Bangladesh to prepare itself to secure access to the EU market. It will be a challenging task for Bangladesh to convince the European Parliament, which does not discuss much on technical issues and mostly concentrates on Social, Labour, and Governance issues, he added. 

In a virtual webinar organised by the Bangladesh-German Chaber of Commerce and Industry (BGCCI) on “LDC Graduation of Bangladesh: Are We Ready for GSP+?” Bangladesh Ambassador to Germany Mosharraf Hossain Bhuiyan said, the EU is Bangladesh's largest export destination and accounts for more than 61 percent of total exports. 

Continuation of tariff preference after LDC graduation is very essential especially in the EU market for Bangladesh’s export growth, he said. Mentioning that Vietnam signed FTA with EU, he suggested Bangladesh to start discussing for both GSP+ and FTA with the EU and implementing FTAs with several countries. 

He, however, expressed dissatisfaction as the commerce ministry had signed just one FTA in the last 18 years. He said the government has initiated several processes to secure easy access to the market in order to export products from Bangladesh.

The webinar was actively participated by reputed personalities both in Bangladesh and Germany. 

Dr. Ahsan H. Mansur, Executive Director, Policy Research Institute (PRI) said, compliance with labour and environment issues is needed to secure GSP plus in EU. He stressed capacity development of the ministries and other agencies to hold negotiations for securing benefits and signing FTA. He also stated that, persuasive diplomatic initiatives along with substantive changes in global conventions will be other important areas for securing the GSP plus scheme. He also mentioned that we are not part of any trade block that really matters.

“We need to convince our EU counterpart to make present Bangladesh in a much formatted manner under sustainability and good governance as the basis for looking at Bangladesh case,” he added.

BGMEA newly elected President Faruque Hassan said, Bangladesh exported $34.13 billion RMG products in 2018-19, of which $25 billion exports enjoyed duty-free market access in the different countries under LDC treatment. 

Some 73 percent of Bangladesh exports is entitled for duty-free access which will face new tariff regime as soon as Bangladesh officially enters into the middle income category. He said 61 percent of readymade garment exports to the EU market would come under new tariffs after the LDC graduation.

“Bangladesh’s export is still dependent on selective basic items, which is another major challenge for us. The share of T-shirt and sweater is 20 percent and 16 percent respectively in its export to EU. Since, these are the most commodity item, 8-10 percent duty imposition will have a significant bearing on the retail price and our competitiveness. He recommended formulating mid-term strategy to maintain competitiveness and stressed upon strategy, capacity building, and diplomatic engagement with the EU to seek an extension of the Everything but Arms (EBA) deal for 10 more years on grounds of exports and employment.

Hafizur Rahman, DG (WTO Cell), Ministry of Commerce informed the Ministry has already organised consensus from LDC group and submitted three proposals to the WTO to extend all special and differential treatment under the WTO Law for 12 years after LDC graduation, extension of transition period and provide export subsidy if after graduation if GNA per capita does not go above $1000 at 1990 base year the country can be included in the category. 

Bangladesh signed Preferential Trade Agreement (PTA) with Bhutan and negotiating with India, Sri Lanka, Malaysia while Japan invited Bangladesh to start negotiation for PTA. The Ministry is already working with some developing partners to implement the trade facilitation issues. 

Faiyaz Murshid Kazi, DG (West Europe & EU), Ministry of Foreign Affairs said, Bangladesh is currently in a negotiation with the EU on developing a Labour Reform Roadmap and hope to reach the final stage soon. He is also hopeful that before the end of this year Bangladesh shall be able to ratify the 27th convention. Regarding FTA with EU, he said the EU partners do not think that they are ready to have FTA with Bangladesh yet. He said the government needs the support of all the related parties to have enough evidence.