Restoration of GSP is a distant goal

Restoration of GSP is a distant goal

The first TICFA (Trade Investment Cooperation Framework Agreement ) meeting was held on 28th April after the US postponed it twice clearly demonstrated that Bangladesh and the US had completely different agenda and expectations.

While Bangladesh wanted restoration of GSP (Generalised System of Preferences )and duty free access of all Bangladeshi goods as being a LDC to the US market under the Bali package of WTO reached last November, the US wanted low tariff from Bangladesh for its goods in the market.

The US also suggested two panels on labour and women in focus to ensure due rights for garment workers and spur women’s participation on the economy of Bangladesh. Furthermore the US delegation stated that they recognized that much work remained to be done in the garment sector for workers and work that had started needed to be seen through to its completion. That meant that restoration of GSP would not be restored until all work had been completed.

On the duty free goods including garments to the US market from Bangladesh the delegation reportedly started that the LDC’s access to the US market was tied with WTO’s further negotiation. .It appears that the first TICFA meeting ended in failure for Bangladesh.

The question is: Why was the negative stance of the US?

There are three main reasons which are :

Strained political relations with the US

The Congress is not yet fully satisfied with the actions taken by Bangladesh for the garment industry

Congressional approval is needed to restore GSP

First, the political interconnection between Bangladesh and the US is thin because of many factors. The main reason is their reservation of the outcome of non-inclusive 5th January election which returned the Prime Minister Sheikh Hasina to power after the main opposition party boycotted the vote and no congratulatory message has come as yet to the Prime Minister.

Nisha Biswal, the assistant secretary of state for South Asia, recently reportedly said that the United States would keep pressing Bangladesh to resolve intense feuding but acknowledged that “we haven’t seen a tremendous amount of movement.”

“We believe that all of the gains that Bangladesh has made in its economy, in its development trajectory, that all of those gains are fragile and unsustainable in the long term if it does not have political stability,” And political stability is not possible without some greater degree of political inclusion.” she told a congressional subcommittee on 30th April.

Representative Steve Chabot, who chairs the House Foreign Affairs subcommittee on Asia, encouraged sustained effort to encourage political progress in Bangladesh.

“If it’s not resolved, I’m afraid the violence is going to escalate and an ally — a good ally of the United States and one that has kind of traditionally been looked upon as a model for a moderate Muslim country — could become just the opposite,” Chabot said

Finance Minister AMA Muhith on 26th April reportedly asserted that Bangladesh’s political ties with the US are not in a “comfortable” state though its ties in the economic field are okay. Muhith also said the relations between the two countries have always been “cold” and the government is trying to make them “a bit soft”, at least on the economic front.

“Politically, their (the US’) pressures aren’t comfortable, not good, and exceed norms,” the minister told reporters at the Secretariat while briefing them about his Washington, New York and Mexico City tours.

This means that unless there an all inclusive parliamentary election in Bangladesh the US administration and the Congress are reluctant to restore GSP.

Second, when the US administration, trade representatives, the EU and the ILO acknowledged Bangladesh’s “some progress” in labour rights and factory safety issues and stressed on keeping up the momentum, influential US Senator Robert Menendez still remained critic He also found “lack of institutional capacity and political will” of the government to protect new unions in the garment industry.

The US senator cautioned the BGMEA and the government and said they “must understand this simple message: Western consumers will not buy clothes that are stained with the blood of Bangladesh’s workers”.

This year on Mar 24, Senator Menendez wrote a letter to the BGMEA President and threatened garment owners that he would not support the restoration of Bangladesh’s GSP facilities unless “harassment and intimidation” of garment union organisers and members are stopped.

After revoking GSP facility, the US administration rolled out action plans to ensure factory safety and workers rights.

In the new statement, according to the US embassy, Menendez said for many the tragedy was “a call to action”. “The US government has suspended trade benefits for Bangladesh until it takes several concrete steps to improve workers’ rights and safety.

“The government of Bangladesh, while making progress in the registration of new unions, still lacks the institutional capacity and political will to protect them”.“This has had a chilling effect on labor organizing in the country,” he asserted. He said many workers now fear losing their jobs if they join a union and union organizers rightly fear for their own safety.

“Without the strong voice of an independent factory union, workers have no mechanism to ensure their own safety,” he said. “They cannot make sure that managers keep fire doors shut and stairwells clear, or that cracks in columns and walls are not simply painted over.

Third, the GSP was suspended by the US administration in June 2013. Although the trade under GSP was small, the suspension damaged the reputation of Bangladesh in the safety and protection of garment workers. . Moreover whatever the US does, the European Union picks up and follows.

However this time the EU has not suspended its GSP to Bangladesh garments. Currently, Bangladesh enjoys a 12.5 percent duty benefit in the EU market under GSP for the country’s 60 percent exports meant for the bloc of 28 nations.

Another important fact is that since its introduction in 1974, the GSP program has required periodic renewals by the Congress.. The current GSP expiration date was July 31, 2013. The House of Representatives introduced a bill on July 17 extending GSP to September 30, 2015.

The Senate followed with an identical bill on July 18, but it is still not certain that the bill will make it through both houses and land on President Obama’s desk.

It is reported that that GSP bill is tied with President Obama’s request that TPA (also known as “fast track”) is needed to implement the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership agreements currently under negotiation.

However, some lawmakers are working to generate opposition to TPA in the belief that Congress should not cede its constitutional authority to regulate commerce. It is reported that given that congressional priorities lie elsewhere few if any of the trade-related bills are likely to be taken up in the near future.

What is GSP?

Generalised System of Preferences (GSP) is a preferential trade program designed by the US to promote economic growth in the developing world. It provides for duty-free treatment of certain merchandise that is produced and exported from select beneficiary developing countries.

In order to be eligible for duty-free treatment under GSP, qualifying goods must: (1) consist of at least 35 percent by value of local BDC content; and (2) be directly shipped from the BDC to the United States.

In 2011, Bangladesh enjoyed the GSP facility for exporting products worth about $26.3 million. Items that enjoyed the facility included tobacco products, sports gears, tents, kitchen appliances and plastic products.

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