Dhaka,  Tuesday
05 March 2024

Businesses concerned over GSP cancellation

Sanjay Adhikari Rony

Published: 02:53, 5 December 2023

Businesses concerned over GSP cancellation

Photo : Messenger

The evaluation report by the European Union (EU) Commission concerning human and labour rights in Bangladesh has sparked concerns about the country's Generalised System of Preferences (GSP).

Simultaneously, a new US government policy focusing on labour rights has instilled a sense of worry among business circles.

The United States has signalled potential sanctions, including trade-related ones, based on these labour issues. Additionally, reports indicate that Bangladesh's GSP benefits in the EU might be in jeopardy. This has led to significant apprehension within the country's business community due to these dual announcements.

Economists fear that if these concerns materialise, Bangladesh could face a severe economic crisis. The withdrawal of the GSP facility by the European Union, especially impacting the garment industry, the primary sector driving Bangladesh's export earnings, would pose a significant threat. Moreover, losing the GSP facility could impede Bangladesh's ability to acquire the GSP Plus facility in the future.

Both the US and EU have historically been major markets for Bangladeshi products. Approximately 20 percent of Bangladesh's total export income comes from the United States, while 48 percent of its total product exports are directed to the 27 EU countries. Notably, 93 percent of Bangladesh's product exports to the EU consist of ready-made garments.

The garment industry has flourished in these markets over the last two decades, largely due to GSP benefits. Therefore, traders are deeply concerned that any hindrance in trade with these markets could severely impact overall export trade.

Insiders in the garment industry emphasise that the intensified focus on labour rights issues, subsequent to restrictions on law enforcement and visa policies, has become a significant cause for concern. Recent political circumstances and worker protests regarding minimum wages in the garment sector have further intensified worries among entrepreneurs.

Faruque Hasan, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted this, saying, “If the United States enforces a ban on garment imports from Bangladesh or imposes additional duties, it would result in significant sectorial suffering, potentially leading to the closure of numerous factories and subsequent job losses.”

“Labour laws have been amended three times in the last decade in favour of workers in Bangladesh. We are prepared to make further amendments if necessary,” added the president.

He further noted, “Exports to the US market have declined by approximately 30 percent in the last nine months. The European Union has also urged the country to reform its labour policies to sustain its market advantage. Hence, we need to place greater emphasis on understanding labour policies and GSP benefits.”

Analysts caution that, considering the political context, there are legitimate reasons to be alarmed by these two reports. Additionally, announcements like these may lead to complications in transaction processes conducted by banks affiliated with various international regulatory authorities, posing a significant warning for Bangladesh.

Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), conveyed this to The Daily Messenger, saying, “The necessary policy reforms crucial for the economy have unfortunately been held hostage by a dysfunctional political situation. If politics remains unstable, addressing economic concerns and fostering stability and growth will be incredibly challenging, particularly in the context of conducting elections.”

“However, despite the concerns voiced by the business community, the government appears to be disregarding the gravity of the situation,” added Debapriya.
Contrarily, Foreign Minister AK Abdul Momen recently mentioned that there's no cause for concern regarding the US policy on labour issues, asserting that the government isn't facing any pressure in this regard.

It's noteworthy that the Generalised System of Preferences (GSP) stands as the EU's primary trade policy, aimed at assisting reasonably economically weaker and developing nations in exporting goods to the EU. GSP benefits are extended on the condition of compliance with international standards covering human rights, labour rights, environmental conservation, climate considerations, and good governance. This framework has made the EU a significant export destination for Bangladeshi products.

In the fiscal year 2022–23, approximately 45 percent of Bangladesh’s total product exports were directed to the 27 EU countries. The EU has explicitly stated that beneficiary countries could risk losing their GSP benefits if they fail to adhere to human and labour rights standards.

Messenger/Disha

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