Bangladesh 'to lose GSP facility'

President Barack Obama is expected to announce suspension of US trade benefits for Bangladesh after several deadly factory disasters in the country's garment sector that have cost more than 1,200 lives, Reuters says quoting a congressional source.

Published : 27 June 2013, 11:48 AM
Updated : 27 June 2013, 02:20 PM

A representative from the Bangladesh Garment and Industrial Workers Federation found this Joe Fresh label in the rubble of Rana Plaza at Savar. Bangladesh Garment and Industrial Workers Federation handout

The New York Times quoting Obama administration sources and Congressional officials said the official announcement would come late on Thursday US time, early Friday Bangladesh time.
US trade officials have said they expected Obama to announce a decision on the matter by the end of June. The US Trade Representative's office did not have an immediate comment on whether an announcement would come on Thursday.
Labour advocates want the US to convey its disapproval of working conditions in the country by stripping Bangladesh of its special trade status. It might also lead the European Union, which does exempt the garment industry from tariffs, to revoke this status. The European Union buys more than $ 12 billion in Bangladeshi garments each year, or roughly three-fifths of the country’s production.
Suspending Bangladesh from the US Generalised System of Preferences (GSP) programme would increase US duties on an array of products the country exports to the United States, such as tobacco, sporting equipment, porcelain china, plastic products and a small amount of textile products.
But it would not directly affect Bangladesh's main export, clothing, since garments are not eligible for duty cuts under the GSP programme, which was created in 1976 to help economic development in the world's poorest countries and to reduce import costs for US companies.
Bangladesh is among more than 125 countries that receive breaks on United States tariffs under a World Trade Organisation programme intended to promote economic growth around the globe.
In 2012, Bangladesh was spared about $2 million in US duties on about $35 million worth of goods under GSP programme, but it paid about $732 million in US duties on $4.9 billion of clothing exports not covered by the programme, according to Ed Gresser, a trade analyst with the GlobalWorks Foundation, Reuters said.
Still, Obama's decision would be a repudiation of working conditions in Bangladesh following the collapse of the Rana Plaza garment factory building in April that killed over 1,100 people and the Tazreen Fashions Ltd factory fire in November last year that killed over 110 people.
It also could influence the European Union's decision whether to suspend trade benefits for Bangladesh, which would have far more impact since Bangladesh's clothing and textiles exports receive duty-free treatment there.
The EU imported roughly 9.2 billion euros ($12.13 billion) of goods from Bangladesh last year, according to data from the EU's executive, the European Commission.
Clothing and textile products ranging from towels and bedding accounted for almost 93 percent of those goods.
EU officials have threatened to kick Bangladesh out of the program - a process that could take more than a year - unless it improves worker safety conditions.
However, labour unions and Democrats on US Capitol Hill have been pressing the US government to suspend the trade privileges for Bangladesh, reported the New York Times. But at the same time, some State Department officials also pushed against suspending the trade privileges, saying it would damage diplomatic relations and undermine the economy or an already poor country.
Bangladesh is allowed to export nearly 5,000 products duty-free to the United States, which purchases about 25 percent of the country’s $18 billion in annual apparel exports.
Losing the GSP facility could cost Bangladesh millions of dollars in taxes.