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US-Bangladesh Economic Links

by Wahiduddin Mahmud
If freer trade can be made mutually beneficial for both the rich and the poor countries, it is up to domestic policy-makers to see that those benefits are fairly distributed within the countries. Why should then the low-wage exports from poor countries be blamed for creating inequality and job loss in the rich countries? We hope that President Clinton’s visit would help him to get a fresh perspective on these issues so that he can be a more ardent champion of advocating the elimination of poverty worldwide.
THE people of Bangladesh feel overwhelmed and have high expectations regarding President Clinton’s visit. However, the significance of the visit lies more in its symbolic value as a goodwill gesture than in any immediate gains of a concrete nature. The visit will obviously draw a lot of international media attention. In this era of information, it is very important how you package yourself in front of the global community. Although still remaining one of the poorest countries in the world. Bangladesh has come a long way from being the ’basket case' (Henry Kissinger’s unfortunate characterization of Bangladesh of the early 1970s). We should project a positive image by highlighting our many achievements, such as in food production, ready-made garment export, population control. child immunization, micro-credit. and so on.
The visit perhaps signifies that the US interest in
Bangladesh has been elevated, at least to an extent, from mainly humanitarian concerns to commercial and strategic ones. The volume of investments by US companies in the energy sector has rapidly risen in the recent years and there are good prospects for the continuation of these trends. However, the issue of on-going negotiations regarding specific investment proposals need not be linked to the Clinton visit; these proposals must be judged on their own merits, keeping in view the Interest of the country. Nobody would expect us to do otherwise.
The Bangladesh authorities are likely to seek debt-relief of US $ 700 million owed to the US under PL480 food aid programme. If granted, such debt relief may he conditional to using the' funds for environmental protection as stipulated under the relevant US legal provisions. In this context, it needs to be pointed out that Bangladesh is excluded from the international debt-relief initiative which is aimed at helping the so-called Highly Indebted Poor Countries. Com-gared to these countries, angladesh does not have as large a debt overhang, but this is'partly because Bangladesh never defaulted on debt repayment or sought any debt rescheduling. In other words, the country is penalized for Its good record of living up to its debt obligations.
From the point of view of Bangladesh, the most important aspect of the bilateral economic relationship is the access of ready-made garment export to the US market, currently amounting to USS 1.7 billion annually. The garment Industry In Bangladesh provides employment to well over a million workers — mostly women from poor families — and is the predominant source of the country's export earnings. There is a great concern about the affect of the removal of US import quotas after 2004. given the stiff competition Bangladesh is likely to face from other exporting countries including China.
Bangladesh authorities are likely to seek preferential or tariff-free access In the US market for the garment export from Bangladesh subsequent to the abolition of the present quota system. A more plausible case may perhaps be made by seeking this facility for the Least Developed Countries (LDCs) as a whole. Bangladesh, being by far the largest of the LDCs. has always played a leading role in upholding the interest of these countries. The Uruguay Round has offered relatively little in the way of the market access for the exports of the LDCs. since tariffs remain high on their export goods with the greatest potential.
Another alternative ap-ftroach to US-Bangladesh trade Inks could be what I have proposed recently through newspaper columns, namely, to set up a bilateral free-trade arrangement between the Iwo countries (which would mean removing all protective tariffs, but not consumption taxes like VAT). In the past, the US administration did consider having such a trade agreement with particular developing countries such as Egypt, but It did not materialize at the end. I think that It is worth floating such an idea to examine Ils Implications and to sec how the US responds. Instead of seeking the favour of unilateral access for our exports In the US market, we are uniquely positioned to invite the world's mightiest economy to enter into a trade arrangement with us on absolutely equal terms.
For the US. offering such a facility to Bangladesh — the most Important among the LDCs — could be of great symbolic value in raising her international goodwill and image. It would demonstrate that the US is genuinely committed to the cause of free trade and that of helping the poorest countries. Such an arrangement could serve as a model of how North-South co-operation can be of mutual benefit without Involving any act of charity or assistance on the part of the richer countries.
Bangladesh, of course, stands to gain enormously. She can secure and expand her US market for ready-made garment export, especially beyond 2004. The possibility of exporting a range of other items, such as leather goods and horticultural products, will also open up. At present, Bangladesh's exports to the US are several times higher than her imports from that country - nearly 2 billion US dollars of exports compared to imports worth only 300 million dollars during fiscal 1999. We already have duty-free import of grains from the US. Manufactured imports from the US will, of course, increase If made duty-free. But. there is no danger of the domestic market being swamped by such imports, since these will be higher-priced compared to our present imports, say. from China and India. Most of all. Bangladesh will gain from higher foreign Investment. Foreign investors, including those from the US. will be interested to take advantage of lower labour costs in Bangladesh to produce for the US market.
On the other hand, given Bangladesh's limited export capability. there should not be any apprehension on the part of the US that exports from Bangladesh would displace employment opportunities in the US. Such apprehensions were raised regarding Mexican exports to the US under the NAFTA, which later proved to be overly exaggerated. Of course, there will need to be safeguards such as for excluding re-exports from third countries and for special exemptions for particularly vulnerable sectors.
Bangladesh has also a responsibility to project the views of the poorest countries regarding the issue of so-called 'labour standards'. President Clinton raised this issue In Seattle, much to the detriment of the outcome of that ill-fated WTO conference. Nobody disputes the need for improving labour standards in the poor developing countries. But the groundlevel realities must also be taken into consideration, so as to ensure that the enforcement of such standards benefits, and not hurts, the very people whose welfare is at stake. As a humanitarian issue, improvements of labour standards must be part of a broader agenda for social development and poverty alleviation. Fortunately, one does not come across in Bangladesh some of the worst forms of breaches of labour standards, such as bonded labour or the employment of child labour In hazardous environment. While child labour is still quite common In Bangladesh, remarkable progress has been achieved In recent years in increasing the school attendance rates of children, both male and female.
I would not go here Into the many Issues regarding the fairness of the International economic system. It Is a reasonable guess that to a Martian observer of our planet's economy, the most striking puzzle would be why a worker in Bangladesh
makes a tiny fraction of the wage of a worker in the US doing a similar manual Job. A possible answer to this query is to tell the Martian that he is being naive and that he should go back to where he came from. But alternative answers could express concerns not only about lack of free flows of unskilled labour across countries (while those of capital and high-skilled manpower are encouraged). but also about the trade barriers that are sought against Eroducts that use low-wage
>bour in the poorest countries. If freer trade can be made mutually beneficial for both the rich and the poor countries, it is up to domestic policy-makers to see that those benefits are fairly distributed within the countries. Why should then the low-wage exports from poor countries be blamed for creating inequality and job loss in the rich countries? We hope that President Clinton’s visit would help him to get a fresh perspective on these issues so that he can be a more ardent champion of advocating the elimination of poverty worldwide.
The author is the President. Bangladesh Economic Association.
***The Daily Star SPECIAL SUPPLEMENT ON THE VISIT OF THE PRESIDENT OF THE UNITED STATES OF AMERICA TO DANGLADESH. March 20.2000***