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GSP scrapping may send wrong message

Affect FDI, trade with US, even RMG exports, says draft position paper for USTR hearing

Refayet Ullah Mirdha
An end to GSP facility for Bangladesh may have an adverse impact on trade with the US, although the privilege covers an insignificant quantity of the total exports, says an initial position paper prepared by the government.
"Withdrawal of GSP is likely to deliver a very harmful message about the country to the US buyers, as they might think that, out of consumer concerns and adverse
media publicity, Bangladesh is not the right place to source from. That could affect our exports, even the RMG products,” said the position paper.
In 2011, Bangladesh exported products worth only $ 26 million under Generalised System of Preferences (GSP) which covered 0.54 percent of the total export of more than $ 5 billion.
"The US authority may even think of going beyond the GSP withdrawal, such as
putting embargo on exports from Bangladesh, citing so-called violation of human and worker rights."
"However, the possibility of such embargo in practice seems less likely, as it could be against WTO rules and other international norms," the draft position paper said.
The withdrawal of GSP for Bangladesh is likely to be widely publicised around the globe and would negatively impact the Foreign Direct Investment (FDI) in Bangladesh, the paper added.
The paper also said the news of GSP withdrawal on the grounds of unsafe and hostile working environment might encourage the US consumers to shy away from purchasing Bangladesh-made products.
The withdrawal might also tarnish the image of Bangladesh's higher achievements of Millennium Development Goal (MDG), the paper said.
Asked, Commerce Secretary Mahbub Ahmed told The Daily Star, “I will hold meetings with the officials to finalise the country's position regarding United States
Trade Representative's (USTR) GSP hearing in the US."
He said the ministry would also place progress reports of the commitment of the previous hearing that took place on January 24,2012.
Bangladesh is now preparing the position paper for the next hearing, as the USTR office has sought by January 31 the stakeholders' opinions on possible withdrawal, suspension or limitation of GSP.
A Federal Register notice said the GSP subcommittee under the Trade Policy Staff Committee is considering recommending that the GSP benefits given to Bangladesh be withdrawn, suspended or limited, the notice said.
The GSP subcommittee thinks Bangladesh did not make much progress in addressing labour rights issues.
The next hearing, the fourth of its kind, might take place in March, just within one and a half years of the last hearing.
Generally, the USTR calls for GSP hearing in every three years, but this year it is taking place earlier due to the devastating fire incident at Tazreen Fashion Ltd in Ashulia on November 24,2012. A total of 112 workers died in the blaze.
Bangladesh first attended the USTR hearing
on GSP in 2007, the second hearing was held in 2009 while the third on January 24 last year.
In the third hearing Bangladesh pledged to introduce Better Work Programme of the International Labour Organisation (ILO) and International Finance Corporation (IFC), according to the copy of the hearing. The Daily Star obtained the copy of the third hearing of USTR.
The government also committed to launch a project in collaboration with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) to establish dormitories for female workers in Chittagong.
“The facilities are expected to open in two years. Plans for similar facilities in other cities are on cards. The benefits here include school, hospital and day care centres and entertainment facilities," the document said.
The paper also said a future integrated trade policy for Bangladesh, which is under early development, will include consideration of labour issues.
Bangladesh government also committed to work with the USAID and its projects, which are concerned with the enhancement of labour rights, to ensure sustainability and reform.