Obama decision on Dhaka trade soon

Reuters/Washington

President Barack Obama could soon decide to cut off trade benefits for Bangladesh, in a largely symbolic response to tragedies in the country’s garment sector that have cost more than 1,200 lives in the past eight months.

The US trade representative’s office, with input from other government agencies, is completing its recommendations in preparation for a White House announcement by June 30.

Even though the trade benefits affect less than 1% of Bangladeshi exports to the US, its government has pleaded with the Obama administration not to cut them off.

The AFL-CIO, the largest US labour organisation, first filed a petition to suspend Bangladesh from the US Generalised System of Preferences programme in 2007.

The US government has put off that decision for six years, hoping the threat would be enough to encourage Bangladesh to make long-needed labour reforms.

But after the Tazreen factory fire in November that killed 112 people and the Rana Plaza building collapse in April that killed 1,129 more, it seems likely that Obama will eliminate or reduce the trade benefits, Celeste Drake, the AFL-CIO’s lead on trade issues, said.

The past year in Bangladesh has been so horrendous that unless the US acts the labour provisions of the GSP programme will be seen as meaningless, she said.

The GSP programme is aimed at helping create jobs in poor countries by waiving US duties on thousands of goods as long as the countries meet certain eligibility requirements.

Bangladesh has been in the programme since it began in 1976. But its main export, clothing, is not eligible for GSP tariff cuts, in deference to the US textile and apparel industry, which employed some 2.4mn workers four decades ago compared to less than 300,000 now.

Last year, the GSP programme spared Bangladesh about $2mn in duties on $35mn worth of tents, golf equipment, plates and other items it exported to the US, said Ed Gresser, a trade analyst with the GlobalWorks Foundation.

But Bangladesh paid about $732mn in duties on $4.9bn worth of clothing to the US. That is almost twice as much as the $383mn in US tariffs collected on $41bn worth of French goods in 2012, Gresser said.

In the past, some lawmakers have proposed changing the GSP programme to provide duty-free benefits for clothing from Bangladesh and Cambodia, but US textile manufacturers lobbied to prevent action on the legislation.

At least 13 countries have lost some or all of their GSP benefits since workers’ rights protections were added to the eligibility criteria in the 1980s. Most have been reinstated after making progress on the concerns.

While Bangladeshi clothing manufacturers would not be directly affected by a decision to suspend the GSP programme, Drake said she expected other Bangladeshi companies hit with increased duties to join the international community in lobbying the government for labour reforms.

“It’s a small stick, which is perhaps right, given that it is a developing country. Nobody wants to do something that would be an earthquake to their economy,” Drake said.

Sanchita Saxena, associate director of the Center for South Asia Studies at the University of California at Berkeley, said revoking Bangladesh’s GSP benefits would not help workers in Bangladesh’s garment industry.

“If the US wants to help improve conditions, international brands and international NGOs can help in building capacity to monitor the thousands of factories that need monitoring and help to enforce some of the laws that are in the books,” she said. 

US retailers should also sign an agreement embraced by European retailers to improve safety conditions in Bangladesh’s garment industry, Saxena added.