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US-GSP hearing

submission by CPD

 

1. The Centre for Policy Dialogue (CPD), a leading civil society think tank in Bangladesh, has a long track record of dealing with trade-related issues, WTO negotiations, US-Bangladesh bilateral relations, global trading regime in apparels, market access under the GSP schemes and competitiveness, working conditions, labour rights and compliance-related issues as they concern Bangladesh's export-oriented apparel sector. CPD's analytical reports, publications, dialogue reports and outreach activities as regards the above may be found in the CPD website: www.cpd.org.bd

2. The CPD is interested to make the following submission in the context of the country practice review being conducted by the GSP sub-committee of the Trade Policy Staff Committee (TPSC) of the United States Trade Representative (USTR). We understand that the American Federation of Labour and Congress of Industrial Organisations (AFL-CIO) has earlier made a submission to the GSP sub-committee expressing concerns about GSP (generalised system of preference) eligibility criteria related to workers' rights in Bangladesh's export-oriented garment sector. We are aware that the GSP sub-committee is at present considering “withdrawal, suspension or limitation of GSP benefits on products imported into the US from Bangladesh”.

3. In view of the above, the CPD would like to make the following submissions to US-GSP sub-committee:

3.1 The CPD is of the opinion that the US is an important trading partner of Bangladesh and the decision in connection with US-GSP will have important implications for Bangladesh-US bilateral economic relations. It will also transmit important signals to major stakeholders that deal with Bangladesh. We reckon that a negative decision in the above context will transmit adverse signals to US importers from Bangladesh, US aid to Bangladesh and US investors willing to invest in Bangladesh, to the detriment of Bangladesh's and, in the end, Bangladesh's workers' broader interests. The decision will also have repercussions in terms of Bangladesh's market access in other countries which provide preferential and duty-free access to Bangladesh under their respective GSP schemes (e.g. EBA of the EU, Canadian GSP scheme for the LDCs) because of damage to the 'country brand' of Bangladesh. Hence, the impact of the decision by the US-GSP sub-committee will not be delimited to only the narrow range of products, currently exported by Bangladesh under the US-GSP scheme. As is known, even less than half of one percentage of total export of $5,100 million from Bangladesh (in July-June, FY2012) entered the US market by enjoying US-GSP facility. But any adverse decision is likely to have damaging impact beyond this narrow remit of the US-GSP.

3.2 The labour rights issues raised in the AFL-CIO submission and mentioned by the US-GSP sub-committee mainly concern Bangladesh's export-oriented garment sector, which accounted for 89 percent of Bangladesh's total export to the US in FY2011-12. As is known, this sector is not covered under the US-GSP scheme. It is to be noted that unlike African and Caribbean Basin LDCs, Bangladesh does not get duty-free access for its apparel products under any bilateral initiative of the US. Thus, the issue of 'withdrawal, suspension or limitation' concerns a sector that does not, as a matter of fact, enjoy any preferential treatment in the US market.

3.3 In view of the above, we strongly feel that the US concerns with regard to labour rights and safety would have been grounded on a much firmer base had Bangladesh been given duty-free access for garment exports either under the US GSP scheme or as part of a bilateral or regional initiative on the part of the USA or in the WTO as part of the ongoing negotiations in non-agricultural market access (NAMA). Indeed, in spite of the fact that three bills were tabled and placed before the US Congress over the last several years that concern proposals for duty-free access for (mainly) apparel exports from Asia-Pacific LDCs, none resulted in fruition. As is known, the import duties on Bangladesh's apparel exported to the US in 2012 were equivalent to about $700 million, with apparel items facing average tariff of 15 percent at US customs points (this amount incidentally was several times US annual bilateral aid to Bangladesh). Research shows that duty-free access will significantly raise Bangladesh's competitiveness in the US market and will also eliminate intra-LDC disparity that now exists because of African Growth and Opportunity Act (AGOA) and Caribbean Basin Initiative (CBI). US retailers and consumers will also benefit as duty-free access will allow import at lower price. The envisaged additional market access and higher export earnings could also serve as a resource, both for the government and the entrepreneurs, for improving working conditions at work place. It would, thus, have been much more effective if the US had taken an initiative to provide duty-free access to garment exports from Bangladesh and then tried to address the genuine concerns of the US in the areas of workers' rights, safety and security by taking advantage of the opportunities provided by such an initiative. As some have pointed out, “this is a powerful carrot that could work”.

3.4 The CPD strongly feels that labour and trade union rights and work place safety, and adherence to compliance requirements are critically important issues. As a civil society organisation, we always take the stand that these should be improved on a continuing basis. There have indeed been some improvements in this regard in the past. As is known, Bangladesh has ratified 33 ILO (International Labour Organisation) conventions including seven of the eight core ILO conventions. Over the past years, the government of Bangladesh has been taking several steps to enforce labour related standards and labour rights through Bangladesh Labour Act 2006, by working with ILO, EU and other stakeholders, and by strengthening institutions and agencies that deal with occupational safety of workers in workplace including fire safety, periodically raising minimum wage. Elimination of child labour from the garment industry, stricter enforcement of safety regulations by government agencies, tripartite initiatives (government, entrepreneurs' association the BGMEA and ILO) to ensure compliance, BGMEA-buyers alliances and initiatives undertaken to improve working conditions, and formation of workers welfare councils in the export-processing zones are some of the recent initiatives in this regard. These have started to bear fruit, but no doubt Bangladesh has a long way to go. However, managing a sector such as the garment with its more than five thousand enterprises, three million workers and $20 billion exports is not an easy task. There is no reason to question that all involved stakeholders, including the government, entrepreneurs, workers organisations and NGOs working with workers and major buyers will need to play their respective roles to ensure that worker rights are respected and occupational safety improves on a continuing basis. The CPD will continue its efforts to improve the situation and work with the involved stakeholders. However, we also strongly feel that any measures by the USTR should be directed to better the situation and not to put the workers in a disadvantageous position. As we have argued earlier, if the GSP is withdrawn, through direct and indirect affects, it will be in the end the workers who will suffer. Such a prospect will put in harm's way the contribution the garment sector has been making in terms of providing job opportunities particularly for women, poverty alleviation, social upliftment, women's empowerment and Bangladesh's overall economic growth. We think that genuine concerns that informed the views of the GSP sub-committee ought to lead to steps and measures that do not hurt the workers, but contribute to raising their welfare, which we reckon is also the end-objective of the work of the US-GSP sub-committee.

3.5 There are several international organisations to which Bangladesh is accountable for enforcement of its labour-related laws. The ILO of course is the most important organisation, but there are many others which serve as watchdogs with regard to Bangladesh's working environment, and Bangladesh is accountable in these fora through periodic reviews (indeed, Bangladesh's trade policy was highly appreciated in the recently held Trade Policy Review (TPR) in the WTO). So rather than enforcing trade sanctions, the US could pursue a more proactive role and work with Bangladesh in these fora to address the attendant concerns and improve the situation of workers.

3.6 We cannot but observe that major buying houses are always on the lookout for cheaper sources of procurement of apparel items from countries such as Bangladesh. Oftentimes we see the hypocrisy between 'ethical buying' and 'unethical sourcing'. The USTR may like to impress upon the major buying houses that they have an important role to play in ensuring workers' safety and should be ready to bear a part of the additional costs originating from compliance-related investment, by offering better price to producers. We hope that the USTR will examine this angle very closely as this could be of much help in addressing the genuine concerns that the US-GSP sub-committee has, without harming the workers.

3.7 We would like to conclude our submission by urging the US-GSP sub-committee to take an enlightened view as regards the issues under consideration by this august body. As a prominent civil society organisation with a track record of two decades of working with issues of concern and interest to Bangladesh, the CPD will continue to put pressure on all involved stakeholders to adopt, practice and enforce trade union and other labour rights, workplace safety, improvement of working conditions, better compliance and higher wages for workers. We also think that the US-GSP sub-committee's ultimate aims are also similar. However, we think that the purpose of improving workers' situation will not be appropriately served through withdrawal, suspension and limitations of GSP facilities provided to Bangladesh by the US. It will in the end hurt those very workers, working in a sector that does not enjoy the US-GSP benefits under the current eligibility regime. Rather we tend to strongly think that initiatives to provide Bangladesh's apparel sector the duty-free market access in the US, through WTO commitment or bilateral or regional initiative, could be a powerful tool to attain the same goals. If the duty-free market access initiative could be deployed, managed and implemented in a manner that attains the aforesaid same goals, it is surely worthwhile to try to explore that particular route. Conditionalities informing such an initiative could be designed in a manner that supports enforcement of labour rights and occupational safety, better wages and decent labour in Bangladesh's apparel sector or for that matter any other sectors in Bangladesh.

3.8 We would, thus, like to request the US-GSP sub-committee most strongly not to take any punitive action against Bangladesh with regard to its GSP eligibility in the US. Rather, we would urge the sub-committee to continue to encourage Bangladesh to adopt better labour practices through other means some of which we have mentioned in our present submission.