The new Generalised Scheme of Preferences (GSP) proposal of the European Commission is likely to put pressure on Bangladeshi woven apparel export as it focuses only on preference eligibility under the GSP+ scheme that demands enhancing local value addition.
At present, Bangladesh ready-made garments industry depends on 60% imported woven fabric, and to reduce this dependency the sector has to develop local woven textile industries, said the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
"We have about 10 years in hand to strengthen backward linkage of manmade fibre-based apparel and it is possible to do it within this time," said Abdullah Hil Rakib, a director of the BGMEA, at a press conference on Saturday.
"We are also ahead of many countries in the sustainability index required to get GSP+ after LDC graduation. Moreover, we already have a vertical setup in knit-based apparel. Now, we just have to improve backward linkage for manmade fibre," said Abdullah Hil Rakib, managing director of the Team Group.
He added that it is possible to improve on man made fibre items if the government provides policy support.
Bangladesh has sought for 12 years of grace period to recover the impacts due to Covid-19 even though an LDC country gets three years of EBA (eventing but arms) facilities after graduation.
The BGMEA observed that the new EC proposal gives Bangladesh the opportunity to gain GSP+ facilities in EU market after LDC graduation, as it proposes to remove the import-share criterion – which is now up to 7.4% – while Bangladesh's total export is about 26% compared to EU's.
On 21 September, the European Commission submitted a new GSP proposal which will be discussed at the EU Parliament for 2024-2034 for approval.
BGMEA President Faruque Hassan said Bangladesh has to increase its market share in the EU with the existing EBA facility, maintaining competitiveness. Besides, the country should sign some PTAs and FTAs.
There are some challenges that Bangladesh must address through diplomacy in order to achieve GSP+ or properly utilise the trade preference, said Abdullah Hil Rakib.
For example, under the EBA, LDCs were allowed preferential "rules of origin" (RoO) permitting "single transformation" in the production chain of the exportable, he added.
But preference eligibility under the GSP+ scheme demands "double transformation"—cotton or fibre to product
"We need to persuade the EU to change the condition of double transformation to single as Bangladesh still imports a large percentage of woven fabrics to manufacture garments," said Abdullah Hil Rakib.
Trying to regain US GSP
The US government suspended the facility after the Rana Plaza collapse incident in 2013 that killed over 1,100 people.
Faruque Hassan said they were discussing getting back the GSP facility in the US markets.
The BGMEA president said, "The US allows 97% items under GSP. Unfortunately, Bangladesh's apparel items fall under the rest 3%. Until the USA suspended our GSP benefit in 2013, we used to enjoy GSP facility worth only $40-$50 million, which could have been $100 million by now."
However, he also mentioned that it will not be an easy job to get back GSP facility in the US market, as it requires their political decision. The US authority several times postponed talk on this issue due to their elections, Faruque Hassan added.
"Now we are requesting them to give duty-free access to apparels made from US cotton," said the BGMEA president.