Bangladesh's Generalised System of Preference (GSP) status will end in 2023, and now the European Union (EU) stated that they will extend it if we meet some criteria.
First, they recommended changes in our labour laws and the government made several amendments in line with their recommendations. The EU, however, was not satisfied and recommended further amendments in conformity with ILO and Universal Periodic Review.
Besides, it has asked Bangladesh to ensure human rights in the country to remain eligible for the GSP status. Therefore, Bangladesh will have to ensure strict labour law and human rights to remain eligible for GSP after 2023.
Bangladesh became a signatory to the World Trade Organisation in 1995 and has been enjoying the GSP status under the Everything but Arms agreement for a long time as a Least Developed Country (LDC).
Currently, the country enjoys GSP in 37 countries around the world including the European Union, which is our largest export destination. This facility is important because it exempts us from high export duty on our products.
Since Bangladesh does not pay any export duty, it gives us an advantage over countries like India which does not have a GSP or GSP+ status. We have enjoyed the GSP status in the United States from 1980 to 2013 – but the Obama administration cancelled our GSP after the Rana Plaza tragedy.
If we lose our GSP in the EU, we will lose our economic growth. As already mentioned, the EU is the largest market of our apparel export. In 2019, Bangladesh exported apparel worth Tk19 billion to the EU, which is almost 60 percent of the country's total apparel export.
This has been possible because of the duty-free access to the European market under the GSP facility. So, the facility is extremely crucial to our growth and development. Although Bangladesh is set to graduate from the Least Developed Countries (LDC) status in 2024 – but can still enjoy the benefits of GSP till 2027, if it can meet the conditions set by the EU.
Bangladesh has enjoyed the GSP facilities as an LDC, as a result, our export grew faster than competitors i.e, China, India, Pakistan, Indonesia and others. Therefore, if this status is revoked, our growth will be hindered.
As GSP exempts importers from duty on a maximum level, the government and RMG sector should work together to make the most of this opportunity in the EU market.
The new condition was received by the concerned authorities on November 3. The letter said "ensuring that Bangladesh aligns fully with international standards on human and labour rights would also be important in view of the EU's legislative work on the future GSP regulation and for the conditionalities for the granting of preferences after 2023."
As mentioned earlier, the government had amended the existing labour laws multiple times to meet the requirement of the EU. However, the EU has suggested that the government formulate a time-bound action plan to address human rights issues, complying with the recommendations of the Universal Periodic Review of the UN Human Rights Council.
So, the government and BGMEA will have to work together to continue the duty-free access, to remain competitive in the EU market. The apparel manufacturers of the country on the other hand need to explore new markets outside the EU.
The EU assesses the progress of Bangladesh regularly under the review of the EU Sustainability Compact. They have given observations on safety and human rights issues earlier too. In the meantime, Bangladesh has made significant progress in safety standards.
So, I am very much optimistic that we will be able to satisfy the EU in human rights progress as well in the coming years.
Meanwhile, our foreign minister assured that the government will handle this issue promptly and there is no reason to worry about it. But there are certainly a few things that the authorities must do in this regard.
If Bangladesh graduates to a middle-income country from an LDC, we will be no longer eligible to enjoy the GSP after 2027. But we will have the opportunity to continue to enjoy the duty-free access in the EU under the GSP plus.
However, in obtaining the GSP plus there are three vulnerability criteria:
1. Exports of the seven largest products from a country under the EU GSP must represent more than 75 percent of the country's total exports over three years.
2. The country has to ratify 27 international conventions. Bangladesh ratified all the international conventions except the minimum wage convention of ILO.
3. The country's three-year average exports under the EU GSP must represent less than 6.5 percent of the value of the EU's total GSP imports from all GSP beneficiaries.
Bangladesh does not fulfil the third criterion as the country's share to total EU imports under GSP is around 9 percent at present.
However, this threshold has been previously changed from 4 percent to 6.5 percent when Pakistan was granted the GSP plus.
So, I think our government will be also able to convince the EU to change this threshold once again for us. For this, we need to start economic diplomacy from now.
The author is the Managing Director of Classic Group and former Vice President of Bangladesh Garment Manufacturers & Exporters Association (BGMEA)