Exporters in the Bangladesh's garment sector are concerned whether the duty-free facilities will still be available after the country graduates from the least developed country (LDC) status to that of a developing one.
However, the good news is that the garment sector of Bangladesh will get duty-free facilities in the UK and Canada even after graduation.
Australia too has already assured Bangladesh of continuing the duty-free facilities. These three countries cover some 16 per cent of our garment export.
The European Union is the biggest market of readymade garments. Bangladesh will get the GSP plus facilities in this market for three years after the graduation from LDC to developing countries.
In order to get the GSP plus facilities after that, Bangladesh will have to fulfil certain criteria.
The European Commission has already finalised the draft of the new GSP policy for the years from 2024 to 2034. However, it is yet to be approved by the EU parliament. Bangladesh will not get the GSP plus facilities, if the draft gets approved.
There is no indication of continuing the duty-free facilities from India and Japan, two major markets of readymade garments for Bangladesh. The EU, India and Japan cover 55 per cent of our garment exports.
People in the garment sector say the government didn’t have to do anything to get duty-free facilities from the UK and Canada. It would not be wise to think of other countries doing the same. The concerned department of the government should take initiative to ensure such facilities after graduation from LDC.
Speaking to Prothom Alo, chairman of Research and Policy Integration for Development (RAPID) Abdur Razzaque said, “It usually takes 5-10 years to sign a free trade agreement (FTA) with any country. The government has undertaken an initiative to sign a Comprehensive Economic Partnership Agreement (CEPA) with India. It will also take 5-10 years to complete the process."
The government should take initiative to extend the existing duty-free facilities with India and Japan for three to six years after 2026. At the same time, government level discussions are needed to get the GSP plus facility in the EU.
According to the figures of the Export Promotion Bureau, readymade garments worth USD 46.99 billion were exported from Bangladesh in the 2022-23 fiscal.
Of these, readymade garments worth USD 23.54 billion were exported to the EU, USD 5.03 billion to the UK, USD 1.55 billion to Canada, USD 1.6 billion in Japan, USD 1.15 billion in Japan and USD 1.01 billion to India.
If everything remains on track, Bangladesh will graduate from LDC in 2026. The UK, like the EU, announced it will continue providing the duty-free facilities to Bangladesh till 2029. Meanwhile, the UK government has launched a new scheme for developing countries – Developing Country’s Trading Scheme (DCTS). Some 92 per cent of exported products from Bangladesh, including readymade garments, will get duty free facility under this scheme.
The Canadian government has decided to provide duty free market facilities to developing countries under the general preferential tariff (GPT) scheme. The regulations and conditions of production will be relaxed under this scheme. Besides, it will provide duty free facilities to all the other products from a developing country. The Canadian parliament passed a finance bill on 8 June, extending the span of the GPT scheme up to 2034.
Bangladesh has had full duty-free and quota-free access to Canada under the least-developed country tariff (LDCT) scheme since 2003. The LDCT scheme falls under the GPT scheme, which is renewed every 10 years. The existing GPT scheme will end in 2024.
Appreciating this decision taken by the Canadian government, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Faruque Hassan on Sunday, "Readymade garments from Bangladesh will continue to get the duty-free market facility in Canada till 2034. Bangladesh provides only 14 per cent of Canada’s total garment import. It means that Bangladesh has more scope in the market of Canada. Therefore, we should take effective measures to increase our exports to the country with GPT plus facilities.”
Three years ago, a World Trade Organisation (WTO) report predicted intense competition for Bangladeshi exporters losing all the market facilities available prior to the country’s graduation from LDC.
The report said it would cause a decline in the export income of the country to USD 5.37 billion due to pressure of bearing additional duties. Although the pressure has eased a bit due to the announcements from the EU, the UK and Canada, the problem is not completely solved yet.
Speaking regarding this, BGMEA vice-president Shahidullah Azim told Prothom Alo, “The Australian MPs have assured us that the duty-free facilities will be available till 2032. They, however, haven’t announced it officially. “
He further said, “The government should act more promptly to continue getting the duty-free facilities after 2026. It should be done not only for the businesspersons, but also for the sake of the country.”
*This report appeared on the print and online versions of Prothom Alo and has been re-written in English by Ashish Basu