US investigation into overproduction, forced labour: What is the objective?

In the history of global trade, it is often seen that major powers frequently use the language of principles to try to manage their own economic crises.

The US has launched an investigation against Bangladesh concerning ‘overproduction’ and ‘forced labour,’ which is not just a question of labour rights or fair competition; rather, there is a significant political-economic context behind it.

Especially given the long-standing and increasing trade deficit faced by the US, the pressure to reduce this deficit is now manifesting more clearly in their policymaking. This has led to a situation where the ‘overcapacity’ of countries like Bangladesh poses a hindrance to the US's trade competitiveness.

Over the past few decades, US imports have grown rapidly, yet exports have not kept pace, resulting in a significant trade deficit. Although they do have a surplus in service exports, policymakers in Washington are searching for ways to reduce imports and protect domestic production.

Issues like ‘overproduction,’ ‘dumping,’ ‘forced labour,’ and the ethics of supply chains are increasingly becoming part of trade policy.

In two decades, exports of Bangladeshi garments to the US market have increased significantly. Consequently, as part of broader strategies to reduce trade deficits, the US has begun questioning Bangladesh's production and labour systems through investigations.

Many analysts view this as a defensive economic measure. Alongside, the US has initiated investigations into whether products in around 60 countries, including Bangladesh, are being produced using forced labour.

The main reason is that the US Supreme Court has declared Trump’s counter tariffs illegal and ordered the return of the collected amounts. It is anticipated that the Supreme Court might issue many such rulings, which has led the Trump administration to desperately order such investigations.

The reality is that despite criticisms regarding Bangladesh’s labour conditions and wages, there has never been an allegation that products are manufactured using forced labour. Moreover, the definition of overproduction is unclear. Analysts believe that Bangladesh has strong arguments in favour of its position on these matters.

In this context, seeing the US investigation solely as an issue of labour rights or human rights does not capture the entire picture; it is part of the larger trends in global trade politics. Not only the Trump administration, but even previously, they have acted contradictorily by making free trade agreements. When they saw that developing countries were benefitting more, they tried to pull the reins. They have used various policy and moral arguments as trade tools.

Historically, the US was also accused of overproduction, especially during its dominance in agriculture and certain industry sectors. Although these accusations were most prevalent after World War II, the kind of formal investigations seen today (including those against 16 countries including Bangladesh) did not occur then. Instead, there is a connection between the great depression of 1930 and US overproduction.

In the 1920s, mechanisation and expanded production led to significant overproduction in the US agricultural sector. Because of high production, the price of agricultural products dropped by 50 to 70 per cent.

Simultaneously, rapid industrialisation resulted in excess supply in sectors like automobiles and consumer goods. In this context, the US passed the Smoot-Hawley Tariff Act in 1930, increasing import tariffs by up to 60 per cent, aiming to protect the domestic market during times of overproduction. It is said that the imposition of counter tariffs squeezed international trade and deepened the Great Depression.

During the Great Depression, the US government adopted a policy of destroying certain agricultural products to reduce market supply and stabilise prices. In response to the depression, Franklin D Roosevelt’s administration enacted the Agricultural Adjustment Act in 1933, which included measures like destroying some cotton fields, slaughtering livestock, and preventing excess grains from entering the market, with the goal of increasing agricultural product prices by reducing production.

In the post-World War II period, Europe and Japan accused the US of using subsidies to overproduce wheat, corn, and chicken meat, putting pressure on local markets abroad. Especially after introducing food aid programmes under the Agriculture Trade Development and Assistance Act (PL-480), these complaints began to intensify. One well-discussed example was the Chicken War, where after rapid growth in US chicken meat exports, Europe imposed a 25 per cent tariff on importing that chicken meat.

Simultaneously, in the steel and machinery sectors, various complaints about overproduction arose under the General Agreement on Tariffs and Trade. In the 1950s and 1960s, the capacity of US manufacturing factories exceeded 90 per cent in many cases, at a time when Europe was still undergoing post-war reconstruction.

This was not the end; after the 1973 oil crisis, the US took initiatives to increase its own energy production. When subsequent overproduction of oil put pressure on global market prices, dissatisfaction arose among OPEC member countries. In the 1980s, a similar type of market pressure occurred for a time in the textile sector. To limit imports in many cases, the US imposed high tariffs. Consequently, domestic production increased, leading to over-supply in the market—paralleling the criticism currently directed at China.

However, since 1975, the US gradually faced a major trade deficit. By 2025, this deficit approached about $1.2 trillion. As a result, in today’s global economy, the US is no longer considered a ‘country of overproduction’ in the conventional sense. It's not an economy reliant on production; rather, the US now depends on sectors like services, technology, and high-value innovations.

While the US has a deficit in merchandise trade, it has a substantial surplus in service trade. According to Xinhua News, in 2025, the US's service trade surplus increased to $339.47 billion, or 33,947 crore dollars. CNBC reports that despite imposing numerous counter tariffs to reduce the trade deficit, it has effectively decreased by only 0.2 per cent in 2025.

The question arises: does a trade deficit automatically mean a country is a loser? Is there reason to believe that? Economists who study this never say so. It occurs due to structural reasons. If this deficit is judiciously and beneficially used for the country's economic development, it can be positive for the economy. However, a persistent and uncontrolled trade deficit can certainly be a cause for concern.

Moreover, at different stages of development, countries rely on different sectors. Initially, there is agricultural dependency; then industrial dependency; and when a country reaches the pinnacle of development, it becomes service or technology-dependent. The US has also gone through this phase.

Of all the technology used in the world today, almost all are developed by them. Now China is following that path. Some economists argue that India has somewhat prematurely become service or technology-dependent. They argue that it has progressed toward the service sector before fully developing its manufacturing sector.

On 2 April 2025, Donald Trump declared this day as US Independence Day. In his words, practically every country in the world, whether friend or foe of the US, has economically ‘chewed up’ the US over the last 50 years. As a result, factories in the US have shut down, and people have lost jobs; but he will not allow this to continue. This is the reasoning behind his mutual tariffs.

When discussions about globalisation begin, the concept of free trade comes to the forefront. Theoretically, it is said that when markets are open, goods, services, and capital will flow freely, accelerating global development.

In reality, it has been observed that after the 1990s, with rapid globalisation, countries like China, India, and Bangladesh have achieved high growth rates. However, alongside this success, a paradox also emerges, where, despite advocating for free trade, strong economies often adopt various policies to protect their industries and agriculture.

Nobel Prize-winning economist Joseph E Stiglitz (in "Making Globalization Work") reminds us that trade liberalisation is one of the most controversial aspects of globalisation. International trade has never been completely free. In many cases, the markets of developing countries were opened to products from developed countries, but reciprocal benefits were not ensured to the same extent. The capability to take advantage of these opportunities by smaller countries has not developed. It was observed that even when tariffs were reduced, non-tariff barriers like quality control, anti-dumping measures, subsidies, or various administrative complexities were retained. As a result, not all countries benefit equally from trade liberalisation.

A critical example illustrating this paradox is the North American Free Trade Agreement (NAFTA). This agreement created a large free trade area among the US, Canada, and Mexico. Theoretically, it was expected that this would be a significant opportunity for Mexico. However, in practice, Mexican small farmers faced immense pressure competing against subsidised American agricultural products. Simultaneously, although tariff barriers were reduced, various non-tariff measures often limited the entry of Mexican products. Consequently, Mexico's economy became increasingly dependent on the US economy.

From this experience, it is understood that countries like the US, despite promoting themselves as advocates of free trade, sometimes take protective measures to safeguard domestic markets. Agricultural subsidies, anti-dumping duties, stringent quality control conditions, or questions around labour standards—all these often become political tools of trade policy. When the US raises accusations against various countries about overproduction or labour standards and starts investigations, many analysts argue that it is a new form of this longstanding protective trade policy.

Joseph Stiglitz believes that developing countries should be viewed separately. But in the existing system, this matter is left to the whims of the developed countries. If these developing countries do not listen to the developed countries, then the developed countries can take back the preferential benefits they have provided. This matter has now become a political weapon in the hands of developed countries.

Stiglitz argues that a single reform can remedy this. Developed countries should open their markets to least-developed countries without any expectation of reciprocation or political and economic conditions. There should also be provisions allowing these least-developed countries to extend the same benefits to other least-developed countries.

However, they should not be required to offer these benefits to other developed countries. Middle-income countries should also do this, but they should not be required to offer these benefits to other developed countries, thus preventing harm to their industries. In other words, there should be an equitable approach to offering preferential benefits, not just equality.

*This article, originally published in Prothom Alo online edition, has been rewritten in English by Rabiul Islam