The forthcoming European Union Generalised System of Preferences (GSP) scheme does no favor Bangladesh, points out EuroCommerce, the European body representing retail and wholesale sectors. It says the safeguard measures proposed in the forthcoming GSP would severely affect Bangladesh. Currently, Bangladesh benefits from the ‘Everything but Arms’ arrangement of GSP for least developed countries (LDC's). With a per-capita income of $2,457 in 2021, Bangladesh is classified a low-middle income country. With new GSP Regulation coming in to effect next year, Bangladesh could be given the ‘Most Favoured Nation’ tariffs and have the zero custom duty which it currently enjoys, removed.
GSP is aimed at helping products originating from a select list of developing countries preferential access to the EU markets. The preferential treatment is usually in the form of zero or reduced Custom Duties. The current GSP regulation ends on December 31, 2023 and the new one starts on January 1, 2024 valid for the next 10 years.
Bangladesh set to lose LDC status
Bangladesh is expected to exit the group of least developed countries (LDCs) in 2024, the most important change that it is going to face will be associated with preferential market access for exporters, particularly in the EU. The implication is huge, as 58 per cent of the country’s exports are to the EU and UK and Bangladesh's exports could face average duties of 8.7 per cent as its status upgrades from an LDC. What’s more for readymade garments, it could be 12 per cent.
The safeguard measures proposed in the European Union’s new GSP regulation would severely affect Bangladesh’s overall economy, points out EuroCommerce. The platform has already requested negotiations on the new GSP regulation and fears hundreds of thousands of RMG workers are at risk of losing their jobs. Additionally, the proposed measures could jeopardise the sustainable development of the sector. It is estimated shipments would drop by 5.7 per cent per year. To mitigate these effects, Bangladesh needs to qualify for the GSP+ scheme to preserve its competitiveness in the export market.
GSP+ scheme is a 'special incentive arrangement for Sustainable Development and Good Governance' for 'vulnerable developing countries'. This system grants full removal of tariffs on over 66 per cent of EU tariff lines. To qualify for the scheme, Bangladesh has to ratify 27 international conventions and has to fulfill the 'vulnerability' criteria as set by the European Union. In order to address these concerns, amendments of the existing labour laws, elimination of child labour, registration of trade unions, elimination of backlog in cases of labour laws etc, have been given the most emphasis.
The government of Bangladesh, along with relevant stakeholders, has been actively addressing issues related to the international conventions for some time now. An indicative action plan for addressing all the issues has already been developed and shared with the European Union. However, it has been put on hold due to the pandemic. A tripartite committee has already been formed with six representatives from the government, three representatives from entrepreneurs, and three representatives from workers.
Over 50 per cent export to the EU a roadblock
One of the biggest obstacles is that as soon as Bangladesh crosses 37 per cent threshold of exports to the EU, the new GSP Regulations will kick in. It is now time for a tripartite discussion between the EU law makers, the EuroCommerce personnel and Bangladesh government to find a middle path that does not destroy the well-invested, revenue and job generating textile and readymade garment sector of Bangladesh, the backbone of its export-based economy.