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EU’s GSP plus benefit

BD against safeguard clause on clothing

Experts find provision 'unfair'

MONIRA MUNNI | November 28, 2021 00:00:00

Bangladesh has requested the European Commission (EC) to remove one particular provision from its GSP plus system to help the country's textile and RMG products address the safeguard measures that are likely to be imposed by the European Union (EU).

The Ministry of Commerce (MoC) sent a letter to the EC in the middle of this month, arguing that the proposed safeguard measures would severely affect the exports of the products like knitwear, woven and home textile under HS Sections 61, 62, and 63.

If the combined share of these products (EU defines these items as "product group S-11b") from a country exceeds 6.0 per cent of the total EU imports of the same products, safeguard measures would be triggered to remove duty-free market access for these items, according to the provision of this new rule.

"Bangladesh would be most affected by this provision," Md Hafizur Rahman, additional secretary of commerce, told the FE. "We have recently requested the EC to withdraw this 6.0 per cent threshold."

Bangladesh's share in total EU imports of these items is more than 13 per cent, according to an official estimate, and these products are now enjoying duty-free access to the EU market under their EBA (everything but arms) initiative.

The EC in September last proposed the new Generalised Scheme of Preferences (GSP) for a period from 2024 to 2034.

Officials and experts have expressed the fear that Bangladesh will lose the benefit after its graduation from the least developed country (LDC) status. The 'safeguard clauses' would be applicable then under the GSP plus regime, they added.

The average tariff rate on export of the S-11b products from Bangladesh would be an average of 12 per cent from the existing zero tariff, they said.

Director of Policy Research Institute (PRI) of Bangladesh Dr Abdur Razzaque appreciated the EC's proposal to remove another provision from the GSP plus rules that a country would be eligible for GSP plus benefit if the EU's combined imports do not go beyond 7.4 per cent of its overall import under the EBA.

"It's a welcome news for Bangladesh as it will be eligible to apply for the GSP plus benefit."

"The proposed GSP rules will create a unique circumstance in which Bangladesh qualifies for the GSP plus, but more than 90 per cent of its exports to the EU will have to face an average tariff hike of 12 per cent overnight from zero per cent," he said.

"In my view, the safeguard measures on textile and clothing are contradictory to the intent of the proposed new regime," he said, however. He explained that in the preamble (paragraph 24) of the new proposal, it is stated that the product graduation should not apply to GSP plus and the EBA beneficiary countries.

But the likely exclusion under safeguards will be tantamount to product graduation, he added. "I also think that the new GSP rules can be regarded as unfair."

The trade expert said the products including textile and clothing from non-LDCs like Sri Lanka, Pakistan and the Philippines were still benefiting from the GSP plus.

Even relatively advanced developing countries like India and Indonesia, known for their export competitiveness and capacities, can also get Standard GSP benefits for their apparel exports, he added.

Against this backdrop, the erosion of Bangladesh's tariff preferences would clearly be contrary to the argument of a GSP regime being development-friendly, he observed.

Mr Razzaque suggested that Bangladesh should now engage with the EU so that the restrictive safeguard provisions can be removed to allow local apparel exporters to continue to benefit from duty-free market access under the GSP plus.

When asked, Bangladesh Garment Manufacturers and Exporters Association president Faruque Hassan said they were working with the government to address the issue.

"We have raised the issue with concerned authorities during our recent visit to some EU countries, including the UK and Belgium," he said. The BGMEA had talks with the EU diplomats here in Dhaka on the graduation and post-graduation challenges of the sector, he added.

Economists and experts at a recent roundtable on 'LDC Graduation: Challenged and Opportunities' stressed the need for product diversification, skills development, and enhancing productivity to address the post-graduation challenges.

According to official data, Bangladesh exported RMG products (knit and woven) worth US$19.43 billion to the EU in the last fiscal year (FY2020-21), which is 61.77 per cent of its total RMG exports of $31.45 billion.

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