Compliance in RMG sector and GSP

Bangladesh is in great shock and suffering deep frustration after Obama administration announced on June 29 that it was not among the countries that had been granted GSP facility till December 2017. The trade facility under which duty on exports is reduced or made zero was withdrawn in mid 2013 in the aftermath of the tragic accidents in Tazreen and Rana Plaza garment factories that took a toll of over twelve hundred workers and injured thousands. In addition to lack of building safety and absence of protection against fire accidents, inadequacy of labour rights for trade union activities was also cited as a reason. Bangladesh was asked by America to improve working conditions in factories and grant labour rights before it was considered qualified for GSP again.
Improvement of working conditions in garment factories had been going on even before the Tazreen and Rana Plaza accidents. This was required by the ILO and foreign buyers who oversaw the implementation of reforms on regular basis. Enforcement of compliance was not only intensified but made more rigorous and detailed after the two tragic incidents. Groups organized under Accord with 36 American buyers and Alliance with 190 European buyers became more active for compliance in the face of public outcry and pressure from human right groups. Pressure also came from the governments of their countries to prevail over suppliers to bring about necessary improvements. In America the labour organizations that had been chafing against increasing exports of garments from Bangladesh got a golden opportunity to cajole their government to take punitive action against Bangladesh that would shrink the volume of garment exports.
Withdrawal of the GSP has not affected the export of garment from Bangladesh as the item never enjoyed the facility even while it was available for the country. Only 5.0 per cent of exports from Bangladesh including leather, leather goods, tobacco, ceramics, plastic goods and carpet backing came within the purview of the GSP extended to Bangladesh. The withdrawal of the trade facility will affect the export of these items significantly and as such its negative impact cannot be ignored. Even though garment was not included under GSP it lost the prospects in future for duty-free status. Since 80 per cent of Bangladesh garments go to America as exports the benefit of duty-free facility under the GSP would have been great in terms of export earnings. Along with this tangible matter of economics the image of the country is also involved. To be excluded from the GSP in America was tantamount to failure to be recognized as a country where 'best practice' was not followed on the labour front. It has become a stigma that will continue to hurt the country until renewal. Naturally, Bangladesh is smarting under discomfort and despair.
Renewed energy and additional resources were applied by Bangladeshi garment suppliers to improve the situation through compliance with requirements for reforms. As the cost involved was immense foreign buyers under Accord and Alliance committed funds to defray part of the expenses as their share. Though this was mere token so far very little amount has been made available. As of now Bangladeshi suppliers are bearing the brunt of the whopping expenditure incurred for compliance. While the major suppliers are somehow scraping together resources at their disposal the majority of middle or small units are gasping for survival. Their income and profits are not just enough to meet even a fraction of the cost of compliance. In view of this it was rather unsympathetic and impractical for the think tank CPD to declare that compliance had nothing to do with profit margin. It is an obligation that has to be fulfilled under any circumstances. This astonishing stance was taken by the think tank in a dialogue recently organized by it with the German non-profit organization Friedrich-Ebert-Stifting where a lead speaker opined that compliance could not be compromised, using lower profit margin as a pretext. The compliance with conditions could no longer be left on whether a unit made profit or not, analysts said using a study. The study was conducted at a time when the apparel sector was undergoing major reforms. The study found what is already obvious, that the large factories managed to comply somehow while smaller ones lagged behind. It would have been appropriate if the study pointed out the financial constraints faced by the factories and stressed on prompt and adequate sharing of expenditure by the buyers grouped under Accord and Alliance. The need for raising the price level higher should also have been highlighted. It was, however, admitted that accommodating additional costs by suppliers was not so easy in low level of profit margin. It was also pointed out that suppliers in other countries spend more on compliance because they are able to maintain their competitiveness because of low interest rates, developed infrastructures, skilled labour force, semi-automatic production process, higher labour productivity and low cost of raw materials. A representative of the garment factory participating in the dialogue vented frustration in the meeting saying western buyers wanted to ensure workers' rights and safe working conditions and at the same time demand cheap products.
The realities of the situation demand that Accord and Alliance should release funds required for compliance quickly as promised by them. The buyers should also raise the prices for items of garments reducing their profit margin a little.
Denial of GSP to Bangladesh by America has been unfair and unjust as no comparison has been made among garment exporting countries. The record and standard of factory safety and labour rights cannot be better in Pakistan, Afghanistan or Nepal. It is unthinkable that Bangladesh is lagging behind in terms of compliance in 121 developing countries which have been granted GSP facility afresh. The suspicion becomes inescapable that more than compliance is involved as the reason for denial of the trade facility to Bangladesh. Whatever that may be, the government should continue its efforts to convince policy makers in Washington rather than sit quietly nursing the wounded feelings. The ongoing process of compliance should continue and approaches made to concerned authorities in America should be intensified. The American export market is too big to wallow in sulking or play for time. Bangladesh's competitiveness as an exporter is at stake.
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