No headway in duty-free access to US market

US secretary of state John Kerry, during his nine-hour Dhaka visit last week, mostly concentrated on security and terrorism. But trade is always on the agenda of any bilateral talk between two countries.
When the US secretary of state called on Prime Minister Sheikh Hasina, there, too, trade issues cropped up. The Prime Minister reiterated the demand for tariff-free access of Bangladeshi products to the US market.
Trade issues, however, featured in the official meeting between Kerry and his Bangladesh counterpart, Foreign Minister AH Mahmood Ali. Commerce Minister Tofail Ahmed and Home Minister Asaduzzaman Khan also took part in the official meeting.  In the meeting, the government had raised the issues of tariff-free market access of Bangladeshi products to the US and restoration of the Generalised System of Preferences (GSP).
Kerry did not make any commitment but assured his interlocutors that these matters would be examined. On his part, he stressed on labour rights and better working conditions, especially in the garments industry.
 Tariff wall: Bangladesh is facing a tariff wall while entering the US market, which is the largest export destination of the country. Though John Kerry, in reply to the Prime Minister's request, said they would examine the issue.
The tariff-free market access in the US is a long-time demand of Bangladesh. It is the only developed country which is yet to provide any preferential market access to three least developed countries (LDCs) Bangladesh, Cambodia and Nepal. On an average, the US is getting 15.50 per cent tariff against import of Bangladeshi products annually. Last year the US customs earned $911.60 million as tariff against import of Bangladeshi products worth $5,916.77 million. The simple average tariff rate is calculated by dividing the value of the collected total tariff by the value of total imports in a year. Actual tariff rates ranged from 5.0 per cent to 25 per cent on various products.
A puzzle, however, lies here on payment of the tariff. Generally, the US importers have to bear the burden of tariff as they are responsible for paying the customs duties. But, higher tariff usually increase the burden and importers pass it on to the consumers by charging higher prices. The higher price thus discourages consumers to purchase the particular product. As a result, demand for such product declines and exporters ultimately find it less profitable to export. The real world scenario is not as plain as stated as sharing the burden of higher tariff is complicated to some extent.
On average, around 80 per cent of the US imports from developing countries are fully duty-free.  Moreover, import tariff now generates around 1 per cent of the total revenue of the US, which was 30 per cent a century back. The US is denying the tariff-free market access to Bangladesh on the plea that Doha Round negotiation of the World Trade Organisation (WTO) is not complete. The Hong Kong ministerial declaration of the organisation in 2005 obliged the developed countries to provide 100 per cent duty-free quota-free (DFQF) market access to the LDCs. There is, however, an escape route also as the declaration allowed 'countries not in a position to do so' to provide market access to at least 97 per cent products. The US is using the clause to keep the garment product outside the DFQF benefit. Though the Bali ministerial declaration in 2013 asked the developed countries to extend the coverage of 97 per cent, the US stands firm on in its position.
The market access to the US becomes a tricky game for Bangladesh. Despite higher tariff, Bangladeshi exports are gradually increasing in the market. The country's exports to the US stood at $6 billion last year from $4.2 billion in 2010 of which more than 90 per cent is apparel product. Total apparel (both woven and knitwear) export stood at $5.6 billion in 2015. So, duty-free access means duty-free access for Bangladeshi apparel item. African countries have lobbied to the US administration strongly for not allowing such market access to Bangladesh. In Nairobi ministerial conference, it was Lesotho which moved against 100 per cent tariff-free access for LDCs. It is to be noted that African and Caribbean LDCs enjoy DFQF market access for all items including apparels under the African Growth and Opportunity Act (AGOA) and the Caribbean Basin Initiative (CBI) respectively.  
GSP FIASCO: A preferential scheme known as the Generalised System of Preferences (GSP) was in place for long which provided preferential treatment for a few products. But the Obama administration suspended the GSP for Bangladesh three years back. The suspension came into effect in September 2013. The Rana Plaza tragedy that claimed more than 1,100 lives of garment workers prompted the GSP suspension. Since then, several efforts were made to revive the GSP benefit and some initiatives have also been taken by Bangladesh to improve the working conditions of garment workers. Nevertheless, no progress was made on revival of the GSP.
The latest annual review of GSP programme also excluded Bangladesh. Under the current GSP programme, approximately 5,000 products from 122 beneficiary developing countries and territories, including 43 least-developed countries, are eligible for duty-free treatment when exported to the United States. Based on the latest review, new duty-free status has been added to travel goods (including luggage, backpacks, handbags, and wallets). At the same time, eligibility of certain products from specific GSP beneficiary countries has been removed as these countries were identified 'sufficiently competitive' in those products. Fluorescent brightening agents and PET resin from India are two examples of such exclusion from the GSP list.
As GSP is a rule-based trade preference programme and subject to follow the non-discrimination principle of the WTO, any decision regarding GSP needs to be compliant with WTO rules. Moreover, the WTO has categorically entrusted all the dealings on labour related issue to the International Labour Organisation (ILO).  So, WTO members are not in favour of using the labour standards for protectionist purposes. On this ground, suspension of Bangladeshi GSP is not legitimate although the country couldn't put up these arguments vigorously.
The USTR has already initiated process of annual review of GSP for 2016-17. Countries have been asked to file their petitions by October 4, 2016. So, as a part of its continuous effort to revive the GSP benefit, Bangladesh may submit its petition within the due date.
In fact, around 1.0 per cent of Bangladeshi products was under GSP coverage. These include plastic, ceramic, carpet and golf sports products. Without GSP, these products are subjected to 20 per cent import tariff and so their export declined significantly.
RECIPROCITY ON CARDS: Continuous denial of the DFQF treatment and withdrawal of the GSP make it clear that Bangladesh is unlikely to get any preferential market access to the USA in the near future. Moreover, by mounting pressure on the WTO to include new issues and abandon the Doha-round negotiation, the US and its allies, Global North in a broader term, categorically move to the policy of reciprocal trade deal, not preferential deal any more. The Trans Pacific Partnership (TPP) is actually a reflection of such a trade policy.
In the Nairobi ministerial conference last year, the US categorically opposed continuation of Doha round negotiation and called for abandoning it. Developing countries took a stand against such a move. Finally, WTO members reached a compromise deal keeping the Doha round 'somehow alive.' The Nairobi declaration doesn't ask for DFQF for LDCs although it compels  developed countries for relaxing the rules of origin.
Again, a few months back, at a meeting on Non-Agriculture Market Access (NAMA) in the WTO, the US claimed that as the WTO members did not reaffirm the Doha Development Agenda in Nairobi declaration, there is no scope for any Doha negotiations on industrial goods. It means the US is no more recognising the Doha negotiations. According to a report of Third World Network (TWN), the logic forwarded by the US was that 'it secured maximum gains in slashing industrial tariffs outside the trade body' and so it 'doesn't see any merit in conducting the NAMA negotiations at the WTO.'
The multilateral trade regime through the WTO called for less than reciprocity for  developing countries. But, this is more difficult to achieve due to the US trade policy. Against this backdrop, Bangladesh can expect very little development on market access to the US under a multilateral framework. A bilateral negotiation under TICFA (Trade and Investment Cooperation Framework Agreement) may yield some positive outcome.
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