NPDA needs filtering or upgrading to benefit Bangladesh
Saturday, 16 February 2008
Enayet Rasul
Along and eagerly expected bill is nearing the endorsement stage at the US Congress. Among other things, the aim of this proposed law is to extend quota free and duty free access of goods from the least developed countries (LDCs) to the US market. Bangladesh has been actively seeking passage of this legislation to boost its main export product, readymade garments, (RMG) in the US market. Thus, there would be every reason for Bangladesh to be happy about the passage of this act. Why this is not the case is an issue that deserves a good scrutiny by all concerned followed by timely and effective persuasion of the US lawmakers for not adopting it in its present form. Bangladesh government and other quarters who stand to be adversely affected by the bill as it is now, must not lose a moment in girding up their loins to ensure that US lawmakers do appreciate their concern and bring about adequate amendments and additions in the proposed bill so that its passing proves to be truly useful for this country.
A proposed law to help the LDCs in the legislature of the most powerful country in the economic sense , is expected to be only generous in its aims and objectives. But the NPDA bill includes such provisions which, on adoption, can turn out to be economically very damaging for Bangladesh when ironically it was earlier only thought that it would bring great gains for a poor country like Bangladesh with LDC status. For the NPD bill is not designed to help Bangladesh in facilitating its trade and the industries behind such trade. The NPDA bill in its present form proposes many things. It does provide for duty free and quota free export of the goods from LDCs to its markets. But this concession is a symbolic one at best for, as in the case of Bangladesh, many of its products would not be competitive in relation to other competing countries in the US market even if there are no quotas or tariffs. The lone exception is RMG.
But for getting this concession for a single product, Bangladesh would have to embrace some very risky provisions which are stated in the bill. For instance, one of the provisions is that all export-oriented sectors must attain uniform standards in respect of compliance issues. The compliance issues involve labour standards, remuneration paid to workers and other benefits. These are really non tariffs barriers (NTBs) of sorts. USA and some other developed countries have been pressing on these compliance issues for long. As a result, nearly 50 per cent of the RMG industries in Bangladesh have been forced to become compliant and the rest are finding it difficult to meet the compliance standards for many reasons. Adopting the NPDA as it exists now, will involve the strict adherence of all sectors in Bangladesh to the compliance demands right from the moment the bill is made into law.
Probably, sections of the RMG sector can afford to be very correct on compliance issues and still get something out of doing business with the USA. But not all in the RMG sector can do the same and for them the quota and duty free concession of exporting to the US market will practically mean nothing as the compliance factor will be applied rigidly after the passing of the bill.
A more dangerous situation will be faced by other export-oriented sectors in Bangladesh such as leather, fisheries, shrimp, etc. These are only emerging ones and on the whole would be hardly able to meet the uniform compliance standards in a sustainable manner as demanded by the present draft of the NPDA. The RMG industries, at least in part, have grown considerable sinews in the financial and other sense to try and absorb the costs of meeting compliance demands. This is because they have been operating for a long time. But the same cannot be said about the nascent industries in the other sectors. These would be simply incapable of meeting fully the compliance standards and still retain any incentive to export in the US market. Thus, the passage of the NPDA bill with such stringent provisions cannot be a positive stimulus for them.
Other provisions in the bill would require Bangladesh to throw open its services sector to US businesses for investment unconditionally and compulsorily. After its enactment and if Bangladesh wants to continue to trade with the USA, it will have to allow US companies to unconditionally invest in any of its service sectors such as oil, gas, power, water, telephone, etc. Bangladeshi investors or the government will be hardly able to match US investors in the services field either in the scale of investment or in any other way. Thus, ownership and control of these sector will pass exclusively to US companies. Bangladeshi enterprising and initiatives in the services sectors will not be feasible under such circumstances.
For benefiting from the NPDA, the LDCs will also be asked to agree to not giving any kind of supports to their industries in the areas of tariff, monetary and fiscal policies, subsidies, etc. Whatever special concessions are given to local industrial enterprises, the same will have to be given to US companies wanting to invest in these countries. Thus, the NPDA would be making the playing field very uneven for local industrial entrepreneurs. Accepting its terms and condition could mean blocking the way to industrialization for Bangladesh by its own entrepreneurs.
Whatever concessions the World Trade Organisation (WTO) have extended to the LDCs, the passing of the NPDA in its present form will mean getting no value out of these concessions. For instance, WTO is allowing the LDCs exemption from implementation of intellectual property laws till 2016. This created an opportunity for Bangladesh to set up a robust export-oriented pharmaceutical industry and to become a major beneficiary of the same. But the NPDA bill insists that countries to be covered by it must implement the intellectual property laws immediately. The doing of this would only mean killing the emerging export-oriented pharmaceutical sector of Bangladesh even before it takes off.
Thus, the present provisions of the NPDA are seen as very inconsistent with the economic interests and aspirations of Bangladesh. No time should be lost by our government in pointing out to US lawmakers the reasons for the concern of Bangladesh about this bill. Bangladesh should have no objection to passing it. But only after its suitable amendments, deletion of certain provisions and incorporation of new ones as would safeguard the vital economic interests of Bangladesh and other LDCs.
Along and eagerly expected bill is nearing the endorsement stage at the US Congress. Among other things, the aim of this proposed law is to extend quota free and duty free access of goods from the least developed countries (LDCs) to the US market. Bangladesh has been actively seeking passage of this legislation to boost its main export product, readymade garments, (RMG) in the US market. Thus, there would be every reason for Bangladesh to be happy about the passage of this act. Why this is not the case is an issue that deserves a good scrutiny by all concerned followed by timely and effective persuasion of the US lawmakers for not adopting it in its present form. Bangladesh government and other quarters who stand to be adversely affected by the bill as it is now, must not lose a moment in girding up their loins to ensure that US lawmakers do appreciate their concern and bring about adequate amendments and additions in the proposed bill so that its passing proves to be truly useful for this country.
A proposed law to help the LDCs in the legislature of the most powerful country in the economic sense , is expected to be only generous in its aims and objectives. But the NPDA bill includes such provisions which, on adoption, can turn out to be economically very damaging for Bangladesh when ironically it was earlier only thought that it would bring great gains for a poor country like Bangladesh with LDC status. For the NPD bill is not designed to help Bangladesh in facilitating its trade and the industries behind such trade. The NPDA bill in its present form proposes many things. It does provide for duty free and quota free export of the goods from LDCs to its markets. But this concession is a symbolic one at best for, as in the case of Bangladesh, many of its products would not be competitive in relation to other competing countries in the US market even if there are no quotas or tariffs. The lone exception is RMG.
But for getting this concession for a single product, Bangladesh would have to embrace some very risky provisions which are stated in the bill. For instance, one of the provisions is that all export-oriented sectors must attain uniform standards in respect of compliance issues. The compliance issues involve labour standards, remuneration paid to workers and other benefits. These are really non tariffs barriers (NTBs) of sorts. USA and some other developed countries have been pressing on these compliance issues for long. As a result, nearly 50 per cent of the RMG industries in Bangladesh have been forced to become compliant and the rest are finding it difficult to meet the compliance standards for many reasons. Adopting the NPDA as it exists now, will involve the strict adherence of all sectors in Bangladesh to the compliance demands right from the moment the bill is made into law.
Probably, sections of the RMG sector can afford to be very correct on compliance issues and still get something out of doing business with the USA. But not all in the RMG sector can do the same and for them the quota and duty free concession of exporting to the US market will practically mean nothing as the compliance factor will be applied rigidly after the passing of the bill.
A more dangerous situation will be faced by other export-oriented sectors in Bangladesh such as leather, fisheries, shrimp, etc. These are only emerging ones and on the whole would be hardly able to meet the uniform compliance standards in a sustainable manner as demanded by the present draft of the NPDA. The RMG industries, at least in part, have grown considerable sinews in the financial and other sense to try and absorb the costs of meeting compliance demands. This is because they have been operating for a long time. But the same cannot be said about the nascent industries in the other sectors. These would be simply incapable of meeting fully the compliance standards and still retain any incentive to export in the US market. Thus, the passage of the NPDA bill with such stringent provisions cannot be a positive stimulus for them.
Other provisions in the bill would require Bangladesh to throw open its services sector to US businesses for investment unconditionally and compulsorily. After its enactment and if Bangladesh wants to continue to trade with the USA, it will have to allow US companies to unconditionally invest in any of its service sectors such as oil, gas, power, water, telephone, etc. Bangladeshi investors or the government will be hardly able to match US investors in the services field either in the scale of investment or in any other way. Thus, ownership and control of these sector will pass exclusively to US companies. Bangladeshi enterprising and initiatives in the services sectors will not be feasible under such circumstances.
For benefiting from the NPDA, the LDCs will also be asked to agree to not giving any kind of supports to their industries in the areas of tariff, monetary and fiscal policies, subsidies, etc. Whatever special concessions are given to local industrial enterprises, the same will have to be given to US companies wanting to invest in these countries. Thus, the NPDA would be making the playing field very uneven for local industrial entrepreneurs. Accepting its terms and condition could mean blocking the way to industrialization for Bangladesh by its own entrepreneurs.
Whatever concessions the World Trade Organisation (WTO) have extended to the LDCs, the passing of the NPDA in its present form will mean getting no value out of these concessions. For instance, WTO is allowing the LDCs exemption from implementation of intellectual property laws till 2016. This created an opportunity for Bangladesh to set up a robust export-oriented pharmaceutical industry and to become a major beneficiary of the same. But the NPDA bill insists that countries to be covered by it must implement the intellectual property laws immediately. The doing of this would only mean killing the emerging export-oriented pharmaceutical sector of Bangladesh even before it takes off.
Thus, the present provisions of the NPDA are seen as very inconsistent with the economic interests and aspirations of Bangladesh. No time should be lost by our government in pointing out to US lawmakers the reasons for the concern of Bangladesh about this bill. Bangladesh should have no objection to passing it. But only after its suitable amendments, deletion of certain provisions and incorporation of new ones as would safeguard the vital economic interests of Bangladesh and other LDCs.