Proposed EU GSP regulation threatens BD economy: EuroCommerce

The safeguard measures proposed in the European Union’s (EU) new GSP regulation would severely affect Bangladesh’s overall economy, according to EuroCommerce – the principal European organisation representing the retail and wholesale sector.
It notes that if the proposed rules remain untouched, Bangladesh could face most-favoured-nation (MFN) tariffs and the suspension of zero-duty benefits for its apparel items in the EU market.
EuroCommerce, a platform representing over 5 million companies in the European retail and wholesale sector, has expressed  concern to the EU over a specific article of the new post-2023 GSP regulation proposal connected to the automatic safeguards applied to textile and ready-made garment (RMG) products.
The platform has already requested negotiations on the new GSP regulation and fears that 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.
The principal European organisation has urged the EU to launch trialogue discussions on the new regulation without further delay.
EuroCommerce has expressed hope that the EU can consider a targeted and technical solution to mitigate the possible negative impact on Bangladesh due to the new GSP regulation proposal.
It believes that it is essential for Bangladesh to maintain preferential access to the European market after 2029, considering the expected graduation of Bangladesh from the Least Developed Countries (LDC) category.
EuroCommerce has suggested that a transition period for countries that join GSP plus post-graduation from LDC prior to activation of the automatic safeguards should be introduced to give more time to beneficiary countries and economic operators to adjust.
It has also cited that increasing the threshold for triggering automatic safeguard measures on RMG products from the proposed 37 per cent to the current level of 47 per cent would have a dampening effect.
According to the letter, with the proposed article, if Bangladesh’s share of S-11b products (of the combined HS Sections 61, 62, and 63, comprising knitwear, woven, and home textile items) as a percentage of all EU GSP-covered imports exceeds the suggested threshold of 37 per cent, the automatic safeguard measures will be triggered.
“The corresponding Bangladesh share is estimated to be almost 50 per cent. It means there is a significant risk that the automatic safeguard measures will suspend the zero-duty benefit for ready-made garments products (woven, knit, home textiles) before the end of this decade,” the letter said.
Earlier, the commerce ministry had requested the European Commission, arguing that the proposed safeguard measures would severely affect the exports of products such as knitwear, woven, and home textile items under HS Sections 61, 62, and 63, according to Md Hafizur Rahman, an additional secretary now under Leave Preparatory to Retirement (LPR) of the commerce ministry.
However, he noted that 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 GSP rule.
If the proposed rules remain unchanged, even when Bangladesh will benefit from GSP Plus preferential access under the new post-2023 GSP regulation, its RMG products will face MFN tariff rates in the EU. RMG products from Bangladesh to the EU will face an average tariff hike of 12 per cent from zero per cent.
Bangladesh mission in Sweden has sent the EuroCommerce letter to the commerce ministry recently to chart out the next course of action, said an official, adding that they are continuing negotiations to cushion the fallout stemming from the safeguard measures and looking for changes in favour of Bangladesh.
EuroCommerce is concerned that the consequences will not only be negative for international brands but, first and foremost, for the economy of Bangladesh.
According to the letter, “Considering that there are approximately 4.0 million people employed in Bangladesh in this sector, the majority being women, hundreds of thousands of jobs are at risk in the country, should the automatic safeguards be activated.”
“If alternative destinations for some part of the production will be available by then, we might see an exodus of international brands with a negative impact on the Bangladesh overall GDP.”
“We also fear there is a risk reducing the incentives for Bangladesh to keep working on the reform path ahead, which is strictly linked with the actual possibility to have a preferential access to the European market. Some of the sustainability standards developed over years of hard work might also be at risk,” Christel Delberghe, director general (DG) of EuroCommerce, mentioned in the letter.
The ongoing EU GSP facility will end this December, and a new GSP scheme will be effective from January 01 for 2024-2034. The EU parliament is now reviewing the new GSP regulation.
In the new GSP, duty-free market access to the EU market might be subjected to fulfilling difficult conditions. Besides, it has also proposed to bring product graduation and rules of origin under strict conditions after 2026.
Currently, Bangladesh’s products have duty-free market access to 38 countries. Of the countries, 27 are the EU member-states.
The EU is Bangladesh’s largest export destination. Bangladesh has been enjoying duty-free facilities for exporting goods to different EU countries since 2001 under the Everything But Arms (EBA) scheme.
Around 50 per cent of Bangladesh’s export earnings come from the bloc. The country exported goods worth US$ 23 billion to the bloc.
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