US Bangladesh Trade and Investment Relations
Tuesday, 3 November 2009
Opening remarks by
Dr. Zaidi Sattar,
Chairman,
Policy Research Institute
Welcome to you all. I would like to thank the US Embassy for allowing us to host this event which is very relevant for the Bangladesh economy. I am also thankful to The Financial Express for agreeing to jointly host this event and thanks to the President of The Federation of Chambers of Commerce and Industry, Mr. Annisul Huq, for agreeing to be the Chief Guest. I would like to welcome Mr. Michael J. Delaney, the Assistant US Trade Representative for South and Central Asia for agreeing to be with us today and share some of his thoughts on US-Bangladesh trade relations. I also thank Mr. Yussuf Abdullah Haroon who is a Former President of FBCCI; he will chair the program and conduct the proceedings. Before I hand over the mike to the Chair, let me give a very quick, two minute introduction to the subject matter.
This is the Policy Research Institute of Bangladesh and we are a private, non-profit, non-partisan research organization. We are committed to promoting independent, non-partisan research in the areas of trade, macroeconomic, policy, poverty and growth. We are also committed to promoting greater understanding of the Bangladesh economy, its key policy challenges, domestically as well as in the rapidly integrating global marketplace; and trade policy issues are a primary focus of this institution. We have an international advisory panel of very distinguished economist of global repute; if you kindly visit our website you will see that.
We know that the US is committed to open trade; its average tariffs are only 2.5%, and few, if any, trade-related QRs esixt. The irony is that when it comes to labor-intensive imports, like textiles and leather goods from Bangladesh, its tariffs spike up to 15-30 percent, whereas imports from EU face tariffs of under 0.5%. As a cheap labor country, Bangladesh exports labor-intensive products at the low end of US garment market, and faces tariff peaks. Result? Low-income American consumers who are the major buyers of Bangladesh garments end up paying higher tariffs compared to high-income consumers. American economists from Nobel Laureate Paul Samuelson to Nobel Laureate Paul Krugman, have argued that nation's should specialize and export according to their comparative advantage. Bangladesh is doing just that and being penalized for it. Is it fair? Yes, tariff issues can be brought up at multilateral platforms, but we believe there is scope for engaging on this subject on a bilateral basis as well. If this can be done under a broad framework of understanding, it could produce results.
Mr. Yussuf Abdullah Haroon,
Ex-President, FBCCI
Our keynote speaker today is Mr. Michael J. Delaney as you've heard. A few words on his background. I believe this is his first visit to Bangladesh. Mr. Delaney was appointed Assistant US Trade Representative for South Asia in 2008 and in this position he is responsible for development of trade with the countries comprising South Asia; India, Afghanistan, Pakistan, Bangladesh, Bhutan ,Maldives, Nepal and Sri Lanka as well as Iraq. Several trade initiatives fall under his purview including the US proposal for creation of regional opportunity zones in Afghanistan and certain regions of Pakistan. Mr. Delaney is a commissioned senior diplomat with the US Department of State. Since entering the Foreign Service in 1982 much of his career has been devoted to development of US trade. He's served in various capacities in Portugal, Brazil, Korea, Finland and Australia. Immediately prior to his appointment at the USTR Mr. Delaney served as US Political Adviser to NATO's Southern Region Command Kandahar, Afghanistan. Without further ado I would like to request Mr. Delaney to please make his presentation.
Thank you.
Mr. Michael J. Delaney, Assistant US Trade Representative for South
and Central Asia
Dr.'s Ahsan Mansur, Zaidi Sattar and Yussuf Abdullah Harun of PRI. Ladies and gentlemen. Thank you very much for your warm welcome. Indeed I have been warmly welcomed at all my meetings during my time here in Dhaka. I am truly enjoying my experience of your famous Bangladeshi hospitality and again I am enjoying my visit here and it's been very informative.
I just had a meeting with the American Chambers of Commerce in Bangladesh. The dynamism of business here was amply demonstrated with the questions that were posed by Chamber members on our relationship. We discussed the proposed US-Bangladesh TIFA, a topic I would like to discuss further here at PRI, but before that I would like to start off by talking briefly about President Obama's trade policy priorities.
President Obama's trade agenda reflects our respect for entrepreneurship in market competition, our environment, opportunity for all and the rights of workers. It works to benefit American workers and their families along with increasing the wellbeing of those living in the poorest regions of the world. Our trade agenda seeks to do a number of things including support a rule based trading system; advance the social accountability and political transparency of trade policy; make trade and important policy tool for advancing progressing on national energy and environmental goals. And make sure the trade agreements are addressing the major unresolved issues that are responsible for trade frictions. We also want to build an existing free trade agreement and bilateral investment treaties in a responsible transparent manner; and finally we aim to uphold our commitment to be a strong partner to developing countries, especially the poorest developing countries. We believe that free and fair trade with a proper regard for social and environmental goals and appropriate political accountability will foster global wellbeing.
It is U.S commitment to developing countries that brings me to Bangladesh this week. I hope to make progress on initiatives that will expand US-Bangladesh trade and investment relations. One of these initiatives is our proposed Trade and Investment Agreement Framework (TIFA). TIFAs can yield many direct benefits; a US-Bangladesh TIFA would serve as a forum for government and business representatives from our two nations to discuss economic issues of mutual interest. Its objectives include improving cooperation and enhancing opportunities in trade and investment.
The U.S. has already signed TIFAs with more than 30 trading partners including Pakistan, Sri Lanka, Afghanistan, a grouping of Central Asian nations and ASEAN. We would like Bangladesh to be our next TIFA partner but I told the Foreign Minister ultimately the decision regarding that is up to you. We need a willing partner. I understand that this is somewhat a controversial issue here in Bangladesh. And that's all to the good. I believe the public debate on these issues are part of democracy and part of a democratic process. My own view is that we believe a TIFA is the best mechanism to advance our trade and investment relationship. It contains no legally binding commitments; it is a platform for dialogue.
I am here this week to exchange views on a range of trade and investment issues. The Commerce Minister and I had a very cordial, fairly comprehensive exchange of views and most issues we agreed and some issues we didn't agree. In every case it was a very productive exchange because we now have a much better understanding of each other's positions and that gives us what we need to move forward and find solutions to the outstanding issues that we need to address in order to expand our trade and investment relationship.
Right now the U.S. is Bangladesh's No.1 customer; if anything happens to that relationship I think you all would agree that it would not be a good thing for Bangladesh. We have no formal relationship for having any sort of dialogue on trade relationship and I personally think that is a deficiency that needs to be remedied. Our preferred solution is a TIFA again but the decision is up to the Government of Bangladesh.
Under the TIFA we will create a trade and investment council where representatives of our two governments meet at regular intervals --typically once a year-- to discuss issues of mutual interest. They would also consult with the private sector to ensure business interest from both countries that are represented. A TIFA would further enhance strong annual two-way trade between Bangladesh and the U.S. Trade between our nations amount to about 4.2 billion dollars last year. At a time when global trade was faltering, Bangladesh's apparel exports to the U.S. actually grew by 11 percent. We remain your single largest export market. The Commerce Minister and I had very productive talks yesterday regarding the TIFA, along with my colleagues at the US Embassy; we at the US Trade's Representatives Office look forward to further talks ultimately to signing an agreement with the Government of Bangladesh.
Another important issue I raised with Government of Bangladesh counterparts gets at the heart of President Obama's trade policy; that is workers' rights. The US Trade Representatives are currently reviewing Bangladesh's progress on labor issues following the submission of a petition by the U.S. Trade Union AFL-CIO to suspend Bangladesh's benefits under the Generalized System of Preferences (GSP).
Bangladesh has made real progress in addressing concerns outlined in the petition; particularly regarding child labor and the rights of workers in the export processing zones. We hope to see further progress on workers' rights in EPZ and the apparel sector in general. President Obama and US Trade Representative, Ron Kirk, firmly believe that adequate protection of the status, conditions and compensation for workers is a key component of a healthy global trading system. Bangladesh has demonstrated its resilience in the face of the global economic crisis. I am confident that Bangladesh will remain resilient even after it expands benefits for the workforce that is at the roots of its trade success. We are keen to resolve the outstanding GSP petition to guarantee Bangladesh the chance to expand its use of GSP benefits. By using GSP benefits more effectively Bangladesh can increase its exports to the United States almost immediately we believe. GSP also allows Bangladesh to export certain goods to the United States with low or no duties.
We frequently here request to provide Bangladesh with duty free access to the U.S. for ready-made garments. I wish as much energy was spent seeking ways to better utilize Bangladesh's GSP benefits in the U.S Market, despite the fact that Bangladesh could export 4800 different products with little or no duty under GSP. Bangladesh only exported 330 GSP eligible products to the U.S. in 2008. So there's 4800 GSP eligible products and Bangladesh exported 330 and those products represented 21.6 million dollars in exports which is a very small amount that works out to six-tenths of 1 percent of all Bangladesh exports to the U.S. that year. Now these numbers confirm that we have a reasonably large export volume from Bangladesh but it's actually in a narrow range of goods.
I'm sure you're thinking how many of those 4800 items does Bangladesh actually produce or could export?
Now we believe that there is considerable potential; there are many goods Bangladesh produces that could be exported to the U.S. under GSP. One of our favorite examples is porcelain or china. Under GSP Bangladesh can export the U.S. porcelain or china, table and kitchenware duty free, zero. Bangladesh already exports china to the U.S. but I would argue that given the strength of the porcelain sector, Bangladesh should actively seek new buyers for China and increase exports in this area. We believe this is one example of many where greater attention is needed. What's in GSP that could help Bangladesh to diversify its exports? GSP benefits focuses on products that are less successful in getting into the U.S. Market. We all know that it is in Bangladesh's interest to diversify its exports; the GSP program can help you to do that. I urge Bangladesh businessmen and policy makers to examine the list of goods that enjoy the GSP benefits and seek new U.S. Markets for Bangladesh's exports.
It is a time of great promise in the US-Bangladesh economic relationship; now is the time to deepen our already strong trade and investment relations.
I look forward to hearing your suggestions on how we can best do that and finally I greatly appreciate the Policy Research Institute's contribution for providing a forum on such an important discussion. Thank you very much.
Dr. Ahsan H. Mansur, Executive Director, PRI
Trade and Investment Framework Agreement
It is more than 7 years that Bangladesh and US governments have been discussing this issue. The draft agreement had gone through some changes during the BNP government and also during the caretaker government. The Caretaker government has rightly left it for the successor political government to deal with, in order to avoid controversy.
The most important element of TIFA is the provision of establishing a US-Bangladesh Council on Trade and Investment with representatives of both parties. Since US is one of the major sources of FDI, such a formal framework to discuss bilateral trade and investment issues will be very important for BD. Certainly, replacing the current ad-hoc case by case arrangement for bilateral consultation on trade and investment issues by a formal mechanism will be important for BD. He has mentioned two issues related to this provision in the draft agreement:
The participation in the proposed Council should include competent persons from the non-government sector as well and not only limited to officials of government entities (as stated in the 2005 draft TIFA agreement). Iceland TIC agreement allows for seeking such advice.
Another is that whether the clause referring to the establishment of "Joint Working Groups may meet concurrently or separately to facilitate its work" in the 2005 draft has been dropped in the revised draft. In Pakistan agreement (which is a more recent one) also there is no such provision.
Generally there are three critical issues about which concerns are expressed by the government, trade bodies, and concerned civil society representatives and media in BD. These are:
TIFA's emphasis on Intellectual Property Rights (IPR). This is probably the most contentious issue in the draft TIFA. As per the WTO, BD is insulated from the IPR (including Patent act) till 1916. Bangladesh pharmaceutical industry is rightly taking advantage of this provision and expanding its production and export base. If we have to follow the IPR now, BD has to incur huge expenses as big US companies license many of the patents. IT expenditure will also be increased to license software. The critical issue is:
Why cannot the proposed TIFA allow for protection of IPR benefits that BD gained under the much broader WTO arrangement?
Why the proposed TIFA for Bangladesh has to include IPR provision, while there is no such provision in the agreement with Iceland (signed January 2009)?
The second concern about the draft TIFA is, if Bangladesh agrees to the provisions relating to labor and environment, these would most likely be raised during the bilateral talks.
These issues are already being raised in different contexts, fairly and sometime unfairly. Bangladesh is seriously working on these issues and certainly significant gains have been made on the labor issue while more can be done and will be done. Besides, dealing with the labor issues in the context of the proposed Council would stop involvement of all other nongovernment parties like AFL -CIO or US corporations (like Wal-Mart etc.) on these matters. Or TIFA will simply serve as an additional instrument for exerting pressures on BD and not replace/substitute for those other pressure points.
Government and the civil society both are increasingly concerned about the environmental issues and more efforts by the government would be desirable. However, the problems are not going to be solved without concerted efforts and enforcement over a long time. While this issue is important it would not be desirable to use it as a potential nontariff barrier against Bangladeshi exports. How would you assure Bangladesh in this regard?
The other important issue is whether TIFA would serve as a tool for future negotiations on duty-free access of Bangladeshi textiles clothing to the US market. It would be useful to heed from the USATR whether such an expectation has any reasonable basis. There is no explicit commitment from the US side. However, some statement like what is mentioned in the Pakistan agreement (Point no. 17), that the "framework agreements may help prepare parties for eventual free trade agreement negotiations" or something like "duty-free access of textile products to each other's market" cannot be used in the TIFA agreement. This issue is certainly important for Bangladesh since unlike other exporting countries to the US market, Bangladesh's 90% export is textile products, which are subject to relatively high duty rates. The average duty rate on Bangladeshi exports to the USA is more than 15%, compared with the average duty rate of 0.3% for the exports from the EU 27 countries. The high duty on textile products certainly discriminates against Bangladesh, although this is not deliberate. It certainly undermines Bangladesh's efforts to grow out of poverty through trade. What the EU has given to a country like Bangladesh, why cannot the US give that as well?
Inflow of US FDI inflows into Bangladesh
US FDI Inflows have played a major role in many East Asian economies. However, in the case of Bangladesh the inflows have remained quite limited and generally going to only energy related projects. Most of the FDI has gone to development of gas and generation of electricity. The amount of investment has been quite modest, even compared with countries like Pakistan. Pakistan received more than one billion dollars in US FDIs in 2007/8, compared with only $40 million in Bangladesh.
l What would be your suggestion for Bangladesh regarding attracting more US FDI into the country in a broad range of fields beyond the energy sector?
Dr. M.A Taslim, CEO, Bangladesh Foreign
Trade Institute
Since TIFA document has still not been made public, it's difficult for me to comment on it, so I would rather comment on trade in general and investment.
The United States is the most important trading partner country of Bangladesh, the total bilateral trade in 2007 between Bangladesh and the United States was $ 4.3 billion of which 3.6 billion was exports from Bangladesh to the US and 0.6 billion was imports from the USA. What is less known among people of Bangladesh is that the US also happens to be the 2nd largest source of remittance---total remittance inflow was 1.4 billion dollars in 2007/08. And the USA was also the largest source of FDI in 2006 and 2nd largest source in some other years and it was the second largest bilateral contributor of foreign assistance. Now if you put them altogether, we get a number like 5.5 billion dollars that is actually added to the aggregate demand of Bangladesh. And 5.5 billion as a proportion of GDP is fairly a large number-----7 to 8%.
So, any disturbance to this relationship is going to affect Bangladesh fairly seriously. Well, even though we don't have any bilateral forum, we have at least one multilateral forum where we can discuss things; and it is the WTO. Diplomatically, we also can engage in discussion to solve any of those problems. Now although the US is the largest importing nation for Bangladesh, our export is extremely concentrated on a few items. RMG alone occupied 90.4% of total export to the USA. And if we include other textile exports like caps, vegetable fiber and woven fabrics its share increases to 94%!! This indicates we need immediate diversification of our exports.
Now, people in the developed countries, as Mr. Delaney himself, may have difficulty in understanding why we cannot diversify in those other 4800 products that we can produce. But this is precisely what LDC means-----why we have so much traffic jam? Why we don't have skilled labor? Why do we have so few industries? Why do we have so much poverty? That's why it is not really that easy for our producers to diversify into our industries and effectively compete against other countries.
It is apparent that President Obama is not that interested in trade as we have observed in his first State of the Union Address he did not even mention the word "trade" for once!
Now, I think we can cooperate on an investment arena. Despite the fact that the USA is one of the largest investors in Bangladesh, this investment goes mostly to extraction industries. But other industries and sectors need help too. We would be wondering if the US extends investment to other areas, such as in infrastructure development.
Mr. K.Z Islam, Managing Director, Nirman International
Trade and investment framework is a broad aspect for trade agreement; it is not binding on any party and anything objectionable can be removed. Adequate safeguard for effective protection, enforcement of the intellectual property rights (TRIPS) and workers right are the key issues to be raised under this framework. I don't understand why the signing should be held up? Why can't we sign this agreement immediately?
Dr. Mustafizur Rahman, Executive Director, Centre for Policy Dialogue
The experience of Sri Lanka- US TIFA is instructive. When Sri Lankan side was asked about an authorization of TRIPS loss to remove obligation of IPR, amending the competition policy in Sri Lanka, and liberalization of capital account of Sri Lanka. These issues are also raised in the forum of Bangladesh -US TIFA. Bangladesh also raises the issues for farm subsidy (14 billion US dollar) which impedes our market excess for our agricultural products. Everyone knows that Bangladesh will be subjected to changes in loss and US will do nothing in terms of reducing its farm subsidies. So, what will be the United States reaction on that?
Besides, there are number of derogation of the WTO and what will happen when discussion goes beyond our WTO commitments? So, will there be any provision over there that anything will be decided in this forum will not infringe upon what has been given to Bangladesh in multilateral forum like WTO?
Mr. Mahbubur Rahman, President, International Chambers of Commerce
Mr. Delaney asserted that every action related to the policy should be transparent and all stakeholders must be involved. In this case, transparency is almost nowhere and stakeholders are not a party. He also mentioned that USA has lost interest in the multilateral trade negotiation after Doha round of WTO. So, they are more concentrating on the bilateral trade negotiation than multilateral trade. Besides, the issue that is being raised by AFL -CIO is not very open and creating non tariff barriers. So, Bangladesh should be involved both in the FTA and TIFA.
l So, it is absolutely essential, stakeholders must be a party before we sign this framework agreement?
l If it is favorable for both these countries bilaterally, then this is a more advantageous position for both countries, so, why not we should sign? Similarly, the FTA, why not?
l Again, why the United States has been emphasizing more on the bilateral free trade agreement bypassing the multilateral trade agreement of WTO?
Mr. Abdul Hye Sarker, Chairman, Bangladesh Textiles Mills Association
He pointed out that Bangladesh has GSP facilities for 4800 items, out of which only 330items are exported in the US market. Actually, Bangladesh doesn't have much in USA other than apparel, seafood and another few items. Unless those items are including in the GSP, it cannot help much for Bangladesh. He made a question why USA suddenly seizes our facilities to help DFQF access in our garments?
Dr. ABM Mirza Azizul Islam,
Former Adviser, Ministry of
Finance and Planning
First: There are some global regimes such as International Labor Organization (ILO), Trade Related Aspects of Intellectual Property (TRIPS), and World Trade Organization (WTO). Some of the issues are already addressed in one of the global regimes. In that sense some investment issues are being addressed either under intellectual property or WTO and so on .So if you are going to have a TIFA, why don't you have a provision that this will not impose any obligation on Bangladesh beyond what is agreed upon in the global forum.
Second: I would like to point out that when you have a discussion about welfare or compensation of labor we have to think not merely of labor that is currently employed but also those who are waiting there outside for potential employment. The issue is that the greater the rate of compensation for currently employed workers, the inevitable economic reaction would be for the entrepreneurs to go for capital intensive ventures and to reduce the employment potential. So you are actually limiting the possibility of employment of those who are not currently employed by raising labor intensity. So there is every reason to think that when AFL CIO makes a complaint, their concern is more about the employment of American workers or in other words to limit the import of labor intensive goods into U.S. So I think the U.S. government needs to take a position as to what extent they should really be influenced by AFL CIO if they are really concerned about the welfare of the workers in least developed countries such as Bangladesh.
Third point: You have mentioned that there are lots of products under GSP which Bangladesh is not availing at all. Here the U.S. Govt. could encourage investors from U.S. to invest in Bangladesh in the products which Bangladesh is not currently availing of and it could also be in the form of joint ventures. Bangladesh is quiet liberal about 100% foreign direct investment. So US investors are most welcome to engage in manufacturing products which could avail of GSP facilities in the US. I might add that the US already has similar initiative under AGOA for the African countries. If US could give preferential access to African countries including African least developed countries it is not fair that Bangladesh should be deprived of exactly the same privilege.
Dr. M. Rahmatullah,
Transport Policy Adviser, Planning Commission
We observed that Bangladesh has been suffering very badly because of poor infrastructure as well as energy and power base. This is an area where you need to help us in developing our infrastructure so that we can do better in making our products more efficiently and with competitive cost. My question here is that-
"What are the prospective areas of US investment in Bangladesh"?
Mr. Farooq Ahamed, Secretary General, Metropolitan Chamber of Commerce and Industry
He mentioned the enforcement of workers right involving the child labor issue. He thought that child labor issue under TIFA agreement should be viewed moderating. He also said that Bangladesh is the most densely populated country in the world. In the recent report that has been submitted by the US Department of Labor, 13 sectors have been identified from Bangladesh where child labor is sizable and each of these sectors can be subdivided into three subsectors, namely formal sector, informal and micro level where most of the families are involved in family business.
Mr. Annisul Huq,
President FBCCI
On TIFA, we don't know what is in it, so we cannot comment much on it. We had a seminar in March this year on TIFA and the conclusion of the seminar was that "we need to know about TIFA further and a discussion with all the stakeholders would be needed before the government makes any decision on it". We request the Bangladesh authorities to inform the stakeholders.
Mr. Delaney confirmed that the US is interested in signing TIFA with Bangladesh. We will say, why not if it is beneficial for both the parties? It should be signed but we first need to discuss and thoroughly scrutinize it. Now, time is coming when multilateral umbrella is expanding every year, I mean the Doha round which is possibly going to be concluded next year or in 2011, where Bangladesh needs a big favor from the US. I think when we think of signing TIFA we expect a very good and cordial help from the US side.
Today the US textile industry is not that extensive as it was in 2004 when the quota was totally abolished. Now Bangladesh, I think, is totally marginalized being an LDC because we see other LDCs in Africa getting duty free benefits or access through AGOA agreement while Bangladesh is left out alone. Even we see that some special initiatives have been taken for Pakistan and Sri Lanka leaving Bangladesh outside from which they are getting advantage on 7 products which Bangladesh mostly produces and exports. Mr. Delaney was talking about GSP; I would like to say in this context that out of 6500 HS Codes 82.7% is duty free for Bangladesh. But what does Bangladesh produce other than textile? Shrimps, leather etc which are getting duty free access. But textile alone occupies 85-88% of our total exports to the USA. Therefore if only the US gives us any facility or advantage in textile then we can really say that the US is giving us a big benefit.
We have seen in the Hong Kong ministerial and Geneva discussions, whenever the US favors something it normally gets priority. So, we request on behalf of the business community and labor force and industries of the country to the US to give us a favor. Our Minister went to Africa last week to the LDCs ministerial conference, but since most of the African countries are united we don't think the conference is giving us the right indication of getting this facility.
Finally, I would like to say that we are not against TIFA as such; all we need prior to signing it is a sound understanding of what is in there and an internal discussion with the stakeholders and a complete confirmation and support from the US side that Bangladesh will not be marginalized among LDCs in the pretext of AGOA. Alternatively, Bangladesh needs to be included in one platform among LDCs. We have put forward many alternatives to be included in the text of the next ministerial and we hope and expect a very strong support from the USA on these issues.
Barrister Harun Ur Rashid
Former Ambassador to the UN Mission, Geneva
Any agreement between unequal powers raises many concerns and suspicions about intentions and objectives. In the instant case, TIFA is a framework proposed by the super power, US to a Least Developed Country (LDC), such as Bangladesh. Naturally, many concerns were raised in the country. Moreover the country that provides the draft to another has inherently built their optimum interests in it and has more advantages than the one which merely proposes amendments to it.
Some say that although word "Trade" occurs in the TIFA title, it seems the US has given more emphasis on services sector and has not taken into consideration Bangladesh being a LDC that enables Bangladesh to get Bangladeshi goods duty-free access to the US market as the US has allowed African and Caribbean LDCs. Bangladesh should not be put into a disadvantegeous position in signing the TIFA by denying a longer period of time for meeting commitments under the WTO as LDCs."
ASM Mainuddin Monem,
Deputy Managing Director, Abdul Monem Ltd
My understanding is that TIFA is a framework agreement within which there can be formal discussions between the two parties to help improve the climate for investment. However, what has come out in these discussions is that much depends on the negotiating abilities of the contracting parties.
There are several issues to be negotiated; and there are concerns in Bangladesh about labor rights and IPR. Bangladesh feels it will lose out on these two counts, if it signs TIFA. But US envoy says that it is non-binding and only a platform for further discussions. I feel the atmosphere is clouded by a lack of clarity on contentious issues which need to be fully explained to the private sector stakeholders.
Mr. Michael J. Delaney
I'd just like to make a few comments. Mr. Mustafizur Rahman invoked US-Sri Lanka TIFA in a negative way, but I don't. I spend a lot of my time as Assistant USTR negotiating with the countries in my portfolio and most of the time it's done under the auspices of TIFA arrangements. We used our TIFA to organize an investment mission out to the east, precisely Trincomali, where the LTTE was until recently. The TIFA arrangement was on the request of Sri Lankan government, they are desperately trying to get the economy stand up in this liberated area, trying to generate employment as a means of fostering national reconciliation.
On workers' rights
Workers' right, the whole issue of labor is a very important part of our trade policy. This is a huge part of what America is all about. When you talk to the USA, let me be very frank about this, when you are gonna talk to the USA we are always gonna talk about liberty, we are always gonna talk about freedom and protection of the individual. That's what we are all about. There is one thing I want to impress on you all today; we make no apologies for that. That is what we are about. And , by the way, we are very proud of the fact that we have played an important role in advancing the welfare of the workers of Bangladesh, we provide substantial monetary assistance in doing this and we intend to continue doing that. In the future hopefully we can expand that.
On the Intellectual Property Rights (TRIPS)
On intellectual property rights, TIFA is not legally binding. Things like TRIPS are legally binding. Therefore, TRIPS would trump any TIFA, that's implicit. If you want language to make it explicit, recognizing legal rights etc. in these various agreements, we won't have any problem on that.
On FDI
We talked a lot about FDI, how to invest, how to increase US investment in Bangladesh. This is an excellent topic for a TIFA meeting. That's what we exactly would like to do with the TIFA meetings. Let's sit down and figure out, we need more energy companies come here to invest. Let's sit down and work that out. What is the way to make that happen? Let's have a meeting, let's have a dialogue; it's really hard to do that without a dialogue.
Conclusion
I personally think that TIFA is the way to go and we need it. And I personally don't think it's a good idea to have such a big and important relationship without some kind of formal basis for discussion. It's true we could simply ring up the Foreign Minister and say, hay let's have a discussion next week and the Foreign Minister is gonna ring me up. We could stroll into the WTO. Since it is a multilateral forum, it would be difficult to discuss strictly bilateral issues. I think we need something like TIFA and we have this with dozens of countries. Here is a suggestion, why not you call up Trade Minister G. L. Peiris , ask him how he feels about TIFA; ask other ministers of existing TIFA countries. Has your experience been positive or negative? Do you think this is a good idea or bad idea? Do that with Afghanistan. Ring up Minister Nematullah Shahrani. Ring up Commerce Secretery Suleman Ghani of Pakistan. Ask all these peoples and see what happens. Take a survey and let that guide your decision. That might be the best way to proceed.
Mr. Yussuf Abdullah Haroon, Ex-President, FBCCI
I would like to emphasize the importance of a formal basis or framework for any agreement and taking advantage of opening that to foster economic growth. A lot of investments are needed to reach the GDP growth target of 8 to 10 percent within 2013. To take these investments, it is essential for favorable environment and proper negotiation at the WTO levels and bilateral level. In WTO, a country gets what it negotiates, not what it deserves. There is not much room for emotional appeal in WTO and that's why Bangladesh has serious deficit in terms of negotiating capacity. So, we have to build up capacity and really look at the issues very closely. Six years have gone by yet up to now; our government has not had a single discussion with the stakeholders in a meaningful way. So, in terms of our development, concerns can be accumulated in our discussion with the United States and if we are late again, Bangladesh will resume the story of unfulfilled promises.
Mr. Moazzem Hossain,
Editor, The Financial Express
I strongly believe that the points made are worthy of consideration for further consolidating and strengthening bilateral relationship between these two countries in a win-win situation. Investments that are particularly facilitated by the opening of new opportunities in areas of trade can be a strong catalyst. The dynamics of trade does indeed provide the momentum to help expand the horizon for producing new economic activities with investments energizing the process thereof and a conducive environment both domestic and external is vitally important to facilitate expansion of trade and to attract investments. Bangladesh looks forward to support a policy for unhindered market access of its products and also for creating new opportunities for export diversification. However, it is equally important for us to stay competitive to trade with the rest of the world as well as attract investments from within and outside for better economic performance. Here, the high cost of doing business is a matter that will have to be dealt with in earnest.
Dr. Zaidi Sattar,
Chairman,
Policy Research Institute
Welcome to you all. I would like to thank the US Embassy for allowing us to host this event which is very relevant for the Bangladesh economy. I am also thankful to The Financial Express for agreeing to jointly host this event and thanks to the President of The Federation of Chambers of Commerce and Industry, Mr. Annisul Huq, for agreeing to be the Chief Guest. I would like to welcome Mr. Michael J. Delaney, the Assistant US Trade Representative for South and Central Asia for agreeing to be with us today and share some of his thoughts on US-Bangladesh trade relations. I also thank Mr. Yussuf Abdullah Haroon who is a Former President of FBCCI; he will chair the program and conduct the proceedings. Before I hand over the mike to the Chair, let me give a very quick, two minute introduction to the subject matter.
This is the Policy Research Institute of Bangladesh and we are a private, non-profit, non-partisan research organization. We are committed to promoting independent, non-partisan research in the areas of trade, macroeconomic, policy, poverty and growth. We are also committed to promoting greater understanding of the Bangladesh economy, its key policy challenges, domestically as well as in the rapidly integrating global marketplace; and trade policy issues are a primary focus of this institution. We have an international advisory panel of very distinguished economist of global repute; if you kindly visit our website you will see that.
We know that the US is committed to open trade; its average tariffs are only 2.5%, and few, if any, trade-related QRs esixt. The irony is that when it comes to labor-intensive imports, like textiles and leather goods from Bangladesh, its tariffs spike up to 15-30 percent, whereas imports from EU face tariffs of under 0.5%. As a cheap labor country, Bangladesh exports labor-intensive products at the low end of US garment market, and faces tariff peaks. Result? Low-income American consumers who are the major buyers of Bangladesh garments end up paying higher tariffs compared to high-income consumers. American economists from Nobel Laureate Paul Samuelson to Nobel Laureate Paul Krugman, have argued that nation's should specialize and export according to their comparative advantage. Bangladesh is doing just that and being penalized for it. Is it fair? Yes, tariff issues can be brought up at multilateral platforms, but we believe there is scope for engaging on this subject on a bilateral basis as well. If this can be done under a broad framework of understanding, it could produce results.
Mr. Yussuf Abdullah Haroon,
Ex-President, FBCCI
Our keynote speaker today is Mr. Michael J. Delaney as you've heard. A few words on his background. I believe this is his first visit to Bangladesh. Mr. Delaney was appointed Assistant US Trade Representative for South Asia in 2008 and in this position he is responsible for development of trade with the countries comprising South Asia; India, Afghanistan, Pakistan, Bangladesh, Bhutan ,Maldives, Nepal and Sri Lanka as well as Iraq. Several trade initiatives fall under his purview including the US proposal for creation of regional opportunity zones in Afghanistan and certain regions of Pakistan. Mr. Delaney is a commissioned senior diplomat with the US Department of State. Since entering the Foreign Service in 1982 much of his career has been devoted to development of US trade. He's served in various capacities in Portugal, Brazil, Korea, Finland and Australia. Immediately prior to his appointment at the USTR Mr. Delaney served as US Political Adviser to NATO's Southern Region Command Kandahar, Afghanistan. Without further ado I would like to request Mr. Delaney to please make his presentation.
Thank you.
Mr. Michael J. Delaney, Assistant US Trade Representative for South
and Central Asia
Dr.'s Ahsan Mansur, Zaidi Sattar and Yussuf Abdullah Harun of PRI. Ladies and gentlemen. Thank you very much for your warm welcome. Indeed I have been warmly welcomed at all my meetings during my time here in Dhaka. I am truly enjoying my experience of your famous Bangladeshi hospitality and again I am enjoying my visit here and it's been very informative.
I just had a meeting with the American Chambers of Commerce in Bangladesh. The dynamism of business here was amply demonstrated with the questions that were posed by Chamber members on our relationship. We discussed the proposed US-Bangladesh TIFA, a topic I would like to discuss further here at PRI, but before that I would like to start off by talking briefly about President Obama's trade policy priorities.
President Obama's trade agenda reflects our respect for entrepreneurship in market competition, our environment, opportunity for all and the rights of workers. It works to benefit American workers and their families along with increasing the wellbeing of those living in the poorest regions of the world. Our trade agenda seeks to do a number of things including support a rule based trading system; advance the social accountability and political transparency of trade policy; make trade and important policy tool for advancing progressing on national energy and environmental goals. And make sure the trade agreements are addressing the major unresolved issues that are responsible for trade frictions. We also want to build an existing free trade agreement and bilateral investment treaties in a responsible transparent manner; and finally we aim to uphold our commitment to be a strong partner to developing countries, especially the poorest developing countries. We believe that free and fair trade with a proper regard for social and environmental goals and appropriate political accountability will foster global wellbeing.
It is U.S commitment to developing countries that brings me to Bangladesh this week. I hope to make progress on initiatives that will expand US-Bangladesh trade and investment relations. One of these initiatives is our proposed Trade and Investment Agreement Framework (TIFA). TIFAs can yield many direct benefits; a US-Bangladesh TIFA would serve as a forum for government and business representatives from our two nations to discuss economic issues of mutual interest. Its objectives include improving cooperation and enhancing opportunities in trade and investment.
The U.S. has already signed TIFAs with more than 30 trading partners including Pakistan, Sri Lanka, Afghanistan, a grouping of Central Asian nations and ASEAN. We would like Bangladesh to be our next TIFA partner but I told the Foreign Minister ultimately the decision regarding that is up to you. We need a willing partner. I understand that this is somewhat a controversial issue here in Bangladesh. And that's all to the good. I believe the public debate on these issues are part of democracy and part of a democratic process. My own view is that we believe a TIFA is the best mechanism to advance our trade and investment relationship. It contains no legally binding commitments; it is a platform for dialogue.
I am here this week to exchange views on a range of trade and investment issues. The Commerce Minister and I had a very cordial, fairly comprehensive exchange of views and most issues we agreed and some issues we didn't agree. In every case it was a very productive exchange because we now have a much better understanding of each other's positions and that gives us what we need to move forward and find solutions to the outstanding issues that we need to address in order to expand our trade and investment relationship.
Right now the U.S. is Bangladesh's No.1 customer; if anything happens to that relationship I think you all would agree that it would not be a good thing for Bangladesh. We have no formal relationship for having any sort of dialogue on trade relationship and I personally think that is a deficiency that needs to be remedied. Our preferred solution is a TIFA again but the decision is up to the Government of Bangladesh.
Under the TIFA we will create a trade and investment council where representatives of our two governments meet at regular intervals --typically once a year-- to discuss issues of mutual interest. They would also consult with the private sector to ensure business interest from both countries that are represented. A TIFA would further enhance strong annual two-way trade between Bangladesh and the U.S. Trade between our nations amount to about 4.2 billion dollars last year. At a time when global trade was faltering, Bangladesh's apparel exports to the U.S. actually grew by 11 percent. We remain your single largest export market. The Commerce Minister and I had very productive talks yesterday regarding the TIFA, along with my colleagues at the US Embassy; we at the US Trade's Representatives Office look forward to further talks ultimately to signing an agreement with the Government of Bangladesh.
Another important issue I raised with Government of Bangladesh counterparts gets at the heart of President Obama's trade policy; that is workers' rights. The US Trade Representatives are currently reviewing Bangladesh's progress on labor issues following the submission of a petition by the U.S. Trade Union AFL-CIO to suspend Bangladesh's benefits under the Generalized System of Preferences (GSP).
Bangladesh has made real progress in addressing concerns outlined in the petition; particularly regarding child labor and the rights of workers in the export processing zones. We hope to see further progress on workers' rights in EPZ and the apparel sector in general. President Obama and US Trade Representative, Ron Kirk, firmly believe that adequate protection of the status, conditions and compensation for workers is a key component of a healthy global trading system. Bangladesh has demonstrated its resilience in the face of the global economic crisis. I am confident that Bangladesh will remain resilient even after it expands benefits for the workforce that is at the roots of its trade success. We are keen to resolve the outstanding GSP petition to guarantee Bangladesh the chance to expand its use of GSP benefits. By using GSP benefits more effectively Bangladesh can increase its exports to the United States almost immediately we believe. GSP also allows Bangladesh to export certain goods to the United States with low or no duties.
We frequently here request to provide Bangladesh with duty free access to the U.S. for ready-made garments. I wish as much energy was spent seeking ways to better utilize Bangladesh's GSP benefits in the U.S Market, despite the fact that Bangladesh could export 4800 different products with little or no duty under GSP. Bangladesh only exported 330 GSP eligible products to the U.S. in 2008. So there's 4800 GSP eligible products and Bangladesh exported 330 and those products represented 21.6 million dollars in exports which is a very small amount that works out to six-tenths of 1 percent of all Bangladesh exports to the U.S. that year. Now these numbers confirm that we have a reasonably large export volume from Bangladesh but it's actually in a narrow range of goods.
I'm sure you're thinking how many of those 4800 items does Bangladesh actually produce or could export?
Now we believe that there is considerable potential; there are many goods Bangladesh produces that could be exported to the U.S. under GSP. One of our favorite examples is porcelain or china. Under GSP Bangladesh can export the U.S. porcelain or china, table and kitchenware duty free, zero. Bangladesh already exports china to the U.S. but I would argue that given the strength of the porcelain sector, Bangladesh should actively seek new buyers for China and increase exports in this area. We believe this is one example of many where greater attention is needed. What's in GSP that could help Bangladesh to diversify its exports? GSP benefits focuses on products that are less successful in getting into the U.S. Market. We all know that it is in Bangladesh's interest to diversify its exports; the GSP program can help you to do that. I urge Bangladesh businessmen and policy makers to examine the list of goods that enjoy the GSP benefits and seek new U.S. Markets for Bangladesh's exports.
It is a time of great promise in the US-Bangladesh economic relationship; now is the time to deepen our already strong trade and investment relations.
I look forward to hearing your suggestions on how we can best do that and finally I greatly appreciate the Policy Research Institute's contribution for providing a forum on such an important discussion. Thank you very much.
Dr. Ahsan H. Mansur, Executive Director, PRI
Trade and Investment Framework Agreement
It is more than 7 years that Bangladesh and US governments have been discussing this issue. The draft agreement had gone through some changes during the BNP government and also during the caretaker government. The Caretaker government has rightly left it for the successor political government to deal with, in order to avoid controversy.
The most important element of TIFA is the provision of establishing a US-Bangladesh Council on Trade and Investment with representatives of both parties. Since US is one of the major sources of FDI, such a formal framework to discuss bilateral trade and investment issues will be very important for BD. Certainly, replacing the current ad-hoc case by case arrangement for bilateral consultation on trade and investment issues by a formal mechanism will be important for BD. He has mentioned two issues related to this provision in the draft agreement:
The participation in the proposed Council should include competent persons from the non-government sector as well and not only limited to officials of government entities (as stated in the 2005 draft TIFA agreement). Iceland TIC agreement allows for seeking such advice.
Another is that whether the clause referring to the establishment of "Joint Working Groups may meet concurrently or separately to facilitate its work" in the 2005 draft has been dropped in the revised draft. In Pakistan agreement (which is a more recent one) also there is no such provision.
Generally there are three critical issues about which concerns are expressed by the government, trade bodies, and concerned civil society representatives and media in BD. These are:
TIFA's emphasis on Intellectual Property Rights (IPR). This is probably the most contentious issue in the draft TIFA. As per the WTO, BD is insulated from the IPR (including Patent act) till 1916. Bangladesh pharmaceutical industry is rightly taking advantage of this provision and expanding its production and export base. If we have to follow the IPR now, BD has to incur huge expenses as big US companies license many of the patents. IT expenditure will also be increased to license software. The critical issue is:
Why cannot the proposed TIFA allow for protection of IPR benefits that BD gained under the much broader WTO arrangement?
Why the proposed TIFA for Bangladesh has to include IPR provision, while there is no such provision in the agreement with Iceland (signed January 2009)?
The second concern about the draft TIFA is, if Bangladesh agrees to the provisions relating to labor and environment, these would most likely be raised during the bilateral talks.
These issues are already being raised in different contexts, fairly and sometime unfairly. Bangladesh is seriously working on these issues and certainly significant gains have been made on the labor issue while more can be done and will be done. Besides, dealing with the labor issues in the context of the proposed Council would stop involvement of all other nongovernment parties like AFL -CIO or US corporations (like Wal-Mart etc.) on these matters. Or TIFA will simply serve as an additional instrument for exerting pressures on BD and not replace/substitute for those other pressure points.
Government and the civil society both are increasingly concerned about the environmental issues and more efforts by the government would be desirable. However, the problems are not going to be solved without concerted efforts and enforcement over a long time. While this issue is important it would not be desirable to use it as a potential nontariff barrier against Bangladeshi exports. How would you assure Bangladesh in this regard?
The other important issue is whether TIFA would serve as a tool for future negotiations on duty-free access of Bangladeshi textiles clothing to the US market. It would be useful to heed from the USATR whether such an expectation has any reasonable basis. There is no explicit commitment from the US side. However, some statement like what is mentioned in the Pakistan agreement (Point no. 17), that the "framework agreements may help prepare parties for eventual free trade agreement negotiations" or something like "duty-free access of textile products to each other's market" cannot be used in the TIFA agreement. This issue is certainly important for Bangladesh since unlike other exporting countries to the US market, Bangladesh's 90% export is textile products, which are subject to relatively high duty rates. The average duty rate on Bangladeshi exports to the USA is more than 15%, compared with the average duty rate of 0.3% for the exports from the EU 27 countries. The high duty on textile products certainly discriminates against Bangladesh, although this is not deliberate. It certainly undermines Bangladesh's efforts to grow out of poverty through trade. What the EU has given to a country like Bangladesh, why cannot the US give that as well?
Inflow of US FDI inflows into Bangladesh
US FDI Inflows have played a major role in many East Asian economies. However, in the case of Bangladesh the inflows have remained quite limited and generally going to only energy related projects. Most of the FDI has gone to development of gas and generation of electricity. The amount of investment has been quite modest, even compared with countries like Pakistan. Pakistan received more than one billion dollars in US FDIs in 2007/8, compared with only $40 million in Bangladesh.
l What would be your suggestion for Bangladesh regarding attracting more US FDI into the country in a broad range of fields beyond the energy sector?
Dr. M.A Taslim, CEO, Bangladesh Foreign
Trade Institute
Since TIFA document has still not been made public, it's difficult for me to comment on it, so I would rather comment on trade in general and investment.
The United States is the most important trading partner country of Bangladesh, the total bilateral trade in 2007 between Bangladesh and the United States was $ 4.3 billion of which 3.6 billion was exports from Bangladesh to the US and 0.6 billion was imports from the USA. What is less known among people of Bangladesh is that the US also happens to be the 2nd largest source of remittance---total remittance inflow was 1.4 billion dollars in 2007/08. And the USA was also the largest source of FDI in 2006 and 2nd largest source in some other years and it was the second largest bilateral contributor of foreign assistance. Now if you put them altogether, we get a number like 5.5 billion dollars that is actually added to the aggregate demand of Bangladesh. And 5.5 billion as a proportion of GDP is fairly a large number-----7 to 8%.
So, any disturbance to this relationship is going to affect Bangladesh fairly seriously. Well, even though we don't have any bilateral forum, we have at least one multilateral forum where we can discuss things; and it is the WTO. Diplomatically, we also can engage in discussion to solve any of those problems. Now although the US is the largest importing nation for Bangladesh, our export is extremely concentrated on a few items. RMG alone occupied 90.4% of total export to the USA. And if we include other textile exports like caps, vegetable fiber and woven fabrics its share increases to 94%!! This indicates we need immediate diversification of our exports.
Now, people in the developed countries, as Mr. Delaney himself, may have difficulty in understanding why we cannot diversify in those other 4800 products that we can produce. But this is precisely what LDC means-----why we have so much traffic jam? Why we don't have skilled labor? Why do we have so few industries? Why do we have so much poverty? That's why it is not really that easy for our producers to diversify into our industries and effectively compete against other countries.
It is apparent that President Obama is not that interested in trade as we have observed in his first State of the Union Address he did not even mention the word "trade" for once!
Now, I think we can cooperate on an investment arena. Despite the fact that the USA is one of the largest investors in Bangladesh, this investment goes mostly to extraction industries. But other industries and sectors need help too. We would be wondering if the US extends investment to other areas, such as in infrastructure development.
Mr. K.Z Islam, Managing Director, Nirman International
Trade and investment framework is a broad aspect for trade agreement; it is not binding on any party and anything objectionable can be removed. Adequate safeguard for effective protection, enforcement of the intellectual property rights (TRIPS) and workers right are the key issues to be raised under this framework. I don't understand why the signing should be held up? Why can't we sign this agreement immediately?
Dr. Mustafizur Rahman, Executive Director, Centre for Policy Dialogue
The experience of Sri Lanka- US TIFA is instructive. When Sri Lankan side was asked about an authorization of TRIPS loss to remove obligation of IPR, amending the competition policy in Sri Lanka, and liberalization of capital account of Sri Lanka. These issues are also raised in the forum of Bangladesh -US TIFA. Bangladesh also raises the issues for farm subsidy (14 billion US dollar) which impedes our market excess for our agricultural products. Everyone knows that Bangladesh will be subjected to changes in loss and US will do nothing in terms of reducing its farm subsidies. So, what will be the United States reaction on that?
Besides, there are number of derogation of the WTO and what will happen when discussion goes beyond our WTO commitments? So, will there be any provision over there that anything will be decided in this forum will not infringe upon what has been given to Bangladesh in multilateral forum like WTO?
Mr. Mahbubur Rahman, President, International Chambers of Commerce
Mr. Delaney asserted that every action related to the policy should be transparent and all stakeholders must be involved. In this case, transparency is almost nowhere and stakeholders are not a party. He also mentioned that USA has lost interest in the multilateral trade negotiation after Doha round of WTO. So, they are more concentrating on the bilateral trade negotiation than multilateral trade. Besides, the issue that is being raised by AFL -CIO is not very open and creating non tariff barriers. So, Bangladesh should be involved both in the FTA and TIFA.
l So, it is absolutely essential, stakeholders must be a party before we sign this framework agreement?
l If it is favorable for both these countries bilaterally, then this is a more advantageous position for both countries, so, why not we should sign? Similarly, the FTA, why not?
l Again, why the United States has been emphasizing more on the bilateral free trade agreement bypassing the multilateral trade agreement of WTO?
Mr. Abdul Hye Sarker, Chairman, Bangladesh Textiles Mills Association
He pointed out that Bangladesh has GSP facilities for 4800 items, out of which only 330items are exported in the US market. Actually, Bangladesh doesn't have much in USA other than apparel, seafood and another few items. Unless those items are including in the GSP, it cannot help much for Bangladesh. He made a question why USA suddenly seizes our facilities to help DFQF access in our garments?
Dr. ABM Mirza Azizul Islam,
Former Adviser, Ministry of
Finance and Planning
First: There are some global regimes such as International Labor Organization (ILO), Trade Related Aspects of Intellectual Property (TRIPS), and World Trade Organization (WTO). Some of the issues are already addressed in one of the global regimes. In that sense some investment issues are being addressed either under intellectual property or WTO and so on .So if you are going to have a TIFA, why don't you have a provision that this will not impose any obligation on Bangladesh beyond what is agreed upon in the global forum.
Second: I would like to point out that when you have a discussion about welfare or compensation of labor we have to think not merely of labor that is currently employed but also those who are waiting there outside for potential employment. The issue is that the greater the rate of compensation for currently employed workers, the inevitable economic reaction would be for the entrepreneurs to go for capital intensive ventures and to reduce the employment potential. So you are actually limiting the possibility of employment of those who are not currently employed by raising labor intensity. So there is every reason to think that when AFL CIO makes a complaint, their concern is more about the employment of American workers or in other words to limit the import of labor intensive goods into U.S. So I think the U.S. government needs to take a position as to what extent they should really be influenced by AFL CIO if they are really concerned about the welfare of the workers in least developed countries such as Bangladesh.
Third point: You have mentioned that there are lots of products under GSP which Bangladesh is not availing at all. Here the U.S. Govt. could encourage investors from U.S. to invest in Bangladesh in the products which Bangladesh is not currently availing of and it could also be in the form of joint ventures. Bangladesh is quiet liberal about 100% foreign direct investment. So US investors are most welcome to engage in manufacturing products which could avail of GSP facilities in the US. I might add that the US already has similar initiative under AGOA for the African countries. If US could give preferential access to African countries including African least developed countries it is not fair that Bangladesh should be deprived of exactly the same privilege.
Dr. M. Rahmatullah,
Transport Policy Adviser, Planning Commission
We observed that Bangladesh has been suffering very badly because of poor infrastructure as well as energy and power base. This is an area where you need to help us in developing our infrastructure so that we can do better in making our products more efficiently and with competitive cost. My question here is that-
"What are the prospective areas of US investment in Bangladesh"?
Mr. Farooq Ahamed, Secretary General, Metropolitan Chamber of Commerce and Industry
He mentioned the enforcement of workers right involving the child labor issue. He thought that child labor issue under TIFA agreement should be viewed moderating. He also said that Bangladesh is the most densely populated country in the world. In the recent report that has been submitted by the US Department of Labor, 13 sectors have been identified from Bangladesh where child labor is sizable and each of these sectors can be subdivided into three subsectors, namely formal sector, informal and micro level where most of the families are involved in family business.
Mr. Annisul Huq,
President FBCCI
On TIFA, we don't know what is in it, so we cannot comment much on it. We had a seminar in March this year on TIFA and the conclusion of the seminar was that "we need to know about TIFA further and a discussion with all the stakeholders would be needed before the government makes any decision on it". We request the Bangladesh authorities to inform the stakeholders.
Mr. Delaney confirmed that the US is interested in signing TIFA with Bangladesh. We will say, why not if it is beneficial for both the parties? It should be signed but we first need to discuss and thoroughly scrutinize it. Now, time is coming when multilateral umbrella is expanding every year, I mean the Doha round which is possibly going to be concluded next year or in 2011, where Bangladesh needs a big favor from the US. I think when we think of signing TIFA we expect a very good and cordial help from the US side.
Today the US textile industry is not that extensive as it was in 2004 when the quota was totally abolished. Now Bangladesh, I think, is totally marginalized being an LDC because we see other LDCs in Africa getting duty free benefits or access through AGOA agreement while Bangladesh is left out alone. Even we see that some special initiatives have been taken for Pakistan and Sri Lanka leaving Bangladesh outside from which they are getting advantage on 7 products which Bangladesh mostly produces and exports. Mr. Delaney was talking about GSP; I would like to say in this context that out of 6500 HS Codes 82.7% is duty free for Bangladesh. But what does Bangladesh produce other than textile? Shrimps, leather etc which are getting duty free access. But textile alone occupies 85-88% of our total exports to the USA. Therefore if only the US gives us any facility or advantage in textile then we can really say that the US is giving us a big benefit.
We have seen in the Hong Kong ministerial and Geneva discussions, whenever the US favors something it normally gets priority. So, we request on behalf of the business community and labor force and industries of the country to the US to give us a favor. Our Minister went to Africa last week to the LDCs ministerial conference, but since most of the African countries are united we don't think the conference is giving us the right indication of getting this facility.
Finally, I would like to say that we are not against TIFA as such; all we need prior to signing it is a sound understanding of what is in there and an internal discussion with the stakeholders and a complete confirmation and support from the US side that Bangladesh will not be marginalized among LDCs in the pretext of AGOA. Alternatively, Bangladesh needs to be included in one platform among LDCs. We have put forward many alternatives to be included in the text of the next ministerial and we hope and expect a very strong support from the USA on these issues.
Barrister Harun Ur Rashid
Former Ambassador to the UN Mission, Geneva
Any agreement between unequal powers raises many concerns and suspicions about intentions and objectives. In the instant case, TIFA is a framework proposed by the super power, US to a Least Developed Country (LDC), such as Bangladesh. Naturally, many concerns were raised in the country. Moreover the country that provides the draft to another has inherently built their optimum interests in it and has more advantages than the one which merely proposes amendments to it.
Some say that although word "Trade" occurs in the TIFA title, it seems the US has given more emphasis on services sector and has not taken into consideration Bangladesh being a LDC that enables Bangladesh to get Bangladeshi goods duty-free access to the US market as the US has allowed African and Caribbean LDCs. Bangladesh should not be put into a disadvantegeous position in signing the TIFA by denying a longer period of time for meeting commitments under the WTO as LDCs."
ASM Mainuddin Monem,
Deputy Managing Director, Abdul Monem Ltd
My understanding is that TIFA is a framework agreement within which there can be formal discussions between the two parties to help improve the climate for investment. However, what has come out in these discussions is that much depends on the negotiating abilities of the contracting parties.
There are several issues to be negotiated; and there are concerns in Bangladesh about labor rights and IPR. Bangladesh feels it will lose out on these two counts, if it signs TIFA. But US envoy says that it is non-binding and only a platform for further discussions. I feel the atmosphere is clouded by a lack of clarity on contentious issues which need to be fully explained to the private sector stakeholders.
Mr. Michael J. Delaney
I'd just like to make a few comments. Mr. Mustafizur Rahman invoked US-Sri Lanka TIFA in a negative way, but I don't. I spend a lot of my time as Assistant USTR negotiating with the countries in my portfolio and most of the time it's done under the auspices of TIFA arrangements. We used our TIFA to organize an investment mission out to the east, precisely Trincomali, where the LTTE was until recently. The TIFA arrangement was on the request of Sri Lankan government, they are desperately trying to get the economy stand up in this liberated area, trying to generate employment as a means of fostering national reconciliation.
On workers' rights
Workers' right, the whole issue of labor is a very important part of our trade policy. This is a huge part of what America is all about. When you talk to the USA, let me be very frank about this, when you are gonna talk to the USA we are always gonna talk about liberty, we are always gonna talk about freedom and protection of the individual. That's what we are all about. There is one thing I want to impress on you all today; we make no apologies for that. That is what we are about. And , by the way, we are very proud of the fact that we have played an important role in advancing the welfare of the workers of Bangladesh, we provide substantial monetary assistance in doing this and we intend to continue doing that. In the future hopefully we can expand that.
On the Intellectual Property Rights (TRIPS)
On intellectual property rights, TIFA is not legally binding. Things like TRIPS are legally binding. Therefore, TRIPS would trump any TIFA, that's implicit. If you want language to make it explicit, recognizing legal rights etc. in these various agreements, we won't have any problem on that.
On FDI
We talked a lot about FDI, how to invest, how to increase US investment in Bangladesh. This is an excellent topic for a TIFA meeting. That's what we exactly would like to do with the TIFA meetings. Let's sit down and figure out, we need more energy companies come here to invest. Let's sit down and work that out. What is the way to make that happen? Let's have a meeting, let's have a dialogue; it's really hard to do that without a dialogue.
Conclusion
I personally think that TIFA is the way to go and we need it. And I personally don't think it's a good idea to have such a big and important relationship without some kind of formal basis for discussion. It's true we could simply ring up the Foreign Minister and say, hay let's have a discussion next week and the Foreign Minister is gonna ring me up. We could stroll into the WTO. Since it is a multilateral forum, it would be difficult to discuss strictly bilateral issues. I think we need something like TIFA and we have this with dozens of countries. Here is a suggestion, why not you call up Trade Minister G. L. Peiris , ask him how he feels about TIFA; ask other ministers of existing TIFA countries. Has your experience been positive or negative? Do you think this is a good idea or bad idea? Do that with Afghanistan. Ring up Minister Nematullah Shahrani. Ring up Commerce Secretery Suleman Ghani of Pakistan. Ask all these peoples and see what happens. Take a survey and let that guide your decision. That might be the best way to proceed.
Mr. Yussuf Abdullah Haroon, Ex-President, FBCCI
I would like to emphasize the importance of a formal basis or framework for any agreement and taking advantage of opening that to foster economic growth. A lot of investments are needed to reach the GDP growth target of 8 to 10 percent within 2013. To take these investments, it is essential for favorable environment and proper negotiation at the WTO levels and bilateral level. In WTO, a country gets what it negotiates, not what it deserves. There is not much room for emotional appeal in WTO and that's why Bangladesh has serious deficit in terms of negotiating capacity. So, we have to build up capacity and really look at the issues very closely. Six years have gone by yet up to now; our government has not had a single discussion with the stakeholders in a meaningful way. So, in terms of our development, concerns can be accumulated in our discussion with the United States and if we are late again, Bangladesh will resume the story of unfulfilled promises.
Mr. Moazzem Hossain,
Editor, The Financial Express
I strongly believe that the points made are worthy of consideration for further consolidating and strengthening bilateral relationship between these two countries in a win-win situation. Investments that are particularly facilitated by the opening of new opportunities in areas of trade can be a strong catalyst. The dynamics of trade does indeed provide the momentum to help expand the horizon for producing new economic activities with investments energizing the process thereof and a conducive environment both domestic and external is vitally important to facilitate expansion of trade and to attract investments. Bangladesh looks forward to support a policy for unhindered market access of its products and also for creating new opportunities for export diversification. However, it is equally important for us to stay competitive to trade with the rest of the world as well as attract investments from within and outside for better economic performance. Here, the high cost of doing business is a matter that will have to be dealt with in earnest.