How serious is it for Bangladesh's RMG export?

Zillul Hye Razi | Published: Tuesday, 29 August 2017 | Updated: September 06, 2017 14:45:37

Export of 'Made in Bangladesh'-tagged garment items to the European Union (EU) or its duty-free access under a relaxed rule of origin unilaterally given by the EU through GSP for the LDCs may be facing risk of a temporary suspension. The apprehension of such an action by the EU started first with the inclusion of a Special Paragraph in ILO's report on Bangladesh in June 2016.
The ILO report concluded that certain provisions of Bangladesh Labour Act (BLA 2006, amended in 2013) and the EPZ laws on workers' rights to association and collective bargaining are not compatible with ILO standards. The apprehension of the Technical Status Report of Sustainability Compact published in 2016 has also expressed serious concern regarding the same issue raised in the ILO Report. The series of meetings of Bangladesh authorities, all in 2017, with the EU under Compact Forum, EU-Bangladesh Joint Commission and with the visiting Members of the European Parliament in Dhaka reiterated the position of the EU, which essentially warned that continuation of GSP would be conditional to the improvements of workers' rights in Bangladesh.
European Commission, the executive organ of the EU and with competence on trade issues in its entirety, cautioned Bangladesh by sending two letters in a few months' time to remind of the stake in GSP. The letters even a put a deadline for Bangladesh to act on the recommendations provided earlier by the ILO on the BLA and the EPZ laws. Bangladesh is expected to share its version of the changes included in the BLA and EPZ laws as recommended by the ILO by the end of this month. The outcome or the reaction of EU or ILO on this latest legal step of Bangladesh is unlikely to be known before the end of the summer break in Europe. The international trade unions associated with the ILO's Committee of Experts as well as with the EU officials dealing with Compact, such as the ITUC, are also waiting to analyse in details the new version done by Bangladesh.
The EU has been the single largest export destination for Bangladesh's RMG industry. During the fiscal year 2014-15, a total of US$ 15.36 billion worth of garment products were exported to the 27-nation EU block and the figure grew to an amount of $17.75 billion during the fiscal year 2016-17 when the annual export was $28 billion. It proves the importance of the EU to the country's RMG products' business. Therefore, the issue of GSP scheme provided by the EU, which is the major reason for the growth of garments export to the region, needs to draw the highest level of priority.
Areas of ILO and EU's concern
The Special Paragraph inserted in the International Labour Committee Report of June 2016, noted with 'deep concern that the government has failed to make progress on the repeated and consistent conclusions of this committee despite the substantial technical assistance and financial resources provided by donor countries.' It is interesting to note the frustrating tone over the government's previous assurances made to the ILO. ILO's broad areas of concerns are:
* Issues related to the freedom of association and collective bargaining in the Labour Act, 2013, particularly the unresolved 'priorities identified by social partners'.
* Full freedom of association in the EPZs, including the ability to form employers' and workers' organisations of their own choosing, and to allow workers' organisations to associate with the workers' organisations outside the EPZs.'
* To act urgently on the anti-union activities, reinstatement of illegally-dismissed workers and enforce disciplinary/legal actions against the people who committed violence against the workers.
* Expeditious registration of trade unions with easier legal procedures.
ILO opinion is important for Bangladesh: Bangladesh has committed to resolving all the issues raised by the ILO in the Special Paragraph during its last meeting with the ILO a few months ago. This is a serious matter as singling out Bangladesh in the ILO's parlance of 'special paragraph' is considered as inclusion in the 'black list'. The 'special paragraph' or the issues flagged there get more relevance for Bangladesh as the EU's preferential access under the GSP, commonly known as the EBA, depend on adherence to certain UN and ILO Conventions.
Just to refresh the scenario faced by Bangladesh - EU law says the EBA may be withdrawn temporarily, in respect of all or of certain products, if there is evidence of 'serious and systematic violation of principles laid down in the conventions listed'. Among the 15 Conventions listed (Official Journal of EU, L303, 2012), the most relevant ones for Bangladesh are ILO conventions 87 and 98. These two Conventions are related to the rights of association and collective bargaining. Bangladesh is one of the signatories to these two Conventions, among others, mentioned there since the independence of the country. The EU also entrusts the ILO as the monitoring body for compliance of these two Conventions, in the GSP as well as in Compact.
The European Parliament, Compact and the international trade unions are linked: The European Commission's Technical Status Report on Bangladesh Sustainability Compact (July 2016) expressed almost similar concerns like the ILO on the slow progress of several issues. Acknowledging the tangible improvements achieved on building and occupational safety, the report pointed out gaps in the areas of workers' rights. This report used more information sources (including ITUC and Human Rights Watch) than that of the ILO. The most important message the Report stated under Commitment 1a (Amendments to the Bangladesh Labour Law) - 'While the BLA of 2006 as amended in 2013 includes several improvements, it does not address the longstanding concerns expressed by stakeholders and the ILO with regards to ILO Conventions 87 and 98 on Freedom of Association and Collective Bargaining. Further amendments to the law are therefore needed to bring it into conformity with fundamental labour rights'. Citing examples, the report mentioned the 30 per cent minimum membership required to form trade unions and the extension of the freedom of association and collective bargaining to the workers in the EPZs.
The pressure from international trade unions and the European Parliament is unlikely to go away from reviewing Bangladesh's status as a recipient of GSP for the LDCs. Some of them believe that initiation of the GSP investigation in Bangladesh will compel the country to act on the protracted concerns over the workers' rights. It may be mentioned here that GSP for the LDCs for decades did not attach any strict condition linked to the rights of the workers, which were meant for GSP+ only. It was the insistence of the MEPs to link rights issues (15 UN/ILO Conventions for all 3 GSP system of EU) and facilitated the changes made in the GSP Regulations declared in the year 2012. Bangladesh is now under searchlight of the ILO, Compact partners and MEPs with regard to its handling of labour rights. It is unlikely that any of these partners will be happy merely with futuristic assurances from Bangladesh like before. They surely understand the complexity of the ground reality in speeding up the reforms. Nevertheless, they expect sizeable efforts to ensure real change is sustained over the course of long term in Bangladesh.
The way out: Is the apprehension over EU's suspension of GSP real? Bangladesh earlier came close to such a possibility during 1997-98. The EPB had to cancel about 27,000 GSP certificates it 'wrongly' issued over three years to avert the crisis. The suspension could have been imposed that time under the GSP Regulation on Administrative Cooperation. Therefore, the immediate challenge is to prevent any investigation into adherence to the GSP conditions put forth by the EU. That can be done only through bringing amendments to the BLA and EPZ Act following the ILO guidelines.
If there is a temporary suspension of GSP by the EU, it will deprive importers of buying Bangladeshi clothing duty-free and RMG producers will also miss the relaxed rules of origin they have been enjoying in woven items since 2011. The suspension, in the worst case scenario, may also apply to other export items of Bangladesh, or simply for exports from the EPZs, as spelled out in the GSP Regulation. The nervousness of the European buyers is very evident from the letter written by the Brussels-based European Foreign Trade Association (FTA) to the Prime Minister of Bangladesh in July this year, urging to cooperate with EU and ILO to retain the GSP. The letter mentioned that 'uncertainty has been rising among European apparel companies that are chalking out their future sourcing strategy at present.' We surely hope that all the stakeholders in the RMG sector will seriously take note of the message.
The author is a former Trade Advisor in the EU Delegation to Bangladesh. hye.razi@gmail.com