BD basic garment risks taking a hit as India, EU move closer to FTA

Bangladesh's garment industry risks taking a battering if India and the European Union sign free trade agreement, insiders have feared.

They say the government should facilitate establishment of textiles and backward linkage industry to stave off the possible negative impact associated with the FTA.  

The negotiations on the FTA under which New Delhi might get zero tariff access is likely to resume anytime soon, which is expected be concluded by end of this year or early next year, sources at the foreign ministry said.

The EU provides duty free access to Bangladesh and Pakistan under its 'every thing but arms' programme while Indian products are subject to payment of about 12 per cent duty.

"If India gets the duty-free access for the readymade garment products, it will have a huge negative impact on our exports," former president of BGMEA, Shafiul Islam Mohiuddin told the FE.

Bangladesh might lose competitiveness in basic garment products like T-shirt and home textiles, he said, adding: "No doubt it will be a challenge for us and it will put lots of pressure on us."

The trade preferences will lead to production boom for basic garment and home textiles in India, which produces cotton, yarn and fabric, he added.

He said the government should facilitate establishment of backward linkage industry and textiles to make the local garment industry self-reliant.

Abdus Salam Murshedy, a leading garment manufacturer and also president of Exporters Association of Bangladesh, said Bangladesh might lose competitiveness in basic garment products like T-shirt and home textiles--the major items of local export.

He said availability of raw materials in the Indian domestic market has already given New Delhi an edge over Dhaka.

"We must ensure that the backward linkage industries and investors in these sectors get all necessary support, which can help entrepreneurs expand existing units and set up new factories."  

A trade expert seeking anonymity said being a third party, it would be very difficult for Bangladesh to prevent the EU from offering duty-free access to India.

"But through diplomatic channel, we can always express our concern to the EU and pursue them informally that if it offers trade preferences to India, Bangladesh's garment exports are sure to take hit."

He said some least-developed countries pursued developed nations, including the US not to allow duty-free access to Bangladeshi products in their market.

"So we also can do the same," he added.

"They (LDCs) made a compelling case, which resulted in getting African countries duty-free access to the US market. But our exports are subject to an average of 15 per cent duty in the US market," he explained.

Dhaka should beef up diplomatic efforts to make the EU understand the FTA would hit the apparel industry hard, which employs over four million workers, mostly women.

When contacted, commerce secretary Mahbub Ahmed told the FE: "We are aware of the possible free trade area between India and EU and we have already commissioned a study on analysing the impact of the FTA on Bangladesh. I can make comments only after I get the report.