Pakistan's gain of GSP Plus status from the EU authorities will not hurt Bangladesh's exports to the EU because of the diversified products Bangladesh has, a study found.
The European parliament last year approved the Single Delegated Act under which 10 countries, including Pakistan, were allowed into the generalised system of preferences plus (GSP Plus) scheme.
The decision of the EU, the main export destination of Bangladesh, came into effect from January 1 this year.
Pakistan was awarded the GSP plus status despite being a developing country due to a massive flood which killed several hundred people and damaged huge crop lands in 2010.
It was feared that Bangladesh will lose a large chunk of its EU market share due to Pakistan's gain on GSP facility as both are strong competitors in the EU apparel market.
Bangladesh has been enjoying duty- and quota-free status to the EU since the inception of the trade privilege by the EU in 1971.
Bangladesh will not suffer any major impact on its EU garment exports in spite of Pakistan's GSP Plus status, Mostafa Abid Khan, director of Bangladesh Foreign Trade Institute (BFTI), said in his research paper: Revised GSP scheme of the EU: implications for Bangladesh.
Abid presented his paper at a seminar organised by the BFTI at Cirdap auditorium in Dhaka yesterday. Pakistan's export to the EU is likely to increase by $1 billion a year, however, majority of the increase will be from trade creation, he said in the paper.
There is also a possibility of trade diversion from China, India, Bangladesh and Turkey as well, due to allotment of zero-duty benefit for 75 specified Pakistani products exported to the EU, he said.
However, trade diversion effect for all countries, including Bangladesh, is statistically insignificant, he said.
Trade diversion from Bangladesh may take place in t-shirts, jerseys, pullovers, cardigans, waistcoats and other men's or boys' suits of cotton, women or girls' suits, bedding material of cotton and artificial fibre.
“The tragedies in the garment sector exposed the weakness of Bangladesh. But the compliance issues in the Bangladesh improved radically this year compared to previous years,” Frederic Maduraud, minister counsellor of EUD Bangladesh, said at the seminar.
He said this year the workers of Tuba Group were paid with proceeds from sale of the group-owner's land, and the garment makers managed a good amount of fund for paying the workers.
Still, Bangladesh needs to improve a lot to fulfil the conditions agreed in the Sustainability Compact, signed between Bangladesh and the EU involving the International Labour Organisation in Geneva in July 8 last year, he said.
“EU wants to remain engaged with Bangladesh. But, Bangladesh needs to improve workplace safety.”
“After the inspection of almost all garment factories in Bangladesh, less than 2 percent were found vulnerable, which indicates that Bangladesh is a safe place for garment business,” said Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association, the garment makers' apex platform.
Mustafizur Rahman, executive director of the Centre for Policy Dialogue, suggested export diversification to the EU market, as Bangladesh has the potential to export of other products to the same market.
Bangladesh could export bicycles to the EU market that is worth $1 billion annually, said Zillul Hye Razi, EU trade adviser.
“We cannot amend the rules of the EU, but we can change us so that we can enjoy the duty benefits,” said Mashiur Rahman, the prime minister's economic affairs adviser.
People thought that Bangladesh will lose its garment business after the elimination of multifibre arrangement in January 1, 2005, but that did not happen, Rahman said.
Rather export from Bangladesh has been increasing since then, he said.