Prospects brighten for GSP Plus as EU changes rules
Bangladesh's prospects of keeping exporting to the European Union duty-free have brightened as the bloc has proposed to update rules to allow a growing number of graduating LDCs to qualify for the preferential trade benefit.
A least-developed country's share in the EU's total import can't be more than 7.4 per cent to qualify for the duty-free export facility under the region's Generalised Scheme of Preferences (GSP).
But on September 22, the European Commission, the executive branch of the EU, dropped the threshold in the proposed new GSP scheme.
On its website, the EC said the GSP scheme was now being updated to improve its overall efficiency and effectiveness to respond to future challenges for beneficiary countries.
The review also aims to facilitate access to the GSP Plus arrangement for the growing number of LDCs graduating from the Everything But Arms (EBA) facility.
Bangladesh is set to graduate from the grouping of the LDCs in 2026. The government has been lobbying for the GSP Plus status to retain the duty benefit.
The country is the largest exporter to the bloc among the LDCs and has already crossed the threshold, which stands at 26 per cent. The threshold has emerged as a major barrier in obtaining the GSP Plus status after the LDC graduation.
The EU is the largest export destination for Bangladesh.
Currently, 58 per cent of the total export and 64 per cent of total garment items in particular of the country is destined to the EU.
The new proposal will be final when adopted by the European Parliament and the EC. Adoption could take place in the last quarter of 2022. The new GSP regulation is expected to enter into force on January 1, 2024, according to the website of the EC.
The current scheme expires by the end of 2023.
The new scheme for the LDCs and developing countries will run for 10 years from 2024 to 2034.
Speaking about the new GSP proposal on September 22, Valdis Dombrovskis, executive vice-president and commissioner for trade of the EC, said: "Now, we want to build on the success of the GSP scheme and take it further."
"There is no need to overhaul the scheme, as we did 10 years ago. But we will do some fine-tuning to respond better to the changing needs and challenges of beneficiary countries – and to bring the scheme closer in line with our trade sustainability principles."
"Today's proposal aims to reinforce the scheme's social, environmental and climate aspects, reduce poverty and increase export opportunities for developing countries."
The GSP Plus is a special incentive arrangement for sustainable development and good governance that slashes tariffs to zero for the same tariff lines as in the case of Standard GSP, which is extended to the low and lower-middle income countries.
Local apparel exporters are hopeful that Bangladesh will be able to obtain the GSP Plus status.
"Obtaining the GSP Plus status will not be difficult if the EU finally adopts the proposed rules without the threshold criteria," said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association.
The EU will continue the same trade benefit for Bangladesh even after graduation for three more years to 2029 as the trade bloc has granted the grace period to help the country make the transition smoothly.
Moreover, the UN may also allow the continuation of duty benefit to the LDCs for 12 more years. The LDCs, including Bangladesh, have been lobbying with various other countries and the international community for the extension.
A decision about the extension may come at the 12th Ministerial Conference of the World Trade Organisation in Switzerland between November 30 and December 3.
"We are hopeful either of the two," said Hassan while speaking at a media briefing at the Westin Hotel in Dhaka yesterday.
Hassan also said Bangladesh was well ahead in fulfilling the conditions of 32 international conventions that had to be met to avail of the GSP Plus.
For instance, Bangladesh has the highest number of Leadership in Energy and Environmental Design (LEED) green factory buildings certified by the United States Green Building Council (USGBC).
Of the top 10 LEED-certified garment buildings, nine are in Bangladesh, and of the top 100 such structures, 40 are in the country. Another 500 garment factories are waiting to be certified by the USGBC.
Hassan said Bangladesh was receiving an increased volume of work orders from international retailers and brands as demand rose thanks to the reopening of the global economies following several months of lockdowns.
The price of the exported apparel items has also increased a bit, he said.
Despite the price hike of the garment items, the export value of the items to the US markets declined by 8.04 per cent between August last year and July this year because of the impact of Covid-19 on the global apparel supply chain.
Hassan suggested garment exporters calculate the price of garment items and the cost of production carefully to avoid losses.