EU trade privilege hinges on human rights record
Bangladesh will have to meet the European Union's new criteria on human rights to retain its duty-free market access to the bloc as the EU looks to increase accountability and fight impunity, said a top diplomat.
The EU is scheduled to assess the trade privilege in light of the human rights situation after the bloc became more cautious about it.
"As a major beneficiary of the EBA (Everything but Arms), Bangladesh will have to comply with the new criteria on the human rights to enjoy the benefit on exports," said Rensje Teerink, head of the EU Delegation to Bangladesh.
Some 61 per cent of Bangladesh's exports are destined for the EU.
Garment export, which accounts for about 85 per cent of the national sales abroad, rose from $12.49 billion in fiscal 2009-10 to $27.95 billion in 2019-20, according to a recent study by the Bangladesh Garment Manufacturers and Exporters Association.
Of the total export, more than 90 per cent are apparel items and 96.4 per cent goods are covered by the GSP scheme.
On December 7, the European Council adopted a decision and a regulation establishing a global human rights sanctions regime.
This will allow the EU to target individuals, entities and bodies – including state and non-state actors – responsible for, involved in or associated with serious human rights violations and abuses worldwide, no matter where they occurred.
"The new regime enables us to impose sanctions regardless of where human rights violations and abuses occur…," said Josep Borrell, high representative of the EU for foreign affairs and security policy and vice-president of the European Commission.
"…without having to create new, country-specific sanctions regimes as we had to do until now. This means we have new tools to increase accountability and fight impunity," he said in a blog.
The EU can also respond to human rights violations by suspending development aid or withdrawing EBA trade preferences, Borrell said.
"So, Bangladesh needs to protect the EBA facility by complying with the new conditions of human rights," Teerink said in an exclusive interview with The Daily Star recently.
"The Director-General Trade and DG Employment of the EU have been closely monitoring the human rights situation in Bangladesh to be assessed for the next eligibility."
The new condition on human rights has been communicated with the ministries of commerce, labour and employment and foreign affairs, she said.
Retaining the trade privilege in the EU is important for Bangladesh because the current economic growth of the country happened significantly riding on the bloc's generous trade benefit over the last five decades.
Once the country graduates to a developing nation from the least-developed country (LDC) grouping in 2024, Bangladesh will face a lot of competition from other countries in the EU, and there is a possibility of losing the market share due to erosion in preference, the envoy said.
"It is very difficult to say exactly how much Bangladesh would be affected due to graduation," Teerink said, adding that the EU would remain a major market for Bangladesh even after the graduation.
After the expiry of the current EBA, obtaining the GSP Plus status to the EU by Bangladesh would also be very difficult because of a strong export base of the country to the EU.
For instance, the minimum threshold of import value by the bloc from a GSP eligible country should be less than 7.4 per cent of the total imports from all beneficiary countries during the last three consecutive years on an average. Bangladesh's share was 24.4 per cent in 2018.
In fact, Bangladesh is the biggest beneficiary of the GSP among all LDCs and is alone utilising 67 per cent of the trade preferential treatment because of higher shipment of apparel items.
In order to qualify for the GSP Plus, a country must meet some criteria.
First, a potential country must be considered vulnerable, according to a document of the European Commission on the EU's GSP.
A vulnerable country refers to a nation which is not classified by the World Bank as a high-income or upper-middle income country for three consecutive years.
Also, a country must have ratified 27 core international conventions in the fields of human and labour rights, the environment and good governance.
The GSP Plus is a special incentive arrangement for sustainable development and good governance. It slashes tariffs to zero for vulnerable low and lower-middle-income countries.
Bangladesh has ratified almost all major conventions except for a fundamental convention of the International Labour Organisation's Minimum Age Convention.
In major progress, Bangladesh has amended the labour law, bringing down the threshold of the consent of workers required for the formation of trade unions to 20 per cent from 30 per cent.
"I think that is a good and commendable threshold, but it is not enough," Teerink said, adding that the threshold would not be able to ensure the freedom of association of workers.
To retain the EBA, Bangladesh needs to follow the labour roadmap recommended by International Labour Organization (ILO).
"The EBA is a such a gift that is quota-free and duty-free access to a country, we have to be sure certain basic human rights and labour are respected while products enter the European Union markets," Teerink said.
"That is why we have this EBA engagement to see where is Bangladesh on trade."
If certain basic principles are not respected, there would be unfair competition, she said.
There will be an important meeting about the improvement on labour rights this year.
She said there was no doubt that Bangladesh has been progressing economically despite the fallouts of the Covid-19 fallouts.
"We are incredibly proud as Bangladesh is going forward to be graduated to be a developing country."
She praised the government's efforts to roll out the stimulus packages for industries.
Bangladesh's economy needs to be diversified, and at this moment, it is very much dependent on the ready-made garment industry.
"I hope the government will address it in its Eighth Five-Year Plan," Teerink said.
The ease of doing business is an important area to improve the business climate in the country, according to the diplomat.
Bangladesh, along with other LDCs, has been pushing for an extension of the current GSP status for 10 more years because of the fallouts of Covid-19.
However, she said she was not much aware of the EU's position in this regard.
Many local trade experts have suggested signing a free trade agreement (FTA) with the EU.
Responding to this, Teerink said, "At this moment, this is not in the discussion of the DG Trade. Maybe in future, the FTA issue might be discussed."
The issues of responsible business behaviour by retailers and brands of the EU and the low-price issue of garment items of Bangladesh will be discussed in the next meeting of Sustainability Compact, which was signed between Bangladesh and the bloc in 2013 after the Rana Plaza building collapse.
"Very crucial due diligence issues will be discussed in the meeting as many Bangladeshi garment suppliers have been affected by unusual deferral payments by EU retailers and brands during the pandemic," she added.