Revamp efforts to secure market access, seek more American investment

Any major trade benefit on the export of goods bound for the US from Bangladesh with the changeover in power is unlikely as Washington rarely alters tariff structures on the import of apparel items.

However, the power shift may open the door for Dhaka to step up its efforts to secure preferential market access and investment from the US, according to experts and industry leaders.

Their comments came as American voters chose Democrat Joe Biden as the 46th president of the US.

Of the total shipment to the US from Bangladesh, nearly 95 per cent includes the apparels. But the US government has never cut the import duty on apparels and the garment has remained excluded in the list of the items that have been granted the Generalised System of Preferences (GSP).

The GSP status for Bangladesh has remained suspended since June 2013 after the nation's deadliest industrial incident Rana Plaza building collapse in April 2013 that left 1,138 workers dead and more than 2,500 workers injured.

The current tenure of the US GSP scheme is coming to an end next month and unless the Congress renews the preferential trade scheme, Bangladesh would have little possibility of gaining any extra benefit with the shift of power in the US, the south Asian country's single largest export destination.

Currently, 120 developing countries and territories are GSP beneficiaries, according to the US GSP Review Book.

In 2018, products valued at $23.8 billion entered the US duty-free under the programme, out of $238.4 billion worth of total imports from GSP-eligible countries. The US imports from all countries amounted to $2.6 trillion in the year.

Bangladesh's apparel exporters face 15.62 per cent tariff, one of the highest, in the US markets. The rate is far lower for countries like China and Vietnam.

Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said Bangladesh might not get any major benefit on the export of garment items to the US because the tariff on the imports is fixed on the most-favoured-nation basis.

Rather, the new Democrat government might impose more stringent conditions on labour and compliance issues practised in Bangladesh.

"Historically, the democrats are always more careful about global human rights, labour rights and compliances in industries compared to the Republicans."

Bangladesh may seek US investment. The Trump Administration has some reservations on foreign investment by American companies.

"Bangladesh can lobby with US companies to attract investment from major American conglomerates as the Democrat governments are liberal on foreign investment," Rahman said.

Furthermore, Bangladesh can seek supports from the Biden administration at various multilateral forums like the World Trade Organisation for the extension of the Trade-Related Aspects of Intellectual Property Rights so that the country's pharmaceuticals industry benefits.

So far, the US government has allowed duty-free benefit on apparel imports only to some African countries under the African Growth and Opportunity Act (AGOA).

However, the beneficiary nations are failing to fulfil the expectation on the garment export to the US as they are not strong in apparel manufacturing and do not have adequate facilities to produce clothing items as per the demand of American customers.

AK Azad, managing director of Ha-Meem Group, a top local garment exporter, said there might not be any extra benefit due to the change in the administration in the US.

Of his total garment shipment, 90 per cent are destined to the US. Some of his clients include GAP, American Eagle, JC Penney, Abercrombie and Fitch and VF Asia.

However, if the Biden administration maintains the same policy on China as enforced by the Trump administration, Bangladesh might benefit from shifting of work orders from China, Azad said.

Before the Covid-19, local garment manufacturers were receiving work orders moving away from China, but the pandemic stopped the shift.

"A lot of major US retailers and brands had contacted me to source more garment items. The pandemic put a halt on their plans. I hope they will revive their plans once the pandemic is over."

During the fifth round of meeting under the Trade and Investment Forum Agreement (Ticfa) in August, Bangladesh sought more American investment in potential sectors like the pharmaceutical. The issue of reinstating the GSP for certain Bangladeshi products was also raised.

Before the country's GSP status was suspended, Bangladesh shipped products worth $24 million to the US under the preferential trade treatment.

As much as 97 per cent of the goods of Bangladesh-origin had enjoyed the duty-free access to the US markets as a least developed country. The country's main export item, garment, was not included in the package.

Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, said: "We can't predict trade based on the shift of the US administration.

"We also have to consider the dynamics of the US economy which is going through a slowdown at this moment and how the second wave of the Covid-19 unfolds in the US."

There may be some shifts in the trade policy between Trump regime and the upcoming Biden administration which may reshape the US trade relationship with China and Vietnam, she said. 

"To be more specific, lifting off the punitive tariff imposed by the US on China and reopening of the Trans-Pacific Partnership (TPP) discussions would certainly not be favourable for Bangladesh."

"Yet, the dynamics of China's competitiveness in apparel items and the capacity of Vietnam vis-à-vis Bangladesh in the products that we manufacture tilt [the balance] to our favour somewhat."

In contrast, Huq said, the power shift may equally open the door for Bangladesh to revamp its efforts and lobby in the US for market access since it has been making so much of progress in the area of sustainability.