New rules 'catastrophic' for garment industry, knitwear makers warn

Local knitwear exporters yesterday attacked plans to change the rules governing duty-free access to the European Union, claiming it would have a 'Sidr' like effect on the local industry.
"After three or four years the impact of the change will be like that of a Sidr for the knitwear industry of the country," said Fazlul Hoque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), alluding to the recent cyclone, at a press briefing.
Under present rules garments made in least developed countries (LDCs) are given duty-free access to the EU if those are produced using local cloth or yarn. However, under new EU proposals this rule will be replaced by a condition that 30 percent of the products value be added locally. This will allow garment manufacturers to use cloth or yarn from abroad and still gain duty-free access.
Fazlul said the proposals would be a 'catastrophe' because they would undermine the backward integration of the industry in Bangladesh, in which a thriving yarn and cloth sector supply the garment producers.
The EU proposal would not be viable for the Bangladeshi knitwear sector as it would encourage dumping by China, India and Pakistan who would export cheap cloth and yarn, he added.
He also warned that it would encourage China to set up at least 300 factories in Cambodia within next two years to take the opportunity of duty-free access.
Already Chinese investors are running 296 factories in Cambodia to bypass EU and US restrictions on readymade garment exports from China, he said.
"We think the main objective of giving duty-free access to the LDCs for maintaining 'sustainable development' by those countries will be greatly hampered by the imposition of a 30 percent value addition criteria," the BKMEA president said.
The BKMEA will write to the EU to put forward its views and will seek a meeting with top EU officials in Brussels.
The BKMEA views echoed those expressed by the leaders of Bangladesh Textile Mills Association who on Monday said the condition demanding the use of local yarns and cloth for duty-free access should be retained for at least five years.
However the BKMEA attacked the yarn producers for increasing prices and monopolising the local market.
The BKMEA also said if the EU insisted on using the value added criteria, it should be increased to 45 percent of each items value. This would make it harder for garment manufacturers to use imported cloth and yarn and still qualify for duty-free access.