The suspension of duty-free access to the United States will dent the image of Bangladesh more than its exports, business leaders and analysts said yesterday.
It might intensify campaigns against Bangladesh over labour standards and influence the EU to take a tougher stance on the continuation of trade privileges for the nation.
They expressed these views as the US decided to suspend the Generalised System Preferences (GSP), a scheme that allows Bangladesh to export nearly 5,000 products duty-free to the US.
"It is very unfortunate for us and an overreaction on the part of the US," said Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association.
"We thought the US would maintain GSP facility by attaching some conditions," he said. "This is a strong message. The decision will impact Bangladesh's image negatively."
"We are trying our best to improve labour conditions. But it is not possible to do anything overnight," said Atiqul, mentioning that Bangladesh is now working on amending the labour law to execute the Better Work Programme of the International Labour Organisation (ILO).
He, however, said RMG exports to the US might not be affected as they are not covered by GSP.
But garment items are included in the GSP benefit guaranteed by the European Union, which provides nearly half of Bangladesh's annual exports earnings at $24 billion.
"It [suspension] will create a bad reputation globally that labour standards are poor in our country, although it is not always the case," said Fazlul Hoque, president of Bangladesh Employers Federation.
He said the suspension might not have an immediate effect on business.  "But there is risk of effect on business in the mid and long terms," he warned, noting that the decision might intensify campaigns against Bangladesh by its competitors in other countries.
"Intensified propaganda on Bangladesh's poor labour standards may force buyers to curtail orders from here," said Fazlul, a former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
"And if the EU starts talking about the matter, that will be worrying," he said, "We should be very careful, active and take effective steps to improve our image in labour standards."
The EU also warned of withdrawing GSP after the Rana Plaza building collapse that claimed 1,129 lives on April 24.
"It [suspension] will have a ripple effect on other countries, especially those under the European Union," said Ahsan H Mansur, executive director of Policy Research Institute (PRI).
"Other countries may also feel the urgency to look into compliance with the issues of labour rights, compensation and workers' safety in factories. That will be the real effect on exports."
Toufiq Ali, former ambassador of Bangladesh to the World Trade Organisation, said a few selected exporters who are currently enjoying the GSP facilities might be affected by the suspension.
On impact on exports to the EU, he said: "The EU has a generous policy towards Bangladesh."
After the collapse of Rana plaza building, the major EU importers engaged with BGMEA to find a solution for the future, he added.
Khondaker Golam Moazzem, additional director, research, of the Centre for Policy Dialogue (CPD), said non-traditional products' exports, which benefited through GSP facility, might slow because of increased competition.
"Unless exporters explore alternative markets for their products, expansion of their industries will be adversely affected."
Moazzem also said garments buyers or brands of the US might be under pressure from retailers and consumers for sourcing apparels from Bangladesh.
But brands might need to depend on Bangladesh at least for mass-scale basic products because of the competitiveness of Bangladesh's clothing sector in terms of price, quality and capacity to handle bulk scale production orders, he said.
He also said the US decision may have adverse implications in the context of RMG export to other major markets. The EU, which has so far maintained a “moderate strong stand”, may take a tougher stand after the US decision.
"However, Bangladesh will get some space to work on improving the compliance standard, which might cause less adverse impact in case of exports to other markets."