The American Apparel and Footwear Association (AAFA) will urge the Obama administration to reinstate trade benefits for Bangladesh, as the country is an important sourcing destination for American customers.
“We will try to propose USTR [United States Trade Representative] to withdraw the GSP suspension on Bangladesh next year, if the GSP scheme is renewed again,” Nate Herman, vice president (international trade) of AAFA, told The Daily Star in an interview in Dhaka on Monday.
AAFA is the highest trade body for apparel and footwear traders in the US, representing more than 1,000 retailers and brands in the $361 billion US retail sales market.
Herman was in Dhaka to attend the Apparel Summit, which was organised by Bangladesh Garment Manufacturers and Exporters Association, as a discussant.
“Once GSP is revived for Bangladesh, we will try to include leather goods, backpacks, luggage, wallets and smartphone covers that originate here,” he said. “This will be our first step next year so that Bangladesh is benefited.”
AAFA tried to include Bangladesh's garment items in the generalised system of preferences (GSP) scheme for the last five years, but failed, he said.
The trade privilege has remained suspended for all beneficial countries since July 31 last year. After the Rana Plaza building collapse, the USTR, the chief trade negotiation body for the US, suspended the scheme for Bangladesh, citing serious shortcomings in labour rights and workplace safety in June last year.
Since suspension, Bangladesh has been lobbying the US government to reinstate the trade benefit by improving workplace safety and labour rights, following the 16-point action plan provided by the Obama administration.
“Garment items from no country enjoy the GSP privilege. So, Bangladesh is no exception,” Herman said.
Since Bangladesh does not enjoy a zero-duty benefit on exports of apparel, it needs to pay a 15.61 percent duty -- one of the highest rates on the export of garment items to the US market.
First enacted in 1974, GSP eliminates import duties for American firms on certain products from nearly 130 developing countries. American companies have been losing $2 million a day -- over $850 million so far -- since the benefit was suspended last year.
Before suspension of the scheme, Bangladesh used to export 0.54 percent of total exports to the US, or around $26 million a year, under the trade privilege. Continuation of the scheme is important for the country's image.
Herman also agreed that the 15.61 percent duty is high compared to other competing countries in the US market. The trade relationship between the two countries is stable and exports from Bangladesh to the US are expected to grow, although there was a slight fall in apparel exports in recent months, he added.
“The US retailers are following a wait and see policy on purchasing goods from Bangladesh as the action plan is still being implemented here,” Herman said.
“The US retailers are still observing progress on implementation of the action plan. This is the main reason for the slight fall in recent exports.”
He said the bigger US buyers are strongly committed to staying in Bangladesh.
The US is the single largest garment export destination for Bangladesh: 23 percent of garments worth $5.5 billion reach American markets a year.
“I think the situation is improving. Everything is going in the right direction in Bangladesh. But the progress should be sustainable so that disasters do not occur again.”
He said the Bangladesh government should continue workplace safety activities even after the departure of the Accord and Alliance, who will leave by the end of 2018, so that no-one can question the safety and security issues of the workers.
On the target to export apparel worth $50 billion by the end of 2021, Herman said: “I think the target is achievable. It depends on the sustainability of the progress made in the sector in the last two years under the action plan.”
After the Rana Plaza tragedy, a section of customers in the US reacted to worker safety issues in Bangladesh. “But now, people are coming back to purchase more Bangladeshi items.”
Herman said the prices of Bangladeshi garment items exported to the US increased by 20 percent in the last four years, although the price level was stagnant for the decade leading to 2010.
He said garment exports from Bangladesh to the US will continue to grow, but it is hard to predict how much it will grow in the next 10 years, as so many US buyers are sourcing from here.
“I cannot really predict how much exports will grow. People in the US have been looking to get out of China. China's apparel market share in the US is declining and Vietnam's share is growing,” he said.
Herman made three suggestions to take exports forward: continued progress in reform efforts, improving productivity and ensuring workplace safety.