Bangladesh requires a clear strategy for GSP+

This February, Bangladesh received the endorsement of the US Committee for Development Policy (UNCDP) regarding its final timeline for exiting minimal Developed Countries (LDCs) group. Bangladesh is currently scheduled to keep the LDC category in 2026.

As we keep the group, Bangladesh will miss out on the LDC -specific choices and privileges afforded by its international development partners. The most certain and significant damage will be duty-free and quota-free (DFQF) market gain access to for the country's export things.

This is a predicament that Bangladesh exporters will be watching most closely. The EU (along with the huge UK) market currently makes up about about 62 percent of outfits exports and nearly 56 percent of most exports from Bangladesh. Losing these huge trading rewards overnight represents a significant risk for Bangladesh's export competitiveness. Logically, addressing DFQF loss-related fallouts-specifically in the EU market-must be considered a core pillar of Bangladesh's LDC graduation (transition) strategy.

In 2015, the EU initiated a preferential market scheme for (non-LDC) Low-Income Countries (LICs) and Low-Middle-Income Countries (LMICs), titled "Special Incentive Arrangement for Sustainable Advancement and Good Governance", often called GSP+. Under this scheme, the EU offers zero duty market access up to 66 percent of tariff lines to the eligible countries, like Bangladesh.

But, curiously, out of a complete of potentially eligible 71 LICs and LMICs, presently only eight enjoy benefits under GSP+, with Pakistan and Sri Lanka being the simply countries from South Asia.

So, the question is: how is Bangladesh on the point of gain access to the EU's GSP+ benefits? It becomes even more critical given previously rising problems that Bangladesh would continue steadily to enjoy the EBA (Everything But Arms)-the special set up for LDCs, providing them with duty-free, quota-free access for all goods except arms and ammunition-till 2029. But, the reality is: the EU is definitely advancing on a fresh GSP+ Policy by 2023, which might not exactly produce our EBA continuation automatic.

Bangladesh must fulfil countless requirements to access the already existing GSP+ scheme: a beneficiary country has to satisfy a good vulnerability criterion. This means, an exporting country's benefit of the very best seven major products should be more than 75 percent of its total GSP-covered exports. Quite simply, high product focus is considered to be a sign of the exporting country's "vulnerable economy".


Presently, that figure for Bangladesh is just about 96 percent of our total exports to the EU. So, Bangladesh has already been eligible for the scheme, at least on one count.

The other eligibility condition pertains to the "import share criterion". This implies, the exporting country's show in the EU's total import beneath the scheme should not be a lot more than 7.4 percent. This limit offers been imposed to curb the dominance of "large suppliers" among the beneficiary countries.

On that criterion, Bangladesh is indeed a major supplier of clothing and other goods in the EU market, as the relevant physique is as high as 26 percent. So, unless the allowed show is significantly elevated or the denominator of the worried variable is favourably transformed, Bangladesh will not be qualified to receive GSP+. Of program, Bangladesh could try to negotiate replacement of the criterion with an altogether fresh one.

Beneath the existing EBA, LDCs are granted preferential "Rules of Origin" (RoO) permitting "single transformation". But, desire eligibility beneath the GSP+ scheme needs "dual transformation" of the exported things. In other words, in post-graduation lifestyle, if we are to get DFQF marketplace access, Bangladesh has to first convert fibres into materials and then fabric to apparels. While this is very demanding and has important implications for product competitiveness, surely we have to analysis the ongoing structural alterations inside our apparel and textile market.

Beyond the difficult complex issues, now there is another group of complex (and similarly important) issues concerning the recommendations of "sustainable creation" and "good governance". These circumstances are collectively known as the "sustainability requirements". Social and environmental considerations will probably become much larger.

We can not sit pretty. We must act, from nowadays, to handle the emerging scenario and possible consequences. A few of the key actions will include the following.

The government and all the industry trade bodies should collate and process credible info to argue the "vulnerability criteria" and "import share criteria", if we plan to pursue the GSP+ pathway.

The Bangladesh apparel sector has slowly but surely strengthened its backward linkage industries. Up to 80 percent of our exportable knitwear will be undergoing double transformation, although it is around 50 percent for woven garments. If Bangladesh opts to meet up GSP+ eligibility, we should immediately draft and progressively put into practice a "strategic business strategy" in the textiles sector to covers the "shortfall" in the area of backward (as well as forward) linkage industries,

The RoO of GSP+ also offers alternative opportunities for meeting certain requirements of twice transformation. One option supplies the exporting countries the chance to make use of "regional cumulation" of RoO of its products. One such provision permits imports from South Asian countries (including India) to profile in the calculation of the double transformation. Although India is probably the two predominant suppliers of textiles and apparel-related inputs, Bangladesh till right now has justifiably prevented this option in the curiosity of growing our domestic textile industries. We need to decide to what extent we'd wish to go for this and invoke this program that is potentially available for accessing GSP Plus.

The regional cumulation provision may also be executed by accounting for imports from countries with which the EU has Free Trade Agreements (FTA). Two Asian countries-Vietnam and South Korea, that have FTAs with the EU-happen to be relevant for Bangladesh. The question we then have to look at is the extent to which Bangladesh's exports will stay price-competitive through the use of South Korean inputs. Meanwhile, sourcing from Vietnam will come to be quite complicated because they already have proven themselves as a main competitor of Bangladesh in global outfits market.

The government and the industry stakeholders may also have to have a clear strategy about how our making industries would accomplish other related global commitments-to ensure clean energy, carbon neutrality, waste operations, robust climate actions vis-à-vis the emerging EU Green Deal, Circular Economy frameworks, etc.

Last but not minimal, Bangladesh can weigh the option of a great FTA with the EU to have everlasting duty-free access. Surely, a bilateral FTA with the EU would witness "trade-offs" on aspects/issues much more political than just tariff. This is a tedious, so-far-uncharted walk that requires difficult trade-offs between domestic sectors/sectors. Presented the rudimentary understanding and preparedness in your government and organization on bilateral FTAs to time, I am not sure at which stage Bangladesh may opt for negotiating an FTA with the EU.

All of these can hardly wait for another rainy day. Period is normally ripe for the government and our organization and industry to discover eye to eye and get started talks, at least internally.