|
Trade facilitation under new GSP regime
Shahiduzzaman Khan
2/16/2006
After the debacle at the Hong Kong Ministerial, Bangladesh has, in fact, two options that remain wide open. First, it should make all-out efforts to retain the generalised system of preference (GSP) facilities for its export products. Secondly, the country should pursue the World Trade Organisation (WTO) to implement Mode-4 that allows temporary movement of natural persons.
A report published in the FE this week suggested that as a follow-up of the Hong Kong Ministerial, country's commerce minister held two meetings this week that discussed market access, product diversification and services negotiation under Mode-4.
The country has, indeed, rightfully started identifying products in an effort to keep those in the duty-free list of 97 per cent tariff lines as decided in the Hong Kong meet. A priority list of products will also be developed to gradually bring them out of the 3.0 per cent sensitive list. A few countries, including the USA, kept this option open to protect their domestic industries or for other political and economic reasons. At the same time, Bangladesh will push the countries providing GSP facilities not to put items in the sensitive list.
The commerce minister held threadbare discussions with the leaders of trade bodies, academics, trade experts, economists and officials trying to set a working programme on the issues. This programme is scheduled to be submitted to the WTO for further scrutiny. The government will form a high-level committee to evaluate the list of products and other strategies and finalise them before the next WTO meeting.
Currently, Bangladesh gets GSP facilities from the European Union (EU), Canada, the USA, Japan, Australia, New Zealand and Norway. Bangladesh exports over 90 per cent of its major export items that include woven garments, knitwear, frozen food and footwear and leather goods to the GSP-providing countries.
In an earlier development, the US government put on hold the process of withdrawing GSP facilities for Bangladesh, as the condition for allowing trade union activities in the export processing zones (EPZs) has been met. The decision to retract the notice about withdrawal of the GSP was taken in view of the implementation of EPZ Labour Union and Industrial Relations Act 2004 by Bangladesh.
After the end of the quota system in 2005, Bangladesh and other least-developed countries (LDCs) are very much dependent on GSP facilities to survive. Currently, Bangladesh is exporting a large quantity of goods to the US, the EU and other developed countries without export duties under the terms of the GSP facilities. If the country loses the GSP facilities due to their misuse, it would have to face a difficult situation. Export volumes would fall and many industries might face closure.
Of late, there are allegations that a number of exporters are also involved in the misuse of GSP facilities granted in the form of duty-free export to some developed countries including the US and the EU. The Ministry of Commerce in an investigation recently said that a few companies were involved in exporting the products of some 'third countries' to the EU nations using GSP facilities. Such third countries, including some developing countries from Asia, are not allowed to enjoy GSP facilities.
The inquiry into such allegations was deemed necessary after the EU complained that some 'third country' goods were exported to European states through Bangladesh by misuse of GSP facilities. Such incidents are highly regrettable.
Meanwhile, Bangladesh Ambassador to the European Commission (EC) urged the EU for evolving a separate GSP for the LDCs of the world. A time has now come when the case of LDCs must be viewed differently from those of the advanced developing countries, he said.
Reports say the EU is working on a new regime of GSP to be effective for ten years from 2006. This may not be adequate at all. In the past GSP has not functioned very well in offering preferential access for the LDCs. Until today, Bangladesh could not utilise more than 49 per cent of the GSP facilities. The rate is much worse for many LDCs. The problem with the present scheme of GSP must be analysed before a new GSP is formulated.
With the country's apparel and textile producers being at loggerheads over the modalities of new GSP, the government is yet to determine its stance on the trade facilities to be offered by the 25-member bloc. If the Commerce Ministry takes a hasty decision on the 'sensitive' issue, it may create new rift between the local apparel exporters and the textile producers.
The new GSP that allows imports of everything but arms to the EU market from 49 LDCs was due to come into force from July last year. But it has been deferred until January 01, 2006 because of the sharp spat among some member countries of the Brussels-based organisation.
Currently, Bangladesh receives the GSP facilities for its apparel products and that the country is allowed a two-stage transformation -- yarn to fabrics and fabrics to outfits -- to qualify the upcoming scheme. The current GSP, in place since 1995, applies to imports from developing countries that pay duty on entering the EU market, and that are not already duty-free under the Most Favoured Nation (MFN) deals.
In order to take advantage of the new GSP facilities, well-articulated strategies need to be taken by the government. A repeat of the Hong Kong debacle will bring disaster for the country. There is also the need to improve Bangladesh's negotiating strategies so that the country could include all its export items into the 97 per cent product categories that allowed duty-free and quota-free market access of LDC goods.
There is no room for the 'rhetorics' ahead of any meaningful dialogue at the WTO. A team of experts should be sent to the negotiating table. It should be headed by a seasoned trade specialist, not a 'lofty talker' being all sound and fury signifying nothing as was the case with Bangladesh at the Hong Kong Ministerial.
|