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Saturday 23.06.2018 | Name days: Līga

U.S. may strip Bangladesh of tariff breaks

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Author: REUTERS/SCANPIX

The Obama administration may strip Bangladesh of import breaks following deadly accidents in the country’s textile industry, another sign of the pressure building on the southeast Asian nation to improve labor conditions.

Business, labor and advocacy groups are all struggling over how to respond to the April 24 incident — the worst-ever in the textile industry but an event that could produce meaningful change in a nation on its way to becoming the world’s largest garment exporter.

A group of mostly European nations has signed on to a binding inspection program. U.S. firms such as Wal-Mart have declined, but political backlash may be building. On Thursday, a group of senators wrote to major U.S. retailers urging them to reconsider, and the Obama administration is also debating how to get American firms more constructively engaged, Washington Post reported.

U.S. officials said the decision was made last fall to begin pressuring Bangladesh for improvement in its labor conditions, and the process intensified after the recent incidents.

Requests by labor groups to exclude Bangladesh from tariff breaks have been pending for several years, but USTR said in documents published in the federal register that “the lack of progress by the government of Bangladesh in addressing worker rights issues . . . warrants consideration of possible withdrawal” of benefits.

That has gotten the government’s attention. A delegation of top Bangladeshi officials is in Washington this week lobbying to retain the tariff breaks and to convince U.S. leaders in USTR.

The textile industry, historically, has been prone to problems. It is a sector that thrives on cheap labor and can easily decamp from one country to the next as buyers at such major firms as Target or Spain’s Zara chain seek the lowest-cost suppliers.

The expiration in 2005 of a worldwide quota system, in which developed nations like the United States limited how much in textiles they would import, touched off a global explosion of investment in such places as Bangladesh, a densely populated nation with a per capita income of around $2,000 annually. The country now relies on garment exports for about a fifth of its annual economic output. Complexes with hundreds of warehouse textile shops have sprung up under lax oversight, and a consortium of textile factory owners has developed into a potent political force.

In documents submitted to the USTR, the Bangladeshi government acknowledged its inability to cope, saying the expansion of the textile industry “has outstripped the pace of our progress” in strengthening regulation.

The tariff breaks in question allow Bangladesh to export a wide variety of goods to the United States tax-free; last year that amounted to about $35 million. The breaks do not apply directly to Bangladesh’s textile industry, which sells in excess of $4.5 billion of goods to the United States each year. But analysts say excluding Bangladesh from the Generalized System of Preferences, a nearly 40-year-old program meant to encourage manufacturing in poor countries, would send one of the sharpest signals available — short of cutting off trade altogether or increasing tariffs directly on textiles.

Advocacy groups generally argue against those stark measures, on the grounds that the brunt of the pain falls on workers left jobless by the disruption in trade.

The plight of workers in Bangladesh has long been a concern — starting with child labor revelations in the 1990s and through the more recent spate of fires and industrial accidents — said Raymond C. Offenheiser, president of Oxfam America and a former Ford Foundation representative in Bangladesh. But for all the problems, the textile industry has also drawn millions of young women into the labor force, allowed them to send money home to village families and has probably delayed childbearing and marriage from the early teens — a dramatic cultural shift in the predominantly Muslim nation.

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