Published in The Observer on Wednesday, 2 September 2015.
Now think of TPP-A nightmare to exports
Haradhan Ganguly
A debate on a highly talked-about issue GSP (Generalised system of preferences) is turning to be confusing due to two opposite statements by two high-ups. One from Prime Minister’s International Affairs Adviser Gowher Rizvi, to whom politics had no bearing on the US government’s decision to leave out Bangladesh from the list of 122 nations for which interest President Barack Obama has re-authorised GSP until 2017. Rizvi’s comment is in stark contrast to Commerce Minister Tofail Ahmed’s that the US did not give GSP back to Bangladesh for reasons other than the 16-point action plan. Bangladesh fulfilled all the 16 conditions in the action plan laid out by the United States (Daily Star 25 August 2015). Rizvi’s view echoed the same that of Marcia Stephens Bloom Bernicat, the US ambassador to Bangladesh.
Such discord on a critical issue like GSP from high-ups of the government is unceasing of course. But we know realisation of compliance, so to say, extent of ensuring workers’ life securities will have to be made more to the tune of our standard in line with our economic, social and environmental capabilities, if not be harmful to our competitiveness. Mind you, cost of production of Bangladeshi garments has already been high comparing to those of others. So Tofail Ahmed’s stance depicts what the reality is.
But GSP is run down by TPP—the Trans-Pacific Partnership. It is a proposed trade agreement between several Pacific Rim countries concerning a variety of matters of economic policy. Among other things the TPP seeks to lower trade barriers, such as tariffs, establish a common framework for intellectual property, enforce standards for labour law and environmental law and establish investor-state settlement mechanism.
On June 3, 2005, TPP was drafted, and was signed by 12 countries on 18 July, 2005 in New Zealand. These 12 countries came in fold in phases. They are USA, Canada, Australia, New Zealand, Japan, Brunei, Chile, Malaysia, Mexico, Peru, Singapore and Vietnam. They are controlling altogether 40 per cent of the world economy. TPP is said to operationalised from 2015.
Noted feature of TPP is that it is still a secret pact. The text of the treaty has not been made public. Wikileaks just leaked out several documents in 2013. A number of global health professionals, internet freedom activists, environmentalists, labour organisations, advocacy groups and civil societies in the negotiating countries have criticised and protested the treaty because of its secrecy and controversial clauses. Even in the USA criticism and controversy have sprung up. To the concerned world people, implementation of TPP is one of the primary goals of the trade agenda of the Obama administration. To them this secret agreement is meant for enhancing corporate interests of the USA. In the face of rising criticism President Obama assured to open TPP through internet very soon.
Why is Bangladesh worried about the implementation of TPP? The equation is very simple. Vietnam is second to China in apparel exports in the US markets. If TPP is implemented Vietnam will have access to the US markets with zero duty. In that process Bangladesh will lose its total competitiveness to Vietnam. Since Bangladesh will have to export in US market with 16.5 per cent duty which Vietnam is also doing as of today. Statistics shows Vietnam’s apparel export to the US increased 12-13 per cent till today. With implementation of TPP the trade will exceed 28 billion dollars. Within 2020 Vietnam desires to enhance its exports including apparels to the US markets to the extent of 50.57 billion dollars. In 2014 the total export to US was eight thousand 178 crore dollars out of which China’s volume was two thousand 979 crore dollars. Vietnam’s position was third with 926 crore dollars and fourth was Bangladesh and Indonesia. With the implementation of TPP, Bangladesh, with a heavy 16.5 per cent duty, will definitely lose competition to Vietnam in apparel export.
Of our total export, garments occupy 78 per cent. Of this 60 per cent goes to Europe and 25 per cent to the US. Only 61.3 per cent of our export enjoys GSP. Now with allowing Vietnam with zero tariff our apparel in the US markets would get totally messed up.
The Centre for Policy Dialogue finds in an exercise on TPP effect on our exports to the US as competitor against Vietnam that it exports knit and woven products much like Bangladesh. While Bangladesh exported USD 2,628 million worth of its top 10 RMG products to the US during July-March of FY2015, Vietnam exported USD 2,753 million worth of the same products to that country. Currently Bangladesh and Vietnam face the same rate of US customs duty for these products (between 7.6 and 16.5 per cent). The realisation of TPP and its offer to Vietnam a duty-free access to the US market will increase Vietnam’s share of the world apparel export market from four per cent to 11 per cent by 2024, while Bangladesh’s market share may only increase from 5-7 per cent. If TPP is not realised, Bangladesh and Vietnam essentially stand neck and neck, with each country predicted to have an eight per cent market share in 2024. The challenge before Bangladesh is whether the country will be able to position itself strongly as a potential apparel-exporting-source in view of China plus one strategy adopted by the major buyers.
Experts view that only to resist China in the US markets TPP was resorted. The Guardian writes still China is unparallel in exports of steel and garments in the US markets. To reign in China, the US’ forming of alignment and zero tariff is one of the missiles. Behind all, geopolitical mapping is secretly active.
Disastrous effect of TPP has created a new anxiety among all concerned. How to cope with situation created in utterly uneven competitiveness with Vietnam has become a matter of concern to Mr Tofael Ahmed. Vietnam will be enjoying zero tariff by the grace of the USA, Bangladesh will be leftover with 16.5 per cent tariff. The President of the Federation of Bangladesh Chambers of Commerce and Industry Abdul Matlub Ahmad says don’t cry for GSP. Think for TPP now. The Central body of apparel exporters forsook election. To fight with TPP effect they are going to form a new central body by selection so that appropriate personalities for negotiation could come in talks. Commerce Ministry could set up a cell with persons with excellence over the system of rules of origin, antidumping and counter-veiling, preference erosion and labour standard etc. Bureaucratisation of that proposed cell would not bring any result.
Haradhan Ganguly, a retired Professor, is secretary of United Nations Association of Bangladesh-UNAB