The debate currently going around on whether Bangladesh has complied with ILO core labour standards to gain back US GSP (whatever little it means in real value for Bangladesh) is misdirected. The matters and issues which should be discussed in respect of Bangladesh’s trade and economic relations with the United States are as follows:
1. Whether imposition of trade restrictive measures on ILO (International Labour Organisation) core labour standards is actionable under WTO (World Trade Organisation) and TICFA (Trade and Investment Cooperation Forum Agreement) obligations?
2. Out of the three instruments GSP, WTO-DFQFMA (duty-free quota-free market access) and BFTA (Bilateral Free Trade Agreement), which one is the best and prudent option for Bangladesh to strengthen and deepen its trade and economic relations with the USA? 3. Various US and WTO documents are to be examined and analysed to determine the specific course of action for Bangladesh in order to promote mutually beneficial and sustainable trade and economic relations with the USA within the limits of WTO and TICFA obligations.
WTO RULES: All preferential trade agreements among two or more WTO members must comply with the conditions laid down in the respective sets of rules to obtain the preference, defined by the guiding principle of non-discrimination in Article I of GATT (General Agreement on Tariffs and Trade), Article II of GATS (General Agreement on Trade in Services), and elsewhere. They all must comply with all other provisions of GATT 1994 and WTO Agreements and Instruments as prescribed in the WTO Appellate Body Report of WT/DS246 of 2004 between India and EU (with US, Japan and Australia joining as interested parties).
TRADE RESTRICTIVE MEASURES ON CORE LABOUR STANDARDS: Imposition of trade restrictive measures on core labour standards constitutes a violation of mandatory WTO obligations. All WTO member countries are committed to uphold four fundamental internationally recognised ILO “core” standards: 1. freedom of association, 2. no forced labour, 3. no child labour, and 4. no discrimination at work (including gender discrimination).
The debate whether trade actions could be used to impose labour standards, or whether this would simply be viewed as an excuse for protectionism has been hard-fought at the WTO. Some developed countries (US, EU and others) proposed to introduce new WTO rules and disciplines that would provide a powerful incentive for member nations to improve workplace conditions and “international coherence”. On the other hand, many developing countries, including Bangladesh, pointed out that the issue has no place in the WTO framework. They argued that the campaign to bring labour issues into the WTO is actually a bid by industrial nations to undermine the comparative advantage of low-wage trading partners. These nations argued that efforts to bring labour standards into the arena of multilateral trade negotiations are little more than a smokescreen for protectionism. At the 1996 WTO Singapore Ministerial Conference, members defined WTO’s role on this issue, identifying the International Labour Organisation (ILO) as the competent body to negotiate labour standards. The relevant paragraph (paragraph 4) reads, “We renew our commitment to the observance of internationally recognised core labour standards. The International Labour Organisation (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalisation contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO secretariats will continue their existing collaboration.” The 2001 Doha Ministerial Conference (Paragraph 8 of Doha Declaration) reaffirmed the Singapore Declaration on core labour standards: “We reaffirm our declaration made at the Singapore Ministerial Conference regarding internationally recognised core labour standards. We take note of work under way in the International Labour Organisation (ILO) on the social dimension of globalisation.”
ABOUT GSP IN WTO: The Generalised System of Preferences (GSP) came into existence under a 1971 ten-year waiver on GATT Article 1.1 MFN clause (equal treatment to all members), made permanent in 1979 through the GATT “enabling clause” that authorises all GSP programmes to operate under its provisions as interpreted by the WTO Appellate Body (India-EU-GSP Dispute: WT/DS246) and also to comply with WTO obligations including the decision on ILO core labour standards adopted under Paragraphs 4 and 8 of the WTO Singapore and Doha Ministerial Decelerations respectably. The US Congressional Research Service Report (Link: www.crs.gov RL33663) on Generalised System of Preferences (GSP) for Members and Committees of Congress, submitted on January 13, 2013, mentions the following:
Page 28: “Although the GSP is a unilateral and non-reciprocal tariff preference, any changes to the programme would need to be considered in light of the requirements of the WTO Enabling Clause, as it has been interpreted by the WTO Appellate Body.”
Page 4: “Among other things, the clause further provides, at 3(c), that any differential and more favourable treatment provided under the clause “shall in the case of such treatment accorded by developed contracting parties to developing countries be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries.” It is pertinent to have a look at the WTO Enabling Clause. Section 3(c) of the Enabling Clause states that any differential and more favourable treatment provided under the Clause “shall … be designed and, if necessary, modified to respond positively to the development, financial and trade needs of developing countries.” US Congressman Sander Levin echoed the same spirit when he, during his visit to Bangladesh, said: “The US understands that the GSP facility should be responded in a positive way, and not in negative way” In this context, the WTO Appellate Body report on India-EU-GSP Dispute is also highly relevant. Para 164 of the report says: “Paragraph 3(c) [of the Enabling Clause] mandates that the response provided to the needs of developing countries be ‘positive’.” Positive is defined as “consisting in or characterised by constructive action or attitudes”. This suggests that the response of a preference-granting country must be taken with a view to improving the development, financial or trade situation of a beneficiary country, based on the particular need at issue…”
US SUSPENSION OF GSP FOR BANGLADESH: The USA, resorting to trade restrictive measures, suspended GSP for Bangladesh on June 27, 2013 “because it [Bangladesh] has not taken or is not taking steps to afford internationally recognised worker rights to workers in the country.” In reaction to the US action, Dr Supachai Panitchpakdi, secretary-general for United Nations Conference on Trade and Development (UNCTAD) asserted that: “The decisions of the United States and the European Union to demand implementation of controversial labour standards in Bangladesh following an industrial tragedy that killed more than 1,100 people … pose a serious threat to the rule-based global trading system.” He further said, “Labour rights and standards are something very sensitive to all developing and least developed countries at the World Trade Organisation, and when countries try to impose labour standards they are just distracting from the WTO’s authority. It is unfair to punish countries outside of WTO by threatening denial of market access.” It need not be further clarified that the US suspension of GSP for Bangladesh is in gross violation of mandatory obligations of the WTO and the decisions on ILO core labour standards adopted in WTO Ministerial conferences held in Singapore in 1996 and Doha in 1996 and 2001.
PROPOSED BANGLADESH AGENDA ON US-GSP and DFQFMA: United States, the prime importer of the world, has not only denied Bangladesh DFQFMA as prescribed under the WTO but also excluded Bangladesh from its GSP scheme re-introduced from June 27, 2015 designating almost all the developing countries as GSP beneficiaries. The longstanding issue of non-fulfilment of the DFQF market access provision by the US has further aggravated the market access difficulties for Bangladesh. It should be noted here that the prospect of obtaining DFQF market access for Bangladesh under WTO appears quite remote and the issue is becoming increasingly redundant because of proliferation of regional and bilateral trade agreements in all strategic combinations. Bangladesh, the only country with no bilateral free trade partners anywhere, has therefore no other option but to enter into BFTAs (Bilateral Free Trade Agreement) for entry into potential global markets such as US, EU and other OECD (Organisation for Economic Co-operation and Development) countries and the 12-country CIS (Commonwealth of Independent States) bloc to protect, safeguard and enhance its trade interests in goods and services sectors in a sustainable manner. This will also facilitate Bangladesh to claim on reciprocal basis Mode 1, 3 and 4 access from the BFTA partners under the WTO services agreement. In order to further reinforce the move, Bangladesh should, in the light of the foregoing discussion (especially the WTO provisions and ministerial decisions with regard to GSP), call upon the US:
1 To keep the issue of labour standards outside the jurisdiction of GSP or LDC DFQFMA scheme as mandated in the decisions on ILO core labour standards adopted under Paragraphs 4 and 8 of the WTO Singapore and Doha Ministerial conferences respectively. The jointly agreed ILO, Bangladesh, EU and US, ‘Sustainable Compact’ & Bangladesh Action Plan to deal with all issues related to labour standards, welfare and safety may be gradually implemented along with respective capacity development under the supervision of ILO;
2. To operationalise US duty-free and quota-free market access for all goods originating from Bangladesh as an LDC, as adopted and prescribed in paragraph 36 of Annex F of the Hong Kong Ministerial Declaration, in a manner that ensures stability, security and predictability prior to the forthcoming Ministerial Conference in Kenya in compliance with the declarations agreed and adopted in the earlier ministerials;
4. To ensure product coverage of the Duty-Free Quota-Free Market Access across “all products originating from all LDCs” including products already covered under any unilateral FTAs or mutual preferential market access schemes including GSP;
5. To establish Bangladesh-US Comprehensive Free Trade Agreement under the basic terms of TICFA without prejudice to each other’s rights and obligations under WTO. Similarly, efforts should be in place to establish Bangladesh-EU Comprehensive Free Trade Agreement without prejudice to each other’s rights and obligations under WTO.
SOME SPECIFIC TERMS PROPOSED FOR BFTA
1. The overriding terms of BFTA (Bilateral Free Trade Agreement) with Bangladesh shall be without prejudice to the rights and obligations under the WTO Agreements (as in BD-US TICFA and BD-EU trade agreement) including GATS LDC Modalities.
2. Bangladesh should open its service sector on MFN (Most Favoured Nation) basis to maximise promotion of the services trade at home and abroad, particularly when its services regime is already open on MFN basis under domestic laws and regulations and also under SAFTA (South Asian Free Trade Area) Services Agreement.
3. Bangladesh has kept open its Public Procurements for foreign participation on MFN basis. In turn, Bangladesh should ask for reciprocal treatment from the respective countries.
4. Products originating from Bangladesh should be exempted from all customs duties with effect from the date of commencement of such FTA (Free Trade. Bangladesh, in turn, may offer to the FTA parties preferential tariff accorded to India under SAFTA which would be reduced to 0-5 per cent level for 90 per cent tariff lines in parallel with SAFTA tariff reduction commitments. The phase-out period for the tariff lines to be taken out of the Sensitive Lists as agreed to by the SAARC member states may also be extended to BFTA partners for possible trade creation rather than diversion.
5. Products, originating from Bangladesh should be excluded from the sensitive list with longer transition period for Bangladesh in line with procedures adopted in SAFTA for elimination/ reduction of the Sensitive/Negative list.
6. Rules of Origin should be based on value addition criteria (summation of FOB value of exports – summation of CIF value of imports >or = 30 per cent) taking into account the provisions laid down in WTO Bali Ministerial Declaration.
7. The BFTA should ensure harmonisation of TBT (technical barriers to trade) and SPS (sanitary phyto-sanitary) measures and signing of MRA (Mutual Recognition Agreement) to streamline flow of traded goods.
8. Certificates on technical regulations & standards issued by the respective designated national bodies should be accepted on the basis of MRA mutually agreed upon.
9. National treatment should be accorded in respect of charges and fees for imported products at the rate applicable for like/similar domestic products and fees levied must be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or for fiscal purposes.
10. The BFTA partners shall adopt and notify non-restrictive, automatic and transparent import licensing procedures.
11. The BFTA shall recognise that effective protection and enforcement of intellectual property rights, encourage technological innovation, transfer of technology and investment under the respective terms and obligations of the WTO Agreements.
12. The BFTA trade regime should affirm commitments made in the Doha Declaration that expansion of trade and investment and the promotion of sustainable development and protection of the environment can and will be mutually supportive.
13. The BFTA should affirm ILO core labour standards as adopted in the WTO Singapore Ministerial (Paragraph 4) and Doha Declaration (Paragraph 8) and recognise the importance of providing adequate and effective protection and enforcement of worker’s rights in accordance with each participant’s obligations and domestic labour laws.
14. The BFTA partners should establish a Joint Council on trade and investment. The Joint Council shall be comprised of representatives of both Parties. All meetings of the Joint Council shall be jointly chaired by the designated Ministers of both the governments. The Joint Council may establish working groups that may meet concurrently or separately to facilitate its work.
