The generalised system of preference (GSP) is a preferential tariff system which provides for a formal system of exemption from the more general rules of the World Trade Organisation (WTO). Specifically, it’s a system of exemption from the most-favoured-nation (MFN) principle that obliges WTO member-countries to treat the imports of all other WTO members in the way they treat the imports of their ‘most-favoured’ trading partner. In essence, MFN requires WTO member-countries to treat imports coming from all other members equally, that is, by imposing equal tariffs on them, etc. GSP exempts WTO member-countries from MFN status for the purpose of lowering tariffs for the least developed countries (LDCs), without also lowering tariffs for the rich countries. The GSP was established to promote exports of low-income countries to industrialised ones in order to support their economic growth and development. However, the designs of these schemes are rather complex and the aspect of GSP has been found to be controversial. US GSP promotes sustainable development in beneficiary countries by helping these to increase and diversify their trade with the United States. The programme provides additional benefits for products from least developed countries. According to a US Chamber of Commerce study, moving GSP imports from the docks to US consumers, farmers, and manufacturers supports tens of thousands of jobs in the US. It also boosts American competitiveness by reducing costs of imported inputs used by US companies to manufacture goods in the country. GSP is especially important to US small businesses, many of which rely on the programme’s duty savings to be competitive. In addition to promoting economic opportunity in developing countries, the GSP programme also supports progress by beneficiary countries in affording workers’ rights to their people, in enforcing intellectual property rights, and in supporting the rule of law. The United States instituted GSP on January 01, 1976 as a means of promoting growth in the developing countries through preferential access of their exports to US market. It provides for duty-free entry into the US for some 5,000 products of 122 countries. The value of GSP exports stood at around $20 billion in 2012. The largest beneficiaries are India, Thailand, Brazil and Indonesia. The US administration has renewed the GSP facility for the developing and least developed countries of the world after it suspended it for the last two years on expiry of the earlier legislation. But surprisingly, Bangladesh is the only country along with Russia which was excluded from the list of 122 beneficiary countries for duty-free market access of their exports to the USA when the announcement of its renewal hit the global capitals. The US Congress recently made new legislation for GSP facility and the Obama administration has put it back on track on July 29 with retrospective effect from the date of suspension two years ago. Bangladesh was entitled to enjoying GSP facility from 1980 although its major exports to the USA, including ready-made garments, remained excluded from the benefit, denying the real business opportunity that Bangladesh could harvest under the concessional trade access. The US suspended GSP facility to Bangladesh after the Rana Plaza disaster in 2013. The exclusion of Bangladesh resulted mainly from its apparent failure to fulfill all of the 16 conditions that the Obama administration had laid out when it revoked the privilege two years ago on grounds of poor workplace safety and labour rights The beneficiaries of the new scheme include all South Asian countries such as India, Pakistan, Nepal, Sri Lanka, Bhutan and Afghanistan. Only Bangladesh remains excluded. It would pour in a damper on the country’s attempts to expand export basket and reduce its reliance on garments. Suspending Bangladesh from the GSP programme would also increase US duties on an array of products the country exports to the United States, such as tobacco, sporting equipment, porcelain china, plastic products and a small quantity of textile products. The negative impact of the US GSP removal is speculated to be a warning for future trade between Bangladesh and the United States including the prospect of retaining the MFN status which benefits Bangladesh’s economic growth. According to the Bangladesh Economic Review (2014), during the last three years there was no significant foreign direct investment inflow from the US to Bangladesh. In such circumstances, the repeated attempts of the Bangladesh government to regain the US GSP are crucial for the country’s continued economic growth. Bangladesh cares deeply about retaining GSP benefit because of the country’s extremely narrow and fragile export basket, link between trade performance and human development and social stability, and most importantly seeking negotiation as an early-stage industrialising nation. Bangladesh’s export sector is extremely narrow in terms of both size of market and diversity of export items. The US is Bangladesh’s single largest export destination that accounts for more than a quarter of Bangladesh’s exports. More than 95 per cent of the export earnings from the US, worth more than$ 4.5 billion, come from just one single item which is garment. Given this excessive dependence on one single item, Bangladesh remains extremely serious about adding new items to its export basket. Herein lies the essentiality and significance of the US GSP. More importantly, Bangladesh’s image as a trade partner of the US is tainted. This may discourage US and other foreign investors, new and old, from venturing into Bangladesh, which may have a moderate effect on the prospect of future export growth of the country, particularly in US market. The biggest short-run fear for the country is a similar action adopted by the European Union (EU). The EU had previously threatened to remove preferential access of Bangladeshi RMG products in EU market if the government did not take measures to improve the working condition in factories. Bangladesh RMG export to EU grew to about $11.37 billion as of June 2012. Hence, such an action will be devastating for the country’s RMG sector which exported products worth $19 billion dollar in the last fiscal year and employs about 4.5 million people at the bottom of the population pyramid, 80 per cent of whom are women. Thus, there will be increasing pressure on the government to improve working conditions as the EU will be closely observing Bangladesh. Several European importers have already come forward to help the country in improving safety features of RMG factories, which is a good sign for the country. The protection of workers’ interest is not just a GSP issue. This is essential for modernising employment practices in Bangladesh in line with good international practices; the convergence of interests with the GSP is a win-win situation. Some economists advised the government to improve the political-level understanding with the US, avoid games of blaming others, integrated inter-ministerial coordination efforts, direct and continuous contact with the governments of Bangladesh and the US, as they take actions on workers’ rights and safety, implementing the commitments and suggestions by the US, the EU and other development partners’ action plan, easing obstacles to investment, strengthening negotiation skills and bargaining power and quality of economic diplomacy. The sooner the country fulfils all the conditions, the better it is not only for gaining the GSP but also for ensuring rights of the workers as well as image- building and reputation of Bangladesh. Looking forward, Bangladesh needs to develop strong policies to improve domestic competitiveness. With highly favourable endowment of labour, Bangladesh has a huge comparative advantage in labour-intensive manufacturing. Focusing on investment, infrastructure, land availability and labour skills is the main policy challenge. Apart from education and training, converting labour to a productive and committed workforce will also require strong social policies to protect the welfare of the workers. This long-term development challenge, rather than access to GSP, provides the imperative for adopting appropriate employment policies for workers. Bangladesh as a small country cannot influence the political decision of the US. The US GSP is not a political issue; it is an economic and technical issue where Bangladesh’s active participation along with good relations with the US is more essential to retain the GSP benefits to become a middle income country by 2021 as soon as possible and without delay
