Home Apparel Exporters seek deeper trade with US despite tensions

Exporters seek deeper trade with US despite tensions

Bangladesh’s exporters are hoping for a boost in bilateral trade, Generalised System of Preferences (GSP) for clothes made from US cotton, and more foreign direct investment (FDI), despite the diplomatic tensions between Dhaka and Washington.

Industry insiders and experts say a GSP facility for clothes made with US cotton will be a win-win for both Bangladesh and the USA. Bangladesh holds a strong position in cotton-based clothes manufacturing, but meets 98 per cent of its cotton demand through imports.

Currently, the US cotton market share in Bangladesh is only 5.5 per cent, and the country produces 95 per cent of cotton for exports.

GSP for the US cotton-made clothes can help increase its market share in Bangladesh to $3 billion over the next 5 years – 7 years, and additional exports for Bangladesh worth $400 million – $800 million every year, they added.

Industry insiders believe that the state of political ties between Bangladesh and the USA will not impact bilateral trade.

“We believe that the recent US VISA Policy will not impact Bangladesh’s business sector,” said Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan.

On the issue, Commercial Counselor to the US Embassy in Bangladesh John Fay said, “Bangladesh is improving in issues such as labour rights, labour law reforms and freedom of association for reviving the GSP, which remains lapsed since December 2020.”

The US Congress has not taken any new initiatives in this regard since then. But there is a possibility of reducing the duty on the import of garment items from Bangladesh, Fay added while addressing a seminar titled “Bangladesh-US Trade and Investment.”

The event, held at the Economic Reporters Forum (ERF) auditorium in the capital on Monday, was organised by the ERF. Forum President Mohammad Refayet Ullah Mridha presided over the programme, while Secretary Abul Kashem moderated it.

Research and Policy Integration for Development (RAPID) Chairman Mohammad Abdur Razzaque presented a key note titled “Partnering up: US-Bangladesh Trade and Economic Cooperation.”

Razzaque said, “Bangladesh should ensure fibre security in the coming days, as the country produces less than two per cent of the required nine million bales of cotton. Almost the entire demand is met through imports, and the USA is gradually becoming a good source for this fibre.

“Bangladesh’s exports to the US have expanded at a faster pace in recent times, compared to many other countries. But due to the low export basket, Bangladesh has failed to cash in on the available opportunities.”

Cambodia, a small economy, is exporting more items than Bangladesh, he pointed out.

Razzaque then said, “Clothes currently occupy 83 per cent of Bangladesh’s total exports to the USA, but we failed to capture a larger piece of the pie as China’s share in the sector declined. Vietnam is taking advantage of the situation.

“Despite the big opportunity in man-made fibre based clothing exports to the US market, Bangladesh’s market share in the sector is just 5 per cent, while Vietnam holds 21 per cent. Bangladesh can increase their exports to the USA through non-cotton clothes.”

In the keynote, Razzaque mentioned that the US annual import size is $3.3 trillion, and Bangladesh occupies just 0.2 per cent of the pie, even though the country is their single largest export destination.

Bangladesh’s earnings from the apparel sector stood at 83 per cent or $8.52 billion in FY23, and US apparel import share is just 3 per cent of their total annual import.

The US has the largest FDI stock in Bangladesh amongst partner countries, and has invested over $4 billion. Gas and petroleum sector received 70.9 per cent of such investments, while textile and clothes received just 3 per cent, according to the keynote.

At the programme, Razzaque welcomed US investors to invest more in Bangladesh in industries such as apparel produced with manmade fibre, footwear and leather, pharmaceutical, ICT, automobiles and light engineering.

The government has prepared special economic zones across the country for this very reason.

Echoing Razzaque, Policy Exchange of Bangladesh Chairman Masrur Reaz said, “The sky is the limit for attracting investments from the USA in different sectors across Bangladesh. Currently, Bangladesh is the second largest garment exporter worldwide and third largest manufacturing hub for large volume and low valued garment items worldwide.

“However, Bangladesh needs to improve the border and customs clearance process for attracting more foreign direct investments.”

Commenting on the matter, US Counselor Fay said, “There are some challenges to investing in Bangladesh, mainly in the areas of profit repatriation, intellectual property rights, data protection act and logistics services.

“There is a big potential for the USA for investments in Bangladesh’s healthcare, ICT, and education sectors.”

As Bangladesh’s major export basket is apparel, and the sector performs exceptionally well in the US market despite above 15 per cent duty on the products, BGMEA President Faruque Hassan said GSP on US cotton clothes will help increase the country’s exports to the US market.

Faruque added, “It will be a win-win situation for both countries as local millers are importing 11.5 per cent of the total nine million bales of cotton from America. Australia and the UK have already confirmed that they will continue zero tariff trade benefits even after Bangladesh graduates from LDC, but the USA is yet to announce anything.”

In his speech, Faruque mentioned that Bangladesh has achieved a lot of development in the past decade in areas of workplace safety, workers’ rights, and formation of trade unions. 

The country even amended labour rules and is in the process of amending the labour act.

He mentioned that to reduce carbon footprint, Bangladesh is setting up green RMG factories, and already 202 factories obtained LEED certification from the US Green Building Council.

“I hope the USA will consider reviving the GSP facility as we have complied with the 16 point Bangladesh Action Plan provided by the US government for GSP reinstatement. We do not want aid, we believe in trade,” Faruque pointed out.

Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon said, “The country currently imports 20 per cent cotton from India, 11 per cent from USA and 3 per cent from Australia.

“The Joe Biden administration should follow the fifth Ministerial Conference of the World Trade Organisation (WTO) held in Hong Kong in 2005, where the developed countries agreed to give duty-free trade benefits for 100 per cent products.”

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice-President Fazlee Shamim Ehsan said, “Bangladesh has done a lot in terms of workplace safety, but the USA is not recognising our initiatives as the GSP remains suspended for Bangladesh since June 2013.”

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