Jun 28, 2013
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US to suspend trade benefits for Bangladesh

Jun 28, 2013

WASHINGTON, United States - President Barack Obama is expected to announce on Thursday that the United States is suspending U.S. trade benefits for Bangladesh because of wretched safety conditions in that country's garment sector that have cost more than 1,200 lives in the past year, a congressional source said.

The mostly symbolic U.S. gesture follows the collapse of the Rana Plaza garment factory building in April that killed 1,129 people and the Tazreen factory fire in November that killed 112.

It could influence the European Union to take similar action, which would have a much bigger impact on Bangladesh.

Richard Trumka, president of the AFL-CIO labour federation, said the decision sent an important message to countries that receive duty-free access to the U.S. market under the Generalized System of Preferences (GSP) program.

"Countries that tolerate dangerous - and even deadly - working conditions and deny basic workers' rights, especially the right to freedom of association, will risk losing preferential access to the U.S. market," Trumka said.


Suspending Bangladesh from the GSP program would increase U.S. 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 amount of textile products.

But it would not directly affect Bangladesh's main export, clothing, since garments are not eligible for duty cuts under the program, which was created in 1976 to help economic development in the world's poorest countries and to reduce import costs for U.S. companies.

In 2012, Bangladesh was spared about $2 million in U.S. duties on about $35 million worth of goods under the GSP program, but it paid about $732 million in U.S. duties on $4.9 billion of clothing exports not covered by the program, according to Ed Gresser, a trade analyst with the GlobalWorks Foundation.

A European Union decision to suspend trade benefits would have far more impact since Bangladesh's clothing and textiles exports receive duty-free treatment there in contrast to average U.S. duties of around 15 percent.

EU officials raised the possibility of suspension in early May in the hope of prodding Bangladesh into action.

The EU imported roughly 9.2 billion euros ($12.13 billion) of goods from Bangladesh last year, according to data from the EU's executive, the European Commission.

Clothing and textile products ranging from towels and bedding accounted for almost 93 percent of those goods.

EU and Bangladeshi officials will meet in Geneva in July for talks aimed at improving safety conditions in Bangladesh and preserving the country's trade benefits.

An EU spokesman in Brussels said the expected U.S. action underscored the EU's concerns.


The United States' own review dates back to 2007, when the AFL-CIO, the main U.S. labour group, first filed a petition asking that Bangladesh's trade benefits be revoked.

U.S. trade officials have said they considered that step as "the last resort," but are increasingly frustrated with Bangladesh's intermittent progress over the past six years.

European retailers have responded to the two tragedies by signing an agreement to promote worker safety in Bangladesh, but many U.S. retailers have balked at accord, saying it gives unions too much control over ensuring workplace safety.

They have been working instead with former Maine U.S. senators George Mitchell, a Democrat, and Olympia Snowed, a Republican, on an alternative plan to improve fire and safety regulations in the garment factories of Bangladesh.

The effort is being coordinated by the Bipartisan Policy Center, a Washington think tank.

"At this point only a few final details remain to be worked out and agreed upon. We remain on track to complete the process by early July," BPC President Jason Grummet said earlier this week in an email.

Congress added workplace safety and other worker's rights criteria to eligibility requirements of the GPS program in the 1980s. At least 13 countries have been suspended from the program since then on labour grounds.

Most were later reinstated, but Belarus, Sudan, Syria and Myanmar, also known as Burma, remain out.

The Obama administration is currently considering whether to restore GPS benefits for Myanmar in recognition of recent political reforms in the Southeast Asian country, but some human rights groups warn that is still premature.

(Reporting by Doug Palmer; Editing by Vicki Allen)

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