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Bangladesh may not get GSP benefit

The US has made its position clear that it doesn’t intend to return the GSP benefit to Bangladesh until the country makes substantial progress on labor safety and labor rights.

However GSP applies to a very small part of Bangladesh’s exports to the US and hence has a minimal impact on US-Bangladesh trade and investment in the short to medium term. The bigger worry for Bangladesh is if and when it becomes a middle income or developing country. If this happens, it will lose duty-free and quota-free access to a host of countries including EU, Canada, Australia and Norway, and preferential access to some other countries that it has now on account of being a less developed country (LDC). This privilege has been a major force in the country’s export growth during the last two decades.

Most of Bangladesh’s exports that enjoy duty-free and quota-free access will be hit by the same tariff wall as faced by other countries such as India and Vietnam. The price advantage that Bangladesh’s exporters enjoy against non-LDC developing countries will disappear.

Bangladesh needs to prepare itself for this eventuality. Exporters who have become accustomed to duty-free access in other countries will have to learn to compete at reduced profits. There will have to be some restructuring of the export industries in order to flourish in the new trade regime.