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US suspends trade privilege for Bangladesh

Decision made in wake of deadly Rana Plaza collapse

US suspends trade privilege for Bangladesh

Bangladesh's garment industry has warned that the US decision to suspend GSP will hurt workers (photo by Chandan Robert Rebeiro) reporters, Dhaka and Chittagong

June 28, 2013

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The US on Thursday announced the suspension of trade privileges for Bangladesh in a move to punish the country for poor labor standards in the wake of the Rana Plaza building collapse in April which killed over 1,100 garment workers.

The decision follows a six-year long US review of Bangladeshi workplace safety and labor rights after AFL-CIO, the largest trade union in the US, lodged a petition seeking suspension of Generalized System of Preferences (GSP) for the South Asian country.

The US government “has not seen sufficient progress” towards basic safety standards, despite its “close engagement and clear, repeated expressions of concern” with Bangladesh over the past few years, US Trade Representative Michael Froman said in a statement.

“The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” Froman added.

GSP offers 127 developing countries, including Bangladesh, the opportunity to export up to 5,000 types of products duty free to the US.

Once GSP is suspended Bangladeshi exporters will incur tariffs of over 15 percent, although the scheme never included the country’s main export industry – ready made garments.

About one percent of Bangladesh’s US$5 billion of annual exports to the US are covered by the GSP system.

However, Thursday’s announcement has raised concerns in Dhaka that other key markets may follow suit including the European Union. The EU is Bangladesh’s single largest market for garment exports, an industry worth $20 billion per year.

On Friday, the Bangladeshi Foreign Ministry issued a statement condemning the US decision, saying it would hurt the people it was apparently designed to help – the country’s five million poorly paid garment workers.

“It cannot be more shocking for the factory workers of Bangladesh that the decision to suspend the Generalized System of Preferences (GSP) at a time when the government … has taken concrete and visible measures to improve factory safety and protect workers' rights," it said.

Nazma Akter, a labor leader in Dhaka, said that the domino effect in other markets like the EU could further hurt garment workers in Bangladesh where the minimum wage is just $38 per month.

“The decision is unjust and hurts the country’s image. The US government punishes Bangladesh for its faults, but it is not pressing US companies to pay more for clothes instead of seeking cheap clothes,” he said.

Mohammed Nasir, managing director of Evergreen Sweaters in Dhaka and a director of the Bangladesh Garment Manufacturers and Exporters Association, said the decision could hurt the country’s efforts to raise labor standards in the long term.

“The US has suspended the GSP at a time when the government, garment owners and laborers are working on improving safety in the workplace. It will send a negative message to buyers and consumers abroad and damage the industry as a whole,” he said.

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