CPD Policy Brief on

Seeking Fair Market Access for Bangladesh Apparels in the USA: A Strategic View

This policy brief maintains that the implementation of an early and accelerated quota-free regime for Bangladesh's RMG exports to the USA should be an important focus of the country's strategy in managing the run-up to the total phase-out of MFA in 2005. In view of this, evidence and analysis have been marshalled from the perspective of ATC-WTO framework as well as from the Bangladesh-US bilateral relationship, to argue a case for an immediate enhanced access for apparel exports from Bangladesh to the US market.

The readymade garments (RMG) sector of Bangladesh has come to occupy a special position in the design and implementation of the export-led growth strategy, which Bangladesh has been pursuing over the last two decades. The sector has been able to sustain a momentum of robust growth for over the last decade and half. With the conclusion of the Agreement on Textiles and Clothing (ATC) under the Uruguay Round (UR) of multilateral trade negotiations, both the context and the content of trade in Textiles and Clothing are set to undergo important changes. Given the potential impact the ATC may have on Bangladesh's overall development prospects and on the future of the country's apparel sector in particular, the country needs to closely monitor the implementation of the ATC.

As is well known, US market is exceedingly important for Bangladesh's RMG sector. Although the share has declined over the last five years, the USA accounts for about 42% of total RMG exports from Bangladesh in 1999. It is important to note here that about 70% of the RMG exports to the USA from Bangladesh are currently carried out under quota. It is from this vantage point that Bangladesh will need to define its coping strategy under the MFA integration schedule and to articulate appropriate policy positions to extract the maximum possible concessions from major trading partners such as USA.

How Bangladesh deals with the consequences of the post-MFA regime will to a great extent depend on how it manages the transition process during the next four years i.e. till the time when ATC will come under full implementation. An analysis of the Integration Programme of the USA and Canada (and also that of the EU) shows that the integration schemes are back loaded. In the first two stages of the integration, the US has so far eliminated quotas for only two categories of apparels. In view of this, Bangladesh should argue that it be given greater market access for its apparel exports in the USA since she has not been benefited from the MFA integration under the first two stages.

Although average tariff rates in developed countries have come down from 6.3 per cent during the pre-UR period to about 3.8 per cent after the UR, tariff rates in the T&C sector, and more particularly, on items of critical importance to Bangladesh have continued to remain at very high levels. Such relatively high tariffs (more than 20 per cent) on items of export interest to Bangladesh undermine the country's competitive capacity vis-à-vis domestic producers and those receiving preferential access to US apparel market.

The paper builds a case for duty-free access to US market and in effect asks for EU-parity in the US market. As is known Bangladesh's exports are already allowed quota-free access in the EU market. In this connection, Bangladesh could point out that in a recent move the European Commission has proposed opening its markets to all goods except arms from the world's poorest countries (Lamy-ABA proposal). Building up a case on the possible (unintended) negative impact of the US TDA2000 on Bangladesh's future export performance, the GOB could urge the government of the USA to extend the zero-tariff and quota-free facility as regards exports of Bangladesh apparels on a bilateral basis. The paper argues that for Bangladesh and other LDCs the quota-free regime should be brought one stage forward i.e. from the third stage. This would allow LDCs to compete in the US market under a quota-free regime for 3 years whilst quotas continue to remain for the non-LDCs. Another option, the second-best one, would be to seek enhancement of quotas at an accelerated rate compared to what has been envisaged under the WTO-ATC.

To obtain the full text of this report please contact:

Centre for Policy Dialogue
Dialogue and Communication Division
House 40C, Road 11, Dhanmondi R/A, Dhaka-1205, Bangladesh
Mailing Address: GPO Box 2129, Dhaka-1000, Bangladesh
Tel: (880 2) 8124770,(880 2) 9141734,(880 2) 9141703 Fax: (880 2) 813095.