Implementation of WTO ATC:
Current Status and Implications
for Bangladesh
This
paper reviews the experience with
implementation of the WTO-ATC and
also looks at the possible implications
of the ATC in terms of future performance
of Bangladesh's apparels sector.
It reviews the status of implementation
of the first two phases of integration
of the MFA into the ATC and future
projections of integration, identifies
the implications of the implementation
of the ATC for Bangladesh's export-oriented
apparel sector and presents some
of the major non-ATC related developments.
The paper also identifies some of
the strategic responses that Bangladesh
could pursue in view of the evolving
global scenario in the trade in
Textiles & Clothing (T&C).
The
paper argues that although the emergence
of the Bangladesh RMG occurred within
the ambit of the Multi-Fibre Arrangement
(MFA) its growth was sustained also
by Bangladesh's comparative advantage
in the global market. The RMG sector
of Bangladesh registered a quantum
leap from a meagre $1.0 million
worth of exports in 1978 to $4.2
billion by the year 2000.
The
following observations were made
regarding the ATC program of implementation:
- The
imports of 1990 have been expressed
in volume terms, which has ultimately
lowered the share of value added
products.
- Restrictions
maintained by the four countries
(USA, EU, Canada, and Norway)
have mainly focused on apparels
which have provided the quota
imposing countries an opportunity
to integrate clothing or value
added products only at the last
stage.
-
The
integration scheme leaves ample
scope for restricting imports
of clothing till the last stage.
Bangladesh
is currently facing restricted market
access in apparels in two of the
four quota enforcing countries,
the United States and Canada. Bangladesh
faces quota restrictions as regards
twenty-one categories in the U.S.
market and nine categories in the
Canadian market. Consequently, 70
per cent of exports to these two
markets were being carried out under
quota.
It
was argued in the paper in the context
of quota fill rate of major categories
of Bangladesh's RMG exports to USA,
that saturation of quota coupled
with growth performance in non-quota
items was indicative of the potential
market penetration power of Bangladesh
in the post-MFA context. The paper
presents an analysis of the integration
schemes of the USA and Canada under
the various phases and attempts
to assess their implications for
Bangladesh's export of RMG to these
markets. It finds that as far as
Bangladesh is concerned, under
the US programme of integration major categories
of high interest such as 347/248,
340/640 and 647/648, accounting
for three-fourths of exports to
US market, will be integrated into
the ATC only at the last stage of
MFA phase out. However, in
spite
of the fact that implementation
of the first two stages ATC integration
schemes did not have any negative
impact on the performance of Bangladesh
export oriented apparel sector,
there was little scope for complacence.
Rather, the back-loaded integration
scheme may hit the country in full
force in the year 2005. The comparative
advantages enjoyed till now by Bangladesh
in the context of the quota regime
would be put to severe test in the
coming days.
The
paper argues that the objectives
of the ATC relating to the progressive
phase out of quota restrictions
remained, to a greater extent, unrealised.
The paper asserts that in the present
context it would be in Bangladesh's
best interests to build up a case
for an early and accelerated implementation
of the MFA for the LDCs. In addition,
Bangladesh could also ask for duty-free
access which in effect would mean
claiming EU-parity in the US market.
Bangladesh would need to clearly
articulate her claim for special
treatment in the WTO during the
review process of the ATC and would
need to build up a strong case in
support of her demands. Such demands
could include (i) a review of the
ATC integration scheme, (ii) implementation
of the draft Seattle Declaration;
and (iii) call for an extension
of the market access under US TDA
2000 on bilateral as well as on
LDC basis. Bangladesh should use
the S&D status given to the LDCs
in the WTO to argue for special
treatment under the ATC. It should
also play the China card. The above
arguments must be presented in a
coherent manner to ensure Bangladesh's
enhanced market access in both EU
and the USA.
The
recent developments in the global
T&C trading regime which are not
directly related to the ATC have
accentuated the challenges Bangladesh
is likely to face during the run-up
to the complete phase out of the
MFA. These developments are: (i)
imposition of anti-dumping duties
in the USA on exports of shop towels
for Bangladesh; (ii) enactment of
US Trade and Development Act 2000
under which concessional treatment
(quota-free and duty-free access)
has been provided to the Caribbean
and Sub-Saharan countries; (iii)
possible implications of accession
of China in to the WTO and (iv)
possible implications arising out
of Bangladesh's concurrence to the
regional cumulation provision of
the EU GSP.
As
regards the
US Trade and Development
Act 2000 and its possible implications,
it was argued that the introduction
of US TDA 2000 would enable countries
in Sub-Saharan Africa and
the Caribbean
Basin quota-free, duty-free access
to the USA market whilst Bangladesh
would be constrained both on account
of quota-restraint as well as high
tariff rates. As a result, competition
might be expected to intensify for
some of the low priced items within
the same categories where Bangladesh's
export performance have traditionally
been robust. Once these countries
are allowed to access to the US
markets at zero tariff, the comparative
advantage situation could be expected
to undergo important changes.
The
paper also investigates possible
implications of China's accession
to the WTO. The quota utilisation
performance for categories, having
export interest for Bangladesh such
as 338, 339, 640, 341 and 342, was
better in the
case of China compared
to Bangladesh in 1999. The paper
argues that there are three aspects
which should be looked at urgently.
Firstly the change over time of
the Revealed Comparative Advantage
(RCA) situation: Bangladesh would
need to continuously keep track
of the RCAS. Secondly, categories
for which Bangladesh had RCA> 1
belonged to the lower segment of
the market and it was important
for Bangladesh to search for modalities
in order to graduate from this level;
and thirdly, the prospect of increased
competition from emerging major
suppliers of apparels in the global
market.
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) 8130951.
