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Bangladesh Rolls Back US FTA Bid. Here’s the Startling Reason Why.

Bangladesh has reportedly abandoned its bid for a free trade agreement (FTA) with the United States over concerns that it is in no shape to meet potential demands on issues such as labor and human rights.

The South Asian nation had been exploring the possibility of a Bangladesh-United States FTA to counteract the suspension of tariff benefits under the Generalized System of Preferences (GSP) following the 2013 collapse of Rana Plaza, which killed 1,134 garment workers and injured thousands more just outside the capital of Dhaka.

The GSP freeze, enacted under the Obama administration, has meant that garments, Bangladesh’s No. 1 export, incur as much as 15 percent in duties when entering the U.S. market, which manufacturers say make them less competitive.

Ministry officials told the Financial Express, however, that they did not think such a proposal would “draw any positive signals” from the Americans, and that even if the United States agreed, Bangladesh would be hard-pressed to meet the “rigorous conditions to be imposed by the world’s biggest economy.”

“Firstly, the matter is whether the U.S. will agree or not. Secondly, are we able to address many pressing issues?” Bangladesh Trade and Tariff Commission member Mostafa Abid Khan told the Financial Express last week. Khan said that American interest in an FTA was “very minimal,” considering the lack of momentum toward restoring GSP privileges.

The European Union may pose other complications. On Sunday, Rensje Teerink, head of the EU Delegation to Bangladesh, told the Daily Star that the country will have to adhere to the bloc’s new criteria on human rights to hang on to its duty-free market access. More than 6o percent of Bangladesh’s exports are earmarked for the EU.

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“As a major beneficiary of the EBA (Everything but Arms), Bangladesh will have to comply with the new criteria on the human rights to enjoy the benefit on exports,” she said, referring to a “global human rights sanctions regime” the European Council adopted in December. The framework will allow the EU to target individuals, entities and bodies responsible for, involved in or associated with serious human rights violations and abuses worldwide, no matter where they occurred.

Meanwhile, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country’s biggest trade group of factory owners, recently signed an agreement with Chicago law firm Sidley Austin to get advice on earning duty-free trade benefits to EU extended once Bangladesh graduates from the group of least-developed countries to developing in 2024. (The EU has granted a three-year grace period on the facility following the upgrade.)

The Bangladesh textile industry, which employs 4.1 million workers, racks up roughly $30 billion annually by exporting ready-made garments, which account for some 16 percent of the country’s economy. The Covid-19 pandemic has led international retailers to pull back from placing orders, demand steep price cuts or delay payments, however, hamstringing growth. Trade data shows that shipments to the United States, the single largest export market for Bangladesh’s products, stumbled 12.6 percent year over year. Overall, garment exports fell 17 percent to scrape past $27.5 billion in 2020, according to the Export Promotion Bureau.

As Bangladesh’s factories continue to tread water amid a worsening second wave of the coronavirus, so too are workers struggling to make ends meet. More than 200,000 garment workers have lost their jobs as a result of the economic battering, according to union leaders. (The BGMEA puts the number at a more modest 70,000.)

The Dhaka Tribute reports that some laid-off workers are getting rehired at other factories, albeit with less pay. Mirajul Islam, a former line supervisor at a factory in Gazipur who earned 18,000 taka ($212) a month, told the outlet that he turned down a number of jobs because the pay was too low, but had no choice to finally accept once his savings dried up.

“Since there is enough supply of workers, the factory owners are taking the advantage by offering low wages,” Nahidul Islam Noyon, secretary of Sommilito Garments Sramik Federation, a workers’ union, told the Dhaka Tribune. “We hope the trade associations would take steps to stop such malpractice,” he added.

Rubana Huq, president of the BGMEA, denies that lowballing is happening, however. “First of all, we do not have any idea about the credibility of such allegations and the magnitude of such incidents,” she told the outlet. Second, she has not seen any instances of factories violating laws.

“While we have a fairly high attrition rate in the industry and workers switching jobs is a common phenomenon, factories are not required to check the last pay status by the former employers of the workers,” Huq said. “We are against exploitation of any form. But such an allegation needs a reality check on the overall economic scenario, which has been heavily disrupted by the pandemic.”

Meanwhile, a new consumer survey, conducted by grassroots group Fashion Revolution and published last week, found that more shoppers want fashion brands and governments to promote transparency and respect for human rights and the environment across supply chains.

Of the 5,000 respondents polled across Germany, France, Italy, Spain and the United Kingdom, 75 percent agreed that fashion brands should do more to improve the lives of the women making their clothes, up from 72 percent in 2018. One-third (33 percent) said it’s important that the clothing they buy is made by workers who are paid a living wage, and 22 percent said it’s important that the clothing they buy is made in safe working conditions.