EU-proposed move could deprive clothing shipping of the tariff benefit

A measure proposed by the European Union could affect Bangladesh’s strong clothing shipments to the bloc, even if the country obtains Generalized System of Preferences (GSP) Plus status after switching to a developing country.

In the proposed SGP Plus scheme, the EU said that if the value of a particular garment from a country eligible for duty-free export under the bloc’s Everything But Arms (EBA) facility exceeds 6 percent of the total value of imported clothing, the zero duty facility will not apply to the product even if SPG Plus status is granted, Commerce Secretary Tapan Kanti Ghosh said.

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The value of total clothing imported from Bangladesh to EU countries has already passed the threshold and now stands at over 9.74% when considering the value of clothing imports in 2019.

EU member states bought clothes worth € 154 billion from outside the bloc in 2019. Of that, € 15 billion went to Bangladesh, or 19% of the total, according to data. ‘Eurostat.

“We will launch an intense negotiation with the EU on the 6 percent safeguard measure,” Ghosh said.

The secretary also said that a ministry technical committee was working on the matter to get a detailed picture and assess the implication of the safeguard measure.

Ghosh will raise the issue when he meets today Charles Whitley, the EU Ambassador to Bangladesh, in his secretariat office.

“If necessary, we will launch negotiations with the European Commissioner for Trade,” said the secretary.

Rubana Huq, former chairman of the Bangladesh Garment Manufacturers and Exporters Association, said the safeguard measure would apply to higher value-added products, not volume.

“This will give us a serious advantage,” Huq replied in a WhatsApp message.

The EU is Bangladesh’s main export destination.

Currently, 58 percent of the total exports and 64 percent of the country’s total clothing items especially are destined for the continent.

Dhaka is negotiating with the EU to continue to enjoy trade advantages for a period of three years until 2029 after its exit from the group of least developed countries in 2026.

The new SPG Plus plan will take effect from January 2024 and will run until 2034.

Abdur Razzaque, director of the Bangladesh Policy Research Institute, said that according to the proposed SPG provisions, Bangladesh is likely to qualify for the SPG Plus after graduation. But the EU’s specified “safeguards” would exclude the country’s clothing exports from any tariff preferences.

The proposed GSP removed the import share criterion, which stipulated that a country’s share of imports covered by the EU’s GSP in 2019 cannot exceed 7.4%.

Bangladesh is a major exporter of clothing, and almost all of it is exported duty free. Its share of imports covered by the EU-GSP was well over 7.4 percent.

“Bangladesh will not be eligible for GSP Plus under existing GSP rules. So the proposed removal of the import share requirement is good news for Bangladesh,” Razzaque said in an email.

However, the proposed EU GSP rules specify that if the combined share of HS Sections 61, 62 and 63 (comprising knitted, woven and home textiles and defined as “product group S-11b”) d If a country exceeds 6 percent of total EU imports of the same products, safeguard measures would be triggered to remove duty-free market access for those products.

“All of this implies that Bangladesh will benefit from preferential SPG Plus access. However, its clothing items will be subject to MFN (Most Favored Nation) tariff rates in the EU.

The noted researcher described the safeguard measures on textiles and clothing as contradicting the intent of the proposed new regime.

“In the preamble of the new proposal, it is stated that product graduation should not apply to GSP Plus and EBA beneficiary countries. But the likely exclusion under safeguards will be equivalent to product graduation. . “

If the proposed rules remain unchanged, the average tariff on Bangladesh’s clothing exports to the EU will drop from currently zero to an average of 12%, according to Razzaque.

The new proposals will be final when adopted by the European Parliament and the European Commission, the executive arm of the EU. The adoption could take place in the last quarter of 2022.

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