The European Commission has proposed a new GSP (generalised scheme of preferences) framework which focuses on core issues like climate protection and good governance, and lowers thresholds for exports which, an economist and businessmen fear, may limit Bangladesh's gains from "GSP plus" in key export items like apparels.
The proposed scheme, to be discussed by the European Parliament, calls for lowering product graduation thresholds (that is, the temporary suspension of tariff preferences for highly competitive products) by ten percentage points so that the large industrialised producers leave more space in sectors where they are very competitive.
Though the proposed step has been intended to maximise the opportunities for low-income countries to benefit from the GSP, it may prove difficult for Bangladesh's largest export sector, apparels.
"If the new scheme is put in force, benefiting from GSP+ may be difficult for Bangladesh," said Professor Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD).
The new proposal further improves the current scheme by ensuring a smooth transition for all countries set to graduate from least developed country (LDC) status in the next decade, said the new legislative proposal adopted by the European Commission for 2024-2034 period.
"They will be able to apply for the special incentive arrangement for sustainable development and good governance (GSP+) if they commit to strong sustainability standards and can thus retain generous tariff preferences to access the EU market," it added.
The new proposal sets the general threshold at 47% and textile threshold at 37%, down from existing 57% and 47.2% respectively, to leave more space for poorer developing countries.
"In case the thresholds are lowered, Bangladesh's major export items, which are well above those thresholds, may not gain from GSP. However, we may have some gains in other items, which we do not export much.
"The ceiling may deprive us of the benefit in items in which we have good export performance," Professor Mustafizur noted.
Bangladesh, still as a least developed country, will continue to enjoy EU's existing GSP, known as "Everything but Arms" (EBA) initiative, until it expires in December 2023.
The new scheme, once adopted, will apply from 1 January 2024.
Earlier, the European Union (EU), destination of $18.7 billion or more than a half of the country's total exports, asked for a roadmap from Bangladesh to improve labour standards to stay eligible for the zero-duty export facilities in the EU market for 10 more years.
The government sent its six-year roadmap to the EU, agreeing to amend the labour law and rules, to comply with the ILO and EU labour standards by 2026.
Bangladesh has been in negotiation with the EU for enjoying trade privileges beyond the graduation from LDC in 2026 and three years grace period till 2029.
"It is yet a proposal from EU commission which will be finalised at the end of 2023 by EU parliament, but this draft is very important for all those will enjoy GSP+, Standard GSP and EBA," said Professor Mustafizur Rahman.
This draft also included five new points with the current 27 international conventions related to human rights, labour rights, protection of the environment and climate and good governance to benefit from this arrangement, he added.
"Those new conditions will strengthen its enforcement and also make withdrawal and suspensions of the facility easier," said the economist.
The new draft has some positive side –– for the first time the EU specifically mentioned that all graduating countries would be able to apply for the GSP+ facility, he added, suggesting that the government should rectify some conventions on labour rights.
"The overall proposals are development-friendly but rectifying some conventions within a short time will put pressure on the government as EBA for LDCs including Bangladesh will expire in 2023," said the CPD Distinguished Fellow.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) vice president Fazlee Shamim Ehsan said, "We are welcoming this move, which will create an opportunity for Bangladesh to get GSP+ facility."
"We have amended our labour law to protect workers' rights, the government may consider rectifying some conventions, which will make the process easier", he added.
Fazlee Shamim Ehsan also mentioned that this proposal would create some problems for Bangladeshi woven garment exporters.
If the government provides policy support that will be helpful to make preparations to overcome the upcoming challenge through establishing more textile units in this sector, he added.
"It is high time to declare the woven textile as a thrust sector," said BKMEA vice president.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) director Abdullah Hil Rakib said, "The new proposal will make it easy for us to have a smooth transition. We were almost pushing them to improve the threshold or else it would be difficult for us to have GSP plus. Even though our goal will be to retain the full GSP facilities till 2029."
The apparel sector leader said they would be in Brussels in November "to persuade the process with a proper appeal."
Md Saiful Islam, President of Leathergoods & Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) said, "The new proposal has focused on climate protection, it will be a beginning point for Bangladesh as we are the more vulnerable country for that."
The proposed conditions may affect the apparel export, which is the largest export earner for the country, he added.
He also suggests the government should negotiate with the EU through political and diplomatic ways, to take benefit from the new GSP proposal.
Md Saiful Islam also mentioned that the entrepreneurs should maintain all compliances as per the rules.
The European Parliament and the Council will now discuss the proposal. The current GSP Regulation expires on 31 December 2023. Once adopted, the new GSP Regulation will apply from 1 January 2024.
The new GSP framework strengthens the EU's possibilities to use trade preferences to create economic opportunities and to advance sustainable development. The modernised framework also expands the grounds for the withdrawal of EU GSP preferences in case of serious and systematic violations. Beyond the core human rights and labour conventions already covered, the proposal incorporates environmental and good governance conventions.
It also expands the list of international conventions that need to be complied with by adding two additional human rights instruments on the rights of people with disabilities and the rights of the child, two labour rights conventions on labour inspections and tripartite dialogue, and one governance convention on transnational organised crime.
Earlier this month, Head of delegation of the European Union to Bangladesh, Ambassador Rensje Teerink had said Bangladesh, with the graduation from LDC, needs to follow the core issues related to the GSP Plus in detail because "GSP Plus will probably be the way forward."
She said the current GSP regulation only applies to human and labour rights conventions but the new regulations will be extended to environmental protection and good governance issues.