An Assignment

On
GSP Facilities: A Study on Bangladesh

Course Title: International Business

Course Code: IBS 301

Prepared for

Md. Istiak Uddin

Course Instructor

Dept. of Business Administration

University of Asia Pacific

Prepared by

Nusrat Saragin

Registration No: 10202024

3rd Year, 2nd Semester

Spring 2013

Date of Submission: May 15, 2013

 GSP Facilities: A Study on Bangladesh

GSP Facilities:

The Generalized System of Preferences (GSP) is a formal system that favours the developing
countries provided by certain developed countries of the world. These developing countries
are known as the beneficiary countries and the developed ones are known as the donor
countries. GSP facilities are being offered by various donor countries and their policies of
giving those facilities differ from country to country as well.

The U.S Generalized System of Preferences (GSP) grants the duty-free treatment for almost
all the imports from any of their 127 listed beneficiary countries up to 5000 products. GSP
was established on January 1, 1974 by the Trade Act of 1974.

Enlisted Products under GSP scheme for duty-free or quota-free access are:

Mostly the manufactured items

Various types of chemicals

Minerals and building stones

Jewellery

Many types of carpets

Certain agricultural and fishery products.

Products that do not come under the GSP system include:

Textiles and apparel

Watches

Footwear, handbags, and luggage products

GSP Facilities for Bangladesh:

If we look back we can see, Bangladesh exported products of U.S $26.33 million to the U.S.A
under the GSP system. Many products of country enjoy the GSP facilities as a less developed
country. Among them the leading GSP imports from our country were tobacco products,
sports equipment, china kitchenware, and plastic bags & articles etc. But the most important
item exported to the USA from our country doesnt enjoy the facilities under GSP scheme.
According to the source, only 10% of Bangladeshs exports enjoy these GSP facilities.

Undoubtedly, whenever we are talking about the international trades readymade garment
sector (RMG) comes at first in our mind. We are the second largest RMG exporter in the
world after China. Moreover, Bangladesh has an exceptional opportunity to increase the
garment export demand to the U.S.A and European Union (EU) Countries because of its
cheaper labor costs. A greater portion our export earnings come from the RMG sector.
Currently, there are approximately 5000 garment factories in our country. A huge number of
people are working there and larger portion of them are female. Almost two crore people
are dependent on the RMG sector either directly or indirectly for their earnings. But now the
existence of the vital sector of our country is in a great threat.

Withdrawal of GSP Facilities from Our Country:

Although RMG sector plays a vital role for the economic expansion of our country, proper
attention has not been given ever to the working conditions and others facilities of the
labours in those factories. And now considering the working environment of labours & their
rights U.S can now cancel the GSP priority-free entry rights in our country. And if this
occurs in reality then surely the socio-economic structure of our country is going to be
distressed badly.

One of the largest buyers of ours is U.S.A and the EU countries have always sought a well
functioning working atmosphere with all required facilities. But unfortunately, the owners of
our RMG industries have never given needed attention towards these facilities. As a result, a
number of occurrences of fire have been occurred in the garment industries. Many people
lost their lives due to this type of unwanted occurrences. So the dissatisfaction of labors has
been increasing in the RMG sector of our country for the last few years. And after the
incident of Tazreen Fashion in Ashulia the news of fire accidents in other RMG factories and
other irregulations have been detected and focused through media to the most of the world.
Now including U.S many other countries are also raising questions about the working
condition and the given facilities of labours in the garment factories of Bangladesh.

On June, 2007 American Foundation of Industrial Labor (AFILO) which is the largest labor
organization in U. S.A raised their objections about providing the GSP facilities in our
country. They filed a petition before the U.S Trade Representative in order to remove the
name of Bangladesh from the list of enlisted beneficiary countries. They claimed that
Bangladesh does not follow the worker rights which include:

The right of association

The right to organize and bargain collectively

Freedom from compulsory labour

Minimum age for employing the children, and

Acceptable conditions of work with respect to minimum wages, hours of work and
occupational safety and health.

Since the filing of the petition Bangladesh Government defended themselves at two rounds
of hearing so far. One was in the year of 2007 and another was in the year of 2012. But the
recent firing incident in Tazreen Fashion and the building collapse in Savar have once again
raised their doubts about the safety measures of our garment factories. Moreover, the
political unrest of our country also increased the possibility of withdrawing GSP facilities
from our country.

Consequences of the Withdrawal of GSP Facilities:

Although RMG sector of our country doesnt come under the GSP scheme, Bangladesh had
to face a great loss to the export trades if the GSP facilities become withdrawal from our
country. As it would create a negative image of our country before the international market.
And thats why if Bangladesh wants to continue the GSP facilities in our country it is high
time govt takes all the necessary steps immediately regarding the safety and security issues
if labours.

Bangladeshs Shot to Retain the GSP Facilities:

Bangladesh is the largest single exporter country to the U.S.A. And to hold the position our
Govt, is trying very hard. Bangladesh Govt. is taking all necessary steps to stop these fire and
other accidents from occurring again and again. The Govt. has made stronger the Fire
Service and the Civil Defence of our country to take immediate actions while some incident
occurs. The labours of Bangladesh got small amount of salaries according to the biggest
competitor China in terms of RMG trades. Moreover, according to the buying law
International buyers should buy from China because of their enhanced facilities. But
Bangladesh costs $38 per labor whereas China costs $175 per labor. And because of this
cheaper cost Bangladesh is already in a good position in comparison to China. Child labor is
also less in our country. But the picture is different now. Because of lacking in the safety of
our garment labours Bangladesh Govt. can lose enjoying these GSP facilities. And as a lion
share of our exports goes to U.S.A which is 40%, there is no chance to pay less attention
anymore to this matter.

The decision of the final hearing would come by this June. Now we can just hope that the
RMG sector of our country can overcome this serious obstacle this time. But whatever the
outcome would be, it is necessary that the concerned authority looks after the security and
safety issues of labours and also handle this situation in future. Because the country may not
get lucky every time unless it takes required precautions.

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