US Suspends Bangladesh GSP as Factories Collapse Showing Poor Labour Standards

The US has suspended Bangladesh from its Generalized System of Preferences (GSP) scheme, according to an announcement released last week by Washington’s top trade official. The news comes following growing concerns over labour conditions in the Asian country, particularly after a garment factory collapse in April that killed over 1100 workers.

“Our GSP statute requires basic standards for worker rights and worker safety as a condition of eligibility,” US Trade Representative Mike Froman said in explaining the Obama Administration’s decision. “Despite our close engagement and our clear, repeated expressions of concerns, the US government has not seen sufficient progress towards those [labour] reforms.”

The US had already been reviewing whether to keep Bangladesh in the scheme before April’s factory collapse, given other instances of reportedly unsafe working conditions. A separate factory fire in November 2012, for instance, had killed over 100 workers.

Under the GSP - a scheme that dates back to 1974 - developing countries deemed eligible by Washington can export certain goods to the US duty-free. Currently 127 countries count as GSP beneficiaries. Until last week’s suspension from the programme, Bangladesh was able to export some products - mainly tobacco, sports equipment, porcelain china, and plastic products - duty-free.

The country’s exclusion was announced as part of the US’ annual review of the scheme. The removal from the GSP does not, however, prevent the US from buying goods from the country.

The developing country has already enacted some measures to respond to international pressures for industry reform, such as raising the minimum wage for garment workers and allowing trade unions to be formed without the prior consent of factory owners, and is currently considering additional modifications to its labour laws.

Bangladesh is also a beneficiary of the EU’s “Everything But Arms” scheme, which is part of the bloc’s Generalised System of Preferences. That scheme - unlike Washington’s - does indeed include Bangladeshi apparel, meaning that any suspension by Brussels would have an impact on the country’s garment sector. The EU is also Bangladesh’s largest trading partner.

Shortly after the April incident, EU Trade Commissioner Karel De Gucht and High Representative of the Union for Foreign Affairs and Security Policy Catherine Ashton said that they were considering “appropriate action,” including through their GSP, in order to “incentivise responsible management of supply chains involving developing countries.”

De Gucht has since met with Bangladesh Foreign Minister Dipu Moni, after which the two sides said they had agreed to safeguard EBA benefits “through determined action to improve health and occupational safety standards in the export-oriented Ready-Made Garment factories in Bangladesh.”