Workers arrive early in the morning at the One World Apparel factory in Port-au-Prince to assemble garments for export from Haiti. The current preferences list excludes several major sectors, including clothing. Credit: Ansel Herz/IPS

By Carey L. Biron
WASHINGTON, Jul 18 2013 (IPS)

A broad spectrum of interests are urging U.S. lawmakers to extend a law offering trade preferences to developing countries, slated to expire at the end of the month.

U.S. business lobbyists as well as development experts are stepping up calls to re-authorise the agreement, known as the Generalised System of Preferences (GSP), ahead of a Jul. 31 deadline. Failure to do so, advocates warn, would cost U.S. companies some two million dollars per day and likely lead businesses to shift contracts away from some of the least-developed countries covered by the GSP agreement.“If you raise tariff levels for products coming from these countries, you will see business agreements shifting to other countries where the economics are more stable.” -- Daniel Anthony of the Coalition for GSP

While a bill to extend this system was finally introduced on Wednesday in a House of Representatives committee, those pushing for an extension are warning that these consequences will still come to pass if Congress chooses to act after the deadline, as lawmakers have done repeatedly in the past.

“We are so happy that the renewal process has taken this very important step,” Laura Baughman, executive director of the Coalition for GSP, a Washington advocacy group representing U.S. businesses, told IPS in a statement.

“[But] the clock is ticking more loudly as the days advance toward July 31. Not only will expiration adversely affect more than a hundred developing countries who use GSP, but it will hurt their U.S. customers and workers who use products imported under GSP to make other products in the United States.”

In the United States (other developed countries have similar agreements), GSP has been in effect since the mid-1970s, aimed in part at strengthening developing economies. Today, it eliminates tariffs on goods imported to the United States from some 127 developing countries, with additional coverage for 43 countries dubbed “least developed”.

The set-up provides for lower prices for imported products used by U.S.-based manufacturers or retailers. Foreign-made car parts, for instance, are an important item under GSP, which last year impacted on around 20 billion dollars’ worth of U.S.-imported products.

“Through GSP, some of the poorest countries in the world get a shot at sharing in the benefits of international trade,” Charles Rangel, a member of the House of Representatives and a co-sponsor of the re-authorisation bill, said Wednesday.

“It is vital to our commitment to promote economic development, democracy, worker rights, rule of law, and other fundamental values in the world. This is a programme that has received broad, bipartisan support virtually every time it has come up for renewal. We need to move on it now.”

Advocates worry that if Congress fails to re-authorise GSP by the Jul. 31 deadline, the resulting price hikes for imported products will severely impact on small and medium-sized businesses in the United States. In turn, this lack of pricing stability could lead companies to find more stable sourcing contracts elsewhere.

“If you raise tariff levels for products coming from these countries, you will see business agreements shifting to other countries where the economics are more stable,” Daniel Anthony, director of research and government relations at the Coalition for GSP, told IPS at a briefing last week.

“But unfortunately there’s no way to know the full effects of those decisions, given the vast number of factors involved.”

During each previous period after which GSP expired and awaited retroactive re-authorisation by Congress, the value of GSP imports fell precipitously. In 2010, for instance, the re-authorisation process took nearly a full year, and the value of those contracts fell by nearly five billion dollars.

Unlike the vast majority of legislation moving sluggishly through the U.S. Congress today, GSP has historically enjoyed broad bipartisan support. Yet despite this support, the Congress has repeatedly re-authorised the system for just a few years at a time, thus leading to the current situation in which an already dysfunctional Congress is overloaded with work.

In terms of trade discussions alone, the U.S. is currently engaged in massive negotiations towards two huge free trade agreements, while several other trade bills are pending. On Wednesday, one of the primary authors of the re-authorisation bill, Congressman Dave Camp, stated that he hoped to get the GSP legislation done by the end of the year.

Least-developed focus

It is difficult to gauge the impact of the U.S. GSP on developing countries, partly because the United States has several other trade preference programmes. According to a report released in January by the official Congressional Research Service, total U.S. imports from all GSP countries has grown substantially in recent years, a trend that the report cautiously suggests could have helped create “some export-driven growth in developing countries”.

Yet the report also concludes: “for individual industries in developing countries, the positive impact of the GSP could be seen as quite significant.”

Very few are currently calling for GSP to be ended outright. But development advocates and some economists have been pushing for alternative trade preference schemes that could potentially have a far greater impact on the world’s least-developed economies.

The top five countries exporting goods to the United States under GSP, after all, are India, Thailand, Brazil, Indonesia and South Africa, nearly all currently considered “middle income”. Indeed, this is a fact that some members of Congress have increasingly pointed out amidst calls for reforms.

In addition, the current preferences list excludes several major sectors, including clothing, where relatively cheap labour in developing economies could offer a major advantage.

Indeed, the recent high-profile decision by the United States to rescind GSP preferences to Bangladesh in the wake of a series of incidents highlighting poor – even lethal – working conditions in that country’s massive garments sector was undermined by the fact that garments, which constitute some 90 percent of Bangladesh’s exports to the United States, were not actually covered under GSP.

“The administration should seek congressional approval for duty-free, quota-free market access for all least developed countries, with a safeguard for existing African clothing exports,” Kimberly Elliott, a trade and globalisation scholar at the Center for Global Development, a Washington think tank, wrote in a June letter to the new U.S. trade representative (USTR), Michael Froman.

“The aim should be to limit the benefits for already competitive exporters only as much as necessary to shield African exports.”

Thus far, there has reportedly been no substantive response to this suggestion from Froman’s office.

Elliott notes in a follow-up blog: “Since U.S. movement on duty-free, quota-free market access would also be a big contribution to making the meeting of trade ministers in Bali in December a success, I’m puzzled by USTR’s resistance to this.”

Twenty-five-year-old Razia is one of 2,500 survivors of the factory collapse in Bangladesh. Credit: Naimul Haq/IPS

By Jim Lobe
WASHINGTON, Jun 27 2013 (IPS)

Citing Bangladesh’s alleged failure to respect international labour rights, U.S. President Barack Obama Thursday suspended trade benefits for the South Asian country’s exports under the Generalised System of Preferences (GSP).

The move came two months after the collapse of a building, the Rana Plaza, in Dhaka that killed more than 1,200 textile and garment workers.

The disaster, which followed last November’s fire that killed 112 workers at the Tazreen garment factor, drew unprecedented attention to labour conditions in Bangladesh’s fast-growing apparel industry and to the major western retailers that are its chief customers.

“I have determined that it is appropriate to suspend Bangladesh’s designation as a beneficiary developing country under the GSP program because it is not taking steps to afford internationally recognised worker rights to workers in the country,” Obama, who is currently on a tour of Africa, said in a statement issued by the White House.

“The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” said U.S. Trade Representative (USTR) Michael Froman after the White House announcement.

He noted that Washington would begin “new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented”.

A broad indirect impact

The direct impact of Thursday’s decision, which followed a multi-year USTR review initiated by U.S. labour unions that have long complained about working conditions in Bangladesh, is likely to be minimal, since the country’s apparel exports – its biggest industry by far – are not covered by Washington’s GSP programme.

“GSP doesn’t cover sensitive products like apparel,” said Dan Anthony of the Coalition for GSP, a lobby group for U.S. companies that benefit from GSP, which provides about 750 million dollars a year in tariff relief for products from developing countries. Last year, importers of Bangladeshi products received about 35 million dollars in GSP benefits.

Of that total, the tobacco sector was the largest beneficiary, accounting for over 11 million dollars in exports. Exports of golf equipment, porcelain and china hotel and restaurant tableware, and plastic bags each received around five million dollars in GSP benefits, according to Anthony.

While the total represented less than one percent of the more than four billion dollars in apparel goods imported to the United States from Bangladesh last year, the indirect effects of the GSP suspension are likely to be much greater, according to labour activists and their supporters.

“The decision to suspend trade benefits sends an important message to our trading partners,” according to a statement released by the Richard Trumka, the head of the AFL-CIO, the largest U.S. trade confederation which initiated the government’s review of Bangladesh’s labour conditions more than six years ago.

“Countries that benefit from preferential trade programmes must comply with their terms. Countries that tolerate dangerous and even deadly – working conditions and deny basic workers’ rights, especially the right to freedom of association, will risk losing preferential access to the U.S. market,” he said.

Others stressed that the decision will exert renewed pressure on U.S. apparel companies to adhere to binding agreements regarding their responsibility to improve and oversee working conditions in the garment factories, including the Accord on Fire and Building Safety in Bangladesh (Safety Accord) that has been signed by several dozen mainly European retailers, such as H&M, Primark and the Benetton Group, since it was concluded last month.

“While the decision is an important step by the U.S. government, the decision alone may not ensure that action will be taken to end the epidemic of senseless deaths of Bangladesh’s garment workers,” said Liana Foxvog, organising director at the International Labour Rights Forum (ILRF) here.

“As a next step, we ask the U.S. government to call on U.S. companies like Gap and Walmart to make legally binding commitments to invest in the future of Bangladesh garment workers by joining the Safety Accord,” she said.

Most major U.S. companies have so far declined to sign the accord due to concerns that disputes could wind up before U.S. courts that could grant huge damages for non-compliance.

Safety considerations

Bangladesh is currently the world’s second biggest apparel exporter, with an estimated 5,000 textile plants. Since last November, more than 1,500 workers have died in fires and the Rana Plaza collapse.

In documents submitted to the USTR, the Bangladeshi government itself admitted that the rapid expansion of the textile industry “has outstripped the pace of our progress” in ensuring adequate regulation and oversight.

For all of the country’s plants to meet minimum safety standards, improvements will cost on the order of about three billion dollars – or an average of 600,000 dollars per factory, according to labour activists who worked on the Safety Accord. That accord requires signatories to pay for all of the improvements.

The Wall Street Journal reported Thursday that major U.S. retailers, including Wal-Mart and Gap, are expected to reach their own accord next month that would establish a 50-million-dollar, five-year fund to support the needed improvements.

Unlike the Safety Accord, the proposed plan would strictly limit the circumstances under which any disputes could be taken up by U.S. courts and limit the liability they could face there.

Activists consider the U.S. plan, which is being negotiated with the help of the Bipartisan Policy Centre, to be inadequate in almost every respect.

Last week, 113 organisations sent a letter to Secretary of State John Kerry urging the administration to support the Safety Accord. Public demonstrations against the recalcitrant companies are being organised in front of their stores in 30 U.S. cities as part of the International Day of Action to End Deathtraps.

“No one will want to wear clothing that is ‘Made in Bangladesh’ if it is made on the blood of workers,” said Senate Foreign Relations Committee chairman Robert Menendez, who held a hearing on labour issues in Bangladesh earlier this month. “It’s time for American industry to show leadership and work with their European counterparts on a global standard for safety.”

Labour activists stress that safety is not the only challenge workers in Bangladesh face. Threats and violence against union organisers are also common.

Last month, the International Labour Organisation and the World Bank rejected Bangladesh’s application to join their “Better Work” programme, which carries out unannounced inspections of textile factories, complaining that the countries labour laws were too weak and repression against union organisers too great to warrant the country’s membership.