Earlier today, the US Trade Representative issued a call for comments on a petition to withdraw, suspend, or reduce Bangladesh’s benefits under the Generalized System of Preferences (GSP) over its failure to improve labor rights. There is no question that working conditions in Bangladesh’s garment factories are abysmal and that efforts to organize workers to protect themselves are suppressed. Several months before the tragic fire that killed more than 100 workers at Tazreen Fashions, a labor rights activist was found tortured and killed. It would be tough to make a case that Bangladesh meets the GSP eligibility condition of “taking steps to afford internationally recognized worker rights.”
The problem with this “stick” is that it is a tiny one since Bangladesh receives virtually no benefits under the GSP program. Clothing, the sector that most often generates the appalling headlines, accounts for more than 90 percent of Bangladesh’s exports and is not eligible for duty-free treatment under the GSP program. Through the first 10 months of 2012, Bangladesh received GSP benefits on only $30 million in exports to the United States, less than one percent of the total, while the rest were levied an average import duty of 15 percent. (All numbers are from the US International Trade Commission’s Trade Dataweb.) So withdrawing Bangladesh’s GSP eligibility could signal American displeasure, but it would have little or no impact on the country’s clothing sector.
This is a case where US trade negotiators have a powerful carrot that might work better. Three years ago, a CGD working group criticized the United States for being one of the few rich countries that did not provide complete, or nearly complete, duty-free, quota-free market access for all least-developed countries (LDCs). Although full market access is one of the elements of the global partnership called for under the eighth Millennium Development Goal, the United States provides such access only for eligible African exporters under the African Growth and Opportunity Act. Today, the United States even lags some of the large emerging powers that launched programs of their own that are more generous than what the United States provides, particularly for 14 poor Asian exporters, including Bangladesh.
Duty-free, quota-free access remains politically difficult in the United States for reasons I discussed here. While our working group argued that the feared costs of extending market access to all LDCs were exaggerated, our recommendations have thus far fallen on deaf ears. But what if that access could be used to leverage better lives for millions of poor young women in Bangladesh’s garment factories? Along with the ever-nearer 2015 deadline for implementing the MDGs, this is just one more reason that the Obama administration and Congress should move on duty-free, quota-free market access for all LDCs.