by Abu Sufian
Recently, Finance Adviser Dr Salehuddin Ahmed has stated that the country is pursuing diplomatic efforts to revive GSP facilities in order to minimize its trade imbalance with the US. Earlier, Commerce Adviser Sheikh Bashir Uddin stated that to regain the duty-free access (GSP-Generalized System of Preferences trade program) of Bangladeshi products to the US market, the country’s demands regarding labour rights must be met. The interim administration is moving in that direction. This is undoubtedly a good initiative by the present interim government, as GSP programs offer preferential trade treatment, like duty-free access, to developing countries that meet specific criteria, including respecting international labour standards. It is to be noted that strong labour law implementation and enforcement are not just about compliance with GSP requirements; they are also essential for promoting fair and sustainable economic development.
Currently, 85% of Bangladesh’s total export earnings come from ready-made garments. The country is ranked second in the world in terms of ready-made garment exports. Bangladesh’s competitors are now Vietnam, Cambodia, and Laos. However, it will be difficult for Dhaka to maintain its position in the global garment export market in the coming days. The main reason for this is that labour laws in Bangladesh are not up to international standards. Bangladesh has been repeatedly criticized by the international community for its violations of human rights and labour rights. Sadly, Bangladesh has been widely criticized for its working conditions, labour rights, child labour, trade unions, and minimum wages.
On December 1, 2024, the annual wage increase for workers working in the garment industry was increased by 9%. Is it possible to maintain the standard of living of workers by increasing their annual wages by 9% amid high food inflation? The workers wanted 15%. Dissatisfaction among the workers has grown over this decision. Because a 9% wage increase amid high inflation will fail to ensure the standard of living of the workers. In Bangladesh, wage rates do not increase at the same rate as inflation. According to BBS data, food inflation rose to 14.10% in July last year. At that time, the wage growth rate was only 6.17%. Later, in November, the wage rate increased by 8.10% against food inflation of 13.80%. Based on these statistics, it can be said that the minimum wage demanded by the workers of 25,000 taka was not unreasonable.
Due to inflation, real income and purchasing power are decreasing. Workers are now being deprived of balanced food. They are falling sick. As a result, the productivity of workers is decreasing. This is having an impact on the economy. Eminent economist Dr Debapriya Bhattacharya, head of the Economic White Paper Committee, said that Bangladesh is stuck in the middle-income trap due to the low productivity of the labour force in the industrial, agricultural, and service sectors. The International Labour Organization (ILO) report for 2024-25 said that Bangladesh ranks third in South Asia in the list of low-wage workers. The minimum wage in Bangladesh is $105 (now increasing slightly), Vietnam is $132-192, Sri Lanka is $125, Jordan is $366, Haiti is $159, and Indonesia is $258-320. Bangladesh has been operating its garment production operations with cheap labour for 45 years. In today’s world, it is not possible to survive in the competitive market with cheap labour.
The European Union (EU) and the United States have repeatedly expressed concern about cheap labour in Bangladesh. They have been proposing to increase the minimum wage for workers in line with global standards. A US labour delegation came to Dhaka from November 22-25 last year to review labour-related issues. The US representative said that the price of goods will not increase if they are stuck with cheap labour. The world’s leading brands never buy cheap labour. If the wages of workers in the ready-made garment sector in Bangladesh increase at a satisfactory rate, US buyers will promise long-term purchase orders. It is worth mentioning that the United States signed a deal with Cambodian factory owners that included stipulations stating that if worker pay is increased, US buyers will assure advanced booking through long-term purchase orders.
The United States wants the implementation of 11 points related to labour rights in Bangladesh. As part of this, trade union registration must be made easier to ensure labour rights. It has also emphasized increasing the minimum wage and ensuring labour standards. In Bangladesh, a trade union can be formed in a factory with a minimum of 20% of worker consent. The United States now wants to reduce it to 10%. The US Embassy in Dhaka said in a press release that addressing long-term challenges to labour rights is critical for Bangladesh’s democracy and governance. It added that worker empowerment is essential for sustainable and inclusive economic growth, respect for human rights, democratic stability, and gender equality.
Bangladesh has been deprived of trade benefits due to labour-related issues. If it leaves the least developed country status, Bangladesh will not get preferential trade benefits (GSP) from the EU. Then, goods will have to be imported with high tariffs. Again, if labour rights are not ensured, GSP Plus benefits from the EU will not be available. GSP+ is a special incentive package for sustainable development and good governance of vulnerable developing countries. Vulnerable countries refer to those suffering from a lack of export diversification and insufficient integration within the international trading system. To get GSP Plus benefits from the EU, Bangladesh will have to comply with 32 international conventions. In addition, the National Action Plan (NAP) formulated by the government on the labour sector will have to be implemented. The NAP covers broadly nine issues, including framing Bangladesh Labour Law in compliance with the ILO standards on freedom of association and collective bargaining, and elimination of child labour in all its forms by 2025.
58% of Bangladesh’s total exports go to EU countries. If the GSP is terminated, an 8.7% duty will have to be paid. Export earnings will decrease. Goods have to be exported to the United States with a 16% duty. Rapid Research Institute said that 21.7% of the garments the EU imports from non-EU countries are imported from Bangladesh. So, the EU market is important for Bangladeshi garment exports. It is necessary to mention that the US cancelled Bangladesh’s GSP benefits in the wake of the Rana Plaza collapse and the Tazreen Fashions fire. However, if Bangladesh can make progress on labour laws, labour rights, and human rights, then the chances of getting GSP Plus benefits from the EU will increase. The good news is that Bangladesh has accepted the ‘Universal Periodic Review’ given by the EU in 2023. It is urgent to implement it.
The interim government has started reforms in many sectors. In the meantime, a ‘Labour Reform Commission’ has been formed. The United States has welcomed the formation of this commission. The chief advisor wants to bring labour laws at par with global standards. Remittances sent by expatriates and export earnings have sustained the import-dependent economy of Bangladesh. Bangladesh has no choice but to take all necessary measures to establish labour rights to sustain garment export markets. If Bangladesh wants to survive with its peers, then labour rights must be ensured.
The author:
Abu Sufian: Independent Researcher and Freelance Columnist.
