WASHINGTON – President Barack Obama announced Thursday the suspension of U.S. trade privileges for Bangladesh in response to growing concerns over labor rights and worker safety there.
The decision is the culmination of a years-long review of labor conditions in the impoverished nation. Pressure on the Obama administration to act intensified after more than 1,200 people died when a factory collapsed April 24, one of the global garment industry’s worst accidents.
In a proclamation, Obama said Bangladesh was not taking steps to afford internationally recognized worker rights to employees in that country.
Suspending the benefits developing countries receive as part of the Generalized System of Preferences program for Bangladesh is a highly symbolic move. As Bangladesh’s biggest trading partner after the European Union, the United States hopes it can exert significant pressure on Bangladesh’s authorities to reform labor practices and ensure workers’ rights in a country where factory accidents have been all too common and the minimum wage is just $38 per month.
Recent deadly industrial accidents “caused everyone to grieve but underscored problems we have seen in Bangladesh for some time,” U.S. Trade Representative Michael Froman said in a conference call with reporters after the announcement. “Our goal is to see Bangladesh restore its eligibility, but to see workers in safe conditions.”
He said the administration has no timetable in mind for restoring Bangladesh tariff breaks, noting that this will depend on the progress made in improving workers’ conditions.
The United States expects the country to follow through on approving a new labor law and take a series of other steps being negotiated with the U.S. Labor Department, unions, civic groups and others. The suspension becomes effective in sixty days after publication in the federal register.
Bangladeshi officials argued strongly against a suspension and have said that their country is making progress on improving textile industry conditions.
The suspension abolishes tariff breaks granted to about $35 million worth of imports annually. The breaks cover a wide variety of goods that are imported by the United States free of tax. However, the breaks do not apply to Bangladesh’s textile industry, which sells in excess of $4.5 billion of goods to the United States each year and in 2010 accounted for 90 percent of Bangladeshi exports to the country.
Although the GSP tariff breaks apply to only a small percentage of the country’s exports, Froman said the suspension “has greater impact than the numbers themselves suggest, given the public attention and the importance the government attaches.”
Labor unions and Democrats on Capitol Hill have been pressing the Obama administration to take this step.
“Bangladesh’s labor laws must be dramatically improved, and suspending GSP benefits will hopefully help kick-start these overdue reforms,” said the Foreign Relations Committee president, Sen. Robert Menendez.
Trade advocacy groups generally argue against trade-disrupting measures on the grounds that the brunt of the pain falls on workers.
Kimberly Elliott, a trade specialist at the Center for Global Development who has been following issues in Bangladesh, said the administration was taking the wrong tack if it wants to change the country’s behavior. She believes that offering tariff breaks to textiles — and the prospect of a boost in Bangladesh’s already massive exports to the U.S. — would likely be a more effective strategy. That move would be controversial, however, among U.S. textile companies and poor countries like Haiti and Kenya that benefit from U.S. trade preferences.
“It is pressure from buyers that is going to get Bangladesh to change,” she said. “This case has been dragging on for six years, and it took a building collapse and a thousand people dying for the U.S. government to get to this point. It is not clear to me that it sends that much of a signal.”
Another alternative would be to increase tariffs directly on textiles, a move that also would hurt the dozens of U.S. companies that rely on Bangladeshi garment factories.