The European Retail Sector Is At The Heart Of Eu-bangladesh Relations
Director General of the Foreign Tarde Association (FTA)
It is a proven fact that the growth experienced in Bangladesh over the past decade was mainly due to increased trade with the EU. Between 2005 and 2014, the total volume of EU-Bangladesh trade has increased from around €5 billion to over €14 billion. Textiles and clothing dominated exports from Bangladesh while machinery and transport equipment predominated in Europeans’.
This close relationship is maintained through FTA’s active engagement on the ground, via our representative in Dhaka, who provides our Brussels office with frequent updates on the political and economic environment in Bangladesh. Furthermore, I have the opportunity to visit the country on a regular basis to meet with high-level political and business representatives, such as my recent trip in October 2015. In addition, this December I met with H.E. Ismat Jahan, Ambassador of the People’s Republic of Bangladesh to the EU to discuss topics of high importance for European businesses operating in Bangladesh, as well as the pressing issues in today’s relations between the EU and Bangladesh, and how the FTA could provide support in this process.
We are at an important moment in EU-Bangladesh relations for different reasons. Firstly, the country has rapidly developed over the past few decades, with an average annual GDP growth of 6.1% with prospects of becoming a mid-income country in the early 2020s. However, in such a scenario the country would no longer benefit from the Generalised Scheme of Preferences (GSP) ‘Everything But Arms’ status, which grants free exports to the EU. In order to maintain the preferential trading system with the EU, Bangladesh would have to apply for the Generalised Scheme of Preferences Plus (GSP+). This scheme demands compliance with 27 international core conventions on labour rights, human rights, environment and governance, which the country strives to apply. The country should prepare for this soon-to-be scenario and pave the way for an early compliance with the core conventions.
Secondly, the EU is currently setting up a Registered Exporter system (REX) in order to facilitate the certification of origin from GSP beneficiary countries. While Bangladesh is not planning to introduce the new system immediately, rather in the medium-term, FTA supports a prompt implementation of the system in order to allow traders from Bangladesh to benefit from the automated procedures and faster processing times.
Thirdly, improving the working conditions in supplying factories and farms in Bangladesh remains of utmost importance. The Business Social Compliance Initiative (BSCI), a service offered by FTA to support members in their efforts to improve labour conditions in their global supply chains, is working with businesses towards meeting these challenges in a sustainable way. Its development-oriented approach unites its participants around one common Code of Conduct, which draws on important international labour standards and sets out 11 core labor rights that they strive to implement in cooperation with their business partners.
In the aftermath of the Rana Plaza disaster, the “Accord” and the “Alliance” for Fire and Building Safety were set-up. FTA welcomes the important progress this has brought, but it agrees with the Bangladesh Government’s position that the Government itself must become more responsible for inspecting standards in the country. In this respect, FTA supports the view that the Accord and Alliance activities should not be extended beyond its agreed-upon time frame in 2018 and that the responsibility for ensuring worker, health and safety standards should shift to the Government and domestic authorities. Sharing the responsibility is key, and it should not rest only on the shoulders of European and international businesses but also local government and, most importantly, local businesses.
Embracing this holistic vision of sustainable supply chains, FTA is also supportive of the Partnership for Sustainable Textiles (the German “Textilbündnis”) established in October 2014, and actively participated in respective Working Groups. Furthermore, the FTA fosters other similar national initiatives that aim to bring about social, environmental and economic improvements all along supply chains. However, close coordination and cooperation is required to avoid duplication and additional layers of complexity and bureaucracy to already existing and successful programmes such as BSCI.
Fourthly, substantially more efforts are required in response to climate change and its consequences. In 2014, FTA launched a complementary sustainability service to tackle businesses’ environmental impact derived from their supply chain activities in sourcing countries, the Business Environmental Compliance Initiative (BEPI). BEPI is currently looking into developing its presence in Bangladesh with the aim of offering a full-package service for international buyers of consumer goods and domestic manufacturers.
Finally, Bangladesh remains a highly attractive sourcing place but more efforts are needed to overcome some of the generic barriers to higher market integration. As indicated by the FTA Trade Barometer, a quarterly survey among FTA members that assesses business developments in the import sector, companies are positive about the future development of the country and over 35% of those participants expect Bangladesh to – even further – increase in importance as a sourcing market in the next three years. However, many other challenges still remain to be tackled in the country and combined action from both public and private stakeholders will be required. Questions of political unrest, labour conditions, environment, building integrity, structural reforms and corruption need to be addressed more vigorously. In order to ensure the long-term sustainability of its economic growth and development, Bangladesh should diversify its economy. Sectors such as leather, agriculture, fisheries, and electronics industries currently amount to merely a fraction of the total exports to the EU, but have a large potential for future growth of the country.
All in all, there is no doubt that Bangladesh has made an important and remarkable journey over the past few years. Our latest publication, “FTA Focus: Is Bangladesh a Success Case?”, provides a balanced view of the country’s development since 1991. The document underscores the contribution of the ready-made garment industry to the economic and social development in Bangladesh, and highlights the next objectives for the industry: a gradual implementation of a social security system, an increase in salaries and improvement of transport infrastructure. We, the retail and import sector, stand ready to help and support the country’s further development.
WHAT IS FTA?
The Foreign Trade Association (FTA) is the leading business association of European and international commerce advocating the values of free trade and sustainable supply chains. Representing over 1,700 retailers, importers and brand manufacturers, our association has a long-standing partnership with Bangladesh, a country that has become the second most important sourcing destination for FTA members.