Duty-waiver can raise annual cotton apparel exports to US by up to $800m: Expert

Bangladesh's cotton garment exports to the USA can grow by $400-800 million annually if the US government waives duty on exports of apparel made from cotton imported from America, said a researcher at a seminar in Dhaka on Monday.

At the same time, through such a facility, the US can also export $3 billion worth of cotton to Bangladesh in the next five to six years, said Mohammad Abdur Razzaque, research director of the Policy Research Institute (PRI) on Monday.

Speaking at a seminar on Bangladesh–US trade and investment, organised by the Economic Reporters' Forum (ERF) at its auditorium in Dhaka, Razzaque said, "A cotton GSP scheme is a special scheme that the US can take for Bangladesh to allow duty-free export of garment items made from American cotton to the American market."

Over the last few years, the local garment suppliers and the government have been negotiating with the American authorities for a 15.62% duty waiver to be permitted on the garment items exported to the USA made from imported cotton from America.

Bangladesh's apparel exports to the US market were $9.75 billion in 2022, of which cotton apparel export value stood at $6.91 billion, according to data from the Office of Textile and Apparels (Otexa).

Razzaque, who is also chairman of Research and Policy Integration for Development (RAPID), a private think tank, continued that this scheme is a low-hanging fruit for both countries, which means if the government of the two countries want they can implement it easily. It will be a win-win for both.

Only the sky is the limit for attracting investment from the USA in different sectors in Bangladesh, said Masrur Reaz, chairman of Policy Exchange of Bangladesh, a private think tank.

Urging a reinstating of GSP status for Bangladesh, Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), stated that the cotton GSP scheme will be a win-win situation for both countries as local millers import 11.5% of the total nine million bales of required cotton from America.

Bangladesh has a lot of scope to explore the US markets as the local suppliers can meet 9.7 percent demand of the total import of apparels by the USA in a year, he continued.

"I hope the US will consider the revival of the GSP as Bangladesh has complied with the 16-point Bangladesh Action Plan provided by the US government to Bangladesh for GSP reinstatement," Hassan said.

Mohammad Ali Khokon, president of Bangladesh Textile Mills Association (BTMA), informed the seminar that currently Bangladesh imports 20% of required cotton from India.

John Fay, commercial counsellor of the US Embassy in Bangladesh, said there is a possibility of reducing the duty on export of garment items to the USA from Bangladesh. 

However, he did not elaborate on the matter.

Fay mentioned some challenges to investment in Bangladesh, such as problems with profit repatriation, intellectual property rights, data protection act and challenges of logistics services.

There is a big investment potential for the US in healthcare, ICT and education, Fay added.

He suggested that Bangladesh improve in labour rights, labour law reforms and freedom of association for reviving the GSP, which lapsed in December 2020. The US Congress has not taken up any new scheme until now.

Now in terms of getting it back, the GSP is a potential future option and DFC (The US International Development Finance Corporation) financing is a potential future option and a signal that Bangladesh is back being attractive as an investment market, Fay continued.

ERF President Mohammad Refayet Ullah Mirdha chaired the seminar, which was moderated by its General Secretary Abul Kashem.