FTA WITH EUROPEAN UNION
Industry Desk: Bangladesh will face stiff competition in apparel export to European Union (EU) as its competitor country Vietnam signed a free-trade agreement (FTA) with the EU, said BGMEA president Rubana Huq. The EU signed the free-trade deal with Vietnam on June 30, paving the way for tariff reduction on 99 per cent of goods, traded between the bloc and the Southeast Asian country. After a long three-and-a-half years of negotiation, the agreement was signed in Hanoi between EU Trade Commissioner Cecilia Malmstrom and Vietnam’s Minister of Industry and Trade Tran Tuan Anh. The trade deal of the EU, the first of its kind with a developing country in Asia, will be effective after approval of the European Parliament. Local trade analysts said Bangladesh will face a serious blow, as its strong trade opponent Vietnam signed the FTA with the EU. Almost 11 per cent of Vietnamese apparel exports to EU will get complete duty waiver at the time of enforcement of this agreement, said Rubana Huq, president of BGMEA. Responding to a quarry, BGMEA president said 12.18 per cent share of Bangladesh’s apparel export to EU competes with Vietnam on these items. These items (147 in number) will face stiff competition and the possibility of trade diversion is higher in this category, she said. Within five years, 49 per cent of Vietnam’s and 62 per cent of Bangladesh’s total exports to EU will be competing directly. Apart from erosion of competitiveness and resulting trade diversion, this FTA may take a severe toll on the price level of the Bangladeshi manufacturers, Rubana Huq,said. Bangladesh apparel exports have lost 3.64 per cent value in terms of price per unit during 2014-2018, whereas Vietnam’s price has gone up. With the gradual elimination of tariff on Vietnam’s exports the price competition will be more intense. Currently, the EU is the largest RMG export destination of Bangladesh. If Vietnam, the country’s one of the main competitors, gets zero tariff facility to the EU, Bangladesh’s market share will shrink. In 2018, Bangladesh exported a total of 19.32 billion dollar worth of garment to EU with a growth of 11.17 per cent compared to 2017. During the same year Vietnam exported a total of 3.92 billion dollar with an annual growth of 9.74 per cent. Vietnam is currently is the sixth largest apparel exporting country to EU (holding a share of 4 per cent of EU’s import), whereas Bangladesh is the second (19 per cent of EU’s total apparel imports). This wide gap in market occupancy is a clear threat for Bangladesh, Huq added. Both parties will need to ratify the agreements and adopt legislative amendments for effective implementation of the FTA. She also informed that Vietnam did not ratify two fundamental conventions of ILO include 87 – freedom of association and protection of the right to organize, and 105 – abolition of forced labor, whereas Bangladesh ratifying 7 out of 8 conventions (including 87 and 98) will be penalized by the enforcement of this FTA. Vietnam has recently ratified ILO Convention 98 – right to organize and collective bargaining, and supposed to ratify ILO Convention 105 and 87 soon.