CHALLENGES FACED BY BANGLADESH RMG
Enactment of US Trade Development Act 2000
The Trade and Development Act 2000 more popularly known as US Trade Development Act 2000 was enacted in the USA on May 19, 2000. This act consisting of the African Growth and Opportunity Act (AGOA) and the United States-Caribbean Basin Trade Partnership Act was aimed to introduce a new trade and investment policy for Sub-Saharan Africa (SSA), expand trade benefits to countries in the Caribbean Basin Initiative (CBI), enhance the GSP and strengthen the US Trade adjustment assistance programmes. The US TDA 2000 provided preferential trade access, especially in textile and apparel sectors, to the countries of Africa and Caribbean Basin. The US Trade Development Act 2000 provided duty-free and quota-free access to 48 countries of Africa and 24 countries of the Caribbean Basin for exporting textile and apparel products to the US market on certain eligibility criteria. Some of the beneficiary countries, especially in the Caribbean Basin, are Bangladesh’s direct competitors in the US apparel market. Since this act was enacted, Bangladesh’s RMG had to struggle harder to maintain its competitiveness and prevent losing market share to these beneficiary countries.
Accession of China to WTO
China is perhaps the largest supplier of textiles and clothing in the world. The accession of the country to WTO happened on December 11, 2001 opening up a new vista of market access for itself. China has a very large production base of fabric, by using competitive and appropriate technology. China also has a very large pool of labor force for the highly labor intensive apparel industry. Both these factors ensure a very high degree of competitiveness. China’s accession to WTO has removed their major market access constraint. The high degree of integration that China already had between their textile and clothing sector enabled them to respond quickly to the demand of garment buyers. This posed the threat of the diversion of business to China in large quantum from countries like Bangladesh, urging them further to remain competitive. End of the MFA Era
The beginning of the year 2005 marked the birth of the post MFA era. The MFA (Multi Fibre Arrangement, also known as the Agreement on Textile and Clothing (ATC)) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005 in accordance with the WTO Agreement on Textiles and Clothing (ATC) of 1994. The period of MFA (1974-2004) enabled Bangladesh to emerge as a global supplier of RMG (Readymade Garments). But its termination threatened to change this scenario. Countries that relied on the secured market of quotas had to face enormous challenges amid intense global competition. Bangladesh’s heavy reliance on this sector gave rise to certain vulnerabilities. With neighboring countries, such as India and China, building ever more formidable RMG industries, a substantial part of Bangladesh’s RMG workforce was put at risk of job loss if the industry failed to stay competitive, not to mention considerable losses in foreign exchange earnings. In order to prevent such losses and remain a notable player in the apparel market, Bangladesh had to devise and implement strategies to improve its overall competitiveness and that of the RMG sector. A study by the World Bank titled, “End of MFA Quotas: Key Issues and Strategic Options for Bangladesh Readymade Garment Industry,” explored the factors that have brought success to Bangladesh’s RMG industry and examined the probable threats and key constraints in the post-MFA era. It also set out a number of strategic options for the sector to pursue, building on past achievements and competitive advantages in order to be able to enhance Bangladesh’s export competitiveness in the global marketplace. It suggested a dual approach that assisted Bangladesh to compete...
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