A better solution

Last year alone, over $828m in tariffs was paid to the US on goods, primarily RMG products, exported there from Bangladesh.

Bangladesh pays the second-highest rate of tariff duty (15.6%) for exports to the US market. This is almost twice the rate of other developing countries such as Vietnam and roughly five times the rate of China and India.

The Ticfa talks this week suggest there is no sign of this discriminatory rate changing soon. As RMG exports do not come under the suspended bilateral GSP arrangement, even restoration of GSP will not make a difference.

We call on policy-makers in both countries to give urgent attention to the elegant proposal made by the chief economist of the Bangladesh Bank for a Tariffs for Standards fund.

A portion, say a quarter of the $800m plus that Bangladesh pays the US to export garments, could be invested by the US in a fund administered by a third party such as the World Bank, to finance factory upgrades and improvements in working standards in Bangladesh.

The RMG industry needs substantial long-term investment to allow more modern factories to be built. Reports such as the 10 point plan issued by the RMG Action Group last year indicate that a $1bn fund is needed to make substantial progress.

While some overseas investors are reportedly raising money for factory upgrades, a multilateral government supported fund would make this much easier.

Tariffs for standards can address both countries concerns, by applying money which is already being collected to improve factories and working conditions.