New GSP of UK: Bangladesh’s RMG export prospects brighten

Bangladesh's garment export to the United Kingdom (UK) is expected to rise significantly as the British government will continue to offer duty-free benefits to developing nations even after they graduate from the least developed country (LDC) status.

As per the United Nations Committee for Development Policy, Bangladesh is scheduled to make the United Nations status graduation to a developing nation from an LDC in November 2026.

This will also lead to the country losing its preferential trade benefits.

Only the European Union (EU) will continue offering the LDC trade benefits to Bangladesh for a grace period of three more years, up to 2029.

However, the UK has introduced its new Generalised System of Preferences (GSP), namely Developing Countries Trading Scheme (DCTS), under which developing nations will also enjoy duty-free benefits to the UK markets.

The UK has introduced its new Generalised System of Preferences (GSP), namely Developing Countries Trading Scheme, under which developing nations will enjoy duty-free benefits to its market.

The DCTS replaces the EU GSP scheme, under which Bangladesh used to avail duty-free access to the UK, as a part of Brexit, for which the British government has been developing new trade policies.

In the post-Brexit period, Bangladesh's apparel has been staging a strong performance in the UK because of its price competitiveness.

For instance, Bangladesh exported $ 5.02 billion worth of clothing to the UK in the last fiscal year of 2022-23, which was $ 4.50 billion in FY2021-22, according to the Export Promotion Bureau (EPB).

And during the January-July period of 2023, it amounted to $3.11 billion, up from $2.72 billion in the same period of the previous year.

Currently the UK is the third largest export destination for Bangladesh after the US and Germany.

Bangladesh is the second largest garment exporter worldwide, accounting for 7.9 percent of the global market.

Every year the share of the country has been increasing, with top exporter China losing its market share for a shortage of skilled workforce and growing cost of production.

The UK's new DCTS came into effect recently, with the British government implementing the new policy after consultations with stakeholders, said Md Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

However, under the European Union's draft GSP proposal for 2024-34, Bangladesh's apparel products may face protectionist measures, said BGMEA President Faruque Hassan in a WhatsApp message.

But the UK's DCTS does not include such provisions, he said.

Currently, the BGMEA and the Bangladesh government are trying to lift the protectionist measures through consultations with the European Commission.

Accordingly, the government has already proposed that the EU extend the grace period for the status graduation up to 2032, citing the severe fallouts of the pandemic and Russia-Ukraine war, he said.

Even for economically vulnerable countries, the DCTS appears more flexible in terms of the implementation of certain international conventions, Hassan said.

"Apart from the UK, we have also been able to secure positive outcomes in market access to Canada and Australia," he said.

"We are launching the Developing Countries Trading Scheme (DCTS) to harness the power of trade to help developing countries grow and prosper," reads a statement from the UK's Department for Business & Trade.

"The new scheme offers developing countries one of the most generous sets of trading preferences of any country in the world," it adds.

The DCTS applies to 65 countries, including those that currently benefit under the UK's GSP, offering lower tariffs and simpler rules of origin requirements for exporting to the UK.

The GSP includes 47 countries in the GSP LDC Framework and 18 additional countries or territories classified by the World Bank as low income (LIC) and lower-middle income (LMIC).

It does not apply to countries classified by the World Bank as upper-middle income for three consecutive years, or to LICs and LMICs with a free trade agreement with the UK, the statement also said.