The new reciprocal trade agreement signed between Dhaka and Washington on February 9 was initially considered a major diplomatic success. But now there is growing confusion and concern over the “cotton segment” in Bangladesh’s $47 billion apparel industry. This provision states that reciprocal tariff exemption will be available only if the apparel is made from American cotton or man-made fibers.
Under the agreement, a 19 percent reciprocal tariff has been imposed on Bangladeshi apparel in addition to the already applicable MFN duty of about 16.5 percent. In case of no relief, the total fee reaches 35.5 percent. The government says that the 19 percent tariff on clothes made from American raw materials will be removed, but the industry argues that the basic duty will still be applicable.
BGMEA President Mahmood Hasan Khan clarified that the pre-agreement fees will not be waived. He says that even after getting concession, exporters will have to pay 16.5 percent duty, due to which the cost will remain high. Also, the agreement sets a “specified quantity” limit, which will depend on the amount of raw materials imported from the US.
Analysts and think-tank experts believe that the language of the agreement is vague and many technical aspects are not clear. If competing countries like India also get similar benefits, Bangladesh's competitive edge may weaken. In such a situation, it is necessary for the government to clarify the terms of the agreement, otherwise this much talked about deal may fail to provide the expected security.
