TICFA and GSP: A tenuous link
The Ministry of Commerce has been dogged by two difficult issues during the recent past. One is the dilemma whether to sign the proposed Trade and Investment Cooperation Framework Agreement (TICFA) with the USA, and the other is how to prevent being excluded from the GSP scheme of the USA over labour standards. It seems the Ministry believes the solution to both these problems to be one and the same: if Bangladesh signs TICFA, the USA would go slow on the GSP issue. In other words, the USA has upped the ante in respect of GSP benefits in order to pressurise Bangladesh into signing TICFA. The Commerce Minister has said as much.
The proposal for a trade and investment framework agreement (TIFA) was first proposed by the USA about a decade ago. The then government shied away from such an agreement in view of some clauses relating to labour and environmental standards, intellectual property rights (IPR) obligations and governance issues (corruption). Because of the discomfort of Bangladesh government, the USA deleted the environmental standards and corruption issues from their subsequent drafts. It seems the government later overcame its concerns about IPR obligations, but it was adamantly opposed to any mention of labour standards.
The government has not made the contents of the latest draft of the proposed TICFA public. Hence, it is difficult to make any definitive comments about it. Some parts of it have been leaked to the media, but their veracity cannot be guaranteed. The sticking point still seems to be labour standards.
The USA has signed trade and investment framework agreements with a large number of the relatively small developing countries and economic blocs. None of the large emerging countries, Argentina, Brazil, China or India, have such agreements with the USA and the only developed countries to sign TIFA are Iceland, Switzerland and New Zealand. All these agreements are of a similar format with about one-half of the agreement devoted to a preamble and the other half to articles. The preamble is a statement of good intentions and objectives, while the articles contain what the parties actually agree to do.
The issues that Bangladesh have (or had) difficulties with are (were) contained in the preambles. Hence, they are in the nature of good intentions or of objectives that the contracting parties aspire to; they are not required to be immediately implemented. It is noteworthy that the labour rights issues are routinely included in virtually all TIFAS. For example, the preamble of the TIFA with Pakistan, Malaysia or Sri Lanka has the following regarding labour rights:
‚ÄúRecognizing the importance of providing adequate and effective protection and enforcement of worker rights in accordance with each nation‚Äôs own labour laws and improving the observance of internationally recognized core labour standards‚ÄĚ
This excerpt suggests that the contracting parties recognise the importance of respecting its own laws in regard to labour rights and of gradually moving toward international core labour standards, which are consensually set by the International Labour Organization.
Bangladesh government has never adequately explained why it finds this minimal commitment to adherence to its own labour laws and to ILO‚Äôs core labour standards (to which it is a signatory) so unacceptable. Unless there are some compelling reasons that are not publicly known, such a statement in the preamble of a trade and investment framework agreement should not constitute a sufficient reason to discard it.
On its part the USA has attempted to make the agreement more acceptable by renaming it TICFA. The new draft is for a cooperation agreement rather than an outright agreement. US officials have let it be known that there is no scope for further revising the draft.
It should be borne in mind that an expression of good intentions about IPR and labour rights is common to virtually all TIFAs. It would be unwise to expect that an exception will be made for Bangladesh. The TIFAs (and TICFA) provide a convenient forum for discussion of trade and investment related issues with the US government on a regular basis. It does not bind either party to any specific measures. Currently Bangladesh has to request for opportunities for discussing any such issues, say duty-free access, with the US government. If Bangladesh had a TIFA with the USA, it could have raised these issues in every meeting. Of course, the converse is also true, the USA could raise labour or other issues in these meetings.
The trade and investment agreements are strictly government to government affairs. These are initiated by, and negotiated between, two governments. However, the current predicament of Bangladesh with the US Generalized System of Preferences (GSP) does not fall in this category. A petition to exclude Bangladesh from GSP benefits has been lodged with the US Trade Representative (USTR) in 2007 by an influential trade union organisation of that country namely AFL-CIO. Any number of people and organisations, including Bangladesh government, may give submissions to the USTR supporting or disputing the arguments of the complainant. The USTR will be in the role of an adjudicator deciding on the merit of the arguments of both sides in light of the rules and regulations under which GSP was granted to Bangladesh. It should be noted that this was not a suo moto case initiated by any agency of the US government.
The Commerce Minister‚Äôs apprehension that the GSP case has been initiated to force Bangladesh into signing TICFA may be misplaced unless he has confidential information that AFL-CIO and the US government are working in cahoots. Such a ‚Äėconspiracy‚Äô theory seems untenable in view of the fact that very recently AFL-CIO has petitioned the US government also not to sign a TICFA with Bangladesh. If there was no collusion, and the likelihood is that there was none, the signing of TICFA with the USA will in no way reduce the merit of the GSP case against Bangladesh which will proceed without let. Assuming that the government believes TICFA to be not in the best interest of Bangladesh, it may end up with both accepting an ‚Äėundesirable‚Äô TICFA and also having GSP facilities withdrawn or curtailed.
A careful analysis of the TICFA and the current GSP case suggest that they are entirely separate issues. Hence each must be dealt with on its own merit. Given the Bengali mind, it is not unusual that many see a US conspiracy since labour rights issues are raised in both TICFA and the GSP case of AFL-CIO.
US laws empower the President of the country to withdraw or curtail GSP benefits with respect to any commodity or any country. In making such a determination the President must consider several matters, ‚Äúone of which is whether a beneficiary country has taken or is taking steps to afford to workers in that country internationally recognized worker rights.‚ÄĚ
The US government has stated that ‚Äúbased on the most recent available information including updated reports from the AFL-CIO, the GSP sub-committee believes that the lack of progress by the government of Bangladesh in addressing worker rights issues in the country warrants consideration of possible withdrawal, suspension or limitation of Bangladesh‚Äôs trade benefits under GSP‚ÄĚ (Federal Register, 8 January 2013). This should make clear the USTR has determined that Bangladesh has not made meaningful progress toward protecting labour rights. Obviously, the defence arguments against the complaints of AFL-CIO put up by Bangladesh government and other stake holders during the hearings of 2007 and 2012 have not convinced the USTR that it has done enough in this regard. Whether or not the latest round of defence arguments presented by Bangladesh government and others will fare any better will be known when a final determination is made by the USTR.
The principal complaint of AFL-CIO is that ‚ÄúBangladesh has not yet taken sufficient steps to afford internationally recognized worker rights‚ÄĚ. Bangladesh government and employers have to convincingly demonstrate that contrary to this assertion they have actually taken effective measures to protect worker rights. With repeated factory ‚Äėaccidents‚Äô that gruesomely kill hundreds of poor workers and murder of union workers that are not properly investigated they have a difficult task.
M. A. Taslim is a Professor of Economics of the Department of Economics, University of Dhaka. He is currently holding the charge of the Chairman of the Department. He was formerly the Chairman of Bangladesh Tariff Commission.