What is GSP? Why it is Necessary for Textile Sector of Bangladesh?

What is GSP? Why it is Necessary for Bangladesh Textile Sector?

Md. Ferdus Alam
Department of Textile Engineering
Southeast University
Mobile: 01925419270
Email: Ferdus.j@gmail.com
Facebook: Ferdus Alam

The Generalized System of Preferences (known as GSP for short) is a formal system whereby a wide range of industrial and agricultural products originating in certain developing countries are given preferential access to the markets of the developed country. Actually, GSP is an instrument by which developed nations help the poorer countries foster more trade. The GSP scheme is specifically designed to benefit certain developing countries and integrate them into the world economy.

It is provides garment manufacturers in Bangladesh with duty-free access to the market of the developed country--subject to certain conditions relating to the origin of the materials used in the manufacture of the garment. Bangladesh is allowed to export nearly 5,000 products duty-free to the United States, which purchases about 25 percent of the country’s $18 billion in annual apparel exports.

Importance of GSP Status:
Bangladesh has an excellent opportunity to boost exports of garments to the USA and EU countries where demand for
  • Low price
  • Good quality
  • Capacity
  • GSP status
So, GSP status is very important for us.
  • With the GSP status, Bangladeshi garment products can enter the market duty free. On the other hand, its absence, it has to pay 12 percent import duties for most products. This status helps decrease the cost per unit of garments, causing the demand to rise.
  • This not only helps the garment industry but also the entire economy.
  • Increased trade means higher export earnings which help promote further industrialization, leading to higher economic growth.
  • Now let us look at a more concrete example. Bangladesh’s apparel exports to the EU made a leap since January 2011 when it allowed GSP for Bangladeshi garments made from imported fabrics. Previously, Bangladesh used to enjoy the GSP benefit only for those garments made from local fabrics.
  • There is a 46 percent rise in apparel exports between a year without and with GSP, indicating the importance of this status in the country’s apparel industry.
    Graph of GSP
  • Without it, the price per unit of garment will rise and this may lead to many European buyers turning their backs on our products.
***But a few month ago, President Barack Obama has suspended long-time US preferential trade benefits, or GSP status, for Bangladesh in a mostly symbolic response to dangerous conditions in the garment industry that have cost more than 1,200 lives in the past year.

And recently, Bangladesh runs the risk of losing its GSP facilities in the European Union (EU).

As a result of losing the GSP facility will cost Bangladesh millions of dollars in taxes as well as will lead to the loss of an essential ingredient in our brew.

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Mazharul Islam Kiron is a textile consultant and researcher on online business promotion. He is working with one European textile machinery company as a country agent. He is also a contributor of Wikipedia.

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