WASHINGTON — The Obama administration is getting tough with Bangladesh.

This story first appeared in the June 28, 2013 issue of WWD. Subscribe Today.

The U.S. said Thursday it will suspend trade benefits to Bangladesh, turning up the pressure on the Southeast Asian nation to make serious reforms to workers’ rights and safety in the wake of two tragedies in the country’s apparel sector that claimed the lives of more than 1,200 garment workers.

The U.S. and European Union have each been conducting reviews of General System of Preferences trade benefits to Bangladesh, intensified by the Rana Plaza building catastrophe in April that claimed 1,129 lives and an earlier fire at Tazreen Fashions that killed 112 garment workers.

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“The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” said U.S. Trade Representative Michael Froman. “While taking this action today, the administration is also initiating new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented.”

The suspension of benefits will come 60 days after the notice is published in the Federal Register. The entire U.S. GSP program expires at the end of July and must be renewed by Congress. The U.S. did not make any stipulation for the renewal of Bangladesh’s GSP status.

While the punitive action by the U.S. will affect as much as $34.7 million in Bangladeshi imports into the U.S. under GSP, the hit to Bangladesh’s economy was considered modest, since the country’s largest export — apparel — is not covered by the U.S. trade preference program and remains unaffected.

The European Union’s GSP program covers apparel and were the trading bloc to suspend or withdraw benefits to Bangladesh, the impact on its economy would be significantly greater.

“We only act if the [International Labor Organization] determines that a serious and systematic violation of core labor conventions exists,” said a spokeswoman for the EU delegation to the U.S. “This ensures that we lend our maximum support to the ILO process, and that we act in full respect of our [World Trade Organization] commitment to avoid discrimination. The ILO will monitor progress especially throughout 2014 and we will follow this process closely.”

The spokeswoman also noted that the EU would only consider withdrawing GSP in line with international law and “only if this would help rather than harm.”

Since the EU GSP program covers apparel, “a decision to withdraw [benefits to Bangladesh] may generate hardship for literally millions,” she said.

Imports of goods from Bangladesh to the U.S. totaled $4.9 billion in 2012, according to USTR. The four largest import categories from Bangladesh were woven apparel ($3.3 billion), knit apparel ($1 billion), miscellaneous textile products ($178 million) and headgear ($115 million).

In 2012, the total value of imports that entered the U.S. duty-free under GSP was $19.9 billion, including $34.7 million from Bangladesh. Top GSP imports from Bangladesh in 2012 included tobacco, sports equipment, porcelain china and plastic products.

Asked on a conference call with reporters if the action taken by the U.S. was primarily “symbolic,” in light of the fact that GSP does not cover apparel, Froman said: “While GSP covers only a small portion of U.S. imports from Bangladesh, we think the issue of GSP eligibility has greater impact than the number themselves, given the public attention the GSP review has received in Bangladesh and the importance the government of Bangladesh attributes to it.”

Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, called the U.S. action “exceptional.”

“It’s a foreign policy tool and a sanction and it is modestly punitive,” Hufbauer said. “For the manufacturers affected by this, it is the difference between getting their products into the U.S. market or not. It could be that other countries that have GSP programs, and most of the advanced countries do, [would take similar action] and that would take away a big portion of Bangladesh’s exports. Then you are talking real numbers and I would think that would be a concern to Bangladesh.”

Julia Hughes, president of the U.S. Association of Importers of Textiles & Apparel, said the action by the U.S. is “an effort to send a message that Bangladesh needs to take quick action to improve workers’ rights in Bangladesh,” but she didn’t believe the suspension of benefits would put a chill on new apparel business there.

“All apparel companies are well aware of the issues in Bangladesh and are already very active in responding, whether it is the IndustriaALL [fire and building safety accord] or the one being developed here in the U.S.,” Hughes said. “There is no question that everyone is well aware that there are concerns by the U.S. government of some shortcomings in Bangladesh.”

Richard Trumka, president of the AFL-CIO, which filed the original petition against Bangladesh in 2007 to have the country’s GSP benefits withdrawn, said: “The decision to suspend trade benefits sends an important message to our trading partners. Countries that benefit from preferential trade programs must comply with their terms. Countries that tolerate dangerous and even deadly working conditions and deny basic workers’ rights, especially the right to freedom of association, will risk losing preferential access to the U.S. market.”

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