Bangladesh will face stiff competition in apparel exports to the European Union (EU) as its competitor Vietnam recently signed a free trade agreement (FTA) with the EU, according to Bangladesh Garments Manufacturers and Exporters Association (BGMEA) president Rubana Huq, who said almost 11 per cent of Vietnamese apparel exports to EU will get complete duty waiver.
The EU signed the free-trade deal with Vietnam on June 30 in Hanoi, paving the way for tariff reduction on 99 per cent of goods, traded between the bloc and the Southeast Asian country. The trade deal will be effective after approval by the European Parliament.
Huq said 12.18 per cent share of Bangladesh’s apparel export to EU competes with Vietnam on these items, according to Bangla media reports.
These items—147 in number—will face stiff competition and the possibility of trade diversion is higher in this category, she said.
Within five years, 49 per cent of Vietnam’s and 62 per cent of Bangladesh’s total exports to EU will be competing directly. Apart from erosion of competitiveness and resulting trade diversion, this FTA may take a severe toll on the price level of the Bangladeshi manufacturers, Huq said.
Bangladesh apparel exports have lost 3.64 per cent value in terms of price per unit during 2014-2018, whereas Vietnam’s price has gone up. With the gradual elimination of tariff on Vietnam’s exports the price competition will be more intense.
Currently, the EU is the largest RMG export destination of Bangladesh. If Vietnam, the country’s one of the main competitors, gets zero tariff facility to the EU, Bangladesh’s market share will shrink.
Vietnam did not ratify two fundamental conventions of ILO: the 87th one on freedom of association and protection of the right to organize, and 105th one on the abolition of forced labour, whereas Bangladesh, which has ratified seven out of eight conventions will be penalised by the enforcement of this FTA, Huq added.