EU New Trade Rules Impact Bangladesh's Textile Industry

A Bangladeshi business leader said that since the EU allowed Bangladesh to use ready-made garments made from other local materials without tariffs to enter the EU market, Bangladeshi textile manufacturers faced a deep crisis.

According to the new EU rules of origin, even if fabrics from other countries are used, exporters can now enjoy preferential tax-free access to the 27 EU countries. The EU is the world's largest apparel market.

The previous EU rules of origin continued for 12 years and provided a protective umbrella for local textile factories because the rules of origin required exporters to purchase mainly Bangladeshi-made fabrics. Only in this way can they enjoy the EU's duty-free concessions.

As the European Union has relaxed its import rules since January of this year, Bangladesh’s imports constitute a huge amount for domestic companies.

According to official sources, in the first six months of this year, Bangladeshi ready-made garment exporters only imported fabrics from China worth 730 million taka (US$10 million), which is higher than the 130 million taka (US$2 million) in the same period of last year.

Imports increased by 462%. This is an alarming figure for domestic manufacturers.

Bangladeshi ready-to-wear exporters import fabrics from different countries, mainly importing fabrics from China and India.

The textile industry in Bangladesh has more than 1,300 major textile manufacturing plants with a total investment of more than US$4 billion.

The ready-to-wear outfit is Bangladesh’s main export earning industry and the country’s largest employer industry, second only to agriculture.

Textile manufacturers say that the EU's umbrella expires on December 31, 2010. This is the main reason why local entrepreneurs have established 380 spinning mills, 400 weaving factories, and 260 printing and dyeing plants.

Bangladeshi industry sources said that Indian, Pakistani, Chinese and Turkish manufacturers are taking the opportunity to dump the fabrics they produce to the textile industry in Bangladesh.

The Bangladesh ready-to-wear association earlier requested the government to provide cash incentives to protect investment in Bangladesh and improve the competitiveness of Bangladeshi products because other competing countries provide incentives to their domestic textile industry.