Hopes of US duty-free access fading for Asian countries

Emerging Textiles

More delays for Pakistan, Bangladesh, Sri Lanka, Cambodia

Hopes of US duty-free access fading for Asian countries

25 April 2006

The road to US duy-free access could be longer than expected for a series of emerging countries. While Pakistan was recently refused that textiles and apparel benefit from preferential treatment, chances of duty-free access for Bangladesh, Sri Lanka or Cambodia are progressively fading. With US mid-term elections looming and a new top trade negotiator in Washington, ongoing negotiations may be further delayed while implementation of already signed deals could also be longer than expected.

Hopes are fading for apparel exporters from Asian countries that expected geting a duty-free access to the US market.

For instance, the US is continuing in its drive to negotiate bilateral free trade agreements which could eventually include Pakistan.

Both countries are scheduled to meet in Washington on 26 April to continue working towards a bilateral Free Trade Agreement (FTA).

The US has told Pakistan that it would grant duty-free access for goods produced in so-called Reconstruction Opportunity Zones (ROZ).

This would be similar to that of the Qualified Industrial Zones (QIZ) in Egypt and Jordan where goods pay no import duty as long as they comply with rules of origin (RoO).

US authorities however made it clear that textiles and apparel would not be accepted in ROZs.

Bangladesh FTA hopes fade

As for regional neighbour Bangladesh, its hopes of ever reaching an FTA with the US appear to be fading.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) recently confirmed that it is to reconsider its lobbying of the US Congress.

It is under pressure from members who do not export to the US and who claim the cost is too expensive.

The BGMEA is reportedly paying a lobbying firm in the US $13,000 per month.

With US elections scheduled for later this year, there seems little chance of getting the much anticipated trade bill to be voted upon.

This duty-free bill was introduced in Congress after the tsunami devastated parts of Asia in December 2004. Sri Lanka and Cambodia would have also benefit from duty-free access under such a law.

South Korea aiming for 2007

By contrast, South Korea seems well placed to make progress with the US although there are groups hostile to a quick deal.

Both countries announced on 2 February their intentions to commence negotiations which are due to begin in Washington on 5 June.

Opinions in Korea’s National Assembly have been reported as ’divided’ by Korean press claiming the government is being ’too hasty’.

Those that defend an FTA with the US argue that this would provide the Korean economy with a much needed engine for further growth.

Deal with Peru still has problems

This was the view taken by Peru which signed the Trade Promotion Agreement with the US on 12 April.

Both sides praised the deal which would provide an elimination on tariffs and other barriers to goods and services.

This will allow US duty-free access to a large range of Peruvian goods and builds on the Andean Trade Preference Act (ATPA) which is due to expire later this year.

Although the talks have now ended following the joint signature, both the US and Peru still need to implement the deal in their respective parliaments.

This could prove difficult as the agreement still has opponents in both countries.

The Democrats in the US are concerned that the deal does not go far enough in protecting the rights of workers and have threatened to vote against the bill.

In Peru, outgoing president Alejandro Toledo, who negotiated the agreement, is set to be replaced by an opponent of the PTPA in July.

New US Trade Representative to talk with Southern Africa

US Trade Representative Rob Portman, who negotiated and signed the PTPA, is leaving his post to take up a new job as budget director in the Office of Management and Budget.

He is replaced by deputy trade representative, Susan Schwab who will continue with free trade agreement negotiations with 14 other countries.

This includes talks with the South African Customs (SACU) comprising Botswana, Lesotho, Namibia, South Africa, and Swaziland.

Negotiators until now failed in reaching a global agreement.

The Deputy USTR, Karan Bhatia, met with senior officials from the five countries on 18 April and confirmed the US commitment to conclude a comprehensive free trade agreement.

In a statement to press, the Deputy USTR said a framework has been established to encourage a stronger bilateral relationship before an FTA is reached in the longer term.

This would be built on the established African Growth and Opportunity Act (AGOA) which provides sub-Saharan countries with duty free market access in the US.