Making the Cut?
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by 2015 for India, Sri Lanka, and Pakistan and by 2018 for Bangladesh and the other member countries. However, most T&C products are placed on the sensitive list of each country, which exempts them from tariff reduction. Bangladesh, India, and Pakistan included most T&C products on their sensitive list whereas Sri Lanka has a relatively short sensitive list for T&C products (UNDP 2006). In particular, textiles and textiles articles account for very high tariffs on the sensitive list. India’s tariff lines for textiles and textiles articles are among the highest, accounting on average for 34.2 percent. Nepal is the highest with 37 percent, Bangladesh is next with 31.6 percent, and then Pakistan with 24 percent (Taneja and Sawhney 2007, cited in Tewari 2008). These countries should follow Sri Lanka, which has an average tariff rate of 1.9 percent for textiles and textile products. Another challenge is India’s specific duties on T&C imports. Before the final removal of the T&C import ban in India, India’s T&C industries lobbied for specific duties on a large number of fabrics and clothing products in 2000. These compound duties use the ad valorem duty rate to calculate a specific duty that is imposed generally on low-value products for which domestic demand is high and where other developing countries are competitive. The elimination of intraregional trade barriers, which include tariffs, specific duties, and nontariff barriers, is a precondition for increased regional integration in the T&C sectors. Furthermore, improvements in intraregional transport, logistics, and customs facilities are central to reduce costs and lead times in regional trade. Besides these central measures, intraregional trade must also be actively promoted. The ASEAN Competitiveness Enhancement (ACE) Project is a good example in this regard (see chapter 4). A similar program could be developed for the SAARC region.
Conclusions The clothing sector in Bangladesh has a strategic significance in creating employment and exports and in the industrial development process of the country more generally. In this chapter the development and challenges of the clothing sector in Bangladesh in the post-quota and post-crisis world have been assessed. The development with regard to exports, number of firms, and employment yields a positive picture of the clothing sector in Bangladesh. However, the global environment for clothing trade has changed significantly, which is related to changes in buyers’ sourcing policies and the MFA phaseout, and has been accelerated by the global economic crisis. Bangladesh has an important role in global clothing trade, but to maintain or improve its position the Bangladeshi clothing sector has to respond to this new environment. Several policy recommendations to address challenges and increase the competitiveness and sustainability of Bangladesh’s clothing sector have been discussed above. The main policy areas include (i) solving the power crisis and improving physical and bureaucratic infrastructure in other areas such as transport, logistics, and customs; (ii) improving productivity, skills, and capabilities at the firm level and developing further from CMT to FOB and full-package supplier; (iii) increasing further backward linkages and reducing lead times; (iv) improving labor compliance; (v) diversifying end markets; and (vi) increasing regional integration. In the conclusions in chapter 6 global and country-specific challenges from the country case studies are brought together and main policy recommendations are identified.