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GSP+ scheme could help Bangladesh address LDC graduation losses

 

GSP scheme could help Bangladesh address LDC graduatioBangladesh graduation from Least Developed Countries (LDCs) is likely to be bittersweet. On one hand, Bangladesh will progress to being a developing country on the other it stands to lose LDC specific preferences and privileges afforded by international development partners. One of its most significant losses would be the loss of duty-free and quota-free (DFQF) market access for exports. Bangladesh’s exit from LDC has been scheduled by United Nations Committee for Development Policy (UNCDP) for 2026. On its graduation, the country stands to lose huge trading benefits to the EU and UK market.

Exploring GSP+ to cover DFQF fallouts

To address DFQF loss-related fallouts—particularly in the EU -- Bangladesh plans to access the EU’s GSP+ scheme. As per aGSP scheme could help Bangladesh address LDC graduation losses Daily Star report, the GSP+ scheme was initiated by the EU In 2015 for non-LDCs, Low-Income Countries (LICs) and Low-Middle-Income Countries (LMICs). Titled ‘Special Incentive Arrangement for Sustainable Development and Good Governance’, the scheme enables EU to offer zero duty market access upto 66 per cent of tariff lines to the eligible countries, like Bangladesh.

Currently only eight countries including Pakistan and Sri Lanka enjoy benefits under GSP+ scheme. To access these benefits, Bangladesh needs to fulfill several requirements including raising the value of top seven major exports to over 75 per cent of total GSP-covered exports. Bangladesh already fulfills this criterion as the current value of top seven exports is 96 per cent of total exports to the EU.

Eligibility requirements

Secondly, Bangladesh needs to limit its share in EU’s total imports under the scheme to 7.4 per cent. Currently, Bangladesh’s share in EU’s total imports is 26 per cent which could hamper its eligibility for GSP+. The preference eligibility under the GSP+ scheme demands "double transformation" of exported items. If post LDC graduation, Bangladesh aims to access the DFQF markets, it needs to move on from being a producer of raw materials to a supplier of finished goods.

Another challenge Bangladesh faces is fulfilling the sustainability requirements. It needs collate and process credible data to argue the ‘vulnerability criteria’ and ‘import share criteria,; if it intends to pursue the GSP+ pathway. It also needs to strengthen its backward linkage industry by implementing a strategic business plan in the textile sector.

Invoking regional cumulation provision

The Rules of Origin facility of GSP+ enables Bangladesh to meet the requirements of double transformation. The country can invoke the ‘regional cumulation’ provision that allows imports from South Asian countries to account in the calculation of the double transformation. The regional cumulation provision also allows Bangladesh to account for imports from countries with which the EU has Free Trade Agreements (FTA). However, to what extent Bangladesh’s exports will remain price-competitive by accessing the inputs from these countries, needs to be seen.

Strategies for climate-related goals

Bangladesh also needs to formulate new strategies to accomplish other related global commitments including ensuring lean energy, carbon neutrality, waste management, robust climate actions vis-à-vis the emerging EU Green Deal, Circular Economy frameworks, etc.

To gain a permanent duty-free access to trading nations Bangladesh can weigh the option of an FTA with the EU. However, this is a tedious, so-far-uncharted option that requires difficult trade-offs between domestic industries/sectors. Therefore, the Bangladesh government needs to initiate discussions with business and industry leaders on strategies post LDC graduation.

 
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