BD opposes Indonesia’s move to slap safeguard duty

Bangladesh has opposed Indonesia’s move to impose a safeguard duty on apparel shipments to the country as such a measure would be inconsistent with the provisions of global agreements on safeguards, tariffs and trade.

The Bangladesh Trade and Tariff Commission (BTTC) and the Bangladesh Garment Manufacturers & Exporters Association (BGMEA) shared their arguments and observations on the matter during a recent hearing conducted by the Indonesian Safeguards Committee (KPPI).

The hearing took place on November 20, more than one-and-a-half months after the KPPI initiated an investigation into the viability of a safeguard duty following a request from the Indonesia Textile Association against the import of apparels.

The event was organised to give apparel exporting nations an opportunity to present their views on the proposed safeguard duty.

Bangladesh fetched about $30 million from apparel exports to Indonesia in fiscal 2018-19.

So, levying a safeguard duty would hurt the shipment of garments, which is the country’s main export item, according to the BTTC and BGMEA observations.

Nearly 40 lakh workers, mainly women, are employed by the apparel sector.

In its submission on behalf of the government, the BTTC cited the provisions in the General Agreements on Tariffs and Trade (GATT) and the World Trade Organization (WTO) Agreement on Safeguard to explain that imposing such protective measures does not fulfil the conditions set in the related treaties.

“Therefore, resorting to safeguard measures is unwarranted,” said BTTC Member Mostafa Abid Khan.

The WTO agreements provide its members with the scope to take safeguard actions, such as temporarily restricting the imports of a product to protect a specific domestic industry from any potential threat, according to the WTO.

Such measures, which in broad terms take the form of the suspension of concessions or obligations, can consist of quantitative import restrictions or duty increases to higher than bound rates, said the organisation.

The Indonesian authority initiated an investigation into its apparel imports for the period between 2017 and 2019.

The BTTC said it made an effort to determine whether apparels were exported to Indonesia in increased quantities, absolute or relative terms to domestic production along with the trends in the rates and amounts of increase in imports, during the period.

It then said the number of garments shipped dropped in 2019 compared to the previous year and that the downward trend was going to continue this year.

Therefore, the upward trend in the cost and amount of the products under investigation does not satisfy the conditions outlined in the WTO Agreements on Safeguard, the BTTC said.

The BTTC also said Indonesia cut its tariff rates in line with free trade agreements with countries such as China. It said due to a 10 per cent reduction in tariff for China, imports from the country would likely increase.

“This is actually what happened,” the BTTC added.

Therefore, the commission said, it may be deduced that an increase in the import of the product shown in the petition is not a result of any unforeseen development, a prime prerequisite of taking safeguard action as per the global trade agreement.

The BGMEA said the claim in the petition filed by the Indonesian Textiles Association, regarding the decline in production, did not match data from the large and medium manufacturing industries or micro and small manufacturing industries that produced apparels for the same period.

Indices clearly show the production of micro, small, medium and large manufacturing industries maintained a positive growth between 2017 and 2019, according to the BGMEA.

While the petition was lodged on the grounds of injury to the domestic industry, Indonesia’s apparel export has also been confronted with losing competitiveness, said the BGMEA.

It cited falling exports of apparel and increasing producers’ prices, unit prices and the rising minimum wage in the southeast Asian nation.

“Since all the data related to price and wages are suggesting that Indonesia’s apparel industry may be suffering from erosion in competitive advantage, the temporary safeguard measure is neither appropriate as per the agreement on safeguards, nor is it sufficient to protect the local industry.”

The trade body also cited the trade imbalance between Bangladesh and Indonesia, showing that it favours the latter.

Bangladesh brought over $1.94 billion worth of goods from the southeast Asian country and exported that of $57 million in the fiscal year of 2018-19.

Of the garment items, Dhaka imported $187 million worth of textile articles and shipped $30 million worth of apparels.

“The import of textile by Bangladesh, which goes to the production of export-oriented garments, is allowed to enter duty-free here,” said BGMEA President Rubana Huq.

In its submission, the BGMEA cited that Bangladesh’s apparel items face duties as high as 25 per cent to enter Indonesian markets while Chinese products get duty benefits.

Indonesia’s local industry might be facing the impact because of the zero-tariff access in favour of giants like China and Vietnam.

Therefore, imposing additional duty would simply harm Bangladesh, said Huq.