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The only way to boost exports to the EU market is through diversification

EU Delegation represents the EU in Bangladesh. The Delegation works closely with all of the EU member countries that have diplomatic representation in Bangladesh. This Delegation represents the EU as a whole, as part of the EU’s unified diplomatic corps – the European External Action Service. Charles Whiteley, Ambassador & Head of Delegation is the official representative of the EU in Bangladesh. The Delegation functions much like an Embassy and represents the EU in its dealings on political issues, trade, development, cooperation, etc. EU-Bangladesh diplomatic relations were established in 1973. In 2001, a cooperation agreement was signed extending trade, economic and development cooperation, human rights, good governance, and the environment. The EU is supporting endeavours by the Government of Bangladesh, the private sector, and other stakeholders to further improve labor standards, health and safety, and the protection of rights in order to enhance this success story. Recently team Textile Focus headed by Mohammad Ashraful Islam, Editor, Textile Focus & Md. Rakibul Islam, Special Correspondent, Textile Focus had a conversation with Charles Whiteley at the EU Delegation in Dhaka. Key discussion points are mentioned here for our readers-

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Figure: Charles Whiteley Ambassador & Head of Delegation of the European Union to Bangladesh

Textile Focus: How do you see the economic growth of Bangladesh? What is your observation regarding the contribution of the textile and apparel industry to the Bangladesh economy?

Charles Whiteley: Bangladesh is a rising economy with remarkable economic development and social progress story. It is among the fastest-growing economies in the world, outshining India and many other developing countries in per capita income, building on strong ready-made garment (RMG) exports. The apparel industry is the lifeline of Bangladesh’s economy. However, I think the country’s economic potential is underutilized due to heavy reliance on one sector.

In the first decade of the 21st century, the export share of garments was around 75 percent. Interestingly enough, this share keeps increasing as we have entered the 3rd decade. Single-product export dominance is rare in history. Look at Vietnam- how it has developed a diversified export basket well beyond the garments. Last year, Bangladesh earned a record 55 billion US dollars from exports. Garment export alone made up more than three-fourths or 47 billion US dollars which is 85 percent of all exports. While the contribution of the garment sector is praiseworthy, the diversification of exports is a must, looking at it from a long-term perspective.

Textile Focus: Bangladesh’s apparel industry is the second largest in the world. What are the opportunities you see for the EU in bilateral trade with Bangladesh regarding raw material (fiber, machines, chemical) export?

Charles Whiteley: Bangladeshi exports enter the EU market without any quota and duties under the current Everything But Arms (EBA) trading scheme for LDCs. EBA will expire for Bangladesh three years after the LDC graduation. So, there is a limited window of time for Bangladesh to diversify its exports by using this comprehensive market access opportunity.

Europe’s chemical and machinery industries are the world leaders. However, the EU is open to high-quality and compliant products in its market, be it chemicals, machinery, or any other product, no matter where they are coming from.

When it comes to the export of fibre, I see huge potential for recycled fibres. EU is going to require minimum amounts of recycled fibres in new textile products produced in the EU. In 2022, the European Commission presented the EU strategy for sustainable and circular textiles. The objective is that all textiles placed on the EU market are durable, repairable, and recyclable, and made to a great extent from recycled fibers. This opens the door for the export of fibres from Bangladesh. I think some level of export is already happening. The potential is huge to scale it up and grab the EU market for recycled fibres.

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Photo (from left to right): Mohammad Ashraful Islam, Editor, Textile Focus; Charles Whiteley Ambassador & Head of
Delegation of the European Union to Bangladesh; Md. Rakibul Islam, Special Correspondent, Textile Focus

Textile Focus: Bangladesh’s apparel export to the European Union has shown value-wise growth by 3.9% during the January-March period of 2023 to $5.6 billion from $5.4 billion in January-March 2022, at this moment how can Bangladesh boost exports to the EU market?

Charles Whiteley: The garment sector is doing extremely well in the EU market despite the Ukraine war and economic slowdown in Europe. In the 2022 calendar year, Bangladesh had a record 50 percent growth of its exports in the EU market, driven mainly by apparel products. This trend is expected to continue, as inflation is easing in Europe. As I said, a key way to boost exports to the EU market is through diversification.

Textile Focus: Bangladesh will turn into an LDC to DC by the year 2027. After graduation, what will be the trade opportunities and challenges coming between countries?

Charles Whiteley: Bangladesh will is all set to graduate from the LDC status in 2026. Following a transitional period of three years, it would be removed from the EU’s EBA arrangement in 2029. It can then apply for the GSP+ program. Ratifying 32 conventions on human rights, labour rights, good governance, and the environment is a precondition to access this scheme, which Bangladesh has done already.

The next step is the implementation. The first action in this process is the implementation of the National Action Plan on the labour sector (2021-2026), which Bangladesh agreed with the EU.

Textile Focus: The Bangladesh government is doing 100 economic zones and so many foreign investors are coming, how do you see the opportunities for EU companies to invest in the backward and forward linkage industry?

Charles Whiteley: Developing 100 special economic zones very much reflects the Government’s ambition to attract more foreign direct investment to Bangladesh. FDI is important to bring technological know-how and diversify the economy.

However, a level playing field for both local and foreign sectors is also necessary. Addressing the challenges of existing foreign investors is equally important. EU is currently a top investor in Bangladesh with 2 billion FDI stock. But compared with EU investments in developing countries such as Vietnam ($6 billion EU investment in 2022) it is far from being ideal.

There are both direct and indirect barriers that limit the potential of EU investment in Bangladesh. Barriers to foreign investment are intrinsic barriers to Bangladesh’s economic development. We are trying to create an EU Chamber of Commerce in Bangladesh, in order to address the challenges faced by the EU economic operators.

Textile Focus: What are the challenges of bilateral trade between two countries?

Charles Whiteley: EU has always been open to imports, allowing developing countries to develop their export industries. For example, exports from Bangladesh to the EU have more than tripled between 2011 and 2022, reaching around €24 billion. However, EU exports to Bangladesh have been low, at the level of 3 billion euros at the same time. The EU27 trade deficit with Bangladesh has grown more than three-fold, reaching over €20 billion last year.  It calls for action in removing obstacles the EU operators face in Bangladesh.

The main challenge behind the immense trade imbalance is the numerous tariffs and para-tariff barriers that hinder quality European products from entering Bangladesh. Difficulties at customs are endless. There is huge room for improvement, as Bangladesh is going to graduate from LDC status.

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