Load shedding was another bothering things that happened after some moments again and again. So, in the middle of our work we need to stop working.
We cant provide sufficient graphs and statistics inside. Because we didn’t get enough resource from the web related to our topics.
About WTO
The World Trade Organization (WTO) is an international organization designed to supervise and liberalize international trade. The WTO came into being on January 1, 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947, and continued to operate for almost five decades as a de facto international organization.
The World Trade Organization deals with the rules of trade between nations at a near-global level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the bulk of the world's trading nations and ratified in their parliaments. Most of the WTO's current work comes from the 1986-94 negotiations called the Uruguay Round, and earlier negotiations under the GATT. The organization is currently the host to new negotiations, under the Doha Development Agenda (DDA) launched in 2001.
The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the Ministerial Conference. The WTO's headquarters are in Geneva, Switzerland.
About MFA
The Multi Fibre Arrangement (MFA) (a.k.a. Agreement on Textile and Clothing (ATC)) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005.
The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. Developing countries have a natural advantage in textile production because it is labor intensive and they have low labor costs. According to a World Bank/IMF study, the system has cost the developing world 27 million jobs and $40 billion a year in lost exports.
However, the Arrangement was not negative for all developing countries. For example the EU imposed no restrictions or duties on imports from the very poorest countries, such as Bangladesh, leading to a massive expansion of the industry there.
At the GATT Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organization. The Agreement on Textiles and Clothing provided for the gradual dismantling of the quotas that existed under the MFA. This process was completed on 1 January 2005. However, large tariffs remain in place on many textile products.
Bangladesh was expected to suffer the most from the ending of the MFA, as it was expected to face more competition, particularly from China. However, this was not the case. It turns out that even in the face of other economic giants; Bangladesh’s labor is “cheaper than anywhere else in the world.” While some smaller factories were documented making pay cuts and layoffs, most downsizing was essentially speculative – the orders for goods kept coming even after the MFA expired. In fact, Bangladesh's exports increased in value by about $500 million in 2006.
During early 2005, textile and clothing exports from China to the West grew by 100% or more in many items, leading the US and EU to cite China's WTO accession agreement allowing them to restrict the rate of growth to 7.5% per year until 2008. In June, China agreed with the EU to limit the rate to 10% for 3 years. No such agreement was reached with the US, which imposed its own import growth quotas of 7.5% instead.
When the EU announced their new quotas to replace the lapsed MFA, Chinese manufacturers accelerated their shipping of the goods intended for the European market. This used up a full year's quota almost immediately. As a result, 75 million items of imported Chinese garments were held in European ports in August 2005. A diplomatic resolution was reached at the beginning of September 2005 during Tony Blair's visit to China; putting an end to a situation the UK press had dubbed Bra Wars.
About RMG
Traditionally, the RMG industry has been dominated by a quota system that imposed export levies on garment products to Europe and the United States. Towards the end of the seventies, Bangladesh established itself as a latecomer to the international garment industry. Industrial growth expanded rapidly as the country benefited from its preferential treatment within the protectionist market structure. Now, with the phase-out of the Multi Fiber Agreement (MFA) on the 1st of January 2005 this quota system has come to an end and new challenges lay ahead.
The sector can be broadly subdivided into two product categories, namely woven and knitted garments.
Since the industry accounts for approximately 80% of overall exports of Bangladesh and generates a significant amount of foreign exchange its activities form a vital part of the national economy. Geographically, most of the garment enterprises are clustered around the urban areas of Dhaka and Chittagong.
Due to market liberalization, brought about by the expiration the MFA, Bangladesh faces increased international competition which puts the national industry under severe pressure to improve productivity and performance. One major comparative advantage is the cheap and abundant labor force which is by international comparisons among the lowest in the world.
Opinions on the future development of the RMG industry are ambiguous. Whereas some stakeholders argue that the sector is able to adapt to international market dynamics being in the position to stand up to foreign competition others sources tend to disagree, expecting market consolidations and future exports to decline. In any case, to fully capitalize on its comparative advantages, the Bangladeshi industry has to overcome some internal and external obstacles.
MFA Phase Out and Rise of China
The MFA was always regarded by developing countries as developed countries’ protectionist attempt to bar their textile products, which is one of few industrial sectors where developing countries have comparative advantages. Though many developing countries had always pressed to eliminate the MFA, it is an irony of history that during the phasing out of the MFA, in July 2004 some developing countries like Mauritius called to extend the MFA, in face of the prospect of China seizing the lion’s share of world exports of textile goods.
The quota system on one hand was protectionist for the developed countries; on the other it helped to spread out textile exports across 200 countries. According to a WTO report, eliminating quotas for textiles products will end with only 30 strong developing countries left; among them China’s share of exports may be as high as 50 percent (currently 16 percent), while India’s is projected at 15 percent (currently four percent). Mexico, Philippines, and Indonesia will see textile exports halved, and Mexico will drop to three percent from the current 10 percent. In developed countries like the US and EU, over the past four years the US has lost 350,000 garment and textile jobs and probably more than half the remaining 700,000 are at risk1.
The International Textile, Garment, and Leather Workers’ Federation (ITGLWF) also called to extend the MFA, in order to save textile and garments jobs in developed as well as developing countries. In a press release, the ITGLWF said that since the elimination of the quota system on 31 Dec 2004, serious plant closures and job losses were reported in Kenya, Cambodia, Mauritius, Sri Lanka, Philippines, and Tunisia. When its call failed, the ITGLWF many times came close to the point of endorsing the EU’s policy of using the clause in China’s WTO accession agreement that restricts exports from China.
US labour federation the AFL-CIO along with US conservatives are even more aggressive in their attack on China’s surge of cheap imports, holding it responsible for plant closures and job losses in the US. In 2000 the AFL-CIO fought in vain to stop the Clinton administration granting Permanent Normal Trade Relations status to China, and its demands to improve workers’ rights as a condition of China’s WTO accession also failed. In 2004 the AFL-CIO called to impose trade remedies (like raising tariffs) on China for being responsible for the disappearance of 2.5 million manufacturing jobs. Recently it joined the Chinese Currency Coalition to press the Chinese government to revalue the yuan. It seems that the AFL-CIO conceives that trade protectionism is a good way to keep jobs. Ironically, when it comes to free trade promoted by the North American Free Trade Agreement (NAFTA) and the WTO, the AFL-CIO does not remain loyal to trade protectionism and oppose NAFTA and the WTO in principle, but was content in trying to append a labour clause on free trade agreements.
To identify China as the main winner and the US and EU as losers over the end of the MFA is far from true. The first thing to note is that foreign textile companies account for one quarter of all Chinese export earnings from textile products; they, not Chinese companies, directly benefit from expanding Chinese exports. Chinese companies do reap the remaining three quarters of export earnings, but generally their average profit rates are low, since the majority of them subcontract to foreign brands, only earning a fraction of value added, often just 10 percent2. Importers like Wal-Mart and brand companies pocket the major share of profit. Thirdly, the more China exports textile products, the more it needs to import textile machines from developed countries; Germany is the top textile machine exporting country.
In fact China has become the world’s biggest textile machine importer, and is one and a half times higher in money terms than the second country—Turkey3 . In the exchange of labour-intensive products (Chinese textiles) for capital-intensive products (US and EU machinery), the latter get most value added. Therefore, the rise of China as a textile products exporter benefits Chinese, US, and EU companies. It is in the interests of all three to see the end of the MFA, despite episodic frictions.
That textile manufacturers in developed countries may lose market share does not nullify the above statement, because benefits can be 10 times the losses to US capitalists as a whole by forcing open the capital goods markets and services of developing countries, with China ranked number one. Textiles production is a sunset industry in developed countries anyway, and stopping China’s imports will not save jobs there, because Wal-Mart will simply shift sourcing from China to India.
Here it must be noted that China also is losing textile and garment jobs. To be competitive enough to drive others out of business, Chinese textile and garment sectors shed 52.5 percent and 28 percent of jobs respectively between 1996 and 2001, amounting to 3.3 million and 0.5 million jobs. 26 million manufacturing jobs were lost in the same period, accounting for 40.5 percent of all manufacturing jobs4. Such a sharp decline in manufacturing jobs in this short time was unheard of. Those retaining jobs in Chinese textile and garment factories saw their wages cut and intensity of labour rose. In July 2005 3,000 textile workers in Guangzhou struck against wage cuts and were suppressed. However, neither the AFL-CIO nor the ITGLWF ever mention China job losses when calculating job losses in textile and garment in particular or manufacturing as a whole.
Targeting China and letting the US government off the hook, or worse, supporting US protectionism, cannot benefit US workers. For there is no essential link between protecting the market from cheap imports and keeping jobs. What links exist are weak, never direct, and dependent on many factors that labour cannot control—employers, not employees, control investment decisions and distribution of profit that directly affects labour. Labour cannot fight for things over which they have no control. Even in the short-term, when protectionism produces positive side effects that may keep jobs in certain sectors, in the long run there is no basic correlation between the two. In this era of globalisation, the link between trade (protectionist or free trade) and job creation, or more generally the link between growth and job creation, is weaker than ever. To argue the otherwise only helps the ruling elite pit workers in all countries against each other. US labour should first and foremost hold the US ruling elite responsible for job losses.
The Consequences for RMG Sector in Bangladesh
There is no doubt that the RMG sector is the most important industry of Bangladesh. It is also true that the future of Bangladesh economy will greatly depend on the future of this industry. It is therefore necessary to make sure that this industry does not lose its leading position in the post-MFA global export market.
The BGMEA always claimed that the RMG sector earned as high as 76% of the total FE, hardly conceding that it has to spend FE to import fabrics and other accessories so the net FE earning is much lower than the figures it mentions. Rightly, the claim of BGMEA has been contested by BTMA at a seminar held on 27 July 2004 by pointing out that the net FE earnings of the RMG sector was only 34.88% of the total $6572 million earned in 2002-03. Of this 34.88%, RMG made with domestic fabrics earned 24.34% and RMG with imported fabrics earned only 10.54%. Besides, BTMA has also drawn our attention to another interesting point. The BTMA presented statistical facts to demonstrate that it is another sector and not RMG that earns the highest amount of FE. The highest amount? 3062 million or 46.56%? wAs earned through wage-earners? Remittances in 2002-03.
During the last several years, Bangladesh is losing ground in the US market in most of its market segments (categories). It is happening primarily because Mexico and the CBI countries have been granted duty and quota-free status in the US market. In fact these countries enjoy double advantages putting Bangladesh into disadvantages. One advantage is their duty- and quota-free status. The other is their shorter lead time because they are geographically nearer to the US market. For these reasons, they can sell their merchandises at lower prices. For Bangladesh it is difficult to beat them in terms of prices. One way for Bangladesh might be to improve its customer services and develop and maintain long-term relations with the large customers. Experiences indicate that in many cases large buyers having long and satisfactory transactional relationship often tend to be willing to pay slightly higher prices if service quality is better, and if they find the suppliers (Bangladeshi exporters) are much more reliable. Here proper relationship management is likely to be helpful. Bangladesh should apply another strategy to regain and or retain its share in the US market. In US market product differentiation rather than product diversification is likely to be more appropriate strategy. If Bangladesh can develop design capability, it would be able to come with differentiated products in the categories that are not supplied by Mexico or CBI countries. This will however need market and marketing research and also aggressive promotional efforts on the part of Bangladesh.
Role of RMG
The Readymade Garment Industry of Bangladesh has become the largest foreign exchange earning sector, exporting apparel of all sorts to the USA, Europe and other developed countries. The Readymade Garment (RMG) industry of Bangladesh tells an impressive story about the leadership of private enterprise and the country’s successful transition to a major export-oriented economy. The country registered its first apparel export in 1978, but the progress since the early 1980s has been simply phenomenal. It has by now become a colossal industry, earning the lion's share of the country's foreign exchange and providing the nation's women with the largest formal employment.
The role of the RMG sector in our national economy can hardly be over-emphasized. There has been a steady development in our RMG export field during at least the last decade and a half but in the last few years it has been unique. The export of RMG recorded an average growth of 21.53% since 1994-95. The growth of export in the RMG sector from 1993 to 1999 shows that in 1993 it amounted to 61.4% of the country’s total export income, and by 1999 it was 76.05%. This indicates how rapidly the export of the RMG has grown (see Table 1)
Table-1: Development of the Export of RMG Sector
Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled).
Table-2: Development of the Export (in Million Taka) of different Sectors from 1993 to 1999
Source: Bangladesh Export Statistics, Export Promotion Bureau (EPB) (Compiled).
Back in the 80s, a large number of private sector initiatives were taken in manufacturing sectors like the RMG industry. The RMG industry has enjoyed a meteoric rise from less than 50 factories in 1983 to over 3000 in 1999. In between this period, the level of employment has increased from some 10,000 to approximately 1.5 million today (see Table: 3); with its share of employment in the manufacturing industry increasing from a mere 2% to over 15%.
Table-3
Source: Bangladesh Statistics, EPB
Women are the most disadvantaged section of our population, whereas in the apparel and garment industry they are the prime movers of this labor-intensive industry. About 90 per cent of the workers are women, comprising of almost 70% of all female employment in the nation's manufacturing sector. This industry has also created a vast scope for employment at all levels of production including management, supervision, etc. This sector has uplifted the neglected section of the population, thus radically transforming the socio-economic condition of the country.
Problems
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Quata system: Bangladesh export its all readymade garments product in Europian country.but 1985 united states started quota system to Bangladesh exporting RMG product. As result it’s a great restriction for exporting.
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Insufficienty of item product: in international market hundreds of readymades garments product are demanded there Bangladesh only export 10/12 items product. Where chaina, Honkong, Taiwan export 60 to 70 item product. For this reason Bangladesh can’t survive a long run.
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Insufficienty backward and forward linkage industry: RMG sector of Bangladesh phase a great problem for backward and forward linkage industry so readymade garments row materials all are imported.
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Low produce of cotton: there are 142 ring spinning mill in Bangladesh and 15 open and spining mill, 1126 spining workshop. Where only produce for domestic market.
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Free trade system: Another important problem is free trade agreement because in this system one country can export own product on any country without any prohibition. As a result it hamper developing countries own industrialization.
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Lacking of foreign investment: Bangladeshis RMG sector need enough investment but country’s business mans can’t encourage their investor. So for this crisis our garment industry always faces difficult challenge.
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Low quality production: The garments product quality of Bangladesh is very low. Because all garments use only 65% materials for their products. Mismanagement, load shedding, lacking of row materials, political violating all are responsible for low quality product.
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Competition of international market: china, India, Indonesia, Malaysia, Taiwan, Singapore, honking, all country getting improves their RMG sector Bangladesh compute with them in international market for survive. Although competition is a necessary term for international business but it’s a problem for Bangladesh.
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Port problem: Another problem is transportation because the undeveloped infrastructure is restricting for that, sometime ships are waiting long run for passing product sometime delay delivery time.
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Problem of maintaining quality product: sometime Bangladesh can’t export quality product at the demand of customer as a result it can’t continue exporting a country long run.
Solutions
The entrepreneur of this readymade garments industry market that 90th century is the contrary of industrialization. If all problem are solved and government take proper stapes for improve this industry. It can play a vital role for economic growth. The solutions are -
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Increase item number of product: For survive in international business Bangladesh need increase product. So they can compute other and which product is quota free they can export.
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Established backward and foreword linkage industry: Establish new spining and wavering industry, baton and other materials permanently supplies.
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Technical development: To income productivity and reduce production cost, must use developed technique can’t use explore domestic technique for use.
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Train up labour and salary increase: Every labour of the RMG sector must need training because if they train up they can product quality goods. Readymade garments industry should increase their labour salary and provide them pension social insurance.
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Make a favorable situation for foreign investment: Like other industry readymade garments should increase its investor. Make individual EPZ on Dhaka; Khulna and Razshahi arrange trade fair.
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Make a fashion and design: Bangladesh should improve their product as like their exporting country demand. They should reduce import their clothing materials on this way. It can help to increase profit in clothing industry.
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Make suitable situation for business: To improve this industry government should ensure favorable political, economical and social stability.
Conclusion
The abolition of quotas, contrary to earlier predictions, has not as yet adversely affected the Bangladesh industry, thanks to the restrictions that still apply to China and Bangladesh's duty-free access to the EU market. Today, Bangladesh continues to be one of the leading exporters to the US and EU markets. The knitwear industry has done particularly well and there has been a shift from producing woven garment to manufacturing knitwear. The full impact of quota abolition will probably not be felt before 2008, when restrictions on China are scheduled to end. Moreover, expected growth in the global market for garments could mitigate the negative impacts on the garment industry in Bangladesh.
Garments industry in Bangladesh is a speed up exporting industry. At present this industry only exporting economic growth in Bangladesh. It can a vital role in our economy. About 21 years, in this industry provide us 55% exporting ravine. It can contribute large number in total ravine . although there are number of restriction ten our RMG industry but its Netware sectors economy growth is satisfactory. So we can’t manger its future.
Reference
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www.gtz-progress.org/RMG.htm
- www.amrc.org.hk/5604.htm
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www.globalmon.org.hk/eng/Post-MFA-era.pdf
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www.southasianmedia.net/Magazine/journal/8_phases_out.htm
- www.tradeobservatory.org/headlines.cfm?refID=18887
- www.econpapers.repec.org/paper/pdbopaper/50.htm
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www2.dw-world.de/southasia/germany-bangladesh/1.132752.1.html
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www.bgw-info.net/reports/The_RMG_Sector_of_Bangladesh_and_Its_Female_Workers_Awaiti.pdf
- www.sg.biz.yahoo.com/060810/16/42olo.html
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D Bhattacharya - Seminar on Export Competitiveness in Bangladesh Industry
- MK HASSAN - Applied Economics, 1998 - Taylor & Francis
- R Afsar - Women in Labor Market in Changing Economies: Demographic
- K Siddique - CPD Occasional Paper Series, 2003
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M Murayama - in Post-MFA Era: The Case of India, Bangladesh and Sri Lanka 2006
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S Halim, A Haq - 2004 - Paper, Department of Sociology. Dhaka University, Bangladesh