Textile Mills: Casualties of the EU’s relaxed Rules of Origin
The EU’s relaxed rules of origin under the generalised system of preferences (GSP) may have substantially boosted exports of readymade garments from Bangladesh in the first three months of the year. However it appears to have spelled gloom and doom for the textile industry as sales of local fabrics, in particular woven fabrics, have reduced.
The EU’s relaxed rules of origin now permits exporters from least developed countries to import fabrics and raw materials from other countries, whereas previously the rules acted as protective shield to the backward linkage industries such as the textile mills. Previously the rules imposed that garment manufacturers purchased local fabrics in order to gain the zero tariff benefits from the EU.
Textile Mill owners are now complaining that ready garment factories are importing cheaper fabrics from other countries, but it is a policy of the EU which cannot be changed. Besides consumers worldwide have a right to the cheapest prices and the readymade garment industry of Bangladesh must remain competitive.
The textile mill industry has been protected for decades, but now it is time to be competitive. If domestic suppliers cannot offer fabrics at a competitive price, the market will inevitably be captured by foreign manufacturers. Needles to say, if local manufacturers can supply quality fabrics at a competitive price, there will be no need for the readymade garment industry to seek overseas suppliers.
Some of the ways that textile mills can become competitive is by increasing productivity and by enhancing efficiency. Support from the government in helping reduce capital costs such as electricity subsidies could help too.
It may be a struggle in the short term, but if the textile manufacturers can lower costs, it will be a benefit for all in the long term.
