Trade policies to achieve non-trade objective

The word "trade" is more than just a term; it is a powerful force that shapes human lives, livelihoods, and entire economies. In today's era of globalisation and digitalisation, international trade has fostered an unprecedented level of interconnection and interdependence among nations. Trade policies are evolving beyond their traditional role of facilitating commerce to address broader objectives, including labour rights, human rights, and climate change mitigation.

Developed nations are increasingly incorporating values-based criteria into their trade policies. For instance, the United States suspended Bangladesh's duty-free benefits under the Generalized System of Preferences (GSP) in 2013 following the Rana Plaza factory collapse, which exposed severe labour and safety violations. A similar approach was taken with Thailand in 2019, when allegations of forced labour in the fishing industry and restrictions on labour rights led to a temporary suspension of its GSP benefits.

The European Union has also integrated labour and human rights considerations into its trade policies. After the Rana Plaza disaster, the EU launched the Sustainability Compact for Bangladesh to improve labour rights and factory safety. Cambodia also faced significant consequences under the EU's Generalized Scheme of Preferences (GSP). 

In 2020, the EU partially withdrew duty-free access for 20% of Cambodia's exports under its "Everything But Arms" (EBA) scheme due to violations of labour and political rights, including restrictions on freedom of expression and association, political repression, and unresolved land disputes.

Environmental concerns are also reshaping global trade policies. The United States has taken steps to integrate sustainability into trade through initiatives like the Green Trade Strategy, which promotes resource efficiency and climate resilience in international commerce. 

As part of this strategy, USCustoms and Border Protection (CBP) purchases electric vehicles, installs charging stations, designs energy-efficient facilities, enforces environmental provisions under the United States-Mexico-Canada Agreement (USMCA), and collaborates with industry and academia to explore emission-reducing practices and technologies in international trade.

In the EU, the Carbon Border Adjustment Mechanism (CBAM) aims to address carbon emissions embedded in imported goods. Currently in its transitional phase, CBAM requires importers to report the carbon footprint of their goods. 

Once the definitive regime begins in 2026, EU importers will be required to pay a financial adjustment by surrendering CBAM certificates. Although the apparel sector is initially excluded from CBAM's scope, concerns are growing that it may be included in the future, potentially increasing costs for Bangladeshi exporters.

Another EU initiative, the Corporate Sustainability Due Diligence Directive (CSDDD), is designed to identify and mitigate adverse human rights and environmental impacts. Set to take full effect by 2029, the directive mandates that companies comply with stringent social and environmental standards. 

Given that the EU is Bangladesh's largest export destination, Bangladeshi companies, particularly those in the apparel sector, must align with these standards by conducting due diligence to prevent human rights violations and environmental damage in their supply chains.

Bangladesh faces significant challenges as it transitions out of its Least Developed Country (LDC) status, particularly due to policy changes in its key export markets. A primary concern is the loss of duty-free and quota-free access, which will result in higher tariffs and stricter rules of origin. Additionally, the country will need to address labour rights and environmental issues with greater urgency.

A recent publication by the United Nations Trade Representative, Adapting Trade Policy for Supply Chain Resilience: Responding to Today's Global Economic Challenges, highlights concerns about Bangladesh's weak labour standards and environmental protections. The report also underscores the vulnerability of women in garment factories, who often face gender discrimination, physical abuse, and sexual harassment due to inadequate enforcement of labour rights. To maintain its global trade competitiveness, Bangladesh must take stronger measures to protect workers and uphold labour rights.

On the environmental front, Bangladesh has made significant progress in promoting sustainable manufacturing. The country is home to over 235 green factories certified under the Leadership in Energy and Environmental Design (LEED) program, including 61 of the world's top 100 LEED-certified factories. While this achievement is commendable, greater emphasis must now be placed on improving labour standards.

As global trade becomes increasingly influenced by non-trade factors—such as labour rights, human rights, and environmental sustainability—Bangladesh must proactively integrate values-based considerations into its trade policies to remain competitive in the international market.

Sumaeya Akhter is a Senior Research Associate at Research and Policy Integration for Development (RAPID). Email: sumaeyaakhter111@gmail.com

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.