Punishing Bangladesh

bd sewing

Obama comes down hard on factory workers in Dhaka.

The Obama Administration has finally found a nation it’s willing to punish—mighty Bangladesh. The U.S. suspended tariff-free access to the U.S. market for a small portion of Bangladesh’s exports last week. U.S. Trade Representative Michael Froman said the goal is “to see Bangladeshi workers in safe, appropriate work situations.” But the real effect will be to hurt those workers and hand the AFL-CIO a protectionist victory.

Big Labor has petitioned since 2007 to strip Bangladesh of its privileges under the Generalized System of Preferences (GSP), which allows lower tariffs for goods from developing countries. The collapse of the Rana Plaza textile factory building in April killed more than 1,100 people, while giving the Administration a political excuse to do the bidding of the AFL-CIO and its allies in Congress. 

The decision defies economic or moral logic. First, the U.S. GSP program doesn’t include textiles, the industry that has attracted the labor movement’s ire. Garments account for more than 90% of Bangladesh’s exports to the U.S., and these goods will continue to pay an average tariff of 15%. Tariffs on clothes didn’t encourage better safety standards in the textile industry, and higher tariffs on other products will squeeze those factories’ profit margins and possibly force them to cut corners on safety.

Textile tariffs merely slow the ability of Bangladesh and similar countries to get on the first rung of the development ladder. Sewing work is well suited to migrants from the countryside with few skills, and because it requires dexterity rather than strength, it gives opportunities to women.

So while Bangladeshi workers earn some of the lowest wages in the world, the experience of countries like China that have trod this ground suggests that on the current trajectory this is temporary. In the last two decades, the proportion of the Bangladeshi population living in poverty has fallen to less than 40% from 70%. As the pool of underemployed labor is exhausted, investment in technology and higher skills boosts productivity and wages.

The safety problems in Bangladesh are a tragic side effect of an industry growing quickly while government and society struggle to keep up. Dhaka needs help to improve its capacity to regulate industry and fight corruption. But that should not obscure the fact that the factories are fundamentally a blessing to be encouraged.

Washington could do more to help the developing world’s workers if it cut textile tariffs to zero by including them in the GSP program. Once countries like Bangladesh can export garments more easily, they will progress through this stage of industrialization faster. Slowing their progress only punishes them for the failures of their government, and rewards the backward thinking of the AFL-CIO.

Source: Wall Street Journal
Image: AFP/Getty Images