Trade war between US and China

Mohammad Amjad Hossain :
Travesty of truth is that consumers, businesses and economy continue to take a hit in spite of negotiations and calls continue between US trade representative and others with Chinese counterpart to have fair trade deal. These new negotiations prompted when China acted as tit- for -tat. The US President Trump in fact slapped ten percent import tariffs on $ 200 billion worth of Chinese goods in October of 2018. China in fact was not deterred and fired back with tariffs of 5 to 10 percent on $ 60 billion of US goods ranging from beef to condoms as well. This tit for tat resulted slowing down growth of economy and affecting consumers as well. President Trump was of the opinion that China will bow to his demands to import more American goods in reducing the trade deficit and bring back some lost American jobs.
President Trump has been confronting next several weeks whether to ratchet up tariffs on Chinese goods, impose new tariffs on import of foreign made cars and keep metal tariffs on trade partners of Canada and Mexico. Imposing tariffs has dampened exports of some America’s most cherished products like Soybeans, nail manufacture to whisky. As reported, most draconian duties have been imposed by European countries on the import of whisky from America. Twenty-five percent duties have been imposed by European countries on the import of whisky. Stock market in December of 2018 reflected dreadful month indeed.
By now lawmakers in US Congress have expressed concern about imposing tariffs on Chinese products and results of negotiation on new deal with China. On 12 March US trade representative Robert Lighthizer gave a testimony to Senate Finance Committee wherein he is reported to have said a deal with China remains as elusive as ever but talks are in final weeks. Lawmakers asked Trade representative whether White House end a tariff war that has taken a toll on financial market and US agricultural sector as well.
As a matter of fact, President Trump wants to pressure China into changing what he calls its unfair trade practices while the United States demands greater access to Chinese markets by American companies. Interesting enough to note that China has been marching economically and has become second largest economy of the World in 75 years. China’s population was living under extreme poverty 75 years back.
Trade war between US and China becomes blessing for countries in South-East and South Asia. The recently free trade agreement in some South-East Asian countries makes it easier for them to supply goods to the United States. The comprehensive and progressive for Trans-Pacific Partnership trade agreement which includes Malaysia, Singapore and Vietnam will have wide access to US market. Similarly, Bangladesh will be beneficiary as well. Bangladesh’s share in ready-made garment export to US market is on the rise. Major international brands like H&M, The GAP, LEVIS and ZARA have manufacturing facilities in Bangladesh.
These international brands can easily divert order to Bangladesh if tariff war on Chinese products does not resolve. By now Bangladesh turned out as world’s second largest readymade garment exporter bringing around US $30 billion every year. According to a report by Just-Style apparel sourcing strategy, low labour cost, abundant labour and duty-free access to World markets make Bangladesh turned out to be second largest readymade garment exporter. Therefore, owners of garment factories should consider increasing basic salary of labourers in commensurate with market.
Another area needs to be carefully studied to stop setting up India-based garments companies’ liaison offices in Dhaka. These Indian based companies are utilizing Bangladesh’s most favoured nation status which means lower tariffs in the US and European markets. Their shipment goes from Bangladesh but money goes to India. This writer is quoting from an interview given to Business Line of The Hindu by Mr.V.Ramchandran, Proprietor of Wearer Intercontinental of Bangalore in May of 2013. According to him, as many as 400 garment buying houses from India have their liaison offices in Dhaka. Over a period of time Bangladesh would lose export-oriented markets if the present trend continues.
Another area of interest to Bangladesh is revival of GSP by the USA which has been suspended since 2013 because of collapse of Rana Plaza building where several garment workers have lost their lives and fire at Tazreen Fashions. Complaints came from many international brands to ensure safety of work force in garment factories. The US government also wants to ensure freely to operate by trade union leader to look after the interest of labour forces in garment factories. There is a lack in this arena. It is widely reported that leader of garment labourers union either is beneficiary to the government in power or is in favour of owner of garment factories. Inspection system needs to be improved in garment factories.
No amount of pursuing with the US government would revive GSP facilities unless the American Federation of Labour and Congress of Industrial organization is satisfied of correct action being implemented in garment factories in letter and spirit.

(Mohammad Amjad Hossain, retired diplomat and former President of Toastmaster International Club of America, writes from Virginia)