The Financial Express

LDC graduation: Duty erosion may harm RMG exports to Canada

| Updated: October 03, 2022 16:37:24

FE file photo FE file photo

Local apparel exports to Canada that have grown over the last one decade might face a setback due to duty erosion there after 2026, industry insiders said.

Bangladeshi-made readymade garment exports to Canada that is currently enjoying duty benefit are likely to face 17 to 19 per cent duty once the country graduates from the least development country (LDC) status, they added.

Canadian apparel market size is about US$10 billion or 2.2 per cent of global apparel imports, according to Research and Policy Integration for Development (RAPID).

Apparel exports to Canada witnessed a robust 33.22 per cent growth in the last fiscal after a 13 per cent growth in FY'21 while the growth was 25 per cent negative in FY'20.

Bangladesh fetched US$1.32 billion from apparel exports to Canada in the last fiscal year of 2021-22, according to Export Promotion Bureau (EPB) data.

Out of $1.32 billion--$679 million came from knitwear items and the rest from woven garment exports, data showed.

The country's apparel exports were $874.85 million in FY 2011-12 and crossed billion dollar marks in FY'14 and FY'18 respectively, according to data.

When asked, Fazlee Shamim Ehsan, owner of Fatullah Apparels, said, "The issue is really concerning as Canadian buyers are mainly placing work orders here in the country to take advantage of the duty free benefit."

Knit items exports to Canada increased in the last fiscal year whereas buyers placed work orders largely for woven items, he said adding demand for knit items increased mainly because of the pandemic.

Mr Ehsan, also a vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA),

said if local apparel items face duty in the Canadian market, they would lose competitiveness especially to Vietnam as buyers like Walmart and Target place large volume work orders but offer low rate.

He said the government should move to sign free trade agreement with Canada, adding Bangladesh will be benefitted much as its import is less compared to exports.

Talking to the FE, Dr MA Razzaque, chairman of Research and Policy Integration for Development (RAPID), said Bangladesh has immense potential to increase its export earnings from European Union, United Kingdom using its existing capacity as it is likely to enjoy the duty free market access after graduation until 2029.

Additional US$20 billion can be earned from the EU during the period, he said.

"But it would be difficult for markets like Japan and Canada as local RMG is likely to face duty there," he said.

Echoing Mr Razzaque, the BKMEA leader said Japan, Australia and Canada are three potential markets for Bangladesh beyond the traditional US, EU and UK markets.

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