A Review of Canada's Extension of Tariff Benefits to Manufactured Apparel Exports -The Asian Age

Industrialization is the primary source of economic development in a developing country like Bangladesh. The most crucial sector in the economy of Bangladesh is the garment industry. The apparel industry is the largest in Bangladesh regarding export earnings, contribution to GDP, employment creation, etc., with the second most prominent position in the global market.

The readymade garment industry is playing a vital role in strengthening the basic foundation of the current socio-economic structure of Bangladesh. The garment industry has created employment opportunities for many people in the country. It is making a significant contribution to solving the unemployment problem. The contribution of this industry to poverty alleviation, economic development and empowerment of women is undeniable. Also, our economy is getting stronger by earning foreign exchange.

Currently, it is the largest export-oriented industry in Bangladesh. In the fiscal year 2022-2023, export earnings from the ready-made garment industry alone amounted to $46,991.61 million. Bangladesh is the world's 2nd largest exporter of ready-made garments, followed by China.

Readymade garments from Bangladesh are exported to most countries of the world. However, the countries of the European Union, like Germany, France, the United States of America, Canada, and the United Kingdom, have the largest market for the readymade garments industry of Bangladesh.

Despite the COVID-19 pandemic, global economic recession, Russia-Ukraine war, dollar crisis, etc., Bangladesh's ready-made garment industry sector has managed to maintain its position. After more than half a century of independence, Bangladesh is now on its way to the ranks of developing countries. Bangladesh has already been recognized as a middle-income country. Bangladesh will officially graduate to a developing country in 2026. Experts say Bangladesh will lose duty-free export facilities if it becomes a developing country. This will have an impact on the export sector of the ready-made garment industry as well.

For this reason, many countries have announced increased tariff benefits in the garment industry sector. The garment industry of Bangladesh will get duty-free benefits in the European market till 2029. Recently, the Canadian government has extended duty-free market facilities to all developing countries after transitioning from least developed country status in 2026, from which Bangladesh will benefit. According to a bill passed by the Canadian Parliament in June this year, Bangladesh will enjoy duty-free market privileges in the Canadian market until 2034.

The Government of Canada has undertaken to continue providing duty-free market benefits to developing countries under the General Preferential Tariff (GPT) scheme. Under the plan, other products will be given duty-free entry into the country apart from relaxing manufacturing norms for apparel items.

Those involved in this industry say that this policy decision will help transform Bangladesh's garment industry into a safer, cleaner, greener, more sustainable sector and contribute to the country's overall infrastructural development. "Now is the time to take our bilateral trade to new heights," they say.

According to Export Promotion Bureau (EPB) data, Canada was Bangladesh's 11th largest export partner in the fiscal year 2022-23. In that financial year, Bangladesh exported goods worth 1.72 billion dollars. Apart from this, this North American country is one of the leading markets for Bangladeshi clothing.

Bangladesh's garment exports to Canada reached US$ 1.55 billion in FY 2022-23, compared to US$ 1.33 billion in FY 2021-22. That is, in the fiscal year 2022-23, the exports of Bangladesh increased by 16.55 per cent compared to the previous fiscal year.

Analysts say that Bangladesh has great potential to enter the Canadian market. Bangladesh should increase the export of manufactured garments in the country with the GPT Plus facility. At the same time, we should focus our efforts and resources to maximize this potential's benefits.

Global trade is said to catalyze the growth and prosperity of economic partnerships between nations in an interconnected world. Against this backdrop, Canada's decision to maintain tariff preferences for Bangladesh's garment industry until 2034 can be seen as an affirmation of its commitment to enhancing international trade relations and supporting a developing economy. This extension of tariff preferences will significantly affect the Bangladeshi garment sector and the broader economy. This benefit emphasizes the important role that trade priorities play in advancing economic development.

The garment industry has emerged as one of the most significant sectors in Bangladesh, contributing substantially to the country's economic growth and employment opportunities. With competitive advances in affordable and quality apparel production, Bangladesh has emerged as an important country in the global apparel supply chain. The continuation of tariff concessions in Canada, a significant trading partner, assures the sustainability of Bangladesh's garment exports.

Canada's decision to maintain tariff preferences for Bangladesh's garment sector is evidence of the mutual benefits that trade partnerships can bring. This supports Bangladesh's economy by increasing export earnings and ensures a steady supply of affordable and diverse apparel for Canadian consumers. The relationship between the two countries goes beyond mere economic transactions, evolving into a partnership that will contribute to the welfare and progress of both societies.

Beyond the economic benefits, expanding tariff preferences holds a transformative potential for Bangladesh's domestic development. As trade preferences translate into increased export earnings, the sector creates a ripple effect throughout the economy. Higher revenues enable investment in infrastructure, education, healthcare and other critical industries that form the basis of sustainable development. Enhanced tariff concessions catalyze this progress, leading Bangladesh to a more inclusive and prosperous future.

Moreover, mutual trade continuity serves as a beacon of stability amid the uncertainty created by global trade volatility. Ensuring a stable market for readymade garment products enables Bangladesh to plan long-term, boost investor confidence and encourage strategic growth initiatives. This stability assures volatility that meets the challenges arising from sudden changes in trade policies and protects the livelihood of millions of people employed in the garment sector.

It is essential to recognize that extending tariff preferences is not an isolated issue; this is consistent with Canada's commitment to ethical and sustainable trade practices. The priority scheme encourages compliance with international labour standards, worker safety, and environmental regulations. This serves as an inspiration for the garment industry of Bangladesh to continuously improve its practices, fostering a responsible manufacturing environment that conforms to global expectations.

Beyond the trade partnership between Canada and Bangladesh, It exemplifies the spirit of cooperation in achieving its shared goals. As both countries work together to navigate complex global challenges, this sustained support for Bangladesh's garment sector indicates promise for increased socio-economic progress. It embodies the belief that trade, combined with ethical and inclusive principles, can be a powerful tool for positive transformation.

In the context of a post-pandemic world, the extension of tariff preferences for Bangladesh's garment sector is particularly relevant. Disruptions to global supply chains caused by the pandemic have exposed vulnerabilities in various industries, prompting countries to reassess their trade relationships and resilience. Against this backdrop, Canada's decision to maintain its commitment to Bangladesh's garment industry sends a message of solidarity and partnership, reinforcing the notion that joint efforts are essential to overcoming shared challenges.

However, it is essential to consider this development of relationships with a balanced perspective. While trade preferences provide growth opportunities, they should also be a stepping stone to building a diversified and self-reliant economy. Leaders and stakeholders in Bangladesh's ready-made garment industry sector must capitalize on the enhanced tariff benefits and undertake structural reforms that encourage innovation, value addition and development of new industries. This strategic approach will enable Bangladesh to transform from a predominantly export-oriented economy to a more robust and dynamic economy capable of coping with the changing global economic environment.

Finally, Canada's decision to maintain tariff preferences for Bangladesh's apparel industry until 2034 is a testament to the enduring partnership between the two countries and the recognition of trade priorities' vital role in economic development. This expansion will strengthen Bangladesh's garment sector and pave the way for massive economic progress, contributing to infrastructure development, job creation and improving living standards. As Bangladesh seizes this opportunity, it must also work towards building a resilient and diversified economy that harnesses trade leverage as a means of sustainable growth. Continued cooperation between Canada and Bangladesh serves as a beacon of hope in a rapidly changing world, emphasizing the power of partnership to build a more prosperous future for all.

Dr. Matiur Rahman is a
researcher and a
development worker.