The US has initiated a new trade investigation into Bangladesh and other economies to assess if their policies and practices are contributing to global overcapacity that could negatively impact American manufacturing. This investigation, launched on March 11 by the Office of the United States Trade Representative (USTR) under Section 301 of the Trade Act of 1974, aims to address what the US considers unfair foreign practices. The USTR has pointed out evidence of structural excess capacity and production in Bangladesh, which maintains a goods trade surplus of $6.15 billion with the US.
The trade surplus is primarily driven by textile exports, with the Bangladeshi government offering cash incentives for exports across various sectors, including textiles and leather products. Additionally, Bangladesh’s cement industry is facing significant excess capacity amidst a prolonged industry downturn. In recent years, the national consumption of cement in Bangladesh has dropped to levels well below total capacity, indicating a challenging market environment.
Bangladesh’s Garment Manufacturers and Exporters Association President Mahmud Hasan Khan expressed concern over the country being under investigation. However, the specific areas to be probed, such as production capacity, intellectual property rights, and incentives, are unlikely to have a substantial impact on Bangladesh. Notably, Bangladesh’s production model relies on receiving work orders from international buyers, making excessive production impractical. Furthermore, Bangladesh has taken steps to align with international labor standards, amending labor laws and ratifying key International Labour Organization (ILO) conventions. The government has also begun phasing out export incentives in preparation for its transition from the least-developed country (LDC) status later this year.
