USA: Duty-free status for LDCs

A bill introduced in the US Senate for granting duty-free status to competing economies may devastate Pakistan’s clothing industry, businessmen fear.
According to information received by The News, Senators Dianne Feinstein, a Democrat, and Kit Bond, a Republican, introduced a bill on May 21, which would provide duty-free treatment for textile and apparel goods, up to a limit, from 14 least developed countries (LDCs), which are currently not beneficiaries of any US programme. These countries are Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Maldives, Nepal, Samoa, Solomon Islands, East Timor, Tuvalu, Vanuatu and Yemen. Sri Lanka will also be offered the same benefits.
Some of these countries like Bangladesh, Sri Lanka and Cambodia have already snatched Pakistan’s share in clothing exports even without the duty-free status. Industry circles express concern over the exclusion of Pakistan from the duty concession facility. In the current scenario, they say, Pakistan is under more stress than the least developed countries.
The likely fast-track approval of the duty-free status would be in sharp contrast to the proposed Reconstruction Opportunity Zones that the US government announced about five years ago, but have not been approved yet by the US parliament. Pakistan’s clothing exporters have strong reservations about the ROZ bill which the US government has sent to public representatives for approval.
“The ROZ bill had been delayed for years, which has resulted in closure of over 45 per cent of the clothing industry,” said MI Khurram, former chairman Pakistan Hosiery Manufacturers Association.
He said after a long debate the entire NWFP was included under the ROZ programme but in Balochistan the ROZs could be established within 100 miles of the war zone. “This is unfair,” he said, adding the entire province should have been included like the NWFP.
After three years of debate, he said, the US government included almost all textile categories in the ROZs which would be eligible for zero-rated access to the US market. However, he regretted that in order to make the concept unworkable one clause had been added to the bill, which was under consideration of the Congress, that 100 per cent production of goods should be done in the ROZs.
Leading clothing exporter, Sheikh Zafar Ahmad, said that would mean that the entrepreneurs would have to establish spinning and weaving/knitting mills in the ROZs and also dyeing and finishing units. Then they would have to stitch and pack the goods in the NWFP for export to the US.
“This is unfair and against the general practice adopted by the US government with other countries like Jordan or some African countries, where they are required to add value up to 35 per cent only and are allowed to import yarn and fabric from outside the special zones.”
Zafar said “the ROZ concept is a poisoned lollypop as in the absence of acute energy and power shortages it will not be possible to establish big spinning, weaving, finishing and dyeing units in the zones which also lack basic infrastructure and security issues.” Even if these units were established, he said, they would be at the expense of existing units running outside the ROZ. “Employment generation for one region will mean equivalent loss of jobs in other regions,” he pointed out.
He said the bill for the least developed countries, if approved, would result in almost total closure of the clothing sector of Pakistan. “It seems that someone in the US is deliberately trying to screw Pakistan while posing as its well-wisher,” he commented.