GSP and the U.S. Sleeping Bag Industry
Reuters reports:
Valuable U.S. trade benefits for about 130 developing countries could expire at the end of the year because of a Republican senator's objection to duty-free treatment for sleeping bags from Bangladesh.
With Congress hoping to finish its work this week, Alabama Senator Jeff Sessions is blocking a vote on a bill to renew the Generalized System of Preferences program, or GSP, already approved by the House of Representatives.
...
"I'm not going to stand by and allow nations to cheat on their trade agreements and manipulate trade agreements that in effect destroy our industry," Sessions said last week in a speech on the Senate floor.
Supporters of Bangladesh say the country is not cheating, but only taking advantage of a provision in the GSP program that allows poor countries to export sleeping bags to the United States without paying a 9 percent import duty.
Earlier this year, President Barack Obama turned down a request to end the benefit for Bangladesh.
Sleeping bags have been in GSP since 1992, when U.S. policymakers determined they are not import sensitive.
Sessions says the sleeping bag exemption is a "loophole" that threatens jobs at Exxel Outdoors, a sporting goods manufacturer with a plant in his state.
China, which is not a GSP beneficiary, accounted for about 98 percent of all U.S. sleeping bag imports in 2009. But Bangladesh's shipments have risen this year.
The Obama administration, in response to concerns raised by Sessions and Exxel, conducted an "expedited review" of whether to revoke GSP benefits for sleeping bags.
Obama, upon the recommendation of U.S. Trade Representative Ron Kirk, decided against that. But at Exxel's request, the administration is considering the issue again as part of its regular annual review of the GSP program.
CellCorp Global, a Kentucky-based camping products designer that makes sleeping bags in Bangladesh, is fighting Exxel's request, which it says would raise prices for U.S. consumers and hurt employment at its own U.S. operations.
Here's the testimony of the Exxel CEO, from the hearing held by USTR:
11 TESTIMONY BY
12 HARRY KAZAZIAN
13 EXXEL OUTDOORS
14 MR. KAZAZIAN: My name is Harry
15 Kazazian, and I'm the CEO of Exxel Outdoors.
16 And next to me is Ron Sorini. I want to thank
17 you guys, everybody, for giving us an
18 opportunity to be here today. On behalf of
19 everybody at Exxel Outdoors, all of our
20 employees, it means a lot to us to know that
21 we're getting our voice heard.
22 Our story is very unique in the
Page 12
1 sense that our company bought the factory in
2 Haleyville, Alabama, in the year 2000 when it
3 was slated to be closed by Brunswick
4 Corporation when they made a decision to move
5 that production to China.
6 At the time we bought that factory
7 we actually had a factory in Mexico, and
8 really, we were just going there for the asset
9 sale. It took going to the plant, seeing the
10 workers, seeing what the factory was able to
11 do, that we made a decision as a company to
12 close our Mexican operations, invest in that
13 factory, automate it, do all the things that
14 you're supposed to do to compete.
15 We're proud to say it took over
16 five, five, six years, a lot of hard work from
17 everybody in that factory, to get it to the
18 point where we were producing a sleeping bag
19 between two to three percent cheaper than what
20 we could produce one in China. And under
21 those conditions, we were able not only to
22 compete with China, we were able to succeed.
Page 13
1 We are adding employees, making more products
2 on the shelves that are made in America, and
3 it was a win-win situation for everybody.
4 About two years ago we had heard
5 that imports were coming in from Bangladesh
6 duty-free, and when I heard that I was like,
7 it can't be. You know, it's not true. So
8 after we researched it we discovered that
9 under some -- you know, when the Berlin Wall
10 came down there was an agreement that was
11 done. Sleeping bags were changed over to
12 become, from a textile product to a
13 non-textile product, and somehow slipped into
14 GSP and it was just sitting there dormant
15 until somebody discovered it recently and
16 started importing.
17 The problem with that is it's
18 twofold we're able to compete with foreign
19 countries because of automation and a lot of,
20 you know, innovation and efficiency. What we
21 can't do as a company is compete when the
22 products, the raw goods, that we are using are
Page 14
1 more expensive for our factory than our
2 competitor.
3 Probably most of the products that
4 are manufactured overseas, in Bangladesh and
5 other GSP countries if they do take advantage
6 of it, the majority of the products, are
7 coming from China, the raw materials. We also
8 import our raw materials from overseas as well
9 because it's not available at that market
10 price in the US.
11 Most of the products that are
12 manufactured overseas are brought in from
13 China duty-free; in this case, to Bangladesh.
14 They're manufactured and then they're broad
15 duty-free to this country. When we're
16 bringing our fibers and all our raw materials,
17 we are paying duty. The bottom line is, no
18 manufacturer in this country, whether it's
19 General Motors, Chrysler or anybody else, can
20 compete if the cost of their raw materials is
21 at a higher standard cost -- in this case nine
22 percent -- than their competitors.
Page 15
1 Being that sleeping bags are very
2 -- it's not like a fashion, where, wow, you
3 know, it's got a big brand name. It's a
4 sleeping bag. It's just the same bag as when
5 you went camping and everybody else who goes
6 camping. It's been the same thing for 40
7 years and probably even further back. So,
8 that's what makes it tough is that we can't
9 compete on a commodity-driven product if our
10 competitors are at a major damage over a US
11 manufacturer.
12 Now, granted, there's a lot of
13 advantages that -- we understand Bangladesh
14 and we understand the reason for GSP. And as
15 we'll submit later on -- you'll see data -- as
16 far as like tents are another commodity
17 product that is nine-percent duty that's in
18 the same industry. And Bangladesh exports of
19 tents have been rapidly growing, where
20 Chinese, being bigger market share in
21 relations to, you know, Chinese tents.
22 No matter what happens here, no
Page 16
1 matter what decision is made, Bangladesh will
2 export more sleeping bags and will continue to
3 export more sleeping bags to America. The
4 challenge here is whether they take the
5 Chinese share and the US jobs. And that's
6 what we're here to say, that it shouldn't be
7 taken away from the US jobs. It should be
8 taken away from the market share from China
9 because they naturally will continue to
10 expand.
11 This decision to revoke GSP will
12 not adversely affect Bangladesh. It will
13 just, it will just make sure that the jobs are
14 protected in the US. One of the things that
15 I always try to drive home is that we're not
16 asking for any advantages. We're not asking
17 for anything. We're just saying that the
18 playing field needs to be level.
19 It can't be tilted against an
20 American -- we already have -- you know, we
21 pay more in healthcare costs, three times what
22 the labor costs alone is in Bangladesh. We
Page 17
1 have already enough challenges that we have to
2 overcome and that we as a company did. You
3 know, at the end of the day, if the decision
4 is made against us, it's only going to hurt
5 that factory when it closes down. It's only
6 going to hurt our workers.
7 We should want to have more
8 made-in-USA bags. We should want more -- you
9 know, that's the kind of things that we need
10 to have. The playing field needs to be level.
11 We're not asking for any advantages other than
12 keep things fair for everybody. That's our
13 company's position.
14 If there's anything else -- you
15 know, that's pretty much our case. Any
16 questions you may have?
Of course, there's another side to the story. Here's some of the testimony by Bangladesh [note -- the official transcript says he is from Indonesia, but I'm pretty sure that should be Bangladesh]:
2 TESTIMONY BY
3 MOHAMMAD WAHID HOSSAIN
4 EMBASSY OF THE PEOPLE'S REPUBLIC
5 OF INDONESIA
6 MR. HOSSAIN: Mr. Chairman and the
7 Panel, good morning.
8 I would now like to put some light
9 on some less technical aspects of the matter.
10 Bangladesh exports mostly without
11 GSP. In January-August 2010, a period of
12 eight months, Bangladesh exported worth of
13 only $3.1 million of sleeping bags to USA, of
14 which only 40 percent in value of GSP
15 facilities. So there is no scope to blame GSP
16 scheme for the increase in import of sleeping
17 bags from Bangladesh and other countries.
18 And a mere withdrawal of GSP from
19 sleeping bags would not address the
20 competitiveness issue for Exxel. Since 90
21 percent of imports for sleeping bags is coming
22 from China, Exxel should have focused on
1 tackling the size of imports from there rather
2 than targeting Bangladesh, which is a tiny
3 supplier.
4 Exxel's comment on working
5 atmosphere also is not correct. Exxel has
6 made their own comments about the lack of
7 regulation and also low-level cost in the free
8 zones of Bangladesh who are companies that
9 produce sleeping bags. Sleeping bag industry
10 is in the export processing zones, and a small
11 segment of various export-oriented industries
12 regulated by statute under the close
13 supervision of Bangladesh Exports Processing
14 Zones Authority (BEPZA).
15 BEPZA strictly enforces rules and
16 regulations for industries within its own
17 jurisdiction. Also, labor cost in Bangladesh
18 is rising rapidly, as reflected BEPZA's
19 circular on minimum wages just a month back.
20 The wages has a minimum increase of 65 percent
21 or so, only a few days back.
22 Adverse impacts on the withdrawal
1 of GSP -- Bangladesh is a least developed
2 company, where almost half of these people
3 still live under the poverty line -- that is,
4 less than a dollar a day -- and its
5 unemployment rate is about 40 percent.
6 Despite many obstacles, Bangladesh is on its
7 way to poverty alleviation, social development
8 and, in the process, achievement of Millennium
9 Development Goals, MDG, development goals.
10 On the other hand, USA is in
11 charge of all leadership. It's guiding the
12 course of actions across world. Given that
13 reality, withdrawal of GSP by USA is likely to
14 give the wrong signal to the exporters and
15 investors, damaging prospects of enhanced
16 bilateral trade within the US and Bangladesh.
17 In conclusion, we'd like to
18 emphasize that that there no justifiable
19 reason for withdrawing the GSP under sleeping
20 bags, so the petition should be denied.
21 Thank you.