The big trade news from today is that President Obama has decided to exclude Bangladesh from the GSP program:
As part of this year’s review, the Administration also considered petitions to withdraw or suspend certain countries’ eligibility for GSP benefits based on statutory criteria, including whether a country is taking steps to afford internationally recognized standards for worker rights, whether a country acts in good faith in recognizing and enforcing arbitral awards in favor of United States citizens, and the extent to which a country adequately and effectively protects intellectual property rights (IPR). As described in a separate press release, the President has decided, drawing on the recommendation of the U.S. Trade Representative, to suspend the GSP benefits of Bangladesh based on that country's failure to meet the statutory GSP country eligibility criterion related to worker rights.
More details here:
“Our GSP statute requires certain basic standards for worker rights and worker safety as a condition of eligibility. Over the past few years, the U.S. Government has worked closely with the government of Bangladesh to encourage the reforms needed to meet those basic standards. Despite our close engagement and our clear, repeated expressions of concern, the U.S. Government has not seen sufficient progress towards those reforms. The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” said Ambassador Froman. “While taking this action today, the Administration is also initiating new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented. The Obama Administration is committed to reflecting American values in our trade policy, including with regard to the rights of workers worldwide.”
So is this U.S. action legal under WTO rules? I've talked about similar issues before. The main legal obligations are in the Enabling Clause and the key case is the EC - Tariff Preferences dispute (the Appellate Body report is here). An important legal question relates to para. 3(c) of the Enabling Clause, which states:
3. Any differential and more favourable treatment provided under this clause:
...
(c) shall in the case of such treatment accorded by developed contracting parties to developing countries be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries.
Does suspension of trade preferences due to labor rights issues "respond positively to the development, financial and trade needs" of Bangladesh? What exactly are those needs? And what is it that must respond to those needs: is it the preferences themselves as a general matter, or is it each individual decision to grant or not grant them to particular countries?
The more practical question may be, would Bangladesh bring a complaint on this issue? Such a course of action may be problematic when you are hoping a trading partner will do something for you. Is that a flaw in WTO DS rules?
