WTO, Post-MFA Era and the Bangladesh RMG Sector: An Assessment of Performance and Challenges

Abstract

World Trade Organization (WTO) is continuously advocating for effective open market economy. They are demanding for removing any sort of artificial barriers so that free trade can be held. Globalization is not a new phenomenon. It has happened before, probably even on a larger scale, as was the case over a century ago. The advent of globalization of trade and investment caused many developing countries like Bangladesh to call for increased cooperation through the establishment of international rules and commitments under WTO. Bangladesh's accession to the WTO and globalization process provides simultaneous opportunities as well as threat in the international business. Post Multi-fiber Agreement (MFA) era was started from January 2005. As the economy of Bangladesh largely depends on earnings from export of ready-made garments (RMG) sector, the study primarily focuses on this sector. Due to the expanding growth of RMG sector of the country, large number of women workers are employed informal labor market, which represents a social revolution for the country. The labor wage is relatively low in Bangladesh. After post-MFA era, if the garments sector cannot compete with other countries like China, India, Vietnam, Cambodia or Sub-Saharan countries, then unemployment rate will further increase in the domestic economy. Purchasing power will decline and investment may collapse. There is a need to reduce the anti-export bias in the trade regime, improve the investment climate, removing corruption, continue prudent financial policies, bringing political stability, removing growth of militants and terrorist activities, as well as cost-effective measures to assist the RMG sector and its workers. BACKGROUND OF THE STUDY World Trade Organization (WTO) was formally launched in the year 1995 to succeed the General Agreement on Tariffs and Trade (GATT). Currently, total number of members of WTO is 148. The WTO adopted the principles and trade agreement reached under the auspices of GATT but expanded its mission to include trade in services, investment, intellectual property, sanitary measures, plant, health, agriculture, and textile, as well as technical barriers to trade (Source: Daniels et al., 2004). WTO is intervening the domestic economy and advocates for effective open market economy. However, WTO has greater authority to settle dispute issues relatively to GATT. The advent of globalization of trade and investment has caused many developing countries like Bangladesh to call for increased cooperation through the establishment of international rules and commitments under WTO. Investment, competition policy, transparency in government procurement, and trade facilitation has been labeled the Issues, following the WTO work program in the 1996 Singapore Ministerial Declaration. Advocates of WTO argue that movement towards free trade will be beneficial for a country like Bangladesh which can be attained through free trade. But their argument has lots of disadvantages. Bello (2000) argues that the anti-industrialization thrust of the GATT-WTO accord is made even more manifest in the agreement on Trade-Related Aspects of Investment Measures (TRIMs) and the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). He also comments that the WTO, like many other multilateral international agreements, is meant to institutionalize and legitimize inequality. Its main purpose is to reduce the tremendous policy costs to the stronger powers that would be involved in disciplining many small countries in a more fluid, less structured international system. Actually, any sort of new policy brings brighter future for the developed nations rather than poor nations. Secular deterioration of trends of terms trade is pushing countries like Bangladesh toward backward. Moreover, to adjust with the rules and regulations of the WTO has a very difficult task for a country like Bangladesh. The country's increased economic openness has some advantages as well as disadvantages. …

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