Dhaka appeals against Jakarta’s RMG safeguard duty

Dhaka has appealed against Jakarta's safeguard duty on export of apparel items to Indonesia from Bangladesh.   

Highlighting Bangladesh's interest, the Ministry of Commerce Sunday sent a letter to the Indonesian Safeguards Committee (KPPI), requesting a hearing on the duty imposition.

On 23 February, the committee on safeguards of the World Trade Organisation (WTO) issued a notification on the duty imposition. Indonesia – the 16th largest economy in the world – will be imposing it in the next 90 days.

According to the notification, Jakarta slaps safeguard duty ranging from $0.44 to $11.29 per piece on readymade garments (RMG) from Bangladesh, China, Vietnam and Singapore. The RMG items include top garments (casual), top garments (formal), bottom garments, suits, ensembles and dresses, outwear, babies' garments and clothing accessories, and headwear and neckwear.    

Md Hafizur Rahman, director general of the WTO Cell at commerce ministry, told The Business Standard that a hearing on the appeal would take place by 19 March.     

Opposing the safeguard duty imposition, Hafizur said a Bangladesh delegation comprising representatives of commerce ministry, Bangladesh Trade and Tariff Commission, and Bangladesh Garment Manufacturers and Exporters Association (BGMEA) took part in a hearing in November last year.

"Although we put forward various arguments there, Indonesia did not accept them," noted Hafizur.

Indonesia's textile association appealed to their Safeguards Committee saying the country's RMG import was hurting the domestic apparel makers. Subsequently, the Indonesian Safeguards Committee conducted an investigation in 2017-2019 and came up with the measure.

Indonesia is the 5th largest garment and textile exporter in the world. In 2019, the country's exports in the sector amounted to about $14 billion.

According to the WTO provisions, a country can slap the safeguard measures if excessive import threatens its domestic production. 

Slapping the duty amid PTA talks 'undesirable'   

Hafizur Rahman said Bangladesh is taking preparation to sign a preferential trade agreement (PTA) with Indonesia. Under the agreement, Bangladesh has sought duty-free access for readymade garments to Indonesian market.  

"The Indonesian commerce ministry also agreed upon that. Amid the ongoing negotiation, the Indonesian Safeguards Committee slaps the duty which is undesirable," he added.

Hafizur said they opposed the safeguard move during the PTA discussions with their counterpart. "But Indonesian commerce ministry told us they would not interfere in the decision of the Safeguards Committee," he added.

As a least developed country, Bangladesh enjoys duty-free access to Indonesian market for some products except RMG. Bangladeshi apparel makers have to pay 25% duty on export of readymade garment items to the country.      

In a statement, BGMEA President Rubana Huq said bilateral trade between Dhaka and Jakarta is in Indonesia's favour.

In the 2018-19 fiscal year, Bangladesh imported $187 million of textile articles from Indonesia, and exported only $30 million.

Mohammad Hatem, senior vice-president of the Bangladesh Knitwear Manufacturers and Exporters Association, told TBS that Bangladesh's apparel export to Indonesia is tiny, and the duty imposition will harm it further. 

"Compared to the export, we import more from Indonesia with a duty-free facility," he added.