Labour compliance is gaining importance for Bangladesh’s exporters as key Western markets tighten regulations and the country readies to shift from the least developed country (LDC) status. A recent policy analysis by economist Selim Raihan from the South Asian Network on Economic Modeling (Sanem) highlighted that labour standards are now crucial for market access, buyer decisions, and export competitiveness, beyond being just ethical or domestic concerns.
The paper, titled “From Compliance to Competitiveness: The Growing Importance of Labour Issues for Bangladeshi Exporters in the European Union and the United States,” emphasized the significance of adhering to labour standards in light of evolving market dynamics. The country’s major export revenue generator, the ready-made garment (RMG) sector, traditionally relied on factors like low labour costs, a sizable workforce, and preferential market access.
Bangladesh’s primary markets, the EU and the US, receive a substantial share of its apparel exports. The EU grants duty-free access under the Everything But Arms (EBA) initiative, while the US, although a significant market, does not offer similar tariff benefits. With Western markets tightening labour and supply chain regulations and Bangladesh’s impending LDC graduation potentially impacting tariff preferences, the existing export model faces challenges.
The EU, for instance, has introduced stringent rules on corporate due diligence, sustainability reporting, and forced labor, with the Forced Labor Regulation set to take effect from December 2027. This regulation could prevent products produced with forced labor at any stage from entering the EU market. As Bangladesh transitions post-LDC graduation, it may retain preferential benefits for a limited period but could eventually lose them, necessitating compliance with the EU Generalized Scheme of Preferences.
In contrast, the US focuses on customs enforcement and buyer-imposed requirements to combat forced labor. Given that many Bangladeshi garment manufacturers source materials from China, exporters may need to demonstrate that restricted inputs are not part of their supply chains. Meeting buyer codes on issues like child labor and worker rights is also crucial to avoid shipment delays or order cancellations.
As compliance demands heighten, exporters must maintain detailed records on workers, subcontractors, and raw material origins. Large exporters have an advantage in investing in digital traceability systems, while smaller entities may struggle with paper-based records. This disparity could potentially widen the industry gap, favoring larger exporters over smaller players.
Nonetheless, improved compliance can yield commercial benefits by fostering stable buyer relationships, reducing disruptions, and enhancing access to premium sourcing programs. Recommendations from Raihan include enhancing labour inspections, efficient dispute resolution mechanisms, shared digital compliance tools, and support for smaller exporters. Industry collaborations on traceability platforms, training initiatives, and reducing redundant audits are also encouraged.
To stay competitive, businesses are advised to integrate labour compliance into their overall production strategy, rather than treating it as a mere pre-audit requirement. Mapping suppliers, enhancing record-keeping, strengthening worker grievance mechanisms, and fostering greater worker participation are essential steps for exporters. Ultimately, compliance is not just a cost but also a potential source of competitive advantage, concluded the paper.