GSP: the hidden iceberg to the Myanmar crisis

Contrary to the current focus on high-stake humanitarian diplomacy, the EU should use its Generalised Schemes of Preferences (GSP) rewards to nudge Myanmar and Bangladesh to collaborate on common practice areas such as aquaculture and garment manufacturing, which includes textiles, clothing and footwear (TCF).

While Bangladesh would benefit from increased food and nutrition security for its ethnic populations along the border based on the supply of popular fish species such as Rohu from Myanmar; Myanmar, on the other hand, can pay close attention to Bangladesh’s success in leveraging private sector competitiveness and harness innovation and coordination in the garment and TCF sector to realise its full potential.

The EU should strategically consider having a two-pronged approach of capitalising on its “hidden iceberg”, that is, the GSP that it extends to Myanmar and Bangladesh. It should also encourage knowledge sharing mechanisms that can complement diplomacy and ensure that appropriate international standards of human rights are met for the benefit of all stakeholders.

GSP beneficiary

In the wake of the historic decision by the Council and the European Parliament on the readmittance of GSP and the lifting of all sanctions against Myanmar in July 2013, the then EU Trade Commissioner Karel De Gucht said: “This has the potential to make a huge difference to the country’s economic development and to bring real benefits to the people there.”

Myanmar, desperate to rid itself of its unfortunate international pariah status accumulated over the years, took this incentive from the EU to undertake comprehensive labour market reforms.

In 2013, the then Myanmar government introduced a series of new labour laws, including the minimum wage law as well as the workers’ rights to organise trade unions throughout the country. It also persuaded the private sector to negotiate with the unions to enforce the minimum wage among other such developments. Eventual tri-partite negotiations on the setting of the minimum wage were institutionalised further for the country to catch up with internationally-recognised workers rights.

Since then, Myanmar has delivered reforms and passed tough tests as a result of its GSP benefits. Before the EU’s decision to bring Myanmar back under the so-called “Everything-but-Arms (EBA)” scheme of GSP, a special privilege reserved for least-developed countries (LDCs), the country’s exports to EU was around € 160 million. But from 2013 onwards, exports immediately increased by 35 percent. In 2014 and 2015, exports grew at a rate of 75pc per year. By 2017, five years after its readmittance, Myanmar’s exports to EU reached a respectable level of € 1.5 billion, representing a ten-fold increase over the period.

The bulk of the exports comprised of TCF which now stands at 80pc of Myanmar’s total exports to the EU.

Potential removal

Last week however, Myanmar received warning from the EU regarding the possible removal of those trade privileges due to human rights violations in the northern Rakhine state.

The crisis in Rakhine was a disastrous humanitarian emergency leading to international outcry for accountability. What the crisis urgently now needs at the most is a resilient Myanmar that could overcome the underlying socio-economic imbalances and other odds to support the successful reintegration of refugees back into their local communities.

The withdrawal of trade privileges, argued by the EU officials as “smart and targeted” instruments to force Myanmar into fixing the ongoing crisis, would be counterproductive at the very minimum. In fact, it would certainly push the country into massive layoffs and violent backlashes that could entirely undermine any chances of resolving Rakhine crisis and putting the overall population – especially the several thousands of female workers in the thriving garment sector – back into vulnerability.

Another key variable are positive industrial relations or collaborative relationships among tri-partite members–the government, the employers and the unions. Trust was built when the unions and the private sector cooperated to set the first minimum wage in 2015 and the subsequent raise of the wage this year. Under those circumstances, Myanmar achieved relative industrial peace, lesser number of disputes and protests while enforcement of dispute settlements became more institutionalised. As a result, the country attracted US$ 2 billion worth of foreign investment into the TCF sector in the last few years while all other sectors witnessed a decline.

The EU’s decision to restore GSP in 2013 laid the seeds for inclusive growth that enabled the country to undertake these reforms and the reversal of such benefits could possibly wipe out all of those achievements. The withdrawal could deprive Myanmar of a chance to replicate its inclusive labour-intensive industry in the conflict-affected regions and extend its social protection policies to cover marginal groups. Furthermore, it could trigger the collapse of the urban economy that recently became acutely vulnerable to external shocks.

Worse still, the proposed “punishment” could easily backfire as the Myanmar public would perceive the EU’s treatment as a favour to the country’s main disputant, Bangladesh, leading to potentially strained relationships between all stakeholders.

Ngu Wah Win is Senior Policy Coordinator at the Centre for Economic and Social Development, an independent and non-political think-tank dedicated to inclusive development in Myanmar.

Source: Myanmar Times

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