Bangladesh Blues
By Sheridan Prasso
Thursday, May 19, 2005

The $14.99 denim short-shorts with the screaming orange belts at Target and other U.S. stores are having an impact a long, long way from home—in Bangladesh.

Denim, this spring's hot fashion trend, is providing temporary relief for the Bangladeshi garment industry, which could lose many of its 1.8 million textile jobs following the end of quotas earlier this year. While overall garment exports from Bangladesh dropped 6% in the first three months of 2005, exports of women's blue jeans and girls' denim skirts to the U.S. more than doubled in January and February, according to U.S. Customs data.

Denim makes up only a small percentage of the garments Bangladesh sends to the U.S., which totaled $1.8 billion last year. But without the recent spike in orders, the falloff would have been worse. With the lifting of quotas, China's share of the U.S. market has soared—Chinese garment exports to the U.S. jumped 75% in January and 147% in February—and Bangladeshi manufacturers have felt the squeeze. Dhaka newspapers have reported that 1,000 garment factories have defaulted on bank loans and are facing closure. In January, Wal-Mart and other retailers demanded that exporters cut prices by 12% or find themselves without new orders. And in March, most of Bangladesh's U.S. and European Union buyers told exporters they had to dump their antiquated letter-of-credit system and be responsible for any duties imposed by importing nations. "It is a little alarming for us," says Annisul Huq, president of the Bangladesh Garment Manufacturers and Exporters Association. "I can see a doomsday, if you ask me."

Huq was in Washington recently to lobby for the lifting of duties on garments from Bangladesh, which is not a WTO member. "We need equal treatment," he says. "If we have duty-free access to the U.S., we'll be competitive with China."

That's not quite true. Between 2000 and 2004, when quotas were in place for both countries, China's market share of U.S. apparel imports rose by more than 50% while Bangladesh's fell by about 16%, even though wages in China are higher. Other factors, such as poor infrastructure and corruption, keep Bangladeshi manufacturers from lowering their costs. Container ships wait an average of ten days just to berth at Chittagong, forcing manufacturers to rely on more expensive air freight. If Bangladesh can't find a way to address these problems, the denim reprieve might not last longer than it takes for this spring's fashion to fade.