Give Bangladesh a chance

Bangladesh as a dangling metaphor
CYBER AGE
From The Statesman
ND BATRA

There is a reason for Bangladesh textile exporters to be optimistic about the long-term outcome of China’s revaluation of the yuan. Of the $7.57 billion export last year, its textile accounted for 75 per cent; but since the phasing out of quota in January 2005, Bangladesh exporters have feared that they might be mauled by China’s cheaper exports.

Fazul Haq, Bangladesh Knitwear Manufacturers Exporters Association president, was quoted as saying, “The appreciation of the Chinese currency means a lot of Bangladeshi exports and jobs since Chinese products are a competitor in the global marketplace.” Chinese products, though cheaper, are certainly not better. The cost-conscious American consumer does not care who made it.

In other words, by pegging the yuan to the dollar and keeping it artificially low, China has been indirectly siphoning off jobs from Bangladesh, a proud democratic Muslim country which needs US help in keeping Islamic militants at bay. To some extent it has been successful. Creating jobs is one way of doing it. But Americans have been more interested in seeing what free market capitalism does to Communist China than its transformational effects upon a Muslim society, which might fall into the kind of hell hole that the Taliban created in Afghanistan.

It is a specious argument that the American consumer would have to pay more if Wal-Mart, JC Penny, Target and other global buyers and mega stores could not buy cheap goods from China. They would look somewhere else and countries like Bangladesh, the quality of whose garments compares favourably with China’s, could easily provide an equally attractive alternative source of supply.

But the political and social consequences of a dollar going to Bangladesh are far more momentous than a dollar going to China. Consider what Jeffrey D Sachs, the Director of The Earth Institute at Columbia University says about Bangladesh in his remarkable new book, The End of Poverty: “Not only is the garment sector fuelling Bangladesh economic growth of more than 5 per cent per year in recent years, but it is also raising consciousness and power of women in a society that was long brazenly biased against women’s chances of life.”

Since most of the employees of export-oriented garment industry are women, just imagine if, Wal-Mart, for example, which buys most of its garments from China, shifts its production by 10 per cent to Bangladesh, the social consequences would be tremendous and would reverberate throughout the Muslim world. Henry Kissinger once called Bangladesh an international basket case, but he has been proved wrong. Bangladesh has climbed the first rung of the development ladder and its growing middle class is proud of the biggest shopping mall in Asia, Bashundhara, with 2,000 stores, which recently opened in Dhaka. Bangladesh might yet escape the fate of becoming another Afghanistan.

Continuing how the garments industry is transforming life in Bangladesh, Dr Sachs says, “The job for women in the cities and rural off-farm microenterprises; a new spirit of women’s rights and independence and empowerment; dramatically reduced rates of child mortality; rising literacy of girls and young women; and, crucially, the availability of family planning and contraception have made all the difference for these women.” But what has this to do with China?

If the global marketplace is a level playing field, economic growth would take place in many countries and prosperity would spread globally. But the USA has been timid in dealing with China, fearing that if China stopped investing its export-earned dollars in the US Treasury, US interest rates would go up, mortgages would become more expensive and the housing bubble would burst.

Since the Chinese don’t buy much from the USA, the surplus dollar is invested in the US Treasury at a low rate. In other words, China has been providing cheep loans to Americans to buy goods from China. China holds $270 billion in US Treasury bonds, which is a kind of threat to the US dollar. What if China shifts its investment from the US Treasury to euro?

This question would not have arisen, if American companies had diversified their buying and let countries like Bangladesh accumulate dollars. In July, a Chinese General threatened to nuke several US cities in case the US intervened in the China-Taiwan conflict. Do you think a Bangladeshi General would have been foolish enough to utter such a diplomatic stupidity? Even a country like the USA that believes in free market capitalism cannot separate foreign trade from public diplomacy. Wal-Mart is not politically neutral. The question is whether China’s announcement of the revaluation of its currency by 2.1 per cent, unpegging it from the dollar but tying it to a basket of undisclosed currencies, is simply a rope trick to muffle American criticism.

Hong Kong, “whose currency,” according to Financial Times, “is considered a proxy for the Chinese currency,” has not revalued its dollar, which means that what China is giving with one hand is taking with the other.

Maybe the yuan revaluation is a clever diplomatic move to soften Congress anger and make way for a red carpet treatment for President Hu Jintao’s US visits in September. And there lies the danger. As China continues mesmerising Americans with its phenomenal export-oriented economic growth, spectacular attempts to take over American companies like Unocol and Maytag, and Machiavellian manoeuvres to oust the USA from Central Asia, I am afraid, Bangladesh—a metaphor dangling between Bashundhara and the Taliban, an exemplar of what the dollar could do to a Muslim country struggling to keep itself away from destructive Islamic extremism — would be forgotten.