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Tue 23 Feb 2016 01:57 PM

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Expiry of US-Bahrain tax rules 'could hit workforce'

Bahraini garment firms may no longer enjoy duty-free exports to the US from July

Expiry of US-Bahrain tax rules 'could hit workforce'
(Getty Images)

Bahraini companies that enjoy duty-free exports to the US under a ten-year trade deal could be forced to cut staff when part of the agreement expires on July 31.

A temporary clause contained in the 10-year-old free trade agreement (FTA) between the US and Bahrain is due to expire this summer, according to a report in Gulf Daily News.

The clause stipulates that three major garment firms in the kingdom can use raw materials imported from countries that are not signatories to the FTA but still export garments free of tax.

The temporary clause is called the ‘tariff preference level’ (TPL), reported the newspaper. Negotiations are under way to renew the clause but US officials have so far stopped short of signing a deal, it said.

If it does not, the costs to the firms would escalate dramatically.

Zayed Al Zayani, Bahrain’s industry, commerce and tourism minister, was quoted as saying:  “The textile and garment sector, which accounts for 25 percent of exports to the US – second only after aluminium – could now see tariffs rather than being tax-free if the deal expires on July 31.

“This means we have to act within the upcoming four months or else those working in the sector would be laid off.”

Al Zayani reportedly added the textile and garment industry in the US was facing tough competition from Southeast Asia where an estimated 1.5 million American workers have been laid off.

“Unions have pressurised the US administration and legislators and the tax exemption deal with Nicaragua has been stopped, while in Morocco and Bahrain it expires this year, and Oman in 2019,” he added.

“We have repeatedly tried to convince the US to renew the deal, but have been responding negatively.”

However, he added: “We have not lost hope.”

Mr Al Zayani was speaking at a press conference on Monday following the weekly cabinet meeting.