Department of International Business

Faculty of Business Studies

University of Dhaka

Term Paper on
Negotiating Success: Resolving RMG Export Compliance Issues between
Bangladesh and the EU

Submitted to:
Dr. Chowdhury Saima Ferdous
Professor
Department of International Business
Faculty of Business Studies
University of Dhaka

Submitted by:
Md. Mazidul Bashar
Roll: ZH-62
Department of International Business
Faculty of Business Studies
University of Dhaka

Date of Submission: July 9, 2023

Contents
Abstract ......................................................................................................................................................... 1
Introduction .................................................................................................................................................. 2
Is the compliance issue between Bangladesh and EU a Distributive or Integrative Bargaining? ................. 3
Four Tactical Tasks Can be Done by Negotiators .......................................................................................... 6
Closing the Deal ............................................................................................................................................ 7
Converting this Distributive Negotiation into An Integrative Negotiation ................................................... 9
Trade-Off Situation ....................................................................................................................................... 9
Commitments Bangladesh can make to EU ................................................................................................ 10
Converting this Distributive Negotiation into A Principled Negotiation..................................................... 10
Conclusion ................................................................................................................................................... 12
References .................................................................................................................................................. 13
 Abstract

Bangladesh is one of the top 5 Ready Made Garments exporters of the world. The main destination
of the RMG goods made by Bangladesh is USA and EU. The reason behind this is the GSP facility.
But the GSP facility is to end in December 2025 because Bangladesh is no longer classified as a
least developed country (LDC). Moreover, for enacting green economy, EU is planning to make
all the countries trading with EU to comply with certain standards, rules and regulations like ESG,
sustainability etc. But maintaining all the standards strictly is a very challenging task for RMG
industry of Bangladesh. This situation seems like a distributive negotiation as EU has option to
source RMG goods other than Bangladesh but Bangladesh does not have bigger market than EU.
This situation can be settled down by negotiation between two parties, Bangladesh and EU. This
report includes the key components of negotiations between Bangladesh and EU like BATNA,
ZOPA, RP. Moreover, this report also includes how Bangladesh can turn this negotiation from
distributive to an integrative or principled negotiation through bargaining and using power. In
distributive bargaining, concessions play a major role in creating a positive negotiation
environment. Bangladesh should carefully analyze tactics and adopt one that matches its
negotiation goals and the situation. Bangladesh may negotiate a positive RMG cooperation with
the EU by carefully analyzing these methods and focusing on the specific concerns being
discussed.

1|Page
 Introduction
Bangladesh is amongst the top 5 RMG exporting countries in the world. The major destination of
Bangladeshi RMG goods are North America, especially USA and EU countries. The main reason
behind this is quota removal and facilities like GSP. Chowdhury, Ahmed and Yasmin found that
After quota removal in 2004 average more than 16% growth were observed from 2004-05 to 2008-
09 and during this period total export growth rate were also more than 15%. (2014). GSP is one
also one of the key reasons for RMG export growth. But in 2025, Bangladesh will graduate from
LDC (Least Developed Countries) to non LDC which will cause GSP facility to end. After that,
Bangladesh will enter GSP plus facility.

EU is one of the largest trade partners of Bangladesh as a large amount of foreign earnings comes
from them. Bangladesh would try to gain more easy access to EU market through removal of trade
barriers, non-tariff and other technical regulations to trade. Country of Origin rules are another
concern. The standards for "made in" a country is negotiated. Simplifying and clarifying these
laws can boost commerce and provide Bangladeshi RMG exports preferred consideration. Clear
rules of origin would assist Bangladesh's RMG sector stay competitive and give exporters
certainty.

For attaining green environment and environmental sustainability, EU is imposing certain rules,
regulations, standards, sustainable development, human rights, workers safety etc. to their trading
partners and Bangladesh is no exception to it. The incidence of collapse of Rana Plaza in 2013 hit
the reputation of the RMG sector negatively. Again, maintaining all the standards enacted by EU
would be very costly and challenging for RMG industry of Bangladesh. But, failure to maintain
the compliances could lead to restriction of export from Bangladesh. EU officials often criticize
the RMG industry issues by mentioning accident of Rana Plaza. This scenario would not be good
for RMG industry of Bangladesh as a whole as 47% of total exports goes to EU. If EU rejects the
exports from Bangladesh, they have alternative source but Bangladesh has rarely a giant trade
partner like EU. So, if the export between Bangladesh and EU cuts off, Bangladesh would be
hampered economically and financially. But there is scope for negotiation between Bangladesh
and EU and negotiation can lead to better solution for both parties. On the other hand, sometimes
negotiation between two parties take place even knowing that one party will lose and the other
party will gain. The rationale for this type of negotiation is that loss can be minimized by that.

2|Page
 Is the compliance issue between Bangladesh and EU a Distributive or
Integrative Bargaining?

The attribute the case possess is the scenario of distributive negotiation. In distributive negotiation,
both parties compete over the distribution of a fixed sum of value. This negotiation creates a win-
lose situation as one party gains over the loss of the other party. The goal is to claim as much value
as possible for oneself and away from the other party.

To understand whether is the issue a distributive bargaining or not, checking these issues are
crucial:

1. Role of BATNA, WATNA, RP, ZOPA

2. Settlement point
3. Bargaining mix
4. Discovering the other party’s RP
5. Influencing other party’s RP

Influencing the other party’s RP

In the case of Bangladesh and EU, EU enacts some regulations, standards and environmental
sustainability measures and failure to comply with these can result in cutting export from
Bangladesh. Here, both parties want to maximize their benefits. From the perspective of
Bangladesh, Bangladesh wants to hold the right to export to EU at any cost as it is one of the
largest trading partners of Bangladesh. On the other hand, EU wants to make sure that Bangladesh
comply with all the standards enacted by EU for attaining environmental sustainability and
sustainable development.

1. Role of BATNA, WATNA, RP, ZOPA

• BATNA: BATNA is another acronym from the world of business, meaning best
alternative to a negotiated agreement. It refers to the next course of action a negotiator
may take if a negotiation fails to arrive at a satisfactory conclusion. Investopedia. (2023, July
8). Negotiation. Investopedia, 20(7), 1-2. Here, the BATNA of Bangladesh is not present as

3|Page
 Bangladesh does not have a giant alternative trade partners importing a huge amount
of RMG from Bangladesh. On the other hand, EU’s BATNA would be the alternative
RMG exporters. They are amongst the top exporters of RMG around the world. They
are:

o China

o Vietnam

o India

o Turkey

o Indonesia.

• WATNA: WATNA is an acronym for the “worst alternative to a negotiated

agreement.” It describes the worst result a party could achieve if the negotiation process
failed. The WATNA is an important part of the negotiation process. In a book
describing the principles of negotiation, authors Matthew P. Guasco and Peter R.
Robinson note that sometimes, the deal on the table is acceptable because it is less bad
than your WATNA, i.e., you are minimizing loss or making the best of a bad situation.
(FourWeekMBA, 2022). In the case of EU and Bangladesh, the WATNA for Bangladesh
would be restriction on import into EU from Bangladesh if Bangladesh fails to comply
with the standards of EU.

• RP: RP stands for Resistance point that is the lowest price that a seller is willing to
accept or the highest price that a buyer is willing to pay. It is the point at which the
negotiator will no longer continue negotiations and will walk away from the deal. So,
RP of Bangladesh would be defined by calculating the financial loss if the market of
EU is slipped out of hand. Bangladesh has to fix the RP accordance with its’ financial,
economic and environmental sustainability factors.

• ZOPA: Zone of possible outcomes is the range of outcomes that is acceptable to both
parties in a negotiated agreement. Bangladesh would face challenges of sustainability
and environmental issues. The ZOPA of Bangladesh and EU will depend on bargaining
power of Bangladesh, industry competitiveness and bargaining power of EU.

4|Page
 2. Settlement point: In negotiation, a settlement point is the final agreement reached by the
two parties involved in the negotiation. It is the point at which both parties are satisfied
with the outcome and are willing to end the negotiation. The settlement point is typically
within the zone of possible agreement (ZOPA), which is the range of outcomes that both
parties are willing to accept. The objective of both parties is to obtain as much of the
bargaining range as possible. Bangladesh and EU’s settlement point would be a point
considering the issues such as: environment, sustainability, labor rights etc.
3. Bargaining Mix of the Negotiation: In negotiation, bargaining mix refers to the set of
issues that are up for negotiation. The bargaining mix can include a variety of factors. The
goal of the bargaining mix is to find a solution that is mutually beneficial to both parties.
In distributive negotiation, bargaining mix is used to maximize one party’s benefit.
Bangladesh's RMG bargaining mix with the EU includes numerous critical factors. First,
Bangladesh wants trade barriers eliminated and advantageous trading agreements to boost
its EU ready-made garment exports. Rules of origin negotiations set RMG product origin
standards, guaranteeing conformity with regulations and enabling preferential treatment.
4. Discovering the other party’s RP: Discovering other party’s resistance point can give the
negotiator a competitive edge in the negotiation. At the same time, concealing own’s RP
from the other party is important for winning in a distributive negotiation. In RMG sector
negotiations, the EU may have concerns related to market access, fair competition,
sustainability standards, labor rights, and intellectual property protection. Knowing the RP
of EU can put Bangladesh in a favorable situation.
5. Influencing other party’s RP: Bangladesh can influence the RP of EU by some following
strategic decisions:
a. Bangladesh can uphold significant improvement areas in sustainability areas,
environmental and labors safety measures.
b. Bangladesh can shift EU’s resistance point by offering them products at more
competitive pricing than the rivals.
c. Bangladesh can provide commitment to conform with the standards enacted by EU
and provide proof of conforming with the standards.

5|Page
 Four Tactical Tasks Can be Done by Negotiators

1. Assessing the other party’s Target, RP, and Cost of terminating negotiation
2. Manage the other party’s impression
3. Modify the other party’s perceptions
4. Manipulate the actual cost of delay and termination

These four issues can be considered by negotiators of Bangladesh while negotiating with EU.

1. Assessing other party’s Target, RP and cost of terminating negotiation:

This can be done in two ways.
• Indirect Assessment
• Direct Assessment

Direct assessment: Market condition, trade information, existing rivalry, industry trends, target
market demands conditions, consumer trends etc. information are sometimes readily available
which may be helpful for Bangladesh to assess the RP of EU.

Indirect Assessment: Direct assessment takes place during the negotiation. Indirect assessment
means determining what information an individual likely used to set target and resistance points
and how he or she interpreted this information. Bangladesh can observe which types of conditions,
regulations EU enact for ensuring continuing export to EU and decide to take position based on
the EU conditions.

2. Manage the other party’s impression

Bangladesh can monitor EU’s impression through screening activities and Direct
actions to alter the impression of EU.
Screening Activities: The screening activities can be done by Bangladesh are:
• Controlling the inadvertently leak of confidential information
• Monitoring and controlling compliance requirements by EU

Direct Action to Alter Impressions:

6|Page
 Bangladesh can alter the impression of EU directly through demonstrating the way they
improved and complied with the regulations imposed by EU like environment, labor safety,
sustainability etc. Bangladesh can also work with NGO working with environment safety,
human rights organizations etc. to convey the message to EU authority regarding the
changes Bangladesh has made to comply with the regulations of EU.

3. Modifying the other party’s perception:

Bangladesh can modify the existing perception of EU regarding the regulations and
compliance of those regulations by Bangladesh RMG industry. Bangladesh can comply
with those regulations and show the real areas of improvements made compared to
before and modify the perception of EU regarding the RMG industry of Bangladesh.

4. Manipulate the Actual Costs of Delay or Termination

Manipulating the actual cost of delay or termination can be harmful for Bangladesh as
Bangladesh do not have strong alternatives to EU market. Trying to manipulate the cost
of delay could make EU shift from Bangladesh to other RMG exporter countries like
China, Vietnam, India.

Bangladesh can try the way for collaborative approach to complete the negotiation
rather than manipulating the actual cost of delay.

Closing the Deal

The final phase of negotiation is closing the deal, which occurs when both parties reach an
agreement and sign a contract. This is typically the most difficult stage, as both parties must be
willing to provide concessions and reach a mutually beneficial agreement.

When negotiation is in the final phase, Bangladesh can consider some tactics:

Provide Alternatives: Before making the final offer and closing the deal, Bangladesh can
make some alternative solutions to EU for successfully completing the negotiation and deal
closing. Understand the EU's Interests: Understand the EU's motivations for imposing these
7|Page
standards. This will assist Bangladesh in identifying potential compromise areas and developing
solutions that satisfy the requirements of both parties.

Highlight Bangladesh's Importance: Highlight Bangladesh's status as the EU's largest

regional trading partner. Expose the economic benefits that the EU derives from this trade
relationship, including competitive prices, dependable supply, and market access.
Highlighting the mutual advantages can assist in strengthening Bangladesh's negotiating
position.

Demonstrate Progress: Bangladesh can demonstrate the progress they have made in
complying with the standards EU has imposed. Especially they can mention the area of
specific progress to the EU which provide EU with a positive image. Bangladesh can also
share success stories, certifications, and independent audits to build trust and confidence.

Split the Difference:

To split the differences, Bangladesh can do the following:

Identify Common Ground: Look at the EU standards and decide which ones fit with
Bangladesh's goals and interests. Find places where the EU's concerns and Bangladesh's
current efforts or commitments might be similar enough to agree on and work together.

Prioritize and Compromise: Find out which standards are non-negotiable for both sides
and put them in order of importance. Then, for the rest of the standards, be ready to give in
and make allowances. Propose different steps that may not meet all of the EU's standards
but show that Bangladesh is serious about fixing the problems.

Seek Technical Assistance and Support: Bangladesh can also seek technical assistance
from EU to meet the desired standards of EU.

Sweeteners

In negotiation, "sweeteners" refer to additional incentives or concessions offered by one party to

the other to make the proposed deal more appealing or attractive.

Market Access for EU goods: Bangladesh can consider providing EU goods better market
access by lowering trade barriers. This kind of exchange can make the EU more likely to

8|Page
 see Bangladesh's efforts to meet the standards in a good light and can strengthen the trade
relationship as a whole.

Increased Transparency and Reporting: Bangladesh can enhance transparency in

reporting its environmental and social practices. This can involve regular disclosure of data
and progress reports, highlighting the steps taken to improve compliance with EU
standards.

Converting this Distributive Negotiation into An Integrative Negotiation

Find commonalities: Bangladesh and the EU want Bangladeshi exports to achieve high environmental,
sustainability, and labor criteria. They also want good trade partnerships. By finding common interests, the
parties can start working together.

Think creatively: Instead of trying to undercut EU standards, Bangladesh may propose inventive solutions
to meet them. Bangladesh might invest in worker education or use more sustainable materials in its
industrial operations.

Willingness to compromise: Both parties must compromise to reach an agreement since no negotiation is
perfect. Bangladesh may have to improve its standards and invest to achieve EU norms.

Trade-Off Situation

In negotiation, a trade-off refers to the process of exchanging concessions or making compromises

between parties to reach a mutually acceptable agreement.

Trade-off situation for EU could be that they could agree to provide financial assistance to help
comply RMG industry of Bangladesh with all the standards. EU can also provide extra transition
period to Bangladesh to comply with all their requirements. Moreover, both parties can create
cooperative monitoring and compliance processes to assure the implementation and adherence to
the agreed-upon standards. This can include regular reporting, inspections, and audits conducted
collectively. Such shared accountability can offer the EU with assurance of Bangladesh's
commitment to meeting the requirements while allowing Bangladesh to keep some autonomy in
monitoring its own progress.

9|Page
 Commitments Bangladesh can make to EU

Labor rights: Bangladesh can make commitment to protect labor right and safety to comply with
EU standards. Bangladesh RMG industry can provide fair wages, provide workplace safety to
ensure that the incident like Rana Plaza collapse do not occur again.

Environmental Sustainability: Bangladesh's commitment to environmental sustainability can be

demonstrated in the RMG sector. This may involve promoting energy-efficient practices, reducing
water consumption, and minimizing the use of toxic substances during the production process.
Bangladesh may also invest in wastewater treatment facilities and encourage RMG factories to
implement eco-friendly technologies.

Converting this Distributive Negotiation into A Principled Negotiation

Converting Bangladesh and the EU's distributive negotiation in the RMG sector into principled
negotiation, also known as interest-based negotiation or negotiation on principles, involves
focusing on the underlying interests, needs, and principles of both parties. Here's how the
negotiation can be transformed into a principled negotiation:

• Try on their point of view

• Invent win-win agreements
• Insist on using objective criteria

Try on their point of View: Negotiation can be a side by side activity rather than face-to-face
battle. Negotiator have to keep ego aside and work collaboratively to achieve a common goal. The
negotiator has to observe the view from other party’s side. Here, EU can try from Bangladesh’s
point of view and work side by side to make Bangladesh follow standards and at the same time
make sure that Bangladesh also benefits from the agreement.

10 | P a g e
Invent a win-win agreement: Both parties need to invent ways to find and reach an agreement
which is beneficial for both the parties to a negotiated agreement. Here, both EU and Bangladesh
can find suitable agreement which would be beneficial for both parties.

Insist on using objective criteria: Using objective criteria means that parties act like a judge and
use objective criteria to decide about the case. Here, Bangladesh can:

• Find and uphold evidence to support its claim

• Bringing documents that justify the fairness of claim.
• Getting the habit of finding what leads to claim the figure being claimed.

11 | P a g e
 Conclusion

The distributive bargaining between Bangladesh and EU represents achieving maximum gain from
a limited resource at the cost of other party’s loss. This leads to stressed relationship between
negotiating parties. This also leaves one party more exploited while making other party more
benefited from the negotiation. However, this negotiation can be turned into an integrative
negotiation where both parties to a negotiated agreement can formulate a win-win agreement by
collaborative approach. So, in the end, it can be said that both Bangladesh and EU can move to
integrative negotiation from distributive negotiation to collaboratively work and gain mutual
benefits. This would result in growth and progress of both parties.

12 | P a g e
 References

Chowdhury, M., Ahmed, R., & Yasmin, M. (2014). Prospects and Problems of RMG Industry: A
study on Bangladesh. Prospects, 5(7), 103-118.
Investopedia. (2023, July 8). Negotiation: Definition, Stages, Skills, and Strategies. Retrieved
from https://www.investopedia.com/terms/n/negotiation.asp
FourWeekMBA. (2023, February 25). WATNA: What Would The Analyst Do? Retrieved from
https://fourweekmba.com/watna/
Haider, M. Z. (2007). Competitiveness of the Bangladesh ready-made garment industry in major
international markets. Asia-Pacific Trade and Investment Review, 3(1), 3-27.

13 | P a g e