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U.S. to suspend trade benefits for Bangladesh: source

WASHINGTON (Reuters) - President Barack Obama is expected to announce on Thursday that the United States is suspending U.S. trade benefits for Bangladesh after two tragedies in the past year in the country's garment sector that have cost more than 1,200 lives, a congressional source said.

U.S. trade officials have said they expected Obama to announce a decision on the matter by the end of June. The U.S. Trade Representative's office did not have an immediate comment on whether an announcement would come Thursday.

Suspending Bangladesh from the U.S. Generalized System of Preferences program would increase U.S. duties on an array of products the country exports to the United States, such as tobacco, sporting equipment, porcelain china, plastic products and a small amount of textile products.

But it would not directly affect Bangladesh's main export, clothing, since garments are not eligible for duty cuts under the GSP program, which was created in 1976 to help economic development in the world's poorest countries and to reduce import costs for U.S. companies.

In 2012, Bangladesh was spared about $2 million in U.S. duties on about $35 million worth of goods under GSP program, but it paid about $732 million in U.S. duties on $4.9 billion of clothing exports not covered by the program, according to Ed Gresser, a trade analyst with the GlobalWorks Foundation.

Still, Obama's decision would be a repudiation of working conditions in Bangladesh following the collapse of the Rana Plaza garment factory building in April that killed 1,129 people and the Tazreen factory fire in November that killed 112.

It also could influence the European Union's decision whether to suspend trade benefits for Bangladesh, which would have far more impact since Bangladesh's clothing and textiles exports receive duty-free treatment there.

The EU imported roughly 9.2 billion euros ($12.13 billion) of goods from Bangladesh last year, according to data from the EU's executive, the European Commission.

Clothing and textile products ranging from towels and bedding accounted for almost 93 percent of those goods.

EU officials have threatened to kick Bangladesh out of the program - a process that could take more than a year - unless it improves worker safety conditions.

(Reporting by Doug Palmer; Editing by Vicki Allen)

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