After Horror, Change?

John Miller, Guest Blogger

John Miller is a professor of economics at Wheaton College (Norton, Mass.). This post appeared originally in the September/October issue of Triple Crisis’s sister publication Dollars & Sense , as Miller’s regular “Up Against the Wall Street Journal” column.

After Horror, Change? Taking Stock of Conditions in Bangladesh’s Garment Factories

On April 24, 2013, the Rana Plaza factory building, just outside of Bangladesh’s capital city of Dhaka, collapsed—killing 1,138 workers and inflicting serious long-term injuries on at least 1,000 others.

While the collapse of Rana Plaza was in one sense an accident, the policies that led to it surely were not. Bangladesh’s garment industry grew to be the world’s second largest exporter, behind only China’s, by endangering and exploiting workers. Bangladesh’s 5,000 garment factories paid rock-bottom wages, much lower than those in China, and just half of those in Vietnam. One foreign buyer told The Economist magazine, “There are no rules whatsoever that can not be bent.” Cost-saving measures included the widespread use of retail buildings as factories—including at Rana Plaza—adding weight that sometimes exceeded the load-bearing capacity of the structures.

As Scott Nova, executive director of the Worker Rights Consortium, testified before Congress, “the danger to workers in Bangladesh has been apparent for many years.” The first documented mass-fatality incident in the country’s export garment sector occurred in December 1990. In addition to those killed at Rana Plaza, more than 600 garment workers have died in factory fires in Bangladesh since 2005. After Rana Plaza, however, Bangladesh finally reached a crossroads. The policies that had led to the stunning growth of its garment industry had so tarnished the “Made in Bangladesh” label that they were no longer sustainable.

But just how much change has taken place since Rana Plaza? That was the focus of an International Conference at Harvard this June, bringing together government officials from Bangladesh and the United States, representatives of the Bangladesh garment industry, the international brands, women’s groups, trade unions, the International Labor Organization (ILO), and monitoring groups working in Bangladesh.

How Much Change On the Ground?

Srinivas B. Reddy of the ILO spoke favorably of an “unprecedented level of … practical action” toward workplace safety in Bangladesh.

The “practical action” on the ground, however, has been much more of a mixed bag than Reddy suggests. In the wake of massive protests and mounting international pressure, Bangladesh amended its labor laws to remove some obstacles to workers forming unions. Most importantly, the new law bars the country’s labor ministry from giving factory owners lists of workers who want to organize.

But formidable obstacles to unionization still remain. At least 30% of the workers at an entire company are required to join a union before the government will grant recognition. This is a higher hurdle than workers face even in the not-so-union-friendly United States, where recognition is based at the level of the workplace, not the company. Workers in special export-processing zones (the source of about 16% of Bangladesh’s exports), moreover, remain ineligible to form unions.

The Bangladesh government did register 160 new garment unions in 2013 and the first half of this year, compared to just two between 2010 and 2012. Nonetheless, collective bargaining happens in only 3% of garment plants. And employers have responded with firings and violence to workers registering for union recognition or making bargaining demands. Union organizers have been kidnapped, brutally beaten, and killed.

After protests that shut down over 400 factories last fall, the Bangladesh government raised the minimum wage for garment workers from the equivalent of $38 a month to $68. The higher minimum wage, however, fell short of the $103 demanded by workers.

The government and the garment brands have also set up the Rana Plaza Donor Trust Fund to compensate victims and their families for their losses and injuries. But according to the fund’s website, it stood at just $17.9 million at the beginning of August, well below its $40 million target. Only about half of the 29 international brands that had their clothes sewn at Rana Plaza have made contributions. Ineke Zeldenrust of the Amsterdam-based labor-rights group Clean Clothes Campaign estimates that those 29 brands are being asked to contribute less than 0.2% of their $22 billion in total profits for 2013.

The Accord and the Alliance

Following Rana Plaza, a group of mostly European retail chains turned away from the business-as-usual approach of company codes that had failed to ensure safe working conditions in the factories that made their clothes. Some 151 apparel brands and retailers doing business in Bangladesh, including 16 U.S.-based retailers, signed the Accord on Fire and Building Safety in Bangladesh. Together the signatories of this five-year agreement contracted with 1,639 of the 3,498 Bangladesh factories making garments for export.

The Accord broke important new ground. Unlike earlier efforts:

• It was negotiated with two global unions, UndustriALL and UNI (Global).
• It sets up a governing board with equal numbers of labor and retail  representatives, and a chair chosen by the ILO.
• Independent inspectors will conduct audits of factory hazards and make  their results public on the Accord website, including the name of the factory, detailed information about the hazard, and recommended repairs.
• The retailers will provide direct funding for repairs (up to a maximum of $2.5 million per company) and assume responsibility for ensuring that all needed renovations and repairs are paid for.
• Most importantly, the Accord is legally binding. Disputes between retailers and union representatives are subject to arbitration, with decisions enforceable by a court of law in the retailer’s home country.

But most U.S. retailers doing business in Bangladesh—including giants like Wal-Mart, JCPenney, The Gap, and Sears—refused to sign. They objected to the Accord’s open-ended financial commitment and to its legally binding provisions.

Those companies, along with 21 other North American retailers and brands, developed an alternative five-year agreement, called the Alliance For Bangladesh Worker Safety. Some 770 factories in Bangladesh produce garments for these 26 companies.

Unlike the Accord, the Alliance is not legally binding and lacks labor-organization representatives. Moreover, retailers contribute a maximum of $1 million per retailer (less than half the $2.5 million under the Accord) to implement their safety plan and needed repairs, and face no binding commitment to pay for needed improvements beyond that. The responsibility to comply with safety standards falls to factory owners, although the Alliance does offer up to $100 million in loans for these expenses.

Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, told the U.S. Senate Foreign Relations Committee, “There is no meaningful difference between the Alliance and the corporate-controlled ‘corporate social responsibility’ programs that have failed Bangladeshi garment workers in the past, and have left behind thousands of dead and injured workers.”

Historic and Unprecedented?

Dan Mozena, U.S. Ambassador to Bangladesh, believes that, despite facing significant obstacles, “Bangladesh is making history as it creates new standards for the apparel industry globally.”

While the Accord may be without contemporary precedent, joint liability agreements that make retailers responsible for the safety conditions of their subcontractor’s factories do have historical antecedents. As political scientist Mark Anner has documented, beginning in the 1920s the International Ladies Garment Workers Union (ILGWU) began negotiating “jobber agreements” in the United States that held the buyer (or “jobber”) for an apparel brand “jointly liable” for wages and working conditions in the contractor’s factories. Jobber agreements played a central role in the near-eradication of sweatshops in the United States by the late 1950s. In today’s global economy, however, international buyers are once again able to escape responsibility for conditions in the far-flung factories of their subcontractors.

Like jobber agreements, the Accord holds apparel manufacturers and retailers legally accountable for the safety conditions in the factories that make their clothes through agreements negotiated between workers or unions and buyers or brands. The next steps for the Accord model, as Anner has argued, are to address working conditions other than building safety (as jobber agreements had), to get more brands to sign on to the Accord, and to negotiate similar agreements in other countries.

That will be no easy task. But, according to Arnold Zack, who helped to negotiate the Better Factories program that brought ILO monitoring of Cambodian garment factories,  “Bangladesh is the lynch pin that can bring an end to the bottom feeding shopping the brands practice.”

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