In April 2013, over 1,100 workers died in Bangladesh when a garment factory complex called Rana Plaza collapsed. Are workers in that country or other emerging markets any safer today? That’s the discussion I moderated on November 18, 2013, at the Boston Global Forum.
There’s no dearth of candidates to share the blame for the accident. Building codes were inadequate, inspections were infrequent, and the enforcement of the law was lax.
Moreover, Rana Plaza is the tip of an iceberg. Bangladesh’s $20-billion garment industry has expanded rapidly in the last 10 years primarily because of low labor costs. With almost 5,000 factories in the country, over two dozen members of parliament among the owners, and with corruption rampant, weak enforcement of the law is inevitable.
Contrary to popular perception, Western governments and international organizations can exert little influence on the Bangladeshi government or companies. World Trade Organization members cannot discriminate against each other, so no country can legally subject garment exports from Bangladesh to quotas or additional tariffs to ensure that the state enacts or enforces laws. In addition, 20 million people, mainly women, earn their livelihoods by working in the garment industry in the country. Any ham-fisted corrective action would leave them unemployed.
The World Bank deflects all labor issues to the International Labor Organization (ILO), whose conventions focus primarily on the rights of labor to organize and to strike for better conditions. While the ILO has promoted workplace safety in recent times, its regular budget doesn’t support hiring on-the-ground inspectors even if the Bangladeshi government would allow them to inspect factories and monitor the enforcement of safety regulations.
That leaves two forces that can improve workplace conditions: Pressure by consumers of Made-in-Bangladesh garments and the responsibility that companies placing orders on Bangladeshi factories may feel because of the efforts of consumers and employees.
The problem is that the bulk of the country’s exports are low-price, low-quality items that are often sold unbranded or as private label products. The low-income consumers who buy these garments are price sensitive and most likely, unwilling to pay even a little extra to correct workplace conditions in a country they have never heard of. Consumer interest is easier to muster among high-income buyers of products such as premium coffees.
Many major retail brands, such as Europe’s H&M and Zara and the U.S.’s Wal-Mart and The Gap, source garments from Bangladeshi factories. To the surprise of many, these companies have stepped up to the challenge. Over 100 European companies have signed a legally binding accord that involves funding the inspection and upgrading of the 1,500 plus factories they use in Bangladesh. Over 25 American companies have signed a non-legally binding agreement that will do much the same for another 620 factories, and they will offer factory owners up to $100 million in low-interest loans.
In addition, a re-energized ILO, with financial support from the U.K. and Dutch governments, has pledged over $24 million to support inspections, training programs, and improvements at the roughly 2,500 high-risk factories that aren’t covered by the Accord or the Alliance.
Such collective action is essential. Bangladesh’s factory owners, who operate with tight margins in a highly competitive industry, find it tough to invest in improvements. Although those investments would attract people, retain workers, and improve long-term productivity, the short-term increase in costs would mean lost orders. Likewise, if Wal-Mart were to unilaterally impose its conditions in Bangladesh, its costs and retail prices would increase sharply.
However, if the major players that source the bulk of Bangladesh’s exports follow through and implement their agreements, conditions for workers could well improve. The fact that there are two groups complicates implementation, but friendly competition and coordination between them could lead to faster and more sustainable results.
Workplace safety isn’t the only issue confronting workers in Bangladesh. Despite support from nongovernmental organizations, organizing unions has proved difficult in the country. Thousands of garment workers went on strike in October 2013 to demand an increase in wages from $40 to $100 per month. Such a large increase might risk the loss of some jobs to Myanmar and other low cost countries, but the sheer scale of the Bangladeshi garment industry cannot be quickly replicated in another country.
Should the responsibility of Western retailers and manufacturers extend beyond workplace safety to the human rights of workers in the factories of their contractors and subcontractors? In a globally integrated economy, Western multinationals have the ability to exert more influence as a force for good than do any other stakeholders. The question therefore is not whether they should, but how quickly and effectively multinationals can work with factory owners, managers, and worker organizations in Bangladesh to implement improved safety and workplace conditions.