United States General Accounting Office

GAO Report to the Ranking Minority Member,

Committee on Commerce, Science and

Transportation, U.S. Senate

July 1998 CARIBBEAN BASIN

Worker Rights

Progress Made, but

Enforcement Issues

Remain

GAO/NSIAD-98-205

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280379 

July 20, 1998

The Honorable Ernest F. Hollings

Ranking Minority Member

Committee on Commerce, Science, and Transportation

United States Senate

Dear Senator Hollings:

U.S. trade preferences provided through the Caribbean Basin Initiative

(CBI), under which most Caribbean Basin products enter the United States

duty free, are tied to worker rights standards, as defined in U.S. trade law.1

 Generally, to be eligible for CBI trade preferences, a country must have

taken or be taking steps to provide workers in that country with

internationally recognized worker rights. The same worker rights

standards are found in the Generalized System of Preferences (GSP)

Program,2

 which has an annual review mechanism that has also been used

to enforce compliance with these standards under CBI.

3

 You have

expressed concern that allegations of worker rights abuses have persisted

in the CBI apparel industry, one of the largest CBI export industry sectors.4

In response to your concerns, we reviewed (1) whether or not Caribbean

Basin countries have made efforts to improve worker rights in the CBI

apparel industry and (2) what efforts the private sector has made to

address concerns about working conditions in CBI countries. We have also

updated information previously provided to you about U.S. apparel

imports from CBI countries5

 (see app. I).

In conducting this review, we analyzed the efforts of the six major CBI

apparel shipping countries —Costa Rica, the Dominican Republic, El

1

Internationally recognized worker rights are defined at 19 U.S.C. 2467(4).

2

GSP trade preferences provide duty-free access to the United States for designated products of

eligible developing countries worldwide, not just in the Caribbean Basin, in order to promote

development through trade rather than traditional aid programs. For more information about the GSP

Program and the review of worker rights, see International Trade: Assessment of the Generalized

System of Preferences Program (GAO/GGD-95-9, Nov. 9, 1994).

3

CBI trade preferences do not cover apparel products, and GSP does not cover most apparel products.

Nonetheless, all beneficiary country governments are responsible for abiding by these worker rights

standards in all sectors of the national economy, including textiles and apparel.

4

This issue was also addressed in a 1993 GAO study, Foreign Assistance: U.S. Support for Caribbean

Basin Assembly Industries (GAO/NSIAD-94-31, Dec. 29, 1993).

5

Caribbean Basin Apparel Imports (GAO/NSIAD-98-59R, Dec. 3, 1997).

Page 1 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Salvador, Guatemala, Honduras, and Jamaica6 —to improve their worker

rights standards and the working conditions in their apparel assembly

industries. We interviewed officials and reviewed documents from the

Departments of State and Labor, the Office of the U.S. Trade

Representative (USTR), and U.S. embassies in these six countries. We also

reviewed the State Department’s annual worker rights reporting for

1992-97 for these countries, as well as GSP worker rights case files. We

conducted field work in July/August 1997 in the Dominican Republic and

Guatemala. We also interviewed industry associations and labor and

human rights groups. It was not possible for us to conduct an independent

assessment of worker rights in each country or to independently verify

specific allegations of worker rights abuses. Rather, we relied primarily on

discussions with country officials and State and Labor Department and

USTR reports. In the Dominican Republic and Guatemala, we discussed the

allegations where possible with government officials, including senior

labor inspection officials. Although much of the available information on

worker rights was not industry specific, we tried to obtain as much

specific information pertaining to the apparel industry as possible. We also

assessed private sector efforts to address concerns about working

conditions in these CBI countries through codes of conduct. We obtained

information on industry association and company codes of conduct from

industry associations, companies, and labor and human rights groups in

the United States, as well as in the Dominican Republic and Guatemala.

(See app. IV for further details about the objectives, scope, and

methodology for this review.)

Background CBI was announced in 1982 to promote export-led growth and economic

diversification in the countries of the Caribbean Basin.7

 Although most CBI

products enter the United States duty free, textiles and apparel were

specifically excluded from duty-free entry. In 1986, the Special Access

Program was initiated to provide trade preferences for apparel assembled

in CBI countries from U.S.-formed and -cut fabric and imported to the

United States under the production-sharing provisions of item 807 of the

U.S. Tariff Schedule (now heading 9802 of the U.S. Harmonized Tariff

6

Jamaica seems to be a unique case among these countries in that it has a history of strong worker

rights standards that differs from the history of labor problems experienced elsewhere in the region.

Many Jamaican political leaders came out of its labor movement. State Department reports on worker

rights in Jamaica state that the government generally enforces the labor law effectively. Also, there

have been no GSP worker rights cases filed. For this reason, the discussion in this report about worker

rights problems generally does not pertain to Jamaica.

7

CBI legislation, the Caribbean Basin Economic Recovery Act (P.L. 98-67, title II), was enacted on

August 5, 1983, and implemented beginning January 1, 1984 by presidential proclamation.

Page 2 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Schedule).8 Under the Special Access Program, CBI countries became

eligible to negotiate bilateral agreements with the United States containing

favorable quotas, or Guaranteed Access Levels (GAL), for these products.

The Special Access Program allows for virtually quota-free access to the

U.S. market for CBI apparel assembled from U.S.-formed and -cut fabric.

The six CBI countries that had GALs in 1997 were Costa Rica, the Dominican

Republic, El Salvador, Guatemala, Honduras, and Jamaica.

The data on trends in apparel imported to the United States under

production-sharing provisions from 1987 to 1997 show that total CBI

imports grew by over sevenfold, from $864 million to $6.4 billion.

However, the performance of individual CBI countries varied. For example,

the value of these imports rose from $336 million to $2.1 billion for the

Dominican Republic, consistently the leading CBI apparel shipper, and

from $113 million to $425 million for Jamaica, which moved from third to

last place among the six CBI countries with GALs. The countries with the

fastest rates of growth over the last 4 years were El Salvador and

Honduras. (See app. I for more detailed information.)

The shift of apparel assembly to the Caribbean Basin—over half of all

imports under production-sharing provisions come from the CBI

countries—is a source of concern to U.S. apparel unions, although apparel

manufacturers believe their ability to compete to some extent depends

upon it. The U.S. apparel manufacturing industry, for a variety of reasons,

went from a peak of 1.45 million workers in 1973 to 853,000 workers in

May 1996, a drop of 41 percent. The unions, as well as labor rights

advocacy groups, are concerned that U.S. jobs are being lost and that the

workers in apparel assembly plants in developing countries are being

employed under abusive labor conditions. The apparel and textile

manufacturers and retailers say that the intense price competition in the

U.S. market is driving apparel assembly jobs to low-cost countries and that

production-sharing reduces the loss of jobs in the U.S. apparel

manufacturing industry to imports with no U.S. content. Apparel

manufacturers state that U.S. companies take their working standards

with them and U.S.-owned plants are considered to have the best working

conditions in these countries.

8

Production-sharing occurs when certain aspects of an article’s manufacture are performed in more

than one country. By importing products under the production-sharing provisions of heading 9802,

companies are exempted from paying U.S. Customs duties on the value of the U.S.-made components

used in making imported products. The United States started participating in the international

Harmonized System in 1989. For more information about the Special Access Program and apparel

import levels, see Caribbean Basin Apparel Imports.

Page 3 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Generally, to be eligible for CBI or GSP benefits, countries must have taken

or be taking steps to afford workers in that country (including any

designated zone in that country) internationally recognized worker rights.

Internationally recognized worker rights are defined as including (1) the

right of association; (2) the right to organize and bargain collectively; (3) a

prohibition on the use of any form of forced or compulsory labor; (4) a

minimum age for the employment of children; and (5) acceptable

conditions of work with respect to minimum wages, hours of work, and

occupational safety and health.9

 According to USTR, while a beneficiary

country’s level of development is taken into account in assessing worker

rights situations, it is U.S. policy that basic human rights are universal and

that all governments are required to respect basic human rights, which

include the first three cited worker rights, irrespective of social systems or

stage of economic development. Worker rights petitions can be filed under

the GSP annual review process to challenge a country’s eligibility for GSP

benefits when parties believe that worker rights violations are occurring.

Loss of GSP benefits in such a case would generally result in the loss of CBI

benefits as well. Under the GSP annual review, governments, not individual

companies, are held responsible for worker rights in a country.

Results in Brief The major CBI apparel shipping countries have made efforts to improve

worker rights in recent years; however, allegations of worker rights

violations persist and enforcement of labor laws generally remains a

problem. Governments have reformed their labor laws to meet

international standards where needed and have been making efforts to

upgrade the performance of their labor departments. These reforms have

included strengthening and streamlining procedures to form unions and

negotiate collective bargaining agreements, establishing labor courts,

enhancing the labor inspection and enforcement capabilities of labor

ministries, and increasing salaries and training for labor inspectors. All the

major CBI apparel shipping countries except Jamaica had GSP worker rights

petitions filed against them over the past decade, and all have been settled

with a determination that steps had been taken to improve worker rights.

However, unions and human rights groups claim that labor laws are still

not being adequately enforced and worker rights abuses are continuing.

There are persistent reports of abuses, such as firing union organizers,

refusing to engage in collective bargaining, and forcing overtime work, as

well as of workplace health and safety hazards. Our work in the

Dominican Republic and Guatemala and review of State and Labor

Department reports indicates that while efforts to improve worker rights

9

19 U.S.C. 2467(4).

Page 4 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

are continuing in CBI countries, there is some validity to allegations of

worker rights violations. CBI governments’ enforcement efforts have been

hampered in many cases by limited resources and training, as well as by

judicial systems that are generally inefficient and sometimes susceptible to

corruption, according to recent State and Labor Department reports.

Prompted in part by continuing allegations of labor violations, the private

sector has taken steps designed to assure consumers of acceptable

working conditions in their industries. Industry associations located in El

Salvador, Guatemala, Honduras, and Costa Rica have established

workplace codes of conduct to be voluntarily adopted by their members.

In the United States, two organizations have created industrywide

workplace codes of conduct that can be voluntarily implemented by

companies with domestic and overseas contractors and suppliers. In

addition, numerous U.S. apparel companies have also established their

own individual company codes of conduct for their domestic and overseas

operations. However, across all these private sector efforts, there is no

agreement within the industry on an effective means to monitor and

enforce these codes of conduct.

Efforts Made to

Improve Worker

Rights, but

Enforcement Remains

a Problem

The major CBI apparel shipping countries have made efforts to improve

worker rights to meet international standards in recent years. The GSP

annual review process has provided an important mechanism for the filing

and resolution of worker rights petitions and has played a role in

encouraging the adoption of reforms. Since the early 1990s, CBI countries

have undertaken worker rights reforms that have included revising their

labor codes to meet international worker rights standards, improving

governmental processes for resolving worker rights problems, and

working to enhance the performance of their labor ministries. Despite

these worker rights reforms, reports of abuses in working

conditions—such as firing union organizers and forcing overtime

work—have persisted, and our work shows that enforcement of labor laws

generally remains a problem.

Worker Rights Enhanced

Across CBI Region

The GSP annual review mechanism has provided an important means by

which worker rights reforms could be encouraged. All the major CBI

apparel shipping countries except Jamaica had GSP worker rights petitions

filed against them over the past decade, and all have been settled with a

determination that steps had been taken to improve worker rights.

However, GSP is only one piece of the larger picture. The past decade has

Page 5 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

been a period of fundamental political and economic changes in most CBI

countries that preceded the labor reforms that followed.10 In addition,

reform governments came to power in most CBI countries that wanted to

more fully integrate their economies into the regional and global economy

and acknowledged that they must meet international standards. Since the

early 1990s, the major CBI apparel shipping countries have reformed their

labor laws where needed to meet international worker rights standards,

strengthening their labor code provisions related to the right of

association and the right to organize and bargain collectively. They have

also been making efforts to improve their processes for resolving worker

rights problems, such as by creating tripartite labor councils to resolve

labor issues, establishing the government’s authority to revoke the export

licenses of companies that violate labor laws, and by setting up new or

additional labor courts to handle labor cases. Moreover, they have taken

initiatives to improve the performance of labor ministries by reorganizing

them to make them more efficient, increasing labor inspectors’ salaries,

and providing training. CBI countries are also participating in a regional

initiative to harmonize labor codes and modernize labor ministries.

GSP Worker Rights Reviews

Encourage Improvements

Worker rights reforms made since the early 1990s were encouraged, in

part, through the GSP worker rights review process. The GSP Program’s

annual review process provides an important mechanism for petitions to

be brought against beneficiary countries in cases in which worker rights

violations are alleged. The GSP Subcommittee, an interagency working

group of the Trade Policy Staff Committee led by USTR, reviews petitions in

a two-stage decision process. In the first stage, a decision is made on

which petitions to accept for full review. Factors such as sufficiency of

evidence and whether substantially new information is presented in

resubmitted cases are considered. In the second stage, the accepted

petitions are fully reviewed, and a decision is made on whether beneficiary

countries are meeting worker rights standards. All the major CBI apparel

shipping countries except Jamaica had GSP worker rights petitions brought

against them, usually by the American Federation of Labor and Congress

of Industrial Organizations (AFL-CIO), as well as labor rights and human

rights groups concerned about labor abuses in these countries. Of the 15

petitions filed from 1987 to 1997, 5 were accepted for review. These

petitions generally focused on violations of the right of association or the

right to organize and bargain collectively, that is, unionization issues.

These reviews often were continued, or “pended,” over a number of annual

review cycles, as USTR consulted with CBI governments over the steps that

10For example, El Salvador’s civil war was settled and the peace accords signed in 1992. Guatemala

returned to civilian government in 1986 and started a peace process that resulted in the signing of

peace accords in December 1996, ending 36 years of internal conflict.

Page 6 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

needed to be taken. In some cases, labor code reforms were drafted,

debated, and enacted in legislatures, or governments took other

substantive actions to enhance worker rights. From 1987 to 1997, all the

cases were closed with U.S. government determinations that steps had

been taken in providing internationally recognized worker rights.

Table 1 shows GSP worker rights petitions accepted for review against CBI

countries, the worker rights violations alleged in the petition, and a

summary of the outcome of the review and steps taken.

Table 1: GSP Worker Rights Cases

Accepted for Review Against Major

CBI Apparel Shipping Countries,

1987-97 Country Year(s)

Violations

alleged in

petition

Outcome of

review &

steps taken

Costa Rica 1993 *Right of

association

*Right to

organize &

bargain

collectively 

*Acceptable

conditions of

work

Petition

withdrawn

11/16/93

after labor

code reforms

enacted

11/12/93 and

Supreme

Court

decision of

10/93

enforcing

right of

association/

collective

bargaining.

Review

terminated

12/93.

Dominican Republic 1989-91 *Right of

association

*Right to

organize &

bargain

collectively

*Forced labor

*Child labor

Review

terminated in

1991 due to

introduction

of labor code

reform

legislation,

which was

enacted in

5/92.

(continued)

Page 7 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Country Year(s)

Violations

alleged in

petition

Outcome of

review &

steps taken

1993-94 *Right of

association

*Right to

organize &

bargain

collectively

Allegations

of

government

not enforcing

reformed

labor code

Petition

withdrawn

10/94.

Review

terminated

12/94.

Government

showed the

will to

enforce the

labor code in

export

license

suspension

and other

actions to

enhance

worker rights

enforcement.

El Salvador 1990-94 *Right of

association

*Right to

organize &

bargain

collectively

Review

terminated

7/94. Labor

code reforms

enacted 4/94.

Guatemala 1985 General

reviewa

Review

terminated

January

1987;

Guatemala

found to be

taking steps.

1992-97 *Right of

association

*Right to

organize &

bargain

collectively

Review

terminated

5/97.

Labor code

reforms in

11/92.b

(Table notes on next page)

Page 8 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

aWhen GSP was reauthorized by the Trade and Tariff Act of 1984 (P.L. 98-573, Oct. 30, 1984),

worker rights eligibility criteria were added. The GSP Subcommittee conducted a general review

of worker rights in beneficiary developing countries at that time. It reviewed 11 countries and

announced the results in January 1987. Guatemala was the only one among these six countries to

be included in the general review. No subsequent general review has been conducted.

bAlthough Guatemala reformed its labor code in 1992, the GSP worker rights review was not

terminated until May 1997. A USTR official stated that every time the United States started to

consider termination, there was some worker rights violation or incident that required further

review. At the same time, there were concerns about the Guatemalan government’s ability to

enforce its labor laws. According to a U.S. embassy official, the Guatemalan government felt that

the goalposts were constantly being moved and that nothing it did would be enough.

Sources: USTR and Departments of Labor and State.

There was also another noteworthy petition that is not in this table

because it was officially rejected for review. It was a petition against

Honduras in June 1995 in which the petitioner alleged violations of the

right of association and the right to organize and bargain collectively, and

claimed that the Honduran government was not enforcing the labor code.

USTR entered into consultations with the Honduran government and

negotiated a memorandum of understanding in November 1995, under

which the Honduran government agreed to take steps to better enforce its

labor laws.

Because CBI trade preference benefits are linked to GSP benefits through

the worker rights provisions that are part of the conditions for eligibility

for both, U.S. government and private sector officials stated that the U.S.

government had substantial leverage in encouraging CBI governments to

take steps to improve worker rights. In fact, the labor code reforms that

were undertaken were associated with GSP worker rights reviews of that

country. While certainly not the only factor, GSP reviews are generally

considered to have played an important role in encouraging reforms to

meet international worker rights standards. (See app. II for more

information.)

Labor Codes Reformed to Meet

International Worker Rights

Standards

In the early 1990s, there was a wave of worker rights reforms, with new

labor codes passed in the Dominican Republic and Guatemala in 1992,

Costa Rica in 1993, and El Salvador in 1994.11 The two areas of greatest

focus in the worker rights reforms were the right of association and the

right to organize and bargain collectively.12 These two worker rights,

11In the case of Honduras and Jamaica, their labor laws generally met international standards,

according to State Department officials.

12Country Reports on Human Rights Practices, U.S. Department of State (Washington, D.C.: 1992-97).

This is an annual report to the Congress. (Hereafter referred to as the Human Rights Report.) We

reviewed Human Rights Reports for 1992-97 for the six major CBI apparel shipping countries.

Page 9 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

together with the prohibition on the use of any form of forced or

compulsory labor, are considered basic human rights, according to USTR.

While forced labor has generally not been an issue in the major CBI apparel

shipping countries, the rights of association and of organizing and

bargaining collectively—fundamental unionization rights—have been very

problematic.

The right of association was strengthened by these CBI governments

through labor code reforms that included protecting union organizers from

dismissal during union formation and streamlining the process to form a

union. In the Dominican Republic, for instance, the new labor code of 1992

specified in detail the steps legally required to establish a union and

provided for automatic recognition of a union if the government did not

act on the union’s registration application within 30 days, according to the

Dominican Secretary of Labor. In Guatemala, the labor code was amended

in 1992 to provide that legal recognition of a new union was to be finalized

by the Ministry of Labor within 20 days, shortening the time frame from 60

days. The labor regulations were also revised to include specific wording

indicating that Ministry officials responsible for delaying petitions for

union status could be fired, according to USTR GSP documents and the

Human Rights Report for 1993. Authority to grant legal status to a union,

formerly the exclusive domain of the President, was transferred to the

Minister of Labor. The reform also strengthened a provision that in the

event that the Labor Ministry determines that workers were dismissed for

union formation activities, they are to be reinstated within 24 hours of the

determination.

The right to organize and bargain collectively was strengthened through

labor code reforms that included protections for union organizers and

specification of the procedures for entering into collective bargaining

agreements. For example, in the Dominican Republic, the former labor

code did not prohibit employers from firing workers who organized as

long as severance pay was given, according to the Human Rights Report

for 1992. Companies were able to fire union organizers as soon as they

attempted to form a union. The new labor code provided job protection for

specific numbers of union organizers and officials, so that union

representatives could not be fired without just cause. The right to organize

and bargain collectively was also strengthened in this way in the labor

code reforms of Costa Rica and Guatemala. (The Salvadoran Constitution

already included such a provision.) In Costa Rica, there was also concern

that Solidarity Associations were beginning to infringe on unions’

Page 10 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

collective bargaining rights.13 The Human Rights Report for 1993 notes

that the reforms established that only trade unions had the right to bargain

collectively on behalf of the workers. Similar reforms pertaining to

Solidarity Associations were also made in Guatemala.

The International Labor Organization (ILO) was also involved in working

with CBI governments in improving the worker rights standards in their

labor codes. ILO worked extensively behind the scenes in providing

technical assistance for the labor code reforms that were enacted in Costa

Rica, the Dominican Republic, and El Salvador. Similar technical

assistance has been provided to Guatemala and Honduras, where

proposed reforms are still under consideration.

Efforts to Improve Process for

Resolving Worker Rights

Problems

Some countries established tripartite commissions, with representation

from industry, labor, and government, to work together to resolve worker

rights issues. For example, the Dominican Republic established the

Tripartite Oversight Commission in August 1993 to mediate disputes in the

free trade zones.14 In April 1994, an agreement was signed between the

government, the Dominican Association of Free Trade Zones, and five of

the six major labor confederations that established (1) the rules governing

the Commission’s mediation process for collective disputes in the zones

and (2) an Educational Commission to enhance knowledge of the labor

code and worker rights, according to USTR GSP documents. The sixth

confederation signed the agreement later that year. The Human Rights

Report for 1996 notes that a tripartite commission was also established in

El Salvador in August 1996 to help resolve conflicts in the zones and

in-bond plants.

An important reform undertaken by some of the major CBI apparel

shipping countries focused on their export license authority. They

established or reaffirmed a legal provision that companies in free trade

zones must abide by national labor laws or their export licenses could be

revoked. In a high-profile case in the Dominican Republic, an apparel

company had a persistent record of illegal anti-union behavior. It had

13Solidarity Associations are formed by employers to provide access to credit unions and savings plans

for their workers, as well as other benefits such as food purchase cooperatives and educational

programs. Unions contend that such associations are used by companies as a kind of company union

to preclude the development of real unions where workers would have bargaining power.

14Free trade zones, or export processing zones, are secured areas that are officially outside of a

country’s customs territory. Foreign-made inputs imported into these zones for export-oriented

manufacturing are exempt from import duties. However, firms must post a bond with the local

customs authorities until their production is exported. When production-sharing takes place in plants

located outside such zones, such firms also post a bond for their production, which is similarly held

outside of the customs territory for assembly and reexport. Plants with such production-sharing are

often called “maquiladoras,” or maquilas, for short.

Page 11 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
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refused to obey a court order to reinstate an unjustly fired worker, and it

was also accused of harassing union organizers on the eve of elections that

could have set the stage for a collective bargaining process. In response to

these and other anti-union activities, the AFL-CIO filed a GSP worker rights

petition in June 1993 stating that the government was not enforcing the

new labor code. After the GSP case was filed, the Dominican National Free

Zones Council used its authority for the first time in April 1994 to suspend

the export license of this apparel company for 10 days. Following the

suspension, the company immediately reinstated the worker, after having

refused to do so for 2 years. Labor relations improved at the firm,

eventually facilitating the signing of the first collective bargaining contract

in the history of Dominican free trade zones. After this breakthrough,

three other collective bargaining agreements were signed in the zones

before the end of the year, according to USTR GSP documents and a Labor

Department report. Also, in El Salvador, the Human Rights Report for 1996

notes that a new law was passed in January 1996 that gave the Ministry of

Economy the power to remove free zone privileges from companies

violating labor regulations.15

Some of the major CBI apparel shipping countries have established or

expanded separate labor courts within their judicial systems, which have

generally been inefficient and often corrupt, according to the State and

Labor Departments. Others are reforming their national judicial systems.

For instance, the 1992 labor code reform in the Dominican Republic

created labor courts in the capital, Santo Domingo, and the second largest

city, Santiago, which began functioning in January 1993. Labor cases in

other parts of the country continued to be handled in regular courts,

according to a Labor Department report. The Dominican Secretary of

Labor told us in July 1997 that three additional labor courts had been

established in 1994 and that they had recently approved another. However,

the Dominican government has recently also begun to overhaul its

judiciary, as promised by the new administration that took office in 1996.

A new 16-person Supreme Court was installed in August 1997, which, in

turn, began a revision of the labor courts. The Human Rights Report for

1997 states that the system of labor courts established in the 1992 labor

code reform to deal with labor disputes had proven ineffective at

enforcing the law. There had been many reports of bribes solicited by

labor judges from companies during the deliberation process. The new

Supreme Court’s overhaul of the labor courts had resulted, as of

15This authority also resides in the Ministry of Economy in Honduras. In Costa Rica, according to the

State Department, the labor code does not directly provide for such suspensions. However, indirect

authority exists since a company’s violation of labor, safety, tax, or other laws may be considered

criminal offenses, resulting in suspension of operations, and thus stoppage of exports.

Page 12 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
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January 1998, in the dismissal of the President of the labor court in Santo

Domingo. In Guatemala, the President of the Supreme Court announced

creation of eight new labor courts and two appeals courts in

November 1996, according to the Human Rights Report for 1997. Seven of

the new labor courts have been set up and are functioning.

Steps Taken to Improve

Performance of Labor

Ministries

CBI governments have also made efforts to improve the performance of

their labor ministries. For example, some governments have reorganized

labor ministries to streamline their operations and make them more

efficient. Other steps have included increasing salaries of labor inspectors

to redress past problems with bribery and increasing the training of Labor

Ministry employees. CBI governments are also participating in a regional

initiative to harmonize labor codes and upgrade the performance of labor

ministries.

In Honduras, inadequate enforcement by the Ministry of Labor had been a

major concern. According to the Human Rights Report for 1994, Honduran

labor leaders believed that worker rights violations would continue until

the Ministry of Labor was reorganized to make it more efficient.

Specifically, labor leaders felt that the Ministry was not enforcing the labor

code, was taking too long to make decisions, and was timid and indifferent

to workers’ needs. In June 1995, the AFL-CIO filed a GSP worker rights

petition against Honduras, and USTR entered into consultations with the

Honduran government. The case was resolved by a November 1995

memorandum of understanding between the Ministry of Labor and USTR,

which called for greater enforcement of the Honduran labor code. The

Human Rights Report for 1996 found that the Ministry had made

significant progress toward enforcing the code. For example, the report

cited a case in which the Ministry had imposed a $10,000 fine on a

company for failure to rehire 16 workers fired for organizing a union. This

action resulted in the company reinstating the workers the next day. The

Ministry also increased its inspections of maquilas and the training of its

inspectors; however, the Human Rights Report noted that more needed to

be done to completely adhere to international worker rights standards. In

January 1998, a new government took office and appointed a Labor

Minister who had been Secretary-General of one of the three union

confederations for 28 years. The new Minister has said publicly that he

needs a 25-percent budget increase and that the Ministry needs computers

and training funds.

In the Dominican Republic, the Secretary of Labor told us in July 1997 that

within the last 5 years the Labor Secretariat had created a new Department

Page 13 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

of Inspection. The Secretariat had computerized its labor force registry,

which included enterprises, the number of workers, and collective

bargaining contracts. There was a second data base, which, among other

things, enabled workers to come to the Secretariat to double-check how

much severance a company owed them. The Labor Secretariat had also

reorganized its labor inspector corps. The Director of Inspections for the

National District told us that the new labor code provided that labor

inspectors be lawyers, so that the Secretariat would have a more

professional corps that better understood the law. Within 4 years, the

Labor Secretariat had also tripled inspectors’ salaries in order to reduce

the temptation to accept bribes, and it planned additional increases in

salaries if the budget permitted. In addition, the Secretariat had set up

procedures so that labor inspectors did not know which plant they would

inspect in advance and rotated inspectors in order to make it harder for

the companies to bribe them.

In Guatemala, the Inspector General of Labor told us that the functions of

the Labor Inspection Division were reorganized and streamlined in June

1997. She also told us that the Ministry was planning to computerize its

operations. According to the Human Rights Report for 1997, enforcement

is improving as new labor inspectors complete their training and as the

rate of inspections has increased. The Ministry has increased the number

of court cases filed for failure to comply with the labor code and has

begun an educational campaign on worker rights. In terms of training, the

Labor Ministry opened a School of Mediation and Conciliation in July

1997, with assistance from the U.S. Agency for International Development

(USAID) which is funding the salaries of instructors. The school is providing

a tuition-free, 6-month, university-level course of study for about 30

students each July and January of the year. The top 10 graduates will be

offered jobs in the Ministry’s new Mediation and Conciliation Division.

In addition, the USAID office in Guatemala has sponsored three

occupational safety and health seminars over the last 2 years. According to

a Labor Department official who has participated in the seminars, the

seminar is a basic introduction to the issue, since there are few standards.

The occupational safety and health inspectors only inspect after the fact to

determine the level of indemnification due to the worker, not to prevent

problems. During the training course, the instructors take the participants

on plant visits to see how to use the equipment.

In El Salvador, a new law reforming the Ministry of Labor was passed in

January 1996. The Minister of Labor reorganized the Ministry, increased

Page 14 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

the number of inspectors, and opened field offices in two free trade zones.

The Human Rights Report for 1997 noted that the Labor Ministry had made

significant progress in modernizing its facilities and professionalizing its

staff. According to a U.S. embassy official in April 1998, the Minister has

succeeded in enhancing the authority of the Labor Ministry. The Minister

has gotten an increase in his budget over the last 2 years and has worked

to raise the professionalism of the Ministry, including providing training

for the inspector corps. In addition, the Ministry of Labor strongly

supports starting a regional labor training school and is working with the

Inter-American Development Bank (IDB)16 to get a loan for this school.

CBI countries are also participating in a new regional initiative to improve

the capabilities of ministries of labor throughout the region,17 through a

jointly funded USAID and IDB program. The USAID component, called

PROALCA, is a regional program designed to encourage the Labor

Ministers to get together to harmonize labor codes, develop strategies for

regional integration, devise a joint strategy for accession to the Free Trade

Area of the Americas,18 and, finally, to develop a strategy to upgrade the

ministries of labor in the areas of labor inspection and labor management

relations. A USAID official told us that the aim is to get governments to

think more strategically on a regional basis and to preclude competition

among countries based on worker rights and lower labor costs. USAID will

provide technical assistance and a grant of $5 million over 5 years. The

IDB’s efforts for its component, the Labor Market Modernization Program,

are focused on four areas: (1) producing research to give an empirical

basis to claims about labor law reforms in the region, (2) creating

information systems for the labor market for the labor ministries,

(3) promoting harmonization of labor standards, and (4) running a series

of pilot programs to test new approaches. An IDB official told us that the

IDB has made an initial commitment of $4 million per year and has also

required counterpart funding from each country’s Labor Ministry, totaling

$1 million per year. Together with USAID’s commitment, funding would

total $6 million per year over 5 years.

16The IDB is a regional financial institution that works to accelerate economic and social development

in Latin America and the Caribbean.

17The eight countries participating in this regional initiative include Belize, Costa Rica, the Dominican

Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.

18The 34 democratically elected leaders in the Western Hemisphere committed in 1994 to conclude

negotiation of a Free Trade Area of the Americas by 2005.

Page 15 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Allegations of Worker

Rights Abuses Persist, and

Labor Law Enforcement

Remains a Problem

Although worker rights progress has been made since the early 1990s,

enforcement of labor laws generally remains a problem. There are

continuing reports of abuses, such as firing union organizers, refusing to

engage in collective bargaining, and forcing overtime work, as well as of

workplace health and safety hazards. Our work in the Dominican Republic

and Guatemala, the State Department’s annual Human Rights Reports, and

Labor Department reports indicate that, despite the progress that has been

made, there is some validity to allegations of worker rights violations. CBI

governments’ enforcement efforts have been hampered in many cases by

limited resources and training, as well as by judicial systems that are

generally inefficient and sometimes susceptible to corruption, according

to recent State and Labor Department reports.

Dominican Republic In the Dominican Republic, for example, there are reports of widespread

discreet intimidation by employers of union activity, according to the

Human Rights Report for 1997. Union members in free trade zones said

that they hesitate to discuss union activity at work, even during break

time, for fear of losing their jobs. The report notes that some Dominican

zone companies have a history of discharging workers who attempt to

organize unions. Although there are about 100 unions in the zones, many

exist only on paper. Only eight of these unions have collective bargaining

agreements. During our visit there in July 1997, the Secretary-General of

the National Federation of Free Trade Zone Workers (FENATRAZONAS), the

union federation for the majority of zone unions, told us about nine cases

of anti-union behavior that the federation was pursuing, in which the

common element was that apparel maquilas had fired union leaders and

members due to their union activities. FENATRAZONAS officials alleged that

some of these union leaders and members were also targets of physical

intimidation and, in one case, that the union leaders were fired, accused of

damaging work, and jailed.

We visited three of the apparel plants about which FENATRAZONAS had

complained that union leaders had been fired and discussed their

allegations with the labor inspection office at the Secretariat of Labor.

When we interviewed the managers at the three plants, none

acknowledged having unions in their plants. Managers at the first two

plants told us that union organizers had falsely set up a union organizing

committee in order to solicit severance payments.19 The managers at the

third plant told us that they were challenging the legitimacy of the union

19At the first plant, the company had paid the severance. After mediation at the Labor Secretariat, the

second company offered reinstatement, but the workers did not accept.

Page 16 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

registration in court.20 The labor inspectors reviewed these allegations and

concluded that the union organizers had been fired in all three cases

because of their union activities.21 Given the Labor Secretariat’s

assessment, the result was that the unions in these three companies were

effectively undercut. The Labor Secretariat only has authority to make

determinations and to try to mediate resolutions, it cannot sanction

companies. Cases of violations may be brought to the courts, which have

the authority to levy fines, but which are generally inefficient and often

have been corrupt, according to Human Rights Reports. Moreover, the

authority to suspend a company’s export license rests with the National

Free Zones Council, which, according to a Council official, would only use

this authority in extreme cases.

Another problem in the Dominican Republic was with forced overtime,

according to the Human Rights Report for 1997, Labor Secretariat officials,

and union representatives we talked to. There were numerous reports of

forced or coerced overtime in factories, as well as instances of workers

being fired for refusing to work overtime. In addition, the report noted that

the Dominican government, in September 1997, denounced the fact that

many employers withheld Social Security payments from employee

paychecks but did not transfer the funds to the Dominican Social Security

Institute. The government estimated that the Institute lost $11 million

(160 million pesos) a month. An associated problem, according to

FENATRAZONAS, was that if Social Security payments were not made,

workers could not receive medical service from the Social Security

hospitals.

During our trip to the Dominican Republic, we visited nine apparel plants

in five zones (including three of the plants that FENATRAZONAS had

described), where we interviewed the plant managers and toured the

plants. Although we did not conduct a formal inspection of these plants,

we did observe physical working conditions.22 While most of the plants

appeared to have acceptable physical working conditions, in a few plants

the ventilation was poor; the restroom facilities were unsanitary; and the

20They said that the union organizers had arranged a meeting under false pretenses and then used the

attending workers’ names without their permission to register the union and had also used names of

workers who were not employees.

21The Labor Secretariat’s determination in these three cases was that unions had officially been

registered at all three plants and if a company wanted to challenge a registration in court that was its

right. Their investigations had not addressed whether the unions in the first two cases were extortion

attempts. However, in other discussions at the Labor Secretariat, officials had acknowledged that such

attempts have occurred at times. To preclude such attempts, they supported reinstatement of fired

union members rather than severance payments.

22We observed conditions related to lighting, drinking water, restrooms, ventilation, fire extinguishers,

and fire doors and exits.

Page 17 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

exit doors were padlocked, including two of the three plants at which

anti-union complaints had been made. Given the limited number of plants

we were able to visit, and because we only visited plants that agreed to be

visited, this should not be considered a representative sample of all

Dominican plants. Furthermore, our observations of the plants were

limited to physical working conditions.

Guatemala In Guatemala, while the law protects workers from retribution for forming

and participating in union activities, enforcement is spotty, according to

the Human Rights Report for 1997. The report noted that while an

increasing number of employers accept unionization, many routinely try to

circumvent labor code provisions in order to resist union activities, which

they view as historically confrontational and disruptive. While the law

specifies that workers illegally fired for union activity should be reinstated

within 24 hours, employers often file a series of appeals or simply defy

judicial orders of reinstatement. An ineffective legal system and

inadequate penalties for violations have hindered enforcement of the right

to form unions and participate in union activities, according to the report.

During our visit to Guatemala in August 1997, we met with officials of two

unions, the Guatemalan Labor Unity Confederation and the Guatemalan

Workers’ Trade Union Syndicate, who cited numerous cases in which they

said union organizers were fired or intimidated. They also cited cases in

which companies closed to avoid dealing with unions. (A different

perspective was held by many of the plant managers and industry

representatives we met, who believed that these plants had closed because

union demands had driven them out of business.)

According to the Human Rights Report for 1997 and union representatives,

the lack of effective enforcement of the Guatemalan labor code is also due

to a scarcity of labor inspectors, continuing corruption, the absence of

adequate training and resources, and structural weaknesses in the labor

court system. The labor courts have generally been ineffective, and efforts

to restructure and modernize the labor court system have made little

headway. In addition, occupational health and safety standards are

inadequate, as is their enforcement. When serious or fatal industrial

accidents occur, the authorities generally take no steps against those

responsible. The Labor Ministry provides training for labor inspectors in

health and safety standards but does not accord such training a high

priority, due to scarce resources.

During our trip to Guatemala, we visited four apparel plants, where we

interviewed the plant managers and toured the plants. As in the Dominican

Page 18 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Republic, we did not conduct a formal inspection, and our observations of

the plants were limited to physical working conditions. All the Guatemalan

plants appeared to have acceptable physical working conditions. Given the

limited number of plants we were able to visit and because we only visited

those plants that agreed to be visited, this should not be considered a

representative sample of all Guatemalan plants.

A recent case at a U.S.-owned apparel plant in Guatemala, which was

investigated by Human Rights Watch, is an example of the difficulties

encountered in enforcing worker rights against anti-union discrimination,

even in what was generally considered to be a model plant. The plant

management had refused to negotiate a collective bargaining agreement

with the union, as was required by the labor law, because management did

not accept the union’s declaration that it had gained membership of

25 percent of the work force. Subsequently, there were irregularities in the

Labor Ministry’s handling of the registration by the union, and there were

indications that the plant managers reacted by discriminating against

union members in order to induce them to quit the union or the plant,

according to the Human Rights Watch study. The U.S. apparel company

subsequently accepted the findings and recommendations of the study and

negotiated a collective bargaining agreement with the union. This was the

first collective bargaining agreement to be reached in a Guatemalan

maquila.

Other CBI Countries To varying degrees, the problems with enforcement appear to be similar in

the other CBI countries, according to the Human Rights Report for 1997,

Labor Department reports, and discussions with U.S. embassy officials.

Even in Costa Rica, where enforcement seems to be somewhat stronger,

workers trying to form unions can still lose their jobs. The Labor Ministry

has 1 inspector for every 30,000 workers in the zones. Due partly to

budgetary constraints, the Ministry has also not fielded enough labor

inspectors to ensure consistent maintenance of minimum conditions of

safety and sanitation, especially outside the capital, San Jose, according to

the Human Rights Report for 1997.

In El Salvador, there is still an anti-union atmosphere, with continued

reports of employers using illegal pressures, including dismissing labor

activists, to discourage organizing, according to the Human Rights Report

for 1997. For instance, in one high-profile case discussed in a Labor

Department report,23 a union federation had attempted to organize a union

23Foreign Labor Trends: El Salvador, 1995-1996, U.S. Department of Labor, Bureau of International

Labor Affairs (Washington, D.C.: 1996).

Page 19 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

at a Taiwanese-owned plant in a San Salvador free trade zone, which had

resulted in violence and the firing or resignation of 300 workers in 1995.

The case generated interest in the United States and led to a consumer

boycott of one of the plant’s well-known U.S. customers. The U.S. apparel

firm subsequently reached an agreement with the company in March 1996

to establish standards to protect worker rights in the plant and to have an

independent monitoring group ensure compliance. A U.S. embassy official,

in April 1998, said that there was a strong general feeling in El Salvador

that the unions represented a disruptive element. This belief had been

amplified by the civil war, in which unions were seen as radicals. He said

that this perception is improving slowly and there is more cooperation

now between business and labor. In terms of enforcement, the Human

Rights Report for 1997 stated that corruption continued to affect labor

inspectors and courts, but improvements in training and salaries had

begun to address this problem. In the area of occupational safety and

health, regulations were outdated, and enforcement, while improved, was

inadequate. The report noted that the Labor Ministry attempted to enforce

regulations, but had limited, though growing, resources to ensure

compliance.

In Honduras, unions were active in the government-owned Puerto Cortes

free trade zone, but factory owners have resisted union efforts to organize

in the new, privately owned zones, according to the Human Rights Report

for 1997. In one case, workers starting organizing at a Korean-owned plant

in a zone near San Pedro Sula in August 1996, resulting in mass firings and

intimidation. Although the company signed an agreement with the Labor

Ministry to reinstate fired workers, not all were rehired, according to an

official of the AFL-CIO’s American Center for International Labor Solidarity,

known as the Solidarity Center. The company also began to organize a

company-controlled union to compete with the first union. The Solidarity

Center official said that two high-level Labor Ministry officials had

personally intervened to intimidate union leaders on behalf of the

company in April 1997. A U.S. embassy official said that the unions had

never filed a formal complaint about this incident with the government. In

June 1997, the company agreed to allow an independent monitoring group

to observe working conditions in its plant.

Informal blacklisting has occurred in the privately owned Honduran free

trade zones, according to the Human Rights Report for 1997. There were

reports that some inspectors had sold the names of workers involved in

forming unions to companies that then fired them before the Ministry

could recognize the unions. There were also reports of compulsory

Page 20 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

overtime at zone plants. In addition, the report notes that the Ministry of

Labor lacked the staff and resources for effective enforcement of either

the labor laws or the national health and safety laws. A U.S. embassy

official told us in April 1998 that the Ministry employees lacked basic

office supplies, computers, and vehicles for inspections. The official said

that while the will exists to enforce the labor law, the Ministry is so

hampered by inadequate resources and training that it cannot effectively

do so. A Department of Labor official gave a similar assessment in

January 1998, adding that the Ministry has had trouble paying labor

inspectors their per diem and transportation expenses to inspect plants in

the San Pedro Sula area, a major industrial center where the maquila

sector is growing.

Apparel Industry Acts

to Improve Labor

Conditions Through

Codes of Conduct, but

Monitoring and

Enforcement Issues

Exist

The apparel industry is pursuing numerous voluntary initiatives designed

to assure consumers that apparel imported from CBI countries is not

manufactured under abusive labor conditions. Apparel assembly or

maquila associations located in several CBI countries have established

voluntary workplace codes of conduct for their respective members. Two

U.S. organizations have also created voluntary industrywide workplace

codes of conduct. In addition, numerous U.S. apparel companies have

devised their own individual company codes of conduct. Regardless of the

approach taken, however, there is no agreement within the industry on an

effective means to monitor and enforce these private sector codes of

conduct. Many in the apparel industry object to the imposition of outside

independent monitors to verify their compliance with the codes of

conduct, while consumer and labor rights groups do not believe that codes

of conduct will be meaningful without such independent monitoring and

enforcement.

CBI Maquila Associations

Adopt Workplace Codes of

Conduct

Over the past 2 years, CBI apparel assembly or maquila industry

associations operating in El Salvador, Guatemala, Honduras, and Costa

Rica have established workplace codes of conduct to be voluntarily

adopted by their respective members. Although each association’s code

and approach to implementation and monitoring vary to some extent, they

have similar provisions. For example, each association’s code includes a

prohibition against forced labor, child labor, and employment

discrimination; protection of the freedom of association, lawful

compensation, and hours of work; and provisions for safe and healthy

working conditions. Noticeably absent, however, is a provision

recognizing the right of workers to participate in collective bargaining,

Page 21 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
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although each code acknowledges a commitment to observing the

country’s laws and labor codes. In addition to these provisions, three of

the four associations have the authority to hire external monitors to verify

company compliance. However, it is too soon to determine how effective

the associations’ efforts will be.

In El Salvador, the Salvador Association of Clothing Industries (ASIC)

developed its code of conduct in consultation with companies that have

codes of conduct, the U.S. embassy, the Ministry of Labor, and ASIC

members. ASIC consists of 250 maquilas, all of which have signed on to the

code of conduct and have voluntarily agreed to be monitored. ASIC

contracted with Peat Marwick, Price Waterhouse, and two other firms to

monitor compliance of its code. In May 1998, ASIC began a pilot program

under which 10 maquilas will be audited on a biannual basis. Companies

that receive positive evaluations would get a seal of approval that they can

use to assure customers that they are in conformance with labor

standards. In the event that a problem is found, the auditing firms would

discuss any problems directly with the maquila and allow the maquila 4

weeks to take corrective action. If problems persist, the auditing firm

would request that ASIC work to bring those maquilas into compliance with

the code. If ASIC is unsuccessful, it would contact the Vice Minister of

Commerce and Industry within the Ministry of Economy. ASIC has not

established punitive measures to enforce the code. Any sanctions against

ASIC members would be imposed by the government.

The Guatemalan apparel maquila association, the Commission of the

Apparel and Textile Industry (VESTEX), was the first of these four maquila

associations to establish a voluntary code of conduct. According to VESTEX

officials, the association’s code was developed based on the codes of

companies and consultations with the regional ILO office. Among its

provisions, the code of conduct provides for the right of freedom of

association, a prohibition against child and forced labor, and the

establishment of environmental safeguards. The association’s code of

conduct was also written in an effort to combat negative images that

potential investors might have about labor conditions in Guatemalan

apparel plants.

VESTEX hired Ernst & Young International Guatemala, an auditing and

consulting firm, to help develop the code of conduct and an accompanying

manual for monitoring compliance, to conduct training seminars, and to

monitor companies’ compliance with the code. VESTEX funds training on its

code for each company out of the export fees that it collects from its

Page 22 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

members. VESTEX also issues certificates to those companies that have

passed audits. In the event that a company is found not to be complying

with the code of conduct, VESTEX may withhold certification from the

company. As of May 1998, 49 of VESTEX’s 236 members have signed on to

the association’s code of conduct and have agreed to undergo an audit. Of

these 49 companies, 24 companies had passed and received certification, 7

were not found in compliance and were recommended for a follow-on

audit, and audits for the remaining companies are pending. An Ernst &

Young representative noted that some of the problems that were

uncovered during the audits were that companies paid bonuses for

piecework that required overtime but were not paying overtime wages.

The most serious problem was that companies sometimes forced their

employees to work overtime.

In Honduras, a U.S. embassy official indicated that the Honduran

Maquiladora Industry Association had released its code of conduct to the

public in late 1997. The code applies to over 40 companies in the maquila

industry. Beyond the establishment of the code itself, the association has

not yet set guidelines for implementation. The Honduran Maquiladora

Industry Association has the authority to select independent monitors and

impose penalties against companies that do not comply with its code.

According to the U.S. embassy official, local unions do not favor the code

and question its validity, primarily because they doubt that human rights

groups and religious groups have the technical expertise to monitor plants.

The Costa Rica Textile Chamber (CATECO) released its code of conduct to

the public in June 1997. Almost all of the companies in the textile sector,

which are primarily U.S.-owned companies (approximately 55), have

signed on to the code. CATECO’s code only provides general guidelines for

implementation. Unlike maquila associations in the other three CBI

countries, CATECO has not established provisions for outside monitors. It

also has not established punitive measures to enforce compliance. CATECO

has an internal Conduct and Ethics Committee that supervises its

company members and their compliance with the code and would conduct

an investigation only if a complaint were raised. Otherwise, disputes are

usually resolved by worker-management teams at the plant level.

According to a U.S. embassy official, CATECO has also started a program to

recognize members as “model companies” for registering annual accident

rates of 5.9 percent or less, establishing formal occupational safety

departments or committees, organizing subcommittees in specific areas,

and providing training for their personnel.

Page 23 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

Industrywide Standards

May Not Be Widely

Accepted in the U.S.

Apparel Industry

In response to the criticism about labor conditions in apparel plants

overseas, two U.S. organizations have established industrywide labor

standards that may be voluntarily adopted by U.S. companies and

implemented with their domestic and overseas contractors and suppliers.

However, whether the apparel industry participates in either

organization’s initiatives may hinge upon acceptance of industry standards

and procedures for monitoring.

Apparel Industry Partnership

Launches Initiative on

Voluntary Workplace Code of

Conduct

In August 1996, President Clinton called upon representatives of the

garment and apparel industry, labor unions, and nongovernmental

organizations (NGO) to join together as the Apparel Industry Partnership

(AIP) to develop a plan that would assure consumers that apparel imports

into the United States are not produced under abusive labor conditions.24

In response to this initiative, the AIP announced plans in April 1997 to

implement a new Workplace Code of Conduct, which defines “decent and

humane” working conditions.25 The AIP also established principles for the

ongoing independent monitoring of apparel contractors and suppliers in

the United States and abroad. Currently, the AIP is developing the

framework to establish a nonprofit association to oversee the

implementation of the code of conduct and monitoring apparatus.

According to a Department of Labor official, this was the first time that

representatives of the apparel industry, consumer groups, human rights

and religious rights groups, and labor unions agreed on a workplace code

of conduct and principles for monitoring such conduct in the apparel

industry. Furthermore, this code of conduct was developed based on

international labor standards and comprises many of the best individual

company codes, according to an AIP member.

The AIP has worked to reach consensus on how to implement the code of

conduct and monitoring apparatus over the past year. The process is not

yet complete, and deliberations continue. As of April 1998, the partnership

was continuing to develop certification standards for monitors and to

determine what or how much information should be disclosed to the

public, according to AIP members. One of the key issues addressed was the

extent to which human rights groups, labor unions, and NGOs should be

24The AIP consists of nine U.S. apparel and footwear companies. The group’s members also include

representatives from human rights and labor rights groups and a university. See appendix III for

further information.

25The AIP formulated a code of conduct that prohibits (1) forced labor, (2) child labor under the age

legally stipulated in the country of manufacture, (3) harassment and abuse, and (4) employment

discrimination. The code further sets forth standards on health and safety, freedom of association and

the right to collective bargaining, wage and benefits (minimum or prevailing wage, whichever is higher

including legally mandated benefits), and hours of work.

Page 24 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

involved in the monitoring process. AIP members appear to have reached

an agreement that human rights groups and NGOs, as well as accounting

firms, can be certified to monitor companies for compliance. Based on the

AIP’s principles of monitoring, all monitors will consult with local NGOs, if

the monitor is not itself an NGO. The AIP was also considering how to

handle conflict of interest issues. Specifically, it was determining how

companies could use firms as monitors, where a business relationship

already existed, without posing a conflict of interest. Monitoring will likely

cover a variety of areas, including financial accounting, workplace

conditions, and worker rights. According to an AIP member, this initiative

would not serve as an absolute guarantee that apparel was made under

appropriate labor conditions; it would, if implemented, establish a process

to guard against labor abuses and to monitor labor conditions.

The AIP also continues to work on developing a mechanism to inform the

public that companies are complying with the code. The AIP has tentatively

agreed to publicize a list of companies that are participating in the

association’s efforts to promote a code of conduct and those that are

certified by the association as complying with the code. At present, the AIP

continues to determine what and how much information will be disclosed

to the association or the public about a company’s performance without

divulging proprietary business information.

Council on Economic

Priorities Also Establishes

a Standard to Address

Labor Conditions

The Council on Economic Priorities (CEP) is a public research firm that has

analyzed the social and environmental records of corporations over the

past 26 years. In October 1997, its affiliate, the Council on Economic

Priorities Accreditation Agency (CEPAA), established a set of voluntary

social accountability standards (SA8000) and a monitoring and

certification process to help companies conform with internationally

recognized worker rights standards. In many ways, there are similarities

between the CEPAA’s and the AIP’s efforts. For example, the CEPAA’s SA8000

and the AIP’s code of conduct include provisions on child labor, forced and

bonded labor, wages, freedom of association and the right to collective

bargaining, discrimination, and occupational safety and health standards.

In addition, both groups plan to certify auditing firms and NGOs such as

human rights groups to monitor company compliance.

However, there are differences between these two approaches as well.

(See app. III for more detailed information.) For example, the CEPAA would

certify that individual companies and contractors, at the plant level, are in

compliance with SA8000 standards, whereas the AIP would certify a

Page 25 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
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company’s compliance based on monitoring a percentage of a company’s

contractors and suppliers. Furthermore, the CEPAA’s approach includes a

provision that allows NGOs, unions, or workers to appeal a company’s

certification. At present, the AIP’s code of conduct and principles of

monitoring do not include a provision allowing an interested party to

appeal a company’s certification. Concerning wages, the CEPAA’s standard

bases wages on an amount that includes discretionary income,26 rather

than on a minimum or prevailing wage, as the standard for remuneration

as adopted by the AIP. Another difference is that the CEPAA has a specific

provision for the remediation of child labor. Companies must implement a

plan to remediate child labor, which may include providing support to

enable such children to attend and remain in school and employing their

parents or older siblings. According to the AIP principles of monitoring,

companies are obligated to establish a means of remediation for

noncompliance with the code of conduct including child labor. Although

the principles of monitoring do not include any detailed provisions for the

remediation of child labor, a Department of Labor official told us in

July 1998 that AIP members have agreed on overall provisions for

remediation of the standards covered by the code of conduct including

child labor.

The Apparel Industry May Not

Accept Proposed Industrywide

Standards and Monitoring

Procedures

Major industry groups and apparel companies have not endorsed either

the AIP’s or the CEPAA’s code of conduct because they object to the

imposition of industrywide standards and to these associations’ plans for

external monitoring of the codes of conduct. The American Apparel

Manufacturers Association (AAMA)27 objects to what it sees as AIP and

CEPAA attempts to dictate labor standards for the apparel industry.

Moreover, it views these efforts as attempts to force compliance with U.S.

standards on other countries. In particular, AAMA objects to the CEPAA’s

SA8000’s establishment of a wage standard that includes discretionary

income, rather than a minimum or prevailing wage as the standard for

remuneration. The National Retail Federation (NRF)28 objects to the CEPAA’s

wage standard as well.

Apparel industry groups and companies have expressed the strongest

objections to the AIP’s and the CEPAA’s positions on independent

26Wages are computed by determining the cost of a basic food basket (using local government

statistics), the percentage of household income spent on food, the appropriate number of household

members, and a percent multiplier for providing discretionary income.

27The AAMA represents about 300 members that are responsible for approximately 80 percent of the

apparel that is sold in the United States.

28The NRF membership represents an industry that comprises 1.4 million U.S. retail establishments. Its

international membership includes 1,000 stores in 50 countries.

Page 26 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

monitoring. Both the AIP and the CEPAA allow NGOs, accounting firms, or

other independent entities to become certified or accredited as monitors.

The AAMA, the NRF, and apparel companies object to these provisions,

particularly the AIP’s requirement that monitors consult with local labor

unions and human rights and religious groups during the monitoring

process. For example, these groups are concerned that (1) labor unions,

human rights groups, and other NGOs might have their own agendas in

participating in the monitoring process; (2) the quality of audits might be

impaired by the lack of experienced social auditors; and (3) these are

attempts to dictate standards for monitoring across the industry. The AAMA

contends that the cost of these audits could be prohibitive to some smaller

firms. Therefore, companies should have the flexibility to establish

internal monitoring programs or choose their own monitors. Another

company representative told us that the AIP’s approach might result in

inconsistent and uneven monitoring and enforcement, if a firm does not

have a consistent program for monitoring compliance at each factory.

Furthermore, there would be no institutionalization of the monitoring

process due to the variance in participation by local organizations. Thus,

there is no consensus on who should control the monitoring. These

industry groups have also expressed concerns about disclosing

proprietary information such as wages, the names of suppliers, and the

results of their audits to possible industry competitors.

Numerous U.S. Apparel

Companies Require

Contractors to Comply

With Company Codes of

Conduct, but Whether

Current Monitoring

Practices Will Be Sufficient

Is Unclear

Over the past few years, numerous U.S. apparel manufacturing and retail

companies have established their own workplace codes of conduct. A 1996

Department of Labor study29 identified 36 U.S. companies that have

adopted some form of code of conduct for their overseas factories and

contractors. According to this study, each corporate code varies with

respect to its specific labor standards but generally includes such

prohibitions as child and forced labor and discrimination based on race,

religion, or ethnic origin. These codes also can include health and safety

requirements, wage provisions that are based on the local minimum or

prevailing wage, limits on working hours and forced overtime, and the

right of freedom of association and collective bargaining.

With respect to monitoring and enforcing the codes in overseas plants, the

Labor study found that the monitoring programs of U.S. companies

included (1) announced and unannounced site visits and inspections

and/or (2) contractual monitoring or self-certification by stipulating labor

29The Apparel Industry and Codes of Conduct: A Solution to the International Child Labor Problem?

U.S. Department of Labor, Bureau of International Labor Affairs (Washington, D.C.: 1996), p. iv.

Page 27 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

standards in contractual agreements and by requiring proof of compliance

or reserving the right to inspect plant sites. Enforcement took various

forms, including prescreening, monetary fines and penalties, corrective

action requirements, educational programs, and contract termination. For

example, U.S. companies may prescreen prospective contractors prior to

entering into a contractual relationship to assess the contractor’s ability to

comply with quality control and labor requirements. Once a contractual

relationship has been established, the U.S. company may require the

contractor to take certain corrective actions if the contractor does not

comply with the company’s code or other requirements. In extreme cases,

such as instances where the contractor has employed child labor, the

company may decide to terminate the contract altogether.

Despite the existence of these corporate codes of conduct, Labor’s study

indicated that the codes were not readily transparent (clear) to the

workers, although many but not all of the factory managers were familiar

with the codes of their U.S. clients. Workers may have been unaware of

the existence of the codes due in part to a lack of effort on the part of

managers to inform their workers. Based on plant visits, the study cited

only one example of a plant that explicitly informed its workers about its

U.S. customer’s code of conduct. Moreover, many maquilas often operate

under more than one code of conduct, particularly if they are contracting

with multiple U.S. companies and belong to maquila associations that have

also established a code of conduct. The Labor study expressed a concern

that having multiple codes that had different definitions of standards and

monitoring requirements created confusion for companies that are

required by their U.S. contractors to implement these codes.

Furthermore, current monitoring practices may not sufficiently ensure

compliance with company codes of conduct. The Labor study indicated

that plants that were either owned by U.S. companies or contracted with

U.S. companies appeared to undergo more frequent and thorough

monitoring. However, based on field visits conducted at several plants,

with some exceptions, U.S. corporations primarily monitored for quality

control and health and safety conditions, with little interaction between

monitors and workers to determine other labor practices. According to

Labor’s report, some workers indicated that they had not seen an

inspector nor could they be certain that company representatives had ever

visited; others indicated that monitors did not speak with workers. In

addition, the report indicated that monitoring of subcontractors is erratic,

suggesting that U.S. importers exert less control over the labor practices

of subcontractors.

Page 28 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

We visited 13 apparel maquilas in Guatemala and the Dominican Republic,

of which 4 maquilas in Guatemala and 7 maquilas in the Dominican

Republic contracted with U.S. companies that had corporate codes of

conduct. Based on interviews and our observations in the four Guatemalan

maquilas, we did not see any physical working conditions that were

inconsistent with the codes of conduct of their U.S. contractors. According

to managers at the four Guatemalan maquilas, U.S. company

representatives inspected the maquilas for quality control and working

conditions at least once a year, and in most cases much more often. At two

maquilas, managers also indicated that they had been audited and certified

under VESTEX’s code of conduct. However, at several of the Dominican

maquilas, we observed some physical working conditions that appeared to

be inconsistent with their U.S. contractor’s code, especially with

occupational safety and health standards. For instance, we found

examples of poor ventilation, padlocked exit doors, and poorly maintained

restrooms. However, given the limited number of plants we visited, this

should not be considered a representative sample of all apparel plants in

these two countries.

Conclusions The major CBI apparel shipping countries have made efforts to improve

worker rights standards and to better address labor problems in their

apparel industries in recent years. CBI governments have reformed their

labor laws to meet international standards where needed and have been

making efforts to upgrade the performance of their labor departments.

However, despite the progress that has been made, allegations of worker

rights abuses persist, and enforcement of labor laws generally remains a

problem in CBI countries. CBI governments’ efforts to improve the

enforcement capabilities of their labor ministries have been hampered by

limited resources and training, as well as by generally inefficient and

sometimes corrupt judicial systems, according to recent State and Labor

Department reports. Some governments are currently trying to redress this

situation by establishing additional labor courts or by starting to overhaul

their judicial systems, by providing additional training for labor inspectors

and mediators, and by participating in a regional initiative to harmonize

their labor codes and modernize their labor ministries. In the private

sector, the fact that U.S. companies and CBI maquila associations have

begun to adopt codes of conduct to self-regulate their industry is another

sign of progress. However, there is no agreement within the industry on an

effective means to monitor and enforce these codes of conduct. Many in

the apparel industry object to the imposition of outside independent

monitors to verify their compliance with the codes of conduct, while

Page 29 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
B-280379 

consumer and labor rights groups do not believe that codes of conduct

will be meaningful without such independent monitoring and enforcement.

Agency Comments The Departments of State and Labor and USTR provided oral comments on

a draft of this report. The Departments of State and the Office of the U.S.

Trade Representative generally concurred with the information presented.

The Department of Labor expressed concern that our discussion of the

AlP deliberations did not provide sufficient information on the

groundbreaking nature of the AIP initiative and that we were describing

deliberations that were still ongoing. In response, we revised the report to

provide more context and to reflect the ongoing nature of the AIP

deliberations. Our report recognizes that the initiative is ongoing; we

wanted to provide information on the status of all private sector efforts,

including the AIP initiative. The Department of Labor also expressed

concern about the appropriateness of comparing the way the CEPAA and

the AIP would implement their codes of conduct given that they were

taking different approaches. Our purpose was to highlight the differences

in the two industrywide approaches to implementing and monitoring their

codes of conduct and not to make any judgments. The Department of

Labor also provided technical comments, which we incorporated where

appropriate.

We are sending copies of this report to appropriate congressional

Committees. We will also make copies available to other interested parties

upon request.

Please contact me at (202) 512-8984 if you or your staff have any questions

concerning this report. Major contributors to this report are listed in

appendix V.

Sincerely yours,

JayEtta Z. Hecker, Associate Director

International Relations and Trade Issues

Page 30 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Page 31 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Contents

Letter 1

Appendix I 

Trends in Apparel

Imports to the United

States, 1987-97

34

Apparel Industry Pursues Production-Sharing Strategy 34

Trends in Apparel Imports From CBI Countries 35

Appendix II 

Outcome of

Generalized System of

Preferences (GSP)

Worker Rights Cases

38

Appendix III 

Two Private Sector

Approaches to

Industrywide

Workplace Standards

42

Appendix IV 

Objectives, Scope,

and Methodology

45

Appendix V 

Major Contributors to

This Report

49

National Security and International Affairs Division, Washington,

D.C.

49

Office of the General Counsel, Washington, D.C. 49

Tables Table 1: GSP Worker Rights Cases Accepted for Review Against

Major CBI Apparel Shipping Countries, 1987-97

7

Table I.1: Rates of Growth of Apparel Imports to the United

States Under Production-sharing Provisions From CBI Countries

and Mexico, 1987-97

37

Page 32 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Contents

Table II.1: GSP Worker Rights Cases Against Major CBI Apparel

Shipping Countries, 1987-97.

39

Table III.1: Summary of Key Attributes of the AIP’s Workplace

Code of Conduct

42

Table III.2: Summary of Key Attributes of the CEPAA’s Social

Accountability 8000 Standards

42

Figure Figure I.1: Value of U.S. Apparel Imports Under

Production-sharing Provisions From Six CBI Countries and

Mexico, 1987-97

36

Abbreviations

AAMA American Apparel Manufacturers Association

AFL-CIO American Federation of Labor and Congress of

Industrial Organizations

AIP Apparel Industry Partnership

ASIC Salvador Association of Clothing Industries

CATECO Costa Rica Textile Chamber

CEP Council on Economic Priorities

CEPAA Council on Economic Priorities Accreditation

Agency

CBI Caribbean Basin Initiative

FENATRAZONAS National Federation of Free Trade Zone Workers

(Dominican Republic)

GSP Generalized System of Preferences

GAL Guaranteed Access Level

IDB Inter-American Development Bank

ILO International Labor Organization

NGO Nongovernmental organizations

NAFTA North American Free Trade Agreement

NRF National Retail Federation

UNITE Union of Needletrades, Industrial and Textile

Employees

USAID U.S. Agency for International Development

USTR Office of the U.S. Trade Representative

VESTEX Commission of the Apparel and Textile Industry

(Guatemala)

Page 33 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix I 

Trends in Apparel Imports to the United

States, 1987-97

The U.S. apparel industry has pursued a strategy of assembling apparel

offshore—or production-sharing1

—in low-wage countries in order to

remain competitive. This strategy has particularly benefited the Caribbean

Basin Initiative (CBI) apparel industry, which has the advantage of

proximity and a preferential trade program that makes apparel assembly in

CBI countries very attractive to U.S. firms.

Apparel Industry

Pursues

Production-Sharing

Strategy

The apparel industry, once concentrated in the United States and other

industrialized countries, has gradually spread to countries with lower

production costs, becoming a global industry. Many developing countries

have based their industrialization on labor-intensive export sectors, such

as the apparel sector. At the same time, companies in the United States

and other industrialized countries have adopted strategies to shift

labor-intensive activities like apparel assembly to low-wage countries

through direct investment (building their own plants) or outsourcing

(buying from contractors). The strong competition in the U.S. apparel

industry, intensified by the increased market share of imports, has led

many U.S. apparel manufacturers to shift their apparel assembly activities

to the Caribbean Basin and Mexico to take advantage of their preferential

trade programs and proximity. This trend has also been followed by U.S.

retailers, who have been directly sourcing brand-name and private-label

merchandise domestically and internationally. A result has been that many

of the largest retailers have also become the large importers of apparel.

More than half of the $178 billion in apparel sold at the retail level in the

United States in 1995 was imported.2

The shift of apparel assembly to the Caribbean Basin was facilitated by the

initiation of the Special Access Program in 1986, under the Caribbean

Basin Initiative. The Special Access Program provided trade preferences

for apparel assembled from U.S.-formed and -cut fabric in CBI countries

and imported to the United States under the production-sharing provisions

of item 807 of the U.S. Tariff Schedule, which is now heading 9802 of the

U.S. Harmonized Tariff Schedule.3

 Under the Special Access Program, CBI

countries became eligible to negotiate bilateral agreements with the

United States containing favorable quotas, or Guaranteed Access Levels

1

Production-sharing occurs when certain aspects of an article’s manufacture are performed in more

than one country.

2

The Apparel Industry and Codes of Conduct: A Solution to the International Child Labor Problem?

3

By importing products under the production-sharing provisions of heading 9802 (formerly 807),

companies are exempted from paying U.S. Customs duties on the value of the U.S.-made components

used in making imported products.

Page 34 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix I 

Trends in Apparel Imports to the United

States, 1987-97

(GAL), for these products. The result was that CBI apparel assembled from

U.S.-formed and -cut fabric was allowed virtually quota-free access to the

U.S. market under the Special Access Program. The six CBI countries that

had GALs in 1997 were Costa Rica, the Dominican Republic, El Salvador,

Guatemala, Honduras, and Jamaica.

The shift of apparel assembly to the Caribbean Basin—57 percent of all

imports under production-sharing provisions came from the CBI countries

in 1997—is a source of concern to U.S. apparel unions, although apparel

manufacturers believe their ability to compete to some extent depends

upon it. The U.S. apparel manufacturing industry, for a variety of reasons,

went from a peak of 1.45 million workers in 1973 to 853,000 workers in

May 1996, a drop of 41 percent. The apparel and textile manufacturers and

retailers say that the intense price competition in the U.S. market is driving

apparel assembly jobs to low-cost countries but that production-sharing

reduces the loss of jobs in the U.S. apparel manufacturing industry to

imports with no U.S. content.

Trends in Apparel

Imports From CBI

Countries

The data on trends in apparel imported to the United States under

production-sharing provisions from 1987 to 1997 show that total CBI

imports grew by over sevenfold, from $864 million to $6.4 billion.

However, the performance of individual CBI countries varied. For example,

the value of these imports rose from $336 million to $2.1 billion for the

Dominican Republic, consistently the leading CBI apparel shipper, and

from $113 million to $425 million for Jamaica, which moved from third to

last place among the six CBI countries with GALs. Figure I.1 shows the value

of apparel imports under production-sharing or 9802 (807) provisions for

the six CBI countries that had GALs in 1997 and Mexico.4

 The data cover the

years 1987 through 1997, the years that the Special Access Program has

been in effect. (Since it was late 1986 before the GALs were negotiated,

1987 is the first full year of data for the program.)

4

We have included Mexico because it had a similar program, the Special Regime Program, under which

it gained preferential market access in 1988 for apparel assembled from U.S.-formed and -cut fabric.

This program was superseded in 1994 by duty-free, quota-free entry under the North American Free

Trade Agreement (NAFTA) for such apparel. Mexico thereby gained an advantage in competing for

market share in relation to the CBI countries in this segment of the apparel industry. CBI countries

have desired parity with Mexico in this segment of the apparel industry ever since.

Page 35 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix I 

Trends in Apparel Imports to the United

States, 1987-97

Figure I.1: Value of U.S. Apparel Imports Under Production-Sharing Provisions From Six CBI Countries and Mexico,

1987-97

0

1,000

2,000

3,000

4,000

5,000

Costa Rica

Dominican Republic

El Salvador

Guatemala

Honduras

Jamaica

Mexico

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

138.399 193.975 253.091 293.229 363.723 480.709 542.785 586.125 668.650 645.421 792.582

336.003 454.115 556.681 581.067 781.058 1,028.589 1,207.556 1,369.182 1,561.106 1,598.073 2,059.274

16.105 23.803 32.766 41.643 76.311 130.439 185.004 303.295 476.660 587.405 894.140

30.311 49.166 79.268 117.031 225.770 311.739 422.777 448.109 519.454 577.327 648.973

40.397 55.001 67.767 87.956 142.774 245.778 332.603 449.621 674.824 969.698 1,360.516

113.058 132.797 162.658 158.361 172.831 217.685 314.014 371.046 448.255 436.934 424.862

300.939 370.228 449.955 448.939 603.289 804.643 1,029.325 1,469.895 2,282.036 2,966.819 4,096.041

Dollars in millions 

Page 36 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix I 

Trends in Apparel Imports to the United

States, 1987-97

Note: Data for 1997 are initial data and are subject to revision.

Source: Major Shippers Report for 9802 (807) Imports, U.S. Department of Commerce, Office of

Textiles and Apparel (Washington, D.C.: Dec. 1989-February 1998).

Table I.1 provides data on the rates of growth of apparel imports to the

United States under production-sharing or 9802 (807) provisions from the

six CBI countries with GALs, from all CBI countries combined, and from

Mexico. The data cover 1987 through 1997. The table shows that the CBI

countries with the fastest rates of growth over the last 4 years were El

Salvador and Honduras. It also shows that imports to the United States

from Mexico have been growing much faster than the CBI countries

combined since 1994.

Table I.1: Rates of Growth of Apparel Imports to the United States Under Production-Sharing Provisions From CBI

Countries and Mexico, 1987-97

Numbers in percent

Year Costa Rica

Dominican

Republic El Salvador Guatemala Honduras Jamaica CBI total Mexico

1988 40.2 35.2 47.8 62.2 36.2 17.5 28.4 23.0

1989 30.5 22.6 37.7 61.2 23.2 22.5 22.1 21.5

1990 15.9 4.4 27.1 47.6 29.8 –2.6 8.3 –0.2

1991 24.0 34.4 83.3 92.9 62.3 9.1 32.8 34.4

1992 32.2 31.2 70.9 38.1 72.2 26.0 29.8 33.4

1993 12.9 17.4 41.8 35.6 35.3 44.3 24.9 27.9

1994 8.0 13.4 63.9 6.0 35.2 18.2 14.6 42.8

1995 14.1 14.0 57.2 15.9 50.1 20.8 24.3 55.3

1996 –3.5 2.4 23.2 11.1 43.7 –2.5 11.2 30.0

1997 22.8 28.9 52.2 12.4 40.3 –2.8 28.2 38.1

Note 1: Data for each year reflect the growth from the previous year. Thus, the growth rate in 1988

is based on the level of apparel imports in 1987.

Note 2: Data for 1997 are initial data and are subject to revision.

Source: Derived from Major Shippers Report for 9802 (807) Imports.

Page 37 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix II 

Outcome of Generalized System of

Preferences (GSP) Worker Rights Cases

The GSP Program administers an annual review process, during which it

considers petitions to add products to or remove products from GSP

coverage, as well as petitions related to country eligibility, including

worker rights petitions. Petitions may be brought by any interested party.

Most worker rights petitions have been filed by the American Federation

of Labor and Congress of Industrial Organizations (AFL-CIO) or by labor and

human rights advocacy groups, requesting that GSP benefits be suspended

due to worker rights violations. Although the GSP Program, which is

administered by the GSP Subcommittee, an interagency working group of

the Trade Policy Staff Committee led by the Office of the U.S. Trade

Representative (USTR), has the right to self-initiate cases, its policy has

generally been to initiate reviews only when triggered by petitions.

During 1987-97, all the major CBI apparel shipping countries except

Jamaica had worker rights petitions filed against them. There were 15

worker rights petitions filed, of which 5 were accepted for review. These

petitions generally focused on violations of the right of association or the

right to organize and bargain collectively, that is, unionization issues.

Generally, most petitions that were rejected for full review by the GSP

Subcommittee were due to determinations that there was insufficient

evidence that countries were not taking steps to provide worker rights or

that substantially new information had not been presented (in cases in

which a petition was resubmitted in the next year). Petitions were also

rejected for review in the case of countries experiencing civil wars where

there were allegations that could not be isolated as worker rights

violations rather than as human rights violations that were part of the

larger conflict.

The GSP annual review has a two-stage decision cycle for petitions that

have been submitted. In the first stage, a decision is made on which

petitions to accept for full review; in the second stage, the accepted

petitions are reviewed and a decision is made on whether beneficiary

countries are meeting the worker rights criteria. If a decision cannot be

reached by the end of the review year, the case is continued, or “pended,”

into the next annual review cycle. Table II.1 shows GSP worker rights cases

for CBI countries by the years of each review, the decision whether to

review, and the outcome of the review and steps taken.

Page 38 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix II 

Outcome of Generalized System of

Preferences (GSP) Worker Rights Cases

Table II.1: GSP Worker Rights Cases

Against Major CBI Apparel Shipping

Countries, 1987-97.

Country Year(s)

Decision

whether to

review

Outcome of

review &

steps taken

Costa Rica 1993 Accepted for

review

Petition

withdrawn

11/16/93

after labor

code reforms

enacted

11/12/93 and

Supreme

Court

decision of

10/93

enforcing

right of

association/

collective

bargaining.

Review

terminated

12/93.

Dominican Republic 1989-91 Accepted for

review

Review

terminated in

1991 due to

introduction

of labor code

reform

legislation,

which was

enacted in

1992.

1991 Rejected for

review

(continued)

Page 39 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix II 

Outcome of Generalized System of

Preferences (GSP) Worker Rights Cases

Country Year(s)

Decision

whether to

review

Outcome of

review &

steps taken

1993-94 Accepted for

review

Petition

withdrawn

10/94.

Review

terminated

12/94.

Government

showed the

will to

enforce the

labor code in

export

license

suspension

and other

actions to

enhance

worker rights

enforcement.

El Salvador 1987 Rejected for

review

1988 Rejected for

review

1989 Rejected for

review

1990-94 Accepted for

review

Review

terminated

7/94. Labor

code reforms

enacted 4/94.

Guatemala 1985 General

reviewa

Review

terminated

1/87, found

to be taking

steps.

1987 Rejected for

review

1989 Rejected for

review

1990 Rejected for

review

1991 Rejected for

review

1992-97 Accepted for

review

Review

terminated

5/97. Labor

code reforms

in 11/92.b

(continued)

Page 40 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix II 

Outcome of Generalized System of

Preferences (GSP) Worker Rights Cases

Country Year(s)

Decision

whether to

review

Outcome of

review &

steps taken

Honduras 1991 Rejected for

review

1995 Rejected for

review

USTR

negotiates

memorandum

of

understanding

of 11/95.

Honduras

agrees to

take steps to

better

enforce labor

laws.

Note: Shaded cells mean that this item was not applicable.

aWhen GSP was reauthorized by the Trade and Tariff Act of 1984 (P.L. 98-573, Oct. 30, 1984),

criteria for worker rights eligibility were added. The GSP Subcommittee conducted a general

review of worker rights in beneficiary developing countries at that time. It reviewed 11 countries

and announced the results in January 1987. Guatemala was the only one among these six

countries to be included in the general review. No subsequent general review has been

conducted.

bAlthough Guatemala reformed its labor code in 1992, the GSP worker rights review was not

terminated until May 1997. A USTR official stated that every time the United States started to

consider termination, there was some worker rights violation or incident that required further

review. At the same time, there were concerns about the Guatemalan government’s ability to

enforce its labor laws. According to the U.S. embassy official, the Guatemalan government felt

that the goalposts were constantly being moved and that nothing it did would be enough.

Sources: USTR and Departments of Labor and State.

Page 41 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix III 

Two Private Sector Approaches to

Industrywide Workplace Standards

Over the past 2 years, the private sector has undertaken two major efforts

to develop industrywide workplace standards. These voluntary efforts

were designed to assure consumers that their products are not produced

under abusive labor conditions in the United States and abroad. In

April 1997, the Apparel Industry Partnership (AIP), consisting of several

U.S. apparel manufacturing and retail companies, consumer groups,

human rights and religious groups, and labor unions,1

 announced its plans

to implement a new Workplace Code of Conduct, which defines “decent

and humane” working conditions in the apparel industry. Since the

announcement, the AIP has worked to reach consensus on how to

implement the code of conduct and monitoring apparatus. The process is

not yet complete, and deliberations continue. In October 1997, the Council

on Economic Priorities Accreditation Agency (CEPAA), an affiliate of the

Council of Economic Priorities, also established a voluntary workplace

standard—social accountability standards (SA8000)—to address labor

conditions across all industry sectors. In the broadest sense, the

workplace standards developed by the CEPAA and the AIP are similar with

respect to the labor conditions that they address, as can be seen in table

III.1 and table III.2.

Table III.1: Summary of Key Attributes

of the AIP’s Workplace Code of

Conduct Source: The AIP.

Table III.2: Summary of Key Attributes

of the CEPAA’s Social Accountability

8000 Standards (Sa8000) Source: The CEPAA.

Although the CEPAA and AIP workplace standards are similar, there are

several differences in each organization’s approach to implementation and

monitoring. First, the CEPAA’s approach to implementation and monitoring

focuses on ensuring compliance at the plant level. For example, the CEPAA

would certify that companies and their contractors or suppliers are in

compliance with SA8000 standards, based on the results of an independent

external audit conducted by an accredited nongovernmental organization

(NGO), accounting firm, or certification agency. Companies would not be

1

AIP membership currently includes the Business for Social Responsibility; The Interfaith Center on

Corporate Responsibility; International Labor Rights Fund; Kathy Lee Gifford; Nicole Miller; Lawyers

Committee for Human Rights; Liz Claiborne, Inc.; L.L. Bean; National Consumers League; Nike Inc.;

Patagonia; Phillips Van Heusen Corporation; Reebok International, Inc.; the Retail, Wholesale,

Department Store Union; Robert F. Kennedy Memorial Center for Human Rights; Tweeds Inc.; Union

of Needletrades, Industrial and Textile Employees (UNITE); and Duke University.

Page 42 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix III 

Two Private Sector Approaches to

Industrywide Workplace Standards

precluded from establishing their own internal monitoring procedures;

however, certification could only be obtained from an accredited

independent entity. In contrast, the AIP’s approach focuses on ensuring

that companies are taking reasonable steps to monitor the compliance of

their suppliers. The AIP would certify a company’s compliance based on

monitoring a percentage of its contractors and suppliers. According to AIP

members, it would be almost impossible to monitor every plant because

some companies have hundreds and thousands of contractors and

suppliers. Moreover, they said that smaller contractors have little incentive

to undergo certification, unless pressured by their customers—U.S.

manufacturers and retailers that have more incentive to convince the

public of their efforts to improve labor conditions than a remote

contractor.

Second, under the CEPAA’s approach, any interested party (that is, NGOs,

unions, or workers) may appeal a company’s certification if it presents

objective evidence confirming serious violations of SA8000. An interested

party may also file complaints about companies and auditors

confidentially with the certifying body. The AIP’s code of conduct and

principles of monitoring currently do not include a provision that would

allow an interested party to appeal a company’s certification.

Third, concerning wages, the CEPAA’s standard bases wages on an amount

that includes discretionary income (or an additional 10 percent of the

wage), rather than on a minimum or prevailing, wage, as the standard for

remuneration as adopted by the AIP. This standard takes into account the

number of persons in the household and the percentage of household

income that is spent on local food items.2

 The CEPAA recommends that

auditors refer to data provided by the World Health Organization, the

Ministry of Economy’s national consumer price index, the ILO, and the

United Nations (Habitat Programme) when conducting their audit. The

AIP’s standard for compensation is based on the minimum wage required

by law in the country of manufacture or the prevailing wage in the

industry, whichever is higher.

Finally, although both the CEPAA’s and the AIP’s approaches include a

standard against the use of child labor under the age legally stipulated for

the country, the CEPAA’s approach also includes a specific provision for the

2

Wages are computed by determining the cost of a basic food basket (using local government

statistics), the percentage of household income spent on food, the appropriate number of household

members, and a percent multiplier for providing discretionary income.

Page 43 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix III 

Two Private Sector Approaches to

Industrywide Workplace Standards

remediation of child labor.3 Companies must establish policies and

procedures to remediate child labor and provide enough support to enable

such children to attend and remain in school until they are no longer

minors. The standard for remediation includes the provision of a specified

amount of funds allocated per child for payment of school tuition. In the

absence of a school in the local vicinity, the company may work with a

local NGO to provide educational facilities and offer to hire minors’ parents

or older siblings if they are unemployed. For minors legally permitted to

work, the company must establish a means to ensure that they are not

employed during school hours and that the total number of hours spent on

daily transportation, school, and work does not exceed 10 hours a day.

Companies must also take precautions to safeguard minors from

hazardous working conditions. According to the AIP principles of

monitoring, companies are obligated to establish a means of remediation

for noncompliance with the code of conduct including child labor.

Although the principles of monitoring do not include any detailed

provisions for the remediation of child labor, a Department of Labor

official told us in July 1998 that AIP members have agreed on overall

provisions for remediation of the standards covered by the code of

conduct including child labor.

3

According to the CEPAA, “child labor” is defined as any work by a child younger than 15 years of age,

unless local minimum age law stipulates a higher age for work or mandatory schooling, in which case

the higher age would apply. However, if the local minimum age law is set at 14 years of age in

accordance with the developing-country exception under ILO Convention 138, the lower age would

apply.

Page 44 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix IV 

Objectives, Scope, and Methodology

The Ranking Minority Member of the Committee on Commerce, Science,

and Transportation asked us to review labor conditions in the CBI apparel

industry. Due to his concern that allegations of worker rights abuses have

persisted in the CBI apparel industry, we reviewed (1) whether or not

Caribbean Basin countries have made efforts to improve worker rights in

the CBI apparel industry and (2) what efforts the private sector has made to

address concerns about working conditions in CBI countries. We also

updated information on U.S. apparel imports from CBI countries.

To identify whether or not steps had been taken to improve worker rights

in the CBI apparel industry, we focused on the six major CBI apparel

shipping countries that had negotiated GAL—Costa Rica, the Dominican

Republic, El Salvador, Guatemala, Honduras, and Jamaica. We interviewed

officials and reviewed documents from the Departments of State and

Labor; USTR; the U.S. Agency for International Development (USAID); the

Inter-American Development Bank (IDB); the ILO; and U.S. embassies in

Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras,

and Jamaica. We reviewed the 1992-97 State Department Country Reports

on Human Rights Practices, which is a legislatively mandated annual

report to Congress that covers worker rights issues. We also reviewed the

Labor Department’s more detailed Foreign Labor Trends reports where

available for the CBI countries, as well as GSP worker rights case files. It

was not possible for us to conduct an independent assessment of worker

rights in each country or to independently verify specific allegations of

worker rights abuses. Rather, we relied primarily on discussions with

country officials and State and Labor Department and USTR reports. The

information presented in this report on foreign law does not reflect our

independent analysis but is based on secondary sources and interviews.

To understand the perspectives of the three main groups that are

concerned about labor conditions in the CBI apparel industry, we

interviewed and obtained documents from apparel industry, labor and

human rights, and regional representatives. To gain the industry

perspective, we consulted with officials of the American Apparel

Manufacturers Association (AAMA), the National Retail Federation (NRF),

the U.S. Association of Importers of Textiles and Apparel, and the

American Textile Manufacturers Institute. To gain the labor and human

rights perspective, we consulted with representatives of UNITE; the

American Center for International Labor Solidarity (affiliated with the

AFL-CIO); the International Labor Rights Fund; Human Rights Watch; the

Guatemala Labor Education Project; and the International Textile,

Garment & Leather Workers’ Federation (headquartered in Belgium). To

Page 45 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix IV 

Objectives, Scope, and Methodology

gain the regional perspective, we consulted with Caribbean/Latin

American Action, a private, independent organization promoting

private-sector-generated economic development in the countries of the

Caribbean Basin.

To assess efforts to enforce labor laws in these countries, we interviewed

officials and reviewed documents from the Departments of State and

Labor, USTR, and U.S. embassies in these countries and relied extensively

on State and Labor Department worker rights reports. We also interviewed

and obtained documents from industry association officials and labor and

human rights representatives. We followed up on enforcement issues

during our field work in the Dominican Republic and Guatemala.

We visited the Dominican Republic and Guatemala in July/August 1997 in

order to conduct more in-depth case studies. We selected the Dominican

Republic because it is a Caribbean country and also the largest CBI shipper

of apparel to the United States. We selected Guatemala because it is a

Central American country and had the first regional code of conduct for

maquilas. During our visits, we interviewed U.S. embassy officials;

Dominican and Guatemalan government officials; a Dominican expert on

economic development; representatives of the maquila industry

associations; American Chamber of Commerce officials; a Dominican free

trade zone operator; apparel plant owners and managers; labor union

representatives and members; and labor rights, human rights, and

women’s rights organization representatives. In the Dominican Republic,

we visited nine apparel plants in five zones: Las Americas, San Isidro,

Santiago, La Roma, and San Pedro de Macoris. We requested and received

agreement to visit three of the plants at which the free trade zone union

federation had alleged worker rights violations had occurred. In

Guatemala, we visited four apparel plants. We conducted a structured

interview with the plant manager in all 13 plants we visited and toured

each plant. Given the limited number of plants we were able to visit, and

because we only visited plants that agreed to be visited, our results cannot

be generalized to all plants in those countries. Furthermore, we did not

conduct a formal inspection of these plants; our observations of the plants

were limited to physical working conditions. We observed conditions

related to lighting, drinking water, restrooms, ventilation, fire

extinguishers, and fire doors and exits. We did not interview any of the

workers in the plants, although we did talk to some apparel maquila

workers at our meetings with the union federations in both countries. It

was not possible for us to independently verify the various allegations of

Page 46 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix IV 

Objectives, Scope, and Methodology

worker rights abuses, but where possible we discussed them with

government officials, including senior labor inspection officials.

To determine the private sector efforts to address concerns about working

conditions in CBI countries, we interviewed officials at the Departments of

Labor and State and U.S. embassies in Costa Rica, the Dominican

Republic, El Salvador, Guatemala, Honduras, and Jamaica. During these

interviews, we also obtained information on the status of actions taken by

the maquila associations in the export-processing zones to establish and

monitor codes of conduct. During our visits to the Dominican Republic

and Guatemala, we interviewed maquila association members, maquila

plant owners and managers, export-processing zone operators, an Ernst &

Young International Guatemala official, and labor union representatives

and members. During our visits to the 13 apparel plants, we inquired as to

whether the plant was contracting with U.S. companies that had codes of

conduct and whether they were monitored. We also spoke with

representatives from the AIP and the CEPAA to discuss their efforts to

develop codes of conduct and the current status of their plans to

implement and monitor their codes of conduct. In addition, we

interviewed representatives from the AAMA, the NRF, and the U.S.

Association of Importers of Textiles and Apparel, as well as

representatives from Levi Strauss & Co., The Gap, Warnaco, and Karen

Kane. We interviewed representatives from these industry associations

and apparel companies to obtain their views on individual and

industrywide efforts to establish, implement, and monitor codes of

conduct. We selected Levi Strauss & Co. and The Gap because they had

established their own codes of conduct and had chosen not to participate

in the formation of the AIP. We selected Warnaco and Karen Kane because

they had originally participated in formation of the AIP and later decided to

withdraw.

To understand trends in the CBI apparel industry, we interviewed and

obtained documents from the Department of Commerce and the U.S.

International Trade Commission, as well as officials of the AAMA, the NRF,

the U.S. Association of Importers of Textiles and Apparel, the American

Textile Manufacturers Institute, and UNITE. We obtained apparel import

data for 1987-97 from the Commerce Department’s Office of Textiles and

Apparel. We also attended a conference at Marymount University,

Arlington, Va., entitled An Academic Search for Sweatshop Solutions, in

May 1997.

Page 47 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix IV 

Objectives, Scope, and Methodology

We conducted our review from May 1997 to April 1998 in accordance with

generally accepted government auditing standards.

Page 48 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
Appendix V 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

John Hutton, Assistant Director

Leyla Kazaz, Evaluator-In-Charge

Sherlie Svestka, Senior Evaluator

Olivia Parker, Evaluator

Rona Mendelsohn, Evaluator (Communication Analyst)

Office of the General

Counsel, Washington,

D.C.

Richard Burkard, Assistant General Counsel

(711319) Page 49 GAO/NSIAD-98-205 Caribbean Basin Worker Rights
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