Bangladesh Apparel Factory Collapse: Background in Brief
Released: 2014-02-06T00:00:00

Background and Overview1

On April 24, 2013, Rana Plaza, an eight-story building, in Dhaka, Bangladesh, collapsed, killing more than 1,100 garment workers. It brought international focus on portions of the global supply chain. It also raised the issue of what might be done to improve working conditions, especially for lower-wage workers in developing countries around the world.

According to press reports, the day of the building collapse workers arrived and saw cracks in the outside of the building where five manufacturing operations were trying to meet production deadlines on apparel products for the U.S. and European Union (EU) markets. Reportedly, management assured them that the building was safe, and told workers that they would not be paid if they did not work. An hour later, the building collapsed. It has been labeled the deadliest disaster in the history of the garment industry.

The Rana Plaza collapse took place five months after a December 17, 2012, fire at another Bangladesh apparel factory, Tazreen Fashions Limited; the Tazreen fire killed 112 workers. Survivors reportedly stated that their managers locked one exit route and told workers that the fire alarms were false, thereby delaying timely evacuation. The combined tragedies brought the six-month total loss of life in Bangladesh in the garment sector to at least 1,200.

After the building collapse, reportedly, thousands of workers took to the streets and vandalized vehicles and shops before being dispersed by police. Soon after that, the government shut down a number of apparel factories, for safety reasons, as concerns about industrial safety across the country continued to grow.

Bangladesh's major export is apparel, which, along with a small amount of textiles, accounts for more than 80% of the country's $24 billion in exports to the world in 2012, or nearly $20 billion. (See the Text Box , "Bangladesh in Brief.") As a result of the Rana Plaza building collapse, some firms, such as Disney, have indicated they may no longer source production from Bangladesh, largely due to concerns over their brand reputation. If this becomes a major trend, one consequence could be that many women, who constitute 80% of the workers in the apparel sector, could lose their jobs. These women, mostly Muslim, have found new independence and an increased standard of living for their families, and have, in many cases, become primary breadwinners. The effect on the economic structure of Bangladesh could be compounded by an ongoing struggle between a secular Bangladeshi identity and a more fundamental/religious Islamic identity.

A number of factors may have led to the recent building collapse. Bangladesh's economy is labor-intensive, which attracts lower-wage and lower-skilled industries such as apparel. Bangladesh is a densely populated country, where a population half the size of the United States is crowded into a geographic area the size of Iowa. To meet increasing global demand for apparel production, primarily by the United States and Europe, certain buildings may have been converted to multi-story manufacturing operations. In many countries, apparel production is generally carried out in one- or two-story buildings because of the inherent fire hazards associated with this production. Three additional floors that reportedly were illegally constructed were added to the Rana Plaza.

According to press reports, working conditions in Bangladesh were theoretically addressed, at least in part, by Bangladesh labor laws and building codes, International Labor Organization (ILO) commitments, codes of conduct held by multinational corporations, and GSP trade preferences.

ILO

Since 1972, Bangladesh has been a member of the International Labor Organization (ILO). The ILO originated in 1919 as a tripartite organization comprised of workers, employers, and governments, to promote "decent work" around the world. Under the 1998 ILO Declaration on Fundamental Principles and Rights at Work , Bangladesh and all ILO members have an obligation to uphold ILO core labor principles, simply by reason of their status as ILO members, even if they have not ratified the conventions behind the principles. Bangladesh has, however, ratified seven of the eight ILO conventions backing and defining the five core labor principles. These principles are very similar to the U.S. list of internationally recognized worker rights.

These rights are the following:

1. freedom of association and the effective recognition of the right to collective bargaining; 2. the elimination of all forms of forced or compulsory labor; 3. the effective abolition of child labor, including the worst forms of child labor; and 4. the elimination of discrimination in respect of employment and occupation.

Whether countries do or do not uphold ILO core labor principles, the ILO has no real enforcement powers other than technical assistance, reporting requirements, publication of information, and moral suasion. An example of ILO activities to enhance worker rights is the Better Work Program, a technical support program which recently went into effect in Bangladesh. It is a joint program with the World Bank that works with government officials, factory owners, and labor groups to ensure safe and decent workplace conditions, and is discussed further below.

Figure 2 , below, shows that most of the concepts of the ILO core labor principles plus the ILO occupational safety and health principle, are included in many U.S. trade and investment laws and programs, including the Generalized System of Preferences program, mentioned below, and some private sector codes of conduct. Thus, Figure 2 shows graphically the extent to which similar sets of rights extend through all three parts of the international worker rights support system.

U.S. Trade Preference Programs12

One area of congressional focus in supporting internationally recognized worker rights has been through provisions in U.S. trade preference programs. These were first introduced in the Generalized System of Preferences (GSP) program in 1985. GSP provides unilateral U.S. tariff preferences for certain products exported by developing countries, to support their economic development. Under GSP, and later introduced in other trade preference programs, the President or his designee is prohibited from designating certain countries as eligible for GSP benefits, based on different criteria, including that a country "has not taken or is not taking steps to afford internationally recognized worker rights." These worker rights are defined as

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 wage for the employment of children; and protection against the worst forms of child labor; and 5. acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.

On the basis of these criteria, effective September 3, 2013, the Obama Administration suspended GSP status for Bangladesh, with no timeline for its possible reinstatement. However, that decision was followed by the USTR release of a "Bangladesh Action Plan 2013," outlining a basis for the eventual reinstatement of GSP status for Bangladesh. (For further discussion of the GSP suspension, and Action Plan, see the following section on "U.S. and International Responses to the Bangladesh Tragedy," under "Executive Branch.")

Corporate Codes of Conduct17

Since the 1980s and 1990s, when globalization accelerated and various interest groups began to publicize "bad actors" on worker rights conditions in factories, corporations have increasingly adopted and publicized corporate codes of conduct. Most, if not all, large multinational corporations sourcing apparel from Bangladesh have posted such codes on their websites. These codes may describe the standards to which the business holds its employees, its suppliers under contract, and sometimes its subcontractors. These codes specify worker rights protections and structural and fire hazard standards to varying degrees. A concern raised by some groups is that corporations may contract directly with suppliers, yet have limited knowledge of the conditions under which the products are produced by subcontractors. Corporate codes of conduct are voluntary on the part of corporations.

The Rana Plaza collapse has focused greater attention on the worker conditions and laws in Bangladesh, and may impact Bangladesh's continued role as a major supplier of apparel, due to corporate buyer concerns over branding and reputation. Key issues may include whether firms will continue to source apparel from Bangladesh, or whether firms will engage more proactively to improve conditions there, as well as the extent to which corporate codes of conduct have been helpful.

A number of interested parties, including parties in Europe and the United States, among them President Obama, and a number of Members of Congress, are calling for U.S. and European companies and other stakeholders to work together to solve the problems. (See section below.)

U.S. and International Responses to the Bangladesh Tragedy

Response to the Bangladesh tragedy has come from Congress, the Administration, the Bangladesh government, the ILO, and the private sector, and continues to evolve. This section briefly describes recent, somewhat overlapping, developments.

Congress

Congressional interest in the Rana Plaza factory collapse stems from its legislative and oversight responsibilities over trade, and key business and labor constituencies. These concerns intersect with private sector interests, including the viability of their international supply chains, and brand reputation.

Soon after the Rana Plaza collapse, some Members of Congress encouraged businesses and other stakeholders to work together to improve conditions for workers in Bangladesh. On May 1, 2013, for example, Representatives Sander Levin, ranking Member of the House Ways and Means Trade Subcommittee, and George Miller, ranking Member of the House Education and the Workforce Committee, sent a letter to President Obama, urging the Administration to convene representatives of European and American retailers, the Bangladesh garment industry (including their workers and unions), the Bangladeshi government, the ILO, and nongovernmental organizations, to facilitate development of a "concrete action plan" to address the range of issues relating to working conditions and worker rights in the garment sector.

In addition, a group of 8 U.S. Senators, led by Senators Harry Reid and Sherrod Brown, and a group of 10 Representatives, led by House Minority Leader Nancy Pelosi and House Minority Whip Steny Hoyer, wrote letters to major retailers encouraging them to join efforts to improve fire and building safety in Bangladesh apparel factories. Two major stakeholder efforts have resulted: the "Accord on Fire and building Safety in Bangladesh," signed predominantly by European, plus a few U.S. retailers and brands; and the "Alliance for Bangladesh Worker Safety," signed predominantly by large North American retailers and brands. (See further discussion below under " Private Sector ".)

Executive Branch

U.S. government interests in the Bangladesh tragedy relate to its oversight of trade and investment, its administration of trade agreements and trade preference programs, and a number of efforts to strengthen the capacity of Bangladesh to promote worker protections. For example, the United States has had a bilateral investment treaty with Bangladesh in place since 1989. After the Rana Plaza tragedy, it signed an additional "Trade and Investment Cooperation Forum Agreement" (TICFA), pledging closer cooperation to prevent more tragedies in the ready-made garment sector.

State Department, USTR, and Labor Department Response. After the Rana Plaza collapse, on May 8, 2013, the State Department, Department of Labor, and USTR convened a conference call with U.S. corporate "buyers" (retailers and brands sourcing in Bangladesh's garment industry). In that call, they "strongly urged" these major corporations to coordinate efforts with each other, and with the government of Bangladesh, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), civil society, and labor groups to (a) help pay for independent safety and fire inspectors; (b) communicate to the Bangladeshi government their concerns about labor conditions; and (c) urge immediate passage of labor law amendments to lay the basis for the establishment of an ILO/World Bank Better Work Program for Bangladesh.

On June 13, 2013, the Department of Labor's Bureau of International Labor Affairs (ILAB) announced that a competitive grant of $2.5 million would be awarded to recipient(s) who would work to (1) strengthen the Bangladesh government's ability to improve and enforce fire and building safety standards; and (2) build the capacity of worker organizations to effectively monitor violations of such standards and abate hazards in the ready-made garment sector.

GSP S uspension for Bangladesh. The decision to suspend GSP status for Bangladesh, effective September 3, 2013, with no timeline for restoring, it was made after the GSP Trade Policy Staff Committee held hearings in March of 2013, in response to an AFL-CIO petition first submitted in 2007 and updated in 2012, after the Tazreen fire.

Implications from the GSP suspension are yet to be determined. The GSP program excludes from eligibility most apparel and textile articles (and other import sensitive products), which constitute 92% of Bangladesh's exports to the United States. Therefore, the decision has little effect on U.S. tariffs on apparel imports, which reportedly average about 16%. On the other hand, some businesses might decide to pull out of Bangladesh for fear that their reputation could be damaged by association with a country that has lost its GSP status for reasons relating to internationally recognized worker rights. If that were to happen, some argue, it could significantly reduce Bangladesh's apparel-making labor force and adversely impact its economy.

The USTR's "Bangladesh Action Plan 2013," released to the public on July 19, 2013, outlined a basis for possible eventual reinstatement of GSP status for Bangladesh. Its directives encompass Bangladesh's own "National Tripartite Plan of Action (NTPA) on Fire Safety and Structural Integrity," for the garment sector of Bangladesh (discussed further below under the "Bangladesh Government.") The USTR Action Plan for Bangladesh, among other things, set forth guidelines for government inspections, labor law reforms, the protection of unions from anti-union discrimination and reprisal, and the extension of freedom of association and collective bargaining rights to export processing zones.

Bangladesh Government

The Bangladesh government response after the tragedy was to work with the ILO on identifying changes needed to better protect workers. The NTPA, (mentioned in the above paragraph), is the most recent result. It is a consolidation of two earlier tripartite plans. It focuses on legislation and policy, administration, and practical activities to improve safety in apparel factories. On July 15, 2013, the Bangladesh Parliament approved some changes to its labor laws. These changes were designed to: (1) make it easier for workers to form labor unions; (2) increase severance and retirement payments for workers with longer tenures; and (3) equalize, for all workers, annual payments under a welfare fund. In addition, the government reportedly plans to add 200 factory inspectors within six months, and to complete a comprehensive safety assessment (extending to fire and structural safety) of all export-oriented garment factories. The government has also been negotiating a new minimum wage for garment workers, who have been protesting against low wages in light of recent inflation. The protesters have sought an increase in the minimum wage from the U.S. equivalent of $38 to $104 per month. Effective December 1, 2013, the Bangladeshi government raised the minimum wage for the country's garment workers by 77% to $68 per month.

ILO

After initial review of the Bangladesh labor law amendments, the ILO stated that the new law "did address some of the ILO's specific concerns, while falling short of several important steps called for by the ILO supervisory system to bring the law into conformity with ratified international labor standards." For example, the ILO noted that major areas remaining to be addressed include (1) a 30% minimum membership requirement to form a union; and (2) the fact that many collective bargaining rights are not extended to workers in export processing zones, which reflect heavy foreign investment.

Additionally, the ILO is participating in: (1) a three-year program on "Improving Working Conditions in the Ready-Made Garment Sector" to support implementation of the NTPA; and (2) the 2013 European Union (EU)-Bangladesh-ILO "Sustainability Compact for Continuous Improvements in Labor Rights and Factory Safety in the Ready-Made Garment and Knitwear Industry in Bangladesh." In addition, on October 22, 2013, the ILO and the World Bank's International Finance Corporation (IFC) announced the establishment of a "Better Work Program" in the ready-made garment sector in Bangladesh. The Better Work Program is a partnership with government, employers, workers, international buyers, and other relevant stakeholders to improve working conditions in the industry and support its long-term competitiveness.

Private Sector

Private sector responses to the Bangladesh tragedy have varied. According to press reports, retailers and some apparel firms have acknowledged their links to unsafe Bangladesh factories, while others have hedged. Another private sector response has been for businesses to debate whether to leave Bangladesh and relocate to countries with fewer high-visibility labor issues, or stay and help solve them in Bangladesh. Some companies, including Disney, as previously mentioned, are considering not sourcing from Bangladesh for a number of reasons, including concerns about their business reputation.

A broader response from many corporations, particularly in Europe, has been to join forces to support change in Bangladesh. After the building collapse, officials from two dozen retailers and apparel companies met with representatives from the German government to try to negotiate a plan to ensure safety at roughly 4,500 garment factories in Bangladesh. On May 13, 2013, several of the world's largest apparel companies agreed to a legally binding "Accord on Fire and Building Safety in Bangladesh" to help pay for fire safety and building improvements there. It requires a five-year commitment from participating retailers to conduct independent safety inspections of factories, and pay up to $500,000 per year toward safety improvements. More than 100 mostly European corporations have signed onto the accord, including Swedish retail giant H&M (the largest producer of apparel in Bangladesh); Inditex, headquartered in Spain; C&A, a Dutch retailer; and Primark and Tesco (British retailers). U.S. signatories include PVH, the parent company of Calvin Klein, Tommy Hilfiger, and Izod, which has signed on to the five-year plan, contributing $2.5 million; and Abercrombie and Fitch.

Other U.S. companies that resisted signing, objecting primarily to the agreement's legally binding nature, have formed a separate group, the "Alliance for Bangladesh Worker Safety." The alliance was organized under the Bipartisan Policy Center (BPC), by former Senate Majority Leader George Mitchell and former Senator Olympia Snowe. Corporate members of the Alliance have pledged over $100 million in capital to support remediation of factories. In addition, $42 million raised for the Worker Safety Fund reflects a tiered fee structure for members based on exports of apparel products from Bangladesh. The group was founded by 17 North American apparel retailers and brands, including Gap, J.C. Penney, Jones, Kohl's, L.L. Bean, Macy's Nordstrom, Sears, Target, VF Corporation, and Wal-Mart. (See Appendix Table A-1 for a comparison of the two plans.)

Issues for Congress

Congressional options relating to the Rana Plaza collapse may cover a range of issues, including allowing the situation to resolve itself. Broadly speaking, Congress may wish to conduct oversight and examine a comprehensive effort by the international community to support change in Bangladesh.

Key questions for Congress include the following:

Is the ILO/World Bank Better Work program an effective approach, and has it been implemented successfully in other countries? How soon should GSP eligibility for Bangladesh be reconsidered? Should tariff benefits for apparel be extended to Bangladesh to support it in improving the safety conditions of its workers? Are there other steps the U.S. government should take? How much progress have the Accord and the Alliance achieved so far in promoting safety workplaces in Bangladesh? Will the ILO be monitoring the implementation of changes to Bangladeshi labor law? What are its current efforts in Bangladesh? What are possible unintended consequences for Bangladeshi apparel workers if action leads to a decline in the apparel industry?

Proposed Amendment to 2014 National Defense Authorization Act

Leading up to passage of the 2014 National Defense Authorization Act, the House bill contained a provision (Sec. 634) that would have required the defense commissary system and the exchange store system to: (a) comply with requirements of the Bangladesh Accord; and (b) in its purchases, give preferences to signatories of the Accord. In addition, the Department of Defense would have been required to notify Congress of garments sold in defense commissaries or exchanges that did not comply with these requirements (i.e., were manufactured by nonsignatories). The final agreement did not include these provisions.

The House sponsors of the amendment noted in a joint statement that garments and documents with U.S. Marine insignia were found in the rubble in the November 2012 Bangladesh Tazreen Fire. Data indicated that the Army-Air Force Exchange, a military retailer, imported 124,000 pounds of garments from several factories in Bangladesh. The sponsors argued that "as a huge purchaser of garments, the U.S. military should not be complicit" in putting the lives of Bangladesh workers at risk.

Appendix.

This appendix compares key provisions of the Bangladesh Accord and the Bangladesh Alliance. Both plans build on Bangladesh's "National Tripartite Action Plan on Fire Safety (NAP) for the Ready-Made Garment Sector in Bangladesh," released in July, 2013. This plan, jointly agreed to by the government of Bangladesh, employer organizations, and worker organizations, with help from the International Labor Organization (ILO), is a consolidation of two earlier tripartite plans. It focuses on legislation and policy, administration, and practical activities to improve safety in apparel factories.

The Accord and the Alliance plans are similar in some regards. Both plans require health and safety committees in all Bangladesh factories that supply companies that are signatories. Both plans require inspections and remediation of hazards, and training of management and workers, in accordance with Bangladeshi law. They differ, however, in their approach to worker protections. Under the Accord, signatories are obligated to require suppliers to extend certain rights to workers, including the right to refuse work they justifiably believe to be unsafe, and the right to a continued employment relationship and income, while the factory is undergoing required safety improvements. Under the Alliance, workers are not given these rights directly. Rather, they are "empowered" to report safety hazards; and 10% of a fund contributed to by the signatories is reserved to support workers temporarily displaced because of factory remediation. Because the programs are still in their early stages of implementation, no reports have yet been issued estimating the effects of either plan.

Stakeholders for the Alliance typically emphasize the similarities between the plans and emphasize their rapid development of protocols. Many stakeholders for the Accord argue that the Accord is a legally binding agreement between companies and trade unions, and includes a central role for workers and worker representatives, including direct trade union participation in factory training. They argue that the Alliance is not legally binding and has no role for trade unions, workers, and worker representatives.