Industry, Government Debate Revoking Bangladesh's GSP Benefits; USTR Will Announce Its Recommendation in June

Democratic lawmakers -- including the Foreign Relations Chairman and House Ways and Means leaders -- said they support GSP suspension or alteration for Bangladesh, in light of April’s devastating Rana Plaza factory collapse, which killed more than 1,000 people, and the Tazreen factory fire in November which killed more than 100.

Besides serving as a warning for Bangladesh, the suspension would show other countries the U.S. is serious about labor rights, said Committee Chairman Robert Menendez, D-N.J. “When you basically have a very limited opportunity, an opportunity to send a clear message, why not suspend the GSP benefits here as a global message?”

Lewis Karesh, assistant USTR for labor, said that “all options remain under consideration” when it comes to Bangladesh’s GSP benefits. The agency received a petition from the AFL-CIO to review the country’s worker’s rights in 2007; one of the GSP eligibility criteria is to give internationally recognized worker’s rights to in-country workers. The AFL-CIO petition alleged health and safety issues, limited right to freedom of association and collective bargaining and violence against workers, said AFL-CIO Trade Policy Specialist Celeste Drake.

The USTR has "taken and continue[s] to take these violations very seriously,” said Karesh. The agency began working with all stakeholders to address AFL-CIO concerns even before the 2007 petition was filed. While U.S. officials have been “explicit” with Bangladesh’s government about the importance of worker’s rights, beginning in late 2012 the situation in the country worsened enough to warrant consideration of GSP suspension or withdrawal, Karesh said. “Recently our feeling has been we have not seen sustained and meaningful progress. In some areas there seems to be a deterioration,” Karesh said, adding that Rana Plaza and Tazreen only served to reinforce those concerns. The USTR issued a Federal Register notice about this in January and held a public hearing in March. USTR will present its recommendation to President Obama by the end of June, Karesh said. Then it is left to the President to decide what action to take.

Both Menendez and Drake, however, said the seven-year gap between the petition filing and USTR’s recommendation is far too long. “The time for granting the benefit of the doubt [to Bangladesh] has passed,” Drake said. “Workers have paid for U.S. patience with their lives.”

Bangladesh’s exports under GSP are less than 1 percent of their gross domestic product, Karesh said. While it is not common for country’s GSP status to be revoked, it has happened before: Karesh rattled off a list of 10 countries, including Nicaragua, Syria and Belarus, with revoked GSP benefits. USTR is currently reviewing whether to restore benefits to Myanmar (Burma), which lost them in 1989 over labor issues.

There are only a limited number of products that can enter duty-free through GSP -- textiles are not covered, which cuts out Bangladesh’s ready-made garment industry, its biggest export and the industry behind the Rana Plaza tragedy. Yet revoking GSP would still have a very big impact, witnesses said.

“If that decision were made, it is a serious decision, it is a Presidential-level decision,” Karesh said. “We believe Bangladesh understands it would send a significant message with regard to doing business in [the country].”

GSP withdrawal is symbolically important, and could potentially impact the European Union’s decision on Bangladesh’s duty-free status there, said Robert Blake, assistant secretary of state for South and Central Asian affairs. And in instances where countries have lost GSP, the action has “absolutely” proven to get the country’s attention, Karesh said.

Committee member Sen. John McCain, R-Ariz., worried that suspending GSP could lead to significant unemployment in Bangladesh, which could ultimately harm the country the U.S. is trying to help. “Seems to me that suspension might be the last bullet to shoot rather than the first,” McCain said.

Karesh agreed that revoking GSP is a step USTR would never take lightly. Solving labor problems in Bangladesh -- and preventing further tragedies -- requires a “comprehensive” solution, of which GSP is but one tool for leverage, he said.

AFL-CIO’s Drake, however, said concerns about mass unemployment are “simply unfounded,” given GSP’s minuscule effect on Bangladesh’s exports. The options for Bangladesh shouldn’t be “no jobs or really terrible jobs with awful conditions and no rights,” she said. “There’s something in between. And it requires government action.”

Garment Industry Takes Action, Develops Competing Fire and Safety Plans

The private textile industry is also taking action. A group of 40 clothing companies, mostly European brands, signed onto a May 12 Accord on Fire and Building Safety, developed by the International Labor Organization and IndustriALL Global Union (here). It requires signatories to develop, finance and implement a fire and safety building program in Bangladesh for five years. The IndustriALL accord includes a provision for an independent safety inspector, and requires companies to compensate employees should factories close for safety renovations. Only three U.S. companies have signed on thus far: Abercrombie & Fitch, Sean John and PVH, the parent company of Calvin Klein and Tommy Hilfiger.

A group of American and Canadian companies announced at the end of May they were building their own fire and safety accord, spearheaded by the Bipartisan Policy Center (here). The American Apparel & Footwear Association, National Retail Federation, Retail Industry Leaders Association, and the Retail Council of Canada have all signed on to help craft the accord. Johan Lubbe, international labor and employment partner at Littler Mendelson in New York, said at the hearing that American brands had concerns over the liability and arbitration sections in IndustriALL.

It should not be viewed as the “sole response” to solving the problems in Bangladesh, said Lubbe, who advises the NRF, AAFA, RILA and the U.S. Association of Importers of Textiles and Apparel. IndustriALL includes “vague” terms which potentially hold “unlimited legal liability,” he said. The way the agreement is written, legal action can be brought against parties by entities that have not signed onto IndustriALL, Lubbe said. The agreement also uses interest arbitration to set price determination, which is a “real concern,” he said.

Lubbe said the U.S.-Canadian group has scheduled regular meetings throughout June and will have their version of the accord ready by early July. Their fire and safety plan is a “work in progress that is receiving high priority in the industry,” and will build off the “extensive” corporate compliance work U.S. and Canadian companies have done in the past, he said.

Drake and Menendez both questioned the merits of having two separate accords Bangladeshi workers will have to live by. Multiple brands often source from the same factory, meaning a worker could be producing clothes for H&M -- an IndustriALL signee -- in the morning and Wal-Mart in the afternoon, Drake said.

Relying on corporate compliance programs is also not enough, she said. Companies like Wal-Mart have operated in Bangladesh for decades, been aware of the systematic labor and health problems for decades, and yet compliance programs have not prevented tragedies, Drake said. The U.S.-Canada plan sounds good, but if it results in more corporate-directed actions that don’t give workers the “opportunity to stand up for themselves” it will be useless, she said.

Government officials at the hearing said they support U.S. company efforts to craft fire and safety regulations for Bangladesh. “We’ve encouraged them to come up with an agreement they can all coalesce around, [that’s] also consistent with the IndustriALL report,” to prevent a “jumble of standards,” said State Department’s Blake.

Officials also stressed the important role the private sector can and should play in enforcing worker’s rights. Governments and international groups are taking action: USTR has proposed to establish a U.S.-Bangladesh Trade and Cooperation Framework Agreement, and is waiting on Bangladesh’s response, Karesh said. The International Labor Organization is also working with Bangladesh’s parliament to pass worker rights provisions, Blake said.

But the private sector, including buyers and the powerful Bangladesh Garment Manufacturers and Exporters Association -- which controls all garment export licenses in the country -- “have a key role to play,” Blake said. They should support independent factory inspectors, anti-corruption efforts and general worker’s rights, government officials said.

If they don’t, “there can be no success,” Menendez said. “No one will want to wear a piece of clothing made in Bangladesh if it’s on the blood of workers. Those brands will go down the tube. It’s only a matter of time.” -- Jessica Arriens