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How to Avoid Another Bangladesh Factory Disaster– Kimberly Elliott
00:23:31
The recent collapse of a factory building in Bangladesh that killed hundreds of people making clothing for export has shined a harsh spotlight on the lack of worker protection in such low-income developing countries. But my guest on this week’s...
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- [00:10]
A
Welcome to the Global Prosperity wonkcast. I'm Lawrence MacDonald. With me in the studio today is Kimberly Elliott. She's a senior fellow here at the center for Global Development. And the topic of our discussion today is a tragedy, the tragedy in Bangladesh where more than 400 people, some reports have said more than 1,000 people died in the collapse of a multi story building in which were located a number of garment factories. Kim, you've worked on worker safety issues and the connections with global trade for some time. What do you make of this tragedy?
- [00:48]
B
Well, it's clearly a horrible tragedy, but it's. I think what's perhaps worst about it is that it's different only in scale from tragedies that happen all too often, particularly in the apparel sector. Because of the nature of the sector, it's very low wage, very low skill, highly mobile, highly competitive. And so the incentives are for factory managers to cut costs as much as they can. The buyers are looking around the world for the lowest prices they can and unfortunately we as consumers I think are incomplete in this because we're looking for the cheapest clothing we can find.
- [01:27]
A
I think that's what has touched me about this is I find myself wondering if I'm wearing something that was made in a place like that. Now, I guess Bangladesh's primary market is Europe, not so much the United States, but I was surprised to find they're the world's second largest apparel maker after China. So the chances are that, you know, our listeners are wearing something made by a Bangladeshi laborer. Pretty high.
- [01:49]
B
It is pretty high. And actually we're, you know, somewhat behind Europe in part because of our trade policy that discriminates against Bangladesh. But it's still, we're still a very large market for Bangladesh and 90% of their exports to the United States are clothing. And it is quite likely that something you're wearing or have worn in the very recent past was made in Bangladesh, particularly if it's, you know, T shirts or jeans.
- [02:17]
A
It seems like there ought to be some leverage that of course consumers want cheap goods that's natural, but they also don't want to feel bloody. They don't want to wear something that was made at the expense of another human being's health or safety. Is there leverage for consumers in this ways that they can bring pressure on companies to pay more to insist on higher standards?
- [02:48]
B
You know, I think certainly they can. They can write to companies. It's hard for them to choose better alternatives right now because we don't have a really, there are very few consumer Labels that tell you anything about the conditions. We, we have fair trade. We talked about this a few weeks ago where, because the supply chains are relatively short, the Fair Trade Organization can certify that a banana or a pound of coffee has been made under good conditions.
- [03:20]
A
And plenty of people are happy to pay a premium for fair trade coffee.
- [03:24]
B
It's still a relatively small market, but at least they have a choice.
- [03:27]
A
More around here in Washington, probably more.
- [03:29]
B
In Washington than in some other places. So that's one problem that consumers cannot directly put their dollars to bear. But they can certainly speak out, they can try and be heard. You know, some, I'm sure there will be some protests in front of some stores that don't respond and they could join in that if they wanted to go that far, I think the worst thing they could do would be to overreact and sort of look for a Bangladesh label and say, I'm not going to buy this at all.
- [03:54]
A
Well, that's what Disney's done. Disney pulled out of Pakistan after that terrible fire that killed 260 plus people. And I gather now they're pulling out of Bangladesh. And I can see why. Disney doesn't want its label to be found in the ruins of these buildings. Its brand is so much about good feeling, good feeling and happiness and stuff. But to withdraw from Bangladesh, that also maybe doesn't do anybody any good.
- [04:19]
B
Well, I think what we can hope in this case is that Disney is a relatively small player in Bangladesh, so that it's sort of a shot across the bow to the industry in Bangladesh, that this is a risk to them if they do not start to improve their own practices. But if all this is 3 million jobs, which is not a huge part of the population, but is a huge part of manufacturing in Bangladesh and in a lot of other countries, it's primarily female workers that are in these factories whose only alternative, I mean, they're taking these jobs by choice. This is, is not forced labor because it's better than any other alternative they have, which in most cases is getting married at 14 or 15 and, you know, starting to have kids, you know, at a very young age when it's not healthy. And so you don't want to lose all those jobs. But we don't want to just ignore the problem. We do want to try and improve things, do whatever we can.
- [05:13]
A
We're going to take our first break. When we come back, I know that in your recent blog post, better Work for Bangladesh with American Help, you propose some solutions and I'm eager to hear about Those this is the Global Prosperity Wonkcast from the center for Global development, I'm Lawrence McDonnell speaking with Kimberly Elliott, senior fellow here at CGD about the terrible factory collapse in Bangladesh. We will be back in a bit. Welcome back to the Wonkcast. Kim, in your blog post better Work from Bangladesh with American Help, you describe a program called Better Work, which, if I remember correctly, is something joint between the International Labor Organization and help me out here. What is Better Work?
- [06:28]
B
The International Finance Corporation of the World.
- [06:31]
A
Bank, the private sector arm of the World Bank. So it's IFC and ilo.
- [06:34]
B
Exactly. And what's interesting about that is the program is really aimed at being a win win. So it's trying to improve labor conditions in factories in the countries where it operates, but it's trying to do it working with governments and with industry and firms in ways that improve the productivity of the firm at the same time that they're proving conditions. The idea being that, you know, healthier, happier, better rested workers are also more productive workers. And so there's partly. So there's training, you know, in human research management for the firms. There's capacity building with the government in terms of their labor inspectorate and then also monitoring of the factories to see that the labor conditions are actually improving. And then the other element is that right now we have this sort of private, voluntary monitoring of corporate codes of conduct in some cases, you know, factories. And you see this with when we have a fire or this building collapse, they go in and find the labels. A single factory is supplying lots of different buyers. Often those buyers each have their own code and monitoring system. And that just kind of piles on costs because they're not always consistent. So it piles more costs onto the factory that they're spending on these audits that they could be spending on improving working conditions.
- [07:57]
A
And we've been hearing you say around cgd, even at our lunch today, people were saying, well, you know, aren't these companies paying for inspectors? You're saying, no, not the companies paying for inspectors. They want the factories to pay the inspectors.
- [08:07]
B
Often they just go in and say, this is our code. We expect you to meet it, and we expect you to show us that you're meeting it. And then the factories actually are the ones that have to go out and pay for the monitors to come in and do the audits. So again, it's costs that are going into. And obviously, I think a lot of those monitoring systems, they vary very much in quality, but overall, they're clearly not solving the problem. They're probably helpful at the margin.
- [08:37]
A
You still have fires, buildings are collapsing.
- [08:40]
B
And you still have a lot of overtime, forced overtime, low wages. You know, those things are not getting fixed by the bombers.
- [08:46]
A
Bad conditions in terms of people's respiratory systems as well and light and air.
- [08:49]
B
All kinds of health conditions. This is again, the building collapse is sort of very tragic because it's so big and hundreds of lives lost and at one time, but exactly. Exposure to dust or to, you know, to various other kinds of toxic chemicals. Those things sort of erode people's health and well being over time and are just not as visible. So the idea of the Better Work Program is to work with all of the stakeholders. And what I started to say about the buyers is that they agree to use the monitoring reports out of this better work program rather than all having their own individual program. So that kind of helps to save costs and time for the factories as well.
- [09:32]
A
Your blog cites an example of a better work program in Cambodia. Can you tell us something about that? It sounds from my reading like it's working reasonably well.
- [09:41]
B
I think it's again, it has helped. It has not solved all of the problems. It's kind of an interesting case because an ILO monitoring program was set up actually back in the 1990s when Cambodia first got access to the US market. And the US said we will give, we had this whole global system of quotas that regulated international apparel trade. The US said to Cambodia, if you will accept a monitoring program and improve your labor standards, we'll give you additional access to our market. And Cambodia, very interestingly, when this quota system expired in 2005, said, you know what, we want to continue this program because we think that this is a good marketing that to be able to say to brand name buyers, you know, if you come here, you know that we have this monitoring and you have less chance of having a scandal. And so there are indicators that we have a couple of papers on our website by Raymond Robertson, sort of who's gotten access to the data out of these monitoring programs. And it does look like there's some improvements now, as I said, there's still many, many problems in Cambodia, but at least it seems to be helping. And Cambodia has not suffered competitively. It's also, you know, one of the largest exporters of apparel globally.
- [10:57]
A
And is the Cambodian Better Work Program one of these joint ILO ifc?
- [11:02]
B
It is now. So it has transformed into that program.
- [11:07]
A
And is it the case then that the ILO is sort of looking after worker well being and the IFC is looking after productivity. I mean, that's how we would imagine.
- [11:13]
B
That's kind of the comparative.
- [11:15]
A
Right.
- [11:16]
B
That's what they're each trying to bring to the process. Right.
- [11:19]
A
Do you know are there other countries that have these better work programs?
- [11:22]
B
There are several that are getting in place. Haiti actually has had one for a couple of years. That was a condition of the US Congress when we extended preferences both before and then again after the earthquake. Lesotho, Vietnam is just getting started with the program. Jordan has a program that arose out of escape scandal there in their sector several years ago in their garment sector. And Nicaragua I believe has one. There may be a couple I'm missing, but it's starting to spread. It's a very interesting, it's a very interesting model.
- [11:53]
A
I think we're going to take our second break. When we come back, I want to hear about the leverage that US Firms and consumers and ultimately the American government might have to get Bangladesh to sign up for a better work program. This is the Global Prosperity Wonkast from the center for Global development. I'm Lawrence MacDonald. We'll be back in, in a moment. Welcome back to the Global Prosperity Wonkast. I'm speaking with Kimberly Elliott, a senior fellow here at the center for Global Development. We're talking about this really horrible building collapse in Bangladesh in which many hundreds of years people have lost their lives and what might be done from the standpoint of the buyers, consumers like you and me, the companies that buy the stuff and sell it to us, and ultimately the US Government to try and improve the situation. Kim, you were telling me about the better work program and you have, I think, a novel suggestion in your blog about a trade off. What's the trade that you're proposing?
- [13:36]
B
Well, right now the US has something called the generalized system of preferences that gives duty free access to imports from developing countries. But apparel is clothing is excluded from that program. We have better preferences for African exporters.
- [13:54]
A
Under the African Growth and Opportunity agoa.
- [13:57]
B
Exactly. That includes apparel. But and we have, I mentioned that there's a special program for Haiti that includes some additional access for apparel. But There are about 14 or 15 Asian least developed countries that don't have really much access to the US market because it excludes apparel. Something like 90% of Bangladesh's exports to the US are clothing. They don't get any preferences. So and because clothing is one of the more highly protected protected products in the US tariff system, they pay an average tariff of 15% versus 2 or 3% for our European trading partners for Example, So there's a big carrot there. The US is currently reviewing Bangladesh's Generalized System of Preferences eligibility because of a complaint from the AFL CIO over its labor practices. But of course that's only $20 million. And it's not clothing, so it's not really the sector. I mean there are other sectors that have problems with working conditions, but this doesn't really get directly to the problem. So my proposal was to offer Bangladesh and the other Asian LDCs duty free quota free access to the US market contingent on taking some serious steps, something like perhaps some signing up for a better work program in exchange for getting that duty free access.
- [15:23]
A
It seems kind of like a no brainer. It seems like a good idea. I was interested because I hadn't known in our discussion in the previous segment that that's similar to what happened in Cambodia. They wanted the additional quota. The US said we'll give you the quota, which is a form of market access if you take steps to improve worker conditions. Individual firms, I guess find it very difficult to do that because they're all competing against each other. But if it's a national effort and it's across the board and the inspections and the certification are being done jointly, you can lower some of the costs of the enforcement, improve the quality of the enforcement and perhaps prevent some of the worst abuses.
- [16:04]
B
Exactly. And of course if it's tied to the duty free quota free, then they're getting, you know, on average a 15% reduction in their cost by not having to pay the tariff.
- [16:14]
A
Do you see the big firms that, you know, it's really a public relations disaster if your label is found in the rubble of a place like this. Do you see those big firms like, you know, Gap and Disney potentially coming around a proposal like this to say that we're interested? It also seems like it's good business for them because it, you know, then they can import these things at lower cost.
- [16:37]
B
Oh, I mean I think the, the brands, the firms, the buyers would go for that deal in a minute. The problem unfortunately is more with the US government has not been willing to offer the duty free quota free access even though they've. The rest of the world, the rest of the rich world has pretty much already done that. Europe under the everything but arms. Canada has its own program. Japan offers duty free quota free on most, about 98% of its imports from developing countries. And the US mainly because it's not willing to take on our textile industry, has not been willing to go there. And it's exactly Bangladesh and to a lesser degree, Cambodia increased imports from those countries that are blocking that initiative.
- [17:30]
A
And I guess although it seems like a no brainer to me from a policy point of view, the timing and the optics are potentially bad because the simple view would be this bad country with its crappy conditions, you know, we shouldn't be supporting them, let's not invest, let's not buy their products. Although I don't know, that seems like punishing the innocent as well.
- [17:55]
B
Well, it's punishing the innocent. And again, I think, you know, at this stage, in reality, whatever you think about the substance, the additional access is not going to be offered without some conditions linked to improving the labor. So that's my proposal is that you actually use that leverage. We should be doing duty free, quota free anyway. But I think in this case you can use it as a lever to try and improve things in Bangladesh. And you know, and just as a kind of a side benefit, in my view, it would also help to contribute to revitalizing the World Trade Organization. They're going to be having a big meeting at the end of the year and duty free, quota free is one of the things that the rest of the world is looking to the United States to contribute. So I mean, there are many ways that I think this would serve US Interests.
- [18:45]
A
Where would the impetus for something like that come from in the United States polity and also within the government?
- [18:54]
B
Well, certainly I would, you know, you could get leadership on it. I would like to see more leadership on it from President Obama and the U.S. trade Representative. Ultimately Congress, though, would have to write legislation to actually implement it. So. And Congress could also take the. They need not wait for the administration to ask for it. They could do this. They could initiate it themselves.
- [19:17]
A
And do you see, is there a consumer movement? I was looking on Facebook to try and see if there were people signing petitions or. And mostly what I could find were news reports, but I didn't spend a lot of time looking. Is there a sort of consumer effort to say, you know, we don't want to be complicit in this anymore, we're looking for a way to be better?
- [19:40]
B
I haven't really seen it and unfortunately, at least the quotes that you read in those newspaper articles are more around. Well, I really feel bad but you know, the clothing at this store is really cheap and so I can buy more stuff. So, you know, there are certainly groups and some consumers that are going to be out there whether it's enough to really make a difference. We will see.
- [20:04]
A
We did have the movement a few years ago. I imagine it's still going. But it came to my attention a few years ago for Logo branded University where the students were saying we want it to be sweatshop free. So there is that little piece of it there around sort of the prestige brands at the bigger schools.
- [20:23]
B
And I don't know how many schools are now the Worker Rights Consortium is active on a number of campuses and is making improvements in labor continuing conditions, a condition for licensing of a lot of apparel items and other items on a lot of campuses.
- [20:44]
A
So would this sort of be a bit parallel to the free trade movement in coffee where people say we don't want to be complicit in something that we don't approve of?
- [20:52]
B
I mean, the universities are licensing so they have that kind of leverage that you simply can't produce it without the license. So perhaps it provides a little extra leverage over things.
- [21:05]
A
Well, it's a terrible thing. And as you point out in the blog, as long as apparel is so low wage and low capital intensive, it's sort of the bottom rung in industrialization, highly mobile. There's going to continue to be problems and I appreciate your work on it and your creative solution to it. Let's hope that they gain some traction.
- [21:27]
B
I hope so.
- [21:30]
A
Thank you very much for being on the show. This has been the Global Prosperity Wonkcast from the center for Global Development. My guest today is Kimberly Elliott, senior fellow here at cgd and we've been talking about the terrible building collapse of the garment factories in Bangladesh. You can find the Wonkast online on itunes and on Stitcher. Just search for wonkcast or CGD and subscribe to hear a new interview every week. Until next time, I'm Lawrence MacDonald. Thanks for listening.
- [22:18]
B
Sam.