U.S. may strip Bangladesh of tariff breaks

Jason Motlagh/For The Washington Post - Garment workers sew sweaters on the factory floor at Syntex Knitwar in Bangladesh. In a sign of pressure building on Bangladesh to improve its labor conditions, the Obama administration may strip Bangladesh of import breaks.

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The Obama administration may strip Bangladesh of import breaks following deadly accidents in the country’s textile industry, another sign of the pressure building on the Southeast Asian nation to improve labor conditions.

The move was prompted partly by a fire late last year that killed 112 people, and gained momentum after the recent factory collapse that claimed more than 1,100 lives.

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Business, labor and advocacy groups are all struggling over how to respond to the April 24 incident — the worst-ever in the textile industry but an event that could produce meaningful change in a nation on its way to becoming the world’s largest garment exporter.

A group of mostly European nations has signed on to a binding inspection program. U.S. firms such as Wal-Mart have declined, but political backlash may be building. On Thursday, a group of senators wrote to major U.S. retailers urging them to reconsider, and the Obama administration is also debating how to get American firms more constructively engaged.

Such agencies as the Department of Labor and the Office of the U.S. Trade Representative (USTR), meanwhile, are stepping up their efforts. Officials at Labor have agreed to fund a program to improve the Bangladeshi government’s currently weak — and some say corruption-ridden — factory inspection system. The USTR, meanwhile, is moving forward with plans to possibly exclude Bangladesh from import tax breaks given to goods from developing countries unless the country improves labor conditions.

U.S. officials said the decision was made last fall to begin pressuring Bangladesh and the process intensified after the recent incidents.

Requests by labor groups to exclude Bangladesh from tariff breaks have been pending for several years, but the USTR said in documents published in the Federal Register that “the lack of progress by the government of Bangladesh in addressing worker rights issues . . . warrants consideration of possible withdrawal” of benefits.

That has gotten the Dhaka government’s attention. A delegation of top Bangladeshi officials is in Washington this week lobbying to retain the tariff breaks and to convince U.S. leaders in the USTR, Labor and the State Department that they are serious about overhauling local labor laws, prosecuting crimes against labor leaders and making other long-sought changes.

“We reached the conclusion that things were not moving forward and we needed to do something dramatic,” said a U.S. trade official, who was not authorized to speak for the record.

The November fire and last month’s collapse of the Rana Plaza textile center brought into sharp relief one of the core moral questions of globalization: What obligation do the nations that benefit from low-cost goods made in places like Bangladesh have to ensure a safe environment and basic rights for workers? The incidents also highlight the challenge of policing a global economy in which developing nations now absorb massive outside investment each year and corporations rely on ever-more diffuse and distant supply chains to source their goods.

The textile industry, historically, has been prone to problems. It is a sector that thrives on cheap labor and can easily decamp from one country to the next as buyers at such major firms as Target or Spain’s Zara chain seek the lowest-cost suppliers.

The expiration in 2005 of a worldwide quota system, in which developed nations like the United States limited how much in textiles they would import, touched off a global explosion of investment in such places as Bangladesh, a densely populated nation with a per capita income of around $2,000 annually. The country now relies on garment exports for about a fifth of its annual economic output. Complexes with hundreds of warehouse textile shops have sprung up under lax oversight, and a consortium of textile factory owners has developed into a potent political force.

In documents submitted to the USTR, the Bangladeshi government acknowledged its inability to cope, saying the expansion of the textile industry “has outstripped the pace of our progress” in strengthening regulation.

The tariff breaks in question allow Bangladesh to export a wide variety of goods to the United States tax-free; last year that amounted to about $35 million. The breaks do not apply directly to Bangladesh’s textile industry, which sells in excess of $4.5 billion of goods to the United States each year. But analysts say excluding Bangladesh from the Generalized System of Preferences, a nearly 40-year-old program meant to encourage manufacturing in poor countries, would send one of the sharpest signals available — short of cutting off trade altogether or increasing tariffs directly on textiles.

Advocacy groups generally argue against those stark measures, on the grounds that the brunt of the pain falls on workers left jobless by the disruption in trade.

“Bangladesh doesn’t want to lose this for symbolic reasons,” said Kimberly Elliott, a senior fellow at the Center for Global Development. “Cutting off trade doesn’t help anything. They lose 3 to 4 million jobs mostly held by young women who would otherwise be working on farms or having kids as teenagers.”

To avoid sanctions, the Bangladeshi government has promised changes, including signing on to an international program credited with improving working conditions in such places as Cambodia — a step that labor advocates have urged for years as textile employment in Bangladesh surged. The Better Work program, jointly administered by the International Labor Organization and the World Bank, generally trades import or other concessions for monitored improvements in labor conditions.

The plight of workers in Bangladesh has long been a concern — starting with child labor revelations in the 1990s and through the more recent spate of fires and industrial accidents — said Raymond C. Offenheiser, president of Oxfam America and a former Ford Foundation representative in Bangladesh. But for all the problems, the textile industry has also drawn millions of young women into the labor force, allowing them to send money home to village families and probably delaying childbearing and marriage from the early teens — a dramatic cultural shift in the predominantly Muslim nation.

“It has benefited women in a powerful way,” Offenheiser said.

Editor’s Note: A previous version of this story included a sentence referring to the plans of the Office of the U.S. Trade Representative that did not make clear it has not yet decided whether to exclude Bangladesh from import tax breaks. The sentence has been clarified.

 
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