Speaking on behalf of several U.S. retail and apparel industry trade associations, Littler Shareholder Johan Lubbe testified before the Senate Foreign Relations Committee on Thursday about efforts to address worker safety conditions in Bangladesh. The hearing was held to discuss the national and international response to recent industrial accidents in Bangladesh, including the Rana Plaza garment factory collapse that killed more than 1,000 workers this year, and the Tazreen factory fire that killed more than 100 workers in 2012.

During the hearing Lubbe explained the reasons why the retail garment industry in the United States and Canada have declined to sign on to a safety accord developed by the IndustriALL Global Union and UNI Global Union, and are instead forming their own coalition to tackle international safety issues. According to Lubbe, the issues facing retail apparel companies that do business in Bangladesh “are extremely complex and systemic” and do not lend themselves to a simple “one-size-fits-all” solution. Said Lubbe: “Any solution requires that all stakeholders work together to develop a system wide solution that will not only provide a long-term and sustainable solution to ensure worker safety in the Bangladesh garment industry, but will also maintain the viability of the country as a key manufacturer and supplier to markets around the world.” 

Lubbe explained the many hurdles to conducting business in Bangladesh. First and foremost, he claimed, “is the Bangladeshi government itself” which is reportedly corrupt and financially involved in the factories themselves. In addition, the infrastructure and lack of enforcement of building codes, among other problems, are not what they should be.

Following the Rana Plaza collapse, several U.S. and European retailers as well as the IndustriALL Global Union met to finalize an Action Plan for fire and building safety in Bangladesh. At this meeting, IndustriALL wound up drafting its own set of principles, which it labeled the “Accord on Fire and Building Safety in Bangladesh,” and gave companies two days in which to sign. Among other provisions, the Accord “requires a five-year commitment from participating retailers to conduct independent safety inspections of factories, and pay up to $500,000 per year toward operational costs,” Lubbe testified. Although many European retailers have agreed to the Accord, only three U.S. companies have signed on.

When asked why U.S. retail support for the Accord is lacking, Lubbe stated “while U.S. retailers share IndustriALL's goal to improve worker safety in Bangladesh and to make tangible progress on the ground, U.S. retailers cannot in good conscience sign the Accord because the current language presents potentially unlimited legal liability given its vague and ambiguous terms.” Lubbe’s concerns include the fact that the Accord “creates legal enforceable obligations, but what is enforceable is vague and uncertain. The obligations are described in broad vague terms and it is left to arbitration to resolve disputes.” He noted also that it “shifts some of the basic government regulatory functions, such as inspections, onto the retailers.” In addition, the agreement’s arbitration provisions effectively permit third parties to set garment prices. Lubbe concluded that the Accord is not the “sole response and solution to the situation in Bangladesh.”

In response to Sen. Tim Kaine’s (D-VA) question as to why European companies do not share the same problems with the Accord, Lubbe explained that European retailers do not function in the same litigious environment as do companies in the U.S. Lubbe said that the binding contract that is the Accord would “become a basis for litigation,” and that “with demise of the Alien Tort Statute,” litigants would find ways to sue companies in the U.S. for actions occurring abroad. Lubbe noted also that Europeans operate under a system with a more institutionalized partnership with trade unions.

Lubbe concluded that there is a strong need for shared responsibility that will include all stakeholders, and that the U.S. retail apparel industry is committed to improving working and safety conditions abroad. To that end, Lubbe explained that the U.S. and Canadian retail and apparel industry has formed an alliance to develop “a single, unified action plan” that will “achieve immediate, sustainable, effective and long-lasting change for the garment industry and its workers in Bangladesh.” Lubbe noted that the U.S. and Canadian effort is “a work in progress,” but that a comprehensive plan will be available in July 2013.

Suspension of GSP

During the hearing several lawmakers as well as panelists advocated for the suspension or withdrawal of Bangladesh’s Generalized System of Preferences (GSP). The GSP is a program “designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.” Notably, the AFL-CIO has issued a petition in 2007 to limit or withdraw the country’s GSP benefits.

Sen. Kaine asked Lubbe whether withdrawing the GSP “might send the reputational signal that the government is serious” about the worker safer conditions in Bangladesh. Lubbe said that the apparel industry will support whatever the government decides, but is concerned about the potential unemployment that might result.

Sen. Robert Menendez (D-NJ) appeared to be a proponent of suspending GSP, saying “we have been sabre rattling. . . . When do we go from sabre rattling to some action?”

Lewis Karesh, Assistant U.S. Trade Representative for Labor, said that his office will make a recommendation regarding the GSP issue to the White House by the end of June. He said that suspending GSP would provide the U.S. with leverage to force changes to health and safety standards in Bangladesh. Karesh claimed that among other serious concerns are the “pattern of harassment” of unionists and the infringement on freedom of association and collective bargaining.

Echoing this sentiment was Robert Blake, Assistant Secretary of State for South and Central Asian Affairs with the U.S. State Department, who claimed that “had there been a union representative on the ground at Rana Plaza, that tragedy would not have happened.” He noted that following the building collapse 27 trade unions have registered in Bangladesh. Suspending GSP “would send significant signal,” he claimed, adding that the European Union could follow suit.

Eric Biel, Acting Associate Deputy Undersecretary for International Affairs with the Department of Labor’s Bureau of International Labor Affairs, stressed the role of the private sector in preventing these tragedies. He said that the goal is to work with the government, workers, and other interested parties to ensure job creation “goes hand in hand” with worker rights and increased safety.

An archived webcast of the hearing and links to panelists’ testimony will be made available here.