By Bangladesh Chronicle staff
Senate- Foreign Relations
Labor Issues in Bangladesh
Thursday, June 6, 2013 – 10:30 AM – 419 Dirksen
Witness List
Panel One
Mr. Lewis Karesh
Assistant U.S. Trade Representative for Labor
Office of the U.S. Trade Representative
Washington, DC
Highlights
– Bangladesh is an important trade partner of the United States. And we have a strong and growing trade relationship. We, the United States, are the largest, single-country market for Bangladesh’s chief export of apparel products.
– One of the ways we are seeking to strengthen that trade relationship is through a regular mechanism for dialogue and cooperation. In this regard, we have proposed to establish a U.S.- Bangladesh Trade and Investment Cooperation Framework Agreement, and are awaiting Bangladesh’s response to that request.
– Despite our many efforts with Bangladesh, beginning in late 2012, we grew increasingly concerned that the worker-rights situation was in fact deteriorating. We concluded that the situation warranted consideration of possible withdrawal, suspension, or limitation of Bangladesh’s trade benefits under GSP.
– The GSP review has given us a much better understanding of the range of labor issues workers face in Bangladesh, and provides a specific mechanism to engage the government. The administration will announce a decision on next steps in the GSP review of Bangladesh by the end of June. All options remain under consideration, including possible suspension, limitation or withdrawal of GSP benefits.
The Honorable Robert Blake
Assistant Secretary of State for South and Central Asian Affairs
U.S. Department of State
Washington, DC
Highlights
– We believe three key reforms are particularly important to improving labor rights and conditions in Bangladesh; guaranteeing workers’ rights to organize, guaranteeing fire safety, and ensuring structural soundness of factories and other facilities.
– Secretary Kerry urged Bangladesh to make transformative and sustainable improvements in worker rights and working conditions. He pressed for further labor union registrations and the enactment of amendments to the labor law that will address freedom of association and worker safety.
– We are seeing some results of our advocacy; 27 trade union registered since September of 2012, the signing of a comprehensive fire-safety plan, and a Bangladeshi commitment to dramatically increase the number of government labor inspectors.
– Last week, Ambassador Mozena met with leaders in a recently- formed union in the garment industry, one of the 27 unions that I mentioned. These workers highlighted their successful efforts since forming the union to improve factory floor conditions such as obtaining potable water, a clean lunchroom, the removal of electrical hazards, and the unblocking of exit stairwells. Their efforts show the potential for a broader sea change in Bangladesh’s approach to labor issues.
Mr. Eric Biel
Acting Associate Deputy Undersecretary for International Affairs
Bureau of International Labor Affairs, Department of Labor
Washington, DC
Highlights
– We’ve also pressed on a number of other labor-rights concerns, includingthe investigation of the murder some 14 months ago of labor organizer, Aminul Islam.
– The Department of Labor is prepared and ready to play a direct role in helping to address these fire and building safety concerns, and other workers’ rights concerns that were illustrated so dramatically and tragically by the Tazreen fire and the Rana Plaza building collapse.
– We have crafted a detailed plan to provide funding to one or more grantees to help strengthen the capacity of both the government of Bangladesh and workers’ organizations within the country to improve fire and building safety in the readymade-garment sector as part of our overall technical assistance programs.
– Buyers and retailers need to play a more active role in addressing labor concerns in their supply chains
Panel Two
Ms. Celeste Drake
Trade Policy Specialist
American Federation of Labor and Congress of Industrial Organizations
Washington, DC
Highlights
– Bangladesh’s labor practices and working conditions have been an issue for more than 20 years. And yet recent tragedies at Rana Plaza and Tazreen Fashions leave no doubt that the current approach is an abject failure.
– Thefirst step in the path forward is for all clothing brands sourcing in Bangladesh to sign the binding accord on fire and building safety. This accord will ensure that factories become safer, brands provide their fair share, and workers can advocate on their own behalves, free from retribution.
– About 60 percent of Bangladesh’s factories are at risk of collapse and that two of the four worst factories in the history of the garment industry happened in Bangladesh in the last seven months
– The administration must act to withdraw or limit Bangladesh’s GSP benefits until the government has taken meaningful, concrete and measurable steps to ensure its workers can exercise their internationally recognized labor rights, including the rights of freedom of association, collective bargaining and acceptable conditions of work.
Mr. Johan Lubbe
International Labor and Employment Partner
Littler Mendelson, P.C.
New York, NY
Highlights
– Bangladesh is a difficult place to conduct international business. First, the deficiency in infrastructure, including the structural integrity of buildings, as well as issues with electricity grid and water availability.
– Second is the challenge of the enforcement of building codes. The country has a set of codes and certificate requirements, which have not been enforced as they should be. The Rana Plaza building collapse only reinforces the need for the enforcement of current codes and an examination of whether the codes need to be updated.
– Third is the Bangladeshi government itself. There are many reports about rampant corruption within the government which need to be address. Protection of workers’ rights has been lacking. The government has signaled a move forward in this regard, and that is supported by the industry.
– The IndustriALL Accord should not be viewed as the sole response and solution to the situation in Bangladesh. The U.S. and Canadian companies have come together in an alliance to develop a single, unified action plan, as they believe will achieve immediate, sustainable, effective and long-lasting change to the garment industry and its workers in Bangladesh.
Hearing Summary
The Senate Committee on Foreign Relations holds a hearing regarding Labor Issues in Bangladesh.
Opening Statements
Chairman Robert Menendez
Highlights
– The tragedy at Rana Plaza, the deadliest accident of the global apparel industry, should be a wake-up call for all of us.
– Bangladesh is a moderate Muslim majority democracy; a trade partner with annual flows topping $6 billion and supporting 10,000 American jobs.
– What happens in Bangladesh will have a dramatic ripple effect on the global apparel industry. A change in working conditions there has the potential to change conditions for workers everywhere.
– Labor is cheaper in Bangladesh, the regulatory process is more flexible in Bangladesh, hours, working conditions and building safety concerns clearly are less cumbersome in Bangladesh, and that means products are cheaper and profit margins are higher.
– The Bangladeshi apparel industry now employs about 4 million, at least 80 percent of whom are women. It finances the government and influences its politics.
– Today, with the Rana Plaza collapse that killed at least 1,127 and the Tazreen Factory fire in November which killed at least 112 workers in conditions similar to the Triangle Shirtwaist Factory fire and 44 more factory fires since, the brands made in Bangladesh are in jeopardy.
– A recent survey by Bangladeshi engineers found that 60 percent of the factories it inspected are vulnerable to collapse.
Ranking Member Bob Corker
Highlights
– The most important objective that we can accomplish today is to determine how all the stakeholders can figure out a way of moving ahead in a way that’s far more safe and keeps this kind of thing from happening again.
– Stakeholders include the government of Bangladesh, the unions, the workers, the U.S., the E.U. and many other governments, but, also, the garment industry, factory owners and others.
Question and Answer: Summary
Panel One
MENENDEZ: Mr. Karesh, you said that we have been very explicit about what we think needs to be done. And obviously on freedom of association it’s pretty clear that if the workers of Rana Plaza had the right to associate, they very well might not have been forced to work in an unsafe building and they would not have died. So in my mind the question is when do we go from saber-rattling to some action? Because while we have seen some movement in laws that have been proposed and/or passed, we have seen very little, if any, enforcement at the end of the day. So the question is how many more people have to die before we decide that, in fact, that is not something that we can morally sustain?
BLAKE: I think there has been some action in terms of 27 new unions registered, in terms of the new fire safety plan, in terms of quite substantial progress on these labor law amendments, which we do — which we’ve been assured by the government of Bangladesh will be passed by the end of this month. But we’re also working with all the buyers and with BGMEA, the Bangladesh Garment Manufactures & Exporters Association. Because they, too, have a very important role to play in terms of hiring new inspectors, both on the fire safety side and on the structural soundness side.
MENENDEZ: So Mr. Karesh, why not, when basically you have a very limited opportunity in terms of maybe the impact on Bangladesh, but an opportunity to send a very clear message — why not suspend the GSP benefits here as a global message? Because it’s not about having manufacturers leave Bangladesh to the next lowest priced place. That doesn’t accomplish the goal. The question is how do we send a message and work to create a universal standard that at the end of the day can allow Bangladesh to continue to thrive but to make sure that it is not done on the death of individuals who work for these industries?
KARESH: I think you’ve hit on the key question that we are facing ourselves right now. GSP offers one mechanism to engage countries and we are currently reviewing that, as I expressed, because we have concerns about whether it has been continued progress. We have recently become more concerned that that has not been sustained improvement in addressing of these issues. What we searched for is what is the best way to achieve the result that I think we all want to achieve, which is safer work places where workers can exercise their rights and where they can go to work and come home from work safe and healthy.
MENENDEZ: What they send under GSP is less than 1 percent of GDP for them, right?
KARESH: Less than 1 percent of their exports to the United States, that is correct, sir.
MENENDEZ: So while not an insignificant action, the damage is relatively small. The message, however, universally is very strong. Mr. Biel, let me ask you, why is it that only a handful of American retailers are signed on, but the Europeans have largely signed on to the All Accord? But only Disney so far has stated that it will no longer source from Bangladesh. 41 companies have signed on to the Industrial All Accord on fire safety and building improvements, which is hailed by labor and consumer groups as a major breakthrough, since global brands have often sought to deflect any direct responsibility over problems.
BIEL: As you mentioned, only three U.S.-based companies, PBH, which was the very first to sign on sometime ago, and more recently two additional ones, as you mentioned, have signed on. But that’s a small number compared to the number from Europe. They’ve outlined, included in the written testimony, their legal and policy reasons, and of course the AFL-CIO has outlined a very different account of it. And we’ve talked to all parties concerned. I think…
MENENDEZ: Are the Europeans less astute about legal liability?
BIEL: Not that we’re aware of. Nor are the three American companies that did sign on. What we are hoping to do, as my written testimony reflects, is indicate that we see a process forward, and I speak for the Department of Labor in this regard, as needing to be a bit of game-changer, not just for the government of Bangladesh in terms if discussing your previous question about the need for greater enforcement mechanisms, greater capacity, the small number of labor inspectors, the fact that — the fact that there is so little oversight on capacity to do the kind of work, not just on fire and building safety, but on broader workers’ rights concerns.But in addition there needs to be a real partnership with the private sector that frankly has been less than robust to date. The last thing I’ll say is the Accord itself is still being implemented. There’s a 45-day period that began in late May for putting additional details in place. And so our hope is, as some of those details become clear, maybe some of the concerns will be obviated and there will be more momentum for additional brands to sign on. But again, that’ll have to be their own determination.
MENENDEZ: Well, for the purposes of this governmental panel, let me just tell you I can assure you that this is not going to go away gently into that good night with one hearing.
CORKER: Let’s talk a little bit about the government of Bangladesh. I think all of us have heard the story of the person who showed up, the inspector, the day before at the particular facility we’re talking about, talking about the fact that it was unsafe. He was turned away and the building later collapsed, 11,000 people died. I know we’re talking here about regulations and rules. I’m just curious about what kind of regulations and rules already exist and is not a question of those — it sounds like to me it maybe is more of a question of maybe those being enforced in the country where this is occurring. And I’m just wondering if one of you all might respond to that.
BIEL: I think it’s a combination of the laws on the books and the lack of enforcement. There are some shortcomings in the laws themselves. So on the legal side there’s some signs of progress, although I would also note, and again, this is referenced in the testimony, that the export processing zones are subject to an entirely separate set of provisions, not part of that same labor code. And that’s why that’s been a particular area of concern, because there’s vast discretion in that area and a lot of — you don’t have the same kind of union structure in that area.So there are some legal gaps, some that are on the way to being remedied, others that remain a ways away.But in addition, there’s the enforcement. Currently, given the size of the sector, the fact that you’ve got only a double-digit number of labor inspectors, is something that’s an obvious shortcoming. Because, in connection with the ILO road map announced at the beginning of May, that number will grow to 200, and there should be budget to get it up to 800 before too long. That’s still not a vast number, but it’s almost a ten-fold increase.
BLAKE: I think the Rana Plaza tragedy really underlined the number of failings that now exist. One, there was a management failure on the part of the management of that factory, which of course ordered those workers back in when they knew full well that there were cracks in the building. Secondly, it underlined the need for independent unions. Had there been an independent union representative at that facility at that time, they would have ordered the evacuation of those workers. Third, I think it underlined the immense governance challenges that still exist in Bangladesh. This building was built on unstable land. There were two floors that were added illegally. So there’s a great deal of corruption and governance challenges that still need to be met. And fourth, as my colleague said, it underlines the need for much greater and more capable inspections, not just by government inspectors, but by independent inspectors who can hopefully reinforce whatever the work is being done by the government.
CORKER: Mr. Biel, could you tell us a little bit about what those characteristics may be to your knowledge as far as what the U.S. companies are planning to do. Again, it’s my understanding that they’ve committed to some June 30 deadline. I think all of us would look with anticipation to what that is and maybe you could give us a little preview?
BIEL: My preview will be fairly sketchy, I’m afraid, in that it’s only been about a week since we first heard of the unification of a number of U.S. brands and trade associations around what’s now being coordinated by the Bipartisan Policy Center and former Senators Mitchell and Snowe. The Accord has been in place for a couple of years. There were only two companies, and then three that were participants in it until recently when the momentum in recent weeks, including post Rana Plaza, led some three dozen additional ones to come onboard. In the next few weeks, if not the next few days, there will be an opportunity perhaps to compare and contrast two different models as you learn more about how the Accord is being implemented and perhaps learn what this initiative that’s brand new involves.
CASEY: Assistant Secretary Blake, I wanted to ask just one question and I’ll submit a number of other questions for the record. It’s one of capacity, if you can assess — and I know you’ve spoken to this in one way or another in your testimony and other ways — but the capacity of the government of Bangladesh to provide enforcement of existing rules, but then also the capacity, in terms of reform and making the improvements we think are vitally necessary. Just in terms of capacity, if you can just address that?
BLAKE: Thank you, Senator. I think when you talk about capacity, you talk about both — are there sufficient numbers of inspectors, but then, also, even more critically, is there the will to actually enforce these things? And I think that we’re making significant efforts and the government is making significant efforts to hire the necessary number of inspectors. And we’re also encouraging, again, a parallel industrial effort on the part of the buyers and BGMEA, so that they will have their own coterie of independent inspectors, as well. Because we think that’s very, very important. But then there’s the question of governance. And that’s something that Bangladesh really needs to take ownership on. And again, I think that’s where there’s the most — in many ways, the most significant challenges. To ensure that the sort of culture of corruption that has persisted for so long is finally brought to end and that there are serious efforts at remediation and serious efforts to ensure that all of these inspections not only take place, but that then whatever decisions are made are actually enforced.
MURPHY: Mr. Blake, you were sort of careful in your testimony, it didn’t sound like — suggest that we were actively encouraging companies to come together on a joint standard. And so I wanted to ask all three panelists, we can start with you, as to what role we are going to be playing to try to facilitate American companies, whether it be in agreement with European companies or on their own, to have some common commitment rather than just doing what we’ve been doing for a long time, which is just asking each one of them to come up with their own standards?
BLAKE: As I said in my testimony, we’ve had several rounds of conference calls with all of the buyers already hosted by the State Department with our other inter-agency colleagues, and we’ve encouraged them to come up with an agreement that they can all coalesce around and hopefully one that is also consistent with the IndustriALL Accord. As my colleagues said, there are some concerns on the part of the American companies about liability questions, and obviously that’s a judgment they’re going to have to make. But many other parts of the IndustriALL Accord, they seem to be willing to embrace.
KARESH: Assistant Secretary Blake’s covered it well. I guess what I would add, you know, building on my previous response is that, you know, there are moments in time — and the chairman highlighted the one in our own country from 1911 with Triangle Shirtwaist, which lead to a whole change in terms of enforceable laws. A lot of the things that the Department of Labor administers today coming out of that moment in time in the mid-’90s after Kathie Lee Gifford and other things, where some of the voluntary mechanisms, the principles, the multi-stakeholder agreements came into being. It can’t just apply to Bangladesh, but Bangladesh may be a stepping stone. We deal at the department and through the Better Work Program with conditions in other countries around the world, from Haiti to Honduras to Lesotho, and so forth. But Bangladesh is the second largest export market to us. It’s a massive industry, and so we really need to get it right, not just with respect to government enforcement, but how brands and retailers see their own responsibilities.
BIEL: I’m going to support the comments made by both State and Labor on this. We have always worked together to support corporate social responsibility and efforts on the part of the buyers and manufacturers to address these issues. But it’s our view that that is not going to be enough in and of itself. That there has to be a culture change within Bangladesh, within the government.
MURPHY: Mr. Blake, I’d just direct my last question to you, but possibly others can comment. And this is on the issue of liability. It seems to me to be a bit of a red herring. We have the Kiobel (ph) case and others, which have greatly limited the ability of people in other countries to submit claims in the United States. Are we advising these companies on their potential U.S. liability, or are we leaving it up to their individual judgment?
BLAKE: No, sir, we haven’t taken a position on that very narrow issue. We’ve just, again, taken up a wider view that they should come together and coalesce around whatever plan they can agree on. And that ideally, that could be something that is consistent with the industrial A.L. accord (ph).
KAINE: Bangladesh is a sovereign nation and they have their own sets of rules. There could be culture of corruption. There could be labor challenges. There could be safety standards that we wouldn’t accept. We don’t have the command and control of them that we would in this country, but we do have levers, and I want to just spend time talking about the levers. So, on the levers that the United States would have, share with me a little bit about the general system of preferences. It’s my understanding that the FLCO had filed a complaint seeking to diminish or reduce the GSP status of Bangladesh in 2007. And has that been under consideration for six years?
KARESH: They filed that in 2007, and we did accept it for review, and we have been reviewing it and engaging with the government of Bangladesh ever since. There have been previous submissions. And we have seen progress at times. And, in fact, previously, we closed some GSP petitions prior to this petition being open because we saw progress. We continued to work with the government ever since this petition was received to address issues. We did see some action taken. But recently, our feeling has been that we have not seen sustained and meaningful progress on issues, and that we have concerns that, in fact, that in some areas, there seems to be a deterioration.
KAINE: Let me just ask about the structure of the GSP program. I gather that it was something established as part of the Trade Act in 1974. Congress set the parameters of a program. The granting of GSP treatment is something that is handled administratively through the USTR? Do I understand it correctly?
KARESH: That’s correct. The U.S. Trade Organization is the primary office responsible for the trade programs. Decisions with regard to GSP itself, eligibility for countries, and whether there can be a suspension or limitation is actually a presidential determination based on a recommendation form USCR. And we have currently indicated that we will make a decision with regard to steps on GSP for Bangladesh by the end of June. And we are in inter-agency discussions on forming a recommendation to the president.
KAINE: So the recommendation will be done by the end of June to the White House?
KARESH: That is correct, sir.
KAINE: I noticed, there was one reference to an early instance where GSP status was suspended to Burma over workers’ rights issues. I mean, just generally in terms of the program, is suspension of GSP status something that’s commonly been done in the last 40 years? Or is it extremely rare?
KARESH: It’s not common. It’s happened in a few instances. Burma is one of those instances.
KAINE: And Burma was over workers’ rights issues?
KARESH: That is correct.
KAINE: And when was that suspension? Just generally.
KARESH: 1989.
KAINE: And are there other instances of GSP suspension, other than the Burmese example?
KARESH: Yes, there has been. There’s been several cases. I know Nicaragua — situations with Nicaragua, Paraguay, Romania, Chile, Burma, Central African Republic, Liberia, Sudan, Syria, Morytania, The Maldives…
KAINE: In your judgment — and this is now a question to all three of you — what would the consequences of the GSP suspension be, recognizing you haven’t made that recommendation? But is — is it a minor thing because it only covers a certain amount of trade? Or is it a major thing because it sends a signal about the working conditions in Bangladesh that would — that would affect them sort of either diplomatically, or affect the willingness of private sector partners to invest?
KARESH: Secretary Blake would like to respond to it, as well, but let me just say briefly that there are a limited number of products that can come under GSP that would be affected. It is a presidential level decision for the United States. And we believe Bangladesh understands that it would send a significant message with regard to doing business in Bangladesh.
BLAKE: It would send a very significant signal, because it’s symbolically important. And it would also potentially have an impact on the E.U.’s decision. Because the E.U. has its own GSP program, which covers a much wider range of products than our own.
KAINE: And based on the format of the program, as you described it, I gather it’s sort of an interim process. It’s not just, you know, you’re in or you’re out. But the United States in dialogue with the Bangladeshi government could lay down some conditions and say, “If you do not do X by a certain date, our intent would be to recommend to the White House or the president could even say, our intent would be to withdraw GSP status.” Do I understand the program correctly?
BLAKE (?): Yes, sir, that’s correct. And we — and you have a choice of withdrawing, suspending or limiting. There has been in one situation where we did not fully take all of the benefits away, but partially took them away. And then our intention, if that were to happen, would be exactly that: to have an action plan so that Bangladesh took those steps and could regain eligibility.
KAINE: In the instances where we have withdrawn GSP benefits — and you gave a number — have there been instances where, when that has happened, the countries have wanted to come back and work to regain them? So, with respect — I know you’re analyzing with respect to Burma right now, but has it — has it proven to be — you know, to get their attention so that they want to come back and regain GSP status?
BLAKE: Yes, absolutely.
KAINE: Okay. The World Bank has a “work better,” or a program that’s trying to focus on these issues, as well. Could you describe the status of that?
BIEL: Sure. It’s actually jointly administered by the International Labor Organization and International Finance Corporation, and part of the World Bank Group. What it enables us, in terms of going back to your question about leverage, is, we sit on both the donors committee and the advisory committee of the Better Work Program, and we are not the final decision makers. That’s the management group by senior officials — led by senior officials at the ILO and IFC. And so, for example, in this case, Bangladesh has long indicated they want to be part of Better Work. We see that as potentially, if it’s well administered, a step forward in terms of regularizing some of the issues and having a more systemic program of dealing with Freedom of Association and other issues in the workplace. Thus far, they have not been met. There’s been progress in one bucket on union registration that Assistant Secretary Blake mentioned, and I also mentioned in the written testimony. The other is these labor law reform amendments. Not the entire package, but four specific ones. And we think that things are moving in the right direction, although it’s a bit complicated by the fact that there have been some different versions, at least in English translation on one or two.
MCCAIN: Secretary Blake, you’ve probably already addressed this, but what’s your short and long-term priorities in this area, which you enumerated, including improving the government of Bangladesh’s capacity to improve the infrastructure within Bangladesh to address building and worker safety.
BLAKE: We earlier talked about how this is going to have to be a comprehensive program on the part of all of the stakeholders. But since you talk about the Bangladeshi side of it, it will be very important that there first be this freedom of association. And we’ve been talking about earlier, 27 unions have been registered. Had there been a union representative on the ground at Rana Plaza that tragedy would not have happened. But there also needs to be comprehensive effort on the inspection and safety side and the enforcement of that as well. And, again, we had a detailed discussion of that. We think that the buyers and the Bangladesh Garment Manufacturers and Exporters Association have a key role to play, both of them, in helping to build up an independent (inaudible) of inspectors, both on the fire safety side and the structural soundness side as well to back up whatever inspections are done by the government.
MCCAIN: Are you confident that they will be taken?
BLAKE: I’m fairly confident …
MCCAIN: In other words I guess, what kind of cooperation are you getting?
BLAKE: We’ve certainly gotten the government’s attention and we’ve certainly gotten the BGEMA’s attention. And, as we discussed earlier, our own buyers are now working with formers Senator Snow and Mitchell to see if they can come up with their own plan that we hope will be consistent with the industrial accord that the European buyers have coalesced around.
MCCAIN: Are you satisfied with the progress so far?
BLAKE: Certainly not. I mean there needs to be much greater progress.
MCCAIN: No, but I mean what you have done so far, is this on the time …
BLAKE: Yes, I think we are making progress, but there’s much more that needs to be done on the part of all the stakeholders.
MCCAIN: Thank you. Mr. Karesh, you observed in your prepared testimony that USTR’s review of Bangladesh’s Generalized System of Preferences, GSP trade benefits. What impact would the suspension of GSP benefits have on our efforts to improve the safety conditions of Bangladeshi workers?
KARESH: Thank you, Senator McCain. As others have mentioned, our view is that we need a comprehensive effort to address these issues, of which GSP is one mechanism that provides leverage. It is a significant step. If we were make a determination to suspend or limit, it’s significant. We believe that there are people within the Bangladeshi government who understand that and would be concerned about taking measures to ensure that that didn’t happen.
MCCAIN: I guess I’m curious whether in your assessment it would help or hurt if we suspended the GSP. Obviously, it would have significant unemployment impact in this impoverished country.
KARESH: Making this type of decision, which ultimately is a presidential decision, the USTR can only make a recommendation to the president and there’s consequences in any action. Our goal is to address the concerns about free association, safety and health and that’s why we’re taking a very close look at this issue and trying to answer that question ourselves right now as to what we can do under GSP and other means to improve the lives and working conditions for workers in Bangladesh.
MCCAIN: In other words, as Secretary Blake was saying, lay out what we expect of them and see if they make progress or not on it and, then, if not, then obviously other alternatives have to be considered? Is that an appropriate way or is that the way you’re approaching this situation?
KARESH: Yes. We would never take that step lightly. We’ve been engaged on these issues with the Bangladeshis for quite a long period of time and we have not seen the meaningful progress we would like to have seen.
MCCAIN: Tell me a little bit, you and Mr. Biel, what they haven’t done that you want them to do or that they have been slow in doing.
BIEL: There covers a number of different areas and it’s been mapped out, as Mr. Karesh mentioned, the petition — and, as Senator Kaine mentioned, the petition goes back six years and, in fact, there had been a previous cycle. So the issues are not new, but, you know, you’ve got a few different buckets of activity. The ready-made garments sector, which, obviously, Is the focus of this hearing and is the largest and most dynamic sector in Bangladesh. The shrimp processing sector is another area where there’s been a history of labor rights abuses. There’s been some signs of progress made although, interestingly enough less …
MCCAIN: I guess what I’m asking is what you want them to do.
BIEL: Yes and so in these sectors, ready- made garments, shrimp processing, the export processing zones, which is a separate legal authority and with regard to fire safety, although that’s kind of the on the margins of GSP. A specific set of steps have been delineated to deal with freedom of association, protection of workplace safety. There have also been some specific actions laid out and this has been directly communicated in writing from our former U.S. Trade Representative Kirk, from our Ambassador in Bangladesh Dan Mozena, to the Bangladeshis also with regard to some investigations of killings of labor activists, deregistration of civil society groups. It’s all been made quite clear in the last several months, here’s the steps that need to be taken. And there was a GSP hearing that USTR chaired on March 28th and a long discussion bilaterally the next day with the two governments across the table.
MCCAIN: Well, I’d appreciate if for the record you would provide us with, and I know that it’s — I hope it’s not too hard that what we expect of them and also what we expect of companies and corporations that do business there. We haven’t address that I think in as much depth as I would like what we expect of the companies and corporations that do business there. obviously, it’s a two-way street. And, also, frankly, it would really ratchet up the unemployment in Bangladesh and I think that’s something that at least we ought to have as a consideration, not the primary consideration, but as a consideration before we take the kind of ultimate action. Do you agree, Secretary Blake?
BLAKE: Again, I don’t want to compromise what the president will decide. But I do think that this is — will have quite a far-reaching …
MCCAIN: Oh, but you give the president advice and counsel.
BLAKE: Yes.
MCCAIN: I expect the president to know a lot of things, but not too much about this particular issue, although I’m sure he’s aware.
BLAKE: Well, I think this is quite an important tool. And the issue is how do we best leverage that tool to get the progress on the ground that we’re seeking and that’s the issue that we’re now discussing internally.
MENENDEZ: What is the status of the investigation into the April 2012 murder of Bangladeshi Labor Organizer Aminul Islam. It is my understanding the case remains unsolved and key leads have apparently been dropped.
BLAKE: Sir, the case does remain unsolved. A suspect was taken into custody in November of 2012, but since then there’s been no progress that I’m aware of on that case.
MENENDEZ: Well, April 2012, so that’s over a year. You say it’s part of our dialogue. I’m not quite sure what that means. How intense are we actually asking about this case, what follow-up are we seeking from this case?
BLAKE: We do ask about. It was when Former Secretary Clinton was in Bangladesh the last time. She raised this in all of her meetings. She talked about it publicly. I raise it in my meetings with the Bangladeshis here and, of course, our ambassador on the ground is very active on this.
MENENDEZ: And what do they say?
BLAKE: Well, just exactly what I just said that the case remains under investigation, but they don’t have anything further to report.
MENENDEZ: And the person who was arrested, is he still in incarceration?
BLAKE: He is, to my knowledge.
MENENDEZ: Well, I look forward to getting a further report from State on this.
Panel Two
KAINE: This is an issue that we have to wrestle with in terms of leverage — what is our leverage over a situation. We don’t have command and control of Bangladeshi regulations, culture of corruption, building codes, but we do have leverage. Ms. Drake, your organization filed one of the bits of leverage that we have is this GSP status, and your organization filed with the USTR a request to either withdraw or limit GSP in 2007. If you’d just describe the basis for that original complaint that was filed six years ago. Was it all about restrictions of workers’ rights? Or did it also make the connection to unsafe working conditions?
DRAKE: It definitely made the connection to unsafe working conditions. In the GSP statute, it outlines internationally recognized worker rights as including freedom of association, collective bargaining, freedom from forced labor and child labor, and acceptable conditions of work, which are then defined to include worker health and safety, minimum wages and maximum hours of work.
KAINE: You and your colleagues must have had a sick feeling when the building collapse news came across the wire, given the fact that you had raised this issue as a potential concern that many years ago.
DRAKE: Absolutely.. Earlier, it was said somebody had received assurances from the government of Bangladesh. Well, for the workers of Bangladesh, receiving assurances from their own government isn’t very reassuring. I mean, even before the Tasrene fire, there was another incident at Gariva a couple of years before that, and that was supposed to be the turning point. We’re well beyond whatever anyone would need to see as evidence that the current system of, you know, the government’s very feeble efforts and the voluntary compliance programs of the corporations simply are not working and it really is time to act and make this the final turning point.
KAINE: But I’d like you, first Ms. Drake and then Mr. Lubbe, to address this question about whether if there’s a recommendation to the president to withdraw GSP status, would that do more good or more harm.
DRAKE: It is a tough question to wrestle with, but the AFL-CIO falls squarely on the side that acting on the GSP petition to limit or withdraw benefits will do far more good than it will harm. The concern about mass unemployment is simply unfounded, given that the GSP products comprise about 1 percent of Bangladesh’s exports to the United States, as was discussed in the earlier panel. We’re talking about a much smaller segment of the economy. The ready-made garment sector, which is what we’ve been talking about primarily today, doesn’t get GSP benefits, and so it wouldn’t be affected by tariff changes. And I do have a list of what those products are that get GSP benefits. And the top three are tobacco, for instance. And so it really is a product-by-product issue. You’d have to look at, well, what’s the, you know, the demand, the elasticity for tobacco and are Bangladesh’s tobacco exports really going to be prohibited by putting a tariff — that kind of question. Even though the GSP benefits are small in monetary value, they have reputational concerns and they’re also tied to future investments under the OPIC, the Overseas Private Investment Corporation. And there are several of those programs right now in Bangladesh. Those would not be threatened at all by a change in the GSP status. But future OPIC investments couldn’t occur until the GSP status would come back.
LUBBE: The industry wants to support the Bangladeshi garment industry. But on the same hand, it also wants to ensure that there’s an incentive to the government as a very important stakeholder to fulfill its promises. Whether the withdrawal of the GSP status will achieve that, it has to be evaluated in all of those factors. The industry will support what the government does here. The industry is concerned about potential unemployment. We do not know what the true impact will be on unemployment and whether factory workers — factory owners will use that as an excuse to shed employees. So it needs to be very carefully considered.
KAINE: Mr. Lubbe, you talked in your testimony about the reason that American and Canadian apparel manufacturers or companies have chosen not to sign the accord, but are pursuing a combined effort. Beginning with the accord, what were some — what were the subject of some of the provisions? You indicated there could be potential liability or there was vague language, but what were the subject of some of the provisions that the American and Canadian firms found problematic? I’m assuming that there were some that were fine, but then there were some that were controversial. If you could describe those?
LUBBE: The first point is the utilization of arbitration. What the accord does is it uses arbitration really to fill in and write the agreement for the parties ultimately. It provides for a wide array of disputes. And as it’s worded, not only between the parties, but I think from a legal analysis, leaves the room for non-parties to the accord to utilize the accord to declare disputes, that go to arbitration. The second issue is as a binding contract, it becomes a basis for litigation in the U.S. And we have examples where with the demise of the Alien Tort Act, a variety of contracts and agreements have been used to sue companies in the U.S. for the bad acts of actors outside of the U.S. And that is a real concern. The accord does not exclude that. That possibility is there. The third issue, just in terms of broad scope, is also again through the avenue of interest arbitration. If you review the provisions that deal with remediation, they are provisions that deal with these signatories must engage in commercial viable agreements. And if the supplier or the factory owner says, “Well, the price that we are negotiating is insufficient because I need more money to improve health and safety,” and let’s say, for example, the U.S. retailer says, “Well, I don’t think at the price that you are asking, that that’s too high,” it potentially goes to interest arbitration again. So, you have price determination through interest arbitration.
KAINE: And just since this is an industry internationally that I have no expertise in, even with the concerns that you laid out, a sizable number of the European manufacturers signed onto the accord. Describe why that is the case. Why would European manufacturers find it to be acceptable, but North American manufacturers or companies find it to be less acceptable?
LUBBE: Senator, you would appreciate that I can’t speculate exactly how they view their risks. My opinion is that they are not in the same litigious environment that we are. We have the history under statutes that have created the forum to sue in the U.S. for foreign bad act. As far as I know, the Europeans do not have that same system. A second explanation could be the Europeans have a much more institutionalized partnership relationship with trade unions. Where our model here is different. There is a — through the use of works councils — European works councils. So, this type of agreements with unions are not uncommon in general, that will cover European-wide issues.
KAINE: Mr. Lubbe, one question I have is, are North American — and specifically American companies — do they balk at the notion of signing onto accords that encourage organization and association rights of workers in Bangladesh?
LUBBE: Senator, as far as I know, that was not a stumbling block.
KAINE: Talk to me a little bit about the timing of that effort, and when we might be expected to know something about it.
LUBBE: This is a work in progress that is receiving high priority in the industry. That has been reported. The stated goal is to come with a comprehensive plan that will have immediate action that will provide for long-term solutions and have that plan ready by, I understand, early July. I also understand that in terms of the actions that have been taken, there is already a structure set up through working groups to look at various aspects. Everybody’s struggling in terms of what would be the — how to prioritize what. This is a huge issue. So, sometimes, how do you prioritize what is also an issue. That is all being discussed, and there are very regular meetings scheduled throughout this month for all the parties to coalesce around this and come up with a plan that will work for the industry as a large, and also get the individual major players involved in the theater.
MENENDEZ: What do the companies you represent believe is their core responsibility in regard to the topic that we’re talking about?
LUBBE: Senator, I think I can best summarize it as follows.The issue of their corporate social responsibility has taken a focus on health and safety of the workers in Bangladesh. And that has been catapulted to the top of the priority. If you look at companies’ social corporate responsibility, it has always been over the years, since it’s become important for companies to recognize and play their role, it’s been a work in progress. It is a continuum effort of improving. What has happened now with these very tragic events in Bangladesh is that health and safety, and including structural soundness of buildings in which their suppliers are operating has come to the forefront. And in that respect, the industry understands, and wants to play an important role to contribute as one of the stakeholders to make certain that that issue is addressed. The industry sees itself as one of the stakeholders and one of the role players. And it’s — and it’s ready and willing to play that role. Specifically, the issue of inspections. A number of the industry individual companies have stepped up their health and safety inspections to make certain that within their scope of influence, the providers and suppliers within their global supply chain, that they make certain that they accelerate and increase those inspections.
KAINE: Is it your perception in the reaction of North American companies to the accord that arbitration is a point of dispute, but that there’s a reticence to sign onto an accord that encourages labor organizations to form and flourish because they’re actually, on our own turf, very reticent about labor organizations and their right to organize and flourish?
DRAKE: I would say that’s the conclusion that one would draw from the evidence. And it really is unfortunate that the president put up a slate of nominees that represent all sides of the issue on labor and that it is being blocked. And if the United States doesn’t have a functioning National Labor Relations Board, that goes all the way down to, you know, the site, the small factory level, and will prevent probably most organizing efforts from succeeding in the United States because the employer side will stop the election, put in a complaint. The complaint can’t be, you know, decisively resolved and things won’t move ahead.
KAINE: And with respect to the accord in particular, since I’m not familiar with the substance of the accord, does the accord only address sort of building code safety conditions? Or does the accord also address the ability of workers to associate and organize in a protected status?
DRAKE: It does. And it particularly gives workers the right to refuse to enter and work in a workplace that they feel is an immediate threat to their health and safety. And it’s having to respect worker rights and having to recognize that workers can stand up for themselves in saying, “I’m not going to go into that death trap today,” I think is for some in the industry, they do not want workers to have that ability to stand up and speak up for themselves to improve their own working conditions and their livelihoods.
KAINE: And so this is a speculative question, but, you know, take it for what it’s worth. If the accord had just had conditions within it about building code and fire safety and things like that, but had not had any conditions dealing with the protection of workers’ rights, is it your opinion that it would have been more acceptable to the North American garment companies?
DRAKE: I can’t say whether they would have signed. I would say I think it would be much more acceptable.
KAINE: All right. Well, this has been fascinating testimony on a very, very challenging topic. And I think both of you acknowledge that there’s a significant complexity. I do think we’re maybe on the verge with the USTR recommendation to the White House and the industry effort to come together behind some set of principles that they could agree with, both of those happening in relative short order, that we’re — we’re on the verge of being able to come back and say, “OK, now that we have some more facts on the table about what the response is likely to be from the private sector and the U.S. government, it would probably be helpful for us to analyze that again soon.” I am the junior member on a 19-member committee, but I will certainly recommend to the chair that we — that we come back and follow up on both of those matters in short order.
