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Obama to Suspend Trade Privileges With Bangladesh Obama to Suspend Trade Privileges With Bangladesh
(about 2 hours later)
The Obama administration on Thursday announced plans to suspend trade privileges for Bangladesh over concerns about safety problems and labor rights violations in that country’s garment industry. The Obama administration on Thursday announced plans to suspend trade privileges for Bangladesh over concerns about safety problems and labor rights violations in the country’s garment industry.
The administration has come under intense pressure to suspend Bangladesh’s trade privileges after a factory building there collapsed in April, killing 1,129 workers, and after a factory fire killed 112 workers last November. The administration has come under intense pressure to suspend the privileges in recent months — first after a factory fire there killed 112 workers in November and then after an eight-story factory building collapsed in April, killing 1,129 workers.
In a letter to Congress on Thursday, President Obama said that the United States would withdraw trade privileges to Bangladesh because it was “not taking steps to afford internationally recognized worker rights.” Trade experts said the administration’s decision would be a substantial blow to Bangladesh’s reputation and was likely to ratchet up pressure on its government to move more quickly to improve factory safety and end what Washington sees as widespread violations of workers’ rights. Administration officials said they have offered Bangladesh a road map for steps it needed to take to have trade privileges restored.
Labor unions and Democrats on Capitol Hill have been pressing the Obama administration to take this step. Bangladesh is allowed to export nearly 5,000 products duty-free to the United States, which purchases about 25 percent of the country’s $18 billion in annual apparel exports. In a letter to Congress on Thursday, President Obama said he was suspending the privileges, effective in 60 days, because Bangladesh was “not taking steps to afford internationally recognized worker rights to workers in that country.”
Bangladesh is among more than 125 countries that receive such breaks on United States tariffs under the Generalized System of Preferences, a World Trade Organization program that is intended to promote economic growth around the globe. Labor unions and Democrats on Capitol Hill have been pressing the Obama administration to take the step, saying the United States needed to go beyond stern words and take strong action to convey to the Bangladeshi government that far more needed to be done to assure factory safety.
In recent weeks, officials in the Labor Department have called for revoking Bangladesh’s special trade status, saying the United States needs to take strong action. Labor officials have asserted that the garment industry has been dragging its feet in improving safety and ending violations of workers’ right to form labor unions. At the same time, some State Department officials have pushed against suspending the trade privileges, saying it would damage diplomatic relations and undermine the economy or an already poor country.
At a hearing in March held by the trade representative’s office, a top official in Bangladesh’s Commerce Ministry said, “Compliance with rights, including labor rights, will necessarily be gradual” in poor countries like Bangladesh.
The administration’s move comes in response to an official complaint that the A.F.L.-C.I.O. filed in 2007. The labor federation was upset about factory fires and a 2005 factory collapse in Bangladesh, as well as the extensive efforts by that country’s garment manufacturers to suppress labor unions.
Administration officials took that complaint with new seriousness after the Tazreen factory fire November and after the Rana Plaza factory building collapsed two months ago in what was the most deadly accident in the history of the world’s apparel industry.
The Generalized System of Preferences covers only a small fraction of American trade with Bangladesh. Those preferences do not apply to the Bangladeshi garment industry, which does not enjoy American duty-free status and represents the great bulk of that country’s trade with the United States. One labor rights advocate familiar with the government’s decision said it called for suspension and provided a road map to restore trade privileges.
Even so, trade experts say they expect the suspension, a serious blow to Bangladesh’s image, would pressure its government to move more aggressively to improve safety and protect worker rights in its garment industry. The industry is a major economic driver, with more than 5,000 factories that employ 4 million workers.
“We welcome the fact that our government has finally decided to take action after we’ve seen all these egregious labor rights violations,” said Cathy Feingold, director of the A.F.L.-C.I.O.'s international department. “We hope this will lead to real change in Bangladesh.”
In December, the United States sent Bangladesh a list of areas that needed improvement to prevent having trade privileges suspended. That list included ending government harassment of union organizers and giving more rights to workers in the country’s special export manufacturing zones.
The A.F.L.-C.I.O. and the Obama administration have both expressed concern about the treatment of labor activists in Bangladesh. In April 2012, the body of Aminul Islam, a prominent labor organizer, was found dead, with signs of torture. Bangladeshi news media reported that government security forces might have been tied to his death. There have been no arrests.
The Obama administration’s move may also influence the European Union, which is also weighing whether to suspend Bangladesh’s trade preferences. Such a move could have much greater impact because Europe’s duty-free privileges cover Bangladeshi apparel, and Europe purchases 60 percent of the country’s garment exports.
“The U.S. decision sends a very strong signal to the government of Bangladesh that they have to do things differently, that there’s a consequence to the way they’ve been operating,” said Michael H. Posner, a former assistant secretary of state of human and labor rights in the Obama administration.“The U.S. decision sends a very strong signal to the government of Bangladesh that they have to do things differently, that there’s a consequence to the way they’ve been operating,” said Michael H. Posner, a former assistant secretary of state of human and labor rights in the Obama administration.
Mr. Posner added that the Bangladeshi government has not done enough to make labor laws amenable to unions and not invested enough in factory safety. “They probably don’t have the financial resources alone to do everything that’s needed,” he added. The suspension will revoke the breaks on tariffs that the United States gives Bangladesh under the Generalized System of Preferences, a World Trade Organization program that seeks to promote economic growth.
Mr. Posner, now a professor at the Stern School of Business at New York University, said Washington’s move adds pressure on American and European retailers to further emphasize factory safety. “It increases public attention to this issue and makes clear that this is a crisis situation and it needs to be addressed by all parties in a different way.” While Bangladesh fought vigorously to prevent the suspension, worried about the signal it sends to its citizens and to global investors, some trade experts said the suspension would be largely symbolic because it will affect less than 1 percent of America’s $4.9 billion in annual imports from Bangladesh.
Wal-Mart Stores, Gap and other major American retailers are working with the Bipartisan Policy Center to develop a plan over the next few weeks to improve factory safety in the Bangladeshi garment industry. But industry and labor officials say the American retailers are unlikely to agree to a legally enforceable plan like the one that has been embraced by more than 40 European retailers as well as a handful of United States retailers like Abercrombie & Fitch and PVH, the parent company of Calvin Klein and Tommy Hilfiger. While the participants in the European-led plan are negotiating implementation details, they have committed themselves to having rigorous, independent factory inspections and to helping underwrite any fire safety and building repairs needed to correct violations. The tariff preferences being curtailed cover products ranging from tobacco to plastic bags, but do not apply to the country’s garment industry, which does not have American duty-free status and represents the great bulk of that country’s trade with the United States.
Bangladesh, one of 125 countries that receive American trade preferences, is allowed to export nearly 5,000 products duty-free to the United States, which buys about 25 percent of that country’s $18 billion in annual apparel exports.
In a telephone interview, Michael Froman, the United States trade representative, said that Washington’s experience with “trade preferences over the years is that the importance of General System of Preferences eligibility is greater than the numbers themselves, particularly in cases where the issue of G.S.P. eligibility has gotten a fair amount of attention in Bangladesh and elsewhere.”
He added: “We’ve been in dialogue with the government of Bangladesh about improving worker rights and worker safety and in the absence of sufficient action, we felt it was important to take this action.”
The Obama administration’s move may have some influence on the European Union, which is also weighing whether to suspend Bangladesh’s trade preferences. Action by the Europeans could have much greater impact because Europe’s duty-free privileges include Bangladeshi apparel and Europe buys 60 percent of that country’s garment exports.
The damage Bangladesh’s other industries will face from the suspension is expected to pressure the country’s garment industry to make many of the changes Washington wants. In December, the United States sent Bangladesh a list of areas that needed improvement. The list included ending government harassment of union organizers and giving more rights to workers in the country’s special export manufacturing zones.
The federal government has not been unified on the suspensions, however. The Labor Department has favored them, arguing that Bangladesh and its garment industry have been slow to improve factory safety and end violations of workers’ rights to form labor unions. At the same time, some State Department officials opposed the move, saying it would damage diplomatic relations with a country that has faced Islamist threats and would undermine the economy of an already poor country.
At a hearing in March held by the trade representative’s office, a top official in Bangladesh’s Commerce Ministry said, “Compliance with rights, including labor rights, will necessarily be gradual” in poor countries like Bangladesh.
The administration’s move on Thursday was in response to an official complaint filed by the A.F.L.-C.I.O. in 2007. The labor federation was upset about numerous deadly factory fires, a 2005 factory collapse that killed 64 workers as well as extensive efforts by Bangladeshi garment manufacturers to suppress labor unions.
The Obama administration took that complaint with new seriousness after the fire in November at the Tazreen factory, which made garments for American companies like Wal-Mart, and the collapse of the Rana Plaza building two months ago. The collapse was the most deadly accident in the history of the world’s apparel industry.
“We welcome the fact that our government has finally decided to take action after we’ve seen all these egregious labor rights violations,” said Cathy Feingold, director of the labor federation’s international department. “We hope this will lead to real change in Bangladesh.”
The garment industry is a major driver of Bangladesh’s economy, with more than 5,000 factories that employ four million workers. Bangladesh is the world’s second-largest apparel exporter after China, having attracted a flood of orders from the Western in recent years as China’s labor costs soared. Bangladesh’s minimum wage of $37 a month, the lowest in the world, has been a huge lure for manufacturers and helped the country’s garment industry expand — with many hastily and shoddily built factories as a result.
The A.F.L.-C.I.O. and the Obama administration have both expressed concern about the treatment of labor activists in Bangladesh. In April 2012, Aminul Islam, a prominent labor organizer, was found dead, his body showing signs of torture. Bangladeshi news media reported that government security forces might have had a hand in his death. No arrests have been made.
While Mr. Posner, the former State Department official, said the Bangladeshi government had not done enough to meet American demands for workplace safety, he added, “They probably don’t have the financial resources alone to do everything that’s needed.”
Mr. Posner, now a professor at the Stern School of Business at New York University, said Washington’s move added pressure on American and European retailers to further improve safety. “It increases public attention to this issue and makes clear that this is a crisis situation and it needs to be addressed by all parties in a different way.”
Wal-Mart, Gap and other major American retailers are working with the Bipartisan Policy Center to develop a plan over the next few weeks to improve factory safety in the Bangladeshi garment industry. But industry and labor officials say the American retailers are unlikely to agree to a legally enforceable plan like the one that has been embraced by more than 40 European retailers.