Bangladesh Apparel Factory Collapse: Background in Brief

Congressional research reportFeb 6, 2014

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Bangladesh Apparel Factory Collapse:

Background in Brief

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Specialist in International Trade and Finance

February 6, 2014

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R43085

Bangladesh Apparel Factory Collapse: Background in Brief

Summary

The April 24, 2013, collapse of an eight-story garment factory, called Rana Plaza, in Dhaka,

Bangladesh, resulted in the deaths of more than 1,100 workers. It is reportedly now considered

the deadliest accident in the history of the apparel industry. Congress has had a long-standing

interest in supporting internationally recognized worker rights in developing countries, and the

building collapse has raised concerns about worker conditions in Bangladesh.

Rana Plaza was allegedly structurally unsound and poorly maintained for apparel production.

Apparel production is generally known as an industry under threat of fire, and one where workers

need easy access to rapid escape routes. Issues relating to workers’ inability to effectively

exercise their rights to organize, bargain collectively, and work in a safe workplace may have

contributed to the tragedy. For example, workers reportedly noticed cracks in the building and

resisted entering, and were told that if they did not report to their jobs, they would not be paid.

The factory collapse brought international focus to those parts of global supply chains that may

not meet basic safety and health standards.

The U.S. government supports internationally recognized worker rights through various policies

and programs. These include U.S. trade preference programs, free trade agreements, foreign

assistance, and Department of Labor initiatives.

Congressional and U.S. efforts in this regard are part of an international worker rights support

structure in place to offer technical assistance and support to countries—especially developing

countries. Other major parts of this structure include international organizations, such as the

International Labor Organization (ILO), founded in 1919; and corporate codes of conduct, which

have arisen from a broader movement of corporate social responsibility that gained strength in the

1980s and 1990s.

Early analysis of the causes of the Bangladesh tragedy raises questions about what went wrong

and about what can be done to help Bangladesh to improve working conditions at factories.

Efforts to make changes in Bangladesh are already underway, and developments on this issue are

evolving.

This report provides an overview of the recent tragedy in Bangladesh and the Bangladesh

economic environment and culture. It also notes the responses to the tragedy, to date, from

Congress, the Administration, the ILO, the Bangladesh government, and the private sector.

Finally, it raises some possible issues for Congress.

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

Contents

Background and Overview .............................................................................................................. 1

ILO ............................................................................................................................................ 3

U.S. Trade Preference Programs................................................................................................ 5

Corporate Codes of Conduct ..................................................................................................... 5

U.S. and International Responses to the Bangladesh Tragedy......................................................... 7

Congress .................................................................................................................................... 7

Executive Branch....................................................................................................................... 8

Bangladesh Government ........................................................................................................... 9

ILO .......................................................................................................................................... 10

Private Sector........................................................................................................................... 10

Issues for Congress ........................................................................................................................ 11

Proposed Amendment to 2014 National Defense Authorization Act ...................................... 12

Figures

Figure 1. Map of Bangladesh ........................................................................................................... 1

Figure 2. Worker Rights Principles Included in ILO Core Labor Principles, U.S. Trade

Preferences and Agreements, and Some Private Sector Codes of Conduct .................................. 6

Tables

Table A-1. Comparison of Key Provisions of Bangladesh “Accord” and “Alliance” ................... 14

Appendixes

Appendix........................................................................................................................................ 13

Contacts

Author Contact Information........................................................................................................... 16

Acknowledgments ......................................................................................................................... 17

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

Background and Overview1

On April 24, 2013, Rana Plaza, an eight-story building, in Dhaka, Bangladesh, collapsed, killing

more than 1,100 garment workers. It brought international focus on portions of the global supply

chain. It also raised the issue of what might be done to improve working conditions, especially for

lower-wage workers in developing countries around the world.

Figure 1. Map of Bangladesh

Source: U.S. Department of State.

Notes: Bangladesh, about the size of Iowa, with a population half that of the United States, is tucked into to the

eastern end of India; it also borders Burma.

According to press reports, the day of the building collapse workers arrived and saw cracks in the

outside of the building where five manufacturing operations were trying to meet production

deadlines on apparel products for the U.S. and European Union (EU) markets.2 Reportedly,

management assured them that the building was safe, and told workers that they would not be

paid if they did not work. An hour later, the building collapsed. It has been labeled the deadliest

disaster in the history of the garment industry.3

For background on Bangladesh, see CRS Report R41194, Bangladesh: Political and Strategic Developments and U.S.

Interests, by (name redacted).

According to press reports, European retailers were the primary purchasers. H&M is reportedly the largest producer

of garments in Bangladesh. Source: “Global Retailers join Safety Plan for Bangladesh,” The New York Times, May 14,

2013, p. A1.

“17 Days in Darkness, a Cry of ‘Save Me’, and Joy,” The New York Times, Saturday, May 11, 2012, p. A1.

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Bangladesh Apparel Factory Collapse: Background in Brief

The Rana Plaza collapse took place five months after a December 17, 2012, fire at another

Bangladesh apparel factory, Tazreen Fashions Limited; the Tazreen fire killed 112 workers.4

Survivors reportedly stated that their managers locked one exit route and told workers that the fire

alarms were false, thereby delaying timely evacuation.5 The combined tragedies brought the sixmonth total loss of life in Bangladesh in the garment sector to at least 1,200.

After the building collapse, reportedly, thousands of workers took to the streets and vandalized

vehicles and shops before being dispersed by police. Soon after that, the government shut down a

number of apparel factories, for safety reasons, as concerns about industrial safety across the

country continued to grow.6

Bangladesh’s major export is apparel, which, along with a small amount of textiles, accounts for

more than 80% of the country’s $24 billion in exports to the world in 2012, or nearly $20 billion.

(See the Text Box, “Bangladesh in Brief.”) As a result of the Rana Plaza building collapse, some

firms, such as Disney,7 have indicated they may no longer source production from Bangladesh,

largely due to concerns over their brand reputation. If this becomes a major trend, one

consequence could be that many women, who constitute 80% of the workers in the apparel sector,

could lose their jobs. These women, mostly Muslim, have found new independence and an

increased standard of living for their families, and have, in many cases, become primary

breadwinners. The effect on the economic structure of Bangladesh could be compounded by an

ongoing struggle between a secular Bangladeshi identity and a more fundamental/religious

Islamic identity.8

A number of factors may have led to the recent building collapse. Bangladesh’s economy is laborintensive, which attracts lower-wage and lower-skilled industries such as apparel. Bangladesh is a

densely populated country, where a population half the size of the United States is crowded into a

geographic area the size of Iowa. To meet increasing global demand for apparel production,

primarily by the United States and Europe, certain buildings may have been converted to multistory manufacturing operations. In many countries, apparel production is generally carried out in

one- or two-story buildings because of the inherent fire hazards associated with this production.

Three additional floors that reportedly were illegally constructed were added to the Rana Plaza.9

According to press reports, working conditions in Bangladesh were theoretically addressed, at

least in part, by Bangladesh labor laws and building codes, International Labor Organization

(ILO) commitments, codes of conduct held by multinational corporations, and GSP trade

preferences.

“Bangladesh Finds Gross Negligence in Factory Fire,” The New York Times, December 17, 2012.

U.S. Department of State, Country Reports on Human Rights Practices, Bangladesh, p. 39.

“Bangladesh Textile Factories Shut Amid Unrest,” BBC News, May 13, 2013.

Disney has announced it will leave Bangladesh and relocate elsewhere. Source: “Bangladesh Fears an Exodus of

Apparel Firms,” The New York Times, May 2, 2013.

See CRS Report R41194, Bangladesh: Political and Strategic Developments and U.S. Interests, by (name redacted).

“Western Firms Feel Pressure as Toll Rises in Bangladesh,” The New York Times, April 25, 2013.

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Bangladesh Apparel Factory Collapse: Background in Brief

ILO

Since 1972, Bangladesh has been a member of the International Labor Organization (ILO). The

ILO originated in 1919 as a tripartite organization comprised of workers, employers, and

governments, to promote “decent work” around the world. Under the 1998 ILO Declaration on

Fundamental Principles and Rights at Work, Bangladesh and all ILO members have an obligation

to uphold ILO core labor principles, simply by reason of their status as ILO members, even if

they have not ratified the conventions behind the principles. Bangladesh has, however, ratified

seven of the eight ILO conventions backing and defining the five core labor principles.10 These

principles are very similar to the U.S. list of internationally recognized worker rights.

These rights are the following:

1. freedom of association and the effective recognition of the right to collective

bargaining;

2. the elimination of all forms of forced or compulsory labor;

3. the effective abolition of child labor, including the worst forms of child labor;

and

4. the elimination of discrimination in respect of employment and occupation.11

Whether countries do or do not uphold ILO core labor principles, the ILO has no real

enforcement powers other than technical assistance, reporting requirements, publication of

information, and moral suasion. An example of ILO activities to enhance worker rights is the

Better Work Program, a technical support program which recently went into effect in Bangladesh.

It is a joint program with the World Bank that works with government officials, factory owners,

and labor groups to ensure safe and decent workplace conditions, and is discussed further below.

Figure 2, below, shows that most of the concepts of the ILO core labor principles plus the ILO

occupational safety and health principle, are included in many U.S. trade and investment laws and

programs, including the Generalized System of Preferences program, mentioned below, and some

private sector codes of conduct. Thus, Figure 2 shows graphically the extent to which similar sets

of rights extend through all three parts of the international worker rights support system.

Bangladesh approved the following conventions relating to ILO core labor principles: freedom of association and

right to organize: C87, 1972; C98, 1972; elimination of forced labor: C29, 1972; C105, 1972; abolition of child labor:

C138 (not approved by the Bangladeshi government); C182, 2001; and elimination of employment and occupational

discrimination: C100, 1998; C111, 1972.

While the ILO does not hold a core labor principle on occupational safety and health, this principle is included in a

larger list of nearly 200 ILO principles. The ILO also publishes background materials on fire risk management. See, for

example, the ILO booklet on Fire Risk Management, and its “Action Checklist Fire Safety,” available on the ILO

website at ilo.org.

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Bangladesh Apparel Factory Collapse: Background in Brief

Bangladesh in Brief

History and Government: The United States established diplomatic relations with Bangladesh in 1972, after its

independence from Pakistan through a 1971 war. Its government is a parliamentary democracy. The State

Department describes relations between the two countries as “excellent,” reflecting “strong bonds of friendship and

shared values.” The CIA World Factbook describes Bangladesh as being “poor, overpopulated, and inefficiently

governed.” (Sources: U.S. Department of State, U.S. Relations with Bangladesh, and CIA, The World Factbook.)

Geography and Population: Bangladesh, on the Ganges River Delta and the Bay of Bengal, is mostly surrounded

by India. Its population is about 164 million, half that of the United States, crowded into a land mass slightly smaller

than Iowa. Its capital is Dhaka, which has a population of about 14 million. (Source: CIA World Factbook.)

Economy: Challenges to Bangladesh’s economy include “political instability, poor infrastructure, corruption,

insufficient power supplies, and slow implementation of economic reforms.” In 2012, on a purchasing power parity

basis, its GDP was $306 billion, or $2,000 per capita. Nearly one-third of the population lives below the poverty line.

Its labor force is divided into 45% in agriculture, 30% in industry, and 25% in services. Its average annual GDP growth

rate since 1996 is 5.8%. Its most important industries are jute, cotton, and garments. (Source: CIA World Factbook.)

Trade and Investment: Bangladesh’s major export is apparel, which, along with a small amount of textiles,

accounts for more than 80% of the country’s $24 billion in exports to the world in 2012, or nearly $20 billion. It

represents an apparel export total that is second in the world, after China. The United States is Bangladesh’s largest

single-country export market, accounting for nearly 20% of the country’s exports. (The European Union (EU) is

Bangladesh’s largest export market overall, accounting for 50% of Bangladesh’s total exports.) However, Bangladesh is

a relatively small trading partner for the United States, ranking 58th and accounting for far less than 1% of total U.S.

trade. In 2012, the United States imported $4.9 billion in goods from Bangladesh, of which $4.5 billion or 92% were

textiles and apparel. U.S. exports to Bangladesh in 2012 totaled $0.5 billion, led by cotton, machinery, and iron and

steel. In 1989, the United States and Bangladesh signed a bilateral investment treaty. After the Rana Plaza tragedy, it

signed an additional “Trade and Investment Cooperation Forum Agreement” (TICFA), pledging closer cooperation to

prevent more tragedies in the ready-made garment sector. World foreign direct investment in Bangladesh currently

totals about $7.8 billion, of which the U.S. stock is about $227 million (2011). (Sources: CIA World Factbook, Global

Trade Atlas, and Department of Commerce, Office of Textiles and Apparel (OTEXA.))

Labor: Bangladesh has a labor force of about 77 million (nearly half of its population), of which about 3.6 million-4.5

million are apparel workers employed in nearly 4,500 manufacturing operations. Minimum wages are $68 per month.

Wages in export processing zones are typically higher. (Sources: State Department: Country Reports on Human Rights

Practices, 2012, and CIA World Factbook.)

GSP Status: Bangladesh is listed as a designated “beneficiary developing country” under the Generalized System of

Preferences (GSP), and is therefore eligible for U.S. tariff preferences for certain products as long as it meets country

eligibility requirements, including worker rights criteria that require a country to have taken or be taking steps to

“afford internationally recognized worker rights” to its workers, including any in a designated zone. These core

worker rights are defined in Section 507(4) of the Trade Act of 1974 as (a) the right of association; (b) the right to

organize and bargain collectively; (c) a prohibition on the use of forced or compulsory labor; (d) a minimum age for

the employment of children; and (e) acceptable conditions of workers with respect to minimum wages, hours of

work, and occupational safety and health. Effective, September 2013, the Office of the U.S. Trade Representative

(USTR) suspended GSP status for Bangladesh, for insufficient progress toward reforms needed to meet basic worker

rights requirements. In 2012, U.S. GSP imports from Bangladesh totaled $35.4 million, out of a total import value of

$4.9 billion. Apparel and textile products are largely excluded from GSP tariff-free benefits. (Sources: Harmonized

Tariff Schedule of the United States; Trade Act of 1974, P.L. 93-618 as amended, 19 U.S.C. 2461; and U.S.

International Trade Commission (USITC) Trade Database, USTR press release July 19, 2013.)

ILO Core Labor Principles: In 1972, a year after its independence from Pakistan, Bangladesh ratified six of the

eight ILO core labor conventions (discussed elsewhere in this report). According to the Department of State, the

most significant human rights problems in Bangladesh included poor working conditions and poor protection of labor

rights. Safety conditions at many workplaces were described as “extremely poor.” Enforcement of acceptable

conditions for workers was reportedly hindered by a lack of labor inspectors. However, because of high

unemployment and inadequate enforcement of laws, workers who demanded redress for dangerous working

conditions or who refused to work under hazardous conditions risked losing their jobs. (Sources: ILO, and State

Department, Country Reports on Human Rights Practices, p. 39.)

Brand Names: Brand name products produced in Bangladesh include H&M, C&A, Nike, Reebok, GAP, JCPenney,

Walmart, Kmart, Wrangler, Dockers, Tommy Hilfiger, Adidas, Eddie Bauer, Eagle, and American Eagle. (Source:

Bangladesh Export Processing Zones Authority.)

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Bangladesh Apparel Factory Collapse: Background in Brief

U.S. Trade Preference Programs12

One area of congressional focus in supporting internationally recognized worker rights has been

through provisions in U.S. trade preference programs. These were first introduced in the

Generalized System of Preferences (GSP) program in 1985.13 GSP provides unilateral U.S. tariff

preferences for certain products exported by developing countries, to support their economic

development. Under GSP, and later introduced in other trade preference programs, the President

or his designee is prohibited from designating certain countries as eligible for GSP benefits, based

on different criteria, including that a country “has not taken or is not taking steps to afford

internationally recognized worker rights.”14 These worker rights are defined as

1. the right of association;

2. the right to organize and bargain collectively;

3. a prohibition on the use of any form of forced or compulsory labor;

4. a minimum wage for the employment of children; and protection against the

worst forms of child labor;15 and

5. acceptable conditions of work with respect to minimum wages, hours of work,

and occupational safety and health.

On the basis of these criteria, effective September 3, 2013, the Obama Administration suspended

GSP status for Bangladesh, with no timeline for its possible reinstatement.16 However, that

decision was followed by the USTR release of a “Bangladesh Action Plan 2013,” outlining a

basis for the eventual reinstatement of GSP status for Bangladesh. (For further discussion of the

GSP suspension, and Action Plan, see the following section on “U.S. and International Responses

to the Bangladesh Tragedy,” under “Executive Branch.”)

Corporate Codes of Conduct17

Since the 1980s and 1990s, when globalization accelerated and various interest groups began to

publicize “bad actors” on worker rights conditions in factories, corporations have increasingly

adopted and publicized corporate codes of conduct. Most, if not all, large multinational

corporations sourcing apparel from Bangladesh have posted such codes on their websites. These

codes may describe the standards to which the business holds its employees, its suppliers under

contract, and sometimes its subcontractors. These codes specify worker rights protections and

structural and fire hazard standards to varying degrees. A concern raised by some groups is that

Issues in this section are also addressed in U.S. free trade agreements, which are not addressed in this report because

the United States does not have a free trade agreement with Bangladesh.

For more information on the GSP program, see CRS Report RL33663, Generalized System of Preferences:

Background and Renewal Debate, by (name redacted).

Among other criteria, there is a waiver of presidential authority based on U.S. national economic interest.

These include the employment/use of children for purposes relating to armed conflict, drug trafficking, sex

trafficking, or pornography.

Federal Register, Proclamation 8997 to Modify Duty-Free Treatment Under GSP, and for other Purposes, July 2,

2013. However, the entire U.S. GSP program expired July 31, after Congress did not renew it.

For an overview of corporate codes of conduct, see CRS Report RS20803, Codes of Conduct for Multinational

Corporations: An Overview, by (name redacted).

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Bangladesh Apparel Factory Collapse: Background in Brief

corporations may contract directly with suppliers, yet have limited knowledge of the conditions

under which the products are produced by subcontractors. Corporate codes of conduct are

voluntary on the part of corporations.

The Rana Plaza collapse has focused greater attention on the worker conditions and laws in

Bangladesh, and may impact Bangladesh’s continued role as a major supplier of apparel, due to

corporate buyer concerns over branding and reputation. Key issues may include whether firms

will continue to source apparel from Bangladesh, or whether firms will engage more proactively

to improve conditions there, as well as the extent to which corporate codes of conduct have been

helpful.18

A number of interested parties, including parties in Europe and the United States, among them

President Obama, and a number of Members of Congress, are calling for U.S. and European

companies and other stakeholders to work together to solve the problems. (See section below.)

Figure 2. Worker Rights Principles Included in ILO Core Labor Principles,

U.S.Trade Preferences and Agreements, and Some Private Sector Codes of Conduct

Private Sector Codes of

Conduct

U.S. Trade and

Investment Laws

ILO

• Internationally

Recognized

Worker Rights:

Core Labor Principles

• Freedom of association and right to

organize

right to organize,

and bargain

collectively

prohibition of

forced labor

protections for

child labor

acceptable

conditions re:

minimum wages,

hours, and

occupational

safety and

heealth

• Elimination of forced labor

• ILO Core Labor

Principles

• U.S. internationally

•

recognized worker

rights

Corporate standards

• Abolition of child labor

• Elimination of employment and

occupational discrimination

Other

• Acceptable conditions of work pertaining

to occupational safety and health

Source: Graphic prepared by CRS.

Disney has announced it will leave Bangladesh and relocate elsewhere. Source: “Bangladesh Fears an Exodus of

Apparel Firms,” The New York Times, May 2, 2013.

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Bangladesh Apparel Factory Collapse: Background in Brief

U.S. and International Responses to the

Bangladesh Tragedy

Response to the Bangladesh tragedy has come from Congress, the Administration, the Bangladesh

government, the ILO, and the private sector, and continues to evolve. This section briefly

describes recent, somewhat overlapping, developments.

Congress

Congressional interest in the Rana Plaza factory collapse stems from its legislative and oversight

responsibilities over trade, and key business and labor constituencies. These concerns intersect

with private sector interests, including the viability of their international supply chains, and brand

reputation.

Soon after the Rana Plaza collapse, some Members of Congress encouraged businesses and other

stakeholders to work together to improve conditions for workers in Bangladesh. On May 1, 2013,

for example, Representatives Sander Levin, ranking Member of the House Ways and Means

Trade Subcommittee, and George Miller, ranking Member of the House Education and the

Workforce Committee, sent a letter to President Obama, urging the Administration to convene

representatives of European and American retailers, the Bangladesh garment industry (including

their workers and unions), the Bangladeshi government, the ILO, and nongovernmental

organizations, to facilitate development of a “concrete action plan” to address the range of issues

relating to working conditions and worker rights in the garment sector.19

In addition, a group of 8 U.S. Senators, led by Senators Harry Reid and Sherrod Brown, and a

group of 10 Representatives, led by House Minority Leader Nancy Pelosi and House Minority

Whip Steny Hoyer, wrote letters to major retailers encouraging them to join efforts to improve

fire and building safety in Bangladesh apparel factories.20 21 Two major stakeholder efforts have

resulted: the “Accord on Fire and building Safety in Bangladesh,” signed predominantly by

European, plus a few U.S. retailers and brands; and the “Alliance for Bangladesh Worker Safety,”

signed predominantly by large North American retailers and brands. (See further discussion

below under “Private Sector”.)

House Ways and Means Committee, “Levin, Miller Urge Action on Bangladeshi Worker Rights, Working

Conditions,” May 1, 2013. The Worker Rights Consortium, a labor rights monitoring group, estimates that it would

cost $600,000, on average, to elevate each of Bangladesh’s nearly 5,000 factories to western safety standards, for a

total of $3 billion. This $3 billion can be compared against a Bangladesh world export market of about $20 billion in

2011. Source: “How to Fix Bangladesh’s Factories,” Bloomberg Businessweek, May 12, 2013.

The other signatories of the letter are Senators Harkin, Durbin, Levin, Leahy, Murray, and Rockefeller. The letters

were sent to the following retailers: the Cato Corporation, Walmart, Sears, Kohl’s Target, Macy’s JCPenney, Gap,

Mango, George Westin Limited, VF Corporation, The Children’s Place Stores, and Corte Ingles. Source: “Reid,

Brown, Six Other Senators Call on Retailers to Sign Accord Guaranteeing Worker Safety in Bangladesh,” World Trade

Online, May 16, 2013.

“House Dems, Faith Groups join Chorus Calling For U.S. Retailers to Sign Bangladesh Worker Safety Accord:

Letter from 10 House Democrats,” World Trade Online, May 16, 2013. Additional signatories are Representatives

Sander Levin, George Miller, Lewis, Schakowsky, DeLauro, Becerra, Crowley, and Michaud. The U.S. retailers are

The Gap, JC Penney, The Children’s Place, Walmart, Target, Kohl’s, VF Corporation, Macy’s, and Sears/Kmart.

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Bangladesh Apparel Factory Collapse: Background in Brief

Executive Branch

U.S. government interests in the Bangladesh tragedy relate to its oversight of trade and

investment, its administration of trade agreements and trade preference programs, and a number

of efforts to strengthen the capacity of Bangladesh to promote worker protections.22 For example,

the United States has had a bilateral investment treaty with Bangladesh in place since 1989. After

the Rana Plaza tragedy, it signed an additional “Trade and Investment Cooperation Forum

Agreement” (TICFA), pledging closer cooperation to prevent more tragedies in the ready-made

garment sector.23

State Department, USTR, and Labor Department Response. After the Rana Plaza collapse, on

May 8, 2013, the State Department, Department of Labor, and USTR convened a conference call

with U.S. corporate “buyers” (retailers and brands sourcing in Bangladesh’s garment industry). In

that call, they “strongly urged” these major corporations to coordinate efforts with each other, and

with the government of Bangladesh, the Bangladesh Garment Manufacturers and Exporters

Association (BGMEA), civil society, and labor groups to (a) help pay for independent safety and

fire inspectors; (b) communicate to the Bangladeshi government their concerns about labor

conditions; and (c) urge immediate passage of labor law amendments to lay the basis for the

establishment of an ILO/World Bank Better Work Program for Bangladesh.24

On June 13, 2013, the Department of Labor’s Bureau of International Labor Affairs (ILAB)

announced that a competitive grant of $2.5 million would be awarded to recipient(s) who would

work to (1) strengthen the Bangladesh government’s ability to improve and enforce fire and

building safety standards; and (2) build the capacity of worker organizations to effectively

monitor violations of such standards and abate hazards in the ready-made garment sector.25

GSP Suspension for Bangladesh. The decision to suspend GSP status for Bangladesh, effective

September 3, 2013, with no timeline for restoring, it was made after the GSP Trade Policy Staff

Committee held hearings in March of 2013, in response to an AFL-CIO petition first submitted in

2007 and updated in 2012, after the Tazreen fire.26

Implications from the GSP suspension are yet to be determined. The GSP program excludes from

eligibility most apparel and textile articles (and other import sensitive products), which constitute

92% of Bangladesh’s exports to the United States. Therefore, the decision has little effect on U.S.

tariffs on apparel imports, which reportedly average about 16%.27 On the other hand, some

“Labor Dept. Offers $2.5 Million in Grants to Improve Will Fund Projects to Improve Bangladeshi Factory

Conditions,” by Niraj Chokshim National Journal, Government Executive, June 13, 2013.

USTR, “United States, Bangladesh Sign Trade and Investment cooperation Forum Agreement (TICFA),” November,

2013.

U.S. Department of State, “State Department Call With U.S. Buyers in Bangladesh Ready-Made Garment Sector,”

May 8, 2013; and “State Department Bureau of International Information Programs, Bangladesh, Private Partners Work

to Improve Worker Safety,” May 9, 2013.

“Labor Dept. Offers $2.5 Million in Grants to Improve Will Fund Projects to Improve Bangladeshi Factory

Conditions,” by Niraj Chokshim National Journal, Government Executive, June 13, 2013.

Office of the U.S. Trade Representative, “U.S. Trade Representative Michael Froman Comments on President’s

Decision to Suspend GSP Benefits for Bangladesh,” June 2013. See also, CRS Report RL33663, Generalized System of

Preferences: Background and Renewal Debate, by (name redacted).

Source of data: U.S. International Trade Commission (USITC) Dataweb. While one option might involve oversight

on possible suspension of GSP status for Bangladesh, as the USTR is considering, some experts have suggested

(continued...)

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Bangladesh Apparel Factory Collapse: Background in Brief

businesses might decide to pull out of Bangladesh for fear that their reputation could be damaged

by association with a country that has lost its GSP status for reasons relating to internationally

recognized worker rights. If that were to happen, some argue, it could significantly reduce

Bangladesh’s apparel-making labor force and adversely impact its economy.

The USTR’s “Bangladesh Action Plan 2013,” released to the public on July 19, 2013, outlined a

basis for possible eventual reinstatement of GSP status for Bangladesh.28 Its directives encompass

Bangladesh’s own “National Tripartite Plan of Action (NTPA) on Fire Safety and Structural

Integrity,” for the garment sector of Bangladesh (discussed further below under the “Bangladesh

Government.”) The USTR Action Plan for Bangladesh, among other things, set forth guidelines

for government inspections, labor law reforms, the protection of unions from anti-union

discrimination and reprisal, and the extension of freedom of association and collective bargaining

rights to export processing zones.29

Bangladesh Government

The Bangladesh government response after the tragedy was to work with the ILO on identifying

changes needed to better protect workers. The NTPA, (mentioned in the above paragraph), is the

most recent result. It is a consolidation of two earlier tripartite plans. It focuses on legislation and

policy, administration, and practical activities to improve safety in apparel factories. On July 15,

2013, the Bangladesh Parliament approved some changes to its labor laws. These changes were

designed to: (1) make it easier for workers to form labor unions; (2) increase severance and

retirement payments for workers with longer tenures; and (3) equalize, for all workers, annual

payments under a welfare fund. In addition, the government reportedly plans to add 200 factory

inspectors within six months, and to complete a comprehensive safety assessment (extending to

fire and structural safety) of all export-oriented garment factories.30 The government has also

been negotiating a new minimum wage for garment workers, who have been protesting against

low wages in light of recent inflation. The protesters have sought an increase in the minimum

wage from the U.S. equivalent of $38 to $104 per month.31 Effective December 1, 2013, the

Bangladeshi government raised the minimum wage for the country’s garment workers by 77% to

$68 per month.32

(...continued)

considering, as an alternative, extending tariff-free treatment for apparel, to Bangladesh, perhaps in conjunction with a

proposed ILO Better Work Bangladesh program under consideration. See “How to Avoid Another Bangladesh Factory

Disaster,” by Kimberly Elliot, Center for Global Development, May 7, 2013.

In the past, the USTR has suspended GSP status for worker rights issues, including for Burma.

Office of the U.S. Trade Representative, “Statement by the U.S. Government on Labor Rights and Factory Safety in

Bangladesh,” July 19, 2013.

“Bangladesh to Reform Labour Laws After Tragedy,” Financial Times, May 6, 2013, p. 4; “Bangladesh Factory Toll

Passes 800—Government Shuts 18 Sites for Safety Improvements, but No Big Outflow of U.S. Companies Seen,”

The Wall Street Journal, May 9, 2013; and “Global Retailers Join Safety Plan for Bangladesh; Will Pay for Changes,”

The New York Times, May 14, 2013.

“Bangladesh Garment Protests Enter Fourth Day,” by Arun Devanth, Bloomberg, September 24, 2013.

“Bangladesh Raises Minimum Wage for Garment Workers After Unrest,” by Arun Devnath, Bloomberg.com,

November 14, 2013, and “Bangladesh Factory Owners Wary of Wage Increase,” Wall Street Journal, December 4,

2013.

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

ILO

After initial review of the Bangladesh labor law amendments, the ILO stated that the new law

“did address some of the ILO’s specific concerns, while falling short of several important steps

called for by the ILO supervisory system to bring the law into conformity with ratified

international labor standards.” For example, the ILO noted that major areas remaining to be

addressed include (1) a 30% minimum membership requirement to form a union; and (2) the fact

that many collective bargaining rights are not extended to workers in export processing zones,

which reflect heavy foreign investment.33

Additionally, the ILO is participating in: (1) a three-year program on “Improving Working

Conditions in the Ready-Made Garment Sector” to support implementation of the NTPA;34 and

(2) the 2013 European Union (EU)-Bangladesh-ILO “Sustainability Compact for Continuous

Improvements in Labor Rights and Factory Safety in the Ready-Made Garment and Knitwear

Industry in Bangladesh.” In addition, on October 22, 2013, the ILO and the World Bank’s

International Finance Corporation (IFC) announced the establishment of a “Better Work

Program” in the ready-made garment sector in Bangladesh. The Better Work Program is a

partnership with government, employers, workers, international buyers, and other relevant

stakeholders to improve working conditions in the industry and support its long-term

competitiveness.35

Private Sector

Private sector responses to the Bangladesh tragedy have varied. According to press reports,

retailers and some apparel firms have acknowledged their links to unsafe Bangladesh factories,

while others have hedged.36 Another private sector response has been for businesses to debate

whether to leave Bangladesh and relocate to countries with fewer high-visibility labor issues, or

stay and help solve them in Bangladesh. Some companies, including Disney, as previously

mentioned, are considering not sourcing from Bangladesh for a number of reasons, including

concerns about their business reputation.37

A broader response from many corporations, particularly in Europe, has been to join forces to

support change in Bangladesh. After the building collapse, officials from two dozen retailers and

apparel companies met with representatives from the German government to try to negotiate a

plan to ensure safety at roughly 4,500 garment factories in Bangladesh.38 On May 13, 2013,

several of the world’s largest apparel companies agreed to a legally binding “Accord on Fire and

Building Safety in Bangladesh” to help pay for fire safety and building improvements there.39 It

ILO, “ILO Statement on Reform of Bangladesh Labor Law, July 22, 2013”.

Ibid. See also, “Conclusions of the I LO’s High Level Mission to Bangladesh.” May 4, 2013. The original effort to

assist Bangladesh after the Rana Plaza collapse was jointly sponsored by the ILO and the International Finance

Committee (IFC), a member of the World Bank Group.

Better Work, “IFC Partners with ILO to Launch Better Work Program in Bangladesh, Improve Worker Safety,”

October 30, 2013.

“After Disaster, PR Tactics Vary; Some Clothing Firms Quickly Concede Links to Unsafe Bangladesh Factory.

Others Hedge,” Los Angeles Times, May 9, 2013.

“Bangladesh Fears an Exodus of Apparel Firms,” The New York Times, May 2, 2013.

“Some Retailers Rethink Their Role in Bangladesh,” The New York Times, May 1, 2013.

The Accord was created by the IndustriALL Global Union and the UNI Global Union together with

(continued...)

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

requires a five-year commitment from participating retailers to conduct independent safety

inspections of factories, and pay up to $500,000 per year toward safety improvements. More than

100 mostly European corporations have signed onto the accord, including Swedish retail giant

H&M (the largest producer of apparel in Bangladesh); Inditex, headquartered in Spain; C&A, a

Dutch retailer; and Primark and Tesco (British retailers). U.S. signatories include PVH, the parent

company of Calvin Klein, Tommy Hilfiger, and Izod, which has signed on to the five-year plan,

contributing $2.5 million; and Abercrombie and Fitch.40

Other U.S. companies that resisted signing, objecting primarily to the agreement’s legally binding

nature, have formed a separate group, the “Alliance for Bangladesh Worker Safety.” The alliance

was organized under the Bipartisan Policy Center (BPC), by former Senate Majority Leader

George Mitchell and former Senator Olympia Snowe. Corporate members of the Alliance have

pledged over $100 million in capital to support remediation of factories. In addition, $42 million

raised for the Worker Safety Fund reflects a tiered fee structure for members based on exports of

apparel products from Bangladesh. The group was founded by 17 North American apparel

retailers and brands, including Gap, J.C. Penney, Jones, Kohl’s, L.L. Bean, Macy’s Nordstrom,

Sears, Target, VF Corporation, and Wal-Mart.41 (See Appendix Table A-1 for a comparison of

the two plans.)

Issues for Congress

Congressional options relating to the Rana Plaza collapse may cover a range of issues, including

allowing the situation to resolve itself. Broadly speaking, Congress may wish to conduct

oversight and examine a comprehensive effort by the international community to support change

in Bangladesh.

Key questions for Congress include the following:

•

Is the ILO/World Bank Better Work program an effective approach, and has it

been implemented successfully in other countries?

•

How soon should GSP eligibility for Bangladesh be reconsidered? Should tariff

benefits for apparel be extended to Bangladesh to support it in improving the

safety conditions of its workers?42 Are there other steps the U.S. government

should take?

(...continued)

nongovernmental organizations the Clean Clothes Campaign and the Worker Rights Consortium

“Global Retailers Join Safety Plan for Bangladesh,” The New York Times, May14, 2013, p. A1. Bangladesh Factory

Safety Accord: At Least 14 Major North American Retailers Decline to Sign, The Huffington Post, May 17, 2013. See

also “H&M, Primark, Others Sign Legally Binding Agreement on Building, Fire Safety In Bangladesh: Reactions:

Walmart; The Gap,” Inside U.S. Trade, May 14, 2013.

Bipartisan Policy Center, “Alliance of Leading Retailers in North America Join Forces in Comprehensive, Five-Year

Commitment to Improve Factory Safety Conditions for Workers in Bangladesh,” July 10, 2013.

While one option might involve possible suspension of GSP status for Bangladesh, as the USTR is considering, some

experts have also suggested as an alternative extending tariff-free treatment for apparel to Bangladesh, perhaps in

conjunction with a proposed ILO Better Work Bangladesh program under consideration. See “How to Avoid Another

Bangladesh Factory Disaster,” by Kimberly Elliot, Center for Global Development, May 7, 2013.

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

•

How much progress have the Accord and the Alliance achieved so far in

promoting safety workplaces in Bangladesh?

•

Will the ILO be monitoring the implementation of changes to Bangladeshi labor

law? What are its current efforts in Bangladesh?

•

What are possible unintended consequences for Bangladeshi apparel workers if

action leads to a decline in the apparel industry?

Proposed Amendment to 2014 National Defense Authorization Act

Leading up to passage of the 2014 National Defense Authorization Act,43 the House bill contained

a provision (Sec. 634) that would have required the defense commissary system and the exchange

store system to: (a) comply with requirements of the Bangladesh Accord; and (b) in its purchases,

give preferences to signatories of the Accord. In addition, the Department of Defense would have

been required to notify Congress of garments sold in defense commissaries or exchanges that did

not comply with these requirements (i.e., were manufactured by nonsignatories). The final

agreement did not include these provisions.44

The House sponsors45 of the amendment noted in a joint statement that garments and documents

with U.S. Marine insignia were found in the rubble in the November 2012 Bangladesh Tazreen

Fire. Data indicated that the Army-Air Force Exchange, a military retailer, imported 124,000

pounds of garments from several factories in Bangladesh. The sponsors argued that “as a huge

purchaser of garments, the U.S. military should not be complicit” in putting the lives of

Bangladesh workers at risk.46

H.R. 3304, P.L. 113-66, December 26, 2013.

World Trade Online, “2014 Senate Version NDAA Includes Provision for New Export Strategies to Africa, Excludes

House Bangladesh Amendment,” December 18, 2013.

House sponsors were Rep. George Miller, ranking member of the House Education and the Workforce Committee,

and Rep. Jan Schakowsky.

Ibid. See also, World Trade Online, “Amendment Pressures Military Retailers to Back Bangladesh Accord,” June 20,

2013.

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

Appendix.

This appendix compares key provisions of the Bangladesh Accord and the Bangladesh Alliance.

Both plans build on Bangladesh’s “National Tripartite Action Plan on Fire Safety (NAP) for the

Ready-Made Garment Sector in Bangladesh,” released in July, 2013. This plan, jointly agreed to

by the government of Bangladesh, employer organizations, and worker organizations, with help

from the International Labor Organization (ILO), is a consolidation of two earlier tripartite plans.

It focuses on legislation and policy, administration, and practical activities to improve safety in

apparel factories.

The Accord and the Alliance plans are similar in some regards. Both plans require health and

safety committees in all Bangladesh factories that supply companies that are signatories. Both

plans require inspections and remediation of hazards, and training of management and workers, in

accordance with Bangladeshi law. They differ, however, in their approach to worker protections.

Under the Accord, signatories are obligated to require suppliers to extend certain rights to

workers, including the right to refuse work they justifiably believe to be unsafe, and the right to a

continued employment relationship and income, while the factory is undergoing required safety

improvements. Under the Alliance, workers are not given these rights directly. Rather, they are

“empowered” to report safety hazards; and 10% of a fund contributed to by the signatories is

reserved to support workers temporarily displaced because of factory remediation. Because the

programs are still in their early stages of implementation, no reports have yet been issued

estimating the effects of either plan.

Stakeholders for the Alliance typically emphasize the similarities between the plans and

emphasize their rapid development of protocols.47 Many stakeholders for the Accord argue that

the Accord is a legally binding agreement between companies and trade unions, and includes a

central role for workers and worker representatives, including direct trade union participation in

factory training. They argue that the Alliance is not legally binding and has no role for trade

unions, workers, and worker representatives.48

See, for example, The Alliance for Bangladesh Worker Safety, “Milestones: A Five-Year Commitment.”

The Bangladesh Accord Foundation, FAQs.

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

Table A-1. Comparison of Key Provisions of Bangladesh “Accord” and “Alliance”

(See table notes for definitions of source abbreviations.)

Subject

Accord on Fire and Building

Safety in Bangladesh: “Accord”

Alliance for Bangladesh Worker

Safety:

“Alliance”

Overview

Signatories

At least 100 signatories including the

following unions: IndustriALL Global

Union and UNI Global Union; NGOs:

Clean Clothes Campaign, and

Worker Rights Consortium;

European corporations; and at least

four U.S. corporations, which include

PVH Corp., parent company of

Calvin Klein, Tommy Hilfiger, and

Izod; Abercrombie and Fitch; Sean

Jean Clothing; and American Eagle

Outfitters.

At least 26 signatory companies

including Gap, Wal-Mart, Target,

Sears, Macy’s Nordstrom, J.C.

Penney, L.L. Bean, VF Corporation,

and Costco. These 20 companies

account for the “overwhelming

majority of ready-made garments in

the U.S. imports from Bangladesh”

(Overview, p. 3).

General Commitment

To establish a fire and building safety

program in Bangladesh for a period of

five years – a program that will

finance and implement a number of

elements (p. 1).

A “binding, five-year undertaking to

share knowledge, experiences, and

best practices” (with exceptions

below).

(Alliance Members’ Agreement

(MA), p. 14, ¶9.1),

Signatories may resign from certain

sourcing relationships after two years

under certain conditions (Accord,

p.6, ¶23).

Members may resign from the

program after two years with no

financial penalty (MA, p. 14, ¶9.1).

The program is governed by the 7member Steering Committee (SC):

~3 seats chosen by trade union

signatories;

~ 3 seats chosen by businesses;

~ plus a neutral chair chosen by and

representing the International Labor

Organization (ILO).

The program is run by the 9member Board of Directors:

~ 4 company representatives;

~ 4 stakeholder representatives with

qualifications in: worker safety,

human rights, anti-corruption, labor,

development, international

diplomacy, governance, or supplier

interests in Bangladesh, and

~ an elected Board chair (Overview,

p. 4).

Administrative activities of the SC

include management, and oversight of

financing, and the work of the Safety

Inspector and the Training

Coordinator (p. 2, ¶4).

Administrative activities include

support for third-party training,

inspections, worker empowerment,

and for workers temporarily

displaced due to factory remediation

activities. (MA, p. 3, ¶2.2).

Three steps:

(1) Any dispute between parties

under this agreement shall be decided

by a majority vote of the Steering

Committee;

(2) Decisions may be appealed to a

final and binding arbitration process;

(3) The arbitration decision is

enforceable in a court of law in the

Members agree to the financial

commitments and components of

the worker safety program.

Governance

Dispute Settlement

Congressional Research Service

Noncompliance for delinquent

companies can result in binding

arbitration. Possible action for

noncompliance includes termination

of membership in the Alliance

Bangladesh Apparel Factory Collapse: Background in Brief

Subject

Accord on Fire and Building

Safety in Bangladesh: “Accord”

Alliance for Bangladesh Worker

Safety:

“Alliance”

domicile of the signatory against

whom enforcement is sought.

(Overview, p. 5).

Signatories contribute to two basic

funds:

Signatories contribute to two funds:

Specific Commitments

Financing

~ For administrative activities

through share contributions based on

annual volumes of garment

production in Bangladesh, subject to

a maximum contribution of $500,000

per year (p. 6, ¶24).

Inspections

Training

Congressional Research Service

~ The “Worker Safety Fund” for

administrative activities including

inspections, training, worker

empowerment, and assistance to

temporarily displaced workers,

through a tiered fee structure.

Maximum contribution $1million per

year. The fund is currently valued at

over $42 million (MA, p. 2, ¶2.2).

~ For financing remediation required

of their suppliers in Tier 1and Tier 2

factories (covering 65% of their

production in Bangladesh) through

joint investments, loans, accessing

donor or government support,

business incentives, or direct

payment (p. 6, ¶22).

~The “Affordable Capital for

Building Safety,” fund is designed to

provide suppliers with access to

affordable loans to finance needed

factory repairs and/or improvements

(MA, p.4, ¶2.3.1).

Signatories are committed to

continue business at Tier1and Tier 2

factories for the first two years,

generally speaking. After that, they

may resign from these sourcing

relationships without penalty (p.6

¶23).

Signatory members may resign from

the Alliance program after two years

without financial penalty (MA, p. 14,

¶9.1-9.4).

Each signatory company shall require

that its suppliers in Bangladesh

participate fully in the inspection and

remediation, activities. If a supplier

fails to do so, the signatory will

promptly implement a notice and

warning process leading to

termination of the business

relationship if these efforts do not

succeed (p. 5, ¶21).

Members have self-imposed

deadlines for meeting inspection

requirements (Alliance Overview, p.

5).

Signatories shall require factories to

implement corrective actions

identified by the Safety Inspector (p.

1).

Each member will be responsible for

developing its own approach to

addressing its relationship with

factories deemed “At-Risk” (MA p

10, ¶6.2(1))

Signatory companies shall require

their suppliers to provide factory

access to safety training teams

designated by the Training

Coordinator. Such teams shall include

safety training experts as well as

qualified union representatives (p. 4,

¶16).

Members commit to providing safety

and empowerment training for 100%

of factories in the members’

respective supply chains (MA, p. 1).

The Alliance reports that it currently

has pledges of at least $100 million.

Inspections are to be carried out by

members or their representatives

and/or by independent qualified

inspectors (MA, p. 9, ¶6.1).

Bangladesh Apparel Factory Collapse: Background in Brief

Subject

Worker Protections

Accord on Fire and Building

Safety in Bangladesh: “Accord”

Alliance for Bangladesh Worker

Safety:

“Alliance”

Maintain employment relationship

and income: Signatories shall require

supplier factories to maintain

workers’ employment relationship

and regular income while the factory

is closed for such renovations for up

to six months. If the supplier fails to

do so, the signatory shall implement a

notice and warning process that may

lead to termination of the business

relationship (p. 4, ¶16 and p. 5, ¶21).

10% of the worker safety fund will

be reserved to support temporarily

displaced workers due to factory

remediation (MA, p. 3, ¶2.2).

Offer of employment: Signatory

companies shall make reasonable

efforts to ensure that any workers

whose employment is terminated as a

result of loss of factory orders are

offered employment with safe

suppliers (p. 4, ¶14).

In the event of a fire or safety

emergency, the Executive Director

(of the Board) will convene affected

members to coordinate a response

on the transition for such displaced

workers and/or aid to victims of

such an emergency, (MA, p. 3,

2.2(b)(ii)).

Right to refuse work: Signatories shall

require their supplier factories to

respect the right of a worker to

refuse work, or to refuse to enter or

remain in a building, under conditions

they justifiably believe are unsafe,

without suffering loss of pay, (p. 4,

¶15).

Members are committed to

empower workers to communicate

their factory fire and building safety

concerns, without risk of retaliation,

to the Alliance or to an independent

third party acting on behalf of the

Alliance, through face-to-face

interaction, or hotlines, and

indirectly through random sampling.

(Overview, p. 3; MA, p. 1 and p. 6,

¶3.2(a)).

Signatory companies shall require

worker/management health and

safety committees in all Bangladeshi

factories and they shall function in

accordance with Bangladeshi law (p.

4, ¶17).

Worker participation committees

will be created at every Alliance

member factory, subject to

Bangladeshi law. (Overview, p. 6).

Sources: Accord on Fire and Building Safety in Bangladesh; The Alliance for Bangladesh Worker Safety, “Statement of

Purpose and Action Plan” and “Overview”, and “Members Agreement” (MA).

Author Contact Information

(name redacted)

Specialist in International Trade and Finance

/redacted/@crs.loc.gov, 7-....

Congressional Research Service

Bangladesh Apparel Factory Collapse: Background in Brief

Acknowledgments

Special thanks to the following for assistance in this report: Cortney E. Dell, (name redacted), (name

redacted), (name redacted), (name redacted), Ronald O’Rourke, (name redacted), Mallary A. Stouffer, and

Sandra Edwards.

Congressional Research Service

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