An accord designed to prevent another deadly disaster in Bangladesh's garment industry drew sharp criticism from a major U.S. retail trade group on Wednesday, which said it would constrain legal rights of U.S. companies, even as more European retailers signed on to the pact.
Wednesday is the deadline for retailers to decide whether to sign onto a fire-and-building safety agreement for Bangladesh, led by labor groups such as Europe's IndustriALL. Almost 30 garment and retail brands sourcing from Bangladesh - including the world's two biggest fashion retailers - have signed up so far, though few major U.S. companies have done so.
Some U.S. retailers, including Gap Inc (GPS.N), have said they would not join the European pact without changes to the way conflicts are resolved in the courts.
Wal-Mart Stores Inc (WMT.N), the world's largest retailer, said it does not plan to sign the accord because it believes its own stepped-up safety inspection plans will get faster results.
Efforts to work on safety improvements in thousands of garment factories come after more than 1,200 workers have died in the past six months in industrial accidents in Bangladesh. The collapse last month of the eight-story Rana Plaza building, which killed more than 1,100, was the deadliest industrial accident since the 1984 Bhopal disaster in India.
Now, companies are choosing whether to sign onto the accord, stick to their own safety programs, or perhaps join a possible pact being discussed by North American trade groups.
The pact includes a binding arbitration process that would be enforceable in the courts of the country where a company is domiciled, according to the text of the agreement that was released on Wednesday. Binding arbitration typically restricts the ability of the parties involved to appeal any decision in court.
In addition, companies that sign on must fund activities of a steering committee, safety inspector and training coordinator, contributing up to $500,000 per year for each of the five years of the agreement.
The Washington, D.C.-based National Retail Federation on Wednesday criticized the accord. It "veers away from commonsense solutions and seeks to advance a narrow agenda driven by special interests," the trade group's president and chief executive, Matthew Shay, said.
The accord "exposes American companies to a legally questionable binding arbitration provision, a process that serves only the unions, not the workers they represent," Shay said, adding that it seeks major funding without providing accountability for how funds are spent.
According to the NRF, when retailers asked for further discussions on U.S.-specific concerns, leaders of the accord were not willing to engage.
IndustriALL spokesman Tom Grinter said the agreement, signed mostly by European companies so far, could not be amended to address concerns of U.S. companies.
"The clear message is that the legally binding nature of the accord is what makes it a historic game changer and watering that down is absolutely out of the question," Grinter said.
Signatories to the accord included the world's two biggest fashion retailers, Inditex (ITX.MC), owner of the Zara chain, and H&M (HMb.ST).
New signatories on Wednesday included British department store operator John Lewis and Arcadia Group, whose chains include Topshop.
$38 A MONTH
The April 24 collapse of Rana Plaza in Savar, near Dhaka, has focused attention on safety standards at Bangladesh factories that make clothing for the world's major apparel brands and retailers. The death toll at Rana Plaza stood at 1,127 as rescue operations ended this week.
Companies that rely on Bangladesh for inexpensive apparel have yet to agree on how best to ensure safe working conditions. Wal-Mart's approach may be faster, but touches only a fraction of Bangladesh's estimated 6,500 garment factories. The European-led accord will take months to implement, but covers a wider spectrum.
Wal-Mart has begun checking the 279 factories that supply its stores, and plans to inspect them all within six months. It has already turned up two locations with safety problems, and it asked the Bangladesh government to suspend production at those factories. Wal-Mart said on Tuesday that it believes its own safety plan meets or exceeds the IndustriALL proposal, and will get results more quickly.
Another union official who has been working on the accord, Philip Jennings, general secretary of UNI Global Union, on Wednesday said in a statement that Wal-Mart was "acting as the pirates of the supply chain" and called its alternative solution "meaningless." UNI Global is a Swiss-based group that says it has 900 affiliated unions around the world.
Meanwhile, documents found at Rana Plaza by the Bangladesh Center for Worker Solidarity showed that orders were placed last year by a Wal-Mart supplier, Fame Jeans, for work to be done at that complex. Wal-Mart said on Wednesday that it is terminating its relationship with Fame Jeans due to its policy on unauthorized subcontracting.
In Chittagong, about 250 kilometers (155 miles) from Dhaka, the capital of Bangladesh, workers at one factory that Wal-Mart wants closed said they were unaware of any safety concerns and business was proceeding as usual. Company officials at Stitch Tone Garments Ltd said they were no longer making clothes for Wal-Mart, but did not reveal who they were currently supplying.
"We don't know about the problems of our owners. We don't know about the risk of building. We are working for our livelihood. If we stop the work, we cannot survive," one of the workers, Parvin Akter, said.
The minimum wage for Bangladesh's garment workers is about $38 a month, although many factories pay more than that to attract workers in a tight labor market. Bangladesh ranked last in minimum wages for factory workers in 2010, according to World Bank data.
North American retailers discussed forging their own Bangladesh safety agreement as an alternative to Europe's plan, although details were sparse.
Despite the differences between U.S. and European companies, the fact that the world's biggest retailers were ready to act indicates that the latest tragedy has begun to bring about change.
In Dhaka, the government has inspected and closed more than a dozen garment factories because of structural problems.
Workers have also begun to demand greater safety and labor rights protections. Earlier this week, worker unrest prompted authorities to shut more 300 garment factories for indefinite periods in the Ashulia industrial belt, on the outskirts of Dhaka, which accounts for nearly 20 percent of total exports.
Garments make up about 80 percent of Bangladesh's exports, so the government wants to ensure business continues as usual. With wages less than half of what workers make in China, Western retailers are just as eager to keep sourcing from Bangladesh.
But some workers doubt that change will come any time soon. Mominur Rahman, who damaged his spine jumping from the third floor to escape the deadly fire that ripped through the Tazreen factory in November, said working conditions remain tough.
"We need to work collectively: workers, factory owners and the government, to see improvement," he said through an interpreter at a workplace safety conference in Thailand last week. "The factory inspection system in Bangladesh needs to be increased and improved. I never saw a factory inspection at the Tazreen factory, not once. Same with the Savar tragedy, nothing will change immediately."
(Additional reporting by Nazimuddin Shyamol in Chittagong, Nivedita Bhattacharjee in Chicago, Emma Thomasson in Zurich and Amy Sawitta Lefevre in Bangkok; Writing by Emily Kaiser; Editing by Michael Perry, Maureen Bavdek and Leslie Adler)