A trans-Atlantic divide between European and U.S. retailers over how best to respond to fatal disasters in Bangladesh textile factories split wide open on Wednesday, with U.S. retailers claiming their European counterparts are giving labor unions too much control over ensuring workplace safety.
Some U.S. retailers, including Gap Inc, had said they would not join the European pact without changes to the way conflicts are resolved in the courts. The rhetoric sharpened considerably when a U.S. trade group, the National Retail Federation, after calls with member companies and other groups, issued a stinging rebuke of the European-led safety accord.
The U.S. solidarity did show one high-profile crack late Wednesday when Abercrombie & Fitch Co announced it had verbally agreed to join the accord.
"We are committed to Bangladesh and support industry-wide efforts to improve safety standards," Abercrombie's director of sustainability, Kim Harr, said in a statement. "We believe this is the right thing to do to bring about sustainable, effective change."
The accord came together last week in the aftermath of the April 24 collapse of Rana Plaza in Savar, near Dhaka, the second high-profile disaster at a Bangladeshi textile center in recent months. The death toll at Rana Plaza stood at 1,127 this week, making it the deadliest industrial accident since the 1984 Bhopal disaster in India.
Earlier this week, apparel company PVH Corp, marketer of the Calvin Klein and Tommy Hilfiger brands, became the first U.S. company to join the accord.
Even so, the U.S. retail and apparel industry remained nearly unanimous in criticizing the compact. Matthew Shay, chief executive of the National Retail Federation, in a statement Wednesday said the accord, hammered out in recent weeks under leadership of IndustriALL, a union organization based in Europe, "veers away from commonsense solutions and seeks to advance a narrow agenda driven by special interests."
He said it "exposes American companies to a legally questionable binding arbitration provision, a process that serves only the unions, not the workers they represent."
Wal-Mart Stores Inc, the world's largest retailer, on Tuesday had preempted the U.S. industry rejection of the European initiative by stating that it intended to work on its own. Wal-Mart said it will implement a stepped-up plan to improve working conditions in Bangladesh factories it employs.
Gap this week became the first of several U.S. retailers to say they would not join the European pact without changes to the way conflicts are resolved in the courts. The accord drew sharp criticism from a major U.S. retail trade group for not calling for equal responsibility from the Bangladeshi government and factory workers.
IndustriALL said the accord 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," IndustriALL spokesman Tom Grinter said.
Signatories to the accord included the world's two biggest fashion retailers, Inditex, owner of the Zara chain, and H&M, as well as British department store operator John Lewis and Arcadia Group, whose chains include Topshop.
The accord calls for binding arbitration 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 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 National Retail Federation, the U.S. trade group, criticized the funding component for not providing for accountability for how funds are spent.
IndustriALL had set Wednesday as the deadline for retailers to sign on to the fire-and-building safety agreement framed out initially by union and non-governmental groups. proposed by the European groups. Almost 30 garment and retail brands sourcing from Bangladesh had signed ahead of the deadline.
A group of five North American retail trade associations and companies had sought to draft their own proposals in recent days. The NRF said a proposal has circulated, but no retailer had signed it yet.
Jonathan Gold, an official with the NRF, said the North American proposal takes into account other stakeholders like the Bangladeshi government and factory owners, as well as the brands and retailers.
Retailers "are afraid what will happen if there was some kind of arbitration ruling and how it's going to come back to them," he said.
The chief executive of the trade group American Apparel & Footwear Association, Kevin Burke, on Wednesday said he met with several Bangladesh government officials, including the foreign minister and the Bangladesh ambassador to the United States as they "begin high-level discussions with all apparel industry stakeholders."
The North American and European companies that rely on Bangladesh for inexpensive apparel are still split on how best to ensure safe working conditions. Wal-Mart's approach, while potentially faster, touches only a fraction of Bangladesh's estimated 6,500 garment factories. The European-led approach covers a wider spectrum.
Wal-Mart said it has begun checking the 279 factories that supply its stores, and plans to inspect them all within six months.
A union official who helped draft the European accord, Philip Jennings, head of Swiss-based 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."
In Chittagong, about 250 kilometers (155 miles) from Dhaka, workers at one factory that Wal-Mart wants closed said they were unaware of any safety concerns.
"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.
Even so, there were signs of change. In Dhaka, the government has inspected and closed more than a dozen garment factories in recent weeks because of structural problems.
Some workers remain skeptical. Mominur Rahman, who damaged his spine jumping from the third floor to escape the deadly Tazreen fire last year, said working conditions remain tough.
"The factory inspection system in Bangladesh needs to be increased and improved," he said through an interpreter at a workplace safety conference in Thailand last week. "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)