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Factory collapse backlash threat to Dhaka
The death of more than 400 people after the collapse of a garment factory in Bangladesh could lead to tighter standards
Bangladesh may lose its preferred trading status in the United States and Europe as the collapse of a factory near the capital Dhaka has thrown the outlook of the country’s key low-cost garment industry into doubt.
More than 400 people have died and hundreds more were injured after an eight-storey building in the town of Savar collapsed last week. As the death toll continues to climb both the US and European Union have put a system of trade preferences that allows goods to enter duty free under review.
The US Administration has been concerned about the worker rights situation in Bangladesh for some time, including issues related to worker safety.
In January the US Trade Representative (USTR) said it was considering withdrawing or suspending Bangladesh from the generalized system of preferences (GSP) that allows it to export goods duty free.
A spokesman for acting USTR Demetrios Mazantis told Emerging Markets he had “conveyed those concerns on numerous occasions” to the highest levels of the Government of Bangladesh.
The USTR had urged the Dhaka government and all players in the garment sector to devote renewed attention to worker safety issues, including building and fire safety, in order to prevent any future such tragedies. The next steps in the review of Bangladesh’s GSP will be announced by the end of next month.
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“The European Union is very concerned about the labour conditions, including health and safety provisions, established for workers in factories across the country,” he said in Brussels. “The EU calls upon the Bangladeshi authorities to act immediately to ensure that factories across the country comply with international labour standards.”
As with previous fatal accidents at factories supplying other multinationals – a fire in 2010 and 2012 and a building collapse in 2005 – April’s tragedy prompted a vow from retailers to do more on safety.
Richard Baldwin, professor of international economics at the Graduate Institute, Geneva, pointed to revelations in 1997 about working conditions at Vietnamese factories supplying Nike.
“Nike got serious about health and safety, but they didn’t stop outsourcing,” he told Emerging Markets. “So, nothing dramatic, but hopefully more attention by Western consumers and thus Western companies to health and safety issues in low-wage nations.”
Ian Davis, professor in disaster risk management for sustainable development at Lund University in Sweden, said regulations in Bangladesh were not strong enough.
“The governance wasn’t there, the regulations weren't there,” he told Emerging Markets. “Look at it from the perspective of price pressure. Where I live, products are dirt cheap, so the risks here aren't restricted to Bangladesh. They are globalized and they are interconnected.”
Bangladesh is the world’s second largest exporter of shop-ready clothes after China and last year the industry, which employs 3 million people, reaped $12 billion in revenues.
Retailers in many western countries have confirmed that companies working in the Rana Plaza complex had supplied them with clothes. These include Primark and Matalan in the UK.
The British Retail Consortium said its members had developed trading programmes that were “driving up” standards among suppliers in developing countries. “This terrible incident emphasizes how important these are,” head of campaigns Richard Dodd told Emerging Markets.
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