Wal-Mart Stores Inc, Gap Inc and other large US retailers are nearing an agreement to establish a $50 million, five-year fund to improve safety conditions in Bangladesh garment factories, a person familiar with the proposal said, reports Wall Street Journal.
The deal could be announced as soon as mid-July, but the details are still being worked out, said the person. The $50 million fund, a critical component of the deal, is contingent on the Bangladesh government meeting certain criteria that would ensure accountability for safety improvements, this person added. It wasn’t immediately clear what level of cooperation Bangladesh officials have agreed to provide.
Two months ago, these major US retailers were criticised for not joining a group of Western retailers that adopted a legally binding pact to improve worker safety in Bangladesh soon after a building collapse in April killed more than 1,100 garment workers.
The earlier pact was signed by dozens of large European retailers such as Hennes & Mauritz AB; Inditex, the parent company of Zara; Tesco PLC, and a handful of US retailers, including Abercrombie & Fitch Co and PVH Corp, maker of Calvin Klein and Tommy Hilfiger.
The agreement signed in May calls for participating companies to contribute no more than $5,00,000 toward the administration of the plan for each of the five years of the pact. Building repairs and renovations, which the brands have agreed to underwrite, carry their own price tag and can reach hundreds of thousands of dollars per factory.
Since then, Wal-Mart and Gap have been working with US retailers, including Target Corp, Macy’s Inc, JC Penney Co, Sears Holdings Corp and VF Corp, to come up with their own accord — in particular, one that wouldn’t expose them to broad legal liability.
The retailers confirmed they are participating in the talks but declined to elaborate.
Activists have tried for years to improve factory conditions in Bangladesh, which has quickly grown to become one of the world’s largest apparel producers. The problem, according to industry executives, is that, in the race to build new factories, building codes and safety standards were often ignored.
There are about 5,000 factories in Bangladesh. Wal-Mart works with nearly 300 of them, while Gap produces in more than 70. Neither Gap or Wal-Mart clothing was found in the rubble of the April factory collapse.
It isn’t clear whether the agreement currently being discussed or the European-led one will raise enough money to fully tackle the problem.
Labour activists who helped fashion the May accord have estimated that it will cost around $3 billion, or roughly $6,00,000 per factory, to renovate all 5,000 Bangladesh garment factories over five years.
Some experts say they are waiting to see whether the new plan will meet or exceed the safety benchmarks already laid down in the deal signed last month by more than 60 retailers.
They are doubtful that $50 million is enough to sufficiently cover the building overhaul needed to improve garment factories and are sceptical of any plans that depend on actions of the Bangladesh government, whose members include factory owners that have resisted such changes before.
‘With a clear bar already set, the question now becomes whether the plan put forward by Wal-Mart, Gap and others will fix the problems faster than the legally binding accord signed last month,’ said Dara O’Rourke, professor of environmental and labour policy at the University of California at Berkeley.
‘For a $20 billion garment industry, $50 million seems like a tiny amount to make real improvements,’ Prof O’Rourke said.
One important difference between the two accords is the level of legal liability signatories would be subject to.
Wal-Mart, Gap and other US retailers partly resisted signing on to the European-led accord, because it comes
with broad liability. Disputes that arise under the agreement between the parties, which include retailers and labour groups, are to be decided by a steering committee responsible for managing the safety programme.
Either party may appeal that decision to a final and binding arbitration process enforceable in a court of law of the home country of the signatory against whom enforcement is sought.
By contrast, the signatories of the US plan could be held legally liable in court by other signatories on two counts: if they agree to commit money to the program and then renege, or if they continue to manufacture in factories that are unsafe, according to the person familiar with the plan. However, if labour groups aren’t part of the agreement, it is unclear who will bring a claim against signatories that violate the safety agreement.
United Students Against Sweatshops and labour groups including the AFL-CIO and the United Food and Commercial Workers International Union denounced the US retailer’s separate agreement and announced plans to protest at Wal-Mart and Gap stores in more than 30 cities on Saturday.
Other aspects of the deal are still being worked out, including how the money will be spent and who will sit on the steering committee. In addition to representatives of retail companies and labour groups, the steering committee could also include government officials, the person familiar the proposal said.
After the April factory accident, one of the world’s worst industrial accidents, the Bangladeshi government said it would raise the minimum wage for garment-industry workers and make it easier for workers to unionize.
The government and factory owners also closed at least 20 factories for safety violations and suspended several factory inspectors it accused of negligence.
Still, some US retailers are concerned that an accord would have little impact without the involvement of Bangladesh officials, who they say have the power to ensure that building codes are enforced and worker rights upheld, according to people familiar with their thinking.
The Bipartisan Policy Centre and two of its prominent members, former senators George Mitchell, Democrat, and Olympia Snowe, Republican, both of Maine, have been leading the effort to broker a deal among the US retailers. The National Retail Federation and the American Apparel & Footwear Association also have been involved.
-With New Age input
