Governing Global Garment Production (Pt. I)

Again, I’m very happy to be guest-blogging at Co-op this month. For my next couple posts, I’d like to focus on the situation of garment production in Bangladesh, which raises fascinating issues of global governance.

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About a year ago, major garment brands in the E.U. and U.S. announced separate and competing initiatives designed to prevent a recurrence of the horrific 2012-2013 Bangladesh factory disasters. The “Accord on Fire and Building Safety in Bangladesh” (“Accord”) was negotiated between various unions and most major European garment brands, as well as some American brands; the “Alliance for Bangladesh Worker Safety” (“Alliance”) was developed by U.S. brands, in particular Gap and Walmart, in conjunction with industry associations in Bangladesh. Under both, brands commit to source from Bangladesh for a period of time and to institute comprehensive systems of factory inspection and remediation.

A year in, the media has begun to report on tensions between the two groups around factory inspections, as well as other growing pains. A recent report from the NYU Stern School also criticized both agreements for doing too little to combat unauthorized subcontracting, arguing that their similarities outweigh their differences. While the press and academics should of course try to understand such tensions, and should point out each agreement’s structural weaknesses, I would argue that the Accord has transformative potential as compared to the Alliance. This point should not be lost in discussions.

In this post, I’ll outline the structural conditions that led to the agreements, and why they represent an important step forward in global labor standards protection. It is a sort of “explainer,” with apologies in advance to those already immersed in the details of the agreements. In a follow-up post, I’ll discuss the importance of the Accord in particular, arguing that it could be the template for a new global labor governance regime.

The agreements are best understood in the context of our existing system of global labor governance—which, in contrast to the binding and legalistic regimes governing trade and investment, is based almost entirely on “soft law.” The International Labor Organization (“ILO”) has enjoyed remarkable success in building normative consensus around its core labor standards—freedom of association and prohibitions on discrimination, child labor, and forced labor—yet it lacks basic enforcement capabilities, and those standards have no direct effect upon either nations or employers.

As a result, “hard-law” labor market regulations have been and remain largely the provenance of nation states. Yet many developing nations lack the political will either to regulate producers within their jurisdiction, and many wealthy nations lack the political will to impose binding duties on their multinationals. Moreover, the global investment regime creates strong disincentives for states to implement stringent labor regulations, lest they begin to appear hostile to investors.

Partially in response to this governance deficit, civil society organizations have long demanded that multinationals use their market power and internal regulatory capacity to ensure labor standards among their suppliers. Most have done so, adopting corporate social responsibility (CSR) codes that require suppliers to protect basic labor standards and to submit to frequent third-party inspections for compliance. But those private efforts have two basic problems.

First, they are generally unenforceable. They take the form of promises by brands to make best efforts to ensure decent working conditions, generally via codes of conduct and monitoring mechanisms. But those codes are carefully drafted so as to avoid any actual liability for suppliers’ labor practices. One need not fetishize formal legality to argue that enforceable commitments will generally have more impact than unilateral promises.

Second, academic observers increasingly agree that codes and monitoring alone are incapable of sustainably improving labor standards. In a recent book building on a decade of empirical research, the political scientist Richard Locke argues that even the best inspections regimes fall victim to price pressures and brands’ desires for quick turn-around times. This leads predictably, he argues, to pervasive mandatory overtime as well as violations of basic safety standards. Rather than remedying violations ex post, Locke argues, brands need to change their sourcing practices and build more collaborative relationships with suppliers.

While Locke seems clearly correct that sourcing practices need to change, it is unclear what—aside from enlightened self-interest—can actually force brands to do so. This is especially the case in ultra-competitive basic consumer goods sectors like garment and electronics. Public authorities could of course force brands and producers to do so by implementing and enforcing strong labor standards, but are unlikely or unable to do so for reasons noted above.

So in the garment sector at least, suppliers faced with demands for low costs and quick turnaround face strong incentives to cut corners. They might disregard basic safety standards such as fire exits and building structures; they might hire more workers and ramp up capacity on an as-needed basis, leading to extremely long work hours; or they might subcontract—or sub-sub-contract—to smaller, fly-by-night operations. Granted, many brands prohibit such unauthorized subcontracting pursuant to their CSR codes and supplier codes, but enforcing that commitment is difficult in the best of circumstances, and brands focused on the bottom line may have little incentive to enforce it anyway.

For years, the result in Bangladesh was a sort of perfect storm of regulatory failure. Many factories opened and grew with minimal oversight of their structural soundness or basic fire-prevention features like fire doors on staircases. Interim storage of large amounts of fabric or goods on particular floors, overcrowding, and even siting of garment machinery on top floors of poorly maintained buildings created the conditions for the 2012-13 disasters. While there isn’t a whole lot of evidence of a general “race to the bottom” in global labor standards across the board, the garment sector does seem to have such tendencies, likely because startup costs are so low and competition therefore so intense.

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The disasters began to change all that. After them, brands faced intense political and civil society pressure to respond—particularly since their existing CSR efforts had failed in important respects. One option was to “cut-and-run,” to cease sourcing from Bangladesh and instead to move to a jurisdiction with marginally higher wages but a better reputation for building safety, perhaps Cambodia, or China, or Mexico. Disney took that approach.

But worker advocates pointed out that doing so would involve abandoning some of the poorest workers on the planet, and called on brands to instead use their market power to reform the industry in Bangladesh. The result, after a great deal of political pressure generated by worker advocates and unions, was the signing of the Accord in May of 2013. The Alliance was announced around the same time, cast explicitly as an alternative to the Accord.

Both agreements seek to solve the collective action problems facing brands and suppliers. They establish independent organizations to inspect suppliers’ factories for compliance with fire and safety standards, and to publish a list of factories from which brands are sourcing; they require brands to continue to source from Bangladesh for a period of time; and they require brands to fund the inspections and safety remediation efforts.

In committing brands to work together and rationalize the industry, the agreements—and especially the Accord—represent major innovations in global labor governance. That said, such agreements are not without precedent: in the U.S., garment unions negotiated structurally similar “jobbers agreements” with brands and contractors in the 20th century, under which brands committed to utilize particular contractors and pay rates that enabled decent working conditions. U.S.-based NGOs and unions have also negotiated various tripartite agreements in the building services and agricultural industries, both of which are characterized by pervasive subcontracting and very low wages.

Again, in a subsequent post I’ll say more about the advantages of the Accord over the Alliance. That post will also pick up two questions that I think are very interesting and understudied in current debates. First, on a socio-legal level, I wonder what determines when and whether such tripartite agreements emerge, and what determines whether they will remain stable or even expand over time? Second, I wonder whether either or both agreements could be expanded to cover other issues, particularly freedom of association, and whether they could be expanded into other garment-producing nations. If so, we could see the beginnings of a new regime of transnational collective bargaining, one that could have powerful implications for global labor governance and global distributive justice.

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