Bangladesh Allows Free Unions in Textiles to Please the Western Buyers and WTO and Save $20bn Export

Bangladesh approved a highly-anticipated reform to its national labour law on 15 July broader effort toward averting future disasters such as the factory collapse in April that killed over 1,100 people. Separately, North American and European retailers that source Bangladeshi textile products have announced two respective plans in recent weeks aimed at improving safety standards for workers in the Asian country.

The factory collapse in Savar was one of the worst industrial disasters in recent memory. Bangladesh is the second-largest apparel exporter in the world after China, with a garment industry valued at US$20 billion per year.

Under the labour law revisions agreed on Monday in Dhaka, workers will not need approval from factory owners in order to form unions. Over 80 other sections of the law have also been revised, government officials note, in order to reflect the results of consultations held with factory owners and workers, retailers, development partners, and the International Labour Organization (ILO).

The announcement of the labour law changes comes just one week after the governments of the EU and Bangladesh, with the ILO’s support, agreed to a “sustainability compact” aimed at improving the country’s working conditions. One of Dhaka’s main commitments under the compact was the swift passage of labour law reform.

The EU had confirmed at the time that it would be keeping Bangladesh in its Everything But Arms (EBA) trade preference scheme - which grants least developed countries duty-free, quota-free access to the EU market for all goods exports, with the exception of arms and ammunition - as Dhaka works to implement its various commitments in the sustainability compact.

However, Brussels has left open the possibility of reconsidering the Asian country’s participation in EBA, should it find progress in implementing its sustainability commitments to be too slow.

Washington has already suspended Dhaka from its own trade preference scheme, though the US programme covers a much smaller percentage of Bangladeshi exports and does not include textiles.

In response, a group of over 70 companies - most of them European, and including garment giants like Inditex and H&M - has recently signed onto a binding safety deal with Switzerland-based unions UNI Global and IndustriALL.

Along with involving safety inspections in factories where these companies source their products, the initiative will also require participants to pay US$500,000 per year in order to help maintain safety standards, as well as keep funds in reserve for safety-related renovations to the production hubs. Companies will also be providing detailed information on which Bangladeshi factories they use for their products.

Meanwhile, a group of 17 North American companies, including the GAP, Macy’s, Sears, and JC Penney has decided to instead sign a non-binding agreement of their own, which would be in place for a period of five years. Among other provisions, the plan would involve inspections of all factories of the participating retailers and will attempt to establish common safety standards by October of this year.

These North American companies chose not to sign onto the binding version as they do not want to be exposed to “unlimited liabilities,” given the differences between the US and EU legal systems, explained Jay Jorgensen, the head of global compliance for Wal-mart.

Activists have urged the participating North American retailers to sign the alternative European accord in order to tackle the safety manufacturing issues in a more comprehensive and binding way. They have also noted that boycotting Bangladesh products will only harm the workers that need the most help, and are instead encouraging consumers to make ethical choices and select products from among the companies who have committed to the binding accords.