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Addressing Labor Concerns in Bangladeshi Export Processing Zones

Addressing Labor Concerns in Bangladeshi Export Processing Zones

Labor rights have been a contentious issue between the Government of Bangladesh and the U.S. Trade Representative since the revocation of the Generalized System of Preferences (GSP) in 2013. The GSP is a reduction in tariffs on the imports of lower income countries into the United States. Bangladeshi GSP was revoked by President Obama after the AFL-CIO Solidarity Center (a Foreign Labor Rights NGO associated with the union organizer) filed suit claiming that suspended labor rights in Export Processing Zones were a human rights violation as established under international law. The following background on this complex issue is derived from the text that I wrote for the U.S.-Bangladesh Trade and Investment Cooperative Framework Agreement that took place on November 23rd, 2015 (TICFA). However, the opinions and strategies expressed are mine alone and should not reflect on the U.S. Trade Representative. The TICFA is the annual forum for trade negotiations and the formal airing of grievances by both parties. As I was a direct witness to the TICFA, there is some information for which I have no citation. The background is followed by my policy formulation: I suggest a change in our target for remediation. Instead of futilely trying to convince the Government of Bangladesh to comply with international labor laws by continuing to withhold GSP, we should focus on getting unhappy investors to pull their enterprises out of Special Economic Zones.

The first Bangladeshi Export Processing Zone (EPZ), a specified industrial region where levies are altered or removed in order to incentivize investment, was established in Chittagong in 1984. The Bangladeshis claim that the idea was suggested to the Bangladeshi President Ziaur Rahman in 1977 by Robert McNamara, then President of the World Bank. The EPZ concept was trending during the late 70s and early 80s. The model allowed Foreign Direct Investment into countries and industries that were very difficult to penetrate otherwise. National tax laws and customs duties are suspended inside most zones to create an incentive for investors. Bangladeshi EPZs are unique in their suspension of national labor laws which effectively ban unions, strikes, and labor grievances of any kind. The “efficiency” of eliminating strikes is marketed as a benefit to investors. The EPZs are instead governed by the Bangladeshi Export Processing Zone Authority (BEPZA) which institutes modified laws and labor regulations.

As of 2015, there are 8 EPZs in Bangladesh under the authority of BEPZA. Workers trade their job security and welfare for the promise of higher wages within the EPZ. Fortunately, workers report that workplace safety has improved over the last three years. However, there has been no progress towards extending national labor laws to the zones. The USTR was surprised to learn that investors (names withheld) from within the Bangladesh EPZ Investors' Association (BEPZIA) have expressed disappointment with BEPZA management inside the zones. These disgruntled businessmen comment that they would be willing to transfer to a SEZ (Special Economic Zone) format, in which national labor laws apply, as long as they were able to dissociate from BEPZA itself. Investors are realizing that Bangladeshi EPZs are not a sustainable model. I believe that this rift between BEPZA and its investors demonstrates that the Bangladeshi EPZ system is inferior and antiquated.  

The USTR, however, is concerned by new updates that suggest that SEZs will operate under similar labor laws to BEPZA. The Bangladesh Economic Zone Authority (BEZA) was established in 2010 and is based on the BEPZA model. The SEZs are exempted from the Bangladesh Labor Law and BEZA has the authority to establish the “due rights” of workers in the zones. A clause in BEZA’s framework law effectively bans strikes-employees will be fired and operations shut down if they are found to be engaging in such activity. However, there is no explicit mention of unions as in the BEPZA framework. BEZA is split into a three tier, hierarchical structure: the Governing Board, the Executive Board, and the BEZA Office/Secretariat. Policies are drafted by the Governing Board. The Governing Board must publish its formulated policies in the BEZA gazette which is the only indication of a review, notice, or comment procedure. It seems that the difference between BEZA and BEPZA is that BEZA allows entirely privately owned ventures, while BEPZA does not. The executive chairman of BEZA is Paban Chowdhury, but the board is not fully staffed as of yet. The first government owned SEZ in Mongla is still under construction, but it is possible that at least one privately owned SEZ, Abdul Monem, Ltd., is partially operational at this time. Future SEZ sites have been promised to the Indians, Japanese, and Chinese.

It is the duty of the United States Trade Representative to advocate for the interests of American stakeholders in Bangladesh as well as to monitor labor rights for possible reinstatement of the Generalized System of Preferences. American producers of ready-made-garments (RMG) in Bangladesh are highly concerned with the ethical nature of their work as they fear domestic backlash. As the mouthpiece for American business in Bangladesh, the USTR has adopted the labor rights cause as its own. The 2013 Savar Factory collapse brought the appalling labor conditions to light for American consumers. Some Americans boycotted Bangladeshi-made goods and many American enterprises operating in Bangladesh were publicly shamed. These businesses have learned that further incidents will threaten the value of their shares and their viability in the American consumer market. The other stakeholder to which the United States Trade Representative must answer is the Government of Bangladesh itself. The USTR may work in the field of macro-economics, but as a branch of the Executive Office of the President it is ultimately a diplomatic channel. Therefore, maintaining friendly diplomatic relations and allies in the South Asia region is of great interest to the USTR. The U.S. has a political stake in the region, not simply an economic one. The Bangladeshis are constantly pushing for the reinstatement of GSP and the USTR wants to resolve this diplomatic nightmare as quickly as possible. The Bangladeshis believe that they are being treated unfairly as other countries with labor rights concerns have not had their GSP revoked. Though they have made healthy progress in worker safety in the GSP Action Plan, there has been no progress in the way of labor rights. Workers in Export Processing Zones are still not extended the privileges due to them under the national labor law and labor unions outside of EPZs are increasingly having their registrations rejected due to “administrative error.” When formulating a policy on EPZs, the United States Trade Representative must balance the interests of American businesses, their ethical duties, and the diplomatic relationship with the Government of Bangladesh.

The USTR is highly concerned with solving this GSP issue as quickly as possible, but it has already extended into its second year. I am not foolish enough to think that I can mastermind a policy change to an issue that my superiors have not been able to solve. However, the USTR just recently learned that BEPZIA investors are unhappy with the administrative abilities of BEPZA. The investors do not believe that operating inside the zones and providing the workers with higher wages is worth the limited benefits of banning unionizing.

I believe that the U.S. Trade Representative needs to exploit this opportunity of discontent. My policy change is that instead of focusing on convincing the Government of Bangladesh to comply with international labor standards, we should work to convince American and European investors to pull out of the EPZs. (The EU and U.S. work close together on the EPZ issue.) The Government of Bangladesh is willing to sacrifice worker welfare in order to make money, so I believe they will only comply when those funds are at stake. Many large American textile companies such as Abercrombie and Fitch operate in these zones. The USTR should suggest that they move their operations outside the zones, which would not require them to change their country of operation and would also provide them with cheaper labor. If these American investors are unwilling to work with the USTR, this organization should work with our close allies at The Solidarity Center and the AFL-CIO to create a widespread internet campaign that shames the companies domestically for their labor practices. The USTR actually uses extensive internet marketing campaigns now to sell trade deals to the American public so the infrastructure is already in place. I believe that sharing the statistics on workers who get their limbs amputated from machinery accidents would be enough to repulse and aggravate the more internationally-conscious of the American people.

This is not a difficult policy change as it only requires a strategic refocusing.  It would require a lot of manpower and clever persuasion, but this is why the USTR hires seasoned negotiators. USTR employees would need to start creating persuasive presentations and then meet with their contacts at major American enterprises involved in the SEZs. Ultimately, American stakeholders would be satisfied with the cheaper wage labor and better labor practices so that there are fewer opportunities for public disasters like the 2013 factory collapse. The Government of Bangladesh would be forced to reevaluate their suspension of national labor laws or else risk a significant loss in Foreign Direct Investment. This might create some diplomatic tension initially, but ultimately the Government of Bangladesh will greatly benefit from the reinstatement of GSP. The end game is appealing to all parties.

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