Bloomberg News

U.S. to Revoke Bangladesh Benefits After Factory Collapse (1)

June 27, 2013

U.S. to Revoke Bangladesh Benefits After Factory Collapse

Rescue workers and volunteers search by hand for victims amongst the debris of the collapsed Rana Plaza building in Dhaka. President Barack Obama’s administration is beginning talks with the Bangladesh government to improve conditions and qualify for the trade benefits, which eliminate duties on the imports. Photographer: Jeff Holt/Bloomberg

The U.S. will suspend trade benefits on $34.7 million in goods from Bangladesh because of inadequate labor and safety standards in the Asian nation where a garment-factory collapse killed more than 1,000 workers in April.

“This was not a decision taken lightly by the administration,” U.S. Trade Representative Michael Froman said today on a call with reporters. While the U.S. had been reviewing Bangladesh’s trade status prior to the factory collapse, the April 24 incident highlighted U.S. concerns about labor and safety conditions in the country, he said.

President Barack Obama’s administration is beginning talks with the Bangladesh government to improve conditions and qualify for the trade benefits, which eliminate duties on the imports, Froman said. “There’s no particular timetable in mind,” he said.

The collapse of the Rana Plaza factory, the worst industrial accident in nation’s history, prompted increased scrutiny of the country’s labor conditions. Labor groups also have criticized retailers including Wal-Mart Stores Inc. (WMT:US) and Gap Inc. (GPS:US) for not joining a legally binding agreement to improve worker safety in Bangladesh.

‘Important Message’

“The global workplace cannot be a deathtrap for poor workers producing products for the global economy,” Richard Trumka, president of the AFL-CIO, the largest U.S. labor federation, said in a statement. The U.S. action “sends an important message to our trading partners,” he said, saying nations that tolerate unsafe working conditions will lose access to the U.S. market.

Bangladesh participates in a U.S. program known as the Generalized System of Preferences, which allows zero or reduced tariffs on some products imported from developing countries.

The trade preferences exclude imports of Bangladesh’s apparel, which the U.S. Commerce Department said represented 91 percent of the $4.9 billion in U.S. imports from the nation last year.

The U.S. action is largely symbolic because textiles and apparel aren’t included, and it may influence the European Union’s review of trade preferences, Jonathan Fee, a trade lawyer at Alston & Bird LLP in Washington, said in a phone interview.

“It would be a giant kick in the teeth for Bangladesh to lose GSP status with the EU,” which includes apparel, he said.

Progress Lacking

The U.S. had considered steps to raise tariffs on some Bangladeshi goods even before the collapse. In a Jan. 8 notice in the Federal Register, the U.S. Trade Representative’s office said that “the lack of progress by the government of Bangladesh in addressing worker rights issues in the country warrants consideration of possible withdrawal, suspension or limitation Bangladesh’s trade benefits.”

Democrats in Congress praised the administration’s decision.

“Bangladesh’s labor laws must be dramatically improved and suspending GSP benefits will hopefully help kick-start these overdue reforms,” Senate Foreign Relations Committee Chairman Robert Menendez of New Jersey said in a statement.

The U.S. action is “an appropriate and welcome step,” Representatives Sander Levin of Michigan and George Miller of California said in joint statement. “We expect this decision will be viewed with interest by others considering similar action, such as the European Union,” they said.

Miller and Levin said they would continue to push U.S. corporations to join a legally binding accord that allows companies to source products from Bangladesh only if labor rights and conditions in the country improve.

Wal-Mart of Bentonville, Arkansas, and San Francisco-based Gap are among U.S. retailers forging an agreement to establish a $50 million, five-year fund to improve safety conditions in Bangladesh garment factories, the Wall Street Journal reported yesterday, citing a person familiar with the matter.

To contact the reporter on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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