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Bumps In The Road To Cambodian Labor Reform (Int'l Edition)


International -- Asian Business: Cambodia

Bumps in the Road to Cambodian Labor Reform (int'l edition)

A U.S. trade deal becomes a test case in global standards

Last year, impoverished Cambodia made an unprecedented deal: In exchange for the U.S. agreeing to increase the textiles it imports from there, it would let foreign monitors inspect its garment factories and certify it was improving its labor standards. Never before had the U.S. agreed to swap favorable trading terms for good labor practices, and it marked a significant victory for U.S. trade unions--specifically the American Union of Needle Trades Industrial & Textile Employees (UNITE), which had strongly lobbied Washington's trade representative for the link. While the deal was an unusual breach of national sovereignty, Cambodia is a war-ravaged nation in desperate need of export earnings and investment. It could hardly say no.

But this path-breaking agreement is having unintended consequences, including acrimonious labor-management relations, which are fast turning Cambodia into a major test case for global labor standards. If Cambodia eventually proves it can have a big garment export industry operating with worker-friendly conditions, it will prove the U.S. unions' case that they can help improve the lot of workers overseas. But if in the end all this does is force a vital industry to pack up and go elsewhere, it would be a major setback.

Local unions, emboldened by U.S. support, have gone haywire--organizing violent, wildcat strikes that have blackened Cambodia's reputation for having a docile, if untrained, workforce. Garment manufacturers, on the other hand, are having second thoughts about the unfettered free market they found when peace began returning to the country about five years ago and government officials beckoned them with liberal policies. "This labor unrest will obviously cause investors to think again about putting more money in this country," says Roger Tan, general secretary of the Garment Manufacturers Assn. in Cambodia, which represents 90% of the 200 mostly Taiwanese- and Chinese-owned garment factories. "Instead of spending $2 million here, why not go to Laos, Vietnam, or South Africa?"

Since a government-negotiated settlement in July, both sides have been operating under an uneasy truce. The unions won a $5 increase in the monthly minimum wage, to $45--their first since 1997. That makes them slightly better paid than workers in Laos and some provinces of China, but less well paid than workers in Vietnam and Thailand. Garment makers steadfastly refused other demands, and the dispute left both sides in a state of confrontation over unresolved issues such as forced overtime and intimidation of union representatives. Many predict more unrest, and some factory owners threaten to leave if workers strike again.

Certainly, Cambodia can't afford to lose its apparel industry. Clothing accounted for a staggering 70% of Cambodia's exports last year, or $600 million. A full 75% of them went to U.S. stores, including Gap, J.C. Penney, Target, Wal-Mart, and Nike. Cambodia's labor force depends on garments, too. The factories provide 109,000 jobs, mostly to young women from poor provinces who send their savings home.

Rather than acrimony, what labor rights advocates had in mind from the beginning for Cambodia was a situation that would benefit both workers and employers. Workers would get fair wages, better labor conditions, and more jobs. Subcontractors would be able to certify to multinationals worried about their public images that the clothes they're ordering weren't made under sweatshop conditions--thus placing the factories ahead of other Asian contractors in the race to fill orders. Plus, advocates say, happier workers are more cost-efficient, quit less often, and make fewer mistakes--and that saves money. "A number of companies have come to see the self-interest in this," says Aron Cramer, vice-president at San Francisco-based Business for Social Responsibility who has hosted workshops in Cambodia to educate subcontractors on global labor standards. "By taking responsibility at their level, they can achieve savings."

The task of teaching these lessons to manufacturers in Cambodia has been an arduous one. After the U.S. granted Cambodia Most Favored Nation trading status in 1996, investors drawn by cheap labor and quota-free garment exports began building textile factories. But UNITE, alarmed by the sudden flood of cheap imports (chart), pushed for quotas to be linked to certification of labor standards.

Part of the problem now, however, is monitoring. When the deal was reached, the International Labor Organization agreed to set up a program with U.S. funding. But the $1.2 million plan was short on details, and the ILO still says it hasn't received funds to begin. This makes it impossible for factories to prove compliance in order to win more access to the U.S. market. In the absence of the ILO, U.S. buyers are doing it themselves. Gap Inc., which sources from 25 Cambodian factories, has three full-time staff enforcing its code of conduct. "Obviously there's been conflict between owners and workers," says a Gap spokesman. "We think we can make an impact on these problems."

UNITE's policy director Mark Levinson says that despite some setbacks the whole effort "has definitely worked to improve the climate in which unions can function." Still, unions claim factory owners threaten dismissal to any would-be organizers. "Worker representatives always get fired," says a 21-year-old worker in Taiwanese-owned factory Kun Mao Hsing Co. (KMH), which produces garments for a Nike Inc. subcontractor. Not so, says owner Chen Chin-Chung, who claims a dozen activists trying to organize a strike left voluntarily. "They found better jobs elsewhere," he insists.

Unions say such disputes leave them little alternative but confrontation to get the standards they feel are due under the U.S. agreement. Chea Vichea, president of the Free Trade Union of Workers of the Kingdom of Cambodia, the most active of the country's five big labor federations, wants more concessions. "Organize strong, strike strong, then negotiate," he says. "If we are weak, we cannot demand anything."HARD CASH. Even with the $5 increase, a Cambodian garment worker's life is no picnic. The $45 wage is based on a 48-hour, six-day week. Most workers want the extra cash they earn from overtime, but many say they are required to work past the two-hour legal limit and lose jobs if they refuse. Workers pay $5 a month each to sleep four to a room in primitive boarding houses. Seysipae Seysinath, 23, and her sister support seven siblings back in their home province of Prey Veng. "We work for others, not ourselves," she says.

Far from ideal--but workers like Seysinath know they need these jobs. That's why she and others still hope for an accommodation that will bring the best of all worlds to Cambodia's workers and employers alike.By Frederik Balfour in Phnom Penh, with Sheri Prasso in New YorkReturn to top


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