Laura Tyson on Cleaning up Global Supply Chains

Nearly one year after more than 1,100 Bangladeshi workers died in the collapse of the Rana Plaza textile factory, corporations and governments are still struggling with how to enforce decent working conditions in global supply chains.

But as Laura Tyson argues in a new column for the New York Times Economix blog, there may be some counter-intuitive strategies for preventing future tragedies.

American and European companies are still scrambling to improve safety in the Bangladeshi clothing factories that supply them.  European companies have signed the Accord on Fire and Building Safety in Bangladesh, and American companies have embraced a plan called the Alliance for Bangladesh Worker Safety.   Both plans call for higher safety standards for safety and more inspections.    A special board appointed by the Bangladesh government has called for a 77 percent increase in the minimum wage, to about $68 a month

Big multinational corporations buy heavily from Bangladesh, which is the world’s second biggest clothing exporter after China.   But even though labor groups and civil society organizations have been warning for decades about the dangers, disasters still keep happening.  And Bangladesh is just one link in the global supply chains that deliver consumer goods to rich nations.  As a result of globalization, almost everything Americans buy contains either materials or components produced in part by low-wage workers in developing countries.

The good news, Tyson notes, is that there is a lot of agreement in principle about what constitute minimally acceptable standards for workplace conditions.   Look at any number of voluntary industry codes of compliance, and you’ll find they all condemn child labor, forced labor, discrimination, sexual abuse and dangerous conditions.

Big western corporate buyers, from Walmart and Benetton to Apple and H&M, worry about their reputations.  Their customers want low prices, but they are increasingly aware and concerned about products produced by exploited and endangered workers.

The problem is monitoring and enforcement.  The maze of subcontractors makes it easy for multinational buyers to keep their  distance from grim workplace practices.  Local governments, eager for business, can abet the cover-ups.  Even if a multinational company wants to enforce humane conditions, it’s difficult to know what’s happening below the first or second tier of suppliers in their chains.

One innovative strategy, Tyson suggests, may be the Better Work program, a joint venture between the International Finance Corporation and the International Labor Organization. Better Work conducts in-depth, unannounced factory-level inspections in eight countries, including Cambodia, Indonesia, Nicaragua and Haiti.  It’s now starting a new program for Bangladesh.

Better Works only inspects factories that provide their consent, and not all of them give it.  But its reports offer accurate and credible information on hundreds of factories in a given country.  It also lists the names of factories that open themselves to inspection.  Factories that don’t open themselves up pose a red flag for corporate buyers that want to protect their reputations, as well as for non-governmental organizations and advocacy groups that pressure the corporations.

There’s another possible lesson from Better Work, Tyson argues: international trade agreements can provide leverage to improve supply-chain conditions.   Better Works got its start after the United States and Cambodia signed a trade-opening pact in 1999.  To get more access to the U.S. market, Cambodia had to show that its workplace conditions were improving.   That led to the launch of Better Factories Cambodia, and studies have shown that the program did indeed foster better conditions there. Cambodia became the prototype for other Better Works programs in many other countries.

Trade agreements are unpopular in Washington right now, especially among Democrats.   Senate Majority Harry Reid recently threw cold water on President Obama’s calls for fast-track authority to pass the Trans-Pacific Partnership.  Some Democrats see such deals as encouraging a race to the bottom that will only drag down conditions for American workers.   But the Cambodian deal, Tyson says, illustrates how trade deals can raise standards abroad rather than lower them at home.

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