short reading.

Cheap goods come at a price in Bangladesh

Jopson, Barney. FT.com (Dec 18, 2012).

As Mike Duke, Walmart's chief executive, prepared to give a talk on corporate responsibility last week in New York, protesters outside said a deadly factory fire in Bangladesh last month had shown he did not have the credibility to do so.

The blaze killed at least 117 people at the Tazreen factory on the outskirts of Dhaka, which made clothes for Walmart, albeit without its approval. Maritza Silva-Farrell, one of the protest's organisers, said: "They could easily support these factories to improve safety conditions. And they chose not to."

As with previous fatal accidents at factories supplying other multinationals - a fire in 2010 and a building collapse in 2005 - November's tragedy prompted a vow from Walmart to do more on safety. Sears, whose products were also being made at the Tazreen plant, apparently without its knowledge, likewise pledged to take action.

But labour activists say that in the past business-as-usual has resumed all too quickly. Averting further disasters, they say, requires substantive safety investments from an industry under pressure to supply cheap clothes to the west at the same time as delivering higher profits for shareholders and better conditions for workers.

Other industry watchers say that while multinationals have been lax, Bangladesh's government has indulged them and must shoulder the responsibility for enforcing higher standards among local manufacturers.

An official inquiry this week concluded that the Tazreen fire was an act of sabotage, but its preliminary report also called for criminal charges to be brought against the factory owner for death by negligence.

Rising labour costs in China, the world's biggest clothes maker, have shaped Bangladesh's garment industry as multinationals have diverted orders to the south Asian country in search of lower costs - and driven helter-skelter factory expansion.

Now the world's second-biggest garment producer, Bangladesh saw its clothing exports surge to $19bn in the 12 months to June this year. But many of the country's 5,400 garment factories still lack basic safety measures, with highly flammable fabric kept in corridors, windows barred, doors locked to prevent theft, and jerry-rigged wiring that is prone to electrical fires.

Bangladesh's 3.6m garment workers are also among the lowest paid in the world, even after the government raised the minimum wage two years ago in response to violent protests stoked by double-digit inflation.

At the same time, cash-strapped consumers struggling with the fallout of economic crises in the US and Europe have created more demand for cheap clothes from discount chains and "fast fashion" stores. Big buyers include Sweden's Hennes & Mauritz, which plans to double its purchases from Bangladesh to $3bn a year.

The price of clothes in the US fell 4 per cent in the decade to the end of 2011 while the consumer price index rose 27 per cent.

Scott Nova, executive director of the Worker Rights Consortium, a monitoring group in Washington, said: "There's this giant contradiction between the sourcing imperatives of the companies and their labour rights commitments. You cannot fundamentally change labour practices and cut prices at the same time."

But Walmart's Mr Duke told his audience in New York that there was no conflict between lower prices and safer factories. "If a factory is not going to operate with high standards then we would not purchase from that factory and there is no discussion about price," he said.

However, Walmart goods were being made at the Tazreen factory - even though the US group had withdrawn its authorisation several months ago - because a supplier had subcontracted an order to it.

One activist said a Walmart official had led opposition to a plan for multinationals to invest in safety improvements at an industry meeting in Bangladesh in 2011, but Walmart said her remarks were taken out of context. It said it recognised that the cost of goods would include the cost of meeting its safety standards.

Mustafizur Rahman, executive director of the Dhaka-based Centre for Policy Dialogue, a private think-tank, says western retailers are guilty of "hypocrisy" but will be more careful after the Tazreen fire.

"The front factory is compliant, but there are back contractors who are not being compliant western buyers have overlooked those", he says.

Khalid Nadvi, senior lecturer at the University of Manchester, says there are also problems with factory audit systems - set up by brands after the sweatshop controversies of the 1990s - because they are unregulated.

"No one monitors the auditors," he says. "You have anecdotal evidence of workers being coached prior to audit inspections."

Multinationals also face no financial or legal liability if they break their own rules. Phillips Van Heusen - which makes Calvin Klein and Tommy Hilfiger products and bought from the owner of the factory in the 2010 fire - signed a landmark agreement with labour groups in March 2012, which gives them the ability to hold it to account on safety. However, a lack of clarity about what powers the labour groups will have deterred some retailers from joining the deal.

Kevin Burke, chief executive of the American Apparel & Footwear Association, a trade body for manufacturers and retailers, says: "The penalty for us is that the consumers won't buy our product if we buy from factories where people are dying."

He adds: "If Bangladesh wants to keep our industry in Bangladesh, they need to make enormous changes in the way they build [and] maintain factories."

The International Labour Organisation has been in talks about implementing a factory improvement programme that has been successful in Vietnam and elsewhere. But ILO officials said Bangladesh first had to do more to recognise workers' rights.

Mr Rahman said the government should also strengthen its oversight of the garment industry and send a clear signal that it has "zero tolerance" in the case of flagrant violations of hitherto weakly enforced rules.

Western activists, however, insist that the solution lies with foreign buyers, which they say could eliminate the pressures that lead to such disasters by paying more. For companies such as Walmart, which wear frugality as a badge of honour, that raises tough questions.

Additional reporting by Richard Milne

Credit: By Barney Jopson in New York and Amy Kazmin New Delhi

(Copyright Financial Times Ltd. 2012. All rights reserved.)

Statement: Multinationals should be held responsible for the factories in which their products are made in other countries.

1. Present arguments (as many as you can think of) supporting the above statement.

2. Present arguments (as many as you can think of) why multinationals should not be held responsible.

3. What is your position?

4. Do you think Japanese MNCs are more responsible than the MNCs of the United States of America? How about European MNCs? Do some research to answer these questions.

WRITE YOUR ANSWER UNDER FOUR CLEARLY MARKED SUBHEADINGS (SEE BELOW) REFERRING TO THE FOUR ABOVE.

1. FOR THE MOTION:

2. AGAINST THE MOTION:

3. MY POSITION:

4. DISCUSSION: