If US brands bought more from Bangladesh they would also be providing benefits for American shoppers, workers and politicians

If US brands bought more from Bangladesh they would also be providing benefits for American shoppers, workers and politicians

In spite of the country's advances since 2013, Bangladesh's minimum wage is still just $64 a month. Mike Flanagan asks why, and suggests that buying more from Bangladesh would not only be in the interests of US brands and retailers – but would also help to boost wages in the country.

Minimums aren't averages

Bangladesh's average wage in 2017, though, was over twice that (about $150). And garment-making is just about the highest-paying job in the country, so the average garment worker is likely to be earning more still.

Not much by Western standards, but better than five years ago. And when the alternative is no wage at all, local factories are still able to recruit. Very different from the UK or US clothing industries, where manufacturers can't recruit locals at almost any wage.

But why don't workers get paid more?

Factory owners say they're not getting enough from the retailers they sell to. Fair enough – but the state US and European clothing retailers are in right now, means they're unlikely to be able to pay much more any time soon. There are lots of experiments to try to coax wages up, and more get announced every week – like the Ethical Trading Initiative's pilot in encouraging suppliers to appraise the companies buying from them. But they'll take time.

Suppliers are supposed to make the best case they can for better prices: but last week Mostafiz Uddin, CEO at jeans supplier Denim Expert, weighed in with a surprisingly rounded view of his UK customers. Though activists often make a fuss about clothes selling for three times the price a factory gets, that markup is simply the cost of Western shop wages, rent and our whopping 20% VAT. 

Normally, there's a profit too. But in the past week respected credit monitors named Neiman Marcus, Sears and J Crew among the companies that could be next to default. And the Credit Suisse US Retail Store Closure Index for mid-2018 showed that for the second successive year, US retailers are likely to close more square feet of retail space than ever before.

Five years ago, the world's biggest clothing buyer was saying publicly some Bangladeshi suppliers were rotten negotiators. Now we've got one of Bangladesh's biggest exporters saying his British customers can't afford to pay more. Many readers won't quite understand that – but every seasoned garmento will be pole-axed. 

There really is a monumental problem at Western clothing retailers, and next week on just-style we'll be looking at it – with a few suggestions.

In the meantime, though, there is one thing US brands and retailers might do: 

Buy from Bangladesh

In 2017, the EU imported 38% more garments from Bangladesh than in 2013, but it spent 83% more in US dollar value terms. The US, meanwhile, imported 18% more garments than in 2013, but value rose just 6%. There are a number of reasons for this, but we'll concentrate on two:

Import duty: The EU, like most Western countries, gives practically all goods from Bangladesh – and all other Least Developed Countries (LDCs) – unlimited duty-free access. The US has a different policy: although it offers free access to all LDCs for many goods under the Generalized System of Preferences (GSP), it does not extend the offer to textiles and clothing. It does, however, offer duty-free access for apparel and textiles from Haiti, and most countries in Africa (under AGOA, the African Growth and Opportunities Act).

President George W Bush agreed at the World Trade Organization in 2005 that the US would include textiles and clothing in the categories it offered GSP treatment to from all Least Developed Countries.

Bush couldn't deliver on that. His successor, Barack Obama, couldn't honour the promise either. US clothing makers, weavers and spinners objected, claiming abolishing quotas in 2005 had hurt them. So growth in Bangladeshi garment exports to the US has been a lot slower than to Europe.

Hostile publicity: Publicity about Bangladesh in the US has been a lot more hostile than in Europe. While there has been widespread coverage in Europe of the positive developments in Bangladesh, the US hears far more about the horrors that existed five years ago, or demonstrations to boycott a store for some allegation connected to Bangladesh.

The US clothing trade used colossal energy trying unsuccessfully to sell the TPP (in practice: duty-free access for Vietnam) to politicians. I'm suggesting it now campaigns to offer Bangladesh and other current LDCs the same benefits offered by the EU and Japan. The UK has also declared it will continue to offer these benefits even if it leaves the EU.

The power of positive reinforcement

The real reason Americans should buy from Bangladesh is that it is in their interests. Unlike the argument presented for TPP, a duty-free deal with Bangladesh is in the interests of all Americans, and not just shareholders in clothing retailers.

For the past decade, Bangladeshi politicians have been telling their press that the US ought to give Bangladesh duty-free access because…

...well, the argument is usually along the lines of "you owe it to us" or "we're poor." But here are the real reasons:

  • For American shoppers: Bangladesh is cheaper than Vietnam. Or China. Cheaper still without the addition of massive import duties. US garment factories can't recruit staff; but unemployed workers still need cheap clothes. No-one stands outside my local Primark moaning about how cheap it is: they're fighting their neighbours to buy the cheap stuff while it's there.
  • For American workers: See above.
  • For American politicians: See above.
  • For President Trump: See above. Plus, Bangladesh isn't China. Every garment bought from Bangladesh is one more poke in the eye for the Chinese. Plus, 'Buy Bangladeshi' is a great way of rubbishing Obama.
  • For political activists. Everywhere: You DO want poor people to be better off. Don't you?

So what's not to like?

But isn't Bangladesh going to lose its access privileges?

Not right away. WTO rules are that the UN's "graduation" process from LDC status won't mean withdrawing the country's special access to Western markets until about 2027. At that point, the likelihood is that Bangladesh will qualify for a special EU programme that – rather like AGOA – offers duty-free access for low-income countries demonstrating commitment to improved human rights.

Which is precisely Bangladesh has been showing since last year.

We're suggesting, in effect, that the US and Europe align their programmes for using concessions on import rules to encourage low income countries improving their human rights.

Which brings us to factory safety. Which is the next subject.