How buying from Bangladesh can help boost wages

In spite of recent advances, Bangladesh’s minimum wage is still just $64 a month. Why?

Minimums aren’t averages

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

Not much by Western standards, but better than five years ago. Local factories can recruit, though: the alternative is no wage at all.  Very different from the UK or US clothing industries – where clothing manufacturers can’t recruit locals at almost any wage.

But why don’t workers get paid more?

There are lots of experiments going on trying to coax wages up, and more get announced every week – like the Ethical Trade Initiative’s pilot in encouraging suppliers to do appraisals on 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 started publicly discussing Neiman Marcus, Sears and J Crew and the word “bankruptcy” in the same sentence And  the Credit Suisse US Retail Store Closure Index for mid-2018 showed American retailers likely, for the second successive year, 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 possibly Bangladesh’s biggest exporter 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 Americans might do.

Buy Bangladeshi

In 2017, the EU imported 38% more garments from Bangladesh than in 2013, but it spent 83% more in US dollar terms. The US imported 18% more garments than in 2013, but spent just 6% more. There are several 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: though it offers duty-free access to all LDCs for most goods the concession does not include textiles and clothes. Unless they’re from Haiti or most of Africa.

President George W Bush agreed in 2005 at the World Trade Organisation that the US would extend the LDC concession to textiles and clothes.

But he wasn’t able to deliver on that promise. His successor, Barrack 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 sales to the US has been a lot slower than in Europe.

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

Now 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 campaigns to offer Bangladesh and other current LDC’s the same benefits the EU and Japan offer. Benefits the UK has declared it will offer even if it leaves the EU

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 America’s AGOA in Africa – offers duty-free access for any low or medium income country demonstrating commitment to improved human rights.

Which is precisely what Bangladesh has been doing lately.

So the US and Europe should align their programmes for using concessions on import rules to encourage better human rights in poorer countries. And encourage their citizens to Buy Bangladeshi

Why buying Bangladeshi’s in America’s interests

Buying Bangladeshi will certainly be good for Bangladesh. But Bangladeshi politicians have been telling Americans that for decades, and it hasn’t washed because – well, many Americans haven’t been doing too well economically and when they’re struggling, their politicians aren’t at their most generous.

The real reason Americans should buy Bangladeshi 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 those with shares in clothing retailers.

Buying Bangladeshi is good for:

  • American shoppers: Bangladesh is cheaper than Vietnam. And 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.
  • American workers: See above.
  • American politicians: See above.
  • 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.
  • Political activists. Everywhere: You DO want poor people to be better off. Don’t you? So what’s not to like?

Which brings us to factory safety. Our next subject.