Bangladesh's dependence on garments, and its undoing

In mid December 2016, workers at the main centre for garment and textile production in Bangladesh went on strike. The government's response was heavy-handed, raising questions over the country's political and economic development model. Photo  StephenK/

Prosperity rising

If the economic data are anything to go by, Bangladesh is doing pretty well. The government expects the economy to grow by 7.5 per cent in the current 2016-17 financial year (July-June), from 7.1 per cent growth last year. While the World Bank foresees it being a little slower, at 6.8 per cent, by all estimates the macro-economy is growing faster than the population it serves, and has been for some 20 years, halving the poverty rate between 2000 and 2016. This growth picture has an Achilles Heel. Ready-made garments and clothing products account for more than 80 per cent of the country's export earnings. This economic narrowness, in a country still classed by the United Nations as Least Developed, leaves Bangladesh extremely exposed to anything that disrupts the clothing and textile mills, as well as to shifting patterns of global consumption. Such a disturbance came last month, when some 1,600 garment workers in Ashulia, a northern exurb of the capital Dhaka that is the country's main export hub, were dismissed for their role in a week of industrial action in December 2016. Their action had closed 59 factories from 11 December onwards to demand that the minimum wage be tripled from 5,300 taka (USD67) per month to BDT16,000. They had expected a tri-annual government minimum-wage review board to recommend a pay raise last year, but it failed to do so. Labour unrest at Ashulia is a yearly occurrence, given the very low wages on offer, and it has never seriously impaired Bangladesh's development as a garment exporter. This is partly because the global brands that source items from Ashulia's factories have a degree of separation between their businesses and those that are producing their wares, limiting - though not eliminating - their reputational exposure to local practices. However, in this instance, the situation was different. Tens of thousands of protesters flocked onto Ashulia's streets. The strikes took place right before the peak season of Christmas, and they coincided with a visit by the U.S. ambassador-at-large for religious freedom, David Saperstein. This appears to have provoked the authorities into a more brutal crackdown than in previous years. The government activated the Special Powers Act and used it to imprison without trial 30 suspected ringleaders. Local media reported that the National Board of Revenue had asked banks to hand over the account records of six labour leaders, going back to 2009. Factory owners brought civil actions against the strikers, and in some cases enhanced security measures at their sites to include armed guards.

Western media take note

 On 22 January 2017 the New York Times, one the most widely read newspaper in the U.S., wrote an article sympathetic to the trade unionists. It noted letters from major international clothing brands including GAP to the country's prime minister, Sheikh Hasina of the Awami League party, urging her to respect workers rights and address the pay issue. It noted pointedly, however, that the retailers did not threaten any consequences if Hasina disregarded these requests. Nor had they confirmed whether or not they were pressing factory owners to drop their lawsuits against their employees. Such media coverage comes at a difficult time for governments in the U.S. and Europe, amid a destabilising backlash in Western democracies against globalisation. To date, Western governments have essentially turned a blind eye to the human-rights infringements of Hasina's government, as these have mostly been directed at Islamist and pro-China opposition parties that the West is not sorry to see suppressed. In the current climate, however, the authorities treatment of the garment workers, and the Western media's portrayal of this, could easily conflow with the agenda of those who endorse U.S. President Donald J. Trump's anti-globalist policies. On 23 January, for instance, in one of his first acts as president, Trump cancelled U.S. participation in the Trans Pacific Partnership (TPP), which would have lowered trade barriers between the U.S. and other Pacific rim states.
With automation increasingly levelling the costs of manufacturing in the West and Asia, Bangladesh risks losing its comparative advantage if it raises worker pay
Although Bangladesh was not party to TPP, it does benefit from a number of other globalist agreements, for instance with the E.U.'s Generalized Scheme of Preferences. These preferences, however, are contingent on Bangladesh respecting labour rights. Negative media coverage raises pressure on Western governments to intervene. Even worse for Bangladesh, the country's main champion within the E.U. is the U.K., the country's former colonial ruler and home to the largest Bangladeshi diaspora in Europe - and a country that is in the process of withdrawing from the European Union, in what is arguably another expression of Western discontent with multilateral trade zones. Having lost the U.K.s influence in Brussels, which is now negligible in the wake of the Brexit decision, Bangladesh faces the possibility that its main European markets will raise tariff barriers in response to its labour policies. But if Hasina's government concedes the pay rises demanded from the workers, it jeopardises its own successful economic model. As A2 noted in our recent special report, Rags to rags: The impact of automation on Asia's textile, clothing and footwear industries, the challenge facing globalisation comes as much from the re-shoring of manufacturing to Western markets as it does from Trumpian political movements.