The Subcommittee will examine the working conditions in developing countries and the impact on the U.S. economy of importing goods produced in sweatshops.
Witness Panel 1
Betty FuentesColumbian flower plantation worker and labor activistWritten Testimony Submitted byBeatriz Fuentes, PresidentSintrasplendor union at Splendor FlowersBogotá, ColombiaBefore theCommittee on Commerce, Science, and Transportation,United States SenateFebruary 14, 2007IntroductionI am the president of the Sintrasplendor union, which was founded in November 2004 at the Splendor Flowers plantation in Colombia, a farm belonging the multinational Dole. I have more than 10 years of experience working in the Colombian cut flower industry. For Valentine’s Day, the day when more Americans buy cut flowers from Colombia than any other day of the year, I have traveled to the US to share my testimony about the poor working conditions that exist in many Colombian flower plantations, and which I have experienced firsthand over the past decade.My coworkers and I have witnessed the limitations of Colombian labor law enforcement, and voluntary initiatives in addressing these serious labor rights violations. New, enforceable strategies are needed to effectively guarantee workers’ rights in this industry.Occupational health and safetyFlower workers are inadequately protected against occupational hazards. In the greenhouses, we are exposed on a daily basis to highly toxic chemicals, without sufficient protection. We are also exposed to extreme temperatures, and we work long hours doing repetitive tasks. These conditions cause serious health problems including allergies, respiratory problems, eye problems, spinal problems, and carpal tunnel syndrome.I have had a problem with carpal tunnel syndrome for the past five years, due to the fact that I have had to spend 8-10 hours straight cutting stems with scissors. Most workers are assigned to one job for several months at a time, frequently causing repetitive motion injuries. Currently, we must trim 300-400 flowers per hour.On July 14, 2005, there was a tragic accident on one of the company buses on which we ride to work every day. On that day, as on most days, the bus was excessively overloaded. We had asked them to fix this problem but they hadn’t done anything about it. Several workers were killed or injured. I was on this bus when the accident occurred.Forced pregnancy testingIt is also common for flower plantations to require female job applicants to take a pregnancy test to demonstrate that they are not pregnant, which is illegal. Or they ask if we are planning on having more children, and if we have had an operation. The management does not do this out of concern that the pregnant women are exposed to the same toxic pesticides as all of the other workers. They do it because they don’t want to pay the maternity leave or the other benefits legally due to pregnant workers.Union bustingColombia is the most dangerous country in the world to be a trade union leader. Compared to other sectors, the cut flower industry fortunately has not experienced the same extreme level of trade union violence. Other forms of retaliation against unions remain all too common, however, and we hope that the violence will not escalate.My coworkers and I founded a new independent union at Splendor Flowers, called Sintrasplendor, in November 2004. We were motivated to form a union because of the worsening conditions at Splendor. The company began assigning more and more flowerbeds to each worker, making the workload intolerable. Over the past ten years, the workload has doubled from 15-20 flowerbeds up to 30-40 flowerbeds per worker. This means more backbreaking labor for no more pay. Lately the company has been firing sick workers and old workers. They also announced that they would soon turn some jobs over to subcontractors, which means that those workers will lose the little job stability that they currently have. The company was writing up its own collective agreements and making the workers sign them, without even giving them a chance to voice their opinions. We hoped that a union would enable us to present a petition to the company, and therefore negotiate improved working conditions, guaranteed overtime pay, and salary increases.Sintrasplendor was the first independent union to be successfully established in a Dole-owned flower company in Colombia. When Sintrasplendor received its registration from the Ministry of Social Protection, the company presented a list of objections, asking the Ministry to revoke the registration. Splendor Flowers used various forms of persecution against the independent union, including assigning extra work on days when the Sintrasplendor had planned assemblies and other union-related activities.The company invited in another union and signed a collective bargaining agreement with them almost immediately. The agreement said that any worker who joined the company union, Sinaltraflor, would be rewarded with 40,000 pesos (approximately US$20). The company wanted the majority of workers to join Sinaltraflor, because they could then negotiate with Sinaltraflor instead of with Sintrasplendor. The company even lent one of its buses to take workers to a Sinaltraflor meeting, during working hours. Company representatives pressured workers not to join Sintrasplendor. When we distributed flyers in the plantation to explain to workers why we had formed an independent union, the company prohibited workers from reading them. According to Colombian law, it is legal to read this kind of flyer inside the workplace, during lunchtime or a break.The Colombian government recognized our union as a legal entity in 2005. Nevertheless, the company still has not sat down to negotiate with us.On October 12, 2006 Dole announced that it would close the Corzo farm at Splendor Flowers. We believe that the motivation behind this closure is that the company did not want to provide basic rights and decent work conditions to its workers. Clearly, we can not trust our local laws to protect our labor rights – including our right to organize – but rather we need new and enforceable international legal tools to ensure these rights.Splendor-Corzo will officially close in mid 2007 after the company completes the necessary legal processes. Corzo is the larger of the two farms at Splendor Flowers. Dole justifies the closure of Splendor-Corzo by saying that it has “historically produced products with limited/seasonal demand and have high costs”. However, in 2001 Splendor Flowers was the second most successful flower company in Colombia, reaching 19 million dollars in sales. Dole has not provided evidence that Splendor is a losing enterprise. It appears that the plantation closure is a response to the growing support for Sintrasplendor. Splendor management has been offering workers compensation to get them to resign. This past weekend, they fired over 200 workers. Of more than 2000 workers employed at this plantation in 2006, only 150 remain. We are worried that Dole will soon announce the closure of La Fragancia, the other plantation where an independent union has successfully been established.Lack of recourse to labor authoritiesColombian workers who want to file complaints about labor rights violations are often discouraged because governmental institutions like the Ministry of Labor take so long to resolve these cases. For example, in early 2005, my union filed several complaints before a labor judge, regarding occupational health problems and violations of the right to organize. Almost two years have passed and none of these cases has been resolved. Meanwhile, a month and a half ago the company filed a request with the Ministry of Labor to approve the mass firing of all workers at Splendor Flowers, so they can close the farm. The decision is expected to be released next week. Apparently, justice comes faster for companies than for workers.ConclusionBecause of the low wages in this sector and the long working hours, I have very little time to spend with my two young children, and lack the money to give them a decent education. The realities of the flower industry have contributed to social instability and disintegration of many families in the flower-growing region of Colombia.We need effective legal mechanisms to ensure that these companies give us safe, healthy, and decent workplaces. Thank you for allowing me to share this testimony, and I hope you take it into account in the consideration of S. 367.
Sheikh Nazmaformer Bangladeshi garment worker and labor activistTestimony of Sk NazmaFounder and Former PresidentBangladesh Center for Worker SolidarityBefore theSenate Committee on Commerce, Science and TransportationFebruary 14, 2007My name is Sk Nazma and I am from Bangladesh.
I started working when I was 12 years old, as a helper in a garment export factory called Bay Garments Ltd. At that time, in 1984 we worked 10-14 hours a day and seven days a week. For this we earned 240 Taka a month, which comes to 2 ½ U.S. cents an hour. I worked for 10 years in the garment factories, eventually becoming a skilled sewing operator. But in every factory I worked, the legal rights of the workers—80 percent of whom were young women—were repressed. Then, in 1993, I helped to organize the first major struggle in a garment factory to win our rights and organize a union. The factory was called Comtret Apparels Ltd. It took six months of struggle, but eventually we won.
That was how the Bangladesh Center for Worker Solidarity (BCWS) was formed, of which I was the president. The AFL-CIO Solidarity Center has helped us in our struggle.
That is when the serious threats began. Gang members, thugs, sent by management constantly harassed and threatened us. On many occasions I was assaulted and ruthlessly beaten.
For years, as we carried out the work of the Bangladesh Center for Worker Solidarity Center, accompanying and providing support for the garment workers in their struggle to win their legal rights, the threats continued.
In March 2005 the threats against my life became very serious and I had to flee to the United States, where I was granted legal asylum on 2006.
In 1992, there were as many as 100,000 child workers toiling under unsafe conditions in Bangladesh’s booming garment export factories. It was a huge problem, with children as young as six, seven, eight years old, forced to work 12 or more hours a day, often seven days a week. Then, largely due to legislation proposed in the U.S. Senate, the exploitation of child workers was ended.
But it is starting to come back again, and this is what I want to focus my testimony on.
My colleagues at the Bangladesh Center for Workers Solidarity have been involved in a nine-month investigation of a large factory called Harvest Rich, which is located in the Narayarganj District of Bangladesh, where clothing is sewn for Wal-Mart, Hanes, J.C. Penney, Puma and other European companies.
This is what we found. When the research began in June, we discovered scores of children just 11, 12 and 13 years of age working at the Harvest Rich factory. More than 300 to 400 adolescents—14, 15, 15 and 17 years old—were also illegally employed at Harvest Rich. Under Bangladeshi law, factories are strictly prohibited from hiring anyone under 14 years of age, while adolescent workers between the ages of 14 and 17 can only be employed under special circumstances, and are allowed to work just five hours a day for a maximum of 30 hours per week. Also, adolescents may never work at night.
Halima was one of the 11 year-old workers. Routinely, she was forced to work 11 to 14 hours a day, from 8:00 a.m. to 7:00, or more commonly 10:00 p.m. She was at the factory seven days a week, with an average of just two days off a month. It was not uncommon for Halima and the other children to be at the factory 95 hours a week.
But it got even worse. Before clothing shipments had to leave for the U.S., there were often mandatory 19 to 20-hour all-night shifts from 8:00 a.m. right through to 3:00 or 4:00 a.m. the following day, after which the workers would sleep on the factory floor for a few hours before beginning the next shift at 8:00 a.m. that same morning. Even the child workers could be forced to work such grueling all-night shifts three or four times a month. While paying a very rare unannounced visit to the Harvest Rich factory in November, U.S. company representatives found dozens of workers at 12:30 a.m. still sewing boys Faded Glory jeans for Wal-Mart, 16 ½ hours into what would have been a 19 to 20-hour shift had the executives not sent the exhausted workers home.
Halima worked as a helper, just as I did when I started out when I was 12. A helper’s job is to clean the finished garment by cutting off any loose threads that may remain. Halima was given a mandatory production goal of cleaning 150 garments an hour—she was working on Hanes underwear—one every 24 seconds. The pace was relentless.
She was on her feet all day, standing at a high table. Sometimes, she said, she just fell down or fainted from exhaustion. The factory was hot and all the workers were sweating.
If Halima or another young worker made a mistake, they were beaten. This happened every day, the workers said. They would be slapped very hard by their supervisor, who was always a man, and sometimes the children cried. They were also cursed at. If they fell behind in their production goal, they would also be beaten, or if they used the bathroom without permission. They were only allowed two visits a day, and the bathroom was filthy, without toilet paper, soap or towels.
For this, Halima and the other children were paid six cents an hour, 53 cents a day and $3.20 a week. The wages are so low that Halima and many of the other workers actually brush their teeth with their fingers and ashes from the fire because they cannot afford a toothbrush or toothpaste.
Even the skilled sewing operators at the Harvest Rich plant are being paid a wage of just 17 cents an hour, $1.35 a day and $8.09 a week. Such wages do not come close to providing even a minimally decent standard of living. on.
Overtime was mandatory, but not one worker in the Harvest Rich factory was paid their correct overtime wages. We estimate that the workers were cheated of up to half the wages legally due them. Anyone who objected to working on Friday, which was supposed to be their weekly holiday, would have three days’ wages docked as punishment.
Anyone daring to ask for their legal wages would be fired.
The corporate monitoring, even by some of the largest corporations in America, did not work at the Harvest Rich factory. When the monitors arrived for their usual announced visits, the child workers were hidden in the filthy bathrooms or put on the roof. The factory kept two sets of time records, using the falsified one to show the monitors. All the workers knew this. But anyone who spoke one word of truth to a corporate monitor would be fired the minute the monitor walked out the door.
The workers at the Harvest Rich factory, and in garment factories all across Bangladesh, are in a trap. Of course our workers need their jobs—they desperately need these jobs, but without enforcement of Bangladesh’s labor laws, the workers are left without rights and are actually seeing their wages falling every year.
As I mentioned earlier, the exploitation of child labor in Bangladesh’s garment export industry was wiped out, or greatly diminished, in 1992. After that, child labor was not a problem. This is why BCWS had to act quickly when we saw the re-emergence of child labor at Harvest Rich, as well as in some nearby plants. The campaign focused on Harvest Rich has been largely successful in ending the hiring of children under 13 years of age, though many other labor rights violations continue in the factory. But at least for now, we believe that the resurgence of child labor in Bangladesh’s garment industry has been blocked.
The garment industry in Bangladesh is booming—Bangladesh sent one billion garments to the U.S. last year—and this would be great news for the poor women garment workers if their legal rights were respected and they earned a wage that would allow them to climb out of misery. Today, there are 4,220 garment export factories in Bangladesh employing at least 2.2 million workers.
Yet despite booming exports over the last 12 years, the real wages of Bangladesh’s garment workers have been cut nearly in half as a cumulative inflation rate of 88 percent has eaten away at the purchasing power of their wages.
The demands of the Harvest Rich workers are very modest. They are willing to work 10, 11 or even 12 hours a day, as long as overtime is voluntary and paid correctly. They need one day off a week, as they are exhausted. The beatings must end. The workers’ dream would be to earn at least 5,000 taka a month, which is just $71.50 a month, $16,50 a week, or 35 cents an hour.
Surely it is not too much to ask that the great U.S. and European companies must respect the labor laws of Bangladesh. If this happened, it would be a great step forward for the over two million garment workers in Bangladesh, who are some of the hardest working people anywhere in the world, but also among the poorest.
Witness Panel 2
David SocolowCommissionerNew Jersey Department of Labor & Workforce DevelopmentTestimony of New Jersey Labor Commissioner David J. SocolowHearing before the United States SenateSub-Committee on Interstate Commerce, Trade and Tourism,Committee on Commerce, Science and TransportationWednesday, February 14, 2007State Initiatives to Prevent Abusive Sweatshop Labor ConditionsChairman Dorgan, Members of the Subcommittee, thank you for this opportunity to come before you to discuss what states like New Jersey are doing to help stop workers from being abused in sweatshops. I am David Socolow, and I serve as the Commissioner of the New Jersey Department of Labor and Workforce Development.As this committee has heard from the compelling personal stories of witnesses at today’s hearing, workers continue to be exposed to sweatshop conditions around the world, leading to horrendous child labor abuses, dangerous working conditions and unconscionably low wage levels, as global manufacturers produce low-cost apparel for the world’s most affluent nations.Here in the United States, governments at both the State and Federal levels have worked for almost a century to eliminate these terrible working conditions from our economic landscape. As state labor commissioner, I lead an agency whose daily mission is to ensure that the workers of New Jersey are paid fair wages and are provided safe workplaces. However, now that much of the apparel in the global marketplace is manufactured overseas, we must not turn a blind eye to sweatshop abuses elsewhere that we would not tolerate in our own backyard.We can do our part by using the State’s purchasing power to counteract sweatshop labor practices. Rather than buying goods based solely on the lowest possible price, we should include in our procurement policies a recognition of the real cost of the apparel we buy. Such enlightened procurement policies take into account the harm that sweatshop conditions cause, not only to those workers exploited in overseas factories, but also to American workers and manufacturers who cannot compete against unscrupulous contractors paying poverty wages while ignoring workplace health and safety.New Jersey’s Apparel Procurement Executive OrderIn my home state of New Jersey, over the past two years, State governmental agencies purchased more than $7 million worth of apparel for uniformed staff, employees and individuals for whom the State provides clothing, and linens in our State correctional and developmental institutions.In 2002, our state government took an historic step toward addressing sweatshop abuses by implementing Executive Order 20, which requires that all apparel purchased by the State of New Jersey be manufactured in the United States under fair labor conditions. Moreover, this Order requires contractors providing apparel to the state to provide the names and locations of all subcontractors involved in the manufacture of that apparel and to sign Affidavits certifying that: their workers are paid a “non-poverty wage”; workers are afforded a mechanism to resolve employer-employee disputes; the employer is committed to neutrality in regard to union organizing efforts; and that workers are afforded a safe and healthy work environment free from discrimination.This policy is making a real impact in protecting workers. In one recent example, a winning bidder swore in an affidavit to supply the State with domestically manufactured apparel at a cost lower than three other bidders who offered non-domestic product. When we found in an audit that the company had supplied a mix of both domestic and imported products, we gave them a choice: give up the contract, or provide only linens manufactured according to the State’s anti-sweatshop standards. The company agreed to provide sweat-free products and this was confirmed in subsequent audits.In another case, a losing bidder challenged the recommended award of an apparel contract to another vendor. In responding to the protest, the winning bidder withdrew their affidavit, stating that they could not supply the domestically made apparel at the prices they bid. After a re-bid, the original winning bidder made a new offer to supply domestically produced apparel at a price 20% higher than the lowest bid for imported product. New Jersey has found that this is the typical price differential required to avoid purchasing products made in sweatshops. It is worth paying this small premium with our residents’ tax dollars to uphold the values of the people of our state.In implementing the State’s Apparel Procurement Executive Order, we have been alerted to potential abuses by competitors of contractors or bidders during the procurement process. This market-based mechanism is vital to enforcing New Jersey’s apparel procurement standards while minimizing the cost to state government. In this way, the State can work for the best interests of the people we represent.National Initiative: State and Local Government “Sweat-Free” ConsortiumWhile our Apparel Procurement Executive Order has provided New Jersey with a useful tool to avoid purchasing sweatshop-produced apparel, Governor Corzine has acted to take the next step toward ending worldwide sweatshop conditions. Last September, Governor Corzine announced that New Jersey would join a State and Local government consortium proposed by Governor Baldacci of Maine, with the goal of ending the use of state taxpayer funds to purchase apparel manufactured in sweatshops. The inaugural meeting of this consortium is planned for next month with representatives from the states of Maine, New Jersey and Pennsylvania, and we are currently recruiting other state and local governments to join this effort.This consortium initiative will be modeled on the efforts of more than 160 colleges and universities that have banded together to end sweatshop production for collegiate apparel under the Workers Rights Consortium (WRC). The WRC sets high standards for the production of collegiate apparel and investigates factories around the world to root out sweatshop conditions and abuses.As with colleges and universities, state and local governments are a group of buyers with the common interest of avoiding sweatshop-produced goods. To date, more than 170 state and local jurisdictions across America have adopted procurement policies aimed at eliminating sweatshops from their supply chain. Now, working together, state and local governments can strike with even greater force against sweatshop conditions.With the buying power of all of these entities joined in a national consortium, global manufacturers will recognize the value of producing goods for this market while meeting basic workplace requirements, including paying living wages, offering fixed working hours, putting an end to the use of child labor, ensuring the right to collective bargaining and protecting worker health and safety.A single state, town or university cannot end the global exploitation of sweatshop workers. But each of us can take steps to combat the economic incentives that give rise to sweatshop abuses.Thank you again for the opportunity to testify today. I look forward to responding to your questions.
William JonesChairmanCummins-Allison Corp.Testimony of William JonesChairman, Cummins-Allison Corp. &Member, Board of Directors, U.S. Business and Industry CouncilBefore the Subcommittee on Interstate Commerce, Trade and TourismCommittee on Commerce, Science, and TransportationUnited States SenateFebruary 14, 2007Good afternoon, everyone. I am very grateful to be here today to provide the perspective of an American manufacturer.Thank you, Senator Dorgan for inviting me to testify on the problem of sweatshop labor. This is a critical issue for many corporations committed to manufacturing in the United States and I applaud you for your leadership in trying to correct this problem.My name is William Jones and I am the Chairman of Cummins-Allison Corp., a privately held Chicago corporation founded in 1887. Today, Cummins is a manufacturer of security equipment, particularly focused on the processing of coin and currency at high speeds. We employ approximately 900 individuals in the U.S. and provide work for another 10,000 Americans employed by our key U.S. suppliers. 95% of the products Cummins sells worldwide are manufactured in Chicago, Illinois.Perhaps some Senators are not familiar with the challenges facing our domestic manufacturers, or the benefits that we bring to the American economy. Manufacturers are so often the backbones of our communities – creating wealth, providing decent-paying jobs with good benefits. Our companies pay taxes, company management pays taxes, and our employees pay taxes. Those taxes make possible schools, roads, water treatment plants, first responders, libraries, social services, and hospitals.Our Company headquarters and manufacturing are in Mt. Prospect, Illinois. About two years ago, the head of the Mount Prospect, IL school district called me up and invited me out to lunch. I said sure but why call on me. He said because you’re the largest taxpayer in our town and we wouldn’t have the schools, facilities, and classes we do without you.Let me give you my views on sweatshop labor and then turn to some of the other, broader issues facing domestic American manufacturers. First and foremost, sweatshop and slave labor are one of the moral outrages of our time and must be abolished. Something is very, very wrong when wealthy people and corporations get even wealthier on the backs of the working poor.In addition, sweatshop and slave labor can end in economic catastrophe for us all. This abuse does not create a healthy middle class of consumers in the sweatshop countries, who in turn embrace democratic political values to protect what they have gained by the fruits of their hard labor. It does not advance these countries’ economies more than marginally – with a robust middle class of consumers driving the economy.Why not? Because unlike the sweatshops of America’s past, today’s sweatshops are found in very low-income countries with towering rates of un- and underemployment. Whereas the chronic scarcity of labor throughout American economic history eventually helped our wages rise, the mammoth glut of labor throughout the developing world is bound to keep wages at rock bottom for, at least, many decades.At the same time, sweatshops have sucked much of the life out of the remaining labor-intensive sectors of American manufacturing -- which remain far and away the best hopes for middle-classlives for our own poor. If unchecked, these trends will threaten much of our remaining domestic manufacturing base -- a manufacturing base which underpins our national defense and prosperity. Ultimately, the demise of so much manufacturing will undermine the entire American economy, which is THE engine of world growth.The owners of the sweatshops may get rich; the owners of the brand names may get rich; and the retailers who trade in these goods in the American market may get rich – but at the expense of American workers and factory owners. There are those who mistakenly suggest that sweatshops bolster U.S. living standards by providing cheap goods for consumers. A first world country raises its living standards on a sustainable basis by helping workers become employed, genuinely more productive and earn higher wages, not by helping consumers get cheaper socks or toasters.I am not aware of any country in history that become a great power by consuming, rather than by producing.So I commend you for introducing S. 367, your bipartisan measure to prohibit the import, export and sale of goods made with sweatshop labor. My company, Cummins Allison, and the US Business and Industry Council, of which I am a member, both heartily endorse this bill. A $10,000 fine for violations combined with the right to sue for damages for those who produce the goods under fair working conditions is a fair and balanced approach to solving the scourge of slave and forced labor.Across the developing world from large countries like China to smaller competitors like Jordan, slave and forced labor is epidemic. These nations need to do a better job enforcing their own laws and commitments on the issue. S. 367 gives them and some of the shady players that are manufacturing illegitimately, the right incentives to clean up their acts and improve working conditions for millions of individuals. Again, I am most appreciative of the spotlight that you have shone on these horrible practices and look forward to the enactment of this vital legislation.Now I want to discuss some of the broader American trade and international economic policies that are contributing to the demise of domestic manufacturing.In the last few years the governors of four states have contacted me asking me to move from Illinois to their states. I’ve politely declined because no matter what tax breaks they offer me, they can’t change the U.S. trade policies that are killing companies like mine. Only you in Washington can do that. But in fact over the last three decades, Washington has taken my tax dollars and used them to try to put me out of business.Some corporate leaders would say I should move to Europe, where the governments would protect me because my creating jobs would mean that they don’t have to carry people on welfare rolls. Most governments there, of course, provide health care and pension coverage that would reduce the competitive pressures on my company. Others might say that I should go to China so my business could survive by paying low wages and minimal benefits. Some who move their manufacturing to China subcontract with firms that use forced or penny-wage labor in order to gain a competitive advantage. That, too, is an available option.So, I could take the high road and move my manufacturing to Europe where they have industrial policies to keep their nations competitive, or I could take the low road and go to a low wage area that would reduce my production costs. Those are the choices that U.S. trade and international economic policy force on companies like mine.But don’t worry, I’m not going anywhere. I intend to stay right here in the USA providing great machines and great jobs, and fighting to preserve the domestic manufacturing base.It is clear to me that the federal government’s trade policies of the past three decades – through Republican and Democratic administrations alike – have vastly eroded our domestic manufacturing base. Three million manufacturing jobs have been lost since 1997 – and believe me, it’s not just because American manufacturing has become so much more efficient and productive, as you often hear from the globalization cheerleader crowd. No, tens of thousands of companies have closed their doors for good – not because they got more productive but because they were put out of business by unfair foreign competition, whether subsidies, non-tariff barriers, currency manipulation, dumping, or other anti-competitive practices.So I hope I’m starting to convince you that we have a lot in common and we share a certain vision for the American people: work with dignity, with good wages, and good benefits, healthy families, and healthy cities and rural areas.The inequalities brought about by the decline in domestic manufacturing are profound and far reaching. They affect every segment and institution in our society, and yet Washington has been asleep at the switch while our trade deficits soar and the East Asians hold so much of our public debt. How much longer can the current situation continue before the dollar collapses and we enter a serious worldwide economic adjustment?We must approach trade policy as more than just winning legislative battles in Washington
–Our chief concern must be about helping to put America’s living standards and economic power back on a rising path by strengthening our economy’s ability to produce. We need to restore our country’s ability to earn its way in the world. That’s the only way to create lasting, broadly shared prosperity for the American people, and ensure our national security.That’s also the only way that we’ll be able to preserve a functioning global economy that can provide expanding opportunity around the world – because an economically healthy American import market is central to growth prospects everywhere. Don’t ever let anyone call you a protectionist because you are challenging current trade policy – what you are doing is to try to restore balance to a world trading system that is completely out of whack essentially because foreigners are gaming the system to grab more than their fair share of the wealth.Achieving this goal means enacting into law measures that strengthen in major, concrete ways companies like mine and the tens of thousands of others like it that create middle-class jobs and anchor communities. And it means enacting into law concrete measures to help new companies realize the advantages of starting up and creating jobs in America.If our legislative strategies don’t seek these results, they will not save a single existing job or create a single new one. Indeed, domestic manufacturing and all the employment benefits it creates will start shrinking faster than ever.How can Congress help? By strongly supporting new trade policies that will make much bigger changes than most critics have been talking about so far.By all means, let’s keep pressing for better labor and environmental provisions in new trade agreements. Let’s use trade with our market, by far the largest in the world to abolish slave and forced labor. But let’s also realize that actually helping boost production and employment and wages in the United States will require much more.The United States Business and Industry Council we will be working hard for prompt passage of the Ryan-Hunter bill, which would enable domestic manufacturers to win import relief against Chinese currency manipulation. It attracted some 170 co-sponsors in the last Congress. This bill deserves to be a very high priority of yours this session as well. Let’s get it passed in the House quickly - and introduced and passed in the Senate in short order as well.In addition, we need to do something about inequalities created for our domestic producers by the widespread use of Value-Added Taxes by 136 ofToday, the VAT disparity is a huge factor for U.S. producers. The total yearly VAT penalty paid by American producers of goods and services is roughly $380 billion. We need to put in a border equalization tax, so that goods imported into America face the same hurdle that American goods do going into foreign companies. I know it is a very technical issue, but $380 million is real money and the resulting distortions of trade flows have destroyed hundreds of thousands of American jobs.We will be working hard to help attract more co-sponsors for the Trade Balancing Act that Rep. Mike Michaud from Maine introduced in the House at the end of the last session – and to find Senate co-sponsors to introduce a companion bill. The Trade Balancing Act makes use of Article XII of the WTO and puts into place an emergency import surcharge until major trade imbalances are corrected.The president has announced that he will seek renewal of Fast Track authority, which expires in July. We desperately need to block traditional Fast Track authority, under which all these bad trade deals have been passed for the last thirty years. Fast Track is an abdication of the authority that the Constitution gives the Congress. It has allowed the Executive Branch to mostly ignore the Congress all these years and the results have been devastating. We need for Congress to reclaim its trade authority. We need to develop an entirely new way of negotiating trade agreements.In fact, we need to announce a moratorium on all further trade agreements until we figure out what we are doing wrong and how to get our trade deficit under control – which specifically includes enforcing the trade agreements we have. Those who support the failed trade policies of the past maintain that just one more trade agreement will help us export our way out of the mess we are in. That’s nonsense. We need a set of comprehensive solutions to solve our trade problems – and piecemeal new trade agreements are not among them.Finally, anyone genuinely concerned about preserving American jobs and living standards must help us find ways of protecting American intellectual property better and preventing dumping of foreign products in the American market below their cost of manufacture. I know that there’s some resentment surrounding the use of IP trade laws by American multinational companies. But the very survival of countless smaller domestic companies like mine heavily depends on strengthened intellectual property protection. If there have been abuses, let’s correct them. But let’s make sure not to do anything that could set precedents that wind up throwing the baby out with the bath water. Otherwise, you’ll deal a fatal blow to many of our country’s best companies and best employers.Make no mistake about it. Domestic companies like mine, who are passionately devoted to keeping their production and their workforce in the United States, are under attack in the world economy. We and our workers are under attack from high-income countries like Germany and Japan. We are under attack from low-income countries like China and India. Foreign governments do what they can, whatever it takes, to advance their national interests and those of their companies – despite the negative consequences for other countries and other peoples.American domestic companies and their workers also deserve policies from their government that further their interests – not abandon them. Unfortunately, Washington’s priorities have long been elsewhere, but we live in a democratic system where the ineffective trade policies of the past can be changed. With enough help from this committee and other members of Congress, that’s exactly what we can do.
James Englishon behalf of Leo GerardUnited SteelworkersUNITED STEEL, PAPER AND FORESTRY,RUBBER, MANUFACTURING, ENERGY,ALLIED INDUSTRIAL AND SERVICE WORKERSINTERNATIONAL UNION
James D. EnglishInternational Secretary-Treasurerbefore theSubcommittee onInterstate Commerce, Trade and TourismCommittee on Commerce, Science and TransportationonThe Decent Working Conditionsand Fair Competition ActFebruary 14, 2007Statement of James D. English, International Secretary-TreasurerUnited SteelworkersBefore the Subcommittee on Interstate Commerce, Trade and TourismCommittee on Commerce, Science and TransportationonThe Decent Working Conditions and Fair Competition ActFebruary 14, 2007Mr. Chairman, members of the Committee, on behalf of the 1.2 million working and retired Steelworkers in the United States and Canada, I appreciate this opportunity to testify in support of Senate Bill 367, The Decent Working Conditions and Fair Competition Act. I applaud you for your leadership in authoring this important legislation. And I applaud as well Senator Graham from South Carolina who is a primary co-sponsor on the bill. All too frequently, policy makers have ignored the dark side of increased globalization and its impact on workers both domestically and around the globe. Your actions suggest a growing bi-partisan awareness that new measures are needed to establish effective standards to defend the most vulnerable among us if the promise of expanded international trade is to be realized.For far too long, the United States government’s trade agenda has focused on corporate protections while ignoring the lives of human beings toiling within the global economy. One result is that products reaching American soil often come with the taint of being produced in inhumane conditions. Many workers making products destined for the United States do not have the option of rejecting forced labor, unsafe conditions, indecent pay, discrimination, or other violations of their rights. Instead, because of their poverty and desperation, they are the victims of a global trading system that allows, if not encourages, horrendous working conditions to swell corporate bottom lines.The recent period of trade liberalization has not been kind to working Americans. Despite the negotiation of a series of so-called free trade agreements over the last dozen years, real income and wages in the U.S. are stagnating or falling, inequality is growing, more people are in poverty, debt is growing faster than income, and millions of decent, good paying manufacturing jobs have disappeared. Unfair trade policies, and the massive and ultimately unsustainable trade deficits that have resulted, are a key contributing factor to the job loss, destroyed communities, and falling wages and benefits that American workers are facing today.These problems are not limited to U.S. workers. Indeed, for workers in the countries of many of our trading partners, the situation is considerably worse. In export processing zones alone, hundreds of thousands, if not millions of workers are trafficked to work in sweatshops, making products for export to the U.S. Many of these workers have their passports confiscated and are forced to work inhumane hours for pittance wages, sometimes going months without a paycheck. These workers are often denied their basic human rights at the workplace, especially the right to organize and bargain collectively, even while they make products for some of the largest and richest corporations in the world. If corporations can demand and win strong, enforceable laws, backed by sanctions to protect their products and intellectual property, certainly workers should demand and achieve laws to protect the rights of workers who make those products. The enactment of S.367 would be a significant step forward in bringing some balance to the global economy.The Decent Working Conditions and Fair Competition Act simply states that if products are made in sweatshop conditions, they are not welcome in our markets. A product is considered a sweatshop good if it is produced under conditions that do not meet core labor standards. Those standards include the right to associate, organize and bargain collectively, a prohibition on forced or child labor, and basic conditions of work including wages, safety and health protections, and hours of work.The idea of linking conditions of work to trade is not new. It has been present in our national dialogue on international economic affairs for more than 100 years. The McKinley Tariff of 1890 included a provision banning the import of prison made goods. In 1912, the U.S. banned the import of white phosphorous matches because of health hazards associated, not with their use, but with their production. The Administrations of President Eisenhower, President Nixon, President Reagan, the first President Bush, and President Clinton all sought to include worker rights and standards in multilateral trade agreements. Their collective reasoning was perhaps best expressed 20 years ago in a 1987 letter to the House Ways and Means Committee from President Reagan’s Labor Secretary Bill Brock who wrote:“Those countries which are flooding world markets with goods made by children, or by workers who can’t form free trade unions or bargain collectively, or who are denied even the most minimum standards of safety and health are doing more harm to the principle of free and fair trade than any protectionist group I can think of.”While sadly little progress has been made at the multilateral level, Congress has over the last 20 years introduced the concept of linking worker rights to trade in a variety of U.S. laws. The Caribbean Basin Initiative, the Generalized System of Preferences, the Andean Trade Preference Act, the Overseas Private Investment Corporation, and Section 301 of the 1988 Trade Act, to name just a few, all contain some form of worker rights conditionality. While all well intentioned, enforcement of their worker rights provisions has been lacking.It is in this context that The Decent Working Conditions and Fair Competition Act holds the most promise. In assigning enforcement responsibilities to both the Customs Service and the Federal Trade Commission, the bill sends a clear message that abusive labor conditions in trade will no longer be tolerated. Perhaps more importantly, by creating a private right of action, the indifference or passivity on the part of the executive branch will no longer be able to block needed action. I would suggest however, that the section of the bill that deals with who has the standing to sue, be amended to include workers and their unions. Workers are on the front lines of unfair and abusive trade and need to have the ability to seek redress in the same manner as companies or investors.The Decent Working Conditions and Fair Competition Act seeks to address one of the questions that need to be answered as our nation confronts an expanding global economy. This is not about free trade or protectionism, but rather what are the rules that should be in place to insure just and fair competition. For workers, the overriding issue in discussions on international trade is not free trade or protection, open markets or closed markets, or more investment or less. Rather, the debate for us is over how the gains of economic activity are to be distributed and who has a say in making that determination. If the growing internationalization of the U.S. economy results in economic growth, we are concerned with who will benefit—the tiny number of people on the top rungs of the economic ladder—or the vast numbers on the bottom and middle rungs. And we certainly do not believe that the only choice is between autarky and an unrestrained free market.History teaches that there is no reason to expect that an unregulated free market will bring sustained equitable economic growth and progress. For trade unionists, most of the historic achievements of our movement, the establishment of a minimum wage, the abolition of child labor, the development of workplace health and safety laws, as well as the establishment of collective bargaining were intended to temper and restrain some of the most brutal effects of the free market.We now have to extend our domestic experience into the international arena. By setting a floor on labor rights and standards, The Decent Working Conditions and Fair Competition Act does exactly that. Consumers have a right to know the products they purchase are not produced in sweatshop conditions. Businesses have the right to compete fairly, and not with companies that engage in worker abuses. Shareholders have the right to invest with the knowledge that they are not supporting sweatshop practices. And, most importantly, workers around the globe have the right to earn a living without the degradation of toiling in inhumane conditions.
Charles KernaghanExecutive DirectorNational Labor CommitteeStatement of Charles KernaghanDirector of the National Labor CommitteeBefore theSubcommittee on Interstate Commerce, Trade and TourismCommittee on Commerce, Science and TransportationFebruary 14, 2007Mr. Chairman, members of the Committee, I appreciate the opportunity to testify at this very important hearing regarding worker rights standards in the global economy.The U.S.-Jordan Free Trade Agreement went into effect in December, 2001. Over the next five years, apparel exports from Jordan to the U.S. soared by 2,300 percent, growing from $52.1 million in 2000 to $1.2 billion in 2006.The U.S.-Jordan Free Trade Agreement was reported to be a model agreement, since for the first time, worker rights standards and environmental protections were included in the core of the agreement.Yet something went terribly wrong, as the U.S.-Jordan Free Trade Agreement quickly descended into Human Trafficking and involuntary servitude. At least 36,149 foreign guest workers are employed in Jordan’s 114 garment factories, at least 90 percent of which are foreign-owned, mostly by Asian investors. The guest workers come from Bangladesh, China, Sri Lanka and India.Bangladeshi guest workers had to pay $1,000 to $3,000 each to unscrupulous manpower agencies in Bangladesh to purchase a two-to-three-year contract to work in Jordan. This is an enormous amount of money in Bangladesh, and as poor workers, they had to borrow the money on the informal market at exorbitant interest rates of five to ten percent per month.From the minute they took the loans, these workers were in a trap, and a race against time to pay off their large debts. But the workers were promised that they would be able to earn $134.28 a month for regular hours and up to $250 a month with overtime. All housing, food and medical care would be free. The workers were told they would live well, “like they do in the West.” They would get at least one day off a week, sick days, vacation time and national holidays.But there was a catch: The contract tied the guest workers to just one factory, prohibiting them from working elsewhere.One hundred and fifteen workers from Bangladesh purchased contracts to work at the Al Shahaed Garment factory in Irbid, Jordan.Upon their arrival at the airport, management immediately confiscated their passports. Nor were the workers provided with residency permits, without which they could not go out on the street without fear of being detained by the police for lack of the proper papers.Once in the Al Shahaed factory, the workers found themselves forced to work shifts of 15, 38, 48 and even 72 hours straight, often going two or three days without sleep. They worked seven days a week. Workers who fell asleep at their sewing machines would be slapped and punched. Instead of being paid the $250 a month that the ad promised, the workers earned two cents an hour, or $2.31 for a 98-hour workweek. Workers who asked for their legal wages could be imprisoned up to three days without food. Workers who criticized the food the company provided were beaten with sticks and belts. Twenty-eight workers had to share one small 12-by-12-foot dorm room, which had access to running water only every third day. These workers sewed clothing for Wal-Mart.When, in desperation, the workers demanded their legal wages, they were forcibly deported and returned to Bangladesh without their back wages. Many of these workers are now hiding in Dhaka City and peddling bicycle rickshaws to survive. They cannot return to their home villages because they have no possible way to pay off the mounting debt they incurred to go to Jordan in the first place.At the Western factory, also in Irbid and producing clothing for Wal-Mart, Bangladeshi guest workers who were trafficked to Jordan faced much the same fate. They too were stripped of their passports and forced to work 16 to 20 hours a day, seven days a week. Despite working 109 hours a week, the workers routinely went for months without being paid. In the first four months of 2006, the Western workers were not paid a single cent in wages. There are also credible of reports of sexual abuse, including the rape of a sixteen year-old girl. Workers who asked for their wages would be beaten and threatened with forcible deportation.At the Al Safa factory in the Al Hassan Industrial Estate, a young Bangladeshi woman no more than 20 years of age hung herself after being raped by a factory manager. This happened in February 2005. She hang herself in a bathroom using her scarf. Her body was not immediately returned to Bangladesh, but rather, remained at the local morgue for several months. In this factory, they sewed clothing for the Gloria Vanderbilt label.The National Labor Committee released our report on Jordan in May 2006. By July 2006, Jordan’s Trade Minister at the time, Mr. Sharif Al Zuibi, declared: “Our inspection regime may have failed us and may have failed us miserably.” Jordan’s labor department had just 88 labor inspectors to oversee 98,000 business operations. The primary role of the labor department inspectors was to issue work permits to foreign guest workers. By law, Jordan’s unions were not permitted to organize foreign workers.Acting quickly, the Jordanian Government to date has closed at least ten of the worst garment factories and relocated over 1,000 workers to better factories. Across Jordan, especially in the 59 larger direct contract factories, conditions have improved. Guest workers passports have been returned and most workers now have their necessary residency permit. At most, workers are toiling 11 hours a day and not the 15-plus-hour shifts that were routine in the past. Most workers are being paid at least the legal minimum wage. Factory conditions and treatment have improved.However, problems continue in some of the 55 smaller subcontract factories in Jordan.In the Concord Garment factory in Cyber City Industrial Park near Irbid, 350 workers have not been paid for the last three months, despite the fact that they are forced to work 15 to 16 hours a day, from 8:00 a.m. to 11:00 p.m. or 12:00 midnight, seven days a week. Women workers report being cursed at, slapped and punched by factory managers. There is no heat or hot water in the dorm, and even the toilets lack running water several days a week. Many of the workers are falling ill. If any worker asks for their legal rights, they will be immediately attacked, beaten and deported. Nor has management returned the workers’ passports or issued their necessary work permits.At the Classic Fashion factory in Jordan, 500 workers are required to work seven days a week, putting in routine 14-hour shifts from 7:30 a.m. to 9:30 p.m. As a result, the workers are sick and exhausted There are no sick days and management provides no medical care. This factory produces for Jones Apparel, the Gloria Vanderbilt label.At the Hussein Jordan Garment factory in the Al Hassan Industrial City, the workers are being forced to work 10 regular hours rather than the legal eight hours. If workers arrive one minute late to the factory, they are beaten. Nor have these workers received their passports and residency permits. They are being paid below the legal minimum wage and the factory is illegally charging workers for food and medical care. All overtime is obligatory and sick days and national holidays are not respected. The Hussein Jordan factory produces for Victoria’s Secret.On balance however, much has improved in Jordan’s garment industry, and the government is seriously responding to reports of continued violations. But must remains still to be done. The guest workers are still denied the freedom of association and the right to organize.We do not know of a single prosecution of factory owners for human trafficking and holding tens of thousands of workers under conditions of involuntary servitude.Nor do we know of any case where the foreign guest workers were paid the outstanding back wages legally due them. But there is hope that the significant improvements will continue.A second concrete example I want to raise is that of the Kaisi Metals factory in Guangzhou in the south of China, where 600 to 700 workers toil under dangerous and illegal conditions producing furniture parts for export to U.S. companies. Among those companies is the Knape & Vogt Manufacturing Company—located in Grand Rapids, Michigan—which imported $10.4 million-worth of goods from the Kaisi factory in a recent three-month period. Every single labor law in China is routinely violated at the Kaisi factory, along with the International Labor Organization’s core worker rights standards, while the U.S. companies sourcing production there say and do nothing.Grueling, exhausting, numbing, dangerous and poorly paid would be the only way to describe the workday at the Kaisi Metals factory. Kaisi workers are routinely forced to toil 14 ½ to 15 ½ hours a day, from 8:00 a.m. to 10:30 or 11:30 p.m., often seven days a week. It is not uncommon for the workers to be at the factory 100 hours a week, while toiling 80 or more hours.Workers are paid on a piece rate basis. It is standard for management to arbitrarily set wildly excessive production goals requiring workers to complete 7,780 to 11,830 pieces in a day, which is 640 to 980 operations an hour—or one piece every four to six seconds—for which they are paid an astounding six-hundredths of a cent per piece. The work pace is brutal, relentless and dangerous.Workers are paid below the legal minimum wage and cheated of their overtime premium, earning less than half of what they are legally owed. Workers are paid just $24.33 for a 77-hour work week, and 32 cents an hour. The workers should be earning at least $52.56. The current minimum wage is 58 cents an hour.It is a dreary life for the 600 to 700 workers at the Kaisi factory, who are housed in primitive over-crowded company dorms located on the seventh floor of the factory. Each room measures 11 feet by 24 feet and its walls are lined with double-level metal bunk beds. There is no other furniture, not even a bureau, a table or chair. Six to eight workers share each room. For privacy, the workers drape old sheets and plastic over the openings to their bunks. There is a tiny bathroom, which the workers say is filthy. There is no hot water and any workers who want to bathe during the winter must walk down four flights of stairs to fetch hot water in a small plastic bucket and return to their dorm room for a sponge bath. The dorms are very over-crowded and the air reeks of perspiration and sweaty feet.Married couples must live “off campus” under equally deplorable conditions, since they are able to afford only the smallest, most primitive one-room apartments. Zhu Shenghong, who lost three fingers at the Kaisi factory, lives in a single room with his wife. Their only furniture consists of a bed, which is broken, a few primitive wooden tables and three tiny chairs Zhu made himself before he was injured, using scraps of wood he picked up on the street. They cannot afford a television. The toilet is an outhouse, and the kitchen is in a hallway partitioned with some planks of wood. Zhu and his wife often cook with wood, largely subsisting on turnips. This is all that two people, both working in export factories, can afford.Much worse still is the fact that the Kaisi factory is a dangerous place to work, where scores of young people have been seriously injured, and some maimed for life.Dai Kehong was just 24 years old when both his hands were crushed while working on a punch press molding machine producing furniture parts for export to U.S. companies. It happened at 9:00 p.m. when Dai was 13 hours into his routine 15 ½ hour shift. Dai’s right hand is mangled and deformed, with only the thumb and forefinger remaining, but frozen in place. His left hand was also crushed and frozen into a claw, as he is unable to bend or straighten any of his fingers. He has no ability to use either hand and will need an artificial limb.On September 29, 2006, Zhao Chengquang’s left hand was crushed while he was working on an order for the U.S. Knape & Vogt company. His stool suddenly slid out from under him leaving his left hand caught in the machine. His hand was crushed, severing two fingers with the knuckles and a large part of his left hand.In September 2006 alone, five Kaisi factory workers were seriously injured, resulting in the loss of at least six fingers.In direct violation of China’s laws, the Kaisi factory failed to inscribe its workers in the mandatory national work injury insurance program, which is China’s equivalent of Worker Compensation. Kaisi management also failed to report these serious work injuries to the local authorities. The Kaisi factory refused to pay anywhere near the full compensation these injured workers were legally owed. Management is even refusing to pay for Dai Kehong’s artificial limb.U.S. companies could never tolerate such abusive treatment of their products and have gone out of their way to work with the Kaisi factory to bring their contractor into compliance with international packing specs so that their products will not be damaged en route to the U.S. Knape & Vogt spent one year working with its contractors in China spelling out acceptable criteria that its packing must meet and demanding that each package pass rigorous tests before shipment.At the same time, the U.S. companies stood by and did not say a word as scores of young workers were injured and maimed due to dangerous working conditions. Nor did the companies sourcing production at the Kaisi factory utter a single word to protest the seven day, 80-hour work weeks, or the fact that workers were being paid below the legal minimum wage and cheated of their overtime premium while working on their goods. Nothing was done to bring the primitive dorm conditions up to a level of acceptable decency.In fact, the companies give every indication that they care much more about their products than about the human beings in China who make them.This is just one example—and there are hundreds—of how easily the paper-thin labor laws in China are flaunted by the multinational corporations with complete impunity. Here too, the voluntary corporate codes of conduct and private monitoring schemes have failed completely—and with such tragic results for the workers.Senator Dorgan, I believe that the Decent Working Conditions and Fair Competition Act, which you and your colleagues recently introduced in the U.S. Senate, is the single most important action that can be taken to end the race to the bottom in the global economy. Once passed, this legislation will reward decent U.S. companies which are striving to adhere to the law. Worker rights standards in China, Bangladesh and other countries across the world will be raised, improving conditions for tens of millions of working people. Your legislation will for the first time also create a level playing field for American workers to compete fairly in the global economy.Thank you for allowing me the opportunity to testify on this critical issue, of raising standards in the global economy rather than lowering them.
Daniel GriswoldDirector, Center for Trade Policy StudiesCato Institute“The Best ‘Anti-Sweatshop’ Policy:Expanding U.S. Trade with Developing Countries”Testimony by Daniel GriswoldThe Cato Institute
Before the Trade, Tourism, and Economic Development Subcommittee
of the Senate Commerce, Science, and Transportation Committee
Hearing on “Overseas Sweatshop Abuses, Their Impact on U.S. Workers,
and the Need for Anti-Sweatshop Legislation”February 14, 2007Mr. Chairman and members of the subcommittee, thank you for inviting the Cato Institute to testify today at this hearing on U.S. trade policy and global labor standards. My name is Dan Griswold, and I am director of the institute’s Center for Trade Policy Studies.The Cato Institute is a non-profit, non-partisan, voluntarily funded education institution. Through research and public events, we have worked for three decades now to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace among nations.The constituents you represent have no reason to fear America’s growing trade with people around the world, including trade with workers in developing countries. Expanding trade with developing countries not only promotes more U.S. exports, but just as importantly it provides a wider array of affordable products for American consumers—such as shoes, clothing, toys, and sporting goods. Tens of millions of American families benefit from more vigorous price competition in goods that make our lives better everyday at home and the office. Lower prices and more choice translate directly into higher real compensation and living standards for American workers.There is no ‘race to the bottom’American workers are not pitted in zero-sum competition with workers in poor countries. There is no global “race to the bottom” on labor standards. Through specialization, global incomes and working conditions can rise for workers in all countries that participate in the global economy. American workers can compete profitably in world markets because we are so much more productive. Because of our education, infrastructure, efficient domestic markets, the rule of law, political stability, and a generally open economy, American workers compete and prosper in a broad range of sectors. As our country has become more globalized in the past 25 years, American workers and their families have enjoyed significant increases in real incomes, compensation, and wealth.Nor has trade with developing countries undermined America’s manufacturing base. According to the latest figures from the Federal Reserve Board, the output of America’s factories in 2006 was more than 50 percent higher than in the early 1990s before NAFTA and the World Trade Organization came into being. American factories are producing more aircraft and pharmaceuticals, more sophisticated machinery and semiconductors, more chemicals and even more passenger vehicles and parts than 15 years ago. It is true that output of clothing, shoes and other low-tech goods has been declining, but those are not the industries of the future for the world’s most sophisticated economy. U.S. factories can produce more with fewer workers because manufacturing productivity has been growing so rapidly.If there were a “race to the bottom,” then the lower wages and labor standards in less developed countries should be attracting large shares of global investment. Of course, developing countries attract foreign investment in those sectors in which they enjoy a comparative advantage, such as light manufacturing, but in fact, the large majority of manufacturing foreign direct investment (FDI) flows between rich countries.When U.S. multinational companies look to invest abroad, their primary motivation is not a search for low wages and low standards. Far more important than lower costs are access to wealthy consumers, a skilled workforce, modern infrastructure, rule of law, political stability, and freedom to trade and repatriate profits. That is why most outward U.S. FDI flows to other high-income, high standard countries. Between 2003 and 2005, more than 80 percent of U.S. direct manufacturing abroad flowed to the European Union, Canada, Japan, South Korea, Taiwan, and Singapore.Openness to trade and investment leads to faster growth, which leads to higher wages and labor standards, including so-called core worker rights. That is why the world’s most developed economies, which account for most of the world’s trade and attract most of its foreign direct investment, also pay the highest wages, and maintain the highest labor standards related to freedom of association, discrimination, forced labor, and child labor.Trade and globalization are raising labor standards in developing countriesTrade and globalization are lifting wages and working conditions for hundreds of millions of people in developing countries. The pay and conditions offered in foreign-owned factories are almost always far higher than those offered in the domestic economy. In fact, working for multinational companies that export are almost invariably the best jobs available in poor countries. Those jobs offer poor workers, especially young women, their best opportunity at financial independence and the simple pleasures and dignities of life we take for granted.For example, apparel jobs are among the lowest paying manufacturing jobs in our country, but they are among the best paying in poor countries. A recent study from San Jose University found that the apparel industry actually pays its foreign workers well enough for them to rise above the poverty line in the countries where they invest. In Honduras, for example, where college protestors have targeted its alleged “sweatshops,” the average apparel worker earns $13 per day, compared to the $2 a day or less earned by 44 percent of the country's population.Rising levels of global trade have lifted hundreds of millions of people out of the worst kind of poverty and working conditions. According to the World Bank, the share of the world’s population living in absolute poverty, defined as an income equivalent to one U.S. dollar per day or less, has been cut in half since 1981, from 40.4 percent to 19.4 percent. Poverty has fallen the most rapidly in those areas of the world that have globalized the most rapidly, especially China. It has fallen the least or actually increased in those regions that are the least touched by globalization, in particular sub-Saharan Africa.Openness to trade and the growth it brings exert a positive impact on the welfare of children in less developed countries by reducing rates of child labor. The International Labor Organization recently reported that the number of children in the workforce rather than in school worldwide has dropped by 11 percent since its last report in 2002, to about 200 million. The number working in the most hazardous jobs has dropped even more steeply, by 26 percent.Globalization is a major reason for the positive trend in child labor. As household incomes rise in developing countries, especially wages paid to adult females, fewer families face the economic necessity of sending their children to work. Studies confirm that labor force participation rates by children aged 10 to 14 decline significantly with rising GNP per capita.The overwhelming majority of child laborers toiling in poor countries work in sectors far removed from the global economy. More than 80 percent work without pay, usually for their parents or other family members and typically in subsistence farming. Most other child laborers work for small-scale domestic enterprises, typically non-traded services such as shoe shining, newspaper delivery, and domestic service. A report by the U.S. Department of Labor found, “Only a very small percentage of all child workers, probably less than five percent, are employed in export industries in manufacturing and mining. And they are not commonly found in large enterprises; but rather in small and medium-sized firms and in neighborhood and home settings.”Parents in poor countries do not love their children any less than we love our own. When they succeed in rising above a subsistence income, the first thing they typically do is remove their children from working on the farm, domestic service, or factory and enroll them in school. By raising incomes in poor countries, free trade and globalization have helped to pull millions of kids out of the workforce and put them in school where they belong.In Central America, trade liberalization and other reforms of the past two decades have spurred not only growth in incomes but also measurable social progress. According to the World Bank, literacy rates for men and women 15 and older have risen significantly in every one of the six DR-CAFTA countries since 1980. In fact, between 1980 and 2001, the average literacy rate in the region has increased from 67 percent to above 80 percent. At the same time, the percentage of children aged 10 to 14 who are in the workforce has been steadily declining in all six countries. The average share of children in the labor force across the six countries has dropped from 17.4 percent in 1980 to 10.0 percent in 2002. Expanding trade with the United States will likely accelerate those positive trends.It is certainly true that working conditions in less developed countries can strike Western observers as unacceptable if not appalling. But two points need to be considered. First, wages and working conditions are likely to be even worse in non-trade-oriented sectors, such as services and subsistence agriculture, sectors that have been largely untouched by globalization. Second, poor working conditions in those countries are not a new development but have always been a chronic fact of life. “Sweatshop” conditions persist today not because of globalization, a relatively new phenomenon, but because of previous decades of protectionism, inflation, economic mismanagement, hostility to foreign investment, and a lack of legally defined property rights. Globalization is not the cause of bad working conditions but the best hope for improving them.Punitive tariffs aimed at sweatshops will only hurt the people we are trying to helpPerversely, withholding trade benefits because of allegedly low standards would in effect punish those countries for being poor. It would deprive them of the expanded market access that offers the best hope to raise incomes and standards. The use of trade sanctions would target the very export industries that typically pay the highest wages and maintain highest standards in those countries.The effect of sanctions would be to shrink the more globally integrated sectors that are pulling standards upwards, forcing workers into informal, domestic sectors where wages, working conditions, and labor-rights protections are much lower. Lower wages paid to parents would make it more difficult for families on marginal incomes to keep children in school and out of fields or factories. “Tough” sanctions to allegedly enforce higher standards would be tough only on the poorest people in the world.Demanding that poor countries eliminate child labor under threat of trade sanctions can easily backfire. In 1993, Congress seemed poised to pass the U.S. Child Labor Deterrence Act, which would have banned imports of textiles made by child workers. Anticipating its passage, the Bangladeshi textile industry dismissed 50,000 children from factories. Most of those children did not end up in school but instead fell into prostitution and other “occupations” far more degrading than weaving cloth in a factory.America’s trade policy is already biased against workers in poor countries without making it more so through “anti-sweatshop” legislation. The United States and other rich countries currently impose their highest trade barriers against products of most importance to poor countries: clothing, textiles, and agricultural products. In fact, our average tariff imposed on imports from poor countries is about four times higher than those imposed on imports from other rich countries.Our regressive tariff system imposes punitive tariffs on workers in some of the poorest countries in the world. According to the Progressive Policy Institute, the U.S. government collects more tariff revenue on the $2 billion in mostly hats and t-shirts we import from Bangladesh in a year than on the $30 billion in planes, computers, medicines and wine we import from France. Imports from Cambodia face an average tariff of 16, ten times higher than the average 1.6 percent we impose on all imports.Our trade policies also hurt the world’s poorest farmers and their children. A 2002 study for the National Bureau of Economic Research found that higher rice prices in Vietnam were associated with significant declines in child labor rates. Specifically, a 30 percent increase in rice prices accounted for a decrease of children in the workforce of 1 million, or 9 percent. The drop was most pronounced among girls aged 14 and 15. As the incomes of rice-growing families rose, they chose to use their additional resources to remove their children from work in the field and send them to school. If U.S. rice subsidies are indeed depressing global rice prices, as evidence confirms, then those same programs are plausibly responsible for keeping tens of thousands of young girls in Vietnam and other poor countries in the labor force rather than school.Attempts to “enforce” labor and environmental standards through trade sanctions are not only unnecessary but also counterproductive. Sanctions deprive poor countries of the international trade and investment opportunities they need to raise overall living standards. Sanctions tend to strike at the very export industries in less developed countries that typically pay the highest wages and follow the highest standards, forcing production and employment into less-globalized sectors where wages and standards are almost always lower. The end result of sanctions is the very opposite of what their advocates claim to seek.If members of Congress want to encourage higher labor standards abroad, they should support policies that encourage free trade and investment flows so that less developed nations can grow more rapidly. As a complementary policy, Congress could seek a more robust International Labor Organization that could systematically monitor and report on enforcement of labor rights in member countries. Meanwhile, civil society organizations are free to raise public awareness through campaigns and boycotts, while importers can cater to consumer preferences for higher standards through labeling and other promotions.The demand for trade sanctions as a tool to enforce labor standards confronts Americans with a false choice. In reality, the best policy for promoting economic growth at home and abroad--an economy open to global trade and investment--is also the best policy for promoting higher labor standards.
 For a more detailed critique of the “race to the bottom” thesis, see Daniel Griswold, “Trade, Labor, and the Environment: How Blue and Green Sanctions Threaten Higher Standards,” Cato Trade Policy Analysis no. 15, August 2, 2001. U.S. Department of Commerce, Survey of Current Business, Bureau of Economic Analysis, September 2006. Benjamin Powell and David Skarbek, “Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat?” Journal of Labor Research, 2006, Volume 27, Issue 2, pp. 263-274. World Bank, World Development Indicators, 2006, available at devdata.worldbank.org/wdi2006/contents/Section2.htm. International Labor Organization, “The End of Child Labour: Within Reach,” Geneva, 2006. Keith E. Maskus, “Should Core Labor Standards Be Imposed Through International Trade Policy?” Policy Research Working paper no. 1817, The World Bank, August 1997, p. 14. ILO, p. 8. “Breaking the Labor-Trade Deadlock,” Carnegie Endowment for International Peace, Inter-American Dialogue, Working Papers 17, February 2001, p. 17. U.S. Department of Labor, “By the Sweat & Toil of Children (Volume I): The Use of Child Labor in U.S. Manufactured and Mined Imports,” 1994, p. 2. The World Bank, World Development Indicators. Jagdish Bhagwati, In Defense of Globalization (New York: Oxford University Press, 2004), p. 71. Edward Gresser, Testimony before the Senate Subcommittee on International Trade, October 27, 2005. Eric Edmonds and Nina Pavcnik, “Does Globalization Increase Child Labor? Evidence from Vietnam,” NBER Working Paper no. 8760, July 2002.)
Steven JessephPresident and CEO, Coast Guard SystemsWorldwide Responsible Apparel ProductionWorldwide Responsible Apparel Production (WRAP)Statement toUS Senate Commerce, Science and Transportation CommitteeFebruary 14, 2007Mr. Chairman, thank you for inviting me here today to discuss this critically important issue and for the opportunity to testify before this Committee on the subject of working conditions in factories around the world. The views I express today are mine and represent the Worldwide Responsible Apparel Production program, best known as WRAP. My remarks do not represent the views of any trade association, retailer or branded company. As President and CEO of WRAP, I deal with these issues every day.From 1997 – 2000, the American Apparel & Footwear Association, or the AAFA, funded a task force of outside consultants and industry experts to examine working conditions in apparel and textile facilities in the major apparel producing countries. Member companies made a clear commitment that it did not want to be associated with “sweatshops” and child labor conditions and believed the best way to address the challenge was to create an industry-wide, global code of conduct enforced through a factory-based monitoring and certification program. In January 2000, WRAP started operations as an independent, 501 (c)(6), non-profit organization with its own 10-member Board of Directors and funding dedicated to ensuring legal, ethical and humane production of sewn products. We believe WRAP is the most rigorous and comprehensive code of conduct for labor-intensive manufacturing of consumer products covering not only labor and human rights issues, but addressing environmental protection, customs compliance and security as well.WRAP is completely separate from the AAFA. However, we do enjoy the support of the AAFA and 20 other trade associations around the world that encourage their members to have the factories in their supply chains certified to the WRAP standard. Last week, Caribbean-Central America Action, a trade promotion group based in Washington, D.C., issued the report of its recent annual meeting in which it encouraged all apparel and textile factories in the region to become certified by WRAP.WRAP has no members and therefore no dues. We do not rely on government grants to sustain our operations. We are funded by registration fees from applicant factories, training fees and monitor accreditation fees.The WRAP certification process involves a lengthy application that must be submitted by the factory seeking to be certified. The application requires the factory to answer detailed questions regarding its practices in areas such as minimum age of workers, working hours, regular and overtime wages, and health and safety, and more. When the application is complete, an independent monitoring firm then performs a rigorous inspection of the factory to determine if the written information previously submitted is accurate. Frequently, factories do not pass on the first inspection. Since our goal is to help them achieve certification, we advise them of the non-compliances so they can correct them and receive a certification recommendation during a subsequent audit.However, there are some areas of non-compliance that will not be tolerated such as prison labor, child labor and physical abuse. A certification is generally valid for one year and gives companies considering using the factory reasonable assurance that the factory is in compliance with accepted standards. Since 2000, over 5,000 factories have registered with WRAP and in 2006 we certified factories in 71 countries.WRAP has created an audit methodology that in most parts of the world is effective in gaining a true understanding of what goes on inside factories. We certify factories that are in compliance with the WRAP standards. We also refuse to certify and decertify factories that aren’t. We regularly conduct unannounced follow-up audits of certified factories to ensure they maintain on-going compliance. If they don’t, and if those non-compliances are sufficiently egregious, I have no hesitation to decertify a factory and advise that factory’s customers of our actions. Accordingly, there are strong economic incentives for factories to maintain compliance with the WRAP standards.There are other initiatives similar to WRAP. Their codes of conduct and audit methodologies might be a little different than WRAP but we are all trying to do essentially the same thing: eliminate abusive working conditions, and protect the health, safety and rights of the workers through the positive force of economic incentives.WRAP is also working with other certification programs, trade associations, technical training schools and universities to help develop courses and seminars for factory managers and owners in the areas of management systems, health & safety, compensation and benefits, working hours, environmental protection, regulatory compliance and more. We hope that eventually these courses and will lead to certifications and degrees in the area of corporate social responsibility.WRAP’s experience with its factory certification program has demonstrated to us that positive efforts such as education and training are essential to improve working conditions. In 2002, WRAP received a grant from the US Department of Labor to conduct factory training in 35 countries around the world. That grant expired long ago but our training work continues. February 2006, WRAP participated in a USAID-funded Trade Capacity Building project related to Technical Barriers to Trade (TBT) in Colombia. And, WRAP is also participating in a similar USAID-funded program in Morocco. We believe education and training, at all levels are crucial to building capacity at the local level.For the past thirty years, I’ve worked in a variety of government, manufacturing and consulting environments, and for the past twelve years in the areas of codes of conduct and factory monitoring. I’ve visited hundreds of factories in 44 different countries on five continents and have seen first-hand the good, the bad and the ugly. I understand this industry and its complexities very well. I’ve seen tremendous progress in the quality of management and working conditions in factories, especially in the past five years. However, with all the progress that has been made, there is still much work to do.We need to help apparel producing nations strengthen the rule of law and build expertise within labor ministries and with their inspectors. And, we need to help employees understand their rights under the laws of their sovereign states. WRAP has been helping do this, and more.As we’ve learned from behavioral psychologists and economists, the best way to achieve positive and sustainable change is through market incentives and rewarding positive behavior. For us, that behavior is being in compliance with WRAP standards. We believe we’re on the right track.Thank you, Mr. Chairman for your leadership on this issue. We appreciate the opportunity to submit this testimony. I would be pleased to answer any questions you might have.