GUEST BLOG: Wage negotiations in Bangladesh – lessons for the global apparel industry, from Steve Lamar, AAFA President and CEO

Recent negotiations in Bangladesh to update the wage structure generated protests, violence, widespread arrests, and intense emotions that continue to reverberate both in Bangladesh and around the world. 

The legacy of that period, which is still being written, will remain deeply tarnished until the government releases all those unlawfully detained and fully investigates and holds accountable those responsible for the violence.

As we continue to strongly advocate for the newly-elected government to make this a first priority, we are also looking back over the last 4-5 months to see what lessons can be learned to put us collectively on a stronger footing. 

For AAFA, five lessons have become immediately obvious that create a powerful teaching moment for the wider global apparel industry, not just for Bangladesh, but also for apparel production everywhere.

First, there is no question that successful wage negotiations require robust, good faith, and peaceful collaboration from all stakeholders – unions and worker rights groups, government, industry, and key NGOs. Each of these players has a shared interest in ensuring that worker compensation rates meet both basic needs, and provide discretionary income.  Keeping that alignment at the forefront of every conversation is paramount.

Second, the stakes in Bangladesh were magnified because the wage structure had not been reviewed in five years. This is unacceptable.  During any time period, and especially during the economic gyrations the industry and the world has experienced since 2018, common sense tells us that five years is way too long to wait between negotiations. A more frequent review – AAFA and many stakeholders have recommended annually in the case of Bangladesh – is more appropriate to make sure that the companies and the workers who are dependent upon these wage structures do not fall behind. 

Third, the talks fueled a false, and frankly distracting, expectation that buyers should collectively call for a specific minimum wage increase, and could all agree to raise the prices they pay to absorb the expected cost increases associated with higher wages.  AAFA received a number of appeals, including a well-publicized request from several U.S. lawmakers, for our membership to call for a specific minimum wage and to make collective commitments to price increases for products made in Bangladesh. Not only do such requests miss commercial and economic realities, but they also ignore the very real problem that such collusion is explicitly prohibited by U.S. anti-trust laws. Such decisions are always properly made by individual companies and reflect the unique negotiating dynamics of each individual supplier-buyer partnership as expressed through responsible purchasing practices.

Fourth, the wage talks unfortunately preserved a narrative that wage rates are the key to a competitive industry while, in reality, there are multiple factors at play.  In a world of rebalancing supplier buyer dynamics, concepts like trust, stability, and values have become the new foundation to assess competitiveness. These concepts will only become more important as existing initiatives mature and new regulations come online that require a deeper level of collaboration, among a wider network of deeper tier suppliers, than ever before. 

Although pricing is still a factor, a growing number of companies throughout the supply chain are looking beyond wages for partners who can help support and sustain changing business operations and models that emphasize reliability, transparency, traceability, and due diligence. Findings from the recent Better Buying Purchasing Practices IndexTM 2023 support this: despite generally slow and uneven progress on responsible purchasing practices across the industry generally, Better BuyingTM repeat subscribers were reported, by suppliers, to be improving in two key areas – Cost and Cost Negotiation, and Payment and Terms – both closely related to supplier sustainability and, importantly, their payment of decent wages.

Bangladesh has taken the lead in some of these areas, making strong advancements in sustainable production, and in vertical production.  Bangladesh’s ability to execute on its sustainability commitments and its ability to deliver not only the final garment but the yarns and fabrics that go into that garment, not a reputation as being a low-cost supplier, are what will drive its competitiveness in the years to come.

Finally, these wage debates – along with industry transitions to become more transparent, traceable, and sustainable – shine a light on another economic cost factor that bogs down supply chains these supply chains as they are evolving to meet the needs of today’s workers and society. U.S. tariff policy for the apparel industry has been largely unchanged since it was created nearly 100 years ago.  While there is probably no consensus on what a modern tariff policy should look like, it is highly unlikely that, if it were created today, we would see the complicated, regressive, unbalanced, and (weirdly) misogynistic features we see today.

Let’s use Bangladesh as one example of how U.S. tariffs fall disproportionately on developing countries. Imports from Bangladesh — which didn’t even exist as an independent country when the current U.S. tariff structure was created — now pay twice as many tariffs each year as products imported from France, even though those equal nearly seven times the value of imports from Bangladesh.  

When consumers buy fashion that aligns with their values, they presumably want to make sure the workers who made those products were responsibly compensated and that the garment was the product of good environmental and manufacturing practices.  What they don’t realize is that they are often also paying for the economy that existed 10 years before President Joe Biden was born.

As we, and all industry stakeholders, continue to improve supply chains to ensure they match our values – whether it be measured by better buying or more sustainable practices – perhaps we should remove the tariff overhang that is weighing down these same supply chains to make room for those additional investments.