The ILO's Better Factories Cambodia program: a viable blueprint for promoting international labor rights?

• Author: Hall, John A.
• Position: International Labour Organization

INTRODUCTION

The International Labour Organization's (1) (ILO's) innovative program, Better Factories Cambodia ("Better Factories"), represents one of the more important attempts made by the international community to promote labor rights in a developing nation. The lessons Better Factories offers are significant for all stakeholders in the global labor market and suggest at least the outline of a practical blueprint for the future promotion of international labor standards globally. While the ILO's program in Cambodia has achieved notable success in reaching specific criteria, future ILO efforts elsewhere must be adjusted to reflect lessons learned in the Better Factories model. Specifically, future programs will need active, long-term ILO participation and management, and an understanding that supervisory responsibilities cannot quickly revert to local control in many countries. Additionally, future programs intended to promote broad international labor standards must recognize the limitations of a program relying almost entirely on factory monitoring. While Better Factories has been successful in addressing specific factory-floor violations of the domestic labor code--such as working conditions and overtime requirements--it has largely failed to identify or counter broader political concerns, such as the climate of corruption in which independent trade union leaders have been intimidated, brutalized, and murdered. Better Factories has undoubtedly won important battles in its factory-level campaign for labor rights, but the war will be lost if truly independent trade unions are not permitted to flourish and Cambodia follows the Chinese model of government-dependent unionism.

For more than a decade, a system of quotas limiting imports from key garment manufacturers such as China and India incidentally helped some developing nations by giving them guaranteed access to key markets in the $400 billion global trade in textiles and garments. The Multi-Fibre Agreement (MFA), signed in 1995 under the General Agreement on Tariffs and Trade (GATT), provided a ten-year window for industrialized countries to adapt to the requirements of open competition in the textile and garment industry. Several poor nations, including Cambodia, benefited as rich-country buyers such as the United States began to source materials from countries not subject to quota rules, and as Chinese manufacturers invested in facilities in nations with unrestricted access to the huge U.S. market. Cambodia's garment industry flourished: exports grew from nothing in 1994 to $1.9 billion in 2004, with two-thirds of sales to the United States and most of the remainder to the European Union. Garments constitute eighty-five percent of Cambodian exports. (2) By 2008, over 350,000 Cambodians--primarily young women from the poverty-stricken countryside--were working in over three hundred factories clustered around Phnom Penh. (3) The United States Agency for International Development (USAID) estimates that remittances from these workers now sustain twenty percent of the entire country's population of thirteen million people. (4) As the ILO has noted, "No other country in the world depends so much on the garment industry as Cambodia." (5)

Cambodia's garment industry expanded so rapidly that by 1998 the U.S. government began negotiations to bring Cambodia into the quota system. The result was the innovative 1999 U.S.-Cambodia Bilateral Textile Trade Agreement (Bilateral Agreement), which for the first time linked labor conditions to trade privileges. The Bilateral Agreement created trade incentives for the Cambodian apparel and textile industry to bring itself into substantial compliance with Cambodian labor law and international labor standards by promising as a reward increased access to the U.S. market. Central to the Bilateral Agreement was the establishment of an independent and credible system of third-party factory monitoring intended to assess compliance, which was coordinated and managed by the ILO.

With the phasing out of the MFA quotas on January 1, 2005, poor countries searched for ways to protect their new garment industries in a world of unfettered competition and in the shadow of the now unrestricted manufacturing superpower, China. One option was--as many labor rights activists feared--to "race to the bottom," cutting costs by driving down already low wages, ignoring or suppressing labor rights, and allowing for the deterioration of factory conditions. Cambodia, however, chose to continue down a different path. Since 1999, Cambodia has--with guidance from the ILO--attempted to create a niche as a "sweatshop-free," socially responsible manufacturing platform for garments and textiles, providing guarantees of substantial sector-wide compliance with both domestic labor law and international labor standards. There were hopes that this niche would continue to make Cambodia attractive to American and European buyers despite Cambodia's inability to be competitive in terms of overall cost-efficiency with mega-producers such as China and India. (6)

The current Better Factories program, which incorporates third-party factory-level monitoring of working conditions and a vigorous outreach and education program, is an outgrowth of the 1999 Bilateral Agreement. Though the Bilateral Agreement expired with the accession of Cambodia into the World Trade Organization (WTO) in 2004 and the conclusion of the MFA quota system for textiles and apparel--which ended the ability of the United States to use increased quotas as a reward for substantial labor compliance--the Bilateral Agreement continued in spirit, with the innovative program of ILO-managed factory monitoring being incorporated into the Better Factories program established by the Cambodian government and ILO in 2005.

Does the ILO's Better Factories model offer a blueprint for other nations interested in capturing the benefits available from documenting substantial compliance with national and international labor standards and averting the "race to the bottom" pressures associated with unfettered globalization? The ILO certainly believes it may, and has recently introduced a similar program in Vietnam. Better Factories Cambodia, however, also offers cautionary warnings that the program has marked limitations and weaknesses along with great potential. It is clear that Better Factories has been more successful in certain areas of labor law compliance than others. Compliance with provisions regarding, for example, specific working conditions, child labor, health and safety regulations, and minimum wage requirements have improved and are generally carefully documented. On the other hand, Cambodia remains a country where core labor rights are often marginalized: independent union activists--particularly those not members of the ruling political party--are targeted for intimidation and even murder; strikes are frequently broken with violence by security forces; and the legally protected activities of genuinely independent unions are disrupted, typically with no legal consequence.

The future of Better Factories is unclear. The recent global recession and associated financial turmoil has devastated the international trade in garments and textiles, and Cambodian factories have seen U.S. and EU orders collapse in 2009. Extraordinary global pressures beyond the control of Cambodia have been reflected in a wave of factory closures, mass layoffs, and repeated calls by factory owners to lift many of the more burdensome labor protections guaranteed by Cambodian labor law and international labor standards. Unfortunately, it was at this crucial juncture that the ILO's role in the Better Factories program was reduced, due to a prior agreement that placed program management and control under Cambodian supervision on January 1, 2009. (7) Better Factories became, on that date, largely a Cambodian program rather than a purely ILO one. Given the pervasive culture of corruption in Cambodia, the systemic lack of independence among Cambodian government officials, and the dismal record of labor law enforcement prior to the ILO's participation, it is open to question whether the independent, credible, and transparent monitoring system at the heart of the ILO's Better Factories program can be maintained. These doubts are particularly resonant due to the recent global recession, which has led some factory owners to question whether the costs associated with substantial compliance can still be justified in the face of widespread factory closures and a collapse in orders from U.S. buyers for whom low price has become paramount.

1. THE RAPID GROWTH OF CAMBODIA'S GARMENT INDUSTRY SINCE 1995

   As in many developing nations, Cambodia's garment and textile industry flourished in the years after the adoption of the MFA, signed in 1995 under the GATT. (8) The MFA provided a ten-year window for industrialized countries to adapt to GATT's requirements for open competition in the textile and garment industries by permitting importing nations to impose limits on imports from key garment manufacturers such as China and India. (9) In effect, these limits ensured that producers in key manufacturing nations had to pay a premium to access the enormous EU and U.S. markets or were blocked entirely. Due to these restrictions, EU and U.S. buyers began to source production from countries not subject to quota rules. In response, primarily Chinese investors began to expand manufacturing capacity in nations not subject to quota limits. As a result, many developing countries, most notably Cambodia and Bangladesh, experienced explosive growth in their garment and textile manufacturing industries. (10)

   As Bama Athreya of the International Labor Rights Forum has noted, "In 1993 the International Monetary Fund (IMF) began a structural adjustment program for Cambodia intended to create an attractive climate for foreign capital." (11) Beginning in 1995...