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US May Help Bangladeshi Garment Suppliers Pry Payments from Order-Canceling Brands: Report

The Office of the U.S Trade Representative (USTR), the White House’s trade negotiation arm, has reportedly agreed to assist the Bangladesh government with chasing down payments from American brands and retailers that have canceled completed and in-production garment orders due to the ongoing Covid-19 pandemic.

The assurance, according to a press release issued by the Bangladesh ministry of commerce Wednesday, came at a virtual meeting of the United States-Bangladesh Trade and Investment Cooperation Forum Agreement Council, the committee’s fifth session since its establishment in 2013 to negotiate trade and investment between the two nations. Two-way trade in goods with Bangladesh, according to USTR, totaled $9 billion in 2019. (The USTR did not immediately respond to a request for comment.)

To date, predominantly Western businesses have canceled or suspended more than $3.1 billion in orders—or the equivalent of 981 million garments—from Bangladeshi factories, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the South Asian nation’s largest trade group of apparel-factory owners. With revenues for the apparel and footwear industries poised to shrink by up to 30 percent year over year, per McKinsey & Company, the BGMEA predicts an “irrecoverable loss” of $5 billion by the end of the year.

U.S. companies that have canceled complete and in-production orders without paying, demanded steep retroactive discounts or protracted payment terms in Bangladesh, Ethiopia, India and elsewhere include bankrupt J. C. Penney, Ross, Kohl’s, Sears, The Children’s Place, T.J. Maxx, Urban Outfitters Inc. and Walmart-owned Asda, according to the Worker Rights Consortium, a labor group that maintains a “Covid-19 tracker” to monitor corporate responses during the pandemic. Many of these retailers have studiously ignored the growing public backlash as exemplified by the #PayUp social-media campaign. On top of that, there have been few if any legal consequences for renegers, who cite contractual force-majeure loopholes for their actions, though Sears owner Transformco is facing down a $40 million lawsuit from unpaid Bangladeshi suppliers.

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The Penn State Center for Global Workers’ Rights estimates that more than one-quarter of the country’s 4.1 million garment workers have been laid off or furloughed due to the economic fallout, but even those who have jobs face a bleak future. A July report by Clean Clothes Campaign, a consortium of workers’-rights groups, calculated that Bangladeshi garment workers lost a cumulative $501.6 million in March, April and May due to the industry’s throttled cashflows. This week, a survey published the South Asian Network on Economic Modeling (Sanem) and Microfinance Opportunities found that one-third of garment workers in Bangladesh are the sole earners of their households, making them especially vulnerable to financial shocks, like those stemming from Covid-19, which could leave them starving and destitute.

On Wednesday, finance minister Mustafa Kamal said the government may consider another stimulus package for garment exporters so they can pay workers their August wages. Officials had announced in April a disbursement of 5,000 crore taka ($589 million) to export-oriented industries, charging factory owners 2 percent interest on the loan. Last month, it allocated another 3,000 crore taka ($354 million) to help export-oriented industries pay July wages. The government’s total stimulus largesse has topped 1 trillion taka ($11 billion) for all industries.

Commerce secretary Mohammad Jafar Uddin led the 24-member Bangladesh delegation, and Chris Wilson, assistant U.S. trade representative for South and Central Asia, headed the 13-member U.S. delegation at the meeting, which raised the possibility of American entrepreneurs setting up manufacturing plants for the production of a possible coronavirus vaccine, which would make the drug more affordable for all parties.

Uddin also asked the Trump administration to reduce duties on export of apparel products to the United States, particularly since Bangladesh imports millions of bales of cotton—or roughly 11 percent of its annual cotton requirement—from the United States each year. The U.S. delegation, in turn, asked that American cotton imported by Bangladesh not be fumigated on arrival since it goes through the process before being shipped and double fumigation can deteriorate the fibers’ quality.