International Business: Cambodia
Cambodia's Bumpy Road to Labor Reform
Its U.S. trade deal is a test case for global standards
Last year, impoverished Cambodia made an unprecedented deal: In exchange for the U.S. agreeing to increase the textiles it imports from the country, the government said it would let foreign monitors inspect Cambodian garment factories and certify they were improving labor standards. Never before had the U.S. swapped favorable trading terms for good labor practices, and it marked a significant victory for U.S. trade unions--namely the American Union of Needle Trades Industrial & Textile Employees (UNITE), which had lobbied Washington for the link. While the deal was an unusual breach of sovereignty, Cambodia is a war-ravaged nation in need of export earnings and investment. It could hardly say no.
But this path-breaking agreement is having unintended consequences, including acrimonious labor-management relations, which are fast turning Cambodia into a major test case for global labor standards. If the country eventually develops a big garment export industry operating with worker-friendly conditions, it will bolster U.S. unions' case that they can improve the lot of workers overseas. But if the experiment ends by forcing a vital industry to pack up and go elsewhere, it would be a major setback.
Local unions, emboldened by U.S. support, have gone haywire--with violent, wildcat strikes that have blackened Cambodia's reputation for having a docile, if untrained, workforce. Garment manufacturers, on the other hand, are having second thoughts about the unfettered free market they found when peace began returning to the country about five years ago and local officials beckoned them with liberal policies. "This labor unrest will obviously cause investors to think again about putting more money in this country," says Roger Tan, general secretary of the Garment Manufacturers Assn. in Cambodia, which represents 90% of the country's 200 factories. "Instead of spending $2 million here, why not go to Laos or Vietnam?"CONFRONTATION. Since a government-negotiated settlement in July, there has been an uneasy truce. The unions won a $5 increase in the minimum wage, to $45 a month. Garment makers steadfastly refused other demands, and the dispute left both sides in a state of confrontation over unresolved issues such as forced overtime and intimidation of union representatives. Many predict more unrest, and some factory owners threaten to leave if workers strike again.
Certainly, Cambodia can't afford to lose its apparel industry. Clothing accounted for 70% of Cambodia's exports last year, or $600 million. A full 75% of them went to U.S. stores, including Gap, J.C. Penney, Target, Wal-Mart, and Nike.
Rather than acrimony, labor rights advocates had in mind a situation that would benefit both workers and employers. Workers would get fair wages, better labor conditions, and more jobs. Subcontractors would be able to certify to multinationals worried about their images that their clothes weren't made under sweatshop conditions--thus giving Cambodian factories an advantage over other Asian contractors in the race to fill orders. Plus, advocates say, happier workers are more cost-efficient, quit less often, and make fewer mistakes--and that saves money. "A number of companies have come to see the self-interest in this," says Aron Cramer of San Francisco-based Business for Social Responsibility, which has hosted workshops for Cambodian subcontractors.
Another big problem now is monitoring the settlement, which is the job of the International Labor Organization. The program still hasn't started, making it impossible for Cambodia to certify improvements and get promised quota increases. At the end of the day, Cambodians need jobs, and U.S. clothing stores need workers to make their products. The trick is finding the best and fairest solution for employers and employees alike.By Frederik Balfour in Phnom Penh, with Sheri Prasso in New YorkReturn to top