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US Retailers To Defend Alternative Bangladesh Accord

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Johan Lubbe will testify tomorrow

The group of North American retailers led by Wal-Mart Stores Inc. and Gap Inc. that is refusing sign the IndustriALL-led Bangladesh fire and building safety accord is scheduled to defend its alternative plan tomorrow, WWD reports.

The trade daily got a hold of an internal draft of the testimony, which Johan Lubbe, an international trade law expert who is advising key North American industry groups, will present before the Senate Foreign Relations Committee tomorrow. According to WWD, tomorrow's hearing is intended to accomplish three things for the affiliation of retailers: 1) defend the alternative plan, 2) explain why many U.S. companies refuse to sign the legally binding international accord and 3) stress the need for shared responsibility.

Since the WWD article is behind a firewall and available to subscribers only, we are recapping the most revelvant quotes from the leaked draft. Click through for the break down.

The main objections are issues of liability and, of course, money.

"A majority of U.S. retailers have stated they would not be able to sign the accord because of significant legal liability concerns," reads the draft.

One main complaint is that the IndustriALL-led accord creates legal and enforceable obligations that are "vague and uncertain," and are left to arbitration to resolve disputes.

Specifically, "the accord requires a five-year commitment from participating retailers to conduct independent safety inspections of factories and pay up to $500,000 per year toward operational costs."

Also, the draft claims that the IndustriALL accord "unduly shifts the responsibility on signatory retailers to maintain the employment relationship of subcontractors, thereby forcing joint-employer status on the retailers."

Lubbe says the accord shifts some of the Bangladesh government's "regulatory functions, such as inspections, onto retailers." That's a bad thing for North American companies because, "in the event of a factory closure, retailers would be jointly liable not only for paying wages to laid-off workers, but also costs for structural repairs and finding employees alternative jobs if they are laid off."

That stance echoes the statement of U.S. Under Secretary for Political Affairs Wendy Sherman, who in May said that the US considers the enforcement of labor standards to be "the responsibility of the government of Bangladesh."

U.S. retailers are also concerned that "in arbitration, if a factory claims the price paid by retailers should be higher to fund the safety upgrades, it will force retailers to accept higher prices for garments."

We'll be reporting on the actual hearing tomorrow, so stay tuned for more.
· Retailers to Defend Bangladesh Stance in Congress [WWD]
· What If the Garment Industry Had 'Ethically Made' Labels? [Racked]