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5 Reasons American Companies Refused To Sign Bangladesh Safety Accord

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In this Feb. 21, 2012, a Gap logo is diplayed on a store at the Derby Street Shoppes complex in Hingham, Mass. Gap Inc. reports quarterly financial results Thursday, Feb. 23, 2012, after the market close. (AP Photo/Stephan Savoia) | AP

Earlier this week Walmart, Gap and 15 other North American clothing companies were roundly criticized by labor groups after the retailers signed on to a plan meant to improve conditions for workers in Bangladesh.

Their agreement was separate from an earlier pact signed by fast fashion monolith H&M and 69 other mainly European retailers also meant to address problems in the developing nation after a catastrophic garment factory collapse killed 1,129 workers earlier this year.

The main sticking point for the Americans: The European agreement features a binding arbitration process, enforceable in the homes courts of each company.

"They are not similar at all," Scott Nova, executive director of Worker Rights Consortium, told The Huffington Post of the two agreements. "One is an enforceable agreement under which retailers have to pay to make these death traps in to safe factories. Another is a public relations sham put forward by companies like Walmart, with a horrific track record on worker safety, under which there are no binding obligations to pay a single penny to make factories safer."

Both Walmart and Gap, the two retailers leading the charge on the North American plan, downplayed the differences between the two agreements earlier this week. Jay Jorgensen, Senior Vice President & Global Chief Compliance Officer at Walmart, wrote in a statement Wednesday that the agreements offered "two strong plans." While Gap executives said the goal of the North American treaty is create a program that "can create real change."

Here are the likely reasons why American retailers went their own way:

1. Worry Over Lawsuits:
The primarily-European plan, the Accord on Fire and Building Safety on Bangladesh, is legally binding with sanctions for noncompliance. The North-American plan, the Bangladesh Worker Safety Initiative, is not. When the European plan was being drafted, American companies expressed reservations about the potential costs and liabilities associated with the plan. Some of the retailers also said at the time that a legally-binding treaty would slow down safety improvements.

"In the context of negotiations with Gap, Gap was offered language that would guarantee them immunity from any lawsuit by any third party under the Accord," said Nova. "They weren't even interested in discussing that language. What Gap wanted was a guarantee that they would never have to pay more than $2 million per year to fix the factories."

2. Reluctance To Pay For Renovations:
If there are serious fire or safety hazards in the factories, the companies will provide the funds needed for renovations under the European-backed plan. The American group will utilize "shared accountability" to figure out financing options with the Bangladeshi government, factory owners, aid agencies, and "working participation committees," according to the NYT.

3. Fear Of Bad Publicity:
The European-backed plan will publicly release the names, addresses, and detailed audit reports from the roughly 1,000 factories its members use. The American plan will select an non-governmental organization within the next month and conduct its reviews of its 500 factories internally through the NGO.

4. Reticence Over The Cash Commitment:
The European plan is a five-year agreement requiring a maximum $500,000 per year contribution by each company. For the North Americans, funding is based on how much production each retailer has in Bangladesh; those at higher levels will pay $1 million a year for five years. They have raised $42 million thus far.

5. They Have Less Of A Presence In Bangladesh:
The members of the American alliance include Walmart, Gap, Target, Nordstrom, and J.C. Penney. The European plan has the backing of PVH, the company that owns labels Calvin Klein and Tommy Hilfiger, Benetton, Carrefour, and H&M, the single largest producer of apparel in Bangladesh. Europe buys about 60 percent of Bangladesh's apparel exports while the U.S. buys abut 25 percent, according to the NYT.

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