Sweatshops, the global economy and Williams: a perspective

(This report was prepared by the Williams ad hoc committee on sweatshops and College purchasing)

“Globalization” may be a vague and overused word, but one of its implications is fairly concrete: every day we use a lot of things made by distant people who work under miserable conditions. What can or ought we do about it?

This is not the first time such a question has been raised at Williams. On one front—the Center for Development Economics—the College has engaged the issue for over 40 years. With reference to College purchasing, in March 1999 Athletics, Dining Services, and Security conducted inventories of their purchases and suppliers. Soon after, Athletics began trying to collect information on codes and monitoring from manufacturers and vendors. This year, many of us in the Williams community have been encouraged to reflect on this question, and others like it, as a result of the recent events organized under the heading “Whose Responsibility Is It?.” Since the beginning of the Spring Semester, we, members of an ad hoc committee of students, faculty, and staff, have been wrestling with it too.

It’s about time we all talk about it. We have arranged for a forum to be held Monday, May 8th (7:30pm in the Goodrich Great Room- details above), featuring several off-campus experts on the issue, both as a kind of culmination to the social responsibility project events and as a way for us to engage and learn from interested members of the College community. In anticipation of this event, we have prepared the following summary of issues and arguments—including lots of unresolved and contentious questions—from our deliberations.

As most of you are aware, along with other interested consumers, students on many U.S. campuses have organized against the use of overseas “sweatshops” to produce goods sold in university stores or with university logos. The issue, as we discovered, is enormously complex. Apart from empirical issues (finding out what effect an action is likely to have), the campaigns have also opened debates about what workplace standards are appropriate, how to monitor these credibly and fairly, and tying this all together, which of two competing organizations (the Fair Labor Association or the Worker Rights Consortium) to join or support. While Williams buys lots of athletic apparel and other goods from a long list of firms, many of which have or contract with overseas factories, the College neither licenses its logo nor owns a retail store. In this way, we differ from Duke and other schools whose national sports exposure assures them substantial revenues from the sale of university-logo goods.

The “sweatshop issue” has been especially prominent for over a decade now, as rapidly growing international trade has included an expansion of light manufactured imports into the United States. These goods often come from countries much poorer than ours, where environmental standards are weak or widely ignored. Most important here, they come from countries that are generally less democratic and less protective of workers’ rights. At the extremes, we hear of rugs that are knotted by children of six, soccer balls sewn by slave labor, or toys assembled by political prisoners. While many of the worst offenses have to do with goods that are not traded internationally (children making bricks in Pakistan, for instance), in the United States the issue has been mainly about what is exported from these countries to ours.

This preoccupation with traded goods has come about not just because Pakistani bricks never reach our shores. For many, the story is one of multinational firms that have closed factories here in order to have their goods made more cheaply abroad. Some firms own the factories in question; in light manufacturing, most do not, preferring to contract with specialized manufacturing companies that are usually headquartered locally. In these factories, where there are low to moderate skill requirements and a high degree of routine in the manufacturing process, a docile, obedient (nonunion) and cheap work force is a real advantage to the employer and thus, to the multinational buyer. Hence the impression, articulated vocally by union members in the U.S., that the problem is not just the existence of poor working conditions overseas, but rather that global firms actively seek out such conditions, leaving empty factories at home while enlarging their profits.

From those who decide they want to do something about sweatshops, two kinds of answers have emerged. One is explicitly political. There have been a variety of proposals to make the achievement of certain labor standards a prerequisite for a country’s participation in free trade agreements. Some advocate a global approach that would link the standards of, say, the International Labor Organization (ILO) (http://www.ilo.org/) to the rules and dispute resolution procedures of the World Trade Organization (WTO) (for an article advocating this, along with other links, see http://www.summersault.com/~agj/clr/alerts/piecebybamaathreya.html ). The issue has also been posed in bilateral terms, as with NAFTA or, more recently, with the debate in the U.S. Congress about placing human and labor rights conditions on China’s entry into the WTO. Most of these proposals have not been adopted, or they have been diluted. For the most part, trade and labor standards are not now enforceably linked.

The other kind of answer, and the one that concerns us here, involves the market power of mobilized consumers. This is indirectly political, because it entails an organized campaign to make people aware of the issues. However, its ultimate goal is to act through free, though enlightened, choices in the marketplace.

Does it deserve to be called a boycott? Many activists (such as Chie Abad, when she visited Williams on April 25) oppose boycotts, because these might throw people out of work, and they don’t use the word to describe what they are advocating. But if we make the purchase of goods conditional on a firm’s adherence to a verified code of conduct in its manufacturing, we are implying that if they do not comply we will buy from someone else. At the individual level, this is just a positive choice by an independent consumer. (By choosing to attend Williams we are not boycotting Amherst.) But we rightly expect a company to pay little attention to one person’s conditions. When we propose joining a group of colleges and universities behind a single code of conduct, is it more about showing academic solidarity or getting the companies’ attention? If the latter, it does bear some resemblance to a boycott. Whatever we decide, however, the more relevant question may not be what to call it, but whether it is the right thing to do.

Markets and Working Conditions

Let us start with the most fundamental and difficult issue. Can we be sure that a campaign against sweatshops will really help workers? Here you can sometimes find two fairly well-established positions that are so widely divergent that they have trouble arguing in the same terms. One is easy to sum up: sweatshops are morally intolerable and should be eliminated; at the very least, we should not buy goods made in them. The other position, citing basic microeconomics, says that improvements in working conditions or wages would be seen by employers as a rise in unit labor costs. Hence, other things equal, employment would fall. The argument is sometimes heard from managers of multinationals, subcontractors, or their representatives. That does not make it wrong. And if it is right, it means that a campaign to ban sweatshops would be at least partially counterproductive: it could end up hurting some of the very people it was meant to help.

This is a familiar moral dilemma. In a famous essay Max Weber described the distinction between an “ethic of ultimate ends,” in which we judge the morality of an action by its intention, and an “ethic of responsibility,” in which we give an account of an action’s foreseeable consequences. In the former, we act according to commandments about right and wrong (Weber’s example was the Sermon on the Mount); in the latter, we try to predict effects, and then assess their desirability and likelihood of each. Now, the point of describing the dilemma is not to keep us pinned on its horns. For Weber, both sides were necessary to political life: you need to have a goal in mind before you can exercise responsible prudence in achieving it.

Moreover, there are several ways in which the picture from the economics blackboard might be too simple. (For a relevant example, a recent article from The Economist describes the complicated results of efforts to end child labor in the Pakistani soccer-ball industry.)

In the first place, improvements in workplace conditions may have compensating positive effects on productivity and quality. (Ever try to operate an industrial sewing machine for twelve hours on one lunch and one bathroom break?) The former would reduce the cost of labor per unit produced (since more shirts are made in the same time, assuming hourly wages). The latter would raise the ratio of accepted to rejected goods, and thus effective productivity. One of us had a phone conversation with Eileen Kaufman of the Council on Economic Priorities Accreditation Agency (CEPAA), which trains and certifies factory monitors. She told of surprised employers calling the workplace changes “the best quality control program I’ve done.” This implies that firms do not always construct the most efficient possible manufacturing process, and that lower wages do not necessarily imply higher profits. However, it may not have much practical significance for us unless we can join a campaign that limits itself only to those improvements in working conditions that enhance productivity or quality.

But even if there are added costs of production, apparel factory owners don’t necessarily have to bear them. Consumers might do so. A campaign could create a segmented market as companies passed on the costs of compliance to those consumers willing to pay them (while those who didn’t care would pay less). Usually it is assumed that this rise in price would reduce demand and thus create unemployment, as described above. But maybe the groundswell of concern about sweatshops—and attitudes registered in polls about willingness to pay a few cents more for “clean” goods—are telling us that this effect would be minimal.

Another possibility is that the branding or retailing firm (e.g., Nike or Wal-mart) absorbs a reduction in its profits. This is probably the favored option of most anti-sweatshop campaigners. It is true that when we compare corporate earnings to the wage bill, there seems to be a lot of room; but it is hard to guarantee that this is where the costs would fall. However, if the companies did absorb the costs, it wouldn’t have to be seen as an economically irrational move. Managers would be able to tell shareholders that they did so in order to protect the value of the company’s brand—a major asset on the balance sheet.

For some, using economics is a mistake. They would argue that the problem of counterproductive actions can be finessed very simply: establish reliable contacts with the affected workers. Don’t presume to rely on economic theories to determine what is best for someone living in a society we may not understand, when we can talk to the workers themselves, or their union representatives, so that their needs can be coordinated with the pressure we can exert. This implies that if they fear layoffs, we reduce the pressure.

For others, the problem with this view is that it considers only those currently employed in certain factories, and not those who might be employed under different conditions in the future. As one member of our committee has argued, in many countries there are large pools of unemployed people who are “willing, indeed eager, to work at wages and under conditions that are terrible.” Hence, if our anti-sweatshop campaign foreseeably reduces the rate of expansion of employment in a country, then it has harmed someone, although we don’t know who or when. Consulting with existing job-holders may not tell us about this.

As all this implies, attention to consequences matters not only for those who propose to act, but also for those who propose not to. Yes, as one member of our committee argued, it is not good enough just to feel better by distancing ourselves from evil sweatshops. But just as we try to avoid mere gestures, so might we also beware of using simple economic theory—as opposed to evidence—as an excuse for comfortable inaction. Contacts with affected workers might be a good place to start. Beyond this, as another member put it, if everyone had refused to do anything, today we would not even know about the problem—it would have been “brushed under the carpet.” That is, our current ability to assess likely consequences depends on the fact that other people—be they the ILO or the United Students Against Sweatshops—were not satisfied with simple answers and have gathered information useful to us.

Some may argue that we do not have to worry about the results of our actions anyway, since the College is a little fish in the vast pond of goods bought by universities or stamped with their logos. Yet we are proposing to act not alone, but in concert with other institutions behind common codes of conduct and monitoring procedures. The goal of this association is precisely to coordinate our market power—and thus, to have consequences. Besides, a big part of social responsibility is becoming aware of how our small choices (paper or plastic?) are not as inconsequential as they may seem.

What to Do?

It seems to us that these are the main possible courses of action.

1. Do nothing.

We could decide that organized efforts in this area are futile or counterproductive. For example, it may be argued that if we refuse to purchase goods made in the very worst sweatshops, we will take jobs and money away from the people who need it most—the presumably desperate who are employed there—and shift resources to the less desperate workers at better factories or in wealthier countries. This position would acknowledge that inaction does not absolve us of responsibility. It would argue that inaction is, under current circumstances, a socially conscious decision. In the spirit of attentiveness to evidence, it would also involve a commitment to remain aware of the situation as it evolves.

2. Join the Fair Labor Association (FLA).

The FLA (http://www.fairlabor.org/) is an outgrowth of the White House Apparel Industry Partnership (AIP), organized in 1996 by President Clinton and Labor Secretary Robert Reich. In 1997 the AIP announced a code of conduct and principles of monitoring; later, the FLA was constituted around acceptance of these obligations. The FLA board has an equal number of NGO’s and corporations. As the campaign against sweatshop apparel developed on campuses, the FLA welcomed many university and college members. Today it has over 130; collectively they have one vote on its board. However, in the course of the AIP’s deliberations over the code and its monitoring, several unions and human rights groups left the group, with one of the key issues being whether or not a “living wage” should be part of the code.

3. Join the Worker Rights Consortium (WRC).

The WRC (http://www.workersrights.org/ ) originated in 1998 from the split in the AIP. Its board does not include for-profit companies involved in manufacturing or selling apparel or footwear. It was created by the United Students Against Sweatshops (USAS), which may be the group you’ve heard the most about (http://www.umich.edu/~sole/usas/about/index.html ), along with unions and NGOs. At this writing, 44 universities have joined it and it has been endorsed by some 30 members of Congress. Its founding conference was in the beginning of April 1999, and it is now getting established as a monitoring organization.

Since we have already discussed some of the considerations governing the decision between option 1 and the other two, let us first look at what divides options 2 and 3 before turning to the problems of implementation at Williams.

What to Put in a Code

It used to be that most codes were written by the companies themselves. More and more, however, companies are signing on to codes written with others, or entirely by others. Even from the standpoint of firms using their adherence to a code as a marketing tool, there is an advantage to this. A proliferation of codes threatens to create so much confusion among consumers as to negate the positive effects, for a company’s reputation, of meaningful compliance. This is what led the Council on Economic Priorities to establish its accreditation arm, CEPAA (http://www.cepaa.org ), whose SA 8000 standard is modeled on the ISO 9000 quality standard that qualifying companies may use in their marketing. CEPAA rests on the proposition that there are some companies, aiming for the “socially responsible” market, that are motivated to provide credible proof of clean practices to the consumer. Other codes, such as that written by the WRC, come from unions and interested consumers. They are not designed to fit the immediate needs of companies seeking to differentiate themselves into a “socially responsible” market niche, though they could eventually serve that purpose.

As noted above, several key provisions distinguish the FLA from WRC. One is the “living wage” requirement. Advocates for the FLA argue that this cannot easily be measured, and that anyway it would be wrong for outside experts to try to determine what it means in each country or region. The FLA code states that “Employers recognize that wages are essential to meeting employees’ basic needs. Employers shall pay employees, as a floor, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and shall provide legally mandated benefits”

(http://www.lchr.org/sweatshop/amendedFLA.htm#CONDUCT).

Advocates for the WRC argue that a “living wage” can be determined by asking the workers, and that the FLA code falls short in other ways—for example, in failing to require publication of factory addresses, in permitting companies to choose their own monitors, and its failure to protect women explicitly. (CEPAA’s SA8000 code is somewhere in between, with wage provisions, for example, that do not mention “living wage” but are more generous than those in the FLA’s code.)

Given that the FLA and the USAS both decry sweatshops, it may be surprising that the debate between them has become, at times, so bitter. At those times the USAS describes the FLA as a shill for companies, and the FLA ridicules the USAS and WRC for inexperience and sterile posturing. The FLA’s opponents point to a variety of problems that they link to the corporate presence on the FLA board. Some opponents of the FLA, including the USAS and some NGOs, argue that its actions are meant to deceive the public and cover up sweatshop abuses. Hence membership in FLA is itself harmful, and a compromise that included membership in both the FLA and WRC would still be a sellout.

The Problem of Monitoring

Nowadays, all kinds of firms and associations have codes of conduct. They may seem like a cheap way to improve a company’s image—especially when we hear reports of sweatshops with unobserved codes on their walls. It is crucial to be able to verify a company’s compliance. But how? As codes have proliferated, it has become harder to monitor them effectively and to know, without a lot of effort, what verified compliance really means. Moreover, we are dealing with cases in which there is a lot of physical and social distance between factory and consumer. This makes the problem even more challenging.

Monitoring involves inspecting factories, sifting through company documents, and questioning workers. Different ways of monitoring are generally classified according to who is doing this. “First party” monitoring is a company’s own internal process. It is also the kind that has been traditionally featured in corporate codes of conduct. The firm makes a promise to the public, and then promises to hold itself to the promise. “Second party” monitoring involves another organization doing the checking. This can be a for-profit entity, such as a big-five accounting firm, contracted by the first party. It might also be a local human rights organization that the first party reluctantly authorizes to do the work. In this context, a “third party” may mean someone, other than the monitoring organization, who files a complaint or gives relevant information to the monitor, perhaps when the organization is not involved in making an inspection. This might be a local human rights organization that is not itself inspecting the factory. Finally, since monitoring work demands both expertise and a reputation for integrity, much like other forms of auditing, another “third party” has emerged in this field—organizations, such as CEPAA, that train and accredit monitoring entities.

The FLA and WRC differ on their monitoring standards. The FLA assumes that internal monitoring is insufficient but leaves it to companies to choose their monitors, which can be for-profit firms. The FLA also provides for third party complaints. The WRC looks to a particular kind of “second party” to do the monitoring: local religious and human rights NGOs. It is presumed that they will be the most effective and credible, gaining the trust of workers more easily since they are from the same place. In addition, since it is easier for them to be present over the long term, they ought to be able to develop strong enough relationships with workers so that future code violations would quickly become known and remedied.

A few differences have become topics of intense discussion. The FLA’s opponents often note that it permits many monitoring documents to be kept private, including the locations of factories involved. They also point to operational concessions, such as permitting the monitored firm to provide the list of factories to be monitored. The FLA counters that its program is up and running, and that since monitors have to inspect factories and company records, no program can work without the cooperation of the companies.

It is not assumed that for-profit monitors are by nature ineffective or incredible. But in practice these monitors have so far been contracted under codes that permit reliance on single or multiple-day inspections. These brief operations may suffer from the fact that workers may feel pressure not to cooperate with the monitors, or may not trust them. At least this is the critique, written by the Transnational Resource and Action Center, of an audit done at a Nike plant (http://www.corpwatch.org/trac/nike/ernst/). This is not to imply that the presence of local monitors solves all problems. They could be subtly co-opted by factory owners or, in some places, by corrupt or unrepresentative union bosses. No arrangement guarantees perfect credibility.

Still, most of the committee agreed that any system of monitoring would not work unless it was informed by regular contact with workers, and it would not be sustainable unless it linked up with their organizations. This way, we would find out what our intended beneficiaries want—which may not be the same as what we think they want.

Operational challenges: Implementing a Code at Williams

Because Williams does not license or have a bookstore, our challenges mainly relate to having our various suppliers—of athletic and security uniforms, office supplies, and computers, to name a few—assure us that they are ready to comply with a code we favor.

Here is where the benefits to organization may appear. First of all, suppliers—and monitors—may find it easier if lots of institutions are on the same code and the same monitoring system. Second, Williams is a small purchaser. Unless we affiliate, companies may not even return our phone calls. Third, without affiliation we lack other channels for reliable information on working conditions at the factories of our vendors. The Athletics Department routinely requests “codes of conduct” from each manufacturer when ordering uniforms. Those documents, when supplied, are very vague we have no way of ascertaining that they are followed. They may say “Made in USA” when they are only assembled in this country.

However, there are several complications. Local vendors would miss our business. But we might thereby damage a small business that happens to have binding contracts with firms with bad policies. In addition, in carrying out these policies, we could raise the cost of uniforms while narrowing our selection.

We would also have to face the diversity of manufacturing conditions behind the same brand: when looking at Nike, for example, would we exempt their operations in Canada, the source of their ice hockey gear, or take on the company as a whole?

Finally, in some circumstances our choice of brand—tournament soccer balls or basketballs, or manufacturer’s logos—is dictated or regulated by the NCAA.

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