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Lower tariffs, fewer quotas make Bangladesh the go-to apparel producer

People look at a burnt garment factory outside Dhaka, Bangladesh, Sunday, Nov. 25, 2012. At least 112 people were killed late Saturday night in a fire that raced through the multi-story garment factory just outside of Bangladesh's capital, an official said Sunday.

Hasan Raza/AP

When countries such as Canada ditched import duties and quotas on garments from Bangladesh a decade ago, the country became the go-to apparel producer.

In 2003, Ottawa dropped its 18-per-cent duty on clothing made in Bangladesh, as well as restrictions on volumes shipped here. "It opened up the floodgates," said Bob Kirke, executive director of the Canadian Apparel Federation. The number of employees in the ready-made garment industry more than doubled in a decade, to four million in 2011-2012 from almost two million in 2000-2001.

Clothing producers and retailers rushed to find suppliers in Bangladesh, cashing in on the federal government's bid to help the country and other least-developed nations to the detriment of Canadian clothing makers, many of which have since closed.

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Bangladesh boasts a cheap, unskilled work force while China has developed skilled garment workers who are demanding more money – and driving Western retailers to source their clothing increasingly in Bangladesh. But its factories stick to producing the basics – T-shirts and underwear – which generate thin profit margins, putting pressure on the businesses to keep costs down.

Retailers such as grocer Loblaw Cos., which makes some of its Joe Fresh apparel in Bangladesh, are drawn to the country for its low cost and large pools of cheap labour.

Bangladesh has comprehensive safety regulations but they aren't well enforced, with few resources and inadequate numbers of inspectors, who are not well paid and can be easily swayed by factory owners, said Avedis Seferian, chief executive officer of WRAP, a non-profit organization that inspects and certifies factories in Bangladesh and elsewhere (although not connected to Loblaw).

Bangladesh is a poor country, and the garment and textile factories make up more than three-quarters of its gross domestic product, Mr. Seferian said. While some factories are in poor shape, "it really comes down to how enlightened management is."

"They don't make as much on a pack of underwear as you do on a designer suit," he said. "So you end up creating that much more pressure to produce large quantities and get them out as quickly as you can. So the conditions are, unfortunately, very conducive to trying to get things done as cheaply as possible. Therefore the incentive to cut corners where one can is heavy."

Mr. Kirke said Ottawa could work more closely with the government of Bangladesh and groups such as the International Labour Organization to improve labour standards and the enforcement of building codes – in exchange for preferential access to the Canadian market. Indeed, the recent federal budget extends the no-tariff provisions for Bangladesh and other needy countries another 10 years.

"This is part of a government policy to reinforce production in the least-developed countries," he said. "Can we, on the margins, do something to improve the situation?"

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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