No Sweat (Shop): Labor Reforms in Cambodia

Article excerpt

Some US politicians have called for trade agreements to be linked to labor and environmental standards. Few realize, however, that one such trade deal already exists. In January 1999, Cambodia and the United States signed an agreement that allowed Cambodia to export more textiles only if its factories complied with international labor laws. Five years later, this unique trade pact has had significant success.

After Cambodia's civil war ended in 1991, foreign investors began opening garment factories throughout the nation. They were attracted by cheap labor, low taxes, and the unusual rules governing the world textile trade--specifically, upper limits that the United States and other developed nations set on the amount of textiles that they import from different individual countries. Unable to export more garments from traditional producers like China, investors jostled for their share of Cambodia's quota.

Conditions in Cambodia's garment factories were dire. Workers had to pay fees to middlemen in order to obtain jobs and were then kept in debt bondage. Forced overtime, illegal pay deductions, and child labor were commonplace. Additionally, many workers did not earn the Cambodian minimum wage of US$40 a month. Labor unions not linked to the ruling Cambodian People's Party (CPP) were stifled.

The Cambodian Labor Code, passed in 1996, was supposed to prevent all of this, but the law was impossible to enforce. Labor inspectors were paid miserably low salaries and made their living on bribes instead. Furthermore, the CPP leadership dominated the industry and had no incentive to launch crackdowns itself.

In 1999, the United States negotiated its novel trade deal with Cambodia. Under the agreement, Cambodia's textile export quota would be increased by up to 14 percent a year (later raised to 18 percent) if it was found to be in "substantial compliance" with international and Cambodian labor law. The UN-sponsored International Labor Organization (ILO) would send inspection teams to factories, interview workers and employers,

and compile the results. The United States would evaluate the ILO's findings and decide if and how much to raise the quota.

Businessmen feared that Cambodian labor unions would become too powerful and unruly, and indeed there were large strikes in the summer of 2000. Tensions waned, however, and textile manufacturers were not scared off. From 1999 to 2003, garment exports rose from US$600 million to US$1.5 billion, and the number of garment workers tripled to 235,000. With Cambodia's real GDP at roughly US$4 billion, this is a tremendous increase. …

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