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U.S. retailers shun Bangladesh reforms

Nearly all U.S. clothing chains, citing the fear of litigation, declined to sign an international pact ahead of yesterday’s deadline, potentially weakening what had been hailed as the best hope for bringing about major reforms in low-wage factories in Bangladesh.

Companies including Walmart, Gap, Target and J.C. Penney had been pressed by labor groups to sign the document in the wake of last month’s factory collapse
in Bangladesh that killed at least 1,127 people. More
than a dozen European retailers did so. But U.S. companies feared the agreement would give labor groups and others the basis to sue them in court.

Walmart had been under particular pressure because the company is one of the biggest buyers of clothes from Bangladesh and, as the largest retailer in the world, has broad influence over the industry. Instead, the retailer said this week that it would conduct its own inspections at its Bangladesh facilities.

Walmart reiterated yesterday that it would not sign the accord at this time, because it “introduces requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals.”

The accord that’s on the table would likely cost retailers about $3 billion over the next five years, said Scott Nova, executive director of the Workers Rights Consortium, which supports the accord. Labor groups had set yesterday as the deadline to sign up.

So far, European retailers have said they are willing to pay that price. H&M, the largest buyer of clothes from Bangladesh, has agreed to the deal. So have Carrefour, the world’s second-largest retailer, Benetton, Marks & Spencer and El Corte Ingles. All told, 60 percent of garments produced in Bangladesh go to European retailers.

Most U.S. companies, however, balked at the language in the accord. Some said it would expose them to excessive legal liability – particularly in America’s litigious courts.

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