Pakistan’s Garment Workers Left Behind Under Preferential EU Trade Deal

A preferential trade deal between the EU and Pakistan is not bringing hoped-for benefits to workers. infinity21/Shutterstock.com

Just over a year ago, Pakistan was added to a list of developing countries that benefit from a highly preferential trade system with the European Union. It means tariff-free access to the lucrative EU-market, but Pakistan is also expected to hold up its side of the deal by improving human rights, governance and environmental protection. However, early indications are that this is not happening. And workers in the country’s garment factories are among those suffering most.

Nasreen Khanum is a mother of two who lives in Karachi, the financial capital of Pakistan and a city now infamous for the Ali Enterprises garment factory fire that killed more than 250 workers and injured 55 others.  

“I used to work in a factory called Moonlight, but it was unsafe,” she says. “We weren’t allowed lunch breaks and there was no bathroom for women. It was so bad the company shut down.”

According to labor advocates, such conditions are typical of those endured by factory workers in Pakistan’s garment and textiles sector.

Last year, in an effort to improve conditions, the European Union added Pakistan to its Generalized System of Preferences scheme, which allows developing nations to export goods, such as food and clothes, to Europe while paying lower or no taxes or duties. This unfettered access to 28 of the world’s richest economies can transform the prospects of entire countries.

Doors to wealthy consumers—previously closed because small factories and businesses simply could not afford to export to EU countries with high import tariffs in place—are opened and as a result firms can expand, able to hire that extra staff member and return investments into the local economy. There is an enhanced status called GSP+, which is open to economically “vulnerable” countries, including Pakistan as of January 1, 2014.

On the surface, this GSP system sounds like a panacea for many of the problems of lower income countries around the world, desperately eager to export goods to rich customers in the West. But look a little closer and the seams begin to unravel. Some countries and the big businesses in them, it appears, are reaping the rewards of tax breaks but doing little to meet the statutory obligations set by the European Union to help the workers—and they’re getting away with it.  

The European Commission, the legislative and governing body of the European Union, has set out clear guidelines for countries that wish to benefit from preferential tax treatment. These, they say, are “binding undertakings” and if a country should fail to meet them, they will lose the protection of the GSP+ status, risking economic and industrial upheaval.

The EC says that the “GSP+ is the EU’s primary trade policy instrument to promote human rights, labor rights, environmental protection and good governance in vulnerable developing countries.” The commission describes it as an “ incentive-based scheme” for those lower income countries that agree to the implement 27 core international conventions. These include United Nation conventions on human rights, the International Labour Organisation’s rules on the rights of workers, and other relevant pacts on the environment and fair governance.

In 2014, radical changes to the GSP system were made in an attempt to ensure that only those countries that needed it were getting the millions of euros worth of tax and duty exemption. The EU decided that of the 176 countries that were previously eligible, only 90 would continue to get the support in order to insure that “the help is focused and effective.”

Said to rank at only 23 per cent in terms of a fair and just system of governance, being heavily dependent on international aid with corruption at every level rife, Pakistan is an excellent candidate for the GSP+ system. Over half of the population lives below the poverty line, many in remote villages where the government has less control and people rely people local militias or religious leaders.

HIGH STAKES

With an economy that is heavily reliant on its agricultural sector, Pakistan is now trying to make its mark on the world stage as a big player in the garment and textile industry. It would be easy to argue that the most fundamental reason for the existence of the GSP+ system is to protect people and the environment in developing countries. Yet since becoming an GSP+ country more than a year ago, Pakistan seems to be failing on both points and showing few signs of meeting the EU’s requirements.

And for the millions of factory workers in Pakistan, there has been little change to the now normalised poor standards of working life since the awarding of GSP+ status to the country.

“I work for another factory now and get paid per garment I make. Nothing has changed in the last year,” says Khanum. “Nothing at all.”

Because the EU has categorised Pakistan as a “vulnerable” country, the garment and textile industry is likely to get a major economic boost through the scheme. According to the Trade Development Authority in Pakistan, the government sees the acceptance into the GSP scheme as “a tremendously advantageous position.” It notes that China, Colombia, India, Indonesia, Thailand and Vietnam are no longer eligible for GSP+, meaning that some of its main competitors for European business when it comes to garment no longer have preferential access to the vast and profitable EU marketplace.

Pakistan’s government trade authority predicts major benefits for the country, adding that, “our trade analysts have estimated an overall growth of almost 15% in the combined Textile and Garment sector by the year 2014-15, adding approximately US $ 1.5 billion to the total exports of Pakistan.”

With such high stakes and the benefits so clear, there are major incentives to ensure that Pakistan keeps the GSP+ status at all costs.

In response to the GSP+ system being awarded to Pakistan, the Pakistan Institute of Labour Education and Research has released a damning report on the progress—or lack thereof—being made in the country.

“Although successive governments have been quick to allow cash, tax and other initiatives to the manufacturers and exporters, none has formulated a labour policy protecting the workers’ rights,” the report says. “Occupational safety and health, the core element of a decent work environment, remains the lowest priority of the stakeholders despite the rising incidences of work related injuries.”

Despite the hazards, Khanum would rather work in a garment factory because the alternative is so dire. “Life before working in a garment factory was hard. It was impossible. My husband was a drunk and left me and I have no one else.” she says. “In seven days I make about 3,000 rupees (about $30) and that’s enough for my daughters and I.”

LABOR RIGHTS STRUGGLE

Pakistan is a deeply conservative country and there are very few jobs that women can do without being chastised and even attacked. And even when they do manage to secure a job, women are often severely disadvantaged.Figures published by the Pakistani government show that whilst on average men in the garment industry earn 12,716 rupees (about $1,200) a month, women doing exactly the same work make, on average, less than half of their male counterparts at 4,953 rupees (about $500). In fact, whereas the monthly income for men has increased since the introduction of GSP+ it has actually gone down for women.

Since 1951, the ILO has maintained that a person’s sex should not dictate how much they are paid for the work they do. If the EU was to take the 27 conventions of the GSP+ seriously, then Pakistan would have to be held accountable for the lack of progress in the widening wage gap and the continual discrimination towards women in the work force.  

And when it comes to unionization—with collective action an essential way for workers to fight poor factory conditions—Pakistan also lags behind. Less than 1 per cent of the country’s workforce are members of a trade union. Joining a union is the constitutional right of every Pakistani citizen, but through decades of coercion and struggle, unions have barely survived says Nasir Mansoor, deputy general secretary of the National Trade Unions Federation of Pakistan.

“The way the system is at the moment, the GSP+ will help the factories, it will help the government with employment and income figures to say, ‘Hey, look how well we are doing,’ but it is not helping the workers,” Mansoor says.

For decades, unions have been crippled here in Pakistan and in turn, so has the voice of the workers. “They always say that if you phone the union and if you ask for workers rights, it means the flight of capital from Pakistan. They terrorise workers and refuse to give them contracts,” he says.

Mansoor believes that the GSP+ system has the potential to do good for both business owners and their employees, but only if it works. Right now, he says, it’s not working. “For how long will we say that paying workers something is better than nothing? The workers today remain in perpetual poverty and have no voice,” he says.

Turfa Shah, 32, works stitching clothing in a factory in the industrial zone of Karachi called S.I.T.E. “I have had no real education” she says, “I don’t know what else to do.”

Shah, like Khanum and many others, gets paid a piece rate for the number of items she sews in a day. The illegal practice often sees her working 12-14 hours to make ends meet. “I have to beg my sleazy manager to give me the jobs, and whatever I make he takes 300 rupees anyway. I’m supposed to be paid 3,300 rupees. But everyone knows the managers take a cut from our money.”

Fatima Farhat is a program manager at PILER who has worked closely with the garment factory workers and others who say they are losing out when it comes to the GSP+ agreement. She says she is aware of a bribery culture in the garment industry and says that extortion and corruption takes place at every echelon.

The majority of industrialists, she says, are “totally averse to following the laws.” They fail to “recognise workers’ legal rights and are prone to achieve that end by coercion, corrupt practices and bribery.”   

“Labour ministries and departments, including the inspection wings, are corrupt and lacking in capacity to undertake their assigned functions,” she adds, explaining that this amounts to “no, or very little implementation of laws.”

COMPLIANCE 

Adding to the problems, figures produced by the Pakistan Bureau of Statistics show that 73.6 percent of workers are employed in the informal sector, which is made up of illegally run factories that avoid registration with the government altogether. “In contravention of the ratified ILO convention, previous national and provincial policies and practices in Pakistan have severely undermined labor inspection,” says PILER. “Under the existing system, only registered factories and shops are covered.” The majority of factories are therefore unmonitored and the workers there completely unprotected.

The EU makes it clear that it tries to monitor all countries accepted into the GSP+ scheme. But its monitoring and scorecard system, a process which measures the Pakistani government’s progress in adhering to those 27 conventions, relies heavily on the beneficiary country self-reporting.

Under the GSP regulations, the European Commission say that the burden of proof for compliance with the GSP+ scheme rests with the beneficiary country. “Thus, it is primarily for the beneficiaries to provide all information necessary that will allow us to assess their GSP+ compliance.”

Critics of Pakistan’s lackluster implementation of GSP+ standards have pointed out that this is possibly the biggest weakness in the system. With the lucrative incentives in hanging onto the country’s newly acquired GSP+ status, and the system of monitoring so corrupt and ineffective, the danger is that the EU has a very vague—if not erroneous—representation of the reality on the ground.

But that’s not to say that those building their wealth on the sweat of poor workers can do so with impunity. In 2010, Sri Lanka was disqualified from the GSP+ system, after an investigation by the EU found that it had breached UN conventions on human rights during the recent civil war there. The removal of the GSP+ status had a major affect on Sri Lanka’s economy, particularly the export-reliant garment and textiles sector.

The European Commission is hopeful that Pakistan will not get to the same stage as Sri Lanka, and Pakistan’s GSP+ status is due to be reviewed in 2016. A spokesperson from the European Commission says that Pakistan has “pledged to ensure” the GSP+ conventions are implemented.

“Moreover, throughout 2014 and 2015, the government of Pakistan has demonstrated clear willingness to discuss with the EU authorities on very sensitive issues such and women or children rights, rights of minorities, labor standards etc and to further step up their practical efforts for the sake of Pakistani people.”