Caribbean Basin: Worker Rights Progress Made, but Enforcement Issues
Remain (Letter Report, 07/20/98, GAO/NSIAD-98-205).

Pursuant to a congressional request, GAO reviewed allegations of worker
rights abuses that have persisted in the Caribbean Basin Initiative
(CBI) apparel industry, focusing on: (1) whether or not Caribbean Basin
countries have made efforts to improve worker rights in the CBI apparel
industry; (2) what efforts the private sector has made to address
concerns about working conditions in CBI countries; and (3) updated
information about U.S. apparel imports from CBI countries.

GAO noted that: (1) the major CBI apparel shipping countries have made
efforts to improve worker rights in recent years; however, allegations
of worker rights violations persist and enforcement of labor laws
generally remains a problem; (2) governments have reformed their labor
laws to meet international standards where needed and have been making
efforts to upgrade the performance of their labor departments; (3) these
reforms have included strengthening and streamlining procedures to form
unions and negotiate collective bargaining agreements, establishing
labor courts, enhancing the labor inspection and enforcement
capabilities of labor ministries, and increasing salaries and training
for labor inspectors; (4) all the major CBI apparel shipping countries
except Jamaica had Generalized System of Preferences worker rights
petitions filed against them over the past decade, and all have been
settled with a determination that steps had been taken to improve worker
rights; (5) unions and human rights groups claim that labor laws are
still not being adequately enforced and worker rights abuses are
continuing; (6) there are persistent reports of abuses as well as of
workplace health and safety hazards; (7) GAO's work in the Dominican
Republic and Guatemala and review of Departments of State and Labor
reports indicates that while efforts to improve worker rights are
continuing in CBI countries, there is some validity to allegations of
worker rights violations; (8) CBI governments' enforcement efforts have
been hampered in many cases by limited resources and training, as well
as by judicial systems that are generally inefficient and sometimes
susceptible to corruption, according to recent State and Labor reports;
(9) prompted in part by continuing allegations of labor violations, the
private sector has taken steps designed to assure consumers of
acceptable working conditions in their industries; (10) industry
associations located in El Salvador, Guatemala, Honduras, and Costa Rica
have established workplace codes of conduct to be voluntarily adopted by
their members; (11) in the United States, two organizations have created
industrywide workplace codes of conduct that can be voluntarily
implemented by companies with domestic and overseas contractors and
suppliers; (12) numerous U.S. apparel companies have also established
their own individual company codes of conduct for their domestic and
overseas operations; and (13) however, across all these private-sector
efforts, there is no agreement within the industry on an effective means
to monitor and enforce these codes of conduct.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-98-205
     TITLE:  Caribbean Basin: Worker Rights Progress Made, but 
             Enforcement Issues Remain
      DATE:  07/20/98
   SUBJECT:  Clothing industry
             Foreign governments
             Foreign trade policies
             Foreign trade agreements
             Occupational health standards
             Import regulation
             Occupational safety
             Working conditions
IDENTIFIER:  Caribbean Basin Initiative
             Generalized System of Preferences Program
             Dept. of Commerce Special Access Program
             Costa Rica
             Dominican Republic
             El Salvador
             Honduras
             Jamaica
             Guatemala
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Committee on Commerce,
Science, and Transportation, U.S.  Senate

July 1998

CARIBBEAN BASIN - WORKER RIGHTS
PROGRESS MADE, BUT ENFORCEMENT
ISSUES REMAIN

GAO/NSIAD-98-205

Caribbean Basin Worker Rights

(711319)


Abbreviations
=============================================================== ABBREV

  AAMA - American Apparel Manufacturers Association
  AFL-CIO - American Federation of Labor and Congress of Industrial
     Organizations
  AIP - Apparel Industry Partnership
  ASIC - Salvador Association of Clothing Industries
  CATECO - Costa Rica Textile Chamber
  CEP - Council on Economic Priorities
  CEPAA - Council on Economic Priorities Accreditation Agency
  CBI - Caribbean Basin Initiative
  FENATRAZONAS - National Federation of Free Trade Zone Workers
     (Dominican Republic)
  GSP - Generalized System of Preferences
  GAL - Guaranteed Access Level
  IDB - Inter-American Development Bank
  ILO - International Labor Organization
  NGO - Nongovernmental organizations
  NAFTA - North American Free Trade Agreement
  NRF - National Retail Federation
  UNITE - Union of Needletrades, Industrial and Textile Employees
  USAID - U.S.  Agency for International Development
  USTR - Office of the U.S.  Trade Representative
  VESTEX - Commission of the Apparel and Textile Industry (Guatemala)

Letter
=============================================================== LETTER


B-280379

July 20, 1998

The Honorable Ernest F.  Hollings
Ranking Minority Member
Committee on Commerce, Science, and Transportation
United States Senate

Dear Senator Hollings: 

U.S.  trade preferences provided through the Caribbean Basin
Initiative (CBI), under which most Caribbean Basin products enter the
United States duty free, are tied to worker rights standards, as
defined in U.S.  trade law.\1 Generally, to be eligible for CBI trade
preferences, a country must have taken or be taking steps to provide
workers in that country with internationally recognized worker
rights.  The same worker rights standards are found in the
Generalized System of Preferences (GSP) Program,\2 which has an
annual review mechanism that has also been used to enforce compliance
with these standards under CBI.\3 You have expressed concern that
allegations of worker rights abuses have persisted in the CBI apparel
industry, one of the largest CBI export industry sectors.\4 In
response to your concerns, we reviewed (1) whether or not Caribbean
Basin countries have made efforts to improve worker rights in the CBI
apparel industry and (2) what efforts the private sector has made to
address concerns about working conditions in CBI countries.  We have
also updated information previously provided to you about U.S. 
apparel imports from CBI countries\5 (see app.  I). 

In conducting this review, we analyzed the efforts of the six major
CBI apparel shipping countries--Costa Rica, the Dominican Republic,

El Salvador, Guatemala, Honduras, and Jamaica\6 --to improve their
worker rights standards and the working conditions in their apparel
assembly industries.  We interviewed officials and reviewed documents
from the Departments of State and Labor, the Office of the U.S. 
Trade Representative (USTR), and U.S.  embassies in these six
countries.  We also reviewed the State Department's annual worker
rights reporting for 1992-97 for these countries, as well as GSP
worker rights case files.  We conducted fieldwork in July/August 1997
in the Dominican Republic and Guatemala.  We also interviewed
industry associations and labor and human rights groups.  It was not
possible for us to conduct an independent assessment of worker rights
in each country or to independently verify specific allegations of
worker rights abuses.  Rather, we relied primarily on discussions
with country officials and State and Labor Department and USTR
reports.  In the Dominican Republic and Guatemala, we discussed the
allegations where possible with government officials, including
senior labor inspection officials.  Although much of the available
information on worker rights was not industry specific, we tried to
obtain as much specific information pertaining to the apparel
industry as possible.  We also assessed private sector efforts to
address concerns about working conditions in these CBI countries
through codes of conduct.  We obtained information on industry
association and company codes of conduct from industry associations,
companies, and labor and human rights groups in the United States, as
well as in the Dominican Republic and Guatemala.  (See app.  IV for
further details about the objectives, scope, and methodology for this
review.)


--------------------
\1 Internationally recognized worker rights are defined at 19 U.S.C. 
2467(4). 

\2 GSP trade preferences provide duty-free access to the United
States for designated products of eligible developing countries
worldwide, not just in the Caribbean Basin, in order to promote
development through trade rather than traditional aid programs.  For
more information about the GSP Program and the review of worker
rights, see International Trade:  Assessment of the Generalized
System of Preferences Program (GAO/GGD-95-9, Nov.  9, 1994). 

\3 CBI trade preferences do not cover apparel products, and GSP does
not cover most apparel products.  Nonetheless, all beneficiary
country governments are responsible for abiding by these worker
rights standards in all sectors of the national economy, including
textiles and apparel. 

\4 This issue was also addressed in a 1993 GAO study, Foreign
Assistance:  U.S.  Support for Caribbean Basin Assembly Industries
(GAO/NSIAD-94-31, Dec.  29, 1993). 

\5 Caribbean Basin Apparel Imports (GAO/NSIAD-98-59R, Dec.  3, 1997). 

\6 Jamaica seems to be a unique case among these countries in that it
has a history of strong worker rights standards that differs from the
history of labor problems experienced elsewhere in the region.  Many
Jamaican political leaders came out of its labor movement.  State
Department reports on worker rights in Jamaica state that the
government generally enforces the labor law effectively.  Also, there
have been no GSP worker rights cases filed.  For this reason, the
discussion in this report about worker rights problems generally does
not pertain to Jamaica. 


   BACKGROUND
------------------------------------------------------------ Letter :1

CBI was announced in 1982 to promote export-led growth and economic
diversification in the countries of the Caribbean Basin.\7 Although
most CBI products enter the United States duty free, textiles and
apparel were specifically excluded from duty-free entry.  In 1986,
the Special Access Program was initiated to provide trade preferences
for apparel assembled in CBI countries from U.S.-formed and -cut
fabric and imported to the United States under the production-sharing
provisions of item 807 of the U.S.  Tariff Schedule (now heading 9802
of the U.S.  Harmonized Tariff Schedule).\8 Under the Special Access
Program, CBI countries became eligible to negotiate bilateral
agreements with the United States containing favorable quotas, or
Guaranteed Access Levels (GALs), for these products.  The Special
Access Program allows for virtually quota-free access to the U.S. 
market for CBI apparel assembled from U.S.-formed and -cut fabric. 
The six CBI countries that had GALs in 1997 were Costa Rica, the
Dominican Republic, El Salvador, Guatemala, Honduras, and Jamaica. 

The data on trends in apparel imported to the United States under
production-sharing provisions from 1987 to 1997 show that total CBI
imports grew by over sevenfold, from $864 million to $6.4 billion. 
However, the performance of individual CBI countries varied.  For
example, the value of these imports rose from $336 million to $2.1
billion for the Dominican Republic, consistently the leading CBI
apparel shipper, and from $113 million to $425 million for Jamaica,
which moved from third to last place among the six CBI countries with
GALs.  The countries with the fastest rates of growth over the last 4
years were El Salvador and Honduras.  (See app.  I for more detailed
information.)

The shift of apparel assembly to the Caribbean Basin--over half of
all imports under production-sharing provisions come from the CBI
countries--is a source of concern to U.S.  apparel unions, although
apparel manufacturers believe their ability to compete to some extent
depends upon it.  The U.S.  apparel manufacturing industry, for a
variety of reasons, went from a peak of 1.45 million workers in 1973
to 853,000 workers in May 1996, a drop of 41 percent.  The unions, as
well as labor rights advocacy groups, are concerned that U.S.  jobs
are being lost and that the workers in apparel assembly plants in
developing countries are being employed under abusive labor
conditions.  The apparel and textile manufacturers and retailers say
that the intense price competition in the U.S.  market is driving
apparel assembly jobs to low-cost countries and that
production-sharing reduces the loss of jobs in the U.S.  apparel
manufacturing industry to imports with no U.S.  content.  Apparel
manufacturers state that U.S.  companies take their working standards
with them and U.S.-owned plants are considered to have the best
working conditions in these countries. 

Generally, to be eligible for CBI or GSP benefits, countries must
have taken or be taking steps to afford workers in that country
(including any designated zone in that country) internationally
recognized worker rights.  Internationally recognized worker rights
are defined as including (1) the right of association; (2) the right
to organize and bargain collectively; (3) a prohibition on the use of
any form of forced or compulsory labor; (4) a minimum age for the
employment of children; and (5) acceptable conditions of work with
respect to minimum wages, hours of work, and occupational safety and
health.\9

According to USTR, while a beneficiary country's level of development
is taken into account in assessing worker rights situations, it is
U.S.  policy that basic human rights are universal and that all
governments are required to respect basic human rights, which include
the first three cited worker rights, irrespective of social systems
or stage of economic development.  Worker rights petitions can be
filed under the GSP annual review process to challenge a country's
eligibility for GSP benefits when parties believe that worker rights
violations are occurring.  Loss of GSP benefits in such a case would
generally result in the loss of CBI benefits as well.  Under the GSP
annual review, governments, not individual companies, are held
responsible for worker rights in a country. 


--------------------
\7 CBI legislation, the Caribbean Basin Economic Recovery Act (P.L. 
98-67, title II), was enacted on August 5, 1983, and implemented
beginning January 1, 1984, by presidential proclamation. 

\8 Production-sharing occurs when certain aspects of an article's
manufacture are performed in more than one country.  By importing
products under the production-sharing provisions of heading 9802,
companies are exempted from paying U.S.  Customs duties on the value
of the U.S.-made components used in making imported products.  The
United States started participating in the international Harmonized
System in 1989.  For more information about the Special Access
Program and apparel import levels, see Caribbean Basin Apparel
Imports. 

\9 19 U.S.C.  2467(4). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The major CBI apparel shipping countries have made efforts to improve
worker rights in recent years; however, allegations of worker rights
violations persist and enforcement of labor laws generally remains a
problem.  Governments have reformed their labor laws to meet
international standards where needed and have been making efforts to
upgrade the performance of their labor departments.  These reforms
have included strengthening and streamlining procedures to form
unions and negotiate collective bargaining agreements, establishing
labor courts, enhancing the labor inspection and enforcement
capabilities of labor ministries, and increasing salaries and
training for labor inspectors.  All the major CBI apparel shipping
countries except Jamaica had GSP worker rights petitions filed
against them over the past decade, and all have been settled with a
determination that steps had been taken to improve worker rights. 
However, unions and human rights groups claim that labor laws are
still not being adequately enforced and worker rights abuses are
continuing.  There are persistent reports of abuses, such as firing
union organizers, refusing to engage in collective bargaining, and
forcing overtime work, as well as of workplace health and safety
hazards.  Our work in the Dominican Republic and Guatemala and review
of State and Labor Department reports indicates that while efforts to
improve worker rights are continuing in CBI countries, there is some
validity to allegations of worker rights violations.  CBI
governments' enforcement efforts have been hampered in many cases by
limited resources and training, as well as by judicial systems that
are generally inefficient and sometimes susceptible to corruption,
according to recent State and Labor Department reports. 

Prompted in part by continuing allegations of labor violations, the
private sector has taken steps designed to assure consumers of
acceptable working conditions in their industries.  Industry
associations located in El Salvador, Guatemala, Honduras, and Costa
Rica have established workplace codes of conduct to be voluntarily
adopted by their members.  In the United States, two organizations
have created industrywide workplace codes of conduct that can be
voluntarily implemented by companies with domestic and overseas
contractors and suppliers.  In addition, numerous U.S.  apparel
companies have also established their own individual company codes of
conduct for their domestic and overseas operations.  However, across
all these private sector efforts, there is no agreement within the
industry on an effective means to monitor and enforce these codes of
conduct. 


   EFFORTS MADE TO IMPROVE WORKER
   RIGHTS, BUT ENFORCEMENT REMAINS
   A PROBLEM
------------------------------------------------------------ Letter :3

The major CBI apparel shipping countries have made efforts to improve
worker rights to meet international standards in recent years.  The
GSP annual review process has provided an important mechanism for the
filing and resolution of worker rights petitions and has played a
role in encouraging the adoption of reforms.  Since the early 1990s,
CBI countries have undertaken worker rights reforms that have
included revising their labor codes to meet international worker
rights standards, improving governmental processes for resolving
worker rights problems, and working to enhance the performance of
their labor ministries.  Despite these worker rights reforms, reports
of abuses in working conditions--such as firing union organizers and
forcing overtime work--have persisted, and our work shows that
enforcement of labor laws generally remains a problem. 


      WORKER RIGHTS ENHANCED
      ACROSS CBI REGION
---------------------------------------------------------- Letter :3.1

The GSP annual review mechanism has provided an important means by
which worker rights reforms could be encouraged.  All the major CBI
apparel shipping countries except Jamaica had GSP worker rights
petitions filed against them over the past decade, and all have been
settled with a determination that steps had been taken to improve
worker rights.  However, GSP is only one piece of the larger picture. 
The past decade has been a period of fundamental political and
economic changes in most CBI countries that preceded the labor
reforms that followed.\10 In addition, reform governments came to
power in most CBI countries that wanted to more fully integrate their
economies into the regional and global economy and acknowledged that
they must meet international standards.  Since the early 1990s, the
major CBI apparel shipping countries have reformed their labor laws
where needed to meet international worker rights standards,
strengthening their labor code provisions related to the right of
association and the right to organize and bargain collectively.  They
have also been making efforts to improve their processes for
resolving worker rights problems, such as by creating tripartite
labor councils to resolve labor issues, establishing the government's
authority to revoke the export licenses of companies that violate
labor laws, and by setting up new or additional labor courts to
handle labor cases.  Moreover, they have taken initiatives to improve
the performance of labor ministries by reorganizing them to make them
more efficient, increasing labor inspectors' salaries, and providing
training.  CBI countries are also participating in a regional
initiative to harmonize labor codes and modernize labor ministries. 


--------------------
\10 For example, El Salvador's civil war was settled and the peace
accords signed in 1992.  Guatemala returned to civilian government in
1986 and started a peace process that resulted in the signing of
peace accords in December 1996, ending 36 years of internal conflict. 


         GSP WORKER RIGHTS REVIEWS
         ENCOURAGE IMPROVEMENTS
-------------------------------------------------------- Letter :3.1.1

Worker rights reforms made since the early 1990s were encouraged, in
part, through the GSP worker rights review process.  The GSP
Program's annual review process provides an important mechanism for
petitions to be brought against beneficiary countries in cases in
which worker rights violations are alleged.  The GSP Subcommittee, an
interagency working group of the Trade Policy Staff Committee led by
USTR, reviews petitions in a two-stage decision process.  In the
first stage, a decision is made on which petitions to accept for full
review.  Factors such as sufficiency of evidence and whether
substantially new information is presented in resubmitted cases are
considered.  In the second stage, the accepted petitions are fully
reviewed, and a decision is made on whether beneficiary countries are
meeting worker rights standards.  All the major CBI apparel shipping
countries except Jamaica had GSP worker rights petitions brought
against them, usually by the American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), as well as labor
rights and human rights groups concerned about labor abuses in these
countries.  Of the 15 petitions filed from 1987 to 1997, 5 were
accepted for review.  These petitions generally focused on violations
of the right of association or the right to organize and bargain
collectively, that is, unionization issues.  These reviews often were
continued, or "pended," over a number of annual review cycles, as
USTR consulted with CBI governments over the steps that needed to be
taken.  In some cases, labor code reforms were drafted, debated, and
enacted in legislatures, or governments took other substantive
actions to enhance worker rights.  From 1987 to 1997, all the cases
were closed with U.S.  government determinations that steps had been
taken in providing internationally recognized worker rights. 

Table 1 shows GSP worker rights petitions accepted for review against
CBI countries, the worker rights violations alleged in the petition,
and a summary of the outcome of the review and steps taken. 



                                Table 1
                
                  GSP Worker Rights Cases Accepted for
                    Review Against Major CBI Apparel
                      Shipping Countries, 1987-97

                    Violations alleged in     Outcome of review &
Country   Year(s)   petition                  steps taken
--------  --------  ------------------------  ------------------------
Costa     1993      *Right of association     Petition withdrawn 11/
Rica                *Right to organize &      16/93 after labor code
                    bargain collectively      reforms enacted 11/12/
                    *Acceptable conditions    93 and Supreme Court
                    of work                   decision of 10/93
                                              enforcing right of
                                              association/collective
                                              bargaining. Review
                                              terminated 12/93.

Dominica  1989-91   *Right of association     Review terminated in
n                   *Right to organize &      1991 due to introduction
Republic            bargain collectively      of labor code reform
                    *Forced labor             legislation, which was
                    *Child labor              enacted in 5/92.

          1993-94   *Right of association     Petition withdrawn 10/
                    *Right to organize &      94. Review terminated
                    bargain collectively      12/94. Government showed
                    Allegations of            the will to enforce the
                    government not enforcing  labor code in export
                    reformed labor code       license suspension and
                                              other actions to enhance
                                              worker rights
                                              enforcement.

El        1990-94   *Right of association     Review terminated 7/94.
Salvador            *Right to organize &      Labor code reforms
                    bargain collectively      enacted 4/94.

Guatemal  1985      General review\a          Review terminated
a                                             January 1987; Guatemala
                                              found to be taking
                                              steps.

          1992-97   *Right of association     Review terminated 5/
                    *Right to organize &      97.
                    bargain collectively      Labor code reforms in
                                              11/92.\b
----------------------------------------------------------------------
\a When GSP was reauthorized by the Trade and Tariff Act of 1984
(P.L.  98-573, Oct.  30, 1984), worker rights eligibility criteria
were added.  The GSP Subcommittee conducted a general review of
worker rights in beneficiary developing countries at that time.  It
reviewed 11 countries and announced the results in January 1987. 
Guatemala was the only one among these six countries to be included
in the general review.  No subsequent general review has been
conducted. 

\b Although Guatemala reformed its labor code in 1992, the GSP worker
rights review was not terminated until May 1997.  A USTR official
stated that every time the United States started to consider
termination, there was some worker rights violation or incident that
required further review.  At the same time, there were concerns about
the Guatemalan government's ability to enforce its labor laws. 
According to a U.S.  embassy official, the Guatemalan government felt
that the goalposts were constantly being moved and that nothing it
did would be enough. 

Sources:  USTR and Departments of Labor and State. 

There was also another noteworthy petition that is not in this table
because it was officially rejected for review.  It was a petition
against Honduras in June 1995 in which the petitioner alleged
violations of the right of association and the right to organize and
bargain collectively, and claimed that the Honduran government was
not enforcing the labor code.  USTR entered into consultations with
the Honduran government and negotiated a memorandum of understanding
in November 1995, under which the Honduran government agreed to take
steps to better enforce its labor laws. 

Because CBI trade preference benefits are linked to GSP benefits
through the worker rights provisions that are part of the conditions
for eligibility for both, U.S.  government and private sector
officials stated that the U.S.  government had substantial leverage
in encouraging CBI governments to take steps to improve worker
rights.  In fact, the labor code reforms that were undertaken were
associated with GSP worker rights reviews of that country.  While
certainly not the only factor, GSP reviews are generally considered
to have played an important role in encouraging reforms to meet
international worker rights standards.  (See app.  II for more
information.)


         LABOR CODES REFORMED TO
         MEET INTERNATIONAL WORKER
         RIGHTS STANDARDS
-------------------------------------------------------- Letter :3.1.2

In the early 1990s, there was a wave of worker rights reforms, with
new labor codes passed in the Dominican Republic and Guatemala in
1992, Costa Rica in 1993, and El Salvador in 1994.\11 The two areas
of greatest focus in the worker rights reforms were the right of
association and the right to organize and bargain collectively.\12
These two worker rights, together with the prohibition on the use of
any form of forced or compulsory labor, are considered basic human
rights, according to USTR.  While forced labor has generally not been
an issue in the major CBI apparel shipping countries, the rights of
association and of organizing and bargaining
collectively--fundamental unionization rights--have been very
problematic. 

The right of association was strengthened by these CBI governments
through labor code reforms that included protecting union organizers
from dismissal during union formation and streamlining the process to
form a union.  In the Dominican Republic, for instance, the new labor
code of 1992 specified in detail the steps legally required to
establish a union and provided for automatic recognition of a union
if the government did not act on the union's registration application
within 30 days, according to the Dominican Secretary of Labor.  In
Guatemala, the labor code was amended in 1992 to provide that legal
recognition of a new union was to be finalized by the Ministry of
Labor within 20 days, shortening the time frame from
60 days.  The labor regulations were also revised to include specific
wording indicating that Ministry officials responsible for delaying
petitions for union status could be fired, according to USTR GSP
documents and the Human Rights Report for 1993.  Authority to grant
legal status to a union, formerly the exclusive domain of the
President, was transferred to the Minister of Labor.  The reform also
strengthened a provision that in the event that the Labor Ministry
determines that workers were dismissed for union formation
activities, they are to be reinstated within 24 hours of the
determination. 

The right to organize and bargain collectively was strengthened
through labor code reforms that included protections for union
organizers and specification of the procedures for entering into
collective bargaining agreements.  For example, in the Dominican
Republic, the former labor code did not prohibit employers from
firing workers who organized as long as severance pay was given,
according to the Human Rights Report for 1992.  Companies were able
to fire union organizers as soon as they attempted to form a union. 
The new labor code provided job protection for specific numbers of
union organizers and officials, so that union representatives could
not be fired without just cause.  The right to organize and bargain
collectively was also strengthened in this way in the labor code
reforms of Costa Rica and Guatemala.  (The Salvadoran Constitution
already included such a provision.) In Costa Rica, there was also
concern that Solidarity Associations were beginning to infringe on
unions' collective bargaining rights.\13 The Human Rights Report for
1993 notes that the reforms established that only trade unions had
the right to bargain collectively on behalf of the workers.  Similar
reforms pertaining to Solidarity Associations were also made in
Guatemala. 

The International Labor Organization (ILO) was also involved in
working with CBI governments in improving the worker rights standards
in their labor codes.  ILO worked extensively behind the scenes in
providing technical assistance for the labor code reforms that were
enacted in Costa Rica, the Dominican Republic, and El Salvador. 
Similar technical assistance has been provided to Guatemala and
Honduras, where proposed reforms are still under consideration. 


--------------------
\11 In the case of Honduras and Jamaica, their labor laws generally
met international standards, according to State Department officials. 

\12 Country Reports on Human Rights Practices, U.S.  Department of
State (Washington, D.C.:  1992-97).  This is an annual report to the
Congress.  (Hereafter referred to as the Human Rights Report.) We
reviewed Human Rights Reports for 1992-97 for the six major CBI
apparel shipping countries. 

\13 Solidarity Associations are formed by employers to provide access
to credit unions and savings plans for their workers, as well as
other benefits such as food purchase cooperatives and educational
programs.  Unions contend that such associations are used by
companies as a kind of company union to preclude the development of
real unions where workers would have bargaining power. 


         EFFORTS TO IMPROVE
         PROCESS FOR RESOLVING
         WORKER RIGHTS PROBLEMS
-------------------------------------------------------- Letter :3.1.3

Some countries established tripartite commissions, with
representation from industry, labor, and government, to work together
to resolve worker rights issues.  For example, the Dominican Republic
established the Tripartite Oversight Commission in August 1993 to
mediate disputes in the free trade zones.\14 In April 1994, an
agreement was signed between the government, the Dominican
Association of Free Trade Zones, and five of the six major labor
confederations that established (1) the rules governing the
Commission's mediation process for collective disputes in the zones
and (2) an Educational Commission to enhance knowledge of the labor
code and worker rights, according to USTR GSP documents.  The sixth
confederation signed the agreement later that year.  The Human Rights
Report for 1996 notes that a tripartite commission was also
established in El Salvador in August 1996 to help resolve conflicts
in the zones and in-bond plants. 

An important reform undertaken by some of the major CBI apparel
shipping countries focused on their export license authority.  They
established or reaffirmed a legal provision that companies in free
trade zones must abide by national labor laws or their export
licenses could be revoked.  In a high-profile case in the Dominican
Republic, an apparel company had a persistent record of illegal
anti-union behavior.  It had refused to obey a court order to
reinstate an unjustly fired worker, and it was also accused of
harassing union organizers on the eve of elections that could have
set the stage for a collective bargaining process.  In response to
these and other anti-union activities, the AFL-CIO filed a GSP worker
rights petition in June 1993 stating that the government was not
enforcing the new labor code.  After the GSP case was filed, the
Dominican National Free Zones Council used its authority for the
first time in April 1994 to suspend the export license of this
apparel company for 10 days.  Following the suspension, the company
immediately reinstated the worker, after having refused to do so for
2 years.  Labor relations improved at the firm, eventually
facilitating the signing of the first collective bargaining contract
in the history of Dominican free trade zones.  After this
breakthrough, three other collective bargaining agreements were
signed in the zones before the end of the year, according to USTR GSP
documents and a Labor Department report.  Also, in El Salvador, the
Human Rights Report for 1996 notes that a new law was passed in
January 1996 that gave the Ministry of Economy the power to remove
free zone privileges from companies violating labor regulations.\15

Some of the major CBI apparel shipping countries have established or
expanded separate labor courts within their judicial systems, which
have generally been inefficient and often corrupt, according to the
State and Labor Departments.  Others are reforming their national
judicial systems.  For instance, the 1992 labor code reform in the
Dominican Republic created labor courts in the capital, Santo
Domingo, and the second largest city, Santiago, which began
functioning in January 1993.  Labor cases in other parts of the
country continued to be handled in regular courts, according to a
Labor Department report.  The Dominican Secretary of Labor told us in
July 1997 that three additional labor courts had been established in
1994 and that they had recently approved another.  However, the
Dominican government has recently also begun to overhaul its
judiciary, as promised by the new administration that took office in
1996.  A new 16-person Supreme Court was installed in August 1997,
which, in turn, began a revision of the labor courts.  The Human
Rights Report for 1997 states that the system of labor courts
established in the 1992 labor code reform to deal with labor disputes
had proven ineffective at enforcing the law.  There had been many
reports of bribes solicited by labor judges from companies during the
deliberation process.  The new Supreme Court's overhaul of the labor
courts had resulted, as of January 1998, in the dismissal of the
President of the labor court in Santo Domingo.  In Guatemala, the
President of the Supreme Court announced creation of eight new labor
courts and two appeals courts in November 1996, according to the
Human Rights Report for 1997.  Seven of the new labor courts have
been set up and are functioning. 


--------------------
\14 Free trade zones, or export processing zones, are secured areas
that are officially outside of a country's customs territory. 
Foreign-made inputs imported into these zones for export-oriented
manufacturing are exempt from import duties.  However, firms must
post a bond with the local customs authorities until their production
is exported.  When production-sharing takes place in plants located
outside such zones, such firms also post a bond for their production,
which is similarly held outside of the customs territory for assembly
and reexport.  Plants with such production-sharing are often called
"maquiladoras," or maquilas, for short. 

\15 This authority also resides in the Ministry of Economy in
Honduras.  In Costa Rica, according to the State Department, the
labor code does not directly provide for such suspensions.  However,
indirect authority exists since a company's violation of labor,
safety, tax, or other laws may be considered criminal offenses,
resulting in suspension of operations, and thus stoppage of exports. 


         STEPS TAKEN TO IMPROVE
         PERFORMANCE OF LABOR
         MINISTRIES
-------------------------------------------------------- Letter :3.1.4

CBI governments have also made efforts to improve the performance of
their labor ministries.  For example, some governments have
reorganized labor ministries to streamline their operations and make
them more efficient.  Other steps have included increasing salaries
of labor inspectors to redress past problems with bribery and
increasing the training of Labor Ministry employees.  CBI governments
are also participating in a regional initiative to harmonize labor
codes and upgrade the performance of labor ministries. 

In Honduras, inadequate enforcement by the Ministry of Labor had been
a major concern.  According to the Human Rights Report for 1994,
Honduran labor leaders believed that worker rights violations would
continue until the Ministry of Labor was reorganized to make it more
efficient.  Specifically, labor leaders felt that the Ministry was
not enforcing the labor code, was taking too long to make decisions,
and was timid and indifferent to workers' needs.  In June 1995, the
AFL-CIO filed a GSP worker rights petition against Honduras, and USTR
entered into consultations with the Honduran government.  The case
was resolved by a November 1995 memorandum of understanding between
the Ministry of Labor and USTR, which called for greater enforcement
of the Honduran labor code.  The Human Rights Report for 1996 found
that the Ministry had made significant progress toward enforcing the
code.  For example, the report cited a case in which the Ministry had
imposed a $10,000 fine on a company for failure to rehire 16 workers
fired for organizing a union.  This action resulted in the company
reinstating the workers the next day.  The Ministry also increased
its inspections of maquilas and the training of its inspectors;
however, the Human Rights Report noted that more needed to be done to
completely adhere to international worker rights standards.  In
January 1998, a new government took office and appointed a Labor
Minister who had been Secretary-General of one of the three union
confederations for 28 years.  The new Minister has said publicly that
he needs a 25-percent budget increase and that the Ministry needs
computers and training funds. 

In the Dominican Republic, the Secretary of Labor told us in July
1997 that within the last 5 years the Labor Secretariat had created a
new Department of Inspection.  The Secretariat had computerized its
labor force registry, which included enterprises, the number of
workers, and collective bargaining contracts.  There was a second
database, which, among other things, enabled workers to come to the
Secretariat to double-check how much severance a company owed them. 
The Labor Secretariat had also reorganized its labor inspector corps. 
The Director of Inspections for the National District told us that
the new labor code provided that labor inspectors be lawyers, so that
the Secretariat would have a more professional corps that better
understood the law.  Within 4 years, the Labor Secretariat had also
tripled inspectors' salaries in order to reduce the temptation to
accept bribes, and it planned additional increases in salaries if the
budget permitted.  In addition, the Secretariat had set up procedures
so that labor inspectors did not know which plant they would inspect
in advance and rotated inspectors in order to make it harder for the
companies to bribe them. 

In Guatemala, the Inspector General of Labor told us that the
functions of the Labor Inspection Division were reorganized and
streamlined in June 1997.  She also told us that the Ministry was
planning to computerize its operations.  According to the Human
Rights Report for 1997, enforcement is improving as new labor
inspectors complete their training and as the rate of inspections has
increased.  The Ministry has increased the number of court cases
filed for failure to comply with the labor code and has begun an
educational campaign on worker rights.  In terms of training, the
Labor Ministry opened a School of Mediation and Conciliation in July
1997, with assistance from the U.S.  Agency for International
Development (USAID) which is funding the salaries of instructors. 
The school is providing a tuition-free, 6-month, university-level
course of study for about 30 students each July and January of the
year.  The top 10 graduates will be offered jobs in the Ministry's
new Mediation and Conciliation Division. 

In addition, the USAID office in Guatemala has sponsored three
occupational safety and health seminars over the last 2 years. 
According to a Labor Department official who has participated in the
seminars, the seminar is a basic introduction to the issue, since
there are few standards.  The occupational safety and health
inspectors only inspect after the fact to determine the level of
indemnification due to the worker, not to prevent problems.  During
the training course, the instructors take the participants on plant
visits to see how to use the equipment. 

In El Salvador, a new law reforming the Ministry of Labor was passed
in January 1996.  The Minister of Labor reorganized the Ministry,
increased the number of inspectors, and opened field offices in two
free trade zones.  The Human Rights Report for 1997 noted that the
Labor Ministry had made significant progress in modernizing its
facilities and professionalizing its staff.  According to a U.S. 
embassy official in April 1998, the Minister has succeeded in
enhancing the authority of the Labor Ministry.  The Minister has
gotten an increase in his budget over the last 2 years and has worked
to raise the professionalism of the Ministry, including providing
training for the inspector corps.  In addition, the Ministry of Labor
strongly supports starting a regional labor training school and is
working with the Inter-American Development Bank (IDB)\16 to get a
loan for this school. 

CBI countries are also participating in a new regional initiative to
improve the capabilities of ministries of labor throughout the
region,\17 through a jointly funded USAID and IDB program.  The USAID
component, called PROALCA, is a regional program designed to
encourage the Labor Ministers to get together to harmonize labor
codes, develop strategies for regional integration, devise a joint
strategy for accession to the Free Trade Area of the Americas,\18
and, finally, to develop a strategy to upgrade the ministries of
labor in the areas of labor inspection and labor management
relations.  A USAID official told us that the aim is to get
governments to think more strategically on a regional basis and to
preclude competition among countries based on worker rights and lower
labor costs.  USAID will provide technical assistance and a grant of
$5 million over 5 years.  The IDB's efforts for its component, the
Labor Market Modernization Program, are focused on four areas:  (1)
producing research to give an empirical basis to claims about labor
law reforms in the region, (2) creating information systems for the
labor market for the labor ministries, (3) promoting harmonization of
labor standards, and (4) running a series of pilot programs to test
new approaches.  An IDB official told us that the IDB has made an
initial commitment of $4 million per year and has also required
counterpart funding from each country's Labor Ministry, totaling $1
million per year.  Together with USAID's commitment, funding would
total $6 million per year over 5 years. 


--------------------
\16 The IDB is a regional financial institution that works to
accelerate economic and social development in Latin America and the
Caribbean. 

\17 The eight countries participating in this regional initiative
include Belize, Costa Rica, the Dominican Republic, El Salvador,
Guatemala, Honduras, Nicaragua, and Panama. 

\18 The 34 democratically elected leaders in the Western Hemisphere
committed in 1994 to conclude negotiation of a Free Trade Area of the
Americas by 2005. 


      ALLEGATIONS OF WORKER RIGHTS
      ABUSES PERSIST, AND LABOR
      LAW ENFORCEMENT REMAINS A
      PROBLEM
---------------------------------------------------------- Letter :3.2

Although worker rights progress has been made since the early 1990s,
enforcement of labor laws generally remains a problem.  There are
continuing reports of abuses, such as firing union organizers,
refusing to engage in collective bargaining, and forcing overtime
work, as well as of workplace health and safety hazards.  Our work in
the Dominican Republic and Guatemala, the State Department's annual
Human Rights Reports, and Labor Department reports indicate that,
despite the progress that has been made, there is some validity to
allegations of worker rights violations.  CBI governments'
enforcement efforts have been hampered in many cases by limited
resources and training, as well as by judicial systems that are
generally inefficient and sometimes susceptible to corruption,
according to recent State and Labor Department reports. 


         DOMINICAN REPUBLIC
-------------------------------------------------------- Letter :3.2.1

In the Dominican Republic, for example, there are reports of
widespread discreet intimidation by employers of union activity,
according to the Human Rights Report for 1997.  Union members in free
trade zones said that they hesitate to discuss union activity at
work, even during break time, for fear of losing their jobs.  The
report notes that some Dominican zone companies have a history of
discharging workers who attempt to organize unions.  Although there
are about 100 unions in the zones, many exist only on paper.  Only
eight of these unions have collective bargaining agreements.  During
our visit there in July 1997, the Secretary-General of the National
Federation of Free Trade Zone Workers (FENATRAZONAS), the union
federation for the majority of zone unions, told us about nine cases
of anti-union behavior that the federation was pursuing, in which the
common element was that apparel maquilas had fired union leaders and
members due to their union activities.  FENATRAZONAS officials
alleged that some of these union leaders and members were also
targets of physical intimidation and, in one case, that the union
leaders were fired, accused of damaging work, and jailed. 

We visited three of the apparel plants about which FENATRAZONAS had
complained that union leaders had been fired and discussed their
allegations with the labor inspection office at the Secretariat of
Labor.  When we interviewed the managers at the three plants, none
acknowledged having unions in their plants.  Managers at the first
two plants told us that union organizers had falsely set up a union
organizing committee in order to solicit severance payments.\19 The
managers at the third plant told us that they were challenging the
legitimacy of the union registration in court.\20 The labor
inspectors reviewed these allegations and concluded that the union
organizers had been fired in all three cases because of their union
activities.\21 Given the Labor Secretariat's assessment, the result
was that the unions in these three companies were effectively
undercut.  The Labor Secretariat only has authority to make
determinations and to try to mediate resolutions, it cannot sanction
companies.  Cases of violations may be brought to the courts, which
have the authority to levy fines, but which are generally inefficient
and often have been corrupt, according to Human Rights Reports. 
Moreover, the authority to suspend a company's export license rests
with the National Free Zones Council, which, according to a Council
official, would only use this authority in extreme cases. 

Another problem in the Dominican Republic was with forced overtime,
according to the Human Rights Report for 1997, Labor Secretariat
officials, and union representatives we talked to.  There were
numerous reports of forced or coerced overtime in factories, as well
as instances of workers being fired for refusing to work overtime. 
In addition, the report noted that the Dominican government, in
September 1997, denounced the fact that many employers withheld
Social Security payments from employee paychecks but did not transfer
the funds to the Dominican Social Security Institute.  The government
estimated that the Institute lost $11 million (160 million pesos) a
month.  An associated problem, according to FENATRAZONAS, was that if
Social Security payments were not made, workers could not receive
medical service from the Social Security hospitals. 

During our trip to the Dominican Republic, we visited nine apparel
plants in five zones (including three of the plants that FENATRAZONAS
had described), where we interviewed the plant managers and toured
the plants.  Although we did not conduct a formal inspection of these
plants, we did observe physical working conditions.\22 While most of
the plants appeared to have acceptable physical working conditions,
in a few plants the ventilation was poor; the restroom facilities
were unsanitary; and the exit doors were padlocked, including two of
the three plants at which anti-union complaints had been made.  Given
the limited number of plants we were able to visit, and because we
only visited plants that agreed to be visited, this should not be
considered a representative sample of all Dominican plants. 
Furthermore, our observations of the plants were limited to physical
working conditions. 


--------------------
\19 At the first plant, the company had paid the severance.  After
mediation at the Labor Secretariat, the second company offered
reinstatement, but the workers did not accept. 

\20 They said that the union organizers had arranged a meeting under
false pretenses and then used the attending workers' names without
their permission to register the union and had also used names of
workers who were not employees. 

\21 The Labor Secretariat's determination in these three cases was
that unions had officially been registered at all three plants and if
a company wanted to challenge a registration in court that was its
right.  Their investigations had not addressed whether the unions in
the first two cases were extortion attempts.  However, in other
discussions at the Labor Secretariat, officials had acknowledged that
such attempts have occurred at times.  To preclude such attempts,
they supported reinstatement of fired union members rather than
severance payments. 

\22 We observed conditions related to lighting, drinking water,
restrooms, ventilation, fire extinguishers, and fire doors and exits. 


         GUATEMALA
-------------------------------------------------------- Letter :3.2.2

In Guatemala, while the law protects workers from retribution for
forming and participating in union activities, enforcement is spotty,
according to the Human Rights Report for 1997.  The report noted that
while an increasing number of employers accept unionization, many
routinely try to circumvent labor code provisions in order to resist
union activities, which they view as historically confrontational and
disruptive.  While the law specifies that workers illegally fired for
union activity should be reinstated within 24 hours, employers often
file a series of appeals or simply defy judicial orders of
reinstatement.  An ineffective legal system and inadequate penalties
for violations have hindered enforcement of the right to form unions
and participate in union activities, according to the report.  During
our visit to Guatemala in August 1997, we met with officials of two
unions, the Guatemalan Labor Unity Confederation and the Guatemalan
Workers' Trade Union Syndicate, who cited numerous cases in which
they said union organizers were fired or intimidated.  They also
cited cases in which companies closed to avoid dealing with unions. 
(A different perspective was held by many of the plant managers and
industry representatives we met, who believed that these plants had
closed because union demands had driven them out of business.)

According to the Human Rights Report for 1997 and union
representatives, the lack of effective enforcement of the Guatemalan
labor code is also due to a scarcity of labor inspectors, continuing
corruption, the absence of adequate training and resources, and
structural weaknesses in the labor court system.  The labor courts
have generally been ineffective, and efforts to restructure and
modernize the labor court system have made little headway.  In
addition, occupational health and safety standards are inadequate, as
is their enforcement.  When serious or fatal industrial accidents
occur, the authorities generally take no steps against those
responsible.  The Labor Ministry provides training for labor
inspectors in health and safety standards but does not accord such
training a high priority, due to scarce resources. 

During our trip to Guatemala, we visited four apparel plants, where
we interviewed the plant managers and toured the plants.  As in the
Dominican Republic, we did not conduct a formal inspection, and our
observations of the plants were limited to physical working
conditions.  All the Guatemalan plants appeared to have acceptable
physical working conditions.  Given the limited number of plants we
were able to visit and because we only visited those plants that
agreed to be visited, this should not be considered a representative
sample of all Guatemalan plants. 

A recent case at a U.S.-owned apparel plant in Guatemala, which was
investigated by Human Rights Watch, is an example of the difficulties
encountered in enforcing worker rights against anti-union
discrimination, even in what was generally considered to be a model
plant.  The plant management had refused to negotiate a collective
bargaining agreement with the union, as was required by the labor
law, because management did not accept the union's declaration that
it had gained membership of 25 percent of the workforce. 
Subsequently, there were irregularities in the Labor Ministry's
handling of the registration by the union, and there were indications
that the plant managers reacted by discriminating against union
members in order to induce them to quit the union or the plant,
according to the Human Rights Watch study.  The U.S.  apparel company
subsequently accepted the findings and recommendations of the study
and negotiated a collective bargaining agreement with the union. 
This was the first collective bargaining agreement to be reached in a
Guatemalan maquila. 


         OTHER CBI COUNTRIES
-------------------------------------------------------- Letter :3.2.3

To varying degrees, the problems with enforcement appear to be
similar in the other CBI countries, according to the Human Rights
Report for 1997, Labor Department reports, and discussions with U.S. 
embassy officials.  Even in Costa Rica, where enforcement seems to be
somewhat stronger, workers trying to form unions can still lose their
jobs.  The Labor Ministry has 1 inspector for every 30,000 workers in
the zones.  Due partly to budgetary constraints, the Ministry has
also not fielded enough labor inspectors to ensure consistent
maintenance of minimum conditions of safety and sanitation,
especially outside the capital, San Jose, according to the Human
Rights Report for 1997. 

In El Salvador, there is still an anti-union atmosphere, with
continued reports of employers using illegal pressures, including
dismissing labor activists, to discourage organizing, according to
the Human Rights Report for 1997.  For instance, in one high-profile
case discussed in a Labor Department report,\23 a union federation
had attempted to organize a union at a Taiwanese-owned plant in a San
Salvador free trade zone, which had resulted in violence and the
firing or resignation of 300 workers in 1995.  The case generated
interest in the United States and led to a consumer boycott of one of
the plant's well-known U.S.  customers.  The U.S.  apparel firm
subsequently reached an agreement with the company in March 1996 to
establish standards to protect worker rights in the plant and to have
an independent monitoring group ensure compliance.  A U.S.  embassy
official, in April 1998, said that there was a strong general feeling
in El Salvador that the unions represented a disruptive element. 
This belief had been amplified by the civil war, in which unions were
seen as radicals.  He said that this perception is improving slowly
and there is more cooperation now between business and labor.  In
terms of enforcement, the Human Rights Report for 1997 stated that
corruption continued to affect labor inspectors and courts, but
improvements in training and salaries had begun to address this
problem.  In the area of occupational safety and health, regulations
were outdated, and enforcement, while improved, was inadequate.  The
report noted that the Labor Ministry attempted to enforce
regulations, but had limited, though growing, resources to ensure
compliance. 

In Honduras, unions were active in the government-owned Puerto Cortes
free trade zone, but factory owners have resisted union efforts to
organize in the new, privately owned zones, according to the Human
Rights Report for 1997.  In one case, workers starting organizing at
a Korean-owned plant in a zone near San Pedro Sula in August 1996,
resulting in mass firings and intimidation.  Although the company
signed an agreement with the Labor Ministry to reinstate fired
workers, not all were rehired, according to an official of the
AFL-CIO's American Center for International Labor Solidarity, known
as the Solidarity Center.  The company also began to organize a
company-controlled union to compete with the first union.  The
Solidarity Center official said that two high-level Labor Ministry
officials had personally intervened to intimidate union leaders on
behalf of the company in April 1997.  A U.S.  embassy official said
that the unions had never filed a formal complaint about this
incident with the government.  In June 1997, the company agreed to
allow an independent monitoring group to observe working conditions
in its plant. 

Informal blacklisting has occurred in the privately owned Honduran
free trade zones, according to the Human Rights Report for 1997. 
There were reports that some inspectors had sold the names of workers
involved in forming unions to companies that then fired them before
the Ministry could recognize the unions.  There were also reports of
compulsory overtime at zone plants.  In addition, the report notes
that the Ministry of Labor lacked the staff and resources for
effective enforcement of either the labor laws or the national health
and safety laws.  A U.S.  embassy official told us in April 1998 that
the Ministry employees lacked basic office supplies, computers, and
vehicles for inspections.  The official said that while the will
exists to enforce the labor law, the Ministry is so hampered by
inadequate resources and training that it cannot effectively do so. 
A Department of Labor official gave a similar assessment in January
1998, adding that the Ministry has had trouble paying labor
inspectors their per diem and transportation expenses to inspect
plants in the San Pedro Sula area, a major industrial center where
the maquila sector is growing. 


--------------------
\23 Foreign Labor Trends:  El Salvador, 1995-1996, U.S.  Department
of Labor, Bureau of International Labor Affairs (Washington, D.C.: 
1996). 


   APPAREL INDUSTRY ACTS TO
   IMPROVE LABOR CONDITIONS
   THROUGH CODES OF CONDUCT, BUT
   MONITORING AND ENFORCEMENT
   ISSUES EXIST
------------------------------------------------------------ Letter :4

The apparel industry is pursuing numerous voluntary initiatives
designed to assure consumers that apparel imported from CBI countries
is not manufactured under abusive labor conditions.  Apparel assembly
or maquila associations located in several CBI countries have
established voluntary workplace codes of conduct for their respective
members.  Two U.S.  organizations have also created voluntary
industrywide workplace codes of conduct.  In addition, numerous U.S. 
apparel companies have devised their own individual company codes of
conduct.  Regardless of the approach taken, however, there is no
agreement within the industry on an effective means to monitor and
enforce these private sector codes of conduct.  Many in the apparel
industry object to the imposition of outside independent monitors to
verify their compliance with the codes of conduct, while consumer and
labor rights groups do not believe that codes of conduct will be
meaningful without such independent monitoring and enforcement. 


      CBI MAQUILA ASSOCIATIONS
      ADOPT WORKPLACE CODES OF
      CONDUCT
---------------------------------------------------------- Letter :4.1

Over the past 2 years, CBI apparel assembly or maquila industry
associations operating in El Salvador, Guatemala, Honduras, and Costa
Rica have established workplace codes of conduct to be voluntarily
adopted by their respective members.  Although each association's
code and approach to implementation and monitoring vary to some
extent, they have similar provisions.  For example, each
association's code includes a prohibition against forced labor, child
labor, and employment discrimination; protection of the freedom of
association, lawful compensation, and hours of work; and provisions
for safe and healthy working conditions.  Noticeably absent, however,
is a provision recognizing the right of workers to participate in
collective bargaining, although each code acknowledges a commitment
to observing the country's laws and labor codes.  In addition to
these provisions, three of the four associations have the authority
to hire external monitors to verify company compliance.  However, it
is too soon to determine how effective the associations' efforts will
be. 

In El Salvador, the Salvador Association of Clothing Industries
(ASIC) developed its code of conduct in consultation with companies
that have codes of conduct, the U.S.  embassy, the Ministry of Labor,
and ASIC members.  ASIC consists of 250 maquilas, all of which have
signed on to the code of conduct and have voluntarily agreed to be
monitored.  ASIC contracted with Peat Marwick, Price Waterhouse, and
two other firms to monitor compliance of its code.  In May 1998, ASIC
began a pilot program under which 10 maquilas will be audited on a
biannual basis.  Companies that receive positive evaluations would
get a seal of approval that they can use to assure customers that
they are in conformance with labor standards.  In the event that a
problem is found, the auditing firms would discuss any problems
directly with the maquila and allow the maquila
4 weeks to take corrective action.  If problems persist, the auditing
firm would request that ASIC work to bring those maquilas into
compliance with the code.  If ASIC is unsuccessful, it would contact
the Vice Minister of Commerce and Industry within the Ministry of
Economy.  ASIC has not established punitive measures to enforce the
code.  Any sanctions against ASIC members would be imposed by the
government. 

The Guatemalan apparel maquila association, the Commission of the
Apparel and Textile Industry (VESTEX), was the first of these four
maquila associations to establish a voluntary code of conduct. 
According to VESTEX officials, the association's code was developed
based on the codes of companies and consultations with the regional
ILO office.  Among its provisions, the code of conduct provides for
the right of freedom of association, a prohibition against child and
forced labor, and the establishment of environmental safeguards.  The
association's code of conduct was also written in an effort to combat
negative images that potential investors might have about labor
conditions in Guatemalan apparel plants. 

VESTEX hired Ernst & Young International Guatemala, an auditing and
consulting firm, to help develop the code of conduct and an
accompanying manual for monitoring compliance, to conduct training
seminars, and to monitor companies' compliance with the code.  VESTEX
funds training on its code for each company out of the export fees
that it collects from its members.  VESTEX also issues certificates
to those companies that have passed audits.  In the event that a
company is found not to be complying with the code of conduct, VESTEX
may withhold certification from the company.  As of May 1998, 49 of
VESTEX's 236 members have signed on to the association's code of
conduct and have agreed to undergo an audit.  Of these 49 companies,
24 companies had passed and received certification,
7 were not found in compliance and were recommended for a follow-on
audit, and audits for the remaining companies are pending.  An Ernst
& Young representative noted that some of the problems that were
uncovered during the audits were that companies paid bonuses for
piecework that required overtime but were not paying overtime wages. 
The most serious problem was that companies sometimes forced their
employees to work overtime. 

In Honduras, a U.S.  embassy official indicated that the Honduran
Maquiladora Industry Association had released its code of conduct to
the public in late 1997.  The code applies to over 40 companies in
the maquila industry.  Beyond the establishment of the code itself,
the association has not yet set guidelines for implementation.  The
Honduran Maquiladora Industry Association has the authority to select
independent monitors and impose penalties against companies that do
not comply with its code.  According to the U.S.  embassy official,
local unions do not favor the code and question its validity,
primarily because they doubt that human rights groups and religious
groups have the technical expertise to monitor plants. 

The Costa Rica Textile Chamber (CATECO) released its code of conduct
to the public in June 1997.  Almost all of the companies in the
textile sector, which are primarily U.S.-owned companies
(approximately 55), have signed on to the code.  CATECO's code only
provides general guidelines for implementation.  Unlike maquila
associations in the other three CBI countries, CATECO has not
established provisions for outside monitors.  It also has not
established punitive measures to enforce compliance.  CATECO has an
internal Conduct and Ethics Committee that supervises its company
members and their compliance with the code and would conduct an
investigation only if a complaint were raised.  Otherwise, disputes
are usually resolved by worker-management teams at the plant level. 
According to a U.S.  embassy official, CATECO has also started a
program to recognize members as "model companies" for registering
annual accident rates of 5.9 percent or less, establishing formal
occupational safety departments or committees, organizing
subcommittees in specific areas, and providing training for their
personnel. 


      INDUSTRYWIDE STANDARDS MAY
      NOT BE WIDELY ACCEPTED IN
      THE U.S.  APPAREL INDUSTRY
---------------------------------------------------------- Letter :4.2

In response to the criticism about labor conditions in apparel plants
overseas, two U.S.  organizations have established industrywide labor
standards that may be voluntarily adopted by U.S.  companies and
implemented with their domestic and overseas contractors and
suppliers.  However, whether the apparel industry participates in
either organization's initiatives may hinge upon acceptance of
industry standards and procedures for monitoring. 


         APPAREL INDUSTRY
         PARTNERSHIP LAUNCHES
         INITIATIVE ON VOLUNTARY
         WORKPLACE CODE OF CONDUCT
-------------------------------------------------------- Letter :4.2.1

In August 1996, President Clinton called upon representatives of the
garment and apparel industry, labor unions, and nongovernmental
organizations (NGO) to join together as the Apparel Industry
Partnership (AIP) to develop a plan that would assure consumers that
apparel imports into the United States are not produced under abusive
labor conditions.\24 In response to this initiative, the AIP
announced plans in April 1997 to implement a new Workplace Code of
Conduct, which defines "decent and humane" working conditions.\25 The
AIP also established principles for the ongoing independent
monitoring of apparel contractors and suppliers in the United States
and abroad.  Currently, the AIP is developing the framework to
establish a nonprofit association to oversee the implementation of
the code of conduct, and monitoring apparatus.  According to a
Department of Labor official, this was the first time that
representatives of the apparel industry, consumer groups, human
rights and religious rights groups, and labor unions agreed on a
workplace code of conduct, and principles for monitoring such conduct
in the apparel industry.  Furthermore, this code of conduct was
developed based on international labor standards and comprises many
of the best individual company codes, according to an AIP member. 

The AIP has worked to reach consensus on how to implement the code of
conduct and monitoring apparatus over the past year.  The process is
not yet complete, and deliberations continue.  As of April 1998, the
partnership was continuing to develop certification standards for
monitors and to determine what or how much information should be
disclosed to the public, according to AIP members.  One of the key
issues addressed was the extent to which human rights groups, labor
unions, and NGOs should be involved in the monitoring process.  AIP
members appear to have reached an agreement that human rights groups
and NGOs, as well as accounting firms, can be certified to monitor
companies for compliance.  Based on the AIP's principles of
monitoring, all monitors will consult with local NGOs, if the monitor
is not itself an NGO.  The AIP was also considering how to handle
conflict of interest issues.  Specifically, it was determining how
companies could use firms as monitors, where a business relationship
already existed, without posing a conflict of interest.  Monitoring
will likely cover a variety of areas, including financial accounting,
workplace conditions, and worker rights.  According to an AIP member,
this initiative would not serve as an absolute guarantee that apparel
was made under appropriate labor conditions; it would, if
implemented, establish a process to guard against labor abuses and to
monitor labor conditions. 

The AIP also continues to work on developing a mechanism to inform
the public that companies are complying with the code.  The AIP has
tentatively agreed to publicize a list of companies that are
participating in the association's efforts to promote a code of
conduct and those that are certified by the association as complying
with the code.  At present, the AIP continues to determine what and
how much information will be disclosed to the association or the
public about a company's performance without divulging proprietary
business information. 


--------------------
\24 The AIP consists of nine U.S.  apparel and footwear companies. 
The group's members also include representatives from human rights
and labor rights groups and a university.  See appendix III for
further information. 

\25 The AIP formulated a code of conduct that prohibits (1) forced
labor, (2) child labor under the age legally stipulated in the
country of manufacture, (3) harassment and abuse, and (4) employment
discrimination.  The code further sets forth standards on health and
safety, freedom of association and the right to collective
bargaining, wage and benefits (minimum or prevailing wage, whichever
is higher, including legally mandated benefits), and hours of work. 


      COUNCIL ON ECONOMIC
      PRIORITIES ALSO ESTABLISHES
      A STANDARD TO ADDRESS LABOR
      CONDITIONS
---------------------------------------------------------- Letter :4.3

The Council on Economic Priorities (CEP) is a public research firm
that has analyzed the social and environmental records of
corporations over the past 26 years.  In October 1997, its affiliate,
the Council on Economic Priorities Accreditation Agency (CEPAA),
established a set of voluntary social accountability standards
(SA8000) and a monitoring and certification process to help companies
conform with internationally recognized worker rights standards.  In
many ways, there are similarities between the CEPAA's and the AIP's
efforts.  For example, the CEPAA's SA8000 and the AIP's code of
conduct include provisions on child labor, forced and bonded labor,
wages, freedom of association and the right to collective bargaining,
discrimination, and occupational safety and health standards.  In
addition, both groups plan to certify auditing firms and NGOs such as
human rights groups to monitor company compliance. 

However, there are differences between these two approaches as well. 
(See app.  III for more detailed information.) For example, the CEPAA
would certify that individual companies and contractors, at the plant
level, are in compliance with SA8000 standards, whereas the AIP would
certify a company's compliance based on monitoring a percentage of a
company's contractors and suppliers.  Furthermore, the CEPAA's
approach includes a provision that allows NGOs, unions, or workers to
appeal a company's certification.  At present, the AIP's code of
conduct and principles of monitoring do not include a provision
allowing an interested party to appeal a company's certification. 
Concerning wages, the CEPAA's standard bases wages on an amount that
includes discretionary income,\26 rather than on a minimum or
prevailing wage, as the standard for remuneration as adopted by the
AIP.  Another difference is that the CEPAA has a specific provision
for the remediation of child labor.  Companies must implement a plan
to remediate child labor, which may include providing support to
enable such children to attend and remain in school and employing
their parents or older siblings.  According to the AIP principles of
monitoring, companies are obligated to establish a means of
remediation for noncompliance with the code of conduct, including
child labor.  Although the principles of monitoring do not include
any detailed provisions for the remediation of child labor, a
Department of Labor official told us in July 1998 that AIP members
have agreed on overall provisions for remediation of the standards
covered by the code of conduct, including child labor. 


--------------------
\26 Wages are computed by determining the cost of a basic food basket
(using local government statistics), the percentage of household
income spent on food, the appropriate number of household members,
and a percent multiplier for providing discretionary income. 


         THE APPAREL INDUSTRY MAY
         NOT ACCEPT PROPOSED
         INDUSTRYWIDE STANDARDS
         AND MONITORING PROCEDURES
-------------------------------------------------------- Letter :4.3.1

Major industry groups and apparel companies have not endorsed either
the AIP's or the CEPAA's code of conduct because they object to the
imposition of industrywide standards and to these associations' plans
for external monitoring of the codes of conduct.  The American
Apparel Manufacturers Association (AAMA)\27 objects to what it sees
as AIP and CEPAA attempts to dictate labor standards for the apparel
industry.  Moreover, it views these efforts as attempts to force
compliance with U.S.  standards on other countries.  In particular,
AAMA objects to the CEPAA's SA8000's establishment of a wage standard
that includes discretionary income, rather than a minimum or
prevailing wage as the standard for remuneration.  The National
Retail Federation (NRF)\28 objects to the CEPAA's wage standard as
well. 

Apparel industry groups and companies have expressed the strongest
objections to the AIP's and the CEPAA's positions on independent
monitoring.  Both the AIP and the CEPAA allow NGOs, accounting firms,
or other independent entities to become certified or accredited as
monitors.  The AAMA, the NRF, and apparel companies object to these
provisions, particularly the AIP's requirement that monitors consult
with local labor unions and human rights and religious groups during
the monitoring process.  For example, these groups are concerned that
(1) labor unions, human rights groups, and other NGOs might have
their own agendas in participating in the monitoring process; (2) the
quality of audits might be impaired by the lack of experienced social
auditors; and (3) these are attempts to dictate standards for
monitoring across the industry.  The AAMA contends that the cost of
these audits could be prohibitive to some smaller firms.  Therefore,
companies should have the flexibility to establish internal
monitoring programs or choose their own monitors.  Another company
representative told us that the AIP's approach might result in
inconsistent and uneven monitoring and enforcement, if a firm does
not have a consistent program for monitoring compliance at each
factory.  Furthermore, there would be no institutionalization of the
monitoring process due to the variance in participation by local
organizations.  Thus, there is no consensus on who should control the
monitoring.  These industry groups have also expressed concerns about
disclosing proprietary information such as wages, the names of
suppliers, and the results of their audits to possible industry
competitors. 


--------------------
\27 The AAMA represents about 300 members that are responsible for
approximately 80 percent of the apparel that is sold in the United
States. 

\28 The NRF membership represents an industry that comprises 1.4
million U.S.  retail establishments.  Its international membership
includes 1,000 stores in 50 countries. 


      NUMEROUS U.S.  APPAREL
      COMPANIES REQUIRE
      CONTRACTORS TO COMPLY WITH
      COMPANY CODES OF CONDUCT,
      BUT WHETHER CURRENT
      MONITORING PRACTICES WILL BE
      SUFFICIENT IS UNCLEAR
---------------------------------------------------------- Letter :4.4

Over the past few years, numerous U.S.  apparel manufacturing and
retail companies have established their own workplace codes of
conduct.  A 1996 Department of Labor study\29 identified 36 U.S. 
companies that have adopted some form of code of conduct for their
overseas factories and contractors.  According to this study, each
corporate code varies with respect to its specific labor standards
but generally includes such prohibitions as child and forced labor
and discrimination based on race, religion, or ethnic origin.  These
codes also can include health and safety requirements, wage
provisions that are based on the local minimum or prevailing wage,
limits on working hours and forced overtime, and the right of freedom
of association and collective bargaining. 

With respect to monitoring and enforcing the codes in overseas
plants, the Labor study found that the monitoring programs of U.S. 
companies included (1) announced and unannounced site visits and
inspections and/or (2) contractual monitoring or self-certification
by stipulating labor standards in contractual agreements and by
requiring proof of compliance or reserving the right to inspect plant
sites.  Enforcement took various forms, including prescreening,
monetary fines and penalties, corrective action requirements,
educational programs, and contract termination.  For example, U.S. 
companies may prescreen prospective contractors prior to entering
into a contractual relationship to assess the contractor's ability to
comply with quality control and labor requirements.  Once a
contractual relationship has been established, the U.S.  company may
require the contractor to take certain corrective actions if the
contractor does not comply with the company's code or other
requirements.  In extreme cases, such as instances where the
contractor has employed child labor, the company may decide to
terminate the contract altogether. 

Despite the existence of these corporate codes of conduct, Labor's
study indicated that the codes were not readily transparent (clear)
to the workers, although many but not all of the factory managers
were familiar with the codes of their U.S.  clients.  Workers may
have been unaware of the existence of the codes due in part to a lack
of effort on the part of managers to inform their workers.  Based on
plant visits, the study cited only one example of a plant that
explicitly informed its workers about its U.S.  customer's code of
conduct.  Moreover, many maquilas often operate under more than one
code of conduct, particularly if they are contracting with multiple
U.S.  companies and belong to maquila associations that have also
established a code of conduct.  The Labor study expressed a concern
that having multiple codes that had different definitions of
standards and monitoring requirements created confusion for companies
that are required by their U.S.  contractors to implement these
codes. 

Furthermore, current monitoring practices may not sufficiently ensure
compliance with company codes of conduct.  The Labor study indicated
that plants that were either owned by U.S.  companies or contracted
with U.S.  companies appeared to undergo more frequent and thorough
monitoring.  However, based on field visits conducted at several
plants, with some exceptions, U.S.  corporations primarily monitored
for quality control and health and safety conditions, with little
interaction between monitors and workers to determine other labor
practices.  According to Labor's report, some workers indicated that
they had not seen an inspector nor could they be certain that company
representatives had ever visited; others indicated that monitors did
not speak with workers.  In addition, the report indicated that
monitoring of subcontractors is erratic, suggesting that U.S. 
importers exert less control over the labor practices of
subcontractors. 

We visited 13 apparel maquilas in Guatemala and the Dominican
Republic, of which 4 maquilas in Guatemala and 7 maquilas in the
Dominican Republic contracted with U.S.  companies that had corporate
codes of conduct.  Based on interviews and our observations in the
four Guatemalan maquilas, we did not see any physical working
conditions that were inconsistent with the codes of conduct of their
U.S.  contractors.  According to managers at the four Guatemalan
maquilas, U.S.  company representatives inspected the maquilas for
quality control and working conditions at least once a year, and in
most cases much more often.  At two maquilas, managers also indicated
that they had been audited and certified under VESTEX's code of
conduct.  However, at several of the Dominican maquilas, we observed
some physical working conditions that appeared to be inconsistent
with their U.S.  contractor's code, especially with occupational
safety and health standards.  For instance, we found examples of poor
ventilation, padlocked exit doors, and poorly maintained restrooms. 
However, given the limited number of plants we visited, this should
not be considered a representative sample of all apparel plants in
these two countries. 


--------------------
\29 The Apparel Industry and Codes of Conduct:  A Solution to the
International Child Labor Problem?  U.S.  Department of Labor, Bureau
of International Labor Affairs (Washington, D.C.:  1996), p.  iv. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

The major CBI apparel shipping countries have made efforts to improve
worker rights standards and to better address labor problems in their
apparel industries in recent years.  CBI governments have reformed
their labor laws to meet international standards where needed and
have been making efforts to upgrade the performance of their labor
departments.  However, despite the progress that has been made,
allegations of worker rights abuses persist, and enforcement of labor
laws generally remains a problem in CBI countries.  CBI governments'
efforts to improve the enforcement capabilities of their labor
ministries have been hampered by limited resources and training, as
well as by generally inefficient and sometimes corrupt judicial
systems, according to recent State and Labor Department reports. 
Some governments are currently trying to redress this situation by
establishing additional labor courts or by starting to overhaul their
judicial systems, by providing additional training for labor
inspectors and mediators, and by participating in a regional
initiative to harmonize their labor codes and modernize their labor
ministries.  In the private sector, the fact that U.S.  companies and
CBI maquila associations have begun to adopt codes of conduct to
self-regulate their industry is another sign of progress.  However,
there is no agreement within the industry on an effective means to
monitor and enforce these codes of conduct.  Many in the apparel
industry object to the imposition of outside independent monitors to
verify their compliance with the codes of conduct, while consumer and
labor rights groups do not believe that codes of conduct will be
meaningful without such independent monitoring and enforcement. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

The Departments of State and Labor and USTR provided oral comments on
a draft of this report.  The Department of State and USTR generally
concurred with the information presented.  The Department of Labor
expressed concern that our discussion of the AlP deliberations did
not provide sufficient information on the groundbreaking nature of
the AIP initiative and that we were describing deliberations that
were still ongoing.  In response, we revised the report to provide
more context and to reflect the ongoing nature of the AIP
deliberations.  Our report recognizes that the initiative is ongoing;
we wanted to provide information on the status of all private sector
efforts, including the AIP initiative.  The Department of Labor also
expressed concern about the appropriateness of comparing the way the
CEPAA and the AIP would implement their codes of conduct given that
they were taking different approaches.  Our purpose was to highlight
the differences in the two industrywide approaches to implementing
and monitoring their codes of conduct and not to make any judgments. 
The Department of Labor also provided technical comments, which we
incorporated where appropriate. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to appropriate congressional
committees, the Secretaries of State and Labor, and the U.S.  Trade
Representative.  We will also make copies available to other
interested parties upon request. 

Please contact me at (202) 512-8984 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix V. 

Sincerely yours,

JayEtta Z.  Hecker, Associate Director
International Relations and Trade Issues


TRENDS IN APPAREL IMPORTS TO THE
UNITED STATES, 1987-97
=========================================================== Appendix I

The U.S.  apparel industry has pursued a strategy of assembling
apparel offshore--or production-sharing\1 --in low-wage countries in
order to remain competitive.  This strategy has particularly
benefited the Caribbean Basin Initiative (CBI) apparel industry,
which has the advantage of proximity and a preferential trade program
that makes apparel assembly in CBI countries very attractive to U.S. 
firms. 


--------------------
\1 Production-sharing occurs when certain aspects of an article's
manufacture are performed in more than one country. 


   APPAREL INDUSTRY PURSUES
   PRODUCTION-SHARING STRATEGY
--------------------------------------------------------- Appendix I:1

The apparel industry, once concentrated in the United States and
other industrialized countries, has gradually spread to countries
with lower production costs, becoming a global industry.  Many
developing countries have based their industrialization on
labor-intensive export sectors, such as the apparel sector.  At the
same time, companies in the United States and other industrialized
countries have adopted strategies to shift labor-intensive activities
like apparel assembly to low-wage countries through direct investment
(building their own plants) or outsourcing (buying from contractors). 
The strong competition in the U.S.  apparel industry, intensified by
the increased market share of imports, has led many U.S.  apparel
manufacturers to shift their apparel assembly activities to the
Caribbean Basin and Mexico to take advantage of their preferential
trade programs and proximity.  This trend has also been followed by
U.S.  retailers, who have been directly sourcing brand-name and
private-label merchandise domestically and internationally.  A result
has been that many of the largest retailers have also become the
largest importers of apparel.  More than half of the $178 billion in
apparel sold at the retail level in the United States in 1995 was
imported.\2

The shift of apparel assembly to the Caribbean Basin was facilitated
by the initiation of the Special Access Program in 1986, under the
Caribbean Basin Initiative.  The Special Access Program provided
trade preferences for apparel assembled from U.S.-formed and -cut
fabric in CBI countries and imported to the United States under the
production-sharing provisions of item 807 of the U.S.  Tariff
Schedule, which is now heading 9802 of the U.S.  Harmonized Tariff
Schedule.\3 Under the Special Access Program, CBI countries became
eligible to negotiate bilateral agreements with the United States
containing favorable quotas, or Guaranteed Access Levels (GALs), for
these products.  The result was that CBI apparel assembled from
U.S.-formed and -cut fabric was allowed virtually quota-free access
to the U.S.  market under the Special Access Program.  The six CBI
countries that had GALs in 1997 were Costa Rica, the Dominican
Republic, El Salvador, Guatemala, Honduras, and Jamaica. 

The shift of apparel assembly to the Caribbean Basin--57 percent of
all imports under production-sharing provisions came from the CBI
countries in 1997--is a source of concern to U.S.  apparel unions,
although apparel manufacturers believe their ability to compete to
some extent depends upon it.  The U.S.  apparel manufacturing
industry, for a variety of reasons, went from a peak of 1.45 million
workers in 1973 to 853,000 workers in May 1996, a drop of 41 percent. 
The apparel and textile manufacturers and retailers say that the
intense price competition in the U.S.  market is driving apparel
assembly jobs to low-cost countries but that production-sharing
reduces the loss of jobs in the U.S.  apparel manufacturing industry
to imports with no U.S.  content. 


--------------------
\2 The Apparel Industry and Codes of Conduct:  A Solution to the
International Child Labor Problem? 

\3 By importing products under the production-sharing provisions of
heading 9802 (formerly 807), companies are exempted from paying U.S. 
Customs duties on the value of the U.S.-made components used in
making imported products. 


   TRENDS IN APPAREL IMPORTS FROM
   CBI COUNTRIES
--------------------------------------------------------- Appendix I:2

The data on trends in apparel imported to the United States under
production-sharing provisions from 1987 to 1997 show that total CBI
imports grew by over sevenfold, from $864 million to $6.4 billion. 
However, the performance of individual CBI countries varied.  For
example, the value of these imports rose from $336 million to $2.1
billion for the Dominican Republic, consistently the leading CBI
apparel shipper, and from $113 million to $425 million for Jamaica,
which moved from third to last place among the six CBI countries with
GALs.  Figure I.1 shows the value of apparel imports under
production- sharing or 9802 (807) provisions for the six CBI
countries that had GALs in 1997 and Mexico.\4 The data cover the
years 1987 through 1997, the years that the Special Access Program
has been in effect.  (Since it was late 1986 before the GALs were
negotiated, 1987 is the first full year of data for the program.)

   Figure I.1:  Value of U.S. 
   Apparel Imports Under
   Production-sharing Provisions
   From Six CBI Countries and
   Mexico, 1987-97

   (See figure in printed
   edition.)

Note:  Data for 1997 are initial data and are subject to revision. 

Source:  Major Shippers Report for 9802 (807) Imports, U.S. 
Department of Commerce, Office of Textiles and Apparel (Washington,
D.C.:  Dec.  1989-February 1998). 

Table I.1 provides data on the rates of growth of apparel imports to
the United States under production-sharing or 9802 (807) provisions
from the six CBI countries with GALs, from all CBI countries
combined, and from Mexico.  The data cover 1987 through 1997.  The
table shows that the CBI countries with the fastest rates of growth
over the last 4 years were El Salvador and Honduras.  It also shows
that imports to the United States from Mexico have been growing much
faster than the CBI countries combined since 1994.




                                     Table I.1
                      
                       Rates of Growth of Apparel Imports to
                        the United States Under Production-
                       sharing Provisions From CBI Countries
                                and Mexico, 1987-97

                                (Numbers in percent)

Ye     Costa  Dominican        El  Guatemal                           CBI
ar      Rica   Republic  Salvador         a  Honduras   Jamaica     total    Mexico
--  --------  ---------  --------  --------  --------  --------  ========  --------
19      40.2       35.2      47.8      62.2      36.2      17.5      28.4      23.0
 88
19      30.5       22.6      37.7      61.2      23.2      22.5      22.1      21.5
 89
19      15.9        4.4      27.1      47.6      29.8      -2.6       8.3      -0.2
 90
19      24.0       34.4      83.3      92.9      62.3       9.1      32.8      34.4
 91
19      32.2       31.2      70.9      38.1      72.2      26.0      29.8      33.4
 92
19      12.9       17.4      41.8      35.6      35.3      44.3      24.9      27.9
 93
19       8.0       13.4      63.9       6.0      35.2      18.2      14.6      42.8
 94
19      14.1       14.0      57.2      15.9      50.1      20.8      24.3      55.3
 95
19      -3.5        2.4      23.2      11.1      43.7      -2.5      11.2      30.0
 96
19      22.8       28.9      52.2      12.4      40.3      -2.8      28.2      38.1
 97
-----------------------------------------------------------------------------------
Notes 1:  Data for each year reflect the growth from the previous
year.  Thus, the growth rate in 1988 is based on the level of apparel
imports in 1987. 

2:  Data for 1997 are initial data and are subject to revision. 

Source:  Derived from Major Shippers Report for 9802 (807) Imports. 


--------------------
\4 We have included Mexico because it had a similar program, the
Special Regime Program, under which it gained preferential market
access in 1988 for apparel assembled from U.S.-formed and -cut
fabric.  This program was superseded in 1994 by duty-free, quota-
free entry under the North American Free Trade Agreement (NAFTA) for
such apparel.  Mexico thereby gained an advantage in competing for
market share in relation to the CBI countries in this segment of the
apparel industry.  CBI countries have desired parity with Mexico in
this segment of the apparel industry ever since. 


OUTCOME OF GENERALIZED SYSTEM OF
PREFERENCES WORKER RIGHTS CASES
========================================================== Appendix II

The Generalized System of Preferences (GSP) Program administers an
annual review process, during which it considers petitions to add
products to or remove products from GSP coverage, as well as
petitions related to country eligibility, including worker rights
petitions.  Petitions may be brought by any interested party.  Most
worker rights petitions have been filed by the American Federation of
Labor and Congress of Industrial Organizations (AFL-CIO) or by labor
and human rights advocacy groups, requesting that GSP benefits be
suspended due to worker rights violations.  Although the GSP Program,
which is administered by the GSP Subcommittee, an interagency working
group of the Trade Policy Staff Committee led by the Office of the
U.S.  Trade Representative (USTR), has the right to self-initiate
cases, its policy has generally been to initiate reviews only when
triggered by petitions. 

During 1987-97, all the major CBI apparel shipping countries except
Jamaica had worker rights petitions filed against them.  There were
15 worker rights petitions filed, of which 5 were accepted for
review.  These petitions generally focused on violations of the right
of association or the right to organize and bargain collectively,
that is, unionization issues.  Generally, most petitions that were
rejected for full review by the GSP Subcommittee were due to
determinations that there was insufficient evidence that countries
were not taking steps to provide worker rights or that substantially
new information had not been presented (in cases in which a petition
was resubmitted in the next year).  Petitions were also rejected for
review in the case of countries experiencing civil wars where there
were allegations that could not be isolated as worker rights
violations rather than as human rights violations that were part of
the larger conflict. 

The GSP annual review has a two-stage decision cycle for petitions
that have been submitted.  In the first stage, a decision is made on
which petitions to accept for full review; in the second stage, the
accepted petitions are reviewed and a decision is made on whether
beneficiary countries are meeting the worker rights criteria.  If a
decision cannot be reached by the end of the review year, the case is
continued, or "pended," into the next annual review cycle.  Table
II.1 shows GSP worker rights cases for CBI countries by the years of
each review, the decision whether to review, and the outcome of the
review and steps taken. 



                                    Table II.1
                     
                      GSP Worker Rights Cases Against Major
                     CBI Apparel Shipping Countries, 1987-97

                    Decision
                    whether
Country   Year(s)   to review     Outcome of review and steps taken
--------  --------  ------------  ----------------------------------------------
Costa     1993      Accepted for  Petition withdrawn 11/16/93 after labor code
Rica                review        reforms enacted 11/12/93 and Supreme Court
                                  decision of 10/93 enforcing right of
                                  association/collective bargaining. Review
                                  terminated 12/93.

Dominica  1989-91   Accepted for  Review terminated in 1991 due to introduction
n                   review        of labor code reform legislation, which was
Republic                          enacted in 1992.

          1991      Rejected for  Not applicable
                    review

          1993-94   Accepted for  Petition withdrawn 10/94. Review terminated
                    review        12/94. Government showed the will to enforce
                                  the labor code in export license suspension
                                  and other actions to enhance worker rights
                                  enforcement.

El        1987      Rejected for  Not applicable
Salvador            review

          1988      Rejected for  Not applicable
                    review

          1989      Rejected for  Not applicable
                    review

          1990-94   Accepted for  Review terminated 7/94. Labor code reforms
                    review        enacted 4/94.

Guatemal  1985      General       Review terminated 1/87, found to be taking
a                   review\a      steps.

          1987      Rejected for  Not applicable
                    review

          1989      Rejected for  Not applicable
                    review

          1990      Rejected for  Not applicable
                    review

          1991      Rejected for  Not applicable
                    review

          1992-97   Accepted for  Review terminated 5/97. Labor code reforms in
                    review        11/92.\b

Honduras  1991      Rejected for  Not applicable
                    review

          1995      Rejected for  USTR negotiated memorandum of understanding of
                    review        11/95. Honduras agreed to take steps to better
                                  enforce labor laws.
--------------------------------------------------------------------------------
\a When GSP was reauthorized by the Trade and Tariff Act of 1984
(P.L.  98-573, Oct.  30, 1984), criteria for worker rights
eligibility were added.  The GSP Subcommittee conducted a general
review of worker rights in beneficiary developing countries at that
time.  It reviewed 11 countries and announced the results in January
1987.  Guatemala was the only one among these six countries to be
included in the general review.  No subsequent general review has
been conducted. 

\b Although Guatemala reformed its labor code in 1992, the GSP worker
rights review was not terminated until May 1997.  A USTR official
stated that every time the United States started to consider
termination, there was some worker rights violation or incident that
required further review.  At the same time, there were concerns about
the Guatemalan government's ability to enforce its labor laws. 
According to the U.S.  embassy official, the Guatemalan government
felt that the goalposts were constantly being moved and that nothing
it did would be enough. 

Sources:  USTR and Departments of Labor and State. 


TWO PRIVATE SECTOR APPROACHES TO
INDUSTRYWIDE WORKPLACE STANDARDS
========================================================= Appendix III

Over the past 2 years, the private sector has undertaken two major
efforts to develop industrywide workplace standards.  These voluntary
efforts were designed to assure consumers that their products are not
produced under abusive labor conditions in the United States and
abroad.  In April 1997, the Apparel Industry Partnership (AIP),
consisting of several U.S.  apparel manufacturing and retail
companies, consumer groups, human rights and religious groups, and
labor unions,\1 announced its plans to implement a new Workplace Code
of Conduct, which defines "decent and humane" working conditions in
the apparel industry.  Since the announcement, the AIP has worked to
reach consensus on how to implement the code of conduct and
monitoring apparatus.  The process is not yet complete, and
deliberations continue.  In October 1997, the Council on Economic
Priorities Accreditation Agency (CEPAA), an affiliate of the Council
of Economic Priorities, also established a voluntary workplace
standard--social accountability standards (SA8000)--to address labor
conditions across all industry sectors.  In the broadest sense, the
workplace standards developed by the CEPAA and the AIP are similar
with respect to the labor conditions that they address, as can be
seen in
table III.1 and table III.2. 



                              Table III.1
                
                 Summary of Key Attributes of the AIP's
                       Workplace Code of Conduct

----------------------------------------------------------------------
Forced Labor -prohibits the use of forced labor, in the form of prison
labor, indentured labor, bonded labor, or otherwise.

Child Labor -prohibits the use of minors under 15 (or 14 according to
the law in the respective country) or under the age for completing
compulsory education.

Harassment or Abuse -prohibits any physical, sexual, psychological, or
verbal harassment or abuse. Every employee shall be treated with
respect and dignity.

Nondiscrimination -prohibits employment discrimination, including
hiring, salary, benefits, advancement, discipline, termination, or
retirement based on gender, race, religion, age, disability, sexual
orientation, nationality, political opinion, or social or ethnic
origin.

Health and Safety -requires employers to provide a safe and healthy
working environment to prevent accidents and injury to health as a
result of the operation of employer facilities.

Freedom of Association and Collective Bargaining -requires employers
to recognize and respect the right of employees to freedom of
association and collective bargaining.

Wages and Benefits -requires employers to pay employees, as a floor,
at least the legal minimum wage or the prevailing industry wage,
whichever is higher, and provide legally mandated benefits.

Hours of Work -except in extraordinary business circumstances, sets
hours of work at the lesser of (a) 48 hours per week and 12 hours
overtime or (b) legally required regular and overtime hours or in the
absence of such, (c) the regular work week in such country plus 12
hours overtime and at least 1 day off in every 7-day period.

Overtime Compensation -requires employers to compensate workers for
overtime hours at a premium rate if legally required, otherwise at a
rate at least equal to regular hourly compensation rate.
----------------------------------------------------------------------
Source:  The AIP. 



                              Table III.2
                
                Summary of Key Attributes of the CEPAA's
                  Social Accountability 8000 Standards
                                (SA8000)

----------------------------------------------------------------------
Forced Labor -prohibits the use and support of forced labor and the
requirement of deposits or identity papers upon commencing employment.

Child Labor -prohibits the use or support of a child under 15 unless
local law stipulates a higher age for work or mandatory schooling,
otherwise the higher age would apply. However, if local law sets the
age at 14, in accordance with the developing-country exception under
International Labor Organization (ILO) Convention 138, the lower age
would apply.

Disciplinary Practices -prohibits the use of corporal punishment,
mental or physical coercion, and verbal abuse.

Discrimination -prohibits employment discrimination, including hiring,
compensation, access to training, promotion, termination or retirement
based on race, caste, religion, disability, gender, sexual
orientation, union membership, or political affiliation.

Health and Safety -requires employers to provide a safe and healthy
working environment and take adequate steps to prevent accidents and
injury to health and to minimize the causes of hazards inherent in the
working environment.

Freedom of Association and Collective Bargaining -requires companies
to respect the right of all personnel to form and join trade unions of
their choice and bargain collectively. Companies must facilitate
parallel means of independent and free association and bargaining if
restricted under law.

Wages and Benefits -requires employers to pay employees wages that
meet at least legal or industry minimum standards and are sufficient
to meet basic needs and provide some discretionary income.

Working Hours -requires compliance with applicable laws and industry
standards on working hours, otherwise prohibits personnel from working
in excess of 48 hours per week on a regular basis and requires at
least 1 day off for every 7 days.

Overtime Compensation -requires employers to compensate workers for
overtime hours at a premium rate and prohibits more than 12 hours
overtime.

Management Systems -requires top management to define, review,
implement, and evaluate the company's policy and procedures for social
accountability and labor conditions.
----------------------------------------------------------------------
Source:  The CEPAA. 

Although the CEPAA and AIP workplace standards are similar, there are
several differences in each organization's approach to implementation
and monitoring.  First, the CEPAA's approach to implementation and
monitoring focuses on ensuring compliance at the plant level.  For
example, the CEPAA would certify that companies and their contractors
or suppliers are in compliance with SA8000 standards, based on the
results of an independent external audit conducted by an accredited
nongovernmental organization (NGO), accounting firm, or certification
agency.  Companies would not be precluded from establishing their own
internal monitoring procedures; however, certification could only be
obtained from an accredited independent entity.  In contrast, the
AIP's approach focuses on ensuring that companies are taking
reasonable steps to monitor the compliance of their suppliers.  The
AIP would certify a company's compliance based on monitoring a
percentage of its contractors and suppliers.  According to AIP
members, it would be almost impossible to monitor every plant because
some companies have hundreds and thousands of contractors and
suppliers.  Moreover, they said that smaller contractors have little
incentive to undergo certification, unless pressured by their
customers--U.S.  manufacturers and retailers that have more incentive
to convince the public of their efforts to improve labor conditions
than a remote contractor. 

Second, under the CEPAA's approach, any interested party (that is,
NGOs, unions, or workers) may appeal a company's certification if it
presents objective evidence confirming serious violations of SA8000. 
An interested party may also file complaints about companies and
auditors confidentially with the certifying body.  The AIP's code of
conduct and principles of monitoring currently do not include a
provision that would allow an interested party to appeal a company's
certification. 

Third, concerning wages, the CEPAA's standard bases wages on an
amount that includes discretionary income (or an additional 10
percent of the wage), rather than on a minimum or prevailing wage, as
the standard for remuneration as adopted by the AIP.  This standard
takes into account the number of persons in the household and the
percentage of household income that is spent on local food items.\2
The CEPAA recommends that auditors refer to data provided by the
World Health Organization, the Ministry of Economy's national
consumer price index, the ILO, and the United Nations (Habitat
Programme) when conducting their audit.  The AIP's standard for
compensation is based on the minimum wage required by law in the
country of manufacture or the prevailing wage in the industry,
whichever is higher. 

Finally, although both the CEPAA's and the AIP's approaches include a
standard against the use of child labor under the age legally
stipulated for the country, the CEPAA's approach also includes a
specific provision for the remediation of child labor.\3

Companies must establish policies and procedures to remediate child
labor and provide enough support to enable such children to attend
and remain in school until they are no longer minors.  The standard
for remediation includes the provision of a specified amount of funds
allocated per child for payment of school tuition.  In the absence of
a school in the local vicinity, the company may work with a local NGO
to provide educational facilities and offer to hire minors' parents
or older siblings if they are unemployed.  For minors legally
permitted to work, the company must establish a means to ensure that
they are not employed during school hours and that the total number
of hours spent on daily transportation, school, and work does not
exceed 10 hours a day.  Companies must also take precautions to
safeguard minors from hazardous working conditions.  According to the
AIP principles of monitoring, companies are obligated to establish a
means of remediation for noncompliance with the code of conduct,
including child labor.  Although the principles of monitoring do not
include any detailed provisions for the remediation of child labor, a
Department of Labor official told us in July 1998 that AIP members
have agreed on overall provisions for remediation of the standards
covered by the code of conduct, including child labor. 


--------------------
\1 AIP membership currently includes the Business for Social
Responsibility; The Interfaith Center on Corporate Responsibility;
International Labor Rights Fund; Kathy Lee Gifford; Nicole Miller;
Lawyers Committee for Human Rights; Liz Claiborne, Inc.; L.L.  Bean;
National Consumers League; Nike Inc.; Patagonia; Phillips Van Heusen
Corporation; Reebok International, Inc.; the Retail, Wholesale,
Department Store Union; Robert F.  Kennedy Memorial Center for Human
Rights; Tweeds Inc.; Union of Needletrades, Industrial and Textile
Employees (UNITE); and Duke University. 

\2 Wages are computed by determining the cost of a basic food basket
(using local government statistics), the percentage of household
income spent on food, the appropriate number of household members,
and a percent multiplier for providing discretionary income. 

\3 According to the CEPAA, "child labor" is defined as any work by a
child younger than 15 years of age, unless local minimum age law
stipulates a higher age for work or mandatory schooling, in which
case the higher age would apply.  However, if the local minimum age
law is set at 14 years of age in accordance with the developing
country exception under ILO Convention 138, the lower age would
apply. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix IV

The Ranking Minority Member of the Committee on Commerce, Science,
and Transportation asked us to review labor conditions in the CBI
apparel industry.  Due to his concern that allegations of worker
rights abuses have persisted in the CBI apparel industry, we reviewed
(1) whether or not Caribbean Basin countries have made efforts to
improve worker rights in the CBI apparel industry and (2) what
efforts the private sector has made to address concerns about working
conditions in CBI countries.  We also updated information on U.S. 
apparel imports from CBI countries. 

To identify whether or not steps had been taken to improve worker
rights in the CBI apparel industry, we focused on the six major CBI
apparel shipping countries that had negotiated GALs--Costa Rica, the
Dominican Republic, El Salvador, Guatemala, Honduras, and Jamaica. 
We interviewed officials and reviewed documents from the Departments
of State and Labor; USTR; the U.S.  Agency for International
Development (USAID); the Inter-American Development Bank (IDB); the
ILO; and U.S.  embassies in Costa Rica, the Dominican Republic, El
Salvador, Guatemala, Honduras, and Jamaica.  We reviewed the 1992-97
State Department Country Reports on Human Rights Practices, which is
a legislatively mandated annual report to Congress that covers worker
rights issues.  We also reviewed the Labor Department's more detailed
Foreign Labor Trends reports where available for the CBI countries,
as well as GSP worker rights case files.  It was not possible for us
to conduct an independent assessment of worker rights in each country
or to independently verify specific allegations of worker rights
abuses.  Rather, we relied primarily on discussions with country
officials and State and Labor Department and USTR reports.  The
information presented in this report on foreign law does not reflect
our independent analysis but is based on secondary sources and
interviews. 

To understand the perspectives of the three main groups that are
concerned about labor conditions in the CBI apparel industry, we
interviewed and obtained documents from apparel industry, labor and
human rights, and regional representatives.  To gain the industry
perspective, we consulted with officials of the American Apparel
Manufacturers Association (AAMA), the National Retail Federation
(NRF), the U.S.  Association of Importers of Textiles and Apparel,
and the American Textile Manufacturers Institute.  To gain the labor
and human rights perspective, we consulted with representatives of
UNITE; the American Center for International Labor Solidarity
(affiliated with the AFL-CIO); the International Labor Rights Fund;
Human Rights Watch; the Guatemala Labor Education Project; and the
International Textile, Garment & Leather Workers' Federation
(headquartered in Belgium).  To gain the regional perspective, we
consulted with Caribbean/Latin American Action, a private,
independent organization promoting private-sector-generated economic
development in the countries of the Caribbean Basin. 

To assess efforts to enforce labor laws in these countries, we
interviewed officials and reviewed documents from the Departments of
State and Labor, USTR, and U.S.  embassies in these countries and
relied extensively on State and Labor Department worker rights
reports.  We also interviewed and obtained documents from industry
association officials and labor and human rights representatives.  We
followed up on enforcement issues during our work in the Dominican
Republic and Guatemala. 

We visited the Dominican Republic and Guatemala in July/August 1997
in order to conduct more in-depth case studies.  We selected the
Dominican Republic because it is a Caribbean country and also the
largest CBI shipper of apparel to the United States.  We selected
Guatemala because it is a Central American country and had the first
regional code of conduct for maquilas.  During our visits, we
interviewed U.S.  embassy officials; Dominican and Guatemalan
government officials; a Dominican expert on economic development;
representatives of the maquila industry associations; American
Chamber of Commerce officials; a Dominican free trade zone operator;
apparel plant owners and managers; labor union representatives and
members; and labor rights, human rights, and women's rights
organization representatives.  In the Dominican Republic, we visited
nine apparel plants in five zones:  Las Americas, San Isidro,
Santiago, La Roma, and San Pedro de Macoris.  We requested and
received agreement to visit three of the plants at which the free
trade zone union federation had alleged worker rights violations had
occurred.  In Guatemala, we visited four apparel plants.  We
conducted a structured interview with the plant manager in all 13
plants we visited and toured each plant.  Given the limited number of
plants we were able to visit, and because we only visited plants that
agreed to be visited, our results cannot be generalized to all plants
in those countries.  Furthermore, we did not conduct a formal
inspection of these plants; our observations of the plants were
limited to physical working conditions.  We observed conditions
related to lighting, drinking water, restrooms, ventilation, fire
extinguishers, and fire doors and exits.  We did not interview any of
the workers in the plants, although we did talk to some apparel
maquila workers at our meetings with the union federations in both
countries.  It was not possible for us to independently verify the
various allegations of worker rights abuses, but where possible we
discussed them with government officials, including senior labor
inspection officials. 

To determine the private sector efforts to address concerns about
working conditions in CBI countries, we interviewed officials at the
Departments of Labor and State and U.S.  embassies in Costa Rica, the
Dominican Republic, El Salvador, Guatemala, Honduras, and Jamaica. 
During these interviews, we also obtained information on the status
of actions taken by the maquila associations in the export-processing
zones to establish and monitor codes of conduct.  During our visits
to the Dominican Republic and Guatemala, we interviewed maquila
association members, maquila plant owners and managers,
export-processing zone operators, an Ernst & Young International
Guatemala official, and labor union representatives and members. 
During our visits to the 13 apparel plants, we inquired as to whether
the plant was contracting with U.S.  companies that had codes of
conduct and whether they were monitored.  We also spoke with
representatives from the AIP and the CEPAA to discuss their efforts
to develop codes of conduct and the current status of their plans to
implement and monitor their codes of conduct.  In addition, we
interviewed representatives from the AAMA, the NRF, and the U.S. 
Association of Importers of Textiles and Apparel, as well as
representatives from Levi Strauss & Co., The Gap, Warnaco, and Karen
Kane.  We interviewed representatives from these industry
associations and apparel companies to obtain their views on
individual and industrywide efforts to establish, implement, and
monitor codes of conduct.  We selected Levi Strauss & Co.  and The
Gap because they had established their own codes of conduct and had
chosen not to participate in the formation of the AIP.  We selected
Warnaco and Karen Kane because they had originally participated in
formation of the AIP and later decided to withdraw. 

To understand trends in the CBI apparel industry, we interviewed and
obtained documents from the Department of Commerce and the U.S. 
International Trade Commission, as well as officials of the AAMA, the
NRF, the U.S.  Association of Importers of Textiles and Apparel, the
American Textile Manufacturers Institute, and UNITE.  We obtained
apparel import data for 1987-97 from the Commerce Department's Office
of Textiles and Apparel.  We also attended a conference at Marymount
University, Arlington, Va., entitled An Academic Search for Sweatshop
Solutions, in May 1997. 

We conducted our review from May 1997 to April 1998 in accordance
with generally accepted government auditing standards. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

John Hutton, Assistant Director
Leyla Kazaz, Evaluator-in-Charge
Sherlie Svestka, Senior Evaluator
Olivia Parker, Evaluator
Rona Mendelsohn, Evaluator (Communication Analyst)

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Richard Burkard, Assistant General Counsel

*** End of document. ***