Newsbreak: Is Wal-Mart working with a sweatshop?

For the first time, the Philippines figures in the growing list of Wal-Mart’s social responsibility critics. Wal-Mart, the world’s biggest retailer, does not have an outlet in the Philippines but has several suppliers based all over the country. One of them is Chong Won Fashion, Inc. (lately renamed C. Woo), a Korean-owned garments company which makes ladies shirts in its factory at the Cavite Export Processing Zone. Chong Won’s workers have formed a union that has accused officials of the Korean firm of harassing their employees. The union went on strike in September last year, following the refusal of management to negotiate for a collective bargaining agreement (CBA). After this, various websites and blogs began criticizing Wal-Mart for its engagement with Chong Won. The international media have joined the fray, featuring the Cavite company as a case study of Wal-Mart’s failure to walk its “ethical standards" talk. Common in the blogs are stories on how the Chong Won workers were forced to take on 24-hour shifts with only a few minutes rest and a sandwich for dinner. The workers also said that it is only when social auditors visit their factory to monitor compliance with labor standards that the medicine cabinets are filled with supplies. The signage, which reminds workers about company prohibitions on drinking water or going to the bathroom during work hours, are removed, they added. Union members told NEWSBREAK that a few days into the strike, violence erupted several times when management, reportedly in collusion with export zone police and security guards, tried to break the picket with force and, some say, with guns. Food, drinks, and other basic necessities were also reportedly blocked from reaching the striking workers in their makeshift tents outside the factory’s gates. Export zone administrator Cecilia Veleña denies that these happened, adding that they merely responded to requests by non-striking workers to be allowed to enter the factory so they could continue working. WORKERS’ INSECURITY The problem started in the late nineties. Workers in Chong Won, especially those who have been with the company since its inception in 1990, realized that they had no benefits to look forward to if they decide to retire. “I could spend the prime years of my life sewing clothes but when I am old and retired, I actually have nothing," laments Florencia Arevalo, 38, who has been working in Chong Won since she was 21. In 2000, about 500 regular employees formed a union called the Nagkakaisang Manggagawa sa Chong Won (NMCW) with the support of the Workers Association Consortium, an association of Cavite-based worker groups that is affiliated with various international labor organizations. An emotional and legal tug-of-war ensued as company owners and officials tried to dissuade employees from joining the union by promising them additional pay. The unionists soon found out that work was being diverted to less costly contractual workers. The workers filed a complaint with the labor department that was contested by management all the way to the Court of Appeals. The company questioned the legality of the union’s leadership and its authority to negotiate a CBA. The union asserted that their 2004 election was legitimate and has already been recognized by the labor department. The workers had said that through a CBA negotiation, they would negotiate for a salary increase, adequate leave benefits and welfare, and improved working conditions. The company refused to give in. DAMNING REPORT Through those years, major international brands such as Gap, American Eagle, Ann Taylor, and Target stopped placing their orders at Chong Won, purportedly for fear of being associated with the factory’s labor issues. Even the leading US universities that back the Workers Rights Consortium (WRC), which came up with a 49-page damning report on the goings-on at Chong Won, have stopped ordering university logo apparels from Chong Won since mid-2006. Cutting and running from a problematic factory has been a common response of major international brands in the past years. Media-savvy watchdog groups have used the Internet in publicizing their campaign against international brands that tend to tolerate unfair labor practices. Major international companies want to avoid allegations that their products were made by workers who toil in slave-like conditions in developing countries. (see Meeting Global Standards). In the case of Chong Won, however, Wal-Mart decided to take a different path. Wal-Mart did not abandon the factory and, for a rare moment in its corporate history, engaged the different players to resolve their problems. At least twice in November 2006, at the Makati office of Wal-Mart’s Global Procurement office, all the stakeholders—the Korean owner, the union officials, authorities from the export zone and the labor department—sat down and discussed possible solutions to the stalemate. Government-led conciliation meetings had resulted in an impasse, which eventually led to the September strike. According to a Manila-based Wal-Mart executive, they decided to engage this time since their role as the end buyer gives them the opportunity to use their market power to effect change. “We were the only buyer who stayed despite the labor problems there. We stayed because we don’t want to deny the people of their means of livelihood, which would have happened if we just pulled out the business," the same executive said. Wal-Mart even offered a five-year worth of orders if the union and management are able to reconcile their differences. NEWSBREAK tried to get the side of Chong Won officials to no avail. The Korean owners are said to be against negotiating a CBA with the union for financial reasons. This has halted the momentum in the Wal-Mart-initiated talks. Meantime, Wal-Mart has hired Verite, a respectable non-profit social auditing group, whose clients include socially responsible investment fund, Calpers, to investigate and recommend what Wal-Mart should do next. Union leaders said that last year, a social auditing team was dispatched four times by Wal-Mart to Chong Won. This indicates that the factory falls under the category of “high risk" as far as Wal-Mart is concerned. A Wal-Mart disengagement from Chong Won is not remote. In its 2005 Ethical Sourcing Standards, Wal-Mart has enshrined the right of workers in its supply chain to form a union. It said, “Suppliers will respect the rights of employees regarding their decision of whether to associate or not to associate with any group, as long as such groups are legal in their own country. Suppliers must not interfere with, obstruct or prevent such legitimate activities." Thus, according to Wal-Mart’s Manila official, “The Chong Won case is actually a compliance issue." CHALLENGE TO WAL-MART Just like all major brands that outsource to low-cost countries, Wal-Mart has instituted a rigorous code of conduct that spells out minimum requirements for working environment, compensation, health and safety, child labor, overtime hours, and other policies. These requirements are defensive strategies and were borne out of Corporate Social Responsibility (CSR) initiatives that play on the power of Western consumers to pressure global companies to influence improvements in all levels of their supply chain. Chong Won, for example, only supplies to One Step Up, which is the US-based domestic supplier of Wal-Mart. We are just challenging Wal-Mart to be true to their CSR standards that they have allowed themselves to be measured against," says Arnel Salvador of the Worker Assistance Center (WAC), which is supporting the Chong Won’s union. The Cavite Export Processing Zone, which hosts Chong Won factory, is one of the largest and oldest zones in the country. When it was set up in 1980s, it was marketed as an investor-friendly location because unions were not be allowed. Majority of its locators are Japanese, who are mostly into electronics, and Koreans, who are mostly into garments manufacturing. Of the 260 locators today, only 11 have unions. SCRIMPING ON SALARIES A Korean businessman who also has a garments factory not far from Chong Won’s told NEWSBREAK that they, like many other factories that receive outsourced orders from global brands, have to reduce their costs since their foreign buyers are out for a race to the bottom, especially as low-cost destinations like China, Bangladesh and Vietnam thrive. But he said that Philippine-based garment companies, which have to plug in additional costs and waiting time for the import of fabrics, have little elbow room to cut costs. He said they could only cut costs on labor, which accounts for about 20 to 25 percent of their operating expenses and is under their control. That, according to him, explains why they scrimp on salaries and try to use contractual labor when possible. Escolastica Segovia, a consultant for garment companies’ CSR compliance, said that local companies cannot escape foreign buyers’ codes of conduct. “Garment companies don’t want the heat. But they also realize that by improving the working conditions in their suppliers’ factories, employees could be more productive and not as prone to join militant unions. That means deliveries are on time and everyone is happy." But in the Chong Won case, not everyone is happy. The union members have been out of work since September. They feel that that Wal-Mart has been dragging its feet and is merely protecting its interests as a capitalist. On the other hand, Wal-Mart, despite its efforts to engage and not bolt out, now feel, according to its Manila executive, “caught in the middle." - Newsbreak