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Walmart's Human Trafficking Problem

By John Sifton

Americans love shrimp, there’s no doubt about it. Per capita consumption in the United States stands at about four pounds a year, the country’s most consumed seafood. The popularity stems from multiple qualities: its durability when frozen, ease of cooking, and culinary versatility, articulated famously by Bubba in the movie Forrest Gump: “pineapple shrimp, lemon shrimp, coconut shrimp, pepper shrimp.”

Shrimp is also very easy to farm. Although there was a time when most shrimp consumed in the United States was caught by shrimpers working the coast of Louisiana, today most of it comes from aquaculture farms in Asia. According to the USDA, the leading country of origin is now Thailand, and the United States is Thailand’s largest export market.

But the American appetite for shrimp now poses challenges for U.S. companies that import it.

In April, a strike broke out at a seafood processing factory in Thailand’s southern province of Songkhla, where thousands of Burmese and Cambodian workers, living in small barracks and working in a nearby factory, process shrimp for export by a Bangkok-based company called Phatthana Seafood Co., Ltd. The proximate cause of the strike appears to have been the company eliminating a daily 20 baht food allowance (about 65 cents) after the Thai government raised the legal minimum wage by over two dollars, to $8.48 a day.

But labor organizers on the ground say that problems at the factory ran far deeper. Among other complaints, some workers said they were provided inadequate toilet facilities and given insufficient bathroom breaks, obliging them at times to relieve themselves in corners of the factory. Far worse, labor organizers say, many of the migrant workers at the Songkhla facility found themselves in conditions amounting to debt bondage. Workers told organizers that many of them paid recruiters excessive placement and transport fees to get the jobs. Managers at the plant took portions of their wages to pay these debts, workers said, as well as various “fees” to the company for accommodation, utilities, and other necessities. Several workers said that before the strike they were promised 26 days of work per month, but often were only given 10 to 14 days of work, going unpaid when the factory was idle.

Some workers were receiving so little pay after deductions that they couldn’t afford sufficient food. Before the strike, they were reportedly catching minnows and snails for meals. Despite the legal requirement that workers be enrolled in Thailand’s social security system to receive health care, the company failed to sign the workers up, meaning workers had to pay out of pocket for any medical treatment for injuries or sickness.

Workers who wanted to leave found it difficult, organizers say, because their official documents, including work permits, health cards, ID cards, and passports, were reportedly confiscated and held by factory management to prevent workers from running away. New workers were told they would only get their documents back after their debts were paid off—a key criterion used in legal cases to prove human trafficking.

The conflict at the Songkhla facility escalated after management locked the workers out on April 9. Thai police fired gunshots in the air to disperse protesting workers. A few weeks later the workers reached a partial agreement with the company for modest pay increases, and received their passports back. The company agreed to provide additional toilets and pay part of the accommodation costs and debts to recruiters, but not utilities or health care. Some of the workers with smaller debts left. But the pre-existing debt conditions continued for most workers. Many today are still effectively in bondage. The company still deducts fees for lodging and other necessities, and when workers receive their pay stubs, written in Thai, they can’t even read explanations of the deductions. And the company has not guaranteed that remaining workers will be enrolled in the official health care system. One company involved in the recruitment of the Cambodian workers—or trafficking, to be more exact—reportedly agreed last May to forgive debts if workers want to return to Cambodia, but in a Catch-22, the workers have to pay an additional fee to do so, and would not be able to try to get jobs with other employers in Thailand.

Local labor organizers are skeptical that even the minor changes made are durable. “I am suspicious that they are making these changes right now only because they are being watched,” one labor researcher told us recently (He asked that his name and organization be withheld). “They want to keep their business running and of course protect their name.” The concern is that the company will revert to old practices when new workers arrive. As the organizer said: “I am concerned that future workers will be subject to the same debt bondage and passport-taking schemes as before. As attention shifts from the factory, we will see if these changes are permanent, or if the factory only meant these responses to be temporary.”

The U.S. labor organization Change to Win has been raising awareness of abuses associated with factories like Phatthana, not just for the sake of workers there but also because one of the U.S. companies supplied by Phatthana is a continuing nemesis for the American labor movement: Walmart.

The scandal in Thailand raises new questions about Walmart’s problematic record on labor rights, illustrated in the past by the company being sued in the United States for gender discrimination—a case that went all the way to the Supreme Court—and in more specific and recent cases involving suppliers and contractors. In late June, for instance, right here in the United States, Walmart suspended a seafood supplier in Louisiana over allegations of mistreatment of immigrant workers, similar to those found in Thailand. Just last week, workers at a Walmart contactor warehouse company in California went on strike protesting what they said were dangerous working conditions and retaliation. The situation at Phatthana also raises questions similar to those that have come up in Walmart’s recent bribery scandal in Mexico, reported in late April by The New York Times—questions about whether Walmart lives up to its commitments for ethical practices in its foreign operations.

Human Rights Watch wrote to Walmart on April 16 to ask about the Phatthana situation and what steps Walmart had taken to investigate the alleged labor abuses there. We also asked if Walmart had taken steps to ensure that similar abuses are not occurring in other Walmart supplier factories in Thailand. We pointed out that Phatthana’s actions appeared to violate provisions in Walmart’s “Standards for Suppliers,” rules the company demands of all suppliers, including provisions related to compliance with labor laws, guarantees that labor is voluntary, compensation and hours, and freedom of association.

Walmart responded in a letter on April 19, saying: “As soon as we received reports of potential violation of our ethical sourcing policy at Phatthana Seafood, we launched an investigation. We take reports like this very seriously, and we will take appropriate actions based on our findings.” The response continued: “Walmart does not tolerate human trafficking. During the factory audits conducted under our ethical sourcing program, personal documentation is checked to ensure work is voluntary, wages are accurately paid and workers are of legal working age.” The letter went on to outline Walmart’s auditing procedures for suppliers and described the company’s procedures, which it said complied with relevant U.S. law. The letter contained generic language extolling Walmart’s commitments to ethical sourcing and its auditing of suppliers. But Walmart’s response did not address why its auditing appears to have failed in the Phatthana case and how its standards were violated so egregiously. Organizers working in Songkhla say that there were inspection visits by outside auditors at the Phatthana plant, but that inspectors did not take notice of abuses, or did not care.

A few weeks after replying to us, a Walmart “International Corporate Affairs Manager” named Megan Murphy sent local journalists in Cambodia an email on May 10 claiming that Walmart “has never sourced products from Phatthana Seafood.” Another Walmart manager, Erica Jones, sent an identical email to a different journalist on May 15.

After the initial April 19 response from Walmart, and taking note of the May responses to journalists, Human Rights Watch wrote back to Walmart again in late May, repeating its earlier questions and adding a few additional queries. Then, quite oddly, Walmart on June 21 sent to Human Rights Watch the same flat message of denial sent to Cambodian journalists, claiming that Walmart had “never” sourced from Phatthana, an argument on its own terms incongruous with the company’s initial claim that it was launching an investigation of the “potential violation of our ethical sourcing policy at Phatthana Seafood.” Indeed, a Walmart official told one of my colleagues in Bangkok in May that the company was traveling to Phatthana facilities to conduct auditing—why would the company audit a facility that is not a supplier?

There really is no doubt about the Walmart connection. Retail packaging for shrimp sold at Walmart-owned stores, including Sam’s Club, show certification codes matching Phatthana; U.S. Customs data compiled by Change to Win show that Walmart is one of Phatthana’s largest customers. Individual bills of lading show scores of individual shipments from Phatthana for “Walmart” and “Sam’s Club,” encompassing tens of thousands of pounds of shrimp over several years. The company also supplies dozens of other U.S.-based companies, providing frozen shrimp for supermarkets and other retailers from Texas to Connecticut. Discussing the company’s “Member’s Mark” brand of shrimp, the Sam’s Club website says that “the farms and production facilities producing shrimp for Member’s Mark employ more than 25,000 people in Thailand and India. These are coveted careers providing good wages, career incentives, education opportunities and medical care.” (The workers in Songkla would presumably disagree.)

It is possible that Walmart knows that Phatthana is a supplier but won’t admit it until it completes an investigation. But it remains to be seen whether investigations will produce any results. One key issue is whether some of the audits were scheduled—an issue that labor groups have raised with Walmart before. As any good investigator knows—whether their subject is human rights, sanitation, or nuclear proliferation—there is no better way to undermine the integrity of a verification program than to notify the operator that you are coming. In the case of factory inspections, it is all too easy for managers to “clean up” the site, intimidate workers not to talk, provide model workers to be interviewed, and conceal whatever underlying problems exist. A Sam’s Club website notes that buyers visit “the ponds and packaging facilities in Thailand and India twice each year to conduct a firsthand inspection. As seafood buyer Dan Kallesen says, ‘We are always looking at quality, sanitation, and production standards, and we want to make sure that we solidify our partnership with the folks actually handling the shrimp. It is important to let our partners in Asia know that we are committed to their business doing well, and it’s great to have the opportunity to say ‘thank you’ in person.’” It is comic—or, actually, tragic—to imagine a Sam’s Club buyer visiting the Songkhla facility, saying “thank you” to a cadre of indentured laborers who are unable to speak openly about their labor woes.

Lack of integrity is a perennial problem with auditing programs, and a key reason why auditing alone is not an adequate solution to labor problems. Only systematic reform of labor laws and government protections can enable enduring protection of workers’ rights.

Walmart and other American companies that import from Thailand have a lot to think about. In June, additional reports surfaced of human trafficking onto Thai fishing boats—some of which are believed to supply fish to the processing companies who supply the U.S. market. And another strike broke out in Songkhla in May at a pineapple processing plant—called Vita Foods—which also sends exports to Walmart and other companies in the United States—a strike that has continued through the year. The trigger was compensation cuts, but the underlying issues are the same as with the Phatthana facility: trafficking and debt bondage. Since both strikes involve suppliers to a major U.S. corporation, the U.S. State Department has been increasingly involved. Staff at the embassy began following both situations, and labor and rights personnel at the State Department in Washington are apprised as well.

Back at the Phatthana plant, after the partial agreement with Burmese workers was reached in early May, Phatthana sent a May 11 response to Human Rights Watch, endeavoring, in their words, “to cover your question by giving you factual information and explaining how the story becomes overly complicated from the miscommunication and misunderstanding due to limited translators of the factory” and aiming to “ensure you that there was no use of excessive force by the Company and our workers are willing to continue their employment with the Company and are satisfactory with the compensation benefits after all misunderstanding is rectified.”

Contending that Phatthana follows relevant international standards and Thai laws, the letter asserts that the dispute was the result of a “the misunderstanding of the minimum wage implementation,” suggesting—quite deceptively—that the recent arrangement with some workers had been company policy all along. The letter did not meaningfully address the underlying claims about debt bondage and trafficking nor the core claim of workers that they were misled to think Phatthana would pay them at higher rates, provide more work, and pay their lodging and other expenses. Nor does the letter offer any explanation as to how several thousand workers—recruited and placed at various times over the last two years—could “misunderstand” their contract terms or the issue of the confiscated passports. Several Cambodian workers have stated the Phatthana employee with whom they communicated about passports was ethnic Khmer and spoke the same language they did.

The letter instead states that Phatthana has “no relationship” with the recruitment company “other than [its] supplying workers to the Company” (a point undercut by a later description of Phatthana working with the recruitment company to settle the labor dispute).

As for allegations of passports held hostage, the letter states that workers provide their documents “voluntarily” so that the company can process them with authorities every 90 days. This is not convincing since passports could easily be collected from the laborers for processing. It is well known in the industry that possession of passports is a sensitive legal issue; any company committed to “following international standards” would avoid the practice. Labor organizers on the ground reported that the company repeatedly resisted requests by workers to return the passports and only did so after the strike broke out. Problems like these are rife through the industry.

Many consumers and labor rights activists, confronted by all of this, might be tempted to embrace an absolutist stance. Don’t eat Thai shrimp or fish! Boycott Walmart! Boycotts sometimes work, but they can also cause more harm to the workers who would supposedly be helped. The goal should be to improve labor conditions and to avoid actions that are likely to eliminate seafood-processing jobs in Asia.

A better approach is to pressure Walmart and other companies to use their purchasing power to demand better labor conditions. Walmart is the largest purchaser of shrimp in the U.S. market, and the U.S. market is the largest in the world. Walmart also buys many other processed products from Thailand, such as processed pineapple products. If it were to ensure that its suppliers abide by basic human rights standards, the impact could be profound for workers in Thailand and elsewhere.

There are good reasons for Walmart to take this approach. As a U.S.-based company, it is subject to U.S. import restrictions, including laws concerning trafficking and forced labor, and it has publicly embraced the doctrine of corporate social responsibility (CSR). From a business perspective, solving labor problems on the ground is preferable to foregoing suppliers because of import restrictions or CSR problems.

Public institutional investors like the New York State Pension Fund and California State Teachers’ Retirement System (CalSTRS) are significant shareholders in Walmart, and exercise their shareholder votes to press for good corporate governance, transparency, and fairness. In the fallout to the Mexico bribery scandal, the New York pension fund announced that it would vote against several members of Walmart’s board of directors at its next shareholder meeting. CalSTRS soon thereafter brought a shareholder suit against Walmart.

A company like Walmart can play an outsize role in setting standards in labor markets overseas. Walmart already has systems in place to do so. It can vigorously enforce its “Standards for Suppliers.” It can follow the “Best Aquaculture Practices,” to which it has signed up, created by an industry group called the Global Aquaculture Alliance to address environmental and social responsibility. If these standards were effectively enforced, situations like the strike at the Phatthana facility could be avoided. 

But the Phatthana strike isn’t just about Walmart and corporate responsibility. The events also cast light on the shortcomings of Thailand’s underlying labor rights conditions, and what the U.S. government is doing to address labor rights violations abroad. How the United States deals with workers’ rights across Asia—not only in Thailand but Cambodia, Vietnam, the Philippines, Bangladesh, and even the economic behemoth China—tells us a lot about the commitment of the Obama administration to labor rights generally.

As was widely reported, the Obama administration in 2012 has been undertaking a diplomatic realignment away from the Middle East, the so-called “Asia Pivot,” forging closer diplomatic and military cooperation with countries across the Pacific. The administration is also negotiating a Trans-Pacific Partnership (TPP) with Pacific border countries from Peru to Vietnam; Thailand and Cambodia are among nations that might be brought into the talks in coming months (China has remained conspicuously uninvited to the TPP party).

The U.S. has an opportunity with the TPP to press many less-labor-friendly nations in Asia to sign treaty language obliging them to make improvements in the way their companies treat workers, including highly vulnerable migrant workers. In the past two decades, there have been major improvements in factories in places like Indonesia, Cambodia, and China. Much of this has come as the result of pressure from Western governments and multinational companies, often as the result of bad publicity.

But appalling treatment of workers remains rife across Asia. While stark examples such as Phatthana may push Walmart to do the right thing in the shrimp industry, the Obama administration also needs to lean more on companies and governments to change underlying labor practices. There is no reason why labor ministries can’t be given more powers to enforce safety standards, no reason why governments can’t push their police to prosecute labor traffickers duping laborers with impossible promises.

The U.S. government can also pressure the home countries of migrant workers, such as Cambodia, to enforce its own laws. Documents provided by Phatthana show that during the Phatthana strike, officials from the Cambodian embassy in Thailand were helping facilitate talks between the workers, Phatthana, and the recruitment company that sent workers to Thailand. In other words, instead of upholding Cambodia’s Law on the Suppression of Human Trafficking and Sexual Exploitation by reporting the serious trafficking allegations made by workers, and helping investigate the implicated companies, Cambodian officials were working with company officials who had violated the law to conclude a labor deal—and one that did little to address underlying violations. State Department officials in Cambodia and Thailand are supposed to be working with Cambodian and Thai officials to help enforce relevant labor laws.

Recommending greater U.S. involvement in fighting trafficking and labor rights abuses is not simply an appeal to altruism or a call for a more moral U.S. foreign policy. In the end, the U.S. government doesn’t have a choice in Asia. U.S. laws prohibit imports tainted by trafficking or forced labor. At the same time, Americans’ insatiable appetite for Asia’s cheaply produced goods and services—for products like Asian shrimp—dictate that U.S. trade policy needs to incorporate labor rights in Asia, with all its problems, into the economic and ethical equations of the day. The situation demands that both Walmart and the United States use their stature, and buying power, to better the lives of the workers who produce the products we consume.

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John Sifton is Asia advocacy director at Human Rights Watch. His full biography and links to other articles he has written can be found here.

[Photo courtesy of Dystopos]

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