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TED Case Studies


Case Number: 510 Mnemonic: RUGMARK



I. Identification
1. The Issue
Moving Children Out of Factories and into Schools

RUGMARK is a voluntary labeling program founded in India which tries to ensure that a
product is made without the use of child labor. The program focuses on the hand-knotted carpet industry which holds a significant portion of the export market in India. The issues at stake here are the rights of children and the sovereignty of nations to decide their own policies regarding labor standards in their countries. Low labor costs are often the main advantage developing countries have in the global economy, and children's rights are often ignored in the heat of the competition to be the cheapest supplier of goods to the world market. There remains a question

as to whether the demand side of the global marketplace (in this case the United States)has the right to choose not to buy products which were produced using unacceptable means. Should this right to choose be thought of as protectionism or altruism? The Rugmark Foundation works to balance the needs of India as a developing country with the values Western consumer markets are beginning to push onto third world country exporters. They do this by using the proceeds from their labeling scheme to create schools for the children who are taken out of the factories.

2. Description
Rugmark and Child Labor
WHO IS RUGMARK? Rugmark was founded by a well known Indian activist named Kailash Satyarthi in September 1994 in cooperation with the German non-governmental organization "Bread for the World". The Rugmark Foundation intended to combat child labor in the notorious hand-knotted carpet industry in India and was finally established after a number of years of campaigning on the issue of child rights violations in India in collaboration with religious groups, trade unions and human rights organizations. All of this work culminated in a UN resolution to move toward labeling schemes that would ensure that child labor had not been used in the manufacturing of a given product. After the publication of the resolution, the objectives and criteria of the organization were formulated by the Indo-German Export Promotion group (IGEP). After establishment of the first office in 1994, a second office was opened in Germany. In 1995 the ILRF managed to assist in the opening of an office in the US. Now Rugmark operates in Nepal and Pakistan as well. Since the founding of RUGMARK, other similar programmes have been developed by the various governments and by the carpet industry itself. The main question for all of them relates to their level of commitment and their ability to oversee and guarantee child labor free carpets. RUGS 101 Although carpets are generally referred to as being woven, they are in fact knotted. Indian carpets which are very large can take a long time to complete. One loom may only produce 2-3 carpets per year. The quality of the rugs is determined by the number of knots per square inch. From what I understand 400 per inch would be of the highest quality, while under 200 would indicate a less valuable rug. Two other factors determined by the labor input are the intricacy of the design and the evenness of the rows of knots. Typically, between 3-6 boys set side by side knotting carpets for even more than 14 hours a day. Of course other non-labor related determinants would be the quality of the wool and the dyes used for coloring it. Some sources explain that the carpet industry is male dominated and that very few girls or women are involved in the process, but other sources have pictures of little girls squatting before the looms and yet other sources report how the carpet industry is used as the entry point for trafficking young girls in the sex trade. (See NEPALSEX Case) Nepali girls are also imported into India for knotting carpets based on Nepali patterns which are supposed to be much more simple and these carpets are counted as lower quality carpets. Child Labor in the Global Economy

The main reason families send their children to work is poverty. Unfortunately, a system in which children are sent to work at a very young age and deprived of basic education will only maintain and even exacerbate the cycle of poverty that is pushing these children to work in the first place. The literature on child labor in India provides numerous examples of this cycle of poverty. There are children who are born into a state of bondage and sometimes the parents do not even know the details of the original transaction. According to many of the cases, it seems that even minimum education would prevent the poor from taken advantage of so often. HOW MANY CHILDREN ARE WORKING? There are millions of children working all over the world. The ILO estimates that there are as many as 250 million children toiling in a wide range of work settings. 50% of these children can be found in Asia, however, the largest percentage of working children are in Africa (around one in three) while 15-20% of the children work in Latin America. The main economic sectors where child labor can be found are: Agriculture Prostitution Services (domestics, restaurants, street vendors) Small-scale manufacturing

Only 5% of child labor goes toward export oriented industries such as manufacturing and mining. Asia has the highest percentage of children who work in export industries. Of the export industries,the following list includes those industries with the highest percentage of child labor worldwide: Garments Carpets Shoes

Small-scale Mining Gem Polishing Food Processing Leather Tanning Furniture

There is no doubt that the problem is a serious one. Some of the products made by the hands of children are sold at the most exclusive stores in the West. The most well known products are the hand-knotted carpets, soccer balls and T-shirts found in our malls. WHY USE CHILDREN? Most of the countries where child labor is found do in fact have minimum age laws and primary education laws, but these laws have not been enforced. A related problem is that sometimes it is the actual law enforcement officials who benefit from the labor of children. In general poverty is usually cited as the main reason for the problem of child labor. Although, no one could dispute that poverty is a factor, it is very important to understand that depending on the country, there are some other social factors that contribute to the problem perhaps just as much as poverty does. Examples cited in the Department of Labor Report include:

1. Economic self interest of the factory owners who profit from the use of such low wage workers whom they can exploit without any legal repercussions. Why Use Child Labor? Because children are: less demanding more obedient

less likely to resist or object easily taken advantage of require lower pay

not protected by the law or its representatives

2. Public indifference or lack of political will due to the fact that child labor is treated as a nonissue by politicians, the media and other figures or institutions who decide which issues are placed on the table for national discussion. 3. Inadequate resources to support established public policy measures regarding primary education laws and policies that promote export industries regardless of their child labor practices. 4. Local governmental labor inspectors lack enough authority, expertise, accountability and experience to do a good job. 5. Corruption at all levels of government can be widespread, and in many cases, there are governmental officials who personally benefit from child labor. 6. Some cultures of the majority or dominant groups in society do not see anything wrong with child labor which utilizes children of lower castes and classes. From the point of the child or the family who sends their child to work the direct cause is poverty or at least the culture of poverty and the lack of any alternatives. The truth is that the amount of money children can make is usually very small. A large portion of children do not get paid at all or are paid so little that the difference it makes in their families income is negligible. It is even more tragic when children are forced to work to pay off parents' debts, or when they are kidnapped and forced to work under all manner of horrendous conditions. The question arises and is a currently a heated debate as to whether to completely abolish child labor or simply regulate it? Both sides of the debate have strong arguments, but are not directly related to international trade. Some people worry that if child labor is abololished all at once, the children will be in an even worse situation. Others worry that if it is only regulated the problem will remain. Considering the fact that the current laws are not upheld or enforced, this argument has some merit. LABOUR CONDITIONS In too many cases, children are taken from their families and forced to work hundreds of miles from home where there is no regulation of their working conditions. Children can be as young as five years old. Sometimes they may be beaten or not have access to nearly enough food or even water. They work in places lacking even basic hygiene, and breaks are few and far in between. The health risks these children face are many depending on the kind of work they perform, but it is safe to say that many of these laboring children are forced to quit working at a relatively young age and so the cycle begins again when they send their own children to work. CONSEQUENCES of CHILD LABOR:

The social cost for the poor countries is the real tragedy because without providing their children with education, more children will inevitably be drawn into these types of working situations. Child labor without education depletes these countries from the potential of their future leaders and skilled laborers. Child Labor in the Carpet Industry in India There are 300,000 children working in the carpet industry in India which recently brought in $815 million annually. This is an increase from 20 years ago when the industry only brought in 41 million with the labor of 20,000 children.{4} {4} The increase in the numbers of child laborers may be a perfect example of how the global economy system is creating the "race to the bottom". The main problem faced by the RUGMARK program in eliminating child labor from the workplace is to do so without causing a significant loss in India's carpet market share, but also to create a viable alternative to work that would benefit all involved. It is also no accident that 80% of the working children in India are the children of the "Dalits" who are oppressed low caste or minority tribal people.(harvey where children work) Increasingly, the issue of children's rights are being discussed in many fora, from local governments in the third world to international conferences such as the 1997 conference on Child Labor which was held in Oslo. One of the reasons that the carpet industry was targeted by RUGMARK is because it is such a large export market for India. It is also known for being a large employer of child laborers and bonded laborers. In India there is an area known as the "Carpet Belt". It is based in Uttar Pradesh, one of the poorest states in India. It is also the most populous. Carpet weaving itself is known to be a traditional industry in Jaipur, Agra, Kashmir and Mirzapur and Bhadoi district region of the Varnasi district in Uttar Pradesh which is basically a strip of land running accross the Northern part of India. US Attitude Toward Social Labeling and RUGMARK In 1992 the Child Labor Deterrence Act was introduced in the United States Congress. This act, although still not passed, was a serious cause for concern in India's export industries and there were allegations that this was a protectionist piece of legislation specifically aimed to destroy foreign competition. *But because carpets are an exported good with a significant share of all foreign currency earning exports, there is room for foreign markets and their consumers to have a say in the types of products they are willing to purchase. Most importantly, there is an opening here for international pressure to have an impact on another country's domestic policies regarding child labor.

In 1997 Congress passed a law that should provide a tool with which the US could be more effective in combating child labor. This was "an amendment to the Tariff Act of 1930 that will now prohibit the US Customs Service from allowing the importation of any product that is made by forced or indentured child labor."* This is a step forward but it does not prohibit the importation of goods made by child labor even when it is illegal in the exporting country. The problem with the "protectionist" objection is that the U.S. does not produce hand-knotted carpets as a major industry. There are no big business concern for this specific industry. Current U.S. policy sees labeling schemes as a restriction on international trade. The U.S. Customs service has not yet implemented the new 1997 law. This law should be enforced as soon as possible. However, the nature of the agreements the U.S. is signed onto, such as the GATT and could see the new law as a form of social sanctions which would then be classified as "A Technical Barrier to Trade." According to Pharis Harvey, the ratified Uruguay Round of the GATT makes it difficult for countries to ban goods made by child labor. A study by the congressional research Service actually concluded that it would be "GATT-illegal" for the US to ban goods for this reason.(Harvey/Where Children Work). According to Harvey, Indian economists who teach in the West say that child labor is necessary. FOr the US to campaign agaist it is a vain attempt to impose one set of cultural standards on another. These economists say that the main impact of pressure of this sort will be to "force children out of productive jobs and into prostitution and dangerous life on the streets."(Harvey,ibid) We should be thinking about ending child labor not as a by product of alleviating poverty but as a way out of it.(Harvey, ibid) Despite the apparent conflicts between the WTO and import ban laws and even labeling schemes, Rugmark and the ILO would welcome an actual court case on the issue. This is because they think the issue of child labor would finally be brought to the level of debate it deserves. In the long run, this debate on children and their labor rights are related to the issue of global labor standards and the rights of sovereign states to legislate their own codes of conduct. The big question is how appropriate is it for international trade to regulate social issues in sovereign states.

3. Related Cases

4. Draft Author:
Sarah Rosenberg, Fall 1998


II. Legal Clusters

5. Discourse and Status:

6. Forum and Scope:

ASIA and REGional At the broadest level, the issue of labeling products either due to environmental concerns or human rights concerns is a global trade issue. Rugmark specifically is an Indian foundation with offices in Germany, the US and Nepal. The US proposed ban on goods made with child labor was a unilateral act that worried the Indian carpet exporting industries. This concern had been growing ever since the issue of the conditions of child labor had received wide publicity in the Western media. This caused the heightened awareness of the child labor problem and was the catalyst that inspired Kailash Satyarthi, Chair of the South Asian Coalition on Child Servitude (SAACS)to create the Rugmark program with strong coordination and support from the IndoGerman Export Promoter (IPEC). Other organizations such as UNICEF, ILRF and the ILO have also been involved in the development and coordination of this program. SCOPE

7. Decision Breadth:
5 (India, Nepal, Pakistan, US, Germany) The above are all the countries where RUGMARK has an office, but the potential for expansion is there. There are, however, no legally binding rules here because the labeling is voluntary. The offices in the US and Germany are focused on attracting importers to contract with those exporters who have signed on with RUGMARK while in the exporting countries, the goal is to attract companies to sign on and to apply RUGMARK standards in the looms that they contract with. The RUGMARK label is a legally binding contract. For more information on RUGMARK, see their website at Rugmark. The Rugmark site can also provide information on exactly what the demands are from the rug-making companies and the loom-owners they with whom they contract in order to be permitted to use the Rugmark label.

8. Legal Standing:

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: ASIA b. Geographic Site: SOUTHASIA c. Geographic Impact: USA Some may argue that the Harkin Bill would be a unilateral act on the behalf of the US. Terry Collinsworth (AAFLI COUNTRY Program Director) states emphatically that this is not the case. Acccording to Collingsworth, the "Harkin Bill should be viewed as an effort to provide an effective enforcement mechanism for existing international norms such as those existing under ILO Convention 138 which many countries have ratified.(ICFTU-APRO Sub-"Regional Seminars on Child Labor", Chapter 7 the Remarks of Terry Collingsworth) Current US laws have not been implemented. The implications of passing them would be that carpet manufacturing and consumption would both be more expensive due to the need to invest more money in overseeing the implementations of these laws. Some estimates indicate that the price to the consumer need not increase very much because the main person who gains from the use of child labor are the loom owners and not the contractors who deal with them. It is the US that wants to institute a law. Because this paper deals with RUGMARK and India in relation to US trade policy, the there are only two countries who would be impacted in the scope of this paper. However, if the US were to pass and implement the other existing legislation that bans the importation of products made with slave or bonded labor, other countries may follow suit and introduce legislation in their own countries that would restrict the use of child labor in products imported into their countries. There is another problem which was mentioned earlier on in this paper and that is the fact that in the context of the Uruguay Round of the GATT, banning products made with child labor may still be regarded as "GATT-illegal". One could speculate that the reason the Harkin Bill has not been enacted is simply because the US Congress is dominated by Republicans. If one accepts the assumption that it is "Big Business" interests who control the Replublican voting patterns one may reach the conclusion that because there is no competition between the US and India in the Hand-knotted carpet industry, congress has not been motivated to give the issue much consideration. Because the notion of "free trade" rules the day, any tampering with this concept is seen as a dangerous precedent to set. One could view this argument as proof that there are no protectionist concerns that are underlying current US policy in the banning of child labor products. Does this mean that the US would only act more agressively if there were a carpet industry to protect? All of these factors add up to the conclusion that the best way to address the Child Labor Issue for now may not be through governments but through private ventures such as RUGMARK. Perhaps, when the political will against child labor becomes stronger, it will be more possible to combat it at the governmental and international legal level. According to a labor rights researcher for a Washington D.C. based NGO, the two main reasons the Harkin Bill will not get passed is because the Federal Government specifically targets children under the age of 16 for military service. U.S. farmer interests are also behind the scenes in preventing the Harkin Bill from getting passed. According to the ILO standards, both of these sectors would not be in compliance and they are backed by republicans. This same labor rights researcher also criticized Rugmark and other labeling schemes as being a waste of time. He thought that if they were really interested in child labor rights, they should put their energy into getting India or any other country to sign and or ratify the ILO conventions. If all countries voluntarily sign on to this international document, the debate over whether or not

one country can demand changes in another country by banning its goods due to one thing or another becomes less important. Of course, as mentioned previously, monitoring and implementing existing laws is a very difficult task.

10. Sub-National Factors:


11. Type of Habitat:


IV. Trade Clusters

12. Type of Measure:
Import Ban [IMBAN] There was a proposed ban that has not taken effect yet. The measures actually taken in India are voluntary.

13. Direct v. Indirect Impacts:]

Direct Impacts [DIR]

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: YES [carpet] b. Indirectly Related to Product: YES [Child Labor] c. Not Related to Product: NO d. Related to Process: YES [Childrens Rights and consumers rights]

15. Trade Product Identification: RUGS

Carpets made in India.

16. Economic Data

Industry Output (India): $152,080,000 (1993)* Employment (children): 300,000 (in India,1993)

17. Impact of Trade Restriction:


18. Industry Sector:

Textiles and Apparel [TEXT]

19. Exporters and Importers:

The main exporters: INDIA NEPAL and PAKISTAN

Main Importers: USA and GERMANY

V. Environment Clusters
20. Environmental Problem Type:
NO In a book titled "Kashmir Carpet Children" there is some evidence that carpet making has an effect similar to that of cash crops. In one village, so many people had switched to carpet making that the agricultural output of the village had decreased. There was no specific information, other than a passing comment on the subject.

21. Name, Type, and Diversity of Species

Not Applicable

22. Resource Impact and Effect: 23. Urgency and Lifetime: 24. Substitutes:

VI. OtherFactors
25. Culture:
YES In the eyes of the West it is a terrible crime to put children in terrible work settings day after day and to deny them the right to grow up with a basic amount of education and recreation time. And some studies indicate that the money they make is so negligible it may not even add to the family's welfare. But we should not forget all the children who worked in the coal mines in England nor the many other examples of child labor in the US. Now it is part of our culture to recognize minimum age requirements for labor. It is also part of our culture to expect that every child be in school to the age of sixteen or so. We must recognize that our economy has allowed us to live this way. Third world countries do not always have the budgets to supply schools in the first place, nor do they have the manpower and other resources necessary to enforce education and child labor laws. This case may be more about the effects of poverty on a society than on the values of differing countries and there cultures. However, I did find reference to the fact that the higher classes in India do not find it odd or wrong that children from the lower classes toil in factories and farms. If one looks at the statistics of the children who are working in factories. There is an unmistakable majority of lower caste children and girls. Apparently, according to one paper, there is a parallel between the geographic areas that have more schools and the category of social classes and castes in that area. Economic resources are actually siphoned away from the poorer areas where even at the governmental level, those people and their children are considered expendable. (Weiner/"The Child and the State in India")

Today, there is enough research to prove that the nimble fingers myth is just that, a myth. Studies have shown that adults are actually more productive than children and that there is no correlation between child labor and higher quality carpets. It has been very upsetting even to discover how rooted the concept of laboring children is and has been in Indian society. There are other countries at similar levels of development and even poorer countries who do not support and defend the use of child labor like India has been doing. From a labor perspective, employing children depresses the wages of adult workers and adds to high unemployment levels. A situation is created where each generation may have to send their children to work at even earlier ages. (Burra/Born to Work) Another aspect that is not highlighted very much is that the parents of the children object to any legislation that would prohibit their children from working. The issue is very complex and there are so many different angles from which to address it, but unfortunately those arguments are beyond the scope of this paper. The ILRF website has a library on line that can provide anyone interested in the subject with more information. They also encourage people to get involved in combating child labor. It is important to note that more forceful legislation on labor is only one part of the picture. It may even be more important to act toward a major overhaul in the Indian education system so that there would be relevant primary education for all. In poor areas, even when there are schools it is common for the teachers to not show up to teach. Even among lower castes there is discrimination and so a school that is in an area dominated by one caste may not permitt other children to attend. As stated previously, legal, social, and religious and culture all play into the problem of child labor.

26. Trans-Boundary Issues:

YES This is because many of these children end up being sold into bonded labor or slavery in other areas of their own country or even across international borders.

27. Rights:
YES Obviously when talking about servitude and slavery, human rights are at stake. This is even more serious when children are being abused and exploited in this manner.

This is what the Rugmark label looks like, although the labels found on the carpets probably do not blink.

28. Relevant Literature

1. "Rugmark After One Year", International Laborrights fund Oct. 1996 2. "Child Labor in the Global Economy"/ Foreign Policy Focus vol.2 No.46 Oct. 1997 3. "By the Sweat and Toil of Children Vol.1" "Final Report of the International Conference on Child Labor", Oslo, Norway 1997

4. "Kids at Work", Mclean's Toronto Dec. 11th, 1995 5. "Where Children Work: Child servitude in the Global Economy", The Christian Century, Chicago April 1995 6. "A Noble Cause, Unintended Harm?" National Journal Washington 1995 7. "The Child and the State in India: Child Labor and Education Policy in Comparative Perspective"/ Myron Weiner Princeton University Press, 1991 This is an excellent book and the author is referred to in much of the other relevant literature. The same goes for the next title. 8. "Born to Work Child Labor in India"/ Neera Burra Oxford University Press, 1995. 9. "Kashmiri Carpet Children: Exploitec Village Weavers"/Peter Cross Anti-Slavery International Child Labor Series No. 11, 1991. 10. "Trades Hidden Costs, Workers Rights in a Changing World Economy"/ International Labor Rights Education and Research Fund, 1988. 11. "India's Carpet Boys, A Pattern of Slavery"/No. 9 1988 Anti-Slavery Society Child Labor Series. 12. "Trading Away the Future, Child Labor in India's Export Industries"/ Harvey, Pharis J. and Riggen, Lauren. International Labor Rights Education and Research Fund, 1994. 13. "Is Child Labor Really Necessary in India's Carpet Industry?"/ Levinson, Deborah; Anker, Richard; Shahid Ashraf and Sandhya Barge. Labor Market Papers, 15, 1996. 14. ICFTU-APRO Sub-Regional Seminars On Child Labor: Report (South Asia and Southeast Asia) July , 1993.


ILRF ILO Rugmark Foundation <UNICEF< A> Website: U.S. Department of Labor, Bureau of International Labor Affairs

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