By Jon Emont 

DHAKA, Bangladesh -- The trade war between the U.S. and China has led many fashion brands to shift production to spots across Asia, including to Bangladesh, where safety issues persist years after two workplace accidents killed more than 1,000 workers.

Many American fashion brands cut back on sourcing from Bangladesh, and others abandoned the country entirely, after the 2012 and 2013 accidents. Over the past two years, however, companies have bulked up sourcing in the country amid efforts to improve safety conditions there, and at least one major brand that left -- Ralph Lauren -- has returned.

That shift has accelerated as the trade dispute has heated up. The dollar value of apparel exports from Bangladesh to the U.S. is up 14.5% in the first half of the year from the same period a year earlier, following a 6.5% rise in 2018 over the previous year, according to U.S. government apparel-trade data.

Urmi Group, a garment manufacturer based in Dhaka, has started receiving orders in the last year from American brands such as Express and Talbots, after sending the vast majority of its production to Europe for much of its history, said Faiaz Rahman, a company director.

"I've never received so many emails from U.S. customers," he said. "They want to switch production out of China." Express and Talbots didn't respond to requests for comment.

The renewed interest in Bangladesh poses a test for the country's safety and labor standards. Low wages and a large labor supply had turned Bangladesh into a garment-manufacturing powerhouse before a pair of horrific accidents. In November 2012, a fire in a Dhaka garment factory killed some 120 workers. Five months later, more than 1,100 people were killed in the collapse of Rana Plaza, which was home to five garment factories.

Bangladesh's share of the U.S. apparel-import market had climbed steadily in the years leading up to the Rana Plaza collapse, but leveled off afterward as brands limited their exposure to the country's production facilities.

In the aftermath, large U.S. retailers like Walmart and the Gap formed the Alliance for Bangladesh Worker Safety, a brand-led safety organization responsible for inspecting Bangladeshi factories that produced goods for Alliance brands. The organization recommended improvements for structural, fire and electrical safety, and blacklisting factories that failed to make changes. When the Alliance dissolved at the end of 2018, it said that more than 90% of the specific factory-safety issues identified in inspections had been resolved for factories that remained in its program.

The safety drive prompted many Bangladeshi factories to relocate from buildings in dense central Dhaka to new factories in the suburbs that could meet standards set by Western brands.

But industry analysts say that despite improvements, safety and compliance issues persist, including structurally unsound factories and retaliation against employees who join labor unions.

Sebastien Breteau, the chief executive of QIMA, a company founded in Hong Kong that conducts tens of thousands of audits and inspections of factories world-wide annually, says the company has found continued use of child labor in the Bangladesh apparel-supply chain. A company report found that over 80% of factories in South Asia surveyed by its structural auditors were in need of improvement over the short and medium term, compared with 57% globally.

Now new tariffs enter force in that already difficult environment. Since Sept. 1, most Chinese garment imports to the U.S. are subject to 15% tariffs -- enough in the apparel industry to make many products uncompetitive or unprofitable.

"The panic of these uncertain prices have led the brands and retailers to move their production to countries that are a lot more risky in terms of social compliance," said Mr. Breteau, referring to factors like safety, hygiene, and forced labor.

Last year around a third of Ralph Lauren's imports to the U.S. came from China, but the company has since reduced that share to less than a quarter as it expanded sourcing operations outside of China.

Ralph Lauren stopped using factories in Bangladesh in 2015 after deciding they didn't have sufficient operations on the ground to do so safely, according to a company spokeswoman.

The company resumed buying from Bangladesh last year as part of a broader strategy to diversify sourcing, according to the spokeswoman, and opened a new office in Bangladesh this year -- decisions it says weren't directly related to the prospect of new tariffs. The company thoroughly vets the Bangladeshi factories it works with and is involved in initiatives there to improve garment workers well-being, the spokeswoman said.

Not all U.S. retailers are returning to places like Bangladesh. Disney, one of the world's largest licensers, forbade suppliers from sourcing from Bangladesh and Pakistan in the wake of the Rana Plaza disaster and has maintained the ban as of April, according to a company list of permitted sourcing companies. Disney didn't respond to a request for comment.

"The brands and the importers feel that, "Oh gosh what's going to happen tomorrow? What will President Trump say that will impact their business?'" said Faisal Samad, managing director of Surma Garments, a Bangladeshi garment manufacturer. "As an option they're looking at Bangladesh."

Other countries in the region have also seen marked increases in apparel exports to the U.S. Vietnam has seen a 12% jump so far this year, and Sri Lanka a 6% increase.

China remains by far the world's largest supplier of garments, and trade experts have long predicted that developing countries in South and Southeast Asia would grab a larger share of the garment trade as wages rose in China. But the shift has only come gradually, in part because China's high-quality infrastructure meant clothes could be shipped quickly from Chinese factories to the U.S. -- necessary in the age of fast fashion, when consumers alight on new styles every few weeks.

Chinese manufacturers have been lowering prices to try to offset the tariffs and stay competitive on prices. The average dollar price for a square meter equivalent of apparel slipped 1.6% in China over the last year to $2.33, according to an analysis of trade data by Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware.

In Vietnam the price rose 9.4% to $3.49; for Bangladesh the rise was 3.2% to $2.99.

"Historically it's been a very mobile industry," said Nicole Bivens Collinson, president of international trade at Sandler, Travis, and Rosenberg, a law firm based in Miami. "You can set up a factory with sewing machines relatively easily."

--Krishna Pokharel contributed to this article.

Write to Jon Emont at jonathan.emont@wsj.com

(END) Dow Jones Newswires

September 02, 2019 08:15 ET (12:15 GMT)