The decision last month by two major European fashion brands to stop sourcing goods from conflict-torn Myanmar over labor rights violations has raised questions over the European Union's stance.

The bloc remains steadfast in the belief that purchasing goods from the country's garment manufacturing sector benefits workers' rights.

Myanmar has been in a crisis since the military launched a coup in early 2021 and ousted the democratically elected government. Anti-military groups launched a "people's revolution" and now control vast swathes of the country.

Sweden's H&M and Spanish-headquartered Inditex, owner of the world's biggest clothing retailer Zara, announced last month that they would phase out sourcing of goods from Myanmar following a landmark report that found "widespread" worker abuse, unpaid wages and forced salary reductions, as well as union intimidation.

Although the EU has imposed seven rounds of sanctions on junta officials and their associated businesses, it has not yet cut Myanmar off from its privileged trade scheme, claiming that doing so would lead to tens of thousands of job losses in the garment sector.

But a steady stream of European fashion giants are quitting the market, with Spanish fashion retailer Mango and Ireland's Primark winding down their business in Myanmar last year.

The departure of H&M, the world's second-largest fashion retailer, is perhaps the most significant as it was a crucial player in the EU-funded MADE in Myanmar program, which attempts to improve working conditions in the country's garment industry. As of early 2023, H&M was sourcing goods from 41 factories in Myanmar that employed nearly 42,000 workers, according to company data.

Judith Kirton-Darling, acting joint general secretary of industriAll Europe, a federation of trade unions, told DW the departure of the two firms is "a win for trade unions and democracy."

"We have long been insisting that [European] brands listen to the calls from trade unions in Myanmar that responsible business conduct is clearly impossible in a country where workers and trade unionists are threatened, arrested, and tortured," she said.

Why is Europe still doing business in Myanmar?

In June, a report by the Peace Research Institute Oslo estimated that more than 6,000 civilians have been killed since the coup, most by junta forces.

The National Unity Government (NUG), which claims to be Myanmar's legitimate government, was established by members of the coup-ousted National League for Democracy (NLD) administration and civil society actors, including members of the country's numerous ethnic minorities.

The NUG has called for a "people's revolution" to dismantle military dominance over politics and to foster minority rights through a new federal system. However, the NUG has wavered on whether to stop foreign companies from sourcing goods from Myanmar's factories.

"We do not want Burmese workers to be unemployed," said Linn Thant, the NUG's envoy to the Czech Republic. "But related companies can pressure Burmese entrepreneurs to ensure Burmese workers have full labor rights. We just want responsible investment."

However, he told DW that H&M and Inditex pulling out of the country signals that foreign companies don't trust the junta's management of the economy.

Since the coup, Brussels has argued that ending Myanmar's tax-free trade benefits under the preferential Everything But Arms (EBA) scheme would have very minimal impact on the junta's finances but would lead to potentially tens of thousands of job losses.

An estimated 700,000 people worked in Myanmar's vast garment industry before the COVID-19 pandemic, and the majority are young female migrants from rural areas, according to estimates by the European Chamber of Commerce in Myanmar.

Despite the escalating conflict, EU imports from Myanmar rose from €2.3 billion in 2021 to €4.3 billion last year, of which more than 73% were clothing goods, according to European Commission figures.

Report shows Myanmar worker abuse

But an influential report published in early August by Business and Human Rights Resource Centre, a workers' advocacy group, found 212 alleged cases affecting at least 108,000 workers between February 2021 and February 2023.

It alleged "widespread" cases of union intimidation, wage theft and "gender-based violence and harassment, including verbal, psychological and physical abuses, and pregnancy discrimination."

According to Heidi Hautala, a European Parliament vice president, the arrests of several trade unionists and labor rights defenders in recent months "have made it increasingly difficult for foreign companies to conduct heightened due diligence in Myanmar."

However, H&M and Inditex's decision to withdraw from Myanmar "raises questions on whether they have sufficiently consulted all stakeholders and not simply succumbed to pressure from certain interest groups," she told DW.

"The companies must now ensure legal pay-outs to workers made redundant. They could also help impacted facilities to obtain new orders from reputable buyers," Hautala said.

A spokesperson for H&M told DW that the company has been "monitoring the latest developments in Myanmar very closely, and we see increased challenges to conduct our operations according to our standards and requirements."

"After careful consideration, we have now taken the decision to gradually phase out our operations in Myanmar," they added. "During this process, we will continue to engage with our stakeholders as part of our enhanced due diligence process."

How could the EU respond?

Kristina Kironska, a Bratislava-based academic specializing in Myanmar, said that the decision by the two European brands could lead to an investigation by the European Commission on workers' conditions in Myanmar.

A similar investigation in 1997, which found widespread use of forced labor in Myanmar, led the EU to remove Myanmar from its privileged trade schemes.

A spokesperson for the European Commission said that the EU continues to support "responsible business sourcing from Myanmar" but didn't rule out a punitive ban on Myanmar's trade benefits.

They noted that the EU is now assessing the human and labor rights situation related to Myanmar's EBA status, and a report on this will be "published shortly."

The EU report will probably follow an ongoing commission of inquiry, a highest-level investigation, by the International Labor Organization that is expected to be released in November.

"Accordingly, the EU can and will – where it deems necessary – adapt its policy," the spokesperson added.

According to European Parliament vice-president Hautala, the guiding principle of any response must always be "what is good for the people of Myanmar and their democratic aspirations."

"Rash exits from the country would only make the life of vulnerable workers in the garment sector increasingly precarious and would not benefit the fight for democratic Myanmar," she added.

Edited by: Wesley Rahn