Social and Economic Impacts of Apparel Trade–Questions from FASH455

Used-clothes-e1501882805445

Debate on Used clothing trade and AGOA

#1 What evidence can support the arguments that cutting off secondhand clothing imports from Africa will allow African nations to build their own textile industry? Likewise, what evidence can support the arguments that African countries overall benefit from importing used clothing from countries like the United States?

#2 Given the debate on used clothing trade on African nations, will you continue to donate used clothing? Why or why not?

#3 China holds a dominant position in textile and apparel production and exports because of their vast amounts of technology, workers, and resources. How do you think least developing countries like Africa will be able to keep up with such steep competition? Why or why not it is a wise decision for the United States to threaten to take away East African countries’ benefits under AGOA?

Social and economic impact of apparel trade

#4 Is factory employment in India a step in the right direction for the country’s gender equality? What effects, positive or negative, could such employment have in regards to gender issues?

#5 We keep arguing that globalization is negative because we are taking jobs away from U.S. workers. But by sending more work to factories in India, we’ve created jobs for these Indian women who, before working in the factories, were sheltered and only sent off into the world for arranged marriage. In this sense, is globalization still negative if we’re creating a sense of freedom and purpose for these women?

#6 As detailed in the article, the working conditions and treatment of workers is extremely unethical in some garment factories.  Can globalization help this issue or hurt it more? 

#7 How do you compare your life to the Indian girls in the article? And please just imagine: ten years later, what will the life of these Indian girls look like? How about yours?

Welcome to our online discussion! Please mention the question # in your comment.

Trade and Development

This video provides a great summary of what we discussed in class on trade and development. Please keep in mind that:

  • Textile and apparel industry (T&A) plays a critical role in generating economic growth, reducing poverty and promoting human development both in history and today. This is why T&A remains a critical sector in the 21st global economy, even though people may think clothing is such a “simple” product.
  • Apparel sourcing is far more than just about how to get the product at the lowest price. Throughout the supply chain, sourcing decisions and practices are closely connected with many people’s destiny in the world, especially those living in the developing countries. As future professionals working in the fashion apparel industry, please think about your impact and responsibilities.

Please feel free to share any comments and thoughts on the video

Two Years after the Rana Plaza Tragedy: What Has Changed?

rana plaza

Note: the followings updates are compiled based on the 2015 Bangladesh Development Conference held from June 5th to 6th at the Harvard University. The conference attracted over 100 attendants and speakers from various aspects of the apparel industry, government agencies, international organizations, non-government organizations and academia.

1. Overall, the industry side argues that tremendous efforts have been made to improve work safety in the Bangladesh apparel industry and things are gradually improving. However, representatives from some labor unions say that changes are not happening fast enough as they should.

2. Indeed, as one of the most noticeable changes after the Rana Plaza tragedy, the Bangladesh apparel factories are now facing more frequent safety inspection and audit from various parties:

  • In addition to the regular inspection conducted by individual fashion brand or retailer, the Accord on Fire and Building Safety in Bangladesh (the Accord) and Alliance for Bangladesh Worker Safety (the Alliance) were established in 2013 respectively (mostly funded by western apparel brands sourcing from Bangladesh) to maintain minimum safety standards in the Bangladesh apparel industry.
  • The Accord has a total five-year budget of $50 million to be used on factory safety inspection and improvement. However, it is far from being clear what will happen after the Accord agreement expires in 2018 and whether the inspection achievements can be maintained afterwards.
  • The International Labor Organization and International Finance Corporation launched the “Better Work” program in collaboration with Bangladesh government, apparel factory owners, workers, fashion buyers and other relevant stakeholders. The program intends to provide assessments of factory compliance with national law and core international labor standards, paired with transparent public reporting on findings.
  • Nevertheless, some people argue that audit itself is not the answer to the problem, just like “a pig will not gain weight simply by weighting it; instead, we have to feed it.” Reflecting on the limitation of inspection and audit, they refer to compliance as just a piece of paper whereas ethics is something that keeps people awake in bed.

3. Some foreign governments also have responded to the Rana Plaza tragedy, although in different ways:

  • Stick: the U.S. government decided to suspend Bangladesh’s Generalized System of Preferences (GSP) status in 2013 as a response to the Rana Plaza tragedy. Because textile and apparel are excluded from GSP, this measure has no direct impact on Bangladesh’s apparel exports to the United States. But the movement is symbolic and significantly increases the publicity of corporate social responsibility (CRS) issue in the Bangladesh apparel industry.
  • Carrot: in comparison, the European Union chooses to continue providing Bangladesh its GSP benefits. As a GSP beneficiary, Bangladesh’s apparel exports to EU can enjoy duty free treatment when competing with other Asian suppliers such as China and India. According to EU, from 2008 to 2012 EU28 imports from Bangladesh increased from €5,464 million to €9,212 million (+69%), which is more than half of Bangladesh’s total exports. While granting Bangladesh the benefit, EU also launches the GSP Action Plan and the Sustainability Compact to encourage responsible businesses in Bangladesh.

4. Training has been provided for Bangladesh officials to help them better understand building safety requirements.

5. More apparel factories in Bangladesh now have their own labor unions. According to the local law, 30 percent of the labor force in a factory can form its own labor union, meaning theoretically one factory can have up to three different unions. There has been more open discussions on “worker/women empowerment”, “social dialogue” and “stakeholder engagement” in the Bangladeshi society as well.  

6. Some creative financial incentive mechanisms are suggested to improve the situation, such as offering factories with better compliance record with more attractive interest rate for bank loans; and adding building safety clauses in factory insurance contract.  

7. Academia is actively engaged in finding a solution for improving the CRS practices in the Bangladesh apparel industry as well:

  • Based on analyzing the factory inspection data, some scholars start to evaluate the effectiveness of the current inspection system (eg: does who pay for the inspection matter for the result? Does violation go down overtime in inspection? What is the role of on-going people to people relationship in inspection?).
  • Some projects intend to develop an estimate of the true size of the Bangladesh apparel industry, given the fact that the worst work condition may exist in those undocumented factories. As a matter of fact, even the Bangladesh government doesn’t know how many garment factories they have in the country.
  • Some scholars propose the idea of linking a company’s social compliance data with its business financial data to evaluate the business implication of CRS practices.
  • Some studies compare the labor practices between Bangladesh and other developing countries in South Asia such as Cambodia and Sri Lanka.
  • Some people suggest using case studies to develop hypotheses for a policy change.
  • More and more studies are now conducted based on field trip and interview in Bangladesh.

8. Criminal charges recently are filed against a dozen individuals and companies identified responsible for the Rana Plaza tragedy.

9. Response to the Rana Plaza tragedy has further led to a discussion on the broader economic, social and political reform in Bangladesh.

Sheng Lu

Study Suggests Positive Social Impact of the Garment Sector on the Lives of Bangladesh Women

While our case study 1 focused on the problem of corporate social responsibility practices in the Bangladesh garment sector, a recent study based on examining 1,395 households in 60 Bangladeshi villages in 2009 suggests that the growth of the garment sector has resulted in positive impacts on the lives of Bangladeshi women.

Specifically, the study finds that:

1) Girls exposed to the garment sector delay early marriage and childbirth at early ages (12-18). Many studies have suggested the negative welfare implications of early marriage and childbirth.

2) Girls exposed to the garment sector gain extra years of education. According to the study, on average, one additional year of working in the garment sector statistically will lead to a 0.48 years of education for girls. The authors further suggest that increased demand for skills in garment factories was one of the main driving forces behind such a positive correlation.

As argued by the authors, in developing countries such as Bangladesh, social policies such as education are often tied to trade policy and industrial policy.

However, one another interesting finding is that the average wage level of respondents working in the garment sector was almost 22% lower than those working in the non-garment sector in Bangladesh.

So, based on our case study and the above research findings, do you have any new thoughts about improving the corporate social responsibility practices in the global apparel industry? Do you think Western retailers shall stop sourcing apparel from Bangladesh because of the reported problem of factory safety and workers’ working condition? Please feel free to share your views.

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2014 USFIA Benchmarking Study Released

UntitledKey Findings

  • China will remain the dominant supplier, though Vietnam and Asia as a whole are seen as having more growth potential.
  • Companies aren’t leaving Bangladesh, and are committed to compliance.
  • Companies continue to look for opportunities closer to home, including the United States, as they diversify their sourcing.
  • Companies are diversifying their sourcing and expect to continue to do so. However, current FTAs and preference programs remain under-utilized or don’t represent a major component of respondents’ sourcing.
  • Respondents welcome the passage or renewal of all future trade agreements that intend to remove trade barriers and facilitate international trade in the industry.

About the Benchmarking Study
The 2014 USFIA benchmarking study is conducted based on a survey of 29 executives at 29 leading U.S. fashion companies from March to April 2014. The study incorporates a balanced mix of respondents representing various business types in the U.S. fashion industry, including retailers, importers, wholesalers, and manufacturers. The survey asked respondents about the business outlook, sourcing practices, utilization of Free Trade Agreements and preference programs, and views on trade policy.

The full study can be downloaded from HERE.

EURATEX Raises Concerns about Pakistan’s Membership in the EU GSP+ Program

In a statement released on November 4, 2013, the European Apparel and Textile Confederation (EURATEX) openly expressed their opposition to the proposed “unique delegated act” for the EU Generalized Scheme of Preferences plus (GSP+) program. Specifically, the EURATEX strongly questioned Pakistan’s qualification as a beneficiary of the GSP+ , saying that “Pakistan has a poor record in matters related to Human rights and in particular to the protection of religious minorities, women and children .”

As put by Mr. Alberto Paccanelli, president of the EURATEX: “During the recent GSP revision it was repeatedly stated by the EU Commission that one of the main objectives of the new regime was to ensure that preferences were given to the countries that need them and in the case of GSP+ to countries that are promoting high Human, Social and Environmental standards.”

The GSP system is an EU trade policy tool specifically designed to help developing countries expand exports to the European Union markets. Beneficiaries of the GSP program can enjoy special favorable market access conditions such as tariff reduction and quota elimination.  For example, the EU charges an average 6.2% and 11.2% tariff rate for textile and apparel imports respectively from most sources, but the rates are lowered to 5.0% and 9% respectively for imports from GSP beneficiaries.

As part of the GSP system, the GSP+ program provides additional market access preferences to those economically and socially vulnerable countries under the condition that these countries will “implement core human rights, labor rights and other sustainable development conventions.” For example, textile and apparel imports from beneficiaries of the GSP+ program will be waived for import tariffs in the EU market. This will substantially improve the price competitiveness of products from the GSP+ beneficiary countries when competing with Asian suppliers such as China and India.

Despite the emphasis on Pakistan’s human right practices, the real factor driving EURATEX’s opposition to Pakistan’s membership in the GSP+ program could be market competition.  Pakistan is one of the most competitive textile and apparel exporters among the GSP beneficiaries. Data show that Pakistan’s textile and apparel exports to the EU market enjoyed robust growth over the past decade, causing the EU domestic textile & apparel manufacturers to become nervous about import competition.  The EURATEX, which represents the commercial interests of the EU local textile & apparel industry, has consistently opposed EU’s duty free access to Pakistan’s textile and apparel products.

Moreover, under the EU GSP system, there is a mechanism called “graduation of competitive sector”, under which imports of particular groups of products originating in a given GSP beneficiary country will lose GSP preferences once the average imports of this particular sector exceed 15% of GSP imports of the same products from all GSP beneficiary countries (12.5% for textile and clothing). However, the “graduation of competitive sector” mechanism will not be applied to GSP+ members. This means that if Pakistan becomes a GSP+ member, the EU domestic textile and apparel manufacturers may have to face increasing import competition from Pakistan but can do little about it.  

The most critical yet controversial part of the debate is, to which extent, the GSP system can be built into an effective and balanced development tool. According to a 2012 World Bank study, “the textile and apparel sector is THE most important manufacturing sector of Pakistan, which generated one-fourth of the country’s industrial value-added, recruited more than 40% of industrial labor force, contributed 8% of the country’s overall GDP and accounted for about 60% of Pakistan’s total merchandise exports.”  That being said, allowing Pakistan to export more textiles and apparel to the EU market is one of the very few ways to make the GSP system work and bring actual benefits to the country. Yet, the EU domestic textile and apparel industry can also cite statistics, arguing the necessity of protecting the domestic textile mills and saving the jobs there by resisting as many textile and apparel imports as possible.

On the other hand, the GSP system needs to take into consideration the benefits of all beneficiaries, especially to avoid creating “losers” and “winners” within the group. This is the philosophy behind the introduction of the “graduation of competitive sector” mechanism so that the interests of those “small countries” can be particularly taken care of. For example, when Pakistan is gaining additional market shares in the EU textile and apparel import market because of the GSP+ status, other less competitive developing countries may see decline of their exports. The textile and apparel industry is as important to these “losers” as it is to Pakistan.

Overall, the GSP debate reflects the significance and the complexity of the textile and apparel sector in the 21st century global economy.  Particularly, trade policy will continue playing a key role in improving the situation, yet it calls for courage and wisdom of policymakers.

by Sheng Lu

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More on Bangladesh: What’s Next?

garment

I’m sure  you have all been reading about the current factory protests in Bangladesh, but here are the basics of the current situation. Factory workers of Bangladesh are asking for a $100 monthly minimum wage, as compared to their current $38 monthly wage. The issue is that factory owners are finding it difficult to pay such a dramatic increase on worker’s wages because of their customers (large global brands). The owners are looking to these global brands as the cause of these issues, claiming these large brands are unwilling to pay more for their goods manufactured in Bangladesh. Currently, factories are unable to produce the goods these global brands have ordered due to the protests.

My question is: What’s next not just for Bangladesh, but for the United States? How will our economy be affected if the factory workers, factory owners, and global brands cannot come to a solution relatively soon? What does this mean for us as consumers? Is there anything we can do as consumers? Welcome for any thoughts!

by MacKenzie Cahoone

Extended reading: http://world.time.com/2013/09/23/bangladeshi-garment-workers-set-factories-ablaze-in-bid-for-higher-wages/ 

Patterns of World Textile Trade:2000-2010

The following findings are from:

Lu, S. (2013). Impacts of quota elimination on world textile trade: A reality check from 2000 to 2010, Journal of the Textile Institut, 104(3), 239–250.

         “Findings of this study challenge the practices of previous studies that evaluated the impacts of quota elimination mostly by focusing on the performances of developing countries in the U.S. and EU markets (Nordas, 2004; Curran, 2008). Although such strategy may work for clothing trade, its appropriateness for scrutinizing world textile trade is evidenced to be questionable. Particularly, to manufacture textiles, it places higher requirements on a country’s technology advancement level and capital abundance than clothing production which is more labor intensive in nature and with lower business entry threshold (Dickerson, 1999). Therefore, as shown in the study, it was the developed countries rather than the developing countries that remain dominant and competitive textile exporters in the world today (WTO, 2011).  On the other hand, the developed countries are no longer leading textile importers either because of their dramatic shrinkage of domestic clothing manufacturing capacity (Dicken, 2003). To certain extent, missing such distinct patterns of textile trade may be one reason why findings of many previous studies turned out to be inconsistent with the reality (Ahmad & Diaz, 2008).

       Second, findings of this study call for attention to the new round of structural change of world textile trade that may have unfolded since the outbreak of the world financial crisis in 2008. This is particularly the case for the high-income countries which suddenly saw sharper decline of their textile export from 2008 through 2010 compared with earlier years in the post-quota era. It is unclear whether such phenomenon is a temporary market fluctuation in nature or reflects a more permanent adjustment of economic structure that is undergoing in the developed countries. Whether and how the financial crisis has structurally affected the world textile trade can be further explored in future studies.

       Third, findings of this study reflect the difficulty of achieving upgrading of the textile and clothing sector in the less-developed countries.  Although the development theory proposed by Toyne (1984) and Dickerson (1999) optimistically predicted the gradual evolution of a country’s textile and clothing sector over time, results of this study indicated that this upgrading process turned out to be very slow in progress for the developing world. Particularly, in today’s globalized economy, the division of labor between the developed countries and the less-developed ones is largely value-chain based and different from the case of inter-industry division of labor when the development theory was introduced (Toyne, 1984; Gereffi, 1999).  It seems there lacks a clear mechanism for the less-developed countries to gradually move up their position in the clothing value chain and have the chance to build on capacity of manufacturing and exporting textiles.  However, chances may occur if the high-income countries proactively “give up” textile manufacturing and instead prioritize the development of other emerging sectors regarded as more strategically important in the post-crisis recovery. “

 

WTO Public Forum 2012: “Is Multilateralism in crisis?”

For your reference. Many issues are relevant to textile and apparel sectors (for example: global value chain, trade and job, trade facilitation, competition policy, intelletrual property right protection, green economy, pluralism/regionalism as well as trade and development).  

This year’s WTO Public Forum will debate:

  • formulating new approaches to multilateral trade opening in areas such as trade facilitation;
  • addressing 21st-century issues and identifying areas in need of new regulations;
  • looking at the role of non-state actors in strengthening the multilateral trading system

The session will cover the following sessions

  • Global value chain: implications for trade policy
  • Trade and job
  • The multilateral trading system in the 21st century: interaction between trade and competition policy
  • Plurilaterals and Bilaterals: Guardians or Gravediggers of the WTO?

This year’s Ideas Workshops will cover:

  • How to ensure green economy policies are implemented in a co-ordinated manner rather than at cross-purposes?
  • The future of the WTO dispute settlement system.
  • Rethinking trade-related aspects of intellectual property in today’s global economy.

WTO’s first ever Youth Ambassadors, selected by separate video and essay contests, will discuss the topic “How can trade promote development?”

Garment-Factory Fire in Pakistan Kills 300 Trapped Behind Locked Doors

In the class, we just mentioned that the conditions under which our clothing were made significantly vary from country to country. Compared with the vidoes we watched yesterday, the story covered by the news is such a sharp contrast.

However, we may also want to think: despite the far-from pleasant working environment, why pepole in Pakistan are still willing to work there? As a consumer or professional in the US fashion apparel industry, what we can do to help improve the working conditions as shown in the picture? and what role can international trade play in helping developing countries like Pakistan to achieve economic development?

As reported by the New York Times article :

“Textiles are a major source of foreign currency for Pakistan, accounting for 7.4 percent of its gross domestic product in 2011 and employing 38 percent of the manufacturing work force. Pakistani cotton products are highly sought in neighboring India and form the backbone of a burgeoning fashion industry that caters to the elite. President Asif Ali Zardari’s government has often called on the United States to drop tariff barriers to Pakistani textile imports, which it says would be preferable to traditional aid.”

We will gradually touch these critical issues in the later part of the course. Stay tuned.

Global Apparel Value Chain Trade and Crisis

Gereffi, G. & Frederick, S. (2010). The Global Apparel Value Chain, Trade and the Crisis: Challenges and Opportunities for Developing Countries. The World Bank.: Washington DC

One recent work of Dr. Gary Gereffi, a well-known expert on value chain studies, on the impacts of the financial crisis on the global apparel industry. It is suggested that the developing countries will gradually move up in the value chain and undertake more value-added functions such as design and product development. This is a two-edge sword to T&A industries in the developed countries. It could mean more resources to take advantage of and more intensified compeitition at the same time. Although Dr. Gary uses the concepts of OEM, ODM and OBM to describe evolution of the apparel chain, the major conlusions are compatable with the famous stages of development theory suggested by Toney (1986).

To read the fulltext, click here

World Bank Released New Report on the Impacts of Quota Elimination on the World Labor Market

Sewing Success?: Employment, Wages, and Poverty following the End of the Multi-Fibre Arrangement

Edited by Gladys Lopez-Acevedo, Raymond Robertson

Directions in Development : DID – Poverty English; Paperback; 532 pages; 6×9 Published March 14, 2012 by World Bank ISBN: 978-0-8213-8778-8; SKU: 18778

Full report can be downloaded from here