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Globalisation
Globalisation
The last thirty years has seen the significant liberalisation of international trade agreements. This meant that corporations could now freely access international markets and manufacture their goods in countries with cheaper labour.
Globalisation and capitalism has led to the pursuit of finding the lowest wages possible – and thus developing economies with low wages are hot spots for garment production.
Prior to the 2000s, quotas put in place by the World Trade Organisation limited the amount of clothing large developing countries such as China could export. This was known as the Multi-Fibre Arrangement (MFA).
This system had been in place since 1974, and was initially designed to protect the local US manufacturing sector from cheaper apparel imports.
It had another effect of enabling smaller developing countries to compete with the prices of countries such as India and China, who had massive workforces. However, in 2005, after being slowly phased out over ten years, this quota system ended.
For developed countries such as the US and Australia, the end of the MFA meant far more clothing could be cheaply imported, and this led to a decline in local manufacturing. In Australia, where domestic production once supplied a significant share of the market, only around 3% of garments are now made locally. At the same time, Australians have become some of the highest per-capita consumers of clothing in the world, fuelling demand for fast and inexpensive imports.
China, no longer constrained by quotas, became by far the largest supplier globally of apparel, manufacturing 65 per cent of the world’s apparel.
Apparel and upgrading
Apparel and upgrading
Garment production is closely linked to economic development. Value chain expert Gary Gereffi observes that “apparel is the typical `starter' industry for countries engaged in export-oriented industrialization” (Gereffi 1999, 37), the first rung on the ladder for a developing country to upgrade economically. Upgrading means being able to offer more complex, higher-value services, bringing economic benefits to a country.
These are the stages a manufacturing company may go through:
1. Cut Make Trim
1. Cut Make Trim
In CMT, factories take orders from brands/designers and simply provide basic garment assembly. CMT is the lowest rung on the ladder.
2. Original Equipment Manufacturing (OEM)
2. Original Equipment Manufacturing (OEM)
In OEM, manufacturers offer a broader array of services, including sourcing of fabrics and trims (buttons, zips etc.), and following the whole production process through to delivery in store. This is a higher-value service.
3. Original Design Manufacturing (ODM)
3. Original Design Manufacturing (ODM)
In ODM, manufacturers offer design and product development services. Examples include MAS in Sri Lanka, which offers a full-package service for many Western brands and retailers.
4. Original Brand Manufacturing (ODM)
4. Original Brand Manufacturing (ODM)
This is the highest level, and it is when the company sells their own-branded goods direct to the consumer. Examples include Nike, Zara, H&M.
High value activities are intangible, and include design, branding, marketing. Lower value activities are the basic production of tangible goods. The 'smile curve' diagram shows how the high value activities are found in developed countries, and the lower value in developing countries.
Many countries are at different stages in this upgrading process. Countries such as Kenya and Ethiopia are stepping up as CMT manufacturers, while Bangladesh and Sri Lanka offer OEM and ODM services to Western brands.
Back in the 1970s, garments may have been made in places such as Taiwan, Singapore and Hong Kong, but by the 1980s these countries had progressed to value-adding activities such as OEM, ODM and eventually OBM. Now they are advanced economies with far less factory production.
Countries such as China and India are established in OEM, ODM and OBM activities. The world's biggest and most powerful brands and retailers are located in the advanced economies of Europe and the US.
The smile curve, from Gereffi, G. and K. Fernandez-Stark (2016), Global Value Chain Analysis: A Primer. Duke University, 14.
A path to development, but at a cost
A path to development, but at a cost
Economic development continues to bring prosperity, education and healthcare to many. Through globalisation, the apparel industry plays a huge role in enabling this development. In Bangladesh, Sri Lanka, and Cambodia, for example, garment production is the country's biggest export industry.
The idea goes that economic upgrading, as described above, ultimately leads to social upgrading and a better life for everyone in the country.
However, others have suggested that the capitalist motives of fashion corporations merely exploit globalisation by taking advantage of developing countries that have unregulated industries (Haque and Azmat 2015). They then move onto the next country as wages rise.
Impoverished countries are eager to attract international trade and thereby fail to construct appropriate governance to protect workers.
The overall advantages of cheap labour therefore come at a high personal cost for many individuals working in the apparel industry, within both developing and developed nations.
The garment workers, who remain largely unskilled and uneducated, are caught in an exploitative situation, financed by Western corporations and maintained by their governments who are keen to keep prices low in order to secure contractual business with the West (Bonacich 2002; Heidebrecht and Kozar 2013).
The distance between brand and worker
The distance between brand and worker
The pursuit of the lowest price possible has also led to a complicated web of sub-contractors.
This diagram to the left describes a simplified relationship that distances the fashion corporation and the factory worker.
As fashion corporations often do not own the factories that produce their garments, they hire manufacturers, who hire contractors, who source offshore factories, who employ the garment workers.
Subcontracting allows Western brands and retailers to push responsibility of the working conditions along the supply chain – despite the obvious reality of human rights abuses.
When brands choose suppliers based on the cheapest costs, it creates a cycle where prices stay low because factories need to compete for business, which leads to poor conditions and the unethical treatment of workers.
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