Not made in China: Garment manufacturing Part II


China thinks manufacturing clothes is so last decade.

As labor costs in the "world's factory" continue to rise dramatically, global fashion brands are looking elsewhere to source apparel. In addition to established hubs like Bangladesh and Vietnam, the garment game is ripe for new players: Myanmar (Burma), Haiti and Ethiopia, among others, are looking to rejuvenate a once-thriving trade or even build one entirely from scratch.

China will shed approximately 85 million manufacturing jobs in the coming years, which, some development experts say, could be a golden opportunity for economic development à la South Korea.

The standard narrative: Start at the bottom with low-skill, basic textile manufacturing (like T-shirts) and work your way up to more complex garments (like suits), then to more complex goods like electronics. Improved quality of life and a rising consumer class will naturally follow, creating sustainable and natural growth.

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As in China, garment assembly will then be seen as low-brow. "You don't make tanks out of textiles," says Derek Scissors, a scholar at the American Enterprise Institute.

china manufacturing jobs

But whether China's successors can actually follow the "textile to tank" model is a point of serious contention. Some argue that new entrants can survive only by offering the lowest costs — read: unlivable wages and minimal, if any, rights. Footloose garment brands, apt to flee to wherever labor costs are lowest, make nurturing an industry with highly skilled workers, robust infrastructure and effective legislation extremely difficult.

It's harder to unlearn bad habits, so the best shot at a sustainable industry may be Ethiopia, which is essentially a blank slate. Despite dire infrastructure shortcomings, Ethiopia's access to a continental market with six of the 10 fastest-growing economies and one of the world's largest cattle (leather) stocks makes "China 30 years ago" an attractive long-term investment. The Chinese and Turkish certainly seem to think so. Huajian Shoes and Akya Tekstil, two of the world's largest apparel makers, are planning multibillion-dollar "apparel-cities" fit for up to 60,000 workers and 50 different manufacturers each.

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H&M, the Swedish apparel giant, has staked an early claim in Ethiopia as well. By partnering with nonprofit Swedfund, they're championing a "responsible" way forward with three new sustainable factories, and growing. The move to set an ethical foundation in a new entrant mirrors that of Gap in Myanmar this past June. Once called an "outpost of tyranny" because of its brutal military dictatorship, Myanmar underwent vast democratic reforms in 2011; stifling economic sanctions from the West were eased a year later. Now the country's garment industry is on track to bring in $1.7 billion of export revenue in 2014 — compared with $900 million in 2012.

china global brands

And companies are doing it, supposedly, with a conscience. By partnering with USAID and local NGOs, Gap is trying to avoid the plunder-and-bail reputation of the garment industry. "We want to lend resources in such an important time for the country," to set a precedence of humane working conditions and work with the government to build institutions to protect best practices, Debbie Mesloh, Gap's senior director of government and public affairs, told OZY.

Benjamin Powell, director of the Free Market Institute at Texas Tech University

But some are calling BS ... literally. "There's a great deal of bullshit in the world of corporate social responsibility," says Scott Nova, director of the Worker Rights Consortium. "The idea that a brand would move into a country to make the world a better place is absurd. They do it because it's cheaper," he says.

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Indeed, according to the country's own manufacturers association, Burmese workers make as little as $30 per month, below the World Bank's $1.25/day poverty threshold. And early reports show Ethiopian garment workers earn between $37 and $53 per month, making them the world's two lowest paid (Bangladeshi workers earn approximately $68).

Few can ignore the data, but some experts argue that low wages — once a characteristic of all now-developed economies, most recently Taiwan, South Korea and Hong Kong — are a necessary initial sacrifice to attract investors. If job seekers voluntarily choose to work for low wages in a factory, that means it's the best of a series of bad options, says Benjamin Powell, director of the Free Market Institute at Texas Tech University. "If we were to impose laws on these countries mandating higher pay and working conditions, it would take away the very reason companies chose to come there, thus leaving them trapped in an even worse poverty," he told OZY.

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In Haiti, where 80 to 90 percent of its exports come from apparel, there's some hope for development with labor standards. Conditions in Haiti have improved significantly, argues Arianna Rossi, research and policy officer at Better Work, an arm of the International Labour Organization that specializes in the garment industry. The minimum wage was raised in May of this year to $5 a day and Better Work's most recent report shows factories are complying almost across the board — 37 percent are even receiving at least $6.75.

To be sure, garment hasn't proven the jobs creator it was touted to be. A 2-year-old industrial park in northern Haiti, Caracol, financed to the tune of $124 million by the U.S., has led to only 3,000 jobs, instead of the projected 60,000. That's despite duty-free access to the United States via the HOPE II trade agreement and serious promotion from the State Department, former Secretary of State Hillary Clinton and former President Bill Clinton.

Still, companies are coming to the realization that "treating workers better is good for business," Rossi says, citing a Better Work research project as proof of concept.

Experts like Nova aren't sold. For one, if the garment industry was a way out of poverty, wages shouldn't have declined over the past decade across the world and, on average, constitute about a third of a "living wage."

Whether the garment industry is good for national and individual economic development or not, countries like Haiti, Myanmar and Ethiopia are rolling out the red carpet for fashion's name brands. If they'll have buyers' remorse remains to be seen.

This article originally appeared in Ozy. CNNMoney and Ozy are partnering to tell the story of the "Real Economy."

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