Clothing industry

A presentation for School work only.

Presented in Class 16th February 2017

1. Clothing Industry © Gustavo Majstruk Nnenna, Moses, Ayonni, Dalvir, Deia

2. Agenda Introduction & MFA Production Circuit & Global Shifts Labour & Technology Company and Regional Strategies & GA P Regionalizing production networks & Conclusion

3. The Clothing Industry HIGHLIGHTS Second largest industry in the world worth about $2.5 trillion - $3 trillion USD Second largest employer of labour Second largest polluter in the world after the oil and gas The clothing industry is part of a larger industry - textile industry Previously regulated by the Multi-fibre Arrangement

4. Multi-Fibre Arrangement (MFA) A special international framework that regulated trade in clothing and textile from 1973 to 1995 Protected developed countries clothing and textile industry from developing countries Imposed import quotas on developing countries

5. The Multi-Fibre Arrangement (MFA) Major factor in the changing global pattern of production and trade of clothing. Renegotiated four times ( 1977, 1982, 1986, 1991) EU and the US negotiated tighter import quotas and invoked anti-dumping procedures

6. The Role of the State R estructur e and rationalization through s ubsidies and adjustment programmes. Stimulate O ffshore assembly and preferential trading A greements. Protect from competition from low-cost producers in developing countries

7. The Multi-Fibre Arrangement (MFA) Loopholes in the MFA Increased evasive actions S witch to other items False labelling R elocat ion t o other countries

8. The Multi-Fibre Arrangement (MFA) • 1995 -the regulation of trade in textiles and clothing was incorporated into the WTO (Wor ld Trade Organization) • MFA phased out over a 10-year period (1995–2004) • US and the EU ‘integrated’ first those products which already entered their markets freely. 70% of imports left to the end of the transition period • 2005- MFA eventually abolished • 2008 – monitoring procedures and import quotas negotiated with C hina

9. Production Circuit Figure 14.1 The clothing production circuit

10. Employment Statistics in 2005 Figure 10.3 Employment in the global clothing industries Source : Global Shift: Mapping the changing contours of the World Economy 6 th Edition, page 304

11. E xport Statistics in 2013 Figure 14.2 The geography of clothing exports Source : based on WTO, International Trade Statistics , 2013: Table II.70

12. Shift in clothing export Figure 14.3 Leading clothing exporters Source : based on WTO, International Trade Statistics, 2013: Table II.69

13. 3 Major type of clothing Figure 14.4 Composition of demand for different clothing categories in the USA Source : based on Abernathy et al., 1999: Figure 1.1

14. Sweatshops Video This video describes the benefit of Sweatshops in developing countries.

15. Points in favor of Sweatshops It is a bad idea to prohibit Sweatshop labor. The Exchange between Worker + Employer is mutually beneficial. It is better to do something to end the problem of global poverty than it is to do nothing.

16. Production C osts and T echnology Capital Intensity is generally low. Labour intensity is generally high. Labour costs are the most significant production factor. Technology is relatively unsophisticated.

17. Production costs and technology Two kinds of technological changes are important in clothing industry: - Those that increase the speed with which a particular process can be carried out. - Those that replace manual with mechanized and automated operation. Current technology developments in the manufacture of clothing F ocused on three areas: - Increas ing the flexibility of machines. - Addressing the problem of sequential operations. - Developing the unit production system to deliver individual pieces of work to the operator on a conveyor belt system.

18. Recent Technology Most recent developments are based on Microelectronic Technology : N on-sewing operation: grading, laying out and cutting material in the pre-assembly stage. This will result in enormous savings on materials wastage and greatly increase the speed of process. For example: Grading process may be red uced from 4 days to 1 hour. C ore problem with technology. ( so far very few limited success has been achieved in mechanizing and automating the sewing process. )

19. Benefits of Technology developments The main benefit is the time savings that results from automated manufacture. Time Savings leads to two major benefits: -Speeding up the production cycle reduces the cost of working capital by increasing the velocity of its use. -It becomes possible for the manufacturer to respond more quickly to consumer demand.

20. Corporate Strategies A significant increase of retailers’ dominance in the industry Industry global ization controlled by developed country f irms i.e large buyers and retailers Low cost labour & orientation to specific markets Several broad categories of clothing companies: - Producers of basic goods for large markets - Operators of small workshops -‘Factoryless’ firms -Large scale integrated firms

21. Offshore Production A recent shift balance between domestic sourcing and offshore sourcing by large compan ies Lower labour costs in foreign locations (Asia) Large clothing firms in the world went completely offshore

22. Changing relationships between garment manufacturers and retailers Figure 14.7 Changing relationships between garment manufacturers and retailers Source : based on Abernathy et al., 1999: Figures 3.1, 4.1

23. Improving Labour Conditions External pressure with focus on factory working conditions and labour exploitation 2013 Rana Plaza factory collapse in Dhaka, Bangladesh Efforts in improving Human Rights: Monitoring of suppliers and subcontractors to ban illegal practices & child labour “Better Factories Cambodia” initiative by International Labour Organization with the support of large companies Human Rights groups such as: OXFAM , labour unions & anti-sweatshop organizations, Labour Behind Label (LBL), and Clean Clothes Campaign (CCC)

24. A bout GAP

25. GAP American clothing and accessories retailer Headquartered in San Francisco, California An annual Revenue of USD $15.8 Billions in 2016 Banners: Gap, Old Navy, Banana Republic, Athleta, and Intermix Over thousands of f actories worldwide

26. Issues Gap among companies accused of Unsafe working conditions and forced abortions (2003) Child labor (2007) Refusal to sign the legally binding building safety agreement (2011) In 2014, GAP was awarded ‘’Public Eye’’ A ward

27. Corporate Social Responsibility (CSR) Partnership with “Better Work Program” to protect workers’ rights Implementation of recycling programs “Recycle your Blues” Recycling of solid waste in stores Impact on environment through company’s supply chain system

28. Labour Costs Figure 14.6 Hourly labour costs in the clothing industries 2008 Source : Werner International

29. Regionalizing Production Networks Resulted from the Non Existence of regulatory constraints from MF A So firms started thinking Tradeoffs between Labour Cost and the need for Market Proximity Resulted in Increased Regionalization NON EXISTENCE OF MFA WAYS TO REDUCE COST BY FIRMS INCREASED REGIONALIZATION mainly towards ASIA

30. WORLD BIGGEST INDUSTRIES IN US DOLLARS (Billions) Food and Retail - - $ 5300 Clothing is a huge part of the Retail industries Clothing is worth about $2.500B - $3,000B Alcohol - - $ 1161 OPEC - - $ 1027 Telecommunication - - $ 957 Pharmaceuticals - - $ 950 Source : Quora.com (April, 2016)

31. Global Trade Network Currently : Major Manufacturing Global Regions (Clothing) East Asia North America Europe

32. Global Trade Network Intra-Region Trade Regions (Textile) East Asia * Low intra-region exports Americas (North, Central & South) * High intra-region exports Europe *High intra-region exports

33. Global Fashion Industry Statistics - Employment LABOUR DISTRIBUTION IN NUMBERS Source : Fashion United, 2017

34. Asia The Newly Industrializing Economies (NIEs) Taiwan, Hong Kong & South Korea Got Clothing Orders from the USA & Europe Outsourced these orders to China, Malaysia etc Creating Triangular Manufacturing NIEs becoming Middlemen rather than manufacturers Geographical Proximity factor One-fifth of the intra region larger than USA Asia is a big market in itself

35. China Population - 1.4 Billion Labour force - 816.6million Unemployment - 4.1% Fashion industry employs - 10 million people GDP - 8,358.4 Billion World’s Number-One in terms textile and garment export 225 Billion dollars Export in 2012 More than 100,000 Manufacturers

36. Bangladesh Mostly Exports to Europe and America 60% goes to europe and 40% to America Greatest strength is its greatest weakness - High Labour but Low wages - 4 million employed in the fashion industry 90% are women Destination target for most top brands e.g. GAP RANA Plaza collapse killing thousands of people majorly women in 2013

37. North America China is the leading supplier of clothing to North America The advent of NAFTA in 1994 reduced the leading effect of Chinese Exports NAFTA USA Comparative Advantage in Textile manufacture Mexico Comparative Advantage in Clothing production GIVES TEXTILE PROVIDES CLOTHING BUYS CLOTHES

38. USA & MEXICO RELATIONSHIP Figure 14.8 Development of ‘full-package’ garments production in Torreón, Mexico Source : based on Bair and Gereffi, 2001: Figure 2

39. Europe Most highly integrated regional market in the world Key Manufacturers : France, Germany, Italy and UK Recent decline in cloth manufacturing because of Low cost factor in Asia

40. FRANCE

41. GERMANY