Clothing Industry

Clothing Industry Gustavo MajstrukNnenna, Moses, Ayonni, Dalvir, Deia

AgendaIntroduction & MFA Production Circuit & Global ShiftsLabour & Technology Company and Regional Strategies & GAPRegionalizing production networks & Conclusion

The Clothing Industry HIGHLIGHTS Second largest industry in the world worth about $2.5 trillion - $3 trillion USDSecond largest employer of labourSecond largest polluter in the world after the oil and gasThe clothing industry is part of a larger industry - textile industryPreviously regulated by the Multi-fibre Arrangement

https://www.google.ca/search?q=the+clothing+industry&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj805CvjJHSAhVP0WMKHdREC7wQ_AUICSgC&biw=1600&bih=721#imgrc=uPdFAxbHwBMqIM:

https://newint.org/features/1993/08/05/facts/

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

http://www.business2community.com/fashion-beauty/30-shocking-figures-facts-global-textile-apparel-industry-01222057#cCI1UMqMFFU8ISzF.97

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

The Role of the StateRestructure and rationalization through subsidies and adjustment programmes.Stimulate Offshore assembly and preferential trading Agreements. Protect from competition from low-cost producers in developing countries

US Flag Waving:https://www.google.ca/search?q=usa+flag+waving&tbm=isch&imgil=4P0d7RtRvFVbFM%253A%253BjkuldZ18GRuuWM%253Bhttps%25253A%25252F%25252Fwww.youtube.com%25252Fwatch%25253Fv%2525253DXVmYrF0Zivw&source=iu&pf=m&fir=4P0d7RtRvFVbFM%253A%252CjkuldZ18GRuuWM%252C_&usg=__Iqf7NmPNLwIFfGxl5NTLfbP0K2o%3D&biw=1093&bih=471&ved=0ahUKEwjYm_iXj5HSAhVG2IMKHQY0C2gQyjcIJw&ei=acWjWJjDAsawjwSG6KzABg#imgrc=4P0d7RtRvFVbFM:

UK Flag waving: https://www.google.ca/search?q=uk+flag+waving&tbm=isch&imgil=mfwcut1pbjc3GM%253A%253BBnN_mlBIL_kHWM%253Bhttps%25253A%25252F%25252Fwww.youtube.com%25252Fwatch%25253Fv%2525253DwIehfkf7ffo&source=iu&pf=m&fir=mfwcut1pbjc3GM%253A%252CBnN_mlBIL_kHWM%252C_&usg=__UF9qW-dXVwZ5a0vi3asq02_jg5k%3D&biw=1093&bih=471&ved=0ahUKEwjqtpfBj5HSAhWO2YMKHZ3FBNIQyjcIJw&ei=v8WjWKrbII6zjwSdi5OQDQ#imgrc=mfwcut1pbjc3GM:

The Multi-Fibre Arrangement (MFA)Loopholes in the MFA

Increased evasive actions

Switch to other items

False labelling

Relocation to other countries

https://www.google.ca/search?q=loopholes&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiOmJytlZHSAhUm8YMKHbDXAX0Q_AUICCgB&biw=1600&bih=721#imgrc=qpRa0-urM2ApjM:

The Multi-Fibre Arrangement (MFA)1995 -the regulation of trade in textiles and clothing was incorporated into the WTO (World Trade Organization) MFA phased out over a 10-year period (19952004) US and the EU integrated first those products which already entered their markets freely. 70% of imports left to the end of the transition period2005- MFA eventually abolished2008 monitoring procedures and import quotas negotiated with China

Production Circuit

Figure 14.1 The clothing production circuit

Employment Statistics in 2005

Figure 10.3 Employment in the global clothing industriesSource: Global Shift: Mapping the changing contours of the World Economy 6th Edition, page 304

Export Statistics in 2013

Figure 14.2 The geography of clothing exportsSource: based on WTO, International Trade Statistics, 2013: Table II.70

Shift in clothing export

Figure 14.3 Leading clothing exportersSource: based on WTO, International Trade Statistics, 2013: Table II.69

3 Major type of clothing

Figure 14.4 Composition of demand for different clothing categories in the USASource: based on Abernathy et al., 1999: Figure 1.1

Sweatshops VideoThis video describes the benefit of Sweatshops in developing countries.

https://www.youtube.com/watch?v=O2sW2wt3nLU

Points in favor of SweatshopsIt 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.

https://www.youtube.com/watch?v=NxBzKkWo0mo

Production Costs and TechnologyCapital Intensity is generally low.Labour intensity is generally high. Labour costs are the most significant production factor.Technology is relatively unsophisticated.

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 Focused on three areas:- Increasing 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.

Recent TechnologyMost recent developments are based on Microelectronic Technology: Non-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 reduced from 4 days to 1 hour.Core problem with technology. (so far very few limited success has been achieved in mechanizing and automating the sewing process.)

Benefits of Technology developmentsThe 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.

Corporate StrategiesA significant increase of retailers dominance in the industryIndustry globalization controlled by developed country firms i.e large buyers and retailersLow cost labour & orientation to specific marketsSeveral broad categories of clothing companies: - Producers of basic goods for large markets - Operators of small workshops -Factoryless firms -Large scale integrated firms

Image retrieved from:https://www.google.ca/search?q=factories&biw=800&bih=555&source=lnms&tbm=isch&sa=X&ved=0ahUKEwih-Z3W_JPSAhUI92MKHR0yC3UQ_AUIBigB#tbm=isch&q=clothing+factory&imgrc=0eE6nNnHqq2ZFM:

Offshore ProductionA recent shift balance between domestic sourcing and offshore sourcing by large companiesLower labour costs in foreign locations (Asia)Large clothing firms in the world went completely offshore

Changing relationships between garment manufacturers and retailers

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

Improving Labour Conditions

External pressure with focus on factory working conditions and labour exploitation2013 Rana Plaza factory collapse in Dhaka, Bangladesh

Efforts in improving Human Rights:Monitoring of suppliers and subcontractors to ban illegal practices & child labourBetter 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)

Image retrieved from: https://www.google.ca/search?q=rana+plaza+bangladesh&biw=1280&bih=603&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwj5rviZk4HSAhWGf7wKHVSBBJEQiR4IggE&dpr=1.5

About GAP

Video to be stopped at 1:31 minutes

GAPAmerican clothing and accessories retailerHeadquartered in San Francisco, CaliforniaAn annual Revenue of USD $15.8 Billions in 2016Banners: Gap, Old Navy, Banana Republic, Athleta, and IntermixOver thousands of factories worldwide

Retrieved from: https://www.google.ca/search?q=GAP&biw=1280&bih=603&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjx7djRuYLSAhXqg1QKHQVmA0AQ_AUICCgD#tbm=isch&q=gap+clothing+logo&imgrc=_

Issues Gap among companies accused ofUnsafe 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 Award

Retrieved from:https://www.google.ca/search?q=legla&biw=1280&bih=603&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiCn6r6uoLSAhXiw1QKHTb2B_oQ_AUIBigB#tbm=isch&q=legalhttps://cleanclothes.org/news/2014/01/23/public-eye-awards-2014-gap-receives-award-of-shamehttps://en.wikipedia.org/wiki/Gap_Inc.

Corporate Social Responsibility (CSR)Partnership with Better Work Program to protect workers rightsImplementation of recycling programsRecycle your BluesRecycling of solid waste in storesImpact on environment through companys supply chain system

https://fashionwithaheart.wordpress.com/2011/05/18/gap-inc/

Labour Costs

Figure 14.6 Hourly labour costs in the clothing industries 2008 Source: Werner International

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

Ayonni Soumanou () - moses please go back to csr slidesWORLD BIGGEST INDUSTRIES IN US DOLLARS (Billions)Food and Retail --$ 5300Clothing is a huge part of the Retail industriesClothing is worth about $2.500B - $3,000BAlcohol --$ 1161OPEC --$ 1027Telecommunication --$ 957 Pharmaceuticals --$ 950Source : Quora.com (April, 2016)

https://www.quora.com/Which-are-the-worlds-biggest-industries-in-dollars

https://www.google.ca/search?biw=1600&bih=770&tbm=isch&sa=1&q=industry+&oq=industry+&gs_l=img.3..0l5j0i67k1l2j0l3.135884795.135886052.0.135886780.9.8.0.0.0.0.509.1772.2-1j3j0j1.5.0....0...1c.1.64.img..4.5.1768.Rm8Co1WuO0E#imgrc=_gGSgq7grxFscM:

Global Trade NetworkCurrently : Major Manufacturing Global Regions(Clothing) East Asia North America Europe

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

Global Fashion Industry Statistics - EmploymentLABOUR DISTRIBUTION IN NUMBERS

Source : Fashion United, 2017

Asia The Newly Industrializing Economies (NIEs)Taiwan, Hong Kong & South KoreaGot 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 USAAsia is a big market in itself

China Population -1.4 BillionLabour force-816.6millionUnemployment -4.1% Fashion industry employs -10 million people GDP-8,358.4 BillionWorlds Number-One in terms textile and garment export 225 Billion dollars Export in 2012 More than 100,000 Manufacturers

BangladeshMostly Exports to Europe and America 60% goes to europe and 40% to AmericaGreatest strength is its greatest weakness - High Labour but Low wages - 4 million employed in the fashion industry90% are womenDestination target for most top brands e.g. GAP RANA Plaza collapse killing thousands of people majorly women in 2013

https://www.fashionunited.com/executive/management/bangladesh-overready-garments-at-a-price-20133010493341?_ga=1.240516867.1496594180.1487264797

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

USA & MEXICO RELATIONSHIP

Figure 14.8 Development of full-package garments production in Torren, MexicoSource: based on Bair and Gereffi, 2001: Figure 2

EuropeMost 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

FRANCE

GERMANY

https://fashionunited.com/global-fashion-industry-statistics

Source: http://hilltopfamilydental.com/wp-content/uploads/2016/08/qAfabric-300x225.jpg