7:10 AM Oct 28, 1996

LABOUR: TEXTILE, FOOTWEAR, CLOTHING INDUSTRIES GO SOUTH

Geneva 28 Oct (Chakravarthi Raghavan) -- The geographical distribution of production in the textiles, clothing and footwear (TCF) industries have changed dramatically in the past 25 years -- with production shifting to the developing world, especially to Asia, according to a report by the International Labour Office.

The report, with an eye on the organized labour and its concerns in North America and Europe, was released (under embargo) in Washington on Friday, but made available to the media in Geneva (the ILO headquarters) only on Monday morning.

The report notes the mention of the labour standards issue in the closing statement of the Chairman of the Marrakesh meeting, holding out the possibility of including 'additional items' in the WTO, and suggests "this might pave the way for a discussion of the issue of social protection in the WTO."

However, the issue has provoked sharp reactions within the WTO, in the run-up to Singapore, with the US trying to bring it up and with most of the developing countries, and several of the developed countries too resisting any role for the WTO.

Meanwhile, in the discussions at the WTO on the review of the implementation of the Agreement on Textiles and Clothing, there is an impasse between the exporting developing countries and the major importing industrialized countries on a report to the Singapore Ministerial Conference (SMC).

The Goods Council of the WTO has been debating the implementation of the Agreement on Textiles and Clothing -- where the developed countries have not effected any commercially meaningful liberalization and have made frequent use of the transition safeguards.

Informal talks within the Goods Council to come up with a report and recommendations have failed to find a compromise, and the report might reflect the differences between the two groups of countries, a WTO source said Saturday. This might force the Ministers at the Singapore meeting to discuss the issue.

Efforts to reach a compromise are however expected to continue -- well beyond the 7 November deadline set for adoption by the General Council of reports to the SMC.

The ILO report says the shift in production, as a result of globalization, has resulted in sizeable employment losses in Europe and North America and important gains in Asia and other parts of the developing world.

The report shows that while in the Textile industry, the share of the industrial countries in production capacity of synthetic and artificial fibres has declined from about 80% in 1968-69 to 58% in 1984-86 and to 44% in 1990, there has been a gradual building up of an "industrial oligopoly" in which a large share of man-made fibres produced throughout the world were -- either directly through subsidiaries or indirectly by transfer of licences -- under the control of a limited number of TNCs from the industrialized countries or the Newly Industrialized countries (NICs).

According to the report, the available evidence also suggests that globalization has led to a net gain in the level of worldwide employment and that the informal sector promotes a "growing volume of employment in developing countries, especially in clothing and footwear".

The report, for a tripartite meeting on 'Globalization in the Footwear, Textiles and Clothing Industries' (28 October to 1 November), also brings out that employment in the formal sector establishments has changed very little since 1980, and real earnings in that sector have in fact risen in several industrialized countries.

The report uses the term globalization to the process that combines trade liberalization, internationally oriented enterprise strategies and activities and other elements of economic integration. Trade liberalization, it notes, does not amount to globalization -- as liberalization could occur with little international movement of capital and/or companies. It is the increased transnational activity of enterprises (not only through direct investment, but also strategic alliances, licensing arrangements, different forms of sub-contracting) which leads to this integration.

The evidence in the report contradicts the hypothesis that globalization is leading to compression of real earnings in the higher-income countries, it also points to a "widening earnings gap" between TCF workers in higher- and lower-income countries.

The shift of the clothing industry, with Asia emerging as the major world supplier has been in three stages - with South Korea, Singapore, Hong Kong and Taiwan, in the first wave of shift; the Philippines, Indonesia and Malaysia, and recently Thailand in the second wave; and Bangladesh, Pakistan, Sri Lanka, (and more recently) Laos, Nepal and Vietnam. The last group have attracted foreign investors and subcontractors, and have developing sewing and assembly activities which have generated considerable employment, but very vulnerable to world trends of comparative advantages.

The scenario in India and China have been somewhat different. In India, there has been a gradual increase in range of products and improvement of quality, to meet domestic demand from a growing middle class and also for the external markets. In China, where developing a competitive textiles and clothing industry has been one of the government priorities for the transition (to market economy), the country has become a major world producer and supplier. Already it accounts for 13% of the world supplier market.

In the American continent, the NAFTA accord has made Mexico a privileged supplier to the USA and Canada. Foreign investors have built up a sizeable clothing industry and the 8000 enterprises in Mexico are in a strong position visavis Latin American competitors. Within Mercosur, Brazil plays a pivotal role. In Africa, Morocco, Mauritius, Tunisia and more recently Madagascar have become important clothing producers exporting most of their products to industrialized countries.

Looking to the future, the report sees emerging competition between the middle-income and low-income countries of the South, with the industrialized North maintaining its grip by catering to the higher segments of the market, and through its sub-contracting and licensing arrangements.

IPS adds from Washington:

The ILO report released said the change in three of the world's most labour-intensive industries has been accompanied by a parallel shift in production from the formal to the informal sector.

The ILO said the change has had a generally negative affect on wage levels and working conditions. But the globalisation process has led to a net gain in the level of worldwide employment - mainly in the informal sector, as employment in the formal sector of the three sectors has changed very little since 1980.

The report estimated there were 23.6 million workers worldwide employed in the manufacture of textiles, clothing and footwear (TCF).

"No one knows just how many work in the informal sector, but the figure may be five to ten times as high," Kari Tapiola, ILO Deputy Director-General, said.

The report, 'Globalisation of the Footwear, Textiles and Clothing Industries,' marked the opening of a meeting in Geneva Monday, hosted by the ILO, involving government representatives, employer's organisations, and trade unions from 34 countries. It will continue until Friday.

The meeting aims to offer guidance for national and international plans to promote employment and workers' rights throughout the TCF sector, which has recently become the focus of increasing attention, especially in major consumer countries.

The speed and scope of the north-south migration of textile, clothing and footwear production and jobs has been dramatic, according to the report. In the 20 years between 1970 and 1990, the number of workers in the formal sector increased by 597 percent in Malaysia; 416 percent in Bangladesh; 385 percent in Sri Lanka; 334 percent in Indonesia; 271 percent in the Philippines; and 137 percent in South Korea.

China, with 5.3 millIon workers, leads the world with the number of people employed in TCF industries.

During the same 20-year period, employment in the developed world has declined sharply. The number of TCF workers has fallen by 58 percent in Germany; 55 percent in Britain; 49 percent in France; and 31 percent in the United States.

The decline has been even more severe in the Nordic countries, according to the report. Between 1980 and 1990, Finland lost 73 percent of its TCF jobs. Sweden and Norway lost 65 percent.

Evidence presented in the report "contradicts -- for the formal sector -- the hypothesis that globalisation leads to real earnings compression in the higher-income countries" for those jobs which have remained in the North.

In fact, the earnings gap between formal TCF workers in high-income and lower-income countries is actually widening, according to the report.

For example, in 1992, the average hourly costs (wages and social charges) in the textile, apparel and leather industries were 18.40 U.S. dollars in Germany; 15.70 dollars in Italy; 13.40 dollars in France; 10.30 dollars in Japan; 10.50 dollars in Canada; 10 dollars in the United States; and 9.70 dollars in Spain.

That compares with 1.70 dollars in Mexico; 3.70 dollars in Hong Kong; 3.80 dollars in South Korea; and 4.20 dollars in Taiwan.

More worrying than the wage gap, however, is the shift in production from formal to informal enterprises, the report said.

Given minimal or non-existent government regulation, employers find it much easier to abuse workers' rights, including child labour laws, in this sector, the ILO report adds.

In response to fast-changing demand patterns, TCF industries have witnessed a gradual "shift of full-time in-plant jobs to part-time and temporary jobs and, especially in clothing and footwear, increasing recourse to homework and small shops," the ILO report said.

Wages of homeworkers are almost universally based on the piece-rate system and tend to be substantially lower than for comparable worked performed in a factory. The first, and to date only, international convention promoting the rights of home workers was adopted by the ILO last June.

"Child labour," according to the report, "is still very much a reality in the TCF sectors" and has recently increased as a result of the growth of the informal sector and homework.

But the report notes that rising pressure from consumer groups, governments, trade unions, employers' organisations and non-governmental organisations (NGOs) has begun to reverse this trend.

The adoption of "Codes of Conduct" by several large multinational companies, including Levi's, The Gap, Reebok, and others have helped, the report says. A recent U.S. Labour Department report, however, found that such codes need to be backed up by on-site monitoring to be effective.

In the clothing industry, the number of clandestine workshops has grown exponentially in recent years, according to the report. These generally ignore national labour legislation and exploit illegal migrants. Many are involved counterfeiting products from famous trademarks, an activity estimated to account for more than five percent of world trade in clothing.

Currently, about 60% of world clothing exports are manufactured in developing countries, according to the report, which says that Asia is now the world's largest supplier, producing more almost one third of all clothing exports.

Even within Asia, there has been a shift in production trend. South Korea, Singapore, Hong Kong, and Taiwan have begun to reduce production while poorer countries in Southeast Asia and Indochina, with cheaper labour markets, now produce more clothing.