Trading Down

Article excerpt

In less than five years, the garment industry in poor, war-ravaged Cambodia has more than doubled into a $1.5 billion industry employing 200,000 workers and generating nearly three-fourths of the country's exports. This rapid growth was stimulated by an unusual 1999 bilateral trade agreement that increased Cambodia's share of the US market as the government made progress protecting labor rights. The agreement--monitored by the International Labor Organization--gave unions freedom to organize one-fourth of the garment industry into independent unions, whose strikes in 2000 boosted industry wages by about 25 percent. Now the small yet tangible progress workers have made, and many of their jobs as well, are in jeopardy.

Ironically, the threat to poor countries like Cambodia comes from a change in international trade regulations they championed for years. Many of them are having second thoughts.

Since 1974 garment and textile exports to the United States have been governed by the Multi-Fiber Agreement (MFA), which gave developing countries quotas for specific products exported to the United States and Europe. Designed to protect garment and textile industries in rich countries as they adjusted to growing imports, it spread apparel production to a larger number of poor countries. When the World Trade Organization was established ten years ago, the rich countries--in exchange for new rules protecting intellectual property and investment rights--agreed to phase out the MFA, which has cost developing countries potential jobs.

On December 31 the last of the quotas ends. But contrary to the expectations of a decade ago, many poor countries will actually lose millions of jobs when the quotas expire. China, the new low-wage industrial superpower, is expected to quickly capture the lion's share of the global apparel and textile industry. China will not simply take jobs from North Carolina and Los Angeles; over the past four years the United States has lost 350,000 garment and textile jobs, and probably more than half the remaining 700,000 are at risk. Even more devastating, China is likely to displace large parts of the apparel industry that is crucial for many developing countries, like Bangladesh (forecast to lose 1 million out of its 1.8 million apparel jobs), Mexico (where 90 percent of export jobs are at high risk) and poor African countries like Mauritius and Lesotho (84 percent at high risk).

Within a few years, the World Bank and WTO estimate, China will capture half of world clothing exports--double its current share--and make 50 percent of all clothing exported to the United States, up from 16 percent. But recent experience in markets without quotas suggests that China could quickly take 70 percent of the US market. Although some high-end, quick-turnaround apparel and textile work will stay in the advanced countries and nearby lower-wage suppliers, like Mexico and Eastern Europe, China will dominate overwhelmingly.

China has enormous advantages. It has a huge untapped labor force and extremely low, if not always the world's lowest, wages--averaging from 15 to 86 cents an hour in the garment industry, by various estimates. It also has raw materials; its own textile industry; a massive influx of capital, modern technology and management expertise (much from Hong Kong and Taiwan); a well-developed infrastructure in coastal industrial zones; and the ability to provide comprehensive manufacturing packages to the huge retailers that dominate the global industry. Those companies want to get products from a few countries, not dozens. China's currency, linked to the rapidly weakening dollar, is said to be undervalued by at least 40 percent, making its exports artificially cheaper.

China also suppresses independent unions and maintains an internal passport system that deprives migrant workers, who form the bulk of the export-manufacturing workforce, of many basic rights. According to an AFL-CIO trade petition prepared by Columbia University law professor Mark Barenberg, "repression of workers' rights lowers Chinese wages by 47 to 86 percent. …