Look at the clothing tag on your shirt. Where was it made? Most likely, the shirt was manufactured outside of the United States. This can be explained by two words. Global outsourcing. Global outsourcing has been a hot topic concerning many Americans since the early 1990’s. Businesses are always deciding whether or not to take on this great challenge. This trend can be seen in the textile and apparel industry, companies have moved mass amounts of production overseas. Although it seems all companies in the textile and apparel industry are transferring their production to other countries, it is not essential for a business to outsource in order to be competitive. Throughout the history of outsourcing, arguments both for the advantages and disadvantages have been heard, but by looking at two companies such as Liz Claiborne or American Apparel we can see exactly how outsourcing works.
Global outsourcing is a very important business decision. It means both a world of opportunity and a world of great danger. Global outsourcing occurs when a company decides to move or contract out a part of their manufacturing or service operations to other countries. More often then not a company chooses to move its production to developing countries or cheaper economic systems. Global Outsourcing is easiest in modular companies. A modular company can be easily broken apart with little effect on the overall business. The idea of global outsourcing did not just appear over night. It’s an idea that has been cultivated throughout history.
Global outsourcing’s history is longer than some even realize. No sector in the world has received as much protection as the textile and apparel industries. As barriers to trade were reduced, global outsourcing started to gain speed. Since World War II, various actions have allowed for global outsourcing in the textile and apparel industries. Before World War II the United States economy was largely self-sufficient. It produced the great majority of what the nation consumed within its own borders. It was not until after the war that global outsourcing became hot. This trend was spurred by the 1944 Bretton Woods Conference. The Bretton Woods Conference brought together the victorious Allies to draw up rules for the postwar international system. This conference led to the establishment of the World Bank and the International Monetary Fund, which launched a procession of looser trade barriers. The world's trade began to liberalize as international trade agreements granted one special exemption after another to textile and apparel industries in advanced countries. This was only the beginning for global outsourcing. After the Bretton Woods conference, agreements were passed one after another concerning the textile and apparel industry. In 1962 negotiations concerning the General Agreement on Tariffs and Trade (GATT) took place, in which, Americans and Europeans reduced the Long Term Agreement Regarding International Trade in Cotton Textiles (LTA) in order to regulate exports from developing countries. This agreement allowed for the first jobs to be relocated overseas starting in the early 1970s. These jobs were in industries requiring low levels of skill like clothing. In 1974, The Long Term Agreement Regarding International Trade in Cotton Textiles was replaced by the Multi-Fibre Arrangement (MFA), which lasted until 1994. This agreement gave protection to many more types of natural and man-made fibers. It placed quotas on the amounts of certain fibers that one country could export. This helped to keep one country which cheap exports, like China, from capitalizing the market. In 1995, the World Trade Organization changed the Multi-Fibre Agreement into the Agreement on Textiles and Clothing. This agreement stated that the quota system would terminate January 1, 2005. This left the industry open to any countries business, resulting in...