Globalization

Abstract
The worldwide movement towards economic, financial, trade and communication integration, to simply put it, the process of globalization has brought many drastic changes and improvements on global business. Naturally globalization has brought rich dividends to apparel industry and has helped to manufacture products of superior quality and value.

With all the positive contribution of globalization such as international sourcing, releasing of trade barriers have been instrumental in creating more employment opportunities and expanding the industry, there are major talking points of job losses in development countries, poor working conditions and low wages in developing countries.

This essay discusses the effects of globalization on apparel industry from a business perspective and will give you an insight whether globalization has been a saviour or a curse for global apparel industry.
Introduction

www.businessdirectory.com defines Globalization as “The worldwide movement towards economic, financial, trade and communications integration”. It further explains that “Globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent”.
With this global integration every country on the map is connected and new global business opportunities have unfolded. Global apparel industry has also been impacted by globalization and there are many debates whether it has actually being a saviour or curse for the industry.
The process of globalization has its own pros and cons. arriving at a conclusion whether globalization has actually being a saviour or a curse for apparel industry, largely depends on which side of the planet you are from. For instance the outsourcing of labour emerged through globalization has been a real economic boost for developing countries while developed countries had to suffer from industry downfalls and significant job losses. In the overall context globalization has helped apparel industry to achieve a lot in terms of increase of overall production, employment opportunities, economies of scale, innovations, expansion of industry. However heavy clouds lie over industry issues emerging as a result of globalization such as sweat shops, ethical sourcing of products and labour, job losses, the role of trade federations and agreements.

This essay is aimed at contributing to the analysis of pros and cons of globalization on apparel industry and ultimately aid you to arrive at a conclusion whether globalization has been a saviour or a curse for the global apparel industry.

The emergence of globalization in apparel industry

Fashion and clothing have been a global affair since the age old days. The trading of these industries has been taking place for centuries, from the time the first trade routes were opened between eastern and western empires

But the revival in fashion and textile industry in the early twenty first century was due to many commercial factors combined together with changing cultural and social factors which evolved through globalization.

“The globalizing of dress would not have occurred without improved transport, free trade agreements, accessibility of goods all over the world, and the phenomenon of branding. Nor could this process have happened without the penetration of capitalist practices and sophisticated marketing systems into areas formerly remote from Western influence”.

Black, Sandy. Sept. Ethical Fashion and Eco fashion. In Berg Encyclopedia of World Dress and Fashion: Volume 10 – Global Perspectives.

With the luxuries of globalization freely available around the globe the leading apparel companies in United Kingdom and United States stopped domestic manufacturing and moved to the cost effective option of migrating to countries with cheap labour and material costs. This move is evident since the 1970s and is significant in 1990s with a further decline in domestic manufacturing. Also trade agreements established through globalized movements have played a major part on this shift to overseas manufacturing in search of cheap labour and materials.

“However, the steep increase in overseas manufacturing, particularly in China and India, is a direct result of the changes in international trade agreements that occurred in January 2005, when the Multifiber Arrangement (MFA) and General Agreement on Trade and Tariffs (GATT), which had previously regulated import and export quotas between countries, came to an end. The end of regulation enabled cheaper goods to flood the market, disrupting the previous status quo.

As a consequence, many developing countries such as Bangladesh and Cambodia entered the garment-manufacturing trade, becoming significant elements of the fashion-supply and outsourcing system”.

Black, Sandy. Sept. Ethical Fashion and Eco fashion. In Berg Encyclopedia of World Dress and Fashion: Volume 10 – Global Perspectives.

According to Kunz, G; Garner, M. (2011) Globalization makes the retail prices of products lower so more customers can buy more goods which is in turn will create market expansion and more employment opportunities in the apparel industry. This low retail price is achieved through globalization which makes sourcing more effective in apparel industry. Apparel companies now seek for lowest cost in terms of labour and materials. Simply globalization help companies save money in production and bring more revenue to the company. “As we progressed through the 1980s and 1990s and in to the 21st century, however, the source of these products changed from domestic to international to multinational to global as textile and apparel professionals sought the ever elusive supplies of merchandise that would both satisfy their customers and generate the levels of profit necessary to sustain their business”..

Kunz, G; Garner, M. (2011) Going Global: The Textile and Apparel Industry. New York: Fairchild Books

Globalization and international sourcing

As mentioned earlier the geographical production of apparel industry has changed dramatically with the emergence of globalization. According to the International labour office a trend of parallel shift of production from formal to informal sectors can be seen resulting in growing employment opportunities to the developing countries while handing significant employment losses for Europe and North America regions.

Mr. Kari Tapiola, Deputy Director-General of the ILO has stated that,

“from 1970-1990 the workers of the Textile and clothing industry has been increased by 597% in Malaysia, 416% in Bangladesh, 385% in Sri Lanka, 334% in Indonesia and 271% in Philippines. During the same time period the employment in developed countries were at a steady decline. The number of workers in the industry has decreased by 58% in Germany, 55% in United Kingdom, 49 % in France, 31 % in US and more alarmingly 73% in Finland, 65% in Sweden and Norway”.

International Labour Organization. (1996). Globalization changes the face of textile, clothing and footwear industries.

Looking at the stats it is safe to declare that the impact of globalization has led to a worldwide increase of employment opportunities and overall production in the industry through the shift to the informal sector employment from developing countries. However it is important to identify the main reason for this shift are the low wages and conditions of work in developing countries in comparison to developed countries. This has paved the way for negative consequences such as "widening earnings gap between workers in developed and developing countries in the textile and clothing industry."
According to International Labour office statistics, in 1992 the average hourly wage in the textile, apparel and leather industries were: Germany - $18.40, Italy - $15.70, France - $13.40, Japan - $10.30, Canada - $10.50, US - $10, Spain - $9.70. This is compared to the hourly wages of developing countries Mexico - $1.70, Hong Kong - $3.70, Korea $3.80, China - $4.20.
Impact of Globalization on the U.S. apparel Industry.

The US apparel market has been declining as a result of production being shifted to developing countries. According to US Department of Commerce data a significant decline in the value of US shipments, industrial production, capacity utilization and employment can be seen in the apparel industry. Many famous US textile companies have declared bankruptcy and closed down their operations. Also a dramatic decline of employment from over 700,000 in 1997 to 238,400 in 2006 further proves the decline of apparel industry in US. But contrastingly the industry has experienced a significant growth in retail sales.

“When these figures are coupled with the growth of apparel imports from over US$47 billion in 1997 to nearly US$72 billion in 2006, one may safely conclude that apparel imports have rapidly displaced U.S. apparel production. In the early part of the twenty-first century, an estimated 90 to 95 percent or more of garments in the U.S. market are produced outside the United States. The percentage of import penetration varies by product category. This represented major market losses for U.S. textile firms that once supplied the fabrics and other components. However, it is primarily U.S. apparel firms and retailers who are importing the garments; thus, these segments remain competitive”.

Dickerson, Kitty. Sept. Textile and Apparel Industries at the Turn of the Millennium. In Berg Encyclopedia of World Dress and Fashion: Volume 3 – The United States and Canada.

Impact of Globalization on Asian apparel industry.

Globalization has certainly being a saviour for Asian apparel industry. With the onus being on international sourcing many Asian countries have rose to occasion and took maximum advantage on the labour opportunities presented by developed countries. The governments have made investments and given tax cessations to exploit this industry opportunity. The apparel industries in Bangladesh, Sri Lanka and India can be viewed as success stories of international sourcing emerged through globalization. “In the short space of 15 years, Bangladesh emerged as the eighth largest garment exporter to the United States by 1991. Approximately 100 different types of garments are now exported to 50 countries around the globe. A major source of foreign exchange, the garment sector grew at a compound rate of 125 percent from 1977 to 1991 (Wahid and Weiss 1996, 167) and the garment industry provided jobs for women. Almost overnight a labor force of approximately 200,000 young women appeared in Dhaka city (Feldman 1992, 118), the capital of Bangladesh.”

Ahmed, F. (2004). The Rise of the Bangladesh Garment Industry: Globalization, Women Workers, and Voice. NWSA Journal, 16(2), 34-45

Garment industry has been the Sri Lanka's largest gross export earner since 1986 and accounted for more than 52 per cent of total export earnings of the country. It is also the country's largest net foreign exchange earner since 1992. (Sri Lankan journals online: “Garment Industry in Sri Lanka Challenges, Prospects and Strategies”. Vol 33, No 1&2, 2003)

Indian apparel industry accounts for 14 percent of industrial production, 4 percent of the gross domestic production and 16.63 percent of the country’s total exports and also thirty five million employment opportunities being the second largest industry in the country in terms of employment.

According to the Annual Report of the Ministry of Textiles (2007), the “close linkage of the Industry to agriculture and the ancient culture and tradition of the country make the Indian textiles sector unique in comparison with the textiles industry of other countries.”

Bhandari, Vandana. Sept. Fashion and the Garment Industry in South Asia. In Berg Encyclopedia of World Dress and Fashion: Volume 4 – South Asia and Southeast Asia

The impact of trade federations and trade agreements on apparel industry
When assessing the impact of globalization on apparel industry, it is important to observe the role played by trade federations such as EEC, NAFTA and trade agreements such as GATT. The trade federations and trade agreements has provided the platform for product sourcing and cost efficient labour which will be instrumental in developing superior products at a better price. Agreements such as GATT and NAFTA could make it easier for countries to trade within their individual federations with lower trade barriers. Also by lowering tariffs and reducing some of the non-tariff barriers, these agreements will help facilitate sourcing and enhance the opportunities for offshore retailing. This will ultimately lead to more customer demand on industry, economies of scale, increased employment and new market opportunities. (Viewpoint: “thoughts on globalization from the people who will lead our industry into the 21st century." WWD 4 May 1995).

However key personnel in industry giants have different opinions on trade federations and trade agreements have on the industry.
Lawrence R. Pugh, Chairman, CEO of VF Corp. states that, “Regional trade federations allow a more centralized approach to manufacturing and distribution. That means we can achieve lower costs due to better economies of scale, and due to reductions in some of the complexities of operating a multinational business. The formation of the EEC opened up such opportunities for us in Europe, as may NAFTA in North America”.
According to Arthur Martinez, Chairman and CEO, Sears Merchandise Group, the trade federations and trade agreements have fallen short of expectations.

“While the promise of trade federations is to eliminate artificial trade barriers which have made it difficult to source, there has been no real progress to date. Political issues create an underlying subtext that will continue to hamper the ability of these federations to fulfill their promise.

Trade federations have an inherent, perhaps insurmountable problem: They have no clear-cut policies or goals, polities being the preeminent consideration. It is not likely that new trade federations will replace protectionist barriers. Most-favored-nation relationships will continue to exist”.

It is evident that the trade federations established through globalization has a positive impact on the industry by lower costs, But the food for thought is actually the lower labour costs and other benefits translates in to lower prices as many manufacturers may choose to direct cost savings in to personal gain.

Emerging issues in apparel industry caused through globalization.

With the so called shift of labour into developing countries another area of concern is “sweat shops’” in textile industry. Since the whole purpose of outsourcing labour is to get the production done for lowest labour as possible many leading textile manufacturers made overseas employees work for longer hours and wages which were not even sufficient to support their families. They were exposed to working conditions that posed a serious threat to their personal health. Many world famous brands such as Adidas, Nike and Gap are accused of these allegations in the past. These selfish acts indulged by corporates spoils economies of two countries as the outsourcing of labour is done at the expense of significant job losses of developed countries and fair wages of workers in developing countries. (Unfair practices in textile industry in guise of globalization. 2012) Also the issues of illegal migrants as workers, less respect for labour legislation and production of counterfeit products can also be viewed as a negative impact of globalization on Textile and apparel industry.
According to International Herald Tribune: "A Broken Model for outsourcing." (2013, June 28) many workers die due to fire, building collapses and other accidents which could be easily prevented if the factory owners invested money in creating a safe work place for workers. The most recent incident being a factory collapse killing more than 1100 people in Bangladesh. After the incident 50 European apparel companies have signed an agreement to improve the working conditions of outsourced apparel factories. Even though it is surely a right step towards improvement much bigger steps needs to be taken to eradicate root causes which causes threat to the safety of the workers.
Most of the American and European brands and retailers use a rotational policy when using hundreds of third world suppliers. Instead of keeping a long term relationship with suppliers this is done with the motive of getting the lowest price from suppliers. Because of this fact factory owners face the dilemma of keeping competitive prices for bids and they are left with no money to improve the working conditions even if they really need to. As the leading companies have no obligations to give these suppliers more business it is highly unlikely that they will invest in improving working conditions. Even though globalization has helped the industry to develop to a larger extent, there are no control mechanisms to mitigate this kind of risks for workers.

With the current system retailers waste time sending back defective goods occur due to poor machinery and working conditions. Keeping long term business relationships with suppliers may bring slight increases of price but long term apparel companies can be in a better position to demand better working conditions which will lead to quality of the end product. (International Herald Tribune. "A Broken Model for outsourcing." 2013, June 28).
"Child labour is still very much a reality in the industry" and has recently increased as a result of the growth of the informal sector and homework. Of late however, rising pressure from consumer groups, but also from governments, trade unions, employers' organizations and NGOs has begun to reverse this trend. Among other significant measures: the adoption of "Codes of ethics" by several large multinational enterprises such as Levi's, The Gap, Reebok and others”.

International Labour Office, Geneva. (1996). Globalization of the footwear, textiles and clothing industries. Report for discussion at the Tripartite Meeting on the Globalization of the Footwear, Textiles and Clothing Industries
Conclusion

The impact of globalization has had a wider impact on the global apparel industry since early 21st century. Through international sourcing which is one of the major impacts of globalization, leading apparel manufacturers have outsourced their production to developing countries which have enabled mass economies scale and lower retail prices. This situation has a healthy impact on the industry in terms of increase of overall production, employment opportunities, innovations and overall expansion of industry. With all the positive impact on the industry there are few areas of concerns emerging such as sweat shops, ethical sourcing of products and labour, job losses which are halting the progress. Putting proper control mechanisms on mitigating above concerning areas will continue the saviour role of globalization on apparel industry.

Reference

Ahmed, F. (2004). The Rise of the Bangladesh Garment Industry: Globalization, Women Workers, and Voice. NWSA Journal, 16(2), 34-45

Bhandari, Vandana. Sept. Fashion and the Garment Industry in South Asia. In Berg Encyclopedia of World Dress and Fashion: Volume 4 – South Asia and Southeast Asia. Retrieved January 13, 2014 from http://www.bergfashionlibrary.com/view/bewdf/BEWDF-v4/EDch4007.xml

Black, Sandy. Sept. Ethical Fashion and Eco fashion. In Berg Encyclopedia of World Dress and Fashion: Volume 10 – Global Perspectives. Retrieved January 09, 2014 from http://www.bergfashionlibrary.com/view/bewdf/BEWDF-v10/EDch10034.xml

Dickerson, Kitty. Sept. Textile and Apparel Industries at the Turn of the Millennium. In Berg Encyclopedia of World Dress and Fashion: Volume 3 – The United States and Canada. Retrieved January 12, 2014, from http://www.bergfashionlibrary.com/view/bewdf/BEWDF-v3/EDch3016.xm

http://www.businessdictionary.com/definition/globalization.html#ixzz2UBuBEF9e Retrieved January 03, 2014

International Labour Office, Geneva. (1996). Globalization of the footwear, textiles and clothing industries. Report for discussion at the Tripartite Meeting on the Globalization of the Footwear, Textiles and Clothing Industries. Retrieved January 10, 2014 from http://www.imf.org/external/ns/search.aspx?NewQuery=Globalization+on+apparel+industry&submit.x=0&submit.y=0&col

International Herald Tribune. "A Broken Model for outsourcing." (2013, June 28). Retrieved January 09, 2014 from Business Insights: Global

International Labour Organization. (1996). Globalization changes the face of textile, clothing and footwear industries. Retrieved January 08, 2014, from http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_008075/lang--en/index.htm

Kunz, G; Garner, M. (2011) Going Global: The Textile and Apparel Industry. New York: Fairchild Books
Retrieved January 08, 2014, from http://www.fairchildbooks.com/ext/resources/instructor-resources/PDF-previews/1062-Sample.pdf

Sri Lankan journals online: “Garment Industry in Sri Lanka Challenges, Prospects and Strategies”. Vol 33, No 1&2, 2003 Retrieved January 14, 2014 from http://www.sljol.info/index.php/SS/issue/view/143

Unfair practices in textile industry in guise of globalization. (2012). Retrieved January 6, 2014, from http://www.fibre2fashion.com/industry-article/45/4467/unfair-practices-in-textile-industry3.asp

"Viewpoint: thoughts on globalization from the people who will lead our industry into the 21st century."
WWD 4 May 1995. Retrieved January 06, 2014 from Business Insights: Global.