1. Clothing Industry
Nnenna,
Moses,
Ayonni,
Dalvir,
Deia

2. Agenda
• Introduction & MFA
• Production Circuit & Global Shifts
• Labour & Technology
• Company and Regional Strategies & GAP
• Regionalizing production networks & Conclusion

3. The Clothing Industry
HIGHLIGHTS
● Second largest industry in the world worth
about $2.5 trillion - $3 trillion USD
● Second largest employer of labour
● Second largest polluter in the world after the
oil and gas
● The clothing industry is part of a larger
industry - textile industry
● Previously regulated by the Multi-fibre

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

5. 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

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

7. The Multi-Fibre Arrangement (MFA)
Loopholes in the MFA
● Increased evasive actions
● Switch to other items
● False labelling
● Relocation to other countries

8. 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 (1995–2004)
• US and the EU ‘integrated’ first those products which already
entered their markets freely. 70% of imports left to the end of the
transition period
• 2005- MFA eventually abolished
• 2008 – monitoring procedures and import quotas negotiated with
China

9. Production Circuit
Figure 14.1 The clothing production circuit

10. Employment Statistics in 2005
Figure 10.3 Employment in the global clothing industries
Source: Global Shift: Mapping the changing contours of the World Economy 6th Edition, page 304

11. Export Statistics in 2013
Figure 14.2 The geography of clothing exports
Source: based on WTO, International Trade Statistics, 2013: Table II.70

12. Shift in clothing export
Figure 14.3 Leading clothing exporters
Source: based on WTO, International Trade Statistics, 2013: Table II.69

13. 3 Major type of clothing
Figure 14.4 Composition of demand for different clothing categories in the USA
Source: based on Abernathy et al., 1999: Figure 1.1

14. Sweatshops Video
This video describes the benefit of Sweatshops in developing countries.

15. Points in favor of Sweatshops
● It 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.

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

17. 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.

18. Recent Technology
● Most 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.)

19. Benefits of Technology developments
● The 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.

20. Corporate Strategies
● A significant increase of retailers’ dominance in the industry
● Industry globalization controlled by developed country firms i.e large buyers and
retailers
● Low cost labour & orientation to specific markets
● Several broad categories of clothing companies:
- Producers of basic goods for large markets
- Operators of small workshops
-‘Factoryless’ firms
-Large scale integrated firms

21. Offshore Production
● A recent shift balance between domestic sourcing and offshore sourcing by large
companies
● Lower labour costs in foreign locations (Asia)
● Large clothing firms in the world went completely offshore

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

23. Improving Labour Conditions
● External pressure with focus on factory working conditions and labour exploitation
● 2013 Rana Plaza factory collapse in Dhaka, Bangladesh
● Efforts in improving Human Rights:
○ Monitoring of suppliers and subcontractors to ban illegal practices
& child labour
○ “Better 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)

24. About GAP

25. GAP
● American clothing and accessories retailer
● Headquartered in San Francisco, California
● An annual Revenue of USD $15.8 Billions in 2016
● Banners: Gap, Old Navy, Banana Republic, Athleta,
and Intermix
● Over thousands of factories worldwide

26. Issues
● Gap among companies accused of
○ Unsafe 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

27. Corporate Social Responsibility (CSR)
● Partnership with “Better Work Program” to
protect workers’ rights
● Implementation of recycling programs
○ “Recycle your Blues”
○ Recycling of solid waste in stores
● Impact on environment through company’s
supply chain system

28. Labour Costs
Figure 14.6 Hourly labour costs in the clothing industries 2008
Source: Werner International

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

30. WORLD BIGGEST INDUSTRIES
IN US DOLLARS (Billions)
● Food and Retail - - $ 5300
○ Clothing is a huge part of the Retail industries
○ Clothing is worthabout $2.500B- $3,000B
● Alcohol - - $ 1161
● OPEC - - $ 1027
● Telecommunication - - $ 957
● Pharmaceuticals - - $ 950
Source : Quora.com (April, 2016)

31. Global Trade Network
Currently :
Major Manufacturing Global Regions
(Clothing)
● East Asia
● North America
● Europe

32. Global Trade Network
Intra-Region Trade Regions
(Textile)
● East Asia
* Low intra-region exports
● Americas (North, Central & South)
* High intra-region exports
● Europe
*High intra-region exports

33. Global Fashion Industry Statistics - Employment
LABOUR DISTRIBUTION IN NUMBERS
Source : Fashion United, 2017

34. Asia
● The Newly Industrializing Economies (NIEs)
○ Taiwan, Hong Kong & SouthKorea
■ Got ClothingOrders from the USA & Europe
■ Outsourcedthese 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 USA

35. China
● Population - 1.4 Billion
● Labour force - 816.6million
○ Unemployment - 4.1%
○ Fashion industry employs - 10 million people
● GDP - 8,358.4
Billion
● World’s Number-One in terms textile and garment export
● 225 Billion dollars Export in 2012

36. Bangladesh
● Mostly Exports to Europe and America
○ 60% goes to europe and 40% to America
○ Greatest strength is its greatest weakness
■ - High Labour but Low wages
■ - 4 million employed in the fashion industry
● 90% are women
● Destination target for most top brands e.g. GAP
○ RANA Plaza collapse killing thousandsof people majorly women in 2013

37. 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 CLOTHINGBUYS
CLOTHES

38. USA & MEXICO RELATIONSHIP
Figure 14.8 Development of ‘full-package’ garments production in Torreón, Mexico
Source: based on Bair and Gereffi, 2001: Figure 2

39. Europe
● Most 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

40. FRANCE

41. GERMANY