GLOBALIZATION CHANGES THE FACE OF TCF INDUSTRIES
(World of Work, n. 18 - 1996)
This trend, says the International Labour Office in a new report, has been accompanied by a parallel shift of production from the formal to the informal sector in many countries, with generally negative consequences on wage levels and conditions of work.
The available evidence, however, 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 also points out that real earnings have in fact risen in several in dustrialized countries.
The total number of TCF workers in the formal sector is estimated at 23.6 million worldwide. No one knows just how many work in the informal sector but the figure may be five to 10 times as high", says Mr. Kari Tapiola, Deputy Director-General of the ILO. Written by staff from the ILO Sectoral Activities department, the report served as a basis for discussions by participants in a "Tripartite Meeting on the globalization in the Footwear, Textile and Clothing Industries" held in Geneva from 28 October to 1 November. Delegates to the meeting represented governments, employers' organizations and trade unions from 34 Ieading TCF producing, exporting and importing countries.
Much of production capacity and jobs have shifted to the developing world. In the 20 years from 1970 to 1990, the number of TCF workers increased by 597% in Malaysia, 416% in Bangladesh, 385% in Sri Lanka, 334% in Indonesia, 271% in the Philippines, and 137% in Korea.
China now employs 5.3 million workers, the most in the world, an increase of some 2 million workers since 1980.
During the same 20 year period, employment in the developed world declined sharply. The number of TCF workers decreased by 58% in Germany, 55% in the United Kingdom, 49% in France and 315 in the United States. The US still employs 1.6 million workers, down from 2.5 million in 1980.
The decline has been even more severe in northern Europe. In the 10 years between 1980 and 1990, Finland lost 73% of its TCF jobs. Sweden and Norway lost 65%.
While the evidence presented in the report "contradicts - for the formal sector - the hypothesis that globalisation leads to real earnings compression in the higher income countries", it also points to a "widening earnings gap between TCF workers in higher - and lower - income countries."
For example, in 1992 the average hourly labour costs (wages and socia] charges) in the textile, apparel and leather industries were (in US dollars): Germany $18.40, Italy $15.70, France $13.40, Japan $10.30, Canada $10.50, US $10, Spain $9.70.
This compares with: Mexico $1.70, Hong Kong $3.70, Korea $3.80, Taiwan, China $4.20.
In response to fast-changing demand patterns, the 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 home work and small shops", notes the ILO report. Wages of homeworkers are almost universally based on the piece-rate system and tend to be substantially lower than for equivalent factory workers. The first, and to date only, international Convention (No. 177) promoting the rights of homeworkers was adopted by the ILO in June 1996.
"Child labour", says 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. 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 in this area has been the adoption of "Codes of ethics" by several large multinational enterprises such as Levi's, The Gap and Reebok.
In the clothing industry, the number of clandestine workshops has grown exponentially in recent years. Few pay any respect to labour legislation and many hire illegal migrants. Many are involved in counterfeiting products from famous trademarks, an activity estimated to account for more the 5% of world trade in clothing.
The impact of the globalization of TCF differs according to the country and the individual industry.
Clothing
At present, more than 60% of world clothing exports are manufactured in developing countries. Asia is the major world supplier today, producing more than 32% of the world' s clothing exports.
This emergence as the world's major supplier has occurred in three stages. During the first wave of development, the Republic of Korea, Singapore, the territory of Hong Kong and Taiwan, China achieved excellent results within their own borders, but then began to cut down production and invest heavily in other least-cost countries. As a result, between 1985 and 1990, production in the Philippines, Indonesia, Thailand and Malaysia increased greatly and led the world market in exports.
These countries have in turn begun to invest or redistribute part of their production to a third wave of countries such as Bangladesh, Pakistan, Sri Lanka and more recently, Laos, Nepal and Vietnam.
China is world's leading clothing producer
China however, has become the leading world producer and supplier of c]othing - currently generating almost 13% of the world supply - without the benefit of outsourcing from other countries. Instead, the country has thrived under a government policy geared toward developing a clothing and textile industry open to the outside world.
On the American continent, NAFTA has made Mexico a privileged supplier of clothing to Canada and the United States - the leading purchaser of clothing, importing 24% of the world' s supply.
In addition, foreign investors, who had anticipated the signing of the free trade agreement, have built up the clothing industry in Mexico which, with 8,000 clothing enterprises, is in a strong position vis a-vis its Latin American competitors.
In central and Eastern Europe, Bulgaria, Hungary, Poland, Romania and the Czech Republic are gradually becoming important suppliers to the European market.
Each country has tended to specialize in a specific range of products and their volume of exports to the OECD countries has been steadily growing since the middle of the 1980s (US$24 million in 1987; US$5 2 million in 1991).
Since 1991, the place left empty by the former Yugoslavia has prompted foreign hlvestors and entrepreneurs to shift their activities to other countries. Croatia, the Russian Federation, Slovenia and Ukraine have thus become host countries for the relocated activities of European clothin industrialists.
In several instances, ultra-modern factories capable of holding their own against their most successful Western counterparts have been constructed to ensure that they can produce articles complying with European quality standards.
Morocco, Mauritius, Tunisia and, more recntly Madagascar, have become important clothing producers which export most of their production to industrialized countries. African countries as a whole, however, have been little affected by the globalization of the TCF industries.
Textiles
The biggest changes in the textile industry occurred in the 1960s when new production centres began rapidly springing up in Asia.
Many of these centres opened first to service the less capital-intensive clothing industry, then used the export earnings from these products to set up their own textile production.
Other developing countries entered the market with investments from multinational enterprises.
As a result of new production centres, developing countries' share of textile production increased dramatically through out the 1970s. The production of certain fibres by these countries increased by nearly 300%, to account for more than 21% of the world s supply by 1980.
During the past two decades textile production in Asia has forged further ahead at an average inclease of 3.6% per year. By comparison. industrialized countries have only increased production an average of 0 2% per year over the same period.
Industrialized countries lead world textile production
Despite the tendeney towards relocation, industrialized countries still lead in the worldwide production of textiles, due to their great strides in modernizing the production process.
In 1990 Germany was still the main world exporter of textiles, producing 12% of world exports in value. ltaly was second, producing 8.6% of world exports. Four other industrialized countries - Belgium (5.7%) France (5.5%) Japan (5.3%) and the United States (4.5%) - were in the list of the ten major world exporters.
The other major exporters were in Asia. The territory of Hong Kong ranked third with 7.4% of the value of world exports, followed by China in fourth place with 6.5%, Taiwan, China in sixth place with 5.7% and the Republic of Korea in seventh place with 5.6%.
Footwear
The footwear and clothing industries are similar in structure and share many of the characteristics of production and trade. Most of the countries which have emerged as successful producers and exporters of garments have also become important in footwear.
Among the exceptions, Brazil and Mexico have become key players in footwear, but much less so in clothing. A few other countries - such as Singapore - are major producers of garments but not footwear.
Almost all of the higher-cost countries have seen their footwear production fall. In the United States, the industry has declined - since the late 1970s - more than in any other industrialized nation, although footwear production in France, Germany and the United Kingdom has declined significantly in the ensuing years.
Production has also declined, albeit more slowly, in major southern European producer countries - since 1985 in Italy, 1988 in Spain, and 1991 in Portugal.
As in the clothing and textile industries, footwear production has shifted largely to developing countries capable of producing large shares of the world's supply at far less cost.
In 1992, for example, 63.2% of the world's total of shoes were produced in Asia and the Middle East, even though these regions accounted for only 43.5% of shoe consumption.
In contrast, North and Central America, which produced only 6.4% of the world's shoes, consumed 20.6%.
The countries of Western Europe produced 11.7% and consumed 18.2% of global shoe production.
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