Bangladesh clothing factories are not safe

A fire in February at the Garib & Garib Sweater Factory in Bangladesh killed at least 21 workers and injured a further 50. Reports suggest that the emergency exists were blocked in the seven story building as was the main gate. Since 2000 there have been at least nine fires in Bangladesh apparel manufacturing companies resulting in nearly 273 deaths.

This recent fire demonstrates that audits by retailers are failing to notice inadequacies when it comes to safety and the protection of workers.

Research provides evidence that the volume of apparel imports from Bangladesh by South African retailers has grown. It is hoped that South African retailers will take note about the poor state of Bangladesh's clothing industry when it comes to safety and ensure that the workers from the companies supplying them are adequately protected.

During the period of South Africa's quotas on Chinese imports, Mauritius, Malaysia and Bangladesh increased their exports to South Africa by at least 345%, 680% and 2076% respectively. Imports from Vietnam equated to 388%, Thailand by 39% and Myanmar 197%.

Comments on SA's Textile Industry re:New Policy Development

By NICK STEEN
Published: 2010/03/29
Business Day

THE release of the second Industrial Policy Action Plan predictably drew bland support from industry and criticism from economists of the support measures for “sunset” industries. What has been lacking in the debate is the context of the plan in SA’s socioeconomic environment.

The plan is presented in a country in which workers still bear the scars of apartheid education or suffer the effects of a still- dysfunctional one — a country lacking in service delivery, one with inefficiency and in which corruption is widespread and, importantly, one in which foreign competitors have gained or gain significant market advantage through state subsidy and support.

It is in this context that Trade and Industry Minister Rob Davies has crafted his policy document. He has taken a developmental approach, recognising the need to retain and create employment in the short term, as well as to build an economic platform for the future. The textile and clothing industry features prominently in the plan, and its support has received much criticism.

The critics rely on the free market principle that industries that need government support should be allowed to fail so that more competitive industries can replace them.

Unfortunately, this criticism arises from a lack of understanding of the constraints the sector faces. It is also made without offering alternatives that will fulfil the vital job- creating role that it provides.

The industry has had a bad image for years, characterised as being unproductive, with eastern competitors being held up as model examples. This view has not been helped by poor public relations and divisions between subsectors.

In reality, independent analysis has shown that local apparel manufacturers are at least as efficient in the actual manufacturing process as their eastern competitors. Their lack of competitiveness lies largely in input-cost differentials. Productivity is a problem in the South African textile sector, but many of its problems are not sector-specific — they are the result of systematic failures in the broader economy and of society.

Can one stigmatise the sector for productivity problems linked to AIDS and drugs, or the failures of Transnet and Portnet, or the inability of customs and excise to stem the flood of illegal imports? Or should it be supported while these impediments to competitiveness are corrected?

Also, the effect of foreign-government subsidy is ignored when analysing the textile and clothing sector — because it is not properly appreciated or because it is simply viewed as a benefit to local consumers. This approach fails to take account of the long- term effect of de-industrialisation caused by subsidised imports. The sector could die because other countries subsidise their textile industries, while we do not.

Both Pakistan and India have targeted SA for textile exports and, besides general support measures, have specific subsidies for textile products sold to this country. Should this be regarded as a reason to allow the industry’s demise — or a reason to support it against unfair competition?

Also to be considered is the fact that once de-industrialisation has occurred, local retailers and consumers are left to the pricing mercy of foreign manufacturers.

This danger was seen globally in the agricultural sector, where the importing of highly subsidised agricultural products has caused the demise of local farmers, leaving countries facing a food security crisis.

The recession has caused countries to question whether the widespread importing of subsidised finished goods has resulted in the destruction of their industrial capability and brought an unhealthy dependency on imports. This de-industrialisation has also entrenched unemployment and created a dependence on the state for those workers who previously occupied these jobs.

The Industrial Policy Action Plan shows the government is prepared to question the approach of previous administrations and to look for new solutions. It indicates new willingness to decrease or increase tariffs to the benefit of industry, rather than simply to appease the World Trade Organisation.

Where tariffs are decreased, it will be on intermediate goods to lower input costs and increase the competitiveness of local manufacturers. In being prepared to raise duties selectively, the minister is simply recognising the effects of foreign subsidy and the local socioeconomic impediments to competitiveness. He will also temporarily reduce the pressure on the sectors that still need to be restructured to meet the multiple challenges of global sourcing, increased innovation and shorter lead times.

A number of opportunities for textiles and clothing are presented. To be welcomed is a focus on recapturing lost local market share. This contrasts with previous plans, which aimed at creating an export industry without solid local foundations. This plan copies the approach taken successfully by Brazil. It is belated recognition that export orientation generally follows local market success.

Illegal imports and underinvoicing are also given a high priority, with several efforts by the South African Revenue Service mentioned. These are critical interventions for the sector which, if successful, would certainly change the fortunes of the industry. Industry bodies calculate that nearly half of imported textile finished products enter SA either illegally or are underinvoiced.

Disappointingly, no mention is made of the industry’s recommendation for an illegal imports levy on all finished textile imports, the proceeds to be used to resource and reward customs officials in their fight against illegal textile imports.

Skills development features in the plan once again, with the emphasis broadened to include management development and succession. However, the dearth of higher-level skills has less to do with the need for training than with the lack of attractiveness of the sector. It must offer the possibility of successful and profitable careers before skilled people will look to enter the industry.

The same applies to the aim of racially transforming the industry. Until it offers a decent return on investment, neither black entrepreneurs nor managers will be enticed to replace existing white capital and skills.

For the first time, a move is made to address rationalisation and specialisation in the fabric manufacturing subsector, with the aim of moving away from futilely trying to compete with the major cotton countries in commodity textiles. This will require consensus between textile and apparel manufacturers and a more active role for the Department of Trade and Industry, both of which have been lacking. Davies should look at how Brazil and Bangladesh achieved their successes in this area.

The fostering of innovation and new technologies are proposed. With other governments also going this route and local industry not profitable or stable enough to make the type of investment needed, the government will need to give it more support than is forthcoming from the Treasury.

The plan is commendable and could lead to the re-industrialisation of the sector. But to be successful, changes in both attitude and structure in the sector are needed. Success will need an open mind and a willingness to take constructive criticism by industry, labour and the department, a preparedness to co-operate and collaborate and a need to go beyond the scapegoat of “poor productivity”. The process will probably also need more money than the Treasury has allocated.

Steen is the CEO of Sheraton Textiles.

Copyright protection for fashion: The debate continues

Harvard Law Prof's Poor Economic Analysis Used As Cover For Unnecessary Fashion Copyright

For many years, we've pointed to the fashion industry as a perfect example of how a creative industry can be incredibly innovative and fruitful, even without copyright protections. It's a great story, and studies have shown, in fact, that the lack of copyright protection for fashion designs has been key to the success of the industry. There are a few reasons for this: (1) Brand recognition still matters, so people still want the originator's work -- and thus the copies tend to spread the concept further, and actually increase desire for the "real" version. (2) Copying of designs helps better segment the market, and actually allows top designers to increase their prices. (3) Most importantly, the fact that copiers so quickly copy the works of top designers means that those designers can't rest on their laurels and have to quickly move on to next season's design. In other words, as we've seen in many other industries, as you remove monopoly protections, the incentives to innovate actually increase.

And there should be no question that things work fine in the fashion industry, as it is highly competitive, with many different players, and new designs hitting the market all the time. Considering that copyright's sole purpose is to create incentives to promote such innovation, it's hard to see how anyone would be justified in suggesting we need a new copyright over fashion.

And yet, as with other types of intellectual property, what happens is the incumbents all realize that with such monopoly rights, they would be able to block competitors, slow down their rate of innovation, and capture greater monopoly rents. So they push for them. And, tragically, politicians have been listening. Back in 2007, a bill was introduced to add copyrights to fashion. That bill went nowhere, but similar efforts were made in 2008 and 2009 (when designers tried to enlist Michelle Obama to help their cause).

This year, it looks like the plan is to hide behind an economically questionable law review article put out by a Harvard law professor, Jeannie Suk, and a Columbia law profesor, C. Scott Hemphill (who actually appears to have a degree in economics). A bunch of folks have sent over a Boston Globe article that focuses on how Suk is helping to craft this latest attempt at adding copyright to fashion design, using the law review article as economic proof that such a law is needed. This is troubling, as the economics in the paper are severely lacking.

Given the success of the industry today, combined with the studies showing how it benefits from a lack of copyright, I wanted to read the analysis to see why Suk felt so strongly about this, and I have to say that it makes highly questionable economic arguments with no basis in fact at all. Instead, almost every economic argument is a random assumption about things -- with provably false statements like "Obviously, people always want to purchase inexpensive copies of creative works or have them for free."

No, that's not obvious and it's not right. Studies have shown that people are more than willing to pay for scarce quality -- and recent studies proving that a huge number of buyers of counterfeit goods later buy the real goods suggest that people have no problem paying for the authentic versions when they can. The myth that "people just want stuff for free" has been debunked so many times, it destroys the credibility of this paper.

But, even worse, Suk seems to base her entire argument on one simple economically-illiterate pretense: that competition is bad, and without monopolies, people innovate less:

The reduced profits can be expected to have a negative effect on the amount of innovation; this is a standard result of economic theory.

No. No, it is not a standard result of economic theory. It is only the result in a market that is static, in which no additional innovation can occur. But in the real world, in a dynamic market, this is called competition and has been a part of every "standard" economic theory since Adam Smith, who he noted that if someone is making a profit, it will bring in competition. But this doesn't have a negative effect on the amount of innovation. Quite the opposite. Competition drives innovation by encouraging people to come up with something new. Monopolies decrease innovation by taking away competition and slowing down market innovation. That is what economic theory (and reality) says.

Basically, Suk's whole position is based on the fact that the monopoly rents of designers is decreased by a lack of copyright, but she fails to consider that this leads to greater and more frequent innovation (which we see all the time in the market). What's even stranger is that she flip-flops her argument in the middle of the paper. She talks repeatedly about how designers need big profits to have the incentive to innovate, but then says that big designers aren't the ones really threatened. Instead, she claims, it's the smaller designers. But, those designers didn't have those big profits to protect in the first place. They're out there trying to make a name for themselves by designing something new and cool -- so they have plenty of incentive to innovate. And if their design this year is copied, that's great for them because it gives them greater recognition and means the demand for their original products will be even greater the following season.

Now, we see bad economic reasoning all the time -- but it's troubling when it comes from a Harvard professor (law, not economics), whose mixed up work is being used as the basis of changing the law that could seriously harm an innovative creative industry that is currently thriving.

Ref: by whytewolf on Wed, 03/17/2010

South African 2010 mascot factory closed

Zakumi factory told to shut : Sweatshop reports stop mascot production
Ref: Times Live

A Chinese factory contracted to produce figurines of World Cup mascot Zakumi has been forced to stop work after accusations that it was running a sweatshop. Fifa's worldwide licensing representative, Global Brands Group, has suspended its approval of Shanghai Fashion Plastic Products & Gifts after an inspection and audit of its factory.  The audit was prompted by international media reports that the workers at the factory were paid R23 a day and teenagers were forced to work 13-hour shifts to manufacture Zakumi figures. Shanghai Fashion had agreements with companies in Europe, North America and South Africa to make 2.3million toy figures of the dreadlocked leopard mascot.

About 100000 of the figurines were reportedly destined for Ascendo Industrial, a heavily guarded factory and distributor in Newcastle, KwaZulu-Natal, owned by ANC MP Shiaan-Bin Huang and his wife, Su-Luan, who subcontracted the work to the factory in China. Yesterday, Global Brands Group spokesman Paul Zacks said he could not confirm the conditions at the factory, pending approval of a statement from its head office in Singapore. But he said the audit identified a number of areas of non-compliance with Global Brands' policy.

"A corrective action plan has been put together with the manufacturer to close the gaps and make necessary improvements. In the interim, approval for this factory to manufacture these figurines has been temporarily suspended, affording them the opportunity to put in place corrective actions and measures to ensure the factory remedies its non-compliance," he said. The Fifa group has not disclosed the length of the suspension but said the company will be audited again. However, Huang is confident the suspension will be lifted as early as next week and manufacturing resumed. "There is no big issue. There was an inspection. But when the media reports began, the factory began paying its workers more and changing, so I think by next week, they will be making the figurines again," he told The Times.

Cosatu spokesman Patrick Craven said the trade union welcomed the moves to improve working conditions at the factory in China, but any work related to the World Cup should not have been outsourced. "We still stand firm behind our statement that all World Cup goods should be proudly South African," he said.

Comment: Mr. Patrick Craven has been asked a number of times to comment on the Bafana Bafana clothing made in China but he is yet to respond. Can we assume the same conditions prevail in the factories making South Africa's national soccer team's merchandise?

The Zakumi 2010 FIFA mascot will be made in China

It is confirmed that this year’s FIFA mascot will be made in China, rather than in South Africa. This was released by the clothing research agency ReDress and cited in a Business Report article last week while public concern has been aired about it through various media channels.

This news was not welcomed well by Judith King who stated; “huge profit will be made by exploiting low-paid Chinese workers while South African workers miss the chance to get new work”.

South Africans have been asked to boycott the 2010 World Cup “made in China” products as the South African Football Association should be held accountable for not supporting their own SA clothing industry. This decision equates into a lost opportunity for the South Africans in general as they were hoping to make something authentic whilst reviving many of the small and medium-sized clothing businesses.

Posted by Marcus on Thursday, March 4, 2010

Ref: http://www.betonworldcup2010.com/