From Unpaid India Workers, To China’s Uyghur Crisis, Fashion Retail Has A Huge Problem

Watch this documentary trailer. It is three minutes long. First a warning, there are Rated R instances of violence.

These are the people that make our jeans and sneakers. This is the world they inhabit. This is the sector they work for. They are a part of the global supply chain of fast fashion, almost all of it out of Asia.

Walk into a Macy’s or a Gap, and for sure the labels will all say Made in India, Made in Bangladesh, Made in Vietnam, Made in China, with a few exceptions. Do it sometime.

The Gap, which is one of the most transparent of all of the fast-fashion retailers, publishes a list of the contractors that make its clothes. They should be commended for it. They have 140 in China, though none in Xinjiang, home to the Uyghur detention centers. They have 62 contractors in Indonesia and 47 in Cambodia, both countries the subject of that older footage above dating back to 2013. I don’t know if the Gap has worked with any of them. They also have 90 in India, all according to their September 2020 report.

India is an especially interesting case. Their factories were closed in March due to Covid-19 restrictions. Most of them never got paid as American retailers cancelled their orders.

India: $160 a Month

When your favorite store says “buy one get one 50% off” it’s not like they’re losing money. Even with a 50% discount, they’re still profitable. That’s because countries like India pay their cut and sew factory workers about $160 a month, that’s about half of what Asia Floor Wage Alliance thinks is a livable wage in India.

The Apparel Export Promotion Corporation (AEPC) of India conducted two surveys of garment exporters, with 105 and 88 exporters respectively in May 2020. Some 83% of them reported their orders were either wholly or partially cancelled because of the pandemic.

For orders cancelled, 72% said that their buyers — mostly in Europe and the U.S. — had not taken responsibility for materials already purchased. Almost 50% indicated that buyers were asking for discounts on goods already shipped; 72% said they were asked for more than 20% discount, and 27% had been asked for discounts of above 40%. The AEPC report said 88% of exporters felt “challenged” in paying wages to workers. “Being challenged can be understood as being a euphemism for not paying wages to workers,” say researchers from the Society for Labor and Development in New Delhi.

Washington DC based Global Labor Justice is calling out big retailers like Target, Nike, and H&M, among others, for not supporting those workers after canceling orders.

“Government and corporate responses to the pandemic have exposed structural inequalities created by supply chain models of production. Within the fast fashion industry — consumer apparel, footwear and home good textile — the pandemic revealed how current supply chain models widen inequality and create a race to the bottom for workers, small suppliers, and the governments of countries that rely on garment production as a major private sector export sector,” Global Labor Justice (GLJ) has posted on its website.

Anyone who has seen pictures of India early in the pandemic should recall masses of migrant workers wandering the streets trying to get home as their factories closed. One headline in the National Geographic quoting one of those workers says, “they treat us like stray dogs.” These are the companies fashion retail contracts.

GLG said the fashion industry “must create a new era of supply chains where brands and their investors are held accountable for responsible business practices.”

This is a headache for the big, branded global apparel makers. Woke at home. Asleep in Asia.

Meet the Uyghurs: Nothing to See Here

The recent sanctions by the U.S. and Europe against China for its treatment of the Uyghur Muslims in Xinjiang have led H&M to promise it will no longer source its cotton from there. But now they are backpedaling for going along with the bans.

U.S. Homeland had already instructed Customs and Border Protection to seize any product that has come into the country made by cotton from Xinjiang.

China quickly instigated a social media campaign to chastise these brands, with actresses influencing Germany’s Hugo Boss subsidiary to say on their social media account that they would still be in the market for Xinjiang cotton “because of its quality.”

Japan’s Asics is being canceled by the Chinese.

All of this prompted the Financial Times — one of the biggest voices for the global, free trade Davos crowd — to write about how companies doing business in China are now faced with weighing the risk/reward of profits over principals.

So far this is the message: “Yes, we know China has some bad actors in Xinjiang and elsewhere, but it’s a very important market.”

It’s as simple as that.

The Fashion Lobby’s Favorite Market

According to sources in the domestic textile industry, the fashion lobbyists, led by the U.S. Fashion Industry Association (USFIA), are supposed to meet with Ricardo Zuniga, a State Department official in charge of Central America to discuss the migrant crisis on Friday. Representatives from Walmart and the Gap have RSVP’d.

The USFIA is heavily involved with the Biden Administration and their efforts include exemptions from Section 301 tariffs against China, and inclusion of textiles and apparel in the Generalized System of Preferences (GSP), a trade rule that allows duty free access of certain goods into the country as produced by countries that are part of that preference list. Textiles and apparel are excluded from the GSP.

The industry wants to get rid of a “yarn forward” trade rule that would wipe out country of origin considerations under existing free trade deals with Mexico and the U.S., and Central America and the U.S., and bring fabric in from China to Central America.

Such a move would almost surely wipe out large swaths of the American textile industry.

The U.S. textile industry supply chain—from textile manufacturers to high end apparel makers in New York and California — employed 585,240 workers in 2019. U.S. textile and apparel exports totaled $75.8 billion in 2019, with a lot of American yarn and fabric going to Mexico and Central America to make clothes to later be shipped here duty free.

Exporting Asian fabrics and yarns there would also be a blow to the factories in poor countries like Guatemala and El Salvador, responsible for significant jumps in border crossings as people there seek out economic opportunity here. Crushing their textile business for massive amounts of Asian imports would be a boost for more illegal immigration.

The USFIA’s website underscores their thinking: “fashion is made possible by global trade”. In this case, the Asian supply chain rules the roost. And the China consumer market seems to be more important to them now than the U.S., as least from a political view.

As they struggle to pick sides, the big fashion brands face political headwinds. Most of those headwinds are blowing in China at gale force from Beijing and from social media, all lambasting foreign brands.

The NBA might not have had a problem with a few Hong Kongers burning Lebron James jerseys. But I doubt the NBA and Nike, which makes a lot of those jerseys, would want to see them burning Air Jordan’s in Shanghai, Guangzhou, Beijing and Shenzhen.

Seeing how no American is boycotting China to pressure action to remedy the situation in Xinjiang, they are turning to placate those consumers who are.

The Uyghur Forced Labor Prevention Act is likely to pass this year, and that will make it harder for companies to be associated with China as it gets branded a human rights abuser. The bipartisan bill would require apparel brands to prove that their clothes have zero Xinjiang cotton in them.

The industry is now convinced that Biden will not remove the Trump China tariffs, but they will try to convince new USTR Katherine Tai to grant more exemptions.

The industry also thinks that imports from other Southeast Asian nations will be problematic, with sanctions banning business with Myanmar, and Vietnam under the spotlight for currency manipulation which could lead to Section 301 tariffs in a worse case scenario.

Both the GSP and the Miscellaneous Tariff Bill have lapsed and Congress has yet to renew them. They are expected to do so later this summer. This will define which countries benefit from accessing U.S. markets, and which products, too.

Fast-fashion brands and retailers want to get apparel and textiles included, perhaps in exchange for tougher labor standards at designated, high tech Asian factories, which may lure Tai.

One source in the industry told me, “No way Tai would recommend that to Congress. It would be catastrophic for the industry inside CAFTA and USMCA,” they said about the two big regional free trade agreements.

It’s not just fashion and athletic apparel names trying to keep their China relationship out of the headlines. According to Reuters, Boeing is now worried about China human rights.

Only, not in the way one might hope they are worried about it. They don’t want China to buy France’s Airbus instead. If that were the case, it would require China is choosing Boeing’s rival because Boeing’s home country is blaming them for genocide. It would also have to assume that France was not. Will France stand-down to sell a few passenger jets?

CEO Dave Calhoun told the U.S. Chamber of Commerce’s Aviation Forum this week that “we still have to trade with…China.” Airbus’s CEO probably thinks the same way.

Earlier this week, the U.S. State Department said in their 2020 Country Reports on Human Rights Practices that China was committing genocide against the Uyghurs. It was the first officially written statement on the matter, after months of rhetoric from Washington.

China has rejected those charges. They’ve sanctioned individuals in return.

But worse than that for the apparel industry, they have taken to ostracize, belittle, shame and cancel any corporation that dares challenge them on it.