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Execs Focus on Treatment of Workers

NEW YORK — The consolidation of apparel manufacturing into fewer factories around the world after apparel and textile quotas are lifted Jan. 1 may encourage plant owners to comply with vendor codes of conduct on adequate wages, working hours and...

NEW YORK — The consolidation of apparel manufacturing into fewer factories around the world after apparel and textile quotas are lifted Jan. 1 may encourage plant owners to comply with vendor codes of conduct on adequate wages, working hours and the proper treatment of employees.

“Most retailers and apparel importers are thinking about placing bigger bets with fewer people,” among the 148 nations of the World Trade Organization that are dropping the import limits, said Anne Gust, chief administrative and compliance officer for Gap Inc. “With that comes a bet on higher standards.”

The issues of underpaid workers, human rights violations and mistreatment of employees in some foreign contract factories first came under public scrutiny in the mid-Nineties. Apparel vendors and retailers, who source most of their products from plants largely run by independent owners, turned to codes of conduct that they developed or that were generated by third-party monitors such as Social Accountability International in an effort to crack down on abuses.

Gap’s suppliers once accepted the rules grudgingly, but in recent years factory owners have told Gust, “‘We do it because we see the benefit of it,’’’ she said.

Complying with codes of conduct and improving workers’ treatment has helped Gap suppliers to attract and maintain skilled employees. Faced with violations such as excessive work hours, Gap has brought in industrial engineers to help its contractors operate more efficiently.

“In some cases, productivity is up as much as 40 percent,” at the factories, Gust said.

Tom Haugen, executive director at Hong Kong sourcing powerhouse Li & Fung (Trading) Ltd., said, “Your ability to influence what happens at a factory is directly proportional to the amount of business that you do there.”

Gust and Haugen made their remarks at a Social Accountability International conference in Manhattan on Oct. 18.

Daniel Rüfenact, director of corporate social responsibility with the $100 million Lausanne, Switzerland-based sportswear brand Switcher, said his company has also improved compliance at its plants by giving larger orders to fewer suppliers — in his case, cutting to about 25 factories in India and China from 250.

“One of the most important incentives is that we are going to work with them on a long-term basis,” he said. “If you commit to work with them for five years, as we try to do, then you can have everything.”

Dealing with abuses such as employees toiling for shifts of 12 hours or longer requires educating factory owners on labor standards and understanding why the workers are willing to submit to the shifts. Switcher noted that the migrant workers who came from rural areas to staff its Chinese apparel factories in coastal cities were often willing to work for long stretches partly because there was nothing else to do at their dormitories during off hours. Since their wages were low, the additional shift time — and additional pay — was welcomed.

So getting the firm’s vendors to make meaningful changes in shift lengths required a two-part solution: raising hourly wages so that workers’ pay was not reduced and developing recreation and education programs to keep factory workers busy when they were not at their sewing machines.

Sandra Polaski, senior associate for the Trade, Equity & Development Project at the Carnegie Endowment for International Peace, suggested that companies need to focus on China as they try to improve living standards for garment workers.

“China is big enough that it can draw a line under the race to the bottom,” she said, using the analogy for factories’ efforts to undercut one another by paying workers lower wages. China faces growing unemployment in rural provinces, where formerly state-run companies are making the jump to private ownership and are cutting millions of jobs.

Polanski suggested that Chinese authorities should raise national minimum wage standards to ensure that manufacturers don’t prey on the unemployed. That, in turn, would reduce some of the pressure for manufacturers outside China to cut their wages to compete.

Speakers at the conference agreed that China will be in a position to grow its share of apparel manufacturing after the quotas are lifted, though they suggested there won’t be an immediate surge.

“For next year, by and large, all our customers are holding back on China because of the uncertainty,” including the possibility of safeguard actions resulting in fresh quotas being imposed by the U.S. and European Union, Haugen said. “I don’t think there will be a rush into China for a while.”

WTO nations have the option of placing category-specific limits on their imports of Chinese garments through 2008 through a provision known as the safeguard measure. The U.S. last year imposed safeguard limits on some Chinese goods that already had seen their quota limits lifted, and domestic manufacturers this month filed petitions seeking additional safeguards.

Haugen said that some of his customers in the children’s wear category, which already has been freed of quotas, are trying to reduce their reliance on China.

Chinese manufacturers — particularly in the south — face hurdles such as energy shortages, Gust said.

Even if China’s growth is gradual at first, it will be pronounced after the safeguard provision expires, speakers said. Polaski noted that China’s market share growth will come at the expense of poor nations that are dependent on apparel and textile exports. Apparel exports represent 45 percent of the gross domestic products of Lesotho and Cambodia, and 41 percent of Honduras, and many developing nations are not prepared to handle the potential loss of export business, she said.

“The international community’s response to this problem so far has been really inadequate,” she said.

Gust said governments, companies and nongovernmental organizations need to collaborate on this potential problem, which some experts fear could jeopardize the jobs of as many as 30 million garment workers worldwide.

“You can’t just get one sector to go fix this issue,” she said.

Still, she added that it’s important for apparel importers to consider the effect of their actions on fragile economies. While business demands may require firms to pull orders from some nations, she said, executives should ensure that “you do so at least in a responsible way.”