Levis: Made in China?

by Dara Colwell, AlterNet

May 9, 2002

Last month, Levi Strauss & Company, a brand practically synonymous with the U.S.A., decided to shutter virtually all domestic production and shift its manufacturing overseas. While news of the layoffs, roughly 22 percent of Levi's global workforce, resounded heavily across the worn wooden floors of Levi's San Francisco headquarters, the halt is also bad news for America's textile industry. More than just closing shop, Levi's failure to manufacture on home turf reflects a sobering reality for the industry. This is the final death knell of a decades-long lament.

While companies such as Gap, Guess and Ralph Lauren have long farmed out production overseas, Levi's recent move to combat crumbling sales is a disheartening one for workers. Although the company hasn't remained untouched by sweatshop scandal (in 1992, the Washington Post exposed Levi's exploitation of Chinese prison labor to make jeans), Levi was the first major manufacturer to draw up a code of labor standards. Wal-Mart, and then almost all leading U.S. garment retailers, soon jumped on the bandwagon. As a whole, the industry's track record has been less than stellar, witness the sweatshop campaigns of the 1990sbut Levi tried to buck the trend. "Those were the last of the good jobs," says Medea Benjamin, referring to jobs at Levi's American factories. Benjamin is cofounder of Global Exchange, a San Francisco-based nonprofit that monitors trade and human rights. "Now Levi's has joined the race to the bottom to become another sweatshop company."

In the game of globalization, the changing rules of world trade have led many American companies to outsource production solely to developing countries, where the cost of labor is dramatically low. For years, Levi Strauss tried to salvage American jobs, maintaining wages at $9 to $14 per hour, but with sales eroding 40 percent in the past five years, the competition finally proved too stiff.

According to Levi spokesperson Linda Butler, the company's decision to shift overseas doesn't automatically signal a deterioration of workers' rights. "We believe we can operate profitably and operate with principles at the same time. We've done that for many years," she says. "A business needs to be profitable. The question is how does one implement tough business decisions with compassion, while avoiding decisions that have a negative impact on stakeholders?"The apparent answer, according to Katie Quan, former vice president of UNITE, the Union of Needletrades, Industrial and Textile Employees, has more to do with a cost-effective bottom line.

"Like all companies, Levi is mostly driven by profit," says Quan, who is unconvinced that Levi has set up camp elsewhere for any other reason than to cut costs. Historically, the textile and garment industries have often been the first to operate efficiently in developing countries because producing textiles requires more unskilled labor and less sophisticated (read cheap) goods. This allows companies to concentrate on increasing profit through design and marketing. Levi's recent plant closures, says Quan, "demonstrate the company's overriding concern with profit." The massive overseas relocation that has taken place for decades is further predicted to increase when the Multi Fiber Arrangement (MFA) is phased out by January 2005. The MFA, an international, Byzantine quota system fashioned in the 1960s to protect First World producers from Third World competition, has shielded the United States from the tremendous jump in Third World textile exports. When the MFA is finally phased out, low-wage producers in developing countries, such as China, will quickly benefit. China's growth potential in the American market is huge, currently, U.S. imports from China are five times as large as its exports, according to a report by the Economic Policy Institute.

For consumers, the MFA phase-outs will be positive. Trade reform will cause world textile, apparel and cotton production to rise as exports from countries formerly restricted by the MFA grow. With fewer trade barriers, prices will drop, roughly four percent in the long run, according to the USDA's Economic Research Service.But for workers, who will bear the brunt of market dislocations, the outlook is not so rosy.

Here in the U.S., according to the Economic Policy Institute, trade liberalization cost the domestic manufacturing sector 1.3 million jobs in 2001.� "We have allowed the apparel industry to be decimated over the last five or six years," says Nick Lardy, senior researcher at the Brookings Institute in Washington D.C. and an expert on China. "Since 1995, there has been a reduction of 371,000 jobsor 53,000 jobs a year, almost all on the production side."

Lardy says that China, which currently holds about one-fifth of the global apparel market, might have as much as 50 percent of the world market after MFA phase-outs. While China's brawn will likely replace similar imports from other countries, such as Korea, Lardy says Mexico, which hasn't been subject to quotas, has been a huge factor up to now. "Mexico is the hole in the dike for the U.S. apparel industry," he says.

Abroad, trade liberalization has induced rapid structural change, leading to super low wages and declining work conditions. As countries use the pull of a massive low-wage labor market to lure direct foreign investment, international corporations are frequently enriched at workers' expense. For example, since NAFTA was launched in 1994, Mexico, where many American companies relocated their production, has seen a 21 percent drop in manufacturing wages, according to the Economic Policy Institute. The insecurity fostered by the end of the MFA phase-out threatens to bring a period of intense competition, leading companies to create some of the very conditions that work against their attempts to implement codes of conduct.� Competitive pressure in the fashion industry has already created working conditions that are often brutal and exploitative. According to the Hong Kong-based watchdog organization Asian Labour Update, garment workers in Sri Lanka and Thailand often work 12- to 16-hour days to meet high production quotas. In China, where only government-run trade unions are allowed to function, workers' rights are severely limited. According to the All-China Federation of Trade Unions, of the 2.4 million foreign invested enterprises in China, only 12 percent have unions. This top-down operation ensures that company rights, not workers, are given top priority.

"Losing our ability to manufacture domestically leaves us vulnerable to political changes in other parts of the world," says Global Exchange's Benjamin. "Just like our dependency on foreign oil has meant coddling Saudi Arabia, our dependency on China or Mexico can jeopardize our ability to stand up for human rights."

Human rights remain the core issue for activists like Sam Gregory, program coordinator at Witness. The New York-based nonprofit, co-founded by musician Peter Gabriel, promotes international human rights through the use of documentary film. Witness recently held a week of screenings on sweatshop conditions in the U.S. territory of Saipan, taking the discussion to Capital Hill.

"When production is driven overseas, out of the reach of U.S. labor law, people feel it's very hard to put pressure on manufacturing companies," Gregory says. "But consumers have sway. Consumer dollars can put pressure on retailers to buy clothing that hasn't been made under sweatshop conditions."

Gregory believes consumers may hold the trump card to push for stronger labor standards. He explains that the sweatshop campaigns of the '90s informed consumers, leading to the growing movement on U.S. college campuses to make sure that clothing carrying school logos is not manufactured in sweatshops. "The movement grew from zero to 250 campuses, there's real potential to support workers elsewhere and have those standards in place," he says.

 As the maker of America's rugged national uniform takes up digs in countries that once clamored to sport its illustrious denim, the label "Made in America," may become as rare as a pair of Nevada jeans. For activists like Benjamin, who will be keeping an eye on the shift, the salient issue is whether Levi Strauss will continue to advocate for decent jobs. "It's very sad that Levis is leaving," she says. "But if Levis can't make a living making clothing in a socially responsible way, the responsible thing to do would be to get out of the clothing business," she says.

---------- Dara Colwell is a Brooklyn-based freelance writer.