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The coming Apocalypse for US Apparel Makers

DECEMBER 3 - 9, 2004
Losing Our Shirts
An unhappy New Year looms for American apparel makers
by Steven Mikulan
L.A. Weekly

Look for the union label when you are buying that coat, dress or blouse.
Remember somewhere our union's sewing,
our wages going to feed the kids, and run the house.
We work hard, but who's complaining?

-Garment Union song


At midnight New Year's Eve, the world will come to an end for many apparel
manufacturers and their workers, as the World Trade Organization terminates
the 1974 Multifiber Arrangement's quotas that have stabilized the global
clothing industry for 30 years. The end of these quotas for the WTO's 148
member nations is expected to trigger a flood of cheap, well-made Chinese
textiles and clothing into factories and department stores from Manila to
Mission Viejo. It's a flood that could drown some developing countries,
destroying already fragile industries while continuing the steady
deindustrialization of America's own economy. The effects threaten to reach
far beyond the loss of indigenous manufacturing jobs, seriously damaging
economies in poor countries and increasing emigration toward wealthier ones.
It is the rag trade's Y2K, but this time the sky really is falling.

The quota expirations for 98 categories of textiles and apparel mark the
final stage of a 10-year phase-out of restrictions on the annual metric
tonnage countries could export to North America and Western Europe.
Originally designed to protect these continents' local clothing industries,
the export ceilings created new garment economies in places like Haiti,
Mexico and Kenya. When, say, Wal-Mart exhausted its quota of pajamas that it
had consigned from one country, it would turn to another for more inventory,
thus spreading industrialization throughout Eastern Europe and the Third
World.

In 2002, the last time specific quotas were abolished, Haiti lost half its
U.S. market to China, which packs a triple threat of low wages, modern
efficiency and quality merchandise. Since quotas on brassiere exports were
phased out in 2002, for example, Haiti's U.S. exports have plunged more than
94 percent, while China's initially increased 232 percent; likewise, as
China's unfettered exports of infantwear jumped 826 percent over the same
period, Bangladesh's shrank 18 percent. These statistics, analysts warn,
only hint at what lies ahead four weeks from now, when 701 quotas in the
U.S. alone will disappear. In addition to the presumed tidal wave of Chinese
products, post-January 1 predictions include:

. More offshoring of American apparel companies, since companies that had
previously been "shackled" to the U.S. by quotas will have no reason not to
set up plants in Third World countries.

. Sub-Saharan African countries, which had benefited from no-tariff
agreements with the U.S., will lose trade because the savings they passed on
to American retailers from not paying import duties will not match the
savings offered by other countries with lower overhead and, now, no quotas.
(Tariffs will not be affected January 1.)

. By 2010, according to a federal task force on textiles and apparel, only
one-quarter to one-third of the current 50 to 60 exporting countries will be
doing business with the U.S.

"When [apparel quotas] came off in 2002, China's share in those 29
categories went from 9 percent then to over 70 percent today," says Mark
Levinson, chief economist for the Union of Needletrades, Textiles and
Industrial Employees (UNITE). "When quotas expire in January we expect the
Chinese market share in the U.S. to increase from just under 20 to about 70
percent. That's a huge increase in millions of workers in developing
countries [who] will lose their jobs - it's the largest industrial shift in
the last century. Roughly tens of billions of dollars will be shifting to
China. This is a monumental issue globally."


Locally, of course, the big question is how January 1 will affect Los
Angeles, California's largest garment-producing center. The L.A. County
Economic Development Corporation claims L.A.'s apparel-manufacturing sector
generates $24.3 billion annually, making it the city's single largest
industry. Still, it's an industry in decline. The number of Los Angeles'
cut-and-sew garment workers peaked in 1996 at 97,500, according to the state
's Employment Development Department; there are currently about 62,600
workers employed, the vast majority Latino or Asian women immigrants.

For now the consensus seems to be that there is no consensus. According to
Ilse Metchek, executive director of the California Fashion Association, 2005
's first quarter will simply reflect the last months of 2004 - although she
believes one immediate effect will be even more gridlock at the L.A. and
Long Beach harbors, which are now operating at a crawl as Christmas goods
from Asia stream into port.

"You've got a lot of nervousness in the industry," she says of the harbors
possibly becoming worse chokepoints. "Retailers are afraid they won't have
inventory on the shelf. It will all shake out about the end of April,
beginning of May."

One thing Metchek is not counting on is price drops.

"Wal-Mart can't get any cheaper," she says, claiming the profit margin on
clothing is already razor thin. "Apparel is 10 percent cheaper than it was
10 years ago. There's only so much [retailers] can buy. If any savings are
to be had, they will be kept by the stores. The price of labor is not the
biggest factor for stores - it's the cost of transportation."

Kent Smith, executive director of downtown L.A.'s Fashion District Business
Improvement District, disagrees.

"The apparel industry is pretty price competitive," Smith tells the Weekly.
"It'll be hard to resist lowering prices. And as the quotas come off we'll
be seeing more wholesalers here, which will drive down prices."

Smith sees both silver linings and safety for the Los Angeles market.

"We have leather jackets made in our districts - China's lack of quotas will
have no effect on us because the craftsmen are already located here. But
places like Vernon and northern Orange County will be negatively impacted."

Lonnie Kane, the president of Karen Kane Inc., has his plant, which employs
about 200 workers, in Vernon, although he sources about a third of his
product with Chinese factories. Kane and his wife, Karen, began their
company working out of their Studio City garage 25 years ago and have built
it into a respected line specializing in high-end clothing. Like Smith, Kane
believes higher-priced American apparel makers, especially in Los Angeles,
will survive January 1 without problems.

"The budget end of apparel manufacturing is already gone," he tells the
Weekly. "January 1 definitely could be the stake in the heart of moderate
manufacturing, of the smaller manufacturer who's not sophisticated enough to
import. And the [textile] guys who make basic fabrics look to be devastated
if every khaki and denim product comes out of China."

According to Kane, however, Los Angeles' rag trade cannot expect any help
from city government.

"L.A. is unfriendly to the apparel industry," he says. "It likes the
prestige of having a creative industry like Hollywood, but doesn't want
'dirty businesses' like sewing factories. Yet cities tend to lose sight of
the fact that we need to have employment at every level and sewing factories
provide entry jobs to unskilled and immigrant workers."

Karin Mak, of Sweatshop Watch, a Los Angeles-based garment-worker advocacy
group, is equally pessimistic: "The L.A. economy will be devastated as much
as the garment industry, because workers contribute to the local economy.
Half the industry will stay, and half of it will move - especially if
workers try to unionize."


There are, of course, people for whom January 1 is more than a theoretical
headache.

"I would sell fruit in the street," says Areceli Ruiz, when asked what she
will do if the direst predictions come true. "The worst thing that could
happen is that I would be left without a garment job. I've cleaned houses,
but it's harder to find those jobs because they want references. I've never
asked for help from the government even though everyone says we immigrants
only want welfare. I pay taxes but get nothing back because I have no Social
Security number."

I speak to Areceli and her sister, Alejandra Ventura, through a translator
in the Sweatshop Watch offices, a block away from downtown's bustling Santee
Alley retail center - a sprawling market selling low-price clothing,
knockoffs and bootleg DVDs. Santee will probably remain untouched by January
1's quota changes - except that many locally produced garments will be
replaced by cheaper imports. The two sisters are Guatemalan immigrants who,
along with thousands of others like them, helped build both Santee Alley and
the upscale California Mart a few blocks west.

Alejandra, who arrived here in 1986, remembers her early years when she
worked side by side with former doctors, nurses and professors - immigrants
whose first North American jobs were on sweatshop floors. She knows too well
the constant yelling and threats from supervisors, the filthy bathrooms and
long hours.

"The bosses think we're slaves," she says, "that we don't feel pain or get
hurt." Alejandra says her best years came at the end of the 1980s, when she
pulled down between $400 and $500 a week, working 10- to 12-hour days. But
after the North American Free Trade Agreement, she says, wages in L.A. went
down. Today, she only works sporadically, partly because she insists on
receiving a taxable paycheck from her employers, as opposed to the lump of
cash most prefer to pay. Without a paycheck record, she is ineligible for
any kind of government medical care or Social Security benefits.

Areceli and Alejandra live within a one- or two-bus commute from their homes
in the MacArthur Park area. Alejandra has five children, two of whom are
adults working back in Guatemala, while her sister has one 10-year-old.

Areceli says that when the post-9/11 economy slumped, conditions got worse
downtown. Today she makes $243 per week working 10 to 12 hours a day sewing
single-needle work on blouses, pants and jackets, plus two and a half on
Saturday; she receives one 15-minute break during her workday.

I ask Alejandra what she thinks will happen when the quotas are removed.

"I believe it's already starting," she says, "because what they pay is less
than before. The bosses look for people who won't speak up, who need to send
money back home."


The economic dislocation brought on by the end of textile and garment quotas
is only the latest iceberg to appear on the high seas of free trade. Since
the Clinton administration inaugurated NAFTA, more than a million and a half
American jobs have been offshored as multinational buccaneers move plants
and assembly lines to countries whose workers are paid poverty wages. But
far from having their living standards raised, workers in the developing
world have had what few job safeguards they enjoyed superceded by WTO rules
and find themselves competing with workers of even poorer nations.

It reminds one of the close of Bertolt Brecht's Weimar satire, The
Threepenny Opera, in which the privileged and connected characters celebrate
their good fortune while London's beggars shamble off into the shadows:


For some are in darkness

And others are in light.

And you see the ones in brightness

Those in darkness drop from sight.


Capitalism, as Marx famously said, "has set up that single, unconscionable
freedom - free trade. In one word, for exploitation, veiled by religious and
political illusions, it has substituted naked, shameless, direct, brutal
exploitation." The bittersweet irony is that China, the world's last Marxist
power, will be the cause of so much of the coming misery. Still, as
Sweatshop Watch claimed in a "working paper" published last year, it is the
multinationals, in their never-ending search for lower labor costs, that
have actually taken jobs out of the United States, not China.

"Who benefits from the expiration besides China?" Mark Levinson asks.
"Wal-Mart, the Gap - most apparel companies are the big multinational
retailers. They want to source product anywhere they can."

Levinson's organization is the descendant of the International Ladies
Garment Workers Union and the Amalgamated Clothing and Textile Workers
Union. It merged last summer with the Hotel Employees and Restaurant
Employees International Union (HERE) to form UNITE HERE. UNITE has plenty to
lose New Year's Day. Since 1990 the number of American garment and textile
workers has declined more than 50 percent; today about half a million
workers are employed in what remains of America's once robust apparel and
textile manufacturing industries. Worse, UNITE's partner, HERE, is engaged
in a bitter and protracted contract dispute with hotels in Los Angeles, San
Francisco and Washington, D.C. The combined unions claim a membership of
840,000, but more than 400,000 of these are retirees.

"There's absolutely no question that the end of quotas will result in job
loss in the U.S. textile and apparel industry," Levinson says. "We're trying
to protect the numbers we have right now and to expand, but we're not going
to organize in a factory that's going to be shut down."

Levinson says his union is now concentrating on organizing America's largest
domestic apparel manufacturers - those contracted by the Defense Department.

"Our argument is 'Look, you don't want sweatshops making garments for our
soldiers.'"

UNITE HERE has joined the American Manufacturing Trade Action Coalition
(AMTAC), an industry-labor lobby that is petitioning the Commerce Department
through an interagency group called the Committee for the Implementation of
Textile Agreements (CITA), to stall the quota terminations or to adopt
"safeguard" restrictions on imports.

As of this writing, CITA, which can thwart the removal of quotas if it
believes they will cause a serious disruption to America's clothing and
textile industry, has agreed to review eight of the petitions and is
considering the remaining three. This is an unprecedented action because
such petitions are normally only filed after evidence of economic disruption
can be proved, not in anticipation of it. Needless to say, the Chinese, who
joined the WTO in 2001, are not happy. Although repeated queries by the
Weekly to Chinese trade agencies, as well as to the Chinese embassy and to
China's Los Angeles consulate, went unanswered, Beijing's China Daily
recently made clear its displeasure by quoting a Beijing textile manager as
saying "it is 'ridiculous' that the U.S. government would decide the fate of
Chinese pant producers by pure speculation."

For its part, AMTAC accuses the Chinese of using currency manipulation and
state subsidies to create unfair trade conditions. It's worth noting that
China's command economy, which assigns individual factories their own,
internal quotas (apart from the WTO's), has created a Byzantine system in
which factories can "sell" surplus quotas to other factories. For example,
if a Los Angeles apparel maker called Teen Seen contracts for 10,000 tank
tops from People's Tank Top Factory No. 1, and the Chinese plant is only
permitted to make 9,000 units, it will have to buy 1,000 quota units from
People's Tank Top Factory No. 2. But the cost for the subsequent 1,000
units, which can easily account for 10 percent of the overall tank top cost,
is passed on to Teen Seen in Los Angeles. In some cases, the selling of
quotas has become bigger business than manufacturing itself and, in the
Wild, Wild East of today, creative entrepreneurs have set up dummy factories
to make money by selling the quota units they've been granted to real
factories.


Until the first signs of economic change appear after New Year's, observers
will content themselves with predicting the most likely winners of a world
without quotas - China, India and Vietnam, the last of which is poised to
join the WTO. And there are the losers, a long list that includes Honduras,
Bangladesh, Mauritius and the Philippines - all the former equatorial
colonies whose teeming millions live beneath tin roofs, forever at the mercy
of foreigners.

It's unclear what direction CITA is leaning toward regarding the pleas now
before it, although a Chinese textile industry spokesman has noted that CITA
's decision to review AMTAC's petitions was made before the presidential
elections and seemed to be more of a political gesture by the Bush
administration than a genuine signal of concern. (A spokeswoman for the
Commerce Department declined to answer questions directly for this article,
preferring instead to give only background information via e-mail.)

He may be right, given the White House's reluctance even to go through the
motions of jawboning with foreign trade partners. Still, maybe there will be
a period of adjustment long enough for the world's apparel and textile
industries - and American garment workers - to prepare for the worse. Who
knows? Perhaps there is an apparel glut - if not in the stores, then in Los
Angeles' harbors - and China will not be receiving a tremendous number of
orders immediately after January 1. Or perhaps China, which is currently
racked by severe power outages because of its rapidly growing industrial
sector, simply won't be able to keep up with increased orders in the near
future.

For now, local apparel manufacturers appear mildly optimistic - or
fatalistic, depending on one's interpretation.

"Nothing's the end of the world," says Lonnie Kane. "We saw this with the
shoe business - 98 percent of which is now imported. Apparel and textiles
have slowly moved offshore. It's all about price. We don't have a place for
low-wage industries. But I don't want local manufacturers to go away because
I enjoy the flexibility and don't want to depend solely on imports."

And what happens to the people who formerly worked in those industries -
will they all be forced to sell fruit on the street and clean houses?

"When your economy is undergoing massive change," says the L.A. Fashion
District's Kent Smith, "people are unfortunately going to lose jobs. We're
just not masters of our economy anymore."