If a pair of Nike sport shoes retails for approximately $100 and the worker who puts the shoe together earns about $1 out of that $100, why can't the money be distributed more equitably, so that working conditions are improved and the worker earns more? Labor rights campaigners have been asking questions like this for more than a decade.

On 20 February 2003 a group of nearly 50 people from 22 countries in Eastern and Western Europe, North and Central America and Asia, from non-governmental organizations (NGOs), trade unions, and multi-stakeholder monitoring and verification initiatives. The group met in Mülheim-an-der-Ruhr, Germany for a one-day seminar on pricing issues in the global garment industry.

The seminar was organized by the Clean Clothes Campaign and IRENE in collaboration with EED/Germany.

The programme addressed topics including the MFA phase out; China's role in the global economy esp. after accession in the WTO; how far can business models deliver improved labour standards; are the key solutions at the bottom or at the top of the value-chain?; and understanding the different cost factors that make up the garment price and what the costs of labour would be if ethical standards are met. Input was given from experts in the garment sector. A reader has been prepared for this seminar.

A summary of the seminar is at the end of this page.

For more information contact:peterpennartz@irene-network.nl

You can download the English report (pdf file, 10 pg, 209 Kb) here:
To download the Spanish version of the report (pdf file, 10 pg, 209 Kb):
To view and print pdf-files you can download for free Adobe Acrobat Reader at:http://www.adobe.com/products/acrobat/readstep2.html

SUMMARY

Macro Trends in the Garment Industry

• Garment production will be located in proximity to textile production
• China will represent 50 to 60% of total garment production (up from 40%)
• Increasing inter-regional competition (increasing dominance of trading blocs)
• Quota replaced by tariffs (tariffs created by trading blocs, ex. GSP)

Developments within Garment Supply Chains

• Retailers use frequent stock rotation to help achieve higher profits
• Emergence of "Asian TNCs"
• Emergence & increasing concentration of full-service suppliers (that provide "one-stop shopping")
• High number (over capacity) of subcontractors: FOB and CMT companies
• Orders placed direct or indirectly (via buying offices) with producers
• Investors remain important to garment companies (most need loans each year)

Pricing

• Factory-level costs include direct costs (wages of garment workers, approx. 1% of retail price), indirect costs, and macro costs
• Sourcing companies and suppliers lack knowledge of their costs and cut blindly
• Suppliers focus on cutting direct costs, such as wages, instead of indirect costs
• For CMT suppliers wages can be significantly more important costs
• Compliance with living wage and working hour standards at odds with sourcing company purchasing policies
• Sourcing companies have failed to integrate compliance with their incentive, stock inventory, and reporting systems
• If sourcing companies pay higher prices more money might go to employers, but not necessarily to workers