by Gianluca Corinaldesi and Meredith Watkins
UVA Professor (and Duke Ph.D.) Jennifer Bair joined Penn State Professor Mark Anner and Duke Professors Gary Gereffi and Giovanni Zanalda for a conversation on “COVID Disruptions to the Apparel Supply Chain: Focus on Bangladesh.”
Since the beginning of the ‘70s, the apparel industry has been synonymous with outsourcing and offshoring. Apart from China, Bangladesh has become the world’s main supplier, with garments representing 81% of the country’s exports. The fatal incident of Rana Plaza in 2013 cast a spotlight on the dire workers’ conditions in the apparel factories, with governments and brands initiating programs aimed at securing safety standards in the industry. But at the same time, a generalized downward trend of apparel prices around the world created a squeeze for producers, who seemed to be competing for brands by lowering prices and, above all, wages.
Against this backdrop, the COVID-19 disruption generated a series of delayed payments and cancellation of orders for Bangladesh factories. In February, when retailers started facing declining sales, they began delaying payments and canceling orders to 80% of suppliers. Western brands and retailers invoked force majeure clauses to not pay suppliers, for an estimated total value of $3.1 billion of canceled orders. Over 2.2 million workers were affected. Almost no buyer helped with furloughed workers and severance payments.
Luckily, researchers immediately called attention to the issue. A report by Penn State’s Center for Global Workers’ Rights started tracking brands who were behind in their commitments. The report got a lot of media attention, to the point that more and more buyers have now begun paying up. What was so “dramatic” in this situation, Duke’s Gary Gereffi pointed out, is that the reactions recurred within days and weeks, not months and years. Demand-side disruptions like this one happen really fast. “Within days and weeks orders are canceled, and workers are the groups most affected,” Gereffi concluded.
Mark Anner and Jennifer Bair agreed that a conversation on living wages is needed. As Anner underscored, factoring in safety and better wages wouldn’t drive up the final price of apparel products more than 25%.
In the future, the concept of “total costing for decent work” should be more widely accepted.
This event was the third webinar in the Rethinking Diplomacy Program "COVID-19 and Global Supply Chain Series," organized by the Duke University Center for International and Global Studies with the support of the Josiah Charles Trent Memorial Foundation Endowment Fund.
Here are excerpts from the event:
ON THE IMPACTS OF RANA PLAZA IN BANGLADESH
Jennifer Bair (University of Virginia):
“There’s been a lot of progress in Bangladesh, particularly on the factory safety front. When it comes to, in some ways, the most visible part of the crisis in Bangladesh, which is simply the structural safety, the fire safety in the apparel factories, there’s been a lot of progress in inspecting and remediating those factories, which wasn’t really happening prior to Rana Plaza.”
ON THE IMPACT OF COVID-19 ON WOMEN WORKERS
Mark Anner (Penn State):
“Of the 1 million workers adversely affected, most are young women of color. We know that most of the garments we wear are made by young women of color in Bangladesh and around the world.”
“This is a crisis that’s not an isolated crisis for the one industry. It’s a crisis for the economy, for the world.”
ON THE EFFECTS OF CANCELED PAYMENTS IN BANGLADESH
“There's all this pressure for brands and retailers to pay up what they owe for orders they had placed. What happens when the orders don't come in in the future? $3.1 billion dollars was the value of the cancelled orders, but the total value of exports in Bangladesh has reached $34 billion in a year. So those cancelled orders, that's a problem, a very serious problem. That's a lot of money. So how will they survive?”
ON THE IMPACT OF PRICE SQUEEZING ON CONSUMERS AND RETAILERS
“There’s been deflation in apparel prices and if you look at the decline with paying less for apparel, one could argue that that's a good thing for the pocketbook of the American consumer. But if you look at the decline in the consumer price of apparel, it's not as great as the decline in the unit values of imports. The question is where's that going? There's a fair amount of work that tries to show that the margins of retailers have actually benefited the most from this downward price squeeze.”
ON THE IMPORTANCE OF PRICING FOR LIVING WAGES
“The price for that product needs to include living wages, safe working conditions, worker rights.”
“For an industry that’s largely duty and tax exempt, how do you have revenue to take care of social protection anytime, but especially during a crisis? I think income revenue for the government, for health care, education, and social protection has to be priced into these garments.”
ON THE POSITIVE EFFECTS OF GARMENT WORKER WAGES
“If you look at the number of calories that are consumed by the children of garment workers versus the number of calories consumed by children of rural households that don't have any access to that kind of waged income, the former tend to do better. So for those of us who have been looking at labor outcomes, there's always this question of trying to ensure pro-poor, pro-worker growth and recognizing that there are real concerns with labor standards, and at the same time, there are positive stories that come out of the of these employment opportunities, particularly for young rural women.”
ON BOTTLENECKS IN THE APPAREL INDUSTRY
“What I see in supply chains is what technically we might call supply chain monopsony or just bottlenecks. I think competition rules are better at addressing monopoly and you find that by looking at prices going up. The problem with monopsony or supply chain bottlenecks is the squeeze goes in the other direction. It's on wages and suppliers and on workers and that needs to be addressed.”
ON DIVERSIFYING INTERNATIONAL DEVELOPMENT STRATEGIES
“You can achieve development by exporting garments--that works when there's a more limited number of countries doing it. I think we need more diversified development strategies and trade rules that encourage that.”
ON THE IMPACTS OF COVID-19 ON THE APPAREL INDUSTRY AND WORKERS
“It’s striking that your presentations outlined two major disruptions in the Bangladesh apparel export industry. One was the Rana Plaza fire, which was a supply-side disruption, which meant it was so much harder for orders to actually get out. But this COVID-19 disruption is a demand-side disruption. If anything, it seems like the demand-side disruption is even more dramatic because it occurred so fast. Within days and weeks, the orders are being cancelled. In both cases, workers are very much at the heart of the groups most affected.”
ON THE NEGATIVE EFFECTS OF OVERSATURATION IN THE APPAREL INDUSTRY
“There's a lot of apparel factories out there in the world; a lot of countries are trying to kind of climb the ladder in the sense of industrializing or developing via apparel exports. Then you really do have this kind of scenario of downward price pressure, where almost it works like a reverse auction, where countries are competing with each other by offering buyers the lowest price, even if those prices are not consistent essentially with minimum wages, let alone what a living wage might be. While I don't think apparel is the only example of that, I do think it's probably the extreme example.”
“There's a real concern that as more and more countries are sort of coming into the global market for apparel suppliers, it may in fact exacerbate some of this competitive downward pressure on wages.”
Resources and links to Media Coverage:
- NPR segment with Mark Anner interview: https://www.wbur.org/hereandnow/2020/04/28/bangladesh-retail-shutdown
- New York Times Coverage: https://www.nytimes.com/2020/03/31/fashion/coronavirus-bangladesh.html?s...
Bair et al:"The Political Economy of Private and Public Regulation in Post-Rana Plaza Bangladesh. (Bair.pdf)
Watch the full event:
Check out the previous events:
- COVID-19 and Global Supply Chains: Disruptions and Restructuring:
- Food Supply Chains and COVID-19: Mother Nature and Selective Resilience: