Race to Bottom for Garment Workers

A t midnight on January 1, 2005, the World Trade Organization terminated the Multi-Fiber Agreement’s (MFA) quota system for apparel after ten years of incremental phase-outs. This agreement,  a piece of U.S. legislation, was created in 1974 to set export quotas on all textile-manufacturing nations.  

These limits on how many garments a country could export served to protect the U.S. ailing garment industry from being overwhelmed by a growing number of cheap imports from developing countries, particularly China. Developing nations demanded the quotas be removed, asking the WTO in 1994 to phase them out, saying that developed countries used them to unfairly protect their own industries. 

Says Kimi Lee, director of the Los Angeles-based Garment Workers Center, “Although it’s hard to know for sure, 80,000 job losses are predicted in the U.S. [from those inside the textile industry]. Because of [quotas], the MFA made large companies spread out their production.  Once Bangladesh hit their 10,000th pair of pants, for example, you would have to go somewhere else to get your pants made. With quotas gone, the companies would be able to find the country with the lowest wages to produce there.” 

Unexpectedly, however, in the last 30 years, the quota system also resulted in positive growth for developing nations. This quota system forced buyers, including large retailers like J.C. Penney, the Gap, Wal-Mart, and Ralph Lauren, to purchase textiles and ready-made garments from a long list of countries. This allowed developing nations, such as Bangladesh, to build up their garment industries. In Bangladesh, one-third of the country’s industrial workforce now works in the garment industry, which accounts for 75 percent of all its exports. The country is expected to lose nearly a million jobs as a result of MFA’s termination. 

In a September 2004 report on the MFA by the National Labor Committee (a sweatshop workers advocacy group), Gary Ross, vice president of worldwide operations for Liz Claiborne, asked, “Would we be in 35 countries if quotas didn’t exist? We’d probably be in as few as 10 or 15.” 

Law Of The Jungle 

P redictions from experts about the impact of the MFA’s termination paint a wide range of scenarios. Many predict that China—with the world’s largest work force, and some of its lowest wages—will control nearly half the global apparel market within ten years. 

In the same report, J.C. Penney’s purchasing department president, Peter McGrath, described the post-quota trade environment as “the law of the jungle: only the strongest will survive.” Increased competition is expected to drive down prices, which could potentially drive down wages as a result. 

After learning that Bangladesh asked the WTO to review the quota eliminations and its impact on poor nations, J.C. Penney threatened to pull work from the country if the request was not withdrawn. Said McGrath, “We will have to question our business relationship with our partners if they continue to act like this. We can’t go back without causing major disruption to U.S. importers, so we are talking tough to people who want to bring up any issue at all.”