As Textile Curbs Fall, Many Feel Hardship

The Jan. 1 expiration of a global textile quota system has led to massive job losses and brewing labor unrest in countries that are finding it harder to compete against China and India.

Dozens of textile and apparel factories have been shut and tens of thousands of jobs have been lost -- from South Africa to El Salvador to the U.S. -- according to government officials, labor activists and trade groups around the world.

Labor unrest is rising in Cambodia and the tiny African nation of Lesotho after factories closed unexpectedly, leaving employees stranded without back pay.

Manufacturers in Italy, South Africa and the United States are pressuring their governments for restraints on imports of Chinese apparel and textiles. Turkey was the first country to impose such curbs after quotas disappeared.

With criticism mounting, China has said it would monitor its exports and, if necessary, take steps to slow shipments of low-end goods. U.S. industry officials said Tuesday that they could not confirm reports that China was considering levying tariffs on its apparel exports.

Quick action is needed to protect the hardest-hit countries, some trade experts say. They fear that laid-off workers in poorer countries, mostly women, will be forced into prostitution or illegal immigration.

“South Africa has huge pockets of poverty, and all that’s happening is those pockets are growing larger by the day,� said Ebrahim Patel, general secretary of the South African Clothing and Textile Workers Union. His union, which has asked the government to restrain Chinese imports into the domestic market, is fighting the closure of two factories in Capetown and Durban that employ 1,750 workers.

These and other fallouts stem from the elimination of a decades-old quota system established to protect domestic textile and clothing manufacturers in the U.S. and other developed countries from cheap foreign competition. The system allocated shares of the market to different countries.

Critics said that the quotas protected inefficient producers and cost American consumers billions of dollars a year through higher clothing prices. The last of the quotas were removed Jan. 1, unleashing free-market forces that so far have primarily benefited China and India at the expense of smaller developing countries.

Early data show U.S. imports of some popular apparel and textile categories from China and India surged as much as 1,200%. Overall, Chinese imports rose more than 60% in the first quarter from a year earlier, according to Nathan Associates, a Virginia economic consulting firm.

Because comprehensive figures are not yet available, economists said it was still too early to determine the overall effect on the global economy.

Ifzal Ali, chief economist of the Asian Development Bank, predicted that job losses would accelerate in the second half of this year. He said he opposed restraints on China, arguing it would raise costs for U.S. and European consumers and temporarily shift production to other low-cost countries. Instead, he said, global agencies must help poor countries develop new industries and improve their roads, ports and management skills.

But others argue that initial trade data are evidence that the poorest of the poor need immediate help. The apparel industry had operated as an entry point for countries whose only competitive advantage was a large pool of cheap, unskilled labor. “There has to be some recognition ... that not all developing countries are created equal,� said Paul Ryberg, a Washington attorney and president of the Africa Coalition for Trade.

As expected, many of the earliest victims are manufacturers in smaller countries that lack raw materials such as cotton and are far from the largest markets in the U.S. and Europe. Also vulnerable are factories that lack resources to modernize and can’t sustain increasingly slimmer profit margins.

Factories in Hong Kong, Taiwan and Macau saw deep declines in exports of some popular apparel products whose production shifted to mainland China.

The quota expiration also has hastened the demise of the U.S. textile industry. According to the National Council of Textile Organizations, the industry has lost 17 factories and more than 5,000 jobs since Jan. 1.

Those cutting jobs claim they can’t compete against China, which has lower wages, plentiful raw materials and in some cases subsidized rent and utilities. U.S. textile makers also accuse China of keeping its currency undervalued to keep its exports cheap.

In Cambodia, hope is eroding fast that an innovative U.S.-backed program designed to improve factory conditions will prevent orders from leaving. Since the first of the year, 11 factories have closed and 25 more have suspended operations and are not expected to reopen, according to the country’s Garment Manufacturers’ Assn. In all, 22,000 people have lost jobs.

Typical of struggling manufacturers is the business owned by Roger Tan, who has reduced employment at his Phnom Penh factory to 800 from 1,000. He said he invested in modern equipment and improved working conditions, but those added to his costs, making him even less competitive.

“I have buyers whom I met who say, ‘Hey, you have everything at your factory, that’s great. But your prices are too high for me.’ �

Pressure is building to find new ways to aid poor countries. A bill has been introduced in Congress that would allow Cambodia and 14 other “lesser-developed countries� to export to the U.S. duty-free, a right enjoyed by many of the world’s poorest countries. Central American governments are lobbying hard for passage of a trade agreement that would expand their duty-free access to the United States.

But even those extra trade benefits may not be enough to keep many poor countries in the game. Sub-Saharan Africa, whose exports to the U.S. had boomed in recent years because of preferential trade privileges under the African Growth and Opportunity Act, recorded a 1.5% drop in exports in the first quarter, U.S. data show.

In addition to losing orders in the U.S., South African firms are seeing sales to Europe decline. They also face a surge of cheap Chinese products into their domestic market.