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Foreign Aid Undercuts U.S. Jobs : Apparel Workers Lose Out to Assisted Caribbean Factories

June 25, 1989|RICHARD ROTHSTEIN | Richard Rothstein is the author of a study of the international apparel industry to be published by the Economic Policy Institute, a Washington research organization

Stimulated by designers preferring nearby contractors who respond quickly to fashion trends, Los Angeles garment firms now employ 100,000 workers, with another 20,000 performing illegal home work or toiling in unregistered garages.

But while L.A. garment jobs increased by 50% since 1973, national apparel employment declined by 25%. Low-wage imports now supply 55% of our apparel purchases, up from 25% 15 years ago. If present trends continue, in a decade all U.S. garment manufacturing will disappear.

Domestic firms compete with Third World contractors paying a fraction of U.S. wages. In Bangladesh, 10-year-old girls earn 25 cents an hour as indentured seamstresses. In the Philippines, 13-year-old girls work 110 hours a week and are locked in apparel factories at night. Mexican workers' real wages have fallen 50% since 1982, spurring California production to shift south of the border. Recent apparel import growth has been from Caribbean nations like Haiti where compensation (including benefits) is 42 cents an hour.

Nonetheless, even unconscionably low wages do not enable Third World apparel to compete here. Imports also need extensive government assistance. Concluding that domestic garment manufacturing will inevitably decline, the federal government's foreign policy includes substantial aid to expand apparel manufacturing overseas.

The most egregious example is the Caribbean Basin Initiative, which is coordinating efforts to expand capacity for American apparel manufacturing in Haiti, Jamaica and the Dominican Republic. A garment maker can get more U.S. assistance for manufacturing in the Caribbean than for operating in Los Angeles.

The Commerce Department advertises widely to U.S. manufacturers, describing Caribbean sewing plants with excess capacity for contract work. No similar service exists for domestic firms.

The U.S. Agency for International Development finances Caribbean manufacturers' fabric purchases for processing into garment exports to this country. The agency trains Caribbean management while the U.S. Labor Department instructs their employees. The agency also provides capital for Caribbean credit firms and establishes companies to market garments of small Caribbean manufacturers. Hundreds of U.S. garment companies go bankrupt annually for want of similar services.

Promotion under the Caribbean Basin Initiative has had dramatic results. Caribbean apparel exports to the United States have tripled in the last five years. U.S.-owned or -contracted apparel plants in Jamaica grew from four to 70; 20,000 Jamaicans now sew for U.S. firms. In the Dominican Republic, 200 U.S. firms or contractors operate in special export zones where low wages are supplemented by tax breaks and a prohibition on union organizing.

The Bush Administration recently proposed expansion of aid for Caribbean apparel. The rationale is "national security," hoping that jobs created in Caribbean export zones will help maintain friendly governments in power.

But moderate leaders may not survive by relying on low-wage development strategies. Poorly paid workers who can't afford to purchase goods they produce may refuse to support export policies designed to earn dollars for debt repayment or possible future development. The recent electoral defeat of Jamaican Prime Minister Edward Seaga, a vocal proponent of CBI exports, or the massive demonstrations this year by Trinidad workers protesting wage cuts to make exports even cheaper, cast doubt on the contribution of excessively low wages to social stability.

This foreign policy demands sacrifice from women, minorities and immigrants in our apparel industry--told by Administration economists that their layoffs result from natural advantages that developing nations have in labor-intensive manufacturing. Workers should adjust to a rational allocation of world resources, the line goes, by training for jobs where America has "comparative advantage." Poorly educated clothing workers, however, are unlikely to find suitable re-employment. Retail, hotel or restaurant service generally pays even less than low garment wages.

Yet the decline of our apparel industry is not inevitable. As the surge of L.A. garment employment shows, American contractors could compete in fair international markets. American apparel workers are more productive than their Third World counterparts. American firms close to retail markets can respond quickly to trends. These factors often offset savings from exploitative wages offshore. If domestic shops enjoyed government assistance as offshore firms do, our apparel industry could continue providing employment to immigrant and minority communities.

Or, if we really wish to sacrifice this industry to "national security" strategy, we should forgo asking our own poorest workers to bear the entire burden for such decisions. If foreign policy, not the marketplace, dooms domestic apparel manufacturing, garment workers are entitled to retraining and transitional income support beyond the minimal help we normally provide industries faced with truly more efficient competitors.

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