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Filling in the GAP

American retail giant Gap Inc. is shifting the majority of their operations away from Mainland China.

Adam Smith’s idea to “never to attempt to make a home what it will cost him more to make than to buy,” is a perfect description of the philosophy behind Chinese product manufacture. It is this cheapest form of produce that allows us to keep up with today’s throw away fashion ideology. Yet when asked, most U.S. consumers today will say they prefer to buy American brands and U.S. made products. However, with the influx of foreign goods — U.S. imports totaled $1.2 trillion in 2002, 11% of U.S. GDP — buying American is no longer practical in some instances and impossible in many others. Price often takes precedence over other priorities such as quality, durability and style. So while “Made in America” may no longer be as important as we once believed; are we really getting our money’s worth? What is the real cost of using cheaper clothing manufacturers to create a sustainable business future for America?

In recent times, China has become the world’s biggest textile and clothing exporter, selling $42 billion of clothing and textile manufactured products overseas in the first half of 2004. This has led to a crossroads situation in countries like America, where the National Council of Textile Organizations is predicting that 650,000 U.S. jobs will be lost by 2007 as 1,300 textile factories close due to the ability of retail outlets and fashion houses to outsource their products to countries like China.

Yet it appears that cheaper is not necessarily better for the producers who are choosing to manufacture in China. Certainly, the idea of going to China must have been causing a few headaches for some managers from America’s second largest clothing retailer Gap Inc. Recently The Gap Inc. (trademarks include Gap, Banana Republic, Gap Kids, Gap Shoe Stores, Baby Gap Store) has found out the hard way that China was not a suitable environment for its business. In a nutshell the Gap has cancelled contracts with 42 of its clothing manufacturers in China for breaching Gap’s labor standards this year. The Gap announced the changes in its Social Responsibility Report (SR Report), which described the company’s internal investigations into the labor practices of its factories worldwide in 2003. The report detailed that 9% of China’s 464 factories producing merchandise for Gap were dropped. This placed China at the top of the list for compliance violations in the case of Gap’s factories, when compared to other nations. China is one of the 50 countries that Gap outsources its labor to, but also the source for the largest production. In 2003, 16% of Gap’s merchandise came from China, but according to the SR Report there were “unique and complex compliance challenges” involved. One example of these challenges includes the difficulty of addressing workers’ needs and grievances “in a country that does not recognize workers’ right to associate freely outside of government approved organizations.” The report said the reason such a high number of factories were dropped as Gap’s suppliers is due to the “concealment of overtime and unwillingness to share complete and accurate information.” Over 50% of the factories failed to fully comply with local laws. 25 to 50% had poor records of the age of their workers, unclear wage statements and poor working environments, such as a lack of first-aid kits, personal protective equipment, operational safety devices on machines, and proper means of storage for flammable and hazardous materials. Investigators found physical coercion and verbal abuse violations occurred in as many as 25% of the factories. Also, common were violations of local legal working conditions and restricted access to Gap internal inspectors.
Since the release of the Report, human rights groups such as Sweat-shop Watch have praised Gap for its openness and movement towards better working conditions in its factories. Such positive feedback for Gap’s actions have quelled old accusations of labor abuses as well as placing pressure on other clothing and manufacturing companies with factories abroad to follow suit. Global corporations like Wal-mart might follow the trend, after observing the precedent set by Gap. Knowledge is an empowering tool for both the consumer and the producer as it allows us to create sustainable economic opportunities for ourselves and others in this global community. So what have we learned from America’s clothing giant built on the two of the most popular fashion items, of jeans and T-shirts? It shows that multinationals such as Gap Inc., can set social and business trends, that can reach beyond the borders of countries. After all, they are already setting global trends with their jeans.

M. Ho, and Victoria Kelly-Clarke are correspondents for Chinascope.