As you read this article,
there is a good chance
that you or someone close to you is wearing
clothing imported from Latin America. A quick check
of the label may reveal that it is a shirt from the Gap
made in Honduras, a pair of Lee Ryder jeans made in
Brazil, Bali underpants made in Guatemala, a Levi’s
golf shirt made in the Dominican Republic, or a Haggar
sports jacket made in Colombia.
Garments produced in Latin America and imported
into the United States represent a growing segment of
the U.S. clothing market. As industry analysts, business
people and, increasingly, workers, realize, such a devel-
opment is by no means accidental. It is the product of a
search for higher profits by U.S. apparel companies, by
some of their competitors like Korean-owned contrac-
tors, and, above all, by large clothing buyers such as
Wal-Mart and Macy’s at the expense of low-wage labor
in Latin America. It is also the product of trade policies
and political decisions adopted by the U.S. and Latin
American governments.
Clothing is big business. In the United States, whole-
sale apparel sales were $78.4 billion while retail sales
were $211 billion in 1994.1 There are about 30,000
clothing manufacturers in the United States, which
employ over 800,000 production workers in this coun-
try (down 30% from the mid-1970s). They directly or
Hector Figueroa is assistant research director at the Service
Employees International Union. He is a former research associate at the Amalgamated Clothing and Textile Workers Union.
400,000 people
AtcAinoi r an — ldA
today in the United States than at any other time in the
nation’s history.
The U.S. clothing market, one of the most attractive in
the world, has become the final destination for an
increasing amount of apparel assembled overseas, much
of it in Latin America. Imported clothing represented
66% of total sales in the U.S. clothing market in 1992
compared to only 28% in 1973. Likewise, textile
imports have grown from 5.8% of the U.S. market in
1973 to 21.7% in 1992.2 The share for garments import-
ed from Latin America under special duty-free tariff
programs has increased from 3.9% of the U.S. clothing
market in 1970 to 16.7% in 1993.3
The industry throughout the Americas is undergoing
significant changes, which have produced clear winners
and losers. Increased market integration-in the wake
of neoliberal economic restructuring and “free-trade”
accords-means that a particular country’s role in the
industry is determined to a large extent by the size of its
domestic market, its level of industrialization, and its
access to modem technology.
Large modem textile mills are prospering, as they
continue to invest in new, capital-intensive technolo-
gies. Meanwhile, smaller, older mills, unable to with-
stand the competition from cheap fabric imports, are
being wiped out across the hemisphere. Likewise,
while garment-assembly enclaves in the Caribbean
Basin and Central America are booming, older apparel
NACIA REPORT ON THE AMERICAS 34REPORT ON TRANSNATIONAL INVESTMENT
industries that served the domestic market
are dying off throughout Latin America.
The clothing industry is marked by fero-
cious competition between big retailers, and
among apparel manufacturers vying for
these retailers’ business. In this cut-throat
business, companies are anxious to find
ways to cut costs. In the process, workers
throughout the Americas are placed in com-
petition with one another, deprived
of their labor rights, and
forced to accept the disci-
pline of low wages and
the market.
The textile-apparel
industry can be pic
chain in which difi
ments of production and d
are integrated to form a f
product-an article of
Advances in transportation
In this cut-throat
business, workers
throughout the
Americas are placed
in competition with
one another, and
deprived
of their
labor
rights.
municatons technology as wenl as organizational changes in corporate management have dispersed the production of clothing across an unprece- dented number of developing and Northern industrial- ized countries. 4
Competition favors producers and distributors that
can operate in a consistent way at lower costs, particu-
larly those who can sell at prices that are substantially
above costs (due to technical and commercial advan-
tages). Proximity to large markets saves transportation
costs and reduces turn-around time. Long-term contrac-
tual relationships with large buyers and product design-
ers offer another competitive advantage.
Because clothing manufacturing remains a labor-
intensive process, the cost of labor is an important con-
sideration. Large retail buyers have been able to take
advantage of the availability of a global pool of work-
ers whose wage rates differ for historical, institutional
and economic reasons-and, in some cases, because of
the outright repression of labor rights. Companies bring
these workers into competition with one another by
relocating production from high-wage areas to low-
wage ones, by contracting out-the industry term is
“outsourcing”-aspects of production to companies
already operating in low-wage areas, or by forcing the
movement of low-wage workers to high-wage areas in
conditions where they cannot demand higher pay.
The fashion chain has three major segments: textile
production, clothing production, and retail sales.
Textile production is the most capital-intensive seg-
ment, the most concentrated (at the level of produc-
tion), and the least internationalized (as far as direct
ownership or control). This portion of the fashion
industry in the Americas is located
primarily in larger, more industrial-
ized countries such as the United
States, Mexico, Brazil, Chile,
Argentina, Colombia and Vene-
zuela. The United States, however,
clearly dominates textile produc-
tion in the continent.
The region is dotted with embat-
tled, small-scale textile industries
that produce natural fibers for inter-
nal as well as external consumption.
Cotton accounts for about one-third
of natural-fiber production. The
United States is the second-largest
producer-after China-and a
tjor exporter. Nonetheless, the relatively abundant sup-
of cotton in the hemisphere, the lower level of capi-
required to produce cotton fabrics, and formerly pro-
ted domestic markets sustained small cotton-produc-
n industries in countries such as El Salvador, Paraguay
I Ecuador. Wool is another important natural fiber in
me region, particularly in Southern Cone countries like
Argentina, Chile and Uruguay.
In addition to natural fibers, textile manufacturers in
the United States, Mexico and Brazil produce man-made
or synthetic fibers such as polyester and nylon. These
fibers are generally produced in large, sophisticated
chemical facilities by large transnational or domestic
companies with state-of-the-art equipment. Synthetic
fibers are used not only in apparel, but also in household
and industrial goods. In the end, this industrial capacity
to produce both natural and man-made fibers divides
countries into those with the potential for a diversified
textile industry and those likely to see their domestic
industry radically transformed, if not disappear.
Clothing production, the middle segment of the fash-
ion chain, is the most fragmented, least technologically
sophisticated, and most geographically dispersed. In an
effort to drive down costs, clothing manufacturers-
primarily from the United States but also East Asian
and some Latin American ones-have increasingly
opted to work with subcontractors in low-wage areas.
The decision whether to use subcontractors in the
United States, overseas, or in both places depends
largely on the type of garment and the type of company
behind the brand name. There are two general cate-
gories of clothes: mass-produced (staple) garments and
fashion garments. Mass-produced garments-such as
underwear, men’s and boys’ clothing, and sportswear-
are subject to less variation in demand and style. The
companies which produce these garments are closely
integrated with the manufacturing of fabrics; in some
instances, they even own their own textile-mill plants.
Because they are generally large and technologically
Vol XXIX, No 4 JAN/FEB 199635 Vol XXIX, No 4 JAN/FEB 1996 35REPORT ON TRANSNATIONAL INVESTMENT
sophisticated, these companies can establish more
favorable, long-term contracting relationships with big
retail buyers. They also tend to own their own facilities
overseas, and use contractors largely to respond to sud-
den growth in demand.
Fashion and seasonal garments, by contrast, have a
very short life cycle (from a few months to a couple of
weeks, to even days in the case of event-related sports-
wear). These garments are manufactured by thousands
of small companies, mostly contractors and smaller
retail chains who rely on low-wage labor. A number of
companies have set up operations in Florida and other
low-wage states in the U.S. South. Geographic proxim-
ity to Latin America makes it relatively easy for these
firms to send cut fabric to maquiladoras and receive
finished garments within a few days.
If resources are scarce or proximity to the final retail
market is vital, U.S. cities with large immigrant popu-
lations such as New York and Los Angeles offer anoth-
er source of low-wage labor. Indeed, sweatshops are
simply companies under contract with larger manufac-
turers that try to produce a dress or other garment for as
little as $3 a piece, using child, undocumented, and
sometimes slave immigrant labor. More than 50% of
U.S. garment contractors pay less than the minimum
wage, fail to pay overtime premiums, or violate labor
laws in some other way. 5 These sweatshops represent a
reemergence of organizational forms and working con-
ditions reminiscent of Victorian capitalism.
In the clothing-production segment of the fashion
chain, it is useful to distinguish between national
brands and small brands. National-increasingly inter-
national–brands are heavily concentrated. In the
United States, 30% of all wholesale clothing sales is
produced by just 20 companies with household names
like Fruit of the Loom, Liz Claiborne, Phillips Van
Heusen and Oshkosh B’Gosh, Inc. Most of these com-
panies manufacture or contract out the manufacturing
of more than one brand-name product. Small brands
account for the other 70% of all wholesale apparel sales
in the United States. About 23,000 establishments pro-
duce these small brands.
This universe of apparel companies is characterized by
manufacturers, jobbers and contractors. Manufacturers
carry out the whole process from design to finishing to
marketing. They contract out work when demand sud-
denly peaks. Jobbers design garments, acquire fabric,
and arrange for the sale of finished clothes, but they carry
out production by cutting fabric and hiring contractors to
assemble the clothes. Contractors are companies that
receive already cut garment in bundles from the jobbers
and process it into finished clothes. The contracting sub-
segment of the apparel chain allows companies in the
fashion industry to expand production to meet increased
demand, avoid large capital outlays, and prevent workers
sitting idle when demand drops off. Sub-contracting is
also done more and more by large retailers like the Gap
that sell their “own” brands.
f we think of the fashion chain more as a train than
a chain, the engine would be located at the retail
end. The importance of marketing and of being able
to respond rapidly to changing fashion trends gives
apparel buyers enormous power over producers.
Retailers have grown in importance as well as in con-
centration. For example, four department-store chains-
Sears Roebuck, J.C. Penney, Federated Department
Stores (including Macy’s), and May Department
Stores-account for about 77% of department-store
sales by the top-ten apparel companies. 6 These depart-
ment stores and, more recently, fast-growing discount
mass-merchandise retailers like Wal-Mart and Kmart
constitute the most important single determinant of con-
tinent-wide production patterns.
Over the past decade, retail markets have been charac-
terized by significant price slashing. Average retail cloth-
ing prices in the United States are growing at rates that are
less than inflation, and are sometimes even falling. As a
consequence, average profit margins for apparel manufac-
turers are around 2% below manufacturing as a whole. 7
These price reductions have been prompted by the
slow growth of apparel demand associated with declin-
ing average wages and household incomes in the
United States and increasing income inequality. U.S.
consumers are buying less clothes ($11 billion less
annually) today than in the early 1980s. 8 They are also
buying clothing from different retail outlets, depending
on their income group. For example, workers with
falling wages are shopping at stores like Wal-Mart,
while upper-income groups buy from specialized out-
lets like Anne Taylor and Banana Republic. The declin-
ing U.S. middle class in this country is reflected in
department stores’ shrinking market share of the retail
business.
Prices are also being kept down because of brutal
competition from the mass-merchandise discounters.
Stores like Wal-Mart have managed to lower their oper-
ating costs substantially more than competitors throu
organizational innovations such as low-cost invento
control methods, and through “outsourcing” garme
to contractors who pay less than subsistence wages.
a result, these retailers have been able to offer c(
sumers relatively less expensive clothing, whi
nonetheless includes a substantial markup.
Retailers are caught in a Darwinian battle for s’
vival. More than half of all clothing stores in the Unit
States today are expected to go out of business by t
year 2,000.9 Mergers and consolidations among U
retailers have cut even further into the number of ret
outlets. Fewer stores means fewer markets for appa
makers to sell clothes to. This allows the remaini
retailers to exert considerable pressure on manufact
ers, demanding lower prices, faster delivery, and bet
service.
ronically, in spite of the increased number of U
garment imports from Latin America, the regio
industry as a whole is in severe crisis, with much
its productive capacity idle. Latin America’s tradition
textile and apparel industry has notably declined sir
the late 1970s. Meanwhile, countries that have g
ment-assembly enclaves such as the Dominic
Republic and Guatemala are faring better [see tal
below], but not in ways that suggest long-term grow
In fact, these countervailing trends are often presi
within the same country. In El Salvador, for examp
textile production declined by 40% and clothing mar
facturing by 55% between 1975 and 1991, while
clothing sector as a whole grew 12% from 1985
1991, largely due to export-oriented assembly. 1 0
Neoliberal free-trade
policies are largely to Garmeni
blame for the sorry state (In
of Latin America’s dom-
estic textile and apparel
industries. These policies
opened up previously
closed domestic markets, Mexico
exposing national indus- Dominican Republic
tries to fierce global com-
petition. Austerity mea- Costa Rica
sures imposed by the Haiti
International Monetary Jamaica
Fund (IMF) and World Colombia
Bank exacerbated the Honduras
region’s already pro-
nounced income inequali-
ty, decimating domestic El Salvador
markets. Fiscal austerity Source: U.S. International T and cutbacks of state sup- U.S. textile, apparel and fo
port have increased the (HTS) Subheading 9802.00.
cost of imported fabrics,
gh equipment and other essential inputs for garment pro-
ry- duction.
nts Throughout Latin America, numerous companies that
As produced for local and regional markets are being
rn- wiped out by lower-cost imports of new and “second-
ch hand” garments from the United States and East Asia as
well as, in the case of South America, more industrial-
ur- ized neighbors such as Brazil. While these domestic
ted textile and apparel industries were often outdated and
the inefficient, they nonetheless employed tens of thou-
.S. sands of workers. Only companies with access to both
ail modern technology and export markets, usually
rel through joint ventures with U.S.-based transnational
ng corporations, have been able to survive.
ur- These joint ventures, while still numbering only a
ter handful, are growing rapidly. Perhaps the most dramat-
ic example is the joint venture between North
Carolina’s Cone Mills and Mexico’s top denim compa-
.S. ny, CIPSA. Cone Mills, the United States’ leading tex-
n’s tile exporter, is among the world’s largest producers of
of denim fabric. One of its most important customers is
nal Levi Strauss, with whom the company has a close part-
Ice nership. Cone Mills and CIPSA are in the process of
ar- building the world’s largest and most modern denim
an complex in northern Mexico, which will incorporate all
ble segments of the fashion chain from textile manufactur-
th. ing to the production of finished clothes. The complex
ent will employ some 3,500 workers. They will be pre-
,le, dominantly young men and women who, if paid at cur-
nu- rent local wages, will earn about $38 for a 48-hour
the week. This translates into a 70 cents per hour wage,
to compared to average wages of $10-15 an hour in the
U.S. textile industry.
t-Assembly Industry in Latin America
sports to the United States in millions $)
1985 1987 1989 1991 1993
282 380 460
143 234 390
62 92 172
80 97 116
28 84 115
22 30 57
17 27 50
6 20 42
6 13 20
725
547
254
101
131
82
107
117
44
1,075
896
374
65
251
113
236
218
103
Percentage
change
1985-1993
+381
+626
+603
-80
+896
+513
+1,388
+3,633
+1,717
tade Commission. The above figures represent the duty-free value of
otwear imports for consumption under Harmonized Tariff Schedule
80.
NACLA REPORT ON THE AMERICAS 38REPORT ON TRANSNATIONAL INVESTMENT
The most dynamic part of the region’s apparel
industry are the offshore garment-assembly oper-
ations. Maquiladoras in export processing zones
in Mexico, Central America and the Caribbean Basin
now employ over 300,000 workers.
Profit margins in these activities are An Ed
normally three times higher than the
industry’s average. The fortunes made T-Shil
in this business come largely at the at a ma expense of the workers, the majority of
whom are women and children who in El work as many as 50 to 80 hours a week
at a miniscule wage. For example, a Liz sells
Claiborne jacket made at the Doall while tl maquiladora plant in El Salvador’s
Progresso Free Trade Zone sells for mak $178, while the workers making the gar-
ment earn just 56 to 77 cents per hour.
The horrible conditions in which gar- ment assembly
workers work and live
have become the subject of increasing
public outcry [See “The Gap an(
Sweatshop Labor in El Salvador,” p. 3(
The history of offshore garment
assembly by U.S. companies began
in Puerto Rico during the 1940s and
1950s. At that time, Puerto Rico
became a preferred source of garment
since it offered low-wage labor (209/
di
rt
f
h
ir
S
30Vo of me u.S. minimum wage) as well as unlimited access to the U.S. market without tariff
restrictions. Profits could be easily repatriated from
Puerto Rico, federal subsidies were abundant, and prof-
its were not subjected to taxation when they arrived
back in mainland coffers.
As a result, apparel employment grew from a few
thousand jobs to more than 50,000 over the course of a
few decades. Because Puerto Rico is a U.S. protec-
torate, many companies found it appealing to set up
their own manufacturing operations as well as a net-
work of contractors, many of which were small U.S.
companies following their major customers. In the
process, domestic apparel manufacturers not linked
with U.S. manufacturers and retailers quickly disap-
peared. Department stores like J.C. Penney and Sears
Roebuck-followed in the 1980s by Kmart and Wal-
Mart-set up stores in Puerto Rico. Most local retailers
found it difficult to compete with the large chains and,
just like many of their manufacturing counterparts,
went out of business.
As international competition in the industry intensi-
fied and labor costs in Puerto Rico began to rise during
the 1960s, U.S. apparel companies began to move else-
where in search of cheaper labor. Most sought out con-
tractors in East Asia. Others set up operations in the
Dominican Republic under the auspices of the U.S. gov-
ernment which wanted to promote economic stability
there after its military invasion of the island in 1965.
U.S. companies also began to take advantage of spe-
cial trade and investment arrange-
ie Bauer ments with neighboring Mexico in the
1960s. The much-publicized Border made Industrialization Program gave U.S.
,uiladora firms a powerful incentive to locate
labor-intensive manufacturing processes
alvador in Mexico, where they could benefit
from cheap labor, geographical prox- or $12, imity to the U.S. market, and lax envi-
e worker ronmental, health and safety regula-
tions. Today, Mexico’s maquiladora
ng the sector employs about 100,000 workers
in the apparel industry, and to a nt earns lesser extent in textile production.
per shirt. Meanwhile, imports of U.S. and Asian fabrics and clothing are taking away business from Mexico’s domestic
apparel and textile manufacturers.
Many companies have gone bankrupt or have turned
emselves into merchandisers, working as inter-
mediaries between U.S. apparel manufacturers
and retailers, and Mexican retail outlets.
aquiladoras in Central America
were established in the 1970s, but
.. v a. only registered significant growth
during the mid-1980s. Revolution and political instabil-
ity in Central America combined with low-wage com-
petition from Asia prompted the Reagan Administration
to initiate the Caribbean Basin Initiative in 1983. The
accord established special tariffs and quota arrange-
ments to promote imports of clothing made with U.S.-
cut fabric. Offshore garment assembly in the region
mushroomed, first in Dominican Republic and Costa
Rica, and later in Guatemala, Honduras, El Salvador,
Colombia and Jamaica. As the United States regained
political and military hegemony in the region,
Nicaragua and Panama followed suit.
Declining prices of traditional exports such as cotton, coffee and bananas, combined with the need to obtain
U.S. dollars to service large foreign debts, induced
Central American governments and domestic elites to
invest in the maquila sector. These governments passed
laws and decrees establishing new free-enterprise or
export processing zones (EPZs). They granted tax
exemptions, special exchange systems, free utilities, and
complete profit repatriation for companies that set up
businesses in these areas. Labor organizing was inhibit-
ed through repression, as trade unionists were black-list-
ed and even assassinated. Mandatory employee benefits
and rights were weakly enforced. Employers, though,
Vol XXIX, No 4 JAN/FEB 1996 39 Vol XXIX, No 4 JAN/FEB 1996 39REPORT ON TRANSNATIONAL INVESTMENT
were quickly organized in exporters’ associations like backward linkages with the local economy which might
Fusades, representing contractors in El Salvador, and spur wider economic development.
CINDE, representing contractors in Costa Rica.” The future of the clothing industry in the hemisphere
Textile and apparel now account for looks bleak. It is likely to be marked by increased wage
30% of Central America’s exports to the
United States. Between 1983 and 1990,
traditional garment imports from Latin
America, not eligible for Caribbean
Basin Initiative special tariffs, declined
by 165.2%. By contrast, textile and
apparel imports under the Caribbean
Basin Initiative increased by 396.3%
over the same period. 1 2
of tens of thousands of jobs. Textile and
garment production in the Americas is
increasingly a decentralized but highly
integrated chain of commodity, capital,
and labor flows. To match that level of
globalization, trade unions will have to
establish new forms of international coop-
eration and solidarity that parallel the
The maquilas offer certain advantages to the coun- changes in how the industry operates.
tries where they are located: they generate jobs and for- These new organizing strategies have already begun to
eign currency. Parallels have been drawn between emerge in the struggle against the North American Free
industrial development in East Asia, in which the assem- Trade Agreement (NAFTA), against neoliberal econom-
bly of garments and electronics for export supposedly ic policies, and for worker rights in the maquiladora sec-
“kicked-off’ the growth of modern industry. But the the- tor. Alternative economic-development strategies will
sis that maquilas are a first stage in the industrialization also be needed. As long as global commodity chains con-
of the region is shaky at best. Control of production and tinue to discipline and direct the region’s economies to
distribution ultimately rests in the hands of a few pow- satisfy the needs of powerful transnational corporations,
erful U.S. retailers and brand-name manufacturers or the working conditions of people throughout the hemi-
jobbers. Moreover, the maquiladora industries offer few sphere are not likely to improve.
In the Name of Fashion
1. Standard and Poor’s Industry Survey “Textile, Apparel and Home
Furnishings,” September, 1994.
2. Standard and Poor’s Industry Survey
3. American Apparel Association, “Apparel Industry Trends,” April,
1995.
4. For a detailed analysis of the apparel commodity chain, see Gary
Gereffi and Miguel Korzeniewicz, eds., Commodity Chains and
Global Capitalism (London: Praeger, 1994) and Peter Dickens,
Global Shift: The Internationalization of Economic Activity (New
York: Guilford Press, 1992).
5. “In a Sweat Over Sweatshops,” Business Week, April 4, 1995,
and Joanna Ramey, “NY Labor Raids Show Hotter Competition,”
Women’s Wear Daily, May 5, 1993.
6. Standard and Poor’s Industry Survey.
7. Standard and Poor’s Industry Survey.
8. Standard and Poor’s Industry Survey.
9. Standard and Poor’s Industry Survey; also Gereffi and
Korzeniewicz, eds., Commodity Chains.
10. James Wilkie, ed., Statistical Abstract of Latin America, 1995,
and Teresa Rend6n, La empresa maquiladora textil y de confec-
ci6n en Centroamerica (Mexico: UNAM, 1995), unpublished
manuscript.
11. For details, see Kurt Petersen, The Maquiladora Revolution in
Guatemala, Occasional Paper Series 2, Center for International
Human Rights at Yale Law School, 1992; and Teresa Rend6n, La
empresa maquiladora.
12. Mark Rosenberg and Jonathan T. Hiskey, Annals of the American
Academy (May, 1994).
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