The Empire’s New Clothes

Last week’s Bangladeshi garment factory collapse that has already killed more than 300 workers was horrific – and avoidable. The building’s owner has now been arrested, having reportedly ignored warnings about dangerous cracks in the building. Workers in the factory sewed clothes for consumers in rich countries, including some being made for Joe Fresh, owned by Loblaws. Loblaws has taken responsibility and vowed to make changes, but many customers have said they will boycott the store.

Less appreciated, however, is that the rise of Bangladeshi garment factories is something that Canada has encouraged. Canada made a significant policy change a decade ago, eliminating all tariffs and quotas on imports from the poorest countries. While the average tariff on all goods exported to Canada was less than 1 per cent, roughly 70 per cent of textile and clothing products subject to tariffs had tariffs greater than 15 per cent. The 49 poorest countries were not exempt.

The policy change was unveiled as part of a G8 Africa initiative. But, while most of the world’s poorest countries are indeed in Africa, they export very little. By contrast, poor South Asian nations, such as Bangladesh and Cambodia, as well as the Caribbean nation of Haiti, had some capacity to take advantage of the duty-free access to Canada. Canada’s clothing imports from Bangladesh were $330 million in 2003 and soared to $1.1 billion by 2012. Similarly, Canada imported $83 million in clothing from Cambodia in 2003, and over half a billion by 2012.

As many have noted, conditions in garment factors are abysmal. They are the contemporary equivalent of the dark satanic mills of 19th century England. The mostly women who labour in them endure long hours in poor conditions and earn low wages. Yet, as history has shown, the textile sector serves as the first rung on the ladder to development and economic prosperity. And, according to some commentaries such as this one, it has fueled a social revolution in Bangladesh.

As they did in Europe and North America, garment factories offer workers a chance to enter the better-paying formal sector of the economy. Better wages raise living standards and lower poverty, particularly in cities and towns. Garment production represents a rare chance for many of the women employed in these industries to earn independent income. Their alternatives are usually subsistence farming in the villages they come from.

Textile and clothing exports also contribute to greater overall economic stability. This is because they come from an economic sector that is more stable and has a relatively higher value-added component than the agricultural sector, on which most of these countries depend for their exports. The textile and clothing sector also creates entrepreneurial opportunities and managerial jobs for members of the middle class who might otherwise emigrate.

In other words, Canada’s decision to encourage more imports from these economies encourages exactly the type of activity that promotes development, sexual equality, and poverty reduction in the poorest countries. (Canada’s recent decision to eliminate tariff preferences for more developed economies such as China will now make it even more attractive to import from Bangladesh. The benefits and costs of this more recent policy decision merit another discussion on their own.) Many Canadian clothing imports now come from the poorest countries. In fact, 50 per cent of all Canada’s imports come from outside of the U.S. today (down from 35 per cent a decade ago). These imports come from both developed and developing markets.

In short, Canadian companies are now engaged with markets that are very different from Canada’s. This means that our companies need to ensure that their entire supply chain meets reasonable working conditions and standards, at the very least to protect their reputations which can be easily and quickly destroyed. After the horrific factory collapse in Bangladesh, consumers in Canada and other rich countries will now be able to apply much more pressure on companies to demand better working conditions in poor countries.