Impact of Globalization on Textile and Apparel Firms Globally - Research Paper Example

Globalization Globalization can be defined as an exchange of economic activities between “people, companies, and governments of different nations”. (Levin Institute, 2014) These economic activities include trade, which requires investment and the help of technology. Globalization needs the support of the political machinery in different countries. It impacts the general environment and culture in different countries, the processes of trade effect culture and the processes themselves get affected by culture and adapt. (Levin Institute, 2014) Globalization increases competition and adds to the quality of goods and services produced in a country (particularly less developed countries) (Arnett, 2002). Globalization has been present for a great deal of time now with the activities of “trade, immigration, and the exchange of information and ideas.” (Arnett, 2002). Moreover, with the advent of technology, especially in the fields of communication, a great amount of mutuality now exists in terms of financial dependency and economic trade. (Arnett, 2002). There is a lot of speculation regaridng globalization recently. The growth rate of international trade which was rapid, has diminished in the past few years, especially with global economies going into recessions. (Schuman, 2013). However, globalization is still in the running and growing strong. In the past investments and technology innovations were moving from the Developed countries to the Developing or Less Developed countries. (Schuman, 2013). However, that is a thing of the past now. Emerging markets are taking over the role in innovation and investments worldwide. For instance, “Apple’s chief rival is not a European or even Japanese company, but South Korea’s Samsung”. (Schuman, 2013) Impact of Globalization on Textile and apparel firms globally: Textiles and Apparel industry can refer to the manufacturing and design of textiles. It includes the production process and the technology or machinery used to produce textiles. There may be various uses of textiles such as industrial and non industrial. Industrial usage means the use of textiles in aiding production, whereas non industrial usage means the use of textiles in daily wear , as apparels or fashion. The three biggest exporters in the textiles industry are all developing countries such as: 1. China 2. India 3. Mexico Globalization of the textile industry is not something new. It has been going on since several years. In the early ninetheenth century, America was actively trading Indian Cotton in England. Later, it began exporting cotton to China. (Abernathy et al, 2004) However, as the textiles industry developed in China and Japan, China began exporting textiles and is now the leading exporter in the world.. Although Globalization aims to enhance effeciency in production through technology, this has given rise to many problems in the textile industry. The major problems are poor economic conditions coupled with lack of proper infratructure to implement these technologies. The two main impacts of Globalization in the textile industry have been “Lean Retailing” and “Product Proliferation.” (Abernathy et al, 2004) Lean Retailing is a concept where organizations do not to carry inventory and expect the manufacturers to provide stock on demand. Product Proliferation is the marketing of the same product in different varitians such as size color or uses. This encourages mass production.. In Western Europe, England’s Industrial revolution was kicked off with textile production and now France and Italy have been juxtapositioned as the Fashion capitals of the world. However, there has been a distinct shift in the pattern of textile trading. As the Western European production fell, and is expected to fall further, manufacturing activites shifted, and will further shift, to developing countries with a cheap labor wage. (K.Sentamilselvan, 2012) Germany, Italy, France, UK and Belgium total textile exports have fallen from 242% in 1991 to 13.6% in 2000. (K.Sentamilselvan, 2012). During the same period, China and India’s textile exports have increased dramatically. Moreover, the textile trade between Mexico and USA increased from $71 million in 1991 to approximately $ 8200 million in 2000, 115 higher than Mexicos earlier exports to USA. (K.Sentamilselvan, 2012). In the last twenty years, textile production has increased by 3.6% p.a in Asia, compared to Developed Western Nations increase of only 0.2% p.a. (ILO/96/33, 1996). However, with globalization came unemployment in Europe and USA and ssizeable employment gains in Asia and other Developing countries. (ILO/96/33, 1996) International Labour Office in a new report says that “this has been accompanied by a parallel shift of production from the formal to the informal sector in many countries with generally negative consequences on wage levels and conditions of work.” (ILO/96/33, 1996) The total employment in the Textiles and associated sector is approximately 23.6 million all over the world, with 5.3 million workers in China (increase of 2 million since 1980) (ILO/96/33, 1996). Moreover, critics on globalization argue that “it undermines the cultural integrity of other cultures and, is therefore, repressive, exploitative and harmful to most people in most places.” (Lechner, 2012) Another result of Globalization was the creation of NAFTA or North American Free Trade Agreement. This further ate into the US domestic firms with cheaper influx of goods from Mexico. (Abernathy et al, 2004) Challenges faced by textile and apparel firms face because of globalization: Some of the challenges faced by firms in the textile industry due to globalization can be outlined as follows: Lack of Infrastructure: With most of textile exports coming from Less Developed countries to Developed Countries, there is pressure for these firms to provide products with a certain quality standard and benchmark. This poses a unique challenge due to poor infrastructural situation in the country of operation. Financial Challenges: The issues of ‘Lean Retailing’ and ‘Product Proliferation’ (discussed earlier) require these firms to continue replenish stocks, sometimes more than once in a single season. This required heavy investment in production which is not always available in less developed countries.. There is also a requirement to invest heavily in proper machinery and move away from labor incentive production. These again require a sizeable capital. Import/Export Surplus: Most producers face the problem of surplus clothing which is often rejected by European and American shops and due to cheaper products available by other countries such as China and Indonesia. Regulations by Importing Countries: With the changing dynamics and power in the hands of Exporters, the importers in order to boost in-home production may impose regulations on imports which may include increasing taxes and tarrifs. Billionaire Donald Trump has made call for tariffs to be slapped on Chinese imports (Rein, 2012) In addition to the above mentioned challenges, even US apparel industry faces important challenges with the amount of imported garments in the domestic market, which keeps increasing year on year. (Rees, 2004) In order to promote development in under developed country while safeguarding its domestic market, “the U.S. government has negotiated a variety of trade agreements extending preferential treatment, including duty- and quota-free access to the U.S. market for apparel and other textile products manufactured in developing countries in the Caribbean Basin, sub-Saharan Africa, and the Andean region” (Rees, 2004) Moreover, it including certain provisions, which granted China admission in the World Trade Organization, and hence China benifitted almost instantaneously with the Multi Fiber Arrangement (MFA) quota being phased out. (Rees, 2004). Environment and social abuses occurring in the production and distribution of textile and apparel goods: Environmental: Many environmental issues exist in the textile industry. A huge quantity of wastewater and air pollution is emitted because of textile production. Even during the production process, a considerable amount of energy, water and other resources are used to produce these textiles. Moreover, due to lack of proper infrastructure and Governments ability to invest in Environment well-being, a lot of production facilities in the textiles are not as environmentally friendly as desired. Equipments are old and newer ones a generally quite expensive to buy. Due to the sound pollution occurring by the use of heavy machineries, there is a lot of disruption in nearby communities. The textile industry employs unskilled labors who are not really qualified to ensure that production is efficient and hence it leads to wastage or utilizing additional resources for production. (USEPA, 2004). As is the case with any other industrial sector, the textiles and apparel industry must also comply to Environmental safety standards to ensure the protection of the environment. The Resource Conservation and Recovery Act of 1976 provide certain regulations for the disposal and use of hazardous materials and other wastage that may occur during production. Classification of what constitutes hazardous materials, its storage period and technique and disposal are all under the above mentioned regulation. (USEPA, 2004) Social: Child Labor: One of the major social issues facing the apparel and textile industry is Child Labor. As western companies find it difficult to compete with cheap labor destination production countries, they outsource their production to these lesser developed countries, where child labor is a huge problem. Child labors are basically jobs that refrain a child from going to school or a job that is harmful for a child. These less developed countries have little or no restrictions on child labor. Child labor is a favored option in many countries because they are paid even lesser than the adults. Moreover, children can be more easily controlled, coerced and threatened even. Moreover education is not an available option to these children and they have to go on the lookout for work to sustain themselves and their families. (USEPA, 2004) Labels: Labels provide the customer with the information about the product. This information is more easily accessible to the consumer than a website as this information is available almost immediately. Labels include the country in which the product is produced. However, other important information such as production process environmental impacts and the testing process should also be incorporated on labels. This will give more information in the hands of the buyers, and some may refrain from buying products which for example have been tested on animals or hurt the environment. (USEPA, 2004) Sweatshops: A sweatshop is a “Factory where workers do piecework for poor pay and are prevented from forming unions”. (USEPA, 2004) This is quite common in the clothing industry. Sweatshops breach even the most basic of rights for the workers such as minimum wage, safety protocols and overtime. It is also known that sweatshops regularly employ Child Labor. (USEPA, 2004). It is not possible for a Western company to enforce any practice regulations that they may in foreign companies and thus a lot of less developed countries engage in Sweatshops regularly in order to reduce costs and increase profits. (USEPA, 2004) however, the practice of these sweatshops are not limited in Asian or less developed countries. The apparel industry in Los Angeles, USA is rife with sweatshops that employ Latino immigrants as cheap labor and poor conditions. (Bonacich, 1998). The main issue for this continuos exploitation of Latino workers is the lack of political clout they have in the country. Although this is changing and ‘Latino political mobilization’ is taking place nowadays it still is not enough to help these people. (Bonacich, 1998) Workers must form unions to fight for their basic rights. (Bonacich, 1998) Conclusion: Globalization as a concept is certainly here to stay. It has increased the quality of goods and services worldwide with open markets and competitiveness. The exchange of technologies is adding to cost effectiveness and better utilization of resources. Even in the textile and apparel industry, although it has challenged the age old system of productions and competitive environment, globalization has certainly been helpful. Though there are many challenges facing textile and apparel firms, the firms that can quickly innovate and understand consumer behavior shall come out on top. However, in their efforts to be cost effective and efficient, firms should not ignore environmental safety and social issues facing the textile industry. References: Abernathy et al, F. D.-4. (2004). Globalization in the Apparel and Textiles Industries. Arnett, J. .. (2002). The psychology of globalization. American Psychologist 57 (10). Bonacich, E. (1998). Latino immigrant workers in the Los Angeles apparel industry. New Political Science , 20(4), 459-473. ILO/96/33. (1996, October 28). Globalization Changes the Face of Textile, Clothing and Footwear Industries. Retrieved March 12, 2014, from International Labour Organization: http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_008075/lang--en/index.htm K.Sentamilselvan, M. V. (2012). GLOBALIZATION & TRADE IN TEXTILE INDUSTRY. International Journal of Marketing and Technology , 1-9. Lechner, F. &. (2012). he Gloabaliazation reader, (4th ed.) . West Sussex, UK: Wiley-Blackwell. Levin Institute. (2014). Globalization 101. Retrieved March 12, 2014, from What is Globalization: http://www.globalization101.org/what-is-globalization/ Rees, K. &. (2004). The U.S. textile and apparel industry in the age of globalization. . Global Economy Journal, , 4(1), 1-22. Rein, S. (2012). The end of Cheap China. Hoboken, NJ: John Wiley & Sons. Schuman, M. (2013, Nov. 19). Globalization Isn’t Dead, It’s Only Just Beginning. Retrieved March 12, 2014, from Time World: http://world.time.com/2013/11/19/globalization-isnt-dead-its-only-just-beginning/ USEPA, U. S. (2004). Textiles and Apparel Environmental and Social Issues. Retrieved March 12, 2014, from Duke University: https://web.duke.edu/mms190/textiles/environmental.html Read More