United States Department of Labour
This report is the third volume in ILAB's international child labor series. It focuses on the use of child labor in the production of apparel for the U.S. market, and reviews the extent to which U.S. apparel importers have established and are implementing codes of conduct or other business guidelines prohibiting the use of child labor in the production of the clothing they sell. The report was mandated by the Omnibus Consolidated Rescissions and Appropriations Act of 1996, P.L. 104-134.
A recent development, corporate codes of conduct and other business guide lines prohibiting the use of child labor are becoming more common, as consumers as well as religious, labor and human rights groups are increasingly calling upon companies to take responsibility for the conditions under which the goods they sell are being manufactured. Many U.S. companies that import apparel have adopted codes of conduct that prohibit the use of child labor and promote other labor standards. For purposes of this report, the term "codes of conduct" is used generically to refer to various types of corporate policies and standards on child labor and other work ing conditions. These instruments take different forms codes of conduct, state ments of company policy in the form of letters to suppliers, provisions in purchase orders or letters of credit, and/or compliance certificates.
The term "child labor" generally refers to any economic activity performed by a person under the age of 15. Not all work performed by children is detrimental or exploitative. Child labor does not usually refer to "light work" after school or legitimate apprenticeship opportunities for young people. Nor does it refer to young people helping out in the family business or on the family farm. Rather, the "child labor" of concern is generally employment that prevents effective school attendance, and which is often performed under conditions hazardous to the physical and men tal health of the child.
There are no reliable statistics on the rate of child employment in any par ticular economic activity, including the apparel sector. Most information on child labor in the garment industry comes from eyewitness accounts, studies by non -governmental organizations (NGOs) and academicians, reports by journalists, and studies by the International Labor Organization (ILO).
Anecdotal information gathered during the preparation of this report indi cates that in some of the countries examined, fewer children may currently be work ing on garment exports for the U.S. market than two years ago. A dramatic example involves Bangladesh, where large numbers of children worked in garment factories as recently as 1994. International media attention and threats of boycotts and can celled work orders led to the dismissal of thousands of child workers from the garment sector unfortunately with no safety net in place for them. Thus, it is possible that in the absence of government programs to assist the children, the precipitous dismissal of child workers can endanger, rather than protect them. More research is needed so that governments, industry, international organizations, and others concerned with the welfare of children are better equipped to design appro priate programs. It is clear, however, that local and national commitments to univer sal and free education for children are immediate and positive steps which can and should be taken.
One reason for any potential downward trend in the use of children in the garment industry may be the widespread adoption in the last several years of U.S. company codes of conduct prohibiting child labor. This potential downward trend may also be the result of (1) greater public awareness about child labor and its use in export industries; (2) changes in the garment industries of exporting countries tend ing to eliminate subcontractors where the use of child labor is most likely to occur coupled with policies to the same effect by U.S. importers; and (3) concerns that importing countries could enact legislation banning the importation of products made by children. Most likely all of these factors have worked in a mutually-reinforcing way to reduce the use of child labor in the export sector. On the other hand, there remains continuing evidence of child labor in the apparel industry of some countries, including the use of child labor in homework. To be any more definitive, further information is needed.
Voluntary codes of conduct have become increasingly common among U.S. corporations in recent years, particularly in the apparel sector. They have their roots in ethical guidelines for multinational corporations developed in the 1970s and voluntary codes of conduct developed by private groups during the 1980s. The first apparel company code of conduct was adopted in 1991. Most other codes have been developed in the last two or three years.
United States corporations have adopted corporate codes of conduct for a variety of reasons, ranging from a sense of "social responsibility" to pressure from competitors, labor unions, the media, consumer groups, shareholders, and worker -rights advocates. The U.S. Government has also encouraged U.S. corporations to adopt model business principles for their overseas operations.
The U.S. is the world's largest importer of garments. Imports of garments have been increasing steadily since the 1970s. Between 1985 and 1995, U.S. imports of apparel grew in current dollars by 171 percent, reaching nearly $34.7 billion. In that year, the U.S. imported apparel products from 168 countries.
The U.S. apparel industry is made up of a complex chain of actors whose functions often overlap. The industry includes the following entities:
In order to gather information on the extent and implementation of U.S. garment importers' codes of conduct containing child labor provisions, the Depart ment of Labor conducted a voluntary survey of the largest U.S. retailers and apparel manufacturers, based on their level of sales in 1995 as reported in publicly available documents.
Thirty-six of the 42 companies indicated that they have adopted a policy specifically prohibiting the use of child labor in the manufacture of goods they import from abroad. These policies take different forms:
Corporate codes of conduct that address labor standards vary from company to company with regard to the specific labor standards included. Some or all of the following elements are found in various codes: (1) prohibitions on child labor; (2) prohibitions on forced labor; (3) prohibitions on discrimination based on race, reli gion, or ethnic origin; (4) requirements to ensure the health and safety of the work place; (5) provisions on wages, usually based on local laws regarding minimum wage or prevailing wage levels in the local industry; (6) provisions regarding limits on working hours, including forced overtime, in accordance with local laws; and (7) support for freedom of association and the right to organize and bargain collectively.
U.S. corporate codes of conduct in the garment industry also differ with respect to how the labor standards are defined. The standards used to define child labor vary significantly from company to company. For example, a company's policy statement may:
In some cases, companies' policies prohibiting child labor in the production of their goods do not contain any definition of child labor.
An important issue regarding implementation of corporate codes is their transparency, or the extent to which foreign contractors and subcontractors, workers, the public, NGOs and governments are aware of their existence and meaning. Transpar ency reinforces the message of codes and leads to more credible implementation. When transparency is lacking, interested parties cannot benefit fully from a code of conduct.
Monitoring is critical to the success of a code of conduct; it also gives the code credibility. Yet, most of the codes of the respondents do not contain detailed provisions for monitoring and implementation, and many of these companies do not have a reliable monitoring system in place.
Respondents indicated that they utilize a variety of means to monitor that their codes of conduct or policies on child labor are respected by their suppliers.
Active monitoring may be done through regular checks, formal audits or evaluations, or special visits by corporate staff. The frequency and intensity of visits vary greatly from company to company. For example, some companies may focus their site visits on their larger suppliers or suppliers where there have been alleged problems, or may only monitor those facilities from which they import directly or which manufacture their private-label merchandise.
Contractual monitoring shifts at least part of the burden of responsibility for ensuring compliance with codes of conduct onto the foreign manufacturer, the sup plier or the buying agent. Even when monitoring is primarily contractual, there are instances in which the U.S. corporation requires documentary proof of compliance or reserves the right to carry out on-site inspections.
While technically not a monitoring activity, evaluation of prospective con tractors with regard to labor standards is becoming an important aspect of code implementation. Seventeen of the companies that responded to the survey stated that they have a process in place to evaluate overseas facilities before they establish a business relationship with them. Such on-site evaluations or inspections have long been made primarily to verify whether the facilities have the physical capacity to meet quality and quantity specifications. Increasingly, the working conditions and employment practices of prospective contractors are also being evaluated, screening out companies that are violators or have the potential for being so in the future.
Enforcement of codes of conduct refers to how U.S. companies respond to violations of their codes of conduct. The vast majority of respondents stated that they have never found any violation of the child labor provisions of their codes; some companies attributed this to their efforts to evaluate and carefully select suppli ers before entering into contracts with them, while others indicated that child labor violations of their codes are less common than other types of violations, such as safety and health.
Most respondents stated that, faced with an allegation of violation of their code of conduct, they would first investigate to confirm the use of child labor and then impose enforcement measures. Enforcement policies range from the more severe immediate termination of the business relationship to more tempered responses, including demand for corrective action (e.g., dismissal of under-age work ers), cancellation of specific orders, and placement of the violating supplier on probation.
Department of Labor officials visited six countries where there is extensive production of garments for the U.S. market the Dominican Republic, El Salvador, Guatemala, Honduras, India, and the Philippines. The objective of the visits was to learn about foreign suppliers' approaches to the implementation of the established child labor policies of U.S. importers. Interviews were held with as many relevant persons or organizations as possible associated with the apparel industry, i.e., Labor Ministry officials, manufacturers, plant managers, buyers, trade associations, unions, workers, community activists, human rights groups, organizations concerned with children's issues, and other NGOs. At the beginning of each interview, Department of Labor officials indicated that the purpose of the interview was to gather informa tion for a public report, and any information collected could be used for that pur pose.
The central element of the field visits was the opportunity to discuss matters related to the existence and implementation of codes of conduct with managers and workers of plants producing apparel for the U.S. market. Department of Labor officials visited 74 apparel-producing plants and 20 export processing zones and met with key representatives of the garment industry and more specifically of the garment export industry in all six countries. The results of interviews regarding the 70 plants determined to be exporting to the U.S. market at the present time are reported in the study.
The consensus of government officials, industry representatives, unions and NGOs interviewed by the Department of Labor in the Dominican Republic, El Salva dor, Guatemala, and Honduras is that child labor is not now prevalent in their gar ment export industries. In the very few cases where child labor was mentioned, the children were 14 or older. However, the use of workers 15 to 17 is common and there may be extensive violations of local laws limiting the hours for workers under 18.
There was some anecdotal information about the prior use of child labor in the garment industry in Central America. Labor union representatives stated that about two years ago, the garment export industry began to dismiss young workers to avoid adverse publicity in importing countries. Often plant managers no longer hire young workers (14-17 years of age) even if they meet domestic labor law or com pany code of conduct requirements. However, there are also some reports of fraudulent proof-of-age documents being used by child workers to seek jobs in the garment industry. There continue to be allegations in Guatemala of children working for small subcontractors or in homework in the San Pedro de Sacatepequez area.
Meanwhile, it is clear that children continue to work for subcontractors and in homework in the Philippines and India. They perform sewing, trimming, embroi dering and pleating tasks. It is also the case that children are not prevalent in the larger factories in the Philippines, and that recently plant managers in India have become more concerned about not using child labor.
While most survey respondents indicated they have distributed their code of conduct to all suppliers, many said they were not certain if workers knew about their code. Field visits in six countries revealed that:
While most respondents monitor foreign suppliers for quality of product and scheduling coordination, monitoring of child labor policies is far less common. Field visits revealed that:
Foreign plant managers said factories that have passed the screening process and have become contractors of U.S. apparel importers may face a range of corrective measures should they fall short in complying with codes of conduct. Examples of corrective measures cited included changes to the physical plant (improvement of bathrooms, eating facilities, lighting, ventilation), monetary penalties, immediate dis missal of young workers, and termination of contracts.
Foreign plant managers and other industry officials stated continued access to the U.S. market is a very large incentive for overseas garment producers to meet quality/timeliness requirements and comply with codes of conduct.
Based upon the information collected from the voluntary survey of 48 U.S. apparel importers and site visits to six countries producing garments for the U.S. market, the Department of Labor found that codes of conduct can be a positive factor in solving the global child labor problem. Most of the large U.S. apparel importers responding to the voluntary questionnaire have adopted codes prohibiting child labor in garment production and some are clearly committed to their implementa tion. This is a remarkable change in a matter of just a few years.
Codes of conduct are not a panacea. Child labor remains a serious problem, with hundreds of millions of working children around the world. However, the presence of children in the garment export industry may be reduced by the imple mentation of codes of conduct. It is also possible that changes induced by codes of conduct could have positive spillover effects for children more generally, e.g., a greater commitment of a foreign country to compulsory education for children. However, this relationship requires further study.
Finally, because codes of conduct seem to be tools used by large apparel importers, there may remain smaller importers without codes of conduct still willing to overlook the working conditions of the plants in countries from where they pur chase their garments. This question also deserves further study.
Consistent with the important efforts already undertaken by many U.S. ap parel importers, the Department of Labor recommends that U.S. companies consider whether some additional voluntary steps might be appropriate:
1. All actors in the apparel industry, including manufacturers, retailers, buying agents and merchandisers, should consider the adoption of a code of conduct.
If all elements of the apparel industry have a similar commitment to eliminat ing child labor, this would have a reinforcing impact on the efforts that the leaders in the industry have made. Trade associations should consider whether they could increase their technical assistance to help assure that the smaller companies in the industry can achieve this objective.
2. All parties should consider whether there would be any additional benefits to adopting more standardized codes of conduct.
There is a proliferation of codes of conduct. Some foreign companies and producer associations are even drafting their own codes. The definition of child labor differs from code to code, thereby creating some uncertainty for business part ners and workers as to what standard is applicable.
3. U.S. apparel importers should consider further measures to monitor subcontractors and homeworkers.
Since most of the violations of labor standards, including child labor, occur in small subcontracting facilities or homework, U.S. apparel importers should consider further measures to monitor subcontractors more closely.
4. U.S. garment importers particularly retailers should consider taking a more active role in the monitoring/implementation of their codes of conduct.
The implementation of codes of conduct is a complex matter, and a relatively recent endeavor. Implementation seems best and most credible when U.S. companies get directly involved in the monitoring. There is little incentive for for eign companies to comply with a U.S. importer's code of conduct if there is no verification of actual behavior.
5. All parties, particularly workers, should be adequately informed about codes of conduct so that the codes can fully serve their purpose.
In the supplying countries, managers of enterprises are generally familiar with the codes of their clients. Workers, however, are seldom aware of codes of conduct of the U.S. corporations for which they make garments. NGOs and foreign governments are also not fully informed about codes of conduct.
Child labor is almost invisible to most people, but child workers are legion in the world. Sold or exchanged as cheap merchandise, many children cannot escape bonded labor or prostitution. Others suffer, and may only barely survive, the long hours of work, the heavy burdens, the dangerous tools, the poisonous chemicals. The strongest will go on, forever bearing the physical and emotional scars of premature labor. At a time when they should be at school and preparing for a productive adult hood, young boys and girls are losing their childhood and, with it, the promise for a better future.
It is true that all over the world there is increasing awareness of this problem. Nevertheless, a wall of silence still surrounds the worst forms of child labor; and other barriers of ignorance and self-interest tend to perpetuate it. Only a clear perception of the problem and the firm resolve to combat it will finally eradicate the evil of child labor.1
In 1993, the United States Congress provided for the Department of Labor's Bureau of International Labor Affairs (ILAB) to establish a special unit to research the use of child labor worldwide and publish reports on child labor issues.
This report is the third volume in ILAB's international child labor series. 2 ILAB's two previous reports documented the use of child labor in the production of U.S. imports, as well as situations of forced and bonded child labor. The present report focuses on the use of child labor in the production of apparel for the U.S. market, and reviews the extent to which U.S. apparel importers have established and are implementing codes of conduct or other business guidelines prohibiting the use of child labor in the production of the clothing they sell. 3
A development of the last few years, corporate codes of conduct and other business guidelines prohibiting the use of child labor are becoming more common, as consumers as well as religious, labor and human rights groups are increasingly calling on companies to take responsibility for the conditions under which the goods they sell are being manufactured. The term "code of conduct" is used generically in this report to refer to various types of corporate documents establishing policies and standards on child labor and other working conditions. These instruments take dif ferent forms codes of conduct, statements of company policy in the form of letters to suppliers, provisions in purchase orders or letters of credit, and/or compliance certificates.
Chapter II provides an overview of the U.S. apparel industry, U.S. apparel imports, major U.S. retailers and manufacturers of apparel and their codes of con duct.4 An analysis follows of how apparel companies implement the child labor protections of their codes using transparency, monitoring, and enforcement as benchmarks. This analysis is drawn from information provided to ILAB by the com panies themselves. Chapter III uses information gathered by Department of Labor officials in six countries that export garments to the U.S. market to describe how the codes of conduct are being implemented abroad. Chapter IV contains conclusions on codes of conduct gathered from the review of company policies prohibiting child labor as well as the country visits.
The remainder of this introduction will place the discussion of codes of con duct in the broader context of child labor throughout the world. It will give some background on existing international child labor standards and current estimates of child workers. It also will provide some observations on recent child labor trends in the garment industry, and explain why codes of conduct have come to be seen by some as a partial response to the international child labor problem.
The International Labor Organization (ILO) establishes and supervises the application of international labor standards including child labor standards. Its basic philosophy on child labor was set in the early part of this century: "Under a certain age children should not need to engage in an economic activity." 5
The term "child labor" generally refers to any economic activity performed by a person under the age of 15. Not all work performed by children is detrimental or exploitative. Child labor does not usually refer to performing "light work" after school or legitimate apprenticeship opportunities. Nor does it refer to young people helping out in the family business or on the family farm. Rather, the "child labor" of concern is generally employment that prevents effective school attendance, and which is often performed under conditions hazardous to the physical and mental health of the child.
International standards provide guidelines on the minimum age for employ ment, allowing for exceptions based on the conditions of work. ILO Convention 138 on the Minimum Age for Employment, adopted in 1973, states: "The minimum age. . . should not be less than the age of compulsory schooling and, in any case, shall not be less than 15 years." Convention 138 allows countries whose economy and educational facilities are insufficiently developed to initially specify a minimum age of 14 years and reduce from 13 years to 12 years the minimum age for light work. 6
Convention 138 defines "light work" as work that is not likely to harm the child's health or development, or prejudice his/her attendance at school. Conven tion 138 also prohibits any child under the age of 18 from undertaking dangerous work that is, work that is likely to jeopardize the health, safety or morals of young persons.
Partly due to the focus on the child labor issue in the last few years, there have been further discussions about more clearly defining what constitutes "exploit ative" child labor that violates the human rights of a child and for which a strong international consensus exists for immediate abolition. 7 The ILO has begun the effort to adopt a new standard on the abolition of the most "intolerable forms" of child labor by 1999.
In the meanwhile, the ILO's International Programme on the Elimination of Child Labor (IPEC), established in 1992 to assist countries in the phased elimination of child labor, refers to certain categories of child labor as "intolerable": children working under forced labor conditions and in bondage; children in hazardous work ing conditions and occupations; and very young working children (under 12 years of age).8
Whether child labor is defined by age or conditions of work, no reliable information exists on the actual number of children working throughout the world. Most available data and it is partial only covers economic activity of children between the ages of 10 and 14. The ILO estimates that there are at least 73 million economically active children in this age group.9 The number of child workers under 10 is thought to be significant in the millions.10 However, according to the ILO, the probable total number of child workers around the world today may be in the "hundreds of millions."11
Child Labor in the Apparel Sector
There are no reliable statistics on the rate of employment of children in any particular economic activity, including the garment sector. Therefore, most informa tion on child labor in the garment industry comes from eyewitness accounts, non -governmental organization (NGO) and academic studies, journalists, and ILO re ports.
The Department of Labor's 1994 international child labor study, By the Sweat and Toil of Children (Volume I): The Use of Child Labor in U.S. Manufactured and Mined Imports, catalogued existing information on child labor in the garment indus tries of Bangladesh, Brazil, China, Guatemala, India, Indonesia, Lesotho, Morocco, the Philippines, Portugal and Thailand. While the report noted that more research was necessary to confirm the extent and working conditions of child workers, in some cases it stated that children were involved in the production of garments for export to the United States.
With the exception of Bangladesh, where children regularly worked in large -scale, formal factories, the report found that children were more likely to work in small subcontracting shops or homework situations. In some cases, children were found to work in locked shops, with armed guards preventing entrance and exit during work hours. Children worked on tasks such as sewing buttons, cutting and trimming threads, folding, moving and packing garments. In small shops and homesites in the Philippines, children were also found embroidering and smocking (making pleats). In some cases, children worked long hours sometimes six or seven days a week. Some children received less than the minimum wage and were not paid for overtime work.
Today, two years after our initial findings, children continue to work in the apparel sector. A 1996 ILO study states that "...there is no denying that child labor is still very much a reality" in the apparel sector, although it is "extremely difficult to give exact figures, particularly for the segment involved in world markets, because of the complex subcontracting arrangements in operation." 12 The same ILO study also notes positive developments that may have contributed to the shifting of some chil dren out of the garment sector: increased international concern about the conditions under which labor-intensive goods such as clothing are produced, and initiatives by some developing countries to eliminate child labor in order to improve the image of their industries.
Anecdotal information gathered during the preparation of this report also indicates that fewer children may be working on garment exports for the U.S. market at least in some countries in 1996 than in 1994. This conclusion, however, is based mainly on anecdotal evidence in the six countries where Department of Labor officials visited. More research is necessary to confirm that a downward trend in the use of child labor in garment production is a universal phenomenon. 13 This is no small task since a total of 168 countries export apparel to the U.S. market, many of them small suppliers. There are reports of child labor in some newer suppliers to the U.S. market.14
There are several reasons which might explain a potential downward trend in the use of child labor in garment-exporting countries.
First, any potential downward trend may be partly due to the widespread adoption in the last several years of U.S. company codes of conduct prohibiting child labor.
Second, public awareness of child labor and reports of its use in export industries, including the garment industry, may be a substantial contributing factor to a declining use of child labor. There has been a whirlwind of media accounts and public pressure concerning child labor during the past few years. Investigative jour nalists have broadcast or published numerous reports of working children, particu larly in developing countries, making products sold in the United States and other industrialized nations. In some cases, news reports have named the companies whose products were shown to be made by young workers.
For example, in 1993 an American television newsmagazine reported a story of young Bangladeshi children making garments sold at Wal-Mart stores. News accounts also reported that young girls were producing garments at an independent Bangladeshi contractor facility supplying Levi Strauss & Company. More recently, an NGO accused The Gap of selling clothing made in Salvadoran sweatshops that used young workers.15 In 1996, the same group charged that Honduran children pro duced clothing bearing the Kathie Lee Gifford label and sold in Wal-Mart stores. 16
Third, in some countries, such as the Philippines, increasing numbers of larger factories may be squeezing smaller subcontracting shops which are more likely to employ children out of work. Professor Rosario del Rosario, a child labor expert who recently concluded a survey on child labor in the Philippines' garment sector, told Department of Labor officials that although there is still some child labor used in subcontracting levels of the garment industry, the numbers of child workers has decreased since the late 1980s. She said that subcontractors who once employed children have reported that larger exporting factories have markedly decreased their orders for the garments that they had traditionally supplied. 17 While this is not necessarily the case everywhere, the Philippine experience illustrates that a decline in the use of subcontracting arrangements may cause a decline in the use of child labor. 18
A related development that may help explain a downward trend in the use of child labor in some circumstances is the strategic decision by some large U.S. import ers to prevent or restrict subcontracting by foreign suppliers and to consolidate their sourcing with a smaller number of larger factories.
Fourth, garment manufacturers may be responding to concerns that import ing countries could enact legislation banning the importation of products made by children. Such legislation has been introduced in recent U.S. Congresses.
There are also cases where children have been displaced from the garment sector, as business practices have reacted to market pressures to reduce the use of child labor. One of the most dramatic examples involves Bangladesh, where large numbers of children worked in garment factories as recently as 1994 (see Box I-1). International media attention and threats of boycotts and cancelled work orders led to the dismissal of thousands of child workers from the garment sector unfortu nately in this instance with no safety net in place for them.
In response to concerns for the dismissed child workers, a memorandum of understanding was negotiated between the Bangladesh Garment Manufacturers and Exporters Association and the ILO and Unicef with the active support of the U.S. Embassy and the U.S. Department of Labor to place the children in schools, and to offer their jobs to older family members.
Thus, it is possible that in the absence of government programs to assist children, the precipitous dismissal of child workers can endanger, rather than protect them.19 More research is needed so that governments, industry, international organi zations, and others concerned with the welfare of children are better equipped to design appropriate programs.20 It is clear, however, that local and national commit ments to universal and free education for children are immediate and positive steps which can and should be taken.
B O X I - 1 Bangladesh Case Study In 1993, an American television newsmagazine "NBC Dateline" broadcast a story of young Bangladeshi children making garments sold at Wal-Mart stores. This put pressure on Wal-Mart to cancel its contracts with Bangladeshi manufacturers. Other companies informed their Bangladesh partners that the use of child labor was creating negative press and was bad for business. At the same time, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) learned of proposed legislation that could restrict the U.S. import of items made with child labor, poten tially closing the American market to Bangladeshi garments if children were found in the factories. Garment exports are the single largest export industry in Bangladesh with over 50 percent of garment exports going to the U.S. Obviously, should Bangladesh no longer be able to sell its garments to the U.S., its national economy would be seriously affected. This pressure led to action. On July 4, 1994, the BGMEA announced that it would eliminate child labor in the garment industry by October 31, 1994. Thousands of children were reportedly dismissed from the factories as a result. Some reports indicated the children removed from the garment factories were forced to resort to more dangerous and lesser paid work in the informal sector. Rumors circulated that many of the children ended up as street beggars, domestic servants, or were forced into prostitution. Other reports noted that the children were hired by underground subcontractors, working in hidden garment sweatshops under worse conditions than before. While there is no clear evidence describing what happened to the children, it is clear that the government of Bangladesh was not providing adequate schools or other programs for them. Once it became apparent that there was no safety net for the dismissed children, representatives of the ILO, Unicef, the Asian-American Free Labor Institute (AAFLI) and officials of the U.S. Embassy, asked the BGMEA to cease firing underage work ers until a school system and other measures were in place. After a year of extended negotiations, a Memorandum of Understanding (MOU) was signed on July 4, 1995 between the BGMEA, the ILO and Unicef. The MOU provides that all child workers in the garment sector be removed from the factories and enrolled in schools. It forbids any new hiring of underage workers, as well as any retention of children once all MOU schools have opened. A monitoring and verification system devel oped by the ILO oversees compliance; and monitoring teams make unannounced visits to factories and schools, reporting violations to a steering committee for action. The MOU also states that the BGMEA will offer employment to qualified family mem bers of underage workers whose employment is terminated under the agreement and that former child workers will be offered reemployment once their schooling is com pleted. A survey, conducted in the fall of 1995, determined the number and identity of child workers in BGMEA factories. The survey counted approximately 11,000 children a significantly lower number of children than thought to be in the factories a year earlier. As of September 1996, 130 MOU schools for former child workers have opened, serving nearly 2300 children. Clearly, progress has been slow. ILO moni toring teams making random, unannounced factory visits continue to encounter ob stacles from some producers. They also continue to find additional underage work ers that were either missed by the original surveys or are new hires. Furthermore, the schools are not filled. Unless the industry is fully committed to the MOU, its potential success may remain unrealized. |
design appropriate programs.20 It is clear, however, that local and national commit ments to universal and free education for children are immediate and positive steps which can and should be taken.
Codes of conduct have become increasingly common in recent years, particularly in the apparel sector. While the first codes of conduct in the apparel industry were developed in the early 1990s, the majority of the major apparel manufacturers and retailers have developed or are developing codes or business policies that address child labor and other working conditions. Many companies are now revising their codes to incorporate lessons learned from their own or other companies' experiences. While this report focuses on the child labor provisions of codes of conduct, many of its findings can be generalized to the other labor provi sions that codes often address.
The recent proliferation of codes of conduct can be attributed to several factors. With media reports and exposés on child labor becoming more frequent, consumers -- and therefore companies - are becoming increasingly concerned about the conditions under which the garments they purchase are made. Companies' adoptions of codes of conduct serve to ease consumer concerns - and their own - that they may be contributing to the exploitation of child labor. Often companies adopt codes to project a positive image and protect their brand-name or quality reputation. Some are motivated by good intentions; some by bottom-line considerations - many by both.
The analysis of codes of conduct contained in this report is based on a voluntary survey and follow-up telephone interviews with the largest U.S. retailers and manufacturers of apparel. In its review of the extent and effectiveness of codes of conduct in the apparel industry, the report has benefitted from the input of representatives of industry, human rights groups, religious groups, trade unions, workers, academics and other governments.22 Appendices B and C list the companies surveyed and reproduce the codes of conduct they provided. Site visits were under taken to six countries - the Dominican Republic, El Salvador, Guatemala, Honduras, India, and the Philippines - that produce garments for the U.S. market in an attempt to learn more about how codes of conduct are implemented on the local level. Appendix D provides additional information on countries visited and persons and organizations with whom Department of Labor officials met.
Companies with codes of conduct or policies prohibiting the use of child labor in overseas production facilities use a variety of methods to define child labor. Some companies refer to "national law" or "international standards." Some companies, in an effort to avoid adverse publicity, even require their suppliers to comply with minimum age requirements that are above the minimum age mandated by national law or international standards. This is because there is no certainty of what minimum age for employment is "publicly acceptable," and some companies are prohibiting the employment of "teenagers" in the 14 - 17 age bracket to avoid workers who could be considered "children."
While many companies have adopted codes either to prevent, or in response to, adverse publicity, having a code of conduct can, ironically, make companies more vulnerable to criticism if conditions are found that violate their code. Indeed, some companies still consider it "safer" to avoid any public declaration of their standards through a code of conduct.
Furthermore, the most important developments today do not lie so much in adopting codes, which are already widespread, but in the ways companies are devising to implement those codes. Some companies have adopted codes before fully developing methods to implement them. As Chapter II notes, the international apparel industry is complex, with many U.S. companies sourcing from hundreds or thousands of overseas buying agents, contractors and subcontractors. For this reason, implementation presents definite challenges for many importers.
Some companies require their quality control personnel to double as social auditors, while others are engaging outside firms to survey compliance. Still others ask their contractors to sign a contract certifying that they do not hire children, and then rely on the word of the contractor without further verification. Some companies are experimenting with new approaches, literally learning as they go. Some have begun working with unions, human rights and religious groups to establish a moni toring system.
Credibility is the critical element for codes of conduct. Without it, the prom ises contained in a code are hollow and the credibility of the company falters. Com panies' success in assuring the public that their policies on labor practices abroad are indeed being followed will depend on the three key elements of implementation that are discussed in detail in Chapters II and III -- (1) transparency, (2) monitoring, and (3) enforcement.
First, codes of conduct cannot be effectively implemented without transparency. It is critical that all actors affected by a code buying agents, contractors, subcontractors, union representatives and the workers themselves be aware of its provisions. Research conducted for this report suggests that codes of conduct con ceived in the headquarters of U.S. apparel importers are not necessarily well known in the overseas facilities that produce their garments.
Second, while a credible system of monitoring - to verify that a code is indeed being followed in practice - is essential, there is no agreement on the best way to conduct monitoring. Some companies only monitor their largest contractors or contractors that produce private-label merchandise for them and rely on buyer agents or self-monitoring for other facilities. Several methods of monitoring are currently being used and developed, including monitoring by outside auditors and local and international NGOs. The most effective type of monitoring may vary according to the characteristics of the importing company, such as whether it has a strong presence abroad or whether it is vertically integrated. It appears that the closer a company is to the production, the more leverage it has to ensure that the conditions at manufacturing facilities comply with its policies. There also appears to be some dispute among retailers, manufacturers, overseas contractors and other par ties as to who has the ultimate responsibility for monitoring.
Third, the issue of enforcement presents some complex issues. If a company discovers child workers in a facility, the quickest and perhaps easiest way to resolve the problem is to require their immediate dismissal. A small number of companies have strived to come up with more comprehensive solutions to the problem such as providing financial support for the education of the children.
These are some of the pitfalls and challenges that companies face in attempt ing to enforce their code of conduct in overseas facilities. An effective implementa tion program can be time-consuming and financially burdensome. But just as com panies invest in the quality of their clothes, they are now learning how to effectively invest in the quality of their labor conditions.
1 International Programme on the Elimination of Child Labour (IPEC)
(Geneva: International Labor Organization) 1996 [hereinafter IPEC Brochure].
2 ILAB's first two reports are titled, By the Sweat and Toil of Children (Volume I): The
Use of Child Labor in U.S. Manufacturing and Mining Imports (1994), and By the Sweat and
Toil of Children (Volume II): The Use of Child Labor in U.S. Agricultural Imports &
Forced and Bonded Child Labor (1995). In addition, in March 1996, ILAB published Forced
Labor: The Prostitution of Children, the proceedings of a symposium on the sexual
exploitation of children held at the Department of Labor in September 1995.
3 See Omnibus Consolidated Rescissions and Appropriations Act of 1996, P.L. 104-134 (April
26, 1996); S. Rpt. 104-145, Departments of Labor, Health and Human Services, and Education
and Related Agencies Appropriation Bill, 1996.
4 For purposes of this report, the terms "apparel" and "garment" are
used interchangeably.
5 Child Labour: What is to be done? Document for discussion at the Informal Tripartite
Meeting at the Ministerial Level (Geneva: International Labor Office) ITM/1/1996, June 12,
1996, 26 [hereinafter Child Labour: What is to be done?].
6 See Child Labour: What is to be done? at 27.
7 See Trade, Employment and Labour Standards: A Study of Core Workers' Rights and
International Trade (Paris: Organisation for Economic Cooperation and Development) May 14,
1996, 19-21.
8 IPEC Brochure.
9 Child Labour Today: Facts and Figures (Geneva: International Labor Organization,
ILO/CLK/1) June 10, 1996 [hereinafter Child Labour Today: Facts and Figures].
10 Child Labour Today: Facts and Figures.
11 Child Labour Today: Facts and Figures. The ILO is currently working to develop better
statistical information on child labor. Experimental statistical surveys have been carried
out by the ILO in four countries: Ghana, India, Indonesia and Senegal. See Child Labour
Surveys, Results of methodological experiments in four countries 1992-93 (Geneva:
International Labor Office) 1996. The ILO's IPEC program is now utilizing its survey
techniques in other countries -- Turkey, Pakistan and the Philippines (funded by the U.S.
Department of Labor).
12 Globalization of the footwear, textiles and clothing industries: Report for discussion
at the Tripartite Meeting on the Globalization of the Footwear, Textiles and Clothing
Industries: Effects on Employment and Working Conditions (Geneva: International Labor
Organization) 1996, 75 [hereinafter ILO Textile Report].
13 In the case of the People's Republic of China -- the second largest exporter of
garments to the U. S. in 1995 -- documenting labor practices, including child labor,
remains extremely difficult. The 1994 study noted newspaper reports and other anecdotal
accounts of children 12 to 15 years old working 15 hours a day in garment factories. It is
not known whether there has been any demonstrable change in the number or situation of
child workers in the Chinese apparel industry.
14 For example, there is a recent report on possible child labor in a Cambodian garment
factory. See American Embassy - Phnom Penh, unclassified telegram no. 2594, September 16,
1996.
15 In June 1995, the National Labor Committee (NLC) alleged that more than 100 workers at
the Mandarin International garment manufacturing plant in El Salvador producing garments
for The Gap were between the ages of 14 and 17. Although the employment of the young
workers seemed to comply with Salvadoran law and The Gap's code of conduct, it was alleged
that the young workers were forced to work longer hours than allowed by law. In December
1995, The Gap signed an agreement consenting to independent monitoring of its code of
conduct. It also agreed to re-approve the Mandarin factory as a contractor when the
factory could effectively implement The Gap's code. The independent monitoring group
consists of local volunteers from Salvadoran NGOs.
16 In April 1996, the NLC presented testimony at a Congressional hearing alleging that
clothing bearing the Kathie Lee Gifford label sold at Wal-Mart was made by illegal child
labor in Honduras. The NLC claimed that the Global Fashion factory employed workers as
young as 13 and forced them to work long overtime hours, and sometimes through the night.
The NLC asserted that, during peak production times, the girls were not permitted to
attend night school because they were forced to stay at work. A letter sent to Ms. Gifford
outlining these allegations, requested her to publicly disavow the use of child labor and
allow independent human rights monitors access to plants producing Kathie Lee clothing.
Ms. Gifford's first response was to distance herself from the allegations, saying that she
had no knowledge of illegal labor practices and no means to oversee the employment
practices in the overseas production of her clothing. Later, she announced that she would
take responsibility for ensuring that no children produced garments bearing her label, and
encouraged other companies and celebrity endorsers to do the same. Ms. Gifford has
announced her intention to hire an independent monitor to ensure that her clothing is made
under appropriate labor conditions.
17 U.S. Embassy - Manila unclassified telegram no. 12371, September 17, 1996.
18 In contrast to the Philippines experience, a 1996 ILO study on the textile, clothing
and footwear sector notes a trend towards outsourcing. The ILO reports that this is
reflected in the use of homework and in recourse to moonlighting in small enterprises and
clandestine workshops. Such practices tend to undermine basic employment and working
conditions. See ILO Textile Report at 64.
19 A recent article on labor conditions in Honduran garment factories states: "Union
leaders and workers say factory owners have also been reviewing their personnel records
and dismissing all employees who are minors. But that does not mean the dismissed
youngsters are returning to school. On the contrary, management and labor agree that most
of the children have instead sought new jobs outside the assembly sector that are lower
paying and more physically demanding or are buying fake documents in an effort to sneak
their way back into the apparel plants." Larry Rohter, "Hondurans in
'Sweatshops' See Opportunity," The New York Times, July 13, 1996 [hereinafter
"Hondurans in Sweatshops"].
20 Child Labour: Report to the ILO Committee on Employment and Social Policy (Geneva:
International Labor Office) ILO Doc. GB.264/ESP/1, November 1995, 18.
21 According to Levi Strauss & Co., its Global Sourcing & Operating Guidelines
adopted in 1991, were the first ever developed.
22 See International Child Labor Hearing (Washington, DC: U.S. Department of Labor) June
28, 1996.
II. Codes of Conduct in the U.S. Apparel Industry
The United States is the world's largest importer of garments. In 1994, it accounted for 28 percent of world imports of such products.1 The garment industry is a global industry, with American companies importing clothing for the United States market from all over the world. Along with globalization have come increased concerns from companies and consumer, labor and human rights groups regarding the labor conditions under which garments are made. These concerns pertain to health and safety conditions in garment factories, wage and hour issues, trade union rights, and, perhaps most commonly, child labor and forced labor.
In response, many U.S. garment manufacturers and retailers have voluntarily developed codes of conduct, or policy statements, requiring factories with which they do business - in the U.S. and abroad - to meet certain legal and ethical standards. These codes of conduct address a variety of worker rights issues. Provisions prohibiting child labor are one of the most common elements of these codes.
While codes of conduct have been adopted by many companies in the garment industry, they are also a recent phenomenon. A small number of companies in the garment industry first introduced formal codes of conduct in the early 1990s and have been implementing them for several years.2 Most firms, however, have developed codes in the past two or three years.
This chapter will examine the use of codes of conduct by large U.S. importers of garments, specifically with respect to provisions prohibiting the use of child labor in overseas production.3 It will describe the extent to which large U.S. retailers and apparel manufacturers have adopted codes of conduct with provisions on child labor, the content of these codes, and how companies are implementing them.4
Part B of this chapter provides a brief overview of codes of conduct. Part C describes the U.S. garment industry and U.S. imports of garments. Part D explains which apparel manufacturers and retailers were surveyed regarding their importing practices and codes of conduct with respect to child labor. Part E describes the extent, form, content and elements of child labor provisions in garment importers' codes of conduct. Part F describes the various ways in which garment importers implement the child labor provisions of their codes and discusses issues surrounding code implementation.
Corporate codes of conduct are policy statements that define ethical standards for companies. Corporations voluntarily develop such codes to inform consumers about the principles that they follow in the production of the goods and services they manufacture or sell. Corporate codes of conduct usually address many workplace issues - including child labor -and, according to some observers, are part of a broader movement toward corporate social responsibility.5
In the early 1970s, multinational corporations or multinational enterprises (MNEs) were widely criticized for their behavior in developing countries.6 Host governments, as well as labor organizations, said that multinational corporations failed "to operate in harmony with local economic, social and political objectives."7 For their part, many corporations resisted arguments that they had a social purpose to pursue in their overseas activities.
In response to pressure from developing countries and human rights groups, several international organizations developed ethical guidelines addressing the conduct of MNEs. Examples include the draft United Nations Code of Conduct for Multinational Corporations,8 the OECD Guidelines for Multinational Enterprises,9 and the ILO Tripartite Declaration on Principles concerning Multinational Enterprises and Social Policy.10 These multilateral codes of conduct covered MNE behavior on a range of topics, including labor standards.
Although the OECD guidelines and the ILO Declaration of Principles contain mechanisms for reporting abuses and problems, neither organization enforces its guidelines since they are voluntary and not legally binding.11 However, both continue to serve as examples for efforts by private groups and corporations to develop codes of conduct. The U.N. Code of Conduct for Multinational Enterprises was never formally adopted and, therefore, remains merely a statement of principles.
Private groups have also developed voluntary codes of conduct aimed at the operations of U.S. corporations in specific countries or with regard to specific issues. Among these codes, the Sullivan Principles (South Africa)12 and the MacBride Principles (Northern Ireland)13 dealt primarily with labor standards issues, while the Slepak Principles (Soviet Union)14 and the Maquiladora Standards of Conduct (Mexico/Central America),15 dealt with a broader set of topics, with labor standards playing a prominent part. As is the case with the multilateral codes, these privately developed codes of conduct provide models for corporations to develop their own codes of conduct addressing labor standards issues, including child labor.
United States corporations have adopted corporate codes of conduct for a variety of reasons, ranging from a sense of social responsibility to pressure from competitors, labor unions, the media, consumer groups, shareholders and worker-rights advocates. The U.S. Government has also encouraged U.S. corporations to adopt model business principles for their overseas operations.16
Companies that import products from countries whose labor conditions have received negative publicity regarding child labor or abusive working conditions may develop codes of conduct in order to prevent further criticism.17 A Hong Kong trade lawyer stated in a recent article that many importers "just think it's wrong to have their goods made under conditions considered offensive. Others...don't want to be exposed on 60 Minutes or 20/20."18
Companies who spend hundreds of millions of dollars on advertising and whose sales depend heavily on brand image and consumer goodwill are particularly responsive to allegations that their operations exploit children or violate other labor standards. Some have cited positive correlations between responsible business behavior and return-on-investment, stock price, consumer preferences and employee loyalty. The CEO of Levi Strauss & Co. has said:
Some companies adopt codes as a direct response to public pressure. For example, when Starbucks Coffee Company received hundreds of letters from consumers and investors demanding an improvement in working conditions on Guatemalan coffee plantations, it decided to introduce a code of conduct for all of its coffee bean suppliers. A Starbucks executive admitted that the protesters had "prodded" the company into developing a code.20
Corporations may adopt codes of conduct in order to demonstrate that they are good corporate citizens, or to earn the label of a "socially responsible" company.21 By incorporating the concept of social responsibility into their normal business dealings, companies may develop corporate philosophies that combine "altruism and enlightened self-interest."22
There is no information on the exact extent to which U.S. corporations have adopted codes of conduct governing their foreign operations. Press reports and other publicly available information suggest that a significant number of U.S. corporations and business organizations have done so. Most available information on codes of conduct is on large corporations.
For example, U.S. companies in such diverse industries as footwear (Nike, Reebok), personal care products (Gillette), photographic equipment and supplies (Polaroid), stationery products (Hallmark), hardware products (Home Depot), restaurants (Starbucks), and electronics and computers (Honeywell) are known to have corporate codes of conduct.
In addition, several business organizations have issued codes of conduct designed to be used by medium- and small-sized member companies whose corporate structures may not be sufficiently large to develop their own code of conduct. These business organizations include the Athletic Footwear Association, the Toy Manufacturers of America, and the Asia-Pacific Council of American Chambers of Commerce.
In the context of the current report, the Department of Labor has identified more than 35 U.S. manufacturers of apparel or retailers of apparel products that utilize codes of conduct regarding their foreign operations. In addition, two associations that bring together the bulk of U.S. apparel producers and retailers - the American Apparel Manufacturers Association (AAMA) and the National Retail Federation (NRF) - have also developed codes of conduct. These codes of conduct are discussed in more detail below.
In reviewing the development of codes of conduct in the garment industry, it is important to recognize the enormous changes that have occurred in the industry in recent decades. Once concentrated in the United States and other industrialized countries, the garment industry has gradually spread in successive waves to countries with lower production costs, becoming a worldwide industry whose geographical distribution is constantly changing.23
A number of factors have contributed to this globalization. Many developing countries have based or are basing their industrialization on labor-intensive export sectors, particularly the apparel sector. Developing countries have almost doubled their share of world clothing exports since the early 1970s to account for more than 60 percent of exports today.24 At the same time, companies in the U.S. and other industrialized countries have adopted strategies to relocate certain labor-intensive activities, such as clothing assembly, to low-wage countries through direct investment or outsourcing. Thus, according to the ILO, the industrialized countries have "promoted the expansion of the clothing industry in the developing countries and participated actively in the growing globalization of the sector." 25
The garment industry is made up of a complex chain of actors whose roles often overlap. In very general terms, the industry includes the following entities:
Figure II-1 illustrates the relationships among these various entities as they relate to the import of garments.
Intense competition in the U.S. retail sector has resulted in significant restructuring of the industry in recent years. One factor contributing to this trend has been the rise of mass marketing stores and discount retailers with low overhead costs and low prices.26 These nontraditional retailers have displaced a significant share of the sales of traditional apparel retailers such as department and specialty stores.27 There have been a growing number of bankruptcies and consolidations in the retail sector, resulting in an increased concentration of large firms at the retail level.28 In 1993, the five largest retail companies accounted for 48 percent of total retail sales.29
Many experts point to changes in consumer attitudes as a driving force behind the restructuring that is occurring in the retailing industry. Not only have consumers become more cautious in their buying habits, but they have been reducing the portion of their disposable income that they spend on apparel.30 In addition, consumers are increasingly demanding quality goods at low prices.31 Retailers have often been forced to sell merchandise permanently at "sale" prices, with promotions occurring throughout the year.32 Economists and sociologists have attributed increasingly volatile consumer demand to growing numbers of new products, the rise of fashion-consciousness for even the lowest-cost apparel, and more selling seasons.33
In response, retailers are increasingly utilizing new technology to facilitate communication with suppliers and speed the distribution of goods.34 Apparel manufacturers who wish to remain competitive are having to reduce cycle times for apparel design, manufacture and delivery. Many manufacturers have adopted "quick response" manufacturing systems that allow retailers to trim inventory, respond more quickly to changes in consumer preferences, replenish stock almost continually, and offer a wider choice of clothing styles.
Ebbing consumer demand, combined with higher raw-material costs, have in turn placed increased pressures on apparel manufacturers.35 Unable to pass higher costs onto consumers in a market with excess supply, both apparel manufacturers and retailers have been squeezed by lower margins.36 As retailers have gained growing bargaining power through consolidations, apparel manufacturers have had to absorb higher costs and live with lower profit margins in order to maintain production.37 Because of these competitive pressures, apparel manufacturers have also undergone considerable restructuring and consolidation in recent years.38 It is usually the larger manufacturers that can afford the capital investment necessary to successfully adopt more flexible, "quick response" systems.39
In this increasingly competitive environment, the lines between apparel retailers and manufacturers are being blurred as each takes on new roles and enters new aspects of the garment industry. Many retailers, for example, have entered product development and manufacturing as they develop their own private labels. In some cases, department stores and other retailers are directly contracting goods from the same factories used by the brand-name producers from which they buy.40
At the same time, many of the most successful apparel manufacturers and merchandisers have become vertically integrated through the retail level.41 Many apparel manufacturers, in an effort to generate more sales, are opening factory outlets.42 These outlets are a rapidly growing retail distribution channel in the U.S., and are used by manufacturers to showcase their merchandise, test market new products and distribute excess production.43 Having retail outlets gives apparel manufacturers more control over their own distribution and sales.44
More than half of the $178 billion worth of garments sold at the retail level in the U.S. in 1995 was imported.45 By comparison, domestically produced apparel accounted for 70 percent of apparel sold to U.S. consumers as recently as 1980.46 The U.S. apparel manufacturing industry, which employed an all-time high of 1.45 million workers in 1973, supported 853,000 U.S. jobs as of May 1996.47 In 1995, the industry included 24,570 establishments, averaging 40 employees each, and produced $87 billion of garments at retail prices.48
United States apparel imports have been increasing steadily since the 1970s. The U.S. imported nearly $34.7 billion worth of apparel in 1995. During the period 1985-1995, the value of U.S. apparel imports in current dollars increased by 171 percent (see Table II-1).
TABLE II - 1U.S. Apparel Imports, 1985-1995(In millions of current U.S. dollars) |
|||||||||||||
| 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | % Total Trade 1985 | % Total Trade 1995 | |
| Total | 12,785 | 15,147 | 18,036 | 18,184 | 21,047 | 21,937 | 22,595 | 26,713 | 28,218 | 31,368 | 34,649 | 100.0 | 100.0 |
| Asia | 9,318 | 10,907 | 13,943 | 13,505 | 15,763 | 16,232 | 16,430 | 18,879 | 19,006 | 20,382 | 20,995 | 72.9 | 60.6 |
| Americas | 1,887 | 2,291 | 1,847 | 2,405 | 2,891 | 3,111 | 3,855 | 5,092 | 6,170 | 7,369 | 9,439 | 14.8 | 27.2 |
| Europe | 1,424 | 1,725 | 1,954 | 1,907 | 1,932 | 1,969 | 1,681 | 1,811 | 1,889 | 2,269 | 2,670 | 11.1 | 7.7 |
| Austraila New Zealand |
11 | 19 | 28 | 24 | 26 | 37 | 56 | 42 | 42 | 49 | 55 | 0.1 | 0.2 |
| Middle East Aferica |
141 | 192 | 251 | 336 | 431 | 584 | 570 | 884 | 1,081 | 1,313 | 1,485 | 1.1 | 4.3 |
Under domestic law and the rules of the international Multifiber Arrangement (MFA) of the General Agreement on Tariffs and Trade (GATT), the United States has limited the growth of apparel imports for more than three decades through the negotiation of bilateral textile and apparel quota agreements. The agreement establishing the World Trade Organization (WTO), however, provides for a 10-year phase-out of the MFA beginning in January 1995. Resulting reductions in tariffs and the eventual elimination of the MFA system of textile and apparel quotas are likely to accelerate increases in garment imports.49
a. Imports by Source
The United States imports apparel from all regions of the world. In 1995, Asian countries accounted for 61 percent of the value of total U.S. imports of apparel, countries in the Americas accounted for 27 percent, European countries for 8 percent, and other countries for 4 percent. (See Table II-1 and Figure II-2).
In 1995, Hong Kong was the largest source of U.S. apparel imports, accounting for $4.2 billion or 12.1 percent of total U.S. apparel imports. The next four largest sources of U.S. apparel imports in 1995 were China ($3.5 billion or 10.2 percent), Mexico ($2.6 billion or 7.4 percent), Taiwan ($2.0 billion or 5.9 percent), and the Dominican Republic ($1.7 billion or 5.0 percent). Figure II-3 shows the top 25 sources of U.S. apparel imports in 1995. In 1995, 168 countries exported apparel to the United States (See Appendix E).
b. Imports by Type of Importer
Garment manufacturers and retailers increasingly have resorted to imports from lower cost producers to retain their competitive edge in the United States market. Retailers are developing global alliances with suppliers and directly sourcing brand-name and private-label merchandise domestically and internationally.50 Many of the largest retailers also have become the largest importers of apparel. In 1993, retailers accounted for 48 percent of the total value of imports of the top 100 garment importers, according to the U.S. Customs Service.51
Apparel manufacturers and retailers are also increasingly turning to low-cost suppliers abroad to supplement their U.S. production. In some cases, manufacturers contract out apparel assembly operations to overseas contractors. In other cases, U.S. apparel manufacturers have shifted production abroad to take advantage of lower costs and, in some cases, preferential trade programs. To maintain market share, many U.S. apparel manufacturers are expanding their garment assembly activities in Mexico and the Caribbean Basin to take advantage of preferential trade programs.52
The North American Free Trade Agreement (NAFTA) provides reduced or duty-free entry and eliminates most quotas for apparel products from Mexico and Canada that meet certain rules of origin. Under the Special Regime Program, apparel assembled in Mexico from U.S.-formed and cut fabric is allowed quota-free and duty-free entry into the United States market. Finally, under the Special Access Program for the Caribbean, also known as the 807A Program, certain apparel products assembled in participating countries from fabric wholly formed and cut in the U.S. are afforded quota-free entry and preferential duties upon re-entry into the United States.53
The cost of producing clothing is largely determined by two components - the costs of labor and, to a lesser extent, materials. Clothing production is therefore prone to relocation to countries where labor costs are lower, with the exception of producers who escape cost competition through "up-market" strategies.54
The ILO has commented on the effect that increasing competition has had on working conditions in the mass segment of the market:
Some of the newest entrants in the producer market, which are attracting foreign investors, have mainly developed labor-intensive sewing and assembly activities.56 While some of these newest producer countries currently may be small suppliers to the U.S. market, they may also be the location of troubling labor practices.57
In order to gather information on the extent and implementation of U.S. garment importers' codes of conduct containing child labor provisions, the Department of Labor conducted a voluntary survey of the largest U.S. retailers and apparel manufacturers, based on 1995 annual sales figures.58 The companies included in the survey were chosen on the basis of public annual sales data obtained from Kurt Salmon Associates (KSA), a consulting firm specializing in retailing, apparel, textiles, and other consumer products.59
A questionnaire on import sourcing and child labor policies was sent to the 48 U.S. retailers and manufacturers of apparel listed in Box II-1. (See Appendix B for a copy of the questionnaire.) Survey recipients included the largest companies in the following categories: apparel manufacturers, department stores, mass merchandisers, specialty stores, and non-store direct marketers (mail order and electronic home shopping). This chapter's analysis of codes of conduct is based primarily on information voluntarily provided by the companies surveyed.
BOX II - 1
Apparel Manufacturer |
Sales |
| 1. Sara Lee Corporation | $7.151 billion |
| 2. Levi Strauss & Co. | $6.708 billion |
| 3. VF Corporation | $5.062 billion |
| 4. Fruit of the Loom | $2.403 billion |
| 5. Liz Claiborne | $2.082 billion |
| 6. Phillips-Van Heusen | $1.464 billion |
| 7. Kellwood Company | $1.365 billion |
| 8. Russell Corporation | $1.153 billion |
| 9. Warnaco Group | $ 916 million |
| 10. Nike, Inc. | $ 897 million |
| 11. Jones Apparel Group | $ 776 million |
| 12. Oxford Industries | $ 657 million |
| 13. Hartmarx Corporation | $ 595 million |
| 14. Tultex Corporation | $ 585 million |
| 15. Salant Corporation | $ 501 million |
Department Stores |
Sales |
| 1. Sears Roebuck & Company | $31.035 billion |
| 2. JCPenney Company | $20.562 billion |
| 3. Federated Department Stores | $15.049 billion |
| 4. May Department Stores | $10.507 billion |
| 5. Montgomery Ward Holding Company | $ 7.085 billion |
| 6. Dillard Department Stores | $ 5.918 billion |
| 7. Nordstorm | $ 4.113 billion |
| 8. Mercantile Stores Company | $ 2.944 billion |
| 9. Kohl's Corporation | $ 1.926 billion |
| 10. Neiman Marcus Group | $ 1.888 billion |
Mass Merchandisers |
Sales |
| 1. Wal-Mart Stores | $93.627 billion |
| 2. Kmart Corporation | $34.389 billion |
| 3. Dayton Hudson Corporation | $23.516 billion |
| 4. Price/Costco | $17.906 billion |
| 5. Waban Inc. | $ 3.978 billion |
| 6. Ames Department Stores | $ 2.120 billion |
| 7. Venture Stores | $ 1.929 billion |
| 8. Shopko Stores | $ 1.853 billion |
| 9. Dollar General Corporation | $ 1.764 billion |
| 10. Family Dollar Stores | $ 1.547 billion |
Specialty Stores |
Sales |
| 1. Woolworth Corporation | $8.224 billion |
| 2. The Limited | $7.881 billion |
| 3. The Marmaxx Group | $4.448 billion |
| 4. The Gap | $4.395 billion |
| 5. Burlington Coat Factory | $1.585 billion |
| 6. Ross Stores, Inc. | $1.426 billion |
| 7. The Talbots, Inc. | $ 981 million |
| 8. Stage Stores, Inc. | $ 683 million |
| 9. County Seat Stores, Inc. | $ 619 million |
| 10. The Dress Barn, Inc. | $ 501 million |
Non-Store/Direct Apparel Marketers |
Sales |
| 1. Spiegel, Inc. | $2.886 billion |
| 2. Home Shopping Network, Inc. | $1.019 billion |
| 3. Land's End, Inc. | $1.031 billion |
(Source: Kurt Salmon Associates, Financial Profile for Fiscal Year 1995, July 1996)
Forty-five companies responded to the survey.60 Of the 45 responses, 42 were reportable because three companies regard all information provided as confidential.61
Many respondents indicated that they are significant importers - some importing more than half of the merchandise they sell - while others said that their dependence on imports was much lower, in some cases less than 10 percent. Nearly all respondents are direct importers of apparel, i.e., they purchase apparel directly from abroad for their own account. Most are also indirect importers, i.e., they purchase products domestically that have been manufactured overseas and imported into the U.S. by another party.
a. Manufacturers
Of the 15 manufacturers who responded, all but three (Nike, Inc., Liz Claiborne and Russell Corporation) own or have ownership interest in overseas production facilities. Most of these facilities are in Latin America, Mexico, Canada and the Caribbean, but a few are in Asia (China, Sri Lanka, and the Philippines). Some of the manufacturers (Oxford Industries, Sara Lee Corporation, and VF Corporation) indicated that the majority of their imports come from wholly owned plants. Virtually all of the manufacturers surveyed also contract out at least some of their overseas production to non-company-owned facilities. Some manufacturers have close ties to certain contractors, and account for a large share, if not all, of the merchandise that they manufacture. In other cases, they may use a contractor facility for only a short time, and account for a small share of that manufacturer's production.
Some of the manufacturers referred to the advantages of spreading their production across many countries in order to avail themselves of available import quota. Nike, Inc. ('Nike') for example, stated that it is constantly seeking out new apparel suppliers due to the limited amount of quota available in each country for importing apparel into the United States. Others indicated that they source from only a few countries.
Most of the manufacturers also use local buying agents. Only three (Levi Strauss & Co., Fruit of the Loom, and Nike) specifically stated that they do not use buying agents. A few manufacturers indicated that they mainly use buying agents in countries where they do not have their own production facilities or extensive knowledge of the countries' garment industry.
b. Retailers
None of the retailers responding to the survey indicated that they own or have an ownership interest in overseas production facilities. Many of them import from a very large number of suppliers and contractors in many countries. JCPenney Company, for example, contracts with more than 2,000 suppliers in more than 80 countries. Retailers who sell private-label merchandise often deal directly with overseas contractors, who manufacture merchandise to their specifications. Other retailers, who do not carry private label garments, indicated that they purchase imported goods that are already made from a variety of suppliers in the U.S. or abroad.
Several of the retailers surveyed (Ames Department Stores, Dress Barn, Inc., Home Shopping Network, Inc., Mercantile Stores Company, Ross Stores, Inc., Stage Stores, Inc.,62 Venture Stores and Woolworth Corporation) indicated that they purchase all or most imports through one or more buying agents or suppliers located in the U.S. and/or abroad. One retailer (BJ's Wholesale Club, a division of Waban, Inc.) indicated that it only buys imported apparel domestically from wholesalers and distributors.
Of the 42 companies that provided reportable responses to the survey, 36 have adopted some form of policy specifically prohibiting the use of child labor in overseas production facilities. Thirty-four have developed their own policies, and two have adopted the policy of their association or buyer. Appendix C contains the current codes, policies and other documents that were provided by survey respondents.63
a. Manufacturers
Questionnaires were sent to 15 garment manufacturers, all of which responded (Box II-2).
BOX II - 2
| Fruit of the Loom Hartmarx corporation Jones Apparel Group Kellwood Company Levi Strauss & Co. Liz Claiborne Nike, Inc. Oxfor Industries Phillips-Van Heusen Russell Corporation Salant Coproration Sara Lee Corporation Tultex Corporation VF Corporation Warnaco Group |
b. Department Stores
Questionnaires were sent to 10 department stores, eight of which responded (Box II-3).65 Seven of the eight responses were reportable.66
BOX II - 3
| Dillard Department Stores Federated Department Stores JCPenney Company Kohl's corporation (Response not reportable) May Department Stores (Did not respond) Mercantile Stores Company Montgomery Ward Holding Company Neiman Marcus Group (Did not respond) Nordstrom Sears Roebuck & Company |
c. Mass Merchandisers
All 10 mass merchandisers who were sent questionnaires responded (Box II-4). Nine of the responses were reportable.67
BOX II - 4
| Ames Department Stores Dayton Hudson Corporation Dollar General Corporation Family Dollar Stores Kmart Corporation Price/Costco Shopko Stores (Response not reportable) Venture Stores Waban Inc. Wal-Mart Stores |
d. Specialty Stores
Surveys were sent to ten specialty stores, nine of which responded (Box II-5).70 Of the nine responses, eight were reportable.71
BOX II - 5
| Burlington Coat Factory County Seat Stores, Inc. (Did not respond) Ross Stores, Inc. Stage Stores, Inc. The Talbots, Inc. The Limited The Dress Barn, Inc. The Gap The Marmaxx Group (Response not reportable) Woolworth Corporation |
e. Non-Store/Direct Apparel Marketers
All three Non-Store/Direct Apparel Marketers who were surveyed responded (Box II-6).
BOX II - 6
| Home Shopping Network, Inc. Land's End, Inc. Spiegel, Inc. |