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Effects of Covid-19 on Global Garment Supply Chains

Garment workers risk losing jobs as clothing brands demand heavy cuts in costs of suppliers, leading to wage losses of up to $5. 8bn during pandemic.

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Fashion brands typically pay their suppliers weeks or even months after delivery, rather than upon order. This means that suppliers usually pay upfront for the materials or fibres used to make the products brand buy from them. Factories are left with little choice but to destroy or keep hold of unwanted goods already made and lay off their workers in droves.

Millions of garment workers could lose their jobs as global brands are demanding price cuts and delaying payments to suppliers who are desperate for orders to survive the new coronavirus pandemic.

Leveraging desperation

The Center for Global Worker Rights (CGWR) conducted a survey of Bangladeshi garment manufacturers, estimating buyers have canceled $1.44 billion worth of garment exports, leaving factory owners unable to pay their workers.

The health and livelihoods of millions of garment workers and their families who often cannot rely on savings, loans, or public safety nets are at risk. The majority of garment workers are women, often concentrated in low-pay, low-power positions, underrepresented in unions and with additional unpaid child, elderly and sick care duties. Covid-19 has put them at a particular risk, not only for their immediate health but also for their immediate and long-term financial situation.

Home garment workers, who typically lack formal employment contracts, are excluded from any financial support offered by brands, manufacturers, and/or governments. Moreover, migrant garment workers are uniquely impacted by precarious labor under government lockdowns.

Suppliers have been asked to make their prices an average of 12 percent cheaper than last year, according to the Center for Global Workers’ Rights (CGWR) at Penn State University in the United States.

In a survey of 75 factories in 15 countries, suppliers said they had to wait an average of 77 days for payment, compared with 43 days before the pandemic, raising fears of further factory closures in an industry employing 60 million people worldwide.

Order cancellations

Fashion companies cancelled orders worth billions of dollars earlier this year as the coronavirus shuttered stores worldwide, leading to wage losses of up to $5. 8bn, according to pressure group Clean Clothes Campaign.

Despite pressures from transnational labour rights activists to support garment workers, fast fashion brands such as Primark, C&A, and Zara have cancelled orders, which has a significant impact on garment workers around the world.

Suppliers in countries including Cambodia, Ethiopia, Guatemala, India, Mexico, Peru and Vietnam told CGWR they had already laid off 10 percent of their workers and would have to cut another 35 percent of their labour force if order reductions continued.

Emerging second crisis

The manufacturers and labour rights groups said some orders that were cancelled or suspended earlier in the year were being restored, along with new orders, but they were less than the number of firms jostling for contracts.

More than half of the manufacturers surveyed said they would have to close down if the “sourcing squeeze” continued, report stated.

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US and EU trade data provide considerable evidence of a significant loss in value due to order cancellations. A total of USD 16.2 billion was lost, combined, from April through June in the US and from April through May in the EU (a number that will almost certainly increase when June data are available for the EU). Assuming that wages make up 10 percent of the value (at import price), what this suggests is the loss of close to USD 2 billion in workers’ wages, based on reduced imports for the US and EU markets alone.

Meanwhile, some brands have committed to paying what they owed for goods already produced or in-production, others are wielding their power over suppliers and have refused to pay.

The impact of these decisions on the estimated 40-60 million workers employed by the global garment industry has been unprecedented, with millions of mostly women and migrant workers in the Global South left facing destitution without wages, laid off without severance, or working with reduced pay.

The Global union federations and the International Organisation of Employers (IOE) have proposed a joint call for action involving the International Labour Organization (ILO). Brands and retailers should support it, pay for goods already produced or in production as originally agreed upon, and reform their purchasing practices.

The meagre income these workers earned was barely enough to cover their living costs, and as a result, they have little to no savings set aside to deal with a crisis such as this. Workers’ ability to get their families through the current crisis will depend substantially on whether brands make sure suppliers pay laid-off workers their legally due compensation.

Governments, brands, retailers, and suppliers, should work together with labour rights groups and unions to minimize economic harm to workers in their global supply chains.

Garment-exporting and importing governments, donors, and international financial institutions should support the program’s goals to create emergency relief funds and monitor disbursement to all workers through a tripartite process. All parties should work together with rights groups to create effective social protection aligned with ILO standards, including sickness benefits, unemployment, employment injury, and medical insurance.


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