Levis: Made in China?

By Dara Colwell, AlterNet. Posted May 9, 2002.

Last month, Levi Strauss & Company, a brand practically synonymous with the U.S.A., decided to shutter virtually all domestic production and shift its manufacturing overseas. While news of the layoffs -- roughly 22 percent of Levi's global workforce -- resounded heavily across the worn wooden floors of Levi's San Francisco headquarters, the halt is also bad news for America's textile industry. More than just closing shop, Levi's failure to manufacture on home turf reflects a sobering reality for the industry. This is the final death knell of a decades-long lament.

While companies such as Gap, Guess and Ralph Lauren have long farmed out production overseas, Levi's recent move to combat crumbling sales is a disheartening one for workers. Although the company hasn't remained untouched by sweatshop scandal (in 1992, the Washington Post exposed Levi's exploitation of Chinese prison labor to make jeans), Levi was the first major manufacturer to draw up a code of labor standards. Wal-Mart, and then almost all leading U.S. garment retailers, soon jumped on the bandwagon. As a whole, the industry's track record has been less than stellar -- witness the sweatshop campaigns of the 1990s -- but Levi tried to buck the trend.

"Those were the last of the good jobs," says Medea Benjamin, referring to jobs at Levi's American factories. Benjamin is cofounder of Global Exchange, a San Francisco-based nonprofit that monitors trade and human rights. "Now Levi's has joined the race to the bottom to become another sweatshop company."

In the game of globalization, the changing rules of world trade have led many American companies to outsource production solely to developing countries, where the cost of labor is dramatically low. For years, Levi Strauss tried to salvage American jobs, maintaining wages at $9 to $14 per hour, but with sales eroding 40 percent in the past five years, the competition finally proved too stiff.

According to Levi spokesperson Linda Butler, the company's decision to shift overseas doesn't automatically signal a deterioration of workers' rights. "We believe we can operate profitably and operate with principles at the same time. We've done that for many years," she says. "A business needs to be profitable. The question is how does one implement tough business decisions with compassion, while avoiding decisions that have a negative impact on stakeholders?"

The apparent answer, according to Katie Quan, former vice president of UNITE, the Union of Needletrades, Industrial and Textile Employees, has more to do with a cost-effective bottom line.

"Like all companies, Levi is mostly driven by profit," says Quan, who is unconvinced that Levi has set up camp elsewhere for any other reason than to cut costs. Historically, the textile and garment industries have often been the first to operate efficiently in developing countries because producing textiles requires more unskilled labor and less sophisticated (read cheap) goods. This allows companies to concentrate on increasing profit through design and marketing. Levi's recent plant closures, says Quan, "demonstrate the company's overriding concern with profit."

The massive overseas relocation that has taken place for decades is further predicted to increase when the Multi Fiber Arrangement (MFA) is phased out by January 2005. The MFA, an international, Byzantine quota system fashioned in the 1960s to protect First World producers from Third World competition, has shielded the United States from the tremendous jump in Third World textile exports. When the MFA is finally phased out, low-wage producers in developing countries, such as China, will quickly benefit. China's growth potential in the American market is huge -- currently, U.S. imports from China are five times as large as its exports, according to a report by the Economic Policy Institute.

For consumers, the MFA phase-outs will be positive. Trade reform will cause world textile, apparel and cotton production to rise as exports from countries formerly restricted by the MFA grow. With fewer trade barriers, prices will drop -- roughly four percent in the long run, according to the USDA's Economic Research Service.

But for workers, who will bear the brunt of market dislocations, the outlook is not so rosy.

Here in the U.S., according to the Economic Policy Institute, trade liberalization cost the domestic manufacturing sector 1.3 million jobs in 2001. "We have allowed the apparel industry to be decimated over the last five or six years," says Nick Lardy, senior researcher at the Brookings Institute in Washington D.C. and an expert on China. "Since 1995, there has been a reduction of 371,000 jobs -- or 53,000 jobs a year -- almost all on the production side."

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