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RP Headed for the 'Great Labor Massacre'

As a member of the World Trade Organization (WTO), the Philippines will lose its quota for garment exports in the U.S. and other countries – or nearly 90 percent of its garment exports - by 2005. If no trade renegotiations are done soon that would protect the country’s garment and textile exports, nearly 500,000 Filipinos in the industry will be out of work. The country has four years to remedy the situation but at this early thousands of garment workers have already lost their jobs.

BY BOBBY TUAZON
Bulatlat.com

In three to four years, nearly 500,000 Filipino workers employed in the garments industry – one of the Philippines’ top exporters – will lose their jobs. Already, thousands of jobs have been lost over the past months, indicating that the bulk of the potential job losses would have disappeared before the four-year period is even over. Last September alone, a top garment exporter with global operations laid off 1,000 workers. Before that, small- and medium-scale garment companies have shut down, laying off tens of thousands of workers.

This bleak scenario will even more likely to happen given that no significant headway has been made by trade authorities to protect the local garment industry let alone to stave off what could become the “Great Labor Massacre.” Worse, no safety nets promised by President Arroyo are in place to ensure that everything will be A-OK when the “quota-free” regime rules.

The rules of the World Trade Organization (WTO) say that all garment export quotas should be gone by Jan. 1, 2005. Expected to be affected when this rule takes effect are top garment exporters from Asia, including China (and Hong Kong), India, Indonesia, Sri Lanka, South Korea, Taiwan, the Philippines as well as Mexico, which is part of the North American Free Trade Area (Nafta). In a far worst situation, however, are the Philippines, Sri Lanka and other small countries which depend on garments exports as their main dollar earner.

Garments or wearing apparel trade have remained the Philippines’ second biggest export performer. It also constitutes 90 percent of the garments and textile industry’s output. Aside from this, it employs about 443,000 or 15.2 percent of the country’s 2.912 million manufacturing workers, according to the labor department’s Bureau of Labor and Employment Statistics (BLES). The figure will be at least 500,000 when textile workers are included.

Despite all these, however, the industry depends on preferential market shares in countries such as the United States. The Garment and Textile Export Board (GTEB) reported that the industry earned $2.884 billion in 1999, or 1.62 percent higher than the preceding year’s $2.82 billion. The 1999 figure however was powered mainly by exports to the U.S. ($2.16 billion) which accounted for 76 percent of total exports. It was 72 percent in 1998.

The U.S. is a quota market that implements an import quota program which is supposed to benefit selected countries.

European Union

Other quota countries such as European Union members and Canada bought garment and textile products from the Philippines worth $324 million and $54 million, respectively, in 1999. Again according to GTEB, garments exports to Europe fell by between 5 percent to 9 percent from 1997 to 1999 in contrast to the robust 6 percent to 12 percent growth of sales to the U.S. during the same period.

GTEB data showed that while there may have been a hike in garment exports to the quota-oriented U.S. market, the value of exports to non-quota countries dropped 20.42 percent to $340.8 million in 1999 from $428.2 million in 1998.

This year’s export receipts are even more dismal. Garment and textile exports in January-September continued their downtrend, registering 4.29 percent decline to $2.2 billion from $2.3 billion in the same period last year. The U.S. registered $1.685 billion, a slight 2 percent drop from $1.719 billion last year. The biggest drop came from the E.U., with only $222.4 million purchases or a significant 17.39 percent decline from $269.2 million in the same period last year.

Exports to the U.S. are expected to increase by only 3 percent to $2.452 billion due to a slowdown in its economy. This will drop further, however, since right now the U.S. is under recession – the worst ever in two decades.

The decline in sales in Europe and non-quota countries and the threats to exports to the recession-wracked U.S. market mirror global trends in the garments industry. David Birnbaum, president of the Third Horizon Limited, a management and research consultancy specializing in the global apparel industry, said that where in 1990-1995 export growth rates had been 200 percent or more, they were now 20 percent or less. The international garment industry, he said, is over-crowded at every level.

Citing an example, Sri Lanka, Birnbaum said, experienced a 257 percent growth during the first period; it dwindled to just 39 percent in the second. Also comparatively, China registered 250 percent and 25 percent; India, 156 percent and 21 percent; and Indonesia, 133 percent and 15 percent.

‘Great Garment Massacre’

Jan. 1, 2005, the garment specialist says, will go down in history as the day of the “Great Garment Massacre.” “Customers who only yesterday pledged undying loyalty and eternal orders will silently and softly fade away, never to be seen again,” he said.

Worst off, Birnbaum said, will be those countries who rely on the U.S. market and countries whose garment exports approach at least 50 percent of total exports. At least three of these are Sri Lanka which, for the past 10 years, shipped 60 percent of its garments to the U.S.; Indonesia, roughly 45 percent; and Mexico, 100 percent. The other country should be the Philippines, with 75 percent.

Unlike China, India and Indonesia, which still have a variety of strong export products, it is countries like Sri Lanka, Bangladesh, Mexico and the Philippines that will suffer the most serious problems. Garment exports of Sri Lanka and Mexico constitute 50 percent to 60 percent of their total exports.

When garment quotas are eliminated by 2005, Birnbaum said, it is much easier for the U.S., the European Union, Japan and other top importers to leave countries whose exports make up only 3 percent or less of their requirements. This anticipated move will hit Sri Lanka as well as India and Indonesia, whose market share in the prime destinations is only 3 percent each.

Short-term solutions

Philippine garments and textile trade arrangements with the U.S. and European Union countries are being renegotiated but the solutions being sought are short-term and quota-oriented and do not at all cover beyond 2004. The Department of Trade and Industry (DTI), for instance, revealed that the E.U. is dangling a $200 million-$500 million quota hike for Philippine garments exports up to 2004 in exchange for the lowering of the country’s tariffs on carpets, curtains and fabrics.

Requests for renegotiation with the U.S. on the country’s garment exports have been made but no significant response has been coming from Washington. With the recession hitting its economy, the U.S. cannot as yet be counted upon to accommodate trade adjustments being sought by the Philippines.

The greater danger is that no safety nets are in place to protect Philippine trade interests particularly its major exports such as garments. No signals are coming from President Arroyo who, as a senator, authored the bill that ratified the General Agreement on Tariffs and Trade (GATT) – the instrument now seen as the culprit behind the economic woes of developing countries like the Philippines.

As Birnbaum said, “A quota-free world is far from an equal world.” He warned that no amount of trade liberalization will move Asian suppliers closer to the United States. When the garments quota system is abandoned, the U.S. will just import its needs from Canada and Mexico. Bulatlat.com

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