$16.1 billion. That’s how much apparel imports flopped from April through June in the United States and from April through May in the European Union.
Given the lead times on apparel orders, the only plausible explanation for the steep decline is the failure of brands to pay for the clothing they ordered before Covid-19 seized the globe and sent whole economies into free fall, a new report from the Worker Rights Consortium and the Center for Global Workers’ Rights at Penn State University claimed this week.
During that time, U.S. brands and retailers shelled out $9.7 billion less in garment deliveries than they did in the same period last year, a plunge of 49 percent, according to newly released trade data. In the EU, brands and retailers signed off on $6.5 billion less in orders than they did during those same months in 2019, a drop-off of 45 percent. (June data is not yet available for the EU.)
“It is crucial to understand that, because of the time it takes to produce and ship an order after the brand places it, decisions by brands to reduce or forego the placement of new orders with suppliers cannot explain this precipitous drop,” the authors wrote. “Most new orders placed after the crisis began did not begin to arrive at U.S. ports until July. The vast bulk of the shortfall in U.S. imports through June represents the outcome of orders that brands and retailers had placed, and that suppliers had already produced or were in the process of producing, before the crisis began.”
This nosedive in value has led suppliers in Cambodia, Bangladesh, India, Myanmar and Vietnam to freeze production, slash operations or go out of business entirely, leaving millions of garment workers facing reduced hours of work (and therefore reduced income), furloughs or loss of employment, the report noted.
The month of June saw an uptick in the value of apparel imports relative to May, even though the numbers still lagged far behind those of 2019. The bump, the authors wrote, reflects, “in substantial part,” the impact of pressure on brands and retailers from unions and labor-rights advocates seeking redress for canceled orders, retroactive discounts and delayed deliveries and payment.
Certainly the value shortfall wasn’t because of government lockdowns, the report said. While India and Honduras had strict lockdowns in March and April, Vietnam and Nicaragua did not. Bangladesh, the worst hit of the garment-producing hubs, experienced a temporary lockdown, but since garment production was largely considered an essential economic activity, any suspension of factory work or shipping was brief.
“What the data show are substantial losses in export value in countries with strict lockdowns and those without strict lockdowns, somewhat larger in the former but significant across the board,” the authors said. “The data—coupled with the fact that many suppliers were positioned to catch up in May on production delayed by lockdowns in March and April—indicate that lockdowns, while having an effect, cannot explain most of the dramatic loss of value seen in data through June.”
Further examination of U.S. trade data revealed that the overall slump in the value of imports stemmed not only from a decline in order volume but also a decline in prices. The months of January through June saw a net loss of $1 billion that correlated directly with falling per-unit prices, the report said.
“While unit prices for apparel tend to decline modestly year over year due to the price pressure that is ubiquitous in the region, the decline in 2020 over 2019 is vastly larger than normal and is driven by the industry’s response to the pandemic,” the authors wrote. “Since prices reflected in the trade data involve orders placed—and prices contractually agreed—before the pandemic’s primary effects were felt in the U.S. in March, the only means through which the reductions in unit price apparent in the data could have been achieved is the imposition by brands and retailers of retroactive discounts—below the agreed contract price for the goods in question.”
The findings of the report also suggest that garment workers lost close to $2 billion in wages, based on reduced imports for the U.S. and EU markets alone, from April through June.
The numbers square up with those from previous studies: An earlier report from the Clean Clothes Campaign, the apparel sector’s largest alliance of labor unions and non-governmental organizations, estimated that months of truncated wages culminated in garment workers losing between $3.19 billion and $5.79 billion from March through May.
“Official U.S. and EU import data now confirm, with hard numbers, what apparel suppliers and labor rights advocates have been reporting since March,” Scott Nova, executive director of the Worker Rights Consortium, told Sourcing Journal. “As the pandemic unfolded, global brands treated their suppliers in places like Bangladesh and Cambodia like a piggy bank, with the former shoring up their own finances by reneging on billions of dollars in contractual obligations to the latter.”