Framework Agreements: Experience and Strategy

of ITGLWF

International Textile, Garment and Leather Workers’ Federation

Aims of session

1. Types of multinationals and their interrelationships in the TCF sector.

2. Some of the peculiarities of this sector - parts are truly global

3.Problem of existing codes

4.Why an IFA ?

5. Specifics of the ITGLWF draft agreement. What is in it ?

6.Initial employer responses

7. ITGLWF emerging strategy

The Nature of the Beast ...….. Players in the Garment Industry

Apparel merchandisers

Apparel Manufacturers

Buying agents/supply chain managers

Trading companies/import export firms

Retailers

Suppliers

Apparel Merchandisers

In general no manufacturing, only sourcing

Since no manufacturing assets, they are very mobile

hundreds of suppliersbuy only finished garment, not

components

Manufacturers

Loyalty to the national base now undermined by low cost competition.

Some maintain own production but increasingly outsource.

Suppliers/Subcontractors

Coats (Component manufacturer)

Must chase the manufacturersPou Chen (subcontractor)

Spreads its risk Aims to own whole chain of

manufacture

Supply Chain Managers

Can provide fully comprehensive service - may acquire some manufacturing facilities themselvesExplosion of Internet based supply chain brokers

Retailers

• Wield enormous power which affects wages and intensification of work

• Decision on sourcing policy critical

Garment sourcing in the global era

Licensee

Merchandiser/retailer Buyer

Research,Design Supply Chain

Manager

Marketing,

The global subcontracting chain….

First subcontractor

Sub-subcontractor

“Shop-house”

Home workers

Supplier

Home workers

A Global Product

Zip made in Japan

Cotton from Benin

Dyed in Milan using German indigo

Brass rivets made in Italy (Namibian copper and Australian zinc)

Thread from Northern Ireland

Polyester core from Japan

Assembled in Tunisia

Cotton from

Benin

Jeans assembled in Tunisia

Thread from Northern Ireland

Brass rivets made in Italy from Namibian copper and Australian zinc

Zip made in Japan

Polyester Thread Fibre made in Japan

Denim dyed in Italy

International Sourcing into the New Millenium

European Union

Own production 26%

Imports 74%

USAOwn Production

18%

Imports 82% Asia

27% 36%

Intra EU22%

Central Europe &

North Africa20%

Rest of the

World

5% 3%

Caribbean & Central America

29%

Mexico14%

Shifts in Global production

Market Scenario =

Enormously competitive-global warfare, short brand life cycles

Result is apparel manufacturing migration to low cost countries

always changing race to the bottom

Anatomy of a Nike Sweatshirt V167G6N

Sent to the Dominican Republic for assembly

detailed work study specification 22 operations:

5 steps to cut11 steps to sew6 steps to inspect and packTime allowed 6.6 minutes

Anatomy of a Nike Sweatshirt V167G6NHourly rate in the EPZ in the Dominican

Republic 70 cents

worker earns 8 cents for each sweatshirt they sew

sweatshirt retails in the US for $22.99

if Nike doubled the wage it would be still only 7/10ths of 1% of the retail price

The Corporate Response

Unilateral corporate codes of conduct

Creation of Global compliance teams to monitor codes

Signing up to multi-stakeholder initiatives

Propaganda counter-offensives

Company Codes - Problems

Codes are often unilaterally introduced

not all ILO core standards are included

No ongoing dialogue with the workforce

Generally no disclosure of locations with codes

Verification of monitoring process usually company controlled

Extract from a Code of Conduct

Sara Lee Corporation Sara Lee Knit Products International Operating Principles : Labour Unions

SLKP believes in a union free environment, except where laws and cultures require us to do otherwise. The company treats people with equity and fairness, and believes that employees themselves are best able to voice their concerns directly to management. SKLP is committed to the strict observance of laws and regulations related to union activity and encourages individual freedom and direct dealing between employees and management while actively discouraging union representation of employees where the law allows.

Key ITGLWF aims

Framework agreements are negotiated

Agreements include all core standards

Ongoing dialogue - ideally via a world council

Full disclosure of the subcontracting chain

independent verification sought

The determination of a decent employment relationship through effective national legislation and collective bargaining

Employer Problems with IFAs

Have their own standards or terms of engagement with suppliers - why a separate document ?

Problems of scope of the agreement - legally nervous - what is the company ?

Wish to extract responsibility/duties from the ITGLWF

Employer Problems with IFAs (cont.)

What is rationale behind disclosure of locations ?

Verification : have their own designated verifiers under other initiatives - e.g. FLA.

Strategic Options

Consensual and direct dialogue with a multinational – probably brokered by a national affiliate in the HQ country.

As a result of dialogue brokered by other MNCs who have commercial relationships with the MNC in question.

Strategic Options (cont.)

Dialogue resulting from a corporate campaign arising from a specific dispute within a part of the subcontracting chain.

Dialogue resulting from pressure resulting from a co-ordinated recognition campaign launched from key points in the supply chain around the world.