Table of Contents
Globalization is the integration of different economies through out the globe through trade and financial flows in association of the movement of labor and the transfer of technology (Beck, 2000). The interdependency that is ever increasing among nations toward the exploitation of resources, their productivity and marketing, and the primary need of removing the impediments that exist to this interdependency is the force that is responsible with the rush for globalization (Boudreaux, 2008). The frequent obliteration of the national social culture borders by the information and communication that is passed through the modern technology and the flow of the financial capital. There is thus the aspect of relationship between the countries of the world in terms of culture and the economy in general.
The structural changes of politics and social cultural systems in a country are aimed towards the integration of the country, with the global economy through the facilitation of the homogenization of the markets political, and social cultural systems. This thus calls for the fulfillment of the demands of capital for investment and the agencies that lend capital. Globalization is thus, viewed as the process in which there is the transformation of various economies that are recognized as being independent and having unique societies that satisfy the capitalistic, free market economy needs.
There have been radical transformations changes that have been going on with the social cultural and economic systems, in the whole world. This has seen the rise of powerful international corporations, the subsequent revolution of technological progress in information and communication, the liberalization of the political and social cultural systems and forces that are dominance in the markets of integrated economics (Morris & Barnes, 2009).
The economic interdependence was created with the aim of enhancing the world trade and the enormous increase of wealth among the nations; they have a short coming as they have significantly been unable to promote holistic, sustainable and equitable developments. The result of the global forces is the production of social cultural changes that are rapid and which the mark are of inter and intra disparities of various regions. This has the tendency of leading to environmental and ecological crises, the social cultural disintegration, conflict and violence, and the local population increase and disaster hence do increase the magnitude of hardship.
The effect of globalization needs an understanding of the theoretical implication of economic factors that do have the power mobility that usually influence the processes and conditions that are applied in globalization. This paper is aimed at analyzing the effects of globalization that are brought forth in third world countries, in the clothing/textile industries, exploring the concept of globalization and its processes.
The theorists of globalization are in disarray as they have been arguing through, that the economy of the world has seen changes, as the system has integrated the forces that are responsible in driving the markets of capitalists will deriver the prosperity and growth of nations. The primary purpose was the flow of capital and opening of opportunities window to all humanity, which was capable of offering the structures of the economy, political and social cultural benefits to life (Weeraratne, 2004). There was a prediction of enormous growth in Africa, Asia and Latin America with the aim of closing the gap between industrialized and the growing countries. The face of the renewal of crises, and the deepening inequality isles strident it has been argued that this model has been taken over by those responsible in making it.
Globalization has been argued to be a complex by bringing the changes of international social relations while it is still maintaining the capitalistic expressions. The accelerate globalization, has not only led the third word countries to lose, though the west are the greatest beneficiaries (Jerry, Baker, & Korten, 2001). Individuals are losing employment due to the relocation of textile industries to the developing countries where the labor is considered to be cheap, and there is the absence of their labor organizations. There are other reasons facilitating the relocation of people due to the processes of development. The ideology of globalization is the benefits that are accrued with participation in the global economy as the mobility of goods and services, culture, labor, technology and capital investments have the effect of growth in developing countries (Lechner, 2009).
The decline in the US textile industry can be linked to the outsourcing of the labor intensive industries which were set in with the global regulations that were imposed after the World War II. The term worldwide sourcing is used to describe the theory of the international division of labor, which is defined as, ` the breakdown of the production processes into different productions at different sites around the world so as to increase flexibility and reduction of cost of production’ (Budde, 2005). The commencement of the international labor led to the entrepreneurial activities freedom. There are documented opportunities in labor as mostly there is the hiring of women in the developing countries to work in the textile industries with minimum wages. The number is on the increase due to the fact of liberalization of women in third countries. The availability of cheap labor is the driving factor in the field of equity and environmental sustainability, thus; there is a significant role that is played by the global forces to third world industries.
Role of Multi Fabre Agreement in Textile and Clothing Industry
Regimes of trade for textile are crucial in both developed, and the developing countries it plays a vital role in the economy and the advantages that are shifting to the developing nations and foreign earner from the export of the clothes. The effects of globalization have been experienced since 1970s as the structural adjustments that are sought so as to attain the economic benefits. The global industry of text5ile and apparels accounts for trade flow of $353 billion in 2002 spread over 200 nations that were producing with the employment of over 23.6 million workers. The global T&A is governed by the Multi Fabre Agreement MFA in the provision of guidelines regarding the T&A trading and agreement in the quantitative restrictions of trade. The formation of the WTO saw the replacement of MFA with Agreement on Textile and Clothing ATC that had translated the elimination of quotas for a period of 10 years (Weeraratne, 2004).
Globalization of the T&A in the third word countries has enabled the sourcing of their product beyond the borders benefiting from the cost of differentials. This increases the production to be beneficial from the wider market. The introduction of the international conventions in the global market has been affecting the productivity in the developing countries more than the developed nations, as it was put that free trade brings with it benefits. These international agreements have been limiting the freedom that is associated, with actions of the market, thus; they sometime harm the culture of the countries that are involved in the agreement. Third world countries are highly vulnerable to the power of the multinational corporations and the development agencies by the limiting of actions and culture control of these nations.
The purpose of globalization was to help third world countries out of poverty, and the opposition of it is harming the poor countries interests, and thus, the system was left to corporations and the global bureaucracies in planning giving solutions to the problems around the world. The periods of globalization have been seen to result to the opposite of the intended role. This is clearly depicted by the rate of acceleration of poverty in third world countries as a report by the UNDP found there was an expansion in inequalities between the rich and the poor with the global trade being the primary cause as the benefits never reach the poor thus bringing global protests. There have been confirmations than the changes that come in as a result of globalization disproportionally increase the number of rich end and increase of the poor end. It is estimated that between 1988 to 1993 global income of the 10% of the world poor population decreased by a quarter while the share of the 10 of the world rich increased by 8% and this shows the negative effects of globalization (Jerry, Baker, & Korten, 2001).
Interpretation of Keynes Capital Flows Transportation Cost Income Distribution
There are numerous challenges that face the developing nations as they attempt to develop their economies to industrialization as the role of the state in the development agenda has changed due to globalization. More developing nations are in pursuit of foreign investment for them to work in the global markets. This influence and involvement in the global market by a state to compete has been decreasing due to effects of globalization, still the developed countries and the capital agencies- IMF and World Bank have influence of the developing countries to implement the reforms of global markets.
The influence of multinationals and financial sectors has made the developing countries depend more on foreign investment, and this is the most sought by developed countries for them to promote development in their countries. The growth of the urbanized countries shows that they used a degree of protection to their domestic markets that enhanced the industrialization in these developed countries (Budde, Mexican and Central American L.A. garment workers: globalized industries and their economic constraints, 2005). Thus, countries that have dominated the global market are the one pushing for free trade while the countries that are in the process of creating their industrial bases have the understanding of the threats posed by these established countries and thus the need to protect their infant industries. This is in line with Keynes argument that open trade borders were disruptive of a country, as countries needs to be protected against the flow of capital that disrupt the growth of the economy. The reentry industrialized countries mostly in Asia used to restrict the flow of capital to their economy so that their economy would not be destabilized.
Countries that wish to develop in this globalization era do not have the option but to adapt the policies of globalization, which is often limited to the developing countries. In the era, of globalization production of manufactured components are sold as inputs ending up as outputs which are well coordinated globally (Mohamed, 2008). There is less selling in the competitive markets economic theory in both developed and developing countries, and more on the global Value Chain GVC which are usually regulated by global corporations (Marfleet, 1998). The global textile has demonstrated the characteristics of networks in production distribution and marketing of products. The value chain of textile played a vital role in the industrialization process, with it being regarded, as the first step of developing nations towards the path of industrialization. This is because the barriers to entry are low with less capital requirement, and the production is labor intensive the final goods are tradable. Thus, textile is the rapid source of export led industrialization.
The value chain of textile has seen a tremendous increase globally with the export valued at $628.4 billion making the industry be the most traded (Budde, 2005). The large proportion of clothing industries is located in the developing world because they are labor intensive and require little knowledge unlike the textile industry that is capital intensive making it difficult for developing nations to create backward linkages in supply chain of textile. High value adding tasks have remained in the developed nations, relocating the less skilled tasks to the developing nations. Even thong the firms in developing nations that pay high wages are losing their competitive edge in the global market due to the competition of firms that are in low wage countries (Dowling & Valenzuela, 2008).
Textile industry is buyer driven assist is dominated by marketers that control the production network globally by the stipulation of supply specifications. The value chains that are buyer driven are thriving in labor intensive industries as the common global value chains are able to exercise the power to the agent in the chain. The power of the buyer is attributed to the preference of consumers as they no longer require standardized product as a result of globalization, and this have resulted to the suppliers to source the production from the lowest cost. There is a greater concentration of these suppliers in the developed nations due to the merger of corporations, thus the increase of the buyer power globally in the textile and clothing industries (Steger, 2010).
The global sourcing was beneficial in the perspective of pricing products, but the cost competitiveness have disadvantaged it by the lowering of prices, and this was the primary cause of relocation of these industries from the developed nations to the developing nations even though the tread is seen as to be reversing (Navaretti & Aubrey Si, 1995). There is a strive by the suppliers toward a more cost effective management than that which is in existence, in the market. The general shifting of production of textile and clothing from the formal sector in the developed nation to the informal sectors is the negative consequences on the level of wages and working conditions.
Globalization and Outsourcing of Labor and Employment
Globalization has led to the worldwide level of employment with the informal sectors promoting the growing number of employment in developing countries mostly in the textile and clothing industry. The establishments of textile in developed countries have not changed, but the earning from the industry has seen a tremendous increase. (Rahman, 2002) Much of the production capacities have seen relocation to the developing nations as the number of employment is still on the rise.
There has been a significant increase in the number of people employed in the textile and clothing industry in a developing nation with china employing more than 5.3 million workers (ILO, 2011). Employment in the developed nation has been on the decline as the case of the US there was a decline of 31% leaving the number of employed workers in textile and clothing industry at 1.6 million workers.
There is the evidence presentation that do contradict the informal sector that globalization leads to real earning of income, pointing the relative gap that exists in earning between the workers of the developed and developing nations. The cost of hourly labor cost in 1992, in the textile apparel industry, were; Germany $18.40, Italy $15.70, France $13.40, Japan $10.30, US $10 and Spain $9.70 while in; Mexico $1.70, Hong Kong $$3.70, Korea $3.80 and china $4.20 (ILO, 2011).
Adams Smith, Wealth of Nation Theory In Relation To the Textile Industry
Presently the production of textile and clothing is mainly based in the developing nations with Asia leading with 32 percent of world total production. China is the leading supplier of clothes and textile accounting for 13 percent of the total world supply without the outsourcing to other countries as it is geared to the development of a worldwide open clothing and textile industry. Textile and clothing is mainly labor intensive, which has led, to it being more acceptable in developing countries more than has it has been embraced in the developed nation. Previously countries like the United States of America had large tracts of land under the textile and cotton plantations. With the coming of the revolutionary movement with Adam Smith, which brought with it paid labor and end of slavery, production of textile shifted to the developing countries as labor was deemed to be cheap.
Globalization has brought about transfer of technologies of production which has boosted the trade in third world countries. Generally, the industry offers jobs for poor women in the poor countries of the world. Some of these countries have experienced extremely high growth in the sector. Examples would include Bangladesh, Mauritius, Viet Nam, and Sri Lanka. This is because globalization has enabled modern technologies to be applied even in the poorest of countries as communication and transport systems have been enhanced, and skilled labor can easily be imported considering only a few skilled people are needed as compared to the large number of unskilled labor, which as earlier, stated is readily available in these developing countries.
The transfer of textile and clothe industry has left the developed countries with no option than to import as there has been a complete shift of production such that almost all of the textile and clothes are produced in the developing country. Currently the United States of America and Europe are the largest consumers of textiles and clothing. It is estimated that more than 87% of all the clothing on sale in Japan is imported. Statistics also make it so evident that production of textiles in the United States of America has been on a continuous decreasing rate. Between 1992 and 2002, the import of clothing to the state rose from 12% to 21% and finally settled at 19%. This goes to show that the deficit in demand, in the textile and clothing industry, has been fulfilled through imports (Steger, 2010).
Due to globalization consumers no longer want standard goods (Appadurai, 2003). People are becoming increasingly aware and sensitive to matters of quality and are insisting on this. People want a larger variety of goods to choose from which has led to faster product cycle, products no longer stay for too long in the market otherwise they will not be bought, and people are making large orders of a good in a particular time frame (Suarez-Orozco & Qin-Hilliard, 2004). The increasing demand of the consumer has led them to look for the cheapest prices and the most convenient. People have become more careful in buying clothes as the effect of globalization have made them insist on low prices and superb prices forcing the management to absorb the costs of production or risk losing their sales volume (Stifel, 1963).
Retailers have resulted in mergers and acquisitions in order to increase their purchasing power. This is mainly the case in developed economies since the production has shifted to the developing countries and the retailers want to maximize on buying. Increased purchasing power and large discounts and specialty clothing stores have helped the buyers to manage the global supply network. For instance of the top twenty retailers in the United States of America, 56% of all the sales were accounted for by only five in 2007. While in Europe, 35% of all sales in clothes were by the top five retailers. This allows retailers to be able to control a considerable amount of sales of all the textiles and clothing in the developed countries.
Population Growth and Reproduction in the Economy
Globalization has been used in the developing world to spur and accelerate economic growth. This is mainly because of the nature of the textile and clothing industry. It offers the developing countries a competitive advantage in the sense that it offers low job entry level for semi-skilled and unskilled labor. This way more of the population in the third world countries gets jobs in the textiles and clothing industries, and this spur economic development. The problem arises as most of the textile products can be exported and imported at the different levels of production at values and thus semi products are affected by various tariffs, which make them, highly sensitive. The benefit of the import and export at various stages of production is that it allows for specialization. This means that the largest importers also happen to be the largest exporters.
The Republic of Korea and Japan, for example, became developed in a 30-year period largely because of the initial establishment of textiles and clothing industries (Weathers, 2003). East Asian apparel manufacture initially developed from the mere assembly of imported inputs in export-processing zones that were established to take advantage of low labor costs. This was, in part, achieved with the help of capital and technical assistance provided by the EU and the United States. However, the key to the success of East Asia was its ability to move from mere assembly to higher value-added exporting through export incentives, than to original equipment manufacture (OEM), and finally brand-name manufacturing. These steps accelerated growth and enhanced industrial upgrading. According to Gereffi (2002), the most successful countries are those which are experts in OEM supply, or those which are developing full-package capabilities (Robertson, 1992).
The EU textiles and clothing industry has an estimated turnover of $289.1 billion and contributes approximately 4 per cent to total manufacturing added value. Textiles and clothing production in the EU is concentrated in five countries, France, Germany, Italy, Spain and the UK, which account for approximately three quarters of total production. Italy is, by far, the largest producer of textiles and clothing, generating almost one third (28.4 per cent) of the total value added, followed by Germany with 14.5 per cent, France and the UK with around 11 per cent each, and Spain with 10 per cent. The southern countries of Italy, Greece, Portugal and to a lesser extent France and Spain contribute relatively more to clothing production while the northern countries of Austria, Belgium, Germany, the Netherlands, Sweden and the UK have diversified towards niche markets and specialize in high value-added textile production (Robertson, 1994). A full 92 per cent of Belgium’s value-added clothing and textiles is concentrated in textile production along with 80 per cent of employment. Austria and the Netherlands are similarly concentrated in textile production, while textiles account for 70 per cent of Germany’s activities. The UK and France have approximately a 60:40 split between textiles and clothing. In Portugal, Greece and Spain the clothing sector accounts for more than 50 per cent of clothing and textiles workforce (Commission of European Communities, 2003).
The United States has suffered greater losses in clothing and textiles production, and employment than the EU. Between 1990 and 2006, U.S. clothing imports rose by $59.0 billion or an average annual growth rate of 14.2 per cent. Textile imports, by contrast, increased by $7.3 billion, or an average annual growth rate of 7.6 per cent (Martin, 2007). In 2007, US textile output fell for a tenth year to its lowest level in over 35 years, with a 9.2 per cent decrease in employment. At the end of 2006, domestic production accounted for only 9 per cent of the United States clothing market, with imports making up the remainder (American Apparel and Footwear Association (AAFA), 2007).
There is less concentration of textiles imports among the top 10 countries than there is of clothing, highlighting the greater differentiation of markets. The top five importers of textiles (United States, China, Hong Kong, Germany and Italy) import 34 per cent of the world total, while the top 10 (including the UK, France, Mexico, Japan and Spain) import just under half (49.5 per cent). The United States is the leader in textile imports, which increased from US$6.7 billion in 1990 to US$24.1 billion in 2007, up 258 per cent. China’s imports rose by 215 per cent over the period, from US$5.3 billion to US$16.6 billion, while Hong Kong’s imports increased by only 33 per cent from US$10.8 billion to US$13.6 billion. Germany, France and the UK all experienced minor increases, of 14 per cent, 13 per cent and 18 per cent respectively, revealing the gradual erosion of their clothing industries and their move towards importing made-up garments. The United States, China and Mexico, were the only countries in the top 10 that increased their world share. The United States’ share rose from 6 per cent to 11 per cent between 1990 and 2007. China’s share grew from 5 per cent to 7 per cent while Mexico’s imports increased by 471 per cent which took its share of the world market from 1 per cent to 3 per cent.