Economy of the Apparel Industry Essay Example:
In the following paper we will briefly describe the apparel industry and the patterns of growth of this industry via countries all over the world. Due to globalization, environmental issues an trade agreements, transnational corporations have been forced to migrate their manufacturing lines from country to country. These corporations, such as Nike, are significant figures to study and understand as their type has seen greater domestic product than many countries.
The clothing industry is a secondary industry, which means it is one that largely depends on the activity of primary industries, which focus on the development of raw materials, such as fabric. This is why we have seen many countries who are rich in specific primary industries invest in technology in order to expand upon this wealth by diversifying into a secondary industry. Labor costs in developing countries are low, which an important factor which follows a similar concept. This ensures that producers will choose manufacturers in developing countries. The developing countries will experience a growth in exports, the developed countries experience a decrease in production and this, in its entire sum, will eventually lead to uneven development.
As an economy grows, labor becomes more expensive and as labor costs rise, clothing suppliers’ change their preferred country for manufacturing. In most recent times, we have seen investors in the apparel industry move from Taiwan, to China, and most recently to Vietnam. This can be explained by weighing out fixed costs vs. long-term marginal costs. If marginal costs, such as labor aggregately outweigh fixed costs over a calculated period of time, investors will choose to restructure and rebuild. The admission of China into the WTO (World Trade Organization was heavily criticized as a controversial step that reshaped the apparel industry. This one act had affected the North American apparel industry greatly as the American Belt and the centre core of Europe both produced a large percentage of the worlds apparel before the agreement came into place. The areas that endured the most significant changes are job availability in different North American regions, consumer prices, and acceptable standards for working environment and wages.
Seeing as the apparel industry is quite labor intensive, trade barriers used to be an obstacle for countries with an abundant labor supply, encountering the opposition of regulations such as country-specific trade quotas. With GATT (General Agreement on Tariffs and Trade), NAFTA (North American Free Trade Agreement) countries such as Canada and the United States have seen an drastic increase in competition. North American owned companies account for a lot of developing countries’ revenue. For example, retail giant Walmart currently accounts for 12% of China’s exports in the U.S.A..
The apparel industry has become a major catalyst for economic growth and development for countries all over the world, particularly those of East Asia even though apparel manufacturing has always been a large contributor to industrial employment. The recently increased use of outsourcing has, for instance, ensured China the capability to be one of the leading suppliers of the world. The country is currently producing 50% of the world’s shoes using a $50,000-worker plant, claiming the world’s largest footwear production site today. Predicting the future of this industry is a tough feat, but in one’s analysis should include political influences, for example the EU directive on clothing recycling, technology and development, such as the introduction of new fabrics via primary industry resources, corporate social responsibility, and of course availability of labor as a resource.
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