Well, this is what i wrote for my international finance class forum regarding the problem that the clothing industry has been facing lately. Let see what my classmates will respond.
Your thoughts on how to resolve the situation and adapt to changing trade environment
It seems to me that the trend of free trade in the clothing industry becomes inevitable. In the “new world”, there are two ways that a country can adapt to this changing trade environment. Firstly, one can lower their production cost so that they are lower than the Chinese to win more business. BBC article stated that wages in Bangladesh are half those paid in China, which gives the country a competitive edge. However, this might create a vicious cycle by competing with the lowest cost. In the end, the factory workers will suffer since they are not being paid decently as the factory owners do not have high enough profits, due to producing the garments with only marginal profits to have high payroll.
Secondly, let us say we assume that no one is able to compete to produce goods as cheap as China is able to. Other developing countries can emphasis on “their stories behind the garments” (for example, not using child labors, being socially responsible to the community, or partial profits go to community constructions and children education programs) and explain to the European buyers why buyers should buy from them other than the cheapest source. It might sound contradicting to the general business concept of “buy low, sell high”, but customers from Europe might choose a more “socially responsible” clothing brand (by paying 50 cents to 1 dollar more per t-shirt) than the others since customers might focus more on the ethical awareness.
In the long run, I believe that developing countries should not only just focus on producing garments with the cheapest cost; they should also start developing their creativity in fashion and design. In a recent article from NY times (see links below), Chinese workers began to complete some designs and samples for designers overseas. As Chinese market becomes more opened and sophisticated, more people in China will have a competitive edge on creativity in fashion and design of clothing. In doing this, developing countries like China can start to compete in a higher design level with the developed countries. By that time, creativity may not be able to be quantified and can we have quotas to stop creativity from overseas in order to protect the economy?
http://www.nytimes.com/2005/08/31/business/worldbusiness/31fashion.html?8hpib
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