How the pandemic affects countries reliant on manufacturing and production

One year of Corona - one year of lost sales and continuous uncertainties for the fashion industry and global trade. How does this affect the countries where garments are manufactured and produced?

Shortly after the Corona outbreak in March of last year, it quickly became apparent that the pandemic would have long-lasting effects across the global economy. Fashion companies, losing out on sales, canceled orders, and manufacturing was put on hold. Garment workers in production-heavy countries were left with nothing after fashion companies no longer were paying their suppliers. In a call for help by lower-income countries reliant on trade, many fashion companies were put on blast for not paying, exposing a dark side of fashion’s global supply chain.

The “new normal”?

Now, a year later, updates from companies working with suppliers have grown silent. Although manufacturing heavy countries are still voicing their concerns over pay and working conditions, it no longer has the high-profile explosive power it did a year ago. Instead, the focus has turned to domestic problems as more and more countries go into lockdowns, unemployment rises, and local economies are stalled. “I was very pleasantly surprised at how quickly people at the beginning of the pandemic thought about what the situation would mean for the production countries,” said Alexander Kohnstamm, CEO of the Fair Wear Foundation, which is committed to improving working conditions in the fashion supply chain. “Now the lockdown is the new normal, and with it, the attention to the problems of others is disappearing.”

Taking stock: the situation is still grave

The situation in production-heavy countries has grown worrisome. In March alone, there were numerous reports, such as in Thailand, a linen factory closed without notice, putting 1,388 workers on the street. They received no information of termination or severance pay, which is illegal under Thai labor law. In Turkey, complaints are mounting from industry associations that major fashion brands are canceling orders and terminating longstanding partnerships overnight. The nonprofit Business & Human Rights Resource Centre has accused 16 prominent fashion brands of not paying total wages to nearly 10,000 workers in eight factories across Turkey despite profits in 2020.

Mostafiz Uddin, one of Bangladesh’s most committed garment industry advocates and a denim producer himself, appealed to German Chancellor Angela Merkel to reopen stores in Germany because “the livelihoods of millions of garment workers in developing countries like Bangladesh depends on it,” Uddin writes.

Worse situation than before

In a ripple effect of companies not paying suppliers, some countries have adjusted their legislation to combat losses. “Some countries have responded to the situation by changing their laws to focus on cutting costs. This is harmful, now and in the long run,” explains Kohnstamm. “In Indonesia, for example, wages below the minimum wage are now allowed to be paid, and in Vietnam, the government has postponed planned minimum wage increases. In India, labor laws have been reformed, making it easier for companies to fire their workers.”

Companies in Eastern Europe are also hit hard, says Kohnstamm. “In many places, the situation is now worse than before. It has become clear that the workers are paying the price for the Covid-19 crisis.” Additionally, the pandemic has made it much more difficult for trade unions and 3rd party inspectors to enter factories and check conditions. Fair Wear has been able to maintain contact with some workers via a complaint tool they created. “We can now see how important this independent tool is,” said Kohnstamm.

Demand for establishing a relief fund

To provide better financial protection for the affected workers in production countries, the #PayYourWorkers #RespectLabourRights campaign, a coalition of around 200 NGOs and trade unions from 37 countries, calls for establishing a severance fund. Brands and retailers would pay into the fund a fee calculated based on their purchasing volume in the respective country. In contrast, employers’ costs would be calculated based on a percentage of their payroll, according to the idea. “Laid-off workers who have not received severance pay and were employed in the supply chain of a brand or by an employer who signed the fund agreement can then receive a severance payment through an application,” explains Fabienne Winkler, executive director of the Clean Clothes Campaign in Germany. The fund is not intended to replace social security systems but to complement them.

Labor costs are not negotiable

Alexander Kohnstamm is fundamentally in favor of the idea of ​​an aid fund, even if it is regrettable that such a fund is needed at all, he says. “If people were paid living wages, such emergencies could be better bridged. Strong national security systems would also be a real solution, but as long as this is not the case in every country, a national aid fund would be a good ad hoc solution.” Above all, he would like fashion brands to behave more responsibly. “Instead of paying into an aid fund, I would prefer if companies didn’t squeeze out factories. You can negotiate about everything, but not about labor costs.” Fair Wear will be examining how brands have behaved during the Corona crisis through Brand Performance Checks and various assessments. “The crisis showed that strong partnerships are also beneficial for brands. These brands are stronger and more resilient than those who only think in the short term and see CSR as a ‘nice to have.’”

This article was originally published on FashionUnited.DE, translated and edited to English by Tess Stenzel.