The global textile industry, the WTO and Namibia …

EARLIER this year, Ramatex made headlines (once again) when its subsidiary Rhino Garments retrenched about 1 600 workers.

The company claimed this was due to a lack of orders from its customers in the USA. Barely three weeks before the retrenchments, the company was still refuting that there would be retrenchments although Ramatex workers had long observed signs of a pending factory closure.To understand why Ramatex is behaving the way it does, why it came (temporarily) to Namibia, why Rhino Garments closed down and why Namibia’s costs are likely to outweigh the benefits derived from Ramatex, it is crucial to look at three inter-related issues: 1.Developments in the global textile industry, especially the end of the WTO’s Agreement on Textiles and Clothing (ATC) and the ‘Chinese attraction’; 2.The global Ramatex company strategy; and 3.The special incentives offered to Ramatex in Namibia.Global developments When the international Multi-Fibre Arrangement (which provided for a complicated host of quotas for textile and clothing products) ended in 1994, it was followed by the Agreement on Textiles and Clothing (ATC) within the framework of the World Trade Organisation (WTO).This agreement paved the way for the gradual phasing out of quotas and other measures aimed at protecting local textile and clothing industries (particularly in industrialised countries).These quotas ended on December 31 2004 and basically “freed” global textile companies from shifting production to countries whose quotas were not yet filled.We need to remember that Ramatex essentially came to Namibia to benefit from the Africa Growth and Opportunity Act (Agoa), which granted duty-free access to the US market for companies that produce in African countries “approved” by the US government.Given the general trend of reduced tariffs on clothing and textile products, coupled with the end of country quotas, companies like Ramatex no longer have a special incentive to stay in a particular country like Namibia – they are able to choose their production sites anywhere in the world.The end of the quotas at the beginning of this year has already had severe implications for Africa’s textile industry.In Lesotho alone, thousands of textile workers lost their jobs as global corporations relocated.Likewise, Kenya is about to lose 20 000 textile jobs.Even Asian countries (like Bangladesh, Sri Lanka and Indonesia) are likely to lose millions of jobs.The likely scenario is what the International Textile, Garment and Leather Workers Federation (ITGLWF) called a “unipolar textile world with China at its heart”.Under such conditions, countries like Namibia are unlikely to keep transnational textile corporations within their borders.The ‘Chinese attraction’ China has fast become a main attraction as a production site and potential market for global capital.By 2002 already, 30 million of the world’s 43 million workers in Export Processing Zones (EPZs) were employed in China.In that year, China already accounted for more than 20 per cent of world exports in clothing, with its share expected to rise to about 50 per cent within a few years.It already supplies 70 per cent of all Japanese and Australian clothing imports.Between January and April 2005, Chinese textile exports to the USA increased by 258 per cent! China offers the full production chain from the production of cotton to the final products and is able to meet the demands of the global clothing and sportswear chains.It also offers extremely fast manufacturing and transportation times, cheap electricity and has reached high levels of productivity.This means that even extremely low-wage Asian countries like Bangladesh, Indonesia and Pakistan cannot compete with China in the race for foreign investment.Current trends in the global textile industry are a classic example of the race to the bottom as far as labour and environmental standards are concerned.It is therefore highly questionable if it is in Africa’s interest to enter this downward spiral.It also seems to be an illusion to think that Namibia, Lesotho or any other African country will be able to compete with China under the current rules of the globalisation game.Ramatex’s plans A visit to the Ramatex website provides a glimpse into the company’s global strategy.The initially Malaysia-based company expanded production into China in 1997.In 2001 it started operations in Namibia and in 2002 expanded them.In 2003, Ramatex returned its focus to Asia with expansions in Cambodia and China.In 2004, the company expanded further in Cambodia and especially China where it plans further expansions in 2005.If international experiences are anything to go by, Ramatex’s stay in Namibia will be of a temporary nature.Ramatex’s investments have little to do with South-South co-operation as they were not designed to assist Namibia’s industrialisation efforts.On the contrary, the company operates in line with the classic capitalist logic of a highly mobile textile industry that seeks temporary competitive advantages.Special incentives It is ironic that the special incentives Namibia granted to Ramatex now make it easier for the company to shift production.In the initial stages alone, Namibia provided infrastructure of more than N$100 million, while Ramatex imported factory panels and machinery in containers.These items can be dismantled again and shipped out of the country, which would leave Namibia with factory foundations that are of little use to the local economy.In general, companies that invest in infrastructure themselves are likely to stay longer as they need to recover their initial investments to achieve profitability over time.Namibia played the globalisation game in the belief that it had no option but to accept demands set by Ramatex.This explains why Ramatex was provided with subsidised water and electricity, which meant that Namibians cross-subsidised a corporation that already had a turnover of more than US$300 million in 2004.In addition, Ramatex was at times allowed to violate basic workers’ rights, the Namibian Labour Act, the Affirmative Action (Employment) Act, as well as environmental and municipal regulations.Despite signing a recognition agreement with the Namibia Food and Allied Workers Union in 2002, the company never increased its low wages.Evidence of groundwater pollution, which will have a lasting effect on Namibia’s own citizens was also tolerated, seemingly as part of the “price we have to pay”.Despite the many warning signs and repeated calls for intervention to rectify these problems, no clear message was sent to Ramatex that it had to adhere to Namibian laws and policies like other companies.It also seems that no systematic skills transfer to Namibian workers has taken place: the company only provided some initial training and opted to import thousands of production workers from Asia.Furthermore, there are no indications of a programme to ensure technology transfer, which could have contributed to the development of Namibia’s own textile industry in the medium-term.Such technology transfer was crucial, for example, during the initial industrialisation in South-East Asia.Conclusion The dynamics of the global textile industry and Ramatex’s special privileges are now haunting Namibia.After spending huge amounts of public funds, after tolerating avoidable environmental pollution and forcing mostly young women workers to endure poor working conditions, Namibia faces a bleak scenario.In 2003, a study carried out by the Labour Resource and Research Institute (LaRRI) warned that the public funds invested to benefit Ramatex were equivalent to the wages of all Namibian Ramatex workers for almost three years! For Ramatex, on the other hand, Namibia may just have been a temporary location in line with the company’s global strategy.International experiences in many ‘Third World’ countries have shown that an industrialisation strategy based on the goodwill of foreign investors, coupled with repressive labour conditions and environmental degradation, is a recipe for disaster – not for long-term sustainable development.International experie
nces have also shown that such policies are not in the “national interest” but merely serve the interests of foreign capital and its local proxies.This is one of the hard lessons to be learned from the Ramatex saga.The notion of a nation state being able to control global capital also becomes highly questionable under such conditions.Transnationals basically blackmail vulnerable states to offer ever-increasing concessions in return for promised investment and jobs.All this points to the urgent need to develop alternative policies built around the ideal of achieving social justice and sustainable economic development.Elements of such a strategy should be systematic support for developing industries skills and technology transfer for local and regional markets, supplemented by exports.A selective and strategic engagement with the global economy – instead of the current “open door policy” – might hold greater benefits for Africa’s development.This, however, will require courage and a change of the current neo-liberal policies pursued by virtually all governments in the region in line with the dogma preached by the International Monetary Fund (IMF), the World Bank and the WTO.The current problems experienced in Africa’s textile industry thus have to be understood in the broader global context.While there are no immediate quick-fix solutions, the textile crisis (as experienced through Ramatex) once again illustrates the need to implement an integrated industrialisation and development strategy that will transform what has been called the “enclave nature” of our economies.Starting points for such a strategy in Namibia could be: * land and agrarian reform (as carried out successfully in several countries in South East Asia) * the compulsory processing of local raw materials before they are exported * systematic support for local SMEs engaged in processing * (where possible) the awarding of all government tenders to local companies.We have no choice but to transform Namibia’s (and Africa’s) enclave economies if we want to overcome the massive problem of unemployment.- Prepared by Herbert Jauch, Labour Resource and Research Institute (LaRRI).Barely three weeks before the retrenchments, the company was still refuting that there would be retrenchments although Ramatex workers had long observed signs of a pending factory closure.To understand why Ramatex is behaving the way it does, why it came (temporarily) to Namibia, why Rhino Garments closed down and why Namibia’s costs are likely to outweigh the benefits derived from Ramatex, it is crucial to look at three inter-related issues: 1.Developments in the global textile industry, especially the end of the WTO’s Agreement on Textiles and Clothing (ATC) and the ‘Chinese attraction’; 2.The global Ramatex company strategy; and 3.The special incentives offered to Ramatex in Namibia.Global developments When the international Multi-Fibre Arrangement (which provided for a complicated host of quotas for textile and clothing products) ended in 1994, it was followed by the Agreement on Textiles and Clothing (ATC) within the framework of the World Trade Organisation (WTO).This agreement paved the way for the gradual phasing out of quotas and other measures aimed at protecting local textile and clothing industries (particularly in industrialised countries).These quotas ended on December 31 2004 and basically “freed” global textile companies from shifting production to countries whose quotas were not yet filled.We need to remember that Ramatex essentially came to Namibia to benefit from the Africa Growth and Opportunity Act (Agoa), which granted duty-free access to the US market for companies that produce in African countries “approved” by the US government. Given the general trend of reduced tariffs on clothing and textile products, coupled with the end of country quotas, companies like Ramatex no longer have a special incentive to stay in a particular country like Namibia – they are able to choose their production sites anywhere in the world. The end of the quotas at the beginning of this year has already had severe implications for Africa’s textile industry.In Lesotho alone, thousands of textile workers lost their jobs as global corporations relocated.Likewise, Kenya is about to lose 20 000 textile jobs.Even Asian countries (like Bangladesh, Sri Lanka and Indonesia) are likely to lose millions of jobs.The likely scenario is what the International Textile, Garment and Leather Workers Federation (ITGLWF) called a “unipolar textile world with China at its heart”.Under such conditions, countries like Namibia are unlikely to keep transnational textile corporations within their borders. The ‘Chinese attraction’ China has fast become a main attraction as a production site and potential market for global capital.By 2002 already, 30 million of the world’s 43 million workers in Export Processing Zones (EPZs) were employed in China.In that year, China already accounted for more than 20 per cent of world exports in clothing, with its share expected to rise to about 50 per cent within a few years.It already supplies 70 per cent of all Japanese and Australian clothing imports.Between January and April 2005, Chinese textile exports to the USA increased by 258 per cent! China offers the full production chain from the production of cotton to the final products and is able to meet the demands of the global clothing and sportswear chains.It also offers extremely fast manufacturing and transportation times, cheap electricity and has reached high levels of productivity.This means that even extremely low-wage Asian countries like Bangladesh, Indonesia and Pakistan cannot compete with China in the race for foreign investment.Current trends in the global textile industry are a classic example of the race to the bottom as far as labour and environmental standards are concerned.It is therefore highly questionable if it is in Africa’s interest to enter this downward spiral.It also seems to be an illusion to think that Namibia, Lesotho or any other African country will be able to compete with China under the current rules of the globalisation game. Ramatex’s plans A visit to the Ramatex website provides a glimpse into the company’s global strategy.The initially Malaysia-based company expanded production into China in 1997.In 2001 it started operations in Namibia and in 2002 expanded them.In 2003, Ramatex returned its focus to Asia with expansions in Cambodia and China.In 2004, the company expanded further in Cambodia and especially China where it plans further expansions in 2005.If international experiences are anything to go by, Ramatex’s stay in Namibia will be of a temporary nature.Ramatex’s investments have little to do with South-South co-operation as they were not designed to assist Namibia’s industrialisation efforts.On the contrary, the company operates in line with the classic capitalist logic of a highly mobile textile industry that seeks temporary competitive advantages. Special incentives It is ironic that the special incentives Namibia granted to Ramatex now make it easier for the company to shift production.In the initial stages alone, Namibia provided infrastructure of more than N$100 million, while Ramatex imported factory panels and machinery in containers.These items can be dismantled again and shipped out of the country, which would leave Namibia with factory foundations that are of little use to the local economy.In general, companies that invest in infrastructure themselves are likely to stay longer as they need to recover their initial investments to achieve profitability over time.Namibia played the globalisation game in the belief that it had no option but to accept demands set by Ramatex.This explains why Ramatex was provided with subsidised water and electricity, which meant that Namibians cross-subsidised a corporation that already had a turnover of more than US$300 million in 2004.In addition, Ramatex was at times allowed to violate basic workers’ rights, the Namibian Labour Act, the Affirmative Action (Employment) Act, as well as environmental and municipal regulations.Despite signing a recognition agreement
with the Namibia Food and Allied Workers Union in 2002, the company never increased its low wages.Evidence of groundwater pollution, which will have a lasting effect on Namibia’s own citizens was also tolerated, seemingly as part of the “price we have to pay”. Despite the many warning signs and repeated calls for intervention to rectify these problems, no clear message was sent to Ramatex that it had to adhere to Namibian laws and policies like other companies.It also seems that no systematic skills transfer to Namibian workers has taken place: the company only provided some initial training and opted to import thousands of production workers from Asia.Furthermore, there are no indications of a programme to ensure technology transfer, which could have contributed to the development of Namibia’s own textile industry in the medium-term.Such technology transfer was crucial, for example, during the initial industrialisation in South-East Asia.Conclusion The dynamics of the global textile industry and Ramatex’s special privileges are now haunting Namibia.After spending huge amounts of public funds, after tolerating avoidable environmental pollution and forcing mostly young women workers to endure poor working conditions, Namibia faces a bleak scenario.In 2003, a study carried out by the Labour Resource and Research Institute (LaRRI) warned that the public funds invested to benefit Ramatex were equivalent to the wages of all Namibian Ramatex workers for almost three years! For Ramatex, on the other hand, Namibia may just have been a temporary location in line with the company’s global strategy.International experiences in many ‘Third World’ countries have shown that an industrialisation strategy based on the goodwill of foreign investors, coupled with repressive labour conditions and environmental degradation, is a recipe for disaster – not for long-term sustainable development.International experiences have also shown that such policies are not in the “national interest” but merely serve the interests of foreign capital and its local proxies. This is one of the hard lessons to be learned from the Ramatex saga.The notion of a nation state being able to control global capital also becomes highly questionable under such conditions.Transnationals basically blackmail vulnerable states to offer ever-increasing concessions in return for promised investment and jobs.All this points to the urgent need to develop alternative policies built around the ideal of achieving social justice and sustainable economic development.Elements of such a strategy should be systematic support for developing industries skills and technology transfer for local and regional markets, supplemented by exports.A selective and strategic engagement with the global economy – instead of the current “open door policy” – might hold greater benefits for Africa’s development.This, however, will require courage and a change of the current neo-liberal policies pursued by virtually all governments in the region in line with the dogma preached by the International Monetary Fund (IMF), the World Bank and the WTO.The current problems experienced in Africa’s textile industry thus have to be understood in the broader global context.While there are no immediate quick-fix solutions, the textile crisis (as experienced through Ramatex) once again illustrates the need to implement an integrated industrialisation and development strategy that will transform what has been called the “enclave nature” of our economies.Starting points for such a strategy in Namibia could be: * land and agrarian reform (as carried out successfully in several countries in South East Asia) * the compulsory processing of local raw materials before they are exported * systematic support for local SMEs engaged in processing * (where possible) the awarding of all government tenders to local companies. We have no choice but to transform Namibia’s (and Africa’s) enclave economies if we want to overcome the massive problem of unemployment.- Prepared by Herbert Jauch, Labour Resource and Research Institute (LaRRI).