The Multinational Monitor


T H E   F R O N T

Slaves to Fashion

NEW YORK CITY -- When U.S. Labor Department officials raided a garment sweatshop in El Monte, California near Los Angeles on August 22, 1995, they uncovered labor conditions often associated with distant U.S. history or Third World countries.

Like many immigrants from poor countries, the 66 Thai immigrants that the inspectors liberated had come in pursuit of the good life. Soon after arriving in Los Angeles, however, they found themselves locked in a barbed-wire-encircled labor camp and forced to work seven days a week in shifts that, during some rush periods, extended as long as 20 hours a day.

Some of these workers -- all but six of whom were women -- had been imprisoned for five years. For 70 cents an hour, they produced garments that ended up in retail stores such as Hecht's, The Gap and Montgomery Ward. They spent their meager wages at an on-site company store. Attempts to escape were repressed with beatings and threats of rape.

No exit

"It's the worst case of slavery in America's recent history," said Labor Secretary Robert Reich, who indicated that there may be many more sweatshops like El Monte's. "There is a growing cottage industry in smuggling garment workers," says California Labor Commissioner Victoria Bradshaw.

Flagrant violations of labor rights, of which the El Monte case is the worst recent example, are the dirty secret of the U.S. garment industry. The abuses fuel the profits of manufacturers and retailers, who disavow any responsibility for these abuses, blaming sweatshop contractors.

"Manufacturers frequently profit from illegal working conditions by using independent sweatshop contractors, pleading ignorance and, as a result, avoiding responsibility for substandard wages and working conditions," says Steve Nutter of UNITE (the Union of Needletrades, Industrial and Textile Employees), which formed through a June 1995 union merger.

Apparel retailers take in estimated annual earnings of $25 billion a year, while manufacturers make nearly $15 billion dollars a year. These manufacturers design clothes, market their labels, buy textiles and hire contract shops to cut and sew the apparel. In California, there are approximately 5,000 subcontractors who perform the labor-intensive part of production for manufacturers. The contractors employ more than 115,000 workers statewide, paying as little as $1.50 an hour -- typically without overtime pay or health insurance. Just 20 percent of these workers are unionized.

The abuses found in the industry are the result, in part, of its use of immigrant Asian and Latin American laborers, who are poorly positioned to fight back given the obstacles of language and immigration status.

Federal, state impasses

U.S. and state governments have failed to pass tough laws to protect these workers or to enforce existing laws. In California, the legislature has supported stronger legislation but has been foiled by the executive branch. In the federal government, these roles are reversed.

A 1994 U.S. Department of Labor survey found that 51 percent of California garment contractors were not paying the minimum wage, 68 percent were not paying overtime and that 73 percent did not maintain proper payroll records.

Since 1990, garment unions have pushed for better legislation in California. But California governors regularly veto bills that would extend liability for wage and hour law violations from contractors to garment manufacturers. Last year, California Governor Pete Wilson vetoed such a bill, arguing that it would be "plainly inequitable to hold manufacturers liable for the acts of separate and independent businesses." Wilson said that imposing such a liability in California would "only drive the garment industry out of state."

Shaken by the El Monte discovery, the California Senate Committee on Industrial Relations resumed discussions last month on a bill that proposes joint liability for manufacturers and subcontractors in cases of wage and hour law violations. El Monte notwithstanding, the Chamber of Commerce and the Wilson administration remain opposed to this proposal.

As the California Senate convened to discuss possible responses to El Monte, Labor Secretary Robert Reich held two summits on the issue with garment retailers in New York and California in September 1995. Reich called the summits to seek the cooperation of garment retailers in assuring that their contractors comply with labor laws. "The level of abuse is simply overwhelming," Reich said. "It's a problem far too vast for a small number of investigators."

Given the aversion to strong labor laws and enforcement among the Republican majority in Congress, however, Reich lacks clout. "We are trying to convince them, but they know we cannot do much," a Labor Department official admitted.

Retail tales

"Frankly, this is and should be the responsibility of the Labor Department," said Morrison Cain, president of the International Mass Retailers Federation. "We are retailers," he said. "We don't have investigators. We don't have police powers. We don't have control over immigration law. We negotiate with suppliers."

Another retail representative added, "It's first of all the responsibility of the federal and state law enforcement agencies and then the manufacturers who have legal responsibility."

As assembled retailers distanced themselves from responsibility for the problem, others blamed the Immigration and Naturalization Services (INS), arguing that strong enforcement of immigration law would solve the problem. "The real story of El Monte is the story of enforcement of immigration laws," one retailer said. "It has nothing to do with retailers. It is the story of human smuggling."

Despite this litany of denials, few big retail stores are free of ties to El Monte prison labor. "Our inspectors founds goods produced by El Monte slave labor at almost all the major retail stores," Reich said. El Monte, he said, was part of a garment industry "food chain" that is headed by the retailers.

Retailers denied that the links in the food chain were as strong as Reich suggested. "I think there were only a couple of stores that had apparently been in contact [with El Monte]," Tracy Mullin, president of the National Retail Federation (NRF), told Multinational Monitor after the New York summit. Prompted by another NRF representative, Mullin shifted gears and said, "None of the retailers were buying goods produced at El Monte." Asked if any member of her association ever canceled an order in response to wage law violations by a supplier, Mullin said she did not know.

The Labor Department identified 15 manufacturers and 18 retailers that took advantage of these imprisoned workers. The companies deny knowledge of the conditions at El Monte.

Retailers say that they are willing to take "appropriate action" against vendors and suppliers who violate the law, but only if the Labor Department supplies the necessary information.

"We can cancel a contract," says Cain, "but we need the information first." Cain's International Mass Retailers Federation represents most of the $282 billion mass retail industry. "They are all good corporate citizens. They have no interest in dealing with suppliers who ignore the law," he said. "If anyone is gaining from the sweatshop it's a subcontractor."

Retailers at the New York summit said Reich agreed to provide them with information on illicit contractors in the future. But the Labor Department, already incapable of policing the industry, expects further budget cuts. Retailers "feel encouraged by the fact that Congress is going to make further cuts in our resources," a Labor Department official said.

Activists are not counting on the government. "Without worker education and consumer pressure on retailers, nothing much can be expected [to change]," says Miriam Ching Louie of the Oakland, California-based Asian Immigrant Women Advocates.

-- Haider Rizvi

That Used
Imprisoned Workers

F40 California
LF Sportswear
Balmara Inc.
Point Zero
Paragraff Clothing Co.
A&M Casuals
BUM International
Tomato Inc.
Ms. Tops of California
New Boys/Voltage Inc.
Excuses SportsWear
Bermo Enterprises
US Boys
Diane Samandi

Retailers That Used
Imprisoned Workers

Foley's Petite
Meir and Frank
Dayton Hudson
Specialty Retailers
Macy's West
Robinson's May
Neiman's Marcus
Montgomery Ward
Fred Meyer
J.C. Penny

NAFTA Downsizing

A RECENT STUDY FOUND THAT the North American Free Trade Agreement (NAFTA) has not delivered the U.S. job boom that its corporate and political supporters said it would.

The September 1995 study, "NAFTA's Broken Promises: Corporate Promises of U.S. Job Creation Under NAFTA," conducted jointly by Multinational Monitor and Public Citizen's Global Trade Watch, followed up on 81 pre-NAFTA corporate promises about how the agreement would stimulate U.S. jobs and exports. Almost 90 percent of the corporations making these promises have failed to deliver and are unlikely to do so soon.

"The elimination of tariffs and non-tariff trade barriers under NAFTA will have a very positive effect on Mattel and [the company's] more than 2,000 U.S. employees," Mattel Inc. spokesperson Fermin Cuza told the House Ways and Means Committee in September 1993. Two years later, Karen Stewart, another spokesperson for the toy maker, says it is, "too soon to tell" if NAFTA has created any new Mattel jobs in the United States.

It is not too soon, however, to document some of the jobs that Mattel has eliminated in the United States as a result of NAFTA. The Labor Department's NAFTA Trade Adjustment Assistance (TAA) office certified that, in the first 20 months of NAFTA, 520 Mattel workers were laid off as a result of NAFTA-related "increased company imports from Mexico."

TAA provides unemployment assistance to qualifying workers who have been laid off as a result of NAFTA.

Companies of all sizes, in every U.S. economic sector and in all regions of the country have similar stories to tell. The study's researchers investigated promises made by USA*NAFTA (a pro-NAFTA umbrella lobby group representing U.S. corporations), the National Association of Manufacturers, the U.S. Department of Commerce (DOC) and Congressional testimony, identifying 81 specific promises by companies to create jobs and expand exports if NAFTA was approved. During August 1995, companies responsible for 66 of these 81 promises agreed to discuss their progress.

Unkept promises

Through these interviews, researchers discovered that:
* 59 of these 66 NAFTA promises were broken, with the companies involved failing to make significant progress toward their claims;
* 90 percent of the NAFTA job promises were broken and 87 percent of export promises were broken.

U.S. corporations were not the only NAFTA supporters that misled the public and the Congress. In November 1993, President Clinton said, "If this trade agreement passes, NAFTA, we estimate America will add another 200,000 jobs by 1995 alone." But the economic models used by the Clinton administration and the pro-NAFTA lobby to sell NAFTA to the public were flawed. The models assumed full employment, perfect labor mobility, stable currency exchange rates and stable or growing buying power of Mexican consumers. Reality has detoured from these assumptions.

Trade Deficit

On the basis of these erroneous assumptions, NAFTA's promoters, in and outside of the Clinton administration, predicted that, by the end of 1995, the United States would enjoy a $9 billion trade surplus with Mexico. Instead, the post-NAFTA surge in imports from Mexico yielded an $8.6 billion trade deficit with Mexico in the first six months of 1995 alone. Adding the U.S. trade deficit with Mexico to the U.S. deficit with Canada, the overall U.S. NAFTA trade deficit for the first six months of 1995 is $16.7 billion.

If actual DOC trade data is plugged into the formula that NAFTA proponents used to project NAFTA job gains (whereby each $1 billion of net exports generates 19,000 jobs), the accumulated NAFTA trade deficit in the first half of 1995 has cost the United States more than 300,000 jobs.

But the DOC just uses its formula for job gains, not job losses. It says that the U.S. trade deficit with Mexico is the result of Mexico's December 1994 peso crisis, which it argues has no relation to NAFTA. Yet, the value of the peso dropped 16 percent from 3.1 pesos to a dollar to 3.5 before the peso "crash." This decrease wiped out the 10 percent average tariff cut that was to benefit U.S. goods entering Mexico. By the time the peso bottomed out, the $3 billion U.S. trade surplus with Mexico already had turned into monthly deficits.

"NAFTA clearly has had a positive impact on U.S. jobs and exports," Commerce Secretary Ron Brown said in response to the study. "It's time to stop playing the 'blame NAFTA' game every time there is a 'shock' felt in the international financial markets."

Among the names on the TAA list of firms that laid off workers due to NAFTA are a number of companies that acted as NAFTA poster firms. Such multinationals as Allied Signal, Scott Paper, Mattel, General Electric, Procter and Gamble and Zenith all were major NAFTA cheerleaders and promised that the agreement would mean a U.S. employment boon. Yet, the Department of Labor has certified that each of these companies have laid off workers because of NAFTA.

Procter and Gamble President John E. Pepper predicted NAFTA would lead to an increase of 2,000 U.S. jobs at his company. "The result would mean more than double the 1,500 U.S. jobs currently supplying our business in Mexico," Pepper said. But, according to company spokesperson Terry Loftus, the firm was unable to determine NAFTA's total net effect on jobs. Loftus did say, however, that Procter and Gamble has laid off 13,000 people worldwide since 1993 as part of a company restructuring. The Labor Department has certified that 74 Proctor and Gamble manufacturing workers qualified for its TAA unemployment program.

NAFTA poster firms

Zenith Electronics Corporation claims to have kept its pre-NAFTA promise. John Taylor, Zenith's Vice President for Public Affairs claims that 300 "blue collar jobs" were created at the company's Melrose Park, Illinois facilities as a result of NAFTA. Yet, the Labor Department has certified that 510 Zenith employees were laid-off due to a "shift in production to Mexico." Even if Zenith did create 300 Illinois jobs because of NAFTA, the company still has a net NAFTA loss of 210 jobs.

Meanwhile, workers may soon lose the limited TAA aid now available. In late September 1995, the House Ways and Means Committee was considering eliminating the program's funding as part of the budget reconciliation bill. Under the proposal, government funds would be taken from U.S. workers who lose their jobs as a result of NAFTA and would be used instead to offset the tariff revenues that the U.S. Treasury would lose if Congress extends NAFTA trading privileges to 23 Central American and Caribbean countries under the Caribbean Basin Initiative (CBI).

"NAFTA set off a downward spiral in which the U.S. worker seems to lose at every twist and turn," says Public Citizen's Chris McGinn, a principal contributor to the study.

-- Jeremy Madsen

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