JULY 16, 1996
The recent celebrity furor over "sweatshops" - both here and abroad - that exploit workers making name brand apparel, is causing the garment industry to take a hard look at its manufacturing practices. Charlayne Hunter Gault provides a backgrounder, followed by a panel discussion.
CHARLAYNE HUNTER-GAULT: For more on sweatshops and what can be done now, we have three people who attended the secretary's meeting here in Washington today. Larry Martin is president of the American Apparel Manufacturing Association, Bud Konheim, CEO of Nicole Miller, a design retailer and manufacturer based in New York, and Jeff Balinger, a director of Press for Change, a labor watchdog group. Thank you all for joining us. Starting with you, Mr. Balinger, the star-studded cast that we--some of whom we saw just a few moments ago--has put the sweatshop issue into the headlines. Is it beyond the headlines, as big as all that?
JEFF BALINGER, Press or Change: Oh, I think we're, we're in a position now to really talk about this issue, whereas, before, there wasn't enough entry level knowledge by enough people to really address it. Now consumers and advocacy groups are starting to get an idea where these factories are, what the conditions are like, now that a couple of celebrities have spoken out, there's--there's a beginning. We've turned a corner in understanding this question, and I think it's--now we can set things right. It's going to take a long time.
CHARLAYNE HUNTER-GAULT: But how big is the problem?
JEFF BALINGER: Oh, it's huge, and these sweatshops are not little mom and pop operations anymore. They're one factory in Indonesia making shoes for NIKE's 14,000 workers, and it doesn't look like a sweatshop. It's well lit. It's very clean. You don't get white shoes out of a dirty basement somewhere, so this is--it's a different kind of problem, but workers are being abused, and it's in a global economy where it's almost like this factory is just 12 miles down the road, instead of 12,000 miles away, because we have people over there that we're in touch with.
CHARLAYNE HUNTER-GAULT: So the biggest part of the problem is abroad and not here in the United States?
JEFF BALINGER: Oh, we still have problems here. I remember taking some foreign trade unionists around the garment district in New York 20 years ago and talking with the New York State Department of Labor and they had a task force at the time, and they were trying to find these places and unite--the union has always had--you know, as soon as they go down the block, you know, somebody moves in and moves out. It's a very fluid situation. You're always going to have those, those little guys operating and evading you, but now we've got another situation where there are big operators out there that we should be able to clean up.
CHARLAYNE HUNTER-GAULT: Mr. Martin, do you agree with that assessment of the size of the problem and the scope?
LARRY MILLER, American Apparel Manufacturing Association: Well, nobody knows exactly how large the problem is because of by the very nature of the business they're underground and they're difficult to find. We know it exists. We think the government--we want to cooperate with the government and do what we can to help shut ‘em down. They're bad for the industry. They give us a bad name, and they're unfair competition for legitimate operators.
CHARLAYNE HUNTER-GAULT: Mr. Konheim, do you have anything to add to that, the scope and size of the problem?
BUD KONHEIM, CEO, Nicole Miller: Yeah. I think it's as big as they say it is, and I don't see it going away because you've got the western world right now is saturated with goods, and the big retailers of those goods are killing each other for--over price, and price is their god and as long as price is their god, they are going to, whatever they said at the panels today, when it comes up to Walmart fighting Kmart, fighting J.C. Penney, it comes and their only consideration is price, they are going to take the manufacturer and say, hey, your price is too high, we're not going to buy from you, and the manufacturer is going to be squeezed into an untenable position. That basic thing has got to change before any of this other stuff changes.
CHARLAYNE HUNTER-GAULT: So that's what's driving the whole issue as far as--
BUD KONHEIM: Price is driving the issue, and the answer to, to unraveling it is, is (a) make the punishment so severe that nobody wants to get, get caught doing this stuff, and the other thing is to make an incentive that is beyond price, where people make a quality decision at the customer's level.
CHARLAYNE HUNTER-GAULT: Do you agree with that, Mr. Martin, that price is driving all of this?
LARRY MILLER: Well, price is exacerbating the problem that's always been here. There's no question that there is this terrific price pressure these days. There's been terrific consolidation in the retail industry, and there are very large entities buying huge amounts of clothing and, and forcing prices down.
CHARLAYNE HUNTER-GAULT: And so how does that actually contribute to the sweatshop?
BUD KONHEIM: Well, I go to Walmart, let's say, not to pick on Walmart, but everybody knows the retailer, and I say, I've got something--I want to sell you this blouse, what's your price--my price is $3--but I can get it from the other guy for $2.50--let me go back and refigure it--go back and refigure it--I call my contractor in, who is not a sweatshop. You cannot do basic business with sweatshops because just like he said, they're on their way out anyhow. You wouldn't dare put your goods in a sweatshop to begin with, because you're afraid they're going to get padlocked because they don't pay their taxes.
So you go to your original contractor. Listen, I've got a chance to get 50,000 blouses but I've got to come down 50 cents from $3.00 to $2.50, or else they're not going to buy them, we're going to lose the whole order, can you do it? What does the contractor say? Yes. He wants the business. He's already taken a position that he can't do it under his--in the situation he's in--he takes the order because nobody wants to turn down an order of that size. Now we have the order.
Now the thing is, how the hell do we fill the order--how do you fill the order--he starts to scramble--he goes out and finds subcontractors to use that will shave the price--he fills up his own factory--he does whatever he can to fill that order. If he can't even make the 50,000 units and say he can make it anyhow because there is not a contractor in this world that will ever turn an order that's too big. They'll just find a way to get it made, and that's where the sweatshop comes in.
It comes in in the subcontractors. Nobody knows about them. It's impossible to police them. As he says, you could walk into factories and find one out of three or whatever proportion you can find in the sweatshops, but go back next week, they're not there, that space is occupied by somebody else, they haven't paid their taxes, there's a padlock on the door, all that type--that's the situation.
CHARLAYNE HUNTER-GAULT: Is that how you see it, what's driving this whole thing, Mr. Balinger?
JEFF BALINGER: Well, I don't see a lot of price competition in the footwear industry, for example. These people have money to give away huge amounts of money, obscene spending for the Olympics, NIKE's not even an official sponsor, will spend $65 million, and, uh, it seems to me that price doesn't drive them to, to operate with contractors that are breaking a law.
What's operating--what's happening there is they've given over control of these factors to contractors, to these South Koreans and Taiwanese that they got hooked up with in, in the 70's and then when democracy came to, to China, to Taiwan and South Korea, they moved to China and Indonesia, you see, to avoid higher wages, and--but they took their contractors with them, and so we have to differentiate between western-run factories in Asia and the factories that are run by Asians.
BUD KONHEIM: And domestic factories.
JEFF BALINGER: And domestic factories, of course, absolutely. And so, you know, a Harvard business professor went over to Indonesia, and she, uh, wrote a paper about the impact of western investment on labor standards, and in fact, found that they were raising labor standards, western investors. Well, we're not complaining about western investors. We're talking about western buyers like the big shoe companies that aren't in control of these factories and these--these contractors are pushing wages down below a subsistence level and, you know, this is really the situation that we're complaining about, not the western--you know, Gillette goes over there and pays triple the minimum wage. Batashu's producing cheap Indonesian shoes for the Indonesian market is paying triple the minimum wage to western-run factories. That's the difference.
CHARLAYNE HUNTER-GAULT: So when you're--in your conference today I know you talked about some solutions both in the government sector, in the corporate sector, as well as among consumers. Where do you start dealing with an issue like this, Mr. Balinger?
JEFF BALINGER: Well, I think we're just, as I said, there's an entry level knowledge that the consumers are now being aware of through the Kathie Lee controversy, and that's been a long time coming. I've been talking about these factories--shoe factories in Indonesia for a long time.
CHARLAYNE HUNTER-GAULT: But it is a governmental--I mean, do you start at the government level?
JEFF BALINGER: No, no. This is, this has got to be a market solution to this. I think consumers are going to want to have some answers, and, uh, you know, we tried to improve labor laws in different countries by using trade, you know, pressure.
It didn't really go very far, and maybe we shouldn't use that--I think educated consumers can, can do this if they demand, you know, real, um, information from these companies. I just want to point out this movement to codes of conduct by companies to adopt codes to control the contractors, well, you know, NIKE tried this in 1992, adopted, you know, said that all their contractors were going to be, uh, using a code of conduct, but, you know, two years later, this author who wrote a very sympathetic book about NIKE went to Indonesia and he called it "Management By Terror," these shoe factories in Indonesia, so these codes had no impact, because there wasn't enough public pressure behind it to say, okay, a code isn't enough, we want regular inspections by independent organizations that we can then put some faith in, and not just a PR facade.
CHARLAYNE HUNTER-GAULT: Mr. Martin, from the manufacturer's standpoint, what do you think about that? I mean, do you think that codes of conduct do work, or do you think that manufacturers, retailers, the industry has to do more?
LARRY MILLER: By themselves, they don't work, but our members are in their contractors' plants continually. They're there for quality control and, and they can inspect for labor conditions at the same time. Many of them also hire third, third party auditors that audit the books and make certain that they're obeying the law. I think that it ought to be pointed out that the federal government, I think, could do a better job if there were a more cooperative effort.
The Labor Department, for instance, when it finds a sweatshop, which is almost always involved with undocumented aliens, doesn't notify the Immigration & Naturalization Service. These companies that aren't paying proper wages are cheating on their income taxes. It strikes me that it would be very proper for Labor, INS, and IRS to jointly work on these, on these efforts in the United States.
CHARLAYNE HUNTER-GAULT: What do you think about that, Mr. Konheim?
BUD KONHEIM: There's only one way to solve the problem, and I think you have it right. In the end, the boss is the customer at the table. The debt is--if they keep buying merchandise that's made in sweatshops, they'll keep having sweatshops, so the thing is how do you inform and educate that customer? You either label the merchandise--now, nobody says proudly made in a sweatshop, I mean, nobody is going to say that, but how about the reverse, how about if there's a label out that has passed all of the inspections for quality and for value and for good working conditions, and that label is on the merchandise and customers can then pick between unlabeled stuff and labeled stuff?
This was a Japanese idea of the 70's when they turned the country around from having a perception of making garbage to making this high-class merchandise that the Organization of Japan was called MITI, M-I-T-I, and they put a gold seal on everything that was exported and before you knew it, we were into quality--buying quality Japanese things.
CHARLAYNE HUNTER-GAULT: But isn't this going to make the price go up, and are consumers going to want to make that trade-off, Mr. Martin?
LARRY MILLER: Yeah, it's going to be an expensive project but even more important than that is a company or a businessman who stoops to cheat his laborers won't hesitate to counterfeit a tag. You'll wind up with the bad guys putting the tags on the garments.
CHARLAYNE HUNTER-GAULT: What do you think about that--
JEFF BALINGER: Oh, I'm glad he brought up counterfeiting because this is one thing the shoe companies got after immediately in Asia, their contractors were doing it, were hurting them, you see, and they ended piracy. They created whole departments back home, they hired former military intelligence people to put spies in different contractors to see how many shoes were being made.
They dealt with this, but if something is hurting the workers out there, 12, 000 miles away, nobody cares about it, and nobody knows about it, well, four and a half years it took strikes by these workers in Indonesia, who get fired, and interrogated by the military, to get the minimum wage paid there, you see--after lots of publicity and a lot of pressure--
CHARLAYNE HUNTER-GAULT: But is this going to be sustained, though, because you said that if Kathie Lee Gifford and some of the other celebrities hadn't gotten involved, the public wouldn't have been involved--is this going to be sustained?
BUD KONHEIM: No. That's the problem. The problem is you need this type of attention to keep it up, and I don't think it's going to be sustained. I think that the issue is going to be out there and you're going to have people fighting the issue. And the other thing is, is he's talking about an international problem which to me is mind boggling. You're talking about 12,000 miles away. I'm worried about the United States. I mean, we've got these conditions going on right here and our factories are across the street. So--and it's because of quality. We're in there every day and we're inspecting them, and we want all of those conditions for those workers because it's good business. That's what we want. But to keep it up is going to be the problem.
CHARLAYNE HUNTER-GAULT: All right. Well, gentlemen, we have to leave it there. Thank you.