- The world's textile and clothing sector is set to experience a revolution on 1 January 2005 as a global quota system will be abolished. For major clothing producers such as Mauritius, an economic disaster may be the result. No fewer than 75,000 of the overall working population of 549,000 are employed in the clothing sector.
The quota system that has long governed a considerable number of producer countries' textile and clothing exports to the world's biggest markets - primarily the United States and the European Union - will on 1 January cease to exist among members of the World Trade Organisation (WTO), by virtue of a decision taken ten years.
According to the International Confederation of Free Trade Unions (ICFTU), "we can expect to see a wholesale restructuring of this sector," which according to some estimates employs 40 million people - mostly in developing countries - and generates trade in excess of 364 billion dollars a year. China is expected to conquer most of the existing quotas, which have given countries like Mauritius a chance to industrialise.
According to an ICFTU report released today, one of the major bases for Mauritius' welfare may thus suddenly evaporate on 1 January. With 75,000 Mauritians employed in the clothing industry, economic stability in the relatively rich Indian Ocean nation is now threatened.
The garment industry has made a major contribution to the economic development of Mauritius. The country has gradually moved away from "bottom of the range" products such as sugar towards those with a higher added value, so as to increase stability, retain comparatively high wages and compensate for the shortage of local labour.
Ironically, the development of the Mauritian textile sector is mainly a product of the island's Chinese population and investors from Hong Kong, who used the Mauritian export processing zone (EPZ) to build the new industry in the 1980s.
- As with the first generation of newly industrialised Asian states, investors welcomed Mauritius’s cheap labour, political stability and lack of fixed export quotas to the EU and the USA, according to the ICFTU report.
With the years, wages have increased in Mauritius, creating more wealth. Nowadays, a Mauritian garment worker can hope to earn at least 150 dollars a month, which is four or five times more than in many Asian countries or other African countries. With the quota system, however, Mauritius still had a competitive access to markets in Europe and North America.
As the abolition of the quotas is nearing, there has been a succession of company closures in Mauritius, which already have seriously affected the unemployment rate. Several Hong Kong-owned groups already have left the country, and Mauritius has learned to fear the growing power of countries with lower wages like China.
With 54,400 people looking for work, the unemployment rate rose to a record 10.2 percent in 2003. The situation has got even worse since early 2004, according to ICFTU. According to the worst predictions, the EPZ will only be able to maintain 60,000 of the current 90,000 jobs in the years ahead.
Initially at least it was mainly employers from Hong Kong that tended to relocate from Mauritius. Closures of Hong Kong-owned companies have already caused 6,000 job losses. The closure of Summit Textiles last March involved 1,500 job losses, for example. Having had operations in Mauritius since 1985, the company was making financial losses and was tempted by the economic attractions of China since its entry into the WTO.
These textile groups had come to Mauritius largely for the quotas, and now the latter are disappearing. "We love Mauritius for its political stability and educated work force ... but our shareholders are expecting returns on their investment," said Edmond Lau of Sinotex in a recent statement that also spoke for other Hong Kong enterprises. Mauritius's long distance from the USA, compared to Asia, does not do it any favours either.
While further job losses are already programmed, Mauritian authorities are hoping to secure the island's economic future by trying to sell the locality's positive social image and high quality products. "Whilst things are far from perfect, working conditions and wages are less exploitative than those in many other countries specialising in the clothing industry," also the trade unionist report agrees.
- These days if you don't respect workers' fundamental rights and have a transparent personnel management policy, your customers will drop you, David White, human resources adviser to management at the Compagnie Mauricienne de Textile was quoted as saying in the ICFTU report. "The USA and Europe are very sensitive on these matters. Every month one of our customers comes over to carry out an audit," Mr White added.
Further, Mauritius plans to upgrade quality to save jobs and create more. "We are well aware that we will be beaten on the bottom-range clothing market," says Mr White. "That is why we have gone into the medium-range market, where we are tending to compete with Southern Europe and North Africa. In that range there is some price elasticity," he adds.
Also Alain Chan Sun, Director of the Mauritius Export Processing Zone Association (MEPZA), is relatively optimistic. "Ten years ago we faced the same sort of competition from Bangladesh and Sri Lanka. Some buyers were leaving Mauritius for those countries. But most of those buyers came back owing to the higher quality of our products and our professionalism. Today some customers are asking themselves the same questions concerning China," he explains.
Also the Mauritian government is aware of the difficulties the garment industry will face after the ending of the quotas. "We expect some 9,000 job losses in a dozen companies," Labour Minister Showkutally Soodhun was quoted as saying in the ICFTU report.
The government has however not given up hope. "We shall try to provide training in tourism and other alternative sectors to textiles, in order to re-deploy some of the workers sacked by the companies in the export processing zone. With help from the World Bank we have also started taking measures to restructure and renovate the whole EPZ," Minister Soodhun said.
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