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Fashion brands declined to pay $16b in garment orders

Amid COVID-19 lockdown from April to June in the US and April to May EU apparel retailers/brands did not pay $16.1 billion dues to the apparel manufacturers. Sad but truly, the COVID-19 impact on apparel workers and businesses – sitting at the bottom of global garment supply chains – left them exposed and vulnerable.

US-EU-Fashion-brands-declined-pay-16b-garment-orders
Figure: From April to June in the US and April to May EU apparel retailers/brands did not pay $16.1 billion dues to the apparel manufacturers. 

A new report from the Worker Rights Consortium and the Center for Global Workers’ Rights at Penn State University revealed recently that with the long lead times on apparel orders, this drastic fall due to the failure of brands to pay for the garments they ordered before COVID-19 paralyzing the world and tumbling whole economies into nose dive.

According to newly released trade data, at that period, U.S. brands shelled out $9.7 billion less in garment deliveries than they did in the same period last year, a fall of 49%.

Apparel brands and retailers in the EU signed off on $6.5 billion less in orders than they did during those same months in 2019, a 45% decrease.

As fashion stores have been shut by lockdowns in developed market economies, plummeting demand for apparel, brands and retailers have moved quickly to cancel or postpone production orders – refusing, in many cases, to pay for clothing their supplier factories have already produced.

The outcome has been the part or complete shutdown of thousands of factories in apparel manufacturing countries. As a result, millions of factory workers lost job, often without legally-mandated pay or severance.

Creating a shocking impact on global garment supply chains, and the situation will get far worse before it gets better, the report stated.

It is crucial to understand that, because of the time it takes to produce and ship an order after the brand places it, decisions by brands to reduce or forego the placement of new orders with suppliers cannot explain this precipitous drop,” the Mark Anner, Ph.D., Director, Center for Global Workers’ Rights in Association with the Worker Rights Consortium wrote in the report.

“Most new orders placed after the crisis began did not begin to arrive at U.S. ports until July. The vast bulk of the shortfall in U.S. imports through June represents the outcome of orders that brands and retailers had placed, and that suppliers had already produced or were in the process of producing, before the crisis began,” Anner continued.

This dive in value has led ready-made garments (RMG) suppliers in Bangladesh, Cambodia, Myanmar and Vietnam to freeze production, slash operations or go out of business entirely, leaving millions of garment workers facing reduced hours of work (and therefore reduced income), furloughs or loss of employment, the report noted.

Though in June the value of apparel imports surged compared to May, but the collision, the authors wrote, reflects, ‘in substantial part,’ the impact of burden on brands and retailers from unions and labor-rights advocates looking for redress for canceled orders, forced discounts and delayed deliveries and payment.

For sure, the value loss wasn’t because of lockdowns, the report emphasized. Though India and Honduras had strict lockdowns in March and April, Vietnam and Nicaragua did not. Bangladesh, the worst hit of the apparel-producing hubs, experienced a temporary lockdown, but since garment production was largely considered an essential economic activity, any suspension of factory work or shipping was brief.

The data shows considerable losses in export value in countries with strict lockdowns and those without strict lockdowns, somewhat larger in the former but significant across the board,” the authors said.

“The data—coupled with the fact that many suppliers were positioned to catch up in May on production delayed by lockdowns in March and April—indicate that lockdowns, while having an effect, cannot explain most of the dramatic loss of value seen in data through June,” he added.

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