Cambodia's textiles manufacturers maintain market share

By Tim Worstall | 13 May 2005

The New York Times runs an article on how Cambodia is maintaining its share of the global textiles market despite the lifting of the quota system at the beginning of the year. The paper put the success down to the involvement International Labour Organization (ILO) - the unionization - which was previously thought to be Cambodia's doom.

Cambodia, while still a very cheap place to produce apparel, has chosen to rely on outside inspectors and to foster unusually strong garment unions that have become an independent political force in a country otherwise awash in corruption and cronyism. The efforts at improvement here may point the way for other nations seeking to avoid a race to the bottom as they struggle to establish or sustain footholds in the global economy.

Despite the loss of special access to the American market with the end of quotas, the Cambodian government, many garment-factory owners and the unions here are sticking to their higher standards. All agree that these factors have helped Cambodia escape much of the convulsion that is sweeping through the global apparel industry.

The BBC previously suggested that free trade, as opposed to the earlier managed trade, would inevitably sweep away such protections and lead to a race to the bottom:

The garment factories blossomed after Cambodia signed up to a global quota system obliging rich nations to buy from countries with high labour standards. But in January 2005 those the regulations ended, leaving Cambodia's industry in competition with China - where workers' wages and rights remain unprotected.

The only chance of success for Cambodia is to market its labour standards to companies keen to protect their brand name. But will they successfully create a niche market, providing big companies with a unique selling point, or will they fall victim to what some are calling "a race to the bottom" over labour standards?

We know that free trade leads to a race to the top, not to the bottom. But I'm afraid that I don't quite buy the story unionization has helped keep Cambodia in the market. Wages in Cambodia are $90 a month for a senior worker, and for the average seamstress:

For all the self-congratulation in this country over the labor situation, there are critics who say that the typical $45-a-month wage is inadequate, given the value generated by Cambodia's garment exports.

In contrast, wages in China:

Luen Thai pays garment workers in the Philippines an average of $140 a month, compared with $120 in China.

Perhaps Cambodia does not actually show that ILO involvement is the solution? Perhaps it really is just that labour is cheaper there? Regardless, it seems that those who promoted scare stories about textiles liberalization were a little off the mark.