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Textile Workers Get Crash Course in Survival
By BARRY HATTON
10 February 2006
(c) 2006. The Associated Press. All Rights Reserved.

PONTE DA BARCA, Portugal (AP) - Ninety textile workers in northern Portugal have waged a personal battle against the dispassionate forces of the world economy.

So far, their shirt factory has beaten back the threat of outsourcing and the perils of global trade liberalization. But it's been close.

The Afonso Garment Factory came within hours of shutting down as the owners sought to switch production to lower-cost Eastern Europe. Then the European Union dropped its textile quotas, leading to a wave of cheap Chinese imports.

A few weeks before Christmas 2004, about an hour after the workers had clocked out for the day, one of the employees passed by the low, prefab building and spotted representatives of its Switzerland-based owners, Mallet & Tusk, reversing a large truck through the back gate.

Her cellphone calls brought other employees rushing back. In a tense standoff, they confronted the owners and were told the truck was taking the machinery to Slovakia, where wages are lower.

The workers, fearing they could miss out on their due compensation after a factory closure, blocked the driveway with their cars and phoned the police.

"We were shocked and disgusted," said Conceicao Pinhao, who was assistant manager at the factory that produced about 600 men's shirts a day, mostly for export.

The employees were about to become jobless victims of an economic trend that has unnerved workers across the European Union and unleashed widespread labor protests: the relocation of manufacturing to lower-wage economies.

Mallet & Tusk says it pulled out because over the past 10 years the Portuguese workers have gradually lost their competitive edge with the company's modern factory in Slovakia.

Unreasonable wage demands and outdated labor laws that are aimed toward job protection have handicapped the Portuguese in crucial business benchmarks, the company claimed.

Regulations include provisions barring a company from altering employment terms such as working hours without negotiating with the worker, who can refuse. Layoffs involve a long and costly bureaucratic procedure.

"Portugal's appeal as a place to do business has lapsed," Mallet & Tusk said in a statement e-mailed to The AP.

When Mallet & Tusk pulled out and hired a local lawyer to resolve the standoff, the 87 women and three men who worked at Afonso were left with the keys, the machines, a warehouse full of stocks, and orders to fill.

Almost all the staff had been at the factory since it opened in 1991, many hired straight from the local high school. People in the remote northern region live mostly off farming. In its male-dominated culture, few of the women had a chance of finding another job.

They decided to take a gamble: They would run the factory themselves, using the assistant manager's power of attorney to keep the business alive.

"All the workers wanted to stay. They had nowhere else to go. Their future depends on this factory," said Pinhao. "So I started looking for work for us."

But their plight quickly worsened.

World Trade Organization members, including Portugal, removed quotas on textile imports on Jan. 1, 2005. The removal of barriers exposed Europe's textile industry to potentially crushing competition from China.

Italy, France, Spain and Portugal, the European Union's main textile-producing members, warned that shiploads of cheap Chinese goods could wipe out 2.5 million jobs across the continent. Factories faced ruin, they said.

In one sense, the fears were founded. The amount of Chinese clothing entering the EU through September was up more than 44 percent compared to previous year. Socks and stocking imports from China ballooned by more than 500 percent last year, EU figures show.

In Portugal, the textile sector employs about 200,000 people and accounts for around 11 percent of the country's annual exports. Indirectly, an estimated 1 million Portuguese get work from the sector -- about one-fifth of the working population.

Many factories -- almost all of them clustered around small northern towns -- had long relied on cheap, low-quality production because Portugal's minimum monthly salary is about $470, one of the EU's lowest.

But in China the monthly minimum is around $60.

European companies are also saddled with costly rules on worker safety, welfare and the environment -- concerns less of an issue in China.

The result: The unemployment rate in Portugal's garment industry was up almost 15 percent to 6.6 percent in September compared with the same month in 2004. The national jobless rate rose to 7.7 percent from 6.7 percent.

Undoubtedly, competition from China has snatched away business. Chinese rivals are undercutting locally produced shirt prices by at least 30 percent, Pinhao says.

But adjusting production strategies has spared the Afonso factory. Pinhao, now the manager, realized Chinese competition could be fatal. She dodged the threat by focusing on the export of higher-range goods to clients in the United States, England, Spain and Germany, as well as Portugal.

Afonso produces shirts for stores such as Massimo Dutti, an upscale European retailer, and intends to seek out other top-of-the-line outlets where Chinese competition is weaker.

"The recipe for survival is quality," said Pinhao, a short woman in her early 40s with careworn features. "Those in the low-quality, high-quantity bracket are the ones closing down."

Francesco Marchi, director of economic affairs at the Brussels-based European Apparel and Textile Organization, says 2005 was one of worst years for business in recent memory.

"Everyone is vulnerable" to Chinese prices, he said. "The solution is to increase competitiveness. It's a long, long process."

Now, women at the factory still skip busily around broad, low tables, stretching and rolling cloth into machines. Men heave loads onto waiting trucks. All earn about the minimum wage.

The factory is managing to meet its own costs, though Pinhao says she needs capital to invest in more modern equipment.

Last month, Mallet & Tusk sold the factory to Pinhao for a token sum of just over a dollar. Legal details of the agreement were not available.

"We've won a battle, but the struggle goes on," Pinhao said.

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