Upgrading, uneven development, and jobs in the North American apparel industry

In this article we examine the developmental consequences of globalization at multiple scales, using a commodity chains framework to investigate the case of the North American apparel industry. In the first section we outline the apparel commodity chain and offer a brief typology of its lead firms. In the second section we discuss the concept of industrial upgrading and describe several main export roles in the global apparel industry. In the third section we focus on the regional dynamics resulting from the North American Free Trade Agreement (NAFTA). We contrast the Mexican experience with that of countries in the Caribbean Basin to show the impact of distinct trade policies on export-oriented development. We argue that NAFTA is creating upgrading opportunities for some Mexican firms to move from the low valueadded export-oriented assembly (or maquila) model to full-package production. In the fourth section we explore the unevenness of upgrading dynamics through a comparison of two blue jeans manufacturing clusters in the United States and Mexico: El Paso and Torreon. Our conclusions about upgrading and uneven development in the North American apparel industry emphasize the importance of local, national and regional institutional contexts in shaping inter-firm networks and their development impact. Globalization is changing the nature of work and business in the contemporary world economy. Debate today revolves around the implications of globalization’s transformative influence for firms and workers, particularly in the developing world. While capital is increasingly mobile, workers remain relatively place bound, and this tension between the global and the local demands new tools for policymakers studying labour issues, as well as new strategies for labour activists. The International Labour Office has focused on the relationship between globalization and employment in numerous studies, which explore a range of issues from working conditions in maquiladoras to the impact of information and communication technologies on the quantity, quality, and location of jobs (see ILO 2001). Many of these studies have focused on the cross-border production and trade networks that are at the heart of economic globalization, asking about the impact of these networks in the communities where they touch down. The consensus that emerges from this literature is that cross-border networks can have positive as well as negative developmental consequences: ‘Globalization in a regional framework can boost development opportunities, but it may also undermine established local networks of backward and forward linkages’ (ILO 1996: 120). Jennifer Bair and Gary Gereffi 144 This article offers a theoretical and empirical assessment of the developmental consequences of globalization. We contend that the global commodity chains framework, which provides a network perspective on the production and distribution of goods and services in the global economy, is a useful tool for analysing globalization’s implications at multiple levels of analysis, including for local communities and workers. Our discussion focuses on the apparel industry, one of the oldest and most global export industries in the world (Dickerson 1999). Garment making is the typical ‘starter’ industry for countries engaged in export-oriented industrialization and, as has been amply documented, it played the leading role in East Asia’s early export growth (Bonacich et al. 1994; Gereffi 1998, 1999). The East Asian experience is notable not only for the importance of clothes in the export profile of newly industrializing economies such as Hong Kong and Korea, but also because the region is home to countries that have managed to parlay their export activities into upgrading trajectories. This upgrading dynamic reflects a shift between two different production systems that characterize export-oriented production in the contemporary world economy: the assembly model of industrial subcontracting and the full-package model of commercial subcontracting. In this article, the recent emergence of full-package production in the Mexican apparel industry is seen as part of a wider transformation of the North American apparel commodity chain. This process produces winners as well as losers and it creates uneven upgrading opportunities benefiting some firms and workers more than others. Uneven outcomes reflect the ways in which particular communities become linked to international production networks, and the impact of the various institutional environments (supranational, national and local) in which they are embedded. Section one introduces the concept of the apparel commodity chain and offers a brief typology of its lead firms or chain drivers. In the second section we discuss the concept of industrial upgrading and provide a description of the main export roles characterizing apparel-producing countries in the global apparel industry. Section three focuses on the regional dynamics resulting from the North American Free Trade Agreement (NAFTA). We contrast the Mexican experience with that of the region’s other dynamic apparel exporters, the countries of the Caribbean Basin, to show the impact of trade regimes on export-oriented development trajectories. In the fourth section we explore the unevenness of the upgrading process within North America through a discussion of two blue jeans manufacturing clusters in the United States and Mexico: El Paso and Torreon. In the final section we summarize our findings regarding upgrading through networks in the North American apparel industry and we conclude by underscoring the importance of linking the commodity chains perspective with territorially based approaches that emphasize social and institutional contexts in order to advance the debate about globalization and its consequences. The apparel commodity chain The rise of globalization as a central concern of contemporary social science has generated a vast literature regarding its implications for development. Among the key issues that have been posed about the relationship between globalization and development is that of scale: At what level of analysis should we focus our efforts to Upgrading, uneven development, and jobs in the North American apparel industry 145 understand contemporary processes of development, and at what level should policy interventions be directed? While some scholars focus on the rise of supranational institutions and processes that challenge traditional constructions of sovereignty and transform the role of states (Sassen 1996), contributors to the so-called new regionalism underscore the renewed importance of the sub-national locality as a space of development (Amin 1999; Storper 1997). While disagreements in this literature abound, one can identify an emerging consensus that globalization has led to what Peter Dicken and his colleagues call a ‘relativization of scale’. They argue that ‘a distinctive feature of contemporary capitalism is the ability to operate on multiple scales, but none of these scales should, in themselves, be considered a privileged level of analysis’ (Dicken et al. 2001: 95). These authors conclude that the study of globalization requires a grounded, network-based approach capable of ranging across multiple spatial scales while elucidating the dynamic relationships between them. We believe that the global commodity chains (GCC) framework contributes to the development of such an approach. It emphasizes the organizational dynamics of contemporary capitalism – that is, the role of firms in constructing transnational networks for the production and distribution of goods and services. While commodity chains are often global in the sense that they traverse national borders and incorporate firms and workers in several different countries, they are also local because particular links of the chain are rooted in distinct communities. The chain approach illuminates the flows (of capital, goods, services, and labour) between and across space, the implications of these flows for the various places that are incorporated into global chains, and the ways in which local contexts shape and mediate these networks, even as they are, in turn, transformed by them. Commodity chains have four characteristics: (1) an input–output structure, which describes the process of transforming raw materials into final products; (2) a territoriality or spatial dispersion of the activities involved in this transformation; (3) a governance structure, which describes the power relations that are exercised along and through the chain; and (4) an institutional context that shapes the inter-firm networks that connect the various links in the chain and mediate the outcomes associated with the operation of the chain in different environments (Gereffi 1995). The governance dimension is particularly critical for understanding the potential of the GCC approach to shed light on the distributional consequences of globalization by highlighting the ways in which firms and workers in developing economies become incorporated into the global economy. In his work, Gereffi (1994, 1999) identifies two ideal types of governance structures in global commodity chains, which correspond to different organizational forms of international economic coordination. Producer-driven commodity chains are established by industrial capital in sectors such as automobiles, computers and heavy machinery, while buyer-driven commodity chains are controlled by commercial capital in industries such as apparel, footwear and toys. Producer-driven chains are typical of capitaland technology-intensive industries in which large, usually transnational, manufacturers play the central roles in coordinating production networks. Buyer-driven chains, in contrast, refer to those industries in which retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks. The distinction between producer-driven and buyer-driven chains recognizes that there are various forms of coordination and control in global industries, depending on Jennifer Bair and Gary Gereffi 146 the type of firm that is dominant. The task for commodity chain analysis lies in identifying the lead firms in a particular industry, whose strategic position in the chain allows them to create and appropriate higher returns relative to other chain participants (Gereffi 2001). The power of lead firms and their ability to control actors at other segments of the chain are derived from their ability to construct and reproduce various barriers to entry at the segments of the chain they occupy (Kaplinsky 1998). The forms of governance in particular chains affect the distribution of profits and costs among firms and workers that participate in these economic networks: ‘What it [the concept of governance] does is throw light on those factors determining the nature of the insertion of different producers into the global division of labour. ... [I]t is not just a matter of whether producers participate in the global economy which determines their returns to production, but how and on what terms they do so’ (Kaplinsky 2000: 12). Through empirical analysis of global industries, the GCC framework makes possible an understanding of how local developmental outcomes are affected by the networks through which particular firms (and thus the workers they employ, and the communities in which they are located) become incorporated into cross-border chains. The buyer-driven designation aptly captures the dynamics of the global apparel industry, which has been transformed in recent decades by the dramatic increase in offshore production by US and European firms, the emergence of regional production blocs, the phase-out of the Multi-Fiber Arrangement and its replacement with the Agreement on Textiles and Clothing, the prominence of branding as a key strategy, and a dramatic consolidation at the retail end of the chain (Jones 1998; Klein 1999, Taplin 1994). The last two trends capture the growing importance of the organizational buyers or lead firms in this industry. One of the main characteristics of many lead firms that fit the buyer-driven model, including retailers like Wal-Mart, Sears Roebuck, and JC Penney, athletic footwear companies like Nike and Reebok, and fashion-oriented apparel companies like Liz Claiborne, Gap and The Limited, is that these companies design and/or market – but do not make – the branded products they order. They are part of a new breed of ‘manufacturers without factories’ that separate the physical production of goods from the design and marketing stages of the production process. Profits in buyer-driven chains derive not from scale, volume and technological advances, as in producer-driven chains, but rather from unique combinations of high-value research, design, sales, marketing and financial services that allow the retailers, designers and marketers to act as strategic brokers in linking overseas factories and traders with evolving product niches in their main consumer markets (Gereffi 1994). Diversity of lead firms There are three types of lead firms in the apparel commodity chain: retailers, marketers and branded manufacturers (Gereffi 2001). As apparel production has become globally dispersed and the competition between these firms intensifies, each type has developed extensive global sourcing capabilities. While moving out of production, they are fortifying their activities in the high value-added design and marketing segments of the apparel chain, leading to a blurring of the boundaries between these firms and a realignment of interests within the chain. Upgrading, uneven development, and jobs in the North American apparel industry