This report, reflecting an International Labour Organization (ILO) study published in July 2016 and A2’s own research, will consider security and political stability issues relating to a number of Asian countries that have become major sources of textiles, clothing and footwear (TCF) production, and where the loss of these industries is certain to have a profound impact on governments, commerce and individuals.
The debate over the extent to which automation, notably robotics and other rapidly emerging technologies such as 3D printing, will impact employment among the already largely de-industrialised Western economies, is well rehearsed and continues to broaden and deepen.
Less discussed is the impact of robotics and automation on the economies, societies and political stability of countries that have benefited greatly from the recent advent of mass waged employment in industrial sectors. These sectors are particularly vulnerable to changes wrought by increased and advanced automation.
The ILO estimates that nearly 70 per cent of South-east Asia’s 9.2 million TCF jobs are threatened by automation – including 88 per cent in Cambodia, 86 per cent in Vietnam and 64 per cent in Indonesia. Similar losses will also affect workers in Bangladesh and Sri Lanka; China and India, which both have huge TCF sectors, are not covered here largely because they have equally huge actual and potential domestic markets or actively seek to protect indigenous artisanal textile and apparel industries.
Rapidly rising wages in Asia have narrowed the economic rationale for the offshore TCF industry
The rapid and remorseless advance of technological innovation is changing many aspects of manufacturing processes, just as it has done since the dawn of the Industrial Revolution some 200 years ago. The main impact of such innovation has been to replace relatively simple repetitive tasks that once employed huge numbers of people. According to some estimates, between 60 and 75 million people are currently directly employed in TCF sectors, mostly in Asia. Their wages help sustain a further 250 million people and contribute economic benefits for countless millions of others who provide goods and services within their communities.
Now, however, the winds of globalisation are shifting in a new direction. ‘Re-shoring’ or ‘in-shoring’ – the process whereby offshored manufacturing processes return to developed economies – is being enabled by new machinery that reduces labour intensity and thus makes manufacturing bases in the West more economically viable.
Rapidly rising wages in Asia have narrowed the economic rationale for the offshore TCF industry. Coupled with the rampant counterfeiting in Asia of luxury European and U.S. fashion designs, and the manifold political, security, business and reputational risks presented by low-cost bases such as Bangladesh, this is enough to persuade many management teams to consider allocating the significant capital investment needed to take advantage of mechanical automation.
Western governments are actively promoting this trend, amid a political backlash against globalisation that is having profound consequences. They are under intense domestic pressure to prioritise the redevelopment of their own former manufacturing areas, many of which are in decline, over considerations such as comparative advantage, global free trade and the economic development of poorer countries. Persistently low inflation over the past decade has dampened fears of higher prices, a likely by-product of this new emphasis.
Even the U.K., long a byword for free-trade absolutism, is promoting in-shoring
Such economic neo-nationalism is to be found even in the bastions of free-market orthodoxy. In the U.S., the Reshoring Initiative (reshorenow.org) is a government-endorsed, business-sponsored programme whose mission is to ‘bring good, well-paying manufacturing jobs back to the United States’. In March 2016, it suggested that re-shoring was a major factor in the addition of 67,000 new manufacturing jobs to the U.S. in 2015 – more than were offshored. Around 60 per cent of the re-shored industry was returned from China. It is no coincidence that U.S. TCF production has rebounded since 2009, but without employing more workers.
France has drawn inspiration from the Reshoring Initiative, for instance by offering calculation tools that allow companies to assess the relative costs of offshore and re-shored production (what it calls ‘relocalisation’). A French government study found that businesses re-shoring to France were motivated by factors such as product quality, speed of logistics, and their desire to brand their products as ‘Made in France’, which enhances their cachet among emerging-market consumers in particular.
Even the U.K., long a byword for free-trade absolutism, is promoting in-shoring. In 2015, the Alliance Project, a not-for-profit organisation funded by the British government, estimated that 20,000 new TCF jobs would be created in the U.K. between 2013 and 2020. It identified mechanisation as having ‘a significant impact on the cost benefit of production between different locations for certain product lines’. The production of simple garments such as hosiery and socks, it noted, was already highly automated. Critically, the machinery was also becoming more flexible, and could adapt to rapid alterations in patterns and design. It added, however, that relatively high land and energy costs would slow the re-shoring trend.
Any loss of employment opportunities in Asia due to technological advances will have an immediate impact on communities and, by extension, the wider interests of countries that have little capacity to counter such economic and social instability. This is no longer a theoretical or speculative issue. The moment the full force of this process will be felt across the Asian TCF industries is largely dependent on how accountancy, cost benefit analyses, political, security, supply-chain and reputational issues and tax incentives combine to make the case for replacing cheap overseas labour with initially high-cost machinery installed in onshore plants.
The process is already well underway – notably in China – due to a mixture of demographics, labour shortages, state encouragement to develop high-tech systems and a huge domestic market. China’s vast and growing domestic market can absorb an increasing amount of products from its own factories, while its powerful state security agencies monitor and largely control dissent against economic policies that have already left millions without meaningful work. Few other countries have similar options.
Little can be done to offset the steady rise of of the so-called ‘sewbots’ that can effectively run day and night with little human support
For countries heavily reliant on TCF – also referred to as the ready-made garments (RMG) sector in Bangladesh and textiles and textile products (TPT) in Indonesia – they earn export revenues, provide mass employment and, by extension, a measure of prosperity and stability. For them, the prospect of a reversal in economic growth and evolution is daunting. However, there is little that can be done to offset the steady rise of automation embodied in the rise of the so-called ‘sewbots’ – automated cutting and stitching machines costing less than USD20,000 that can effectively run day and night with little human support, other than ensuring they are well maintained and have sufficient material to work on.
Sewbots do not merely replace many of the functions carried out by human labour, they do so with greater uniformity and flexibility, quickly adjusting to any modifications required or newly introduced clothing or shoe lines. Ever-falling unit prices, coupled with improved capabilities, are set to close today’s garment and shoe manned production lines as surely as artisanal weaving in Europe was brushed aside by mass production techniques in the late 18th and early 19th centuries.
Given Asia’s rapid rise as the global manufacturing centre within a few decades, a rapid deceleration of employment opportunities and the wages they support could prove traumatic and destabilising.
However, while the First Industrial Revolution created entirely new industries that required massive inputs of labour just as thousands of weavers and farm workers lost their livelihoods, what has been the dubbed by some the Fourth Industrial Revolution emphasises the dominance of the creative and communications sectors controlled by a technologically adept elite that produce often ethereal products requiring little or no non-specialised human inputs.
As a result, when waged employment based on mass production techniques and processes vulnerable to automation is lost in emerging economies, there is no obvious source of similar employment that can absorb this huge workforce and replace the small but steady salaries it produces. Managing the transition from labour-dependent to technology-based economies is complex in any country, but given Asia’s rapid rise as the global manufacturing centre within the space of a few decades, a rapid deceleration of employment opportunities and the wages they support could prove traumatic and destabilising.