Friday, February 19, 2010

Eco friendly footwear and comparative advantage

North America is the world's largest importer of footwear with an estimated 90% of footwear sold in the US comes from overseas. Despite major technological innovations, shoe manufacture remains labour intensive with many manual steps involved in the assembly process. The cost of labour has forced most US shoe companies to relocate their manufacturing plants to other countries. China currently produces 70% of all imported footwear and in 2008 more than 1.2 billion pairs of shoes were imported to the U.S. Australia is no different in this respect with many household names such as Blundstone Boots following the same pattern. For as long as labour remains the most important cost factor then work will always go where unit costs are cheapest.
The intense competition faced by the domestic footwear industries here and in the US reflects the ongoing global shift in comparative advantage. Whilst cheaper shoes are what consumers’ need (or will pay for) it also means traditional home industries suffer as a consequence because they find it well neigh impossible to compete. Over the last four decades there has been significant shrinkage in the home clothing and footwear sectors. According to the Footwear Industries of America (FIA), since the 60s, over 70% of shoe factories in the US have closed.

The downside to outsourcing is manufacturers no longer dictate the working conditions in overseas factories, and some unfortunately badly exploit their workers. Sports footwear giants in particular been accused of poor working practice with claims of child labour. To their credit brand leaders have worked to overcome this but do still fall fowl of their critics from time to time.
Analysis of buying trends during the recession confirms sales of certain shoe types have dropped particularly training shoes. One example, where this trend is reversed is the sector called ‘eco friendly footwear.’ The term describes buying locally made products to sustain small businesses opposed to corporate giants; and at the same time reducing the greenhouse gases from shipping products across the world. However it seems after a recent investigation ‘eco friendly shoes’ may it be all they appear.

According to the Vegetarian Site, US companies are farming out vegan shoes to China for production. Retailers defend their action fiscally and declare they cannot make a profit without sourcing the cheapest labour. Makes perfect sense until it is pointed out many eco friendly shoes are also made in factories where poor working practice is likely. When questioned many vegan shoe retailers were oblivious to this and most were unaware of how their shoes were made.

Vegan ethos is clear and consumers will not buy products which knowingly involve animal and or human exploited in their manufacture. This extends to even when the products are free of animal ingredients. Monitoring Asian organisations like The Fair Labour Association (FLA) do exist but have no remit to inspect small independent manufacturers. The factories which manufacture off-brand vegan shoes are not privy to external evaluation but 'self-monitored' instead to conform to local labour laws and regulations. Other independent monitoring bodies such a Verité are seldom used because factory owners fear the inevitable cost hike threat would follow the implementation of humane working conditions.

Excerpt from the Afternoons with Jenny Seeton Cutin FM 101, Perth Western Australia, Friday 02/19/2010.

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