I asked Santos if she and Perry Ellis had any concerns about outsourcing to Colombia given the situation facing workers. “Not that I don’t have anywhere else in the world,” she replied.
As an example of one of the effects of the agreement that would benefit her company, Santos cited tariffs on finished garments like polyester men’s pants. Those were previously subject to import duties of 27.9%. Now that tariff is zero. Despite the name, not all trade in textiles and clothing from Colombia will be totally “free”: U.S. import tariffs ranging from 2.3%-27.9% still exist on items like men’s blazers, women’s suits, swimwear, and certain items of outerwear (though virtually all tariffs will be eliminated over the next decade).
Of course, the trade agreement doesn’t just affect Colombian goods entering the U.S. market: it also makes U.S.-made goods more attractive to Colombian importers. Juliana Alarcón, a sourcing program coordinator at the Cotton Council International, the export promotion arm of the National Cotton Council of America, expects Colombian imports of U.S. cotton to rise under the agreement. Cotton yarn suitable for textile manufacturing was formerly subject to a 15% import duty in Colombia — but that tariff is no more.
U.S. companies including Gap and Victoria’s Secret have also expressed interest in entering the Colombian market since the free trade agreement was passed.
Because garment manufacturing is low-tech and labor-intensive, labor costs are always a key component of apparel production costs. In the recent book Overdressed, Elizabeth Cline sets out how competition has driven down wages in the garment industry to the extent that, the world over, the wage given garment workers is virtually always the legal minimum wage (or lower, thanks to exploitation and sweatshops). Colombia’s monthly minimum wage is now 634,500,000 Colombian pesos, or around $354. That’s significantly higher than the minimum wage of $205-$208 in the Chinese manufacturing regions of Shenzhen and Guanzhou. Santos says she expects production costs to fall in Colombia. “They don’t understand the whole pricing thing here — yet,” she says. “But I think that they will.”