The free trade agreement now in effect between Colombia and the U.S. was a hot topic of conversation at Colombiamoda, the combined fashion week and apparel trade fair that recently took place in Medellín. Not only are Colombian designers eager to break into the U.S. market, but Colombia's apparel manufacturing sector (which accounts for around 2% of the nation's G.D.P., according to government figures) is hoping over the coming years to provide more of the everyday clothing that Americans wear. Brands like Victoria's Secret, Tommy Hilfiger, and Levi's already do some manufacturing in Colombia which makes sense as the country is particularly known for its denim, lingerie and textiles.
U.S. exports of fibers, textiles, and apparel to Colombia totaled $266 million in 2011. In the same year, U.S. imports of Colombian textiles and apparel totalled $238.7 million. But the 100-year-old Colombian textile industry, centered around the mountainous city of Medellín (known to some as "The Milan of Latin America"), has shrunk significantly thanks to increased competition from Asian manufacturers.
Since 2005, Colombian apparel and textiles exports to the U.S. have dwindled by more than 50%.
Danielle Santos, a sourcing manager at Perry Ellis International, says she currently only has two orders underway in Colombia, but that the company will likely increase production there now that the free trade agreement has gone into effect. "Colombia does smaller runs and faster lead times," Santos explained. Margins are so thin in the globalized rag trade that Chinese factories will often turn down smaller orders because they can't deliver economies of scale. This leaves retailers who want a few thousand shirts (instead of 10,000 or 20,000) in a tight spot. Colombian factories, says Santos, are willing to complete those runs. And with ports on both the Caribbean and the Pacific, they can ship to the U.S. in a matter of days.
"The geographical situation that we have makes us more competitive," says a spokesperson for María Claudia Lacouture, the head of the Colombian government agency in charge of promoting exports, tourism, and foreign investment.
The passage of the U.S.-Colombia free trade agreement was not a smooth one. It was bitterly opposed by U.S. labor unions and some Democrats due to concerns about working conditions and political violence in Colombia. More than 2,880 labor leaders have been murdered in Colombia since 1988, according to Human Rights Watch. And for members and organizers trade unions, Colombia remains the deadliest place on earth: of the 76 labor activists killed worldwide in 2011, 29 (or nearly 40%) were murdered in Colombia, according to the International Trade Union Confederation. (Colombia also topped the list in 2010, 2009, 2008, 2007, 2006, and earlier.)
The two factions responsible for the majority of the killings, according to Amnesty International, are paramilitary groups such as those that flourished in Colombia in the 1980s and 1990s, and, even more worryingly, the security forces of the Colombian state. Most of the violence and intimidation targets trade unionists in Colombia's sugar cane, banana-picking, and mining industries; boycotts and lawsuits have been brought against U.S. companies accused of contracting with paramilitaries to murder the employees of their own Colombian subsidiaries. Student-organized protests of Coca-Cola took place in the 2000s, and in 2007, Chiquita was fined $25 million by the Justice Department for making millions of dollars worth of payments to paramilitary groups including the notorious Revolutionary Armed Forces of Colombia or FARC.
Although violence against Colombia's 600,000 textile and garment workers is less common than in other industries, concerns about labor rights were enough to derail discussions of the free trade agreement in the U.S. for several years. The agreement was finally brought before Congress by President Obama in 2011, where it passed, and it went into effect on May 15 of this year. The agreement included a "Labor Action Plan," a series of U.S.-mandated provisions for Colombia, including the appointment of 50 new special prosecutors to investigate cases of violence against workers and labor leaders and the passage of legislation that criminalizes interference with Colombian workers' labor rights and rights of free association.
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."