Study of A Proposal (and its alternatives) to Amend the Textile Labelling and Advertising Regulations: Applying the Conference Board's Optimal Policy Mix Framework

For: The Competition Bureau

Report

February 2003

(PDF; 563 KB; 92 Pages)

Executive Summary

In February 2001, the Ethical Trading Action Group (ETAG) launched a disclosure campaign proposing that the government amend the Textile Labelling and Advertising Regulations of the Textile Labelling Act (TLA) to require disclosure of the addresses of manufacturing sites on labels of apparel sold in Canada. Unlike other disclosure proposals, notably those to be implemented in Australia, this one is meant to apply to manufacturing locations worldwide, not just to those in Canada. In making this request, ETAG members—a broad coalition including religious groups, labour groups, non-government organizations (NGOs), and other socially minded agencies—seek to facilitate verification of the labour standards employed at manufacturing sites around the world that supply apparel to the Canadian market.

This report was commissioned by the Competition Bureau to assess the amendments proposed by ETAG and help identify the implications of implementing the amendments for consumers, government, domestic industry, international trade, and trade agreements. To do this, the Conference Board has followed the processes of the Optimal Policy Mix (OPM) framework, not only assessing the ETAG proposal but also identifying and assessing a number of alternative policy options. As a result, this report helps clarify the policy objective, evaluation criteria, and alternatives to the ETAG proposal.

Following the OPM, the report first looks at the policy objectives of ETAG and other stakeholders, including members of the apparel industry. These policy objectives were found to be substantially broader than those addressed by the ETAG proposal. ETAG seeks to inform consumers on the labour practices used by providers of apparel to the Canadian market. The proposal seeks only to provide the names and addresses of the manufacturing locations. In this sense, the ETAG proposal is incomplete. However, ETAG feels that public knowledge of the exact locations of manufacturing facilities would lead companies to self-regulate—because the information they provide would enable concerned members of the public, including ETAG supporters, to investigate manufacturing locations and publicize the labour practices used in them.

In general, the Conference Board finds that the mechanics of disclosure described by ETAG are ill-defined or impractical in the following respects:

• Current labels lack the space needed to carry information on manufacturing location(s) and labour standards.
• The ETAG proposal would rely on other mechanisms, such as the CA Number web site or other specialized web sites, to disseminate information about the fairness of labour standards. This would be awkward for consumers, at best, if only because of the large number manufacturing locations and the frequency of change.
• ETAG suggests no mechanisms to ensure that the information provided on labels would reflect a balanced view of labour standards. The Conference Board believes that other alternatives that provide balanced information to consumers directly would be better.
• The proposal singles out the Canadian apparel industry, subjecting it to increased scrutiny and uncertainty at a time when the global apparel industry is in turmoil and the roles of Canadians within it are uncertain.
• To disclose manufacturing addresses is to disclose the wrong information, since it fails to inform consumers about what may be of concern to them, namely the labour standards used in the making of a garment. Indeed, the country of manufacture information already found on every garment label provides as much useful information to consumers as would an address of a manufacturing plant.

Much of the discussion in the report centres on the effectiveness of ETAG’s immediate objective: worldwide disclosure of manufacturing sites as a way of informing consumers on labour practices. The Conference Board, with a significant number of stakeholders, believes that the broader objective, namely the use and promotion of fair labour standards in the production of apparel, needs to be the main goal of the policy instrument. In discussing policy objectives as part of the OPM process, stakeholders disagreed on whether disclosure would be an effective means of achieving this overall policy objective. And while much of the feedback of stakeholders centred around disclosure, it is but a part of promoting the use of fair labour standards.

In the context of the policy objectives of stakeholders, the ETAG proposal is an inadequate step forward beyond the status quo. The Conference Board’s interpretation of the proposal is that it fails to provide any additional useful information to consumers about labour standards. Providing information about a large number of manufacturing locations would be most useful to organizations that support the proposal but not so useful to consumers. This, and the significant concerns of other stakeholders around complete public disclosure of supply chain information, suggest that the ETAG proposal as currently formulated is not an effective instrument to achieve the policy objective.

The ETAG proposal to disclose names and addresses of manufacturing locations is also unique. In looking at initiatives around the world, the Conference Board found only one similar disclosure initiative, in Australia. However, the Australian policy objectives are much narrower, targeting only domestic suppliers and focusing on the working conditions of home workers in the Australian apparel sector. The ETAG proposal is much broader in its application, since it seeks to use public disclosure to identify international supply chains—an innovative but largely unproven way of contributing to the issue.

This report reviews a number of alternatives based on initiatives implemented in other countries or suggested by stakeholders, including:

• procurement initiatives (similar to those being implemented by universities and cities);
• institutional practices initiatives (such as company or industry level codes of conduct);
• certification initiatives for apparel suppliers (similar to the one launched in January 2000 by the American Apparel Manufacturers Association);
• bilateral labour agreements (in parallel with trade initiatives, such as those with Chile and Costa Rica); and
• regular reporting on practices used by specific companies.

However, the report suggests that such alternatives, and others tried worldwide, have not been effective at achieving the desired policy objective. This implies that the government take another look the policy objectives being pursued by ETAG, particularly in light of what other countries are doing to address the issue of fair labour standards and in light of the realities facing the Canadian and global apparel industries.

The report suggests that the various policy alternatives might be more effective if they incorporated better disclosure and verification of labour standards as part of the policy choice or if disclosure incorporated desirable features of codes-based or certification-based reporting. While none of the alternatives that were considered are perfect, it is likely that any of them could be strengthened by adding independent review and reporting on labour standards. Again, this suggests to the Conference Board that public disclosure of supply chain information needs to be carefully considered: it is not a tested policy instrument in the global apparel industry.

This report suggests a number of ways to strengthen the various proposals and alternatives and considers international mechanisms and examples brought forward by stakeholders. Concerns that too much proprietary information would be available in the public domain could be addressed by ensuring that such information is released confidentially and only by the appropriate agencies in cases when poor labour practices are documented. Concerns that the various proposals do not provide the required information on the incidence of fair labour practices could be addressed by combining the mandatory disclosure principles with mandated codes of conduct, supplier certification initiatives, and/or audited reporting on practices. Programs and initiatives could be devised to encourage, if not require, disclosure of the supply chain practices promoted by Canadian apparel retailers and manufacturers. Indeed, the report suggests that a combination of information, verification, and reporting initiatives on the issue of fair labour standards, combined with appropriate consequences when improper labour practices are uncovered, would likely be much more effective than any of the other initiatives currently suggested or implemented to address this issue.

Since labour standards in plants making products sold in Canada is an important issue, the Canadian government needs to think hard about whether Canada should become a leader in this area. In particular, the government needs to rethink the scope of its policy objective in light of this report. It needs to consider whether it wants to limit its efforts to the apparel industry. It needs to decide the extent to which fair labour standards in apparel production is a global issue and the extent to which Canada wants to play a role in improving them. Canada does not have the market power to single-handedly change labour practices in countries that supply their products through trade. However, it may want to play a leadership role by example or by exerting its influence in world affairs (for example, through development cooperation initiatives or support of international institutions).

The stakes are high. If Canada and the developed world insist on labour standards that are too high, less developed economies will be unable to participate in global trade in apparel. If they are too low, workers get exploited and countries with dismal records go unpunished. In the end, a higher level of development is likely the only and best way to eradicate unfair labour practices, and it is not up to the Canadian apparel industry to single-handedly address the issue. A concerted effort by the entire government apparatus, combined with similar efforts around the world, is what will help most to resolve the issue of fair labour standards. In contributing to the solution or in taking a leadership position, Canada needs to balance the needs of the Canadian apparel industry with those of the global apparel industry and those of developing countries that are manufacturing apparel for the industry.

If the Canadian government wants to play a leadership role, the Conference Board would encourage all stakeholders to contribute to a solution by defining an achievable objective that is acceptable to all stakeholders. Once a final objective has been set by government, it will be possible to bring together the efforts of all stakeholders to ensure that apparel sold in Canada is manufactured using fair labour practices wherever, worldwide, the manufacturing takes place.