In the initial weeks of the coronavirus crisis, brands and retailers cancelled and postponed orders at factories around the world

In the initial weeks of the coronavirus crisis, brands and retailers cancelled and postponed orders at factories around the world

An analysis of trade data on apparel imports into the US and EU appears to show that buyers cancelled orders worth at least US$16.2bn between April and June this year.

The research by the Center for Global Workers' Rights and the Worker Rights Consortium estimates that in the initial weeks of the coronavirus crisis, buyers reneged on their financial commitments on roughly US$40bn in orders.

Subsequent campaigns by labour unions and labour rights advocates are thought to have led to around US$15bn of this being repaid – but "this still leaves massive arrears, with severe short and long-term impacts for workers and suppliers."

A further investigation into the latest trade data shows that from April to June 2020, US brands and retailers took delivery on US$9.7bn less in garments than they did during the same period a year ago – a drop of 49%.

For exports to the EU, for April and May 2020, brands and retailers took delivery on US$6.5bn less in garments than they did during these months in 2019 – a decline of 45%.

"Given the lead time on apparel orders, the only plausible explanation for most of this drop was brands' failure to pay for apparel they ordered before the crisis – most of which suppliers and workers had already produced," authors say.

They also note the drop cannot be blamed on government-imposed lockdowns rather than cancelled orders, since figures show substantial losses in export value in countries with strict lockdowns and those without strict lockdowns.

Another finding is a bigger-than-expected decline in unit prices in the US, which fell between seven and 40 cents per unit in March through June 2020. In terms of the US$12.2bn calculated in lost value, "from January through June 2020, there was a net loss of US$1bn due to the decline in prices."

The report adds: "While unit prices for apparel tend to decline modestly year over year...the decline in 2020 over 2019 is vastly larger than normal and is driven by the industry's response to the pandemic.

"Since prices reflected in the trade data involve orders placed – and prices contractually agreed – before the pandemic's primary effects were felt in the US in March, the only means through which the reductions in unit price apparent in the data could have been achieved is the imposition by brands and retailers of retroactive discounts – below the agreed contract price for the goods in question. 

"This is consistent with reports from suppliers, corroborated in some cases by buyer correspondence, that some brands and retailers demanded retroactive discounts of suppliers, beginning in March. Interestingly, major price reductions are not evident in the European trade data, at least through May."

On top of all this, "assuming that wages make up 10% of the value (at import price), what this suggests is the loss of close to US$2bn in workers' wages, based on reduced imports for the US and EU markets alone."

Click on the following link to view the research: 'Unpaid Billions: Trade Data Show Apparel Order Volume and Prices Plummeted through June, Driven by Brands' Refusal to Pay for Goods they Asked Suppliers to Make.'