1. What do the brands say about changes in sourcing post-MFA?  Based on MSN interviews with 10 major North American companies MFA+3: Labour rights in a changing garment industry San Pedro Sula, Honduras September 30th, 2008

2. What changes in countries?  Shift from higher cost to lower cost countries globally and within regions  Most companies left some higher cost countries entirely  Most companies began placing orders in new lower cost countries  Overall number of countries didn’t change  Less dramatic shifts than anticipated

3. Increase/decrease in orders  Overall shift from Americas to Asia  Less increase to China than anticipated  Increases to low-cost countries near China

4. Winners & Losers  Countries losing orders: Mexico, Canada, Guatemala, El Salvador, Sri Lanka, Philippines  Countries gaining orders: China, Vietnam, Cambodia, Bangladesh, India, Egypt, Nicaragua, Haiti

5. Surprises?  China & Nicaragua didn’t grow as quickly as expected  Rapid increase in orders to Vietnam  Growth of domestic market in China  Some companies returning to Africa

6. Changes in suppliers  Consolidation: using fewer, larger suppliers  Deeper, longer-term relationships  Not necessarily using fewer factories  Suppliers are multi-nationals themselves, producing in many factories in many countries

7. Key factors in sourcing decisions:  #1 Issue: Price of production  State of US economy & exchange rates affect price  Other factors: speed, quality, proximity to market, full- package capacity, lean, flexibility re styles and fabric, reliability

8. Issues re sourcing decisions  Oil costs/carbon footprint making proximity to market more important  Proximity loses advantage without local/regional access to fabric, etc.  Ability to meet order deadlines and transparency when unable to do so

9. Trade Agreements  DR-CAFTA important, but not sufficient  Regional agreements (Mercosur) also important, not just for US market  New agreements can undercut established ones (CAFTA/NAFTA)  Bilateral agreements between US and countries in other regions increasing competition

10. Labour and Environment  Oil/energy cost linked to carbon footprint issue more important than labour rights  However, labour rights most important when considering entering new country  General agreement: government must improve labour regulation/enforcement

11. Looking Ahead…  Mexico & Dominican Republic could face further declines  Central America uncertain (disagreement on countries)  China less growth than other Asian countries (Vietnam)  Africa could rebound

12. Key factors for suppliers  Invest in fabric supplier relationships  Offer multiple services  Flexibility: multiple styles, variety of fabric  Transport costs & order delivery issues  Sustainable: socially and environmentally responsible, and transparent  Price/profits still the major factor

13. What should governments do?  Attract investment in textile production  Invest in upgrading and training (workers and management)  Improve transport infrastructure, lessen bureaucratic delays  More attention to environmental issues all along production chain  Better labour and environmental regulations/enforcement

14. What does MSN think about what the brands are saying?  Not sufficient information on sourcing plans  Upgrading could bring higher value processes  But, buyer demands could increase: flexibilization, pressure to meet production targets, work overtime, cut labour costs  Brands want lower prices and more services -- workers get squeezed  Consolidation benefits large manufacturers, but not necessarily workers

15. Environment tops labour rights  Rising oil costs & consumer concern make environment more important than workers  But, carbon footprint concerns also give Americas advantage over Asia  Could also favour national/regional production for domestic/regional markets  Can we link environmental, health & safety and community health issues?

16. Shift of emphasis on labour rights  Labour rights still important, but part of a package of demands  Cost and failure of auditing shifts emphasis to government regulation  Could we enlist brand support for better laws and better enforcement?