You may be more cued into supply chain disruptions than normal due to the Pandemic but it's important to know that the fashion supply chain is always changing. Factors outside of your control such as political unrest, conflict and changes to taxes and free trade agreements can make sourcing from some countries difficult and force brands to shift their supply chain. PVH's recent facility closure in Ethiopia is a recent example of this.
Why did PVH leave Ethiopia?
PVH Corp, which owns clothing brands including Calvin Klein, Tommy Hilfiger and Speedo, shuttered its factory doors in Ethiopia in November 2021 due to escalating violence in the country. Their closure came two weeks after an announcement from the Biden administration that the US would suspend Ethiopia from the African Growth & Opportunity Act (AGOA) if it did not mitigate allegations of human rights violations. The US officially suspended Ethiopia from AGOA on January 1, 2022.
What is the AGOA and why is it important?
The AGOA is a US Trade Act established in 2000 that extends eligible Sub-Saharan African nations duty-free access to the US market across a number of industries, the apparel industry being one. Countries must meet certain requirements in order to qualify and remain in the AGOA, these being: each country must be working to improve its rule of law, human rights, and respect for core labor standards. It goes without saying that countries with AGOA status are very attractive to apparel brands looking to put down manufacturing roots.
The backstory on Ethiopia's apparel industry
As recently as 2018, Ethiopia was looked to as a promising new apparel manufacturing hub. A growing economy, significantly lower wage rates, AGOA status, and a government with aspirations to grow the industry lured garment manufacturers to its shores. New industrial parks sprouted in Ethiopia as a result of this, the flagship being Hawassa Industrial Park which attracted big name brands including PVH, Gap, Levi's and The Children’s Place. However, fast forward four years and Ethiopia’s aspirations are on rocky ground. The global pandemic, violent conflict and suspension from the AGOA has left the Ethiopian economy in ruins and left apparel brands questioning their future in the country.
Who has been affected by Ethiopia's suspension from the AGOA?
PVH's closure has affected approximately 1,450 of the Hawassa site's 30,000 person workforce (Vogue Business). Thankfully, PVH has taken some measures to care for those affected workers and is compensating all local operators, as per Ethiopian legal requirements, as well as providing its workers with an additional three months severance pay. It seems likely that other brands will follow suit and move their supply chain elsewhere, with Stephen Lamar, president and CEO of the American Apparel & Footwear Association predicting last year that, “As the crisis spreads—and if Ethiopia does lose AGOA eligibility—companies will increasingly be unable to source from Ethiopia.” (Sourcing Journal)
What you can learn from PVH
Regardless of whether you are an entrepreneur with a great idea or a sourcing executive from an established brand, there are things you can do to safeguard your supply chain and support your workers. Having a diversified supply chain enables you to be nimble and react quickly when faced with external events that threaten production. Additionally, building strong relationships with your suppliers will help you understand local issues affecting your workers and determine how you can better support them.
Whether you’re just starting out to set up ethical apparel factories to produce your garments or you're a seasoned sourcing executive considering moving your supply chain to reduce risk, THR3EFOLD's Sustainable Sourcing Platform offers excellent cut and sew factories across a variety of countries, categories, and quantities for you to discover. Schedule a call with our team to see if this is the right place for you.