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Placing Apparel Production in Political Hot Spots

In their push to drive efficiency and lower costs, brands are manufacturing apparel in a host of politically unstable countries where they have to not only...

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"There's a heightened awareness of the potential for disruption to the supply chain caused by political issues," said Darling.

Still, there has not been any action or particular shift as a result of the risk, he said, noting that Li & Fung has stuck by its approach of keeping a balanced sourcing base.

China, which over the past five years has taken huge strides in market share, is generally seen as a good bet, or is at least one most apparel producers are taking readily.

"From a business standpoint, we don't weigh political risk in China as being a very important decision-maker in terms of placing orders," said Darling.

Li & Fung expects to expand its presence in the country from 19 offices today to closer to 50 in the next five years.

That said, there are a plethora of internal and external issues that could lead to trouble in China, from thousands of social protests a year over everything from labor and environmental issues to the mass migration of people into cities and a secretive, unelected regime competing for resources with other countries around the world. Tension over Taiwan, which China views as a province and countries such as the U.S. consider sovereign, also flares up periodically.

"Wherever there's not a democracy, there's always basis for some concern," said Brenda Jacobs, a trade attorney with Sidley Austin who works with fashion importers. "Even where there's a nascent democracy, there's some vulnerability."

Latin America is a convenient sourcing area, she said, but the emphasis on quick-turn fashions to meet up-to-the-minute demand leaves less time to adjust if something goes wrong.

In some cases, there might be some legal recourse if production were disrupted, but companies might want to simply limit their exposure and cut their losses.

"Arguably, the U.S. companies lose the ability to sell merchandise if they can't get replacements," said Jacobs. "It's the workers in those factories who are the biggest losers because they lose the work. They don't get paid because if the goods don't get shipped, the U.S. buyer isn't paying."

The march of globalization, which has stitched the world closer together economically, has also laid bare inequities in living standards and created a new set of tensions among countries. American companies have had to deal with factories that violate labor laws, where substandard working conditions are exposed by watchdog groups, such as a much-publicized incident in free-trade partner Jordan last year.

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