Reportage. According to a new report, the erosion of labor rights in Europe is driving companies to return manufacturing from Asia back to Eastern Europe and some parts of Italy.

Behind the Made in Italy brand: low wages and ill treatment

“The label ‘Made in Italy’ or ‘Made in the E.U.’ has always suggested quality of workmanship and standards, but if the shoes are designed in the E.U. and then produced in Serbia, Albania, Burma or Indonesia by foreign workers in miserable conditions, or in Italy by contracted third parties who pay wages below the living wage, what’s the added value of the brand ‘Made in the E.U.’ or in Italy?”

That inquiry was launched by the labor rights groups Clean Clothes Campaign and Change Your Shoes — a project of 15 European and three Asian organizations — revealing the true cost of our shoes. A new study by the Centro Nuovo Modello di Sviluppo and FAIR follows the supply chains of three major Italian brands (Tod’s, Geox, Prada), showing how far they still are from respect to human and trade union rights of those who make their-our shoes.

Worldwide, every year about 23 million pairs of shoes are manufactured. Earlier awareness campaigns about the working conditions in which they are assembled, through a supply chain across multiple countries (base product, shoe upper, design, distribution, etc.), had shown us labor-intensive processes subject to rapid delivery times and prices cut to the bone, especially in China, India, Bangladesh, Pakistan and Indonesia.

But according to the report, after that outsourcing, we are now seeing the phenomenon of relocalization, or reshoring, which transfers production activities in the opposite direction thanks to low labor costs.

“The increase in productivity, combined with a policy of wage moderation, greater labor flexibility, more freedom to lay off, soft industrial relations flanked by incentives and subsidies to attract investment, are making even old Europe palatable again,” they reported. “And it has the advantage of a workforce with a high manufacturing tradition. The countries most affected by the phenomenon are the countries of Eastern Europe where salaries sometimes are lower than those in Asia.” Often through the application of local incentives.

One of the examples they identified in the report concerns the €11 million provided by Belgrade in January 2016 thanks to which Geox opened a plant in Vranje, Serbia. The following summer, the brand was the subject of disputes in the local press for various irregularities: unsatisfactory health and security conditions, verbal abuse against workers, irregular forms of hiring, excessive overtime and other violations.

After complaints, pressure from the media and trade union activity have improved things, but the concerns have not gone away entirely.

The practice of outsourcing is common. “The supply chain head contractors used by Geox are all abroad, mainly in the Far East, although there are some in Eastern Europe,” according to the report. ”Tod’s, however, has concentrated its suppliers in Italy, mostly in Marche, Abruzzo and Puglia. However, it also has contractors in Romania for the production of shoes under the Hogan Rebel brand.

“As for Prada, until 2015 it held productive relationships with the China Star International Holding Group, which has footwear factories in China, Vietnam, Indonesia and Bangladesh, but given the gradual loss of competitiveness of Asia, now Prada’s policy is to leave Asia and return to produce in Italy and Eastern Europe, mainly in Romania, Serbia, Bosnia and Herzegovina, as well as Turkey.” This diversification allows brands to pay different prices to their suppliers according to their location.

This highlights the fact that, in “the luxury market,” there is a growing disparity between prices and the actual value of assets. However, this surplus value “is not equally distributed among those who participate in its production and is absorbed for the most part by two stages in the chain: distribution and brand, which siphon off approximately 60 percent of the final price. This mechanism activates an escalating spiral so that who holds more wealth and power in the value chain will end up keeping more and more, being able to increase dramatically its power of sale through marketing and maintain their control over suppliers who report too low prices and too fast delivery times.”

According to Clean Clothes and Change Your Shoes, the key conditions to get businesses to behave in compliance with the protections provided by national laws, international conventions and the U.N. guiding principles are informed consumers and international solidarity networks.

The campaigns ask the brands (including Tod’s, Prada and Geox) to ensure transparency on the supply chain and respect for fundamental rights, including a decent wage, and they ask national governments and the E.U. to strengthen controls on the application of labor laws.

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