As citizens begin to see global warming as an existential threat, governments are being pressured to act, or at least seem to be acting. For the clothing industry, the European Union has taken the first step by announcing that all clothing sold on its territory must meet sustainability standards.
“Everyone talks about the weather, but nobody does anything about it.” It was a joke, written by Mark Twain, around 150 years ago and remained a joke until the end of March 2022, when the EU finally decided it was time to do something about the climate, c i.e. global warming.
For more than 500 years, international trade was perhaps the main driving force behind the foreign policy of governments. Foreign trade was a thing in itself. There were those who argued for free trade while others favored the protection of local industry. However, whatever the pros and cons of trade, no one has considered the effects of trade on the world as a whole. As a result, foreign trade posed serious problems. It brought commercialism and colonialism. On the other hand, the rediscovery of the new world by Christopher Columbus was the unforeseen result of a failed effort to find a new trade route to the Indies.
Foreign trade was the universal justification for practically everything.
• If you want cheap sugar, you have to accept slavery
• If you want tea, you must accept opium
• If you want fast fashion. You have to accept global warming
The mantra of free trade remained unchallenged until the advent of the global warming crisis. Global warming is different.
Global warming is a global problem that requires a local solution.
For years, serious people in both government and industry have pleaded for countries and companies to take the necessary steps to reduce global warming, but to no avail.
World leaders would meet periodically to find solutions to the global warming crisis. At these meetings, government leaders and senior corporate executives pledged to reduce pollution and greenhouse gases over specified periods of time. Unfortunately, after each event, world leaders and senior corporate executives would return to their home offices and ministries where they would return their promises to the relevant parties. Unfortunately, these parties involved were not executives, engineers, or chemists, but rather PR experts because, as everyone knew, the weather change was a joke.
The start of change
On May 26, 2021, a district court in The Hague ruled that Royal Dutch Shell, one of the world’s leading oil companies, had an obligation to cut emissions by 45% by 2030. In response, Shell did not appeal but eventually presented the court with the detailed steps they would take to meet the court’s requirement, including a schedule of deliverables. This was a first step towards greater sustainability.
On March 30 of this year, the EU announced that “the begging days are over! This global problem will be solved locally! Now all clothing sold in the EU must meet sustainability standards (specific standards to be announced). This will have a serious impact on EU garment exporting partners.
This will no longer be limited to specific factories but rather apply to all export industries. If a garment is produced using electricity, water or air that is considered polluting and unsustainable, that garment may be banned from sale in the EU.
This will require garment exporting countries to make real changes. However, the willingness of governments of exporting countries to effect change will be based on two factors: 1. How big is their garment exporting industry? and 2. What changes will they be called upon to make?
For the purposes of this article, we will use India as an example.
a.1.2% = India’s global apparel market share
b.4.4% = Clothing as a percentage of India’s total exports
c.1.2% = Clothing exports to the EU as a percentage of total exports
From Table 1, we can see that when it comes to India, apparel (4.4%) is not a primary export product, and exports to the EU are 1.2 %, i.e. relatively unimportant for India’s foreign trade. The loss of apparel exports to the EU would not be devastating for either the EU or India.
However, the problems posed by the new EU policy are quite serious. Where in the past countries could speak of success (or failure) on a plant-by-plant basis, the measurement of sustainability will be made on a national basis, with imports of products being limited on the basis of national aggregates. Individual exporters will no longer be able to claim that they are not responsible.
Below is a short list of four main areas where the EU may well need to change.
• Water consumption: A few years ago, the World Wide Fund for Nature (WWF) carried out an in-depth study of the Indian cotton growing industry. He concluded based on the irrigation practices of the time when 1900 liters of water were needed to grow enough cotton to make a single t-shirt. The study suggested that the drip method would significantly reduce water consumption and the cost of electricity to run irrigation pumps. The suggestion was never adapted because after taking into account government subsidies, the cost of electricity for the farmer was $0. Moreover, India’s cotton lint exports have declined from $4.5 billion in 2013 to $1.4 billion in 2020. Why bother spending capital to make changes?
• Coal as a driving force: In 2020, 71% of India’s electricity was produced by coal, compared to 61% for China, 19% for the United States and 10% for the EU. This is not only a major cause of global warming, but also gives Indian exports an unfair trade advantage.
• Air pollution PM2.5 (ug/m3): At 51.90, India is in 3rd place in the ranking, ahead of Bangladesh (77.10) and Pakistan (59.00), against 9.04 for the United States.
• Water pollution: The Ganges is the most polluted river in the world. More than 2,000,000,000 people depend on the river for their basic needs like drinking and cooking.
Some would say it’s unfair:
• The factories are not the perpetrators but rather the victims. They cannot control the source of electricity, nor the causes of air or water pollution.
• The United States and China produce far more greenhouse gases and therefore share greater responsibility for global warming.
There is no doubt that these critics are right and, indeed, this whole process is grossly unfair.
These arguments, although 100% true, are unfortunately irrelevant. If the EU imposes restrictions on anyone, it will certainly not be China or the United States. These countries are too important. EU will choose LOW-RANGE FRUIT — India and other Asian garment exporting countries. When the going gets tough in the world of international business, fairness matters very little.
In the end, it all depends on how far each side is willing to go.
The EU is driven by its citizens who see global warming as an existential threat. Its member governments must be seen to act. Big Western corporations are being pushed by activist shareholder groups who, even now, are pushing for CEO pay to be at least partly tied to their actions to reduce global warming. Acting against Asian apparel-exporting countries would be seen as a step forward, at little or no cost to government or business.
On the other side, the Indian government has to show its citizens that India will not pander to the demands of foreigners. With apparel accounting for just 1.2% of total exports, the government might be ready to hold on and take the loss.
Alternatively, the EU can do nothing at all, leaving the Indian government unresponsive.