A Stitch In Time

Richard Pierce, executive director of the Saipan Garment Manufacturers Association. Photo: AP Wideworld Photos

There are currently 25 factories employing 16,500 workers in the Northern Marianas. Of those employees, 14,900 are non-resident workers, mostly from the People's Republic of China. This year alone, the garment industry expects to ship about $800 million worth of garments into the U.S. That's below the record sales of $1.06 billion in 1999 and $1.004 billion in 2000. Sales have been steadily decreasing since 2000.

For the past few years, government and private sector leaders have been asking whether the local garment industry can compete with factories in Asia, where wages are much lower than the $3.05 per hour earned on Saipan. Some Saipan factories may be able to survive but the industry, now more than ever, needs the assistance of the commonwealth government to compete.

"Overall," says Richard Pierce, executive director of the Saipan Garment Manufacturers Association (SGMA), "we will be greatly disadvantaged at the end of the year." China's garment workers earn the equivalent of about $100 a month, while their counterparts on Saipan make an average of $700. Add in overtime, and some Saipan garment workers make an average of $1,000 a month, Pierce says.

Willy Tan, the largest garment producer in the CNMI and Chief Operating Officer for Luen Thai International Group Ltd., says his company has been preparing for the changed conditions for more than a year. He expects to spend over $2 million this year to re-engineer his facilities. "Whoever cannot position himself in the CNMI to compete globally will disappear," Tan predicts.

Pierce and a high-ranking garment executive who asked for anonymity predict some smaller factories may be forced to close sometime next year. "With the safety net that has been set up," Pierce says, "and with the abilities of bigger companies to absorb abandoned workers…we're confident there won't be a big mess as a result of companies folding up."

The CNMI government is helping the garment industry prepare for the possible negative impact of the new trade regulations. But industry officials say more needs to be done. The SGMA and Commonwealth Governor Juan N. Babauta recently signed a contract to hire a lobbying firm in Washington D.C. The plan is to lobby the U.S. Congress to allow up to 70 percent of Saipan's garment product to be done outside of the CNMI and 30 percent to be done locally. Right now it's a 50-50 split in order to qualify to enter the U.S. duty-free. Another option is to hold the minimum wage at $3.05 an hour and the user fee at 3.7 percent, Pierce says.

House Speaker Benigno R. Fitial, himself a former executive at Tan Holdings, says he will not allow wage or user fee increases as long as he is the speaker. Like Fitial, Saipan Chamber of Commerce President Alex Sablan supports the proposed 70-30 split. He also calls on the government to step up its assistance to the industry.

Even House Minority Leader Heinz S. Hofschneider, a frequent critic of the industry, has authored a bill pending before the Legislature to increase minimum wages in other areas except the garment industry. "We can't think of a progressive minimum wage without ruffling the feathers of the industry for obvious reasons-they're very labor intensive and competitive with other regions," Hofschneider says.

Tan, who also owns garment factories in Mexico, Cambodia, China, Indonesia and the Philippines, said another disadvantage the local industry faces is that many countries have free-trade agreements with the U.S., including Singapore, Australia, Morocco, Jordan and Israel. That number is increasing and Tan suggests local leaders lobby the U.S. Congress not to approve any additional similar trade agreements.

But getting the U.S. Congress to support the 70-30 amendment may not be easy, as Pierce himself admits that the 1990s controversy over allegations of "sweatshop working conditions" and "unpaid wages" in the CNMI (that saw some members of the U.S. Congress threaten to federalize the CNMI's labor and immigration) still reverberate in Washington D.C. Local leaders and industry officials maintain that dramatic improvements in the working and living conditions in the garment factories have been made. So much so that even the U.S. Occupational Safety and Health Administration (OSHA) has praised local factories for bringing safety standards and housing accommodation up to par with U.S. factories. OSHA even publicly stated that some of the factories on Saipan can serve as models worldwide.

A photograph taken in the late 1990s at one of Saipan’s garment factories. Most workers in Saipan’s 25 garment factories are from China. Photo: AP Wideworld Photos

Pierce hopes the U.S. does something to protect its domestic industry. "We wish this (lifting of quota) wasn't happening," Pierce notes. "Some of us still have our fingers crossed hoping the U.S. has more influence inside the WTO to slow things up a little bit."

Tan says changes in the apparel industries worldwide occur rapidly and the CNMI must go with the flow. "Before, we had a longer lead time-longer time to produce garments-now we have very short lead time," Tan says. "We have to be careful in planning our business."

Fitial says he has been asking the Commonwealth's Department of Finance since early this year to analyze the impact of revenue loss if the garment industry leaves Saipan so the legislature can make its own decision on the CNMI budget. To date he has not received any response, Fitial says.

Like political leaders, chamber president Sablan would like to see the government do more to assist SGMA. "Do we still want this industry and the benefits it provides to the people and government of the CNMI?" Sablan asks. "Let's sit down and discuss about how we can continue to survive with this industry and discuss other alternatives outside of tourism and garments."

Pierce says that the 20-year-old garment industry will always be controversial but hopes the leaders and people of the CNMI accept it for doing a good job in cleaning itself up and taking care of its business. "I still do believe that it can be a positive thing in the CNMI both economically and in helping the Commonwealth attain its own identity," Pierce says.