Don’t be clothes-minded: understanding the impact of donated clothes

Something very disturbing is happening in a number of developing countries, and what makes it so troubling is that it is being done under the auspices of charity.

Donated clothing has long been a way for people to get rid of their unwanted clothes and other household items, giving them to someone who needs them more.  Frequently these goods are dropped in a bin at the corner of a grocery store parking lot, or are picked up by a truck from your front door. Often done with the best of intentions, what happens next is where the story turns ugly.

The CBC had a well-written exposé on the topic last winter so I hesitate to re-write their words, but in short, these goods are sold to exporters at a per-kg rate, packed into shipping containers heading back to Asia, and dropped in African, Central American and Asian markets along the way.

To properly describe why this trend is disturbing it must be examined on the micro and macro levels. From a macro (country) level perspective, bulk-clothing exports are a way of increasing a country’s exports and thus negating some of the effects of being a net importer (Canada runs a small trade deficit, aka imports more than it exports, to the displeasure of many.)

Here is a crash course in trade balances: trade surplus is good; trade deficit is bad.

Broadly (and very simplistically speaking) higher exports mean that there is a greater demand for a country’s goods abroad – read: economic growth. Higher imports mean more consumption, higher debt, less savings – read: economic stagnation/shrinkage.  Economists, bankers, and stock traders use the figures to evaluate the health of an economy –both domestically and internationally– and make determinations on investments, and interest rates.

As I am sure you have deduced, these signals can be easily manipulated. Namely, by exporting any excess product, at a value as high as possible, to boost export figures and reduce a trade deficit. There are (theoretically) very strict rules from the World Trade Organization (WTO) regulating this practice to protect against dumping and export price manipulation. However, WTO litigation can be costly, time-consuming, and unfair (just ask a Canadian about Canada’s softwood lumber dispute with the US), making it in all likelihood out of reach for any developing nation.

It isn’t easy to figure out the export price per kg. However, through some deduction it would appear within the US it is roughly $1/kg, which may seem low. Yet when you consider the level of wastage that will never be sold because items are of such poor quality, or because supply far outweighs demand, this price is staggeringly high.

All of this says nothing about the diplomatic pressure put on smaller nations to accept unlimited imports, forcing nations to run massive trade deficits of their own, which impacts international loan rates, inflation, currency exchange, as well as the impact on local markets.

For example, Tanzania (a popular destination for used clothing) currently runs, on average, a $297.25 million dollar trade deficit every month. This is despite steadily increasing and promising export figures. Since 2006 they have not once carried a trade surplus, despite exports of many western consumer goods (tobacco and coffee among them).

This in part has resulted in interest rates of 12% (compared to 1% in Canada), an inflation rate of 7.6% (0.7% in Canada), and a debt to GDP ratio of 47.7. In addition, Tanzania suffers from an unemployment rate of nearly 11%, a figure that likely doesn’t truly represent the number of unemployed and underemployed, or the roughly one-third of the population living below the poverty line (2002 estimate).

At a micro-level these imports have a devastating effect on local clothing markets. Prices for used clothes in large markets in East Africa (where I live) vary from $0.20 for a t-shirt to $2-$5 for a dress shirt. These prices represent a washed, perfectly maintained, designer shirt.  Where then does the local clothing maker fit into the equation? Likely she or he will abandon her business and open a store or booth to sell these imported clothes. But what about the fabric maker? Or the person who makes the dye for the fabric? Or the farmer who grows the cotton for the fabric?

The supply chain is nearly endless and these individuals are all either out of a job, working in a different industry, or continuing their work and living in poverty.

But what are the economic realities when compared with how much we enjoy seeing our favourite Toronto Maple Leafs jersey when we're abroad.... (Graham Milner)

But what are the economic realities when compared with how much we enjoy seeing our favourite Toronto Maple Leafs jersey when we’re abroad…. (Graham Milner)

A side effect that most don’t ever consider is the working conditions these clothing vendors work in, which would horrify many who think they are giving their clothing for charitable means. Where I live in Kampala, Uganda, the main market burns down so often it barely makes the news anymore (it has burnt down twice since I arrived in March).

This not only endangers people’s lives, but also burns thousands of dollars in merchandise, creating desperate individuals needing cash to restock their stalls. This doesn’t even touch on the issues of riots and fights that arise on a regular basis when vendors find themselves disenfranchised or being taken advantage of.

So what’s the alternative?

Because I know many will very legitimately question the alternative, or ask which charities are the best, my suggestion would be to ask the charity where the clothes go.

The Salvation Army sells its merchandise in its own stores. Many homeless shelters or shelters for abused families donate these clothes directly needy individuals in your communities. While not a charity, Value Village won’t accept materials it cannot sell, and is a good way to determine if something is worth donating in the first place (sometimes garbage is just garbage).

Generally speaking it is best to do some research, ask some questions and make sure that your actions are what you intended.

Understanding this, it is fairly evident how dangerous Canada’s exports of over $192,000, 000 (CND) in “worn clothing and other worn textile articles” is (2012 figure). Most of these clothes are dumped in foreign developing world economies (Tanzania representing 12.5%, Angola 10.9%, Kenya 10.3%, Pakistan 6.4%, India 6%, Ghana and Congo 5.8%).

Americans tend to send much less of their $636 million exports of used clothes to Africa, instead shipping more to Central America. Tanzania is only their sixth most popular destination. However, for reference the US exports roughly the same amount to Tanzania as Canada, despite an overall export market being 3.3 times larger. The combined total of this is a staggering $60 million (for ease I am considering parity between the USD and CND).

Even worse are stories like this one about Romney giving t-shirts away in Africa. It shows how out of touch western businesses are with how their actions impact global communities. In places where an individual may own one or two shirts, flooding the market with free merchandise equates to taking money out of someone’s pocket and destroying their livelihoods.

We can critique the failures of development dollars, the role of corruption in underdevelopment, and how to make aid more effective till the cows come home. but until we consider how our trade policies and practices impact these countries we will always be limited in what can be accomplished.

There is a great blog post from Fraser Reilly-King in the Ottawa Citizen Development blog that argues that unfettered trade liberalisation does not aid development. Rather, a certain amount of protectionism is necessary for countries to grow. In this light, many developing countries have banned the importation of used clothes. It’s time we stop punishing countries for protecting local markets, and stop dumping our unwanted items on other countries all the while calling it “free trade.”

email
The following two tabs change content below.
Originally from Victoria, British Columbia, Graham is a die-hard Vancouver Canucks fan and an international development professional. He completed a Masters in Business Administration specializing in International Development from the Sprott School of Business at Carleton University in Ottawa, Ontario in 2011. Previously, he completed an honours degree in Public Affairs and Policy Management, specializing in International Human Rights. Graham has worked with several national non-profits in Canada working to raise the profile of humanitarian and development issues in Canada. He has recently returned from Kampala, Uganda, where he worked with the Uganda Landmine Survivors Association as a program officer.

Latest posts by Graham Milner (see all)

Creative Commons License
This work, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Facebook Discussion

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

14 Comments to “Don’t be clothes-minded: understanding the impact of donated clothes”

  1. […] Another way that clothing donations help your community is by providing low-income families with affordable clothing options. We would like to insert this caveat: Make sure your donated clothes are not being shipped internationally. When donating internationally, it is best to donate money, so that nonprofit organizations can take the money and spend it within the economy of the country they are trying to help. Sending used clothing to third-world countries has a negative impact on the communities receiving the donations by displacing local textile makers. More on the negative impact of international clothing donations […]

  2. ggmilner says:

    …. sorry Kris the fourth part is down here

    I realize what I am trying to advocate for is not a popular opinion (amongst economists or western consumers who feel they are “doing good”) however the math backs me up. A 2008 study (also referenced in a fellow WhyDev article “http://www.whydev.org/some-bad-news-about-toms-shoes/”) estimates that the used clothing market resulted in a 50% decrease in employment in the sector between 1981 and 2000 in Africa alone. Since 2000, Canada’s export of clothing has more than tripled ($58.6 million in 2000, to $192.1 million in 2012). These figures are clearly going in the wrong direction.

    Once again thank you for your comments, and I hope there are not to many typos (still recovering from some severe jet-lag which gave me plenty of time in the middle of the night to compose this)

    Graham

  3. […] alarm bells started to ring. Without rehashing tried and tested arguments, we know that there is so much evidence about the negative impact of used clothing donations in poor countries. In fact, as […]

  4. Thanks for the great post Graham. I attempted a photo essay while living and working in Tamale, northern Ghana that explored second-hand NFL jerseys and the men and women who wore them. You can check it out here – http://jerseysure.tumblr.com/

    From what I gathered in talking to shop owners who sold these items is, in Ghana at least, large bags of second-hand/donated clothing ships from Los Angeles (U.S) to Kumasi (Ghana). Shop owners then buy the bags on the basis of weight in Kumasi for about 800 Cedi ($400). Now, a lot of this clothing is sports clothing and you wouldn’t believe how many jerseys of U.S and Canadian sports teams can be found in and around northern Ghana. It is something I would love to explore more, in a similar fashion to the documentary mentioned by others here (T-shirt Travels).

    • ggmilner says:

      Thanks for the kind words Brendan! Love the photos! I have seen a few in E Africa from teams who never won their championship (now if only I could find a Vancouver Canucks Stanley Cup T-shirt my life would be complete.)

  5. Kris says:

    Hi Graham,

    Thank you for your response.

    I think the trade balance discussion is a red herring and I’m not sure why you are concerned about it. Recall the basic identity:

    Savings – Investment = Exports – Imports ( + some small things that we can ignore for simplicity)

    Tanzania (for example) is said to have a trade deficit if its net exports are negative (exports < imports). In this case, Tanzanians are consuming more goods and services than they are producing. How is this possible? Because Tanzanians are also selling assets to foreigners, say in the form of government bonds or foreign direct investment. In this scenario, investment in Tanzania is outpacing domestic savings.

    In my opinion, there is no a priori reason to call this scenario bad. True, a country with a current account deficit is one which is borrowing to finance current consumption, but for a poor country this is quite possibly a good thing (certainly if consumer preferences favour smooth consumption). One way to think of it is this: a poor country with negative net exports is essentially trading future goods and services for current goods and services. Moreover, this poor country is presumably poor because it is capital-poor, and inflows of foreign capital will improve productive capacity.

    There is much more to be said on the topic, particularly with regard to persistently large trade deficits (anything extreme is usually bad news). The basic point is that a trade deficit is not necessarily a sign of economic weakness. They might, in fact, be a very natural thing to expect for certain countries. This is why I took issue with your pithy statement: "Here is a crash course in trade balances: trade surplus is good; trade deficit is bad." The truth is much more complicated.

    Also, in your Tanzanian example, deliveries of used clothes from Canada account for about 0.00002% of that country's imports. So however you cut it, this is not a macroeconomic issue. Rather, the questions you raise are microeconomic in scope, namely, what are the impacts of introducing lower-cost sellers into a market? In ECON 1 language, this translates into an outward shift in the supply curve, leading to a lower price and higher quantity sold. The total net benefits to market participants is positive.

    Now let's enumerate the net benefits group-by-group:

    (1) Consumers: The impact on consumers is positive. I don't understand why you dispute this. If you like hamburgers, and the price falls from $3 to $2, are you not better off? It doesn't really matter whether you choose to buy more hamburgers, or buy more hotdogs, or buys stocks, or stuff the savings under your mattress. Your welfare has increased.

    (2) New Entrants: The new entrants are better off. If they weren't profitable, they either wouldn't have bothered to enter or they would ceased operations.

    (3) Old Sellers: The established producers are worse off. They receive a lower price than before. Some may be forced to exit if their costs are too high.

    Let's add one more group, since your scenario demands it.

    (4) Retailers: The retailers act as intermediaries between the producers and the consumers. The overall net effect for them is positive, but it may be unequally distributed. For example, an established retailer will appreciate lower wholesale prices, but may find her market share fall if new retailers are attracted into the industry.

    Your welfare analysis focuses almost exclusively on group 3. Why? It's fine if you want to ignore group 2, since the concern seems to be focused on nationals, but I think you need to argue the point a bit more thoroughly if you want to neglect the others. True, you mention the retailers, but your concern there seems to be the physical market infrastructure. I'm sure it's horrific, but that's another issue. More importantly, you dismiss consumers all together. (Don't feel too bad. Ignoring consumers is a common sin, as evidenced by most public policy.)

    Instead of consumers, you express deep concern for the fabric-maker, the dye-maker and the cotton farmer. Here you are veering off into general equilibrium territory, which is fine–indeed it is very ambitious. But a general equilibrium is not equal to the sum of selected partial equilibria, i.e, not at all the same thing as referring to the "supply chain" (a very MBA/MPA term). You need to be very careful about making this type of argument. I can just as easily say that these people, and even the established clothing producers that can't compete with the new low-cost imports, are all diverted into other industries and end up just as well off than before. Why is your story right and mine wrong?

    Your scenario basically boils down to this: extremely inexpensive clothing is delivered to a developing country. Is that a good thing or a bad thing? Maybe it is a bad thing as you claim, but that is not at all obvious. Consider this analogous situation. There is a town with a poor neighborhood and a rich neighborhood, and rich people send foodstuffs to a food bank in the poor neighborhood. If I applied your line of reasoning here, I would be forced to conclude that the food bank is a net negative for the poor neighborhood simply because it diverts business from local corner stores. Should we shut down food banks?

    A final thought: aren't almost ALL clothes manufactured in developing countries? Last I checked, North America doesn't have much of a garment industry anymore.

    • Kailer says:

      Thanks for writing this response and saving me the trouble.

    • ggmilner says:

      Once again Kris, thank you for your comments. They are very insightful and certainly highlight the fact that not everyone agrees. While I think that we are going to need to agree to disagree on the overall net benefit to developing economies, there are a few points I need to address in your statement because I feel that they are misleading.

      Firstly your assertion that a developing nation with a trade deficit can be a positive scenario while theoretically this might be true, the reality is far from it. You state it yourself ” One way to think of it is this: a poor country with negative net exports is essentially trading future goods and services for current goods and services”, in a developing economy this is an especially dangerous situation. Firstly, it has been shown to result in massive income distribution and the associated marginalization of the poor. Secondly, I would challenge that trading future goods and services in exchange for current consumption (especially in situations where the current good is not a “necessary good”) is NOT a sustainable growth model. This is again compounded when the situation is happening year-over-year and growing. This is even more relevant in developing economies where the largest exports are natural resources. Unlike large Asian economies, African economies do not have the large human resource market to use as a spring board towards growth (the future resource they trade). When you are counting on oil and minerals as your future exports you risk the long-term sustainability of these markets.

      Your next point regarding the size of the used clothing market is unfortunately misleading (and by my calculations off by a magnitude of 10,000x). According to the CIA Factbook Tanzania’s import for 2012 was $10.33 billion, according to the International Trade Center it was $8.7 billion (admittedly this seems low in comparison to previous years http://www.trademap.org/tradestat/Product_SelCountry_TS.aspx), according to the ever-trustworthy Wiki it was $11 Billion. Of Canada’s $192 Million in exports, 12.5% or $24 Million go to Tanzania, equating to 0.2% of the countries TOTAL imports. When you consider this figure when combined with the exports from our neighbors to the south the percentages jump to between 0.5% – 0.7% depending on who’s trade figures you trust the most.

      BUT what is even more concerning is that that $24 million in Canadian exported clothing from Canada equates to thirty percent of total exports from Canada to Tanzania. You must admit that as Canadians we have more useful exports. (https://www.ic.gc.ca/app/scr/tdst/tdo/crtr.html?naArea=9999&searchType=Top25&hSelectedCodes=%7C6309&productType=HS6&timePeriod=5%7CComplete+Years&reportType=TE&toFromCountry=CDN&currency=CDN&countryList=specific&areaCodes=425&grouped=GROUPED&runReport=true)

      As for your welfare analysis, I will concede that consed that your assessment of the consumer welfare is indeed true in the short-run. But as I have stated all along (and a point that I will defend rigorously) is that the long-run impact on consumers is not beneficial because of long-term impact on the economy. I would also argue (through a term I probably didn’t coin), the “Wal-Mart” effect minimizes or negates any net benefit to the consumer since they are buying an inferior product (used clothing by definition would have shorter life than the same new piece of clothing, not to even consider the possibility of an improved product coming domestically) I.e. a consumer who purchases two t-shirts that last 5 months each is not better off than the consumer who purchased one which lasted a year but cost twice as much.

      New entrants indeed at least initially are able to make a living. However, as supply indiscriminately increases, without a corresponding jump in demand vendors make less and less. Where your theory fials is in regard to the barriers to exit. In this case the barriers to exit from the market are incredibly high (for example there are very few substitutable jobs, many vendors take out loans for their inventory, even a short-term loss of income results in homelessness or lack of food for their families), and as such individuals are unlikely to leave the market, even if by economic standards it is the rational decision.

      You are also correct in stating that the retailers benefit from the status quo (a strong and growing import market of used clothing). However the retailers who are making large sums of money (and in turn who benefit most) are neither local nor do they keep the profits in country. Admittedly there are secondary retailers who are nationals, however your scenario presumes that these individuals or companies wouldn’t required in the alternative situation where there is a thriving national or continental clothing market. Again, in my assessment the net benefit is negotiable.

      Lastly, I adamantly disagree with your analogy. For one, food is a necessary good. Secondly, one must assume that the food bank is not giving food away indiscriminately without a demonstration of need. If a food bank were to open in a neighborhood and be funded/stocked by a large grocery store with an unlimited supply rotten or expired food and instructed to give food away for free or at a below-cost to anyone walking down the street… then yes I would suggest this is not an ethical or necessary and would be absolutely harmful to the local supermarkets.

      While your arguments might be very correct in theory, they highlight the largest issue in development economics. Theories aren’t working. Western economies have treated the economies of developing countries (and I am not referring to the BRIC countries) as subservient partners who are suppose to give the west their oil, and diamonds and in return accept our “garbage”. As I have said before, this piece was meant to highlight two things, firstly the role of donating clothes where individuals feel they are doing a positive thing but in practice are not. And secondly, highlight the broader issue of commodities dumping (Canada’s biggest export to Africa as a whole is Wheat, a crop that is widely grown across the continent).

      I realize what I am trying to advocate for is not a popular opinion (amongst economists or western consumers who feel they are “doing good”) however the math backs me up. A 2008 study (also referenced in a fellow WhyDev article “http://www.whydev.org/some-bad-news-about-toms-shoes/”) estimates that the used clothing market resulted in a 50% decrease in employment in the sector between 1981 and 2000 in Africa alone. Since 2000, Canada’s export of clothing has more than tripled ($58.6 million in 2000, to $192.1 million in 2012). These figures are clearly going in the wrong direction.

      Once again thank you for your comments, and I hope there are not to many typos (still recovering from some severe jet-lag which gave me plenty of time in the middle of the night to compose this)

      Graham

      P.S. I didn’t reference your “final thought” because I didn’t quite understand the relevance

      • Kris says:

        Hi Graham,

        Thank you for your response.

        I am very confused by the overall thrust of your argument. The scenario you initially present is simple and the immediate conclusions are clear: consumers gain, producers lose.

        By arguing against this practice, you are essentially saying that the losses to producers dominate. Maybe you have some dynamic effects in mind (e.g., a deterioration in skills leads to lower productivity over time). Maybe you espouse a mercantilist/protectionist view of development (in which case it matters not what type of goods we are discussing). Whatever it is, you need to clearly explain why we should favour producers over consumers. My major complaint was not that I disagreed with your conclusion (though I do), it’s that your arguments are unsound. And I think you totally missed the point about the food bank analogy, because it fits very well (and are you really comparing used clothes with rotten food?).

        On a related note, I find your “Walmart effect” reference out of place. Let me ask you a question. If you had the option of purchasing (a) two shirts that last 5 months, or (b) one shirt that lasted 12 months, which would YOU choose? If you answer (b), then why do you assume that Tanzanians behave differently?

        Also, why do you keep using the term “dumping”? I do not think it means what you think it means. Maybe you could explain what you mean by “dumping” and why you (presumably) think it is a bad thing in general.

        Kris

        P.S. To elaborate on my “final thought” from before: I find it a bit strange that we are decrying the impact of used clothes exports from the developed world on local garment manufacturers in the developing world, when almost all clothes are manufactured in the latter. It wasn’t that long ago when people mourned the disappearance of garment industries in countries like Canada and the associated “outsourcing” to developing countries. A heretofore ignored aspect of this discussion is that the used clothing in question was almost certainly made in a developing country, and every time a person in Canada or the US donates a piece of clothing to these enterprises they are probably also buying a new piece of clothing, again one that was made in a developing country.

    • Peter says:

      Seriously thanks for writing this out.

  6. Here’s a great documentary on the subject to check out:

    “A former aid worker in Zambia, Shantha Bloemen traces a t-shirt trail carved by global economics and discovers how second-hand clothing–donated as charity in the U.S.–ends up in Africa, leaving Zambia more impoverished than before.” See: http://www.pbs.org/independentlens/tshirttravels/

  7. Kris says:

    So much here to make an economist wince. For one thing, there is nothing inherently bad about trade deficits. I don’t know where you got that idea. More importantly, you completely ignore consumers. It amazes me that you can write about “places where an individual may own one or two shirts”, and fail to comment on the benefit to consumers from paying less for clothing.

    • ggmilner says:

      Hi Kris,

      Thank you for your comment.

      You are perfectly correct that there is nothing inherently wrong with trade deficits, especially in economies that have strong domestic demand for goods and in turn create jobs and markets for sale/resale and generating internal wealth. There are also positive effects for the poor with respect to keeping a country’s currency value low, however these situations are only positive when the domestic need is demanded (in contrast to market dumping). And I would certainly argue that flooding a market with a good (any good) where supply drastically outweighs demand, is not a positive trade deficit. This doesn’t even factor in the cost of borrowing required to finance these deficits.

      As far as consumers are concerned, I would dispute the real benefit to the consumer, and would argue that the knock-on effects to the entire economy restrict growth and hinder the development of a strong middle class. The mere fact consumers might be able to purchase more clothing does not by extension mean they will, it also doesn’t necessarily translate to a greater expenditure of funds in the larger economy. Merely looking at this from a consumer perspective also fails to acknowledge the wealth generation down the supply chain, which would create a greater number of consumers. I absolutely agree that there are those who benefit from less expensive consumer goods (and many of these individuals live in absolute poverty), however in this situation, supply outweighs demand by such a gross margin that it fails to create wealth for even the shop owners. More importantly it doesn’t create sustainable growth.

      I certainly understand that there are many (including yourself) who might disagree with the premise of my posting, my intention when I wrote this was to raise awareness (albeit in a simplistic manner) of the general practice of market dumping in the developing world. While I am not an economist by trade I do have an MBA and I hope that my understanding of the subject is not so rudimentary as to devalue the topic.

      Once again thank you for your comments, and I hope I haven’t made you wince too much.

      Graham