Country of origin labelling

On 21 October 2010 the European Parliament voted by an overwhelming majority in favour of the implementation of “country of origin labelling”. This legislation intends to make it compulsory for clothing, textiles and footwear products imported into the EU to bear “made-in” labels which indicate the country where the product was last significantly altered.

Impact on the fashion industry:

This is likely to have differing impacts on the different sectors of the fashion industry.

Luxury brands that rely on the prestige of the areas in which they source their goods will be encouraged by such legislation, as it could aid them in the battle against counterfeiting. Luxury brands often use the country of origin as a point of promotion, drawing upon the cultural and historical inferences of quality and craftsmanship which a particular area suggests to a consumer. For example, made in Italy for leather goods, or made in Scotland for woollen or cashmere garments. 

Heritage brands in particular, that trade on the concept of patriotism will also support this idea, as those consumers who would generally choose to (for instance) “buy British” will be able to do so without the risk of being deceived as to origin.

Some brands may find the labelling unnecessary and expensive. In general, purchasers of high street brand clothing tend to be less concerned with the origin of their clothes, placing a higher premium on affordability than on the prestige of their clothes. Nonetheless these consumers will be forced to bear the costs, as inescapably, the extra labelling of garments will increase costs of manufacture, and those price increases will inevitably be passed on to the consumer.

Secondly, there may also be implications in terms of the enforcement of these laws. For instance, retailers may find that they are policed by Trading Standards to ensure that their garments comply with this legislation. 

Positive points:

The proposal for this legislation by the European Commission in 2005 sought to rectify a number of issues relating to country of origin labelling:

• Primarily, it is argued that it is in the interests of the consumer for the origin of products to be transparent, following concerns over the mounting incidence of misleading use of origin indications. As there is currently no legislation regulating origin labelling in the EU, consumers may be deceived regarding the true origin of products, and thus unable to make an informed decision as to their buying habits.
• There are also ethical arguments for this transparency, as some consumers would avoid buying products that had been produced in certain countries, perhaps where there is a poor human rights record, or a political system with which the consumer disagrees. Origin labelling would in theory allow consumers to be able to buy their clothes with absolute certainty as to their provenance.
• Further to this, as the EU’s trading partners such as America, China and Japan already have in place country of origin legislation, there is an argument that Europe ought to be placed on an equal footing with its partners. 

Issues:

This proposal has been dismissed by some groups as a protectionist and bureaucratic step that would merely create a barrier to trade. The following are cited as objections to the proposal:

• according to the Commission’s impact assessment, country of origin labelling could add an extra €1.50 to price of an article of clothing and an extra €2 to an article of footwear. Extra logistical costs would also be borne by manufacturers, and companies within the EU to control and manage goods;
• in the production process, goods often go through a number of processes in different countries, it may therefore be difficult to designate the particular country in which a product is made, and lead to a situation where indicating only one country of origin may be equally as misleading as having no country stated at all;
• the EU and its trading partners have different rules regarding country of origin labelling. Companies which produce in developing countries, and sell in both EU and non-EU countries will find this logistically difficult and expensive to organise; and
• the administration of controlling the application of labels, particularly in terms of customs checks, will create further unnecessary bureaucracy. 

The difficulties that this legislation would cause for foreign traders importing goods has led to speculation that this is merely an EU protectionist measure which seeks to restrict cheaper imports from outside the EU.  Certain connotations are associated with products made in, for example, far-Eastern countries which may belie the quality of the clothing produced.  Origin-labelling may therefore have the by-product of reducing sales of products from such countries, merely as a result of stereotyping within the fashion industry.

Next steps:

The proposed legislation has been amended and approved at its first reading by the European Parliament. The European Council will now meet to review this decision, and either approve the proposal, or adopt a “common position” which will be sent back to European Parliament for a second reading. However, the Council is unlikely to give a decision before mid-2011 and it will take considerably longer for any legislation to be implemented, even when it is approved.

However, retailers should be aware of the consequences that such legislation is likely to have.  Certainly, there will be increased costs and logistical difficulties associated with adding these labels into garments.  Whether there will be a genuine discernible improvement for the consumer, however, is debateable.