Sok Hong wants to believe that Cambodia's reputation for decent factory labor conditions will be enough to protect his garment business from competitors across the South China Sea. But he has spent enough time with the U.S. clothing labels that keep his shop running to know that one factor alone will probably determine whether his business can survive.
"They just care about the price. If you have a cheaper price, they will buy from you," said Sok, managing director of the family-owned Kong Hong Garment Co., which exports as many as 30,000 pairs of blue jeans per month to the United States, nearly three-fourths to Wal-Mart Stores Inc. "We don't have child labor at this factory. . . . [But] the buyer doesn't care how good you are."
Five years have passed since Cambodia and the United States signed a trade deal that remains a watershed. Factories here gained duty-free access to the U.S. market in exchange for submitting to inspections from the International Labour Organization, a watchdog group. The volume of clothing Cambodia could ship was pegged directly to improvements in labor conditions.
The deal has been widely hailed as a success, with Cambodia gaining jobs and investment along with better working conditions. But that arrangement will end in January, along with the global textile quotas, and Cambodia's producers will begin paying the same customs duties as everyone else.
Already, buyers are shifting orders to China.
"I'm really worried," Sok said, as he walked a shop floor occupied by 600 workers, the din of sewing machines echoing through muggy air as seamstresses hunched over their tables. "We can't compete against China, no way. I don't want to hurt these workers, but if I have no choice, I will close down the factory."
In preparing for the world after quotas, countries hope to find something that distinguishes them from China. Sri Lanka, for example, hopes its factories can establish an expertise in women's lingerie and manufacturing for labels like Victoria's Secret. Though Cambodia may sell itself on its credentials as a socially responsible producer, industry executives and government officials there express little confidence that their plants can endure without some form of special access to the U.S. market.
Without duty-free access to the United States, "we cannot convince the buyer to come here," said Mashiur Rahman, general manager of Universal Apparel (Cambodia) Co., which makes baseball caps and sweaters for U.S. brands including Banana Republic and the Gap in its six-story factory.
Deeply impoverished and still scarred by the genocidal rule of the Khmer Rouge in the 1970s and more than two decades of war, Cambodia is dependent on garments for 98 percent of its exports, two-thirds of which go to the United States, according to government figures. About 230,000 of the country's 13 million people work in the garment trade.
Beyond the economic disaster that could unfold if factories shut down, the demise of the industry would undermine the notion that poor countries can focus on improving labor standards while still attracting foreign investment and business, Cambodian officials argue.
"The Chinese could lead a race to the bottom," said Cambodia's minister of commerce, Cham Prasidh. "In Cambodia, we started at the very beginning, in 1999, to link trade with labor standards while no other countries in the world dared to do so. Now Cambodia has gained a reputation in the world as a country free of sweatshops."
Sam Srey Mom, acting vice president of the Free Trade Union of Workers of the Kingdom of Cambodia, which represents 47,000 workers in 94 garment factories, said conditions have improved since the start of ILO inspections. There are fewer abuses of Cambodia's $45-per-month minimum-wage law and more compliance with bans on child labor, she said.
But unless Cambodia is given continued duty-free access to the U.S. market, she added, factories here could face an unfortunate choice: Ditch the emphasis on fair play and try to match Chinese labor productivity by squeezing workers or maintain the high road and lose jobs.
Only a decade ago, Cambodia had almost no garment industry. Until United Nations-brokered elections in 1993, imports of Cambodian-made goods were barred by the United States, which refused to recognize the country's Vietnam-backed government. The first major push came in 1994, as Cambodia gained access to the U.S. market, illustrating how the awarding of textile quotas could follow political and diplomatic ends even at the expense of economic logic.
Cambodia relies on imported fabric to make clothes. Energy is limited, and the country's lone seaport at Sihanoukville is inefficient and far from the United States. But once the quota was awarded, the value of garment exports to the United States leaped from $500,000, reaching $288 million in 1998, according to Ministry of Commerce data. In the southern suburbs of Phnom Penh, where thatched-roofed shacks line muddy lanes, modern factories sprouted up across from rice fields.
The biggest surge came in 1999, with the signing of the duty-free access deal with the United States. Today, Cambodia is home to more than 200 garment factories, which collectively shipped $1.1 billion worth of goods to the United States last year, according to the government.
Kong Hong Garment was part of this wave. It launched its first factory in 1995, making uniforms for the Cambodian military. Then a Hong Kong firm, Welsum Enterprise Trading Co., approached it about making blue jeans for Wal-Mart. Sok hired five technicians from Chinese factories to improve efficiency. In 1999, he launched two new factories.
Orders have slowed in recent months as buyers wait to examine new opportunities in China. In mid-August, Sok's factory began sending home dozens of unneeded seamstresses.
"I always think about my future," said Yung Vanna, 22, one of those sent home. "I worry. But what can I do?"