Chapter 4

Economic opportunity in the US and Central America

The reuse clothing market in the US grew 21 times faster than newly produced clothing between 2017 and 2021. One influential market analyst recently commented: ‘Compared to the overall apparel market, resale’s growth has been phenomenal. As the market uniquely meets consumers’ preference for variety, value, and sustainability, we expect the high growth to continue.43

USA

Past research has shown that for every 1000 tonnes of second-hand textiles collected, 20-35 additional jobs are created throughout the used clothing value chain.45 In European operations, typically each 1000 tonnes of SHC creates approximately 90 jobs in sorting and retail. Other studies have estimated that for every 10,000 tonnes of textile materials collected, one job can be created if the items are incinerated, six jobs if sent to landfill, 36 jobs if they are recycled, and up to 296 jobs if the garments are refurbished and re-used.46

The EU calculates that the shift to a circular economy promoted by the Green New Deal will create 700,000 jobs in Europe by 2030.

These jobs support households and prevent poverty. Yet it also remains the case that for business models to be financially sustainable within the US, more technological innovation will be necessary to make certain processes such as baling less labor intensive through automation. Overall, used clothing is a jobs-rich sector, with ample future employment opportunities throughout the value chain, including engineering, digital, and business development.

This report demonstrates that the large, vibrant SHC sector spans the collection, sorting and sale of used clothing and footwear throughout the world. The market is necessarily global and relies heavily on linkages between Global North and Global South countries. The process of sorting and reuse creates opportunities for relatively high-skilled and high-wage employment in emerging markets. However, reducing trade barriers wherever possible is crucial.

Export markets

To maximize the economic opportunities in the sector, it is vital that SHC collected in industrialized countries can be exported efficiently into non-OECD markets. 44% of our survey respondents agree it is ‘critically important’ for the US to support emerging countries by exporting used clothing.

Yet the global SHC market has been under pressure in recent years. Across the world, export and shipping costs have been rising due to growing geo-strategic risks. The stakeholders interviewed for this study said that freight costs for overseas shipping had increased significantly along with decreased availability of shipping containers due to the war in Ukraine. Moving containers through Europe and the Middle-East is more difficult as a result of rising costs and geo-political conflict. One stakeholder reported that while it previously took an average of 30-60 days to move his goods to international markets, it was now taking 120-150 days. Local political conflict may also inhibit access to markets, as has recently occurred in Haiti.

Concerns over the global trade of SHC have sparked international debate, including whether the movement of such goods undermines domestic textile manufacturing in emerging economies. However, the evidence suggests that SHC does not impede domestic manufacturing and if used clothing were unavailable to consumers in importing emerging economies, households would struggle to meet their basic clothing needs. It is estimated that two-thirds of the world’s population rely on SHC.

These factors, together with import bans, may affect the cost efficiency of exporting SHC. The risk is that barriers which restrict access to the international market in used clothing may put unsustainable pressure on the existing SHC sector which is so key to the global circular economy, leading more reusable garments and footwear to be sent to landfill or incineration while encouraging new ‘fast fashion’ production.

The SHC market in the Americas

Greater sustainability in the textile industry does not just rely on more American consumers purchasing used clothing and footwear. It is vital that consumers purchase fewer items of clothing, while donating what they have rather than discarding it as waste so that textiles can be collected and sorted for reuse wherever possible. Expanding the reuse market in the US means being able to sell clothes inexpensively into other markets. For the US, access to Latin American countries is vital.

Interviews with industry stakeholders in Chapter 2 showed that they provide a market into which reusable items that cannot be sold in the US can be made available for purchase. From the perspective of environmental sustainability, more used clothing sold in Central and Latin America will reduce the demand for fast fashion items from low-cost Asian producers. It is notable that Chinese imports of manufactured textile goods to Nicaragua have increased fourfold since 2013, with nearly 10,000 metric tons imported in 2021.

The US is currently the world’s leading exporter of used clothing, responsible for a fifth (17.9%) of global trade, followed by China (15%), the UK (7.5%) and Germany (7%).47 Up to 4 million metric tons of used clothing are traded each year. The US exports approximately 700,000 metric tons of SHC per annum.

Yet only a quarter of post-consumer garments around the world are currently collected for reuse, highlighting the untapped potential that exists.48 The view among US industry stakeholders is that the environment for international SHC trade is relatively strong despite shipping and transportation challenges, with most governments favorably disposed to the industry. In the aftermath of COVID-19's economic impact, demand for used clothing in many emerging economies remains high and significantly outstrips the capacity to supply high quality SHC garments and footwear.

Central America is an increasingly important player in the global SHC market. The vast majority of exports into Latin American and Caribbean (LAC) countries come from the US, with neighboring countries receiving 66% of US SHC exports.49 As such, as the journalist Adam Minter writes, governments in the Global North need to, ‘stop stigmatizing the reuse of developed world goods in developing countries’.50 The problem is that too many policymakers believe there's something dirty about sending your used clothes to Kenya or Tanzania. ‘I think it's worth unpacking why we feel that way. Why are we so threatened by the idea that somebody in an emerging market would be reusing our stuff, in many cases reusing it more efficiently than it's used in a developed market?’

This issue is less pronounced in the US but the EU has now, ‘institutionalized stigmas against exporting secondhand goods into developing countries’.51 In general, there is recognition of the benefits generated by the used clothing sector, notably the options for consumers and the creation of millions of jobs throughout the supply chain in trading, distribution, processing, repair, restyling and so on. A disproportionate share of jobs in the sector in many non-OECD countries go to women, while the SHC trade plays a vital role in preventing millions of households from falling into poverty.

Nicaragua

A key example of a Central American SHC market is Nicaragua. Nicaragua has a population of 7.1 million and an estimated GDP of $14.2 billion.52 The nation recently suffered economic adversity, although it has weathered the aftershocks of Covid-19 better than many LAC countries. According to official government estimates real GDP grew by 10.3% in 2021, an impressive growth rate sustained into the following year.53 Yet living standards have been falling against a backdrop of soaring consumer price inflation.

Unsurprisingly, demand for used clothing in Nicaragua remains strong where the average income is 9,898 Cordoba per month (approximately US $272).54

Our estimates indicate that around 90% of the population of Nicaragua purchase used clothing and footwear items every year. Those involved in the sector report that used clothing has become more culturally accepted in recent decades, and is viewed as generally of higher quality than fast fashion goods. Many low income consumers in Nicaragua are too poor to purchase even cheap new mass-produced clothing. The main objective of the government in Nicaragua has been to attract private sector investment from the US through free trade zones (a challenge due to the lack of a deep water port alongside generally poor infrastructure) and they have generally adopted supportive policies towards SHC.

In 2022, 52,156 metric tons of SHC were imported into Nicaragua (85% of the total volume was from the US worth over $83 million). 1.9% of global SHC imports go to the country, largely from the United States, Germany and Brazil, with a value of $99 million.55

Nicaragua

1,407 metric tons of SHC were exported from Nicaragua at a value of $799,366.56 Textiles are largely exempt from external tariffs. The industry is estimated to be worth around 1% of GDP in official economic statistics, although the figure almost certainly understates the real economic value of the sector to Nicaragua.57

An influential stakeholder involved in the used clothing trade in Nicaragua emphasized that there is minimal waste in the industry: of 1,000 containers imported each year by his business, less than 1% cannot be sold or reused. Garments that cannot be resold are invariably recycled into other products such as industrial rags. There is very little evidence that items are ending up in landfill.

We calculate that the SHC industry in Nicaragua employed approximately 336,635 workers throughout the used clothing value chain in 2022. The official labor force participation rate in Nicaragua hovers around 65%.58 This relatively low level of labor market participation indicates that there is a significant informal economy in which SHC businesses are likely to be clustered.Many of those working in the SHC sector are doing second jobs in order to earn additional income for the household.

According to one observer, SHC businesses, ‘are located in areas of high pedestrian and commercial flow, they are often informal… and most of the vendors are women who do not have access to other sources of employment.Those who benefit [from the industry] are women who do not have access to formal employment, either because of their low educational level or because of the reduced job opportunities in the country’.59

This point highlights the crucial role of the SHC sector in LAC countries like Nicaragua. It provides consumers with affordable clothing options and sustains a steady supply of jobs. Erecting barriers to the import of SHC and footwear items from the US would undoubtedly have adverse social and economic impacts. It would prevent thousands of poor households in countries like Nicaragua from meeting basic needs, such as adequate clothing. Additionally, maintaining strong trade relations with Central American countries, which are direct neighbors of the US, is essential. To effectively manage immigration issues, it is vital to support economic development in Central American nations.