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It takes a very brave man to walk into a conference promoting sustainable local economies and give a speech on the merits of child labour and outsourcing to Asia. But that's just what Lululemon founder and CEO Chip Wilson did last month at the Business Alliance of Local Living Economies conference in Vancouver.

Wilson is no stranger to controversy. He named his high-end yoga wear company Lululemon because he thinks the trouble Japanese people face pronouncing L's works as an extra marketing tool for his product in that country, according to a National Post Business Magazine article which awarded him a special citation for product innovation and marketing.

In the same article, Wilson went on to say "It's funny to watch them try and say it."

Wilson's speech at the BALLE BC conference went over like a lead balloon. Several delegates questioned where the high-end yoga-wear chain is headed in its reach for the global market.

Since 1998, Lululemon has expanded rapidly from its original shop in Kitsilano. Its network now extends across Canada, and in Japan, Australia, and California. The company will soon open stores in Sweden and London, England. But questions are being raised about the company's new outsourcing and how it will remain a responsible retailer.

Child labour can be 'okay'

According to those who attended BALLE BC conference, Wilson told the delegates third world children should be allowed to work in factories because it provides them with much-needed wages. They also say he argued that even in Canada there is a place for 12- and 13-year-old street youths to find work in local factories as an alternative to collecting handouts.

"I look at it the same way the WTO does it, and that is that the single easiest way to spread wealth around the world is to have poor countries pull themselves out of poverty," Wilson told The Tyee.

BALLE BC executive director Penny Scott was at the speech in January.

"He was really raising a grey area, and didn't address the other issues, like where these kids are living, what they're being paid, if they're going to school, if they're being taken care of in those other ways," Scott said.

Vancouver-based Lululemon built its reputation as an "ethical brand" by using local labour to manufacture its clothing. Until recently, Lululemon produced most of its clothing in a non-union shop in East Vancouver with a little more than 100 workers.

Vancouver sweatshops common

Vas Gunaratna, manager of UNITE, the Canadian textile union manager in Vancouver, said just because something is produced locally is no guarantee fair wages are being paid and that the factory is operating in accordance to the labour code.

"There are roughly 150 factories in Vancouver I would consider sweatshops," Gunaratna said. "But I have not heard any complaints about this one."

Gunaratna said competition from Asia in the garment industry has resulted in the almost complete collapse of the Canadian garment industry. The termination in December of the international MultiFibre Agreement, which protected clothing manufacturers in industrialized countries, and the prospect of future free-trade deals with China will surely finish it off entirely in the coming years, Gunaratna said.

Even now, many of the Canadian suppliers in the garment industry are going belly-up. Wilson said three of his suppliers have gone bankrupt in the last year.

Garment rules have changed

In response to this and its growing market, Lululemon hopes to produce half its merchandise in China by the end of the year, Wilson said.

"This is how it works," Wilson said. "If we made something here for $20, it would probably cost $10 US to make in China, but by the time we've changed the US dollar, paid for shipping duty, and everything else that went with it, it might land at $19. From that point of view, it might not make a difference, so why not make it here, which we did."

But now that the brand is expanding into Japan, Australia, Sweden, and England, Wilson said, a $20 Canadian produced garment, which is as cheap as it could be made in this country, lands in those other countries for $30.

"If I ship it out of the Orient it costs $20, which is what our competitors would do. So we have two choices, which are to manufacture everything in the Orient offshore, or to not be in business," Wilson said. "You do it or die."

Faced with such a market, Lululemon can hardly be blamed for moving its operations to Asia. The question remains, though, what is the most ethical way of moving a local fair-labour product into Asia?

Ad had obtuse message

Lululemon didn't get off to a good start.

Last May, when Lululemon started outsourcing to China, the company placed a controversial ad in Yoga Journal magazine showing a fake newspaper article with adults dressed in diapers, with bonnets and pacifiers, at sewing machines. Attached to the article is a post-it note from Chip asking, "How did this get out?"

The ad was meant "to elicit reactions on the global travesty of child labour in an ironic, humorous way."

"We're also sensitive of society's tendency to villianize corporations, and as we grow, we wanted to be proactive and deter individuals and the media from condemning an innocent, ethical company as unethical," Wilson went on to say in a press release

The Chinese factory that Lululemon will use is operated by the same person who owns the current Lululemon factory in Vancouver. Wilson said he has personally inspected the facility in China and feels confident it is far from a sweatshop.

"Ninety-five per cent of the factories I've seen in the Orient are far better than ones in North America," Wilson said. "In China, many people come from the western provinces and their goal is to work seven days a week 16 hours a day, because in five years they want to have a pile of money to go home with and start a business."

Wilson sees a similar situation in Canada.

"In Canada for instance, 99 per cent of our factory workers are Chinese women sewers. If you were to work them eight-hour days, they will be mad at you. If you only work them five days a week for only eight hours, they'll say, 'What are you doing? I don't want to work for you.' If you do only work them that much, they walk out of their shift at 4 o'clock and walk across the street to another factory and work another six hours. This is in Vancouver, in Canada." Not everyone believes Wilson is qualified to judge the labour standards of another country.

Foreign auditing needed

Denise Taschereau, manager of social and environmental responsibility at Mountain Equipment Co-op, was at the BALLE BC conference and said Wilson demonstrated a marked lack of understanding of the issues surrounding offshore manufacturing.

"The question is, Chip, how do you know that? Show me the money. Are you auditing those factories? Have you seen those payroll stubs? What are their overtime wages? If he's suggesting that overtime or inaccurately paid wages are not an issue in offshore factories, then he's walking through them with his eyes closed," Taschereau said.

MEC has faced the booming business growth that Lululemon now enjoys. It tried to grow in a socially and environmentally conscientious way. During its development, MEC established an infrastructure of internal auditing of its domestic and international factories and hired a third party to spot check its factories and report on its findings. MEC now outsources a little more than 40 per cent of its manufacturing overseas, but has held its factories to the highest standards, Taschereau said.

For any major Canadian brand, she said, "as you grow up as a brand in Canada, your commitment to and your systems around being a responsible and ethical retailer have to grow up with you."

Miriam Palacios, BC program coordinator for Oxfam Canada, agrees. "Just because the factories look modern on the inside does not mean the workers inside are being treated fairly – being paid a living wage, or are provided with health care or an education," Palacios said.

In 2004, Oxfam auditors found several human rights violations in the Chinese garment industry – from rampant child labour, unhealthy and unsanitary working conditions, not enough washrooms, not enough breaks, and inadequate wages and benefits. Women were also forced to give urine samples to prove they were not pregnant in order to keep their jobs.

Wilson 'misunderstood'

To guide Lululemon into the next phase of its development, the company has hired former MEC auditor Kerri McKenzie as its production manager, to develop a code of conduct as the company ramps up its operations overseas.

While the company has already begun its outsourcing, McKenzie does not expect the code of conduct to be complete until the end of the 2005. She, like MEC, also plans to hire a third party auditor, Verite , to spot check Lululemon's operations.

McKenzie speaks fluent Mandarin and this week will head to China to audit the Lululemon factory for the first time.

"We're a new company that is just exploding at the seams," McKenzie said. She said her boss is sometimes "misunderstood" and she chalks up his speech at the BALLE BC conference and the child labour ad as examples of this. Lululemon trusts her "implicitly" to guide it into the next phase, McKenzie said, who admitted working with Wilson has sometimes been "frustrating."

"I can't answer for the man, he's misunderstood in his own way," McKenzie said.

Scott Deveau is on staff at The Tyee.