Made in EU -- fashion's legal loopholes

By Adam Tanner and Maja Zuvela
GJIROKASTER, Albania/TRAVNIK, Bosnia (Reuters) - The road to the continent's high fashion boutiques often leads through little-known towns in the Balkans, but you wouldn't know it from reading the labels.
Blerza Kallajnxhi held up a cluster of labels saying 'Made in E.U.' at her factory in Gjirokaster, Albania -- birthplace a century ago of Enver Hoxha, the Communist dictator who isolated Albania from the rest of Europe -- as she explained how she fills orders from abroad.
"We get an order from Greece and they send the material, the model design and the labels," said Kallajnxhi, who bought the small factory in the mountain stronghold of Gjirokaster with her husband two years ago.
Greece -- unlike Albania -- is in the European Union.
In the eyes of many consumers, a product made in Europe might be of better quality than one made in China, Bangladesh or Thailand, where many fashion groups have outsourced manufacturing. But few know what 'made in Europe' really means.
"Nothing says 'Made in Albania,'" said Kallajnxhi. "Of course we are proud of our country, but that's what the client wants."
Global fashion brands are doing nothing illegal in labeling clothes this way, provided the manufacture includes inputs from within the 27-country bloc.
Under EU rules that are obscure to most consumers, goods made in more than two countries are said to originate in the place of "their last, substantial, economically justified working or processing."
It's a loophole that helps cut costs and is now more important than ever, in light of a fall in apparel demand since last September.
But EU-based fashion companies often do not advertise the full extent of their supply chains in lesser-known corners of Europe.
"It is not required that we have to add a label 'Made in Bosnia' though the consumer could inform himself regarding the country of origin by reading a registration number sewn into the garment," Jan Ahlers, vice chairman of the Ahlers AG supervisory board, told Reuters in an email.
German-based Ahlers makes Pierre Cardin suits in Bosnia under license and is the label's exclusive distributor in Germany, Austria, Switzerland and the former Yugoslavia.
Some consumer groups argue brands should be more transparent about their production, and some luxury groups say such outsourcing is a threat.
"Research shows that consumers' trust in retailers is waning," said Josie Nicholson, founder member of Ethical Fashion Forum which advocates social and environmental sustainability in the industry. "Clear and honest labeling is the best way for retailers to win back consumers' confidence."
BUNKERS Continued...
Source: Reuters