The “Walmart quitting Bangladesh” stories contain a moral about China.

According to Women’s Wear Daily (WWD), Walmart is thought to have a “strategy to gradually wind down its sourcing from Bangladesh by early 2014.” Walmart ‘s response to the report tells us little: but if true, the plan provides an important clue to the way garment sourcing might develop in the next few years. It’s at least possible Walmart is actually pointing out we might be getting to a point where even the lowest wages in the world don’t produce the cheapest garments.

The story, derived from gossip among New York fashion agents, is centred on a category the article calls “innerwear”: a phrase I’ve never heard from Walmart, but is the standard word used in South Asia for underwear (which suggests we’re hearing Bangladeshi gossip, not informed leaks from someone close to Walmart decision-making). WWD defines it as including “underwear, sleepwear, robes, active-looking tops” and trousers.  One “innerwear” vendor to Walmart has described “a serious session in Bentonville where they discussed this issue with us. It was nuanced, suggested -- but not threatened -- that suppliers should look at manufacturing and sourcing options elsewhere and slowly pull out of Bangladesh. Bangladesh has the lowest labour costs, but that's only relative”

Another said “There are other alternatives out there, and some people are looking at the possibility of going back to China”

Since most journalists’ current awareness of Bangladesh is fixated on factory fires, the sources quoted by WWD have concluded that “they are extraordinarily sensitive to bad press and to product that's coming out of Bangladesh. Made in Bangladesh has become a dirty word at Wal-Mart”.  Walmart will neither confirm nor deny the story, and its non denial rather points to the conclusion that there’s something in the story: “Bangladesh continues to be an important sourcing market for Wal-Mart. We welcome the opportunity to work with the respective governments, suppliers and factories to improve worker safety conditions and standards”, said Megan Murphy, senior manager for international corporate affairs at the retailer.

My own suspicion is that there’s nothing as definite as a Walmart strategy on this – except a determination that there’ll be no more Walmart garments made in a Bangladesh factory likely to burn down, and the company’s current priority is to ensure all factories Walmart’s using there are relatively safe. Common sense says this inevitably means there’ll be fewer factories Walmart’s using there in a year’s time, and that Walmart’s trying to ensure they’re not caught out by a sudden mass exit as its vendors realise how many of the factories they’re using are likely to trap more workers in a blaze. Walmart’s unlikely to be excessively open about this, though, because it knows moving business away from Bangladesh will attract as much bad publicity as keeping business there.

But the comments about innerwear are interesting. The article quotes a US-based labour activist claiming about the theory Walmart’s just moving underwear out “if it was just a segment like intimate apparel, it would be a very powerful message” that, in his view,  would certainly wake Bangladeshi garment makers up and reform their safety and worker rights policies.

But of course, he would: he’s only concerned with labour rights. Most Western buyers though have different priorities. With thousands of individuals involved in buying apparel from Bangladesh, there are lots and lots of priorities: but overall, I’d say, most outsource from Bangladesh because ex-factory prices are low and most suspect that any improvement in safety or wages will put those prices up.

At that point, Bangladesh may well no longer offer the lowest real prices. Buying in Bangladesh is a costly business: someone’s got to pay the bribes needed to get goods through Customs, and the delays inevitable with the country’s dreadful transport and constant industrial or political unrest add further to cost. Right now, Bangladeshi manufacturers are claiming the current political unrest is adding a further 25% to their production costs.

As a result, though Bangladesh’s duty-free access to the EU makes its prices cheaper than from any other garment making country, that doesn’t help Bangladeshi businesses when they try selling to the US: landed prices in the US from Cambodia, for example, are lower than from Bangladesh, and on average they’re a lot lower from Honduras (which has duty free access to the US, and lower shipping costs).

So the risk of cost inflation (or yet another tragedy, or just endless hassle with activists) makes virtually all buyers in Bangladesh leery of being too committed to manufacturing there. What’s especially interesting, though, is the possibility that Walmart might be particularly sceptical about making underwear there.

Though WWD claims that underwear accounts for about an eighth of Bangladesh’s apparel exports to the US, and that most interest is in moving bra making out, Bangladesh is actually a minnow in the global bra market.

Production is dominated by China, more than in almost any other category: though it accounted for 12.7% of all clothing imported into the EU in 2012, it had just 4% of the bras the EU imported, for example, while China had around 65%. But there’s clearly been some testing among Walmart suppliers of whether Bangladesh’s hyper-low wages might result in more cost-efficient manufacture of a product as potentially labour-intensive as bras, with their vast range of components needed to be sewn together. The line that the WWD story claims is being fed to vendors, though, is that investment in manufacturing technology (and one-piece design)  is driving Chinese bra-making productivity up further. In practice, however little Bangladeshi workers get paid, goes the theory, new manufacturing techniques mean they’ll never be able to make cheaper bras than a far better paid workforce in China using modern equipment.

Looked at this way, Walmart’s cooling attitude towards Bangladesh isn’t directly about the consequences of the country’s dreadful safety record. It’s a realisation that, with 5,000 factories obsessed with keeping wages down and showing minimal interest in driving productivity up, the cost of upgrading factories may very well make manufacture there uncompetitive with other manufacturing centres.

Now thousands of individual buyers make up the customer base of Bangladesh’s dominant industry: it’s unlikely they all think the same way, and the loss of some Walmart business (if the WWD story is well-founded) doesn’t necessarily mean the beginning of a slippery slope towards the disappearance of garment making there.

But it does demonstrate yet again that the race for greater efficiency in garment making doesn’t have to be that race to the bottom activists keep banging on about (and never really manage to find). There are lots of good reasons, apart from worker safety, for finding somewhere that’s not Bangladesh for making clothes, and the consequences of the current safety scares may simply encourage buyers to do what many have long wanted  to: move production to somewhere more conducive to making clothes efficiently