I Found America's Secret Sweat Shops

[00:00:00]In June 1944, more than 70,000 American troops landed on the island of Saipan.

[00:00:06]Thousands would die capturing it. The battle helped change the course of World War II, bringing American bombers within striking distance of mainland Japan and becoming one of the most important victories of the Pacific campaign. It was remembered as a story of sacrifice, of liberation, of American victory. But decades later, that same island would become home to something almost impossible to imagine. A place where companies discovered they could legally operate sweat shops under the American flag. So, how did one of America's greatest wartime victories become the foundation for one of its darkest open secrets?

[00:00:46]It turns out that there once was a loophole hiding inside the map of the United States. A place where for decades some of the laws most Americans take for granted simply didn't apply in the same way and some of the best known companies in the world were more than happy to exploit that loophole for years. That place was Saipan.

[00:01:07]>> Mariana Islands in the Western Pacific Ocean has been a commonwealth of the US.

[00:01:12]The islands have been inhabited by humans for thousands of years. The island itself sits in the western Pacific, more than 9,000 km from Washington DC and far closer to Tokyo and Manila, then to like New York or LA.

[00:01:26]Long before it became part of the United States, Saipan had passed through the indigenous Kamora people who lived there for centuries before Spain colonized the island in the 1500s. After changing hands between Spain, Germany, and then Japan, Saipan became one of Japan's most important Pacific outposts. Then came World War II. If America wanted to push towards mainland Japan, it first had to capture Saipan. In June 1944, more than [music] 70,000 US Marines and Army troops landed on the island in one of the largest amphibious assaults of the Pacific War. What followed was nearly a month of brutal fighting through caves, [music] cliffs, and fortified defense positions. When the battle finally ended, more than 3,400 American troops had been killed and over 13,000 were wounded. On the Japanese side, around 24,000 soldiers were killed, while [music] thousands of civilians also died during the fighting.

[00:02:26]Many in the tragic mass suicides at Mappy Point after being told they would face horrific treatment if captured.

[00:02:33]America's victory though transformed the Pacific War. For the first time, American B29 bombers were in range of the Japanese home islands, making Saipan one of the most strategically important pieces of territory captured during the entire conflict. After the war, the United Nations placed the island into the trust territory of the Pacific Islands, which is administered by the United States. [music] Decades later, rather than becoming a US state, the Northern Marana Islands negotiated a unique political relationship with Washington through an agreement known as the Covenant, [music] signed in 1976.

[00:03:10]Today, Saipan is the largest island in the Commonwealth of the Northern Marana Islands, which is a self-governing US Commonwealth whose residents are American citizens, and defense and foreign affairs remain the responsibility of the United States government. But life on a tiny Pacific island looks very different from life on the US mainland. So local leaders argued they needed greater flexibility to build an economy that could actually survive.

[00:03:36][music] Congress agreed. Under the covenant, the Northern Marana Islands retained control over their own immigration system instead of immediately joining the US federal one.

[00:03:47]They also remained exempt from the federal minimum wage, allowing local lawmakers to set their own wage rates.

[00:03:55]Congress deliberately kept the power to change those arrangements later, but for decades [music] it chose not to, and the reason for that is darker than you think. Now, the territo's minimum wage remained at just $35 an hour, and local authorities were able to issue permits for thousands of temporary foreign workers recruited from overseas. While the island operated under its own wage and immigration rules, it was still part of the United States for trade purposes. All of that meant that manufacturers could produce qualifying garments on Saipan and sell them into the mainland American market without any of the quotas and tariffs that applied to factories elsewhere in Asia. It also meant they could include a coveted made in USA label. Suddenly, this tiny Pacific island offered something almost nobody else could.

[00:04:48][music] Companies could recruit workers from across Asia. They could pay wages far below those on the mainland. sell clothing into the American market and attach one of the most trusted labels in global commerce. Once manufacturers realized how profitable that combination was, they arrived in extraordinary numbers. At its peak, around 34 garment manufacturers were operating on the island, building an industry worth more than $1 billion a year. This also meant that thousands of workers from across Asia would begin arriving with dreams of finding opportunity in America. Instead, [music] many would discover they had entered a system where the thing that trapped them wasn't the Pacific Ocean surrounding the island. It was dead. Welcome to America.

[00:05:35]For thousands of people across China, the Philippines, and other parts of Asia, Saipan wasn't sold as a sweat shop. It was sold as America. Recruiters promised jobs in a US territory where workers could earn far more than they could [music] back home. For many families, it sounded like the opportunity of a lifetime. Some borrowed money from relatives. Others took out loans. So, by the time they even boarded a plane, [music] many workers already owed thousands of dollars in recruitment fees simply for the chance to get a job.

[00:06:08]>> [music] >> You couldn't simply quit if the job wasn't what you'd been promised either because going home meant returning with nothing except a mountain of debt. The very thing that brought workers to the island also became one of the biggest reasons they couldn't leave. And then the report started coming in. One Chinese government worker told the San Francisco Chronicle that after arriving on Saipan, she was forced to work 12 to 16-hour days, much of it unpaid overtime, just to meet production quotas. She said her supervisor yelled constantly and beat workers whenever he felt like it. Employees were even forced to lend him money that according to her was never repaid. Home wasn't much better. She lived in a company dormatory with 120 other workers with eight people crammed into each room. The building had just three working toilets and five showers. She described the food as unsanitary and said the conditions were so degrading that they didn't respect us and they made me feel like I wasn't a human being. And hers wasn't an isolated story. Time magazine told the story of another Chinese worker, Lely, who said she had traveled to Saipan believing she was chasing the American dream. Instead, she said she worked 18-hour days, slept in company barracks with 700 other workers, where there was one toilet for every 50 people, and she alleged that when she complained, she and another woman were beaten by supervisors wielding dress making scissors. And their wage around $35 an hour. These factories could only be described as sweat shops. And to make this worse somehow, many of these temporary workers in Saipan were allowed to remain on the island because of the job they held. You lose the job and you also lose your legal right to stay. This created an enormous imbalance of power.

[00:07:58]The sheer number of workers making similar claims across multiple factories suggested something much larger than one rogue employer or one dodgy factory. The structure itself was becoming part of the story. Meanwhile, the factories just kept producing. By the late '9s, the garment industry had become one of the economic engines of the Northern Marana Islands. According to the US Government Accountability Office, textile exports would eventually peak at around $1.1 billion annually. Every shirt that left those factories carried a story. By the time it reached a shopping mall in America, almost every trace of that story had disappeared. All that remained were three familiar words, made in USA.

[00:08:44]But secrets have a habit of escaping.

[00:08:47]And when this one did, it didn't stop at the factory gates. The story of what was happening there began escaping the island. For years, journalists and investigators had documented what was happening, but Saipan still felt like somebody else's problem. But then people started recognizing the labels. Brands including Gap, Tommy Hilfiger, J C Penney, [music] Sears, Nordstrom, and others were all linked to manufacturers operating on the island through a web of suppliers, contractors, licenses, and sourcing agreements. In 1999, workers decided to take that story to court.

[00:09:25][music] A series of class action lawsuits were filed on behalf of tens of thousands of current and former garment workers, [music] eventually naming roughly two dozen factories operating on Saipan along with more than two dozen American retailers and clothing companies. [music] CBS News described the cases as one of the largest labor actions of their kind, reaching far beyond the factory owners themselves and asking whether the companies selling the finished products also bore responsibility for the conditions under which they had been made. Now, that was never going to be an easy question to answer because most of the companies named in the lawsuits didn't actually own the factories. Let me explain the absolute maze of modern supply chains.

[00:10:08]So, a retailer [music] might place an order with a manufacturer. That manufacturer might subcontract production to another [music] company.

[00:10:15]The factory itself might recruit workers through labor agencies operating overseas. By the time a shirt reached a shopping mall in like Chicago, dozens of different businesses could have touched [music] it. Every company earned money from the final product, but responsibility for the workers who made it became increasingly [music] fragmented at every step along the chain. This is intentional because this system makes it very easy to wash your hands clean of any responsibility.

[00:10:44]Companies would go on to argue that they required suppliers to follow labor standards and that any violations were contrary to company policy. Many denied responsibility for the alleged conduct occurring inside independently operated factories. [music] Now legally that argument carried significant weight because contractors and suppliers were often separate businesses entirely. But for the workers who had paid thousands of dollars the chance to sew clothes and be treated like [ __ ] the distinction [music] could feel almost meaningless. They weren't making garments for some unknown local market. They were producing clothing for some of America's most recognizable brands. Eventually, most of the defendants agreed to settle. The settlements were worth around $20 million and they compensated workers, covered legal costs, and funded an independent monitoring system intended to improve labor conditions in Saipan's garment industry. Importantly, [music] the companies generally settled without admitting liability or any wrongdoing.

[00:11:40]But the lawsuits exposed something much bigger than one island. Saipon wasn't simply some overseas factory. It was a legal and economic system that allowed companies to sell products as made in USA while relying on a foreign workforce whose wages, housing, and immigration status were controlled by their employers. [music] Consumers got cheap clothes. Retailers got reliable production. Manufacturers stayed competitive. The people behind the sewing machines paid the price. This wasn't like this. No one knew about it.

[00:12:12]Like the allegations were making front page news. They were being debated in Congress, and some of America's biggest clothing brands have been dragged into court. The loophole that these people were comfortable exploiting wasn't hidden anymore. Washington could no longer claim it didn't know what was happening. So, if everyone knew about the loophole, why didn't anyone close it? So, now we're in the late 1990s, early 2000s, and it's like everyone knew this was going on. The question was whether anyone was willing to stop it.

[00:12:42]The first obstacle was the government of the Northern Marana Islands itself.

[00:12:45][music] From their perspective, these factories weren't just another industry. They were the economy. According to the US Government Accountability Office, by 1998, the territory was exporting around $1.1 billion worth of clothing annually.

[00:12:59]The factories were generating jobs, [music] tax revenue, and investment for an island with very few other major industries. [music] Local politicians argue that if they suddenly imposed mainland US labor [music] laws, the manufacturers would simply pack up and leave and they would have nothing and the islands would lose thousands of jobs, thousands of people, and just everything would be gone overnight. So, they [music] fought to keep the system exactly as it was, which meant Washington had a choice. Protect the workers or [music] protect the industry. What do you think they did?

[00:13:33]It's going to be a shock. Spoiler alert.

[00:13:34]So the government of the northern Mariana Islands did what governments all over the world do when their interests are threatened. [music] They hired lobbyists. One of those lobbyists was a guy called Jack Abramoff. Now Jack was one of the Republican party's most influential political operators. [music] The Northern Mariana Islands hired him and his lobbying firm to persuade Congress not to extend federal labor and immigration laws to the territory.

[00:13:58][music] A Republican lobbyist seen of the crime.

[00:14:01]Scene of the crime every time. The goal was simply to preserve this legal loophole that had made these factories so profitable in the first place. But Jack Abramoff really defended the garment industry directly. Instead, [music] he reframed the debate. He described the Commonwealth as a classic case of free enterprise at work. Saipan wasn't portrayed as a labor scandal. [music] It was presented as proof that less regulation created prosperity. Calls for federal reform became examples of Washington bureaucrats trying to crush local freedom [music] and successful capitalism. Libertarians, [clears throat] kids in the mines, kids in the sweat shops, libertarians every time. Said in that version of the story, the workers almost completely disappear. Jack also understood [music] that facts really change anyone's minds in Washington, but relationships do. [music] He cultivated influential Republicans including House Majority Leader Tom Delay who visited Saipan and praised it as an economic success story while criticizing efforts to impose mainland labor laws. Political strategist Ralph Reed also helped rally religious conservatives by portraying Saipan as an important center for Christian missionary work and that feral intervention would supposedly threaten that. Like what the heck are we doing now? It's a religious thing. These people got like lured here under false pretenses and are being like literally abused and they're like but it's a Christian issue. Like what the hell is going on? A debate that had begun with government workers being [music] unpaid and living in exploitative conditions gradually transformed into a political argue about free enterprise, [music] religious freedom, and government overreach. Classic libertarian Republican [ __ ] >> [music] >> By the early 2000s, this lobbying campaign had largely achieved its goal.

[00:15:49]Washington hesitated. They didn't do anything for ages. Reform stalled. The factories stayed open. And the legal arrangement that had made Saipan so profitable completely remained in place.

[00:16:00][music] The thing that finally broke Saipan's garment empire wasn't Congress. It was the global market chasing cheaper. So for a really long time, international trade rules had limited how much clothing countries like China [music] could export into markets such as the United States. It's those restrictions that made Saipan unusually valuable because manufacturers could avoid any of those limits while still producing garments that [music] entered the American market carrying the label made in USA. Then in 2005, those rules disappeared under World Trade Organization agreements. The global textile quota system was phased out.

[00:16:38]>> [music] >> Suddenly, manufacturers were free to produce clothing almost anywhere in the world. And almost overnight, [music] Saipon lost the advantage that had made it so profitable. Now companies could manufacture directly in countries with even lower labor costs, even worse conditions for workers. The loophole still existed. It's not like things in Saipan got more expensive. The companies had simply found an even cheaper option and the decline was dramatic. According to the US Government Accountability Office, textile exports peaked at that 1.1 billion. But by 2005, they had already fallen to around 677 million.

[00:17:20]Within just another 4 years, almost [music] every garment factory on the island had closed. Now, by 2010, textile [music] exports had fallen to literally almost nothing. Now, Congress eventually did what Labor advocates had been demanding for years. Beginning in 2007, lawmakers started extending federal minimum wage increases to the Commonwealth, [music] gradually bringing local wages closer to those on the mainland. But that is 2007.

[00:17:48]Remember, they started phasing out.

[00:17:49]That's some 2005. Bit late to the party.

[00:17:53]Then in 2009, responsibility for immigration shifted from the northern Marana Islands to the federal government, ending the separate immigration system that had existed under the Covenant for decades. [music] They were significant reforms, but by then they were largely just cleaning up the aftermath. I mean, the factories were gone. Years of investigative reporting, federal reports, congressional hearings, labor lawsuits, none of them ended the industry. The thing that finally did was just the market. Isn't that crazy? Like, if they could still be doing it, they probably would. But companies still search the world for places where labor is cheaper and regulations are lighter and production costs are lower. Governments still compete to attract investment by offering economic advantages over their neighbors. Modern supply chains still stretch across multiple countries and layers and layers of contractors, making responsibility harder to trace whenever something goes wrong. Saipan isn't the last place companies search for the cheapest combination of labor and regulation. Americans looked at a label that read in USA and assume it represented more than where a product had been assembled. They assumed it meant fair wages, worker protection, strong labor standards, and good jobs for Americans. The biggest loophole on Saipan wasn't hidden inside one of these factories. [music] It wasn't buried in one of the legal documents. It was hidden inside those three words that millions of people trusted without ever asking what they really meant. Made in USA. [music]