Made by Foreign Hands; Rather than outsource production, many Italian luxury brands are employing illegal Chinese immigrants as their artisans.(Cover story)

Byline: Barbie Nadeau

The town of Prato, just outside Florence, is not exactly typical of this part of Italy. Sure, it's got the requisite medieval wall, a handful of baroque churches and charming cobblestone streets. But instead of sauteed garlic, the lingering aroma is of fried wontons. In the cafes, red paper lanterns are as prevalent as red-and-white-checkered tablecloths, and more people speak Mandarin than Italian.

In fact, this Tuscan community of about 200,000 is home to Europe's second largest Chinatown, after Paris. It's also the heart of Italy's apparel industry, home of the MADE IN ITALY label, which for many conjures up visions of old Italian craftsmen hunched over workbenches, sewing the last stitches on a pair of leather shoes or designer handbag. Gucci and Prada have their factory outlets here; Prato even houses Italy's official textile museum, which traces the history of the country's luxury-garment industry.

But the image of the skilled Italian worker lovingly plying his trade is fading fast. In the late 1990s, many fashion houses started outsourcing their work to China and Bangladesh, where labor is cheaper and output faster. Unable to compete, a number of Italian-owned garment factories shut down. Cash-rich Chinese entrepreneurs immediately snatched them up and brought in their own workers. Today the region is flooded with Chinese laborers, the majority of them illegal, allowing high-end fashion houses that refused to export their handiwork to hire Chinese after all--in Tuscany, but at Chinese prices. Indeed, the Cooperation for the Development of Emerging Countries estimates that many work for as little as [euro]2 an hour, and can get by in Italy only by sticking to Prato's Chinatown businesses.

Immigrant artisans have always played an integral role in Italy's fashion industry, but until recently they worked mainly behind the scenes. Now immigrant laborers are playing a more open role in luxury-garment making. Of the 4,275 textile factories in Prato, 2,500 are owned by Chinese, who tend to employ only Chinese workers. And most of Italy's major design houses--including Prada, Versace and Giorgio Armani--rely heavily on Chinese-owned suppliers from Prato.

Indeed, hiring Chinese workers in Italy may be the answer to a tricky dilemma for luxury labels: how to cut costs while retaining the right to call a garment "made in Italy." In a study of Italian textile companies, Michela ...