Vol. IX, Bulletin No. 8.                                                                          September 3, 2004

Coming: Mass Migration of Jobs to China

There Many Millions of Working Women and Men
Are Either Grossly Underpaid or Not Paid at All

Thanks to new "free trade" rules that go into effect next year, the United States will greatly increase its imports of clothing from the People's Republic of China, to the detriment of garment-exporting Bangladesh, the Philippines, Indonesia, and many other poor countries, especially in Africa.  This will mean a large-scale shift of jobs from poor countries with poor labor standards to a country where labor standards are even poorer.

"Factories are closing or threatening to close everywhere, including in Turkey, Mexico, Central America, Africa, and across Asia," says Neil Kearney, who heads the global union representing garment and textile unions.  "Only in China are the builders working overtime constructing new plants and installing new machinery."

The latest analysis of this impending global shake-up of a global industry comes from the World Trade Organization (WTO), which enforces a 1995 agreement to phase out all quota restrictions on free trade in clothing and textiles.  A 41-page WTO "discussion paper" calculates that, with the end of those restrictions on January 1, 2005, China (excluding Hong Kong) will soon triple its share of U.S. clothing imports.  At the same time, Bangladesh, the Dominican Republic, the Philippines, Indonesia, Thailand, and Mexico, but not India, are expected to be among the big losers.

Pressures To Become 'Competitive' with the People's Republic

As a result, "the clothing and textile industries worldwide are in turmoil," Neil Kearney said in his talk at a union congress in Stockholm in early August. "This is a World Trade Organization-manfactured crisis," one that it has so far ignored.  He pointed out that, meanwhile, the International Monetary Fund (IMF) has issued this warning to member countries of the European Union:

 "They [the European countries] must free up labor markets and encourage longer working hours if they are to stay competitive and retain [jobs].  The IMF went further and urged the European Union to name and shame governments that go slow on reform. Reform, in the eyes of the IMF, means cutting wages, working longer hours, reducing holidays, and curtailing social welfare and pension payments.

"Why?  To be competitive with China and all those other countries which ignore labor standards and encourage worker exploitation."

Are Kearney's fears exaggerated?  Isn't China a model for what globalization can do for poor countries?  

Increased Globalization Brings Decrease in Workers' Wages

It's time for a reality check, and Anita Chan, a leading authority on China, provided it in a presentation she made in mid-March at a forum on labor rights held in Shenzhen, China. From her many years of  labor research in China, Chan has reached this conclusion: "As China and Chinese labor become more integrated in the world economy, labor standards have declined."  She cited "two visible [money] indicators" of what she called a "frightening"  trend among workers in the export manufacturing sector:
China Triggering 'Race to the Bottom'

Another trend that concerns Chan is the increased competition for jobs among developing countries. Because more and more millions of China's workers are competing in the international labor market, China is "snatching jobs away" from Asian neighbors, but also from other countries, even in Africa, that are much poorer than China, with a downward impact on their labor standards.

In her Shenzhen talk, Chan challenged conventional economic wisdom that China is going through a low stage of development that will lead to a higher and better stage. "The Marxist concept of primitive capital formation is often invoked to justify the sufferings of the ordinary people for the sake of economic development," she said, adding:

"[The stage of development theory implies] that there will be a movement on to the next stage, one that is better than that left behind. At least historically, this seems to have been the case. The industrial revolution began in the West and then, after years of struggle, most Western countries attained the stage of welfare capitalism. Leaving aside whether this exploitative historical stage is necessary, there are worrying signs in China and in the developing world today that not only are we not leaving this horrific stage behind, but that we are actually regressing into a stage that can be likened to free [unpaid] or almost free [underpaid] labor."

She said that internally China "is leading the race to the bottom" and warned that the rest of the world may be joining it.

Chan cited several developments that could counteract "this [seemingly] unstoppable global phenomenon."  One is the international anti-sweatshop movement, whose activities have lead to the corporate social responsibility (CSR) movement.  For the benefit of Chinese journalists at her talk, she emphasized that neither movement is protectionist.  Many corporations have openly accepted responsibility for upgrading labor standards in factories that make goods bearing their names, but, except for a handful of big corporations, their activities have not been successful, because "supplier factories have developed elaborate mechanisms to cheat social monitors, [and] orders are also beginning to be subcontracted to smaller factories...in those parts of China where monitoring has not yet reached."

(For more by Dr. Chan on the same subject, check her Webpages on the Australia National University Website at <http://rspas.anu.edu/~anita>. There her article, "A 'Race to the Bottom': Globalization and China's Labor Standards," published in China Perspectives, has more information on the points she made in Shenzhen. In addition, she explains in detail the tight controls that the government and employers impose on most workers in factories producing in export. "To all intents and purposes," she writes, "the worker is bonded labor.")

What You Might Do About a Crisis

For companies, workers, and communities dependent on the global garment and textile industries, a new free trade system creates new problems that are likely to escalate to a crisis in many countries. Yet very little is known even by shareholders and others who are supposed to make informed decisions to cope with the historic change that goes into effect on January 1, 2005.  An initiative by the Interfaith Center on Corporate Responsibility fills that gap.

The center's contract supplier working group has worked up a campaign to inform shareholders and consumers and to smoke out corporate plans to deal with what it calls a "looming crisis."  Background information on the center's Website explains the 1974 "Multifiber Arrangement" (MFA), which first set up quotas on specified items that could be imported by developed countries from developing countries, and which in 1995 was replaced by the Agreement on Textiles and Clothing (ATC). Actually, it is the ATC quota system that will expire next year, but the MFA label is the better known symbol for the quota restrictions.

The center urges people to use that background information in a letter-writing campaign to industry leaders:  "As investors and consumers, we encourage you to write to textile and apparel companies and urge them to provide information on their plans to address the phase out of the MFA and whether their plans address the disruptions to the supply chain, the potential dislocation of workers in factories where it currently sources products or other social impacts of the MFA expiration."  The Website supplies a sample letter and the names of companies that should receive it.

It is very difficult to generate human rights pressure on this transformation of a major part of the global trading regime. The system is amazingly complex and larded with acronyms and jargon that turn off the ordinary consumer.  Who reads the typical news story on this?  It is utterly incomprehensible except to insiders. 

In plain English: unrestricted free trade is now to reign in the global garment and textile industries, and it will almost certainly create more wealth and contribute to a reallocation of global power.  But wealth and power for whom?   It is one of the craziest developments of our time that a major beneficiary of this expansion of free trade will be an unfree regime.

Toward Global Trade That Works for All

"On this Labor Day, we urge our leaders to look at trade policies from the bottom-up -- how they touch the lives of the poorest families and most vulnerable workers in our own country and around the world....As the debate around trade heats up, many voices will be heard....Sadly, those least likely to be heard or to have a place at the table are families and workers struggling to make ends meet." 

That was a key point in this year's Labor Day statement, "Global Trade That Works for All," issued by Cardinal Theodore E. McCarrick of Washington, who chairs the domestic policy committee of the U.S. Conference of Catholic Bishops.

After quoting Pope Paul II's statement in 2000 that "All must work so that the economic system in which we live does not upset the fundamental order of the priority of work over capital, of the common good over private interest," McCarrick wrote: "We must always remember that trade agreements and economic policies are not pre-ordained laws of nature, but are created by people and governments.  Their goal must be to promote the dignity of work and the rights of workers." 

Judging Trade Agreements by a 'Moral Measure'

He criticized those who say "that bad jobs are better than no jobs, that poverty is better than misery, that unclean air and polluted water are necessary by-products of economic growth," and responded that "one failing does not justify another. We can do better, and we must do better, in shaping a bold, comprehensive trade and development agenda...."

He called it "an encouraging move in this direction" that U.S. and European governments recently made "important commitments to reduce some agricultural supports that often assist those who need help the least and neglect those who need it most at home and abroad."  He urged that trade agreements be judged by a "moral measure" that included questions such as these:
In late June a delegation of Catholic bishops from Central America visited Washington to "discuss the likely impact of the U.S.-Central American Free Trade Agreement (U.S.-CAFTA)," McCarrick wrote, and "our bishops' conference became more aware of the economic and human benefits and costs of increasing trade in our hemisphere."  In July the Central American and U.S. bishops issued a statement on the proposed agreement, which is available on the USCCB Website.

Mid- and Low-Income Families Left Behind

Although the U.S. economy grew by 3% and productivity grew by 4.5%, the average (median) income of U.S. households remained almost stagnant last year.  "The benefits of growth have not reached middle- and lower-income families," Economists Lawrence Michel and Jared Bernstein of the Economic Policy Institute wrote in their August 26 analysis of the new Bureau of the U.S. Census Bureau report on the 2003 household income and poverty data.

Among the other signs of how an unbalanced economy has left many families behind: because the largest income declines occurred among the lowest income families, the nation's poverty rolls increased by 1,300,000 persons in 2003, and a total of 4,300,000 since 2000.

Sorting Out Global Responsibilities

The UN High Commissioner for Human Rights, Mrs. Louise Arbour, has asked for help in  preparing a report on a controversial subject: the various international initiatives outlining the human rights responsibilities of multinational corporations, including a statement titled "Norms on the Responsibilities of Transnational Corporations and Related Business Enterprises with Regard to Human Rights," or Global Norms, which was adopted by a subcommission of the UN Commission on Human Rights in August last year. 

Faced with sharply conflicting views on  the Global Norms, the UN Commission's annual meeting in Geneva this spring asked the Commissioner to compile an overall analysis (which under UN rules could be no longer than 8,500 words) for the next session of the Commission, in March 2005. (See UN Global Business Norms Barely Alive.)  Mrs. Arbour's office has contacted a long list of "stakeholders" concerned, including specific multinationals, employer associations, and international labor federations, to submit their views, and has also issued a public invitation for other organizations to do so.

In Europe, where the corporate responsibility movement is stronger than in the United States, there has already been much public discussion of the issues involved.  See, for example, CSR-Europe, and papers prepared by Amnesty International and a network of human rights and development groups.

Objections to 'Proliferating'  Norms-Like Documents

A major argument of business groups and some governments, including the United States, is that there are already numerous official and unofficial instruments on the human rights responsibilities of business and that there is no need for another one.  The first part of the argument is correct. But the second part does not follow.

In recent years quite a few such documents have indeed emerged from diverse public and private sources, including corporate codes of conduct.  And more will follow.  Credit (or blame) the global economy.  Instead of criticizing "globalization," more and more people and organizations, including corporations, are seriously seeking serious ways to deal with the reality of ever-expanding global integration. 

This grand effort has historical precedents.  People and groups in the United States, for example, took a long time to sort out the respective responsibilities of federal and state governments, particularly in regard to labor issues confronting national corporations.  U.S. business today recognizes that a national labor market without national rules would be chaotic to both employers and workers.

Exploring New 'Frontier' of Global Economy

In searching for global norms, however, we are in frontier territory.  Understandably, people are not in agreement on just what path to take. But even some leading corporate executives recognize that the global economy requires some kind of basic rules.  And in various venues, they are involved in shaping those rules.

Yet those who complain about the proliferation of norms-like documents have a point.  Their multiplicity and variety do create confusion and even some wasted effort.  It would be useful to seek out and establish some order out of the present disorder, if this pioneering project were undertaken by an institution equipped to handle it.  If not the UN, who?  A vote rejecting a UN role is really a vote favoring an environment in which a thousand flowers bloom.

Education in Ethics for Professors

"How To Teach Ethics, Social Capital, and Development in the University" is the subject of an on-line course in Spanish to be launched in September by the Inter-American Development Bank.  It aims to train "professors capable of promoting ethics and social responsibility."   In an email congratulating the organization on this initiative, I asked: "Any chance of your making it available in English too?"   Answer: "We are planning to translate it into other languages next year."

Good.  The course should provide lessons not only for professors but for other multilateral development institutions, including the World Bank.

Diary: What Are Grandpas For?

"Grandpas Are for Finding Worms" is the title of one of the colorful books that my three-year-old granddaughter, Mai, likes me to read to her.  It doesn't seem to bother her that this grandpa is not interested in finding worms. Or that he isn't up to playing ball and hitting home runs.  He does sing old songs, as the book says, but Mai has yet to call for an encore, as she does regularly for a Wiggles or Winnie the Po video.

For months now Mai has been looking forward to the arrival of a baby brother. Thuy Robert, son of Thuy and Kelly Senser, was born on July 30.  He is a very alert little baby, but it'll be a while before he becomes curious about what grandpas are for.

What are babies for?  Baby Thuy, like his sister Mai, is for loving.


Human Rights for Workers: Bulletin No. IX-8     September 3, 2004
Robert A. Senser, editor
Copyright 2004
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