Behind the Wire 011020

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ICFTU:
Behind the Wire

WEPZA:
Comments and Questions

11. In Mexico, they call them maquiladoras; in Guatemala, swallow companies and in China, "special economic zones". A study by the US Labor Department lists no less than 19 terms to describe export processing zones (EPZs), but their characteristics are virtually identical throughout the world. They are based on the same principle the international segmentation of the production process and adopt the same practices: the search, regardless of international conventions, for the most favourable conditions for the investor, namely low pay and few or no trade union rights. 11. EPZs not defined but attempt made to mix up EPZs with the maquiladoras and swallow companies. China's special economic zones sometimes contain EPZs, sometimes they do not. Much of the output of SEZs in China is destined to the Chinese market.
Peter F. Drucker coined the term "Production Sharing" (Wall Street Journal Op-Ed page, March 15, 1977) to explain what is happening. It is less "wordy" and much easier to use than "the principal of international segmentation of the production process". Adam Smith in 1776 noticed also the gains to be made by specialization, and economists since then have refined the theory of comparative advantage It is the only way to solve the unemployment and poverty crises in the world. The problem with this paragraph is that the last statement that low pay and no trade unions are the conditions an investor looks for is not accurate. Later in this paper the ICFTU recognizes that this over simplification is absurdly misleading.
12. According to one definition "the maquila is part of a process of segregating production in different stages whereby each stage can be carried out by a different enterprise in a different country, to benefit from the comparative advantages that each offers and reduce costs to a minimum". 12. We like "Production Sharing". But this explanation is correct. Note that "maquila" is entirely independent of EPZs. It used to be "export and return" in the US, "in-bond" in Mexico, and is still "outward processing" in Europe. The newest term is "in transit processing" along the TransSiberian Railroad from the Pacific to Europe where most of the factories are not yet in EPZs.
13. Wage costs are the most decisive factor for EPZs, and it is the most labour intensive stages of the production process that are the first to be relocated. In 1991, for example, the hourly wage in the clothing sector was five times lower than the US rate, whereas in Costa Rica it was ten times lower and in Nicaragua nearly twenty two times. 13. The low wage rate countries of the world, such as those in central Africa have almost no EPZs and no investment. Wage costs are not even close to the most decisive factor. Political stability, transport availability, and communications are much more important. In some countries wages may be one fifth of those in the US -- or much less, but a number without any reference is meaningless. Is that with fringe benefits or without? Currently the fringed manufacturing wage ratio between Germany ($30 per hour) and the bottom tier of developing countries ($0.15) is more like 200 times. But there are few factories located in the bottom tier because the wage ratio is not the sole criterion for investment.
14. The EPZs cannot be ignored. They are a rapidly developing international phenomenon which affect an increasing share of trade flows at the international level and employ a growing number of workers. 14. We agree completely, they are perhaps the most dynamic and effective tools countries have to start improving their economies and lifting their citizens out of poverty.
15. In 1995, there were more than 230 export processing zones, spread across nearly 70 countries, including more than 100 in Latin America and the Caribbean, 64 in Asia and 31 in Africa. 15. The WEPZA International Directory of Export Processing Zones and Free Trade Zones published in June 1996 lists over 500, of which over 200 are in the USA. We believe the total will be over 600 in the May 1997 issue. There are still more which do not yet reply to questionnaires. A lot of countries must be pretty foolish if as claimed in paragraph 3 they have no net benefit!
16. According to ILO figures (Ref. http://www.unicc.org/ilo), employment in the zones grew by 9 percent between 1975 and 1986, and by 14 percent between 1986 and 1990. 1.2 million Latin American and Caribbean workers, 250,000 Africans and three million Asians are employed in them. In addition to this are the 14 to 40 million Chinese employed in the "special economic zones". 16. We think the statistic is 9% per year and 14% per year. This is much higher than outside zones. Perhaps there is something that benefits workers.
We believe these numbers are derived from are using Starnberg Institute estimates prepared for the World Bank, without visiting the zones. To the best of our knowledge the ILO has done no direct worldwide survey.
Chinese SEZs are often not the same as EPZs. Much of their production is for domestic use. Nevertheless they have proven to be dynamic centers of both technological and industrial development.
17. In these zones, also known as "free" trade zones, it is the employers who run free like a fox in a hen house. According to a worldwide survey carried out by the ICFTU among its affiliates, enterprises in the zones gain their comparative advantage through worker exploitation and anti-union repression. Most of these enterprises are out to break their competitors in the price war, and they don't mind breaking the backs of their workers, and the union, to achieve that. 17. We agree that there should be a quote about "free" but for very different reasons. Free zones are subject to close control and regulation by the governments of the countries they are in. They have a special Law that establishes them, and imposes rules and regulations on the zones and the companies that invest in them. In most cases the laws are the same as in the rest of the nation, but in some areas they are carefully thought-out alternative rules that are appropriate for the country. Indeed because free zones concentrate foreign investment and industrial enterprises, they are often subject to more scrutiny than domestic firms outside the zones are.
18. It is precisely because enterprises win a competitive advantage through the repression, discrimination and exploitation of workers that the ICFTU is pressing for the introduction of a social clause in international trading relations. The rapid expansion of the zones poses a considerable challenge to the international trade union movement. Enterprises rule supreme in these employers' paradises, while the labour world seems drawn into a downward spiral where everyone is the loser: the exploitation of workers in the Third World is seen as directly linked to the fall in living standards of workers in the North, while the recriminations of workers from the North are seen as an expression of protectionism. 18. It is not EPZs that challenge the international trade union movement as much as the inability of the union movement itself to modernize. The generation gap between union leadership with the crusading ideas of the 1890's and the young 1990's worker is too much. Big union money from dues and pension plans and emphasis on political clout in advanced nations will not win the hearts of Third World workers, nor will special deals through the WTO. ICFTU leaders' envy of the competent modern business enterprises which are serving today's worker better than trade unions is evident in this article. The opportunities for improvement in living standards of industrial workers are not falling in the North or South -- they are better than ever.
The dream
19. Export processing zones have usually prospered at the initiative of private enterprise, with many developing countries taking the lead by setting up "turnkey" industrial parks and attracting enterprises with promises of tax exemptions and lax social regulations. The states who have ventured along this path hope to repeat the miracles of the "Asian dragons", using these modern enclaves as an engine for development. While the economic benefits are far from negligible, particularly in terms of job creation, reality is still a far cry from the glossy image painted by the zones' publicity machines. 19. The early zones in Puerto Rico, Shannon, Barranquilla, Hong Kong, Taiwan, Korea, and Singapore were all a direct result of government initiative -- not private enterprise. It was private enterprise that profited by placing factories in the zones. Mexico in 1965 was the first important country to have a simple operating framework set up by government, but with no government funding, which opened opportunity to the private sector to build 90 EPZ industrial parks in 25 years which now account for over 60% of maquila exports and 80% of maquila direct export jobs, now 900,000. The glossy image is not so far from reality as you imply in the successful EPZs wherever they are.
We now see that "the economic benefits are far from negligible" so that it is now quite clear that the reference in paragraph 3 claiming "Many experts now question whether the zones actually increase overall employment at all or help the national development process." was a deliberate fabrication meant to lend the authority of experts to their unsubstantiated claims.
Lax social regulations have not been an incentive in any EPZ. Some social legislation has been different from the domestic economy precisely because the domestic economy is not working and the government is attempting to find policies that will work.
20. The zones are seductive to investors precisely because they are an enclave, in other words because they are physically, economically and socially separate from the rest of the country. This "apartheid" explains why the advantages offered to foreign investors freed from the burden of bureaucracy, taxation, lack of infrastructure and the application of the labour code do not necessarily translate into corresponding benefits for the host country. 20. The language here is interesting. When making two very unsubstantiated claims, words like "seductive" and "apartheid" are intended to make the reader forget reason. But effective is not the same as seductive and while "apartheid" does literally mean "separateness" in Afrikaans, its use in English is confined to a policy of racial discrimination. It has no place in a discussion of EPZs.
It is amusing to note that the "enclave" nature of EPZs is not attractive to investors at all. The isolation, when it exists, is a requirement of national governments, which have established the EPZ rules. They have not developed sophisticated customs controls, and are concerned about smuggling. Governments that have had EPZs for decades have relaxed the rules with the avid support of the investors.
Further, most EPZs are not really separate from the rest of the country - physically, economically, or socially. The fences (where they exist) are for property protection, much like the walls and fences that surround private homes in Latin America, and other parts of the world. These homes are not separated from the country, any more than a local airport is separated from the city it is in. People, money, and goods, pass through the fences linking the zones both directly and indirectly to the local and global economy. Economically they link to workers inside and outside the EPZ to suppliers in the country and around the world. Socially they make real progress in education, training, and are "windows on the world" for technology transfer and the global market. The social clubs for workers and their families and friends within EPZs are popular (e.g. Taiwan). The benefits to the country in foreign exchange and in many other ways are very large.

ICFTU: Behind the Wire	WEPZA: Comments and Questions
11. In Mexico, they call them maquiladoras; in Guatemala, swallow companies and in China, "special economic zones". A study by the US Labor Department lists no less than 19 terms to describe export processing zones (EPZs), but their characteristics are virtually identical throughout the world. They are based on the same principle the international segmentation of the production process and adopt the same practices: the search, regardless of international conventions, for the most favourable conditions for the investor, namely low pay and few or no trade union rights.	11. EPZs not defined but attempt made to mix up EPZs with the maquiladoras and swallow companies. China's special economic zones sometimes contain EPZs, sometimes they do not. Much of the output of SEZs in China is destined to the Chinese market. Peter F. Drucker coined the term "Production Sharing" (Wall Street Journal Op-Ed page, March 15, 1977) to explain what is happening. It is less "wordy" and much easier to use than "the principal of international segmentation of the production process". Adam Smith in 1776 noticed also the gains to be made by specialization, and economists since then have refined the theory of comparative advantage It is the only way to solve the unemployment and poverty crises in the world. The problem with this paragraph is that the last statement that low pay and no trade unions are the conditions an investor looks for is not accurate. Later in this paper the ICFTU recognizes that this over simplification is absurdly misleading.
12. According to one definition "the maquila is part of a process of segregating production in different stages whereby each stage can be carried out by a different enterprise in a different country, to benefit from the comparative advantages that each offers and reduce costs to a minimum".	12. We like "Production Sharing". But this explanation is correct. Note that "maquila" is entirely independent of EPZs. It used to be "export and return" in the US, "in-bond" in Mexico, and is still "outward processing" in Europe. The newest term is "in transit processing" along the TransSiberian Railroad from the Pacific to Europe where most of the factories are not yet in EPZs.
13. Wage costs are the most decisive factor for EPZs, and it is the most labour intensive stages of the production process that are the first to be relocated. In 1991, for example, the hourly wage in the clothing sector was five times lower than the US rate, whereas in Costa Rica it was ten times lower and in Nicaragua nearly twenty two times.	13. The low wage rate countries of the world, such as those in central Africa have almost no EPZs and no investment. Wage costs are not even close to the most decisive factor. Political stability, transport availability, and communications are much more important. In some countries wages may be one fifth of those in the US -- or much less, but a number without any reference is meaningless. Is that with fringe benefits or without? Currently the fringed manufacturing wage ratio between Germany ($30 per hour) and the bottom tier of developing countries ($0.15) is more like 200 times. But there are few factories located in the bottom tier because the wage ratio is not the sole criterion for investment.
14. The EPZs cannot be ignored. They are a rapidly developing international phenomenon which affect an increasing share of trade flows at the international level and employ a growing number of workers.	14. We agree completely, they are perhaps the most dynamic and effective tools countries have to start improving their economies and lifting their citizens out of poverty.
15. In 1995, there were more than 230 export processing zones, spread across nearly 70 countries, including more than 100 in Latin America and the Caribbean, 64 in Asia and 31 in Africa.	15. The WEPZA International Directory of Export Processing Zones and Free Trade Zones published in June 1996 lists over 500, of which over 200 are in the USA. We believe the total will be over 600 in the May 1997 issue. There are still more which do not yet reply to questionnaires. A lot of countries must be pretty foolish if as claimed in paragraph 3 they have no net benefit!
16. According to ILO figures (Ref. http://www.unicc.org/ilo), employment in the zones grew by 9 percent between 1975 and 1986, and by 14 percent between 1986 and 1990. 1.2 million Latin American and Caribbean workers, 250,000 Africans and three million Asians are employed in them. In addition to this are the 14 to 40 million Chinese employed in the "special economic zones".	16. We think the statistic is 9% per year and 14% per year. This is much higher than outside zones. Perhaps there is something that benefits workers. We believe these numbers are derived from are using Starnberg Institute estimates prepared for the World Bank, without visiting the zones. To the best of our knowledge the ILO has done no direct worldwide survey. Chinese SEZs are often not the same as EPZs. Much of their production is for domestic use. Nevertheless they have proven to be dynamic centers of both technological and industrial development.
17. In these zones, also known as "free" trade zones, it is the employers who run free like a fox in a hen house. According to a worldwide survey carried out by the ICFTU among its affiliates, enterprises in the zones gain their comparative advantage through worker exploitation and anti-union repression. Most of these enterprises are out to break their competitors in the price war, and they don't mind breaking the backs of their workers, and the union, to achieve that.	17. We agree that there should be a quote about "free" but for very different reasons. Free zones are subject to close control and regulation by the governments of the countries they are in. They have a special Law that establishes them, and imposes rules and regulations on the zones and the companies that invest in them. In most cases the laws are the same as in the rest of the nation, but in some areas they are carefully thought-out alternative rules that are appropriate for the country. Indeed because free zones concentrate foreign investment and industrial enterprises, they are often subject to more scrutiny than domestic firms outside the zones are.
18. It is precisely because enterprises win a competitive advantage through the repression, discrimination and exploitation of workers that the ICFTU is pressing for the introduction of a social clause in international trading relations. The rapid expansion of the zones poses a considerable challenge to the international trade union movement. Enterprises rule supreme in these employers' paradises, while the labour world seems drawn into a downward spiral where everyone is the loser: the exploitation of workers in the Third World is seen as directly linked to the fall in living standards of workers in the North, while the recriminations of workers from the North are seen as an expression of protectionism.	18. It is not EPZs that challenge the international trade union movement as much as the inability of the union movement itself to modernize. The generation gap between union leadership with the crusading ideas of the 1890's and the young 1990's worker is too much. Big union money from dues and pension plans and emphasis on political clout in advanced nations will not win the hearts of Third World workers, nor will special deals through the WTO. ICFTU leaders' envy of the competent modern business enterprises which are serving today's worker better than trade unions is evident in this article. The opportunities for improvement in living standards of industrial workers are not falling in the North or South -- they are better than ever.
The dream
19. Export processing zones have usually prospered at the initiative of private enterprise, with many developing countries taking the lead by setting up "turnkey" industrial parks and attracting enterprises with promises of tax exemptions and lax social regulations. The states who have ventured along this path hope to repeat the miracles of the "Asian dragons", using these modern enclaves as an engine for development. While the economic benefits are far from negligible, particularly in terms of job creation, reality is still a far cry from the glossy image painted by the zones' publicity machines.	19. The early zones in Puerto Rico, Shannon, Barranquilla, Hong Kong, Taiwan, Korea, and Singapore were all a direct result of government initiative -- not private enterprise. It was private enterprise that profited by placing factories in the zones. Mexico in 1965 was the first important country to have a simple operating framework set up by government, but with no government funding, which opened opportunity to the private sector to build 90 EPZ industrial parks in 25 years which now account for over 60% of maquila exports and 80% of maquila direct export jobs, now 900,000. The glossy image is not so far from reality as you imply in the successful EPZs wherever they are. We now see that "the economic benefits are far from negligible" so that it is now quite clear that the reference in paragraph 3 claiming "Many experts now question whether the zones actually increase overall employment at all or help the national development process." was a deliberate fabrication meant to lend the authority of experts to their unsubstantiated claims. Lax social regulations have not been an incentive in any EPZ. Some social legislation has been different from the domestic economy precisely because the domestic economy is not working and the government is attempting to find policies that will work.
20. The zones are seductive to investors precisely because they are an enclave, in other words because they are physically, economically and socially separate from the rest of the country. This "apartheid" explains why the advantages offered to foreign investors freed from the burden of bureaucracy, taxation, lack of infrastructure and the application of the labour code do not necessarily translate into corresponding benefits for the host country.	20. The language here is interesting. When making two very unsubstantiated claims, words like "seductive" and "apartheid" are intended to make the reader forget reason. But effective is not the same as seductive and while "apartheid" does literally mean "separateness" in Afrikaans, its use in English is confined to a policy of racial discrimination. It has no place in a discussion of EPZs. It is amusing to note that the "enclave" nature of EPZs is not attractive to investors at all. The isolation, when it exists, is a requirement of national governments, which have established the EPZ rules. They have not developed sophisticated customs controls, and are concerned about smuggling. Governments that have had EPZs for decades have relaxed the rules with the avid support of the investors. Further, most EPZs are not really separate from the rest of the country - physically, economically, or socially. The fences (where they exist) are for property protection, much like the walls and fences that surround private homes in Latin America, and other parts of the world. These homes are not separated from the country, any more than a local airport is separated from the city it is in. People, money, and goods, pass through the fences linking the zones both directly and indirectly to the local and global economy. Economically they link to workers inside and outside the EPZ to suppliers in the country and around the world. Socially they make real progress in education, training, and are "windows on the world" for technology transfer and the global market. The social clubs for workers and their families and friends within EPZs are popular (e.g. Taiwan). The benefits to the country in foreign exchange and in many other ways are very large.

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ICFTU:Behind the Wire

WEPZA:Comments and Questions

ICFTU:
Behind the Wire

WEPZA:
Comments and Questions