Bad working conditions exported between undeveloped countries

By Pia A. Gaarder
Norwatch

Arne Melchior is in charge of the NUPI international trade section and have researched underdeveloped countries trade with clothing. In his opinion the textile and ready-made clothing industry generally have been important to give the countries’ economic growth, but he emphasises the tendency that poor working and wages condition is transferred over national borders.

- We have examples of Korean investments in Indonesia og Hong Kong investments in China where there is clear documentation that it has not had a positive influence on wages and working conditions. On the contrary, we may say that the lower standard is being exported. In practice, this means that when standards are increased in Korea, the lower standards are moved to other countries, Melchior says.

The documentation about this issue is somewhat mixed, there are indications that labour standard has a become a competitive factor between underdeveloping countries. Melchior says there is a limit between long working days and poor working conditions affects the quality of the product. He emphasizes, however that one of the competitive edges of underdeveloped countries in the world market is to make this limit as flexible as possible. Pressure on wages and working conditions follows.

In a larger perspective, the textile and ready-made clothing perspective will have a positive influence for the underdeveloped countries, Melchior says.

Positive effect?
- The textile and read-made clothing industry has been in the center of industrialisation in South East Asia in general, and the development in this region is maybe the most important poverty-fighting effect in the underveloped cuintries during to last 100 years.

Through the texile/ready-made clothings industry the countries have entered into a positive spiral. Although it has been very tough. For the conditios competition on the edge between … are harsh competition on the edge between  …..

- We can see the industry moves from country  to country as wages and labour conditions increase where it originally was, Mechior says.

- In the 70s and 80s Hong Kong was strongly criticised for the conditions that tuked in the textile sector. It was claimed they wre exploiting the labour force, which was correct. But the textile imdustry preresenmted nevertheless and early industriaklising, which spread to other sectors. The alternative is often bottomless poverty.

New tendency?
Isn’t a globalized system of sub-contractors lead a new tendency in textile industry wither harder cmpetition og a general pressurse on prices, wages and working conditions? Isn’t there a risk that the positive spiral stops?

- I have not researched on this new tendency. It is clear that Thailand had an export problem before the Asian crisis in 1997. Their export muscles with the textile were weakened. They got stroger competition from China. This tendency will continue: China is now joining the WTO. China will get better trade conditions  with the West.

The positive spiral “textile-more advanced production-economic growth” presupposes according to Melchior a higher level of education and technology. If the country cannot manage that, it will get a problem.

It seems Thailand is an example of this. The country has no other works a problem with the economic development, Melchor says.

Asian owners
The sub-contractor systems seem to have structure structures where producers are local or regional, and where the responsibility to press salaries- and working standardsn far down the ladder. Is this a general trait?

- The textile industry in Asia is an example of an industry with high local owbnership.  The examples of foreign investment where foreigners do not pull the levels up, is also valid for regional investment. In many cases westen trade businesses is caring for design and marketing, while production is locally controlled.

- I have no clear documentation, but this is possibly a reason why there is more pressure in the textile industry Bu the main reason is that this is a “simple” industry where labour is   plenty, in opposition to industry where companies will have to compete over educated labour – and thus offer better and higher wages and working conditions.

Pressure from China
Can China represent a pressure against other underdeveloped countries tha ountries contribute tokeep salasries down?

- The underdeveloped countries’ most important competition edge is low wages costs. But also the quality of work is a competition edge. China is good at controlling quality. They are professional when it comes to reliability and quality. Which is important in the textile industry. It is not enough to collect people in a shack and get started.

In addition, China has a large supply of cheap lablour, which undoubtedly will set wages and working conditions under pressure in the rest of Asia.

Mr. Melchior says the textile industry in China has a large reservoir of reserve labor, and it will take long time before this has been absorbed. The Chinese textile industry will therefore in  long run have cheap labour and become a sharp competition to the textile industry in other countries.

Free trade unions
In Thailand there was voiced fear that without free trade unions in China, China’s increased admittance to the  world marked will  pressure  salaries and working standards backward in all of Asia and  the subdeveloped countries in general. What is your opinion?

- China has a special inheritance from its communist bacground. Namely that their trade unions are corporatively oriented. That is to say that they are more preoccupied with cooperation between management and workers to  increase productivity that  by increasing wages and improve working conditions.

But although  the workers protest less, they have at the same time another communist heritage which is to be more preoccupied with working conditions.

The problem still is the enormous inner migraton, from the country-side to the coastal areas.

Unemployment  among these masses is too big that they put up with anything. Often, this group is not organised. They therefore have two challenges: both to create independent trade unions in China, and to get  workers to join the trade unions, Mr. Melchior says.

Norwatch Newsletter 9-10/02