People's Campaign Against Imperialist Globalization

Increasing economic integration and liberalization, especially in the areas of trade and investments, have inevitably put to fore the issues of labor rights. Recession coupled with financial crisis all over the world have pushed transnational corporations (TNCs) to adopt cost saving measures in their operations, as well as intensify their competition for markets around the world. And naturally, labor has been on the receiving end of corporate strategies to weather the global crisis.

Down-sizing or right-sizing schemes to create leaner, competitive organizations have resulted in the prevalence of market-oriented hiring schemes, or what is commonly called as labor flexibilization, as capitalists take the fullest possible advantage of the "labor market". What this means in reality is taking advantage of the large army of unemployed to institute individual contracts, flexible hiring, job sharing, casual hiring and the like. The result, of course, is that labor is cheaper, and workers are hired and fired at will. Along with this, unions are further undermined, not to mention the phenomenon of more and more cases of gross violations of labor rights and outright union busting. The case of Mochtar Pakpahan of Indonesia is a grim reminder not only of the fascist Suharto government but also of the violence of corporate attack against the unions.

Corporations have greater room for maneuver since technological revolution has resulted in even cheaper costs of transportation and communication. This has paved the way for the explosion in TNC production subcontracting and the relocation of whole plants to the Third World and the former Soviet bloc countries which mean more profits from cheaper operations and labor costs. But this is not simply a matter of business taking advantage of differentials of labor and production costs between developed and underdeveloped countries. This is essentially a question of TNC business operations in the context of increasing globalization.

TNCs now enjoy even greater freedom and opportunity in the Third World which has been further opened up through policies of liberalization, privatization and deregulation. These policies are prescribed by IMF-World Bank structural adjustment programs which have been designed according to the "Washington consensus". Privatization has opened up natural resources, utilities, infrastructure development and even social services for TNC investments and profit-taking to the loss of social and economic protection and welfare.

Liberalization and deregulation have opened up more and more sectors of national economies for TNC domination and exploitation. Export processing zones have been expanded for TNC reprocessing plants and relocated industries. These zones, also variably called industrial parks, free port areas or special economic zones, allow TNCs great flexibility in production and sales, besides taking advantage of severely depressed wages in Third World economies that have been hobbled by neo-colonial crises.

Neo-liberal policies of globalization and TNC operations have ensured cheaper labor costs and resulted in graver labor conditions in Third World countries. Workers have no job security, nor benefits under various schemes like agency hiring, short term contracts, and casual hiring as piece rate workers, trainees, apprentices and the like. These schemes not only ensure flexibility for business operations but also make sure that workers are paid way below the prescribed minimum wage, cannot form unions nor enjoy benefits mandated by law or otherwise gained through collective bargaining.

Worse, these schemes of labor flexibility are being used to undermine unions or bust unions on massive scale such as in the Philippines where antiworker labor laws disallow workers hired under these schemes to form or join unions. The formation of locals of genuine unions like those affiliated to the Kilusang Mayo Uno (KMU) in the Philippines is feared by TNC subsidiaries and subcontactors since bargaining will tend to raise wages and prevent them from unilaterally extending work schedules, among others. In response, many companies like in the case of the Philippine Long Distance Company or San Miguel Corporation, the union remains but is marginalized by replacing the majority of the work force with contractuals.

In other companies, many in the garments sector, suppliers simply close down their plants (lock out) if they fail to bust or prevent the formation of trade unions. Cases of trade union repression and violence against union leaders and organizers are on the rise. In the Philippines, these cases increased five times in 1996 from the previous year. Union busting has become one of the most important development in the corporate offensive against labor. In the Philippines, they have used the antiworker Labor Code to render strikes illegal and dismiss union leaders and organizers as a result. In Brazil, gargantuan fines are used to penalize unions who go on strike, forcing these unions to take a semi-underground status to avoid the fines.¹

Horror stories of oppressive women and child labor, "slave" or bonded labor, and prison labor further dramatize a situation of untold suffering for workers. The TNC drive for even greater profit margins in the face of stiff competition has resulted in the increase of subcontracting to sweatshops and homework especially for cottage industries like the textile and garment sector. Here, cheaper, unprotected labor is secured through subcontracting and putting out work to women and children who work on a piece rate basis, often well into the night.

Not only are working conditions hellish in sweatshops and factories which do not have enough ventilation and other facilities, but workers are often forced to work overtime when deliveries have become critical because this is cheaper than hiring more workers in the first place. Deaths, like in the case of a factory worker in the Cavite Export Processing Zone who died after having been forced to work for 36 hours without any breaks, are no longer very unusual.

Trade Issues?

For many Northern NGOs and movements, issues of labor oppression and exploitation are looked upon as issues from the context of trade practices. Since many NGOs work parallel to or lobby official bodies, this context of trade is immediately unavoidable. Considering that trade is reckoned in the framework of national perfomance and outputs, such framework would be natural. Trade, after all, is the exchange of commodities from one economy to the another.

But looking at trade mainly in the framework of an exchange between nations and between national companies would miss the essential structures and relations to trade - that trade is under the control or is conducted within the operations of transnational business concerns. While commodities are traded among nations, actually more than two thirds of this trade is conducted by transnational corporations. And a full one third of world trade is intra-TNC where national considerations and controls become inconsequential and in many cases, national interests are actually violated through transfer pricing and other profiteering practices.²

Even if we do look at trade with the understanding of dominance by industrialized nations and powerful transnational corporations, dealing with these social issues as something corollary to trade would still miss the essential economic relations of ownership, control and profit that cut across national boundaries. In the context of TNC operations, trade is no longer simply trade but TNC subcontracting, a global system of production where trade and investment become instruments for maximization of profits. Liberalization and globalization have made this practice blossom further into almost all economic sectors.

It should be obvious that these so-called trade issues cannot be dealt with primarily towards a reform of trade policies among nations and corporations. Not only does this framework miss the essential relations of control and profit involved in trade and investment, but this framework often naturally, albeit unintentionally in most cases, leads to national chauvinist perspectives. More importantly, they serve to hide the real relations of TNC control and overall domination of monopoly capital.

In this context it is but expected for transnational corporations to fashion themselves simply as merchants who have every right to seek better prices by importing from Southern countries and whose natural concerns are quality, price and delivery of commodities. And because we allowed ourselves to fall into the trap of looking at these issues within the framework of trade between discrete entities such as nations and corporations, the TNCs may say that, no matter how powerful and rich they are, they still are merely the customers of unscrupulous Third World suppliers and are therefore as much a victim as the workers of those suppliers are. And in the eyes of some WTO lobbyists and interest groups these Third World corporations or countries would be culprits of social dumping, much to the dismay and disadvantage of Northern companies and societies.

In response to various campaigns, many TNCs like Nike and Gap, for example, formulate codes of conduct for their suppliers to abide by. This system conveniently shields them from bad publicity and frees them from blame which is passed on to their suppliers. This would also mean additional work and profits for auditing and PR corporations, costs which will simply be added on to the retail price of the product.

Dealing with issues of labor exploitation and environmental degradation mainly from the national framework of trade opens the way for national chauvinist views to trade and investment. Examples of these are specific country boycotts or a general reaction to imports, especially from the Third World. Everyone knows that ending imports from one country does not really make much of a difference because there are many more impoverished countries where TNCs can transfer their business to and probably earn even greater profits. On the other hand, by such country campaigns we have simply reinforced the myth that TNCs are not to blame. Or that they are indeed vultures but they can be shooed successfully away from one dying country when they can actually just move to many others around.

And in the face of bad national publicity or country boycotts, many Southern NGOs take on an equally reactionary path of patriotic apologia in defending local companies and bewailing the loss of jobs and export incomes from their poor countries. In this manner, they deny the fact that the local elite are partly to blame for acting as business and political partners to TNCs and ensuring the violation of labor rights to keep wages artificially depressed.

TNC subcontracting as key structure to trade globalization

TNCs are not simply merchants. They are not simply companies which are facing unforgiving competition at home and are seeking relief from falling rates of profit by taking advantage of differentials in labor and price across the seas. If we look at the global structure of production and trade in the various industries, it becomes fairly obvious that what exists is not a network of independent companies operating downstream in each industry, but a network of companies which are interrelated by ownership, or by control in production and markets.

In the electronics, information technology and telecomunications industries, for example, a global network of production that is controlled by ownership and subcontracting schemes is utilized by Japanese, US, Korean and European transnationals. Key technological processes are done in their respective homefronts, but labor-intensive reprocessing and assembly are subcontracted to their subsidiaries or affiliates in export processing zones in the Philippines, Malaysia, Thailand and other developing countries. The subcontracted processes are computed to contribute less than 20% of the total value of the product and result in great profits to the TNCs from cheap labor and operating costs. On the other hand, royalties and R&D (research and development) costs are bloated to contribute to TNC superprofits.

In the garments and footwear industries, a global network of production also exists, whether for large name brands like Nike, Gap or Adidas, or for the thousands of unnamed importer-wholesalers and retailers who import from suppliers all over the world. It may be noted that overall, this industry is apparently more broadly-based by the large number of corporations, and by technology where materials and fashion design are easily replicated. However, production is still controlled by the TNCs which determine design, quality and production cost for every season or order. TNCs do not simply determine the export price in the sense of a buyers' market but actually practice price manipulation because the TNC determines the CMT (cut, make and trim) of the supplier plus allowance for profit. In effect, the supplier does not sell the product, but its production capacity.

The assembly part of production of garments and shoes done through subcontracting schemes in Third World export processing zones occupies a small share of value-added to the final product. The main share goes to the more technology or capital intensive textile, accessory and shoe-component manufacturing which is usually done in industrialized countries likewise through subcontracting schemes in Korea, Taiwan, or the US.

This production relationship in assembly is valid whether the supplier is a fully-owned subsidiary as in the case of Adidas or Triumph; or the TNC has equity in the supplier; or the supplier is an independent local company; or the supplier is itself another TNC which produces the raw material in Korea, for example, and produces the garment in a subsidiary in Southeast Asia. These variations are only determined by such considerations as protecting technology, assuring production space, or ensuring quality control.

A case in point is that of K-Phil Inc., a Korean supplier of yarn and also a sweater manufacturer in the Philippines which is one of the suppliers of Otto Versand, the largest mail order catalogue company in Europe. This was formerly named Kyung-il Philippines before it changed its corporate identity in order to close its plant and bust a newly-formed union. In the current Autumn-Winter 1997-98 Catalogue, a sweater manufactured by K-Phil for the equivalent of only DM10 is sold for DM50. This could have been supplied by another company, Eastland, for example, which has a union and has better working conditions, but would charge Otto around DM20 for the same product and still allow for substantial profit. But that is not enough for Otto.³

In fact, subcontracting TNCs are constantly in the look-out for cheaper prices for comparable quality and export performance. This is rationalized as necessary because of stiff competition, depressed markets and greater risks in bulk production. Buyers exchange notes about which countries offer better prices, and follow the drive by the IMF-World Bank to push countries to set up EPZ's and depress wages through structural adjustment programs. They pit one country supplier with another in order to depress CMT prices and use late delivery penalties and discounts, or even transform shipments into cheaper stock lots through cancellations in order to increase profits.

In the end, many subcontractors are faced with prices that are oftentimes lower than normal production costs. Instead of taking these from their profits, these local TNC agents naturally pass the squeeze on to their workers whether in their factories or through piece-rate jobbers. In many cases, suppliers often export at a loss. Others augment their income through technical smuggling.

Even more illustrative of the scale of control of transnationals in the garments and textile industry that is actually behind this seemingly broad-based sector is C. Itoh, one of the largest of the giant Japanese trading combines or sogo-soshas. Apart from the network of C. Itoh branches conducting general trading worldwide, there is also a network that includes a leading European garment wholesaler-importer, a large HongKong based trading company, a network of chains of more than a hundred factories in Bangladesh, China and Sri Lanka, and a large textile and accessories manufacturer and supplier with headquarters in HongKong, all of which are linked not only through its network of subcontracting. What is more interesting is that these companies reflect various nationalities, and operate globally but are also linked quietly but more decisively through various levels of equity ownership by C. Itoh.

These production and equity relationships, rather than independent trade relationships, can also be observed in other industries where Third World countries have become a source of reprocessed or assembled manufactures like toys, furnishings, textile and the like. National economy exports from local enterprises and utilizing raw materials and technology from the Third World, usually in handicrafts, occupy only a small, marginal percentage of the market.

TNCs are able to manipulate markets because Third World poverty has been amplified by the debt crisis and structural adjustment programs enforced in weakened economies. This creates an oversupply of weak economies and cheap labor ready to take on anything dictated by the transnationals.

Structural adjustment programs are also directly responsible for promoting export reprocessing (like garments and electronics subconductors assembly) as a measure to increase dollar income and employment, the promotions of export processing zones that provide incentives to TNC subsidiaries, weak or anti-worker labor laws, union busting, and the like promoted by opportunist client governments. An example of this is the National Employment Program under the Philippines 2000 program of the Ramos government.

TNCs make more than the traditional merchant profit by manipulating markets and abnormally depresing wages in source Southern countries as a matter of policy. Through the system of production subcontracting TNCs rake in almost all of the profits, and more importantly raise profit margins beyond what relative advantage can be provided by cheaper production costs in the South. These make up imperialist superprofits, a system of profiteering that make TNCs extremely profitable to monopoly capital and their home countries.

_______________________

The author is the Executive Director of IBON Philippines and a member of the Philippine Organizing Committee of the 1996 People's Conference Against Imperialist Globalization

¹ In his presentation to Forum Populaire in Montreal, 14-15 November 1997, Jaio Vacario Neto of the Brazilian Trade Union Center CUT reported that as a result of the oil sector strike, the industrial trade union was fined a staggering 36 M pesos forcing it to go semi-underground.

² In an interview for the above forum, Noam Chomsky stressed that trade is actually an ideological construct since what passes for trade is corporate production operations, and that trade increases inequality.

³ Suedwind, The Catch in Garment Production, Siegburg, October 1997.