“International players must work together to combat poverty pay in the garment sector.”

INTRODUCTION.

“International players must work together to combat poverty pay in the garment sector. ”

Ms. Anannya Bhattacharjee,

coordinator of the International Asia Floor Wage Alliance.

"Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, necessary social services, and the right to security..."

United Nations Universal Declaration of Human Rights Article 25.1

Majority of leading Multinational Companies nowadays prefer to produce their goods in Free Trade Zones (are also known as Special Economic Zones (SEZ); Free Trade Zones (FTZ); Foreign Trade Zone (FTZ); in some countries (for example in China) Special Economic Zones; in Mexico, they are known as Maquilas). For Multinational Companies it costs less to do so. Meanwhile, the human cost of this cheap production is covered by employees working at these manufactories around the world. Mainly these manufactoriesare located in underdeveloped parts of the host country or in developing countries like Brazil, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Madagascar. First time there were 43 million employees in approximately 3000 FTZs connecting 116 countries producing electronics, clothes, shoes and toys.

Export Processing Zones (EPZ) represent labor-intensive manufacturing centers involving the import of raw materials or components and the export of factory products. Governments of many countries establish SEZ s as industrial areas. Doing so they are creating testing grounds for employmentand imposing liberal market economy principles. For example, for corporations originating in FTZ s government may give Tax brake as a stimulant. Foundation of SEZs has created millions of jobs. But apart from this a little improvement has been made in the lives of ordinary employees there. Creation of FTZ s has been launched in order to attract employers and thus minimize unemployment and poverty, also generate a certain progression of the area's economy. But real consequences of the desire to attract investment in FTZ s at any cost are common across all these territories. Employees making these low-cost products exist in poverty. They earn only half of what they need to cover their basic needs and those of their families. They are unpaid overtime, they are forced labour, with poor health and safety transgressions. They work excessive working hours (sometimes they work up to 15 hours per day). This is result of the governments carelessness. Governments of countries placing FTZ have relaxed (or sometimes even actively suppressed) labour standards as I said in order to attract foreign investment into EPZ s.

This course work has two goals that go to the heart of this debate:

· The first is to show examples and analyze the Unethical Issues towards to millions of employees in Export Processing Zones;

· The second is to find some helpful solutionsin order to solve problems that arise when companies do business in Export Processing Zones.

“Ethical” Products and Principles of their making.

‘ Ethical’ means many different things to many different people, and therefore the answer depends on what you mean by ethical. For some people it means that the product is environmentally friendly or made from organic or recycled materials. For others it means clothes made by artisans or small producers. Some people may understand it to mean buying second-hand or locally sourced goods. All of these are important issues.

There is no agreed “ Ethical standards” yet. From the point of view of an International Business, meaning of the term “ ethical” depends upon one’s cultural perspective. Many of The Ethical Issues in International Business are ruled according to the fact that political systems, law, economic development and culture vary significantly from nations to nation. A practice considered regular in one nation may be regarded unethical in another. Managers in a multinational entity have to be particularly attentive to these differences because they work for an institution that transcends national borders and cultures. In the International Business s etting, the most common Ethical Issues involve employment practices, human rights, environmental regulations, and the moral obligation of multinational corporations. According to that, responsibility of any enterprise in any country is to pay their employees a ‘living wage’. But still most of the entities in supply chain policies don’t regard the obligation pay a real living wage as important. As the result, low wages are very common in EPZ s, where country minimum wages are sometimes not applied. Even in the United Kingdom the principle of a living wage in garment sector supports exists mainly on paper.

Most High Street Fashion Brands have the commitment to pay a living wage written into their Ethical Codes. Even though, yet little has being done to put the living wage into the pay packets of employees who desperately need it. This lip service to ethical responsibility without real action to end poverty hasn’t gone on long enough.

High Street Fashion Brands and retailers in Britain have to make sure that employees producing their goods are paid a living wage and that working conditions within the mainstream garment industry are good. Employees throughout their supply chain must be able to exercise their internationally-agreed labour rights before they can be called 'ethical. ' Brands need to focus on internationally agreed labour rights which include:

• appropriate working conditions;

• freely chosen employment;

• a living wage on the regular basis;

• freedom from sexual harassment, discrimination or verbal and/or physical abuse and most importantly;

• secure employment;

• voluntary overtime;

• not excessive working hours;

• workers are able to speak out and defend and improve their own labour rights through freedom of association to join a trade.

The reasonable questions here are: what standards should be applied when work conditions in a host nation are clearly inferior to those in a multinational’s home nation: those of home nation, those of host nation, or something in between?

If some critics would suggest that conditions include the same payment and appropriate working process across nations, how much divergence is acceptable? For example, does this mean that while extremely low pay for 12-hour work-days and a failure to protect employees against toxic chemicals are common for multinationals, should it we tolerate this kind of working conditions everywhere?

Managers regularly face up to ethical dilemmas without clear course of action. For instance, once an American inspector visited a foreign subsidiary in a poor nation and found out that a 12-year-old girl has been hired to work on a manufactory floor. Terrified to announce to the Head Office that the subsidiary is using child labour in direct violation of the company’s own ethical code, the American requested to the local manager to replace the child with an adult employee. The local manager fairly followed his instructions. The orphan, the only breadwinner for her six-year-old brother and herself, the poor girl was unable to find another job. She turns to prostitution. She dies in two years of AIDS. Her brother started begging money. He met the American executive while standing outside of the local McDonald’s. Of course this man was responsible for his fate. While the young boy was begging money, the American accelerated the pace and entered into the McDonalds. He ordered a quarter-pound cheeseburger with fries and cold milk shake. In one year the boy died from tuberculosis.

Did the Americans executive realize the difficulty of the girl’s case? Would he still have requested her replacement if he would know how complicated was her case? I don’t think so. Would it have been better, therefore, to stick with the status quo and let the girl to continue working? Probably not. That would have violated the rules against child labour found in the company’s own the Ethical Code. What was the obligation of the American inspector given this ethical dilemma? What then would have been the right thing to do? There isn’t simple solution to this quiz. The nature of ethical dilemmas is complicated - they are cases where no alternatives seem to be available and ethically acceptable. In this particular situation, giving a paid work to a child wasn’t appropriate, but the fact that she was given a job, neither was denying the child labour her only source of income.

Ethical dilemmas are discussed mainly because still many real-world decisions are very difficult to frame, complex. They involve first-, second-, and third-order consequences that are problematical to quantify. Doing the right things, or even knowing what the right thing might be, is often far from easy.

The manufactories concerned are likely to be located in areas known as Free Trade or Export Processing Zones (EPZ). The Union membership are not facilitating there. Even wording about trade union membership is not allowing and essentially meaningless there (for example, in China and in some EPZs areas trade union are suppressed or forbidden). There is another common chain to many headlines, different from the exploitation of workers by large multinationals. It concerns working conditions of employees in FEZ. At the same time, majority of them considered themselves lucky to be among those who had left their towns in order to get regular-salaried factory job. In 1909 in New York was published an article on hardships in the garment industry. It says there that things are not too bad if people are still immigrating from eastern Europe in order to receive these jobs. International unions are trying to persuade governments to integrate Free Trade Zones into their national economies and ensure that national labour and social legislation is respected. It is disputed that “transnational companies could pay a living wage, enforce environmental and occupational health standards and still make a huge profits”. In other words, the desire for profits must not eclipse an entity’s responsibility to eliminate and emphasize decent labour standards and wages across its supply chain wherever those workers are employed.

It seems impossible to stop buying from enterprises basing in Export Processing Zones. Export Processing Zones are widespread. However, it’s significant to inform these enterprises that labour rights issues are taken seriously and that customers expect them to respect it either. It’s significant because until now The Cost of Living in some countries is very lower than in Britain. The Minimum Wages in these countries are rarely enough to provide a living wage for workers. Many garment workers don't even get paid the minimum wage.

A living wage enables people and their families to meet their basic needs for clean water, nutritious food, health care, shelter, education, clothes, transport, also allowing for a discretionary income, to participate fully in society and live with dignity. It takes into account the cost of living, social security benefits and the relative standards of other groups.

The living wage is what each employee should make within a working week. But real picture of what millions of manufactory employees worldwide have, shows the facts that workers are not getting paid a living wage, they are being exploited, are working excessively long hours, whilst enduring unpleasant and often dangerous working conditions. For instance, have been found Indian workers producing cloth for Next, M&S and Debenhams, living in slum housing, having difficulties affording food, not to mention the union intimidation and violence, long hours in sweltering temperatures, verbal and physical abuse, unsafe water and poor sanitation. There is a report also surveyed employees manufacturing for Nike and Puma. Two thirds of the employees interviewed worked over 60 hours a week in order to earn enough money to cover the cost of basic needs. Most of the workers lived in small rooms with their families. Whole family share kitchen and toilet with their neighbours. One more report found factories in Bangladesh supplying Adidas. Employers pay to their workers lowest, less than required minimum wage. The basic wage for the lowest-paid staff in the Adidas factories was just 9p an hour. Exhausting working hours and severe abuse of workers were also found there. In one factory making baseball caps for Adidas one in five employees interviewed worked over 90 hours a week and two in three had clocked up more than 40 hours’ overtime in the previous month. At the same manufactory eight in ten of the working stuff had been verbally abused by their managers. Women employed at the factories described sexual harassment as widespread. Such sad stories are not new nowadays: “An 80-hour week for 5p. an hour” (from “The Guardian” in December 2006); “Tesco clothes made by child workers in Asia” (in “The Independent’s “) etc. Few months ago an Oxfam Australia report accused the sportswear labels of not doing enough to protect labour rights in their supplier factories in Indonesia. While the companies involved might be different, these stories are depressingly similar.

Women Workers.

It’s generally agreed within the global labour market and especially within EPZs that as employees, women are the worst off. Women represent the majority of employees in EPZs. In countries such as Jamaica and Honduras 90% of the EPZ workforce is female. Research has consistently found that women are paid less than men and are commonly subject to sexual harassment, violence and discrimination. Employers are hiring women from their home towns or villages in their mid – twenties. Then, supervisors, insisting that they are “too old” and that their fingers are no longer sufficiently nimble, have a good excuse to pay them the minimum wage. This practice is a highly effective way of minimising the number of mothers on the enterprise payroll.

For instance, in the Mexican maquiladoras all women applying for work must undergo pregnancy tests. “Cases of women workers in EPZs being forced to take pregnancy tests are well-documented” claims the International Confederation of Free Trade Unions (ICFTU). Some reports implicate such investors in the EPZs owed by Zenith, Panasonic, General Motors, General Electric and Fruit of the Loom, found that “pregnant women are denied hiring”. It seems to be normal for maquiladoras employers to mistreat and discharge pregnant employees. The inspectors of the International Confederation of Free Trade Unions discovered mistreatment designed to encourage employees to resign. Pregnant women were required to do overnights and to work on long hours of unpaid overtime and physically strenuous tasks. These women were also denied time off from work to go to see the doctor. This practice has led to on-the -job miscarriages. “In this way”, the study reports, “a pregnant workers are forced to choose between having a healthy, full-term pregnancy and keeping her job”.

In Cavite are well known stories about pregnant women who have been forced to work even after pleading with the supervisor until 2a.m. It’s not surprising anymore when women working in the ironing section give birth to children with burns on their skin. Some of the stories are certainly apocryphal. They became fear-fueld zones legends. But the abuse of pregnant women in Export Processing Zones is also well documented. The problem is far beyond Cavite. Other methods of sidestepping the costs and responsibilities of employing workers with children are reported throughout the zones. In El Salvador and Honduras the detritus in the zones are littered with empty packets of contraceptives pills that are reportedly passed out on the factory floor. There were reports in the Honduran zones of management forcing employees to have abortion. At some Mexican maquiladoras, women are required to prove they are menstruating through such humiliating practices as monthly sanitary - pad checks. Employees are kept on twenty -eight -day contracts - the length of the average menstrual cycle - making it easy, as soon as a pregnancy comes to light, for the workers to be dismissed.

In some FTZ pregnant workers might be sacked without warning because maternity leave is often non-existent. There is an example in a Sri Lankan zone when a woman was reported to be so terrified of loosing her work after giving birth to a baby that she drowned her newborn child in a toilet. Motherhood has become the scrooge of those zones where employees prefer to avoid paying benefits by assigning employees to a predictable schedule or offering any job security.

Excessive working hours make it difficult for women to both work and care for family members. As an example I would like to talk about Carmelita Alonzo, an employee in Cavite who died, according to her co-workers, “of overwork”. Alonzo, as it it was told to Naomi Klein again and again by groups of workers gathered at the Workers’Assistance Center and by individual workers on one-on - one interview and then described in her book “No Logo” - was a semistress at the V.T. Fashion Factory, sticking clothes for the Gap and Liz Claiborne, among many other labels. All of the workers want Naomi Klein to know this tragedy happened so that she could explain it to “the people in Canada who buy these products.” Carmelita Alozo’s death occurred following a long stretch of overnight shifts during a particularly navy pick season. “There were a lot of products for ship-out and no one was allowed to go home”, recalls Josie, whose denim factory is owned by the same firm as Carmelita’s, and who also faced large orders at the time. “In February, the line leader had overnights almost every night for one week’. Not only had Alonzo been working those shifts. She had a two-hour commute to setback to her family. Suffering from pneumonia - a common illness in factories that are suffocating hot during the day but fill with consideration at night - she asked her manager for time off to recover. She was denied. Alonzo was eventually admitted to hospital, where she died on March 8, International Women’s Day. When Naomi Klein asked a group of workers gathered late one evening around the long, table at the center how they felt about what happened to Carmelita. The answers were confused at first. “Feel? But Carmelita is us.” But then Salvador, a sweet-faced twenty -year-old from a toy factory, said some thing that made all of his co-workers nod in vigorous agreement. “Carmelita died because of working overtime. It is possible to happen to any one of us”. And then Naomi Klein added that “overtime horror stories pour out of the export processing zones, regardless of location: in China, there are documented cases of three-day shifts, when workers are forced to sleep under their machines. Contractors often face heavy financial penalties if they fail to deliver on time, no matter how unreasonable the deadline. In Honduras, when filling out a particularly large order on a tight deadline, factory managers have been reported injecting workers with amphetamines to keep them going on forty -eight - hour marathons.”

The reproductive health of both men and women workers, and their children, may be harmed by exposure to toxic chemicals, heat, noise, overwork and exhaustion. In factories where pregnant workers are allowed to keep their jobs, they may still be required to work in an unsafe environment, although they are often pressured to quit so the employer does not have to pay for maternity leave and benefits required by law. For instance, Runa, who makes clothes for Asda and Tesco, is quoted saying: "My pay is so meager that I cannot afford to keep my child with me. I have sent my five-month-old baby to the village to be cared for by my mother"; Ifat, who works in another factory, said: "I can't feed my children three meals a day"; Rahima Khatun, 21, who works as a sewing machine operator at one Adidas factory, said: “I had my first child last year, but I can’t spend enough time with her as I have to be at work at the factory 12 hours a day, seven days a week. I have no choice. Working overtime is compulsory. My managers are constantly swearing at us and pushing us if we don’t work fast enough. Sometimes the factory does not even pay us for three months at a time.”

Solutions.

During the last few years, there is an increase in awareness by enterprises of their responsibilities towards workers. Corporate social responsibility departments and supply chain policies or codes of conduct implemented have been created as a result of consumer pressure and high profile campaigns. But is this enough? What should be done nowadays by enterprises, government and customers in order to solve problems that arise when companies do business in Export Processing Zones. What are the solutions? Will it be enough for the majority of the enterprises to ensure payment of a minimum wage, which is enough to meet employees ‘basic needs, and the needs of their children. It is a basic common sense part of any entity's accountability. But even though, even being paid the very low minimum wages, many women just don’t earn enough to feed themselves or their families. Considering that, Jo Wood, founder of Jo Wood Organics, who travelled to Bangladesh with the ethical clothing brand “People Tree”, says: "If just 10p was given to the workers (by the retailer), it would raise their wages by 20%. That's a start”.

If buying enterprise have serious concern about conditions along their supply chains and want to improve them considerably, they need to demand from suppliers not only the regular payment of the minimum wages to employees, but mainly to support employees by making better working conditions, for instance to reduce overtime.

Also entities need to change their ways of doing business. They have to trade ethically. Auditing is a critical first step towards ethical trading. It will help to manufactories and to the companies working with them, organize an efficient system in order to correct the mistakes they would find. The best audit would emphasis on interview with employees. A helpful conditions to ensure employees that they will say the right thing is when they are interviewed by a local person with experience of interviewing and who has the workers' trust. Would be better if employees are conducted off-site. Otherwise it may appear to employees and campaigners that most enterprises are more focused on ticking the right boxes than they are in actually improving working conditions.

Long term relationship with suppliers is another way of taking responsibility by the company. For this goal, any company needs to demand lower prices and shorter lead times. On a company-by-company basis it is not easy to organize such a turnaround. Any enterprise doesn’t want to be the first to try new ways of doing things not to miss its perceived competitive opportunity. But there is always government. Government creates ultimately circumstances on this situation. Through legislation on corporate accountability government holds Clothing companies, Retailers and High Street Brands as responsible for their buying practices. Only being hold by government they will stop root themselves out and will take accountability for their part in the process of supporting conditions for the abuse of employees ‘rights. But until now Retailers and High Street Brands are very active on the top of the supply chain. They are surfing on a high water of the global trade and working together controlling the fashion industry. There is no need for them to relocate in order to chase the cheapest labour. Retailers and High Street Brands can easily commit to paying a living wage. They are absolutely responsible for their actions. And of course there are some clear profitable reasons why it is in their interests to maintain the absence of trade unions and minimum wages.

Brands could easily absorb the small increase in costs they generate. The question of the living wage concerns entities because they should take the root of the way they purchase and address the concrete their messages to factory managements. Enterprises need some credit in order to work actively to find industry-wide solutions that is convenient on a country-wide, to supply chain-wide and ultimately industry-wide level. But the companies have to do something, not only simply signing up. This means that buying companies need to:

• Develop strategies to improve wages, above and beyond

• Engage in good-faith negotiations with factories to ensure that a living wage can be paid out of prices paid to the factory. Accept that this may increase the cost they pay to suppliers;

• Make it clear to suppliers that they expect workers to be paid a living wage;

• Make it clear to suppliers that negotiating wages via a functioning collective bargaining agreement will not come at the expense of their custom;

• Ensure that local trade unions, who are better placed to get information from workers, and know the local cost of living, a involved in supplier audits;

• Work with other companies, trade unions and governments on a national and industry-wide level to develop strategies to raise wages, through active participation in multi stakeholder initiatives.

And of course there is always a role of The Customer. Nobody doubts that the pressure by customers on pushing entities to take a much more responsible approach needs to be maintained. Customers should realize the effect that may have the demand for a constantly changing cheap supply of clothes during short seasons. Enterprises have to understand that while they could be prepared to ignore the result of their companies purchasing practices, the rest of us won’t be so easily fooled. More people will know about the working conditions of employees in Free Trade Zones and the 'pittance' wage they are paid, more possible become the solution to create the Fair Trade, where employees will be paid a minimum wage and provided with adequate employment conditions. As a good example there is a fair trade producer group Swallows, located in Thanapara, a small village in north-west of Bangladesh. Swallows is a model of how fair trade garment production can work sustainably." At Swallows, it was a warm community of women who all have a great sense of independence but also work so well together in good conditions," says Jo Wood. "The village they live in is totally self- sufficient, yet it is miles away from what we would term civilization. They have a school, a crèche for the younger children, learning programs and an organic garden." "If you are an ethical and fair trade producer like Swallows, the workers don't have to live in the slums," says Wood firmly. "The workers can stay in their village with their families, their children can be educated and they also work in safer working conditions. Profits are also put back into the local community, making it a self-sufficient and rewarding scheme." Guinea, a Swallows employee, feels that discrimination and lack of opportunity for women in Bangladesh are the biggest barriers to improving living conditions there. But, she says: "The fair trade principles applied by People Tree have created economic stability for Swallows, allowing it to become an independent organisation. It has led to the empowerment of the women of Thanapara."

The child-labour promise, she thinks, is probably the main issue for most consumers, and probably most retailers, too: "No one wants to have pictures of children making their products splashed across the media. But for us, actually, the number one priority is that all workers get a proper living wage. If the parents were earning enough, they'd be able to send their children to school, instead of to work in a factory."

The formula for a minimum wage has been argued all over the world. The Free Trade Zones distributed by High Street Brands have been criticized by numerous authors such as Naomi Klein in her book No Logo, where disrespect to The Ethical Obligations of a multinational corporation towards employment conditions, human rights, corporation, environmental pollution, and the use of power which are not always clear-cut are demonstrated very well. However, there are not only High Street Brands. An increasing number of alternatives such as the ethical and environmental clothing market have seen a bit of an explosion over the past couple of years. This fact is usefully demonstrated at the latest issue of New Consumer magazine with showcasing 101 clothing, bag and shoe designers. "It's wonderful," says Sarah Ratty, who designed the Conscious Earthware line in the 90s and now designs Ciel - clothes that really are both beautiful and green (not literally green obviously - well, not all of them), and worn by celebs such as Sienna Miller. "I really believe that people are finally starting to wake up and notice what's going on. The thing I always wanted to do was to make these kind of clothes fashionable, not just a matter for your conscience, and I think that's starting to happen." The way forward then: secondhand clothes and small, ethical manufacturers and designers, and, in between that, harassing your favourite High Street shops about their ethical and environmental policies. Honestly, it is this season's big thing.”

References:

1. Naomi Klein (2010), No Logo, Fourth Edition, Harper Collins Publishers, London, pg. 216-217

2. Charles W.L. Hill (2008), Global Business Today, Fifth Edition, McGraw-Hill/ Irwin.

3. Andrew Gillespie (2002), Business in action, Hodder and Stougton Educational.

4. Daniels J., Radebough L.H., Sullivan D. (2007), International Business: Environments and Operations, 11^th edition, Pearson/ Prentice Hall, New Jersey.

5. Hill C.W.L. (2007), International Business: Competing in The Global Marketplace, 6^th edition, McGraw –Hill International Edition, New –Jersey.

6. Morrison J. (2002), The International Business Environment, London, Pelgrave.

7. Dobbin, Murray (1999), The Myth of the Good Corporate Citizen: Democracy Under the Rule of Big Business, Toronto: Stoddart.

8. Katz, Donald (1994), The Nike Spirit in the Corporate World. Holbrook: Adams Media Corporation.

9. Korten, David C. (1995), When Corporations Rule the world. West Hartford: Kumarian Press and Barrett-Koehler Publishers.

10. Moody, Kim (1997), Workers in a Lean World, London: Verso.

11. Rodrik Dani (1997), Has Globalization Gone too far?, Washington: Institute for International Economics.

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