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Corporate Globalization Resistance

CAFTA and the Scourge of Sweatshops
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by Global Exchange

Increased trade is the best way to eradicate poverty, so-called free trade advocates say, because exports are the key to sustained economic growth. But in reality, "free trade" agreements that are supposed to increase the global standard of living actually undermine it -- through lowering workers' wages, eroding workers' rights, increasing unemployment, and creating a global 'race to the bottom' that pits workers against each other instead of promoting global worker solidarity.

Proponents of a new 'free trade' agreement with Central America are once again claiming that this pact will help workers. The reality, however, is that if the U.S.-Dominican Republic-Central American Free Trade Agreement (CAFTA) is passed into law, it will transfer more power to multinational corporations at the expense of ordinary citizens and workers. While big business will win out, garment workers will be among the clear losers as CAFTA increases sweatshop-style production, and countries compete to offer potential investors lower wages and free reign over working conditions. If anything illustrates the false promises of corporate globalization and free trade agreements like CAFTA, it's the sweatshop.

What Is a Sweatshop?

According to the group Sweatshop Watch,

"A sweatshop is a workplace that violates the law and where workers are subject to:

  • Extreme exploitation, including the absence of a living wage or long work hours,
  • Poor working conditions, such as health and safety hazards,
  • Arbitrary discipline, such as verbal or physical abuse, or
  • Fear and intimidation when they speak out, organize, or attempt to form a union."

Though many may think of sweatshops as a thing of the industrial revolution, sweatshops are still in operation in countries throughout the world, including the United States. Every day, tens of millions of workers are regularly forced to labor long hours for poverty wages or less, and subject to physical and sexual abuse and toxic working conditions.

Sweatshops and the New Global Economy

The recent proliferation of sweatshops is inextricably linked to globalization. The signature characteristic of the new global economy is the increased mobility and flexibility given to finance capital. Corporations now have more freedom than ever before to relocate to whatever countries will provide the lowest wages and the loosest regulations, lowering their costs to increase their profits. The textile and apparel industry has taken advantage of this new dynamic like few others.

If sweatshops have become a metaphor for globalization's excesses, that's because garment factories are, in fact, the shock troops of the global economy. Visit a country that just recently opened itself up to foreign investment, and you will likely find a host of garment factories, even if there are very few other multinational enterprises located there. Nicaragua and Cambodia are typical examples—poor, war-torn countries that have attracted scores of garment manufacturers but very little else in the way of foreign investment. Low tech, intensely dependent on cheap labor, clothing manufacturing is the crest of the corporate globalization wave.

Separate forces meet in a shameful mix: A footloose industry scours the world for the cheapest wages; countries eager for any kind of investment auction off their workers to the lowest bidder; government regulators deliberately look the other way when abuses occur in order to keep foreign investors happy. It's this combination of desperate profit-seeking and equally desperate investment pursuit which has created the race-to-the-bottom that is at the root of the sweatshop resurgence.

For workers, the current system is a trap. The apparel manufacturers fear that if they raise their workers' wages, and therefore their prices to the U.S. retailers, the U.S. retailers will simply go someplace with even cheaper workers. The threat is real. Because the garment industry is so mobile—retailers can shift sourcing from one country to another in a matter of a fashion season—any country that raises its wages or enforces its workers' rights risks "pricing itself out of the market." That risk is what keeps wages low as long as the retail corporations demand the cheapest price possible.

Isn't a bad job better than no job?

Whenever a debate about corporate globalization and sweatshops arises, defenders of the status quo will almost always say: Sure a sweatshop is bad, but it gives people jobs they wouldn't have otherwise. The truth is that what sweatshops provide are not employment opportunities for workers, but exploitation opportunities for corporations. Wages and working conditions in sweatshops are so poor that workers remain in poverty even while fully employed.

According to the National Labor Committee, a worker in El Salvador earns about 24 cents for each NBA jersey she makes. These same jerseys then sell in the U.S. for $140 each. The 60 cents an hour the Salvadoran NBA seamstresses earn covers only about a third of the cost of living, and even the Salvadoran government says this wage leaves a worker in "abject poverty." In poorer countries such as the Dominican Republic and Nicaragua, the wages are even lower.

Proponents of corporate globalization claim that southern countries have a comparative advantage at producing cheaper garments. Moving factories south is more 'efficient' because workers are 'willing' to work for less. What they're really saying, however, is that taking advantage of the desperation of poorer workers and countries - paying workers less, making them work longer hours, and preventing unionization - is more profitable for the corporations.

Rather than happily accepting sweatshop conditions, garment workers in countries around the world have sought to improve their situation by trying to organize unions. Unfortunately those efforts are almost always crushed. Union organizers have been beaten, thrown in jail, blacklisted, and even killed. In some countries, such as Mexico, the government often cooperates with factory owners as they try to bust organizing drives. In a few countries with strong labor histories, such as Nicaragua and the Philippines, unions are tolerated, but not in the "free trade" zones where most sweatshops are located. Of the 30,000 workers working in Nicaragua's state-sponsored Free Trade Zone, only 3 percent are unionized. In these manufacturing zones, workers are expected to leave their liberty at the factory gates.

"We're not against foreign investment in Nicaragua," a worker there has told human rights groups. "But we are against exploitation." By exploiting workers in sweatshops, corporations drive down working conditions for all workers and prevent countries from pursuing a real model of development that would improve opportunities for their citizens. When corporations pressure countries to keep wages low, ignore domestic labor laws, violate international environmental codes, bust unions, and drive down working conditions globally, they are no longer taking advantage of poor working conditions -- they are creating and perpetuating them.


So-called "free trade" agreements such as the North American Free Trade Agreement (NAFTA), enacted in 1994, have exacerbated the race-to-the-bottom in working conditions. NAFTA is, in a sense, an "investors' rights" treaty. That is, it gives corporate investors new abilities to move production facilities and finished goods and services across international borders while providing guarantees that governments won't get in the way of business.

Countries have traditionally used tools like tariffs, or taxes on imports, as well as quotas, which are outright limits on the volume of imports, to help protect local industries from foreign competition. Lower tariff rates and the elimination of import quotas make it easier -- and cheaper -- for corporations to move goods and services across borders. At the same time, NAFTA's rules have given corporations assurances that government regulations won't interfere with their operations. NAFTA gave corporations new legal rights to sue national governments for the enactment of policies that can undermine their profits.

The changes wrought by NAFTA gave U.S. and Canadian corporations new incentives to relocate factories to Mexico, where wages are lower and labor unions weaker. This contributed to an increase in the number of sweatshops in Mexico. While new jobs were created in Mexico under NAFTA, average wages for workers in manufacturing industries, like textiles, actually fell.

Corporations have been happy to use the new advantages given to them by "free trade" agreements, especially when facing organized work forces in the wealthier countries. According to a study conducted under the auspices of NAFTA's labor side agreement, 90% of 400 plant closings or threatened plant closings in the United States in a five-year period occurred illegally in the face of a union organizing drive.

As corporate globalization continues, the race to the bottom is appearing limitless. Companies that moved jobs from the U.S. to Mexico under NAFTA, are now leaving for Asia where wages are even lower, and regulations more lax. The U.S. has lost over 879,000 jobs under NAFTA, many of those moving to Mexico. Now one-third of the 800,000 manufacturing jobs claimed by the Mexican government to have been created under NAFTA have disappeared as companies move once again to cheaper labor sources.

CAFTA -- a Raw Deal for Workers

Though much criticism has been raised about NAFTA's impact on working conditions, CAFTA fits the same mold. This is of even greater concern, given the fact that labor conditions in Central America are so appalling. Many Central American countries lack basic labor protections such as the right to organize or anti-discrimination laws. Workers regularly face exploitation, abuse, and hazardous working environments. In Guatemala and El Salvador attacks on, and even the killing of union members, is not unheard of.

The situation under CAFTA could be even worse than NAFTA for workers because of the greater disparity in working conditions between the U.S. and Central America. Whereas the average U.S. manufacturing worker makes around $16 per hour, the average Honduran worker producing goods for export to the United States makes 90 cents per hour.

Like NAFTA, CAFTA fails to include the core standards established by the International Labor Organization (ILO). CAFTA also fails to ensure that countries don't weaken or intentionally fail to enforce their already weak laws in an effort to attract investment. If CAFTA becomes a reality, the race-to-the-bottom will accelerate as corporations gain even more ability to move throughout the region. This will spread sweatshop-style production to new places, while making current working conditions even more miserable, as workers are forced to toil for less and less. Under CAFTA, corporations would be able to pit exploited workers in Costa Rica against even more desperate workers in countries such as the Dominican Republic.

What's more, CAFTA could pave the way for a much larger free trade agreement called the Free Trade Area of the Americas (FTAA). The FTAA has been in negotiations since 1994 and if enacted would create a sweatshop haven stretching throughout the Western Hemisphere, encompassing 34 nations, and placing even greater pressure on workers in the region.

The Corporate Sell-Job on CAFTA

CAFTA proponents are attempting to sell the agreement with the argument that it would benefit garment workers in both the U.S. and Central America, who currently face competition from cheaper labor costs in China. The blatant abuse of workers' rights and widespread sweatshop conditions in China are well documented. The World Trade Organization's Multi Fiber Agreement expired on January 1, 2005, abolishing a global quota system in textile production. So corporations like Gap, Nike, and Liz Claiborne, Wal-Mart, and industry groups including the American Apparel & Footwear Association claim that Central America needs CAFTA to keep its sweatshop jobs from moving to China.

Once again, we see that the promises of free trade are false. The majority of textile and apparel products produced in Central America already enter the U.S. duty-free under an existing agreement called the Caribbean Basin Initiative. What CAFTA would do, however, is allow companies to relocate to Central America, import textiles from other countries such as Asia, and then import finished products to the U.S. duty-free, actually reducing the demand for U.S. and Central American-made components. Garment workers in both the U.S. and Central America are currently grossly undercut by cheaper and more 'efficiently' produced Asian goods. CAFTA's lowering of tariffs between the U.S. and Central American countries will not change this dynamic.

In addition, CAFTA will eliminate one of the few tools available to Central American workers to press for better working conditions. Under the CBI and another agreement called the Generalized System of Preferences, Central American firms are currently provided access to the U.S. market on the condition that they meet basic labor rights standards. Without any meaningful labor standards, CAFTA will in essence replace the CBI and the GSP, providing increased market access while actually creating an incentive for countries to erode -- rather than improve -- labor conditions.

Fighting for Work with Dignity

If CAFTA becomes reality, corporations would gain more powers to act without being accountable to their workers, the communities in which they operate, or the public in general. The corporations' gain would come at workers' expense, as more and more people can find only jobs that sacrifice dignity and provide no opportunity. But CAFTA and sweatshops aren't inevitable. People in communities across the U.S. are saying no to sweatshops, and yes to work with dignity by passing living wage resolutions and requiring that government purchasing dollars only go to companies that meet basic labor standards. Collaboration between Southern workers and Northern workers and consumers has led to substantial victories including monitoring of factories and creation of "sweat-free" campuses and institutions. Pressure from consumers and activists has forced apparel companies to adopt and enforce codes of conduct for their factories.

Though CAFTA negotiations are completed, the agreement still must be voted on in the U.S. Congress to go into effect. With a vote likely this year, opposition to CAFTA is mounting, and Members of Congress are hearing regularly from constituents about the negative impacts of free trade. Activists across the globe are demonstrating that sweatshops can be a thing of the past, and we can instead globalize work with dignity.

To find alternatives to sweatshop clothing, visit Global Exchange's anti-sweatshop campaign.

For more information on CAFTA and labor issues:

Citizens Trade Campaign
Public Citizen's Global Trade Watch

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SPEAK OUT to your Member of Congress by calling 202-225-3121 and urging them to vote NO on CAFTA. Find helpful resources and more ideas at our Get Involved section.

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