Bargaining Power

356

14

THE CHALLENGE OF GLOBALIZATION

The globalization of markets for products, fi nancing, and labor has made it easier for companies to produce many of the goods and services they sell wherever in the world the right skills can be found at the lowest cost. The desire to sell products worldwide has also created incentives for fi rms to have a presence in multiple countries. These developments have made labor relations in many industries global in scope. Globalization is of particular importance in the United States and in other high-wage advanced industrial economies.

Globalization poses signifi cant challenges to labor relations practices. Until fairly recently, the laws, markets, institutions, norms, and practices of labor relations developed on a national basis. Globalization has weakened (though not eliminated) the role of national systems of labor relations and has given rise to new institutions, structures, and processes for dealing with all of the labor relations functions we discussed in prior chapters.

In this chapter, we will discuss these new arrangements and the challenges globalization poses to labor relations. We will use the framework we laid out in chapter 1 for analyzing labor relations around the world.

THE EFFECTS OF EXPANDING MARKETS

A key argument John R. Commons, one of the early theorists in labor relations, put forward was that as the markets for product and labor expanded in scope, unions and other institutions also needed to expand if they were to “take wages out of competition” by organizing workers to fi t the scope of the product and labor markets in which they worked. 1 Failure to match the institutions and policies to the scope of the market, Commons argued, would reduce the bargaining power of workers and put downward pressures on wages, what some now call a “race to the bottom.” Firms would move work to lower-wage regions and workers willing to work for lower-than-normal wages would migrate to take

Global Pressures: Multinational Employers, International Unionism, and NGOs

C o p y r i g h t 2 0 1 7 . I L R P r e s s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations Account: s4264928.main.eds

Global Pressures 357

those jobs. As discussed in this chapter, Commons ’ s predictions have proven accurate.

Another change in the external environment—advances in communications technologies—promoted the globalization of employment, especially in sectors where services are provided. Answering phones in call centers, editing, accounting, tax preparation, radiology (X-ray reading), legal research, and document manage- ment, are among the many services that are now provided to U.S. consumers by workers around the world.

Demographic trends also support the globalization of work. Transitioning economies have added a signifi cant number of workers to the global labor force in recent years, adding further competition for available work and putting greater pressure on higher-wage economies.

The Globalization of Business Strategies

Business competition is now playing out on a global basis as fi rms have become multinational. A multinational corporation (MNC) engages in economic activity in more than one country. Over the last sixty years, U.S.-based multinational fi rms have expanded greatly, to the point that they now have a major infl uence on world commerce and the conduct of labor relations in many countries.

Every MNC must make strategic choices about where to locate different parts of their production chain. This brings into play the role of business strategies as a key factor that shapes labor relations in developing countries. One key variable that infl uences the business strategy of an MNC is the wage levels at various potential production sites and in various countries. Although access to resources and markets also infl uence business strategies, the expansion of trade has led to a steady movement of manufacturing and service work from higher-wage countries to lower-wage countries and regions. Box 14.1 illustrates the evolving business strategy of Nike, a U.S.–based fi rm and one of the early fi rms to globalize its production of apparel and athletic equipment. 2

The Nike story told in Box 14.1 is similar to that of many other MNCs that are household names, such as Apple, General Electric, and General Motors. These fi rms sell products that can be easily transported globally and/or that sell to global markets have global supply chains . The development of global supply chains offers economic development and business opportunities to developing countries and to other companies that supply parts or carry out manufacturing on a contract basis for the household-name fi rms. Countries around the globe (and individual fi rms) compete for contracts from MNCs and the jobs that go with them by offering the lowest cost consistent with quality and delivery requirements. The effect of this is that competition in labor relations has become globalized.

The Pressure of Diversity on MNCs

Workers in various countries often view work differently, attach different meanings to work, and place different demands on their unions than is the case in the United States. 3 The management of an MNC thus must develop new skills to operate effectively in different cultural, legal, and institutional environments.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

358 Part V. Special Topics

BOX 14.1 Nike ’ s Global Business Model

Nike started operating as a company in 1964. In the early years, its business model called for the design and marketing of its products to take place in the United States and manufacturing to take place abroad. First it located manufacturing in Japan. As Japan ’ s labor costs rose and Nike ’ s business expanded, the company moved production to Korea and later to lower-cost countries such as Indonesia, Vietnam, China, and parts of Latin America.

Nike did not own or manage the factories that produced its products. Instead, it contracted with supplier companies located in these various countries. In doing so, Nike developed global supply chains. In 2016, Nike supplied products from 600 contractors in 46 different countries around the world.

Source : http://about.nike.com/ .

Of course, management in any fi rm faces some diversity in the demographic and racial composition of their work force and in their workers’ cultures and attitudes toward work. Some workers are concerned most about their pensions, while others may be most concerned about their current income and pay little attention to deferred compensation. Some workers have strong work ethics and would like to work on their own, while others may need constant supervision. The extent of cultural diversity increases, however, as a company crosses national boundaries. For example, compensation policies that work in one country may be inappropriate in another. Or communication and motivation techniques that succeed in one culture will fail in another.

There is also wide diversity among countries in the legal regulation of labor relations and employment conditions and the institutions that shape labor relations (see Chapter 15 ). In some countries, for example, national laws recognize the right of workers to form unions and to strike; in other countries unions are outlawed or are dominated by the government. In some countries, the national government extensively regulates employment conditions. The ideology and form of labor movements also differs markedly across countries, as does the structure of unions.

Multinational Firms and the Centralization of Labor Relations

MNCs face control and coordination problems because of the wide diversity in the culture, law, and institutions of countries. The key decision they face in different countries is how much to centralize the management of labor relations. At one extreme, labor relations management can be centralized in the corporate offi ces of the MNC. Alternatively, a company can use local management in each

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 359

country in which it operates to independently direct labor relations. Management ’ s problem is how to pursue companywide objectives through labor relations policies in the face of all the diversity that arises across the MNC.

From the 1950s to 2000, MNCs responded to this problem by allowing a high degree of local control (decentralization) in labor relations. Analysts of MNCs, in fact, generally conclude that their administration of labor relations is more decentralized than other management functions such as fi nance or marketing. 4 Managers of MNCs found that there were substantial benefi ts to be gained from decentralizing labor relations. These benefi ts include the ability to respond fl exibly to diversity. Local managers in each country could fashion labor relations policies that fi t with local conditions and events.

Since 2000, however, MNCs have begun to centralize their control and administration of labor relations. Although centralization of a corporate function has the advantage of providing consistency and economies of scale, diversity in local laws, culture, and union politics made centralization ineffective in the past.

Why have MNCs switched to more centralized control? The explanation appears to lie in the fact that the expansion of trade and the reduced infl uence and greater standardization of local conditions have led MNCs to prefer more centralization in their production strategies. The emergence of ever more global fi rms leads management to strive to integrate their internal operations and policies more fully. If production across national boundaries is integrated, for example, it makes less sense for the MNC to maintain wide variation in labor relations policies. The opening of trade through mechanisms such as the European Union , the North American Free Trade Agreement, and other regional trading blocs provides additional reasons for MNCs to globalize their labor relations policies.

This trend illustrates an important theme in the recent development of corporate culture, namely, that managements are increasingly striving to link labor relations more closely to business strategy. Increased globalization induces MNCs to develop particular business strategies and then align their production and labor relations systems with those strategies. While this is not very different from the dynamics at work in domestic fi rms, labor relations managers in MNCs face a particularly complex dilemma: globalization has increased the premium on coordination and centralization, but the cultures, laws, and institutions in the countries they operate in are very diverse.

The literature on human resources for MNCs provides theories about what happens when MNCs confront national institutions (i.e., laws and public policies). Some of the literature suggests that multinational corporations must bend to accommodate national (and in some cases local) institutional constraints and/or pressures. Instead of MNCs bringing standardization in workplace practices across countries, it is the MNCs that must bend and modify their practices to fi t institutional constraints and pressures. There is evidence that the intersection of MNCs and country-specifi c institutions leads to hybridization —organizational forms and practices that are blends between the home-country practices of the MNC and the practices that are common in the country where the MNC is operating. At the same time, however, studies of the labor relations practices of MNCs consistently

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

360 Part V. Special Topics

reveal a tendency for MNCs to preserve a strong role for home country practices regarding matters such as pay, career development, and communications with employees. 5

The Globalization of Labor Relations and Human Resource Management: The Case of Colgate-Palmolive

Colgate-Palmolive (C-P) is a U.S.-based multinational consumer products fi rm that has over 100 manufacturing facilities in thirty countries. It serves as a good case study of how a large MNC has restructured its global labor relations activities in recent years.

The sales and fi nancial performance of C-P has been quite strong since 1990. A key to the company ’ s success is that it has intensifi ed its globalization. International sales now contribute most of the company ’ s profi ts. C-P has also focused its manufacturing and marketing operations in particular regions in response to the regional trade pacts that have been made in recent years and to other pacts that are expected in the near future in regions such as Latin America and Asia.

Regional trade pacts have helped spur a movement in C-P toward regional “centers of excellence” through the consolidation of manufacturing. The company has moved away from its past practice of having multiple plants in a region (and, in some cases, in a country) that produce the same product. Technological improvements have made it possible to for C-P produce greater volumes in a single plant, and labor relations policies in the countries where C-P operates make three-shift-a-day, seven day-a-week production possible.

C-P also moved toward a simplifi ed global supply chain (i.e., more global sourcing and fewer preferred suppliers) and less product variety across countries. The latter move has been associated with moves toward making C-P products more similar around the globe to take advantage of scales of economy in production and standardization of its marketing. In addition, the ease with which consumer information now moves across countries is leading C-P to seek greater central control of how its products are marketed. These factors are all leading to greater regional and global coordination of production control, marketing, and other business operations of C-P.

Human resource and labor relations decision making was traditionally decentral- ized at C-P; most decisions were made by facility managers or factory managers in facilities. In this traditional way of operating, country-level presidents and directors of manufacturing at C-P got involved in facility issues only when there was a crisis. A small corporate staff (a vice-president of human resources and a vice-president of labor relations) at the company ’ s corporate headquarters in New York City provided strategic guidance to country- and facility-level managers on labor relations and human resource matters, but often they became involved in plant-level labor relations matters only when a new labor agreement was being negotiated or when a strike or some other emergency was occurring. Even then, their input was only advisory. On an everyday basis, local managers controlled the labor relations function.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 361

In the mid-1990s, corporate managers decided in the mid-1990s that the company needed to move away from this extreme form of decentralization in its labor relations function because of the increased need for coordination across C-P given the increasing role of its global supply chain. In addition, the integration of trade and the creation of centers of manufacturing excellence led the company to consolidate is production system. It accomplished this by closing a number of facilities and expanding output fl ows through increased mechanization and full-day and full-week operations in the plants that remained. One consequence of this production consolidation and increased trade fl ows was that a labor disruption at a center of excellence would now cause greater harm to the company ’ s sales and profi ts. Corporate managers wanted to have more control during labor disruptions and to engage regional human resource and labor relations managers in efforts to minimize their occurrence and effects when disruptions did occur.

A mixture of union and non-union plants evolved at C-P, with much of the growth occurring in non-union plants. However, since 2000, a disproportionate amount of consolidation has been occurring in unionized facilities, in part because the unionized plants tend to be older plants.

Since 2000, in an effort to gain more coordination and more consistency across the company and greater interaction between human resource and labor relations managers and those involved in operations, C-P has created (or expanded) regional human resource offi ces and gave these offi ces more direct involvement in plant- level labor relations activities. To improve the quality of human resource and labor relations, C-P launched a series of regional workshops that involved the company ’ s top manufacturing and human resource and labor relations staffs. The goals of these workshops were 1) to increase the regional focus across the company ’ s operations; 2) to increase coordination between manufacturing and human resource (and industrial relations) staff across the company (these various groups had rarely met together in focused meetings in the past); and 3) to teach a standard and strategic approach to the annual setting of key work-rule and operations objectives in all (unionized and non-union) facilities.

Middle and shop-fl oor managers at C-P are now expected to convey the company ’ s labor relations goals and methods to employees and to implement C-P ’ s global human resource and labor relations policies. This is accompanied by training for workers that focuses on instilling an appreciation for the increased need for adaptive change in the workplace.

C-P business units are now required to use a standardized “strategic labor relations process” to guide the preparation for, process of, and evaluation of collective negotiations (in unionized settings) and employee relations objectives (in non-union settings). The process includes a country-level planning meeting to set labor objectives, submission of those objectives for division approval, a strategically oriented negotiations process accompanied by an appropriate com- munications strategy, and subsequent evaluation of the overall process. Bargaining objectives, which typically involve work rules and work processes, and compensation objectives are identifi ed and then the parties are expected to consider how these objectives support each another. This process takes place under the guidance of

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

362 Part V. Special Topics

a corporate global labor relations strategy that top manufacturing and human resource managers develop. A key outcome of this process is that various human resource performance metrics are now collected and compared across plants. The hope is that this data and comparisons of plant performance will infl uence the objectives that are set in the strategic labor relations process that guides labor negotiations and the formation of employee relations objectives.

Additional steps have been taken in other parts of C-P ’ s human resource and labor relations division to stimulate more regional and global coordination of its operations. For example, the company introduced software for handling employee personnel records that gives employees an easy way to monitor and make changes in their personnel profi le (e.g., when their family status changes because of events such as marriage or the birth of a child). It also created centralized call centers to handle employee requests. The move to shared information services was facilitated by the growing similarity in the nature of the business and technologies in the company ’ s various business units, spurred in large part by the increased role of the company ’ s global supply chain.

At the central corporate, country, and plant levels of C-P, there is now increased attention to work conditions throughout the company ’ s global supply chain. The company makes a regular corporate audit of labor practices, including the monitoring of pay levels and work time and efforts to eliminate child labor. This audit is held at all of C-P ’ s supplier plants and the plants the company directly operates.

The Impact of Globalization on the Management of Labor Relations Processes

For all organizations, globalization is raising a series of questions and challenges related to how labor relations are managed across global suppliers and those who contract with multinational fi rms:

• Which employer is responsible for labor practices in global supply operations, the MNC or the local supplier?

• Should an MNC have an explicit global labor strategy? If yes, what should it be and how should it be monitored and enforced?

• What standards should govern labor practices in an MNC ’ s global supply chain, given the great variation in content and the level at which standards are set for issues such as minimum wages, overtime, and child labor regulations? How should MNCs deal with the great variation in the quality of enforcement of labor and employment laws across transitioning economies?

• Who, if anyone, represents workers in global supply chains? Unions are largely organized at the national level and have not expanded to serve workers across national boundaries and the level of unionization is very low in many transitioning economies (see Chapter 15 ).

• What are the consequences of globalization for labor relations? Is the “race to the bottom” that lowers the standards of living in higher wage countries and holds down wages and working conditions in low-wage countries inevitable

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 363

or does globalization support economic development, employment growth, and improved pay and other employment terms in transitioning nations?

MANAGING THE POLICIES AND LABOR PRACTICES OF GLOBAL SUPPLY CHAINS

The Nike company offers one example of how an MNC has dealt with these key issues. Initially, Nike, like many other MNCs, argued that labor practices among its global suppliers were not its responsibility. As worker activists brought media attention the presence of child labor and unsafe working conditions in companies in Nike ’ s supply chain, the company experience increasing pressure to question and ultimately to revise its view. By the mid-1990s, Nike leaders observed that there was a direct correlation between the growing number of media accounts of poor labor practices and conditions in its supply chain and the company ’ s falling stock price. In 1998, Nike ’ s CEO Phil Knight famously said he was tired of the fact that “Nike ’ s products have become synonymous with slave wages, forced overtime, and arbitrary abuse.” 6

Nike changed its policies and practices and became an early leader by establishing an internal Corporate Social Responsibility Unit. It charged this new unit to create a code of conduct that the company would use to monitor and evaluate labor practices in its supply chain and eventually to make public where its products are made and the extent to which its suppliers are meeting the standards in its code of conduct. Box 14.2 lists the practices covered in Nike ’ s code of conduct. While other large MNCs have followed a similar path, unfortunately, all too often it has taken a tragic accident to motivate companies to do so. Apple ’ s largest manufacturer in China, Foxconn, experienced suicides and considerable unrest in its factories before Apple began to actively monitor and seek to improve operations in its supply chain. The most visible and largest tragedy to date was the collapse of an apparel factory in Bangladesh in 2013, which led to the death of more than 1,100 workers, most of whom were female.

Monitoring Codes of Conduct

Once a company creates a code of conduct, it must decide how to monitor and enforce it. Should the company do it itself, using audit teams staffed by members of their social responsibility units? Should it hire and pay directly an accounting fi rm to audit labor practices? Should it work with and allow NGOs to do the auditing? Should it audit operations on an unannounced basis or tell suppliers in advance when audits will be done? Should it coordinate its audits with other MNCs that purchase goods from a given supplier to avoid having multiple fi rms using different standards and auditing operations multiple times? What standards should apply—ones that are consistent with the host country ’ s laws, norms, and competitive wage rates or company-wide standards?

Some MNCs, such as Walmart, have sought to avoid working with nongov- ernmental organizations (NGOs) and instead hire consultants and professional engineering fi rms to monitor suppliers. Others use a mix of internal auditors,

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

364 Part V. Special Topics

BOX 14.2 Nike ’ s Code of Conduct

Employment is voluntary

• The contractor does not use forced labor, including prison labor, indentured labor, bonded labor or other forms of forced labor. The contractor is responsible for employment eligibility fees of foreign workers, including recruitment fees.

Employees are age 16 or older

• Contractor ’ s employees are at least age 16 or over the age for completion of compulsory education or country legal working age, whichever is higher. Employees under 18 are not employed in hazardous conditions.

Contractor does not discriminate

• Contractor ’ s employees are not subject to discrimination in employment, including hiring, compensation, promotion or discipline, on the basis of gender, race, religion, age, disability, sexual orientation, pregnancy, marital status, nationality, political opinion, trade union affi liation, social or ethnic origin or any other status protected by country law.

Freedom of association and collective bargaining are respected

• To the extent permitted by the laws of the manufacturing country, the contractor respects the right of its employees to freedom of association and collective bargaining. This includes the right to form and join trade unions and other worker organizations of their own choosing without harassment, interference or retaliation.

Compensation is timely paid

• Contractor ’ s employees are timely paid at least the minimum wage required by country law and provided legally mandated benefi ts, including holidays and leaves, and statutory severance when employment ends. There are no disciplinary deductions from pay.

Harassment and abuse are not tolerated

• Contractor ’ s employees are treated with respect and dignity. Employees are not subject to physical, sexual, psychological or verbal harassment or abuse.

Working hours are not excessive

• Contractor ’ s employees do not work in excess of 60 hours per week, or the regular and overtime hours allowed by the laws of the manufacturing country, whichever is less. Any overtime hours are consensual and compensated at a

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 365

premium rate. Employees are allowed at least 24 consecutive hours’ rest in every seven-day period.

Regular employment is provided

• Work is performed on the basis of a recognized employment relationship established through country law and practice. The contractor does not use any form of home working arrangement for the production of Nike-branded or affi liate product.

The workplace is healthy and safe

• The contractor provides a safe, hygienic and healthy workplace setting and takes necessary steps to prevent accidents and injury arising out of, linked with or occurring in the course of work or as a result of the operation of contractor ’ s facilities. The contractor has systems to detect, avoid and respond to potential risks to the safety and health of all employees.

Environmental impact is minimized

• The contractor protects human health and the environment by meeting applicable regulatory requirements including air emissions, solid/hazardous waste and water discharge. The contractor adopts reasonable measures to mitigate negative operational impacts on the environmental and strives to continuously improve environmental performance.

The code is fully implemented

• As a condition of doing business with Nike, the contractor shall implement and integrate this Code and accompanying Code Leadership Standards and applicable laws into its business and submit to verifi cation and monitoring. The contractor shall post this Code, in the language(s) of its employees, in all major workspaces, train employees on their rights and obligations as defi ned by this Code and applicable country law; and ensure the compliance of any sub-contractors producing Nike branded or affi liate products.

Source : “Nike, Inc., Code of Conduct,” August 2010, accessed at http://about.nike.com/ pages/transform-manufacturing on January 17, 2017. See also Nike ’ s Corporate Respon- sibility Report: http://about.nike.com/pages/transform-manufacturing .

consultants, and NGOs. Still others work with global labor organizations to perform auditing and training functions. We will discuss the roles NGOs play in these processes in more detail later in this chapter.

The effectiveness of corporate audits is one of the most hotly debated issues in the fi eld of labor relations today. The results of the best research on this topic indicate that on a scale of 0 to 100, the average compliance rate tends to peak slightly above 50 percent. In addition, few plants appear to be on a path of

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

366 Part V. Special Topics

continuous improvement toward 100 percent compliance. Instead, over time, plants are as likely to exhibit declines in compliance scores.

Some plants do better than others on a consistent basis. Plants located in countries with strong laws governing labor and other business practices tend to have higher compliance scores. So do plants with longer-term contracts with MNCs and plants where there is more management interaction and sharing of expertise about best practices in lean manufacturing and advanced human resource management systems. 7 However, the fact that periodic audit inspections of building safety do not ensure that workplaces are truly safe is well illustrated by the examples a New York Times account gives of the steps managers at numerous garment factories have taken to avoid or manipulate the inspection/audit process (see Box 14.3 ).

BOX 14.3 Fast and Flawed Inspections of Factories Abroad

Inspectors came and went from a Walmart-certifi ed factory in Guangdong Province in China, approving its production of more than $2 million in specialty items that would land on Walmart ’ s shelves in time for Christmas.

But unknown to the inspectors, none of the playful items, including reindeer suits and Mrs. Claus dresses for dogs, that were supplied to Walmart had been manufactured at the factory. Instead, Chinese workers sewed the goods—which had been ordered by the Quaker Pet Group, a company based in New Jersey—at a rogue factory that had not gone through the certifi cation process set by Walmart for labor, worker safety or quality, according to documents and interviews with offi cials involved.

To receive approval for shipment to Walmart, a Quaker [Pet Group] subcontractor just moved the items over to the approved factory, where they were presented to inspectors as though they had been stitched together there and never left the premises.

Soon after the merchandise reached Walmart stores, it began falling apart. Fifteen hundred miles to the west, the Rosita Knitwear factory in north-

western Bangladesh—which made sweaters for companies across Europe— passed an inspection audit with high grades. A team of four monitors gave the factory hundreds of approving check marks. In all 12 major categories, including working hours, compensation, management practices and health and safety, the factory received the top grade of “good.” “Working Conditions—No complaints from the workers,” the auditors wrote.

In February 2012, 10 months after that inspection, Rosita ’ s workers rampaged through the factory, vandalizing its machinery and accusing management of reneging on promised raises, bonuses and overtime pay.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 367

Some claimed that they had been sexually harassed or beaten by guards. Not a hint of those grievances was reported in the audit. …

An extensive examination by The New York Times reveals how the inspection system intended to protect workers and ensure manufacturing quality is riddled with fl aws. The inspections are often so superfi cial that they omit the most fundamental workplace safeguards like fi re escapes. And even when inspectors are tough, factory managers fi nd ways to trick them and hide serious violations, like child labor or locked exit doors. Dangerous conditions cited in the audits frequently take months to correct, often with little enforcement or follow-through to guarantee compliance.

Supply chain experts and monitors say that far too often, factory managers play cat-and-mouse games with inspectors because they are desperate to avoid a failing grade and the loss of a lucrative stream of orders.

The experts provided real-life examples. To avoid appearing illegally overcrowded, one factory moved many machines into trucks parked outside during an inspection, a monitor said. Whenever inspectors showed up at certain plants in China, the loudspeakers began playing a certain song to signal that underage workers should run out the back door, according to several monitors. During inspections in India, some factories displayed elaborate charts detailing health and safety procedures that, like stage props, were transferred from one factory to another, another monitor said. …

Mr. [Auret] van Heerden [president of the Fair Labor Association] said, “You can never visit facilities often enough to make sure they stay compliant— you ’ ll never have enough inspectors to do that. What really keeps factories compliant is when workers have a voice and they can speak out when something isn ’ t right.”

Source : Extracted from Stephanie Clifford and Steven Greenhouse, “Fast and Flawed Inspections of Factories Abroad,” New York Times . September 3, 2013, http:// www.nytimes.com/2013/09/02/business/global/superfi cial-visits-and-trickery-undermine- foreign-factory-inspections.html .

Evidence shows that while codes of conduct have helped improve standards, they cannot, on their own, serve as a comprehensive strategy for achieving compliance or sustained improvements in labor standards in transitioning countries. There is evidence that countries with stronger labor laws and good enforcement practices have better rates of compliance with established labor standards. Research also suggests that combining the monitoring and auditing of labor conditions with advice and training for management on state-of-the-art lean manufacturing and human resource practices generates further improvements. The ILO ’ s Better Factories Cambodia program suggests that a heavy infusion of incentives (lower tariffs or other trade restrictions), government and international pressures, and support for workplace-based unions can also have positive effects.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

368 Part V. Special Topics

The evidence that corporate codes of conduct lead to positive (but limited) results has led to active debates over what else needs to be done to improve labor conditions in global supply chains. 8 Meetings of the multiple stakeholders involved—MNCs, NGOs, unions, government offi cials, representatives from the International Labour Organization (ILO), and academics—have been held at various universities to seek consensus on how to improve the monitoring of and compliance with codes of conduct, but to date no clear consensus has emerged. One big problem is that a root source of pressures to violate labor standards is the purchasing and sourcing staff of MNCs. Pressures to deliver products that have short life cycles (e.g., a popular style of shirts, shoes, etc. or the newest iPad or similar electronic device) quickly reverberate down through the supply chain to contractors, who conclude that they have no choice but to pressure their work force to meet the schedule. Not surprisingly, work hour rules—standards about overtime, maximum hours, meal and rest breaks, days off, etc.—are among the most frequently violated features of codes of conduct.

INTERNATIONAL (FREE) TRADE AGREEMENTS

International trade has been expanded in recent years through the negotiation of various trade agreements. Our review of several of those agreements focuses on the concerns about labor rights and labor conditions that surfaced during debates about these agreements and the provisions in them to address those concerns. We focus on the three trade agreements the United States has made with Canada and Mexico, Jordan, and Colombia. For a discussion of the important infl uence of international labor law, see Chapter 3 .

NAFTA

The North American Free Trade Agreement (NAFTA) between Canada, the United States, and Mexico took effect in January 1994. It removed tariffs and other trade barriers among the three countries over a fi fteen-year period. Both the passage and the continuing effects of NAFTA have been extremely controversial. The agreement has been widely criticized by labor unions who claim that Mexico ’ s low wages are the reason many U.S. fi rms have relocated south of the border. Environmentalists worry that companies fl ee south so they can take advantage of weak pollution controls and lax enforcement of environmental regulations. The American business community and many economists, on the other side of this debate, support NAFTA on the grounds that it brings gains through trade to all three countries. This is the reason Presidents George W. Bush, Clinton, and Obama gave for their support for this international policy. NAFTA supporters claim that it will help integrate Mexico more fully into the world economy and thereby address Mexico ’ s social problems and their spillover effects in the United States (such as high immigration and the drug trade). To address its critics, side agreements were added to NAFTA concerning the environ- ment and labor rights. The labor side agreements create national administrative

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 369

offi ces that are authorized to investigate public charges that one of the NAFTA countries is not enforcing its own labor laws.

The U.S.-Jordan Trade Agreement

In the U.S-Jordan Free Trade Agreement (2001), both countries committed to “reducing barriers for services, providing cutting-edge protection for intellectual property, ensuring regulatory transparency, and requiring effective labor and environmental enforcement.” 9 The effects of this treaty in Jordan were signifi cant because U.S. companies such as Walmart and Target quickly established factories in Jordan and in the fi rst year of the trade agreement Jordan increased its exports by 213 percent.

The U.S-Jordan Free Trade Agreement was the fi rst such agreement between the United States and a foreign country that included labor provisions in the text of the agreement. Both countries agreed to comply with the ILO ’ s Declaration on Fundamental Principles and Rights at Work and to enforce their own domestic labor laws. 10 In addition, the agreement established dispute resolution procedures and trade sanctions to be used if either country was seen as violating its domestic labor laws.

However, although the labor and environmentalist communities hailed these provisions, the U.S government ’ s policies regarding its enforcement of labor laws became much more pro-business when George W. Bush became president. In 2001, U.S Trade Representative Robert Zoellick and the Jordanian ambassador to the United States announced that both the U.S and Jordan had agreed not to resort to trade sanctions and that neither country would use the dispute resolution enforcement procedures outlined in the free trade agreement if doing so would lead to blocking trade. Consequently, the labor provisions that had been hailed as revolutionary in this free trade agreement were not applied as had been hoped. 11 In addition, after the free trade agreement came into force in 2001, Jordan passed the Public Assemblies Law and other legislation that limited freedom of association and collective bargaining.

In 2006, a representative of the National Labor Committee (an NGO) testifi ed to Congress that labor laws were not being enforced in Jordan and provided evidence that the Jordanian garment industry had sweatshops where workers worked twenty-hour days, were not paid consistently, and were emotionally and physically abused and that such shops hired migrant workers from China, Sri Lanka, and Bangladesh who were being forced to work as de facto involuntary servants.

The U.S.-Colombia Trade Agreement

The U.S-Colombia Trade Promotion Agreement (CTPA) was implemented in 2012. 12 The agreement states that both the U.S and Colombia will continue to maintain in domestic law the right to freedom of association (i.e., the right of workers to form and join a union) and the right of workers to engage in collective bargaining. In addition, both sides promised that they would eliminate all forms of forced labor and child labor.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

370 Part V. Special Topics

Observers claim that as has been the case in Jordan and Mexico, the labor rights provisions in the Colombia trade pact have proven to be ineffective. Allega- tions have surfaced that since 2010, 104 labor and human rights activists have been murdered in Colombia. In addition, the Congressional Monitoring Group on Labor Rights has provided extensive documentation showing that the right to organize and engage in collective bargaining is being curtailed and undermined in Colombia. 13

The Controversy Surrounding Trade Agreements

These three trade agreements make it clear that there is a great deal of controversy about to the real impacts of trade agreements on workers’ rights and work condi- tions. Defenders of those agreements argue that trade does ultimately lead to higher rates of economic growth in transitioning economies and improvements, albeit gradual, in wages and work conditions. Critics, on the other hand, claim that trade pacts encourage MNCs to leave countries where wages and work conditions are better. Critics also allege that any growth in employment largely occurs in low-wage sectors, often at the expense of indigenous (and frequently more craft-oriented) production. These debates have contributed to a reluctance to approve the Trans-Pacifi c Partnership that has surfaced in the U.S. Congress (see Box 14.4 ).

BOX 14.4 The Debate Surrounding the Trans-Pacifi c Partnership Trade Agreement

The Trans-Pacifi c Partnership Agreement (TPP) is a trade agreement that was signed on February 4th, 2016, by twelve Pacifi c Rim countries, including the United States. The Offi ce of the United States Trade Representative has stated that the agreement will “promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and com- petitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environ- mental protections.” The TPP includes provisions that will eliminate or substantially reduce tariff and nontariff barriers in essentially all trade in goods and services, including barriers to investment in goods and services. It will also facilitate the development of production and supply chains, promote innovation, and ensure that economies of all levels of development can participate in trade.

Supporters of the TPP in the United States claim that it will bring about an increase in U.S.-produced exports produced and increased support for well-paying U.S. jobs that will strengthen the middle class. Although President Obama has been a fi rm advocate of the agreement, it has been opposed by

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 371

many Democrats. In addition to dissent from high-ranking political fi gures, there has been a signifi cant amount of union opposition to the TPP. One of the main reasons for the opposition is due to fear that liberalization of trade will increase competition between U.S. labor and labor in low-wage countries that are a part of the agreement. Pacifi c Rim countries include Vietnam, Mexico, Chile, Peru, Brunei, and Malaysia.

Union leaders believe that the increase in competition that will result from the TPP will lead to signifi cant losses of U.S. jobs because of outsourcing and lower wages for those who are able to keep their domestic jobs. Critics of the TPP also do not believe that the agreement has adequate protections for workers in the lower-income countries that are parties to the agreement. For example, independent labor unions are not permitted in Vietnam; only unions affi liated with the Communist Party are recognized. Brunei has outlawed strikes and refuses to recognize collective bargaining.

U.S. unions argue that the Obama administration has made concessions on labor rights issues in order to get transitioning countries to accept the agreement, despite the statement of the United States Trade Representative that the agreement promotes “enhanced labor protections.” Unions believe that what little labor protection provisions the agreement does have are nullifi ed by inadequate enforcement mechanisms. Critics of the TPP claim that worker protection effectively is left to the discretion of the individual countries, which will likely do little to change their current practices.

In order for the United States to ratify the TPP, Congress would have had to pass a bill to implement the agreement. In early 2017, newly elected President Trump signed a statement formally abandoning the TPP.

Sources : Offi ce of the United States Trade Representative, “Summary of the Trans-Pacifi c Partnership Agreement,” October 2015, https://ustr.gov/about-us/policy-offi ces/press- offi ce/press-releases/2015/october/summary-trans-pacifi c-partnership ; Ben Penn, Len Bracken, and Rosella Brevetti, “Some See TPP Trade Deal as Harmful to Workers,” Daily Labor Report , October 5, 2015, C-1, Kevin Granville, “What is TPP? Behind the Trade Deal that Died,” New York Times , January 23, 2017, https://www.nytimes.com/ interactive/2016/business/tpp-explained-what-is-trans-pacifi c-partnership.html .

LABOR ’ S RESPONSES TO THE POWER ADVANTAGE OF MULTINATIONAL CORPORATIONS

The expansion of economic activity across national boundaries puts workers and unions at a disadvantage in terms of bargaining power. Multinational operation allows management to shift production and capital across national borders and raises the competitive pressures facing the work force. Imagine, for example, the pressures high-paid U.S. (and Western European) workers face when MNCs operating in their countries can shift production to countries where workers receive hourly wages that are a small fraction of those U.S. and European workers

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

372 Part V. Special Topics

earn and where environmental and other social regulations are weaker. Unionists refer to this as social dumping . When management is struck by workers in their operations in one country, it has a bargaining power advantage if it can turn to production facilities or substitute workers in other countries.

In theory, one way a union could counter the advantages management gains from a company ’ s expansion of its production locations would be to expand its own jurisdiction to make it coextensive with the boundaries of the MNC. Unions in the United States (and in a number of other advanced industrialized countries) have expanded their jurisdiction by shifting from local or regional organizing to become national in scope as the product markets companies serve also became national. If this were to happen on a large scale, the resulting multinational unions would be better able to remove competition across workers in the different locations where MNCs operate. This section examines how successful unions have been at becoming multinational.

Even though there are some examples of multinational unions, or at least the coordination of policies of national unions, this has not happened very often. Let us consider why this is so and then look at some counterexamples.

Diffi culties Unions Face When Operating Multinationally

Unions have found it diffi cult to become multinational because of the wide diversity that exists across countries in culture, law, and institutions. It is diffi cult enough for a union operating in one country to maintain cohesion and solidarity across its members. When the economic and cultural differences, communication diffi culties, and fears that exist across workers in different countries are added on top of the normal problems unions face, maintaining solidarity becomes a nearly insurmountable problem.

Consider the problems that multinational operation in both transitioning countries and highly industrialized countries creates for union solidarity. Workers in a transitioning economy , who earn low wages and face few employment alterna- tives, are generally very reluctant to support the bargaining demands of their high-wage counterparts in advanced industrialized nations. There are strong incentives for the workers in these two countries to view each other as competitors for jobs.

Also, imagine how hard it is for a union to communicate to its members if those members speak a variety of languages. Then imagine the diffi culty a mul- tinational union would face as it tried to obtain and convey the information union members would need as they entered a bargaining process. Here is another area where management in MNCs has an advantage over unions. The managers of an MNC typically have a lot of awareness of company objectives and worldwide activities, whereas workers and unions are often hard pressed to gain information about such activities.

The merger of independent unions across national borders has not been a solution to multinational pressures. It is diffi cult enough to merge unions even in a single country, where there are strong advantages to be gained in bargaining power. Even greater impediments would exist if a merger were to involve two

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 373

unions based in different countries that represent workers at the same MNC. It is most unlikely that the structure of two unions that might consider merging would be similar, even if the workers were employed by the same fi rm. Similar problems would exist even if these unions wanted to merely coordinate their bargaining demands.

Yet even given these diffi culties, examples of cross-national union solidarity and support can occur short of mergers or coordinated bargaining. We examine efforts to build cross-national union solidarity below.

Cross-border union strategies have taken many different forms. The strategies for Thai garment workers, German metalworkers, and U.S. retail workers must be different. Industry, company, union structure, political traditions, ideology, levels of bargaining power, and differing sets of goals all affect how cross-border union activities are structured.

The Role of International Trade Secretariats

Some international trade secretariats provide information to member unions and coordinate activities across national borders. These autonomous agencies cover particular industries or groups of industries. The International Metalworkers Federation, one of the most active of these secretariats, includes members from both newly industrializing and highly industrialized nations. Among its many activities, it issues research reports to its members.

Many of the secretariats have a close working relationship with the International Federation of Free Trade Unions (ICFTU), which includes affi liated unions that represent 48 million workers around the world. The ICFTU excludes Communist unions. The World Federation of Trade Unions (WFTU), a federation of only Communist unions, in the 1960s represented 134 million workers. After the breakup of the Soviet Union, the role of the WFTU declined precipitously. While the global expansion of trade is leading unions around the world to communicate more extensively with their counterparts in other countries, the infl uence of trade secretariats has been modest in part due to political differences across the unions that are members of these union federations .

Cross-Border Union Alliances

Some unions have attempted to overcome diffi culties with communications and political differences and have extended their reach globally either on their own or by forming alliances across national unions. Airline pilots have the most fully established international body. The International Federation of Airline Pilots Associations is composed of 100 national-level pilot unions/associations with a combined membership of approximately 100,000 pilots (see Box 14.5 ).

Cross-National Union Strategies and Pressure Campaigns

Similar cross-border networks or formal agreements to coordinate when needed have occurred in other industries as well. One prominent example was formed in 2008 when the North American–based United Steelworkers and the United

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

374 Part V. Special Topics

BOX 14.5 The International Federation of Airline Pilots Associations (IFALPA)

The mission of IFALPA is to be the global voice of professional pilots by providing representation, services and support in order to promote the highest level of aviation safety worldwide.

This goal is realized through our core function which is to represent our members by:

Interacting with international organizations to achieve the highest level of aviation safety.

Developing common policies and positions and promoting the adoption of such policies by ICAO, regulatory authorities and the State of each Member Association.

Promoting and enhancing the role and status of professional pilots in ensuring the safety of the aircraft and well-being of passengers and goods entrusted to their care.

Promoting a viable and expanding air transport industry. Providing training and education for the benefi t of professional pilots. Providing Member Associations with services as needed. Assisting in the organizational development of Member Associations. Supporting Member Associations by providing expertise in the areas of Technical,

Safety, Regulation and Industrial issues. Facilitating the exchange of information and the co-ordination of activities

amongst Member Associations and Pilot Alliances through various forums such as Conference, Regional Meetings and Standing Committees.

Source : IFALPA, “Mission Statement,” http://www.ifalpa.org/about-us/mission-statement .html .

Kingdom–based UNITE joined forces. Box 14.6 summarizes the goals of their joint effort, called Workers Uniting. To date, these unions have supported each other in strikes involving companies that have operations in Britain and North America.

Comprehensive Union Pressure Campaigns

Unions that use a mixture of research, rank-and-fi le activism, boycotts, and political leverage to put pressure on a company globally have developed more comprehensive campaigns since the late 1980s. These campaigns often target a single employer where workers have gone on strike, have been locked out, or are engaged in an organizing drive. Such campaigns use in-depth research to

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 375

BOX 14.6 Workers Uniting: A Global Union

Workers Unite brings together Unite, the biggest union in the UK and Ireland, with the United Steelworkers, the largest industrial union in North America. Here are four reasons why this partnership is said to be critical by Workers Uniting.

1. The economy is globalizing. From Brussels to Beijing, decisions about our economy are increasingly made far from home. A global union can provide us a voice in those decisions.

2. Politics is globalizing. Right wing politicians are using the same vicious tactics to undermine our livelihoods in the UK as they are in the U.S. and Canada. A global union can help us support progressive politics on both sides of the Atlantic.

3. Our employers are globalizing. A couple decades ago, only a few of our employers operated in more than one country. Now, nearly all of them do. A global union can help us stand up to our employers wherever they operate.

4. The movement is globalizing. Whether it ’ s standing up for fair trade or fi ghting back against bank bailouts, progressive groups are mobilizing and uniting everywhere. A global union can help us join them in the fi ght for a better world.

Source : http://www.workersuniting.org/ .

identify vulnerabilities in the company ’ s global operations. Comprehensive union campaigns build coalitions with other unions, communities, and NGOs around the world to target the company ’ s image, its suppliers, or its customers globally to pressure the company into improving labor conditions.

The 1986 Shell Oil boycott was one of the earliest truly global comprehensive campaigns. Using the consumer boycott as its central tactic, the Shell campaign linked anti-apartheid activists, trade unionists, civil rights activists, politicians, church activists, and consumers in a global divestment campaign. In North America, the United Steelworkers have used these types of campaigns to take on global multinational companies such as BASF, Ravenswood, Bridgestone/Firestone, and Goodyear to end strikes, lockouts, and support collective bargaining campaigns. This approach is not limited to North American unions. Central American banana workers, European dockworkers, and Taiwanese telecom workers have all used cross-border campaigns since the late 1980s.

While many campaigns have been successful, this type of global coordination and comprehensive campaigning requires large amounts of resources, funding, and long-term trust between unions. MNCs have threatened unions with lawsuits

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

376 Part V. Special Topics

for engaging in these types of campaigns, and weak transnational labor standards have made it diffi cult for unions to enforce gains that have been made.

Cross-Border Union Networks

Union networks are groups of unions at a shared multinational employer that come together to create a transnational union structure with the goals of sharing information, coordinating activity, and bargaining with an employer on a trans- national level. Networks fi rst appeared in the 1970s. Global union federations have promoted them as a way for unions to overcome the imbalance in bargaining power with multinational employers. Networks create long-term relationships between unions that have made it possible for them to share information about a common employer, to act as infrastructure during cross-border campaigns, and to act as decision-making bodies that can bargain with employers on a transnational level.

Dozens of networks have been established in the auto, chemicals, food, and service industries. Some networks such as those created by unionized workers at Carrefour and Arcelor have been able to sign agreements with employers on a transnational level. Examples include international framework agreements that establish basic health and safety conditions and independent monitoring. Others such as unions at Volkswagen and Mercedes have created European-style works councils that meet annually with company management to discuss working conditions and compliance with basic ILO conventions. Finally, others such as unions at Gerdau and Sodexo have used networks to create global comprehensive campaigns. Unions in Brazil have used networking as a strategy to coordinate bargaining nationally and to establish transnational links with unions in a company ’ s home country.

However, challenges remain as differences in national labor laws, language and communication issues, and weak transnational legal regulations have hampered attempts to build long-term union structures such as networks.

Campaigns against Sweatshops in the Garment Industry

In the 1970s, sweatshops as a form of garment production reappeared in Latin America, the Caribbean Basin, Southeast Asia, and Southern California. Nations reeling from debt crises and structural adjustment programs had turned to export processing zones (EPZs) for growth strategies. EPZs are tax-free industrial havens for MNCs where they can assemble low-value products such as gar- ments, textiles, electronics, and toys and can employ a low-wage, mainly female work force. Aided by free trade agreements and a system of subcontracting and global production, sweatshops became the symbol of high fashion apparel lines in the developed world and the face of a race to the bottom for transitioning countries.

Workers, mainly young women, organizing in places such as Guatemala, Sri Lanka, Thailand, and Haiti have used global solidarity campaigns as means of winning improvements in individual garment factories and as a way to increase pressure for industry- and retailer-wide codes of conduct. These campaigns bring

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 377

together a unique set of actors that includes garment workers and unions, trans- national NGOs, labor union allies, consumer activists, and North American university students in advanced industrial economies.

Two factors are unique to organizing in the garment industry. First, many of the products produced in the apparel factories of Latin American and South Asia are sold to consumers in North America and Western Europe. This created an opportunity for garment workers to make alliances with unions and consumer groups in advanced industrial countries by bringing to light to their working conditions. Second, many of the factories in newly industrializing countries are actually subcontractors for large, well-known brand names such as Benetton, Disney, and Reebok that are headquartered in advanced industrial countries. Because of the disparity between the high cost of luxury apparel in the advanced industrial countries and the poor working conditions of workers in the transitioning countries, the campaigns of garment workers have often relied on publicity campaigns linking well-known retailers such as the Gap and Walmart to poor working conditions in transitioning countries as a way to improve working conditions in garment factories.

In addition, because athletic companies such as Adidas and Nike have large contracts with universities, U.S. college students have become key supporters of these campaigns through groups such as United Students Against Sweatshops .

Some unions have promoted international framework agreements (IFAs) as effective and participatory structures. IFAs are multilateral agreements between a corporation and a union, usually one of the global union federations , to ensure equal standards across a fi rm at a global level. IFAs establish core labor standards such as the abolition of child labor, nondiscrimination, and freedom of association. They attempt to cover all employees, including workers who are subcontracted or are employed by subsidiaries and suppliers of the fi rm and are designed to establish an institutionalized relationship with the fi rm at the headquarters level that ensures some form of monitoring and a process for improving working conditions. Unionized workers have had some success in getting MNCs to sign IFAs, but they are voluntary and are diffi cult to enforce due to a weak regulatory environment transnationally.

THE ROLE OF NGOS

NGOs are now playing active roles in identifying abuses, lobbying for improved standards and improved enforcement practices, and in some case actively representing workers and/or auditing labor conditions in supplier operations. Some NGOs are funded by employers and some are funded independently by private foundations, individual donations, or labor unions. Some choose to work at arm ’ s length with MNCs and some choose to work in collaboration with them. Many NGOs use both tactics. Various meetings of multiple stakeholders have been held to bring NGOs, unions, MNCs, and international organizations such as the ILO and the World Bank together to try to learn from their experiences to date and from the research that has been done on global labor standards. However, diversity of

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

378 Part V. Special Topics

practices remains the norm. (See Box 14.7 for examples of different NGO activities).

The Worker Rights Consortium

The Worker Rights Consortium (WRC), one of the most active of these NGOs, has been involved in efforts to improve labor conditions at Foxconn in China, at apparel factories in Bangladesh, and at Nike plants in various countries. The history and role of the WRC is described in detail in Box 14.8 .

BOX 14.7 Examples of Labor NGOs and What They Do

Name Activities

Fair Labor Association www.fairlabor.org

Monitors factories independently and reviews company audits Certifi es compliance with codes of conduct Reports on results of audits in participating companies Governed by Board of Industry that consists of

representatives from industry, NGOs, and universities Social Accountability

International www.sa8000.org

Certifi es that manufacturers are in compliance with Social Accountability International labor standards

Trains auditors Provides self-assessment software for supply chains with

recommendations for how to improve performance Lists factories that have achieved SA8000 certifi cation Governed by mix of industry, NGO, and legal specialists

Worker Rights Consortium

www.workersrights.org

Investigates conditions in factories that sell licensed apparel to universities

Publishes periodic reports on factory conditions in different countries

Maintains public database of factories that supply goods to universities

Governed by a board that consists of university, student, and other independent worker rights advocates and experts

United Students Against Sweatshops

www.usas.org

Campaigns against abuses of workers’ rights in factories that supply apparel licensed by universities

Advocates for fair working conditions for university employees

Led by student representatives from participating universities China Labor Bulletin www.clb.org.hk/en/

Provides legal assistance to workers and labor organizations in China

Conducts research on labor conditions in China Maintains website on strikes and collective bargaining in

China Led by professional staff; founded by worker rights advocate

Han Dongfang

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 379

BOX 14.8 Policing Worker ’ s Rights in the Global Economy: The Worker Rights Consortium

The Worker Rights Consortium (WRC), a nonprofi t organization started by United Students Against Sweatshops in consultation with workers and labor rights experts, has become a watchdog for international sweatshop labor. The WRC was started to help enforce the manufacturing codes of conduct adopted by colleges and universities. These codes ensure that factories that produce clothing and other goods bearing college and university names respect the rights of their workers.

The WRC has pressured universities to end contracts with companies that do not comply with labor standards. For example, in March 2000, Brown University terminated its contract with Nike Inc., because of Brown ’ s requirement that Nike comply with the university ’ s licensing requirements and with a monitoring system that is part of the WRC process. In its defense, Nike said it had “serious concerns about the code and monitoring system included under the WRC” and that “the only effective way to make progress in improving factory conditions around the world is to have all stakeholders at the table.” Nike claimed that the WRC was excluding industries that it should be working with.

The WRC at times has clashed with the Fair Labor Association (FLA), an independent group formed by the Clinton administration in 1999 to monitor the labor standards of overseas apparel manufacturers that sell their products to the United States. The FLA grew out of the Apparel Industry Partnership, a group of apparel manufacturers, consumer groups, and labor and human rights organizations President Clinton brought to the White House in 1996. By 2000, over 100 colleges and universities had associated with the FLA so that they could be assured that clothing with their logos was not made in sweatshops. However, the WRC has criticized the FLA for being an industry-controlled monitoring system that only covers up sweatshop abuses. The WRC supported a nine-day sit-in at the University of Pennsylvania to protest the university ’ s association with the FLA.

Since 2000, however, the WRC and FLA have begun to forge a working relationship, including working together on various monitoring projects. The WRC ’ s membership now includes more than 100 colleges and universities.

Sources : “Nike Terminates Contract with Brown after University Seeks Compliance with Code,” Daily Labor Report , April 4, 2000, A-2; “Temple University Reviews Membership in ‘Fair Labor’ Apparel Monitoring Group,” Daily Labor Report , February 22, 2000, A-5.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

380 Part V. Special Topics

THE NEGOTIATION OF GLOBAL STANDARDS

The challenge of creating negotiations structures, processes, and ongoing relationships in global operations has generated several different approaches. The most basic approach is to promote union representation on the shop fl oor of supplier operations by providing technical assistance to unions in transitioning countries. The ILO provides this type of technical assistance. In Cambodia, the ILO has developed a particularly extensive program called Better Factories Cambodia that provides training, dispute resolution, and monitoring of supplier operations. It also educates workers about best practices for unions and collective negotiations and labor standards. Reports on the program are quite positive, unions representing a majority of workers in some apparel plants in Cambodia. In addition, compliance with labor standards in the ILO ’ s code of conduct range from 70 and 95 percent. However, reports continue of collusion and corruption among some employers and union leaders. This program has been sustained for over a decade in large part because of the continued support of the ILO and the Cambodian government. An independent evaluation of the ILO program has shown that the garment industry has continued to grow in Cambodia since the program was put in place and that fi rms that complied with the employment standards the program monitors are more likely to survive over time than those that did not initially comply. 14

While the Cambodian example is encouraging, it has yet to be replicated in other newly industrializing countries with low rates of unionization rates remain quite low. In such countries, the challenges of maintaining stable unions in industries and in companies are quite high.

In some ways, NGOs conduct activities that are similar to what unions do. Some NGOs have led efforts to publicize abuses of labor standards. Some have negotiated with companies to upgrade health and safety and pay levels in specifi c countries. Others have created sophisticated software programs that help fi rms evaluate the state of labor practices in their supply chains and provide advice about how to improve them. Other NGOs, such as United Students Against Sweatshops, have used consumer boycotts and lawsuits against highly visible companies the produce brand-name products, such as Adidas and Nike, to pressure them to end labor abuses among their contractors.

NGOs that Do Unionlike Activities

Some NGOs include the direct negotiation of wages and improvements in other work conditions in their activities. Three prominent examples are found in India. We present them below as examples of the expanding role of NGOs are playing around the world in directly representing and bargaining for low-wage workers.

In India, as in most transitioning economies, NGOs perform some the tasks that unions in advanced industrial countries perform. One such organization is the internationally acclaimed Self-Employed Women ’ s Association (SEWA). 15 Founded in 1972 by Nobel Peace Prize nominee Ela Bhatt, SEWA represents poor self-employed women in rural areas of India who are earn money through their own labor and small businesses. In 2008, the membership of SEWA reached

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 381

over 960,000. Dr. Bhatt ’ s main goals for SEWA include organizing women workers for full-time employment and improving the compensation and benefi ts the women workers receive for that work. SEWA also lobbies state governments and the Indian national government to increase funding for health insurance and for child care centers run by the association ’ s workers’ cooperatives. SEWA also lobbies for more access to capital through credit with fi nancial institutions, microloans, and lower interest rates for fi rst-time borrowers.

Another highly signifi cant NGO/union in India is the Kagad Kach Patra Kashtakari Panchayat (KKPKP). KKPKP represents waste pickers, waste collectors, and informal recyclers, all of whom are part of the informal sector of rural India. 16 A key aspect of KKPKP ’ s role is politically lobbying. KKPKP lobbies local municipalities and state governments to increase grants to its credit cooperative, which offers loans to members and provides a social security fund so waste collectors have retirement funds. KKPKP also helps members negotiate and bargain with local municipalities and private fi rms that hire waste collectors. It also supports members who cannot reach an agreement with employers. For example, in April 2013, the KKPKP engaged in a sit-in strike in the city of Pune to protest the low wages waste collectors received. 17

These are just two examples of the many NGOs in India that have taken on important union-like roles. These organizations represent workers in negotiations with government agencies as well as private sector employers. Almost 60 percent of the Indian labor market consists of rural workers, many of whom labor in the informal sector. These NGO/unions help promote the emergence of an Indian middle class through advocacy, negotiations, protests, and political lobbying.

Summary

This chapter began with the hypothesis of John R. Commons that it would be diffi cult to take wages out of competition by organizing the entire product and labor market in a global economy. He argued without unions as a source of power, a race to the bottom on wages and other working conditions would result, and his hypothesis turned out to be correct.

U.S.-based MNCs have benefi ted from much globalization, including gaining access to cheap labor and benefi ting from the effi ciencies global supply chains make possible. The internationalization of production has created changes that have given MNCs more bargaining power by increasing their strike leverage and their access to cheap labor and as a result of the fact that MNCs can easily shift production across national borders when facing militant labor in any one country. To date, no single institutional response or alternative source of power has been successful in counterbalancing this shift in power. Media exposure has been the most effective way of putting pressure on MNCs to upgrade standards in their supply chains. However, this method has proven to be successful only in short episodes and has not led to sustained institutional change. While media reports of tragedies or abusive work conditions create a fl urry of corrective activity, they tend to lose momentum fairly quickly as media coverage fades.

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

382 Part V. Special Topics

Consumers in general have not responded in consistent ways or demanded data on labor standards or avoided products of companies with reported labor standards problems. However, led by students who have organized on college campuses, successful consumer campaigns have been mounted that require MNCs that sell licensed athletic and sportswear bearing university logos to comply with NGO specifi ed labor standards.

Evidence shows that corporate codes of conduct lead to the positive (but limited) results. This has led to active debates over what else needs to be done to improve labor conditions in global supply chains.

In addition, a number of cross-national union efforts have emerged, some of which involve international networks of unions and workers. Other union campaigns have linked with NGOs to make use of consumer and political pressure. It seems to be the case that achieving and sustaining acceptable work conditions in supply chains of MNCs will require a combination of efforts from management, labor, NGOs, and governments, perhaps eventually reinforced by consumer purchasing behavior.

Discussion Questions

1. Why do international production opportunities and international trade generally advantage multinational corporations and disadvantage union in terms of bargaining power?

2. In the past, what factors led most multinational corporations to prefer to structure their internal labor relations function in a decentralized manner, leaving most control over labor relations issues to local plant managers?

3. What recent factors/trends are leading many multinational fi rms to move toward more central coordination of their internal labor relations function?

4. Why is it so diffi cult for unions to forge cross-national alliances and launch successful cross-national pressure or bargaining campaigns?

5. Describe some of the steps you would take as the head of labor relations in a large multinational fi rm to make sure that work conditions are fair and respectable in your fi rm ’ s global supply chain.

Related Web Sites

ILO on Export Processing Zones: http://www.ilo.org/actrav/areas/WCMS_DOC_ATR_ARE_EPZ_EN/lang–en/ index.htm

Better Factories Cambodia: http://betterfactories.org/

Nike Code of Conduct and Corporate Social Responsibility: http://about.nike.com/pages/transform-manufacturing

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use

Global Pressures 383

Suggested Supplemental Readings

Bronfenbrenner , Kate , ed . 2007 . Global Unions: Challenging Transnational Capital Through Cross- Border Campaigns . Ithaca, N.Y. : ILR Press .

Multinational Companies in Cross-National Perspective: Integration, Differentiation, and the Interactions between MNCs and Nation States . Special issue , ILR Review 66 , no. 3 ( 2013 ).

Locke , Richard M. 2013 . The Promise and Limits of Private Power . Cambridge : Cambridge University Press .

Posthuma , Anne , and Dev Nathan eds . 2010 . Labour in Global Production Networks in India . New Delhi : Oxford University Press .

Notes

1. John R. Commons, “American Shoemakers 1648–1895: A Sketch of Industrial Relations.” Quarterly Journal of Economics , 24 no. 1 (1909): 39–98. See also Lloyd Ulman, The Rise of the National Trade Union (Cambridge, Mass.: Harvard University Press, 1958).

2. For more on the history of Nike and evidence of labor conditions in global supply chains, see Richard Locke, The Promise and Limits of Private Power (Cambridge: Cambridge University Press, 2013). The material in this chapter draws heavily on this book and on the larger MIT-Stanford University Just Supply Chain research project.

3. See Jan Katz, “Cultural Issues in International Business,” in Handbook of International Business , ed. Walter Ingo (New York: Wiley, 1988): 11-1–11-17.

4. For recent research on how MNCs internally structure and operate their labor relations function, see Multinational Companies in Cross-National Perspective: Integration, Differentiation, and the Interactions between MNCs and Nation States. Special issue, ILR Review 66, no. 3 (2013).

5. Ibid. 6. Quoted in Locke, The Promise and Limits of Private Power , 49. 7. Ibid., 47–77. 8. See, for example, the Forum on this topic in The Boston Review 38 (May/June 2013): 12–29. 9. Pablo L. Gradi, “Trade Agreements and Their Relation to Labour Standards,” Issue Paper no.

3, November 2009, International Centre for Trade and Sustainable Development, http://ictsd.org/ downloads/2011/12/trade-agreements-and-their-relation-to-labour-standards.pdf .

10. Eli Kirschner, “Fast Track Authority and Its Implications for Labor Protection in Free Trade Agreements,” Cornell International Law Journal 44, no. 2 (2011): 386–415.

11. Justice for All: The Struggle for Worker Rights in Jordan (Washington, D.C.: Solidarity Center, 2005), http://www.solidaritycenter.org/wp-content/uploads/2014/12/Jordan-JFA.pdf .

12. Offi ce of the United States Trade Representative, “U.S.-Colombia Trade Agreement,” https:// ustr.gov/uscolombiatpa .

13. “The U.S.-Colombia Labor Action Plan: Failing on the Ground,” 2013. A Staff Report, Committee on Education and Workforce Democrats, U.S. House of Representatives, October. http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/fi les/documents/ Colombia%20trip%20report%20-%2010.29.13%20-%20formatted%20-%20FINAL.pdf .

14. Drusilla Brown, Rajeev Dehejia, and Raymond Robertson, “Is There an Effi ciency Case for International Labor Standards?” working paper, Tufts University, 2013. See also Kingdom of Cambodia, International Labour Organization, and Better Factories Cambodia, “Thirtieth Synthesis Report on Working Conditions in Cambodia ’ s Garment Sector,” July 2013, http://betterfactories.org/?p = 6706 .

15. “About Us,” Self-Employed Women ’ s Association , http://www.sewa.org/About_Us_History.asp . 16. “About Us,” Global Alliance of Waste Pickers , http://globalrec.org/who-we-are/ . 17. Leslie Vryenhoek, “KKPKP ’ s Six-Day Protest Wins a Promise from Municipality,” WIEGO , April 11,

2013, http://www.inclusivecities.org/blog/kkpkps-six-day-protest-wins-a-promise-from-municipality/ .

EBSCOhost - printed on 2/21/2022 2:31 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use