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Export processing zones - Globalisation's great deceit

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28 September, 2003The number of Export Processing Zones in the world has increased six-fold since 1995. Largely unorganised, their employees work under poor wages and conditions, with little or no access to unions. The challenge faced by the trade union movement is to find ways to organise workers in EPZs.


The Export Processing Zone of San Pedro de Macorís, east of Santo Domingo in the Dominican Republic, is restricted with gates, razor wire and armed guards. Workers are locked in all day, including during the half hour they are permitted for lunch, and kept there at night until work quotas are completed.

At maquiladoras in Tijuana, Mexico, workers earn around US$1 per hour, wages so low that workers are forced to live in houses they build from packing cases, in communities without sewerage or running water. Women and men work 3_ nightshifts per week of 12 hours each. During each shift they are allowed one 10-minute break and one half-hour meal break.

These are two -- unfortunately typical -- snapshots from the increasingly growing practice of Export Processing Zones. These zones may carry different names -- "Maquiladoras," "Free Zones," "Free Ports" or "Special Economic Zones," but most if not all of them are about two things: tax and duty breaks and cheap, unorganised labour.

The concept of EPZs is not a new one, but in the last 10 years there has been a rapid expansion in the number of countries with EPZs, in the overall number of EPZs, and in the number of workers employed there (see table on page 25).

The main industries operating in EPZs are electronics and garments, while automotive companies also have a significant presence. Major transnationals, including General Motors, Ford, DaimlerChrysler, Toyota, Nissan, Fiat, General Electric, Siemens and Philips, have a presence in EPZs, not to mention the many smaller companies that supply them. According to the OECD, transnationals employ most of the workers in the world's export processing zones.

It is a typical characteristic of EPZs that trade union rights are restricted. Whether this is by law or by a lack of enforcement of existing laws, the result for workers is the same. Few unions have been able to successfully organise EPZ workers.

Promoting EPZs

Various groups have been formed to promote the EPZ concept, including the World Federation of Free Zones, the World Economic Processing Zones Association and many country level associations. To sell EPZs to investors they make frequent reference to the 'bureaucratic procedures' and 'red tape' that can be avoided by creating and investing in EPZs. Naturally, they do not mention that these bureaucratic procedures, to be avoided at all cost, include labour laws to protect workers and guarantee them their rights.

In fact, the impact on workers' wages and conditions is not a question that is considered as a cost of investment in EPZs. Proponents of the EPZ model boast of 'Profitability for All Parties: The Investor, the Economy and the Region' -- the workers who contribute their labour to generate the profits are not considered to be among the parties whose interests are at stake.

And yet the impact of EPZ employment on workers' rights, on their pay and conditions is enormous.

Impact on employment

The International Labour Organisation is sufficiently concerned about the economic and social effects of EPZs that for over 20 years it has monitored their impact on employment. It has also questioned their role in social and economic development in the host countries, noting the lack of information available on whether jobs generated by EPZs are of a long-term nature and the real extent of skills transfer. The ILO has found that in Mauritius over the past 10 years 35 firms have opened in EPZs each year, but the same number have closed down.

In the maquiladoras of Mexico, 250,000 jobs were lost between January 2001 and June 2002, some 15 per cent of the maquila workforce. The companies simply packed up and moved to where wages are even cheaper. The $1.20 hourly rate in Tijuana cannot compete with the 40 cents per hour that workers in China make. Likewise in other low-wage countries such as Indonesia, Thailand and even Vietnam, China is setting the benchmark for low wages and substandard working conditions that many companies simply cannot resist. The pressure is on countries to compete on wage costs or risk losing vital foreign investment to the lowest bidder.

And this is the great deceit of globalisation. The promise that transnational corporations will bring infrastructure, skills development and economic growth to the countries they choose to invest in gives way to the reality that there are few lasting benefits and devastation when the corporations leave.

Challenging the dogma

Unions are fighting against the persistent dogma of the business community that decent wages and conditions are barriers to investment.

When the Malaysian government set up EPZs, it banned the formation of national unions in the electronics industry as an incentive to foreign electronics companies to invest in the development of that sector. According to the Trade Union Advisory Committee to the OECD (TUAC), 96 per cent of all workers in seven EPZs are employed by foreign transnationals, and electrical and electronics firms account for 65 per cent of all EPZ employment. There is still no national electronics union in Malaysia.

TUAC also points out that minimum wages are not enforced in Malaysian EPZs on the grounds that foreign investors would relocate. Similarly, a UN report stated that:
"It is primarily in the EPZs that workers' rights to join a national union for collective bargaining and/or to strike are largely restricted by governments, based on the belief that unions will discourage foreign direct investment in the industry."

Yet the ILO has found that companies are quite capable of adapting to local conditions where countries have an established trade union presence in EPZs and collective bargaining takes place. In fact, such countries "do not appear to have suffered any loss of investment and have the same investor profile as countries which lack trade union infrastructure. In the Philippines, for example, 59 per cent of zone investment is in the electronics sector, and many of the leading electronics firms have increased their investments despite the presence of trade unions in the zones."

The Global Unions' group [including the International Confederation of Free Trade Unions (ICFTU), the Global Union Federations (GUFs) and the Trade Union Advisory Committee (TUAC) to the OECD] has endorsed a statement submitted by national unions to their governments for the 5th WTO Ministerial Conference in Cancún in September 2003. Among other measures, it calls for a clarifying statement to the effect that the weakening of internationally recognised core labour standards in order to increase exports, as in EPZs, is an illegitimate trade-distorting export incentive that is not permissible under WTO rules.

Acceptance of such a statement would be a huge change of heart for the WTO, whose director-general in 2001 said that "I see the reflection of the free zones in almost every part of the world actually as a testimonial to the importance of the free zones to facilitate free and fully competitive trade, which is one of the principles of the World Trade Organisation."

Women workers

While workers in EPZs in general face low pay and poor working conditions, EPZs are notorious for their exploitation of women workers, who account for as many as 90 per cent of the workforce in some zones.

Typically, women's wages are 20 per cent to 50 per cent lower than those of males working in the same zones. Long working hours coupled with overtime and nightshifts lead to women leaving EPZ employment before they reach the age of 25. Accounts of women being forced to undergo pregnancy tests abound.

The Sri Lankan government spent millions on providing infrastructure for companies in EPZs but they did not build any hostels to house the influx of migrant workers, mainly from rural areas all over the island. A women's organisation working in the zones says "the majority of these migrant workers are young women in their late teens and early twenties who are herded together inside small rooms in temporary structures. The majority sleep on the floor."

Legislation restricting night work for women in Malaysia has been cancelled to allow factories to operate 24 hours a day. Women in EPZs work excessive hours: more than 90 per cent work more than 48 hours per week and in some instances they are required to work a further eight hours' overtime after their eight-hour shift. Promotion prospects are low for women, who are predominantly employed as semi-skilled or unskilled workers.

Hard to organise

Existing labour laws either don't apply or are flouted with impunity by employers. In Bangladesh, the zones are exempted from the Industrial Relations Ordinance and investors are informed of the absence of unions as an incentive to invest (see also article on page 30).

The companies that choose to locate in EPZs are looking for cheap labour and exemptions from social obligations, good reasons to strongly resist union attempts to improve wages and conditions. In Sri Lanka, the law requires that unions be recognised in a workplace if 40 per cent or more of the workers belong to the union; yet employers still manage to refuse to recognise properly registered unions, in violation of the national law and of ILO Conventions Nos. 87 and 98. The Free Trade Zone Workers' Union (FTZWU) has formed eleven branches of which only one has been legally recognised. Of the ten branches pursuing recognition through the courts and through campaigns, four have been crushed.

EPZs are often set up in economically deprived areas where labour is cheap and workers are more fearful of losing their jobs if they make demands. Many workers in the maquiladoras of northern Mexico have relocated from even more economically deprived areas and can even less afford to put their jobs at risk.

The predominance of women in EPZ employment is a further barrier to union organisation.

Trade union responses

Organising in EPZs calls for ingenuity and flexibility to overcome the not inconsiderable obstacles put in the way by governments and employers who would rather keep unions out of the zones.

In Maharashtra, India, a small woman in her thirties, Sanjita Jabwala (name changed), is an organiser in the Santa Cruz EPZ. She can freely enter the area, thanks to an identity card that the union has managed to get her. Organising workers in the EPZ is a difficult and dangerous task as Sanjita has to face the hostility of the employers and the mafia-like yellow unions.

In the Dominican Republic, IMF affiliate FENATRAMIM has a method of organising in the EPZs that involves making contact with the workers outside of the workplace. Two or three leaders are identified in each factory who then get the home contact details of the other workers on the pretext of inviting them to a fiesta. Once the initial contact has been made in a social situation, organisers visit the employees at their houses to discuss the union.

Brazilian affiliate CNM/CUT is involved in a project in the Manaus EPZ to strengthen the presence of the union in Nokia. The project starts by training 15 workers who could become union representatives in the workplace and aims to eventually form a World Council of Nokia members and to negotiate an international framework agreement (IFA) with the company. The intention is that the union organisation will be able to spread to other companies within the Manaus EPZ.

In some countries unions specialising in organising within EPZs have been formed, such as the Free Trade Zone Workers' Union in Sri Lanka and FENATRAZONAS in the Dominican Republic.

EPZs are one of the most difficult organising challenges faced by unions. Persistence and a certain amount of creativity are urgently needed to reach this exploited group of workers. Transnational corporations will take advantage of low labour standards and wages to increase their profits to the extent to which they are able. The labour movement must unite to raise labour standards across the globe and prevent corporations from playing one country's workers off against another's.

That is why one of the IMF's priorities is to implement international framework agreements (IFAs). These are agreements between the global labour movement and transnational corporations (TNCs) at a world level. Most EPZ employment is with TNCs and IFAs provide an opportunity to influence their employment practices in the zones.

But IFAs alone are not enough. The best way to improve conditions for workers, especially women workers, trapped in these low-wage jobs is to build a strong labour movement throughout the world.