The Rise of Sweatshops Due to Globalization’s “Race to the Bottom”
What is economic globalization?
This is a term that refers to the expansion of economies beyond national borders, particularly
through trade of goods and services. While supporters of economic globalization talk of
increased prosperity and development, the reality is economic globalization has led to a global
race to the bottom, creating a sweatshop epidemic. Globalization allows corporations immense
power and weakens any single nation’s ability to:
 control corporate practices and flows of capital,
 set regulations, control balances of trade and exchange rates, or
 manage domestic economic policy.1
Key Players: Regulators of Free Trade
The corporate interests of industrialized nations dominate these key players of economic
globalization and each work hand in hand to promote free trade policies.
World Trade Organization (WTO): The WTO was established in 1995 to enforce trade
agreements. As of 2003, there are 148 countries in the WTO.
International Monetary Fund (IMF): The International Monetary Fund is an international
financial institution, founded in 1944, originally intended to stabilize international currencies.
After World War II, the IMF administers and decides on exchange rate policies and provides
member nations with loans to enable them to balance their trade payments. However, today the
IMF forces borrowing countries to accept free trade policies, pay their foreign debt (including
enormously high interest payments), and adopt economic structures such as privatization. Rich
countries control the IMF because voting rights are determined according to financial
contributions.
World Bank: Also founded in 1944, the World Bank is also known as the International Bank for
Reconstruction and Development. It is another international financial institution that works with
regional banks throughout the world to give loans for long-term development projects, like dams,
roads, and power plants. However, by the 1980’s it began imposing “structural adjustment
programs” on borrowing nations, which forced countries to adopt privatization, export
production and deregulation. These are considered “free market” policies similar to what the
IMF requires.
What is free trade?
Free trade is a key feature of economic globalization characterized by the reduction of
regulations and other constraints on businesses to increase international trade. Free trade is also
known as “trade liberalization.” Liberalizing trade means reducing barriers such as tariffs so
that nations can import and export without restraints. For example, the North American Free
Trade Agreement (NAFTA) removed quotas and tariffs for imports and exports among Canada,
the U.S. and Mexico.
What is a “structural adjustment program”?
1
Structural adjustment programs (SAPs) are a set of economic policies required by international
financial institutions, such as the World Bank and the International Monetary Fund, as a
condition of loans these institutions make to developing countries. These programs often include
“austerity measures” such as high interest rates and reduced access to credit, which result in
slower economic growth as well as increased poverty and unemployment. Other adjustment
policies include cuts in government spending on health care and education, increases in the cost
of food, health care and other basic necessities, mandates to open markets to foreign trade and
investment, and privatization of state-run enterprises such as utilities and healthcare.2
Globalization and free trade have sparked what is often termed the “race to the bottom,”
where corporations set up shop all around the world in search of the cheapest labor and
fewest regulations, increasing the global sweatshop epidemic.
False Promises
Proponents of free trade say that trade leads to development and a better economy, which leads
to democracy, which leads to better living and working conditions. Opponents argue that free
trade has forced countries in the Global South to pursue export-led growth. Thus investment in
third world countries occurs mostly in production of goods that will be exported, rather than
production for local needs. One way that countries encourage exports is through the
development of so-called “export processing zones” or “maquiladoras/maquilas.” Maquilas are
factories where goods are assembled for export, usually from imported parts. In these areas,
labor organizing is repressed, wages are low, and multinational corporations are less constrained
by labor laws. Production in these zones depends on the whims of foreign corporations, leaving
the workers there highly vulnerable. At the first signs of organizing for better conditions,
corporations can simply relocate to another country.3
A worker’s views on globalization: Araceli, a Los Angeles garment worker, originally from
Mexico, made the following observations.
On Maquilas:
“I suppose it isn’t enough for corporations to exploit people in their own country. They have to
come to our country to exploit people too. They benefit from so much work from our people.
They demand that work and yet they pay nothing to the workers… And you can’t say anything
[about the wages or abuses] because there is always someone to replace you. The owners can
tell you that there is a line of people waiting to take your job. And it’s true, there are many
people in more need than you. This is something that is true both here [in the U.S.] and in
Mexico.”
Impacts to the Family:
“Working in this industry definitely affects you outside of the factory. If you get home stressed
and angry about the way they treat you in the factory, who are you going to take it out on?
Usually, it is your kids because they’re asking to be fed or they’re running around and so you
yell at them. You end up doing this to your husband too. Or what happens is that you end up
ignoring your children or spending very little time with them because you’re always working.
You have to do this if you want to earn a decent wage.”
2
Who’s Responsible?
“To me, it’s the government that is responsible, the presidents and leaders. They are the ones
who should obligate companies to pay the minimum wage to workers. But the governments are
only interested in their own interests or in the benefits they get from corporations, the bribes.
Government officials are sellouts and so the people bear the exploitation.”
What does all this have to do with the clothes I buy?
Free trade means sweatshops!
Here are how some well-known brands are connected to the global sweatshop:
Toxic Blue Jeans: Tehuacán, Mexico, a blue jean production center that experienced a boom
after NAFTA, is a perfect example of the damage of the maquila industry to natural water
sources. There, rivers are a brilliant blue from the many dyes used in creating the perfect blue
jean, water levels are dangerously low because they are being exhausted by the many laundry
facilities used in the jean making process, and toxic chemicals used in sandblasting or acid
washing run off into irrigation water. Major brands, including Guess, Levi’s, Wrangler and
others, are produced in Tehuacán.4
Guess: The example of jeans maker Guess, Inc. presents a snapshot of how free trade harms
workers on both sides of the U.S./Mexico border. Before NAFTA, Guess was among the largest
apparel manufacturers in the U.S., sewing 97% of its clothes in this country, much of it in Los
Angeles.5 By 1997, in the face of a union drive by Guess workers in Los Angeles and the
opening of Mexico to free trade with the U.S., Guess moved its production to Mexico, as well as
Chile and Peru, leaving only 35% of its production in the U.S.6 As many as 2,000 workers were
then left without jobs.7 Much of Guess' jeans production moved to Tehuacán, Mexico, where
factories employ mostly indigenous people who were displaced from their homelands due to the
pressures of free trade. These workers earned $20 to $40 a week compared to about $5 an hour
for Los Angeles workers at the time.8 They were often forced to work overtime without pay and
lived in poverty in substandard housing.9
Levi’s: Claiming that it has lost too much of the blue jean market share to its competitors
producing offshore, in the early 1990’s Levi’s began closing its North American plants. Today,
Levi’s has closed over 20 of its factories and laid off over 25,000 workers10 in Arkansas,
Georgia, New Mexico, North Carolina, Texas, Tennessee, Virginia, California, Canada and
Europe. Although Levi’s adamantly claims it was an industry leader in developing a corporate
Code of Conduct and trying to maintain domestic production, once it jumped on the
globalization bandwagon, Levi’s said good-bye to “Made in USA” blue jeans and good corporate
citizenship.
Globalization’s Alphabet Soup
One way corporate globalization takes place is through free trade agreements. The agreements
are dominated by corporate interests and have very little input from the populace they impact.
Benignly called “free trade” agreements, these policies go beyond matters of trade, but influence
the social and economic policies of a nation.11 Here are some key free trade agreements:
3
AGOA—African Growth and Opportunity Act, enacted 2000
Includes 36 Sub-Saharan African nations and the US
AGOA was largely promoted by US-based oil corporations. In terms of apparel trade, AGOA
allows limitless duty-free and quota-free access to US markets from the African nations. In
order to participate, the southern African nations must accept structural adjustment and free trade
policies. Although the agreement includes protection of human rights, workers rights, and an
end to child labor, the reality is that workers’ rights are routinely violated. AGOA is seen as a
move by the US government towards using trade policy incentives to influence policy in another
region of the world. AGOA has helped the garment industry in southern African grow due to
exports, but the industry is threatened by the phase-out global apparel and textile quotas. 12
ASEAN—Association of Southeast Asian Nations, established 1967
Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Burma,
Cambodia13
ASEAN began to adopt free trade policies in 1992 with the launching of the ASEAN Free Trade
Area or AFTA. The AFTA called for elimination of tariffs and other trade barriers among
member countries in order to increase competitiveness. ASEAN has been criticized as more of a
political project involving elites with little to no participation by the people.14
APEC—Asian Pacific Economic Cooperation, established 1989
21 Pacific rim countries, including US, China, Monaco, Malaysia, Indonesia, Japan, Thailand,
Singapore, Philippines, Korea, Australia
The “premier forum for facilitating economic growth, cooperation, trade and investment in the
Asia-Pacific region, ” APEC initially formed to facilitate cooperation among the Asian
countries. After 1994, it began to adopt the free trade agenda, lowering tariffs and easing
investments.15 While it promised improved standards of living and increased wealth for the
region, little has materialized since APEC’s establishment, especially during the Asian financial
crisis in 1997. APEC did little to alleviate its impact.
CAFTA—Central American Free Trade Agreement, proposal deadline December 2004
US, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica
Extending the free trade bloc already created by NAFTA, CAFTA is a proposal that not only
includes similar dangerous provisions under NAFTA, but even stronger provisions that would
further give more power to corporations through privatization of public services and reduction of
states’ ability to regulate its own policies. CAFTA is seen by analysts as a push by the US to
bully the smaller, less powerful nations in Central America to pressure the larger countries in
South America to form the FTAA.
CBI—Caribbean Basin Initiative, enacted 1983 (extended to CBTPA – Caribbean Basin Trade
Partnership Act – in 2000)
26 countries in the Latin American region and the US
Though the CBI is not a full trade agreement, it is a seminal program by which the US
government reduced tariffs in textile, apparel, and other goods from participating countries.
Countries were forced to privatize government services, eliminate energy and food subsidies, and
accept US-mandated exchange rates. CBI led to growth of apparel production in the Caribbean
and Central America. A remnant of the Cold War era, the CBI was designed to promote free
trade policies and check the spread of communism throughout Latin America. 16
4
FTAA—Free Trade Area of the Americas, negotiations set to end 2005
34 countries in North America, Central American, South America, and the Caribbean, except for Cuba
Potentially creating the largest trading bloc in the world, the FTAA is an expansion of NAFTA
throughout the Western Hemisphere. Passage of the FTAA would privatize essential social
services including education, healthcare, and water; pit workers against workers in order to drive
down labor standards; and devastate the environment.
NAFTA—North American Free Trade Agreement, enacted 1994
US, Canada and Mexico
NAFTA rapidly deregulated trade and investment among the 3 countries. Rather than creating
sustained economic development, NAFTA largely resulted in negative effects. For example, real
wages have actually decreased throughout the trade region. NAFTA granted an unprecedented
amount of power to corporations through its Chapter 11 clause that allows corporations to sue
governments. Labor and environmental protection laws were undermined through NAFTA.
PPP—Plan Puebla Panama
Although not a free trade agreement, the PPP sets up a multi-billion dollar, 10-year industrial
development and transportation project that would involve Puebla, Mexico to Panama.17 The
project would provide the infrastructure to facilitate trade throughout the region, as well as ease
corporations’ access to the natural resources and cheap labor in the area. The PPP would only
bolster free trade agreements like CAFTA and FTAA. The PPP would displace indigenous and
local communities as well as create environmental problems.
1
Miriam Ching Louie with Linda Burnham, Women’s Education in the Global Economy: A Workbook of Activities, Games,
Skits, and Strategies, Women of Color Resource Center, 2000, Glossary of Terms.
2 World Bank Bonds Boycott, “Frequently Asked Questions,” http://econjustice.net/wbbb/tools/faq.htm.
3 World Bank Bonds Boycott, “How IMF/World Bank Policies Encourage Sweatshops and Lower Wages,”
http://econjustice.net/wbbb/tools/IMFSweatshopspiece.htm.
4 Maquila Solidarity Network and Human and Labour Right Commission of the Tehuacan Valley, “Tehuacan: blue jeans, blue
waters, and worker rights,” 2003.
5 Margot Hornblower, “Guess Gets Out,” Time Magazine, January 27, 1997.
6 “UNITE Hits Guess Move,” Women’s Wear Daily, January 16, 1997.
7 Ibid.
8 Margot Hornblower.
9 National Interfaith Committee for Worker Justice, “Cross Border Blues: A Call for Justice for Maquiladora Workers in
Tehuacán,” July 1998.
10 Ralph Blumenthal, “As Levi's Work Is Exported, Stress Stays Home,” New York Times, October 19, 2003.
11 Lori Wallach, “Public Citizen Pocket Trade Lawyer,” Public Citizen.
12 Esther De Haan and Gary Phillips, “Made in Southern Africa,” Clean Clothes Campaign, 2002.
13
For more information, see http://www.aseansec.org/home.htm.
14 Walden Bello, “East Asia’s Future: Strategic Economic Cooperation of Marginalization?” Focus on the Global South,
September 2002.
15 For more information, see http://www.apecsec.org.sg.
16 Ellen Israel Rosen, Making Sweatshops: The Globalization of the US Apparel Industry, University of California Press: Los
Angeles, 2002.
17 Miguel Pickard, “PPP: Plan Puebla Panama, or Private Plans for Profit?” NOW in Latin America, courtesy of
www.corpwatch.org, September 19, 2002.
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