FTAs and Multinationals

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Whatever the benefits of free trade agreements, there is little doubt that among the biggest beneficiaries of the pacts—perhaps the biggest beneficiaries—are multinational corporations (MNCs). As one writer put it, “The over-riding lesson that is to be learned here is that free trade agreements are crafted to serve the interests of multinational corporations, and those interests, we should have learned long ago, are not necessarily synonymous with the greater good for the largest number.” Even if that declaration is not quite the case, there is no doubt that free trade agreements are not crafted to serve the interests of workers.

A free trade zone (FTZ) or export processing zone (EPZ), also called foreign-trade zone, is an area within which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Free-trade zones are usually established around major seaports, international airports, and national frontiers—areas with geographic advantages for trade. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Most FTZs are located in developing countries. Brazil, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, and Madagascar, for instance, all have EPZ programs. Corporations setting up in a zone may be given tax breaks as an incentive. Usually, these zones are set up in underdeveloped parts of the host country. The rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area’s economy. These zones are often used by multinational corporations to set up factories to produce goods, such as clothing or shoes.

A 2008 working paper prepared by the International Labor Organization finds that the organization, “which has monitored and scrutinized the labour conditions in EPZs for almost 30 years, continues to be concerned about the lack of ‘decent work’ created in such zones.” The report continues: “Large corporations that govern global production chains continue to invest in and produce in EPZs, where the companies benefit from preferential trade and input price conditions, from liberal profit repatriation regulation, and from the relatively lax labour standards that allow greater control of the production process.” The ILO again: “Despite the presence of EPZs – for over 30 years in some cases – there are very few cases where EPZs have played an important role in accomplishing” the goals of raising people’s standard of living and contributing to overall economic development.

The report notes that there is a broad consensus that many countries simply lack the resources to enforce basic labor laws in EPZs. One report from the World Bank summed up the problems in EPZs as follows: “Even in cases where workers’ rights are legally mandated, there may be poor enforcement. Workers’ rights organizations provide a long list of anecdotes involving violent repression of free association, gender discrimination, excess hours of work and significant health and safety concerns.” In a few countries, laws in EPZs are actually different (read: more lax) from laws in the rest of the country—Togo, for example.

Despite changes in policies of some countries, there are continued reports of systematic violations of freedom of association in EPZs throughout the world. The ILO report summarizes this problem, stating: “Under the assumption that union-free zones would attract greater investment, some EPZ-operating countries have, under their laws, either deprived EPZ workers of their right to organize themselves or placed severe limitations on the free exercise of this right”. Some nations, such as Pakistan, China, and Nigeria, still have legal restrictions that limit freedom of association. However, other countries, such as Bangladesh, have taken steps to change the legal environment for unions in EPZs.

Even when national legislation is strong, implementation of freedom of association is often inadequate. For instance, an International Confederation of Free Trade Union report cites action by the Mexican government to protect maquiladoras from collective action and preventing unions, despite claims by the government to the contrary. In addition, the report finds that trade unions are often denied entry to EPZs and workers often dismissed for union activity. The evidence of continued discrimination against unions is widespread, including studies that have found suppression of freedom of association in the Dominican Republic, Jamaica, Sri Lanka, and Guatemala. Moreover, in many countries, there are reports that firms close when unions form only to open elsewhere, and in multiple cases union repression has been violent. These findings are largely congruent with those of the ILO report, that finds that “even when there are no such limitations under the law, EPZ workers in many countries are unable to effectively exercise their freedom of association on account of the anti-union discriminatory practices adopted by employers against EPZ workers engaged in trade union activities. These include the unjust dismissal, suspension, transfer and blacklisting of trade union officials and members. Employers in EPZ enterprises sometimes even resort to physical violence to prevent workers from forming and joining trade unions of their choosing. The problem is accentuated when there is a lack of effective enforcement of laws in the zones, as is often the case.” In addition to freedom of association, the ILO report finds basic problems with respect to EPZ’s illegally low wages, long working hours in violation of national law, excessive overtime, failure to provide safe environments and poor health conditions.

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The Role of Multinationals

Large multinational companies play a large role in the creation and implementation of free trade pacts. In the recently-enacted South Korea free trade agreement, large multinationals spent large sums to support their viewpoints. Theircentral lobbying argument was that the deal will “create new American jobs and opportunities for economic growth by immediately removing barriers to U.S. goods and services in Korea.”

The largest of the big-business coalitions — the National Association of Manufacturers, the Business Roundtable, the Financial Services Roundtable, the American Farm Bureau, Big Pharma and the Retail Industry Leadership Association — all lobbied as well, along with individual mega-corporations. Combined, the pro-trade agreement forces spent tens of millions of dollars a month on lobbying activites. The lobbying effort extended to “grassroots” campaigns in select congressional districts — mailings, robocalls and fundraising events.

Others lobbied in favor of the new Panama free trade pact, according to federal lobbying disclosure forms — a pact that will make it more difficult for the U.S. government to crack down on Panama-related tax abuses.  Mutinational corporations make extensive use of lobbying to promote their views. One company sponsored an ad campaign within the Beltway, asking policy-makers to not “kick a field goal on second down” by passing just the Korea agreement, rather than all three pending. Contact was not limited to Congress. Representatives of the firm contacted policymakers, including House Majority Leader John Boehner (R-OH) and the President’s Deputy National Security Advisor, Michael Freeman, about the South Korea free trade agreement more than 350 times, according to a Project On Government Oversight analysis of DOJ records, and distributed informational materials to policymakers—and met with Super Committee co-chair Sen. Patty Murray (D-WA) to discuss the free trade agreement.

 

Abuse of Workers by Multinationals 

The pro-free trade economist Jagdish Bhagwati once wrote, “If any conviction strongly unites the critics of multinationals today, it is that they exploit workers in poor countries.” In response, global unions have develped a large-scale campaign to unionize workers in developing countries employed by multinational corporations. The global union movement came together in Washington, D.C., in January 2012 to kick off a joint initiative to help workers at multinational companies join unions. Members of the International Trade Union Confederation (ITUC) and the Council of Global Unions met with U.S. union leaders to discuss support for international organizing campaigns.

MNCs can even violate workers’ rights in the United States.  European companies have been accused by Human Rights Watch of violating workers’ rights in the United States.  In a new report, it says European multinational firms have carried out aggressive campaigns to keep workers in the U.S. from organizing and bargaining for themselves.

Human Rights Watch says that a number of European companies heed tough labor laws in Europe, but when they move into the United States, workers’ rights are dropped low on the agenda. Not all the companies are accused of the same shortcomings, but the charges vary from muzzling unions to hiring replacements to fill the places of workers on strike. Tom Porteous, the head of the London office of Human Rights Watch said, “These are all activities, which fall way below international standards to which these companies have signed up.  We have found in the course of our research that all these companies at one time or another have been engaged in activities, which would be totally unacceptable and anathema if they engaged in them in Europe.”