Introduction.

“International players must work together to combat poverty pay in the garment sector.”

Ms. Anannya Bhattacharjee,

coordinator of the International Asia Floor Wage Alliance.

"Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, necessary social services, and the right to security..."

United Nations Universal Declaration of Human Rights Article 25.1

Majority of leading Multinational Companies nowadays prefer to produce their goods in Free Trade Zones (are also known as Special Economic Zones (SEZ); Free Trade Zones (FTZ); Foreign Trade Zone (FTZ); in some countries (for example in China) Special Economic Zones; in Mexico, they are known as Maquilas). For Multinational Companies it costs less to do so. Meanwhile, the human cost of this cheap production is covered by employees working at these manufactories around the world. Mainly these manufactories are located in underdeveloped parts of the host country or in developing countries like Brazil, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Madagascar. First time there were 43 million employees in approximately 3000 FTZs connecting 116 countries producing electronics, clothes, shoes and toys.

Export Processing Zones (EPZ) represent labor-intensive manufacturing centers involving the import of raw materials or components and the export of factory products. Governments of many countries establish SEZs as industrial areas. Doing so they are creating testing grounds for employment and imposing liberal market economy principles. For example, for corporations originating in FTZs government may give Tax brake as a stimulant. Foundation of SEZs has created millions of jobs. But apart from this a little improvement has been made in the lives of ordinary employees there. Creation of FTZs has been launched in order to attract employers and thus minimize unemployment and poverty, also generate a certain progression of the area's economy. But real consequences of the desire to attract investment in FTZs at any cost are common across all these territories. Employees making these low-cost products exist in poverty. They earn only half of what they need to cover their basic needs and those of their families. They are unpaid overtime, they are forced labour, with poor health and safety transgressions. They work excessive working hours (sometimes they work up to 15 hours per day). This is result of the governments carelessness. Governments of countries placing FTZ have relaxed (or sometimes even actively suppressed) labour standards as I said in order to attract foreign investment into EPZs.

This course work has two goals that go to the heart of this debate:

• The first is to show examples and analyze the Unethical Issues towards to millions of employees in Export Processing Zones;

• The second is to find some helpful solutions in order to solve problems that arise when companies do business in Export Processing Zones.

“Ethical” Products and Principles of their making.

‘Ethical’ means many different things to many different people, and therefore the answer depends on what you mean by ethical. For some people it means that the product is environmentally friendly or made from organic or recycled materials.  For others it means clothes made by artisans or small producers. Some people may understand it to mean buying second-hand or locally sourced goods. All of these are important issues.

There is no agreed “Ethical standards” yet. From the point of view of an International Business, meaning of the term “ethical” depends upon one’s cultural perspective. Many of The Ethical Issues in International Business are ruled according to the fact that political systems, law, economic development and culture vary significantly from nations to nation. A practice considered regular in one nation may be regarded unethical in another. Managers in a multinational entity have to be particularly attentive to these differences because they work for an institution that transcends national borders and cultures. In the International Business setting, the most common Ethical Issues involve employment practices, human rights, environmental regulations, and the moral obligation of multinational corporations. According to that, responsibility of any enterprise in any country is to pay their employees a ‘living wage’. But still most of the entities in supply chain policies don’t regard the obligation pay a real living wage as important. As the result, low wages are very common in EPZs, where country minimum wages are sometimes not applied. Even in the United Kingdom the principle of a living wage in garment sector supports exists mainly on paper.

Most High Street Fashion Brands have the commitment to pay a living wage written into their Ethical Codes. Even though, yet little has being done to put the living wage into the pay packets of employees who desperately need it. This lip service to ethical responsibility without real action to end poverty hasn’t gone on long enough.

High Street Fashion Brands and retailers in Britain have to make sure that employees producing their goods are paid a living wage and that working conditions within the mainstream garment industry are good. Employees throughout their supply chain must be able to exercise their internationally-agreed labour rights before they can be called 'ethical.' Brands need to focus on internationally agreed labour rights which include:

• appropriate working conditions;

• freely chosen employment;

• a living wage on the regular basis;

• freedom from sexual harassment, discrimination or verbal and/or physical abuse and most importantly;

• secure employment;

• voluntary overtime;

• not excessive working hours;

• workers are able to speak out and defend and improve their own labour rights through freedom of association to join a trade.

The reasonable questions here are: what standards should be applied when work conditions in a host nation are clearly inferior to those in a multinational’s home nation: those of home nation, those of host nation, or something in between?

If some critics would suggest that conditions include the same payment and appropriate working process across nations, how much divergence is acceptable? For example, does this mean that while extremely low pay for 12-hour work-days and a failure to protect employees against toxic chemicals are common for multinationals, should it we tolerate this kind of working conditions everywhere?

Managers regularly face up to ethical dilemmas without clear course of action. For instance, once an American inspector visited a foreign subsidiary in a poor nation and found out that a 12-year-old girl has been hired to work on a manufactory floor. Terrified to announce to the Head Office that the subsidiary is using child labour in direct violation of the company’s own ethical code, the American requested to the local manager to replace the child with an adult employee. The local manager fairly followed his instructions. The orphan, the only breadwinner for her six-year-old brother and herself, the poor girl was unable to find another job. She turns to prostitution. She dies in two years of AIDS. Her brother started begging money. He met the American executive while standing outside of the local McDonald’s. Of course this man was responsible for his fate. While the young boy was begging money, the American accelerated the pace and entered into the McDonalds. He ordered a quarter-pound cheeseburger with fries and cold milk shake. In one year the boy died from tuberculosis.

Did the Americans executive realize the difficulty of the girl’s case? Would he still have requested her replacement if he would know how complicated was her case? I don’t think so. Would it have been better, therefore, to stick with the status quo and let the girl to continue working? Probably not. That would have violated the rules against child labour found in the company’s own the Ethical Code. What was the obligation of the American inspector given this ethical dilemma? What then would have been the right thing to do? There isn’t simple solution to this quiz. The nature of ethical dilemmas is complicated - they are cases where no alternatives seem to be available and ethically acceptable. In this particular situation, giving a paid work to a child wasn’t appropriate, but the fact that she was given a job, neither was denying the child labour her only source of income.

Ethical dilemmas are discussed mainly because still many real-world decisions are very difficult to frame, complex. They involve first-, second-, and third-order consequences that are problematical to quantify. Doing the right things, or even knowing what the right thing might be, is often far from easy.

The manufactories concerned are likely to be located in areas known as Free Trade or Export Processing Zones (EPZ). The Union membership are not facilitating there. Even wording about trade union membership is not allowing and essentially meaningless there (for example, in China and in some EPZs areas trade union are suppressed or forbidden). There is another common chain to many headlines, different from the exploitation of workers by large multinationals. It concerns working conditions of employees in FEZ. At the same time, majority of them considered themselves lucky to be among those who had left their towns in order to get regular-salaried factory job. In 1909 in New York was published an article on hardships in the garment industry. It says there that things are not too bad if people are still immigrating from eastern Europe in order to receive these jobs. International unions are trying to persuade governments to integrate Free Trade Zones into their national economies and ensure that national labour and social legislation is respected. It is disputed that “transnational companies could pay a living wage, enforce environmental and occupational health standards and still make a huge profits”. In other words, the desire for profits must not eclipse an entity’s responsibility to eliminate and emphasize decent labour standards and wages across its supply chain wherever those workers are employed.

It seems impossible to stop buying from enterprises basing in Export Processing Zones. Export Processing Zones are widespread. However, it’s significant to inform these enterprises that labour rights issues are taken seriously and that customers expect them to respect it either. It’s significant because until now The Cost of Living in some countries is very lower than in Britain. The Minimum Wages in these countries are rarely enough to provide a living wage for workers. Many garment workers don't even get paid the minimum wage.

A living wage enables people and their families to meet their basic needs for clean water, nutritious food, health care, shelter, education, clothes, transport, also allowing for a discretionary income, to participate fully in society and live with dignity. It takes into account the cost of living, social security benefits and the relative standards of other groups.

The living wage is what each employee should make within a working week. But real picture of what millions of manufactory employees worldwide have, shows the facts that workers are not getting paid a living wage, they are being exploited, are working excessively long hours, whilst enduring unpleasant and often dangerous working conditions. For instance, have been found Indian workers producing cloth for Next, M&S and Debenhams, living in slum housing, having difficulties affording food, not to mention the union intimidation and violence, long hours in sweltering temperatures, verbal and physical abuse, unsafe water and poor sanitation. There is a report also surveyed employees manufacturing for Nike and Puma. Two thirds of the employees interviewed worked over 60 hours a week in order to earn enough money to cover the cost of basic needs. Most of the workers lived in small rooms with their families. Whole family share kitchen and toilet with their neighbours. One more report found factories in Bangladesh supplying Adidas. Employers pay to their workers lowest, less than required minimum wage. The basic wage for the lowest-paid staff in the Adidas factories was just 9p an hour. Exhausting working hours and severe abuse of workers were also found there. In one factory making baseball caps for Adidas one in five employees interviewed worked over 90 hours a week and two in three had clocked up more than 40 hours’ overtime in the previous month. At the same manufactory eight in ten of the working stuff had been verbally abused by their managers. Women employed at the factories described sexual harassment as widespread. Such sad stories are not new nowadays: “An 80-hour week for 5p. an hour” (from “The Guardian” in December 2006); “Tesco clothes made by child workers in Asia” (in “The Independent’s “) etc. Few months ago an Oxfam Australia report accused the sportswear labels of not doing enough to protect labour rights in their supplier factories in Indonesia. While the companies involved might be different, these stories are depressingly similar.