Unit 1, Section 3 - Pricing and Sourcing Dynamics in Global Supply Chains
High risk supply chains – low wages, unsafe buildings, forced overtime, violation of right to form unions / collectively bargain
Pricing Squeeze – what lead firms pay to their suppliers
Production Cycle Squeeze – how much time lead firms give to their suppliers to make their products
Lead firms able to consolidate their power thru their suppliers b/c
- trade liberation by the WTO
- technological advances → great control over their supply chains
- entry of China / Vietnam into world market increased # of relatively low wage workers without democratic representation
- growing number of countries producing same thing (overproduction)
resulted in buyers’ market for lead firms in gsc
2 economics processes responsible for downward pressure on wages/working conditions:
control / consolidation of gcs by tncs
Need better enforcement of core labor standards (CLSs) and better regulation of trade and gsc
Need CLS+ - trade agreements to cover / enforce expanded range of labor standards.
WTO agreed to liberalize trade in apparel over a 10-year period (1995) by phasing out the Multi-Fiber Agreement. This decision was accompanied by China’s acceptance into the WTO in 2001. These trade-related agreements allowed buyer to move easily from one country to another.