Chapter 3- Perpetuating dependency or climbing up the ladder
By taking the example of China's entry into the WTO, it is argued that a developing country's social growth is dependent on its entry into the global economy.
But there is a mixed picture of effect of GSC on national development. Some countries have benefited from then
Income from GSC-related trade increased 6 fold for China and 5 fold for India. For developing countries as a whole, GSC related trade represents 30% of their GDP (UNCTAD 2011). But the benefits were appropriated by handful of players, while majority of the workers did not benefit.
Chinese exports as a foreign share of trade in value added was constant at 32% b/w 1995 and 2009. Thus expansion of Chinese economy was due to domestic capital and not foreign capital.
In East Asian countries, Japan, S.Korea and Taiwan, during the Dirigiste era- they saw a strong role of the state, and adopted an export oriented industrialisation. This was concomitant with radical redistributive land reforms and strong investment in infrastructure for increasing production capability. They also saw a healthy growth of the home market, which led to good absorption of labour. The S.E Asian countries were exceptional cases in the Post World War -II era.
Most developing countries were unable to emulate the East Asian countries as they did not undertake the necessary land reforms or the infrastructure development that the latter did. Thus, the surplus labour remained unabsorbed. Thus they were unable to gain significant benefits by integrating into the GSC
Did the integration into the GSC lead to significant growth of physical and social infrastructure in developing and emerging economies? It is argued that this integration will lead to relocation of factories into their countries leading to growth in foreign investment, jobs and infrastructure and help them compete better in the global market. But the pattern of investments shows that foreign investment hasn't increased in any significant manner.
World Economic and Social Outlook 2016 report shows that global investment has increased only by 2.6% per year for 2011-2014.
Even the labour conditions have become fragile and vulnerable. 40% of world's workers work in the informal economy (ITUC 2016) with no minimum wage, social protection or labour rights. Even the workers in the formal economy are working in precarious conditions.
The gap between the developed countries and the emerging economies is widening and is serious.
Unit 2: Impact on development- extractive industries
Extractive industry in Africa- interview with two people from S.Africa
Extractive industry accounts for 75% of all exports, value added component of mfg contributes only 14%.The top 110 mining companies made USD 110 Bn. - 156% increase in profit
Extractive industry is marginal employer as it is capital and skill intensive. Oil industry employs expat labour. though mining employs more locals, it only accounts for 5% of formal employment in the sector. It doesn't help lift them out of poverty.
Extractivism is large scale retrieval of natural resources. It could be through mining, large scale agriculture, commercial farming, forest plantation and fishing. The purpose is usually large scale export with profits being pocketed by the large MNCs based in global North, with money leaving Africa and goes out of the continent.
It negatively affects the people in Africa- their livelihoods and access to natural resources. Large tracts of land are taken away in the process and affects them badly.
Development implications of being a part of the GSC:
financial outflows- what should have been paid as taxes goes out as profits for the MNCs. It affects people's survival - they have no access to resources as they are appropriated by the company, no water, land contaminated by mining, commercial agriculture etc.
a) Some amount of extraction is needed. but it should be done with community consent through community consultations. Identify the resources they need
b) renewable resources
c) agro ecology
d) reduce the use of mined raw materials
Workers' responses in the African mining sector
Since 2007, there have been several strikes on
a) health and safety
b) forms of employment as many were casual workers
c) increase of wages
d) several workers have lost the right to unionise, not formally due to the law but due to the impact of the company.
Some of the resistances have been successful. In gambia, H&S has increased. In S. Africa, the Platinum workers or Marikana workers in 2012 have demanded living wages of 12,500 Rand. But 44 workers were killed.
Workers want at least 20% increase in wages, inquiry into the deaths of the workers. and highlight that working conditions haven't improved though platinum exports have increased
Unit 3: Forced and Child Labour in GSCs (Beate Andrees)
The majority of the child labourers and forced labourers are at the lower tiers of the GSCs
Industries most at risk-
Agriculture- palm oil, cocoa, cotton, hazelnut etc,;
Mining- small scale mining
construction within countries, but also outside their countries
Manufacturing- Lower tiers
Not much is known of child labour incidence.
But it is more linked to
- Deep rooted practices including customary practices
- Discrimination of certain groups (like particular castes in India) and
- absence of FOA and CB
Companies have to take measures to assess risk of their investment and its impact on communities, individuals and workers; and conduct careful due diligence
E.g. International Cocoa Initiative
Regulation on forced and child labour:
Governments have enacted legislation to criminalise forced labour and to eliminate CL, including WFOCL.
In some countries, legislation requires cos to report on steps taken to mitigate forced labour in their GSCs. E.g. UK has enacted Modern Slavery Act, 2015 under which cos. are to provide information on slavery in their supply chain. Though it affects only UK companies, it will affect their operations in other countries as well.
What can trade unions do?
More risks where there is no FOA and CB. Also, there is a connection b/w GSCs and informal economy.
TUs can play a role in organising the workers, and addressing issues at the community level. E.g of Torkor model in Ghana, where the communities have developed alternatives to child labour in the fishing industry.
Unit 4: Taxation, trade and public services
Impact of fragmentation of production in GSCs:
a) workers (countries) compete against each other to lower wages- race to the bottom
b) tax competition: the idea that if a country doesn't lower its tax base, the investors may go to other countries.
c) regulation has been driven down
Public Services International works on all 3 areas. Its campaign on tax justice:
a) transparency in the tax incentives provided to corporations- this is not known at the moment. The demand is to make this info public. This would prevent corruption. It would also help assess whether the incentives provided benefit workers and communities. If the Parliament is obliged to make it public, information such as how many jobs were created and how communities were benefited would be known, helping people assess is the companies are beneficial to the country
b) they also oppose tax competition- the rhetoric that competition is good is just rhetoric, not truth. Taxes are present to provide for public services. So the race to drive down taxes is unhealthy and unacceptable. So PSI argues for a minimum corporate tax base
c) Promoting alternatives: Independent commission for the reform of international corporate taxation. The idea of this is not based on national or corporate interests but on public interests. The idea behind them is that taxation is required to enable human rights.
PSI also exposes tax abuses. e.g. Chevron's tax evasion in Australia, McDonald's tax evasion (USD 1 Bn)
PSI's position on trade agreements an public services
PSI focuses on Trade in Services Agreement (TiSA).
TiSA is an extension to the General Agreement on Trade in Services (GATS). While GATS was discussed in the WTO, TiSA is being discussed behind closed doors.
Areas that it deals with are- logistics, transport, data, finance, labour etc. These agreements lock in the rules so they cannot be changed.
One provision is Regulatory Taking which means that if any government creates a regulation that is made in public interest; it must compensate any private company affected by it. These are applicable only for foreign corporations, so new rules are being created for foreign corporations. Another provision of these trade agreements is that the governments should compensate not just for past or current profits affected, but also for future profits.
The effect of tax policies+ effects of trade policies is making it harder to deliver public services. As the tax base erodes, the financing of the public services becomes difficult. The blame is then put on them for not delivering properly paving for the idea that they should be privatised.