March 25, 2005
reverberations
Posted by Allison Christians

There is an article in the NY Times today that illustrates some of the tensions I've been discussing over the past couple of weeks.  Entitled "Fraying of a Latin Textile Industry," it describes the extreme shifts in the directional flow of US multinationals following the expiration of trade restrictions (quotas) applicable to garment imports into the US. 

The article describes the plight of workers in several countries in Central America that had been hosting factories for US clothing companies.  These countries are losing the factories to other countries, mainly China, now that the quotas are gone, as buyers seek the cheapest price.  Taxation is (unsurprisingly) not mentioned in the article, but, as I argued in an earlier post, the cheapest price usually coincides with generous tax breaks, incentives, and even subsidies by developing countries desperate to create employment.  With tax and other overhead costs out of the way, wages become the final arbiter, and the countries in Central America are feeling the pinch.

Describing long lines of job seekers, the article notes that these applicants are "seamstresses with years of experience - women who spoke as if they had been caught up in some storm that no one told them was coming. For the last seven years, Ms. Campos, a 42-year-old mother of three, had worked in the maquiladoras - the local term for the assembly plants - and the $5 she earned each day was her family's only income.  Then in December 2003, her employers skipped town without notice. They told her and the 400 other workers that they were shutting down the factory for the Christmas holiday. The factory never reopened, and the company left without paying a penny in severance.  She quickly found work at another garment-making operation. That one closed in October 2004. Ms. Campos has been standing in lines every Monday."

The flood of global capital, ever seeking the least resistant market, but leaving serious challenges for developing countries in its wake.

Globalization/Trade | Bookmark

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