By Anna Bartsch

In 2006, democratic Senator Byron Dorgan of North Dakota presented Senate bill S. 3485 to the 109th Congress – a bill that soon became known as The Decent Working Conditions and Fair Competition Act. In it, he offered bipartisan legislation designed to “stop sweatshop abuses with respect to labor that produces products that are sold in the United States” which specifically meant stopping any sale or import of goods deemed to have been produced with sweatshop labor abroad into the United States. The bill never became law and as of today there exists no legislation regarding the topic.

Senator Dorgan. Photo Credit: timjeby, Flickr CC

Senator Dorgan. Photo Credit: timjeby, Flickr CC

Sweatshop labor, and the implicit accusation of exploitation, poses a central challenge to US-Asia relations in particular, and globalization in general. Sweatshop labor is often treated as a strict subset totally contained in the term exploitative labor, and can be defined as labor where unfair advantage is taken of the exploited party, more specifically if the following four conditions are fulfilled: 1) There exists an asymmetrical relationship between A, the exploiter and B, the exploitee, 2) B needs whatever A supplies (in this case, income), 3) B depends on particular A for said resource, 4) A has control over the resource in question. The term “exploitation” and the subset “sweatshop labor” carries within itself a normative judgment, and is often accompanied with statistics and anecdotes illustrating the conditions in question: wages as low as 30$ a month, 40 hour shifts, beatings, forced pregnancy tests and union bans.

It is tempting to condemn exploitative labor as morally outright wrong: and the American population is largely doing so. Public campaigns and boycotts against Nike, Gap and other apparel producers has forced multinationals to allow independent factory inspections and take responsibility for work that is often subcontracted. The American consumer, and thus the American political representative, often takes these labor conditions and the implicit moral judgment made as a reason to view developing world labor conditions as US responsibility. It is arguable  that banning the imports of such goods is not only good for business (it prevents companies such as Nike from losing face and revenue) but also an ethical duty: reduced demand from the world’s biggest consumer would no doubt reduce exploitative labor of the kind discussed. Such thinking inspired Sen. Dorgan’s bill, and prompted the rise of “sweatshop free” brands such as American Apparel. On a political level, it led to American and western voices such as Sen. Menendez and the International Labor Organisation demanding stronger labor protection laws in countries such as Bangladesh. In this way, the widespread moral condemnation of sweatshop labor coupled with the prospect of long term economic gain provides international and US government impetus to follow and get involved in Asian country labor legislation – a process that is largely driven by the American consumer.

South Korean owened Kuk Dong sweatshop in Mexico. Photo credit: marissaorton, Flickr CC

South Korean owened Kuk Dong sweatshop in Mexico. Photo credit: marissaorton, Flickr CC

These political demands have been meet with little response. The economist as well as the conservative politician on both the US importer and the Asian exporter side make use of the so- called Paradox of Exploitation: the predicament that a transaction, as intuitively unjust as it might strike, cannot be truly so if it is pareto-improving, consensual, non-obligatory and generates no third party externalities. This seems to be the case with sweatshop labor, and exploitative labor in general. If, so the argument runs, the laborer would be made worse off by working in a sweatshop, he wouldn’t take the job. Assuming he isn’t forced, 40 hour shifts and 30 cents an hour must be more appealing than subsistence farming.

This side of the argument has prevented US efforts to forcefully raise developing country labor standards in the short term through import bans since 1930, when the Tariff Act “prohibited the merchandise of prison labor, slaves, or forced labor of children”. This lack of legislation in practice means multinational producers can produce low cost goods abroad through a double mechanism: by choosing producer countries with low wages and little protection, and by de facto circumventing the frequently weak law enforcement that does exist. Since there are no incentives apart from political activism in the outlet market, companies are able to maintain the status quo. This is furthermore supported by the widespread economic opinion that sweatshop labor is constitutive, and even a good sign, of the development of a country. Indeed, the often-exploitative garment industry in Bangladesh employs 4 million people. Simply banning imports and thus reducing production of sweatshop goods would endanger the livelihood of these people, although there exist studies such as Harrison and Scorce’s paper showing that while profits decrease, few jobs are lost. Economists Paul Krugman and Jeffrey Sachs moreover maintain that since sweatshop labor constitutes an opportunity, the demand for labor will eventually increase wages and thus living standards and drive growth. Furthermore, sweatshop labor provides skills, technology, capital and management know-how. Thus, US policy designed to change labor conditions in Asia would not only be based on questionable moral sentiments, but actually hinder the economic development of the region. This thinking, coupled with the fact that the purpose of a company is to make profit, is at the core of the US-Asian trade in consumer goods: harsh working conditions are accepted as a necessary byproduct of a process that gives the American consumer access to cheap goods and generates growth for the Asian exporter in the long run. It is important here to note that the libertarian argues that even if the long term economic justifications were unfounded, the labor exploitation would not be the responsibility of the US: since it is not a rights violation to provide no benefit (which is what the import bans would entail: a stop to all sweatshop production), it cannot be a rights violation to provide some benefit (in the form of an opportunity that is still preferred over others).

Poster released by Minimal Minimum Wage. Photo Credit: PT, Flickr CC

Poster released by Minimal Minimum Wage. Photo Credit: PT, Flickr CC

Thus, the moral, economic and political challenges regarding sweatshop labor explain why the US international stance is so conflicted. On one hand, there exists widespread popular horror at working conditions among the consumers, and on the other, an unwillingness to change the status quo due to economic as well as philosophical arguments. These paradoxes are not only reflected in international political life but also in specific US legislation. While there has been no official law since 1930, corporate responsibility has been de facto legislated by the consumer and so-called ethical branding. Companies such as Nike have learned from painful boycotts in the 1990s: Nike has increased its minimum working age to 18, has allowed third party inspections and is reducing work with toxic materials. These rules are largely self-legislative: in the interest of public image and thus long term sales, companies expose themselves to checks by bodies such as Apparel Industry Partnership and Social Accountability 8000. The weakness of such a system is clearly the voluntary element. For comprehensive legislation, the interests of three groups need to be taken into account:

  1.     The US population, and thus their government, as well as the Asian government
  2.     Multinational corporations that produce using exploitative labor
  3.     The worker in said developing country

Keeping these groups in mind, several policy options can be evaluated:

A. Ban the import of all sweatshop labor (as was proposed in 2007).

This leaves all parties worse off, in the long and in the short run. Assuming that popular economic theory is correct in assuming that sweatshop labor is a driver of an early economy and since foreign investment is desperately needed in developing countries, import bans to the US and the resulting decrease in production would impede long term economic growth and short term employment. The latter obviously also affects the third interest group, the worker who is deprived of an opportunity he preferred to the others on offer, whatever they may be. Lastly, this is also harmful to the corporation that uses sweatshop labor. Should it not be able to comply to regulation and pay higher wages and implement safety measures, production will have to decrease or halt. Cost of production and thus of the final product will rise and profit decrease even if it should be able to absorb the shock. This would harm the American consumer, most likely outweighing any positive moral effect he might feel in the knowledge that sweatshop labor in his name ceased to exist.

 B. Keep status quo: self-legislation with mixed political signals.

This would in the short run per definition make no party worse or better off than they are currently. However, in the long run, there is the possibility that the American consumer, and thus government feels the overwhelming responsibility (as it has done previously with child and slave labor) to stop exploitative labor at whatever cost. This could also affect multinationals that in the long run will have to self-police to an extent that federal legislation would make no difference, as companies are already compliant. There is a further distinction to make among exploited workers: while the young and those that are able to acquire skills might have the opportunity to move into less demanding work as soon as the local economy develops, those that are old or less dynamic could be facing conditions even more exploitative as their bargaining power decreases. This can also be reflected in an urban/rural divide. Thus, there could remain a significant risk of economic and social polarization amongst those employed in sweatshops even if economic growth should take off.

C. Introduce moderate legislation in line with the ban of imports on child labor goods.

Such legislation should start by legally codifying what most corporations have agreed to in their voluntary codes. This forces silent outsiders to comply to transparency and safety rules that their competitors can already adhere to, which would undermine the argument that such measures are too expensive for the corporation to swallow. Specifically, this could include possible laws to raise the minimum employment age to 16 and ban any physical violence. These measures would make the worker better off and make neither the firm nor the American consumer worse off. In the long run, corporations could be required to get their subcontractors inspected independently, a process that many already allow, albeit inconsistently and often amidst accusation of corruption. Contrary to many anti-sweatshop campaigns, corporations should not be legally required to pay a US-determined minimum wage: too many uncertainties regarding what constitutes a “living” wage would outweigh the possible benefits. Instead, the focus should be on increasing transparency of their contracted work and especially their safety standards, which would have automatic self- policing effects on both parts. The division in deadlines would allow companies to absorb and write off the future increase in expenditure and provide both a carrot in the form of increased public image and a stick in the form of punishment (e.g. a fine). The worker in the developed country would benefit from improved safety standards while his job is not in danger, and the local government’s concerns over long term economic development would be addressed by both keeping the firms and by improved living conditions. Lastly, the American consumer’s conscience would be calmed, and his goods would not become drastically and suddenly more expensive. US-Asian relations would benefit from less emotional moral arguments, while making trade in the long run more sustainable, and benefiting local workers without harming growth.

Sweatshop labor and the exploitative conditions in which it takes place, are a central challenge for US-Asian and relations trade. It poses economic and moral and thus political challenges, which demand both US involvement in local labor laws and reticence. In taking the moral interest of the American consumer, the profit interest of the corporations in general, and the legislative limits of the government into consideration, the best course of action to address these challenges is to propose limited legislation regarding the trade of sweatshop labor goods. These go less far than the proposed 2007 bill but would constitute an active improvement on the status quo.

 Featured Image: “A family sweatshop in China”, Photo Credit: Danijel James, Flickr CC. License available here.