Contents

Introduction: A Tale About The Underside of Globalization

The Global Context of the New Sweatshops

NAFTA: The Interests Line Up

Nafta and The New Sweatshops

Industrial structure of apparel: a buyer driven global commodity chain

NAFTA: The worst case occurs

Necessity and Solidarity

Introduction: A Tale About The Underside of Globalization

Held in the condominium complex were seventy-two laborers who were forced to work as much as 17 hours a day, seven days a week for $1.60 an hour (Economist, 1995). In some cases, the sixty-seven women and five men, worked up to 22 hours for as little as 50 cents an hour (Noble, 1995). Their wages varied, therefore, between about one-third and one-tenth of the U.S. legal minimum wage. The condominium was also a major fire hazard. There was no rear exit and only small windows with thick iron bars.(Ibid.)

A gang of eight smugglers had paid the workers' airfare from Thailand, promising them a brighter future in America. Upon their arrival, however, the new immigrants were forced into slave labor, working day and night to pay off their "passage fees." The fees ranged from $4,800 to $25,000 (Ibid.) They were also threatened with beatings, rape, and even death. (Noble , 1995a) Following the discovery, all 72 workers were arrested, as illegal aliens, and held by Federal immigration officials. But conditions had been so bad, one of the women said: "The day I was arrested I was very happy."

Budpha Rhangmak, one of the people forced to stay at the compound, claimed that a year ago, two people who tried to escape were severely beaten and sent back to Thailand. He also stated that workers were frequently beaten in the compound to prevent escapes. Another worker from the El Monte sweatshop claimed that she was told that it would take three years for her to pay off the $4,800 dollar traveling fee. She was forced to pay $300 a month. (Noble 1995) According to federal officials, threats against the workers' children or family members in Thailand were used to make sure their parents continued sewing.

Immigration officials had been aware of the El Monte operation for three years, but the local authorities acted only when they heard the testimony of a woman who escaped through a ventilation shaft just weeks before the raid (The Economist 1995). The eight Thai nationals who ran the ring and its businesses were convicted of harboring and transporting illegal immigrants, kidnaping, peonage, and other serious charges. A few weeks after the discovery over a million dollars of their assets, including over $865,000 in cash were distributed to the 72 workers found in El Monte, and to 39 others who worked in other Los Angeles installations controlled by the ring.

The smuggler/owners have been imprisoned. The illegal immigrants are due approximately $3.5 million in back-pay and penalties. (Ibid.) The labor and occupational safety agencies of the state of California asked for $550,000 in penalties from the sweatshop owners. Compensation has also been collected from the garment manufacturers who commissioned work from the contractor. Major American retail chains which sold clothing made in the slave sweatshop include Nieman Marcus, Montgomery Ward and Sears. (Ibid.)

Stories such as these about the Thai slaves of El Monte California symbolically represent one of the main tendencies of contemporary global capitalism: the tendency to level worker's conditions down to or below a global standard more like that of today's most vulnerable Third World workers than that of yesterday's organized workers in the developed industrial social order. This is the concrete meaning of the race to the bottom.

While the Thai slaves represent the unusual worst case of the problems of labor in the apparel industry and in other low wage industries in North America, the rise of the "new sweatshops" is widespread. One responsible estimate, often used by former Secretary of Labor Robert Reich, is that up to half of the entire apparel work force of the United States, potentially 500,000 workers, labor at below the legal minimum wage or without legally entitled premium pay for overtime hours. These workers also suffer unsafe and unsanitary conditions. Such conditions include as many as 50,000 workers in New York City and 70 - 90,000 in Los Angeles -- the two largest centers of garment production in the country. (U.S. GAO 1988, 1989, 1994, 1995; U.S. Department of Labor, 1996)

The North American Free Trade Agreement (NAFTA), dissolving barriers to the movement of goods and capital between the United State Mexico and Canada, is, like the European Union (EU) and The General Agreement on Tariffs and Trade (GATT) part of a project of global capital -- and a very successful one. In thirty years a new form of capitalism has been born out of the crisis of mid century capitalism. The mid-century type of capitalism known variously as Monopoly Capitalism (Baran and Sweezy, 1966; O'Connor, 1973), or later, Fordism (Aglietta, 1979) was characteristically associated with the Keynesian Welfare State (KWS). But many of the characteristic forms and achievements of that variant of capitalism have been superceded by a new one -- global capitalism. This then is the context of NAFTA: a world project of capitalism to dissolve barriers to investment and to lower costs of production entailing, ipso facto, a systematic attack upon and loss of working class power and social protections in the older industrial nations. Yet, paradoxically, this same world context makes more concrete than ever the rewards of solidarity and necessity of internationalism.

In what follows I shall briefly indicate the ways in which contemporary global capitalism differs from its predecessors. Then I will show the ways in which strategic relations under the NAFTA trading regime illustrates these contentions concretely. After a brief report of current research on the impact of NAFTA I shall show that despite the grim prospect there are interesting opportunities embedded in today's difficulties. The theme throughout is the new sweatshops. The reason for this is both symbolic and practical. As we enter a new century we would have hoped to have left behind, in principle and incrementally in practice, the burning "social question" of the end of the last century. Super exploitation of wage labor has had a rebirth in the rich countries and is growing in the developing world as well.

The Global Context of the New Sweatshops

The "race to the bottom" connotes a competitive process whereby the political leadership of a geographic jurisdiction competes with other jurisdictions to reduce the cost of doing business within its territory. Direct economic costs of production such as wages or environmental regulations -- or the legal infrastructure of worker's rights -- are held down or lowered. Additionally, the social wage -- policy driven additions to workers' real income, such as health and social insurances or public transport subsidies -- are similarly constrained or eliminated. While these processes are being effected more or less consciously as problem-solving behavior by leadership cadres of the capitalist class, (Useem 1984; Sklair 1991; Chomsky 1993; Ross and Trachte 1990 ) it is a mistake to understand the "race to the bottom" as merely a political trick, one in which the linguistic usage "globalization" is merely a matter of ideological obfuscation. There is a structural change upon which these political and even cultural developments rest.

In contemporary global capitalism, both the economic and the political levels of amenity won by the working classes in the older industrial regions are put at risk by the competitive environment of the new global order. As to the workers in the newly industrializing countries: the story is more mixed. Despite high (and rising) levels of inequality, Korean and Taiwanese absolute levels of living have risen. But the same is not true in the Western hemisphere: export-led industrialization is not proving to be the route out of poverty that proponents had hoped.

The story of global capitalism begins in the core, the older industrial regions -- where monopoly capital held sway through the late 1960s. Capital to capital relations (the forms of competition and cooperation) were dominated by a structure of stable market shares and oligopolistic competition among the big firms in the concentrated, leading sectors. These firms used administered pricing mechanisms to pass on (rising) labor costs, and had enough market power to extract favorable terms of trade from their competitive sector suppliers and clients. In the leading sectors unionized labor was able to extract rising real wages for itself, and variously in different countries, led its allies in the incremental rise in the social wage, covering as it did competitive sector workers and the vulnerable. In itself the social wage protected all workers from the extremes of economic threat and the fear of penury. It thus emboldens all in relation to capital. For a time the big firms became more or less adjusted to the existence of unions and learned to live in the KWS environment. (O'Connor 1973) The Class to State relation of monopoly capitalism then, included participation of working class representatives in the interest structure of state policy -- in what Poulantzas called the power bloc. (Poulantzas [1968] 1978) To be sure the capitalist class and its monopoly sectors were dominant; but the crumbs at the table were, by now, pretty good left-overs.

This image, from Baran and Sweezy (1966) and O'Connor (1973) is complemented by the Regulationist insight into Fordism. In stabilizing capitalism through the purchasing power of the local working class, Fordism entailed the unity of production and consumption in one society. In the next era this would be severed once again.

Eventually the relative gains of labor in the well-organized, monopoly (large firm, dominant market share) sector created problems for capital. In the late 1960s, compensation began to outdistance productivity, depressing rates of profit. (Mandel 1978; Castells 1980; Bowles, Gordon, and Weisskopf 1983; Weisskopf 1979; Armstrong, Glyn and Harrison 1984). Employers in the older industrial nations became vulnerable to competitors who could take advantage of the less costly labor available in other locales. The MNCs invaded each other's markets and sourcing parts and products from an expanding array of locations. Eventually they began assembly and even deeper production structures in formerly agrarian and colonial countries.

The resulting global competition heightened the need of core capital to control direct labor costs. In this increasingly global context, the use or threatened use of capital mobility emerged as a primary lever of exploitation -- the strategic mechanism by which capital extracts an "acceptable" bargain from, in this case, organized monopoly sector labor. Price competition returned to supplement the strategy of product differentiation in broad parts of the market, changing once again the nature of capitalist competition. And in relation to labor, global capitalism adds a widening global pool of reserve labor to the exploitation of the competitive sector as means of extracting value from labor -- another change from the era of monopoly capitalism.

In contrast to the era of known as monopoly capitalism or Fordism, then, in the global capitalist era, monopoly sector and other firms became global by locating parts or phases of their production processes in regions where low wage and/or politically repressed working classes are available. (see inter alia, Gereffi and Korzeniewicz 1994; London and Ross 1995) Complex chains of production stages are the "backstage" to the presentation of final commodities at the retail level. In a direct manner this disaggregation of the production process over space lowers labor costs and, indirectly, the threat of further relocations provides the leverage needed to extract concessions from the work force still employed at older production sites.

The logic of this strategic matrix is that a multiplicity of local jurisdictions makes possible investor choice, thus disempowering labor or other, local, political actors whose agenda might in any way meet the disapproval of more mobile employers or investors. State policies reflect a change in the balance of class forces in which the power bloc managing state affairs incorporates the material interests of the working class with less frequency than it formerly did. This is among the key ways that the era known as that of monopoly capitalism has changed as it has become the era of global capitalism.

The transition from the era of Fordism to that of global capitalism can be summarized in terms of the three strategic relations of capitalism: capital to capital; capital to labor; class to state. Under the regime of monopoly capital, competition between large capitals was mainly that of product differentiation, not price competition. Today, strategic use of geography , technology, and product mix finds even very large oligopolies using price competition as a major form of competition. In turn large scale capital has come to look more like small capital in its attitude towards unionized labor: unremitting hostility.

The capital to labor relationship of global capitalism resumes the class war of the older era of competitive capitalism -- albeit in new forms. The forms are also different in Europe, Anglo- America and in the Newly Industrialized Countries. In America, the choice to cut labor costs as a fundamental aspect of price competition includes aggressive anti-union activity -- with increasing success. Union density is nearing the end of a 30 year drop which will soon result in a rate of under 10% in the private sector. By contrast, in many European contexts, national labor relations have a tendency to be somewhat more corporatist, especially in the North and West. In developing countries multinational employers seem equally concerned with the political environment: they depend on compliant state managers to create a context in which unionization per se is not important. (London and Ross 1995) In Singapore or Mexico, high unionization rates are meaningless: the state or leading party controls the official unions.

The "social contract " of the third quarter of the century has been discarded. So the social protections which were part of Labor -capital accords (e.g., in the U.S. health insurance; elsewhere, long term employment) have been incrementally eroded; and those which were accepted by capital as part of state policy (the KWS) are under attack. Consequently in each of the three major strategic relations of capitalism, the "market-oriented" policies of the current era, initially signaled by the advent of Reaganism and Thatcherism, have tended toward a general global reality.

Geographic differentiation -- economic, political and social -- plays an important role in each of these three relations. As the production process extends in long commodity chains the right location for the right part of the process depends on unskilled labor cost and availability in one place; appropriate computer skills in another; design centers in yet another; marketing groups with both local and transnational expertise is still other locations. Skill at assembling the workforce for these commodity chains is an important aspect of competitive strategy. And of course, the threat and reality of capital flight to other jurisdictions, gives employers a powerful weapon against their employees. This is an essential part of the story of NAFTA, as we shall see.

Finally national and sub-national political jurisdictions are ever eager to retain economic activity within their boundaries, and thus to compete with others. In a world of expanded investor choice, governments have become more compliant to the wishes of capital. Thus, the balance of class forces in political policy shifts towards the interests of employers. The KWS and the bundle of social democratic protections it once offered are under attack, and environmental regulations create a whole new factor for capital mobility. In Europe this has become known as social dumping; and universally it is understood as a race to the bottom.

The characteristic (but not the only) organizational form of global capitalism is the multinational corporation or the global firm (MNC). Both the multinational producer and the conglomerate are extremely well-adapted to conditions of class struggle on a world scale. "Multisourcing", for example, allows a firm to avoid the consequences of labor difficulties at any one site. Conglomeration, for another example, prevents labor organized in a given industrial sector from jeopardizing the profit flow of a highly diversified corporate structure. The consequence of both is to insulate the employer from labor's power and organization, to increase the employer's bargaining power. Most simply, the vast expansion of investor choice as to the physical location of business activity (i.e. the ability to be mobile) gives capital an immense increment of bargaining power -- directly in its relations with employees and, indirectly, in matters of state policy (see Ross and Trachte 1990, Ch. 5 and 8, for details).

A recent UNCTAD report emphasizes the role multinational capital plays in the worldwide global process. "Multinationals employ directly about 73 million people, representing nearly 10 per cent of paid non-farm jobs worldwide and close to 20 per cent in the industrialized countries."(Williams 1994) These figures understate the impact of the global firms. A key development since the surge of outward foreign direct investment (FDI) of the 1970s has been the elaboration of globe spanning networks of subcontractors. (See Gereffi and Korzeniewicz. 1994.) While relationships with global firms support contractors around the world, their capital is not technically recorded as FDI, thus understating the role of the larger global firm in employment and investment data on world basis. For example, " ... Nike ... employs 9,000 people but nearly 75,000 work for its independent sub-contractors around the globe." (Williams 1994) Indirect employment effects, UNCTAD estimates, may bring the total number of jobs associated with multinationals to 150 million or more. (Ibid.)

Of the eight million jobs added to the roles of multinational firms in the last decade, according to the UNCTAD report, 7 million of these have been in developing nations, especially in East Asia. (Ibid.) In Table 1, inward and outward flows of Foreign Direct Investment (FDI), almost all of which is controlled by MNCs, is displayed.
 

NAFTA: The Interests Line Up

The central claim of these opponents was that it would invite capital flight to Mexico from the U.S. This was the obvious goal of both the American and Mexican treaty sponsors, no secret, and not in itself empirically speculative. The labor groups argued this capital mobility would be capital flight -- evading unions and cutting wage bills. Between 1976 and 1980 the Mexican compensation cost level ranged from 18 to 24 percent of the U.S. level. As the Salinas government readied itself for the passage of NAFTA, courting even more investment than the maquiladora⁽²⁾ already had garnered, Mexican workers' compensation fell to 15 percent of the U.S. costs. (U.S. Department of Labor 1994:2; as cited by Levinson 1996: 11)

Environmental groups claimed the Treaty would encourage firms to evade stiffer U.S. environmental regulations by locating in Mexico. (In the U.S. the role of Canada was not debated.)

Supporting the treaty were the vast majority of what are considered by elite culture to be enlightened sources of opinion: newspaper editorialists; leaders of internationally oriented elite civic associations; most visible academic economists; elected officials known for "intelligent" views on world trade.

An unusually unified front of large employers, however, was critical to the ability of the congress to overcome popular opposition. Employers made large political contributions designed to maximize support for NAFTA. Two studies of the votes in Congress found a strong association between corporate and pro-NAFTA political contributions by so-called "Political Action Committees" ("PACs") and votes for NAFTA. (Steagall and Jennings 1996; Kahane 1996)

The claims of the supporters -- as those of opponents -- tended to exaggeration. In essence the proposition was clear enough: the opening of the Mexican market to American investment (consumer markets were already for all practical purposes open) would lead to increases in higher skilled (more credentialed) administrative, technical and professional jobs in the US, and, even conceding some low wage job loss, the net result would be U.S. job gain. The White House and some business group supporters tended to cite politicized job projections which focused on gross jobs gained from trade, rather than net jobs gained after deductions of the losses.

Scholars from contending camps however, came to tacit agreement that the net effect on job loss or gain would be small relative to the annual churning in the U.S. economy, which after all, has about 130 million jobs. The estimates were that 30,000 - 50,000 jobs would be lost -- or gained -- annually. (See Rothstein 1993) On the other hand, labor and its leftist allies were concerned that the absolute numbers of job losers would necessarily be larger than the net, and these would be concentrated among vulnerable manufacturing workers (who were more likely to be unionized.), or other low wage workers --e.g., minorities and immigrants.

Apart from macroeconomic effects, many of the intellectuals who sided with labor did so because of a certain "underdog sympathy" which runs through some parts of intellectual subculture. Another motive was political: some fractions of the intelligentsia saw the NAFTA project as part of the larger projection of increasing corporate power, increasing subordination of the political sphere to transparent bidding of business leadership. Speaking for this perspective was famed consumer advocate Ralph Nader: the "corporate globalism [resulting from NAFTA] ... establishes supranational limitations on any nation's legal and practical ability to subordinate commercial activity . . ." (Nader and Wallach 1996: 92)

The opposition varied in the degree to which it specified concern for Mexican workers. Some opponents, archetypically the billionaire maverick Ross Perot, had a simple protectionist view: jobs would be lost to Mexico. Others, including at least rhetorically most labor unions, argued that Mexican workers would not reap the full benefits of job growth, for their government was corrupt and repressive and they were unable to form free trade unions without harassment and danger. The relatively cosmopolitan nature of the articulated opposition was ignored by the commentators in the weekly magazines of opinion, and Sunday newspaper features. In those venues the opposition to NAFTA was seen as jingoist and primitive.

It is amusing to discover that candidate Clinton was acutely aware of the logic of the opposition's concerns. Speaking in North Carolina on October 4, 1992, during his first campaign, Clinton crafted a sophisticated view of the dangers and opportunities of free trade with Mexico. He noted the draft Treaty, negotiated by Pres. Bush's trade representative, "is silent with respect to labor laws and the environment." (Clinton 1992:15; as cited throughout by Levinson 1996:7). "For a high wage country like ours, the blessings of more trade can be offset at least in part by the loss of income and jobs as more and more multinational corporations take advantage of their ability to move money, management, and production away from a high wage country to a low wage country. We can also lose incomes because those companies who stay at home can use the threat of moving to depress wages, as many do today." (Clinton p.3) About Mexico, the candidate argued "...[I]f you look at the experience of the maquiladora plants...there is certainly cause for concern. we can see clearly there that labor standards have been regularly violated; that environmental standards are often ignored, and that many people who ha ve those jobs live in conditions which are still pretty dismal not just by our standards, but theirs." (ibid.)

The environmental opposition to NAFTA had two related concerns. The lower standards of Mexican environmental protection in both law and practice, environmentalists argued, would lead to further degradation of (especially) the border regions where maquiladora were concentrated. The big border industrial towns are notorious for their water and sewerage, and chemical disposal problems. Environmentalists were further concerned that in order to evade U.S. standards firms would go to Mexico, in turn causing pressure to lower U.S. regulatory standards.

In the course of the political debate the Administration made concessions to both axes of opposition. It created a side agreement on environmental enforcement, promising to create a clean up fund. A labor "side agreement" was also made, creating a North American Labor Cooperation Council (NALCC) empowered to investigate transgressions of workers' rights. These political concessions had different results. The environmentalists were split, with some of the old mainline groups supporting the agreement because of what they thought were precedent setting concerns for the environment. Other more activist groups, like the Sierra Club, maintained their opposition.

The labor aside agreement attracted no labor support. Indeed, at least one observer, sympathetic to the unions' position, argued that their strategy had been flawed. Had the unions seemed more willing to negotiate, Rothstein argues, they could have gotten greater concessions from the Clinton Administration. (Rothstein 1993) But their opposition was uncompromising. In the event, the side agreement is extremely weak: there is no legal penalty for being found to have failed to enforce one's own labor law.

NAFTA and The New Sweatshops

One case is illustrated by the behavior of the makers of GUESS? jeans. GUESS jeans is owned by a wealthy immigrant family in Los Angeles, the Marcianos, who have specialized in sexy artistic advertising to justify extemely high prices. Their advertising promotes jeans as high fashion articles of clothing, a boutique product. In the early 1990s the Marciano family became very rich as Guess? Jeans were able to command premium prices. Then, under competitive pressure from Calvin Klein and others, Guess began to seek ever cheaper contractors as its price was forced down from $70 to $48. When the Secretary of Labor created a strategy to get firms to obey the minimum labor law by agreeing to monitor their own contractors, GUESS? agreed, thus becoming part of a list of "good guys" (the so -called "Trendsetters List") published by the U.S. Labor Department.

Then during 1996, the apparel union, UNITE, began to organize GUESS'S permanent workers at its Los Angeles warehouse, and put pressure on its sweatshop practices among the contractors. Prodded by the union, the Department of Labor repeatedly found GUESS jeans being made under illegal labor conditions, and eventually suspended it from the "good guy" list. The union began to recruit public support from allies such as a group of Los Angeles poets, and college students and faculty members joined demonstrations at stores which sold their goods. Finally, in the winter of 1996-97 the head of the firm announced that they were moving many of their contracts from the Los Angeles and Southern California area to Mexico, reducing their US work by over 40%. (Hornblower 1997)

"In Mexico the company's stitchers earn $20 to $40 a week, compared with about $5 an hour for their Los Angeles counterparts, who are overwhelmingly Latino immigrants. The difference shaves up to $2 off the cost of each pair of jeans and explains, in part, why U.S. apparel jobs have dropped 43% since 1973." ( Hornblower op cit)

In this case the free flow of capital and commodities between Mexico and the United States allowed a major labor law violator to avoid compliance by moving to another group of super-exploited workers.

In a different kind of case documented meticulously by Jerome Levinson, employees of a Sony Mexican subsidiary were harassed and fired while attempting to form an independent union.

Using the lengthy mechanism created by the North American Agreement on Labor Cooperation (NAALC), upon complaint by American unions, ample evidence of denial of core labor rights of association was found. To no avail: the independent union was killed.

The general pattern is as candidate Clinton, and the labor and left opposition to NAFTA feared. This is emphasized in a systematic study by Kate Bronfenbrenner at Cornell University. Bronfenbrenner studied elections, held under the auspices of the American labor law, in which workers in an enterprise choose whether or not they wish to be represented by a union. During the debate on NAFTA American unions claimed that employers would use the lower pay and lower level of workers' rights in Mexico to evade American standards. They were concerned both about wages and about the right to organize. Bronfenbrenner set out to determine if their claims were correct.⁽³⁾

In a large sample of collective bargaining elections held after the passage of the NAFTA treaty Bronfenbrenner found that employers often threatened to close plants and to move to Mexico in an effort to convince workers to vote against union representation. And when employers did use this strategy they were more likely to defeat unions. (Bronfenbrenner 1996) Thus, Bronfenbrenner's data show that the Guess? case illustrates a broader and more systematically valid relationship: NAFTA has become a weapon whereby management defeats labor organizing, attenuating the right to organize.

Many observers, including some from the historic left and socialist forces, are harshly critical of what they consider to be global hype. For those like David Gordon ( 1995, 1994) or Doug Henwood claims about the race to the bottom in a global context ring false, as merely ideological cloaks on other tendencies. Gordon, for example emphasized the loss of union strength as an explanation for growing inequality, not globalization (1995) . Henwood says ""Globalization" is typically cited to disarm any opposition to almighty capital. If capital is in part playing a confidence trick with this incantation, then maybe labor and the nation-state aren't as powerless as they're said to be." (Henwood 1996)

It is, however, in the joining of the Guess and Sony stories and the Bronfenbrenner study that the relation of inequality, loss of union strength and globalization is most clear. Where employers threaten plant closing and capital flight they are most likely to beat a union. That they actually flee only one third of the time that they threaten is that upon which the Gordon-Henwood argument focuses. But Bronfenbrenner shows that the threat's the thing and the actual instances are what make the threat powerful. And Guess is one of those instances. Thus, loss of union strength is not an entirely separate matter from globalization -- as the labor left understood during the failed campaign to beat the NAFTA treaty.

Industrial structure of apparel: a buyer driven global commodity chain

Apparel production is in some ways an extreme version of this kind of global industry. Changes in the structure of production and of retailing have been striking during the last generation. At the top of the pyramid, high in the food chain of the industry, are the major retailers and widely recognized garment "manufacturers". The distinction between retailers and manufacturers is often small, for the large retailers directly commission production of apparel with their own store labels, just as so-called manufacturers do. Furthermore, neither retailers nor manufacturers usually produce anything at all. With only some exceptions, like Levi's jeans, garment sewing is performed in myriad small shops, often employing less than 50 people. There are over 22,000 of these in the United States. In New York City alone, those who are chronic labor law violators number about 2500 - 3000.

The top twenty garment manufacturers in the United States, meaning those who commission production, control 40% of production. (Moberg, 1997) In turn, they and the big retail chains have terrific leverage over contractors. They name a price at which they will buy completed garments, or sewing of material they provide. The contractors have little discretion., or choice. There are few buyers but many sellers. In turn, contractors, during peak periods, or in order to accommodate a large order, will subcontract batches of goods, or even parts of a garment. A blouse contractor may subcontract collar embroidery, for example. As the work moves down towards the broadening base of the pyramid towards direct producers power and rewards shrink, and the globalization of production becomes more relevant.

Apparel contractors in the older industrial regions -- the so-called core or imperial countries -- must directly compete with contractors in poor countries. When labor law violators in the United States pay $2, or $3/hour they are still paying more than Mexican employers, or far more than the Haitian or Vietnamese rate of $0.28 or $0.30/hour. This competition for work is the primitive building block of the larger phenomenon that now know of as the race to the bottom. Along with it comes the phenomenon of "social dumping.⁽⁴⁾" Thus, at the bottom of the pyramid of the commodity chain for apparel, competition among small (and sometimes large) entrepreneurs drives wages for poor people in rich countries down towards those in poor countries, but it does not necessarily drive wages up for workers in poor countries.

The general result of free trade in textiles and apparel has been the loss of hundreds of thousands of jobs in the United States. The value of imported apparel has gone from 2% in the 1950's to about 40% in the 1990s. Chart One shows this visually.
 

Chart One

The apparel industry, returning to the specifics of the sweatshop problem, is among those characterized by a "buyer-driven commodity chain." When the Guess? firm shifted its production to Mexico it was not -- apparently -- part of a process of "development" for Mexico: for hanging over the heads of Mexican laborers are the even lower wages of Haitians or Vietnamese. And these workers compete with Chinese workers and so on.

NAFTA: The worst case occurs

Here are some of the findings. (Economic Policy Institute 1997) After the treaty passed, through 1995, Mexican goods made up 26.7% of the increase of U.S. imports from non-industrialized, low-wage countries. 43.5% of the increase in U.S. deficits with these countries was attributed to Mexico.

As discussed above (Bronfenbrenner 1996), many firms used the threat of moving to Mexico as a weapon against wage increases and union organization. Over half of the firms used threats to shut down operations to fight union organizing drives. When forced to bargain with a union, 15% of firms actually closed part or all of a plant -- triple the rate found in the late 1980s, before NAFTA.

By 1996, growth in U.S. imports from Mexico and Canada, was much larger-82.7% and 41.1%, than growth in exports -- both in the mid-thirties. A U.S. trade surplus with Mexico of $1.7 billion in 1993 became a deficit of $16.2 billion in 1996. America's overall deficit with the NAFTA countries hit $39 billion in 1996, an increase of 332% from 1993.

Using standard employment multipliers, the U.S. trade deficit with Mexico and Canada has cost the U.S. 420,208 jobs since 1993 (250,710 associated with changes in the trade balance with Mexico, and 169,498 with Canada). This leads to the alarming finding that NAFTA, that is, trade between the U.S. on one hand, and Mexico and Canada on the other, was responsible for 38% of the decline in U.S. manufacturing employment since 1989. The result is especially striking since it is higher than even a partisan anti-NAFTA sources estimated during the controversy.

According to the Economic Policy Institute, NAFTA and globalization generally have changed the composition of employment in America, stimulating the growth of lower paying services industries and accelerating the deindustrialization of the U.S. economy.

The EPI studies address the question of how the NAFTA results might appear to Mexicans. They refute the proposition that the peso devaluation which helps drive Mexican exports to the U.S. is extraneous to understanding NAFTA. As their associate, Professor Robert Blecker of American University put it, "Mexico had to devalue the peso in order to attract the direct foreign investment and export-oriented manufacturing that the NAFTA agreement was designed to promote." This devaluation, however, has had strikingly negative consequences for the Mexican people. Unemployment doubled between mid-1993 and mid-1995, to nearly 1.7 million, while another 2.7 million workers were but precariously employed in 1996. Child labor -- violating Mexican law -- may be as high as 10 million. Real hourly wages in 1996 were 27% lower than in 1994 and 37% below 1980 levels. Of the 1995 working population of 33.6 million, 19% worked for less than the minimum wage, 66% lacked any benefits, and 30% worked fewer than 35 hours per week. The EPI reports that during the three years of NAFTA, the portion of Mexican citizens who are "extremely poor" has risen from 32 to 51%.

Necessity and Solidarity

Even apart from the NAALC institutional structure, almost immediately upon their legislative defeat, a number of American unions turned to lending assistance to Mexican counterparts which were independent of the PRI -- the ruling party which controls a tamed union confederation. These included electrical workers unions, communications workers, apparel workers, and auto workers. All these unions have lent concrete support -- money, organizers, legal cooperation, to Mexican counterparts. It is important -- crucial -- to understand that this is not a matter of sentimental good will -- it is a material necessity. In 1848, in the Communist Manifesto, Marx and Engels wrote: " The proletarians have nothing to lose but their chains. They have a world to win. Working men of all countries, unite!"

In 1848 Marx was incorrect about the implicit argument in his exhortation: working people of many countries could certainly better their situations on a national basis. And in the older industrial regions they eventually did. Now though, the material structures of technology trade and political economy force upon working men and women confrontation with one another across barriers of language, ethnicity, race and culture. Now, solidarity is not a sentiment of noble consciousness but a requirement of common advance. The contradictions of the age visit us in full irony as we enter a new century, with socialism in disrepute and Marxism used as an epithet, now it becomes concretely true: "the free development of each is the condition for the free development of all."

REFERENCES

Aglietta, Michel. 1979. Theory of Capitalist Regulation: The U.S. Experience. London: New Left Books.

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1. In a poll (Yankelovich ) published on June 7, 1993 a sample was asked "Do you agree with Clinton's view that the free trade agreement will create U.S. jobs, or with Perot's view that it will cost U.S. jobs?" showed that only 25 % sided with Clinton while 63 % agreed with Perot (Destler 1995:225 n.12).

2. These are branch plant subsidiaries of (usually) multinational companies.

3. Bronfenbrenner's work was commissioned by the NALCC itself.

4. Social dumping is a term not frequently used in the North American context, but is familiar in the EU discourse: it occurs when nations "tolerate lower standards of social welfare, job safety, and health care among the work force; permitting greater environmental damage in the course of production; and generally [exploit] their lower total hourly labor costs to expand their share of ...manufacturing employment." (Reder and Ulman 1993: 21)