Trade and Employment From Myths to Facts - International Labour ...

Trade and Employment: From Myths to Facts
However, as Artuç and McLaren (2010) point out, exposure to trade can actually
raise the workers’ option value, thereby increasing the quality of jobs in the long
run. In what follows, we review some the most recent evidence on this topic.
Robertson, Brown and Le Borgne Pierre (2009) provide a nice overview of
the issues surrounding trade and the quality of jobs. The countries included are:
Cambodia, El Salvador, Honduras, Indonesia and Madagascar. The primary focus
of the country studies is the textile and garment industries. In all five country case
studies, the authors show that exposure to international trade and investment in
the textile and garment sectors is correlated with an expansion of the number of
jobs in the industrial sector and a contraction of employment in the agricultural
sector. Because working conditions in the textile and garment industries are generally
better than those in agriculture, the case-study authors conclude that the movement
of workers from agriculture to apparel is likely to have improved overall working
conditions in these countries.
In addition, recent developments call into question the effectiveness of relying
on textile and garment manufacturing as a first step towards industrialization. The
chapter on Madagascar raises the important point that while increased exports in
the textile and garment industry did raise wages and employment for a period of
time, the final dismantling of the multi-fibre arrangement (MFA) customs quotas
on 1 January 2005 put an abrupt end to these positive developments. Since 2005,
exports have stagnated and wages and employment have declined. The chapter on
Madagascar concludes on a disconcerting note, claiming that the success of
Madagascar’s export processing zone “added fuel to the idea that using EPZs to
develop a productive manufacturing base and promote employment was a positive
development path for African governments. This chapter shows that this strategy
is no longer sustainable, as a result of the end of the MFA. Yet, no alternative
growth model has been designed.” A similar situation occurred in Indonesia as a
result of the Asian financial crisis. Employment and wage growth in the textile and
garment industries were reversed while employment in the agricultural sector increased.
It has been argued, however, that the jobs in that sector generated through
trade in developing countries are not lost for that country group and that they
may have positive externalities such as the empowerment of women, even if they
are temporary (see Chapter 5 in this volume).
Harrison and Scorse (2010) ask whether outsiders can influence the quality
of jobs in developing countries. They analyse the impact of anti-sweatshop activity
by US activists on wage and employment outcomes in Indonesia. They compare
the wage growth of unskilled workers in foreign-owned and exporting firms in the
textiles, footwear and apparel sectors before and after the initiation of anti-sweatshop
campaigns. They find that anti-sweatshop activity in the United States induced
large real wage increases in targeted enterprises. However, they also find that there
were costs associated with this activity including reduced investment, falling profits
and increased probability of closure for smaller plants. They find no significant
effect on employment.
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