Reports from the Economic Front

a blog by Marty Hart-Landsberg

Corporations On The Move

While the fate of the Transpacific Partnership agreement remains uncertain, one thing is clear: Vietnam’s embrace of the agreement has singled transnational corporations that the country is open for business.  And with labor militancy growing in the Asian region, especially in China, South Korea, Indonesia, and Thailand, transnational corporations appear eager to shift operations to that country.

An article in the South Korean newspaper, the Hankyoreh, highlighted the findings of a recent report by the Korea Trade-Investment Promotion Agency (KOTRA) titled: “Changes in the International Trade Environment and Global Production Bases.”

The report looked at 31 cases involving 27 major transnational corporations that had either invested in China, Vietnam, Indonesia, Thailand, Malaysia, or Mexico in the preceding two years or had announced plans to do so.  According to the Hankyoreh, the report found that:

15 of the companies – accounting for nearly half of the cases – had either relocated their production bases to Vietnam or were planning to. With just one company planning to exit Vietnam, the data mean a net influx of 14 companies.

Meanwhile, signs pointed to a production base exodus from the “world’s factory” in China, with a negative net influx of eight companies (three entries, eleven departures).

The most commonly cited reason for relocating was to take advantage of trade agreements, which was mentioned in 23 cases. Changes in the business environment were cited in 12 cases.  Among business environment changes, the most frequently mentioned was “to cut personnel costs,” which was cited in nine cases.

Such moves put new pressures on Asian governments to intensify their respective efforts to slash wages, weaken labor protections, and cut taxes.  Whether they can succeed is another matter.

For example, working conditions are already terrible in many Chinese export factories—see here for a recent report on living and working conditions at a factory outside Shanghai where workers assembled Apple products.

Moreover, strikes and workplace actions are on the rise as Chinese workers grow increasingly militant in the face of worsening economic conditions.  In fact, the China Labor Bulletin reported a doubling of strikes in 2015 compared to the previous year.

As the Wall Street Journal explained in an article titled “China’s Workers Are Fighting Back as Economic Dream Fades“:

Factory employment in China has fallen for 25 months, according to a business-sentiment index released by Caixin, a Chinese magazine. China’s labor ministry says it expects employment to remain stable near term but says the impact of China’s slowdown and restructuring can’t be ignored. . . .

Chinese researchers and business executives say chances are rising that the Communist government may face the kind of social unrest that it has long feared. Chinese authorities recently detained and interrogated over a dozen labor activists, mainly in Guangdong.

“They definitely see protests as threatening social security, and are concerned,” says Anita Chan, a visiting fellow with the Political and Social Change Department of Australian National University.

The KOTRA report demonstrates that transnational corporations remain committed to their strategy of using mobility (or the threat of it) to force down production costs despite the fact that this strategy will only intensify global stagnation tendencies.  Hopefully, the pressures generated by capitalist globalization will strengthen worker organizing and encourage the building of cross-border solidarity and demands for greater control over corporate investment and production decisions.

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