by Naomi Klein
As I walk along the blank streets of Cavite, I can feel the threatening impermanence, the underlying instability of the zone. The shed-like factories are connected so tenuously to the surrounding country, to the adjacent town, to the very earth they are perched upon, that it feels as if the jobs that flew here from the North could fly away again just as quickly. The factories are cheaply constructed and tossed together on land that is rented, not owned. When I climb up the water tower on the edge of the zone and look down at the hundreds of factories, it seems as if the whole cardboard complex could lift up and blow away, like Dorothy’s house in The Wizard of Oz. No wonder the EPZ factories in Guatemala are called “swallows.”
Fear pervades the zones. The governments are afraid of losing their foreign factories; the factories are afraid of losing their brand-name buyers; and the workers are afraid of losing their unstable jobs. These are factories built not on land but on air.
“It Should Have Been a Different Rosario”
The air the export processing zones are built upon is the promise of industrialization. The theory behind EPZs is that they will attract foreign investors, who, if all goes well, will decide to stay in the country, and the zones’ segregated assembly lines will turn into lasting development: technology transfers and domestic industries. To lure the swallows into this clever trap, the governments of poor countries offer tax breaks, lax regulations and the services of a military willing and able to crush labor unrest. To sweeten the pot further, they put their own people on the auction block, falling over each other to offer up the lowest minimum wage, allowing workers to be paid less than the real cost of living.
In Cavite, the economic zone is designed as a fantasyland for foreign investors. Golf courses, executive clubs and private schools have been built on the outskirts of Rosario to ease the discomforts of Third World life. Rent for factories is dirt cheap: 11 pesos per square foot —less than a cent. For the first five years of their stay, corporations are treated to an all-expenses-paid “tax holiday” during which they pay no income tax and no property tax. It’s a good deal, no doubt, but it’s nothing compared to Sri Lanka, where EPZ investors stay for ten years before having to pay any tax.27
The phrase “tax holiday” is oddly fitting. For the investors, free-trade zones are a sort of corporate Club Med, where the hotel pays for everything and the guests live free, and where integration with the local culture and economy is kept to a bare minimum. As one International Labor Organization report puts it, the EPZ “is to the inexperienced foreign investor what the package holiday is to the cautious tourist.” Zero-risk globalization. Companies just ship in the pieces of cloth or computer parts —free of import tax — and the cheap, non-union workforce assembles it for them. Then the finished garments or electronics are shipped back out, with no export tax.
The rationale goes something like this: of course companies must pay taxes and strictly abide by national laws, but just in this one case, on this one specific piece of land, for just a little while, an exception will be made — for the cause of future prosperity. The EPZs, therefore, exist within a kind of legal and economic set of brackets, apart from the rest of their countries —the Cavite zone, for example, is under the sole jurisdiction of the Philippines’ federal Department of Trade and Industry; the local police and municipal government have no right even to cross the threshold. The layers of blockades serve a dual purpose: to keep the hordes away from the costly goods being manufactured inside the zone, but also, and perhaps more important, to shield the country from what is going on inside the zone.
Because such sweet deals have been laid out to entice the swallows, the barriers around the zone serve to reinforce the idea that what is happening inside is only temporary, or is not really happening at all. This collective denial is particularly important in Communist countries where zones house the most Wild West forms of capitalism this side of Moscow: this is definitely not really happening, certainly not here where the government in power maintains that capital is the devil and workers reign supreme. In her book Losing Control?, Saskia Sassen writes that the zones are a part of a process of carving up nations so that “an actual piece of land becomes denationalized….”28 Never mind that the boundaries of these only-temporary, not-really-happening, denationalized spaces keep expanding to engulf more and more of their actual nations. Twenty-seven million people worldwide are now living and working in brackets, and the brackets, instead of being slowly removed, just keep getting wider.
It is one of the zones’ many cruel ironies that every incentive the governments throw in to attract the multinationals only reinforces the sense that the companies are economic tourists rather than long-term investors. It’s a classic vicious cycle: in an attempt to alleviate poverty, the governments offer more and more incentives; but then the EPZs must be cordoned off like leper colonies, and the more they are cordoned off, the more the factories appear to exist in a world entirely separate from the host country, and outside the zone the poverty only grows more desperate. In Cavite, the zone is a kind of futuristic industrial suburbia where everything is ordered; the workers are uniformed, the grass manicured, the factories regimented. There are cute signs all around the grounds instructing workers to “Keep Our Zone Clean” and “Promote Peace and Progress of the Philippines.” But walk out of the gate and the bubble bursts. Aside from the swarms of workers at the start and end of shifts, you’d never know that the town of Rosario is home to more than two hundred factories. The roads are a mess, running water is scarce and garbage is overflowing.
Many of the workers live in shantytowns on the outskirts of town and in neighboring villages. Others, particularly the youngest workers, live in the dormitories, a hodgepodge of concrete bunkers separated from the zone enclave by only a thick wall. The structure is actually a converted farm, and some rooms, the workers tell me, are really pigpens with roofs slapped on them.
The Philippines’ experience of “industrialization in brackets” is by no means unique. The current mania for the EPZ model is based on the successes of the so-called Asian Tiger economies, in particular the economies of South Korea and Taiwan. When only a few countries had the zones, including South Korea and Taiwan, wages rose steadily, technology transfers occurred and taxes were gradually introduced. But as critics of EPZs are quick to point out, the global economy has become much more competitive since those countries made the transition from low-wage industries to higher-skill ones. Today, with seventy countries competing for the export-processing-zone dollar, the incentives to lure investors are increasing and the wages and standards are being held hostage to the threat of departure. The upshot is that entire countries are being turned into industrial slums and low-wage labor ghettos, with no end in sight. As Cuban president Fidel Castro thundered to the assembled world leaders at the World Trade Organization’s fiftieth-birthday celebration in May 1998, “What are we going to live on?… What industrial production will be left for us? Only low-tech, labor-intensive and highly contaminating ones? Do they perhaps want to turn a large part of the Third World into a huge free trade zone full of assembly plants which don’t even pay taxes?”29
As bad as the situation is in Cavite, it doesn’t begin to compare with Sri Lanka, where extended tax holidays mean that towns can’t even provide public transportation for EPZ workers. The roads they walk to and from the factories are dark and dangerous, since there is no money for streetlights. Dormitory rooms are so overcrowded that they have white lines painted on the floor to mark where each worker sleeps —they “look like car parks,” as one journalist observed.30
Jose Ricafrente has the dubious honor of being mayor of Rosario. I met with him in his small office, while a lineup of needy people waited outside. A once-modest fishing village, his town today has the highest per capita investment in all of the Philippines — thanks to the Cavite zone —but it lacks even the basic resources to clean up the mess that the factories create in the community. Rosario has all the problems of industrialization — pollution, an exploding po
pulation of migrant workers, increased crime, rivers of sewage —without any of the benefits. The federal government estimates that only 30 of the zone’s 207 factories pay any taxes at all, but everybody else questions even that low figure. The mayor says that many companies are granted extensions of their tax holiday, or they close and reopen under another name, then take the free ride all over again. “They fold up before the tax holiday expires, then they incorporate to another company, just to avoid payment of taxes. They don’t pay anything to the government, so we’re in a dilemma right now,” Ricafrente told me. A small man with a deep and powerful voice, Ricafrente is loved by his constituents for the outspoken positions he took on human rights and democracy during Ferdinand Marcos’s brutal rule. But the day I met him, the mayor seemed exhausted, worn down by his powerlessness to affect the situation in his own backyard.31 “We cannot even provide the basic services that our people expect from us,” he said, with a sort of matter-of-fact rage. “We need water, we need roads, we need medical services, education. They expect us to deliver all of them at the same time, expecting that we’ve got money from taxes from the places inside the zone.”
The mayor is convinced that there will always be a country — whether Vietnam, China, Sri Lanka or Mexico — that is willing to bid lower. And in the process, towns like Rosario will have sold out their people, compromised their education system and polluted their natural resources. “It should be a symbiotic relationship,” Ricafrente says of foreign investment. “They derive income from us, so the government should also derive income from them…. It should have been a different Rosario.”
Working in Brackets
So, if it’s clear by now that the factories don’t bring in taxes or create local infrastructures, and that the goods produced are all exported, why do countries like the Philippines still bend over backward to lure them inside their borders? The official reason is a trickle-down theory: these zones are job-creation programs and the income the workers earn will eventually fuel sustainable growth in the local economy.
The problem with this theory is that the zone wages are so low that workers spend most of their pay on shared dorm rooms and transportation; the rest goes to noodles and fried rice from vendors lined up outside the gate. Zone workers certainly cannot dream of affording the consumer goods they produce. These low wages are partly a result of the fierce competition for factories coming from other developing countries. But, above all, the government is extremely reluctant to enforce its own labor laws for fear of scaring away the swallows. So labor rights are under such severe assault inside the zones that there is little chance of workers earning enough to adequately feed themselves, let alone stimulate the local economy.
The Philippine government denies this, of course. It says that the zones are subject to the same labor standards as the rest of Philippine society: workers must be paid the minimum wage, receive social security benefits, have some measure of job security, be dismissed only with just cause and be paid extra for overtime, and they have the right to form independent trade unions. But in reality, the government views working conditions in the export factories as a matter of foreign trade policy, not a labor-rights issue. And since the government attracted the foreign investors with promises of a cheap and docile workforce, it intends to deliver. For this reason, labor department officials turn a blind eye to violations in the zone or even facilitate them.
Many of the zone factories are run according to iron-fist rules that systematically break Philippine labor law. Some employers, for instance, keep bathrooms padlocked except during two fifteen-minute breaks, during which time all the workers have to sign in and out so management can keep track of their nonproductive time. Seamstresses at a factory sewing garments for the Gap, Guess and Old Navy told me that they sometimes have to resort to urinating in plastic bags under their machines. There are rules against talking, and at the Ju Young electronics factory, a rule against smiling. One factory shames those who disobey by posting a list of “The Most Talkative Workers.”
Factories regularly cheat on their workers’ social security payments and gather illegal “donations” from workers for everything from cleaning materials to factory Christmas parties. At a factory that makes IBM computer screens, the “bonus” for working hours of overtime isn’t a higher hourly wage but doughnuts and a pen. Some owners expect workers to pull weeds from the ground on their way into the factory; others must clean the floors and the washrooms after their shifts end. Ventilation is poor and protective gear scarce.
Then there is the matter of wages. In the Cavite zone, the minimum wage is regarded more as a loose guideline than as a rigid law. If $6 a day is too onerous, investors can apply to the government for a waiver on that too. So while some zone workers earn the minimum wage, most — thanks to the waivers —earn less.32
Not Low Enough: Squeezing Wages in China
Part of the reason the threat of factory flight is so tangible in Cavite is that compared with China, Filipino wages are very high. In fact, everyone’s wages are high compared with China. But what is truly remarkable about that is that the most egregious wage cheating goes on inside China itself.
Labor groups agree that a living wage for an assembly-line worker in China would be approximately US87 cents an hour. In the United States and Germany, where multinationals have closed down hundreds of domestic textile factories to move to zone production, garment workers are paid an average of US$10 and $18.50 an hour, respectively.33 Yet even with these massive savings in labor costs, those who manufacture for the most prominent and richest brands in the world are still refusing to pay workers in China the 87 cents that would cover their cost of living, stave off illness and even allow them to send a little money home to their families. A 1998 study of brand-name manufacturing in the Chinese special economic zones found that Wal-Mart, Ralph Lauren, Ann Taylor, Esprit, Liz Claiborne, Kmart, Nike, Adidas, J.C. Penney and the Limited were only paying a fraction of that miserable 87 cents —some were paying as little as 13 cents an hour. (See Table 9.3, Appendix, page 474.)
The only way to understand how rich and supposedly law-abiding multinational corporations could regress to nineteenth-century levels of exploitation (and get caught repeatedly) is through the mechanics of subcontracting itself: at every layer of contracting, subcontracting and homework, the manufacturers bid against each other to drive down the price, and at every level the contractor and subcontractor exact their small profit. At the end of this bid-down, contract-out chain is the worker —often three or four times removed from the company that placed the original order —with a paycheck that has been trimmed at every turn. “When the multinationals squeeze the subcontractors, the subcontractors squeeze the workers,” explains a 1997 report on Nike’s and Reebok’s Chinese shoe factories.34
“No Union, No Strike”
A large sign is posted at a central intersection in the Cavite Export Processing Zone: “DO NOT LISTEN TO AGITATORS AND TROUBLE MAKERS.” The words are in English, painted in bright red capital letters and everyone knows what they mean. Although trade unions are technically legal in the Philippines, there is a widely understood — if unwritten — “no union, no strike” policy inside the zones. As the sign suggests, workers who do attempt to organize unions in their factories are viewed as troublemakers, and often face threats and intimidation.
One of the reasons I went to Cavite is that I had heard this zone was a hotbed of “troublemaking,” thanks to a newly formed organization called the Workers’ Assistance Center. Attached to Rosario’s Catholic church only a few blocks from the zone’s entrance, the center is trying to break through the wall of fear that surrounds free-trade zones in the Philippines. Slowly, they have been collecting information about working conditions inside the zone. Nida Barcenas, one of the organizers at the center, told me, “At first, I used to have to follow workers home and beg them to talk to me. They were so scared —their families said I was a troublemaker.” But after the center had been up and running for a year,
the zone workers flocked there after their shifts —to hang out, eat dinner and attend seminars. I had heard about the center back in Toronto, told by several international labor experts that the research and organizing on free-trade zones coming out of this little bare-bones operation is among the most advanced being done anywhere in Asia.
The Workers’ Assistance Center, known as WAC, was founded to support the factory workers’ constitutional right to fight for better conditions — zone or no zone. Zernan Toledo is the center’s most intense and radical organizer, and though he is only twenty-five and looks like a college student, he runs the center’s affairs with all the discipline of a revolutionary cell. “Outside the zone, workers are free to organize a union, but inside they cannot stage pickets or have demonstrations,” Toledo told me in my two-hour “orientation session” at the center. “Group discussions in the factories are prohibited and we cannot enter the zone,” he said, pointing to a diagram of the zone layout hanging on the wall.35 This catch-22 exists throughout the quasi-private zones. As the International Confederation of Free Trade Unions report puts it: “The workers are effectively living in ‘lawless’ territory where to defend their rights and interests they are constantly forced to take ‘illegal’ action themselves.”36
In the Philippines, the zone’s culture of incentives and exceptions, which was intended to be phased out as the foreign companies joined the national economy, has had the opposite effect. Not only have new swallows landed, but unionized factories already in the country have shut themselves down and reopened inside the Cavite Export Processing Zone in order to take advantage of all the incentives. For instance, Marks & Spencer goods used to be manufactured in a unionized factory north of Manila. “It only took ten trucks to bring Marks & Spencer to Cavite,” a labor organizer in the area told me. “The union was eliminated.”