MULTINATIONAL SUBCONTRACTING In the Caribbean Basin
Hackel, Joy & Cavanagh, John
L'Eggs, Florsheim, Le Sportsac and Maidenform-all familiar brand names which stream into the U.S. market from production spots on the global assembly line. Most Caribbean women employed in...
...There are six million illiterates on that island...
...Here, women work in isolation, receiving even lower wages, no social welfare benefits and--since they usually work on a piece rate basis-are totally at the whim of the multinational supplier...
...Since most subcontracting arrangements involve no capital investment by multinationals, it is easy for a multinational to break a contract in the face of political upheaval and establish a similar one in another country...
...In turn, the multinational reduces the overhead and minimizes the chance of labor unrest...
...It is not coincidental that the Caribbean's largest subcontractor is also the poorest country in the Western Hemisphere...
...Though not as stable as many of the coun- tries in the Caribbean, the fact that you can recoup your initial investment in a short period of time and the profit potential is great enough that one does not have to look for long term stability...
...And, while multinational subsidiaries often use dangerous industrial chemicals and eye-damaging microscopes under which electrical compo- nents are joined, workers in domestic firms often face the dangers of old, poorly maintained machinery...
...In one operation orchestrated by Satellite Data Corporation of New York, Barbadians are paid $1.50 per hour for work that earns their U.S...
...As for personal risk, it's much less than on the island of Manhattan...
...In addition, the multinational can avoid the risk that its investment will be nationalized on unfavorable terms...
...customers are assembled annually by Haitian and Dominican women who can't afford to buy even one...
...markets are made under a subcontracting arrangement...
...Once assembled, the multinational re-imports the goods-under generous tariff exemptions-to the developed country instead of selling them on the local market...
...Conditions deteriorate further when work is subcontracted to the home, as is often the case with apparel...
...investment in the developing world has now surpassed $50 billion...
...There's more democracy for business in Haiti than for business in the United States," he told the Multinational Monitor...
...While global recession has markedly slowed trade and investments worldwide since 1979, international subcontracting has boomed...
...At the forefront is Barbados, an island where by the late 1970s, 59 of 170 industrial enterprises were involved in international subcontracting...
...We're not talking about a steel mill or chemical plants-but if you have in mind a light assembly or pro- cessing operation, you'd do well to take a look at Haiti...
...General Assembly (owned by one of Haiti's wealthiest families) pays all overhead, supervision, social security and training costs for the assembly work of several U.S...
...The country seems eternally beset by bad luck-hurricanes, drought and political violence...
...corporations...
...by 1981 this category of exports to the United States alone exceeded $171 million...
...Locally owned firms are typically in a far more precarious financial situation than multinational subsidiaries, which have the best access to capital markets through ties with the multinational banking network...
...With the exception of the automobile industry, subcontracted labor falls on the shoulders of the female workforce, particularly in semiconductors, consumer electronics and apparel...
...firms...
...Among the array of privileges: foreign patent and licence fees are not applicable for 10 years...
...Theoretically, this value should accrue to the country, but even this fraction is overstated, since some of it represents profits and other returns to multinational subsidiaries, which will be wholly or partially expatriated from the developing country...
...Corporate fears that the GSP might expire without renewal in January 1985 has sent a flurry of trade representatives and corporate officials to Caribbean sites from Hong Kong, South Korea and Taiwan as well as from the United States...
...As of 1976, three products together made up over 80% of the total value of subcontracted exports: apparel and acces12 REPORT ON THE AMERICASsories (39%), toys and sporting goods (29%), and electrical and electronic equipment (13...
...If the subcontractor is in a subordinate position to the multinational, the worker is even lower on the spectrum of power...
...As a result, Caribbean nations now supply the United States with 20% of its playsuits*, 23% of its hosiery, 15% of its dresses, 19% of its cotton nightwear and a host of other assembled products...
...While debates rage over the pros and cons of such development schemes, one figure stands out: for the two major subcontracting industriessemiconductors (the essential component in the electronics industry) and apparel-less than two-fifths of the value of the final imports to the United States are added in the developing countries...
...Over the four-year span from 1979 to 1982, subcontracted imports rose steadily from 21% of manufactured imports from developing countries to 26...
...Most Caribbean women employed in manufacturing these and other items are part of a recent global trend: international subcontracting...
...Hence, whereas the quoted wage rates offered by multinational subsidiaries are usually not much more than those offered by domestic firms, the latter often have a far worse record in paying wages on a regular basis...
...Clearly, the rise of subcontracting has not diversified Haitian exports...
...Perhaps Haiti's most enticing incentive to subcontracting firms is the lowest industrial wage scale in the Caribbean-a minimum wage of $2.64 to $3.12 per day...
...Since the late 1970s, bank and fund advice and loan conditions have stimulated government incentives favorable to multinational subcontracting in these countries...
...JeanClaude Duvalier-if you've made a deal with Jean-Claude Duvalier...
...Most of them recoup their initial investment the first year-which is why they can afford the corporate risk of investing in this troubled land...
...levels...
...At recent conferences in Florida, the association's president, Andre Arpaid, has also played on fears about new Haitian refugees by arguing that subcontracting will create island jobs and "stop Haitians from invading Florida...
...Sure it's a dictatorship, but in a sense it always has been...
...so are taxes...
...Stanley Urban, president of the Haitian-American Chamber of Commerce and Industry, summarized the attraction in 1982...
...Or the subcontractor may be an independent firm or an agent who further subcontracts the assembly work to women who work in their own homes...
...Passage of the Caribbean Basin Economic Recovery Act of 1983, guaranteeing duty-free access to the U.S...
...Data Processing by Satellite In the short and medium term, all forms of subcontracting are likely to grow...
...John Cavanagh, a fellow at the Institute for Policy Studies, and Joy Hackel, a staffperson of Policy Alternatives in the Caribbean and Central America (PACCA), work on IPS' project on transnational corporations...
...A dictatorship *1 hectare = 2.4 acres...
...Think what the Russkies could do there...
...Likewise, in the uncertain atmosphere 11of the currenteconomic crisis, multinationals can more easily slash production orders without idling their own industrial capacity...
...The saire could be said of subcontracting to multinational subsidiaries, which is usually the case with semiconductors and often with autos...
...Haitian subcontractors offer other allurements...
...Unlike more capital-intensive forms of industry, most subcontracting requires little infrastructure, capital outlay or transfer of technology...
...This rapid growth of subcontracting appears to signal a significant shift in the methods used by multinationals penetrating the Caribbean basin...
...Scores of American companies are right now making excellent profits from Haiti's minimal labor costs, among the world's lowest...
...direct investment to developing countries declined...
...BARBADOS 1984 April 16, 1984 MAY/JUNE 1984 the Caribbean basin, as in Southeast Asia, has been encouraged by the World Bank and International Monetary Fund, which have emphasized assembly-type, light manufactured exports as the centerpiece of development...
...Jvtte Rodaaard standards in multinational factories...
...Industrious, Dependable People After Mexico, with its over 600 maquila factories on the U.S...
...12 REPORT ON THE AMERICAS ment brochures, "An industrious people, dependable, friendly and eager to respond to productive challenges," and "A tradition of respect for private property and foreign ownership...
...Under this strategy, manufacturers based in developed countries subcontract the most labor-intensive stages of production, for example sewing or assembly, to the Third World nations where labor is cheap...
...After years of steady growth, new investment did not even hit the $6 billion mark in either 1981 or 1982...
...According to Capital Consult, a Haitian research firm, some 154 corporations have subcontracting arrangements in Haiti, 42% of them foreign owned...
...market and a host of new incentives for multinationals, assures that Caribbean subcontracting will continue to grow...
...The story grows much worse, however, when subcontractors are domestic firms, or simply home workshops...
...The total value of assembly industry exports skyrocketed from $2.3 million in 1967 to $86 million in 1976...
...They continue to make huge profits turning out such items as clothing, jewelry, most of the world's baseballs, even electronic products...
...Caribbean Dateline, December 1983...
...Over 3 million bras for U.S...
...border, Haiti has attracted the most subcontracting business in the region...
...Presently, 90% of all manufactures produced in Haiti for U.S...
...In contrast, subcontracted imports to the United States from the developing world exceeded $7 billion in both years...
...Singularly lacking in government and corporate pronouncements about the Caribbean is any coherent notion of how the corporate involvement will enhance genuine development schemes based on the needs of the majority...
...Haiti has one of the world's lowest standards of living...
...Within the seriously depressed Haitian economy, subcontracting has been brought to center stage and, in the past decade, has been the economy's fastest growing sector...
...I foresee tens of thousands of new jobs in the region over the next five years," claimed Frederic Brooks, chairman of MacGregor Sporting Goods, which is expanding operations on the island by shifting production involving several hundred jobs from Taiwan to Haiti...
...trade legislation which already guarantees duty-free entry of many developing country products into U.S...
...Dictatorship Best for Haitians Haitian Manufacturers Association officials also frequent trade fairs and conferences in Florida and elsewhere with the explicit message that Haiti can make subcontracting highly profitable for U.S...
...Inside a 25-hectare* "industrial zone" in the capital city of Port-auPrince, companies producing targeted products are exempt from income tax for eight years and pay the total tax only after the 14th year of production...
...Since the most recent global economic downturn in 1980, however, banks cut back the volume of new loans, and new flows of U.S...
...The technological possibilities of banks and corporations transporting segments of office work-a bastion of female labor-to the Caribbean for return via satellite open up vast and ominous new horizons for corporate deployment of subcontracting in a variety of service sectors...
...Poor Health and Safety Records In the continuing controversy over the advantages and disadvantages of multinational investment, most concede the often dangerous health and safety A cruise passenger arrives in Haiti, 1983...
...investment in 1981...
...Familiarly known as the CBI, the act begins its 12-year existence during months of intense congressional debate over renewal of the Generalized System of Preferences (GSP), the U.S...
...No American businessman has ever been killed or kidnapped...
...been through direct investment-either fully owned subsidiaries or joint ventures...
...IMF and Bank Encouragement The shift toward subcontracting in This Business Week ad reflects Barbados' campaign to attract foreign investment...
...But all that has had very little adverse effect on the scores of American firms with light manufacturing opera- tions in and around Port-au-Prince...
...Since 1960, the Haitian government has actively wooed subcontracting by enacting a series of decrees which provide lucrative incentives to foreign firms...
...counterparts $4 to $12...
...And you'll get along fine with the government of Pres...
...Haiti's shockingly low per capita annual income of $280 per year reflects the level of "development" at which subcontracting flourishes...
...is the best form of government for these people...
...Finally, since the multinational is often the sole buyer from the subcontractor, it is able to dictate price and conditions in the contract from a position of monopoly power...
...The 154 subcontracting firms operating in Haiti employ 80% of the nation's workforce at these subsistence wages, while attaining productivity levels of 75-80% of U.S...
...Haiti offers, according to its investBest Assembly Plant Operation In the Caribbean: Haiti "That's right-Haiti...
...Traditionally, U.S...
...In all 10 of the leading subcontracting countries in the Caribbean and Central America-except Honduras-the value of subcontracted exports to the United States exceeded .new U.S...
...The subcontractor may be the multinational's own subsidiary, as in the case with nearly all operations which employ women assembling electronics for foreign companies in free trade zones...
...markets...
...Production inputs, 70% of which originate in the United States, are imported duty-free...
...In the new office work "factories," local workers receive information via satellite at the Barbados plant, type it into a computer and then transmit it back to the United States...
...Certain English-speaking Caribbean governments have already begun to offer incentives for such international office work subcontracting...
...corporations' main involvement in developing countries has *Playsuits include such garments as beach tops, halters and short jump suits...
Vol. 18 • May 1984 • No. 3
