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«Labour rights in gLobaL Production networks An Analysis of the Apparel and Electronics Sector in Romania Leonhard Plank, Cornelia Staritz, Karin ...»

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Leonhard Plank, Cornelia Staritz, Karin Lukas

Labour rights

in gLobaL Production networks

An Analysis of the Apparel and Electronics Sector in Romania

Leonhard Plank, Cornelia Staritz, Karin Lukas

LABOUR RIGHTS IN GLOBAL

PRODUCTION NETWORKS

An Analysis of the Apparel and Electronics Sector in Romania

Stand Juni 2009

Medieninhaber: Kammer für Arbeiter und Angestellte für Wien

1040 Wien Prinz-Eunge-Straße 20-22 Druck: Eigenvervielfältigung Verlags- und Herstellort: Wien Leonhard Plank, Cornelia Staritz, Karin Lukas Labour Rights in Global Production Networks An Analysis of the Apparel and Electronics Sector in Romania Acknowledgements The authors thank the ‘Netzwerk Wissenschaft’ of the Vienna Chamber of Labour for their financial support which allowed us to conduct interviews with workers, workers’ representatives and trade unions as well as management and sector experts in the apparel and electronics sector in Romania.

This report is based on an interdisciplinary research project ‘Accountability of States and Transnational Corporations for Labour Rights in Global Production Networks’ conducted by Karin Lukas, Leonhard Plank and Cornelia Staritz, in particular on Plank/Staritz (2009a, 2009b, forthcoming). The research project is funded by the Austrian Academy of Sciences through the DOCteam fellowship.

Danksagungen The AutorInnen bedanken sich für die finanzielle Unterstützung durch das ‘Netzwerk Wissenschaft’ der Arbeiterkammer Wien, die es ermöglicht hat, Interviews mit ArbeiterInnen, BetriebsrätInnen und GewerkschafterInnen sowie Managment und SektorexpertInnen im rumänischen Bekleidungs- und Elektroniksektor zu führen.

Dieser Bericht basiert auf einem von Karin Lukas, Leonhard Plank and Cornelia Staritz durchgeführten interdisziplinären Forschungsprojekt ‘Accountability of States and Transnational Corporations for Labour Rights in Global Production Networks’, im speziellen auf Plank/Staritz (2009a, 2009b, forthcoming). Das Forschungsprojekt wird durch das DOC-team Stipendium der Österreichischen Akademie der Wissenschaften finanziert.

CONTENTS

Executive Summary

Zusammenfassung

1 Introduction

1.1. Context and motivation: changes in international trade and global production

1.2. Research questions and methodology

1.3. Overview of the report

2 Chain and Network Approaches to frame the Global Economy

2.1. Overview of different chain/network approaches

2.2. Under-developed areas

3 Global Production Networks in Apparel

3.1. Global sector dynamics

3.2. CEE´s role in global production networks

3.3. Romania´s integration into global production networks

3.4. Labour rights situation in Romania

4 Global Production Networks in Electronics

4.1. Global sector dynamics

4.2. CEE´s role in global production networks

4.3. Romania´s integration into global production networks

4.4. Labour rights situation in Romania

5 Conclusions and Outlook

Appendices

A.1 Interviews

A.2 Overview of the labour rights situation in Romania

References

LIST OF TABLES, FIGURES AND BOXES

Tables Table 1: Top 25 apparel export countries to EU-15, 1990-2007 (excluding intra-EU 15 trade) Table 2: Top 10 CEMs, 2008 Table 3: Top 30 electronics export countries to EU-15, 1993-2007 (excluding intra-EU trade) Table 4: Major destinations for Romanian electronics exports, 1998-2006 Figures Figure 1: The textile and apparel production network Figure 2: Employment in Romania’s textile and apparel sector, 1990-2006 Figure 3: Vertically integrated versus vertically specialized computer industry Boxes Box 1: Hennes & Mauritz - A leading fashion retailer Box 2: Transnational network organizers: Esquel and Li & Fung Box 3: Zara - A pioneer of ‘fast-fashion’ Box 4: The global CEM-industry Box 5: Videoton - Shifting division of labour Box 6: A McDonald´s approach to labour

EXECUTIVE SUMMARY

The global economy, and in particular the organization of global production and international trade, has changed significantly in the last three decades. Today, international trade and global production are increasingly organised in highly fragmented and geographically dispersed production networks where transnational corporations (TNCs) break up the production process in different parts and locate them in different countries. These transformations have important impacts on the development prospects of countries, firms and workers. While the impacts of these changes on countries, regions and firms have been studied rather extensively, comparatively little has been said about the effects on workers. Hence, this report analyses how global production networks are configured and how the incorporation of firms into these networks impacts on the position of workers and their rights. To analyse these questions an adapted Global Production Network (GPN) approach is used that not only considers the key role of firms, in particular lead firms, in global production networks but also non-firm actors, the institutional and regulatory context and workers.





The apparel and electronics sector in Romania provide the empirical lens to study these questions taking into account broader dynamics in the CEE region. Despite important differences (e.g. labourversus capital-intensiveness, the complexity of the production process or the technology involved) both sectors have been increasingly organised in global production networks, with a global and a regional dimension, involve labour-intensive production steps which have been relocated to countries with lower labour costs and exhibit some similar industry dynamics such as high-competition and ‘fastfashion’-principles as well as labour rights issues. The strategies of lead firms such as H&M and Zara or Hewlett Packard, Dell and Nokia as well as of powerful first-tier suppliers such as Li & Fung in the apparel and Flextronics in the electronics sector aptly illustrate these dynamics. These industry dynamics strongly influence Romania´s position in production networks, in particular its role as a regional supplier country where low costs and/or flexibility with regard to orders and lead times are paramount concerns. However, besides strategies of lead firms and sector dynamics this report reveals the importance of non-firm actors and specific institutional and regulatory contexts in which global production networks are embedded. In CEE the legacy of the state socialist period as well as of the ‘transition’ period, including EU accession, have importantly influenced the articulation of production networks. For instance, in electronics policies devised at the national and local level had an important impact on the specific integration of Romanian firms and workers into production networks.

In apparel the EU´s Outward Processing Trade (OPT) agreements created a deeply rooted division of labour between the lead firms in Western Europe and firms in Romania. On the international level the phase out of the Multi-Fibre Agreement (MFA) heavily impacted on the geographical articulation of production networks in the apparel sector and in electronics the Information Technology Agreement (ITA) furthered liberalization and outsourcing.

In the Romanian apparel sector working conditions in the 1990s, at least occasionally, featured sweatshop-like conditions. Gradually, improvements in working conditions occurred which were partly driven by legislative changes and the efforts of labour inspectorates as well as by international consumer campaigns. As a response to consumer campaigns many large buyers adopted Codes of Conduct (CoC). Our findings in the Romanian context suggest, however, that the effect of these firmdriven initiatives is limited as audits were so far mostly concerned with health and safety issues. Lead firms are reluctant to change their purchasing practices and integrate ‘ethical’ concerns into their core business activities. Thus, today the main labour rights issues in the apparel sector in Romania concern wages, working time and work intensity, informal work, trade union representation and to some extent occupational health issues. In the apparel sector workers often receive the sector minimum wage and piece-rate or a mixture of hourly and piece-rate payment and minimum quotas are common. Given the tight targets working overtime is sometimes the only way to meet quotas.

Overtime issues are also related to fluctuating orders which are increasingly unpredictable and demanded on a short-term basis. Informal work in the apparel sector consists of workers employed without contracts, workers with a contract covering the minimum wage but where the additional wage is paid off the books, or workers hired for long testing periods. Further, contract migrant workers have increased in importance in the apparel sector in Romania, in particular from China, Vietnam, Bangladesh and the Philippines. In the apparel sector female workers comprise 80% to 90% of the workforce as the labour-intensive sewing is exclusively done by women. The unionisation rate in the apparel sector is around 25% but there are important differences between former state-owned and newly established private as well as between larger and smaller firms. Cases of abusive dismissal or unfair treatment of union leaders or of employees willing to establish a union are quite common. These issues are closely connected to Romania´s integration as a regional supplier into production networks that are characterised by ‘fast fashion’ tendencies as well as by OPT relations where low costs and/or flexibility with regard to orders and delivery time are paramount concerns.

In the Romanian electronics sector the situation is slightly different, given differences in the structure of production networks and the technology involved. Although plants of lead firms and Contract Electronics Manufacturer (CEMs) seem to have a ‘high-tech‘ image, large parts of the work in these factories are labour-intensive and low-skilled with a majority of female workers operating on the lines (60-70%). In contrast to apparel the technology used in these plants imposes certain minimum standards with regard to working conditions, particularly in the health and safety area. Hence, the main labour rights issues in Romania concern working time and work intensity, flexible employment relationships as well as hostility towards trade unions. In the electronics sector wages are generally higher than in the apparel sector. However, one of the main motivations for lead firms and CEMs to establish production sites in Romania is still low wages and hence wages in the sector are often below the average wage in the respective region. Wage systems are characterised by a fixed base wage and a high variable share. A key concern for lead firms and CEMs is to manage the fluctuating demands of their clients. Hence, working time is strongly exposed to the volatility of (consumer) end markets. To deal with the constant and rapid change in production volumes firms extensively use flexible employment relationships as provided by temporary employment agencies. In the electronics sector, trade unions are generally weak and as most plants have been established through greenfield investments no established structures of organization existed before. CEMs are in particular known for their hostile behaviour against trade unions. These issues can be related to Romania´s position in a hierarchical, multi-tiered system where firms in Romania carry out relatively unsophisticated activities.

ZUSAMMENFASSUNG

Die Weltwirtschaft, insbesondere die Organisation von globaler Produktion und internationalem Handel, hat sich in den letzten drei Jahrzehnten signifikant verändert. Internationaler Handel und globale Produktion sind zunehmend in stark fragmentierten und geografisch verstreuten Produktionsnetzwerken organisiert, in denen Transnationale Unternehmen den Produktionsprozess in unterschiedliche Segmente aufspalten und diese auf verschiedenen Länder verteilen. Diese Transformationsprozesse haben bedeutende Auswirkungen auf die Entwicklungsmöglichkeiten von Ländern, Firmen und ArbeitnehmerInnen. Während die Auswirkungen auf Länder, Regionen und Firmen relativ häufig untersucht wurden, gibt es vergleichsweise wenig Forschung über die Auswirkungen auf ArbeitnehmerInnen. Daher analysiert dieser Bericht, wie globale Produktionsnetzwerke konfiguriert sind und welche Konsequenzen die Eingliederung von Firmen in diese Netzwerke auf die Position von ArbeitnehmerInnen und ihre Rechte haben. Um diese Fragestellungen zu untersuchen, wird ein adaptierter Globaler Produktionsnetzwerks-Ansatz verwendet, der nicht nur die zentrale Rolle von Firmen, insbesondere ‘Lead Firms’, berücksichtigt, sondern auch die von nicht-Firmen Akteuren, institutionellen und regulativen Rahmenbedingungen sowie von ArbeitnehmerInnen.



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