What Are Free Trade Zones/economic Processing Zones?

What are Free Trade Zones/Economic Processing Zones?

A free trade zone (FTZ)Clothing Export Promotion Zone or Export processing zone (EPZ) is one or more areas of a country where tariffs and quotas are eliminated and bureaucratic requirements are lowered in order to attract companies by raising the incentives for doing business there. Free trade zones can be defined as labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products.

Most FTZs are located in developing countries. They are special zones where (some) normal trade barriers such as import or export tariffs do not apply, bureaucracy is typically minimized by outsourcing it to the FTZ operator and corporations setting up in the zone may be given tax breaks as an additional incentive. Usually, these zones are set up in underdeveloped parts of the host country, the rationale being that the zones will attract employers and thus reduce poverty and unemployment and stimulate the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing or shoes).

In 2002 there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities

The idea that EPZs could help Third World economies first gained currency in 1964 when the United Nations Economic and Social Council adopted a resolution endorsing the zones as a means of promoting trade with developing nations. The idea didnÐŽ¦t really get off the ground, however, until the early eighties, when India introduced a five-year tax break for companies manufacturing in its low-wage zones. Since then, the free-trade-zone industry has exploded.

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 zonesÐŽ¦ segregated assembly lines will turn into lasting development; technology transfers and domestic industries. To lure the foreign investment, the governments of poor countries offer tax breaks, tax regulations and the services of a military willing and able to crush labor unrest. They even 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.

What are conditions like in these zones?

In Cavite, a EPZs in Philippines, there are a lot of factories, each with its own gate and guard, has been carefully planned to squeeze the maximum amount of production out of this land. Windowless workshops are crammed in next to each other, only feet apart. Contractors using time cards to make sure the maximum amount of work is extracted from each worker, the maximum number of working hours extracted from each day.

Regardless of where the EPZx are located, the workersÐŽ¦ stories have a certain mesmerizing sameness: the workday is long-14 hours in SriLanka, 12 hours in Indonesia, 16 in Southern China, 12 in the Philippines. The vast majority of the workers are women, always young, always working for contractors or subcontractors from Korea, Tainwan or Hong Kong. The contractors are usually filling orders for companies based in the U.S.,Britain, Japan, Germany or Canada. The management is military style, the supervisors often abusive, the wages below subsistence and the work low-skill and tedious. The workers are predominantly migrants, far from home and with little connection to the city or province where zones are located; the work itself is short-term, often not renewed.

The wages paid to the workers in these zones are very low. Labour groups agree that a living wage for an assembly-line worker in China would be approximately US 87 cents an hour, whereas in United States and Germany, garment workers are paid an average of US$10 and $18.5 an hour, respectively. 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.

Although trade unions are technically legal in these EPZs, there is a widely understood-if unwritten-ÐŽ§no union, no strikeЎЁ policy inside the zones. Workers who do attempt to organize unions in their factories are viewed as troublemakers, and often face threats and intimidation. The International Confederation of Free Trade Unions report: the workers are effectively living in lawless territory where to defend their rights and interests they are constantly forced to take illegal action themselves. Despite the constant threat of retaliation, the organizers of trade unions face various obstacles. For instance: worker exhaustion.