Source: World Bank, World Development Indicators, July 2015.

       Export-Processing Zones (EPZs)

      The proliferation of EPZs, now found in more than 130 countries, provides further evidence that though industrial development in the global South may be unevenly distributed it is nevertheless very widespread. It also adds more detail to our account of the insatiable appetite of imperialist TNCs for ultra-flexible, low-waged employment in which all their needs are laid out on a carpet and “the burden of the cyclical nature of demand is placed on workers.”⁴⁹

      According to the World Bank, an export-processing zone is “an industrial estate, usually a fenced-in area of 10 to 300 hectares, that specializes in manufacturing for export. It offers firms free trade conditions and a liberal regulatory environment.”⁵⁰ EPZs exhibit the following characteristics: “duty-free imports of raw and intermediate inputs and capital goods … red tape is streamlined … labor laws are often more flexible than … in the domestic market … generous, long-term tax concessions … infrastructure more advanced than in other parts of the country…. Utility and rental subsidies are common.”⁵¹ A long list, yet it is strangely incomplete—“flexible labor laws” is a euphemism for almost universal hostility to trade unions; the predilection of investors in EPZs for female labor is not mentioned—invariably, the large majority of the workforce are women (see chapter 4 for more on this), and neither is the most important factor of all, indeed the EPZs’ raison d’être—low wages.

      EPZs in their various forms have played and continue to play a key role in the competitive race for export-oriented industrialization. Not only are they now found in a large majority of Southern nations, their classic features have become generalized: neoliberal globalization has gone a long way toward turning the whole of the global South into a vast export processing zone. As William Milberg comments, “The distinction between EPZ and non-EPZ activity has diminished in many countries as liberalization policies have expanded in the WTO and regional trade agreements.”⁵² Yet far from declining in significance, EPZs have experienced accelerating growth—the numbers employed in them nearly tripled between 1997 and 2006, the latest year for which there are statistics, when 63 million workers were employed in EPZs located in 132 countries. Milberg’s study of EPZ reports figures for a selection of economies, revealing that in 2006 EPZs were responsible for 75 percent or more of export earnings in Kenya, Malaysia, Madagascar, Vietnam, Dominican Republic, and Bangladesh, while Philippines, Mexico, Haiti, and Morocco earned 50 to 60 percent of exports from their EPZs. Between regions, however, significant disparities persist. The ILO’s Employment in EPZs database reports that Asia’s 900+ zones employed 53 million workers, 40 million of them in China and 3.25 million in Bangladesh. Another 10 million workers were employed in EPZs elsewhere in the world, 5 million in Mexico and Central America, with another million or so in each of Africa, the Middle East, and Central Europe. South America lags, with half a million employed in EPZs.

      Although China remains the most important host, EPZs have been growing faster still in other low-wage countries: 80 percent of EPZ employment was accounted for by China in 1997, falling to 63 percent in 2005–6.⁵³ After China, the largest EPZ employer is Bangladesh, with 3.25 million employees in 2005–6.

      Since their inception, EPZs have been the focus of intense controversy, and were singled out by scholars and activists influenced by the New International Division of Labor school as the epitome of unbridled exploitation of low-wage labor by TNCs.⁵⁴ In a survey for the ILO published in 2007, Milberg concludes that “despite the presence of EPZs—for over 30 years in some cases—there are very few cases where EPZs have played an important role in accomplishing … direct developmental goals,”⁵⁵ and UNCTAD warned in 2004 that manufacturing EPZs were reproducing colonial forms of “enclave-led growth” in which “a relatively rich commodity-exporting sector, well connected to roads, ports and supported by ancillary services, exist side by side with large undeveloped hinterlands where the majority of the population live.”⁵⁶

      The general failure of EPZs to stimulate economic development outside of the zones, typically importing all inputs except labor and paying little or no taxes to host governments, has aroused further controversy. EPZs have also received much criticism because the export subsidies and other trade-distorting emoluments dangled by host governments to lure outsourcing TNCs confound efforts by the World Trade Organization to create a “level playing field.” Given the controversy surrounding EPZs and their paltry contribution to the economic and social development of their hosts, the question arises, why are they continuing to proliferate? The answer is that, having signed up to the IMF/World Bank–promoted strategy of export-oriented industrialization, EPZs provide governments in low-wage countries with a way to attract inward FDI and connect to global value chains. In addition, what “may be the most important political factor,” according to Milberg, is that “governments find the employment creation in EPZs to be essential for absorbing excess labor.”⁵⁷

       SERVICES AND THE GLOBALIZATION OF PRODUCTION

      Until around the turn of the millennium, outsourcing was associated with labor-intensive links or “tasks” in the manufacture of commodities. This took place on a massive scale, despite the significant costs and delays involved in transporting commodities over long distances. The eruption of this into “services,” in particular any service that can be delivered instantaneously to a computer screen with zero transportation costs, has only become a practical possibility for most firms since the late 1990s. Richard Freeman’s prediction that “if the work is digital—which covers perhaps 10 percent of employment in the United States [around 14 million workers]—it can and eventually will be offshored to low-wage highly educated workers in developing countries,” was widely reported in the U.S. news media.⁵⁸ So too an article in Foreign Affairs in 2006 by Alan Blinder, an eminent economics professor at Princeton University, titled “Offshoring: The Next Industrial Revolution?,” which warned “we have so far barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.”⁵⁹ Suddenly a layer of professional, middle-class workers began to feel the cold breath of global competition. As Gary Gereffi remarked,