Statement on Foreign-Trade Zones

Foreign-Trade Zones Represent a Threat to National and International Labor Rights, Environmental Standards, and Human Rights

Foreign-trade zones (FTZs), alternately known as “free trade” or “enterprise” zones, have seldom if ever lived up to their lofty promises of robust economic development and improved welfare for the people of developing, or so-called “developed,” countries. Rather, they have repeatedly been used to enrich a small group of big businesses at the expense of labor and human rights, environmental standards, and the well-being of ordinary people around the world. The Democratic Socialists of America (DSA) opposes these Foreign-Trade Zones and supports the resistance of workers and environmental, labor, and community groups wherever they exist.

The national economic development model associated with import substitution industrialization was abandoned in much of the developing world in the aftermath of the debt crises, provoked in large part by the U.S. Federal Reserve’s drastic interest rate hikes. Beginning in the 1980s with the rise of neoliberal globalization, the major international financial institutions—particularly the IMF, World Bank, and GATT, which later became the WTO—began to pressure countries to open their markets, allow foreign investment and ownership, weaken labor unions, and cut the social welfare budget. This market liberalization was promised to bring the nations of Asia, Africa, and Latin America into the modern world on a fast track.

The promotion of so-called “free enterprise zones” has accompanied these neoliberal policy prescriptions in many countries. The promise was that these zones would attract foreign investment, lead to technology transfer, and provide employment. They were seen as a way to jump-start development and carry countries into the “first world.” The developing nations establishing these free enterprise zones typically offered investors partial or sometimes total tax abatements for years or even decades into the future. The host nations also often built the necessary infrastructure to support these zones, including seaports, railroads and terminals, highways, and industrial parks.

A large part of the attraction for capital was that host governments worked to keep wages low, either by excluding labor unions or creating a repressive atmosphere that deterred labor union organization. These measures, depending on the country, might include firings, beatings, imprisonment, or even murder of labor union activists. These enterprise zones also typically had environmental standards below those of investor countries, or were exempt from environmental standards entirely. All of these measures made the enterprise zones attractive to capital and led to their spread to developing countries around the world.

The existence of these enterprise zones proved attractive to national capital as well, which insisted on being allowed to participate and often demanded that the number of enterprise zones be expanded to other regions of the country. The enterprise zones also provided a competitive model that tended to drive down labor representation, environmental standards, and weakened human rights protections in other parts of the country where no enterprise zones had been created. With this model proliferating, one could say that entire nations became enterprise zones devoid of unions, environmental protection, and human rights.

Nor are these arrangements unique to the developing world; they also exist right here in the United States. “Urban Enterprise Zones,” as they are most often called, have been present since the post–Civil Rights Movement policies of President Lyndon Johnson’s “Great Society” and “War on Poverty” program, and continue being developed to the present day. Similarly to FTZs elsewhere in the world, employers are offered inducements to establish a business (plant, office, or store) and create jobs in exchange for tax breaks or other government assistance.

The most common results of these exploitative arrangements are the following: 1) The company fails to create all of the jobs or jobs at the wages it promised. 2) The company leaves immediately when the arrangement ends. 3) The company leaves before the arrangement ends. 4) The establishment of the plant, office, or store, or even several of them, does not really have a significant impact on the city’s economy. 5) The jobs are unlikely to be union jobs with contracts at union wages. Similarly, in the end, only a small segment of big businesses profit, to the expense of everybody else.

The enterprise zone model has seldom if ever lived up to its promises. While enterprise zones might lead to some industrialization, they seldom lead to the industrial modernization of more than a narrow sliver of a nation. More often, the industrialization is light, minimal, and entirely dependent upon the host nation. While some enterprise zone plants might use modern technologies, in general the ownership and control of advanced technology remains under the control of the foreign corporations of the developed world. The enterprise zones do create some employment, but it is primarily low-skilled labor at very low wages, and host governments work to keep those wages low (often under significant pressure from investors).

The existence of these zones has led to the creation of international labor rights organizations, and to significant campaigns to support exploited workers and educate the public about sweatshop labor. Some international labor organizations and various national labor unions have cooperated in fighting over specific cases and making demands for better labor policies, but, in general, the enterprise zone model has contributed to a reduction in the number of organized workers, their increasing weakness in negotiation of strong labor agreements, and the decline of labor’s political influence. For all of these reasons, the Democratic Socialists of America oppose the policy of creating free enterprise zones and support the resistance of workers and environmental, labor, and community groups everywhere that such zones exist. We demand that all International Labor Organization standards, as well as the highest standards advocated by the International Trade Union Confederation, be immediately established in all free enterprise zones across the world. We call upon our members and our comrades throughout the world to join us in opposing the violation of labor rights, human rights, and environmental standards repeatedly perpetrated in the name of free trade and under the guise of development.