Malaysia is one of Asia's biggest employers of foreign labour. But recently, cases of deaths, abuse and forced labour have come to light. What is going on? Who is protecting these migrant workers?
By A Sivarajan
One of the common arguments used by free trade lobbyists and government officials negotiating the Trans Pacific Partnership Agreement (TPPA) are that if Malaysia signs the trade pact then it will substantially increase jobs in Malaysia.
Even though experiences from trade liberalisations in Africa, Latin America and even from Nafta have shown otherwise, a simple analysis would conclude that increased exports should provide more jobs.
Thirty years of global trade liberalisation has failed to provide enough jobs not even growth for developing countries for the matter.
Even though the regular economic indicators might boast GDP, the same cannot be said about employment.
The rate of world unemployment increased from 5.6% in 1993 to 6% in 2008, while the rate of vulnerable employment decreased from 53.6% in 1997 to 50.6% in 2007; (Global Employment Trends: January 2009, ILO, Geneva, 2009)
Workers in the manufacturing sector of developing countries have seen their wages fall, jobs disappear and unions suppressed in the global race.
Trade liberalisation in developing countries has only proven to destroy small and medium-sized industries that are simply not ready to take on the effects of globalisation, especially in countries like Malaysia whereby business and politics are closely integrated.
Most small- and medium-sized industries would agree that to do business in Malaysia is not a question of knowing how, but knowing who.
Only those players whom have made the right political contacts will make it big and escape from the small- and medium-sized category.
It could be just one job or one order with the right connections could propel the company’s turnover to a multi-million dollar status. Thus, most SMEs remain small with small increases in year to year sales turnover.
Thus to remove protectionist policies all at once, and assume our SMEs will rise will prove to be disastrous, especially when nearly 80% of our workforce are in this sector.
So when trade is liberalised and products from US and TPPA countries flood the market at competitive prices, demand for local goods will see a sharp decline, as naturally consumers shop for cheaper items.
But won’t we export more when tariff is reduced in US?
Without the TPPA, Malaysia is already an open economy and we have been a trading nation since Merdeka.
In 2012, Malaysia exported US$26 billion worth of goods to US, while US only exported US$13 billion products to our country. We have a trade surplus and that is exactly what the US wants to change.
Tariff of Malaysian goods to the US is currently lower than 10%, whereas, our imports from US can be as high as 25%. Thus when trade is liberalised, Malaysia will suffer more with the influx of foreign products after all tariffs are brought to zero. Will it be a net gain or loss?
Malaysia is already the largest exporter of electronic products to the US. The next sector that our policy makers are keen on is textiles. Maybe we will increase our export on textiles and thus more jobs in this sector.
But how about other business sectors such as furniture, food, house wares and metal works? These sectors might not increase their exports, but will be affected when the local market is flooded with the same cheaper products made from US and the other 10 TPPA countries.
Experiences in liberalisation have shown that the gain in employment in one sector still produces in net loss of jobs across all other sectors.
For example in the African nations when they were caught between huge debts and aid from the developed nations, they had to accept trade liberalisation as dictated by the International Monetary Fund (IMF).
Following structural adjustments to their economy, in the manufacturing sector, employment decreased by 0.5% per year from 1981 to 1990 and real wages fell sharply throughout the 1980s.
The share of manufacturing in the economy stagnated or declined in 18 of the 24 countries that underwent adjustment between 1982 and 1988.
Limited jobs in the formal sector increased unemployment and underemployment rates and forced huge numbers into the informal sector.
According to the ILO’s analysis of the African experience in the 1980s,“the general trend towards a growing prevalence of unemployment in the region is undeniable”, with increases in urban unemployment rate during the 1980s in Zimbabwe, Nigeria, Madagascar, Mauritius, Liberia, Côte d’Ivoire, Senegal, Kenya, Togo, Niger and the Seychelles.
Irrespective of the trade agreements concluded, whether bilateral investment treaties, free trade agreements or the TPPA, they all seek to liberalise and open economies on the terms of the developed nations.
Countries in Latin America experienced trade liberalisation since the mid-1970s, and their stories of how jobs are traded away in the following decades after signing the agreement provide substance to our concerns.
A report by War on Want “Trading away our Jobs” notes the following:
“Analysis of the impact of trade liberalisation in 18 countries of Latin America and the Caribbean from 1970 to 1996 reveals the negative effects of tariff cuts on both overall and manufacturing employment.
For example, the cut in average tariffs from 32% in 1980-85 to 14% in 1991-95 caused a reduction in manufacturing employment of up to 5.8% across Latin America. During two decades of freer international trade and increased exposure to international capital, overall unemployment rate in the region increased.
In the 1990s, unemployment in Latin America increased from 7.6 million to 18.1 million, from 4.6% to 8.6% of the labour force, with almost all this increase related to the loss of existing jobs.
Unemployment climbed throughout the decade in Argentina, Brazil and Colombia, and an upward trend was also observed in Bolivia, Chile, Ecuador, Paraguay, Uruguay and Venezuela.”
American workers will benefit while we suffer
That is the irony of the capitalism and free trade. The only class of people who benefit from this are the 1% capitalists from both the developed and developing countries that reap profits where and when they can.
American workers, too, will suffer net loss in jobs, as a result of cheaper products flooding in the 11 TPP countries. That’s why the American automotive industry workers are up in arms against the inclusion of Japan as the 12th partner in the TPPA.
They have already suffered from the more competitive Japanese cars that have taken over the world.
With the TPPA it would make the situation worst for American workers. Workers from both countries developed and developing will suffer a net loss of jobs followed by a spiralling effect of low wages and increase in income gap.
A report from the Economic Policy Institute (USA) titled “No Jobs from Trade Pacts The Trans-Pacific Partnership Could Be Much Worse than the Over-Hyped Korea Deal By Robert E. Scott, July 18, 2013 explains:
“The tendency to distort trade model results was evident in the Obama administration’s insistence that increasing exports under Korean-USA Free Trade Agreement (Korus) would support 70,000 US jobs.
The administration neglected to consider jobs lost from the increasing imports and a growing bilateral trade deficit. In the year after Korus took effect, the US trade deficit with South Korea increased by US$5.8 billion, costing more than 40,000 US jobs. Most of the 40,000 jobs lost were good jobs in manufacturing.
There was also a big gap between the prediction and outcome for the North American Free Trade Agreement (Nafta) enacted in 1994. Nafta was supposed to create 200,000 new jobs through increased exports to Mexico but, by 2010, growing trade deficits with Mexico had eliminated 682,900 US jobs, with job losses in every US state and congressional district.”
Tightening the belt
Businesses to stay above water, will attempt to make cut cost by stalling salary increments, cutting bonuses and slashing employee benefits. Malaysians experienced this scenario during the mid-1980’s and 1997/98 economic crises. Retrenchment will soon follow as companies shut down departments and production units.
Employment will also see a downturn, as businesses delay or shelve their plans to increase staff in their organisations. With the increase in retirement age to 60 now, employers will make do with the current resources.
Jobs will be scarce as there will be no reduction in the number of graduates pumped into the market every year from public and private institutions.
Decline is wages, increase in poverty
The subsequent effect when unemployment increases is that it will drive down wage levels. In search of jobs, the workers will be willing to work for less wages and benefits.
There will be increase in the number of contractual workers compared with permanent ones, as employers prepare to dispose of workers as easy as possible when required.
Malaysia will do worse in terms of income disparity. Even before the TPPA, Malaysia has the highest income disparity in Asia.
One of the most outstanding features of the TPPA is the emphasis on investor rights. The TPPA has provisions for even pre-establishment rights, fair and equitable treatment, national treatment for investors and the ability for investors to challenge government policies in international arbitration tribunals like the Investor State Dispute Settlement mechanism.
Unfortunately, Malaysia policy makers have no record of upholding workers’ rights or promoting pro-worker policies.
Since the 1970’s, the Malaysian government abided by the request of American and Japanese investors to disallow any national union for electronic workers. Thus, until today workers in the same trade cannot be represented by a single national union but are broken up into smaller ones to discipline their strength.
With the TPPA, investors will further insist on greater conditions on unions, pickets, and collective bargaining. Even though the TPPA so called promotes labour rights through the labour chapter, but the bite of the chapter is questionable when greater weight is placed on other investment and trade chapters.
Provisions in the investment chapters that ensures “fair and equitable treatment” to the investor has been interpreted by the ISDS International arbitration tribunal to mean that governments cannot change or improve their policies and regulations (even though it is of public interest ) if it is to be found to be expropriating the investors’ future expected profits.
Simply to say that, the government cannot impose regulations to increase minimum wage of workers, as it will construe as affecting the investors’ cost of doing business.
Thus, the investor may challenge the decision in international arbitration court.
The fear of being sued by investors will have a chilling effect on policy makers and force them to water down pro-worker policies.
Capital in search of greener pastures
The other phenomena that causes loss of jobs is the unstoppable exit of industrial capitalists to other countries. This fact is true for both Malaysian corporations and the 11 other TPPA countries.
In the event that Malaysian workers are expecting their employer to increase production capacity, expand production facility, raise wages and increase employment due to an increase in export orders to TPPA countries, the capitalist thinks otherwise.
Even with an increase in orders, the capitalist mind seeks to lower cost and increase rate of profits. Thus they will move to greener pastures like Vietnam to set up their facility and export.
American workers under Nafta share the same experience when their employers shut down and moved Mexico to lower cost.
If we assume that Malaysian corporations will remain loyal to the country and continue to provide jobs for locals, we should not bet on it.
Even though the prime ministers and presidents of TPPA countries propagate the same rhetoric of forecasted job opportunities, they have no control over how their capitalists behave.
They bathe in the limelight of the 1% Malaysian companies that are excelling in the international trade arena, being ignorant of the increasing income disparity at home.
Workers are told to take pride in CIMB, Maybank, Axiata Celcom, Sime Darby and others since they are Malaysian-made companies, and supposedly every Malaysian has a stake in it.
Finally, we the rakyat have to rise and debunk this “false promises” of increase employment and better living standards, as over and over again the pro-market, pro-investor free trade models have failed terribly throughout the world and we Malaysians should not be duped.
Its time a new model of international trade is moulded from the aspirations of the people, NOT the corporations and capitalist.
A truly fair trade system that is based on solidarity and not greed is in urgent need as workers are in the race to the bottom with the bulldozing of such anti-people free trade agreements in the world.
A Sivarajan is the co-founder of Jaringan Rakyat Tertindas (Jerit) people’s movement. Jerit is a partner organisation under Bantah TPPA.
Source: FMT
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