The Recent Period of Rapid Transition
The migration of industry from developed to developing countries is usually explained by the lower cost of labour. Companies also establish operations abroad to reduce transportation costs by producing within foreign markets, to overcome trade barriers and to avoid fluctuations in currency markets. But some companies migrate to developing nations to escape occupational and environmental regulations and enforcement at home. For many nations such investment is the primary source of new jobs.
Foreign companies and investors have been responsible for more than 60% of all industrial investment in developing countries over the past decade. During the 1980s, a global financial market began to emerge. In a span of ten years, international bank lending by the major developed countries rose from 4% of GDP to 44%. Between 1986 and 1990, foreign investment by the United States, Japan, West Germany, France and Britain grew at an annual rate of 27%. Global cross-border investment is now estimated to be $1,700 billion (LaDou and Levy 1995). There are about 35,000 transnational corporations, with 147,000 foreign affiliates. Much of the investment in the developing world comes from these corporations. The total annual sales of the 350 biggest transnational corporations are equal to one-third of the combined gross domestic products of the industrial world and exceed by far that of the developing world.
Most investment in developing countries goes to Asia. Between 1986 and 1990, East and Southeast Asia received $14 billion, Latin America $9 billion and Africa $3 billion. Central Europe is now openly competing for a share of global investment. India, Vietnam, Egypt, Nicaragua and Uzbekistan have recently liberalized their ownership rules to increase their attractiveness to investors.
Japanese companies and investments are found in almost every country in the world. With limited land and great population density, Japan has a pressing need to export its waste-producing industries. European nations have exported hazardous and environmentally outmoded industries to Africa and the Middle East and are now beginning to export them to Central Europe. Western European corporations are the largest investors in Bangladesh, India, Pakistan, Singapore and Sri Lanka.
China and India, with the world’s largest populations, have had dramatic policy reversals in recent years and as a result have welcomed industries from many countries. United States corporations are dominant in China, Indonesia, the Philippines, Thailand and Hong Kong and Taiwan (China). US companies were expected to commit $l billion of investment to Singapore in 1995, up 31% from 1994.
The Industrialized Countries’ Motivation
In the developed countries, industry provides jobs, pays taxes that support community services and is subject to environmental and occupational health laws. As industrialized nations enact laws to limit the environmental hazards associated with many industrial operations, production costs rise and undermine competitive advantages. To offset this problem, manufacturers move many of their hazardous operations to the newly industrialized countries. They are welcomed because the creation of an infrastructure in many developing nations relies on industrial expansion by foreigners.
When industry migrates to developing nations, companies not only take advantage of lower wages, but also benefit from the low tax rates in communities that are not spending much on such things as sewage systems, water treatment plants, schools and public transportation. When companies establish plants in developing countries, their tax burden is a small fraction of what it would be in most developed countries.
Anecdotal evidence in support of the transition
The University of California, the Johns Hopkins University and the University of Massachusetts have all recently studied the health of American semiconductor workers. The studies demonstrate that women have a major increase in the risk of miscarriage when they work in semiconductor plants. Researchers participating in these studies remark that the companies are laying off the workers and shutting down the plants so rapidly that these studies will probably be the last of sufficient size to give reliability to the findings to be conducted with US workers.
Predictions for a reduction in studies on occupational health
The migration of American and Japanese semiconductor companies to Southeast Asia is dramatically demonstrated in the newly industrialized country of Malaysia. Since the mid-1970s, Malaysia has become the world’s third largest semiconductor manufacturer and the world’s largest exporter of semiconductors. It is very unlikely that foreign companies will continue to fund research on occupational and environmental health in a distant country with foreign workers. The savings realized by the foreign manufacture of semiconductors will be enhanced by the ability of these companies to neglect health and safety as do their international rivals. The miscarriage rate of semiconductor workers will be ignored by governments and by industry in newly industrialized countries. Workers, for the most part, will not recognize the association between work and miscarriage.
The Developing Countries’ Environmental and Occupational Health Decline
Developing countries seldom have enforceable occupational and environmental regulations. They are concerned with overwhelming problems of unemployment, malnutrition and infectious diseases, often to the exclusion of environmental hazards. Newly industrialized countries are eager for the financial benefits that foreign companies and foreign investors bring them. But with those benefits come social and ecological problems.
The positive economic and social results of industrial activity in developing nations are accompanied by serious environmental degradation. The major cities of developing nations are now reeling with the impact of air pollution, the absence of sewage treatment and water purification, the growing quantities of hazardous waste buried in or left on the soil or dumped into rivers or the oceans. In many of the world’s countries, there are no environmental regulations or, if they exist at all, there is little or no enforcement.
The workforce of developing nations is accustomed to working in small industry settings. Generally, the smaller the industry, the higher the rate of workplace injury and illness. These workplaces are characterized by unsafe buildings and other structures, old machinery, poor ventilation, and noise, as well as with workers of limited education, skill and training and employers with limited financial resources. Protective clothing, respirators, gloves, hearing protectors and safety glasses are seldom available. The companies are often inaccessible to inspections by government health and safety enforcement agencies. In many instances, they operate as an “underground industry” of companies not even registered with the government for tax purposes.
The common public perception of off-shore industries is that of the major multinationals. Far more common than these industrial giants are the many thousands of small companies owned by foreign interests and operated or supervised by local managers. The ability of most foreign governments to regulate industry or even to monitor the passage of goods and materials is extremely limited. Migrating industries generally conform to the environmental and occupational health and safety standards of the host country. Consequently, worker fatality rates are much higher in newly industrialized countries than in the developed nations, and workplace injuries occur with rates common to the developed nations during the early years of the Industrial Revolution. In this regard, the Industrial Revolution is taking place all over again, but with much larger populations of workers and in many more countries.
Virtually all of the world’s population growth is occurring in the developing world. At present, the labour force in developing countries totals around 1.76 billion, but it will rise to more than 3.1 billion in 2025— implying a need for 38 to 40 million new jobs every year (Kennedy 1993). This being the case, worker demands for better working conditions are not likely to occur.
Migration of Occupational Illness and Injury to the Developing World
The incidence of occupational diseases has never been greater than it is today. The United Nations estimates that 6 million occupational disease cases occur each year worldwide. Occupational diseases occur with greater frequency per exposed worker in the developing countries, and, of even greater significance, they occur with greater severity. Among miners, construction and asbestos workers in some developing countries, asbestos is the major cause of disability and ill health and, by some counts, the major cause of deaths. The occupational and environmental hazards posed by asbestos products do not discourage the asbestos industry from promoting asbestos in the developing world, where demand for low-cost building materials outweighs health concerns.
Lead smelting and refining is migrating from developed countries to developing countries. Recycling of lead products also passes from developed countries to poorer nations that are often ill-prepared to deal with the occupational and environmental hazards created by lead. Developed nations have few lead smelters today, this industrial activity having been passed to the newly industrialized countries. Many lead-smelting activities in the developing world operate with technologies that are unchanged from a century ago. When developed countries boast of accomplishments in the area of lead recycling, almost invariably the lead is recycled in developing countries and returned to the developed countries as finished products.
In developing countries, governments and industries accept the hazardous materials knowing that reasonable exposure levels are not likely to be legislated or enforced. Leaded gasoline, paints, inks and dyes, batteries and many other lead-containing products are produced in developing countries by companies that are usually foreign-owned and the products are then sold internationally by the controlling interests.
In developing countries, where the majority of workers are in agriculture, pesticides are often applied by hand. Three million pesticide poisonings occur each year in Southeast Asia (Jeyaratnam 1992). Most pesticide manufacture in developing countries is done by foreign-owned companies or local companies with capital invested by foreigners. The use of pesticides in the developing countries is growing rapidly as they learn the advantages that such chemicals offer to the agricultural industry and as they gain the capability to produce the pesticides in their own countries. Pesticides such as DDT and dibromochloropropane (DBCP), which are banned in most developed nations, are widely sold and used without restrictions in the developing world. When health hazards cause removal of a pesticide from a developed country’s market, it often finds its way to the unregulated markets in developing countries.
The chemical industry is one of the most rapidly growing industrial sectors in the emerging global economy. The chemical companies of the developed countries are found throughout the world. Many smaller chemical companies migrate to the developing countries, making the chemical industry a major contributor to environmental contamination. As population growth and industrialization continue throughout the poorer regions of the world, demand for pesticides, chemical fertilizers and industrial chemicals grows as well. To compound this problem, chemicals that are banned in developed countries are often manufactured in increased quantities in the newly industrialized countries. DDT is a compelling example. Its worldwide production is at record levels, yet it has been illegal to produce or use DDT in most developed countries since the 1970s.
Costs Shifting to Developing World
The experience of industrialized countries with the costs of occupational safety and environmental programmes is that a very substantial financial burden is being shifted to newly-industrialized nations. The cost of future accidents such as Bhopal, mitigation of environmental damage and effects on the public health are not often discussed with candour in the developing world. The consequences of global industry may become the roots of widespread international conflicts when the long-term economic realities of industrial migration become more apparent.
The Developing Nation Conundrum
Developing nations seldom support the adoption of the environmental standards of the developed world. In some instances, opponents argue that it is a matter of national sovereignty that allows each nation to develop its own standards. In other cases, there is long-standing resentment of any foreign influence, especially from the nations that have already increased their standard of living from the industrial activities that are now being regulated. Developing nations take the position that after they have the standard of living of the developed nations, they will then adopt stricter regulatory policies. When developed nations are asked to provide developing nations with industries whose technology is environmentally benign, interest in industrial migration lessens dramatically.
The Need for International Intervention
International organizations must take a stronger lead in approving and coordinating technology transfer. The shameful practice of exporting obsolete and hazardous technologies to developing countries when these processes can no longer satisfy the environmental standards of the developed countries must be stopped. International agreements must replace the perverse incentives that threaten the world’s environment.
There have been many efforts to control the behaviour of industry. The Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, the United Nations (UN) Code of Conduct on Transnational Corporations and the International Labour Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy attempt to provide a framework of ethical behaviour. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal was adopted in March 1994. Although it halts most hazardous wastes from crossing borders, it also serves to institutionalize a trade in recyclable wastes that reflected the need for political compromise.
Some international lending institutions are now producing environmental impact assessments (EIAs) when the host country is unable to perform this task. Assessment of the local impact potential of at least certain hazardous industry sitings ought to be mandatory and occupational health and safety standards could be added to plant siting assessments.
The International Organization for Standardization (ISO) has undertaken the development of voluntary standards, the ISO 14000 series that are likely to become the international standard for environmental management. These encompass environmental management systems, environmental audits, eco-labelling, environmental performance evaluations, life-cycle assessment and environmental aspects in product standards (Casto and Ellison, 1996).
Many developed nations have established recommended exposure levels for workers that cannot be exceeded without regulatory or legal action. But in developing countries, exposure standards are often non-existent, not enforced, or too lax to be of use. International standards can and should be developed. Developing countries, and particularly the foreign companies that manufacture there, can be given a reasonable period of time to comply with the standards that are enforced throughout most of the developed world. If this is not done, some workers in these countries will pay an inordinate part of the cost of industrialization.
The most logical international standard of occupational health and safety is the development of an international workers’ compensation insurance system. Workers in all countries are entitled to the basic benefits of workers’ compensation law. The incentive for employers to provide a healthy and safe work setting that workers’ compensation insurance provides for should be such as to benefit workers in all countries, regardless of the ownership of the company.
There must be an international legal system to deal with the environment and there must be an enforcement capability strong enough to discourage even the most criminal of polluters. In 1972, the member countries of OECD agreed to base their environmental policies on a “polluter pays” principle (OECD 1987). The intent was to encourage industries to internalize environmental costs and reflect them in the prices of products. Expanding on the principle, strict liability provision in the laws of all countries could be developed for both property and third-party damage. Thus, the waste generator would be responsible through an international system of strict liability for management of waste from its production to its disposal.
Developing countries do not have large, well-funded environmental groups such as those that exist in developed countries. Enforcement will require the training of personnel and the support of governments which, until recently, placed so much emphasis on industrial expansion that the issue of environmental protection was not even a consideration.