The U.S. Economic Agenda: A Sweatshop Model of Development

September 25, 2007

Over the past decade, U.S.AID has worked hard to promote Haiti as a low-wage site for U.S. companies fleeing offshore. The agency has poured over $100 million into Haiti's corrupt business elite to enlist their support in this effort. In the recent NAFTA debate on Larry King Live between Vice- President Al Gore and Ross Perot, there was a partic- ularly lively ex- change about the threat of jobs moving south to where wages are cheapest. If U.S. companies are only interested in a low-wage labor force, Al Gore asked, why aren't U.S. companies flocking to Ban- gladesh and Haiti? The question An apparel factory in Haiti's export-asser caught Ross Perot U.S.$11 for a 45-hour week. off-guard; in typi- cal fashion, he turned defensive and scoffed that the answer was obvious. Neither man seemed to know that Haiti has indeed caught the U.S. government's eye. Over the last decade, the U.S. Agency for Inter- national Development (U.S.AID) has worked hard to promote Haiti as a low-wage site for U.S. companies fleeing offshore. This is more than just talk. U.S.AID Barbara Briggs and Charles Kernaghan are staff members of the National Labor Committee. This article is adapted from the com- mittee's report Haiti After the Coup: Sweatshop or Real Devel- opment?. nbly sector. The average worker here earns poured over $100 million into Haiti's corrupt and tiny business elite to enlist their sup- port in this effort. The United States has a sig- nificant economic presence in Haiti. Prior to the coup (the most recent figures available), U.S. investment was estimated to represent over 90% of total for- eign investment in the country; 95% of Haiti's light- manufacturing exports are des- tined for the U.S. market. According to the U.S. Commerce Department, the United States had "an estimated $120 million [$90 million exclud- ing inventory] invested in Haiti as of early 1991. With the exception of several oil companies and banks (Texaco, Exxon, Bank of Boston, Citibank), U.S. investment is almost entirely in the assembly sector."' In 1986, U.S.AID put $7.7 million into an Export and Investment Promotion Project "to recruit assem- bly contracts and attract overseas investors" to Haiti. U.S.AID felt that "medium and smaller sized Ameri- can compan[ies]..., which often do not have overseas VOL XXVI, No 6 JULY 199337 0 o C 8 VOL XXVI, No 6 JULY 1993 37REPORT ON HAITI offices, have to be reached through aggressive out- reach efforts." Haiti's "large pool of productive, com- petitive, labor-seeking employment" would be one of the "factors enhancing" this promotional effort. 2 According to U.S.AID, one of its primary objectives is to help Haitian women. In a 1986 report, the agency observed that "assembly industries in Haiti have a ten- dency to create a relatively greater demand for female workers who are believed to be better qualified for work which requires detail, dexterity, and patience. This carries a particular advantage in that increased employment for women in urban areas provides addi- tional income which will more directly bear on the welfare of infants and children." 3 U.S.AID took this position despite their caveat that "the conditions under which [women] work are not generally conducive to realizing their productive capacities nor adequately safeguarding their children's welfare." 4 The agency's public stance is that its real goal has always been to create decent paying jobs that would allow Haitian families to live in dignity and health. In a 1991 report, the agency noted that, "most of these jobs will be for low-income citizens, with a large pro- portion of these going to women. As citizens enjoy employment opportunities, they can then secure their shelter, provide necessary nutrition for their families, place their children in schools and provide adequate health care for their families. With improvement in the social status of its citizens, Haiti's new democracy will be strengthened and the participation of its popu- lation assured." 5 Despite this professed concern, U.S.AID has no empirical studies documenting the number of jobs created in Haiti's assembly-export sector, nor has it conducted any studies on what percentage of these jobs went to women, whether or not the min- imum wage was paid, how many hours were worked, whether overtime and benefits were paid, what work- ing conditions were, how people traveled to and from work, what transportation cost and how long it took, and how families could afford to live on the wages paid. In 1984, the agency observed, "Haiti has no reli- able work-force data." 6 In 1992, the U.S. Commerce Department again noted, "no reliable data exists" on wages, and "reliable data on employment are non- existent in Haiti." 7 U.S.AID never documented the most basic working and living conditions of the very people whom they were supposed to be assisting. What little information exists has to be culled from between the lines, or sought in places other than U.S.AID reports. On the other hand, there is no shortage of U.S.AID- sponsored studies about the advantages that Haiti offers U.S. business interests. As early as 1980, A U.S.AID-funded study found that "women workers tend to be quieter." Only women who are "young and highly motivated" and "who adapt easily to industrial discipline" are strong candidates for employment. U.S.AID was funding studies that showed that it was far cheaper for U.S. companies to produce goods in Haiti than in the United States, even taking into account the costs of relocation, setting up production, freight and customs. A survey of Haitian and U.S. electronic-assembly plants operating in Haiti es- tablished that 38% of the companies enjoyed savings of between 20 and 40% over U.S. production, while 20% enjoyed savings of between 40 and 60%. This study may also have pinpointed the real inter- est in women assembly workers: "Women workers tend to be quieter." The study went on to state that "traditional management prerogatives such as the right to hire and fire are respected by the government. There are no profit-sharing schemes or feather- bedding requirements." Only quiet women, who "are young and highly motivated" and "who adapt easily to industrial discipline," are strong candidates for employment. 8 Concerned about working conditions in plants closely linked to the U.S. economy, a delegation of U.S. trade-union leaders visited Haiti in 1991, just after the military coup. Their business-sector hosts 38 NACIA REPORT ON THE AMERICAS a r 5; 0 0 NACIA REPORT ON THE AMERICAS 38REPORT ON HAITI Above: A street child in downtown Port-au-Prince washes in the gutter outside the ice cream factory because the melting ice provides relatively clean water. Left: The Cit6 Soleil slum in Port-au-Prince. took the delegation to a "model" apparel factory in Haiti's export-assembly sector. At the factory, where fabric is sewn into clothing to be exported to the United States, the highest paid workers receive the equivalent of U.S.$1.48 a day. These workers' aver- age transportation cost to and from work is 44 cents a day. A meager breakfast and lunch comes to 33 cents. This leaves 71 cents to bring home at the end of the day. Multiply this by six days, and working people have $4.26 to meet their family's expenses for a week. Since a working family needs about a third of this to cover rent and other expenses, family members have approximately $2.75 a week with which to feed themselves. 9 Not one single collective-bargaining agreement is in effect in Haiti's export-assembly sector. According to the U.S. Labor Department, "it appears that many employers of the export industry are not in fact willing to bargain with trade unions." Further, "many em- ployers, domestic and foreign, still question the legiti- macy of unions."' 0 While freedom of association, the right to strike, and the right to organize are legally provided to all workers in Haiti, few workers actually enjoy such rights whether employed in export-pro- cessing operations or local firms." ristide's unexpected victory in the 1990 elec- tions threw a wrench in U.S.AID's well-laid plans. Under the Aristide government, observed U.S.AID, "businesses are postponing invest- ment and reducing inventory while waiting to see the future directions of the new government before mak- ing significant business growth decisions."'1 2 U.S.AID, which had spent tens of millions of U.S. tax dollars since 1980 to foster offshore investment in Haiti's low-wage assembly sector, stopped promoting invest- ment when Aristide took office in 1991. A U.S.AID/Haiti Mission internal staff assessment concluded that the incoming government "could bene- fit from position papers staking out the issues" in order to suggest "possible policy solutions" for economic development. "However," continued the study, "in view of legitimate political sensitivities, greater policy ownership by various Haitian interest groups may be more important than more donor-produced studies and reports." The "donor"-U.S.AID-was supposed to go backstage. "Enhancing indigenous policy dialogue capacities within the private sector," the study con- cluded, "may be the most productive course of action...." 1 3 In country after country throughout Central America and the Caribbean, U.S.AID's development strategy is based on working with local business elites in order to help them to more efficiently utilize their large pools of low-wage labor. Accordingly, U.S.AID's next move was to quickly allocate $26 million to the "ad- hoc committee of business organizations" under U.S.AID's control in order to help keep "Haitian pro- duction competitive in world markets."' 4 An internal working paper recommended that the ad-hoc commit- tee be organized and placed "under the umbrella of U.S.AID's export and investment promotion project (Prominex)." Prominex, which after a series of scan- dals changed its name to PROBE (Promotion of Busi- ness and Exports), receives 99% of its funding from U.S.AID, and is in fact a U.S.AID front group. U.S.AID allocated $7.7 million to Prominex, $12 mil- lion in loans to business, and $7 million to foster democracy "from a business perspective." After 67.5% of the Haitian people had voted for change, U.S.AID worked with the Haitian business elite to keep things the same. The refurbished Prominex/PROBE operation was supposed to work with local business organizations to "develop internationally competitive local production, build constituencies for open-market policies, and move Haiti toward becoming a full partner in the hemispheric free-trade block (sic)." Of course, it was Vo XXVII, No 4 JAN/FEB 1994 39 VoLXXVII, No4 JAN/FEB1994 39REPORT ON HAITI Haiti's "highly productive, low-cost labor" which was to be the engine for integrating Haiti into this bloc. By the middle of Aristide's short presidency, U.S.AID was declaring that "signals" from the consti- tutional government "to the business community have been mixed." U.S.AID went on the attack saying that, "decisions have been made which could be highly detrimental to economic growth, for example in the areas of labor and foreign-exchange controls."'5 The agency was displeased with the fact that Aristide While U.S.AID's projects may be a boon for business interests, they have done little to alleviate the devastating poverty of residents of Port-au-Prince. People running for the daily water truck in Cite Soleil. wanted to place temporary price controls on basic foodstuffs so the people could afford to eat. But U.S.AID's real wrath was targeted at labor- reform efforts. They opposed the Aristide govern- ment's attempt to raise the pitifully low minimum wage in Haiti's export-assembly industry. According to the agency, the proposed minimum-wage increase would price Haiti right out of the low-wage assembly market. "Wage systems," U.S.AID said, "should not be the forum for welfare and social programs." It warned that "high distortion in labor costs"-the 50 cent hourly wage proposed by the constitutional gov- ernment-"can lead to capital-intensive, rather than labor-intensive responses to opening of markets." 1 6 Haiti, the agency seemed to fear, might turn into Switzerland or Denmark. hree months before the coup, the agency mused: "If Haiti's investment climate can be returned to that which existed during the CNG [the National Governing Council headed by Lieu- tenant General Henri Namphy, a Duvalier loyalist, who took power after Duvalier fled] or improved beyond that, and the negative attitude toward Haiti appropriately countered, Haiti stands to experience significant growth."' 7 In April, 1992, as the military regime that ousted Aristide became increasingly intransigent, the U.S. Commerce Department calmly noted: After an internationally recognized government is reestablished, the best long-term prospect for U.S. busi- ness will continue to be investment in export-assembly operations. Haiti's proximity to the United States, its access to Generalized System of Preferences (GSP), Caribbean Basin Initiative (CBI) and Section 807 U.S. Customs benefits, as well as its abundance of low- wage, productive labor should make it a good location for assembly operations when the country achieves some level of political stability. 1 8 While U.S.AID's projects may be a boon for U.S. and Haitian business interests, they have done little to alleviate the devastating poverty of residents of Port- au-Prince. The poor continue to live in miles and miles of broken-down shacks made of rough concrete, mud, straw, cardboard and scrap sheet metal. When the wind blows in off the ocean, the metal roofs strain and rattle. It's like being inside a tin can. Open sewers flow down the dirt streets, which are deeply rutted by erosion. When it rains, the sewage overflows into peo- ple's homes. There are no bathrooms, no running water. Thousands depend upon a public faucet, or a broken water main where the people scoop up water. Children can be seen playing and washing in the open sewers. The government doesn't collect garbage. It piles up everywhere in great mounds that the people bum to reduce the volume and to check the spread of disease. The most common meals for working families are cornmeal with onions or some boiled plaintains with beans-when families can afford beans. Almost everyone eats only one meal a day. Many working families have only bread to eat, and rely on sugar-cane water to fill themselves up. The poor are barely surviving, and they are getting sicker. While the restoration of Haiti's elected govern- ment is an urgent and necessary first step, the econom- ic development strategy that Haiti will pursue has great significance for the growth-and sustainabili- ty-of democracy. U.S.AID and other "donors" might consider that the foundation for a viable development strategy must be more than the comparative advantage afforded by "cheap labor." The US Economic Agenda: A Sweatshop Model of Development 1. "Haiti," Foreign Economic Trends and Their Implications for the United States, American Embassy Port-Au-Prince, U.S. Depart- ment of Commerce, International Trade Administration, April 6, 1992. 2. "Haiti," Project Paper/Export and Investment Promotion (Project Number: 521-0186), U.S.AID, August 8, 1986. 3. "Haiti," Project Paper/Export and Investment Promotion, U.S.AID. 4. Country Development Strategy Statement: FY 1986: Haiti, U.S.AID, January 1984. 5. "Haiti," Project Paper/Promotion of Business and Export Project (Amendment Number I/Project Number: 521-0186), U.S.AID, June 29, 1991. 6. Country Development Strategy Statement, U.S.AID. 7. "Haiti," Foreign Economic Trends and Their Implications, U.S. Department of Commerce. 8. The Electrotechnical Industry in Haiti, The Ministry of Economy, Finance, and Industry; Investment Promotion Division [Haiti], 1981 (Estimated). 9. M. Catherine Maternowska, Ph.D. candidate in anthropology, Columbia University, New York. See also Concept Paper Eco- nomic Recovery Assistance II, U.S.AID/Haiti, November, 1986. 10. Worker Rights in Export Processing Zones, Bureau of Interna- tional Labor Affairs, U.S. Department of Labor, August, 1990. 11. Worker Rights, U.S. Department of Labor. 12. "Haiti," Project Paper/Promotion of Business and Export Project (Amendment Number I/Project Number: 521-0186), U.S.AID, June 29, 1991. 13 "Haiti Macroeconomic Assessment," Staff Working Papers, U.S.AID, February, 1991. 14. "Haiti," Project Paper/Promotion of Business and Export Project, U.S.AID. 15. "Haiti Macroeconomic Assessment," U.S.AID. 16. "Haiti," Project Paper/Promotion of Business and Export Project, U.S.AID. 17. " Haiti," Project Paper/Promotion of Business and Export Project, U.S.AID. 18. "Haiti," Foreign Economic Trends and Their Implications for the United States, U.S. Department of Commerce.

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