The Trade of Labour in Global Supply Chains and Offshoring Activities of The Enterprises

By definition, though it varies, Globalisation is a dynamic process of liberalisation, openness, and wide-ranging integration of markets from labour to goods and from services to capital and technology that crossing the borders (Dehesa, 2006). In general, economic globalisation is examined in two way; trade liberalisation and capital liberalisation (the rise of foreign direct investment) (Locke, 2013). This dissertation focuses on the trade of labour in global supply chains and various offshoring activities of the enterprises, and another dimension the liberalisation of capital is not covered. In general, the diversification and growth of supply chains are granted to provide needed investment, employment, technology, and access to the international market. Thus, the integration of marginalised workers located in developing countries into GSCs is expected to contribute to economic development (Locke, 2013).

Together with the trade liberalisation, the rapid expansion of globalised business activities have been recognised from the post-Second World War era accompanied with the emergence and spread of multinational enterprises (MNEs) (Frobel et al., 1981; Hirst et al., 2009). Particularly, during the 1960s, the significant trend of supply chain fragmentation and offshoring activities in search of low-cost labour and materials has emerged together with the rise of the MNEs; “being locally incorporated but foreign-controlled entity” (Kline, 2010:47). During the 1980s, this trend has accelerated by the agreement of Washington Consensus; the package of policy recommendation for developing countries.

The contents of that consensus are the implementation of liberal norms such as trade and financial liberalisation, deregulation, limited government and privatisation (Held and McGrew, 2000). It has transformed the role of the states from directly operating development to providing an institutional framework for private businesses. As for business entities are regarded as a “development tool” in terms of wealth creation through generating employment and providing goods and services but recognising little responsibility for the impact of its activities (Blowfield and Dolan, 2014).

Since then GSCs grew significantly in the last few decades, it covers not only manufacturing industries but also energy, agriculture and various kind of service industries such as call centres and accounting to research and development activities (Gereffi, 2013). However, Many scholars argue that liberal trade is out of control and beyond its hypothesis. Joseph Stiglitz (2007) and Chang (2007) argue that current trade has failed to create the win-win relationship. As a result of easier access to international markets, huge MNEs utilise this opportunity to avoid regulations by shifting production to countries where lack of regulations or less implemented and seek cheaper raw materials and labours.

However, in terms of the developing country’s labour and resource market, there are risks of facing intensified competition and exploitation since they are not ready to compete with the international giant. Therefore, without proper regulation, globalised business potentially leads the race to the bottom by exploiting vulnerable workers and weaken social and environmental regulation on purpose of reducing cost. In fact, many scandals of global brands such as child labour, hazardous working condition, excessive working hours and poor wage issues are reported in this decade (Locke, 2013:4). Since business operation also caused adverse effects stated above, the approach of “development tool” came under severe scrutiny.

Today’s world; the era of post- Washington Consensus regarding government as the complement to markets. An active role of the business for development is promoted and expected to shift from tool to “agent”. It means, there is a growing assumption that business can and should be more than a tool and company’s willingness to uses one’s assets for tackling development challenge is expected (Blowfield and Dolan, 2014).