Harsh realities of Free Trade

The Price of Free Trade – Part II
Tome Fawthrop
YaleGlobal, 1 October 2004

Cambodia has recently emerged from preffered country treatment by the US with the expiration of the Multi-Fiber Agreement (MFA). Previously, Cambodia benefited from low tariffs on textile exports, generous quotas, and the protective cap on China’s market share. However, without those protections anymore Cambodia is forced to compete in the harsh globalized market without any armor. With Cambodia’s clothing industry accounting for around 90% of export earnings, a loss of market share would be devastating to the country, and especially to the young women who are predominantly employed in garment factories and have few alternative prospects.

Hun Sen, prime minister of Cambodia, recently joined the World Trade Organization (WTO) in order to bolster the countries attractiveness to foreign investors. However, in order to receive trade benefits from the US, Cambodia also made the commitment in 2001 to improve labor conditions by working with the International Labor Organization (ILO) and Garment Manufacturer’s Association of Cambodia (GMAC). The price of meeting international labor standards by ensuring practices such as overtime pay, bathroom breaks, union representation, and acceptable working conditions increases the price for Cambodian goods and makes them less competitive with other Asian nations like China, Thailand, or even Bangladesh.

At this point, Cambodia must rely on its ethical label to attract consumers. This article effectively outlines the cut-throat atmosphere developing countries face when working in a free trade environment. With a weak economic base, a reputation for corruption, and inability to meet China’s low cost of labor, the outlook is grimm. Fortunately for us, this article is somewhat old, which means we can find out what happened in 2005 when the US removed its favorable quotas. Unfortunately, you will have to wait and read my paper to find out the answer. Or, of course, do some research of your own!