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ADR_Rodgers_Berik_2006_Labor_Standards - Asias Race to...

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Yana van der Meulen Rodgers is Associate Professor, Women’s and Gender Studies Department, Rutgers University; and Günseli Berik is Associate Professor of Economics and Gender Studies, University of Utah. The authors thank Arnab Basu, Ethel Brooks, Elizabeth King, David Kucera, Ronald Martin, Andrew Mason, William Rodgers, Sanchita Saxena, Ian Spaulding, Franck Wiebe, Joseph Zveglich, and an anonymous reviewer for their helpful comments. We also thank Nursel Aydiner-Avsar for excellent research assistance. Participants at the Rutgers University School of Management and Labor Relations Proseminar, the Asia Foundation’s Working Roundtable in Bangkok on the MFA Phase-Out, and the “Gender, Growth and Inequality” Panel at the 2006 ASSA meetings also provided useful suggestions. This research is supported by funding from The Asia Foundation and a University of Utah Proposal Initiative Grant. All opinions are the authors’ and do not necessarily represent those of their respective institutions. Asian Development Review, vol. 23, no. 1, pp.55 86 © 2006 Asian Development Bank Asia’s Race to Capture Post-MFA Markets: A Snapshot of Labor Standards, Compliance, and Impacts on Competitiveness Y ANA VAN DER M EULEN R ODGERS AND G ÜNSELI B ERIK Labor regulations designed to protect workers, promote workplace equality, and improve working conditions achieve social objectives and affect international competitiveness. Considering these dual outcomes has taken on added urgency as Asian economies adjust to an increase in global competition in textiles and clothing following the end of the Multi-Fiber Agreement, with large projected gains for the People’s Republic of China and potential losses for other Asian producers. Countries that stand to lose from the MFA phase- out face low cost and high quality production from the People’s Republic of China, whose competitive threat lies in its extremely poor compliance record with its own and international labor standards. Yet empirical evidence generally supports the argument that the costs of raising and enforcing labor standards are offset by dynamic efficiency gains and macroeconomic effects. This evidence supports the case for Asian economies to pursue the “high road” in their race to capture post-MFA markets in textiles and clothing. I. INTRODUCTION Labor standards that protect basic worker rights, enhance workers’ job security, and improve their terms of employment may have the unintended effect of raising labor costs and undermining international competitiveness. Considering the potential tradeoffs between social objectives of labor standards and their economic competitiveness has taken on added urgency as textile- and clothing- exporting countries in Asia adjust to a sudden increase in global competition following the end of the Multi-Fiber Agreement (MFA). Quota eliminations are expected to cause significant changes in world patterns of textile and clothing production and trade, with large expected gains for the People’s Republic of China (PRC) and India and potential losses for most other low-cost producers that
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