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Spanish workers await the ‘positive side’ of outsourcing

By Alicia Fraerman

Madrid, Spain, June 18 (IPS)— Controversy and protests abound in Spain when it comes to the phenomenon known as outsourcing: when local or transnational companies move their operations abroad, following the path of lowest production costs.

In Spanish it is known as “deslocalización,” a word that is increasingly applicable in this country. The US clothing company Levi Strauss made an offer to its employees June 15 to compensate them for two plant closings in Spain, but was rejected by the trade unions.

The potential Levi Strauss relocation is just one more in a long line that have already occurred: two electronics giants, South Korea’s Samsung, and the Netherlands-based Philips, and the US toy manufacturer Hasbro have already moved some of their operations out of Spain.

Companies move their productive activities to places that have lower production and labor costs. Thus outsourcing becomes “insourcing” for the countries that take in the new operations, and in Spain’s case, many of them are in Eastern Europe.

“This is the other face of globalization,” says Eva Sánchez, secretary-general of the Barcelona branch of the trade union General Confederation of Labor (CGT). She issued a call to fight outsourcing because in just two years it has cost Spain 10,000 jobs.

According to Raghuram Rajan, chief economist at the International Monetary Fund (IMF), outsourcing is a process that “cannot be stopped because it is an intrinsic part of a dynamic economy.”

Any attempt to stop it could bring with it greater threats than the ones that countries are attempting to avoid, said Rajan, who was in Spain this week to participate in the IMF’s 60th anniversary celebrations held in Madrid.

But his view is not shared by the CGT or a hundred other Spanish labor groups and non-governmental organizations that oppose the current globalization process and have convened a demonstration in Barcelona on June 18 to protest outsourcing and the precarious nature of employment in this country.

These groups will also speak out against the Barcelona Forum 2004, a multi-month cultural event taking place in that Mediterranean city with the declared purpose of contributing towards the construction of a “more just” globalization process. The activists, however, say the Forum is not keeping its promises for social action and is “hypocritical.”

Representatives from the two other leading labor groups in Barcelona, the socialist UGT and the communist CCOO, told IPS they would not be participating in the June 18 protest, although they support some of the CGT’s criticisms of outsourcing.

CCOO spokesman Jordi Ribó told IPS he does not consider the phenomenon negative in and of itself, but that it should be regulated, labor rights respected, and the jobs lost to outsourcing replaced with new ones.

The UGT apparently has a similar position, saying the decision of some companies to move some of their operations outside of Spain “could be compatible with maintaining or expanding employment.”

But that is not the case if the entire operations are moved, and “the lack of an industrial strategy at the national level aggravates the effects of the outsourcing phenomenon,” says the UGT.

While the CGT and civil society groups demand that such moves abroad be penalized if they violate Spanish law, the UGT and CCOO are calling for the European Union to enact a common policy to protect workers from the phenomenon.

These relocations of production are not marginal by any means, says Anne Miroux, head of investment analysis for the United Nations Conference on Trade and Development (UNCTAD).

Four of 10 big European companies have begun to move their service operations abroad, said Miroux, who arrived in Barcelona JUne 16 to present the Forum with the UNCTAD report discussed at its eleventh ministerial sessions all this week in Sao Paulo.

All indications are that the trend is on the rise: the savings in production costs can be 20 to 40 percent, and half of the companies say they will relocate more services in the future.

Many firms, especially from English-speaking countries, contract a range of services in India, without physically relocating any operations, but taking advantage of the existing telecommunications and Internet infrastructure.

India took in $2.6 billion for such activities in the 2002-2003 period, according to the National Association of Software and Service Companies.

University professor Pedro Schwartz, a defender of neoliberal economic theory, says it would be a mistake to treat outsourcing as an evil. There are those who suffer when a factory is relocated, “but the country overall progresses thanks to outsourcing and to any elimination of unproductive employment, due to the effect of national and international competition.”

In reference to the move of Spanish companies to neighboring Morocco, Schwartz says that “if in the middle term, the wages in Spain are four times what they are in Morocco, it is because Spanish labor overall is four times more productive.”

Otherwise, he concludes, one would have to admit that “the corporate executives are idiots.”

But the Spanish entrepreneurs do not appear to be stupid, at least judging from the results of their business dealings.

According to a report presented this week by the finance and investment firm Merrill Lynch and the international consultancy Capgemini, Spain is the EU country where the number of rich people is growing fastest.

In 2003, the number of Spaniards with more than one million dollars in liquid financial assets grew 18 percent, while in the rest of the EU it was 2.5 percent, and in the rest of the world 7.5 percent.

But the boom is not preventing some transnationals from leaving Spain. Levi Strauss will close two factories and lay off 453 workers, most of whom are women over 40.

The famous denim jeans company says its costs in Spain are much higher than at its factories in Eastern Europe, and has offered to compensate the workers with payments equivalent to 38 days of work for each year of employment with the firm.

The unions have rejected the offer, but will take two weeks to resolve the matter, which will be debated in a series of worker assemblies.

Brussels, Belgium, June 17— After ducking efforts by the local Haitian union, Sokowa, to address a series of grievances, Grupo M, a Dominican Republic-based company, has precipitated a strike, organized a lock-out of the workforce, and has finally fired more than half its employees at the Ouanaminthe plant, which manufactures jeans for Levi’s. The International Confederation of Free Trade Unions is protesting against another attempt at union-busting on the part of one of the biggest textile companies in the Caribbean, by calling on the World Bank to intercede in favor of the laid off Haitian workers.

The events in recent days have led to a storm of international protest at the company’s recurrent abuses of workers. According to Neil Kearney, General Secretary of the International Textile, Garment and Leather Workers’ Federation (ITGLWF), workers’ were protesting at the Ouanaminthe Free Trade Zone in Haiti “because of inhuman treatment including violence, intimidation, harassment, forced stripping of women union leaders, beatings, kidnappings and non-payment of wages.”

The plant in question was built using a $20 million loan from the International Finance Corporation (IFC), the World Bank’s private-sector lending arm. A one-day strike on June 7 ended in an agreement between Grupo M and Sokowa for a return to work and the start of negotiations to address workers’ grievances. The following day Grupo M locked out the workforce and announced by letter the closure of their jeans factory in Ouanaminthe. On the June 9, the letter was partially rescinded, and the company restarted production, but on June 11, in another apparent U-turn, it was announced that the firm was laying off 254 workers. However according to the Sokowa union, 370 workers (around 60 percent of the workforce) have been sacked.

While Grupo M claimed to be laying off the workers temporarily, it emerged that they were being pressured to accept severance payments at the same time, which the company may try to use as a pretext to make the dismissals permanent. “The sacking of the workers was an effort to retaliate against them for their strike, and was discriminatorily aimed at the union leaders. All but one of the union’s executive committee members have been fired,” said ICFTU General Secretary Guy Ryder.

While the IFC has proposed mediation between Grupo M and the union, such efforts are likely to remain futile so long as 370 workers have been fired and do not know if they have any chance of being rehired. The ICFTU has sent a letter to the acting president of Haiti, Alexandre Boniface, demanding the immediate rehiring of the workers by Grupo M and the start of serious negotiations with the union. It is also calling on the IFC to withhold its loan payments until production is restored at the Haitian plant.

Grupo M is a particularly abusive employer. According to information received by the ITGLWF, Grupo M CEO Fernando Capellan started threatening to fire factory workers as early as June 3, saying that the factory was suffering several million dollars in losses because of lack of productivity. The same day managers “summoned four women workers into what is called the ‘dark room,’ locked the door, and posted Dominican guards outside. Under the threat of weapons, the women were subjected to a police-style interrogation. Their factory badges and work shirts were ripped off of them, leaving the women topless. After they had been in the room for nearly two hours, their co-workers grew worried and started to approach the room, shouting for the workers to be let out. The guards posted outside the room summoned backup. A truck full of guards arrived. The guards aimed their weapons at the workers, ordering them to back off behind a line traced on the ground with a rifle. A four-month pregnant woman was thrown to the floor, in a pool of mud, her dress torn.”

According to Ryder, “It is vital that the World Bank’s IFC step in and ensure that these Haitian workers, who are in a desperately poor situation, get their jobs back as soon as possible and be allowed to work under humane conditions. In view of Grupo M’s obligations in the loan agreement it signed, the IFC should suspend disbursements on the loan until the workers are rehired and a serious process of negotiations has begun with union to address the workers’ grievances.” Last January, following earlier submissions by the ICFTU on the company’s labor rights abuses, the IFC agreed to make its $20 million loan to Grupo M conditional on the company’s respect for the freedom of association and right to collective bargaining of its employees.