barrientos2011

1. SPECIALFEATURE DECENTWORKINGLOBALPRODUCTION NETWORKS Guest edited by Stephanie Barrientos, Gary Gereffi and Anne Posthuma

2. International Labour Review, Vol. 150 (2011), No. 3–4 Decent work in global production networks: Framing the policy debate Stephanie BARRIENTOS,* Frederick MAYER,** John PICKLES*** and Anne POSTHUMA**** Abstract.  Introducing this Special Feature of the International Labour Review on “Decent work in global production networks” (GPNs), this article reviews the research challenges posed by GPNs, which are changing the structure of trade, pro- duction and employment in today’s globalized economy. The authors define the con- cepts of social and economic upgrading/downgrading that are used in the following contributions to investigate the effects of GPNs. They conclude with a discussion of the initiatives that governments and non-state actors have taken to address the “global governance deficit” and consequent decent work deficits that have emerged with the expansion of GPNs. S and employment in recent decades. A growing proportion of trade is con- ducted not through remote markets or intra-firm trade within multinational enterprises, but increasingly via the operation of value chains or global produc- tion networks (GPNs) involving interlinked supplier firms coordinated by lead companies that exert a high level of control, but have no formal ownership. Such arrangements facilitate the global integration of the entire sequence of activities from initial design to the supply of inputs, manufacturing and distri- bution, through to the final retailing of goods and services, across international borders. These networks of firms involve the fragmentation of production and ignificant changes have occurred in the structure of global trade, production *  Senior Lecturer, Institute for Development Policy and Management, and Associate Director, Brooks World Poverty Institute, University of Manchester, email: s.barrientos@ manchester.ac.uk.    **  Associate Professor of Public Policy and Political Science, and Director of the Program on Global Policy and Governance, Sanford School of Public Policy, Duke University, email: fmayer@duke.edu.    ***  Earl N Phillips Distinguished Professor of International Studies and Chair of the Department of Geography, University of North Carolina, Chapel Hill, email: jpickles@unc.edu.    ****  Senior Specialist in Employment and Labour Market Policies, ILO Office in Brazil, and Coordinator of this Special Feature of the ILR, email: posthuma@ilo.org. Responsibility for opinions expressed in signed articles rests solely with their authors, and publication does not constitute an endorsement by the ILO. Copyright © The authors 2011 Journal compilation © International Labour Organization 2011

3. 300 International Labour Review its outsourcing to a large number of manufacturing units, typically in low-wage developing economies. The expansion of GPNs and their growing economic importance have significant implications for workers, their terms and conditions of employment, and labour regulation. The growth of global production has created new job opportunities in developing and emerging economies. Some of these jobs require specialized skills and pay good wages, but they can also involve casual and flexible labour engaged in low-skilled manual tasks that are often associated with poor working conditions and low incomes. The regulatory ability of governments to ensure that these jobs adhere to recognized standards of decent work faces a new set of chal- lenges in this context, while global buyers concerned about reputational risk have introduced codes of conduct and auditing schemes among their inter- national network of suppliers, and global union federations have designed strategic approaches involving bilateral and multiple stakeholder initiatives and “mature systems of industrial relations”. This Special Feature of the Inter- national Labour Review aims to provide a better understanding of the types of work and employment opportunities generated within GPNs, with a focus on the links between economic and social upgrading (or downgrading) of firms and workers and the governance challenges involved in addressing decent work deficits that may arise in the context of GPNs. A significant body of literature has analysed the dynamics of GPNs and global value chains (GVCs) at the firm and industry levels (Gereffi and Kaplin- sky, 2001; Kaplinsky, 2000; Gereffi, Humphrey and Sturgeon, 2005). Another body of literature has focused on the flexibilization and casualization of work and the challenges of promoting labour standards in the global economy (Standing, 1999; Munck, 2002). However, these two bodies of literature have tended to remain separate, either confined within specific academic disciplines and concep- tual frameworks, or proceeding at different levels of analysis. As a result, there has been only limited exchange of empirical findings and analytical insights on an issue that lies at the heart of the contemporary global economy. A more inte- grated, multidisciplinary approach is required in order to shed light upon the implications of its evolving modes of production, investment and consumption for future patterns of economic growth, employment creation and development in emerging and developing economies and in mature industrial economies. The need for a clearer understanding of these related processes has taken on greater urgency since the onset of the global financial and economic crisis in 2008. Consequent restructuring in the global economy appears to be consolid- ating the role of value chains and their coordinated networks of suppliers, but it is also shifting their dynamics as end markets move towards the South (Staritz, Gereffi and Cattaneo, 2011). How these processes will play out for workers embedded in these value chains is not yet well understood, but they will crucially affect the scope for promoting decent work in the new arena of global development. A key conceptual challenge in analysing the effects of globalized produc- tion centres on the relationship between the economic and social dimensions of

4. 301 Decent work in global production networks global trade, production and employment, given that existing analytical tools are premised largely on national development frameworks. The articles in this Spe- cial Feature contribute to tackling this challenge by developing the concepts of economic and social upgrading (or downgrading) in GPNs. Economic upgrading should be understood as the process whereby firms improve their position in terms of value added and productive capacities within value chains. Social upgrading refers to improvement in the terms, conditions and remuneration of employment and respect for workers’ rights, as embodied in the concept of decent work. While existing studies report separate research find- ings on either economic or social upgrading/downgrading within GPNs, this Spe- cial Feature attempts to analyse how the two processes are linked. The empirical evidence suggests that economic upgradingcan, but does not automatically or inevitably, lead to social upgrading. The conceptual and policy-oriented research questions that arise thus concern the identification of the ways in which economic and social upgrading are attained in GPNs, and under what conditions they can be achieved. The articles in this Special Feature set out the analytical framework and ini- tial findings of an ongoing international policy research programme entitled Capturing the gains: Economic and social upgrading in global production net- works.1 Proceeding from recognition of the limitations of current research, the programme is designed to analyse systematically the linkages between the trade, production and employment associated with GVCs and GPNs. The process of establishing the requisite international network of researchers – academics with different disciplinary, sectoral and regional perspectives – was initiated and facilitated by the ILO, which hosted international conferences and workshops (see, for example, Posthuma and Nathan, 2010). The researchers in the ensuing network have committed themselves to continuing collaborative and compara- tive work on the challenges of – and opportunities for – promoting decent work in today’s GPNs. By way of introduction to the issues, the remainder of this article examines the context in which the transformation of global trade, production and employ- ment has taken place since the 1980s. It also provides an overview of the policy challenges that frame the following analytical contributions to this Special Fea- ture of the International Labour Review. Global context: The restructuring of trade, production and work The emergence of GVCs and their expansion into wider GPNs are part of an important shift in the pattern of international development since the 1980s. The debt crisis and subsequent introduction of structural adjustment policies in many developing countries undermined the state-led, import-substitution industrial- ization policies of the 1960s and 1970s. As part of their adjustment programmes, 1For further information, see www.capturingthegains.org.

5. 302 International Labour Review many of these countries pursued a strategy of export-led growth. While rolling back state programmes, they instituted incentives to attract foreign direct invest- ment and liberalized factor markets (including through labour market deregu- lation). However, this policy shift did not lead to an automatic return to the international division of labour between countries producing primary commod- ities and those producing manufactured goods, as previously analysed in the works of Prebisch and Singer following the Second World War (Gereffi, 1995; Stallings, 1995). Whilst multinational corporations (MNCs) and private capital gained easier conditions for trade and capital flows in developing countries, the process of globalization also led to structural shifts in the organization of trade and manu- facturing. Rapid advances and lowered costs in transport, communications and information technology facilitated the outsourcing of production to develop- ing countries by MNCs and brand-name firms. Initially, such international outsourcing to lower-cost, more flexible labour markets took place in labour- intensive industries such as apparel, footwear and toys, but other industries – including agro-food and services – soon followed suit (Gereffi and Kaplinsky, 2001). Developing countries were thus drawn into new patterns of production, distribution and business organization, led not by States but by an increasingly influential set of retailers, brand marketers and branded manufacturers in advanced industrial economies, which came to be known as “global buyers”. A key feature of the new business model was that, unlike foreign direct investment by MNCs, lead firms did not own the production chains through which they sourced, nor did they directly hire the workers engaged in the production of their goods. Yet, modern technology and falling transport and communication costs allowed them to exercise growing control over the production process, in terms of quality standards, throughput time, costing structures, delivery systems, work- place organization and labour. Gereffi (1994 and 1995) originally described this process as the rise of buyer-driven commodity chains, and the term “global value chain” later came into widespread use to refer to these new dynamics in the global economy (Gereffi and Kaplinsky, 2001; Kaplinsky, 2000; Gereffi, Hum- phrey and Sturgeon, 2005). Each stage in the value chain might involve firms in different countries, hence the international fragmentation of production, with intermediate com- ponents repeatedly crossing borders. In food retail, for example, a modern super- market chain can sell products sourced from thousands of suppliers in over 100 countries, with delivery pre-programmed six to nine months in advance so that the products reach its shelves daily, on a “just-in-time” basis. International outsourcing has also facilitated access to new markets and the transfer of pro- duction practices and expertise to many developing countries, albeit often in segments of the value chain. This process has promoted the rise of new inter- mediaries in the South, as it has the rise of Southern lead firms operating in both domestic and regional markets (Kaplinsky, Terheggen and Tijaja, 2010). The growth of supermarket chains across Africa, Asia and Latin America in recent

6. 303 Decent work in global production networks decades provides a vivid example of the increasing reach of lead firms in recon- figuring production and retailing (Reardon, Timmer and Minten, 2010). Over time, value chains thus took on important regional and global dimensions. Another key characteristic of global production is that the coordination of goods and services through inter-firm networks often cuts across industries, so that the linkages between export industries are critical to understanding trade, production and employment. In the case of the global apparel industry, for example, the East Asian economies that pioneered the export-oriented model of industrialization – i.e. Hong Kong (China), Taiwan (China) and the Republic of Korea – upgraded from being direct apparel exporters to playing a critical role as intermediaries in GVCs. As these economies received orders from global buyers in the United States and Europe, they discovered new sources of low-cost apparel supply in the developing world, such as China, South-East Asia, Central America and Africa. From their new position as intermediaries, these East Asian countries acquired new logistics skills and were able to export low-cost apparel by using their own regional suppliers of textiles. This circuit of “triangle manufac- turing” created multi-tiered GPNs, with complex linkages of trade in intermedi- ate goods and patterns of labour use that made it extremely difficult to trace employment relationships in order to promote improvements in working condi- tions and support workers’ rights in a direct and effective manner (Gereffi, 1999). As value chains developed and became more complex, their production activities came into contact with – and were affected by – a broad range of pol- icies, institutions, and actions undertaken by various social, economic and polit- ical stakeholders. This wider setting in which value chains now operate, expand and are regulated can be analysed using the broader concept of GPN (see Dicken et al., 2001; Henderson et al., 2002; Coe, Dicken and Hess, 2008). Indeed, these authors put more emphasis on the institutional context within which global sourcing takes place – across diverse jusrisdictional and societal environments – and the asymmetry of power relations between the various commercial and social actors involved. GPN analysis helps to investigate how different trans- national networks of firms can result in divergent outcomes for producers and workers both within and between countries. Whilst relatively greater attention has traditionally been devoted to analysis of the productive and economic rela- tions between firms, the GPN literature has increasingly focused on the upgrad- ing or downgrading implications for workers drawn into these global networks (Barrientos and Kritzinger, 2004; Pelger and Knorringa, 2007; Cumbers, Nativel and Routledge, 2008; Posthuma and Nathan, 2010). This Special Feature contrib- utes to this emerging policy-research agenda by examining the nexus of eco- nomic and social upgrading, its underlying dynamics and constraints, and the governance and decent work deficits it may entail. Linking economic and social upgrading in GPNs The growth of outsourcing to developing and emerging economies has generated significant output and productive employment in the South over recent decades.

7. 304 International Labour Review But one of the main challenges in analysing the effects of GPNs lies in the limi- tations of conventional economic theory and measurement tools in a context where global buyers and lead firms coordinate trade, production and work across borders. Moreover, available economic and employment data are typically designed to reflect national forms of economic organization at the aggregate macroeconomic and industry levels. Yet, value chains coordinated by global buyers link firms across industries and countries. Furthermore, GPN subcon- tracting involves producers and workers that are not formally recognized as part of the traded sector, and casual workers who are not counted in formal labour market statistics. As an indicator of the growth of production and employment in GPNs, one could use the number of export processing zones (EPZs) and their employment effects. In 1975, there were 80 EPZs in 25 countries; in 1995, there were 500 EPZs in 73 countries, and by 2006 their number had soared to 3,500 in 130 countries. The number of EPZ workers roughly trebled between 1997 and 2006, increasing from 22.5 million to 66 million, 61 per cent of whom were located in China (Ger- effi, 2006, pp. 10–11; Milberg and Amengual, 2008). GPNs have also transformed the labour force participation of some groups, most notably women and rural migrants. In Bangladesh, for example, the number of workers in the garment industry grew from 0.2 to 3 million between 1986 and 2010 (Staritz, 2011). Approximately 80 per cent of these workers are women, often from rural vil- lages, who previously had no access to wage employment. The opportunities thus created for women have been important in terms of their economic and social empowerment. Yet, they can still face significant gendered constraints, as their socially ascribed skills are often insufficiently rewarded, and obstacles to moving into more advantageous positions (Barrientos, Dolan and Tallontire, 2003; Dolan and Sorby, 2003). The article by Milberg and Winkler in this Special Feature examines some of the conceptual and practical problems posed by the links between economic and social upgrading for producers and workers. They highlight both the diffi- culty of comparing studies which use different variables to capture these dynam- ics and the selection bias of the case study literature that focuses on successful upgraders when in fact downgrading is also observed. Drawing upon national- level data from a sample of 30 developing countries to assess “strong”, “weak” and “relative” upgrading, they find that only nine of the countries had achieved even weak economic upgrading; and most of these countries were located in rap- idly growing East Asia. Milberg and Winkler find that social upgrading – meas- ured very simply by employment growth – is quite limited. However, they acknowledge that their approach is insufficient to capture the full relationship between economic and social upgrading, especially if the latter is conceptualized in terms of a broader “decent work agenda” that goes beyond employment and wages alone. The next article in this Special Feature – by Barrientos, Gereffi and Rossi – further unpacks the definitions of economic and social upgrading at the meso and micro levels in relation to firms and workers linked into GPNs. An implicit

8. 305 Decent work in global production networks assumption in much conventional economic analysis is that export growth and job creation automatically lead to improvements in welfare. However, these authors cite studies which have highlighted the poor quality of jobs linked to GPNs, including low wages, the use of casualized labour, and the lack of labour rights or union representation. Subcontracting often involves manufacturing in small production units or home-based work, with the result that exploitative labour practices (such as child labour) are often pushed to the lower reaches of GPNs. Studies by academic researchers, trade unions and NGOs have high- lighted the purchasing practices of lead firms – expecting lower prices and higher speed of delivery from their suppliers – as drivers of the use of casualized labour. At the same time, however, suppliers must meet rising quality and production standards in order to continue as approved exporters to global buyers, and this has increased demand for skilled workers in some segments of the labour market (Barrientos and Krizinger, 2004; Raworth, 2004). The employment picture would therefore appear to be more complex than individual case studies might suggest. From the perspective of decent work, it is necessary to examine both the quantity and the quality of the employment generated by GPNs. Thus, in add- ition to employment levels, account must be taken of indicators related to labour standards, social protection, wages, working conditions, and workers’ voice. Bar- rientos, Gereffi and Rossi argue that this broader notion of social upgrading fur- ther complicates analysis of the link between economic and social upgrading. First, there is the conceptual challenge of defining how the different dimensions of work are integrated. Second, there is the empirical challenge of measuring both the quantity and the quality of work. From the perspective of companies, their article posits that the ability of firms to reposition themselves through pro- cess, product, functional and chain upgrading is critical to their ability to capture value. From the workers’ perspective, their analysis highlights two aspects: labour as a factor of production and labour as a socially embedded agent. Based on existing case studies and research on the Moroccan garment industry, Bar- rientos, Gereffi and Rossi argue that economic and social upgrading are not lin- ear processes and examine some of the pressures that might move firms and workers in one direction or the other. Factors conducive to economic and social upgrading include requirements binding firms to meet standards of quality and consistent production within GPNs, leading to pressure for workforce develop- ment that enhances skills levels. As regards factors conducive to economic and social downgrading, intense global competition has placed downward pressure on fixed production costs, thereby contributing to increased casualization and “informalization” of employment. Existing case studies indicate that where firms confront the dual pressures of rising standards of quality and production together with pressure to reduce fixed production costs, this often leads to a co-existence of regular and irregular workers on the same sites (Barrientos and Kritzinger, 2004; Raworth, 2004; Rossi, 2011). The links between economic and social upgrading and downgrading are thus not straightforward and therefore raise questions as to how and under what conditions more balanced economic and social upgrading can be promoted.

9. 306 International Labour Review Governance deficits, decent work deficits and responses With a growing share of the global economy now organized into GPNs, the pub- lic and private governance institutions that once promoted social upgrading – and regulated or moderated downgrading – are facing serious challenges.2 The lack of scope for, or coordination between, the two governance spheres and their respective levels of operation is resulting in the emergence of a global “govern- ance deficit” (Gereffi and Mayer, 2006). With the expansion of unregulated supply chains, States and societies have responded by seeking to fill the gap with new governance mechanisms. Drawing on Karl Polanyi’s (1944) concept of the “double movement”, Mayer and Pickles (2010) suggest that markets progres- sively “dis-embed” themselves from social control which, in turn, causes States and societies to strive to re-embed them, partly through new institutions of governance. This double movement results in struggles over the appropriation and distribution of social surplus – or “class processes” (Gibson-Graham, Res- nick and Wolff, 2000) – and in countermovements that seek to re-embed the economy in practices and institutions of social regulation (Pigman, 2005). Vorley, Fearne and Ray (2007) have described this process in terms of “regoverning mar- kets”, which Webster, Lambert and Bezuidenhout (2008) have referred to as efforts at “grounding globalization”. In this sense, the lack of governance mechanisms capable of addressing more adequately the set of decent work deficits associated with globalized pro- duction can be seen to have triggered demand internationally for the strengthen- ing of existing institutions of governance and the creation of new ones. Over the past two decades, the social pressures unleashed by globalization have indeed driven a remarkable expansion of such governance innovations, both public and private, at the international, national and local levels. While these initiatives vary quite widely in scope and in mode of operation, their effectiveness ultimately depends on the extent to which workers’ interests will be adequately promoted and protected in the emerging governance architecture. Non-state initiatives Private governance facilitates markets through standards adopted by industry groups, the activities of business associations and chambers of commerce and framework agreements that establish norms of trust and conduct. In the context of GPNs, governance initiatives might also include efforts by development asso- ciations to attract certain forms of foreign investment or to cooperate with green- field start-ups. They might even extend to direct changes in the production process 2Public governance is imposed by the State (e.g. government policies, legislation and regula- tions). Equally important, however, are the private, non-state institutions, including broad societal norms, corporate codes of labour practice, collective bargaining agreements and non-governmental organizations and movements driven by consumer demand for corporate social responsibility (CSR).

10. 307 Decent work in global production networks or in the structure of buyer-driven supply chains and production networks, or CSR initiatives by leading brands. Private governance can have a significant regulatory impact in the form of corporate policies that go beyond statutory minimum standards, negotiated arrangements between firms and labour advocates, and pressure campaigns driven by civil society and consumers. Distributional effects can also be influ- enced through voluntary or semi-voluntary agreements by firms to pay living wages, or via negotiated wage agreements, voluntary provision of other benefits by firms, and social institutions that provide services to the unemployed and working poor. Non-state governance efforts thus range from largely voluntary efforts to expand CSR across the value chain, to activist and consumer pressure for ethical sourcing and investor movements to create markets for social respon- sibility. These are all part of a broader movement that Appelbaum has called “the privatization of labor law enforcement” (2005, p. 373). In recent years, however, both industry and anti-sweatshop organizations have begun to question the effectiveness of private monitoring and enforcement models in protecting workers and guaranteeing safe and fair working conditions, even in the production of goods for relatively high-priced reputation-sensitive markets, such as collegiate apparel (Jenkins, 2001; Mamic, 2003; Barrientos and Smith, 2007; Mayer and Gereffi, 2010). Buyers and producers have been particu- larly vocal about the surfeit of regulatory demands and codes with which they and their suppliers are expected to comply. Suppliers speak of “monitoring fatigue” (Locke, Qin and Brause, 2007) as sourcing factories may be subject to as many as 30–40 annual inspections and expected to meet the different code requirements of eight to 12 brands, in addition to complying with national legislation. Miller, Turner and Grinter (2011) argue that a global labour force calls for a new approach to industrial relations – a challenge taken up by Global Union Federations (Papadakis, 2008). Initiatives taken by such Federations to conclude “international framework agreements” with MNCs may provide an effective means of promoting labour standards across global suppliers. These initiatives draw on the legacy of Neil Kearney to advance the principles of “Mature Systems of Industrial Relations” (MSIR) as a more sustainable alternative to codes because it is rooted in social dialogue, legitimate labour representation and col- lective bargaining procedures based upon internationally recognized labour rights.3 The MSIR approach emphasizes the primacy of the employment rela- tionship, whereby the supplier as employer bears responsibility for those employed on its premises. It promotes the fundamentals required to ensure free- dom of association and collective bargaining and to promote decent work within global production. MSIR can create an environment in which management and independently elected trade union representatives accept the collective bargain- ing process as the channel through which workplace issues are agreed and addressed, and disputes resolved. 3Neil Kearney was General Secretary of the International Textile, Garment and Leather Workers’ Federation until his untimely death in 2009.

11. 308 International Labour Review Government responses Governments have also begun to respond to the governance deficit through their national policy regimes. Although much effort has focused on industrial policy and economic upgrading, governments in many emerging economies have begun to strengthen public institutions for labour regulation and to develop governance capacities, including social safety nets and other income transfer mechanisms. Countries such as Brazil, Chile, Costa Rica and the Dominican Republic have also focused efforts on labour law enforcement in recent years (Piore and Schrank, 2006, p. 2). In Bangladesh, deep social unrest driven by low wages and poor working conditions in export factories led a coalition of major apparel buyers to join labour advocates in pressuring the Government for a major increase in the mini- mum wage for apparel workers in 2010.4 In response, Bangladesh increased its minimum wage in the apparel industry by 80 per cent.5 Also of interest are reforms in post-socialist States, where former socialist institutions have undergone rapid changes in recent years. After 1989, their planned economies were quickly deregulated, state institutions were weak- ened, export-oriented industries and other manufacturing industries declined with massive retrenchments, and plant and other capital were privatized or abandoned.6 However, most post-socialist States retained their existing (albeit weakened) institutions, including labour inspectorates, health and safety in- spectorates, working time law, child labour laws, overtime regulations, wage payment and contract conditions, insurance and pensions requirements, etc. In the late 1990s and early 2000s, some governments (e.g. Bulgaria and Slovakia) provided their institutions with additional support and funding to ensure better regulation of basic working conditions. Their socialist institutional legacies have thus remained important “partial regulators” of business practices (Pickles et al., 2006; Smith et al., 2008).7 However, the functioning and revitalization of their state institutions as effective bodies of labour regulation are issues requiring further investigation. The paradox of state regulatory regimes exercising their jurisdiction differen- 4The coalition included Walmart, Tesco, H&M, Zara, Carrefour, Gap, Metro, JCPenney, Marks & Spencer, Kohl’s, Levi Strauss and Tommy Hilfiger. 5The increase was, however, far below what had been demanded by workers, and the weak- ness of trade unions continues to hamper the ability of workers to press for further gains (Anas, 2011). 6By the mid-1990s, the relocation of clothing manufacturing from Europe and the United States had revitalized this industry throughout eastern Europe around stitch-up, CM and CMT con- tract manufacturing, structured largely by international buyers and manufacturers. As a result, the industry recovered quickly, but largely “under the radar” of the state authorities, which have remained weak with underfunded and under-incentivized institutions (see Begg, Pickles and Smith, 2003). 7For documentation of abuses in Bulgarian supply chains, see Ivanka Laleva and Bettina Musiolek’s (1999) account of the “Conditions in the Savina factory”. For discussion of the conse- quences of state socialist institutions on post-socialist working conditions, see Pickles and Smith (2010).

12. 309 Decent work in global production networks tially across firms in the same industry highlights the importance of understand- ing how such regimes are articulated with international norms and the codes of conduct and practices of private firms. It also calls for a much fuller understand- ing of how workers’ firm-level and regional struggles for better working condi- tions shape government policies in post-socialist countries. China’s re-regulation of labour The Chinese Government has initiated far-reaching reform in its labour regula- tion in response to various factors, including social unrest among workers in export processing factories and international pressure from NGOs, trade unions and some major buyers concerned about brand reputation. Such reforms were foreshadowed by the state-sanctioned naming of 2005 as the Chinese Year of Corporate Social Responsibility, a commitment to harmonious work and society that has since been consolidated and expanded (see China CSR, 2010). In Janu- ary 2008, China’s new Employment Contract Law came into force, aimed at strengthening job security, ensuring payment of proper wages and benefits, and curtailing the widespread use of seasonal and temporary contracts in lieu of more stable contractual relations. The purpose of this legislation is to reassert the basic values of labour protection in state policy. It also extends labour rights to public employees. Under the Employment Contract Law, employees must have formal fixed-term contracts that can only be terminated with just cause; after a maxi- mum of two fixed-term contracts, the employee must receive an open-ended per- manent contract, which can be terminated only by the employee, for just cause, or by retirement. Individual workers and trade unions can take legal action to enforce their rights. One provision of the new law requires negotiations between workers and companies over conditions of employment and enhances the role of the All-China Federation of Trade Unions (ACFTU) in China’s labour relations system. Over the longer term, China’s new labour law has important consequences for workers, both domestically and elsewhere (Global Labor Strategies, 2008; Harper Ho, 2009). While the law increases the cost of labour in some Chinese factories, it helps to stabilize working conditions for millions of low-wage, temporary contract workers in factories throughout the country, although workers with non-renewable three-month contracts remain uncovered. The Employment Contract Law also changes the ways in which multinational com- panies must deal with workers’ organizations. Lastly, it seems to have led to sourcing shifts, as buyers supplement orders from China with orders from other low-cost regional producers, such as Indonesia, Viet Nam and Cambodia. International initiatives Recent efforts to include labour provisions in international agreements have encountered resistance within the WTO multilateral trading system (WTO, 2010a). However, the Policy and Performance Standards of the International

13. 310 International Labour Review Finance Corporation (IFC), the World Bank’s private-sector lending arm, have included reference to the ILO’s core standards and other labour standards (Ebert and Posthuma, 2009). What cannot be accomplished globally may be possible at the regional and bilateral levels. Given the proliferation of free trade agreements (FTAs), the inclusion of labour provisions in regional FTAs could play a useful role in the absence of a broader multilateral approach (Gereffi and Mayer, 2006; Ebert and Posthuma, 2009).8 The EU has done the most in this regard, with regional trade agreements aimed at fostering economic development and political open- ness, while explicitly granting bilateral trade concessions such as “GSP+” to countries applying the ILO’s core labour standards and other basic rights. EU regional public governance is stronger than that of global institutions, particu- larly in regard to regulatory and redistributive forms of governance.9 By contrast, regional free trade agreements such as NAFTA and the CAFTA do include side agreements on labour, yet their provisions are more limited and do not include explicit references to ILO standards (Mayer, 1998). Overall, the effectiveness of such provisions – implemented at the national level as an instrument to promote labour standards – is indeed restricted when trade patterns are increasingly frag- mented and coordinated across borders by buyers within GPNs. The limitations of private and public governance initiatives to address decent work deficits in GPNs have led to the emergence of other types of coord- inated or collaborative approaches, such as multi-stakeholder initiatives (MSIs). Prominent MSIs concerned with labour standards include the ILO/IFC Better Work Programme, Ethical Trade Initiative, Social Accountability International, and United Nations Special Representative Ruggie’s Guiding Principles on Busi- ness and Human Rights. A critical issue for ongoing research concerns the iden- tification of policy interventions that have proved effective in harnessing the potential of globalization to the pursuit of decent work outcomes. In this regard, it is crucial to understand the respective roles that can be played by public and private regulatory measures, and trade agreements, in the promotion of labour standards. As GPNs are now evolving to include more South–South and regional trading patterns, a new set of questions centres on whether Southern govern- 8According to the WTO: “Regional Trade Agreements (RTAs) have become in recent years a very prominent feature of the Multilateral Trading System (MTS). The surge in RTAs has con- tinued unabated since the early 1990s. Some 421 RTAs have been notified to the GATT/WTO up to December 2008…. At that same date, 230 agreements were in force. If we take into account RTAs which are in force but have not been notified, those signed but not yet in force, those currently being negotiated, and those in the proposal stage, we arrive at a figure of close to 400 RTAs which are scheduled to be implemented by 2010. Of these RTAs, free trade agreements (FTAs) and partial scope agreements account for over 90%, while customs unions account for less than 10%” (WTO, 2010b). 9Facilitative governance enables markets to form, creates jobs, attracts investment, and otherwise promotes economic activity. Regulatory governance constrains the behaviour of profit- seeking firms that might otherwise tend to exploit workers, leading to poor working conditions, lack of job security, constraints on worker organization, and general downgrading of industrial relations systems and practices. Redistributive (or compensatory) governance seeks either to redress inequal- ities through progressive taxation and social services or to compel firms to offer more generous wages and benefits (Gereffi and Mayer, 2006).

14. 311 Decent work in global production networks ments and lead firms, as well as conscientious consumers, will embrace similar practices and regulatory frameworks for labour in GPNs (Kaplinsky, Terheggen and Tijaja, 2010; Knorringa, 2010). Implications of the economic crisis for trade, production and work in GPNs Since 2008, the global economic crisis has had implications for the restructuring of GPNs within the shifting global development arena, which we will briefly con- sider here. The crisis helped to highlight the growing disparity between actual trading activity within GPNs and official trade statistics. During the preceding decade, trade had expanded at a faster rate than the GDP of most trading nations because of the repeated recording of cross-border intermediary goods resulting from the fragmentation of production in global value chains. When the crisis hit, the inverse took place: in 2009, world trade slumped by 12 per cent while world GDP dropped by 2.2 per cent (Milberg and Winkler, 2010). This was partly explained by the withdrawal of trade finance due to the banking crisis, but it also reflected the contraction of cross-border flows of intermediate goods as GPNs were reconfigured, with the emergence of new growth markets in the global South. In other words, the decline in world economic output was not as dramatic as the trade figures alone seemed to imply. Economists are now grappling with this reality, and some have begun to address the shortcomings of economic tools for analysis and measurement (Bald- win, 2009; Sturgeon and Gereffi, 2009; Cattaneo, Gereffi and Staritz, 2010). Pre- liminary studies indicated that the collapse in world trade at the onset of the crisis led to an initial sharp downturn of employment in many developing countries that were linked to production for Northern consumer markets (Baldwin, 2009). However, as production for GPNs picked up (including for Southern consumer markets), so did employment in many locations, although the recovery has been uneven depending partly on how countries were positioned within GPNs. The crisis appears to have led to further restructuring of employment, with evidence of permanent workers being laid off in favour of increased casual and flexible employment, and precarious work on the rise globally (IILS, 2010; ILO, 2010a and 2010b; Green, King and Miller-Dawkins, 2010). In the aftermath of the crisis, GPNs are being further consolidated, while undergoing profound structural shifts in three respects. First, at the macro- economic level, the geographic configuration of global production is shifting away from a predominantly North–South model – in which developed countries provided the investment, product and process technology, and final consumer markets, while developing countries provided low-cost labour for export produc- tion – to include the expansion of South–South production and trade, in which GPNs driven by new Southern lead firms play an important part. Examples include the South African retailer-governed apparel chains that have expanded their sourcing operations to Lesotho and Swaziland (Morris, Staritz and Barnes, 2011), and India’s MNCs which, in 2009, had 45 per cent of the global market for

15. 312 International Labour Review offshore services, with operations in Latin America and other developing econ- omies (Fernandez-Stark, Bamber and Gereffi, 2011). Second, GPNs have created jobs in the South as the offshoring of produc- tion has moved the centre of many manufacturing industries – especially con- sumer goods – to developing economies. However, much of this employment is informal or irregular, especially in the lower tiers and outsourced activities of value chains. This, in turn, poses challenges for the promotion of decent work. Over time, however, the wage compression associated with the export-oriented production model has given rise to labour activism in some locations (Chan, 2010; Posthuma and Torres, 2010), resulting in pressure to improve the terms and conditions of employment within the GPNs. Third, globalized production is impacting upon the respective roles of national governments and private actors in the governance of labour standards, within the context of shifting global economic drivers and the rising importance of Southern governments. Companies which have pursued private strategies of social compliance are beginning to recognize the limitations (and costs) of this model (Barrientos and Smith, 2007). They are seeking wider, more effective alli- ances – including with non-governmental actors – which could potentially pro- vide scope for governments to play a greater role. Strengthened by the global economic and financial crisis, these trends in GPNs have important implications for the changing development arena in which the “BRICS” countries (particularly China and India) are repositioning themselves as global actors. The implications of the post-crisis increase in South–South trade is the subject of ongoing empirical investigation by many researchers, including those in the Capturing the gains programme. However, as economic upgrading of GPN firms does not automatically lead to social upgrading for their workers, the trends discussed above point to a crucial ten- sion within GPNs – which take on greater importance as some Southern firms pursue upgrading strategies within value chains, whilst others are relegated to downgrading strategies. Given the scope for mixed outcomes among different types of firms and workers, it is important to bring into the analysis the wider institutional and contextual factors which can affect those outcomes. A critical challenge is therefore to gain a better understanding of how institutional gov- ernance arrangements, policies and strategies can promote positive outcomes for different groups of workers, firms and countries in a more globally inte- grated economy. Concluding remarks This Special Feature appears at a critical juncture for research and policy ana- lysis. The expansion of GPNs challenges approaches that focus on national markets as the primary unit of economic analysis and policy-making. Whilst national markets persist, their patterns of production, consumption and value accumulation are being reconfigured by GPNs that cut across international borders and industries. For developing and emerging economies, the economic

16. 313 Decent work in global production networks crisis and restructuring of the global economy have significant implications for development paradigms and policy interventions. Traditional approaches based on national strategies of import substitution or export-led growth alone are no longer sufficient to explain and promote development in today’s global economy. GVCs and GPNs are major forces shaping the basis for a new model of development. Global production is increasingly reaching into poorer developing and emerging countries – sought not only as destinations for outsourced production, but also for their growing role as consumer markets, whose sustainability and growth call for rising workers’ incomes. Yet, this is not an even process; it plays out differently in various contexts and industries. The distribution of value across GPNs, rather than simply between countries, is a critical dimension of the new development arena. The issues surrounding the locus and distribution of value within global production must be addressed through policy-oriented research and analysis aimed at identifying how poorer workers and producers can capture greater gains from international trade. As we have suggested, the dynamic at work in the international system can be thought of in terms of Polanyi’s concept of a “double movement”, whereby markets and governance institutions constantly adapt to changing circumstances. Although private governance has emerged to address part of the decent work deficit in global production, there are significant limits to the models that have developed to date. And while there is considerable policy logic to strengthening global institutions with the capacity to regulate or redistribute, the geopolitical reality is that progress on this front is likely to be very slow. The strengthening of state governance capacities, most notably in the emerging market economies of China, India and Brazil, holds considerable promise for the advancement of decent work. However, what might be possible for China on account of its size and institutional characteristics might not be possible for smaller economies. It will therefore be necessary to take these variations into account when developing metrics for effective governance institutions and practices. In the end, “re- embedding” global markets will undoubtedly require hybrid and complemen- tary institutions of governance, both public and private, operating at multiple levels – global, national and local. The large numbers of working poor attest to the importance of job quality, social protection, respect for labour rights, and the right to voice and representa- tion. Indeed, recognition of their importance has been enshrined at the inter- national level, with the inclusion of decent work in the Millennium Development Goals.10 To achieve this goal in practice, policy-makers, workers’ and employers’ organizations, and organized civil society need a better understanding of the key drivers of quality employment creation in the global economy and of the condi- tions under which quality jobs can flourish, in order to formulate more effective 10Target 1b of MDG 1 (“Eradicate extreme poverty and hunger”) reads: “Achieve full and productive employment and decent work for all, including women and young people”.

17. 314 International Labour Review strategies for promoting decent work in today’s global environment. Accord- ingly, the following articles and book reviews11 in this Special Feature aim to con- tribute to a better understanding of economic and social upgrading in GPNs as a basis for promoting more effective policies and stakeholder strategies in the changing global development arena. References Anas, A.Z.M. 2011. “Garment wage hike deprives senior workers: ILO deputy chief”, in Finan- cial Express, 17Jan. Available at: http://www.thefinancialexpress-bd.com/more.php? news_id=123162&date=2011-01-17 [accessed 13 Dec. 2011]. Appelbaum, Richard P. 2005. “Fighting sweatshops: Problems of enforcing global labor stand- ards”, in Richard P. Appelbaum and William I. Robinson (eds): Critical globalization studies. New York, NY, Routledge, pp. 369–378. Baldwin, Richard (ed.). 2009. The great trade collapse: Causes, consequences and prospects. London, Centre for Economic Policy Research. Barrientos, Stephanie; Dolan, Catherine; Tallontire, Anne. 2003. “A gendered value chain approach to codes of conduct in African horticulture”, in World Development, Vol. 31, No. 9, pp. 1511–1526. —; Kritzinger, Andrienetta. 2004. “Squaring the circle: Global production and the informaliza- tion of work in South African fruit exports”, in Journal of International Development, Vol. 16, No. 1, pp. 81–92. —; Smith, Sally. 2007. “Do workers benefit from ethical trade? Assessing codes of labour prac- tice in global production systems”, in Third World Quarterly, Vol. 28, No. 4, pp. 713–729. Begg, Bob; Pickles, John; Smith, Adrian. 2003. “Cutting it: European integration, trade regimes, and the reconfiguration of East-Central European apparel production”, in Environment and Planning A, Vol. 35, No. 12, pp. 2191–2207. Cattaneo, Olivier; Gereffi, Gary; Staritz, Cornelia (eds). 2010. Global value chains in a post- crisis world: A development perspective. Washington, DC, World Bank. Chan, Chris King-chi. 2010. The challenge of labour in China: Strikes and the changing labour regime in global factories. London, Routledge. China CSR. 2010. Available at: http://www.chinacsr.com/en/ [accessed 20 Sep. 2011]. Coe, Neil M.; Dicken, Peter; Hess, Martin. 2008. “Global production networks: Realizing the potential”, in Journal of Economic Geography, Vol. 8, No. 3, pp. 271–295. Cumbers, Andy; Nativel, Corinne; Routledge, Paul. 2008. “Labour agency and union position- alities in global production networks,” in Journal of Economic Geography, Vol. 8, No. 3, pp. 369–387. Dicken, Peter; Kelly, Philip F.; Olds, Kris; Yeung, Henry Wai-Chung. 2001. “Chains and net- works, territories and scales: Towards a relational framework for analysing the global economy”, in Global Networks, Vol. 1, No. 2, pp. 89–112. Dolan, Catherine S.; Sorby, Kristina. 2003. Gender and employment in high-value agriculture industries. Agriculture and Rural Development Working Paper No. 7. Washington, DC, World Bank. Ebert, Franz Christian; Posthuma, Anne. 2009. “Rebalancing globalization: The role of labour standards in existing international trade arrangements and development finance pol- icies”, in IILS: World of Work Report 2009: The global jobs crisis and beyond. Geneva, pp. 63–95. Fernandez-Stark, Karina; Bamber, Penny; Gereffi, Gary. 2011. “The offshore services value chain: Upgrading trajectories in developing countries”, in Staritz, Gereffi and Cattaneo (eds), pp. 206–234. 11The final part of the Special Feature, entitled “Further reading”, presents reviews of two recent books, respectively concerned with the developmental implications of GVCs in the aftermath of the global crisis and the labour dimensions of GPNs in India.

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