By Merlin Hernandez

As large outsourcing centers for US manufacturing like China are becoming more expensive, Export Processing Zones (EPZs) have been attracting renewed attention in places like India, Sri Lanka, and parts of Africa. They are once again being promoted as an engine for economic growth and poverty reduction. It might be interesting to look at Outsourcing from the perspective of the host economy. In an environment of globalization and diversity, outsourcing has the potential to have some key esoteric interests of one partner in the relationship become subsumed to the greater monied interest.

This is not uncommon in the dynamic between large metropolitan economies and small less-developed states, and can present some ethical concerns about the ways those relationships are played out – intrinsic values and needs of host countries are often not factored into the equation. The benefits derived may indeed be one-sided if careful attention is not paid to the terms of reference.

The Export Processing Zone is a model which is supposed to move developing economies closer to increased access to lucrative US markets, and earn much-needed foreign exchange. With low per capita incomes and high unemployment in these economies, governments leap at the opportunity to provide employment and improve the quality of life for their citizens in the immediate term. There is also strong motivation to appease the larger power in the hope of building future economic partnerships. But, too often, the larger long-term interests of these emergent economies are sacrificed for short term benefits.

EPZs are structured to meet the needs of the US manufacturing sector for cheap labor and to circumvent increasingly costly demands of the US industrial relations climate . One common path is that primary manufacturing processes for a range of products are done in the US and the partially assembled good shipped overseas for finishing. A lot of the work is for the garment industry where a US product is designed, patterns made and graded, raw material sourced and cut, and then sent to EPZs outside the US for assembling to strict specifications. The only input required from the beneficiary country is cheap, unskilled labor. Other paths may include local sourcing of raw material or production supervisors who have no decision-making authority.

To the extent that the entire means of production is owned and controlled by outside interests, and there are limited real gains to the host countries, this is not a partnership – local talent and creativity are neither harnessed nor nurtured within the ambit of these arrangements – there is no attempt to develop a body of skilled workers for the industry – no facilitating of a business,  management, or entrepreneurial culture. Larger ethical issues like quality of life, self-determination, and empowerment, amongothers are not brought to bear on these arrangements. It is a system that contains built-in deterrents to real development. This is a body of workers that would forever be available for grunt work for small wages.

China is one of the few countries that have made the transfer of technology and expertise a condition of doing business in that country. Global corporation, DANONE, is nurturing a culture of entrepreneurship in India by supporting small independently-owned factories manufacturing Dannon yogurt for the local trade. It is based on the company’s model for social integration and sustainable development. Compared to reports of sweatshop conditions and human rights violations by companies like Nike and The Gap, we have a sense of what might be possible if there is the will to see the host economy as a partner rather than a cog in the production wheel.

Uneven relationships in the push to economic development, in all their global permutations, would have prompted the International Association of Outsourcing Professionals to develop a Code of Ethics and a set of Business Practice Standards that provide a guide to the practice of outsourcing. These are common business frameworks that create ground rules for inter-cultural transactional relationships to ensure consistency in behaviors and expectations. They are primarily based on disclosure, candor, and the use of agreed upon objective measures for efficiencies. A key component is the training and development of employees involved in the outsourcing process. There is the understanding that each partner brings a specific set of values and desires to the table and the process remains open to continued negotiation of the terms of operation.