Kaesong a sticking point for FTA talks?

Update: The U.S. and South Korea failed to reach an agreement on Kaesong products in discussions on Monday. The issue has been tabled until next month. Negotiations on the other issues–including car and pharmaceutical imports–are continuing this week.

Andrew Leonard at How the World Works has an interesting post up about friction between the U.S. and South Korea over the products produced at Kaesong Industrial Park.

The U.S. position is that Kaesong products are North Korean, and thus should be excluded from preferential access to U.S. markets. Anything else would undermine U.S. attempts to restrict North Korean access to foreign currency. (As a side benefit, intransigence on the issue covers the U.S. flank against U.S. labor unions that will complain that South Korean capital is exploiting cheap labor to gain an unfair trade advantage. But it will take some chutzpah for U.S. trade negotiators to argue that the South Koreans should be condemned for such a practice when that has been one of the core operating principles for U.S. manufacturers for many decades.)

Leonard points out that the U.S. position ignores the role that the South Korean goverment hopes Kaesong will play in “engaging” North Korea and opening up possibilities for future investment. However, he also notes that the North Korean workers at Kaesong give new meaning to the term “slave labor.”

Not only will North Korean workers be paid a mere $57.50 per month — just 3 percent of the prevailing wage down south — but that money goes directly to the state, which then reimburses the workers. No one really knows how much the workers end up getting, and you sure won’t find out by asking them directly. Press reports say there is no socializing between workers and management, and very little opportunity for the North Koreans to do anything but, uh, work.

The question, as Leonard sees it, is whether the exploitation of these workers will be worth it in the long run.

The question of whether engagement between South and North will lead to more openness, even as southern capital exploits northern labor, touches squarely on one of the thornier questions about the interrelationship between globalization and development. Taiwan and South Korea, two countries that were once military dictatorships but embraced the global economy and are now flourishing democracies, are perhaps the two most spectacular examples of nations that succeeded in developing into modern states on the back of their own sweatshop labor. The world is waiting with bated breath to see if China follows their example. But could prospects be any bleaker for a similar transformation in North Korea?

We may never get a starker choice: If Kaesong turns out to be the thin end of the wedge of South Korean “spiritual pollution” that begins the long-overdue process of underming Kim Jong-Il’s rule, and ultimately defuses nuclear tensions on the Korean peninsula, would that justify some brutal short-term sweatshop exploitation? Or is even phrasing the choice in such a way a cop-out to South Korean capitalist propaganda?

I don’t really know enough about the issue to write about it in detail, so I encourage anyone with even passing interest to go read Leonard’s original post.

Myself, I have decidely mixed feelings about the issue of international sweatshop labor. Living in the United States, I was definitely pro-union and a public supporter of several local living-wage initiatives. But as I’ve been reading more about in-depth about the effects of globalization, I wonder about imposing our definitions of sweatshop on working conditions in other countries.

Not that working in unsafe conditions for pennies (or less) an hour is ideal. But you have to ask what the alternatives for those workers are.

I’m currently reading Thunder from the East, a book on Asia by New York Times columnist Nicholas Kristof and business reporter Sheryl Wudunn. A recent chapter discusses Western factories in impoverished areas of Indonesia and Cambodia. Without the factories there, many people would face starvation: foraging–as one family he interviewed–in garbage dumps to survive, working in even more dangerous local jobs, or, as another chapter details, selling their children to brothels in the cities.

There’s also some evidence, as Leonard mentions, that though countries may start out as the “factory floor” for more developed nations, they don’t always stay there.

In April, the Times ran an article about how labor shortages in coastal Chinese cities were driving up wages and prompting employers to improve benefits. As more jobs are available inland, fewer immigrants were flowing into the cities to take jobs there.

For all the complaints of factory owners, though, the situation has a silver lining for the members of the world’s largest labor force. Economists say the shortages are spurring companies to improve labor conditions and to more aggressively recruit workers with incentives and benefits.

The changes also suggest that China may already be moving up the economic ladder, as workers see opportunities beyond simply being unskilled assemblers of the world’s goods. Rising wages may also prompt Chinese consumers to start buying more products from other countries, helping to balance the nation’s huge trade surpluses.

I don’t usually make the free-market argument, but it does make me wonder about whether better working conditions evolve over time as countries industrialize.