NCPA - National Center for Policy Analysis

"Responsibly Produced" Equals Corporate Harrassment

March 22, 2004

Traditionally, rice farming has been Cambodia's major industry, but the country is slowly transforming from an agricultural to an industrial economy through garment production, according to Alan Oxley, a former Australian negotiator on the General Agreement on Trade and Tariffs.

  • Cambodia exported $3.6 million worth of garments in 1994.
  • Cambodian garment workers earn between $480 and $960 per year, well above the average per capita income of $300 per year.

Some 70 percent of Cambodia's exports are courtesy of a quota which gives the country protected access to the U.S. market. Next year, however, the export quotas will be lifted, leaving Cambodia to face stiff competition from China, where costs are estimated to be 25 percent lower. Cambodia runs the risk of having factory owners relocate to other countries.

But now Cambodia is being told there is a simpler route. Non-governmental agencies (NGOs) are telling the Cambodians that if they subscribe to their mantra of "Corporate Social Responsibility," Cambodian garment producers will qualify to label their products as "fair trade" or "responsibly produced" products. With Cambodian garments so labeled, this will create advantage over competitors and the garment industry will flourish.

The NGOs are wrong, says Oakley:

  • Garment producers know that consumers in rich countries are not likely to pay more for "responsibly-produced" goods.
  • Other sellers, such as Starbucks Coffee, have tried to promote the sale of "fair trade" coffee, but consumers have not taken to the higher price or the taste.

Consumers buy on price, quality and fashion, not political correctness. The solution to Cambodia's problem is to take the market as the reference point and send the NGOs packing, says Oxley.

Source: Alan Oxley, "Conning the Cambodians," Tech Central Station, February 26, 2004.

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