For Social Responsibility, Globalization a Double-Edged Sword(A)
I missed a chance to join friends attending protests against the World Trade Organization negotiations in Seattle that broke out exactly five years ago from the day I’m writing this. A few months after that, I did get an opportunity to raise my voice in protest of unfair trade policies that hurt communities and the environment when I attended demonstrations at the annual World bank and International Monetary Fund meetings in Washington, D.C. (This also involved the “opportunity” to see tear gas shot in my general direction and to find myself in a crowd surrounded by a cordon of baton-wielding police in riot gear. Still, the only harm I suffered was getting thoroughly drenched during a soaking rainstorm that led demonstrators to chant, “We’re here/We’re wet/Cancel Third World debt.”)
These protests brought mainstream media attention and public attention to arguments that the globalization of trade leads to a “race to the bottom” as companies move operations wherever they can find the most lax environmental and labor standards, forcing countries to cut those protections to compete for jobs. The last five years have provided plenty of examples of this, as companies continue to outsource U.S. manufacturing—and now even white-collar jobs—to developing countries.
Yet after four years of policies from Washington, D.C. that are widely perceived as favoring business interests over protections for workers and the environment, another aspect of globalization is emerging. Increasingly, regulations and market expectations in other countries are forcing U.S. companies to meet higher standards than they face here at home.
As an example, take the pressing issue of climate change. Last month, Russia ratified the Kyoto Protocol on climate change, which gives the treaty enough international support for it to go into effect in early 2005. Only four industrialized countries refused to sign: Australia, Liechtenstein, Monaco, and the United States. Yet despite the Bush Administration’s steadfast opposition to Kyoto, a growing number of large U.S. companies are taking steps to reduce their greenhouse gas emissions to meet the Kyoto targets, in part to ensure they can operate factories in the thirty countries that have signed the treaty.
Despite global concerns about climate change, the U.S. Congress and the Bush Administration have fought back efforts to significantly boost fuel economy standards for cars, trucks, and SUVs. On the other hand, Chinese leaders, concerned about their country’s rapidly growing dependence on Mideast oil, recently imposed new fuel economy standards that are higher than U.S. requirements. U.S. automakers will have a harder time meeting the upcoming Chinese standards than European and Japanese automakers, which offer many more vehicles that already meet the standards. Duncan Austin, Senior Economist at the environmental think tank the World Resources Institute noted, “If China’s booming automobile market demands smaller and more efficient vehicles than those being produced in the United States, car makers will have no choice but to respond. China’s decision will have a spillover effect, influencing what types of cars are sold in other countries.”
There are plenty of examples on other topics as well. To meet new European regulations, electronics manufactures like HP and Intel have eliminated the use of cadmium and other toxic materials from all their products, not just those units being shipped to Europe. Earlier this year, Monsanto dropped plans to launch a controversial strain of genetically engineered wheat because of concerns raised by major international customers, particularly those in Japan.
Based on these cases and others, companies may want to be careful about winning the “race to the bottom.” In a surprise ending, they just might find a Chinese regulator waiting for them at the finish line….