The Bush administration likes to tell us that everybody benefits when foreign trade restrictions are relaxed. For instance, when U.S. companies set up factories in low-wage countries, the workers there get the benefit of good jobs, consumers here get the benefit of cheaper goods and the companies make lots of money. What about the U.S. workers who lose their jobs? They are supposed to get higher quality jobs in new factories that will take the place of the ones we lose. This is the argument often used in support of the North American Free Trade Agreement (NAFTA), which will soon be taken up in the Congress. It sounds good on paper, but
when you look at what can actually happen, you have to wonder who the winners are.

Take the story of the Indonesian shoe factories that are now making Nike shoes. In the 1980s, Nike, along with a number of other U.S. shoe companies, closed its U.S. factories and moved production to plants in Third World countries. As a result, 65,000 U.S. footwear workers lost their jobs. The main reason for the move was cheap labor. Instead of paying an average of $6.94 per hour to unionized U.S. workers, Nike's subcontractors could hire Indonesian workers, for example, for approximately 14 cents an hour.

By 1991, 24,000 Indonesians, the majority of them women, were making Nike shoes under wretched conditions and for wretched wages. Jeffrey Ballinger, a labor rights advocate who spent over three years working in Indonesia, analyzes the monthly pay slip of one of these women in "The New Free-Trade Heel" (Harper's, August 1992). Her net pay for the month in question, including 63 hours of compulsory overtime, was $37 -- about half the retail price of one of the pairs of sneakers she makes.

Some people argue that workers in Third World countries don't have standards like ours, so they are glad to work for wages that we find shocking. But they pay these women get is not a living wage -- it is, Ballinger says, less than the Indonesian government's figure for "minimum physical need." And he cites a recent study by the International Labor Organization, an arm of the United Nations, which found that 88 percent of the Indonesian women working at these wages were malnourished.

Others would say that what goes on in these plants is none of our business. That seems to be Nike's attitude. Nike's general manager in Indonesia says the company has no reason to investigate reports of unfair labor practices: "It's not within our scope" ("Running a Business," Far Eastern Economic Review, June 20, 1991). And another Nike manager, interviewed by British Thames TV, says that questions about long hours and low wages are the business of "maybe the United Nations .... I don't think it's something you can lay at a shoe company .... " But whatever Nike may think, there are international standards for the treatment of workers,
and they are part of U.S. public policy.

For example, the Generalized System of Preferences extends valuable tariff relief to U.S. trading partners, but if there is evidence that a country is allowing its workers' rights to be trampled, the U.S. trade representative can slap the tariffs back on. The AFL-CIO has lodged several complaints to try to get the U.S. to move on the infractions of labor standards in Indonesia, and the complaints have gotten results -- of a kind. In response to one of them, an Indonesian manpower official ordered his inspectors to issue 400 "official reports of prosecution" (4 per inspector). But the purpose of the order was not to turn over a new leaf It was to show
that the government was doing something and to give the U.S. an excuse to continue favored status, even though massive violations continued. The point is, we could get significant changes -- if President Bush wanted them. 

Who has benefited from Nike's having its shoes made in Third World factories? Certainly not the American workers who were fired. Undoubtedly many of them are still unemployed or working at jobs with lower wages and poor or no fringe benefits. Certainly not American consumers. They are paying very high prices for Nikes relative to what the shoes cost to produce: The Thames TV show put the cost for materials and labor on a pair of Nike trainers at $5.95. And not the Indonesian workers, who put in long hours for miserable wages.

Does Nike need to do business this way in order to survive? Apparently not. Jeffrey Ballinger reports that Bata, a Canadian firm that also uses factories in Indonesia, pays its workers wages that are well above the minimum, together with benefits, while producing shoes for the Indonesian market that are sold at approximately $8 a pair.

This story could have had a happy ending -- and it still could if the President were interested in enforcing our laws against worker exploitation. It also raises some serious questions about NAFT A Unless the treaty is properly put together -- and unless the laws and safeguards that make it up are properly enforced -- NAFTA could be a disaster. It could result in a huge loss of jobs in the U.S. and massive exploitation of Mexican workers at the same time that American consumers continued to pay high prices. As we can see from the Nike story, the benefits of free trade are not automatic.