How are ‘rising powers’ incorporating and influencing global production standards?
An ESRC-funded research programme investigated the growth of industry and labour markets in the rising powers countries of India, Brazil and China and explored the ways firms, civil society organisations and the state are shaping global labour standards. We asked principal investigator Professor Khalid Nadvi to highlight some of the key findings.
How is the global economy changing as the balance of power shifts to rising powers?
The global economy is being transformed, especially by China, India and Brazil. One aspect of this is that governments, firms and civil society bodies from these economies are shaping the rules that govern international trade and production. For businesses in the developing world, meeting international standards – particularly on labour and social issues – is increasingly critical in order to gain market access. Western consumers show growing awareness about sweatshop labour, the food they eat, and how it came to their plates.
Yet, gains from compliance-based approaches in the supply chains to meet international standards, especially for workers and poor producers, remain unclear. Expanding trade between the rising power economies, their growing domestic consumer markets and the increasing significance of their firms raises questions as to how global social standards will be shaped in the future, who the key drivers will be, and what implications arise for workers globally.
What are some of your key findings regarding India?
India’s growth has been marked by the significant expansion of Indian lead firms since the early 2000s. India’s total stock of outward foreign investment rose from 6 billion US dollars in 2003 to 138.9 billion US dollars in 2015. Indian firms now have significant exposure to international markets, and they draw on their domestic market experience to help steer their international business strategies.
What has driven this expansion?
Indian firms have particularly focused on other developing country markets in the global south. In some sectors, Indian emergent multinationals are directly competing against northern lead firms both in emerging and established Organisation for Economic Co-operation and Development (OECD) markets. As such, firms are being increasingly exposed to international labour, social and sustainability standards. In sectors where Indian firms are active players in northern markets, firm-level compliance practices are advanced.
What is the situation in Brazil?
Brazil is currently experiencing severe economic and political challenges, undermining its rising power status. Nevertheless, in sectors as diverse as mining, meat processing and aerospace, Brazilian firms remain global leaders. State and civil society have had a strong and closely interactive role in the shaping of labour and sustainability standards following the re-emergence of democratic politics in 1990. Various governments have since implemented a strong regulatory framework through legislation.
Lastly, what were your observations in relation to China?
Since the economic reforms were enacted, China’s economy has undergone 36 years of extraordinary growth. Economic globalisation and the rising competitive strength of China’s economy have played a particularly important role in spurring Chinese companies to expand their foreign direct investment (FDI) and accelerate their transformation into global firms. China joined the World Trade Organisation (WTO) in 2001 and FDI has subsequently grown at an average annual rate of 36.5%.
Since 2008, the government has initiated a raft of new legislation designed to regulate labour standards, but its implementation is uneven. Grassroots activism and wild cat strikes have led to improvements in wages and working conditions for some , though this has primarily occurred along the coastal belt and Pearl River Delta.
What are the implications of your findings?
“Grassroots activism and wild cat strikes have led to improvements in wages and working conditions for some.”
Our study suggests that fears of a ‘race to the bottom’ on labour and social standards as a consequence of the growing significance of the rising powers are unfounded. Yet, lead firm engagement with labour standards diverges across the three countries and our research suggests that companies engage with standards not only to access northern markets, but also due to local institutional incentives. Moreover, it appears that public and private involvement within the rising powers with environmental and sustainability concerns outstrips that of labour and working conditions.
It is also apparent that actors involved in developing northern market standards have an active interest in developing standards in the global south. It remains to be seen whether the rising powers will seek to shape standards in line with existing norms or develop and transform our current conceptions of what constitutes the content of global labour standards.
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