Double standard on globalization

Boston Globe
July 30, 2003

Double standard on globalization

By Robert Kuttner

If you get into a conversation with a billing
representative of your credit card provider or phone
company, you may notice a faint Indian accent. That’s
because the services industry is shifting more back room
operations to India, where labor costs are a fraction of
those in the United States. IBM, likewise, will soon
move several thousand computer programming jobs to
India, where programmers get far lower salaries. This
decision has angered IBM employees and is contributing
to a rare unionization drive at the high-tech giant, a
company that once prided itself on never laying anyone
off.

In these cases, industry defends the moves as cost-
effective and economically logical. If productive
English-speaking workers in India can perform the jobs,
why not move the work there and pass the savings along
to shareholders and consumers? Most economists,
enthusiasts of free commerce, agree that these shifts
help both India and the United States.

But hold on a moment. India figures in another
controversy. Indian pharmaceutical labs make
prescription drugs at a fraction of the cost that
American drug makers charge consumers. In this case,
however, it is illegal for American consumers to
benefit. The politically powerful pharmaceutical
industry contends that imports of cheaper foreign drugs
violate patent rights and safety regulations. The
industry is also battling legislation that would allow
consumers to import cheaper drugs from Canada, which
legally manufactures or purchases the drugs under
license from the US pharmaceutical companies and
conforms to US safety standards or better.

If you notice a double standard here, you’re right.

American industry wants to be free to shift labor around
the globe. And it fiercely lobbies against any
restrictions, such as transnational labor standards. But
when it comes to property, business lobbies just as hard
for ground rules that make it impossible for consumers
to benefit from product imports that allegedly breach
property rules.

The pharmaceutical industry would reply that when
Canada, under its national heath program, negotiates
cheaper drug prices, those drugs are intended for
Canadians, not for export back into the United States.
If the United States wants a national health program
with cheaper drugs for everyone, let’s contest that
question directly and not via the Canadian back door
(and count on the drug makers to lead the opposition!).
The industry also contends that when Indian labs
manufacture drugs at a fraction of the US cost, that’s
not just abusing a negotiated discount; it’s piracy of
patent rights. But hold on again.

The existence of patents is an artifact of law, which in
turn reflects politics. When Congress passed the first
patent laws two centuries ago, it balanced the rights of
inventors with the value of broadly diffusing the
benefits of invention. The terms of patents and
trademarks were far shorter back then.

The extended patent protection enjoyed by the
pharmaceutical industry today simply reflects that
industry’s immense political power. US presidents of
both political parties have also done the industry’s
bidding by coercing countries like India to accept US
conceptions of patent protection. ThirdWorld countries
have resisted, both because their own people need
cheaper medicines and because they need to develop
economically. (The young American Republic developed its
industry by ’’stealing’’ manufacturing processes from
mother England.) And while the Bush administration’s
Food and Drug Administration suddenly invokes safety
concerns when it comes to doing the drug industry’s
dirty work, it is remarkably relaxed about the safety of
food imports. Many of the products grown overseas are
fruits of international agribusiness, another political
client of the administration.

So the inconsistent treatment of workers and of
corporate products (with policy in both cases tilting
toward business) is not based on necessary economic
logic. It’s a reflection of the power imbalance of
business and labor. For instance, we could imagine an
intellectual property code in which drug industry patent
terms were far shorter, more research was publicly
financed and in the public domain, and safety was
certified by an international agency. Citizens in the
United States, Canada, and India would all benefit from
cheaper drugs.

Likewise, we could imagine a labor code where all
domestic and foreign workers employed by US companies or
their contractors enjoyed basic labor rights like
collective bargaining, health and safety standards, and
pay scales that reflected their productivity. That would
also be good for workers and citizens in both India and
North America.

These systems of labor and property rights would be no
less efficient than the ones we have. They would just
represent a vastly different distribution of wealth,
power, benefits, and rules. Only that.

Robert Kuttner is co-editor of The American Prospect.
His column appears regularly in the Globe.

© Copyright 2003 Globe Newspaper Company.

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