An

Assignment
On

Can we tackle the labour exploitation while embracing Free Trade Policy of
Globalization in poor countries?

Course Name: International Business

Course Code: MGT 4203

Submitted to:

Sabrina Sharmin Nishat

Lecturer
FBS, BUP

Submitted By
Souman Guha
ID-16241002
Section: B Batch:2016

Department of Management Studies Faculty of Business Studies

Bangladesh University of Professionals
Mirpur Cantonment, Dhaka 1216
Date of Submission: July 15, 2019
Case Study: The Rise of Ecuador’s Rose Industry

Can we tackle the labour exploitation while embracing Free Trade Policy of
Globalization in poor countries?

Case Background:

The Rise of Ecuador’s Rose Industry illustrates how the U.S. government’s reduced tariffs on
some South American imports, including flowers, has shifted Ecuador’s dependence on the illegal
drug trade to a successful focus on growing roses. Ecuador is the world's 4th largest producer of
rose. The country exports nearly $240 million. The roses are exported mostly to the United States
and Europe. But it comes with a cost of exploiting poor labourers to maintain low cost or feed
the irresistible greed of the garden owners. This conundrum presents a pressing situation where
we need to answer: can the cost override the benefits?

Basis for Completive Advantage due to free trade:

The basis of Ecuador’s comparative advantage in the production of roses is essentially their fertile
lands where they cultivate their high-quality roses. The right amount of sunlight, fertile soil,
location and altitude makes these roses flourish all year round. It makes them very distinct and
superior to other roses grown elsewhere, that is why most buyers especially from the United States
and Europe are willing to pay extra for these kinds of roses. So, the combination of intense
sunlight, fertile volcanic soil, an equatorial location, and high altitude makes for ideal growing
conditions, allowing roses to owners almost year-round and cheap labour and lowering the trade
barriers on that Ecuador apparently has comparative advantages of roses

Benefits to the Importers:

The United States and Europe are the main importers of Roses. The consumers will benefit
because they can buy great quality at a lower price. The Florist will also benefit by selling
cheaply produced roses which they have arranged, for premium price; especially on holidays like
Mother’s Day and Valentine’s Day. However major rose produces in and outside of these two
countries will suffer. They will first lose customer which will lead to a lack of profitable
business. Less profit will lead to layoffs, which will soon lead to foreclosures and bad debt with
the government. The more bad debts anyone owe the more control the government has over
his/her life

Benefits to the Economy of Ecuador:

 Job Creation:
Many people in Ecuador can earn and maintain their regular life. Working on rose export
and import industry courage social revolution and mothers and wives can get more
control over their families. Government earns more taxes as there are more rose growers.
Working in this industry, they can get more wages and they can get healthcare and
pension.
 Increase in Taxes due to Increase in number of rose growers:
The revenues and taxes from rose growers have helped to pave roads, build schools, and
construct sophisticated irrigation system. By dispersing production activities to different
location around the globe the US and European countries producers can take the
advantage of difference between countries identified by various theories of international
trade
 Earning of Farm Labourers Implications

Other Sides of the Coin:

Due to profitability more, people are getting attracted to rose growing making it harmful for the
environment. Excessive use of land, chemicals are detrimental to the health of the growers.

 Accusations of misuse of toxic chemicals leading to health issues cannot be ignored.

Developed nations must form their own moral compliance policies. Possible solutions
include voluntary programs to identify responsible rose growers or trade sanctions Trade-
off between safety measures and their consequences.
 Health Hazards of the employees
 Miscarriages of Women (ILO said-more than 60% are victim to diseases)

What is the Solution?

  Well-Informed Customers: Informing them what they are buying.
 Voluntarily Identification of Responsible Growers
 Fair Trade Certificate
 Robust Compliance Policy
 Environmental Standards

Analysis of the Case:

The benefits above do not compensate the costs suffered by Ecuador. As I have mentioned, the
rose export industry had benefited Ecuador economically. Ecuador has developed itself by building
roads, schools and irrigation systems. The more Ecuador invests for itself, the more it becomes
more competitive in education, doing business and most especially in producing roses. If they can
earn much for a better research and development program for this kind of trade, United States and
Europe may pay for these roses at a much higher price. However, it will not eliminate the fact that
these countries are able to enjoy world class products which they reap and not sow. In my opinion,
here are several options on how these developed nations should respond to the poor working
conditions in this industry.

Recommendations:

One, they may totally boycott in buying roses from Ecuador or any transactions they make with
enterprises which have bad working conditions. By doing so, the dangers that this kind of business
expose to its workers are put to a stop.

Second, if these countries really want to continuously enjoy these kinds of products, they might as
well establish their own businesses there and harm themselves and not these people.

Third, contracts must be made ensuring that whatever these countries trade with Ecuador or any
other country for that matter, there must be a good and healthy working environment where
employees work. They must not
 The Ecuadorian rose industry is a striking example of the benefits of free trade and
globalization. Lower barriers to trade have allowed Ecuador to exploit its comparative advantage
in the growing of roses and enabled the country to emerge as one of the largest exporters of roses
in the world. This benefits Ecuador, where economic growth and personal incomes have been
bolstered by the emergence of the rose growing industry. It also benefits consumers in developed
nations, who now have access to affordable high-quality roses from Ecuador. It also benefits
foreigners who export goods and services to Ecuador, for a stronger Ecuadorian economy can
purchase more of those goods and services. If there are losers in this process, they are high-cost
rose producers in places like Florida, who have lost business to the Ecuadorians. In the world of
international trade, there are always winners and losers, but as economists have long argued, the
benefits to the winners outweigh the costs borne by the losers, resulting in a gain to society.
Moreover, economists argue that in the long run free trade stimulates economic growth and
raises living standards. But exploiting labour cannot be a continued to fill up our temptation for
profit. More informed customers can make the difference and compliance to robust policy can
handle this. Free flow of information brought about by Globalization is the remedy for this
malpractice.

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