Free Trade Zones/Export Processing Zones


University of St. Gallen, Switzerland

DOI: 10.1002/9781118989463.wbeccs127

Export processing zones (EPZs), also called free trade zones, are industrial islands of exception within global capitalism. They aim to attract foreign direct investment (FDI) offshore, into designated areas in developing countries with special legislation (or rather deregulation). Here, goods and services are produced directly for the global market, circumventing the usual embeddedness into local legal codes and cultural norms. The International Labor Organization (ILO) in Geneva, which has monitored EPZs for decades now, due to their often problematic working conditions, defines EPZs as “industrial zones with special incentives set up to attract foreign investors, in which imported materials undergo some degree of processing before being (re)exported again” (ILO 2003, 9).

The main local factor is “cheap but disciplined labor” (McCallum 2011, 15), whereas raw materials, production technology, and knowledge are imported into these zones by foreign investors – in most cases by the international companies themselves, who take care not to spread their technological knowledge to the host countries too openly (Milberg and Amengual 2008, 21). The products are seldom sold on the local market, but are directly taken back to the global market. Hence, the links to the local country are minimal, both forward (selling to) and backward (buying from the local ...

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