wfn.org | Contract Suppliers Are Issue

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"UNITED METHODIST DAILY NEWS" by SUSAN PEEK on Aug. 11, 1991 at 13:58 Eastern,
about FULL TEXT RELEASES FROM UNITED METHODIST NEWS SERVICE (3431 notes).

Note 3431 by UMNS on Feb. 12, 1997 at 15:53 Eastern (2741 characters).

SEARCH: global economy, contract suppliers, investors, maquila
system, Interfaith Center on Corporate Responsibility
Produced by United Methodist News Service, official news agency of
the United Methodist Church, with offices in Nashville, Tenn., New
York, and Washington.

CONTACT:  Linda Bloom                          77(10-21-71B){3431}
          New York (212) 870-3803                    Feb. 12, 1997

EDITORS NOTE:  This story is a sidebar to UMNS #76 {3430}.

Supplier standards become
issue for religious investors 

     NEW YORK (UMNS) -- Concern over standards for contract
suppliers "has become a front-burner issue" for religious
investors, according to the Rev. David Schilling.
     Schilling, a United Methodist and director of Global
Corporate Accountability for the Interfaith Center on Corporate
Responsibility (ICCR), introduced a Feb. 10 ICCR seminar on that
issue here.
     The concept of contract suppliers long has been a part of
industry, according to Ruth Rosenbaum, coordinator of the
Northeast Coalition for Responsible Investment. Schools, for
example, hire separate companies to run their cafeterias and bus
services.
     In the 1960s, U.S. companies began opening plants in Mexico.
Under the "maquila" system, the raw materials come from the United
States, are assembled in Mexico and then travel back to the United
States when finished.
     Some U.S. companies, such as General Motors, also have plants
that operate under a different system and allow for sales within
Mexico, Rosenbaum said.
     Under this dual system, there are two wage levels, two
different types of destinations for products and two ways in which
profits accrue. With maquilas, worker wages are legally lower and
a "pass-through" accounting system allows no profits to be shown
for work in Mexico, she explained.
     Socially-conscious investors and others have raised moral
questions about the profits being made off these low-paid workers.
Since the plants are parent-owned, investors can exert direct
influence on the companies, Rosenbaum said.  
     But the globalization of the economy now allows for the out-
sourcing of raw materials, component parts, assembly and even
sales of finished products. "The company, at the end, benefits
without having direct ownership," she explained.
     For the contract suppliers, there is "no allegiance, except
to who gave them the most lucrative contract," she added.
     Those suppliers often choose countries with a high
unemployment level and low amount of indigenous industry for their
plants, Rosenbaum said. Profits are accrued outside the host
country, which sees little benefit from production there.
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