TNCs often set up production facilities in export processing zones for which of the following reasons?
A) cheaper labor and fewer worker protections
B) fewer worker protections and better managerial capabilities
C) better managerial capabilities and better labor-management relations
D) better labor-management relations and simpler employment contracts

Question

Quizplus · Accepted Answer

TNCs set up production facilities in export processing zones mostly because of access to cheaper labor and fewer worker protections, making it easier to undermine labor costs and increase profitability. These zones are established by host governments to attract foreign investment and are characterized by privileged trade arrangements, such as tax exemptions, subsidies, and infrastructure development. As a result, TNCs can take advantage of a large pool of low-skilled workers who are paid less than the national minimum wage and have limited rights to unionize or organize protests. This labor arbitrage strategy allows TNCs to achieve economies of scale, produce goods at a lower cost, and bypass regulations that would be enforced in other parts of the country or abroad. Therefore, A is the best choice.

TNCs Often Set Up Production Facilities in Export Processing Zones