Case PDF

INS987
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Soccer Balls Made for
Children by Children? (A):
Child Labor in Pakistan
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07/2015-4865
This case was written by Robert Crawford, Research Associate, under the supervision of Olivier Cadot, Professor of
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Economics at Lausanne University, and Daniel Traça, Assistant Professor of Economic and Political Sciences, INSEAD.
It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling
of an administrative situation.
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This document is authorized for educator review use only by Atif Bilal, Shaheed Zulfikar Ali Bhutto Institute of Science & Technology until December 2016. Copying or posting is an
infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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Background
The Rise of Sialkot
Located in the Punjab province near the disputed border of Kashmir, the site of the first of
many wars between Pakistan and India, over the few decades following independence from
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British rule Sialkot lost virtually all the non-Muslim entrepreneurs and managers who had run
the few industries in the area. Most of the workers left behind were manual laborers, skilled in
the manufacture of sporting goods such as boxing gloves, cricket bats, and tennis rackets.
According to local entrepreneur Zaka-ud-Din:
“In 1947, all trade [in Sialkot] was in Hindu hands. The people who took over
from them were not professionals, and, with their lack of organizational skills, it
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took government incentives to keep them going. They manufactured the cheapest
things you could buy, with very low quality.”
However, a new class of entrepreneurs rose in Sialkot, many with the help of foreign
manufacturers, who offered both new technologies and management training. As
subcontractors making components for assembly by name-brand groups in Europe, Japan, and
the U.S., Pakistani entrepreneurs moved into more profitable, finished product lines.
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“I saw,” Zaka-ud-Din said, “that there was a need for real entrepreneurs. People
wanted higher quality goods. At first we were [soccer ball] stitchers for others,
and then gradually we came to want to make the entire product ourselves. We
became better organized and hired more educated staff…I myself was trained in
the FRG [Federal Republic of Germany] and later in Japan.”
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From its humble beginnings in the mid-1960s, Zaka-ud-Din’s business grew into a multi-
million dollar business employing hundreds of workers in both central factories and home-
based cottage industries.
By the mid-1990s, Sialkot had become a major hub for the highest quality sporting goods and
hardened steel surgical equipment, together accounting for approximately 25,000 jobs in the
Punjab province. Their products were highly customized, requiring great skill and training,
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which so far no outside competitor had been able to profitably mechanize. These industries
made Punjab one of Pakistan’s richest provinces, with a growing middle class and one of the
country’s highest literacy rates. Unlike many of Pakistan’s provinces with poorly integrated
local economies, little if any infrastructure and people living in mud huts, Sialkot’s
surrounding villages were built largely in brick and enjoyed a certain level of infrastructure,
frequently including schools and running water. With 300,000 residents, Sialkot City had an
international hotel as well as a neighborhood of walled, luxury family compounds of poured
concrete and tinted glass. Of course, Sialkot’s development was all relative: traditional sectors
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like wheat farming, brick kilns, and leather tanneries operating alongside export-oriented
industries still accounted for at least 80% of local economic activity and far more in terms of
manpower employment. The local infrastructure was rather poorly maintained and foul-
smelling pools of industrial chemical wastes were common next to offices and residential
areas in the middle of the city. More importantly, many laws on the books, including
prohibitions on child labor, went simply without enforcement.
Copyright © INSEAD 1
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In 1995-96, exports of soccer balls brought in revenues of 1.3 billion in Pakistani Rupees
(PRs) on average 35 million balls were exported to the U.S. and Europe per year while
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surgical equipment brought in PRs. 1.5 billion. Because demand tended to fluctuate wildly,
depending on where the World Cup tournament was held or, in the case of surgical
instruments, the state of the world economy, Sialkot entrepreneurs preferred a flexible
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workforce that they could engage as needed; in 1994, the U.S.-based World Cup games
resulted in an enormous boost in demand for soccer balls, raising export revenues to PRs. 3.2
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billion that year. As a consequence of this and of the unusually high level of product
customization, the niche that Sialkot’s export sectors came to occupy remained extremely
labor intensive, depending less on industrial investments than on specialized manual laborers,
experts in stitching and metal filing by hand. This could be a dangerous choice: while
competitors began to incorporate carbon fibers and other high-tech materials in tennis rackets,
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Sialkot’s sports manufacturers chose to stick with traditional wood frames and labor-intensive
techniques; eventually, manufacturers in Taiwan and other newly industrialized countries took
over the entire industry.
Child Labor in History and Today
Although child labor is, by all accounts, common in the developing world, estimates vary
widely, if for no other reason because the definition of what exactly is “child labor” is by
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itself a matter of debate. A child employed in a factory or a mine is undoubtedly “working”.
So is a child begging in the streets with his parents. But what about a boy herding cattle on his
parents’ farm in the morning before school? What about a girl helping with household chores
while her mother is working outside of the home? The answer depends on what is included in
the definition of “child labor.” Using a standard definition “economically active individuals
under 15” the ILO has produced on the basis of a sample of 124 member countries an
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estimate of 78.5 million children working. By its own reckoning, however, this number is
likely to be a gross underestimate, the reality being probably closer to 200 million. More than
actual numbers, it is “participation rates” which best capture the incidence of child labor, as
they measure the proportion of an age cohort being employed. Table 1 shows participation-
rate data collected by a number of micro-studies (in which researchers actually went to the
fields and counted people):
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1 At that time, PRs traded at approximately 30 to the U.S. dollar.

2 “The Sialkot Story: Making Villages ‘Child Labor Free,’” Economic Review, April 1997, p. 33. No byline.
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Table 1
Study Age cohorts Participation rates (%)
Rural Egypt, 1975 6-11 17

12-14 43
Ivory Coast, 1986 Urban
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Boys 5
Girls 6
Rural
Boys 55
Girls 54
Philippines, Bicol region, Market work
1983 7-12 22
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13-17 44
Home work
7-12 49
13-17 68
Pakistan, 1990 Boys 31
Girls 7
5 villages in rural Pakistan, Boys 19-25
1990 Girls 22-32
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One district in rural Wage work
Maharashtra, India, 1993 Boys 9
Girls 6
Family farm or business
Boys 24
Girls 16
Household work
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Boys 34
Girls 65
Source: Christian Grootaert and Ravi Kanbur, “Child labor: An economic perspective”, International Labor
Review 134, 1995, p. 190.
However, not all “economically active” children work full time; on average, about half are
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secondary workers who contribute to family income by after-school or seasonal labor. The
vast majority of child laborers are unpaid family members, who work in the informal sector,
either in agriculture or related activities as well as an increasing number in small urban
production units. A very small number of child laborers perhaps less than 2% work in
“export” sectors such as carpet weavers or as manufacturers of sports equipment, leather
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goods, and surgical instruments.
While no one knows the precise number of child laborers in Pakistan, analysts estimate that
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there are 3.6 million, almost half of whom work more than 35 hours per week, and many over
56 hours per week. Only about a third are wage earners, the remainder being mainly family
3 “Unicef Report Demands End to Most Intolerable Forms of Child Labor,” M2 Presswire, 10 Dec. 1996. No
byline.
4 See “Child Labor: How the Challenge is Being Met,” International Labor Review, Summer 1997, pp. 233-
257. No Byline.
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helpers, particularly in rural areas. Nearly 400,000 (11% of the total) work in manufacturing
industries; somewhere in the region of 50,000 work in the export sectors, which includes
soccer balls, carpets, surgical instruments, and leather goods. Around two million (60%) of
Pakistan’s child laborers are in the Punjab alone.
Child labor is a perennially divisive issue. It is by no means a new phenomenon: indeed,
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children working in the factories and mines were one of the most detestable by-products of
the early Industrial Revolution. Even to this day, historians disagree about its proper
interpretation. For some writers, especially in the tradition of Chicago-school economist Gary
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Becker, putting children to work should be construed as a rational household decision given
the available alternatives and should therefore be excluded from the realm of normative or
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ethical judgments. This view is neatly summarized by Nardinelli (1990):
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“According to [Becker’s] model, the household can be thought of as attempting
to maximize its output of consumption commodities. (p. 59) […] In the short run, I
would argue, the movement of child labor out of the home and into the factory
made little difference to the family economy. The principal effect was to raise
family income. If it is assumed that work at home and work in the market are close
substitutes, the division between the two is purely a matter of relative
productivities. There is no particular reason to attach great importance to the
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particular division chosen by any family. (p. 60) […] Before the coming of the
factory age, employment as an agricultural servant or the beginning of
apprenticeship meant leaving home to live with the employer. With factory
employment, children continued to live at home after entering the labor market.
One of the short-term effects of child labor in factories was therefore to keep
children living at home longer than under previous types of child employment.”
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(p. 61)
Unsurprisingly, a starkly different view was expressed in the 19th century by Karl Marx, who
viewed child labor as inherently exploitative:
“[To] purchase the labor-power of a family of four workers may, perhaps, cost
more than it formerly did to purchase the labor-power of the head of the family,
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but, in return, four days’ labor takes the place of one, and their price falls in
proportion to the excess of the surplus-labor of four over the surplus-labor of
one.”7
Irrespective of whether child labor was exploitative (as Marx suggested) or not (as liberal and,
later, neoclassical economists argued), what accounted for its ultimate elimination is also a
matter of debate: Was it legislation or technical progress? Both certainly contributed to its
phasing out in most of Europe and the U.S. over the period extending roughly from the 1833
Factory Act to the First World War. A careful study of the elimination of child labor in U.S.
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5 See e.g. Gary Becker, The Economic Approach to Human Behavior; The University of Chicago Press,
1976; or A Treatise on the Family, Harvard University Press, 1981.
6 Clark Nardinelli, Child Labor and the Industrial Revolution; University of Indiana Press, 1990.
7 Karl Marx, Capital, vol. 1, p. 395; quoted in Nardinelli, op. cit., p. 67.
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canneries during the so-called “Progressive Era” (1880-1920)8 indicated that child-labor laws
were in some cases welcomed by employers for whom children in a modern factory were a
source of trouble:
“[Canners] are almost unanimous in the opinion that this law has done them a
great good, for without fear of arousing the displeasure of parents, little children
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can at present be kept out of the cannery… Many canners do not hesitate to seek
the assistance of the inspector in dealing with the troublesome parents who insist
on bringing into the work room children under the legal working age.”9
In those cases, mothers insisted on bringing children to the factories primarily because of the
lack of child-care facilities. However, in other factories typically less mechanized rural ones
labor inspectors checking compliance with child-labor laws were less than welcome:
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“On approaching a particular [rural] cannery, a worker at the front door was
seen to give a “high sign”, and the children darted to the rear exit. Since it is the
duty of the inspector to know conditions as they really are, and not as the
employer would have them represented, the inspector ran to the rear door on the
outside of the cannery in time to catch the youngsters tumbling forth, with bags
tied around them, skinning knives still in their hands and greatly bespattered with
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tomato juice and skins. The parents of these children were sought out and their
responsibilities in the matter explained. By this time, the employer, greatly
excited, appeared on the scene. Nothing uncomplimentary to the inspector
remained unsaid.”10
Many of the issues relating to child labor during the Industrial Revolution remain relevant to
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this day. How exploitative is child labor in modern emerging economies? Would social
legislation patterned after Britain’s Factory Acts effectively eliminate it? How much would it
penalize poorer economies for whom cheap labor is a key source of competitiveness? In other
words, could it retard economic development, in effect penalizing the very people it would
seek to help by perpetuating the poverty that causes child labor?
Social engineers and activists take a different view. They argue that child labor is a violation
of fundamental human rights, as is the case with slavery and prison labor. Children deserve
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time for play, personal development, and a “childhood,” which together represent the surest
route to equitable and sustainable economic development.11 Many activists in Pakistan and
many outside observers seem to share this view. According to Zahid Siddiqi, a founder of the
Non-Governmental Organization Sudhaar, child labor in Pakistan created a kind of
underground market for parents willing to exploit their families:
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8 Martin Brown, Jens Christiansen and Peter Philips, “The decline of child labor in the US fruit and
vegetable canning industry: Law or economics?”; Business History Review 66, 723-738.
9 Maryland, Bureau of Statistics and Information, 24th annual report, Baltimore, 1915, p. 210; quoted in
Brown, Christiansen and Philips, op. cit., p. 727.
10 Maryland, Bureau of Industrial Statistics and Information, twenty-forth Annual Report, Baltimore, 1915, p.
210; quoted in Brown, Christiansen and Philips, op. cit., p. 726.
11 See ILO, Report VI: Child Labor, International Labor Conference, 86th Session, 1998.
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“The more children they put to work,” he said, “the more money they can get.
Lots of their fathers even stop working themselves. Why should they work when
they can get five or six of their own children working for them? This has to stop.”
Approaches to Child Labor in International Law
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Efforts to establish international norms began early in the 20th century. In 1919, the Treaty of
Versailles created the International Labor Organization (ILO) in an “endeavor to secure and
maintain fair and humane conditions of labor.” Since then, the ILO promulgated over 180
multilateral conventions to establish international standards in virtually every area of
employment and labor relations laws.12 Convention 138, adopted in 1973 (although an earlier
text, Convention 5, had been adopted at the time of the ILO’s foundation), prohibits the
employment of children under 15 or before the end of the mandatory school age, whichever
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comes latest. If the work is “dangerous or immoral,” the minimum age is 18. Farm work is
exempted from the general minimum-age rule. Other exceptions include a minimum age of 13
when the work is “not prejudicial” to educational attainment, and a waiver for poor countries
which can set a minimum employment age of 14 (12 for light work and 16 for dangerous
work). Finally, child labor is acceptable if it is an integral part of training.13
For many years, Convention 138 provided a legal basis for international scrutiny of child-
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labor practices in member countries. However, because the ILO does not mandate that its
members adopt all of its conventions, member countries have tended to pick ILO conventions
à la carte, and it so happens that, of the “basic rights” conventions, 138 is the one that has
by far the smallest adoption rate. Only 46 countries have signed it, and Pakistan isn’t among
them, though neither are the U.S., the U.K., Switzerland, Canada, Japan, New Zealand, and
Australia; their common objection to signing it is that the convention is too inflexible to
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accommodate local idiosyncrasies. Of course, non-signatory countries cannot be legally

forced to comply.
A new ILO Convention (182), unanimously adopted in June 1999, is intended to complement
existing ILO conventions and is designed specifically to eliminate the “worst forms of child
labor.” The signatories accept to implement provisions that include:
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precise definitions of what constitutes the “worst forms of child labor,” including all
forms of slavery, prostitution, pornography, illicit trafficing activities, and hazardous
forms of labor;
x the design and implementation of programs to eliminate these labor activities;
x the establishment or designation by signatories of appropriate mechanisms to monitor
compliance;
x adoption of all necessary measures to enforce compliance.
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12 Steve Charnovitz, “Environmental and Labor Standards in Trade,” The World Economy, Vol. 15, No. 3, pp.
339-340.
13 Mascus, op. cit., p. 53.
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Unfortunately, because the new convention is administered exclusively by the national
institutions of each signatory, it too may prove ineffective: no one can force the signatories’ to
implement it in good faith.14
For want of an effective enforcement mechanism for ILO conventions, the idea has been
floated on numerous occasions that “core labor standards” (covering basic principles, such as
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the prohibition of child labor) should be appended to trade agreements and hence made
enforceable by the WTO. The advantage of the WTO over the ILO is that multilateral trade
agreements signed at rounds of trade talks are binding for all signatories and enforceable
under WTO dispute-settlement mechanism. But the WTO route also raises numerous
problems. For one thing, one of the basic principles underpinning the multilateral trading
system is the “like product” treatment enshrined in Article III of the organization’s basic
charter. According to this principle, effectively identical goods (“like” products) cannot be
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treated differently by the importing country on the basis of how they are produced. For
instance, if one soccer ball is produced using child labor and the other is not, trade sanctions
against the first would be deemed discriminatory and in violation of Article III. The only
exceptions, under Article XX, are prison labor and health concerns but Article XX refers to
the health of consumers, not of producers.
At a deeper level, many economists, in and outside of the WTO’s secretariat, fear that
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including labor standards in trade agreements would open a Pandora’s box. According to a
high-level WTO official: “We view the social sanctions issue as a slippery slope once you
admit the legitimacy of using [the WTO’s arbitration process] for political purposes, there’s
no telling where it will all end…The WTO just isn’t equipped for that kind of thing and would
get overwhelmed by cases if it tried to.” To this effect, at the WTO’s 1996 summit, the
organization accepted the banning of child labor as “non-binding” but it designated the ILO as
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“best equipped” to handle issues of workers’ rights. Of course, WTO signatories in less
developed countries vehemently denounce any attempt by rich countries to include labor
standards in trade agreements as a thinly disguised protectionist ploy.
Indeed, whereas some of the “social protectionism” has been driven by good intentions, a lot
of it appeared self-serving. For example, a 1992 proposal by U.S. Senator Tom Harkin the
Child Labor Deterrence Act sought to ban the import into America of goods produced by
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children under 14 years of age. Although similar legislation was supported by President
Clinton and other members of the U.S. Congress,15 Harkin’s links to organized labor raised
suspicions that the Senator was more interested in protecting American jobs, particularly in
textiles, than he was in child rights. In the same vein, Richard Gephardt, an influential leader
in the U.S. House of Representatives, once declared that:
“The repression of political rights is inevitably combined with the denial of

economic rights…we can’t compete against workers who have no rights to
demand a higher wage in return for their hard work and increased productivity.
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We can’t compete with slave labor….We demand that efforts to expand coverage
14 See Bob Davis, “Clinton Backs Effort to Curb Child Labor,” Asian Wall Street Journal, 17 June 1999;
Ranabir Ray Choudhury, “ILO Convention on Child Labor Adopted Unanimously,” Businessline, 19 June, 1999.
15 John Berlau, “The Paradox of Child-Labor Reform,” Insight in the News, 24 Nov. 1997, p. 20.
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of the World Trade Organization include human rights, for they are inextricably
intertwined with any true strategy of global prosperity.”16
Harkin’s bill was later passed in the form of an Amendment to the 1997 Treasury spending
bill, but the agent of enforcement the U.S. Customs Service was ill-equipped to carry out
its mandate; additional funds for the service, while promised, were slow in coming. The
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ultimate effect of the bill was minimal.17 It did, however, scare people in Sialkot: regarding
the Senator’s visit to the area in the mid-1990s, one Pakistani observer said, “Harkin was very
harsh. He created more awareness here and generated more criticism abroad. We were
beginning to work on the problem and visits like his changed the atmosphere… The [U.S.]
Congress started trying to make special laws, sanctions [against child labor] on a regional
basis and against Pakistan.” There was even discussion in the U.S. about a campaign to force
the withdrawal of Pakistan’s most favored nation status,18 but a proposal that drastic did not
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go very far. Indeed, the links of the trade-sanctions advocates with protectionist lobbies
severely undermined the credibility of their campaigns.
New International Activism
Starting in the 1960s, consumers began to play a larger and larger role in economic affairs,
moving from safety concerns at home to corporate ethics and citizenship abroad. New-style
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consumer activists like Ralph Nader, founder of the Public Citizen in Washington, DC, led
lobbying campaigns for safer cars and a cleaner environment. By recruiting young idealists
whom they trained to run their crusades, these activists operated largely through the provision
of information and the results of their investigations to the media. It was the outrage of the
average consumer, who participated in demonstrations or wrote letters to their U.S.
congressmen, that advanced the new policies.19 In the 1980s, wealthier consumer activists
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began to take a different tack: employing the clout of socially responsible pension funds, often
run by “cash czars” who scrutinized the actions of the companies in their portfolios from the
standpoint of both financial returns and ethics. According to New York comptroller Carl
McCall, who oversaw one of the largest public pension funds in the U.S., “When you own
one million shares of stock, you don’t have to picket.” If he saw something he didn’t like,
such as a discrimination scandal at Texaco, McCall was able to pick up the phone and ask
corporate executives about it.20
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It was not long before consumer activists turned to global concerns. With the rise of the
Internet as a tool to disseminate information, a new style of international muckraker and
activist emerged in the late 1980s. For the first time, independent agents and local observers
had the means to find and publicize, cheaply and instantaneously, the global issues that
concerned them. If for whatever reason an issue caught on, it could generate enormous
interest worldwide, either as coordinated campaigns or spontaneous outpourings of protest
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16 See “Free Trade, Fair People: China’s Free Trade Status,” Vital Speeches of the Day, 15 July 1997, pp.
581-585.
17 “USA Trade: Customs Walks Tightrope on New Child Labor Law,” Journal of Commerce as cited by EIU
Views Wire, 15 October 1997. No Byline.
18 Shahidul Alam, “Thank you, Mr. Harkin, Sir!” New Internationalist, July 1997.
19 See Karen Croft, “Citizen Nader,” Salon Magazine, Great Careers #11, 1999.
20 Eileen P. Gunn, “The Money Men,” Fortune, 4 August 1997, p. 74.
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and donations.21 In the mid-1990s, a number of television news magazines visited Bangladesh
and Pakistan to report on alleged cases of bonded child labor, a kind of modern slavery
through the debt obligations of their parents. While consumers remained unwilling to pay
higher prices for goods produced by “socially responsible” methods they preferred known
brands, price, and quality their perceptions of “exploitive” multinationals were beginning to
change for the worse.22 Fearing that these perceptions would affect their bottom line, many
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marketers of craft products from the Third World began to refuse imports of goods produced
by children and other victims of human rights abuses.23
In 1996, a sweatshop-related discovery helped to catapult the issue of child labor into the
international spotlight: a line of clothing sponsored by U.S. television personality Kathy Lee
Gifford, reporters found, relied on children who were paid only US$0.30 per hour in
Honduran sweatshops. Entering an arena that had long been the concern of a few politicians
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and professionals in international organizations, suddenly scores of activists became
concerned about working children. Armies of reporters, some of them celebrities in their own
right, joined the cause, scouring the Third World for examples of abuse and exploitation of
children; their harrowing tales of brushes with mysterious thugs, some clad like local
policemen, lent them credibility and élan. In addition to stories of slave labor and cruel
punishments one famous reporter claimed to have found children “branded, beaten, blinded
as punishment for wanting to go home”24 alarming estimates began to surface. A movement
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to end child labor coalesced around soccer ball manufacturers in the “Foul Ball” campaign.25
Zaka-ud-Din and M. Yunas Ratra (Managing Director of a sporting goods company that bore
his name) remembered vividly when the spotlight fell on them as soccer ball manufacturers in
Sialkot. “An American friend, who was a business associate and customer, called me at
home,” Zaka-ud-Din recalled. “He told me he was watching the news on television, and asked
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me whether it was true that I used children to stitch soccer balls. I was surprised by his
question because I had never looked into it…All we did was subcontract out kits that were
taken to villages and stitched. We didn’t know who stitched them.”
These campaigns could backfire. As a result of a high-profile public-opinion campaign in the

U.S. and in fear of trade sanctions, garment factory owners in Bangladesh had turned out
approximately 50,000 working children into the street, virtually overnight. Unfortunately,
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rather than return to school, instead many of the children lost status within their families,
becoming an insupportable burden in a country where 65% of the children were
malnourished, their earnings had been desperately needed. As a result, the number of
homeless children increased, while many others were forced into more hazardous
21 Deborah Spar, “The Spotlight and the Bottom Line,” Foreign Affairs, Mar/Apr. 1998, pp. 7-12.
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22 Ibid. p. 9.
23 “USA Trade: Customs Walks Tightrope on New Child Labor Law,” Journal of Commerce as cited by EIU
Views Wire, 15 October 1997. No Byline.
24 See Sydney Shanberg, “Six Cents an Hour: On the Playgrounds of America, Every Kids’ Goal is to Score.
in Pakistan, Where Children Stitch Soccer Balls for Six Cents an Hour, The Goal is to Survive,” Life, June
1996, p. 38.
25 “USA Trade: Customs Walks Tightrope on New Child Labor Law,” Economist Intelligence Unit Views
Wire, 15 Oct. 1997. No byline,
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occupations, such as brick baking, street scavenging, and even prostitution.26 Because the
industry brought in US$1.24 billion in 1995-96, which accounted for 62% of Bangladesh’s
export earnings, the government became involved in negotiations; it eventually secured an
agreement with UNICEF and the ILO for over US$250,000 in aid per year, to be matched by
the local garment industry.27 According to businessman Zaka-ud-Din, who had traveled to
investigate the situation in Bangladesh while deciding what to do about the soccer ball
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industry, “only about two-thirds of the children [who had lost jobs] went back to school,” he
said. “It created so much hardship. In any program we created, the children would have to be
given something to do.”
Multinational Corporations: Seeking the Lowest Possible Costs.
Having been thrust into the international spotlight by accusations of exploitation and
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hypocrisy regarding child labor, a number of sport-goods multinationals imposed their own
policies in Sialkot. Reebok, one of America’s premier designer/marketers of sporting goods,
took the vanguard, lobbying its sports industry association to abolish child labor and
undertaking its own extensive investigations at approximately 40 Reebok subcontractor
factories in the Third World. According to Douglas Cahn, Reebok’s Vice President for
Human Rights,
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“[B]ecause we wanted to move quickly, we proceeded on our own…in a tripartite
approach: 1) bring stitching out of the home and into larger factories; 2) set up a
vigorous monitoring system; 3) start remediation programs in education.” The
fourth element consisted of labeling Reebok’s finished balls, to be purchased from
a local contractor who had built a new childfree factory, as “child labor free.”
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The brand manufacturers’ interest in labor issues in poor countries was indeed something
new. As competition between sports-goods manufacturers had become increasingly global in
recent years, outside pressure had become extremely intense on Sialkot subcontractors to keep
prices as low as possible. Cheap labor, it turned out, was the key to this strategy, as
multinational corporations actively sought to find the lowest priced producer-contractors for
labor-intensive goods, frequently playing them against one another in bidding wars.28 To
compete with Adidas in the mid-1960s, for example, Nike had begun to import shoes
manufactured from a low-wage country of that time, Japan. As the Yen and wages in Japan
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rose during the next decade, Nike switched to Taiwan and Korea, where the labor force
remained relatively inexpensive. Nike’s latest moves, in the early 1990s, were to Indonesia,
China, and other countries in Asia, where workers were paid very low wages.29 Such constant
relocation was, of course, nothing reprehensible in itself, but critics charged that its effect was
to pitch workers of poor countries against one another in a “race to the bottom”. Moreover,
historical evidence, as well as economic reasoning, suggested that low wages for adult
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26 Owen Bowcott, “Save The Children: The World Wrings its Hands Over Child Labor, But What Has It
Done to Stop It?” The Guardian, 11 Oct. 1997.
27 Tabibul Islam, “Bangladesh Labor: Garment Industry Claims No Child Workers,” Inter Press Service, 19
Nov. 1996.
28 Adam Schwarz, “Low-tech and Labor Driven,” Far Eastern Economic Review, 2 April 1992, p. 53.
29 Philip Knight, “Global Manufacturing: The Nike Story is just Good Business,” Address delivered to the
National Press Club, 12 May 1998. See Also Bill Saporito, “Can Nike Get Unstuck?” Time, 30 March
1998, pp. 48-53.
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workers were very much at the root of the child-labor problem, since poverty was the primary
reason why parents allowed their children to work.
So better adult wages would clearly have to be part of any solution to the child-labor problem.
For instance, a Save the Children report30 suggested raising the daily wage of an average adult
stitcher from the current range of 75-100 PRs (roughly US$2.50 to US$3.00) to the wage of
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construction workers, that is, 120 PRs (US$4.00). But what would be the effect of such a
wage hike on the prosperity of the industries in Sialkot? Whereas Sialkot’s position in the
market for soccer balls was well established especially in the tournament-grade segment of
the market, where it controlled 80% market share worldwide how would this position
withstand the shock of restrictive labor laws? How much loyalty would the brand
manufacturers have for their Sialkot subcontractors if their costs rose because of a wage hike
or child labor ban? On the one hand, at about US$1.00 per ball the stitching cost was but a
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tiny fraction of the wholesale price of a high-quality soccer ball, which could fetch as high as
US$75 on the U.S. market.31 So the impact of a wage rise on the balance sheet of the big
brand manufacturers was unlikely to be significant. However, on the other hand, Nike and
other brand-name sports MNCs had given little hint that they would be willing to consider
raising their purchase prices for soccer balls in exchange for social progress. There was no
question about their eagerness to put a “child-labor free” label on their products; but how
much were they willing to pay for it?
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NGOs: Trying to Find Innovative Solutions
NGOs have progressively entered areas traditionally reserved for governments, starting with
environmental policies in the early 1990s and moving into economic development and
workers’ rights. Stepping into the role that many local governments could no longer afford,
tC
NGOs were increasingly serving as providers of basic services, e.g. health care, education,
and banking; they were becoming community organizers with greater expertise than the inter-
governmental organizations mandated in the same issue areas.32 For example, Sudhaar, a
Pakistani NGO founded in 1994 and funded by the ILO and other groups, began to set up
educational facilities for children in leather tanneries; according to observers, it was so
successful that a number of foreign NGOs and inter-governmental organizations encouraged it
to expand into other areas as an instrument of change.33
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During the soccer ball controversy, NGOs took on a larger role in Sialkot. Under the
leadership of David Husselby, Program Director of the Save the Children Fund UK (SCF)
office in Islamabad, SCF first came to Sialkot in July of 1996. Though his organization was
wary of allying itself with the private sector, Husselby sensed an opportunity and hired a
handful of researchers in Sialkot, many of whom worked for local NGOs such as Sudhaar, to
investigate child labor in the soccer ball manufacturing industry. “The industry really wanted
to quickly announce a program to end child labor,” Husselby said. “But SCF wanted to give
children a chance to talk first, to find out how they felt” about the sudden attention that child
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labor was generating. SCF’s final report cleared up a number of misconceptions that
30 “Stitching Footballs: Voices of Children in Sialkot, Pakistan”, Save the Children, 1997.
31 Tahir Ikram, “Child Labor a Painful System,” Reuters, 13 December 1996.
32 See Jessica T. Mathews, “Power Shift,” Foreign Affairs, Jan/Feb 1997, pp. 50-66.
33 “Sudhaar A Profile,” Brochure, 1998.
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apparently had been perpetuated by shoddy and exaggerated reporting. “I found that the
reporting of some journalists was hard to stand by or support,” Husselby said.
SCF served as a “catalyst” to facilitate communication between hitherto hostile groups. The
SCCI and the ILO, for example, at first regarded each other with suspicion: while the ILO
feared it was becoming coopted by private-sector “enemies,” the SCCI distrusted the labor-
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union affiliation of the UN organization. Soon, the U.S. government also became interested,
promising funding and attracting the participation of both UNICEF and the ILO. Even the
Pakistani government joined the Sialkot “Partnership to End Child Labor,” as it came to be
called, with the Department of Education and the National Rural Support Program, a publicly
funded NGO. With a view to launching the project at the next “Super Show,” an annual sports
trade fair in the U.S. scheduled for February, 1997, members of the Sialkot partnership
negotiated to draft goals for the project.34
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The Atlanta Agreement.
The Atlanta Agreement was unveiled at the 1997 “Super Show,” in a media blitz of high
drama and expectation. Brand manufacturers in the Sporting Goods Manufacturers
Association of the U.S. pledged to “eliminate child labor” workers under 14 years of age
from the stitching and production of soccer balls, as did the members of the SCCI, within two
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years. In a major departure from its role as a local observer and funder of small-scale
initiatives, the ILO stepped forward to monitor the agreement, acting as a kind of guarantor of
the integrity of the process.
The Agreement,35 which was formulated to avoid the problems experienced by child laborers
in Bangladesh, juggled a number of provisions and requirements:
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x Stitching centers were to be established, which would bring the work out of the household
and into official manufacturing facilities.
x Workers were to be systematically registered in corporate records for the first time, an
additional mechanism for verification of worker age.
x In order to create alternative activities and employment for displaced workers, programs
would be created for purposes of both education for children and wider economic
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development.
x A system of rewards, warnings, and penalties was set up to encourage company
compliance.
x Members of the World Federation of the Sporting Goods Industry would favor vendors
who did not use child labor. For its part, SCCI undertook a commitment to expand the
elimination of child labor to additional industries.
Financial support for the agreement came from a wide variety of sources. The U.S.
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Department of Labor promised to supply US$500,000 for the first two years of the program.
SCCI members would provide US$360,000 to finance independent monitors. UNICEF would
provide US$200,000. Finally, the Soccer Industry Council of America (the industry
34 David Husselbee, How Close is too Close? International NGOs as Development Partners with the
Corporate Sector, presentation to the Conference of Business for Social Responsibility, Nov. 1997.
35 Memo from Sublime Corp.
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association of brand sport-goods manufacturers) would add US$100,000. The bulk of foreign
contributions were targeted for education and prevention programs for the children and other
affected workers.36 Financed largely by SCCI monitoring funds, the ILO had hired 15 staff
monitors to work in teams of two, traveling on motorbikes for random, unannounced visits to
the stitching centers. According to Antero Vahapassi, the ILO official in charge of the
initiative, “this is the first program in which the ILO is getting its hands dirty in the details of
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implementation. We cannot afford to fail. It is a very bold step for us.”
As soon as money for the partnership began to flow into Sialkot, an astonishing variety of
NGO programs blossomed. Engaging the energies of many talented policy entrepreneurs,
NGOs set up initiatives in consciousness raising, community mobilization for economic
development, and the improvement of educational facilities. Sudhaar began to fund
improvements in existing schools and set up non-formal supplementary schools in the hope of
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re-integrating working children into the school system for at least a few hours a day: 154 non-
formal education centers were set up for child laborers, many of them in villages that had had
no schools.37 Nighat un Nisa, a team leader for the National Rural Support Program (or
NRSP, a Pakistani government-supported NGO), set up community credit unions. In an effort
to create alternative sources of income and employment, particularly in rural areas far from
Sialkot, she was counseling village leaders in business and credit management. She was
particularly interested in enticing women to work, and was actively seeking ideas that would
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allow them to contribute to household income, which, she believed, would make them more
confident and active. The women, she said, “are easily motivated… Once child labor is
eliminated, some means will have to be found or created to make up for the financial shortfall.
Some family incomes will be cut in half. Everyone’s participation is vital.” But in spite of
their long-run potential, these initiatives were unlikely to make up for the immediate income
shortfall due to the child-labor ban.
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SCCI members fulfilled their promises on schedule: as of November, 1998, 50% of their
manufacturing took place in the approximately 500 new stitching centers they had set up; 36
manufacturers about half of the manufacturers in Sialkot participated under SCCI
auspices, which represented 65-70% of total annual production of export-quality balls. But all
this did not come for free. According to Naeem Javed, Managing Director of the Sublime
Group of Companies, in the new centers “each ball costs about PRs. 15 more to produce; we
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used to be able to do it for PRs 30-35, but now its costs us PRs 50-55.” Because Sublime
enjoyed a solid relationship with Adidas for the high quality ball market, it did not lose its
business, but it did need to produce more to keep the same profit. This was of course deeply
resented by Sialkot employers. “We all talk about ethics and fair trade,” Ratra said. “But
when I ask my buyers to share the cost, they refuse.” By and large, SCCI member profits were
down by a significant margin. While the exact figures were confidential, one executive of a
major firm confided that his cumulative gross profit had fallen from 18% of revenues to about
10% since the program began. The drop in profits, which differed from company to company,
was due primarily to the costs of opening and running larger stitching centers, that is,
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providing the infrastructure that home-based cottage industries had long allowed them to
avoid. Local contractors footed the entire bill for these. As a result, soccer ball manufacturers
36 U.S. Dept. of Labor, “Labor Department to Fund Elimination of Child Labor in Soccer Ball Industry,”
ILAB Press Release, 13 Feb. 1997.
37 See Elimination of Child Labor in the Soccer Ball Industry in Sialkot, ILO Mid-Term Review, Nov. 1998,
paragraphs 8-18.
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were struggling to improve their efficiency reducing rejection rates by a factor of almost
90%, investing in whatever labor-saving technologies they could find, and training their labor
force. In addition, to maintain profits with the higher overhead costs of their stitching centers,
the larger firms were increasing the scale of production. For less efficient small- and medium-
sized producers, the bottom line was squeezed to a new low. “It is becoming a matter of
survival,” Ratra said. “For now we [the larger firms] are keeping our heads above water.” But
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many others were likely to be pushed out of business by an industry-wide consolidation in the
next few years.
The initiative also had an unforeseen impact on Punjabi women. By taking labor out of the
home environment to outside stitching centers, the new manufacturing arrangement would
effectively prevent them from working for a variety of reasons. First, there were the
prohibitions of religion, which in Pakistan co-existed with caste: according to increasingly
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influential Islamic law and custom, women were not allowed to mingle with men who were
not in their immediate families, which included working alongside men; caste restrictions
added to the complexity of women’s work opportunities, effectively eliminating many
“higher” caste women from traveling outside of their villages. Second, despite the relative
wealth of Punjab province, the state of local infrastructure often hindered women from
traveling. Bus services for women effectively ended at 4 p.m., which meant that they could
not be at home to “take care” of their husbands when they returned from work, as dictated by
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regional custom. But preventing women from working would compound the income-loss
problem created by the elimination of child labor, as the male household head would then
become the sole wage earner.
The decline in numbers of working women also threatened to reverse recent gains in their
social status. According to Ms. un Nisa:
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“If [women] have income, they begin to feel empowered within the family. Before,
they could do housework, care for children and livestock and that was about all.
Now they can earn their dowry on their own, buy clothes…A female that
contributes income to the family is more confident and can talk and discuss
things.” The opportunities for women in faraway, isolated villages, she said, were
extremely limited. “We are headed for a real crisis,” she said.
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Other participants also worried that, while a lot was occurring at present, there was a danger
that little, if anything, lasting would be established. “No one has an overview of what
everyone is doing,” one official complained. “There is a lot of duplication in the same village.
It is a mess and may be making communities more dependent on outside [actors].” Moreover,
he feared that international attention was fickle and likely to shift to some other fashionable
cause, perhaps soon. “We are beating the drum, getting people together, raising awareness,”
he said. “It is very positive that the business community has finally admitted that child labor
exists. But if we stop, everything will probably disappear. We are building no permanent
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structures.” Another former government official was even more pessimistic and openly
questioned whether the entire initiative was becoming a tool of corporate propaganda. The
NGOs, he said, “are trying very hard to infiltrate the feudal power structure in Pakistan. But
they don’t want the international community to know how badly the odds are stacked against
them. The stories of [government-sanctioned] violence and Mafia thugs are very real. So they
have to appear optimistic. Their jobs depend on international funds.”
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Was the Atlanta Agreement a success? Have the Sialkot children gained? In the words of
Fawad Usman Khan, a founder of Sudhaar,
“[I]f it were up to me, I would take all child laborers out of the more hazardous
professions and put them into the soccer ball industry there are no chemicals,
they are well paid, and the hours are flexible. The children can work at home in
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their spare time, mixing it with housework or after school. I am very worried that
the children taken out will end up in more dangerous occupations. This is an easy
sector when compared to carpets or leather tanneries.”
Have Pakistani women, whose position is most vulnerable, gained in the new arrangement? If
the Atlanta Agreement was indeed a success, does it provide a model that can be emulated
elsewhere, say in the carpet industry? Is it likely to have ripple effects in other industries?
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No
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INS987

Child Labor in Pakistan

Child Labor in History and Today

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