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TRADE UNION STATEMENT
TO THE 1997 OECD COUNCIL AT MINISTERIAL LEVEL
AND TO THE DENVER G7 ECONOMIC SUMMIT
May - June 1997
(Adopted by the TUAC Plenary Session, 16 May 1997)
Introduction and Summary
- OECD countries are richer than ever before, yet greater numbers of citizens are falling into poverty and insecurity is increasing. Global markets are expanding, but 36 million people across the OECD remain unemployed and 12 million more are discouraged from seeking work. More countries have entered world markets, yet over one billion people in developing countries still live in poverty.
- The catchword "globalisation" is being used by many employers to falsely claim that, despite their own soaring profits, living standards must be lowered to be "competitive". It is being used by some governments to plead an inability to act. As a result a form of "policy paralysis" has set in. This is producing a climate of fear of change. The global economy can only function with domestic support; that support along with support for multinational institutions will erode unless policy makers at all levels address the concerns of workingpeople and demonstrate that the multilateral system can deliver economic and social progress.
- The correct response to globalisation must be to manage change. To fulfil the legitimate aspirations of consumers, employees, and investors, markets require effective governance, whether at a local, national, regional or global level. Fifty years ago governments showed vision and leadership through the Marshall Plan, which helped secure prosperity and political stability after the Second World War. Today, the process of globalisation demands that governments again show the same qualities of vision and leadership to ensure that it benefits working people throughout the world.
- Trade unions in OECD countries have taken the lead in negotiations to give priority to employment. The international institutions governing the multilateral trade and investment system must fulfil their responsibilities. The pressures of global markets have to be balanced by a social dimension. OECD countries have to create more quality jobs, to protect the worst of off and most vulnerable in society, and invest for future generations.
- The governments attending the OECD Ministerial and Denver Summit should commit themselves to :
- the immediate and effective coordination of macroeconomic policies to raise sustainable growthand employment;
- the implementation of rules covering global financial markets to enable faster growth of the real economy and reduce systemic risk of financial markets;
- encouraging managers and workers and their representatives to join together in forging high quality workplaces that restore balance in labour markets and allow workers to share in the fruits of productivity growth;
- investment in physical and social infrastructure, notably education and training to make lifelong learning a reality for all;
- guarantee the rights of workers in trade and investment agreements through well-defined and enforceable labour standards;
- achieving effective, rapid and broadly based implementation of the new debt relief initiative for heavily indebted poor countries, the reversal of declines in development assistance, and the establishment of a new agenda of "people-based" development.
- The multilateral institutions must be developed into effective instruments of global economic governance. The G7 and OECD, if expanding their membership, must maintain the common values of pluralist democracies and respect for human rights is they are to be effective.
Raising Sustainable Growth and Employment
- A majority of OECD countries continue to face unsatisfactory economic and employment growth. Inflation is not a risk yet real interest rates are too high. Depressed purchasing power and workers' insecurity mean that consumer confidence is too low to sustain vigorous recoveries. Working people and their families are shouldering the burden of adjustment, whether through depressed wages and job insecurity for those in work or the progressive dismantling of welfare support for the unemployed. Trade unions have shown that they have taken seriously their responsibilities to the unemployed and to help economic recovery. Employers and central banks have now to fulfil their part of the bargain.
- Genuine macroeconomic coordination is needed now to raise growth. The structural deficiency in the mechanisms governing policy formation have to be overcome. Currently the system gives an incentive for individual governments to pursue policies of austerity and high real interest rates that give them an individual advantage in world bond markets and foreign exchange markets. When all countries pursue such policies the result is a profound deflationary bias to economic policy. Concerted action is needed to reduce real interest rates in Europe. Structural public deficits should be brought down over the medium term but action which threatens growth in the short term avoided. A realistic post-EMU framework for growth and employment has to be put in place to implement the propositions for infrastructure and environmental investment as recommended in the European Union White Paper. Such a strategy would also help maintain growth worldwide.
- The objectives of central banks must be widened to include policies for growth, employment, and balanced trade, instead of their narrow fixation on price stability. Workers have suffered sacrifices while global financial markets have contributed to the deflationary overkill of real interest rates and unwarranted currency speculation. The uncontrolled spread of new financial products such as derivatives have increased systemic risk.
- The work of the Bank of International Settlements (BIS) commissioned by the G7 to draw up guidelines for regulatory controls on derivatives trading and to improve the early warning systems on financial market instability are first cautious steps in the right direction. However, this must be policed effectively and the BIS, the International Monetary Fund (IMF) and OECD must cooperate to implement a more comprehensive framework to govern the operations of financial markets. This should include:- an international tax on foreign exchange transactions, the certification of financial markets with acceptable risk and prudential controls and the extension of transparency, disclosure and satisfactory reserve requirements of financial institutions. The goalmust be to stabilise financial markets, and tilt their operations away from speculative transactions and short-term profit taking, toward facilitating long-term productive investment.
- Governments face the challenge of adapting public policy to reduce the widening income gaps in many OECD countries as well as meeting the pressures of ageing populations on pension and health care systems. This requires maintaining a sound tax base for public finances against a background of globalisation. The failure to adequately tax capital income and profits has led to an erosion of the tax base and a disproportionate shift of the tax burden onto labour. The shift from income to consumption taxes has made systems more regressive. International agreements are needed to ensure balanced taxation of capital and profits, whilst public support for fair tax systems must be built up. The OECD must play a pioneering role in this area.
- Environmental taxes can help meet the goals of sustainable development. Although trade unions are sceptical as to the feasibility of complete tax switching between taxes on labourand natural resources, the fact that where such attempts have been made only one per cent of revenues come from "green" taxes means that much more can be done. Again the OECD should play a lead role in developing international agreements and ensuring that social concerns are met.
Translate Growth into Good Jobs - The Role of the High Quality Workplace
- OECD countries have to encourage firms to develop by following strategies which are both competitive and socially acceptable. Labour markets in OECD countries are becoming more unequal which is undermining social cohesion. Some firms are trapped in out-dated forms of production, competing in an ever tougher global market with low wage competition from other countries. On the other hand, there are firms that have shifted to new forms of work organisation in which a high premium is given to the flow of knowledge and innovation. These "high skill - high trust" organisations offer the only way forward. Good practice has to be applied throughout the economy to service and public sectors as well.
- Unions have a central role with management in working to build this "high quality" approach to change. Adaptable labour markets must be based on raising the skills and the functional flexibility of workers so as to exploit changing work organisation. They must not be based on flexibility to "hire and fire" and cut wages, which would be at best irrelevant and at worst could encourage the low wage/low skill route to competitiveness. The excess emphasis in the OECD's Jobs Study follow-up on this "negative flexibility" agenda is fundamentally flawed and must be changed.
- Government policy towards industry and services can help move economies onto higher growth paths. Action is needed to :
- encourage innovation and technological diffusion within a framework of good practice management techniques;
- develop a balanced regulatory framework in which the wider benefits as well as costs of regulation are taken fully into account, and in which there is transparency and full public and employee participation in the process of regulatory reform. Balanced OECD Guidelines can help in this respect;
- increase infrastructure investment in environmentally sound projects, which also develop the appropriate framework for the "global information society";
- the implementation of lifelong learning for all workers. The agreement by the 1996 OECD Meeting of Education Ministers to develop a "social partnership" route for lifelong learning must be implemented. The OECD work on "High Performance Workplaces" as part of its response to the G7 jobs initiative is welcome. More work needs to be done on issues related to vocational training and skills acquisition;
- the expansion of service sector employment on the basis of decent wages and labour standards. Almost limitless job creation potential exists in areas of unmet social needs. The public sector will have to continue to meet these demands, but innovative public/private partnerships are emerging alongside the development of cooperative sectors ;
- the reduction and reorganisation of working time and the extension of learning time. Productivity gains should be more evenly distributed to achieve hours reductions and job creation: learning time and training could also be increased by hours reductions. Systematic and excessive overtime should be eliminated, and where exceptional overtime is worked negotiated safeguards should ensure that as a principle it be compensated by time off.
Guarantee Core Labour Standards in Trade and Investment Agreements
- Governments are extending their systems of national laws governing intellectual property and investor rights to the global level. They have not shown the same willingness to guarantee basic labour and human rights worldwide. This is wrong. It will reinforce the view of globalisation as a "race to the bottom" which puts property ahead of people. The multilateral system relies on domestic support. That support will erode if it does not address the concerns of working people. Core labour standards must be guaranteed in trade and investment agreements.
- There is recognition on the definition of core labour rights as shown by the World Trade Organisation's (WTO) December 1996 Singapore Declaration, which highlighted:- freedom of association and protection of the right to organise, the right to organise and bargain collectively, freedom from forced or compulsory labour and the abolition of forced labour, freedom from child labour, and equal remuneration for men and women and freedom from discrimination in respect of employment and occupation. The OECD Study on Trade and Labour Standards has shown that there can be a positive two way relationship between these standards and open-trading policies. The issue of enforcement however remains. In export processing zones, as well as elsewhere, trade union rights are increasingly violated. In Korea the governments' and employers' attempt to further restrict freedom of association as a response to global competition was rejected by Korean workers.
- The "Singapore declaration" provided a mandate for further work on labour standards by the WTO and ILO, which must be followed up. The ILO should strengthen its machinery for the ratification and supervision of core labour standards. The WTO's Trade Policy Reviews should report on violations of core labour rights. A dialogue between the WTO and the ILO has to deepen so as to prepare the 1998 WTO Ministerial Council. Hemispheric and regional trade agreements must include labour rights clauses. The World Bank and the International Monetary Fund should integrate obligations of respect for core labour standards into all their lending and structural adjustment policies.
- The OECD must develop its monitoring and peer group pressure system for the respect of core standards in Member countries in the light of Korea's backsliding on commitments given. The OECD's Multilateral Agreement on Investment must incorporate the OECD Guidelines for Multinational Enterprises and include a labour clause based on internationally recognised core standards. The Ministerial Council should give the OECD a mandate to work further on labour rights issues, with regard to investment, Export Processing Zones and in its dialogue with non Member countries.
The Agenda for Development
- The eradication of poverty and the strengthening of democracy and social justice in developing countries is both an economic and a moral imperative. Fiscal austerity in the aid donor countries has reduced official development aid flows as a proportion of GNP to record low levels, while private investment flows into developing countries have doubled over a period of just 3 years. Private investment has been concentrated on a limited number of high or middle income countries with fast economic growth. Investment for the few does, however, not replace official aid for the many. Private investment alone is not a solution to poverty alleviation and is not a cheap alternative to OECD countries' commitment to development assistance goals.
- The increasing imbalances of aid disbursement amongst donors is demotivating those countries who have sought to increase or keep their programmes consistent with the UN goal. This may ultimately re-enforce the downward trend. However, some of the recent changes in orientation and quality of development assistance as shown by the OECD's Development Assistance Committee (DAC) are more encouraging and should be broadened further. Positive elements of development partnerships are the increasing focus on social infrastructure development, good governance and other participatory development strategies which are people-centered, promote democracy and fight corruption. Trade union managed assistance programmes that support the free and independent trade union organisations in developing countries and in transition countries are an essential part of sustainable development and democracy building.
- Fifteen years after the debt crisis began, many developing and transition countries remain burdened by unpayable levels of foreign debt. Past action imposing austerity, privatisation and deregulation has not been able to break the vicious circle of ever higher debt service and capital outflows, and has actually weakened the endogenous development potential. Therefore the new IMF/World Bank initiative for greater debt relief (including multilateral debt) is urgently necessary. However, progress is needed to increase the number of countries that can benefit, improve the level of debt reduction, redefine conditionality and advance the schedule for relief. The IMF's contribution to multilateral debt relief should be financed through the sale of the necessary amount of IMF gold reserves. The process of renewal started within the World Bank should be followed by a re-shaping of the IMF's role and policies. The allocations to the World Bank's International Development Association (IDA) should be provided promptly by all donors without unnecessarily stringent conditions. There is also a need for a substantial increase in Special Drawing Rights targeted at low income countries and countries in transition.
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A N N E X I
THE G7 - ROLE AND MEMBERSHIP
There have been renewed calls for a new structure of economic governance to replace the "Group of Seven" (G7) Economic Summits. Recent summits have shown more awareness of employment and social issues with the holding of Employment Conferences. This needs to be built upon. Their effectiveness could be increased through the development of an institutional back-up through the OECD.
A central issue for the Denver Summit is the integration of Russia into the Summit process, into other multilateral institutions such as the WTO and the OECD, as well as into the world economy itself. This must be on the basis of a socially balanced reform programme, the rule of law and continuing democratisation including respect for basic human rights.
Russia's transition to a market economy has been accompanied by the destruction of half of its industrial potential, a collapse of social safety nets, mass poverty and, as a result, a dramatic decline in both life expectancy and birth rates. The reform process in Russia is undermined by a growing divide in Russian society: a few people have become much richer whereas a large majority of the population has fallen below the poverty line, not benefitting from reform. Living standards are at their lowest level for decades. Three quarters of Russian workers are owed substantial unpaid wages. Many mono-industrial cities are in decay and unemployment is soaring. As a result, peace and stability are at risk.
Political stability depends on economic and social stability, a reflection of people's confidence in their future. This can only be achieved if the following most urgent problems are tackled with high priority :
- introduction of the rule of law and respect for democracy and human rights ;
- an end to the intolerable non-payment of wages and arrears in social transfers ;
- channelling investment into the real economy not into short-term financial speculation ;
- achievement of sustainable development closely linked to social progress in the spirit of the World Social Summit's conclusions ;
- eradication of widespread bribery and corruption among the elites, tax evasion and fraud, and introduction of transparency and accountability in the privatisation process.
- Fifty years after the Marshall Plan was initiated there is an urgent need for national action and international support to remove poverty and build and promote social stability in Russia and the states of the former Soviet Union. International assistance should be conditional on respect for core labour rights and in addition include the protection of wages as specified in ILO Convention No. 95. IMF-conditioned stabilisation programmes must take account of this. Monetary stability and combatting inflation is not just a matter of monetary and fiscal discipline, but also requires strong social institutions.
- The cooperation agreement between the OECD and the Russian Federation concluded in 1994 should prominently include work in the areas of good governance, a socially acceptable model of economic restructuring, labour market and social policy reform based on social dialogue and consensus, and education and training policies.
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A N N E X II
THE OECD - ROLE AND MEMBERSHIP
In a globalising world the OECD is needed as a progenitor of international economic governance. If it is to meet this challenge, it must provide a balanced analytic "clearing house" for economic and social policy in industrialised economies. It also has a role to play in establishing more effective rules for the global economy, including a social dimension. It must be flexible in operation, not technocratic, and open to all its stakeholders - notably working people and their organisations.
The OECD must remain a community of shared values. It is much more than just an economic organisation. The unusual circumstances of Korea's accession to the OECD have shown the need for OECD governments to reaffirm their adherence and commitment to fundamental workers and trade union rights as defined in the core Conventions of the International Labour Organisation (ILO). An OECD instrument encapsulating the core ILO conventions is needed. This could have avoided what should be regarded as an abnormality.
The Republic of Korea should, as the most recent member of the OECD, amend those key elements of its labour legislation which continue to contravene the core ILO standard on Freedom of Association. Ahead of the Council decision to invite Korea to OECD membership, the Korean government made a solemn commitment to reform its existing laws and regulations on industrial relations, to bring them in line with internationally recognised standards, including those covering basic human rights such as freedom of association and collective bargaining. Legislation was rammed through the National Assembly on 26 December 1996 in a way which was regarded by many as an undignified procedure for an OECD member. Some progress was made in the revised laws passed on 10 March 1997. Yet more needs to be done not least in the area of civil servants' and teachers' rights to freely join a trade union of their choice. The Ministerial Council should therefore renew the mandate to the Organisation to continue the process of peer pressure by closely monitoring the labour situation in the Republic of Korea until core ILO standards are fully met. TUAC will continue to play an active and constructive role in this jointly with its affiliated unions and the trade unions in Korea.
The OECD's "outreach" activities and future membership negotiations should become broader and not just focus on trade and investment liberalisation. The globalisation agenda has to meet peoples' aspirations not only those of business. In drawing up cooperation programmes with its partners, the OECD must make it clear from the outset that there is a full menu of OECD activities, not just an "a la carte" choice driven by an agenda of competition at "any cost". Recent efforts in the World Bank to undertake critical internal audits of the effects of its policies could serve as a model for the OECD. This would apply to the policy dialogue workshops with non members (DNMEs), the programmes with India and the People's Republic of China as well as to the Emerging Market Economies Forum (EMEF).