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June 2000


Introduction and Summary

1. At the start of the 21st century the global economy appears set for a period of faster growth after the slowdown triggered by the Asian crisis in 1997. The potential growth of productivity brought about by technological change opens the possibility of a “new economy” with higher living standards. This possibility must be used to devote political will and resources to addressing the problems of those in the global economy who have not benefited and, in fact, have seen their relative positions decline. The reality for the vast majority of the world’s population is continuing poverty. Global inequality continues to rise both within and between nations, with the risk of a “digital divide” contributing to the social divide. Many working people see themselves and their families as losers in the globalisation process and excluded from any benefits of change. Workers in developing countries such as in Asia, who built the economic miracle continue to see themselves and their families sacrificed to a financial crisis for which they had no responsibility. Against this background and the failure of the WTO Ministerial Council in Seattle there is a wide questioning of the legitimacy of multilateral institutions and, indeed, the process of global economic integration.

2. Governments must respond to this challenge and abandon the market deregulation approach to globalisation that has dominated the international institutions over the last decade. Economies must be shaped and governed by public policy if they are to function effectively in meeting the expectations of societies. This is as true in a global environment as in national ones. OECD countries have learned governments must act effectively to see to it that economies achieve sustainable growth, full employment and social inclusion. Today there is also a need to develop economic governance for the global economy based on similar rules to manage global markets and create effective international economic institutions which are transparent and accountable. The objective must be to establish a form of development, which is supportive of democracy and socially and environmentally sustainable.

3. The OECD Ministerial Council and Okinawa Summit provide governments with the opportunity to demonstrate their commitment to meeting these goals. By simultaneously increasing the transparency and accountability of the international organisations they can rebuild the public legitimacy of the multilateral system. As a priority governments must:-

- Take co-ordinated measures to sustain and balance demand growth in the world economy with the objective of reducing global poverty and restoring full employment (§ 4-9);

- Re-regulate international financial markets and launch a wide-spread public debate to establish legitimacy for the reform of the financial institutions (§ 10-12);

- Act comprehensively through development assistance policies, debt write-off and the development of broad-based social safety nets and policies of the International Financial Institutions (IFI’s) to meet the objectives of poverty reduction in developing countries (§ 13);

- Move decisively to ensure that the global trade and investment systems reinforce the work of the ILO to guarantee core labour standards (§ 14-17);

- Set up transparent and effective implementation mechanisms for the OECD Guidelines for Multinational Enterprises (§ 18);

- Use the benefits of the “new economy” by encouraging a high road to the management of structural change through the improvement of education, skill and productivity levels (§ 19-20);

- Ensure that growth is socially and environmentally sustainable (§ 21-24).

Growth and social cohesion

4. Recent US experience has shown that sustained demand growth can yield improved productivity and welcome, though long delayed, reductions in inequality. But additional action is necessary to ensure that this growth and its benefits are shared more widely. Increased co-ordination of economic policy is necessary to balance growth globally. Now is the time to sustain higher levels of growth and employment without which there will be long-term damage through widening social division, social alienation and lost government legitimacy.

5. The US trade deficit remains a potentially serious source of financial instability, as does the volatility in asset prices. In tackling these issues the US authorities must continue to support growth in the real economy and not resort to broad interest rate increases to deal with narrow and specific problems. Fiscal policy must be geared to supporting long-term structural priorities such as infrastructure, education, and research and development expenditure, and in particular to achieving a fairer distribution of post-tax income as opposed to making misguided tax cuts for the rich. 

6. Faster growth is now emerging in Europe while core inflation remains subdued and the effects of energy price increases are receding. Sustained growth rates of 3 per cent and above are attainable and should both bring down unemployment and raise employment rates. Abundant labour supply and co-ordinated wage settlements will prevent inflationary bottlenecks appearing. Full employment is the goal, which macroeconomic policy must accommodate. While there is potential for Europe to enter a period of higher non-inflationary growth, it is also significantly lagging behind the US economy. It is essential that the European Central Bank adopts a monetary policy stance that allows faster growth to continue so as to exploit fully the potential of the “new economy”. Sustained domestic demand and private consumption are the main pillars of this, confidence must not be weakened. Any strategy that relies on slow growth and export orientation will fail. Faster growth will also restore the value of the Euro and contribute to rebalance the current account disparities between the major economic regions. The easing of fiscal constraints through increasing government revenues provides a number of opportunities for governments to focus on infrastructure investment, investment in education and health care, and making provision for future demographic changes while easing the tax burden for lower incomes.

7. Recovery in Japan is a prerequisite for lasting growth in Asian economies and for balanced growth worldwide. However, rising unemployment, stagnating incomes and the risks of ageing society have heightened insecurity and dampened consumption. Japan must act decisively to remove this insecurity by developing reliable pension systems, improving training and retraining and investing in new areas of activity such as information technologies, environmental protection and health care. Authorities should continue to make effort to ensure the recovery and stable growth, and to create employment through active and effective budgetary measures for these areas above and through accommodating monetary policy. 

8. Developing and crisis-hit countries in Asia, Latin America and Africa must be given the means to expand domestic demand thus helping to restore global growth and reinforce political stability. Large-scale debt relief can contribute to growth. IMF stabilisation programmes must shift from austerity to the support of growth in domestic demand. Back wages due to Russian workers must be paid, allowing some relief from the vicious circle which has led to lost tax revenue and prolonged the financial crisis. 

9. Governments must maintain a sound tax base for public finances against the background of globalisation. The growth of offshore tax havens and international tax competition have eroded the tax base and disproportionately shifted the burden onto labour. Systems have become more regressive through the shift from income to consumption taxation and must be revised. Governments must act immediately to complete the OECD work programme to stop unfair tax competition between countries.

International rules for financial markets

10. The Asian financial breakdown and the recurring financial crises of recent years are not inevitable events. They are the result of failed policy. Excessive deregulation of the international financial system has left many developing countries vulnerable and unprepared in the face of unpredictable flows of speculative capital. In Asia, reckless lending by international financial institutions and reckless borrowing by domestic firms and institutions, combined with fickle investor expectations to precipitate the crisis. The cost in terms of lost livelihoods, unemployment and poverty has been borne by working people.

11. Despite this, workers have been denied a seat at the table in the discussions between Finance Ministries and Central Bankers over the financial architecture. These discussions therefore lack legitimacy and credibility. The new focus on flexible exchange rates, better information, transparency and surveillance, together with some limited bail in of private creditors does not amount to a credible response. Governments and international financial institutions must establish a consultative mechanism with the international labour movement, open a broader public consultation on the financial architecture, and introduce policies to:-

- Reduce the instability of the G3 currencies, which are out of line with underlying fundamentals, through effective policy co-ordination between Europe, North America and Japan; 

- Recognise the right of governments to control short-term foreign capital flows in the interest of domestic macro-economic and social stability;

- Tax foreign exchange transactions to reduce speculative currency flows and to raise resources for the support of poverty alleviation;

- Establish binding international standards for the prudential regulation of financial markets covering capital reserve standards, limits to short-term foreign currency exposure, controls and certification on derivatives trading and other forms of leveraged investment;

- Develop an effective early warning system based on improved information systems concerning currency flows, private debts and reserves.

12. In the light of the Asian crisis, concrete action should be taken at the regional level, parallel to international action, to avoid any recurrence of the crisis. This action should include the information exchange and monitoring of short-term capital flows in the region, the creation of a fund or an agreement with a view to stabilising currencies, the expansion of reciprocal trade and investment and the establishment of social safety nets. The government of Japan should take the responsibility to realise these measures in co-operation with the other Asian countries, for example through its ODA programmes.

The social agenda of globalisation and development

13. The G8 and OECD countries must reaffirm their commitment to the poverty alleviation and qualitative development goals they set out in 1996, especially the aim of halving world poverty by 2015. The recent upturn in ODA must be further expanded. The welcome commitment by some countries to cancel official debt for the poorest countries must now be followed by all OECD countries and the process must be accelerated to provide far-reaching debt relief in the shortest possible time. The international financial institutions should likewise write off debts to the poorest, and be allowed to raise adequate finance to do so. As host of the G8 summit, the government of Japan should play a leading role in this area. The resources freed up by debt relief must be used to promote poverty eradication specifically through investment in basic health and education. Beneficiaries must be obliged to observe labour and other human rights as a condition for debt relief. Trade unions and other representatives of civil society should be involved in the monitoring of the use of these resources. The best way to achieve this is to create an independent fund in local currency to be financed by the payment from the indebted government of the amount that corresponds to the regular debt repayment.

14. If trade liberalisation is to have legitimacy then it must be made coherent with wider concerns of public policy such as environmental protection and sustainable development, food and product safety and the observance of fundamental labour rights. Developing countries must be better integrated into the WTO decision-making process and given increased access to industrialised country markets within a framework of adherence to core labour standards. 

15. The June 1998 ILO Declaration on Fundamental Principles and Rights at Work was strongly supported by trade unions, employers and governments in developing and industrialised countries alike. It is unambiguous that all ILO member states have an obligation to respect core workers' rights. The Declaration needs a strong and effective implementation mechanism in the ILO. Moreover, it represents a standard, which must become “system-wide” and given effect in the programmes of the international institutions. This must be one of the goals of the 2000 UN Social Summit in Geneva. Core labour standards should be embodied in IMF criteria and World Bank development policies. To gain legitimacy the WTO needs to incorporate rules requiring its members to observe the fundamental standards of the ILO. The WTO already has rules to protect intellectual property and it can no longer ignore abuse of workers’ rights. 

16. Observing core labour rights would not remove the comparative advantage of developing countries. They extend to all workers in the global economy the right to form unions to negotiate wages and conditions of employment. They give children the right to a childhood, they outlaw forced labour, prison labour and discrimination. The OECD Report on Trade, Employment and Labour Standards, and subsequent work has found that observance of such rights is consistent with good trade performance and economic development. Observing core rights allows countries to follow the “high route” to development whereby the benefits are spread more fairly, accountability increased, and corruption reduced. G8 countries can support this process directly by revising the OECD's mandate covering Export Credit Guarantees and the environment, to incorporate social indicators based on ILO core labour standards.

17. A further lesson of Seattle is that WTO trade negotiators must incorporate broader concerns in all trade policy discussions. The WTO must become democratic and transparent. Multilateral Environmental Agreements must be respected. In the services sector, in particular, the GATS negotiations which began this year must take into account the need for public provision of basic services like education and health, and ensure that WTO members retain the right to declare such sectors as non-tradable public services.

18. A central part of the “social dimension” of globalisation must be the effective regulation of the global activities of multinational enterprises to ensure that they observe both core labour rights of their employees and also contribute to the “high route” to economic development. The OECD Guidelines for Multinational Enterprises have the potential to contribute to the realisation of this goal. To achieve this, following the current Review of the Guidelines, governments and the OECD must rapidly set up transparent and effective implementation mechanisms, in co-operation with trade unions. An adequately resourced outreach programme must also be put in place to develop the Guidelines’ implementation beyond the OECD area.

Workers and the New Economy

19. Economies and societies around the globe are experiencing an unprecedented period of technological change, brought about by the growing application of information and communication technology. These technologies now affect firm-to-firm transactions generating new forms of production and exchange as well as new forms of work. The “new” knowledge-based economy has the potential to facilitate greater prosperity and non-inflationary growth. However, these developments call for new and updated regulatory mechanisms if they are to provide for a better and more prosperous future. Special attention must be given to redressing a growing “digital” divide that reinforces and deepens social inequality. 

20. Investment in people is essential to ensure that the transition towards a knowledge-based economy does not worsen existing social problems of unemployment, exclusion and poverty. Government policies must accord a high priority to investment in human and social capital. In particular, policies must: 

- Invest in education and training systems appropriate to the needs of a knowledge-based economy and to the need for quality of employment. This must include better access to new learning and training opportunities tailored in accordance with the needs of different target groups;

- Ensure that “lifelong learning” is made a reality and an entitlement for all, not only to help workers gain from economic and technological change but also to contribute to personal fulfilment and social cohesion. This requires joint action in partnership by governments, business and unions;

- Promote agreements between trade unions and employers focusing on the management of change. They contribute to the improvement of lifelong learning by establishing links between new patterns of working time, job rotation and training. In addition, they contribute to efforts to overcome skill shortages;

- Encourage constructive industrial relations and social dialogue in the knowledge-based economy. It is of particular importance that workers and their unions should have access by right to online information and communication networks at the workplace;

- Reconcile the need for security with adaptability of the workforce by supporting not weakening of social protection;

- Encourage forms of work organisation providing for enlarged job content and enhanced skills, in order to contribute simultaneously to productivity growth and job quality;

- Ensure, in partnership with unions and firms, affordable access by individuals to modern means of communication and information networks, in particular to the Internet. Moreover, policies must guarantee appropriate privacy and protection of personal data;

- Ensure equity in employment and access to education. In particular women must be given increased access if society is to utilise one of its greatest sources of human potential.

 Sustainable development

21. The implementation of sustainable development as set out in “Agenda 21” of the UN Rio Conference on Environment and Development is progressing too slowly. The G8 and OECD governments have the responsibility to lead the process and must implement a new initiative on sustainable development in advance of the “Rio + 10” meeting of the UN, scheduled for 2002. Central to this must be integrating the three “pillars” of environmental, economic and socially sustainable development.

22. The social sustainability of development has been largely absent from governments’ priorities. This must be changed, and the social dimension of sustainable development must become a priority. Poverty alleviation, employment impacts of transition, equitable access to resources and action at the grass roots and workplace level must now be made part of the real policy agenda. Climate change illustrates the point. To date, there is little understanding of the employment implications of environmental degradation, compared to the implications of implementing the Kyoto protocol.

23. Public reaction to biotechnology and GMOs shows that ignoring the social dimension of sustainable development can have a high cost. Biotechnology is expanding rapidly in many industrial sectors and there is a need to give higher priority to protecting the health and safety of consumers through trustworthy labelling and information, especially on the allergenicity of genetically modified foods. The repercussions on workers involved in biotech production processes and in the distribution of products are largely neglected and must be addressed urgently. It is imperative that higher levels of core funding be made available for independent scientific research, which must be matched by a more consistent and rigorous approach to the use of scientific advice in policy-making by governments. The expected growth in biotechnology calls for more industry accountability and transparency. Promoting the involvement of workers and their unions in biotechnology decision-making is a necessary prerequisite and unions must be represented in the OECD proposed “International Forum” on biotechnology and food safety. Food and public safety can be enhanced by this involvement and it can become the basis of support for programmes aimed at addressing the social implications of biotechnology. This new technology must be harnessed to creating jobs and reducing poverty.

24. Biotechnology must not be allowed to aggravate problems of development by narrowing access to intellectual property or technology transfer. In particular, the further growth of concentrated control over the genetic pool of plants and foods must be curtailed. The granting of licences for the use of intellectual property rights must take place in a manner that contributes to the long term development prospects of the host countries. The UN Convention on Biological Diversity should be strengthened to more clearly incorporate the “precautionary principle” and its ratification must be vigorously promoted.

The G8's Responsibility for Promoting Peace and Social Justice

25. The history of the last ten years has shattered the hopes that the end of the Cold War would bring with it a more peaceful and just world. Territorial tensions, ethnic and religious conflicts have intensified; the use of arms and armament sales are on the increase; and there are repeated recorded nuclear tests and development of nuclear weapons. Such circumstances, as well as the crisis affecting international organisations, the deterioration of the environment and recurring financial crises, indicate that G8 co-operation alone cannot solve today’s problems. Therefore, all countries, both developed and developing, should co-operate together to tackle the challenges, in particular by strengthening the functioning of the international organisations. The G8 governments should develop the leadership to ensure this is achieved.

26. It is the UN’s mission to settle international conflicts and to keep the peace. It must be given sufficient means and the appropriate competence to fulfil its commitments. Though precise and impartial information is important in settling armed conflicts, the UN is not equipped with the power and mechanisms to obtain such information. And its actions are also limited even in emergencies. It is now necessary first to examine in depth the procedures so that UN decisions receive global public support and secondly to give stronger power to the UN to enable it to respond more promptly. The International Court of Justice should also be fully utilised.

27. We are concerned that there are still serious examples of suppressed democracy in the world. In particular, we reconfirm our protest against the military regime of Myanmar. The G8 governments should support the resolution on the widespread use of forced labour in Myanmar adopted at the International Labour Conference in 1999 and take adequate measures to ensure that the government abolish forced labour and resume the dialogue with the NLD with a view to restoring democracy.


(1) This statement has been prepared by the Trade Union Advisory Committee to the OECD (TUAC) in co-operation with our partner organisations, notably the International Confederation of Free Trade Unions (ICFTU), the World Confederation of Labour (WCL) and the European Trade Union Confederation (ETUC).

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