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TUAC INITIAL SUBMISSION ON THE 1999 REVIEW OF OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
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- There is a social backlash against globalisation and what is perceived
as the unaccountable power of multinational enterprises. The lack of a
proper policy framework to govern investment is feeding this.
- The OECD Guidelines could help to counter this, yet have been allowed
to fall into disuse.
- Trade unions and other groups are working with those responsible MNEs
to establish a corporate culture based on social and environmental
However this ad-hoc response cannot replace government based regulation
- The central objective of the Review should therefore be to strengthen
the implementation mechanisms of the Guidelines.
- This submission makes a number of practical suggestions for achieving
. a renewed call by governments on multinationals to
observe the Guidelines;
- Revision of the text should be limited, but some updating could take
place to cross refer to the:-
. reform of National Contact Points;
. establishment of monitoring process of observance under the
. a joint ILO/OECD Working Group to be established;
. an annual report on the Guidelines implementation;
. linking of the Guidelines to any eventual multilateral framework
. ILO Declaration on Fundamental Principles and Rights
I - Introduction
. European Union Directive of European Works Council;
. Agenda 21 of the Rio Conference on Sustainable Development.
1. The current Review of the OECD Guidelines for Multinational Enterprises
takes place at a critical time. The growth of foreign direct investment
has been one of the major forces driving globalisation since the early
1980s. The speed of globalisation has however outpaced the ability of
many institutional structures to adjust. In part this is because of the
government approach to deregulation and liberalisation as ends in themselves,
and the assertion that global markets do not need governance or regulation.
The result has been a social backlash as witnessed by the successful campaign
to stop the Multilateral Agreement on Investment.
2. TUAC has called on OECD governments to draw the correct conclusions
from the MAI debacle. The global economy does need multilateral rules for
investment. But these rules have to strike a balance between rights and
responsibilities of investors; the rights of investors and rights of governments,
and the rights of other groups notably labour.
3. The OECD Guidelines could play one part but nevertheless an important
part in contributing to this balance. The notion of balance was at the
heart of the 1976 OECD Declaration on International Investment and Multinational
Enterprises. This established a balance between on the one hand what multinational
enterprises could expect from governments in the National Treatment instrument,
and on the other hand what governments, workers and trade unions could
expect from multinationals in the Guidelines.
4. However, the Guidelines have fallen into disuse and risk becoming
largely irrelevant to the current debates on globalisation. The Review
is therefore a major opportunity to reassert the relevance of the Guidelines.
TUACs survey of national affiliates experience with the Guidelines suggests
that few OECD countries have functioning National Contact Points, in essence
breaching the spirit of the Council Decisions on this. Those rare recent
clarifications of the Guidelines issued by the CIME have been incomprehensible
to anyone other than those involved in their drafting. Some companies have
seen a need to develop their own corporate codes that are of varying quality
and effectiveness. Only a small number make any reference to the OECD Guidelines.
Yet the Guidelines could have played a key role as a governmental reference
point for non-governmental codes.
5. The central objective of the Review should therefore be to strengthen
the implementation mechanisms of the Guidelines and raise their profile,
so that alongside relevant ILO instruments they can form a practical element
in the architecture of global governance. The Washington G8 Labour Ministers
Conference has given an important impetus to this view by noting that there
is a need for international promotion of rules and codes of conduct to
encourage socially responsible business. The OECD can play a role on this
(1) . Section IV of this submission makes a series of practical suggestions
for fulfilling this role.
6. Textual revisions should therefore be very much a secondary consideration
in the Review and focus on those areas where consensus has developed in
other organisations. This should allow relatively straightforward revision
of the text to bring it up to date. Section V of this submission makes
suggestions where this is the case, notably by bringing the Guidelines
into line with the ILO Declaration on Fundamental Principles and Rights
at Work; the European Union Directive on European Works Councils; and relevant
chapters of Agenda 21 of the RIO Conference on Sustainable Development.
II - The Changing Agenda of Globalisation
Globalisation is a fact of life. But I believe we have underestimated
its fragility. The problem is this. The spread of markets far outpaces
the ability of societies and their political systems to adjust to them,
let alone guide the course they take. History teaches us that such an imbalance
between the economic, social and political realms can never be sustained
for very long. (2) .
7. This comment by the Secretary-General of the United Nations follows
closely the analysis of the OECD Secretary-General for 1997 on the triangular
paradigm (3) , in which political stability, economic efficiency and social
progress are seen as interdependent and need to remain in balance. He went
on to argue that globalisation was at risk due to insufficient attention
to the social aspect of the paradigm. The United Nations Secretary-General
quoted above went on in the same speech to call for a social contract with
business whereby in their own activities multinationals would seek to ensure
conformity to international standards on environmental protection, human
rights and labour standards.
8. Both the OECD and United Nations are correct to identify a growing
backlash against globalisation and what are seen to be the unacceptable
activities and unaccountable power of multinational enterprises in this
process. The failure of the MAI was just one manifestation of this. For
their part some MNEs have recognised the problems within their own ranks
and are working, both in a spirit of self interest and co-operation, with
trade unions and others to develop their own corporate culture based on
social and environmental responsibility. In a climate where a significant
part of a companys stock value may depend on its brand image this has
economic logic. One part of this move to socially responsible business
has been the growth of Corporate Codes of Conduct. For their part trade
unions will work with and support those genuine efforts in this area. However,
notwithstanding the progress being made in some quarters, there is a consensus
that these efforts are at best an ad-hoc response to the problems of labour
rights and environmental abuses around the world. For example, only a minority
of such codes include the internationally agreed core labour standards
of the ILO Declaration on Fundamental Principles and Rights at Work, and
many lack independent verification. Moreover, in their worst forms they
can be viewed as a cynical attempt to gain a public relations advantage
in the face of continuing abuses. It is for these reasons that trade unions
see the development of codes of conduct when effective as a welcome, but
supplementary approach to a broader range of regulatory measures.
9. The OECD Guidelines for Multinational Enterprises could have a central
role to play in this process. On the one hand as voluntary recommendations
addressed by governments to multinationals the Guidelines define the substance
of social responsibility and good practice that should be implemented.
On the other hand governments may also transpose the Guidelines into their
national law and practices. Already OECD Member governments and willing
non-Members have to transcribe into domestic law crucial elements of the
follow-up and implementation mechanisms. To-date the 29 Member governments
of the OECD plus Argentina, Brazil and Chile have agreed to initiate National
Contact Points within their government structures to oversee matters related
to the implementation of the contents of the Guidelines. However, only
a minority fulfil their remit. On the basis of the responses by affiliates
and trade unions in the three non-Member countries the TUAC submission
(4) to the Review of the Guidelines proposes a range of workable proposals
to reverse that situation.
III - The TUAC Survey on the OECD Guidelines for Multinational
10. The TUAC survey on the Guidelines was disseminated to all TUAC affiliates,
and through the ICFTU to trade union national centres in Argentina, Brazil
and Chile. A series of questions were posed relating to: the functioning
and effectiveness of the NCPs; the experience of trade unions as regards
the adherence to or otherwise of the contents of the Guidelines chapter
on Employment and Industrial Relations; and similar experiences with the
chapter on Environmental Protection. The following is a summary of the
The National Contact Points
11. Taking the five questions as a whole only four NCPs go some way
to fulfilling their remit. The vast majority are little more than empty
shells. Most have not consulted trade unions on their terms of reference;
not involved trade unions in their work or done so in a reactive manner;
not actively assisted in solving specific cases; and not taken up any cases
on its own initiative.
12. The OECD should be particularly concerned that some TUAC affiliates
saw little point in responding to the survey. Previous requests for information
and help in solving problems with certain MNEs had been ignored or not
followed up, and that had led them to believe that the NCP had been closed.
That experience should have a salutary effect on those arguing that satisfaction
levels are high due to the low numbers of contacts by trade unions to the
NCPs. Typical responses to the survey questions on the NCPs included:
The NCP is so low key that it is almost subterranean. Enquiries
with the (relevant government department) produced the response that if
the body existed, it was not something of which the (department) was conscious.
In one instance the NCP has interpreted its mandate so as to be meaningless:
The NCP does not investigate factual issues, adjudicate labour-management
disputes, or enforce employer behaviour standards. No legal consequences
follow from actions taken by the NCP.
13. The responses were mixed in the case of new OECD Members. Responses
suggest that some NCPs are increasing their profile and becoming engaged
in promotional activities, while others have made no attempt to contact
trade unions or to fulfil their wider mandate. The experience of the TUAC
secretariat bears witness to this. Following its accession to the OECD
a government official designated as the NCP visited the Organisation to
discuss ways in which to deal with Guidelines related matters. Frustrated
at the way certain government representatives within national delegations
and some in the Secretariat had suggested that little attention should
be paid to this work, the official contacted the TUAC Secretariat for help
14. Turning to the trade union experience with NCPs in Argentina, Brazil
and Chile, surprise was expressed in both Argentina and Brazil at their
existence. That was combined with frustration that no efforts had been
made by any government to inform the unions of their adoption of the Guidelines
and their commitment to initiate a NCP.
Employment and Industrial Relations
15. A range of questions were posed in the survey to gauge the way in
which MNEs are adhering to the Employment and Industrial Relations provisions
of the Guidelines. TUAC last surveyed its affiliates on this issue in 1996,
and therefore a comparison can be made.
16. Overall the situation is worse today when compared with 1996. For
example, complaints about the general behaviour of MNEs have spread beyond
North America to many other countries, while increasing in numbers. Complaints
have also spread beyond US based MNEs.
17. In general a trade union presence in a MNE or its subsidiary ensures
that the company adheres to the provisions of the Guidelines. Conversely,
unorganised enterprises are more likely to breach the Guidelines provisions.
However, a trade union presence is no longer a guarantee of good working
employment and industrial relations practices. More trade unions in more
countries are running into major problems of opposition and hostility to
trade union recruitment and organising campaigns, in breach of paragraph
one. In tandem, the use of threats, including re-location to try and influence
the outcome of bargaining continues to increase.
18. Increasing difficulties are being reported over a trade unions
ability to gain information to enable them to obtain a true and fair view
of the performance of the enterprise. US based MNEs are among the worst
offenders here, but they are by no means alone. A frequently cited reason
is the fragmentation over lines of command between central managers and
their subsidiaries, which may reflect the fact that more and more governments
have taken a hands off approach to the enforcement of labour related legislation
and norms. The implementation of the European Union European Works Council
directive is reported as helpful, but no guarantee of an enterprise respecting
its provisions. Within this greater numbers of MNEs are not providing reasonable
prior notice of intended closures, collective lay-offs and dismissals,
while training systems are becoming fragmented.
19. The responses to the survey when set against those in 1996 point
to a deterioration in the way in which many MNEs are living up to the requirements
of the Environmental Protection chapter of the Guidelines. This is especially
worrisome given the consensus view that the chapter is weak and lagging
behind best practice in this area. While enterprises in western Europe
are for the most part adhering to the Guidelines in this area, there are
increasing problems elsewhere. The reasoning behind this is two fold. Firstly,
it is part of the general problem where governments have taken a hands
off approach to managing the activities of multinationals. Secondly, it
is a reflection of the trend in which environmental regulations are being
replaced with measures aimed at voluntary compliance by business.
20. Increasing problems were reported in North America, in particular,
but not confined to the border region between the US and Mexico, and the
Maquiladoras zones. Specific reference was made to problems associated
with an increase in water and air pollution, hazardous and toxic waste
dumping and further environmental and health risks such as cholera, typhoid
and birth defects. As regards the chapters provisions on health and safety
issues in general, and co-operation by enterprises with the competent authorities
in line with the Guidelines, trade unions are seriously concerned that
even these relatively weak provisions are routinely breached.
21. Trade unions in central Europe are encountering more difficulties
in the environmental area. This is particularly, but not confined to non-European
based MNEs. As regards Argentina and Brazil, there is a worsening situation,
especially where privatisation of utility industries has resulted in foreign
22. The responses to the survey highlighted a generalised sectoral dimension
to environmental problems that cuts across all geographical regions. Some
of the worst offenders are enterprises in natural resource sectors, including
mining, forestry, water, along with those in the chemicals sector.
IV - Responding to the Critique: Focusing on implementation
23. The experiences with the implementation mechanisms and contents
of the Guidelines among those TUAC affiliates and trade unions in Argentina
and Brazil that responded to the survey paint a depressing picture. In
addition, a sizeable minority of affiliates have completely given up on
the Guidelines, not because they are satisfied with the activities of MNEs,
nor because they feel that domestic regulations serve their needs, but
because they have lost faith in the ability of their government to implement
24. The OECD must now effectively respond to that damming critique.
Marginal changes to the text alone with no real reforms to the implementation
mechanisms will not suffice. That would signal the continuation by governments
of the failed business as usual approach to regulatory mechanisms governing
the behaviour of MNEs. In turn that would further undermine the standing
of governments in the eyes of working families and trade unions and feed
the backlash against the OECD.
25. The implementation of the following proposals would, however, indicate
that governments do take their responsibilities seriously in this area,
and are willing to meet the TUAC critique of the Guidelines. The Review
should therefore lead to the implementation of the following proposals
at the Spring 2000 meeting of the OECD Council of Ministers.
National Level Initiatives
26. The 1996 OECD Report on Trade, Employment and Labour Standards made
recommendations with regard to improving the implementation of the Guidelines:
The OECD Guidelines on Multinational Enterprises have a role to play
as a voluntary instrument to promote reasonable behaviour by MNEs. This
role would be enhanced if home and host countries make it known that they
expect foreign investors to follow the Guidelines world-wide and if non-Member
countries were encouraged to endorse the Guidelines. ... This would send
a clear message of the importance OECD governments attach to the respect
of these standards. (5) This can be done immediately.
27. For the Guidelines to carry weight and be effective, governments
must ensure that the NCPs fulfil their mandate. In practice, few governments
can claim to have done this. As is clear from the TUAC survey the vast
majority of NCPs are but empty shells, and in some cases undermine any
support and legitimacy for the Guidelines. These criticisms apply for the
most part to those governments that have recently joined the OECD, along
with the non-Members that are supposed to have implemented the Guidelines.
28. The OECD should establish some general orientations for the operation
of the NCPs. Under these they could be encouraged to be tri-partite bodies,
with a mechanism to include NGOs when matters are discussed relating to
environmental and consumer related aspects of the Guidelines. That might
energise the implementation, promotion and dissemination of the Guidelines,
while giving a broader sense of shared ownership and responsibility by
all interested parties. Regular meetings of the tri-partite NCPs should
also be held outside of the regular CIME meetings that focus solely on
Guidelines related issues. Agreed annual reports by these bodies detailing
developments with the Guidelines should be submitted to the OECD meetings
of the Council of Ministers.
OECD Level Initiatives
29. The CIME terms of reference should be revised, such that the Working
group on Multinationals becomes the co-ordinating body of the re-constituted
NCPs, reporting to the main Committee. It could co-ordinate the regular
meetings of the NCPs and the annual report to Ministers.
30. Serious reconsideration should be given to the process of discussion
of cases by the CIME. This could be improved by establishing a panel of
experts who would make recommendations on specific cases raised to it concerning
the operation of the Guidelines and so be able to name companies. This
could consider cases for both observance and non-observance of the Guidelines.
It also need not operate with unanimity in decision-making.
31. A joint ILO/OECD working group could also be established to examine
common work on progressing core labour standards.
V - Textual Revisions
32. Limited revisions are required to modernise the Guidelines. The
flagship chapter on Employment and Industrial Relations will require updating
in the following areas. A cross-reference is necessary in the introduction
to the 1998 ILO Declaration on Fundamental Principles and Rights at Work.
In addition those elements of the Declaration not at present in the Guidelines
text should be incorporated: the effective abolition of child labour; the
elimination of all forms of forced or compulsory labour; and the elimination
of discrimination in respect of employment and occupation. Furthermore,
references to the actual ILO Convention numbers should be inserted into
the text, for example, Conventions 87 and 98 on freedom of association
and rights to collective bargaining.
33. Beyond these changes the text should be expanded to include recent
developments in areas such as workers information and consultation rights,
including the 1994 European Works Council Directive, and its contents.
34. The 1997 CIME clarification over the closure by Renault of its Vilvoorde
plant highlighted the inconsistency of the text on the issue of reasonable
notice. This should be revised such that workers and their trade unions
be given notice of major changes in operations before the final decision
is taken, with no recourse to a refusal on the grounds that exceptional
35. Of late the command and control mechanisms of MNEs have become increasingly
fragmented, leading to situations where it has been almost impossible for
some trade unions to get an effective management response when problems
have arisen. In other cases fragmentation has even led to embarrassing
situations between parent companies and their subsidiaries and sub-contractors.
The Guidelines must therefore make it clear that the parent company has
the ultimate responsibility in overseeing the implementation of the Guidelines
by its subsidiaries, and importantly any sub-contracting companies, as
proposed by the 1996 OECD Report on Trade, Employment and Labour Standards.
36. There is broad agreement that the contents of the Environment Protection
chapter needs to be brought into conformity with the Rio Declaration and
Agenda 21. New text is required to operationalise the contents of chapter
29: Strengthening the Role of Workers and Trade Unions and chapter 30:
Strengthening the Role of Business and Industry. Signatory governments
accorded equal status to these chapters.
37. There is a pressing need to strengthen the link between environmentally
related health and safety information, and how this should be dealt with
in practical terms. A Right to Know clause should be written into the
text covering issues such as the environmental impacts of products and
processes, the right to independent advice, and the right to be consulted
on an enterprises environmental strategies, especially as they apply to
the use of hazardous materials. A Right to Refuse clause that prohibits
disciplinary measures is also required concerning work that is believed
to pose an imminent danger to health and safety, and the wider environment.
38. The OECD Review will have to address how best the chapter can incorporate
the concept of sustainable development. One way would be to revise the
title of the chapter itself to better reflect this important issue. TUAC
will be submitting more detailed suggestions on environment and health
and safety issues as the Review processes.
(1) Chairs Conclusions - G8 Labour Ministers Conference
- Labour Policies In A Rapidly Changing Global Economy. Washington, D.C.
24-26 February 1999.
(2) Kofi Annan, Secretary General of the United Nations.
Address to the World Economic Forum, Davos, 31 January 1999.
(3) The OECD Challenges and Strategic Objectives: 1996.
(4) The TUAC submission has been prepared on the basis of
the responses to a survey that was disseminated to its affiliates, ITSs,
and through the ICFTU to trade unions in Argentina, Brazil and Chile. Responses
have been received from a representative sample of trade unions with a
broad geographical spread.
(5) OECD Report on Trade, Employment and Labour Standards
- A Study of Core Workers Rights and International Trade, 1996.
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