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TUAC INITIAL SUBMISSION ON THE 1999 REVIEW OF OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

- 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 responsibility. However this ad-hoc response cannot replace government based regulation and enforcement. 

- 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 this including:- 

 . a renewed call by governments on multinationals to observe the Guidelines; 
 . reform of National Contact Points; 
 . establishment of monitoring process of observance under the CIME structure; 
 . 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 for investment. 

 . ILO Declaration on Fundamental Principles and Rights at Work; 
 . 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 1980’s. 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. TUAC’s 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 company’s 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 Enterprises 

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 responses. 

The National Contact Points 

11. Taking the five questions as a whole only four NCP’s 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 and assistance. 

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 union’s 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. 

Environment Protection 

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 ownership. 

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 the Guidelines. 

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 MNE’s. 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 circumstances apply. 

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 enterprise’s 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)  Chair’s 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, ITS’s, 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.