John Evans, General Secretary,
Trade Union Advisory Committee to the OECD

Background note for ITGLWF Conference on International Trade, Copenhagen
5-6 October 1995

In 1947 the United Nations Conference on Trade and Employment held in Havana sought to do to the international trading system what the Bretton Woods Conference three years earlier had done to the financial system - to establish an institutional framework for encouraging the growth of trade and avoiding the return to "beggar my neighbour " trade wars of the 1930's. By an historical accident however the international institution whose creation was agreed by governments at Havana - the International Trade Organisation (ITO) - never saw the light of day. In 1948 the United States Senate failed to ratify the Charter and the ITO was never created.

The demise of the ITO was of more than just academic interest because the founding Charter of the ITO approved by governments at Havana included a "Social Clause" committing ITO members to observe fair labour standards. To this day the Havana Charter remains the clearest multilateral governmental statement of the linkage between trade and labour standards. Article 7 said:-

"The members recognise that measures relating to employment must take fully into account the rights of workers under inter-governmental declarations, conventions and agreements. They recognise that all countries have a common interest in the achievement and maintenance of fair labour standards related to productivity, and thus in the improvement of wages and working conditions as productivity may permit. The members recognise that unfair labour conditions, particularly in product for export, create difficulties in international trade, and accordingly, each member shall take whatever action may be appropriate and feasible to eliminate such conditions within its territory."

With the demise of the ITO, the gap was filled by the far more limited General Agreement on Tariffs and Trade (GATT) but the multilateral linkage between trade and labour standards was lost for the immediate post war period.

A generation later in 1995, with the creation of the World Trade Organisation, the linkage of trade liberalisation to the observance of fair labour standards is back on the agenda. The 1994 OECD Ministerial Council mandated the OECD to undertake an analytical survey of the issues involved and this work is progressing. The linkage is the subject of working party discussions within the International Labour Organisation. Although there have been sharp divisions between governments, at some point this work will have to move to the WTO itself. Alongside the issue of environmental standards labour standards have returned as a "new" trade issue after fifty years.

From the point of view of the international trade union movement this represents a step forward particularly after the the 1980's when attacks on labour standards was the flavour of the decade. In the development community at least respect for basic labour standards is now accepted to have a positiveimpacton development. However despite the supposed spread of democratic values and respect for human rights following the ending of the cold war the effort to reestablish what was the consensus in 1947 is proving far from simple. The Ministers of Labour of the ASEAN countries moved a resolution at the 1994 International Labour Conference calling upon the ILO to resist the efforts of "protectionist forces" to introduce a Social Clause in international trade. Debates in the ILO have become deadlocked. Meanwhile their are plenty of free market economists around who don't believe in labour rights in the OECD countries not to mention at a global level. It was refreshing to read a World Bank economist, Herman Daly write in the Scientific American recently "my major concern about my profession today is that our disciplinary preference for logically beautiful results over factually grounded policies has reached such proportions that we economists have become dangerous to the earth and its inhabitants". The return to the promotion of labour standards is one such "factually grounded policy".

The issue of labour standards and trade linkage has become crystallised around the proposal to include a Social Clause in the WTO Constitution. The opponents of a Social Clause have falsely portrayed it as an attempt to force developing countries to accept industrialised countries' levels of wages and working conditions and thereby remove the comparative advantage developing countries gain from low wages. The International trade union movement has sought to engage all parts of the international community in a debate on how a Social Clause can be crafted in trade and investment agreements so as to be in the interests of both industrialised and developing countries and so as to strengthen the multilateral trading system.

The clarity of the debate has not been helped by far too many issues being grouped under the heading of international labour standards. For example there are different issues involved in the discussion of the social dimension of the European Community integration and those involved in discussion of a Social Clause in multilateral trade agreements. Different approaches will therefore be necessary. In countries of comparable economic development and strength especially those engaged in full scale economic integration such as the European Union a process of harmonisation of labour standards and labour legislation will be bound to take place. The real issue is whether this emphasises the best, not the worst practice. As pointed out in the July 1994 OECD Employment Outlook high labour standards in industrialised countries tend to be associated with high levels of productivity and are not inconsistent with economic efficiency and competitiveness. However without an effective social dimension European economic union may put downward pressure on standards in the short term.

However at a global level wide differences exist in productivity, living standards and institutional structures. The international trade union movement is not advocating a global minimum wage. A Social Clause is therefore designed to establish a global commitment to the observation of basic worker rights not the specification of the standards resulting from the free exercise of those rights. It is not for the developed countries to dictate to the developing world what their levels of wages should be but it is legitimate that they should insist that the populations of all trading countries have the right to form trade unions which can then negotiate those conditions. As the experience of South Africa has shown once the trade union freedoms are granted and established a thriving and effective set of social institutions is not far behind.

A Social Clause would not keep imports from developing countries out of OECD markets because they are produced with lower labour costs. It would not slow down the development process. However economic growth and increased trade will not automatically "trickle down" to the populations of developing countries and lead to more jobs and social progress. Where basic rights are denied, power is concentrated in the hands of a political and economic elite. This itself will restrict the ability of mass markets to appear in developing countries. For growing trade to lead to benefits for the population of developing countries as a whole there has to be freedom to create institutions such as trade unions that can ensure a fair distribution of productivity gains. This is also in the interests of the whole world trade system because it will encourage the faster growth of new markets.

Organising trade unions in many parts of the world remains a difficult and hazardous process. The establishment of "free trade" or "export processing zones" is undermining even further the limited labour rights which exist. Pakistan 's 1992 Finance Act allows labour legislation in certain regions to be suspended by government announcement. Columbia, Peru and Venezuela all have restricted labour legislation in export zones. National unions are forbidden from organising in Malaysia's export-orientated electronics industry.

The developing world is also blighted by child labour. An estimated 200 million children are estimated to work as cheap labour often under appalling conditions. They are robbed of their childhood and often their health and lives yet governments are increasingly turning a blind eye. Whilst child labour is often posed as an alternative to even greater poverty for an individual family it is not an acceptable alternative. It is also robbing the countries themselves of the resource they most desperately need - an educated adult labour force.

The real difference of view over a Social Clause is therefore not between the "North" and the "South" but between those who believe that the creation of democratic institutions is a necessary and essential aid to development and those who believe that autocratic government and "disciplined" labour is the key to economic success. Prime Minister Mahathir of Malaysia has the great asset of not fudging his views and put his case clearly in an interview with the Wall Street Journal in 1993. In support of his view that suppressing unions is necessary for trade reasons he said "We worry about our workers, once you insist workers have the right to strike, they don't know how far to go." The tragic lesson of the last 50 years is rather that once governments get authoritarian powers they don't know how far to go!

On the other side of the argument are not just the international trade union movement and human rights groups. The OECD's Development Assistance Committee published in December 1993 Orientations for Aid donors on Participatory Development and Good Governance. These drew the firm conclusion that development efforts can no longer rely on "top-down" government but have to focus on building up independent and democratic institutions. The Orientations urged governments to support the activities of independent bodies including trade unions and the importance of observing the ILO Conventions on trade union rights. Some more far sighted employers have also begun to raise the question of what is the responsibility of multinational companies in relation to human rights. The Sullivan Code concerning the operations of American companies in South Africa in the 1980's did have some positive impact. More recently the clothing manufacturer Levis have scaled-back operations in China because of the prevalence of forced labour. But unless international rules are established the danger remains that trade liberalisation will accelerate the "rush to the bottom" in the short term.

The rules that have to be drawn up by the WTO have been clearly identified by the international trade union movement. They cover six basic human rights Conventions of the International Labour Organisation :

the freedom of association (ILO Convention 87) and the right of collective bargaining (Convention 98);
the prohibition of forced labour (ILO Conventions 29 and 105);
minimum age for employment ,which restricts child labour, (ILO Convention 138);
and non-discrimination in employment (ILO Conventions 100 and 111).

These Conventions are equally relevant for all countries. Their observance would do much to allow trade expansion to bring about an improvement of basic conditions of life. They would also stop the violation of some of the most basic human rights.

Members of the WTO should commit themselves to the observance of these basic Conventions in the same way as would have been the case had the Havana Charter been adopted. But there must be an implementation mechanism established. One possibility would be the creation of a joint committee between the WTO and ILO. On the receipt of a complaint from any of the constituents of the ILO an examination would be undertaken of a country to see whether they were meeting their obligations regarding the Social Clause. Should the Country be found to be falling short of its obligations the Committee would recommend measures to be taken within a specific time period, for example two years. Within that period the ILO would offer technical assistance to help the country meet its obligations. Following the specified period a report would be made on the extent to which progress was being made or setting out a timetable for action. As a last resort a case could be referred to the WTO disputes settlement procedure, with the ILO brought in as an expert witness. The precedent for this approach has already been, set with the WTO TRIP's agreement. Only as a very last resort therefore could trade sanctions be applied if a country consistently refused to comply.

It is hard to see how such a multilateral process could be manipulated for protectionist ends, indeed it looks a far more desirable route to follow than the escalation of unilateral and bilateral measures of trade sanctions against individual countries in the light of public outcry against human rights abuses. Such an implementation mechanism also looks also mild compared to the original sanctions proposed for the ILO by the British Government in 1919 at the time of the establishment of the ILO. The original British first draft of the ILO Constitution said: "One of the major aims of the international Conventions is the eradication of unfair competition, which is founded on oppressive working conditions... The appropriate penalty should be that if a two thirds majority of the conference has reached the conclusion that the stipulations of the Convention have been disregarded, the signatory states should discriminate against the goods produced under proven conditions of unfair competition unless those conditions are eradicated within one year or a longer period to be determined by Conference."

The Social Clause can only be one element of a wider approach to building social rules into a more globalised world economy. The implementation of the OECD DAC Guidelines on development assistance could ensure that resources and financial incentives are available to assist countries to meet their obligations. Funding from the IMF and World Bank should also be conditional on respect for basic rights. For the last decade unions have sought to get more effective implementation of codes of conduct on investment such as the OECD Guidelines on Multinational Enterprises. At the moment as OECD membership is expanding TUAC is seeking to ensure that new members observe basic standards of human rights of the organisation. This is particularly urgent in the case of the application by South Korea to join the OECD. All of this is designed to ensure that the new economic and social " model " which is appearing particularly in parts of Asia of combining market economics and political suppression is countered. The lesson of Eastern Europe was that central planning and political dictatorship did not produce a workers' paradise, but the combination of free markets and political dictatorship will certainly produce a workers' hell.

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