NEW DIMENSIONS OF INTERNATIONAL TRADE
ADDRESSING THE CHALLENGES AHEAD : THE ROLE OF LABOUR STANDARDS
Roy Jones Senior Policy Advisor TUAC OECD
It is a great pleasure to be present at such an important event to represent
the views of the international trade union movement. That the Swedish government
has assembled such a distinguished list of speakers and that they have
travelled such a great distance - is testimony to its efforts to seek a
consensus around the future direction of the world trading system. We too
wish to be part of that consensus. To build a world trading system as part
of a millennium model of economic development that balances economic
efficiency and social justice.
It is particularly pleasing to see such a broad range of stakeholders
in the trading system present. A factor which, I hope will shed more light
than heat although heat is sometimes a good thing on the challenges
ahead for all of us, not just governments. Such efforts should be applauded
and we would hope replicated by all governments in the run up to the November
Seattle meeting of WTO Trade Ministers.
Background To The Seattle WTO Trade Ministers Meeting
In the last two years one third of the world economy has moved into recession. In Asia living standards have
collapsed, and unemployment has
surged to over 26 million in East Asia alone. 100 million people who in
one generation had moved out of poverty have been thrown back into destitution.
Japans slump continues unabated, as deflationary forces deepen. Russias
transition, if there ever was one has stalled, and one quarter of the labour
force remains unpaid. In Brazil, time has been bought for financial markets
but at an enormous economic and social cost. The United States is finely
balanced. While still the motor of growing world demand, it would take
a brave person to forecast this to continue long into the future, against
a background of over-stretched equity markets and a mountain of personal debt. Closer to home the European Union is experiencing slowing
Through the interlinkages of globalisation, including trade imbalances
and dangerously volatile financial markets the spectre haunting the world
economy today is of a truly global recession. The impact of that on employment
and social exclusion would be devastating, as would its impact on the publics
perception of a new negotiating round on trade and other wider issues.
Globalisation Mismanaged: The Root Cause Of The crisis
The crisis did not fall from the heavens it was man made. The responsibility
lies with those governments who believed that the best response to economic
globalisation was to abdicate their management role, to simply leave it
to market forces. Some took the view that the process should be speeded
up by simultaneously attacking the social institutions of civil society,
including trade unions, that underpin market economies. Many western governments
went further in linking these policies to IMF and World Bank structural
adjustment programmes, in addition to WTO negotiations for developing countries.
For the most part the inter-governmental bodies that either police the
world economy or provide its intellectual foundations too changed their
focus to one that prioritised narrow allocative economic efficiency, in
which social institutions were seen as rigidities to the smooth functioning
of private markets. In sum, a one size fits all approach to economic
and social development was created. If the empirical outcome did not conform
to the theory, then it was the fault of the country and not the theory.
The outcome is evidenced by the blinkered pursuit as an end in itself
of full capital account liberalisation and financial market liberalisation
without the countervailing national and international regulatory frameworks.
This was a major contributory factor to the current crisis. Similarly,
the WTO was created with a binding dispute settlement body whose sole remit
was to adjudicate on trade distortionary measures, with a view to pure
trade liberalisation. An attempt was made to replicate this model for international
investment the OECD MAI - an attempt that failed.
Attempts to change the rules and to meaningfully take account of the
social and environmental impacts of such measures, especially at the WTO
have to-date been beaten back. These issues cant however be just swept
under the carpet. Such attempts lie behind the backlash against globalisation
itself. One that is growing daily and fuelling opposition to further trade
and investment liberalisation, while feeding protectionist tendencies.
Managing The Global Economy: A Partnership Approach
It is essential that governments learn the correct lessons from the
crisis and establish a new direction for public policy governing global
markets. This will require the re-regulation through a mix of hard and
soft measures of international financial and capital markets, labour markets
and the world trade and investment system. There are signs that this is
happening, witness the belated recognition that some controls on capital
inflows are a good thing, and that purely market led development leads
to crony capitalism, bribery and corruption - and not just in developing
countries. Yet, however encouraging the responses to date have been, they
are in reality insufficient to meet the task. A full review of the
types of hard and soft regulation needed to re-balance the global economy
is beyond the scope of this paper, but the international trade union movement
has addressed this issue. (1)
Managing a globalising world in an effective way is beyond the scope
of governments and their international institutions working alone. It will
require a new social compact between those economic and social actors willing
to play a constructive part in transforming the global economy into a vehicle
to deliver benefits for all and not just the minority. Trade unions call
this a partnership approach. One that will differ in terms of its scope
and content depending upon the challenges faced.
Such a partnership approach will be needed to address the new dimensions
of international trade. The remainder of the paper will focus on
the required measures to re-balance the world trading order, especially
the institutional aspects of the WTO, in order to meet those challenges
in a socially acceptable way.
Future Directions For the WTO
Whatever the outcome of the Seattle WTO Trade Ministers meeting it
will launch a new round of trade negotiations. At present the key unanswered
question is whether it will be a narrow round (focussing on agriculture
or services) or a broader one bringing in new issues, for example, investment,
competition policy, electronic commerce, labour standards, the environment,
and institutional reform. A key concern for trade unions and other civil
society groups is that a wide round, as proposed by some, would take the
WTO and its dispute settlement mechanism further into the social and environmental
dimensions of national economies. And unless countervailing partnership
based checks and balances are inserted into the Organisation the system
itself could implode.
For its part the international trade union movement has proposed a range
of issues that the new round should address (the full list is annexed for
information). Of these the most controversial remains the proposal to include
core labour standards as part of any future negotiations.
Some governments remain viscerally opposed to this including to their
shame and standing in the international community some OECD countries.
Some governments have even threatened to veto a new round per se if they
are included. One challenge then is how to overcome such threats, predicated
as they are on the notion however misguided that the linking of core labour
standards to trade is either a protectionist measure or a plot to undermine
the comparative advantage of developing countries. It bears repeating that
when trade unions talk about core labour standards we are talking about
human rights that are enabling rights. We are not talking about wage levels,
or other prescriptive labour market mechanisms that would undermine the
comparative advantage of developing countries. I would also add that the
suppression of labour standards is itself a protectionist measure. And
would in fact undermine the ability of those countries seeking to upgrade
their economic potential. Furthermore, and as regards the issue of comparative
advantage developing countries in particular should consider what the inclusion
of China would mean for them within a WTO devoid of enforceable labour
rights. Meeting these challenges requires an analytical and a political
The Trade And Labour Standards Debate: Where are We Now?
Among other work the 1996 OECD Report on Trade, Employment and Labour
Standards along with the 1998 ILO Declaration on Fundamental Principles
and Rights at Work are pointers to where a consensus exists around the
nexus between core labour standards and trade.
A consensus now exists around the definition of core labour standards
based on ILO Conventions: freedom of association and the right to collective
bargaining; the elimination of all forms of forced or compulsory labour;
the effective abolition of child labour; and the elimination of discrimination
in respect of employment and occupation.
There is an irrefutable body of analytical and empirical evidence supporting
the economic case for the implementation of core labour standards as preconditions
for raising a countries growth rate. The OECD report, for example, found
that those countries suppressing these rights did not enjoy better economic
growth rates, and concluded that concerns expressed by some developing
countries that core labour standards would negatively affect their economic
performance are unfounded. The Report also found that with regard to Foreign
Direct Investment host countries may be able to enforce core standards
without risking negative repercussions on FDI flows. More recent research
by other scholars has strengthened those findings.
Work by the OECD Development Assistance Committee and the World Bank,
among others has highlighted the need for strong democratic trade unions
as part of the new paradigm of participatory economic and social development.
The following is therefore clear. Trade and economic development complement
one another, although this can raise distributional issues. The implementation
of core labour standards is a precondition for improving and balancing
economic and social development, and helps to solve distributional problems.
Trade and labour standards are linked. A binding workers rights clause
would not affect aggregate trade flows. It would however empower people
by giving them the tools to better determine their own future.
It is at that point that the consensus begins to unravel around the
vexed question of how to ensure the implementation of core labour standards.
And, when the political dimension takes over from the analytical one.
Re-Visiting The Real World
The theoretical and empirical linkage between trade and labour standards
will, until translated into meaningful policy action by governments remain
an irrelevance for those ordinary working people and trade unions
who everyday confront the harsh realities of globalisation. That is not
to say that all workers lose out in the global market place. Indeed there
are many winners. Equally, there are many good companies around the world
who are competing on the basis of what I would call the high road approach
to competitiveness. Here competitiveness starts with the recognition of
trade unions at the workplace along with free collective bargaining. Negotiations
over such bread and butter issues such as pay, training and career progression
are conducted in a spirit of co-operation. Company profits are generated
through sales growth and expanding revenues, rather than crude efficiency
measures such as downsizing. The need for intra-firm equity is recognised
with CEO and senior managers pay levels staying in step with that of the
workforce. Company re-organisation, where necessary is through negotiation
rather than unilateral imposition. Environmental issues, for example on
workplace health and safety are internalised into the bargaining process,
while wider environmental concerns where necessary are addressed through
ongoing dialogue with NGOs and the local communities that are seen as
stakeholders. In many instances unions too have a role here, given that
workers often live within the surrounding communities of an enterprise.
This is an enterprise based partnership approach.
However, because of globalisation it is increasingly the case that high
road companies are being undercut by unscrupulous low road companies.
Here, trade union rights are suppressed and an atmosphere of fear pervades
the workplace. Profitability is about narrow efficiency gains where more
is squeezed from less, and unilateral downsizing is the norm. Internal
equity is ignored as CEOs, other directors and senior managers engage
in a feeding frenzy over salary levels while depressing workers pay levels.
Internal and external environmental problems are ignored or dismissed as
an irrelevance for the company, with the costs forced onto workers and
local communities. The polluter pays principle gives way to the polluter
Its not only the high road companies and their workers that suffer.
Governments and societies in general lose from the activities of these
free riders. The low road is a breeding ground for corruption, cronyism
and nepotism, as its corrosive effects spread out through society while
simultaneously pulling in those attracted to the rewards. Corporate responsibility
becomes a by word for a smash and grab corporate mentality.
According to the ICFTU annual Survey of Violations of Trade Union Rights
hundreds of trade unionists and workers fighting for the right to organise
are murdered each year while many more disappear, are detained, subjected
to violence and intimidation or simply sacked. The linkage here between
trade and the suppression of workers rights has been confirmed by the
44 ICFTU reports prepared to date as a voluntary contribution to the WTO
Member country Trade Policy Reviews. Similarly, a new TUAC survey has
painted a worsening picture of the labour standards situation in multinational
enterprises operating within and beyond the OECD since the last survey
These abuses, though not confined to are prevalent in those countrys
seeking to turn themselves into export platforms, and especially where
Export Processing Zones (EPZs) have proliferated. There are at present
some 27 million workers in around 850 EPZs world-wide, including enterprises
ranging from small locally run firms to giant multinationals. Each week
sees the design or launch of a new one somewhere.
In essence EPZs are industrial zones with special incentives such as
freedom from taxes and customs duties on imports and exports, alongside
fiscal incentives; all designed to attract mainly foreign, but also local
investors, whose output is primarily for export.
Economic development problems are linked to EPZs. For example, a tendency
to lead to a misallocation of resources, the loss of tax revenues and the
lack of forward and backward linkages into national and local economies.
Of concern here though is the growing tendency whereby governments use
labour standards as part of their incentive packages to attract investors.
This is most visible in countries such as Bangladesh, Namibia, Pakistan,
Panama and Zimbabwe where the existence of trade unions is openly banned,
or as in the case of Malaysia severely circumscribed. Equally problematic
however is the non-enforcement of labour laws in many EPZs. In Mexico and
due to a lack of genuine free collective bargaining wages in EPZs are actually
lower than the national minimum wage.
Women workers in EPZs are most at risk in EPZs. Accounting for an average
of 80 per cent of the labour force they frequently have to endure forced
pregnancy tests and are often subjected to sexual abuse. Their wages tend
to be lower than males in similar occupations, and hours of work are longer
posing additional health and safety problems, and an increased vulnerability
to harassment or attack when travelling to and from work at odd hours or
in the dark.
The situation is more complex in China, where often whole cities or
regions are declared as special economic zones. Access is usually controlled
through the use of residency permits, breeding corruption. The authorities
mistakenly believe that they have solved the labour standards situation
(sic) by the banning of free trade unions. But, resistance to this is growing
and spreading as workers increasingly demand their democratic right, their
basic human right to freedom of association and collective bargaining.
A further concern for trade unions is the recent phenomena whereby a
growing number of governments are authorising the development of privately
owned and managed EPZs, that still qualify for the same incentives as government
zones. It is anybodys guess what will happen to labour standards in these
The question of labour rights abuses is not confined to developing countries.
Australia, Korea, Mexico and New Zealand incidentally all members of
the OECD have questionable records here. In the United States, and according
to independent research at least one in ten union supporters is illegally
fired for trying to form a union. For every thirty people who vote for
a union in any given year one will be illegally sacked. At least one worker
will be illegally fired in 25 per cent of all union organising campaigns.
A 1994 opinion poll found that 79 per cent of Americans believe workers
will be fired if they try to form a union at their workplace. The National
Labour relations Board is estimated to have a backlog of 25,000 cases of
alleged illegal dismissals. (2)
We can see therefore that while in theory and over the long-term the
observance of core labour standards should improve world-wide, the reality
is of continuing abuses to gain a short-term competitive advantage.
Enforcing Core labour Standards
There is a fundamental imbalance in the way governments are addressing
the issue of how to enforce core labour standards through international
institutions. The protection of capital has been mainstreamed within the
international financial institutions and the WTO. The IMF organises multi-billion
dollar bail out packages to ensure that Wall Street is cushioned from the
effects of financial market crises. A bill that will ultimately be picked
up by the tax payer. At the same time the WTO enforces the intellectual
property rights of private companies through its TRIPS agreement. The recent
dispute settlement panel ruling in the case of the banana dispute in essence
found in favour of US based multinational enterprises, whose labour rights
record is abysmal. Ethyl corporation, a US based enterprise recently used
the threat of the NAFTA agreement to force a change in Canadas environment
protection laws, while pocketing a multi-million dollar out of court settlement.
Now the European Union and other governments are seeking to push this further
by including new issues such as investment and E commerce in any new round
Yet, when it comes to labour standards, many of these same governments
wish to ring fence the WTO and the trading system from taking any responsibility
and corrective action for the very problems it is creating. Instead, they
argue the ILO is the forum in which to solve labour standards problems,
in the full knowledge that it has no enforcement mechanism. It should not
be forgotten that those countries now talking up the role of the ILO in
this area are the very same ones that were pushing for its closure five
years ago. Furthermore, and to underline the linkage of trade and labour
standards, during the final stages of the negotiations over the ILO Declaration
on Fundamental Principles and Rights at Work some key governments substituted
Trade Ministers for their Labour Ministers.
The Seattle WTO Ministerial Meeting: Rising To The Challenge?
Trade Ministers at Seattle will have to agree a process of practical
steps to translate the political commitment around core labour standards
into concrete action by the WTO. First and foremost this must include the
establishment of a WTO Negotiating Group on the Relationship between Trade
and Internationally Recognised Core Labour Standards. Furthermore, labour
standards should be mainstreamed into the work of the WTO, along the lines
suggested for the environment, but with an enhanced collaboration between
the WTO and the ILO, including a monitoring committee to oversee and review
the results. This mechanism would provide a useful avenue to consider the
gender implications of trade liberalisation. Should the new round include
investment, then the WTO should initiate a Committee or Working Group on
the relationship between trade/investment and core labour standards, along
the lines of the Trade and Environment Committee established at Marrakech
As regards institutional issues, improved channels are needed for the
involvement of trade unions, employers organisations and other representative
civil society organisations. Access to the dispute settlement mechanism
should be extended to non-governmental actors, and include their involvement,
along with that of competent UN agencies over matters of concern to them.
The European Union must meet its responsibilities here. The EU has committed
itself to pressing for the inclusion of core labour standards into the
WTO through a joint statement with the United States as part of the Transatlantic
Economic Partnership programme. European Commission negotiators at Seattle
must be given a clear mandate by EU governments to prosecute this.
It should not be inferred from this that trade unions see the WTO as
the only inter-governmental organisation that should deal with labour standards
issues. On the contrary, we are pushing this issue at a range of different
fora, including the ILO, IMF, World Bank and the OECD. Moreover, in our
view these issues are the minimum required to re-balance the WTO in a socially
An important issue here is how to build the necessary consensus around
these issues in the run up to Seattle. Developed countries and their supporting
international institutions have a key role to play in this. The guiding
principle here should be a partnership approach.
The OECD is expected soon to begin work to update the 1996 Report on
Trade, Employment and Labour Standards. This would be an ideal opportunity
to deepen its analytical work in support of the economic case for labour
standards, while simultaneously stressing the trade linkage of such standards.
Moreover, the exercise could be used to help build a consensus both within
and beyond the OECD area for this issue to be tackled at the WTO. The OECDs
outreach work programme would be the perfect vehicle for such a consensus
building exercise. In the past the outreach work has been criticised for
pushing too hard and too fast the case for pure market liberalisation.
Such a change in direction would help maintain the case for the WTO labour
standards link beyond Seattle, while helping to restore some lost credibility
to the OECD in light of the MAI debacle.
At the same time the OECD has started a Review of its Guidelines for
Multinational Enterprises, which is expected to be completed by the Spring
2000 Ministerial Council meeting. A meaningful outcome with strengthened
implementation mechanisms would send a powerful signal that the most advanced
countries in the world have prioritised the need to balance the rights
and responsibilities of investors.
Similarly, the World Bank should strengthen its work on participatory
development, and within that the role of trade unions. In turn, the Bretton
Woods Institutions and the Regional Development Banks must incorporate
respect for core labour standards into their work programmes, while simultaneously
explaining to recipient countries the economic and social benefits of such
My presentation today has elaborated on the economic and social problems
that have arisen from the mismanagement of globalisation. Many of these
are due to imbalances built into the world trading system and the WTO itself.
As such Trade Ministers have both a duty and a role in helping to resolve
these at Seattle. I have sought to highlight the direction that we in the
international trade union movement believe the WTO should go if it is to
have a sustainable future: why and how core labour standards need to be
integrated into its procedures. Trade unions do not underestimate the nature
of this challenge, which will require an analytical and a political response,
along with a consensus building exercise. We are ready to play our part
as partners in this. The outstanding question is does the political will
exist to turn the WTO into a body that can shape the trading system to
meet the needs of societies, other than narrow elites? A negative response
would put in danger the necessary public support for the implementation
of the outcome of the next round of negotiations. A positive response would
represent a beacon of hope for those left weakened, marginalised and confused
by the vagaries of an unregulated system of globalisation.
(1) International Trade Union Statement on the World economic Crisis.
Adopted by the TUAC and the ICFTU in December 1998.
(2) AFL-CIO submission to the 1999 TUAC survey on the OECD Guidelines
for Multinational Enterprises.
Annex 1. Broader issues for inclusion into
a new Round of WTO negotiations
Development related issues