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For Consultations with the OECD Liaison Committee

22 November, 1996


  1. TUAC welcomes this opportunity to give its perspective on the Secretary-General's note on "The OECD: Challenges and Strategic Objectives". A year ago, in its note on "The Future Role and Vocation of the OECD" TUAC said that the OECD, against a background of globalisation, must "prove itself as an organisation capable of relinking social and economic progress". We therefore agree that the OECD's mission must be to achieve a balance between economic development, social progress and political stability against the background of the growing pressures of globalisation. We also agree that OECD countries face a breakdown in this balance and risk popular backlash, because too little emphasis has been placed on social factors. We support the view that "all economic policies designed to foster economic growth must have social policy objectives".
  2. The question is what is to be done? This TUAC note sets out the views we are hearing from our membership on the current social malaise; it goes on to set out what we feel should be the OECD's priorities in current and future work to address this problem; and it concludes with some observations on the process of reform within the OECD.

Identifying the problems:- a social backlash against globalisation?

  1. Significant parts of OECD populations perceive that "something has gone wrong" with the world being shaped by global market forces. A gulf is appearing between on the one hand, the interests of narrow elites, and on the other hand, the interests of the rest of society. The former appear to be detaching themselves from society and their responsibility to it. The latter see themselves and their families as losers in the globalisation process. This is leading to an erosion of social cohesion and social responsibility. This is at the root of the breakdown in the balance in the "triangular paradigm" described in the OECD Secretary-General's note. Restoring that balance is not a question of communicating the logic of existing policies better. Rather it necessitates the integration of a social dimension into the globalisation process before there is a backlash against multilateralism and a surge of economic and political nationalism.
  2. Each day's press headlines feed this view. Financial markets react negatively at good job creation figures in the United States citing inflation fears, even though inflation is at its lowest level for decades. Corporations' stock values rise when they lay off staff and fall when they recruit staff. There is much talk of incentives as a means to improve economic efficiency. When applied to top management this means stock options and golden handshakes. But when applied to the weakest in society it means cuts in unemployment and welfare benefits and reductions in the minimum wage. The OECD is more often than not depicted as an enthusiastic advocate of such approaches.
  3. There is also a risk of polarisation between countries. Development aid budgets have fallen to their lowest level in 25 years and aid is being replaced with private investment flows. The only difference is that this investment is going to a handful of relatively rich countries. The poorest are being bypassed, they remain trapped in poverty, famine and ethnic conflict.
  4. Trade union members feel the impact of international economic developments more directly than at any time in the recent past. Hard fought gains or difficult sacrifices can be swept away overnight by volatile decisions of financial markets. In workplace relations they are reminded on a daily basis that capital is internationally mobile, labour is not. Multinationals increasingly threaten to relocate production in their negotiations with trade unions. Traditional trade union action through campaigns for government policies or through collective bargaining with employers is increasingly perceived to be constrained by international developments.
  5. Yet it is misleading to attribute these problems solely to globalisation. It is also wrong to assert that globalisation prevents an effective policy response by governments if political will is present. Market economies need to be appropriately governed if they are to function effectively in meeting the expectations of their societies. This is true in a global environment even if the means may differ.
  6. In one sense public confidence in the legitimate role of the state has to be restored. In another sense, a system of global economic governance must be developed to balance global markets and add a social dimension to international economic integration. If the multilateral trade and investment system is to be perceived as an asset and not a threat by working people, they and not just financial markets need confidence in the credibility of policies. The OECD's vocation lies in assisting OECD countries (the whole of their populations, not just the governments) to address these issues. It has to be a counterweight to the "pensée unique" of much of the thinking on globalisation.

Addressing the problems - TUAC's priorities for the OECD

  1. The "Strategic Objectives" note sets out a range of examples of where the OECD should be addressing these problems. TUAC would highlight four priorities:- achieving growth with equity; promoting core labour standards; developing a socially acceptable model of competitiveness; and reestablishing the role of governance.

Growth with Equity

  1. There is a need to promote growth orientated economic policies. The OECD can play a crucial role in furthering agreement between its major members to coordinate fiscal and monetary policies with the objective of raising growth and lowering unemployment. The OECD itself is an important actor in setting the expectations of financial markets. It should show how governments can by working together, and with the grain of domestic labour market institutions, sustain above trend economic growth over the medium-term. This requires more expansionary monetary policies in many parts of the OECD. The OECD should also further agreements to stabilise exchange rates and encourage cooperation to limit speculative short-term financial transactions. Fiscal consolidation that is sensitive to the issue of social equity can then be pursued.
  2. The questions raised in paragraphs 16-19 of the note as to the approaches towards economic policy are the right ones. The response must not be just to repeat existing economic "religion". A re-examination of inflation, unemployment trade-offs is long overdue. Many finance ministries, central banks and bond market traders appear trapped in a 1980's mind set of inflationary expectations. The risks of the 1990's are deflationary expectations.
  3. Rising joblessness is only part of the social crisis facing OECD countries. OECD data on income and wage distribution shows the rising gap between rich and poor in the 1980's. This is most striking in the United Kingdom and the United States: such developments risk pushing a whole segment of our population outside the structures of society into an impoverished class. A "social audit" has to be built in to all policy analysis.

Promoting Core Labour Standards

  1. The guarantee of core labour standards must be one of the foundations of the global economy if there is to be social development and political stability. The OECD, working with the ILO and other international organisations can do much to promote core standards:- by guaranteeing these rights within OECD countries; developing work on trade, investment and labour standards so as to facilitate initiatives in the WTO; incorporating core standards in the Multilateral Agreement on Investment; and promoting their application through DAC work on Participatory Development and Good Governance.
  2. The OECD is not just an economic organisation but a community of shared values. It was for this reason that TUAC argued that the Republic of Korea should, as part of its accession to the OECD amend those key elements of its labour law which contravened the core ILO standard on Freedom of Association. We hope that the decision by the OECD Council to accept the Republic of Korea as a Member was the correct one. Ahead of that decision, the Korean government made a solemn commitment to reform its existing laws and regulations on industrial relations, to bring them in line with internationally accepted standards, including those covering basic human rights such as freedom of association and collective bargaining. The OECD's Council's request to ELSA to convene monitoring meetings is also significant. It is essential that the Korean government moves quickly to address its labour law anomalies. TUAC will play an active role with the OECD to closely monitor developments together with its affiliated unions and the trade unions in Korea.
  3. Globalisation gives central importance to OECD and WTO work on the so-called "new issues" governing the linkage between trade and the environment, investment, intellectual property, competition policy and labour standards. The OECD Report on Trade, Employment and Labour Standards, and the subsequent workshop with non-Member countries was a positive example of OECD work assisting international consensus building. This work shows that there is now broad agreement on the core labour standards of universal relevance and that implementation of these rights can support economic development providing a closer link between markets and social development. It shows the positive two way relationship between trade and labour standards. The issue confronting the international community is not whether these issues should be discussed in the WTO but whether it can afford for them not to be. The OECD work has already described many of the trade-related enforcement measures which are already in place. Future OECD work can assist in achieving a constructive treatment of these issues in the broader WTO framework. The OECD must therefore continue to work on these issues and join the ILO and the WTO to achieve the universal acceptance and enforcement of core labour standards.
  4. The completion of negotiations on a Multilateral Agreement on Investment (MAI) in the OECD will be one more and very important element in the world multilateral investment system covering a large part of foreign direct investment. Furthermore, coverage will be greatly expanded if, as expected, the agreement is opened to non OECD Members. This factor when combined with moves in some OECD countries to dilute labour standards or to disregard the provisions of the OECD Guidelines for Multinational Enterprises as a means to attract foreign direct investment makes it essential that the Guidelines be incorporated into the MAI. TUAC has shown how this should be done, whilst maintaining the voluntary nature of the Guidelines. The MAI should also specify that governments should not use suppression of core labour standards as an investment incentive. Trade union support for an investment agreement is conditional on this satisfactory incorporation of the Guidelines and guarantee of core labour standards.

A Socially Acceptable "Model" of Competitiveness

  1. Guaranteeing core workers' rights will not remove the competitive advantage of developing countries in terms of wages and working conditions. Nor will it remove the necessity for OECD countries to innovate and adapt. This must not be on the basis of a degradation of broader conditions of work and life. "Moving down market" is not a viable strategy for OECD economies as a whole. Obsession with downsizing and outsourcing does not provide an environment in which people can face change with confidence. The OECD must therefore assist its members in developing strategies which produce "high performance" workplaces, firms, districts, regions and economies which are both competitive and socially acceptable.
  2. The results of some existing OECD work point in this direction:- the need for investment in lifelong education and training (DEELSA); work on the flexible firm and high trust / high skill workforce (DSTI and DEELSA); the blending of competitiveness and corporate responsibility (DSTI); regionalisation and globalisation (Development Centre); Global Information Society (DSTI); partnership for sustainable development and workplace health and safety issues (Environment); partnership for managing public sector change (PUMA); and industrial districts and local employment creation (Territorial Service).
  3. Together these areas of work present a very different model for managing change in labour markets and in organisations, from that which has been given predominance in the Country Specific Recommendations of the Jobs Study. They should be blended to present a new vision for managing change. In sum they have a common feature of empowering individuals in their working lives thereby giving them "confidence in change" rather than "fear of change".

Reestablishing the Role of Governance

  1. The questions posed in the "Strategic Objectives" paper as to the appropriateness of budgetary policies are correct ones. The obsession with public sector downsizing brought with it a high social cost and deflected attention from the need to achieve both a better functioning public sector and better functioning markets. It is correct to depict many reforms as "biased more to the interests of international financial markets than to the medium and long-term objectives of their respective societies" (paragraph 17).
  2. Future OECD work on issues such as the reform of the welfare state, public sector management, and reform of education systems will be judged by the extent to which they can reinforce the OECD's objectivity after a decade of a "rolling back the state". The specialist Ministerial meetings in 1996 have shown the need for a "partnership" approach to change. This must now be built on.

The process of reform within the OECD

  1. At the 1995 Liaison Committee TUAC drew attention to some of the distinctive advantages of the OECD as compared to other international organisations :
  2. It is composed of a group of countries which are the leading economies and which have more similarities than dissimilarities in their political, economic and social structures. Yet it is assuming a global reach and can act as a catalyst for more effective governance of the global economic system.
    It represents almost the whole range of government departments and policy fields, allowing the interconnections and inconsistency of policy to be resolved and a multidisciplinary approach adopted.
    Although an intergovernmental body the OECD through TUAC and BIAC has the opportunity to involve the social partners and not just governments in its work.
  3. The "Strategic Objectives" paper indicates that OECD Directorates will be restructured. Against a background of budgetary restriction and redeployment of resources there is inevitable pressure to reduce the diversity of activities and focus on a set of core priorities. Whilst some activities may certainly be superfluous there are dangers of over-rationalisation. Care needs to be given to maintaining units within the Organisation capable of acting as catalysts in their own right for action on key policy areas rather than subsuming everything under "structural policy". The Environment is one such example.
  4. Some lessons for future outreach activities and membership negotiations should be drawn from existing programmes. In drawing up cooperation programmes with its partners, the OECD must make it clear from the outset that there is a full menu of OECD activities, not just an "a la carte" choice. The value of outreach programmes can only come to light if an overall evaluation takes place against this background. Recent efforts in the World Bank of critical internal audits of the effects of its policies could serve as a model for the OECD. To date OECD cooperation programmes look piecemeal. Despite the important budget allocations for Central and Eastern European (CCET) activities since 1990, a strategic evaluation involving all concerned in the transition process has not been made. The policy dialogue workshops with non members (DNMEs) have focused too heavily on trade and investment liberalisation issues and thus given only a partial impression of OECD work and policy linkages. The relative success of the Workshop on Labour Standards shows what can be done on a wider basis. The same is true of the Emerging Market Economies Forum (EMEF) with an even larger diversity of participating countries.
  5. More diversity of economic views is needed within OECD Departments. Divergent analyses and policy prescriptions need to be debated more openly, if eventual prescriptions are to win general support. The OECD should devote more effort to airing and presenting alternative analyses on major issues, rather than restating the "pensée unique".
  6. TUAC would repeat some of the recommendations it made a year ago with regard to the treatment of micro-economic analysis and structural policy. At national level finance and economics Ministries have played the dominant role in determining economic policy strategies. The predominance of the Economic Policy Committee, the EDRC and the Economics Department within the OECD structure reflect this. In TUAC's view the main responsibility for structural policy should be with the specialist departments where there is expertise and where the practical implications and trade offs in policy advice can be identified more clearly. The ECO, EPC and EDRC could draw on this work when necessary in assessing the interactions of macro-economic policy and structural policy.
  7. If the OECD is to deliver more country specific policy advice and surveillance against a background of increased horizontal work, the current EDRC process will need to be substantially restructured. Rather than structural policy chapters appearing as national recommendations for implementing a general strategy they need to be tailor made to specific country circumstances and draw upon the knowledge of the specialist Committees. The EDRC should therefore be replaced by a more broad-based Committee, served by a general coordination unit of country desks not attached to any particular department and geared towards multidisciplinary work.
  8. TUAC has proposed that with regard to the Jobs Study follow-up the trade unions be invited to give comments on recommendations relating to employment before, rather than after, the Country Reviews are published. An opportunity to express comments could increase the commitment of the social partners to the OECD's recommendations when reviews are undertaken.
  9. The "Strategic Objectives" paper gives a central role to horizontal activities. TUAC has welcomed the innovative and open approach of the Secretariat in inviting its views on the Horizontal Programme on Regulatory Reform. This would be a useful model to follow in future horizontal work. It is hoped more generally to reduce the formality of some standard consultations and achieve more interactive involvement with OECD bodies.
  10. The note states the need to develop communication and dialogue between the OECD and all parts of civil society. As far as TUAC is concerned involvement in the OECD discussions could be strengthened through for example :
  11. the development of OECD seminars and round tables involving TUAC at national level;
    the invitation of representative trade union speakers to Committee and Ministerial meeting sessions;
    at a national level more intensive involvement of trade unions in consultations on country specific recommendations;
    the development and more active use of the Labour/Management Programme.

TUAC is ready to work with the OECD to develop the above initiatives into a genuine "In-reach" Programme.

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