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BUILDING THE SOCIAL DIMENSION OF THE GLOBAL ECONOMY
- The Agenda following the Seattle WTO Ministerial Council
- The OECD's Role

TUAC DISCUSSION NOTE
For Consultations with the OECD Liaison Committee
10 December 1999

1. In 1996 the OECD Secretary-General’s paper on the Challenges and Strategic Objectives of the Organisation warned of the risk of a breakdown in the balance of the "triangular paradigm" of economic development, social progress and political stability in OECD countries and said that this was the cause of an erosion in public support for global markets and institutions. Three years later it is clear that subsequent events have reinforced this analysis and prognosis. 

2. The Asian crisis has had profound social impacts. The real victims of the Asian crisis were not the financial speculators who caused the capital flight, they were the working families of the main "Tiger" economies on whose backs the "Asian miracle" was built. In no way were these Asian workers to "blame" for the crisis yet they have paid the price in terms of unemployment and poverty. The recovery of the world economy from the crisis remains fragile. Unemployment in the OECD, although now falling, remains at above 33 million. The OECD’s own research has shown the increase in insecurity of employees in most OECD countries in the 1990’s compared to the 1980’s. The growth in trade imbalances in the wake of the Asian crisis also remains a fundamental source of weakness. 

3. Alongside the instability of the last three years the longer- term trends in the global economy of growing inequality both between and within countries have continued. The gap in per capita incomes between the richest 20% countries in the world and the poorest 20% rose from 30 to 1 in 1960, to 60 to 1 in 1990, and 74 to 1 in 1995. Within the OECD countries the Organisation’s own assessments point to a continuing growth in inequality and in many countries a disturbing number of workers below the poverty line. In the United States the ratio of average CEO pay in Fortune 500 companies to the average factory worker has risen from 42 to 1 in 1980 to 419 to 1 in 1998. 

4. At the same time the search for sustainable development remains elusive. The five-year review of the Earth Summit showed that the trend towards environment degradation has worsened as measured by all key environmental indicators - soil degradation, freshwater use, greenhouse gas emissions. 

5. For significant parts of OECD populations it appears that the link between economic development and social progress has been broken. They see themselves and their families as losers in the globalisation process. The crisis and the events of the last three years have demonstrated the danger of ignoring the social dimension of globalisation. It has provoked a broad-based backlash against the trading and investment system itself, and derailed attempts to negotiate what would have been an unbalanced MAI at the OECD. 

6. Yet the current situation also gives an opportunity to promote a different model of globalisation to the one of deregulation which has dominated the OECD in recent years. Market economies need to be appropriately governed if they are to function effectively in meeting the expectations of their societies. This is as true in a global environment as in a national one even if the means may differ. OECD countries require good domestic policies aimed at sustainable growth, full employment and social inclusion. However, there is also a need to develop economic governance for the global economy based on new rules to manage global markets. 

The Social Agenda Following Seattle

7. The Seattle World Trade Organisation Ministerial meeting has not been a trade meeting like any other. It and its follow-up cannot just focus on tariff reductions or liberalisation of trade in agriculture and services. It has to achieve a much more fundamental goal of restoring public confidence in the global trading system. The debate about Seattle and the WTO itself has become a debate about globalisation. If trade liberalisation is to continue then it must be made coherent with wider concerns of public policy such as environmental protection and sustainable development, food and product safety and the observance of fundamental labour rights. Progress on the former depends on progress on the latter. 

8. Globalisation has drawn dramatic attention to the need to guarantee core workers rights on a global basis. The regulation of labour standards through the enforcement of certain global minima is not a "new issue". It has been part of the response to previous waves of globalisation:- the creation of the ILO after the First World War; the Havana Charter and the attempt to create the International Trade Organisation after the Second World War. The current wave of globalisation and the creation of the World Trade Organisation have given the issue new focus. 

9. In June 1998, the International Labour Conference adopted the ILO Declaration on Fundamental Principles and Rights at Work. This Declaration was strongly supported by trade unions, employers and governments. It makes clear that all ILO member states have an obligation to respect a number of fundamental rights including the freedom of association and the effective recognition of 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. 

10. The Declaration needs a strong and effective implementation mechanism in the ILO. However, it also represents a standard which must become "system wide" and observed by other international institutions, this is also true in the trade area. In the field of global trade, there is now greater awareness of the conditions under which goods are produced. In sectors such as textiles, clothing, sports goods and footwear, companies with household names rely upon global networks of subcontractors to manufacture the products sold under their brand names. The working conditions in many subcontractors breach human decency - trade union rights are denied, child labour is employed. Frequently in free trade zones, which have sprung up around the global economy core workers’ rights are denied and indeed investment is attracted on the grounds of suppression of core rights. 

11. Such a fear of a "race to the bottom" has led the international labour movement to campaign for a guarantee that those countries who are members of the WTO and benefit from the open world trading system respect the fundamental workers’ rights, which are defined in the ILO Declaration. The labour movement throughout the world in developing as well as in industrialised countries has campaigned for such a guarantee as a fundamental step towards humanising the global economy. 

12. Ensuring consistency between WTO rules and the ILO Declaration will not overburden the WTO. The greatest risk to the world trading system is a perception that it is working against basic human rights. To maintain legitimacy it needs to be transparent and incorporate rules and guarantees that its members observe the fundamental standards of the ILO. It is also misguided to try to build a fence around the WTO. The WTO already has rules to protect intellectual property, it may eventually negotiate rules to observe investors’ rights, it cannot get away with ignoring or accepting abuse of workers’ rights. 

13. Observing core labour rights in the WTO would not be protectionist. Core labour standards are procedural standards giving basic labour rights, they do not set levels of pay or working conditions. Observing core labour rights would not therefore remove the legitimate comparative advantage of developing countries. They simply give the workers in the global economy the right to form unions to negotiate wages. They give children the right to a childhood and they outlaw forced labour, prison labour and discrimination. The OECD 1996 Study on Trade, Employment and Labour Standards itself found that observance of such rights are consistent with good trade performance and if anything there is a positive two-way relationship between observing core rights and economic performance. Observing core rights allows countries to adopt the "high route" to economic development in which the benefits of development are spread more fairly, in which accountability is increased and corruption is reduced. 

The OECD's Role

14. These issues will shape the debate on globalisation at the start of the 21st Century and the OECD must play an active role in promoting and developing a social dimension to the world economy. 

15. The OECD needs first and foremost to ensure that its own membership respects core labour rights. This must apply to all OECD members. It was significant that the Korean government made a solemn commitment in October 1996 at the time of accession to the OECD "to reform its legislation in line with internationally accepted standards, including such basic rights as freedom of association and collective bargaining". It was also significant that the OECD Council mandated ELSAC to monitor the implementation of this commitment. Progress has been made with regard to this commitment, and TUAC welcomes the long-awaited legalisation of one of our Korean affiliates - the KCTU. But this progress continues to be overshadowed by the serious Freedom of Association violations, which still remain in Korea and the continued recourse by the authorities to the imprisonment of trade union officials. The OECD must maintain its peer pressure on this issue until the legislation is in conformity with the ILO standards and the abuse of trade union rights stops. The credibility of both the Korea government and the OECD is at stake. 

16. The OECD must also move rapidly to develop its own work on trade, employment and labour standards. The 1996 OECD Report played a useful role in clarifying the definition of core labour standards, which helped pave the way for the subsequent ILO Declaration. It also helped build some bridges between participants in the debate by drawing attention to the evidence that respect for core labour rights and good trade performance could be mutually supportive. The follow-up meeting with OECD and developing countries in October 1996 produced broad agreement on these two areas. However, since that time just as the issue has moved up the political agenda, it appears to have slipped down the OECD’s. The limited follow-up that is taking place is in danger of being too little too late. 

17. The OECD should:- 

- Continue to update the 1996 Study; 

- Reactivate and intensify the dialogue with non-members through the Centre for Co-operation with Non-Members; 

- Mirror the OECD work that has been undertaken on trade and the environment by establishing a working group of experts and a series of research programmes and conferences on issues around trade and labour standards; 

- Undertake an examination of core labour rights in export processing zones, as part of wider work on damaging investment incentives; 

- Develop more sectoral information on the changes in employment and earnings in those sectors, most affected by globalisation; 

- Re-orientate the follow-up to the OECD Jobs Study to focus on the creation of good quality employment.

19. The OECD must also play an important role to build a social dimension into the debate over food safety. Biotechnology and Genetically Modified Organisms must serve to promote a world system of sustainable food and land use and must not contribute to a deepening of current economic and employment disparities. Social as well as environmental impacts must 
be accommodated within a regulatory framework guided by the precautionary principle, and developed through trustworthy monitoring and research, reliable science, and effective protection of consumers and workers, recognising their right to information and legal recourse. 

20. The Review of the OECD Guidelines for Multinational Enterprises must be seized upon by governments as a chance to build an important and effective instrument of governance of the global economy. Part of the social backlash against globalisation is directed at what is perceived to be the unaccountable power of multinational enterprises. The lack of a proper policy framework to govern the responsibilities, not just the rights of investors, 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. 

21. The OECD must come down clearly against those arguing for a minimalist approach to the Review. The proposed amendments to the text are moving in the right direction, as are the new promotional mechanisms. However, for the OECD to re-gain some lost credibility, the key issues remain the need for much strengthened implementation procedures, alongside the more formal recognition of the coverage of the Guidelines beyond the OECD area. For TUAC affiliates, that requires a measure of "contestability" to be built into the system. We have proposed a range of measures, including a fall-back mechanism through the creation of an OECD level ‘experts group’ with the right to pronounce its views on issues brought to it as they relate to the Guidelines, and to make problem solving recommendations. 

22. The time is now ripe to re-visit the range of OECD mechanisms on bribery and corruption in order to incorporate protection for "whistleblowers". 

Conclusion

23. The OECD’s role has grown in setting new rules for the global economy in a range of areas including corporate governance, harmful tax competition and sustainable development. These are important areas where the objective has become one of establishing effective regulation of the global economy. Trade unions have been brought into the preparation of these initiatives and TUAC is playing an active part in follow-up. They are not commented on in this discussion note. However, the development of an international social dimension remains a missing element. TUAC argues that responding to this challenge is a central one to the Organisation and to multilateral institutions more generally at the start of the 21st Century. 

24. It is an issue that will also engage the OECD in its dialogue with civil society. TUAC welcomes the review that the OECD is undertaking of its relations with civil society. The process of increasing dialogue with NGOs, as well as that of enhancing relations with TUAC and BIAC, can help to further build a culture in the organisation of open dialogue and transparency and make it more relevant to the daily lives of ordinary people in OECD countries. At the same time the dialogue has to be structured in a pragmatic way so as not to swamp the process and as a result lead to less rather than more effective consultation. TUAC is ready to explore practical ways of enhancing its relations with the OECD in the period ahead.