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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
Globalisation - the missing social dimension
1. In 1996 the OECD Secretary-Generals 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 OECDs own research has shown the increase in insecurity
of employees in most OECD countries in the 1990s compared to the 1980s.
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
Organisations 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
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
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
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 OECDs. 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;
18. The OECD must also re-orientate its work on electronic commerce to
take seriously the issue of the "digital divide". The challenge
was put eloquently by the South African Minister and former trade unionist
Jay Naidoo at the OECDs Ottawa conference on e-commerce last year: "As
we discuss this momentous advance of our civilisation and the emergence
of a digital world economy, let us consider that connectivity is, in fact,
the greatest equaliser in the world. But in this very world that we live
in, half of humanity has never used a telephone. Yet, that access could
catapult, could leapfrog the remotest rural community of this world into
the leading edge of this new economy. And so the challenge is how we close
that development gap between the information-rich and the information-poor,
between the north and the south, between the urban and the rural, between
men and women, and between black and white because access to that infrastructure
is going to require a visionary leadership, is going to require a partnership
that is smart and innovative".
- 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".
23. The OECDs 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.