TRADE AND LABOUR STANDARDS
TUAC Briefing Note for OECD Workshop
3 - 4 October, 1996

The OECD was asked to work on trade and labour standards by its Ministerial Council in 1994. An executive summary of the results of their work as approved by the OECD Trade and Employment Committees was released at the time of the May 1996 Ministerial Council. The full OECD Report on which the summary is based is now being published at the time of the OECD Workshop. The Report's analysis and findings are mixed, some commentators who are opposed to labour standards being raised in the World Trade Organisation have said the OECD Report refutes a linkage between trade and labour standards. This is not the case and there are important points in the Report that trade unions in both industrialised and developing countries would support.

For this reason trade unions in the OECD countries gave a cautious welcome to the OECD report on trade and labour standards when it was discussed at the OECD Council of Ministers. Speaking at consultations with the OECD Council of Ministers on 20 May in Paris, the TUAC delegation said that "the Report makes a significant contribution to the international debate on the social dimension of the world trading system which will now intensify in the run up to the World Trade Organisation meeting in Singapore in December. The multilateral trade and investment system now includes rules to protect intellectual property and investors rights. Those rules must be extended to include workers rights."

The Report identifies a set of core labour standards which it says are "widely recognised to be of particular importance: elimination of child labour exploitation, prohibition of forced labour, freedom of association, the right to organise and bargain collectively and non-discrimination in employment".

Although the Report recognises that these rights "cannot be considered primarily as a means to improve market efficiency as they are fundamental rights of workers", it shows that their implementation can also support economic development providing a closer link between markets and social development.

The OECD's review of the relationship between the observance of trade union rights and economic development found that countries which suppressed these rights did not have better economic performance and concluded that "concerns expressed by certain developing countries that core standards would negatively affect their economic performance are unfounded." Rather, there is a positive two way relationship between trade and labour standards. 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. Observance may work as an incentive to raise productivity through investment in human and physical capital".

However the reality for the international trade union movement is that in the new "global economy" trade union rights are being violated. The ICFTU's annual survey of violation of trade union rights has shown a trend of increasing suppression of trade unions for misguided economic reasons rather than political or ideological ones. Organising trade unions in many parts of the world remains a difficult and hazardous process. The establishment of "free trade" or "export processing zones" especially in developing countries is further undermining poor labour rights. The move by some developing countries to respect and enforce core labour standards is being undermined by negative "policy competition" between governments who wish to attract foreign investment through the suppression of labour rights. The Report notes the cases of governments denying core standards to workers in export processing zones, pointing out that the advantages would be short lived.

Whilst calling for economic growth and freer trade the Report states that "there are reasons to doubt that market forces alone will automatically improve core standards" and therefore calls for "more direct promotion mechanisms". In reviewing the mechanisms which already exist it calls on governments to enhance the role of the ILO and points out that "development cooperation programmes can make a positive contribution by addressing the underlying causes" and "strengthening capacity for human rights and good governance".

On the issue of labour standards in the World Trade Organisation, it notes the current lack of consensus and continuing international debate, but says that the WTO's Trade Policy Review Mechanism could be extended to include labour standards without renegotiating or amending WTO articles.

The Report also reviews the experience of promoting labour standards through other trade measures. It notes that with the regard to the use of Generalised System of Preferences (GSP) in the United States "conditioning eligibility for GSP benefits on the respect of core labour standards induced a positive change in the behaviour of some countries". The European Union now has similar arrangements. The Report also reviews the NAFTA side agreements and International Codes of Conduct on Multinational Enterprises. It goes on to look at "private sector mechanisms" such as consumer boycotts, social labelling, and codes, but concludes whilst helping in certain cases "they are unlikely to provide a general solution".

The Report concludes that "all the mechanisms reviewed in the study can potentially address at least one of the reasons for non-observance of core labour standards. However, none of them can solve all the problems at the same time".

Whilst falling short of calling for a "Social Clause" in the WTO as demanded by the international trade union movement, the Report makes clear the links between trade and labour standards, whilst pointing out that the suppression of labour standards does not in the long term yield trade advantages. This should ease the concerns of some developing countries who have opposed the discussion of these issues in the WTO. The time is now ripe for the WTO Ministerial Council meeting in Singapore in December to discuss trade and labour standards and set up a WTO Working Party on the issue as called for by many of the parties including the European Commission and the United States.