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LABOUR STANDARDS IN THE GLOBAL TRADE AND INVESTMENT SYSTEM NOVEMBER 1996 The Trade Union Advisory Committee P. Haridasan While discussing the phenomenon of child labour and ways and means to eradicate the same, one has to keep in mind the reasons which cause this scourge. As abject poverty and economic backwardness are the root cause of child labour, all our efforts should be made to attack the problem of poverty from all sides by sincerely implementing all developmental programmes. The government must pay special heed to eradicate poverty and extend help to the poor children who are really interested in their education. The parents belonging to low socio-economic groups should be motivated to send their children to school rather than to work places. Since most of the parents of the child labour are illiterate, they do not understand and realise the significance of education. It is therefore necessary to develop education consciousness among them by making use of all possible means, especially by effectively organising adult education programmes. There should be compulsory universal education up to the age of 14 years. For this there is need to establish a network of schools well within easy reach of children so that any child desirous of getting education may not have to go more than one kilometre. Trade unions in developing countries in Asia are quite conscious of the need for abolition of child labour. If at all, there may be some difference of opinion about how to tackle this problem. Boycott of goods as propounded by many is a double-edged weapon. While it cannot be ignored that such campaigns do have an impact and force the governments and the employers to act, care should be taken to see that the result of such campaigns should not be throwing the working children to wolves. The pressure put by various groups in European countries on carpet manufacturers in the South Asian countries seems to be contributing to elimination of child labour in that sector. Any programme for abolition of child labour should have a component for re-habilitation of the children thus released from labour. It is important that this rehabilitated children are able to get education along with food and shelter. LABOUR STANDARDS AND FOREIGN DIRECT INVESTMENT THE RESULTS OF THE OECD STUDY Bill Witherell, The debate on labour standards deals primarily with the economic and social implications of trade between countries with different levels of labour standards. However, reflecting the rapid expansion of international investment flows, in particular to the developing world, links between FDI and labour standards are attracting separate attention. While there seems to be agreement on the net positive impact of FDI on the prospects for economic growth in host economies, which provides the conditions for an improvement in labour standards views differ on the direct relationship between FDI and core labour standards. Empirical evidence on the direct relationship between FDI and core labour standards is scarce and remains open to different interpretations. While core labour standards may not be systematically absent from investment decisions of OECD investors in favour on non-OECD destinations, aggregate FDI data suggest that core labour standard are not primary factors in the majority of investment decisions of OECD companies. Nonetheless, some governments in non-OECD countries have restricted labour rights (especially in EPZs) in the belief that doing so would help attract inward FDI from both OECD and non-OECD investors. Inward FDI from non-OECD countries, some of which have had problematic records of respecting core labour standards, has also increased. According to reports by MNEs from OECD countries, core labour standards are not considered a factor in assessing investment opportunities in a potential host country. In these circumstances, host countries may be able to enforce core labour standard without risking negative repercussions on FDI flows. Enforcement may work as an incentive to raise productivity through investment in human an physical capital and may help maintain a level playing-field for OECD investors in the non-OECD area, where the role on non-OECD investors is increasing significantly. LABOUR STANDARDS, FOREIGN DIRECT INVESTMENT AND GOVERNMENT POLICIES Rudy Oswald I would like to talk about the growing importance of foreign direct investment, and particularly about the relationship between investment and labour standards. I would also like to discuss with you labour standards in current U.S. investment policies, highlighting one government vehicle: the Overseas Private Investment Corporation (OPIC). Also, I will discuss direct union negotiation of worker rights standards in union collective bargaining agreements. Foreign Direct Investment As I mentioned, I want to begin by talking about the foreign direct investment as a part of the globalisation of the economy. As other speakers have pointed out, the world and its economic arrangements have changed radically. -Today, over 40% of foreign direct investment outflow is toward developing countries, up from 18% in 1986. The largest recipients are China, Mexico, Malaysia, Indonesia, and Argentina. -Investment flows are currently three times as great as trade flows and are increasing. -Since 1985, almost two-thirds of the total increase in employment by multinational corporations has been in developing countries. -Foreign affiliates of the world's 40,000 multinationals had sales of over $5 trillion, more than all world trade in goods and services. We have made progress negotiating rules to live by in the trade arena. Belatedly, we are beginning to tackle the rules for foreign direct investment. Investment and Labour Standards The work on investment has started in the OECD. Certainly, we believe there is an obligation to consider labour standards as they pertain to the investment of capital no different from our approach in trade. To be succinct, the world community through the Copenhagen social summit has signaled its recognition that certain "core" labour standards are fundamental. These core labour standards include freedom of association, the right to organize and bargain collectively, a prohibition on forced labour, a minimum age for the employment of children and non-discrimination in employment including equality between women and men. As such, the international community would be remiss if these basic labour standards were not guaranteed. And that applies especially to trade and investment flows. Some foreign direct investment is currently flowing into non-OECD countries, directed toward countries that either do not guarantee these basic rights by law or do not guarantee these rights in practice. In addition some countries have established export processing zones that exclude worker rights. Issues and examples like these make the negotiation of a treaty - the Multilateral Agreement on Investment (MAI) - even more critical from the trade unions' point of view. The Multilateral Agreement on Investment With regard to the MAI, I would like to echo Bill Witherell who stated in an earlier speech, "investment-policy makers and international business circles have perceived the need for something more: a comprehensive framework of binding investment rules which is sufficient to meet the requirements of the new international investment environment". I, for one, agree except, of course, that I would have added the international labour community to the mix. But I'm concerned particularly about the Guidelines for Multinational Enterprises. While the current investment instruments are being used as a base, the Codes of Liberalisation of Capital Movements, and Current Invisible Operations have become the base of the new MAI. However, the Guidelines governing multinational corporations' actions, a part of the Declaration and Decisions on International Investment and Multinational Enterprises, adopted in 1976, are relegated to an appendix. The Guidelines for Multinational Enterprises were one part of the broad declaration - the other three related elements are: (1) the National Treatment Instrument, (2) an instrument on International Investment Incentives and Disincentives, and (3) an instrument on Conflicting Requirements. The Guidelines have been reviewed three times in 1979, 1984 and 1991. Fundamentally, the political agreement expressed in the Guidelines has been tested over a 20 year period. We believe the Guidelines should be an integral part of the Multilateral Agreement on Investment. OPIC and Labour Standards There is an existing U.S. programme where labour standards and investment are related. The Overseas Private Investment Corporation (OPIC) provides loan guarantees and investment insurance for U.S. corporations and financial institutions investing in other countries. OPIC's statute includes a prohibition on working in countries which are not "taking steps to adopt and implement laws that extend internationally recognized worker rights ... (including in export processing zones). In the U.S., the statute covering the OPIC includes what is known as "worker rights". The current statute includes five internationally recognized worker rights: the right of association; the right to organize and bargain collectively; a prohibition on the use of any form of forced or compulsory labour; a minimum age for the employment of children; and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. As some of you may know, the five worker rights are supported by the ILO's conventions and recommendations which were established in a tripartite manner over a period of years. This allows the U.S. government to refer to an international standard during the process of reviewing complaints about worker rights. In practice, the OPIC implementation of the worker rights provision usually administratively follows the decisions made by the interagency U.S. trade group. If a country is removed from the list of eligible beneficiaries for trade privileges on the basis of worker rights violations, it will also be ineligible for OPIC benefits. However, since OPIC operates in a larger number of countries, there are approximately 30 countries about whom complaints which can be filed directly to the OPIC. OPIC holds an annual hearing during which worker rights cases may be presented. The AFL-CIO and others have submitted numerous complaints to OPIC over the last ten years. As a result of OPIC's investigation into worker rights practices in these cases, four countries are no longer eligible for OPIC benefits -- the Republic of Korea, Nigeria, Saudi Arabia, and Qatar. One country remains under review at this time -- Vietnam. There is also one special case -- China. China has not been eligible for OPIC benefits since 1989 under a special administrative ruling. In addition, OPIC includes the following language in all contracts it enters into with individual investors to provide financial support:
There are occasions where OPIC has investigated the possible denial of worker rights by corporations which had received OPIC benefits. Of course, the ties between labour standards and investment in the U.S. only apply to the investments where the companies ask for government assistance in making loans or insurance. For other private sector investment, the trade unions also have a role to play. Sectoral Trade Union Initiatives U.S. trade unions are beginning to negotiate collective agreements with multinationals corporations using reference to international labour standards. One example of this is a 3-year agreement covering 35,000 workers between the AFL-CIO affiliate, UNITE and the Clothing Manufacturers Association, a U.S. multiemployer bargaining group. The agreement restricts member companies from using partners, contractors, or other sources that do not observe international labour standards. These standards include those dealing with "living" wages and benefits, reasonable working hours, freedom of association, and the rights to organize or join a union, to bargain collectively, and to strike. Contracting with companies employing child labour or forced or compulsory labour, engaging in discriminatory practices, or failure to provide a safe and healthy work environment is not permitted by member companies. In exchange, outsourcing (imported production as a percentage of total production) is allowed to increase from 10 percent to 22 percent over the term of the three year contract. Conclusion In 1944, delegates from forty-one nations signed the ILO Declaration of Philadelphia, declaring that "poverty anywhere constitutes a danger to prosperity everywhere". The Declaration also goes on to affirm that all individuals in every nation have "the right to pursue both their material well-being and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity; and all national and international policies and measures, in particular those of an economic and financial character, should be judged in this light and accepted only in so far as they may be held to promote and not to hinder the achievement of this fundamental objective". An investment in a business is more than a placement of funds. It is bringing together of the investment of capital with the investment of labour to engage in business activities. Thus, investment treaties should take into account the appropriate rules for safeguarding investment funds as well as for safeguarding labour's investment. The inclusion of worker rights in an investment agreement would assure that the investment rules protect both capital and labour. In addition to the International Labour Organization's tripartite oversight of international standards -- the conventions and recommendations -- there should be a direct link both to trade and investment standards. Obviously, the strategy of pursuing economic growth as the primary goal of development is an important goal but growth alone has no solved the problems of poverty and social inequality. Growth by itself is insufficient to create social development. The AFL-CIO believes all governments must search for answers to the following questions: As we promote economic growth, how can we ensure that we are not imposing new burdens on working people and poor people in both the developed and developing nations? How can we ensure that workers will prosper when their societies prosper? We believe the answer lies in guaranteeing workers a voice in their workplace through democratically elected trade unions. A TRADE UNION INITIATIVE ON VOLUNTARY SCHEMES Marion F. Hellmann Secretary for Industrial Affairs and Research International Federation of Building and Woodworkers Introduction The Uruguay Round is a watershed for the world trading system. It will bring more trade liberalisation, new areas of coverage, stronger rules, new enforcement procedures, and new ways to settle disputes. All governments will need to make important changes in the way trade policy is conducted as a result of the Uruguay Round agreements signed in Marrakech in mid-April 1994. The international trade union movement is demanding that workers' basic rights should be included as part of international trade agreements. The International Confederation of Free Trade Unions (ICFTU) is demanding that World Trade Organisation (WTO) membership should only be granted to countries that ratify seven key ILO Conventions on forced labour, freedom of association, discrimination and child labour. The IFBWW believes that this would help to make the exporting countries observe fair labour standards and would help improve working and living conditions of workers.To make this work the international trade secretariats will also have to define a strategy to make sure that basic minimum labour standards can be implemented in their own industries. The IFBWW is demanding the inclusion of these standards based on the results of the ILO tripartite industrial sector activities and ILO conventions which particularly refer to our industries. This specifically could mean:
Certification: a market-based incentive to encourage companies to improve their forestry practices The management of forests and the long term supply of timber is a central concern for many IFBWW affiliates. The mismanagement of forests entails not only environmental but also social costs. Workers in the forest and wood-processing sectors face daily risks, receive inadequate training, and often do not have the security of permanent employment. In many countries the long term future of industries in these sectors is in jeopardy as unsustainable logging rapidly depletes the remaining forest resources. Following years of intense international debate on forests the discussion has in most cases moved from calls to boycott or ban logging. There is now a general acceptance that forests can be managed to produce timber whilst at the same time maintaining ecological integrity and providing equitable social benefits. Governments have now, at least in theory, committed themselves to sustainable forest management. Tropical-timber producing countries have pledged to achieving sustainable forest management by the Year 2000 under the framework of the International Tropical Timber Organisation (ITTO). Temperate countries have made similar commitments although have managed to avoid tying themselves to specific dates. Despite the rhetoric many governments are yet to rise to the many challenges that a move to sustainable forest management will involve. In fac t the most significant progress has been made outside the governmental sector by non-governmental organisations or progressive elements in the private sector. Forest certification is one of the few positive practical developments to emerge during the 1990s. Certification involves the independent assessment of forest management according to internationally-accepted standards. It is a market-based incentive which encourages companies to improve their forestry practices. If forest management is acceptable then the timber from that forest can be given a label, which will be recognised in the market-place. Certification has been promoted by a number of NGOs and by some members of the timber trade. As yet there has been little involvement from groups representing workers interests. Social issues and forest certification Forest certification and the subsequent labelling of timber products can provide an incentive for better forest management. Many consumers, both individuals and large companies, want to ensure that any wood or wood products they buy come only from well-managed forests. But to make an informed choice requires reliable information on timber sources. Forest certification is a means of independently verifying the sustainability of forest management and so providing the consumer with trustworthy information. For a certification scheme to be effective it must have an acceptable definition of "sustainable forest management", and measurable indicators which can be used to assess whether management is sustainable. Definition of Sustainability It is now widely accepted that sustainable forestry is a much broader concept than just maintaining timber supply. Sustainable management must be environmentally appropriate, socially beneficial and economically viable. This means that forest management must be planned and undertaken with the intention of minimising the impact on the full range of biodiversity, and that local people and forest workers should receive long term benefit from forestry operations and their quality of life should be maintained or enhanced. Criteria and Indicators Assessment of the sustainability of forest operations requires the identification of key issues which are of critical importance. For example forest management can only be considered sustainable if:
There are many other such fundamental factors which are common to all forest management operations wherever in the world they take place. These factors can be termed criteria of forest management. Criteria should cover social, environmental, economic, technical and legal considerations and they should identify the issues which must be addressed in any forest management operation. Today, there are a number of governmental and non-governmental initiatives which have developed criteria for forest management. These include the International Tropical Timber Organisation (tropical forests), Taropoto (Amazon region) the Helsinki Process (European forests), Montreal Process (other temperate and boreal forests) and the Forest Stewardship Council (all forests). Although a wide range of organisations and countries have been involved in the development of the various proposals in most cases organisations promoting workers concerns and social issues have not been at the forefront. In general it has been the environmental movement which has created the impetus for the development of forest certification. This bias is reflected in the content of the proposals. A recent review by Peter Poschen of the ILO has shown that coverage of important social issues is rather weak in all of the schemes. All these initiatives vary in their precise content but all are attempts to establish a framework for improving forest management on the ground. But to actually decide whether a specific forestry operation can be considered sustainable or not requires measurable indicators. But it is extremely difficult, if not impossible, to develop specific measurable indicators which are relevant worldwide, as obviously socioeconomic and environmental factors vary considerably from region to region. The next stage in the development of these schemes should be the identification of measurable indicators which are relevant at the national or local level. National working groups which represent all interest groups should determine locally-acceptable standards for each indicator. In this way a hierarchy of values is established with international criteria and national/local indicators. For instance concerning training: The criteria could be "All forest workers must receive adequate training" The indicator could be : "By 1997 all forest workers must be shown to be adequately trained (through skills testing procedures) in line with specifications in National Code of Logging Practice". The elaboration of national indicators will provide an opportunity to make sure that social issues are adequately covered. Otherwise certification schemes could be developed which label as "sustainable" timber which comes from operations where workers rights are not respected. Social Indicators By their very nature indicators will have to be agreed at the national/local level but there are key areas which must be included. The following list is not exhaustive but provides some suggestions for issues which should be incorporated. Where possible suggestions for both quantitative and qualitative indicators are given as well as reference to any relevant ILO Conventions. Setting the "pass/fail" levels for each indicator must be agreed after extensive consultation with all relevant groups. 1) Indigeneous people - ILO Conventions 107 and 169 Qualitative indicators: are the rights of indigenous peoples to land or other forest resources protected - is forest management is under the control of indigenous peoples on their lands unless control has been delegated wit free and informed consent -are sites of special significance for indigenous peoples protected. 2) Workers rights -Health and Safety - ILO Convention 155 Quantitative indicators: Number of accidents - Disease rate Qualitative indicators: Compliance with ILO Code of Safety - Compliance with national laws - Compliance with Codes of Conduct - is adequate information and training provided for employees - are the causes of accidents and heath problems assessed and preventative measures implemented - are dangerous substances used. Training Quantitative indicators: percentage of adequately trained employees Qualitative indicators: have training needs (skill requirements defined) been assessed - is training equally available to all employees and contractors regardless of sex, race etc - are adequate resources available for training - is training provided in work time. is environmental and silvicultural training provided. Job security Quantitative indicators: work force turnover - length of contracts Qualitative indicators: recruitment problems - type of contract (seasonal, short term)- are contracts the same for contractors and regular employees. Workers rights to organise - ILO Conventions 87 and 98 Quantitative indicators: number of union members Qualitative indicators: - can workers freely form organisations without interference -do all workers have the right to join trade unions - are there any restrictions on right to organise. Participation - ILO Convention 135 Qualitative indicators: freedom of information - are there worker's representative structures at company level - can workers representatives participate in decision making on labour and environmental issues. Equality - ILO Conventions 100, 111 Quantitative indicators: wage rates for men and women Qualitative indicators: is there evidence of discrimination on grounds of race, colour, sex, religion, political opinion, national extraction or social origin in terms of access to employment, access to training and the terms and conditions of employment. 3) Community rights and Benefits Benefit sharing Quantitative indicators: proportion local employees compared with non-locals Qualitative indicators: are there appropriate mechanisms for providing compensation for loss or damage affecting the legal or customary rights, property, resources or livelihoods of local people- are adequate services provided for local population. Living conditions Quantitative indicators: Literacy rates - infant mortality - disease rates Qualitative indicators: adequate housing - permanent freshwater supply - education. Freedom of information and participation in decision making Qualitative indicators: mechanisms established for participatory planning and decision-making - documents accessible - representatives of all interest groups invited to meetings. ILO Labour Clauses: to ensure minimum labour standards in the execution of public contracts During the Uruguay Round of Multilateral Trade talks another negotiation took place in the WTO, which did not get as much attention. This discussion was also concluded in December 1993 and resulted in a new and greatly expanded WTO Agreement on Government Procurement, including procurement for products and for services including construction services. This new agreement was signed by twenty-two governments on 15 April 1994 in Marrakech in Morocco, in parallel with the signing of the Final Act of the Uruguay Round, and will enter into force on 1 January 1996. These countries must apply the WTO rules when issuing tenders for public construction projects, opening up the process to international competitive bidding. When the General Agreement on Tariffs and Trade was negotiated in 1947, government procurement was effectively left out. Contracting parties remained free to discriminate against foreign suppliers and imports. Growing recognition that discriminatory procurement policies represented an obstacle to international trade resulted in a first modest effort to bring government procurement under the WTO rules in the Tokyo Round of Trade negotiations. In 1979 an Agreement on Government Procurement was signed which opened up central government procurement of goods to international competition in most of the industrial countries. This Agreement covers only a small part of government procurement, and it will now be superseded by a totally new Agreement on Government Procurement, which includes construction services. The new and greatly expanded WTO agreement on Government Procurement, including procurement for products and services including construction services became effective on January 1, 1996. The new agreement on government procurement establishes a framework of rights and obligations with respect to laws, regulations, procedures and practices regarding government procurement. The governments signing the agreement must apply the WTO rules when issuing tenders for public construction projects, thereby opening up the process to international competitive bidding. In the construction industry the WTO agreement applies to procurements which are of a value of at least US $ 7 million for most Signatories. Parallel to the WTO agreement the last of seven procurement Directives of the European Community entered into force on July 1, 1994. The new Agreement will have a huge significance for the construction industry world-wide. This opening up of the construction markets especially in Asia i.e. in Japan and Korea and the requirement to contractors to provide total solutions in the form of, for example, Build Operate (and or) Own Transfer (BOT) projects, will increase competition for contracts and will accelerate the concentration and internationalisation of the construction industry. A large proportion of construction work is funded by international or intergovernmental development banks and agencies, and implemented in developing countries. There will be an increase in the total value of contracts awarded. The internationalisation of the labour force will increase. Where migrant construction workers are hired on a large scale by international construction firms there will probably be infringements of migrant workers basic rights and abuses of human and trade union rights. The objective of IFBWW policy is inter alia to achieve sustainability in building activities, leading to stable employment, the improvement of working and living conditions of workers, and developmentally and environmentally sound planning and construction practices. Governments, intergovernmental or international development banks and agencies can greatly help to achieve these objectives. Public procurement and ILO Convention No.94 concerning Labour Clauses in Public Contracts Many countries - 56 countries have ratified Convention No.94 of the International Labour Organisation concerning Labour Clauses in Public Contracts - include labour clauses in specifications for international bidding in public procurement. The International Labour Conference adopted in 1949 the Labour Clauses (Public Contracts) Convention No. 94. The aim of the standard is to ensure minimum labour standards in the execution of public contracts. The Convention deals with all contracts involving the expenditure of public funds awarded by central public authorities to another party employing workers for the construction, demolition, and so on, of public works, the manufacture of materials, suppliers or equipment or the performance or supply of services. The Convention also applies to work carried out by subcontractors. The Public contracts shall include clauses ensuring to the workers concerned wages (including allowances), hours of work and other conditions of labour which are not less favourable than those established for work of the same character by national laws or regulations, collective agreements or arbitration awards, or the general level observed in the trade or industry concerned. The terms of the clauses to be included in contracts shall be determined by the competent authority after consultation of employers and workers concerned. It calls for the publication of texts giving effect to its provisions, for a system of inspection, for sanctions (such as the withholding by public authorities of contracts for failure to observe and apply labour clauses in public contracts) and for measures enabling the workers concerned to obtain the wages to which they are entitled (notably by the withholding of payments due to the employers under the terms of the public contract by the authorities). The essential purpose of ILO Convention No. 94 is to ensure that, through the insertion of appropriate labour clauses in public contracts, the workers employed by a contractor and paid indirectly out of public funds enjoy wages and conditions of labour which are not less favourable than those of other workers doing similar work. The additional protection afforded by these labour clauses in public contracts is deemed to be necessary because this category of workers may not be covered by collective agreements and other measures regulating wages, and is often more exposed than others because of the competition between firms tendering for public contracts. Thus, firms tendering for a public contract, knowing that a lower evaluation of costs may sway the decision in their favour, may be led to calculate labour costs at a level which is below that normally established by collective agreement otherwise. By prescribing standard labour clauses in public contracts, governments aim to eliminate competitive practices of this type and ensures that the workers concerned are entitled to wages and labour conditions at least as good as those normally observed for the kind of work in question in their country. The protection provided through labour clauses in public contracts cannot normally be ensured only through the application of general labour legislation. This is due first of all to the fact that there are many countries in which the minimum standards fixed by law are improved upon by collective bargaining or other means. IFBWW considers that member States of the ILO should ratify and apply the ILO Labour Clauses (Public Contracts) Convention, 1949 (No.94). In addition not only nationally financed but also internationally financed projects should be subject to rules which include labour rights. Therefore, international and intergovernmental development banks and agencies like the World Bank should incorporate labour clauses in their procurement guidelines and tender specifications governing the award of public contracts. A Tripartite ILO meeting on Social and Labour Issues concerning Migrant Workers in the Construction Industry "stressed that in those countries which have ratified the ILO's Labour Clauses (Public Contracts) Convention, 1949 (no.94), the workers concerned should have conditions of labour which are not less favourable than those established for work of the same character in the trade or industry concerned in the district where the work is carried on, in accordance with Article 2, paragraph 1, of Convention 94." The meeting invited the ILO Governing Body to "call on the member States of the ILO: to ratify and apply ILO Labour Clauses... to request the Director-General ... (b) to call on the international and intergovernmental development banks and agencies to take the provisions of Convention No. 94 into consideration when issuing tender specifications for public construction projects." In the documents from Rio de Janeiro and Copenhagen, governments committed themselves to ensure that there is sustainable development in economic growth, equitable distributions and conservation of nature as well as a social development which take poverty, unemployment and social exclusion into consideration. The 1995 G-7 summit in Halifax endorsed the importance of the role of the international financial institutions. Consequently the role of international and intergovernmental development banks and agencies must also be emphasised. When it comes to labour rights in awarding public contracts there is no distinction between an intergovernmental institution like the World Bank and governments. Therefore the IFBWW and its affiliates feel that all international and intergovernmental development banks and agencies should not only acknowledges these labour rights but also incorporate them - in the form of the ILO convention No.94 "Labour Clauses in Public Contracts" - in the procurement guidelines and tender specifications governing the award of public contracts funded by them. IMPLEMENTATION OF LABOUR STANDARDS Stephen Pursey I would like to develop some of the thoughts articulated by Geza Feketekuty on the potential for consensus on labour standards and trade, and try to define the agenda for the sort of informal discussion that will be needed on the road to Singapore. I have often thought that one of the characteristics of the period of international institution building from about 1943 through to the early 50s and the creation of the European Community was that different parts of government and organised business and labour did talk to each other, and perhaps more important listened. They developed a broad consensus about the interrelationship between economic and social policy and national and international responsibilities. The delegates at the ILO's Philadelphia Conference, at Bretton Woods and in San Francisco in 1944/5 and in Havana in 1947 clearly knew what each other were doing and how their efforts interconnected. Unfortunately, the so-called specialised international agencies they created have developed a powerful instinct for what is their "turf", and so have the different ministries of government that attend their meetings. If we are to refashion a new consensus in which the framework for the functioning of a global market economy is solidly founded in the imperatives of national democratic political systems, we badly need to improve communications between the specialists - in particular the linkage between the national and international and economic and social agendas. Let me briefly describe what the ICFTU is and how we developed our policy on international workers' rights and trade. The ICFTU now consists of the national centres of trade unions in 136 countries on all five continents. About two-thirds of our affiliates come from developing and transition countries but about two-thirds of the 126 million union members that make up our affiliates are in the traditional industrialised countries. We have pressed for a linkage between workers' rights and trade in every trade round since Havana in 1947 when the ICFTU was itself in the process of being formed. We made quite a push for inclusion of workers' rights in the Uruguay Round launch at Punte del Este but, as the Uruguayan chair said at the time, there was no consensus to include the item in the MTN but it would have to be taken up after the Round. So that is what we did. As soon as the Round was concluded we renewed our pressure for a special working group to examine the issue and we expect the Singapore meeting in December to again look at and decide upon that proposal. One of the reasons our Marrakech campaign moved the labour rights issue up the trade agenda is that within the ICFTU we spent some time in building a consensus within our now very diverse membership over two issues:- - the definition of basic rights; and - the procedure for examining possible violations of those rights and how to remedy them. We focused on human rights at the workplace because that is where the market economy and citizen's interests come together. We chose seven ILO Conventions which approached universal ratification and which are the enabling rights which give workers the chance to struggle for a fair share of the benefits that trade liberalisation can bring and reduce the adverse effects that massive structural changes to employment can cause. That work inside the ICFTU has paid off well. As was shown in Copenhagen at the Social Summit there is a very broad consensus that these are core labour rights to which all countries should and can commit themselves. A second point of consensus in the ICFTU, and now I think more broadly, is that all countries should aim if not for totally free trade, for progressively more and more open trade with no obvious stopping point. I believe the third area of consensus is that the international community should exert pressure on countries that violate basic standards because these violations reduce the legitimacy of the trading system. A fourth area of consensus is with increasing capital and trade liberalisation there is no such thing as a local labour market. It is difficult to quantify and disaggregate exactly how labour markets are affected by globalisation but few would take the view that there is no effect. One of the most powerful effects is the lowering of the threshold for entry into markets. Even where movements of capital or shifts in trade appear relatively negligible in comparison to changes in levels of employment and the distribution of wages between different groups, employers are clearly very much aware that if they do not constantly try to reduce prices and thus labour costs per unit of output, and keep up with technological changes, they risk losing their business. A further area of consensus that will I think be highlighted by the forthcoming OECD study is that just as it is the interests of countries to liberalise trade even if others do not, it is also in the interests of countries to implement basic labour standards even if others do not. The two go together. And therefore what we need to do is to look at ways to encourage, both by incentives and disincentives, governments to do what is in the interests of the majority of their own citizens, both workers and their corporate citizens, and the international community as a whole. And this is where I think we have got to in forging a new consensus. It has gone a long way in terms of common objectives, but we do not yet have a consensus over exactly how to develop mechanisms which encourage governments to fulfil their responsibilities to their own people and to the international community as a whole and how the WTO and ILO should work together. Faced with this issue the ICFTU has focused on what a possible procedure for such a mechanism would look like. Briefly, what we propose for an open, multilateral, rule-based system for labour rights and trade is the following:- - a regular periodic review by ILO experts of the observance of basic labour standards by all WTO members; with recommendations as to how to resolve any problems; - if problems are found a period of dialogue to help the contracting party find ways to meet the principles in the standards; - a further review of progress - say two years later; - if the problem is solved, the file is closed; if progress is being made a further review in say one year's time; - if no cooperation, a warning that the issue will be referred to the WTO if within one year changes are not put in place; - if still no cooperation, the WTO should determine the appropriate trade response which should, if possible, be multilateral. In our view a multilateral system is best. Regional or corporate codes of conduct are useful but not fully adequate especially because they favour stronger parties over weaker ones. The developing countries' interests would be best protected in a multilateral system. Finally, who are the potential participants in a new consensus? First and foremost it should be democratic developing countries that are most damaged by competition with China and similar countries that have a system of a police/military dictatorship combined with the most crude and arbitrary forms of crony capitalism. Second, responsible business that recognizes that the security and productivity of their investments ultimately depends on the degree to which the system in which they operate produces social justice. And who furthermore cannot afford their corporate and product image to clash with the way they or their sub-contractors treat their workers. Thirdly, it includes the industrial country governments that are trying to adapt to a new global world economy. And fourthly, workers everywhere, especially those who at present are not able to call on a union to help them usually because of weaknesses in labour law. The consensus includes all the major social and political adherents of what is known as the free world. Those not in the consensus are essentially those who see short-term advantages in free-riding outside rules which circumscribe the exercise of their power. And as has been the case so often in history, perhaps the biggest problem for liberal democrats is what do you do about a political force which will not play by the rules. And the lessons of history is that appeasement doesn't work. Talk quietly and for as long as you can but do not drop the stick behind your back. Trade unions need to develop a powerful new drive to establish partnerships with employers for the mutually supportive goals of productivity and growth with social justice. But we need to secure our rights in order to take up the responsibilities such a strategy implies. In the new global market the rights of capital are being systematically entrenched but not enough is being done to secure the rights of labour. It is time to rebalance that relationship, and thus reduce the threat of disruptive conflict between capital and labour, and between countries. The ICFTU wants to see the first WTO Council succeed. It is important for the WTO and for Singapore as host and Asian countries generally that the meeting is constructive and produces results. An important part of achieving success will be avoidance of a major breakdown over labour standards and trade. However, as I have tried to argue, there are a number of points of common ground and also a number of procedural options for developing that ground further. Finally there are a broad range of interests that recognise that labour standards and trade is an issue that will not go away and needs to be resolved. PART III THE DEBATE "ON THE ROAD TO SINGAPORE" Since the end of the Uruguay Round, the issue of trade and labour standards has come to the forefront of the policy agenda. The protracted rise in unemployment in many OECD countries and in wage inequality in some countries has led some observers to look for external explanations, including claims of unfair trade practices associated with competitions from firms that allegedly base their comparative advantage on low labour standards. This view is challenged by those who see internal structural rigidigies as the key factor behind unemployment and growing wage inequality and who claim that differences in labour standards do not have any significant impact on trade flows or foreign direct investment. The debate has focused on he human rights dimension of certain labour standards It is argued that some labour standards reflect basic human rights and that all countries in the world should therefore adhere to these standards. Claims are also made that i) those labour standard that embody basic human rights can stimulate economic development and are therefore in the interest of all workers (and countries) in the world; and ii) observance of these labour standards could neutralise protectionist pressures, thus securing support for free trade. However, there are significant differences of opinion on how such labour standards can be promoted. Some take the view that the international community should exert pressure on those countries that do not observe these standards, with the possibility of trade sanctions as a last resort. Others remain unconvinced that new international promotion mechanisms are required, in addition to those available in the international Labour Organisation (ILO) and fear that the defence of human rights would be captured by protectionist interests. More fundamentally, the issue arises as to whether economic development (associated, for example, with trade liberalisation) will gradually improve labour standards, or whether additional actions (for example, though the imposition of conditionality criteria in international trade agreements) are needed. In June 1994, Ministers invited the OECD Secretariat to undertake an analysis of "areas where further progress with liberalisation and the strengthening of the multilateral system may be required". These areas included "trade, employment and internationally recognised labour standards, including basic concepts, empirical evidence in trade and investment patterns, and current mechanisms for promoting higher labour standard world-wide". Responding to this mandate, the Trade Committee and the Employment, Labour and Social Affairs, Committee began jointly and analytical programme to examine these issues, in close co-operation with other relevant OECD Committees and Directorates as well as other International organisations, in particular the ILO. The attached study is the result of this exercise. Its purpose is to shed some light on the analytical aspects of this issue, while also evaluating mechanisms to promote core labour standards world-wide. Selection of core labour standards and their implementation The debate on trade and labour standards has been made more complex because of a lack of agreement on a list of the labour standards that are relevant to this issue and their definition. Part I of the study identifies a small set of labour standards, termed "core" for the purposes of the study, which 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. The choice of these labour standards is based primarily on the fact that they embody important human rights and that they derive from the universal Declaration of Human Rights. The universality of the basic labour rights has been highlighted in the conclusions of the recent World Social Summit. In addition, three United Nations acts (the Covenant on Economic, Social and Cultural Rights, the Covenant on Civil and Political Rights and the Convention on the Rights of the Child), which contain relatively detailed provisions on core labour standards, have been ratified by over 120 countries, suggesting that these standards receive near-universal adherence. It is also important to note that all countries which are members of the ILO subscribe to the principles of freedom of association and collective bargaining by virtue of their membership. Certain ILO Conventions provide for internationally negotiated definitions of core standards: Conventions 87 and 98 provide detailed provisions on freedom of association the right to organise and collective bargaining; Convention 29 and 105 establish the prohibition of all forms of forced labour; and Convention 111 provides for non-discrimination in employment. Although here is general agreement on the underlying principles behind these Conventions, the study suggests that certain provisions of some of these Conventions or their interpretations may find themselves at variance with national laws or regulations, ratified all five Conventions in question. Finally, there is no ILO Convention that addresses the issue of child labour exploitation as such. Instead, Convention 138 on non-exploitative forms of child labour. Therefore, some OECD countries are of the view that ILO Conventions do not provide a unique and comprehensive set of definitions for the core standards selected in this report. It is difficult to make a precise assessment of the degree of enforcement of core labour standards across countries, as available information is sparse and incomplete. The lack of reliable indicators of enforcement of standards on child labour, forced labour and non-discrimination is especially acute. Available evidence in this area is mostly anecdotal, making any attempt to analyse the economic implications of these standards preblematic. But, on the basis of ILO reports and other sources, the study makes a tentatie assessment of the state of freedom-of-association rights. There is a weak positive association between the degree of enforcement of these rights and the level of economic development. Finally, there seems to be a trend towards better compliance in low-standards countries. Link between core labour standards, trade, economic development and employment The theroretical discussion in Part II suggests that proper implementation of some core labour standards can support economic development, permitting an expansion in trade. Improved enforcement of non-discrimination standards might raise economic efficiency by ensuring that the allocation of labour resources moves closer to a free-market situation. Elimination of forced labour and child labour exploitation can also contribute to improving allocative efficiency. Child labour expoitation, moreover, is likely to undermine long-term economic prospects to the extent that it hampers children's education possibilities and degrades their health and welfare. The economic effects of freedom of association and the right to collective bargaining depend on a variety of factors. On the one hand, these rights can help upgrade production processes, while also raising workers' motivation and productivity. On the other hand, they can introduce a new distortion in the market if unionised workers succeed in raising their wages and working conditions above market levels. The net outcome on economic efficiency depends on the relative importance of these two effects. However, freedom of association as well as the other core labour standards cannot be considered primarily as a means to improve market efficiency, as they are fundamental rights of workers. The empirical analysis presented in Part I refers almost entirely to only two core standards, freedom of association and the right of collective bargaining. This limitation of the analysis is unavoidable given the lack of data regarding the other core standards and the considerable technical difficulties encountered when trying to link the observance of labour standards with a range of economic outcomes. Within these limitations, this analysis suggests that the output effects of greater freedom-of-association and collective bargaining rights are likely to be negligible compared with other factors such as shifts in technology, raw-material prices and terms of trade. More generally, the actual economic effects of core labour standards are likely to be small. Part II also analyses the possible relationship between trade flows and core standards. Several points emerge: - theoretical analysis suggests that in general, trade improves aggregate economic welfare, irrespective of whether or not core standards are observed by all trading partners; - standard trade models show that patterns of specialisations are likely to be determined by fundamental factors such as relative factor endowments, technology and economies of scale; - empirical research suggests that there is no correlation at the aggregate level between real-wage growth and the degree of observance our freedom-of-association rights; - there is no evidence that low-standards countries enjoy a better global export performance than high-standards countries; - a detailed analysis of US import of textile products (for which competition from low-standards countries is thought to be most intense) suggests that imports from high-standards countries account for a large share of the US market. Moreover, on average, the price of US imports of textile products does not appear to be associated with the degree of enforcement of child labour standards in exporting countries; - some case have been recorded where governments appear to deny core standards to workers or deliberately do not enforce them with the aim of improving sectoral trade competitiveness or attracting investment into export-processing zones (EPZs); the expected economic gains from such a strategy are, however, likely to prove short-lived and could be outweighed in the longer term by the economic costs associateds with low core standards; - an analysis of selected trade liberalisation episodes does not prove unambiguously whether trade reforms or freer association rights came first. There is no evidence that freedom-of-association rights worsened in any of the countries that liberalised trade. Nor is it apparent that the promotion of these rights impeded a subsequent trade liberalisation. The promotion of these rights impeded a subsequent trade liberalisation? The strongest finding is that there is a positive association over time between successfully sustained trade reforms and improvements in core standards; - while core labour standards may not be systematically absent from the location decisions of OECD investors in favour of non-OECD destinations, aggregate FDI data suggest that core labour standards are not important determinants in the majority of cases; In these circumstances, host countries may be able to enforce core labour standards without risking negative repercussions on FDI flows. Observance may work as an incentive to raise productivity through investment in human and physical capital. These results imply that concerns expressed by certain developing countries that core standards would negatively affect their economic performance or their international competitive position are unfounded; indeed, it is theoretically possible that the observance of core standards would strengthen the long-term economic performance of all countries. The debate on trade and core standards is also motivated by concern that trade between low-standard countries and high-standards countries has led to a raise in unemployment, especially for unskilled workers, and/or growing wage inequality in the latter countries. Part II reviews research in this area, including the OECD Jobs Study, and shows that any shift in total employment associated with changes in trade patterns should be small. However, there is no agreement among researchers on the magnitude of the trade impact on sectoral employment patterns relative to the impact of other forces, e.g. technological progress and institutional changes. While the majority view is that trade with low-wage countries has had only a small impact on wage inequality over the past 15 years, some studies find large impacts. It seems clear that further theoretical and empirical work is needed to resolve these issues. Mechanisms to promote core labour standards world-wide Even through efforts to improve observance of core standards may be facilitated by economic growth and freer trade, there are reasons to doubt that market forces alone will automatically improve core standards. Hence, the importance of more direct promotions mechanisms. Part III of the study reviews and evaluates different mechanisms that are currently in use or have been proposed to promote core labour standards. These mechanisms may take the form of either incentives or disincentives (i.e. sanctions as the most extreme form), which are channelled through government decisions at the multilateral, bilateral or unilateral level, or alternatively, through private actions. To evaluate the effectiveness of the various mechanisms, one must first determine the extent to which they address the very issue under consideration, that is the existence of low core labour standards and its causes. Once this is done, the effectiveness of particular promotion mechanisms will depend upon the broad coverage of the mechanisms in terms of countries and economic agents, their character (e.g. legally binding versus voluntary), their political acceptability and, finally, their economic and social impacts. In cases of systematic violations of basic worker rights by non-democratic regimes, it is up to the international community to decide what should be done. In such situations, the solution lies in political and legislative changes within the countries concerned with a view to ensuring that the effective implementation of these rights becomes and objective of national policy. For example, there are cases in recent history where serious violations of human rights have been condemned by the UN system Trade sanctions (either unilateral or by the consensus of the international community in exceptional circumstances) and/or consumer boycotts have also been use. Relatively few countries systematically deny core labour standards. The more common case is the non-observance of core standards in certain sectors or the inadequate enforcement of national legislation. A variety of promotion mechanisms, in effect or proposed, have been examined with respect to such case. Enhancing the role of the ILO The ILO's distinguishing features -- its mandate, unique tripartite structure and quasi-universal membership -- make it an appropriate international forum for the promotion of core labour standards. It also provides the only functioning and directly relevant supervisory mechanism. Its monitoring/peer review procedures are specifically aimed at raising the level of standards and ensuring that they are universally recognised and properly implemented. The special procedure on freedom of association appears to be relatively effective. There is some evidence that governments respond to complaints presented under this procedure. Its effectiveness could be increased if more attention were given to countries where union rights are not fully protected and if important recommendations formulated by the Freedom of Association Committee were given more publicity. Recent proposals to promote application of the principles of prohibition of forced labour and non-discrimination in employment in all Member states include, on the one hand, the extension of the freedom-of-association procedure and, on the other, requests for regular reports on obstacles to ratification application of fundamental ILO Conventions (a procedure now existing only for Convention 111). While the latter option is being serious consideration, the former has met with scepticism, and discussion in the ILO has not proceeded very far at this stage. At present there exist practical obstacles to ratification, which prevent some countries from ratifying core ILO Conventions, even when their laws and practices are consistent with the principles embodied in these Convention. Some of these countries argue that revision and updating of the Conventions in question may help attract more ratifications. An additional problem is that there is presently no mechanism to monitor cases of child labour exploitation. However, the ILO Governing Body has decided to place the issue of child labour on the agenda of the 1998 International Labour Conference. More generally, it would help the debate if the ILO could provide reliable and up-to-date information on the enforcement of core standards, an area where information is presently sparse and incomplete. In sum, the current ILO monitoring system has proven to be reasonably effective, within the limits of its applicability. In particular, the ILO has an important role as a focal organisation where universal agreement on core labour standards can be reached. It can also persuade countries that it is in their own interest to promote basic labour rights and to avoid the exploitation of workers, while also informing the international community on cases on non-respect of core labour standards. In poor countries the ILO technical assistance may also contribute to the eradication of child labour exploitation. The ILO has also established a Working party on the Social Dimensions of the Liberalisation of International Trade. The Working Party has decided to suspend any discussion of the link between trade and labour standards through trade sanctions. Instead, it has agreed a future work programme of (i) research and country studies on the impact of trade liberalisation on core standards; and (ii) reviewing the ILO's means of action to promote core standards. Development co-operation and actions through other international organisations Insofar as the non-enforcement of some core labour standards, in particular the prohibition of child labour exploitation, is linked to issues of poverty and economic development, development co-operation programmes can make a positive contribution by addressing the underlying causes. An important advantage of such positive mechanisms, is that they can produce concrete and practical results -- e.g. getting children into schools, helping strengthen labour codes or enforcement capabilities -- without generating major economic distortions or political frictions. On the contrary, these measures are more likely to attract the support of all concerned countries, including developing ones. This links with the broader emphasis in today's development co-operation programmes on strengthening capacity for human rights and good governance, as embodied in the DAC Statement on Development Partnerships in the New Global Context. More can now be achieved in this direction by documenting and sharing experience as well as by assessing the effectiveness of different types of development co-operation in reducing the incidence of child labour and in promoting basic human rights. Proposals have also been made to harness WTO disciplines in order to foster core labour standards. Existing WTO provisions have not been designed for promoting core standards. Some of the suggestions under discussions would imply a reinterpretation of WTO practices and procedures, while others would require to a greater or lesser extent renegotiation and amendment of WTO articles. Extending the WTO's Trade Policy Review Mechanism procedure to include labour standards would fall into the former category while other proposals would fall into the latter. In all cases, a consensus among WTO Members on the appropriateness and effectiveness of using WTO procedures of promote core labour standards and on the institutional changes required would have to be reached. Such a consensus does not exist at present; However, while some countries continue to call for discussion of the issue in the WTO and other are opposed, this remains an issue for international consideration. The debate on this issue and on the associated conceptual and practical difficulties will continue. Finally, it has been suggested to make international financial assistance conditional on the respect of core labour rights by borrowing countries, as there is no practical experience of such a mechanism, it is impossible to evaluate it. However, some difficulties can already be envisaged. First, it would target only those countries which apply for multilateral loans. Second, it is doubtful that restricting one important means on improving national welfare is likely to result in faster improvement of labour standards. Other mechanism at national or regional level Other types of measures include unilateral or plurilateral government actions. Regarding unilateral government actions, the evidence from the US Generalised System off Preferences (GSP) Program suggests that conditioning eligibility for GSP benefits on the respect of core labour standards induced a positive change in the behaviour of some countries. This has prompted the EU to attach a similar set of conditions to its GSP, to become effective as of 1 January 1998. Both systems refer explicitly to internationally recognised labour standards, thus enhancing their credibility and ensuring their consistency with other international actions to promote core labour standards. Compared with unilateral measures, making the respect of core labour standards part of regional trade agreements, as in the case of the NAFTA side agreement on labour co-operation, has the advantage that all concerned parties must agree to a pre-established set of norms and a well-defined dispute-settlement mechanism. However, the NAFTA side agreement aims to enhance the enforcement of existing national labour laws, but does not explicitly refer to norms defined in relevant ILO Conventions; It is also far too early to assess the effectiveness of this particular mechanism. In sum, the influence of these mechanisms depends not only on the sanctions but also on the review process. In any case, their effectiveness is clearly related to the size of the US and EU markets, as well as to the steady erosion of GSP preferences for developing countries under the implementation of the Uruguay Round Agreements. International standards for the conduct of firms International codes of conduct for firms, such as the ILO Tripartite Declaration and the OECD Guidelines for Multinational Enterprises (MNEs), can also play an important role. In a globalising environment, MNEs are a prime vehicle for the transfer of technology, innovation and modern management practices. Nevertheless, the impact of MNEs on the promotion of core labour standards should not be overstated. The most direct effect MNEs can have is on raising the labour standards of their own labour force; MNEs can also exert an indirect influence by requesting that good labour practices be applied by their suppliers and other local partners. Indeed, the variety of existing codes of conduct for firms seems to reflect the increasing importance of business ethics in the regular operation of enterprises; The fact that such codes are voluntary also makes them easier for firms to adopt However, evidence is lacking on their effectiveness in promoting core labour standards in developing countries. Private-sector mechanisms In situations where non-enforcement of core labour standards is not necessarily due to poverty, but is an act of individual employers motivated by potential economic benefits, private-party mechanisms can help create counter-incentives, whereby the respect of core labour standards, and not their denial, are economically rewarded. These mechanisms take various forms: - Ethical standards for firms have been used in the past, in particular with the aim of eliminating apartheid in South Africa. Though these private-sector codes of conduct have had certain effects, in particular with respect to the operations of large MNE's, they have not been specifically directed to the set of core labour standards under consideration in this study. In addition, they have two weaknesses: i) since they are voluntary, firms are free not to follow them; and ii) they are not subject to satisfactory review procedures. - Another mechanism consist in persuading consumers to base their purchases not only on price but also on moral principles; This may take the form of boycotts of products which can be connected with non-observance of core labour standards. The effectiveness of these mechanisms is variable and uncertain, since they depend on widespread consumer acceptance. In addition, boycotts can have an impact on trade and run the risk of being manipulated to suit narrow domestic interests. - "Social labelling" of products allows consumers to buy goods that meet certain criteria deemed to be socially desirable. The advantages of such a mechanism are that it takes the form of an incentive rather than a sanction and that it requires the co-operation of both manufacturers and importers. This enhances its effectiveness. But, as in the case of all labelling programmes, care must be taken that the criteria for attribution are properly defined and monitored, and that all the components/parts of a given product also comply with these criteria. It is unlikely that social labelling could deal with all cases of low core standards. - "Socially responsible investment schemes" aim to promote firms, which implement high standards of social policies. Investment fund managers either screen and select such firm for their funds or reject those firms which violate the set criteria. These schemes have, so far, been run on limited scale and therefore their economic (and social) impact is difficult to gauge. In any case, they generally target only one or two core labour standards, such as freedom of association and child exploitation, and, by their very nature, impact only on those countries in which firms listed on the stock exchange operate or invest. In sum, such private codes and mechanisms can help in certain specific cases, particularly if they reinforce other, more broadly based mechanisms, but they are unlikely to provide a general solution. More generally, an important question that needs to be addressed in connection with these mechanisms is that of how to ensure that the information on which private-sector are based is accurate and free from manipulation. Conclusion Combining the range of situations and objectives outlined above with a variety of existing or potential promotion mechanisms highlights the multifaceted nature of the problem. In particular , 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 problems at the same time. TUAC EVALUATION OF OECD REPORT ON TRADE AND LABOUR STANDARDS 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 was published over the course of this Summer. 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 for the trade union movement. For this reason trade unions in the OECD countries gave a cautious welcome to the OECD report on trade and labour standards. 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. 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 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 work programme 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. LOOKING AHEAD TO THE WTO MINISTERIAL COUNCIL - AN ICFTU VIEW - The relationship between workers' rights and trade The continuing expansion of the global market for goods and services is causing serious concern that intensified competition is undermining basic workers' rights. These fundamental human rights at work are defined in seven highly ratified, "core" Conventions of the International Labour Organisation and are aimed at preventing repression, discrimination and the gross exploitation of working workers' freedom to organise and bargain collectively, freedom from forced labour, freedom from discrimination and a minimum age for employment. Endorsed by the United Nations Summit for Social Development (Copenhagen 1995), the universal observance of these core standards would mark a major step forward in ensuring that all workers have the opportunity to benefit from the potential that an open trading system offers for growth and improved living standards. At their meeting in Singapore, trade ministers should therefore decide to establish a Working Party on International Labour Standards and Trade to examine how the WTO, in collaboration with the ILO, can contribute to improving the observance of basic labour standards. Successive rounds of trade liberalisation have gone a long way towards creating a global market. In a growing world economy, competition helps to ensure a constant improvement in the efficiency of production, the quality of goods and services and a rapid pace of innovation. A sustained high rate of growth of trade stimulates increased job opportunities and can create the conditions for the reduction of poverty and unemployment, and an increase in the purchasing power of wages. However, the emergence of a global market is also causing a widening of social disparities in many countries and a growing sense of insecurity which is increasing tensions between those who feel left behind by rapid change and those who are benefiting, sometimes disproportionately, from the prosperity that increasing trade can bring. For all these reasons the international trade union movement has supported the lowering of trade barriers and opposed protectionism, while stressing that adherence to basic labour standards coupled with active labour market policies are needed to help both workers and employers to adapt to changes in the structure of employment and the skills of the workforce. The effects of the current pattern of trade growth are imbalanced and need to be remedied by a range of national and international policies that will enable a much larger part of the world's population to have a voice in deciding how our societies respond to the challenge of the global market. In a world in which there continue to be very large differences in average income per capita between countries, the level of wages and of productivity vary enormously. This will continue to be the case for the foreseeable future, and therefore the level of wages and other benefits, including minimum wages, should be determined by bargaining that takes account of national considerations. Respect for basic human rights at work does not alter comparative labour costs but it does enable working men and women to have a voice in how the gains from improved trade performance are shared and how to raise productivity and competitiveness. The debate about whether and, if so, how to encourage the parallel improvement of basic workers' rights and the opening up of global markets is not new. It was a major topic of discussion and agreement in 1947 in Havana at the first post-war international conference on trade. It gained significance since the signing of the Uruguay Round agreements in 1994 in Marrakech. The ILO, UNCTAD, the World Bank, the OECD, and the G7 Summit have discussed the issue extensively and a number of serious studies have been produced. There are some signs of an emerging, if partial, consensus upon which trade ministers meeting in Singapore can build. Firstly, there is widespread agreement on the ICFTU's proposals for the following seven core ILO standards as points of reference: - Conventions 29 and 105 on the abolition of forced labour; - Conventions 87 and 98 on the rights to freedom of association and to bargain collectively; - Conventions 111 and 100 on the prevention of discrimination in employment and equal pay for work of equal value; and - Convention 138 on the minimum age for employment (child labour). These standards are amongst the most highly ratified of the ILO. Over 100 states have ratified at least six of the seven. They are not industrialised country standards; they constitute the most accepted standards in the world for the following reasons: - they assert the right of workers to form and join unions and to negotiate conditions of employment that are fair and appropriate for their country's level of development; - they outlaw forced labour or slave labour, which prevent workers from having any say in where they work or in the terms of their employment; - they seek to end discrimination in employment which stops particular groups of workers such as women or migrant workers, from benefiting from trade growth; and - they seek to end the commercial exploitation of children, and will lay the foundation for a programme of aid at communities and families who presently depend on child labour to survive. Adherence to the seven basic ILO standards would prevent the most extreme forms of exploitation and cut-throat competition. It would not end developing countries' comparative advantage, but it would establish a process by which conditions of employment could gradually be improved as trade increases. This would encourage the growth of consumer markets, stimulating both domestic and foreign investment and, most importantly, jobs. This would help to ensure a more balanced expansion of world trade and a smoother process of adjustment to changes in the global division of labour. At the Copenhagen Social Development Summit in 1995 there was a very broad consensus that these are core labour rights to which all countries should and can commit themselves. Furthermore, as stated in the Programme of Action adopted at the Summit (paragraph 6), "... social progress will not be realized simply through the free interaction of market forces. Public policies are necessary to correct market failures, to complement market mechanisms, to maintain social stability and to create a national and international environment that promotes sustainable growth on a global scale." A second point of consensus is that all countries should aim for progressively more and more open trade. The global market is thus set to enlarge and affect significantly an ever increasing number of workers. The intensification of competition is already causing trade tensions to rise between states. This calls for a much closer interaction between trade policy and policies in such fields as the environment, foreign direct investment, business practices and labour. The WTO therefore must adapt to these pressures and increase its collaboration with other agencies, such as the ILO. The third area of consensus is that the international community should exert pressure on countries that violate basic standards not only out of concern for basic human rights but also because such violations call into question the legitimacy of a trading system that allows unscrupulous companies to gain short-term competitive advantage by abusing fundamental workers' freedoms. Already a number of governments and some socially aware companies and trade associations are responding to such concerns by introducing workers' rights provisions into national or regional trade laws and codes of conduct. However such actions cannot provide a general solution. It is high time for the WTO, together with the ILO, to create a pro-active multilateral framework to stave off the danger that even well intentioned unilateral measures could be used for protectionist purposes. A fourth area of common ground is that fears that core labour standards could negatively affect economic performance are unfounded. Studies of the relationship between trade liberalisation and labour standards show a positive two-way relationship over time in which improved observance of basic workers' rights acts as an incentive to raise productivity through investment, especially in education and training, and helps to create a more stable social framework attractive to foreign direct investment. Nevertheless efforts to extend basic labour standards can be undermined by governments which seek to gain a short-term advantage by suppressing labour rights, typically in Export Processing Zones. The countries most at risk from such behaviour are typically developing countries with similar levels of labour productivity and which are consequently under pressure to weaken established workers' rights. International action is therefore needed to promote adherence to basic standards and prevent destructive competition which is damaging both for the country and the workers concerned as well as the international system. These four areas, upon which a large number of both governmental and non-governmental protagonists in the debate about labour standards and trade would agree, are important. However, there are also grave anxieties that pursuit of improved workers' rights through the WTO could create a tool for protectionists to reduce developing countries' market access to key industrial country markets, and indeed that this is in fact the intention of some of the advocates of a linkage between workers' rights and trade. The ICFTU fully recognises these concerns. We have therefore sought to develop proposals for a procedure, involving both the International Labour Organisation and the WTO, which would prevent such dangers of protectionist abuse and firmly place the operation of a workers' rights and trade mechanism in a rule-driven, transparent, multilateral system. The Importance of Procedure Briefly, what the ICFTU proposes for the WTO is:- a review of all WTO members' observance of basic labour standards at regular intervals, for example to coincide with the WTO's existing reviews of countries' trade policy, or on the basis of well-founded complaints. The reviews, to be conducted by ILO experts, should conclude, if necessary, with recommendations on how to resolve any problems; - if problems are found a period of dialogue should then follow to find ways to meet the principles in the standards, followed by a further review of progress - say two years later; - if progress is being made a date for a further review should be fixed, but if there is an adamant refusal to cooperate with the WTO and the ILO, a warning would be given that the issue will be referred to the WTO Council if within a reasonable period changes are not put in place; and - if at this point there was still no cooperation, the WTO would determine the appropriate multilateral trade response. The Need for Dialogue There is clearly a need for further dialogue. The ICFTU and its affiliates have had extensive discussions with governments, international organisations, employers and many other interested experts and non-governmental organisations. These have revealed widespread recognition that a problem exists and that practical solutions need to be found which reinforce the integrity of the open trading system and improve the observance of basic workers' rights. We are convinced that the elements of consensus that are emerging could be enlarged through a deeper and more considered examination of the options and in particular the procedural mechanisms for cooperation between the ILO and the WTO. Developing countries working to improve the rights of their citizens at work at the same time as increasing their participation in the global market have most to gain from a reinforcement of basic workers' rights. Responsible business, that recognises that the security and productivity of their investments ultimately depends on the degree to which the system in which they operate produces social justice, would also benefit. Support could also be expected from industrial country governments that are trying to adapt to a new global world economy and stave off the dangers of a protectionist backlash. And workers everywhere would be able to face rapid and sometimes intimidating changes with a greater degree of confidence. The potential consensus includes all the major social and political adherents of what is known as the free world. This basis of support was and remains vital to the GATT system and for the future of the WTO. The ICFTU, for its part, is more than ready to participate in an open dialogue with all concerned. What is needed is an organized forum for such discussions so that by the time ministers or heads of state and government next meet to agree on the agenda for the WTO for the 21st century, they can examine specific policy options for the international community. A WTO Working Party should therefore be set up in Singapore with a remit to study and report on how the Organisation can contribute to furthering the observance of basic international labour standards in an open trading system with well-defined non-discriminatory mechanisms for action. An Opportunity to Make Progress The promotion of trade and enabling workers to exercise their basic rights are mutually reinforcing. There is no evidence that respect for workers' rights weakens the competitive position of developing countries, indeed by laying the foundations for cooperation between workers and employers, core labour standards contribute positively to trade and development. A workers' rights provision would strengthen the political authority of the WTO and break, rather than build, barriers to world trade. It would provide a means of solving disputes that, if allowed to persist, might increase pressures for protectionism. And it would serve to reinforce the case for enlarged access for developing countries to world export markets. A workers' rights provision in the WTO would need to be backed up, where necessary, by international financial and technical assistance through the ILO, particularly to fund programmes designed to eliminate child labour through the expansion of education facilities and increased income-generating opportunities of the poorest families. The Singapore Trade Ministers Meeting is an opportunity to move on the process of finding a way forward on a issue which threatens to provoke serious disagreement. What is required is a cool objective examination of how the WTO, working closely with the ILO, can take action to improve the likelihood that the benefits of trade growth will be more broadly spread within and between countries, thus widening the constituency of support for trade liberalisation. Such an initiative is vital to ensuring a non-protectionist means for securing basic workers' rights in an increasingly competitive world market. LIST OF PARTICIPANTS AT THE TUAC / LO / FNS SEMINAR Copenhagen, 22 - 23 April, 1996
Adolfsen, Bitten Danish Confederation of Trade Unions Andersen, Jens Central Organisation of Industrial Employees in Denmark Andrews, Keith International Labour Organisation - ILO Awan, Zahooor All Pakistan Federation of Labour Bang, Jakob Danish Union of Nursery and Childcare Assistants Bono, Niels Danish Union of Joiners Cabinet markers and Carpenters Botsch, Andreas TUAC Bundgaard, Helle Confederation of Danish Industries Carl, Alice Public Services International Christensen, Ole Member of Parliament, Christiansborg Dahl, John Clerical Employees in Denmark Edelberg, Einar Ministry of Labour Edström, Ulf Swedish Trade Union Confederation Eliasen, Mogens Danish Union of Food and Allied Workers Evans, John TUAC Feketekuty, Geza Center for Trade & Commercial Diplomacy, Monterey USA Foldberg, Preben Danish Confederation of Trade Unions Frederiksen, Per Danish Union of Plumbers and Allied Workers Froyn Björgulv Council of Nordic Trade Unions Grisewood, Nick International Federation of Commercial, Clerical and Technical Employees Hägg, Leif Council of Nordic Trade Unions Hanneborg, Patrick Ministry of Foreign Affairs, Sweden Hansen, Peder Danish Confederation of Trade Unions Haridasan, P. ICFTU-APRO, South Asia Office, New-Delhi Hartwell, Mathilda British Embassy, Paris, Hatlevik, Hallgeir Ministry of Foreign Affairs, Norway Hellmann, Marion International Federation of Building and Woodworkers, Jacquot, Denis French Trade Union Confederation Johannesen,Flemming Confederation of Unions in the Graphical Industry and Media Sector Kargaard, Soren Danish Confederation of Salaried Employees - Karlsen, Steen Clerical Employees in Denmark Kreps, Pia Economic Council of the Labour Movement Kwon, Yon-mok Korean Confederation of Trade Unions Madsen , Mads Danish Trade Union Council for International Development Madsen , Svend Ministry of Foreign Affairs Man, Yui-kwong Hong Kong Confederation of Trade Unions Menck, Clea The Industrialization Fund for Developing Countries Nielsen, Carsten Danish Confederation of Professional Associations Nielsen, Erik Danish Confederation of Trade Unions Oman, Charles OECD Development Centre Oswald, Rudy AFL-CIO, USA Palshoj, Peter Labour Movement's International Forum Patrick, A. Malaysia Trade Union Congress Pedersen, Jens Danish Confederation of Trade Unions Perez-Ribes, Maria Ministry of Foreign Trade, Spain Poese, Thomas German Trade Union Confederation Potdar, Kamalakar Indian Trade Union Federation HMS Pursey, Stephen ICFTU Pust, Mette Danish Union on Garment and Textile Workers Raghaviah,Mr. National Federation of Indian Railwaymen Rask, Jan The Federation of Building, Construction and Woodworkers' Union Rasten, Bengt Confederation of Trade Unions in the Municipal Sector Rodriguez, Bernardo Embassy of Spain Roekaer, Gunda Danish Union of Garment and Textile Workers Sengenberger, Werner International Labour Organisation - ILO Shin, Eun-cheol Korean Confederation of Trade Unions Shin, Kyung-ha Korea Employers Federation Sorensen, Flemming Danish Trade Union Council for International Development Steininger, Florian Austrian Federal Chamber of Labour Stöger, Robert Austrian Delegation to OECD, Paris Svenningsen, John Danish Confederation of Trade Unions Tapiola, Kari Central Organisation of Finnish Trade Unions Theilgaard, Finn Ministry of Foreign Affairs Thorgrimson, Finn Danish Confederation of Trade Unions Verdugo, Aldo Embassy of Chile Wagenmans, Willy Netherlands Trade Union Confederation Westerlund, Lena Swedish Trade Union Confederation Wistisen, Ib Danish Confederation of Trade Unions Witherell, William OECD Yacob, Halimah National Trades Union Congress, Singapore Zilony, Efraim General Federation of Labour in Israël
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