1.1
The debate on linkage between trade and labour standards is neither
new nor dead, as perceived in some quarters. The debate got a
renewed thrust in late 1980s and early 1990s. Developed and
developing countries have polarised positions on the issue of
incorporating labour standards into the World Trade Organisation
(WTO) platform. The timing, nature and support for linkage between
trade and labour standards reflect that they are going to be major
irritants for developing countries to benefit from the multilateral
trade regime.
1.2
There are two major reasons for a push for integration of labour
standards in the WTO. They are based on the premise that lower
labour costs in developing countries are due to an exploitative
system. First, the loss of jobs is a growing phenomenon in the rich
countries, and some of their industries are seeking level playing
field. Secondly, the fear syndrome, that this will continue to
increase because firms are shifting production to developing
countries due to low labour cost. The first is true, but the growing
unemployment in developed countries is nothing to do with low labour
cost in developing and least developed countries. Secondly, there is
no conclusive proof on the alleged “race to the bottom”
phenomenon.
1.3
At the time of the first ministerial meeting of the WTO, held in
Singapore in 1996, there was a proposal by the International
Confederation of Free Trade Unions, which states: “The contracting
parties (of the General Agreement on Tariffs and Trade) agree to
take steps to ensure the observance of the minimum labour standards
specified by an advisory committee to be established by the GATT and
the International Labour Organisation (ILO), and including those on
freedom of association and the right to collective bargaining, on
the minimum wage for employment, discrimination, equal remuneration
and forced labour.”
1.4
The ICFTU succeeded to get its foot in the door vis-à-vis the issue
of labour standards at the Singapore ministerial meting.
Interestingly, developing countries were found celebrating their
pyrrhic victory as they had been able to get a statement included in
the Ministerial Declaration that mentioned that ILO is the competent
forum to deal with issues in the area of labour standards. However,
it also noted that the WTO and ILO Secretariats will continue their
existing collaboration.
1.5
Since then, there are much efforts on the part of many trade unions
(mostly members of ICFTU) and many rich countries to mainstream
labour standards in the WTO. Many developing country members of the
WTO argued against the inclusion of labour standards, as that could
seriously hamper their market access potentialities in rich
countries. At the same time, most of them accept core labour
standards as essential for the development of their economies, but
maintained that these are domestic issues and ILO is the competent
body to help in this regard.
1.6
The issue came up for discussions during the fourth ministerial
meeting of the WTO, held in Doha in 2001. Paragraph 8 of the Doha
Declaration states: “We reaffirm our declaration made at the
Singapore Ministerial Conference regarding internationally
recognised core labour standards. We take note of work under way in
the International Labour Organisation (ILO) on the social dimension
of globalisation.”
1.7
However, this has made some developing country members of the WTO to
understand that the issue is dead, at least at the WTO fora. On the
other hand, according to many civil society organisations, including
trade unions (both in the North and in the South) that may not be
the case.
1.8
At the same time, both the protagonists as well as antagonists of
the debate are, more often than not, advocating extreme stands
without taking into account the equally important, if not more,
linkage between trade and social development. Not only there is lack
of understanding on the part of many civil society groups, concerted
efforts are not being made to engage in discussions. What is
required is a continuing dialogue to address the issues in an
unbiased manner and try to find solutions to the problems by
evolving a roadmap through consensus rather than creating
roadblocks.
1.9
Realising this vacuum and pursuant to its mandate of building
consensus on contentious issues hindering economic development of
developing countries, Consumer Unity & Trust Society (CUTS) has
undertaken a programme of analysing and understanding various facets
and positions on linkages, particularly between trade and labour
standards. The purpose of this programme is to provide a platform
for discussions among the protagonists as well as antagonists of the
debate on linkages between trade and labour standards. It aims for
improving the level of understanding of both the groups. Thus, CUTS
contemplated organising a session on titled “Linkages: How do we
bridge the gap?” on the sidelines of the WTO Symposium, “The
Doha Development Agenda and Beyond” which was held in Geneva
during 29th April to 1st May 2002.
1.10
However, the news of organising this meeting created some
controversy in the sense that many developing country missions in
Geneva were not comfortable with the title of the session and they
did not want any discussions on labour standards at any platform
having direct link with the WTO. This view was based on the notion
that the issue of linkages between trade and labour standards is out
of the WTO and there should not be any pretext of bringing it back.
1.11
Similar reaction was expressed for a session to be organised by the
global trade unions. CUTS response was based on the fact that it is
necessary to have balanced opinion on the issue and should be
approached in a broader framework of the right to development and
how trade can help in achieving the goals of social development and
factors hindering them.
1.12
The WTO Secretariat requested CUTS to change the name of the
session. The scope of presentations was broadened to include a gamut
of issues concerning the linkage between trade and social
development. Mr. Muchkund Dubey, former Foreign Secretary of India
has agreed to be the lead speaker, but for some reasons he could not
attend the session. Bipul Chatterjee of CUTS stepped in to make
initial presentation.
2.1
The right to development is very much a fundamental right. All
others including civil, political, economic, social and cultural
rights are, in fact, linked to and dependent upon realisation of the
right to develop. International trade is one of many factors, which
can affect the right to development, significantly. In the context
of international trade regime, a mention of it can be found in the
Preamble of the Marrakesh Agreement Establishing the World Trade
Organisation (WTO), 1994. The Parties to this Agreement have
recognised that their relations in the field of trade and economic
endeavour should be conducted with a view to raising standards of
living, ensuring full employment and a large and steadily growing
volume of real income and effective demand, and expanding the
production of and trade in goods and services.
2.2
The Marrakesh Agreement, therefore, recognises that there is a
linkage between trade and social development in general and poverty
and deprivation in particular. Trade policy potentially affects
poverty through its effects on economic growth and income
distribution. Though it is also true that the effects of trade on
income distribution have been more firmly established than its
impact on growth. Given that poverty reduction is sensitive to
income distribution, this could be very significant.
2.3
However, it is also true that the theory of trade policy does not
unambiguously suggest that protection has a negative impact on
growth in developing countries. At the same time, those countries
adopting more open trade regime, along with fiscal discipline, good
governance and safety nets, have enjoyed higher growth rates than
those implementing restrictive policies.
2.4
Furthermore, a pro-poor growth policy has greater impact on reducing
poverty, than growth per se.
And, given the present international trade regime, an open and
simple trade policy can foster some discipline, reduce distortions
in domestic markets, and narrow the scope for wrong or unbalanced
policies in other areas.
2.5
Another dimension to the issue of this linkage is the impact of
protectionist policies on the poor. If trade policy benefits
relatively well off by protecting import-competing sectors
controlled by capital, then trade liberalisation is likely to
redistribute income to the poor. This notion is, however, based on
certain assumptions, which have less relevance in today’s regime
of international trade.
2.6
Thus, there are various dimensions to this linkage and more
importantly, both theoretical and political economic factors are
changing as well as unfolding (i.e. the emergence of new ones) in
this new regime under the aegis of the World Trade Organisation
(WTO).
2.7
However, for this notion (trade liberalisation for the benefit of
the poor) to work at the ground level, certain conditions are to be
fulfilled. First, poor countries are to be provided with better
market access opportunities in rich countries. Various WTO
agreements and other instruments intend to do so, but non-tariff
barriers negate those good intentions. Attempts to induct many
trade-plus issues into the WTO acquis may result in over-burdening
of the international trade regime, in particular when many
developing and least developed countries have lesser capacity to
deal with such issues at the political level. Most of these issues
(like labour standards, gender, human rights, and animal welfare)
are cropping up under moral pretexts.
2.8
Secondly, developing and least developed countries need to build
their capacity to supply products in the market. Supply-side factors
are as important as those of the demand-side in order to realise
better market access opportunities. Apart from infrastructure and
other trade facilitating factors, human resources development also
play an important role in realising benefits emanating from a
liberalised trade regime. Then the relevant question is whether poor
countries have the necessary resources for human development in an
equitable and just manner. A positive approach is required for
strengthening the linkage between trade and social development.
2.9
Thirdly, better market access in rich countries is an imperative for
the poor countries to benefit more from a liberalised trade regime.
Unless there are better terms of trade for products originating from
poor countries, such as achievable standards, tariff distortions
etc, better market access may not actually benefit the poor. This is
especially true for those poor economies, which are dependent on
single commodity exports.
2.10
Finally, even if these conditions for realising the positive linkage
between trade and social development are met, for the poor at the
ground level to benefit more, one cannot ignore the larger issue of
governance. This has several dimensions, and has to be approached by
taking into account local as well as global conditions, as
inequities in the global economic system have upward and downward
linkages.
2.11
Thus, for making trade to work for social development, in particular
that of the poor, several conditions are to be met and coordinated
efforts of different agencies and players are required at various
levels.
2.12
There are efforts to look into the various dimensions of this issue,
and making trade liberalisation work for the poor. Many such efforts
are required to look into the issue holistically, in both
theoretical and political economic terms, supported by civil
society’s understanding.
3.1
More than 45 delegates attended the event, including members of the
Indian, South African, German, Egyptian and other national permanent
missions to the WTO, representatives from NGOs all over the world,
the WTO and other international organisations, academics and
interested individuals.
3.2
In his opening remarks, Phil
Evans of Consumers Association, UK, who was moderating the
session, explained that the relationship between trade and social
development generally and in particular the links between trade and
labour and environmental standards were still very much alive in
debates on international trade. At the domestic level, these issues
arise continually in the legislatures of the US and European
countries. Furthermore, even if they are not currently being
discussed at the WTO itself, social clause exist in a number of
bilateral, plurilateral and regional trading agreements.
3.3
In his presentation, Bipul
Chatterjee of CUTS gave an overview of the relationship between
trade and social development, acknowledging that trade could have
either a positive or a negative impact on social development
depending on the conditions of the region or sector under
consideration and the functioning of the international trading
system. Countries with good governance, fiscal discipline and social
safety nets have generally benefited from their engagement in
international trade. Thus national laws and policies are crucial to
reaping the potential benefits offered by trade.
3.3.1
At the level of the international system, certain conditions need to
be made to make the system contribute to social development. In
particular, poor countries need to be given better market access
opportunities in rich countries. These could be threatened by the
inclusion of too many trade-plus issues in the WTO agenda.
3.3.2
Developing countries also need to develop their supply capacity in
order to be able to take advantage of new opportunities, but this
will require extra resources. Technical barriers to trade and
sanitary and phytosanitary standards imposed by rich countries need
to be genuinely achievable for poor countries so they do not act as
a block on exports.
3.3.3
Chatterjee concluded that coordinated efforts were needed and at
several levels to ensure that social development is maximised in a
just and equitable manner.
3.4 Robert Baldwin of University of Wisconsion at Madison, USA
introduced the history of how the issues of labour and environmental
standards have related to the GATT and WTO, referring to the debacle
that occurred at the Seattle Ministerial meeting when a hard push
for the inclusion of a social clause by some developed countries was
met with equally tough resistance from developing countries,
jeopardising the progress of trade negotiations. This strong
resistance is still the case now, and developing countries even
objected to the relatively weak language on the issue that appeared
in the Doha Declaration, even though labour standards do not form
part of the WTO’s current work programme. Developing countries are
legitimately concerned that labour standards could be used as a form
of protectionism by rich countries.
3.4.1
Labour standards raise issues of ‘economic fairness’ rather than
economic efficiency and are thus much more difficult to achieve
consensus on. A consensus has been built on environmental issues
through many years of painstaking negotiations and Baldwin expressed
the view that the same kind of consensus could also be built over
time on labour. Developing countries will need time to raise their
labour standards and a great deal of work needs to be done at the
national level. Now, NGOs should focus their efforts on national
legislators and policy-makers.
3.5
Beatrice Chaytor of Foundation for International Environmental Law
and Development, UK presented some of the results of a recent study
conducted by FIELD on the impact of non-tariff barriers to trade on
developing countries. A considerable body of anecdotal evidence has
now been built up which can contribute to a better understanding of
the problems that developing country exporters can face in market
access as a result of the imposition of these standards.
3.5.1
Chaytor presented case studies from Cuba, India and other countries
in a variety of sectors. The following general themes were
identified:
1.
Standards may be defined for totally legitimate health and
safety reasons. However, no account is taken of the impact on
developing country
producers before the standards are implemented, with severe impacts
on communities.
2.
Standards implemented by the EU are often significantly
higher than those defined by global standard setting bodies,
which
may be unnecessary
to protect health and safety of consumers in these countries.
3.
Standards are set without any consultation of producers.
4.
Standards may be defined with reference to the process, which
may be inappropriate or extremely costly for developing
country producers
to comply with. There may be cheaper and more efficient ways of
achieving the same result.
3.5.2 The costs of compliance can be very high and developing
countries need extensive assistance from rich countries and adequate
time to adjust in order to meet the standards
3.6 James Howard of International Confederation of Free Trade Unions (ICFTU)
presented the views of ICFTU’s members, around half of whom are
located in developing countries. Many members are very concerned
about the impact of trade liberalisation on industries, which have
grown up behind protective tariff barriers. The reduction of tariffs
have led to job losses and created scepticism and in some cases
hostility to the WTO. The inclusion of labour standards in the WTO
acquis would help to restore their confidence in the international
trading system. The proliferation of export processsing zones is a
particular concern for the ICFTU.
3.6.1
ICFTU’s position for the Doha Ministerial was in favour of:
1.
Meaningful special and differential treatment for developing
countries.
2.
Inclusion of labour and environmental issues in discussions
on investment.
3.
Creation of a working programme to examine the social, gender
and environmental impact of trade.
3.6.2
These aims remain the same for the ICFTU, despite the fact that the
Doha Agenda does not include the creation of such a working group.
Some delegations at the meeting gave the ICFTU’s position tacit
support. Howard predicted that the entry of China to the WTO would
give a boost to support for labour standards as many countries risk
losing their export markets to Chinese producers.
3.6.3
The inclusion of labour standards at the WTO should only relate to
the core labour standards as defined by the International Labour
Organisation (ILO), should contain anti-protectionist provisions and
should involve the ILO in a central role.
3.7
The following points were raised during the discussions:
·
The role of the ILO in relation to labour standards was
discussed extensively. It was noted that the ILO does not have
observer status at the WTO but may still make inputs informally. The
jurisdictions of international organisations and protocols overlap
increasingly which makes cooperation essential.
·
Imposition of trade sanctions on the basis of a judgement by
the ILO could conflict with WTO disciplines. This needs to be
resolved to strengthen the functioning of the ILO. One way to
resolve this could be by clarifying that any member of the WTO could
use sanctions on a country that did not comply with an ILO decision.
·
The strict, rapid panel-based dispute settlement mechanism
(DSM) currently used at the WTO would be inappropriate for cases
relating to labour standards. The inclusion of labour standards
would almost certainly require a new DSM allowing countries several
years to take action in response to a ruling and programmes of
technical assistance.
·
Voluntary corporate codes of conduct may be another way of
improving labour conditions in developing countries. Companies are
developing these standards under pressure from consumers in rich
markets who are concerned with the labour and environmental
conditions of production. Codes of conduct need to be monitored at
the national level to ensure that high standards reach up the
production chain.
·
Trade sanctions are used by the powerful to discipline the
weak and it is this sentiment that lies behind the rejection of
labour standards by developing countries. Developed countries could
contribute more to raising social standards by positive measures
such as meeting their targets for overseas development assistance
than by introducing new punitive measures.
·
The concerns of labour in relation to trade liberalisation
may in fact be caused more by technological change in competitive
global markets than by the reduction of tariffs. Concerns can be
dealt with through consultative processes, involving unions in
negotiations for trade agreements and putting in place supply side
measures to help labour adjust to new conditions. Under these
circumstances, unions may no longer oppose trade liberalisation.
·
All countries support the implementation of core labour
standards. However, particularly in the case of child labour, it is
important to be aware that the wage of a child may make an essential
contribution to household income for a poor family.
·
There is a strong connection between social conditions in a
country and the conditions in which production takes place. This
needs to be taken into account when setting and implementing
standards.
Participants showed interest in the studies conducted by
FIELD. It was felt that the studies should be disseminated widely to
further increase their value.
3.8
In his summing up, Phil Evans
pointed to three of the most important points that had recurred
during the session, which he later presented in the concluding
plenary session of the WTO Symposium:
1.
The costs of compliance are high – who should pay these
costs?
2.
Fairness is essential, in the rules themselves and in the
distribution of the costs incurred in implementing them.
3.
We can move away from negative pressure towards a positive
approach involving concerted efforts to raise standards at the
national level, the
spread of corporate codes of conduct and an increase in aid and
assistance to poor countries.
