Trade Unions and Global Governance

The Debate on a Social Clause

Gerda van Roozendaal

• Publisher: Routledge
• Year: 2020
• Topic: Politics & International Relations
• eBook ISBN:
  9781135842734
• Subtopic: Business General
• Index: Politics & International Relations

As the world economy is liberalized, and national economies become more intertwined, the national decision making of states is also increasingly interdependent, and it has become vital for non-governmental organizations to create an international agenda. This title is an important study of what makes such organizations successful on an international level. The focus is on trade unions, as a key international group of NGOs. It asks whether a global system can be designed to stimulate countries to observe a set of minimum or core standards. It explores three important questions: how have unions attempted to influence the debate on the inclusion of minumum labour standards in the WTO agreement?; what accounts for their success or lack of success?; and what conclusions, with respect to the effective behaviour of trade unions in the construction of international policy, can be drawn from these experiences? In exploring these questions the text looks at social clause debates within a number of international bodies: the ILO, OECD and the EU, and within two countries: the USA and India.

1	TRADE UNIONS, LABOUR STANDARDS AND GLOBAL GOVERNANCE: AN INTRODUCTION

We renew our commitment to the observance of internationally recognized core labour standards. The International Labour Organization (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalization contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO Secretariats will continue their existing collaboration. (WTO, 1996a)

The theme of this book concerns the influence of trade unions on the debate that led to the adoption of the World Trade Organization’s (WTO) Singapore Declaration, cited above. This text, approved in December 1996 by the member states of the WTO, was the result of an intensive debate, which had started ten years earlier with the attempt of the US government to include core labour standards in the negotiations that launched the beginning of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT, predecessor of the WTO).¹

What is at stake in this international labour standards debate is whether a regime can be designed to stimulate countries to observe a set of minimum, or core, labour standards. One way to achieve this is to allow member states of the WTO to apply sanctions to those countries that do not comply with these standards. Such a system is called a social clause. The notion of core labour standards generally refers to the principles embodied in the following ILO Conventions: No. 87 (on freedom of association and protection of the right to organize); No. 98 (on the right to organize and collective bargaining); No. 100 (on equal remuneration); No. 111 (on discrimination in employment and occupation); No. 138 (on minimum age); No. 29 (on forced labour); No. 105 (on the abolition of forced labour); and No. 182 (on the abolition of the worst forms of child labour) (see the explanation of the content of these Conventions in the Appendix). In short, these Conventions refer to four principles: (a) freedom of association and collective bargaining; (b) child labour; (c) forced labour; and (d) equality.²

The final result of the debate linking trade and labour standards was disappointing to the proponents of the inclusion of such a link. The ILO, the United Nations body that traditionally deals with labour issues, was once again on its own in its efforts to ensure the observation of labour standards.

The social clause issue is very controversial. GATT/WTO meetings have been dominated by it, it has been the subject of a considerable body of literature and it has been debated in both national and international contexts. This controversy results from the concern about the future of the international trading system and the increasing competition within this system. Whether one prefers to call it economic ‘globalization’ or ‘internationalization’, the fact is that we live in a world in which national economies are increasingly interdependent. This implies that the non-observance of labour standards in one country can have repercussions on other countries in the form of shifting investments and weakening regulation. Moreover, it is widely recognized that the social and economic aspirations of individuals cannot be fulfilled (only) through a liberalized world market. In an integrated world economy, autonomous states are less able – and sometimes less willing – to protect their citizens against world market forces. This induces thinking about alternative international systems to limit economic competition to an extent that citizens – including workers – can enjoy a decent level of protection.

The central argument of this book is that the International Confederation of Free Trade Unions (ICFTU), the world’s single largest international trade union organization, has strong views about the problems trade unions encounter as a result of economic internationalization. Consequently, the interest of the ICFTU in tackling these problems by means of international regulation is great. In designing such strategies, however, the ICFTU is hampered by insufficient access to international regulatory bodies, since it has no formal position in most international organizations. In addition, the ICFTU is limited by a lack of common perspectives among its members, as it organizes trade unions the world over. The extent to which these and other factors hamper the ICFTU – and its members – is one of the concerns of this study.

Oppression, Resistance and Competition

Many trade unions face three major problems: oppression of their members, resistance to their activities and increasing global competition that may result in increasing investment and regulatory competition.

First, worldwide, many workers are not able to enjoy basic rights, such as the right to organize or to be free from compulsory labour. The 1999 annual survey of the ICFTU reported that hundreds of trade unionists are killed each year for trade union work-related activities (ICFTU, 2000). Some countries cause constant reason for concern, such as Nigeria, Colombia and Myanmar. In November 2000, an ILO Resolution called both international organizations and ILO member states to reconsider their relationship with Myanmar because of the country’s lack of compliance with ILO Convention 29 on forced labour.

Second, and more widespread than oppression, is the daily restriction and rejection of trade unions. The activities of trade unions are often perceived as obstructions to economic growth. The World Development Report (World Bank, 1995) is illustrative in this respect:

Unions do often act as monopolists, improving wages and working conditions for their members at expense of capital holders, consumers, and nonunion (unorganized) labor. The higher wages unions win for their members either reduce business profits or get passed on to consumers in the form of higher prices. (World Bank, 1995: 81)

Third, trade unions are facing the negative effects of economic globalization. As a result of changes in the global economy, competition is increasing. Global shifts have taken place in the sphere of production of goods and services from the old core (Western Europe and the United States) to parts of East and Southeast Asia (mainly Japan and the newly industrializing countries) (ILO, 1997a: 9–10; Dicken, 1998: 399–406, 426). Although in 1994 the United States, Japan and Germany still accounted for 60 per cent of the total manufacturing output in the world, from the 1950s to the mid-1990s developing countries increased their share in manufacturing output from 5 to 20 per cent. The bulk of this growth was due to newly industrializing countries (NICs). The United States saw a decline of its relative share of world manufacturing output from 40 per cent in 1963 to 27 per cent in 1994. During that same period, Japan’s output rose from 5.5 per cent to 21 per cent (Dicken, 1998: 26–30).

Similarly, in the post-war period trade in manufactured products has grown rapidly. Developed countries experienced a rise of their manufacturing exports from 70 per cent of the total export in 1960 to 77 per cent in 1988, while developing economies (mostly the NICs) experienced a rise from 20 to 47 per cent during the same period. Although exports tend to be less concentrated than production, 75 per cent of the merchandise exports are accounted for by the developed countries (excluding the NICs, but including Japan). About 60 per cent of this 75 per cent takes place between the developed countries themselves (Dicken, 1998: 31–5).

A large part of exports of the East and Southeast Asian NICs is destined for the developed markets. Nevertheless, the importance of these markets (excluding Japan) fell from 60 per cent in 1985 to 43 per cent in 1994. Increasingly, the Asian region itself is the destination of export. In other words, Asia is an emerging market for imports. However, this does not mean that the East and Southeast Asian import penetration of developed markets has become less significant. On the contrary, its share in the total of manufacturing imports to developed countries has risen steadily (Dicken, 1998: 31–40).

The service sector provides another field in which internationalization is visible. The service sector, a category covering wholesale and retail activities, and public sector goods such as health, commercial, business and financial services, accounts for a large and increasing share of countries’ gross domestic product. In relation to trade, the last three services in particular are increasingly internationalized. In the 1980s, the growth of trade in services exceeded the growth of trade in manufacturing products, especially services in the field of telecommunications, finance, management, advertising, professional and technical services. The two trades – services and goods – are of course closely interlinked (Dicken, 1998: 30–42).

Since the Second World War there has also been an enormous growth of foreign direct investment (FDI). It has been calculated that during the 1980s FDI grew more than four times faster than world GNP (Dicken, 1998: 42). Even though FDI has a geographical bias (the Group of five accounts for 70 per cent of FDI) (Hirst and Thompson, 1996: 196), its mere growth can create opportunities for those countries that can attract it.³

Possible Consequences of Global Competition

Many trade unionists, and especially those from economically advanced countries, are fearful of the increased international competition. They worry that capital mobility will stimulate further competition between countries on the basis of differences in labour standards. As the ICFTU puts it: ‘workers’ jobs and pay, their conditions and contracts of employment, and trade unions’ bargaining strength are increasingly undermined by the pressure of intensified global competition’ (ICFTU, 1996d).

Many trade unionists (at least from the North) believe that without a social clause the intensified global competition will result not only in a worldwide lowering of standards, but also in a shift of industrial activities and investments from countries with high standards to countries with low standards, which in turn will lead to unemployment and increased wage inequality in countries with higher standards. This will then affect the level of organization of unions. In addition, trade unionists fear the rise of export processing zones (EPZs) and the increased importance of the informal sector. Finally, they worry that global competition will limit the ability of the state to protect workers.

Unemployment and wage inequality

It is not controversial to argue that unemployment is a major problem affecting many (potential) workers. This is illustrated by the fact that on a global level, of a potential workforce of 2.4 billion, 125 million people are formally unemployed, while no fewer than 750 million people are un- or underemployed. In Organisation for Economic Co-operation and Development (OECD) countries, 6.5 per cent of the total labour force was unemployed in 2000. Europe is experiencing high unemployment rates, while US workers are affected by high wage inequalities. Problems facing workers in other parts of the world are much more diverse, but those that stand out are the increasing informal sector employment, underemployment and high levels of population growth, which, combined with insufficient economic growth, lead to unemployment (De Groep van Lissabon, 1994: 66; Dicken, 1998: 430–49; Global Policy Forum, 1999).

One of the causes of unemployment in developed countries is global restructuring. Because of the intensification of global competition and the possibilities technological development offers, TNCs have subcontracted and relocated parts of their production to developing countries. But besides competition, there are other factors responsible for unemployment increases. The worldwide recession that hit the world from the mid-1970s until the mid-1980s, and another one at the beginning of the 1990s, are two of these factors. Because of these recessions there was a decline in demand for goods and services. Another cause involves the acceleration of technological development. Because of its productivity-enhancing capacities, technological progress tends to be labour reducing rather than employment creating. A last cause concerns the penetration of imports from developing countries, which has – together with the relocation of production – attracted a great deal of discussion (Dicken, 1998: 436–40).

The relative contribution of these factors to unemployment and wage inequality is a hotly debated issue. In spring 1996 in Foreign Affairs a discussion was initiated by an article published by Kapstein (1996: 23). In this article, Kapstein argued that trade (i.e. the increased import from Asian countries), in combination with technological innovation, is the most important cause of unemployment and wage inequality. The relationship between trade and technological innovation, he maintained, is that innovation takes place predominantly in those economic sectors threatened by foreign competition (Kapstein, 1996: 23–5). In response to Kapstein, Krugman and Lawrence separately insisted that the growth of international trade is not the main cause of growing unemployment and wage inequality. Both agreed that one of the major explanations of these two trends is technological advancement demanding high-skilled labour (Krugman, 1996: 164–6). Lawrence added that technological innovation is not a response to higher international competition, as highly competitive, internationally oriented sectors are more likely to cut back on investments in response to competition than to stimulate technological innovation (Lawrence, 1996: 172). The economic recession of the 1970s was also offered as an explanation of unemployment and wage inequality. However, Krugman noted that even though demand has recovered since the late 1980s, unemployment and wage inequality are still high (Krugman, 1996: 165–6).

As Chapter 3 will show, the exact impact of trade on unemployment and wage inequality is extremely difficult to estimate. It remains one of the most disputed topics in the debate on the social clause and therefore provides both opponents and proponents with strong arguments either way.

Decreasing membership

While recession, technological development and increasing competition have contributed to expanding unemployment, they are also partly responsible for a trend that results in sleepless nights for many trade union officials: decreasing trade union density levels.⁴ A combination of the above factors and related other factors explain this development: the decline of manufacturing sectors (in developed countries), the rise of economic activity in sectors where unions are traditionally weak (service sector in developed countries, informal sector in developing countries) and the increase in the number of temporary workers, part-timers and home workers. All have led to an increase in a flexible work organization, which in the majority of countries led to a diversified and splintered workforce whose interests are less represented by trade unions. Labour market decentralization and the decline of social democratic policies have further aggravated the decline of unions (Spyropoulus, 1987: 36–41; Hobsbawm, 1995; Western, 1995).⁵ These trends have also affected trade unions in developing countries. In developing countries an additional challenge occurs where the labour force has an agricultural background. Such workers are often difficult to organize.

EPZs

Many countries in the developing world have adopted export-promotion strategies, with the formation of EPZs as an integral part. EPZs are areas within countries that are designed to attract export-oriented industries.⁶ These industries are often offered a package of duty-free imports of products to be used in the production process, waivers on foreign ownership restrictions, special investment incentives and, most importantly for this book, investment-favourable working conditions. Production in these zones concentrates on textile, garment, leather and electrical products (Dicken, 1998: 130).

Although initially the EPZs attracted investment and created employment, the quality of both leave something to be desired. Employment often involves low-skilled and low-wage labourers, while the connection, and therefore the technology transfer, of EPZs with the local economy is often limited. A second problem is that technological innovation also takes place in these EPZs...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of Tables
• Acknowledgements
• List of Abbreviations
• Dedication
• 1 Trade Unions, Labour Standards and Global Governance: An Introduction
• 2 Trade Unions and Global Governance
• 3 Claiming Positions: Debates on Labour Standards
• 4 The Fair Trade Discourse on International Labour Standards: The Case of the United States
• 5 The Neo-liberal Discourse on International Labour Standards: The Case of India
• 6 The OECD Study on Trade and Labour Standards
• 7 Adjusting the ILO to Global Challenges: The Modest Result of the Laborious Debate on the Strengthening of the ILO
• 8 Trade Unions and Global Governance: Summary and Conclusions
• Appendix: ILO Core Conventions and Their Rate of Ratification
• Bibliography
• Index