The global labour standards controversy: critical issues for developing countries

Overview For some time now, the governments of a few advanced countries,as well as their unions and some parts of the business sector, have been pressing proposals to establish multilateral rules permitting punitive trade measures to be taken against countries deemed to be failing to uphold core labour standards. The countries most likely to be arraigned would be developing countries. The latter have,however, firmly rebutted these initiatives, which they argue are protectionist both in intent and in effect. This policy study seeks to move the debate beyond the present stalemate onto a more constructive plane. While closely examining the economic arguments in this controversy, it is also concerned with the broader political and moral dimensions. The authors suggest that developing countries are committed to improving core and other labour standards; the reason why, in general, they are unable to implement many of these forthwith and much more widely is not because of the wickedness or perversity of their governments but essentially their economic circumstances and the structure of their economies. It is emphasized that developing countries should continue to adhere fully to these commitments both for intrinsic developmental reasons and also, importantly, so as not to lose the moral argument. A main objective of the study is to provide for developing countries an in-depth background analysis of the diverse and complex issues involved in considering the question of labour standards. The study deals with a wider range of issues than those strictly germane to labour issues in relation to trade. This should assist developing country negotiators in discussions on proposals to make labour standards compulsory irrespective of the forum in which such discussions may occur. The authors’ point of departure is the concern of US trade unions over their adverse labour market conditions (loss of jobs in manufacturing, increased wage dispersion and job insecurity, among other things), and the belief that the source of these problems is manufactured imports from the South. In addition, certain sections of business express concern about alleged unfair competition from developing countries. These concerns and beliefs, which are widely shared in one way or another by the broad public in advanced countries, propel the policy drive to link labour standards to trade, or, as frequently described, to introduce a ‘social clause’ into the multilateral trade rules. A number of arguments and also data are presented to demonstrate that these allegations and fears are not well founded. Moreover, the analysis suggests that, in the case of most of the core labour standards, adopting measures which are tantamount to forcing compliance with ILO core labour standards will not achieve the declared objective of raising labour standards in the South. Indeed, this would be quite the wrong way to go about achieving improved labour standards, both core and otherwise, in developing countries. The study provides a critical assessment of the core ILO conventions with respect to their application to the specific circumstances of developing countries. It also examines the important question of whether these core conventions should be regarded as basic human rights. The analysis leads to the conclusion that the ILO Conventions Nos. 87 and 98 on the freedom of association and on free collective bargaining are too narrow and exclusive. The authors argue (a) for the revision of these conventions, as well as (b) for the inclusion of the right to a decent livelihood as a core convention and also as a fundamental human right, certainly no less significant than the other core conventions. The study suggests that, as economic development proceeds, labour standards normally evolve and improve without requiring international coercive measures. However, the process can be made somewhat quicker with technical and financial assistance and encouragement by the international organizations as well as civil society organizations. In contrast, attempts to enforce labour standards through trade sanctions are likely to cause economic harm to most exporting developing countries, at least in the short to medium term, while doing little or nothing to improve their labour standards. Indeed, under wholly plausible circumstances, this approach could be seriously counterproductive and reduce standards overall. What is more, any cut-back in developing country exports due to sanctions will not provide protection to labour and industry in the advanced countries for long (if that were the objective). This is because the most severe competition for advanced countries comes from the small number of newly industrializing countries (NICs) whose productivity growth rate is much faster than that of advanced countries. In sum, whatever motivates those urging improved labour standards in the South -- protectionism or genuine concern for the welfare of workers in the South -- the analysis suggests that neither in the South nor in the North would labour be best protected by measures to enforce compliance with core labour standards in the South.Further, evidence suggests that there has been greater slippage in labour standards in the North in the recent period than in the South. However, it is argued here that the main cause of this malaise lies in the current processes of economic globalization, which emphasize free trade, free movement of capital, and labour market flexibility within national economies. Most analysts will agree that the last two characteristics disadvantage labour, North and South, and favour capital. Nevertheless, in keeping with the long traditions of internationalism of the working class movements, the paper suggests that they project their own vision of a new global economic order which would respond more fully to the needs and interests of all people, whether they work in the formal or the informal sector in both developing and developed countries. The analysis presented here suggests that the improvement of labour standards in the South would require faster economic growth and structural change, giving due attention also to policy measures to reduce poverty and inequality, including labour market policies. Such a process would be helped if advanced countries themselves were growing faster, which inter alia would help improve labour standards in these countries. It is argued that faster economic growth, North and South, is perfectly feasible on the supply side (in part because of the unrealized potentialities of the information and communications technology (ICT) revolution, as well as the catch-up possibilities of developing countries). However, for this potential to materialize, a trend increase in the long-term rate of growth of real world demand is needed, which, it is suggested, would in turn require new institutional arrangements for a people-friendly globalization. Specifically, this entails among other things close co-operation between leading economies, so that international demand expansion is not thwarted by co-ordination failures and balance of payments disequilibria. It also requires pay co-ordination policies within advanced countries to forestall inflation. The paper sketches out the main elements of this global Keynesian model for realizing the full supply-side potential of the world economy and achieving fast growth, which would interalia lead to an increase in the demand for labour and help raise employment, real wages and labour standards in both the South and the North. This analysis has important policy implications for each of the parties to the controversy -- advanced and developing country governments and trade unions, multinationals, civil society groups and international organizations, among others. These are outlined in Section VII. Although written from the Southern perspective and for the South, it is hoped that the analysis in this policy study would also be found useful by workers and trade unions in the North as well as by the international community as a constructive way forward from the current deadlock.