6:42 AM Nov 8, 1994


Geneva 8 Nov (Chakravarthi Raghavan) -- In a paper presented to an ILO Working Party meeting next week, the head of the ILO, Michael Hansenne, has sought to push the tripartite body to a discussion of how to provide a social dimension to the international trade system rather than the pros and cons of the range of issues as the ILO Governing Body appears to have intended.

The document presents and explores several options -- in terms of the World Trade Organization (WTO) and the ILO, including amending WTO agreements -- to forge such a link and provide for various WTO trade sanctions on a determination of violation by the ILO.

The options discussed include the concept of 'social dumping' and subsidies and countervailing measures and the invoking of the dispute settlement mechanisms and changes to the General Exceptions clause of the GATT.

In effect it advocates incorporation as a WTO obligation of its members complying with a minimum set of ILO Conventions, an ILO-WTO agreement for the ILO to be the body for judging violations, and thereafter enabling a complaining party to use the WTO machinery of applying the Art XXIII Dispute Settlement procedures (and the trade retaliation) for violation of 'social rules of the game'.

In putting forward the paper, the ILO head appears to have ignored the sharp divisions of opinion within the Labour Conference and its governing body -- among governments, employers, and now even among the national organizations of workers -- on this entire range of issues

The paper proceeds on the basis that the issue is not of why or whether of such a linkage, but of how.

It draws on the analogy of the Uruguay Round TRIPs agreement, and the Marrakesh agreement to continue consideration in the WTO of links between trade, environment and sustainable development, to suggest forging a similar link, as a matter of practical necessity and political will, between social dimensions and the trade system, with ILO playing a role in determining the dimensions and its non-observance and the WTO enforcing it.

This is advocated on the ground of this being the only way of removing the risk that, though illegal under WTO, aggressive unilateralism in national legislations would be used and would gain ground.

A 'non-paper' from the US government delegation, circulating amongst several other government delegations, has called for the working party to address both substantive and procedural issues.

The substantive issue, in the US view, is one of developing a list of core workers rights issues whose observance could be monitored and implemented multilaterally.

The procedural issue is one of how work in the ILO could be linked to that of the WTO, entailing minimum change in rules and procedures of both organizations, and entailing the two working together in monitoring and enforcing labour standards.

Structurally there is some resemblance between the ILO bureau document for the working party and the single-page non-paper of the US which is at the forefront of pushing this issue.

The Hansenne paper on the whole suggests an element of confusion in the ILO bureau's understanding of the Uruguay Round Marrakesh accords as well as the entire range of issues involved including the radical departures from the ILO's Philadelphia mandate which is based on voluntary conformity to standards, by advocating binding conventions.

The Working Party, open to all Governing Body members, was established last June "to discuss and reflect" on all relevant aspects of the social dimensions of the liberalization of international trade".

Hansenne, in his report to the 81st session of the International Labour Conference, had stressed the need for the International Labour Conference engaging in this debate and adverted to the idea of a 'social clause' in international trade agreements (advocated by the ICFTU and other central organizations of workers, and picked up by US and France). Hansenne appeared to be advocating in that report the ILO defining a set of 'basic standards', an ILO assessment of compliance by States with such standards and a binding International Labour Convention to back them -- with ratifying States pledging not to take unilateral trade actions.

A resolution on the trade-labour standards issue had been moved at the conference by the governments of ASEAN countries, but got a low priority and never came up for discussion in the resolutions committee. However the issue had figured in the general debate at the plenary with several ministers as well as employers and workers representatives adverting to the issue of linking social standards and the international trading system in their general statements.

But opinion at the Conference was sharply divided.

Hansenne however summed up the debate by saying the ILO could not avoid the debate but had to see "how we can bring about an adequate marriage between freedom of trade, freedom of association and free negotiation by workers of their conditions of employment and labour", and that many would agree with the US Labor Secretary that any intervention in this area should be based on multilateral machinery rather than unilateral actions. He announced he would ask the ILO Governing Body to set up a working party to analyze apprehensions and constraints and find solutions to these problems.

He then asked the Governing Body (which met after the Conference) to set up a working party (of 20 government members, and ten each of employers and workers), to start examination of "The question of the social dimensions of the liberalization of international trade", discuss all relevant aspects and report back to the governing body.

But discussions there showed lack of any consensus on the Hansenne's suggestion. It was then agreed as a compromise that a working party, open to all members of the Governing Body, would only "discuss and reflect" on the issues and report back to the Governing Body.

The Hansenne paper to the working party ignores this debate to advances the view on the need for a multilateral, universal approach (to link trade and social dimensions) based on consensus involving social partners, within the framework of the ILO,

The paper repeats the view that there were "the beginnings of a consensus" in the Conference debate, and that there were two "symmetrical and complimentary focuses" aimed at strengthening the link between trade liberalization and social progress.

The first issue was whether, without prejudging the level and content of social protection appropriate to each country, it was envisageable to incorporate in the international trade system minimum guarantees enabling social partners to enjoy their fair share of fruits of trade liberalization.

The second issue was whether the expressed will to ensure as far as possible social progress and trade liberalization go hand in hand called for more specific actions on the part of the ILO.

The issues, Hansenne notes, had been discussed at the Conference and had led the bureau to wonder how far the social implications of trade liberalization could be left entirely to unilateral initiative of the States, spurred on only by the ILO (as envisaged by its founders who rejected the idea of giving ILO conventions automatic binding force) or should be dealt with in the context of rules governing international trade with binding force?

Incorporating such a social dimension, and subjecting WTO members to new rights and obligations, it concedes, would involve amending the texts of the WTO which would not be possible without a broad consensus.

The report notes the provisions for amendment (Art. XXX of the GATT and the corresponding, but more complex provisions of the WTO) and what it calls a "polite way of showing the door" to a member not accepting an amendment which others consider to be of a substantial nature altering the balance of rights and obligations and says: "it is difficult to compel CPs, by means of an amendment, to compel with certain obligations in the social field, if they are firmly opposed to them".

However, the document says, the difficulties of introducing such an amendment are not insurmountable and the Uruguay Round negotiations had shown that agreement could be reached on controversial issues, but that they had to be based on reciprocal concessions.

But in the absence of a global compromise, the isolated inclusion of a social dimension could succeed only if it had a broad enough consensus, Hansenne says, and suggests that the Working Party could contribute to such a consensus in a decisive way.

The document discusses three related issues (that could enable such a linkage and consensus): should or should there not be a social dimension in the international trade system (the latter question is skirted around but never fully addressed), what kind of a dimension could be envisaged for this, and how should it be linked to the standards and procedures of the two organizations.

Hansenne adds that his job as Director-General lay in steering the debate in the working party away from "pointless discussion" so that it could concentrate on "real issues" at political, institutional and economic level for forging such a social dimension.

At the political level, he argues, in the absence of a social dimension from the multilateral trade system, there would be a proliferation of unilateral measures aimed at compensating for difference in levels of protection or working conditions or setting up homogenous economic blocs as regards social protection, sheltered by a common external tariff.

He notes that though the Marrakesh Final Act provides for a Dispute Settlement system as a "central element in providing security and predictability", the fact remained that there were national legislations (citing in a footnote the US trade law example) to promote workers rights by "aggressive unilateralism". And though trade law jurists were near unanimous that use of these instruments beyond discretionary trade preferences of the GSP schemes would be illegal, "there is no guarantee that they will not be used and gain ground", he adds.

This risk (of US illegal unilateralism) would disappear if there were express rules at multilateral and universal levels on the basis of a consensus involving social partners within the ILO framework.

At legal and institutional level, the ILO head draws an analogy with the Uruguay Round accords for liberalization of trade covering subjects like intellectual property and relationship between trade policies, environment policies and sustainable development, and argues that "use of trade regulation for such a purpose (social dimensions) is thus a matter of practical necessity and political will".

On objections about ineffectiveness of trade measures to achieve humanitarian or social policy objectives, the paper notes that the measures that could be taken by CPs under the trading system aimed to compensate, by measures affecting access to specified products, for identifiable injury that one cp might have suffered by failure of another to comply with obligations.

This remedy may seem ill-suited to correct wrongful practices in social field since it would be impossible to establish causality and trade measures might affect those already victims of alleged breaches, the paper says and adds: "this objection therefore merits closer attention... but it has more to do with the 'how' than the 'why' (or why not) of the social dimension".

While no one disputes that costs of social protection and wages affected competitiveness of industries and even economies as a whole, the conclusions drawn from this were contradictory: some saw the differences as a form of 'social dumping' to the detriment of the advanced countries while others viewed efforts to remedy differences at worldwide level as nothing more than a disguised attempt at protectionism aimed at stripping less advanced countries of their main comparative advantage compensating for their disadvantage of lower productivity.

The report argues that there was no point in continuing this debate since it was based on false premises, namely, the idea of equalizing social costs, and in disregard of ILO principles.

Social progress depended on economic progress, one of whose driving forces was liberalization of trade. But the experience of integration, as that of the EU, showed need for a minimum of social harmonization but not equalization of wages and social protection as end in itself.

The idea that sharing in benefits of liberalization presupposed a certain uniformity in level and content of social protection also disregarded ILO principles which required these to correspond to the particularities of each country and reflecting free choice of social partners.

But for progress to materialize, certain conditions had to be met and the issue was whether it was legitimate for the international community to impose them. Since membership of the ILO and GATT (WTO) would be increasingly identical, States would take account in each of the organizations the obligations and objectives of the other and it was legitimate to define the social dimension that might be legitimately introduced in the trade system.

Discussing the 'dumping' and 'subsidy' approaches in GATT, the paper says that even if it was not feasible, on objective and universal basis, to define the 'normal' level of social protection, the question still remained whether 'abnormally' low conditions did not distort competition or represent a form of subsidy.

This 'abnormality' could be defined in terms of fundamental right of persons, but also in terms of the market approach of negotiations and contract. The only conditions that could be held as 'normal' would be those 'freely established in the labour market between supply and demand' and whatever the level of development, this presupposed freedom in determining individual and collective working conditions. The same conclusion could arise when seen from the 'subsidy' approach and denial of freedom of association by a contacting party "may legitimately give rise to the presumption that it is endeavouring to maintain working conditions at an abnormally low level".

The paper suggests that liberalization of trade appeared to imply, naturally and logically, atleast for the recognition in the social field of conditions enabling workers to negotiate freely, both individually and collectively, their conditions of work.

Some of the ILO conventions could be translated into specific legal terms for this purpose. The report mentions Conventions Nos 87 and 98 on freedom of association and collective bargaining and 29 and 105 on forced labour and abolition of forced labour as illustrative, but not exhaustive, and extendable to child labour under conditions of slavery.

The only question was how to apply these texts outside of the ILO environment and procedures?

In terms of GATT/WTO procedures, the paper examines the anti-dumping option or analogous general exception provisions -- in Art XX (h) of the GATT relating to international commodity agreements -- to cover certain fundamental workers' rights.

It also notes the dispute settlement option under Art XXIII about nullification and impairment of failure to meet obligations of an agreement.

The paper suggests that membership of the WTO could be made ipso jure subject to the member accepting obligations arising out of specific ILO Conventions (whose violations would be decided by the ILO), and instead of levy of countervailing duties or specific restriction measures, specific provisions being made for consultations with appropriate intergovernmental organization -- the ILO.

The paper also proposes exploring with the GATT application of rules of the game in the social area through a provision for compliance with relevant ILO Conventions as a WTO obligation, supplemented by an agreement between both for implementing such obligations. WTO members would then be bound by specified ILO standards and their violations would have to established in accord with the ILO constitution, but it would be for the WTO to draw its own conclusions from this.