12:09 PM Nov 15, 1994


Geneva 15 Nov (Chakravarthi Raghavan) -- An inconclusive one-day debate Monday in an ILO working party on a possible trade-social clause link appears to have left the tripartite body highly polarized -- not merely along traditional employer-worker divides, but North-South divide too.

Though promoters of the trade-social clause links attempted to project a picture of some success, in that the item remains on the ILO working party agenda to be pursued in March, the decision about continuing the discussions in March had been taken before the debate began -- given that over 60 speakers had notified their intention to speak and could not be accommodated in a one-day debate.

The ILO chief Michael Hansenne's proposal may or may not be 'dead on arrival', as the US employers' delegate A.Katz put it, but would appear in need of something more than continuation of discussions to put any life or momentum behind it -- and a more objective approach from the ILO bureau involving more serious economic study and analysis than has been done in ILO so far.

Without a proper economic and social analysis of the complex of factors involving trade and economic liberalisation and their effects, trying to disarm critics by talking of a 'core' set of standards and no intention of setting world minimum wages, or as the workers' group attempted by confining it to 'human rights social standards' would not move forward the debate on trade-linked labour standards enforcement, one of the observers present commented at the end.

But a trade official said that one 'good thing' that came out of the 'botched up' ILO effort and continued ILO discussions would be to put off pressure over this item in the GATT/WTO and the preparatory committee process. But some others were not so sanguine -- and see the US and other supporters of the US on a twin-pronged front with some overall strategy unlike the South.

With 30 speakers having taken the floor, and some 32 still left to speak, the debate is to continue at a further meeting in March, but with no decision either on further work by the ILO office or any new mandate for the body.

Even the suggestion of the working party chair, Mrs. Maria Nieves Roldan-Confessor, that the ILO office for the next March meeting could provide a document with a "broader analysis of the wider issues of social implications of trade liberalization" and Brazil's suggestion that such a study should not only look at trade liberalization but economic development as a whole, ended up with the ILO office being asked merely to provide an outline for such a study.

The ILO document itself was 'savaged' -- though in diplomatic language -- by its critics, for not dealing with "all relevant aspects of the social dimensions of the liberalization of international trade", but confining himself to pursue the issue of trade-social clause linkages and how to use the trading system to ensure observance of 'core standards'.

Perhaps the mildest came from the Indian government delegate, S.Gopalan, who referred to the Hansenne remark in the paper that it would provide 'food for thought' and said "for this vegetarian delegate, the food was entirely non-vegetarian".

Privately, some industrialized country delegates favouring some social clause trade linkage viewed the ILO bureau document very unfavourably and not helping the cause at all.

In summing up the discussions, Roldan-Confesor said that there were divergent views and the debate would continue in March on the basis of the present document, and no decision would be taken now on further work or any new mandate. She suggested that the ILO office could provide additional information on the main ILO conventions and their ratification by countries and the office could also prepare a factual note on what other organizations are doing on the subject.

In the debate, the only other organizations that were mentioned were the OECD and UNCTAD and their analytical work on liberalization and social implications including employment.

The chair also proposed that the office provide a document containing a broad analysis of the wider issues of social implications of trade liberalisation.

Brazil's Amb. Gilberto Vergne Saboia said any such document must cover not only the trade implications, but economic development also.

It was finally agreed that an outline of the study should be provided for the March meeting.

Among the Third World governments, Brazil and India gave two lengthy and weighty economic and legal arguments against the kind of linkage proposed by the United States, France and a few others at Marrakesh and since then. Many others firmly rejected such linkages.

The US Employers' delegate said US business was united in opposing the links and the US government knew this position. "Opposition to the government position will be maintained by US business," Katz said, and expressed the business unhappiness with government efforts to propose such linkages in the GATT/WTO which was "a rule-making body and has no room to analyse and discuss such a linkage". Workers rights were not trade-related unlike TRIPs, he added, and the US business was equally opposed to trade sanctions over environment. Trade-Labour standards linkages will result in undermining both the WTO and ILO, he warned. He also noted that the US Constitution and the issues of "sovereignty" precluded US ratifications of ILO conventions.

Katz advocated on the other hand 'positive measures', like use of GSP and financial aid and loans to promote upgrading of labour standards in developing countries.

The employers' delegate from Germany later warned that any such linkage would in fact result in double-standards, with enforcement in some cases on grounds of high morality and non-enforcement on pragmatic grounds. He instanced US President Clinton's actions in delinking human rights and trade issues in respect of China as an example of this kind.

The employer's delegate from France gave some support to the idea of such links and ILO study.

Among African countries, government delegates from Kenya and Egypt rejected any such linkage, with Egypt's Amb. Mounir Zahran giving a harsh critique of the ILO document and reproaching countries who had not ratified the majority of the ILO conventions in proposing linkages.

Among Europeans, French government delegate commended the document and its methodological approach for a procedure rather than dealing with the substance. He suggested extending the working party's mandate to a broad study of proposals that the ILO "might" suggest to WTO. The Dutch delegate, whose stance seemed to be more supportive than at Marrakesh, suggested an analysis of the core labour standards and then discussions on how to link them and the WTO's contribution.

The US government delegate saw the discussions as a beginning and involving issues of labour aspects of international trade and how ILO could act on them. While totally free markets were bound by economic and other rules, there were no social rules and this must be explored, but resisting protectionism and linkages that avoided protection. Labour standards should take into account levels of development, core labour standards should be formulated.

In opening the discussions, Hansenne noted the very divergent views -- ranging from the view that lower labour standards amounted to 'social dumping' to the other view that such trade-labour link talk was an instrument of protection. He tried to disarm the developing countries by saying that no one talked of a world minimum wage and the ILO exercise would not lead to one. But the issues of trade-social standards and links should be studied in a multilateral fora and multilateral mechanisms designed to preclude unilateral or bilateral measures. But any mechanism should reflect also the development dimension and ensure compatibility of any commitments in this area with obligations of countries both in the GATT/WTO and ILO.

Italy speaking for the government groups (which is in fact sharply divided on North-South lines, and among the North too) put a 'positive' note in viewing the document and discussion as "an initial step on a long road" to discuss the linkages.

For the workers' group, William Brett (General Secretary of the UK Institution of professionals, managers and specialists), said rather than the trade-social clause or labour standards name, it should be a 'human rights social clause' and the human rights standards that should be observed irrespective of levels of development. These should relate to child labour, prison labour, discrimination, right of collective bargaining and freedom of association. "This would be a 'noble cause' not involving costs of production". Work should be done in the ILO and its standards setting and monitoring machinery and only at the last stage should any linkage with trade be set.

Abedel Gazarin of Egypt, for the employers group, saw no linkage at all between trade and labour standards and criticised the bureau document strongly. "Trade-labour linkages will restrict trade and the employers' group is against any such linkage", he said.

Speaking for the Asian governments, T.S.Tirumurti from India, said ILO over its 75 years had done yeoman service for promoting social justice, but this had rested on basic philosophy of voluntarism, tripartitism and free choice of social partners. Any attempt to deviate from these principles would affect ILO's credibility and its role. Asian governments were committed to promoting labour standards and this was best done in the work under way in the ILO Committee on Legal Standards. That process for updating, reviewing and strengthening the standards would go a long way towards meeting needs of globalization than any attempts at 'diktat' on countries through instrumentalities like linking trade and labour standards.

This was not the first time that the issue had come up before the ILO. Twice before such a link was rejected -- at the time of the Philadelphia Convention itself and as recently as 1990, when there was a full-fledged discussion and decision not to proceed further.

Any trade-labour standards link would go against the principles of free trade and would serve as a protectionist tool, would have adverse implications on economic development and job creation in the Third World and be counter-productive. Any such link would be contrary to basic ILO philosophy and Asian governments could not support any such linkage. "The document before prepared by the Office is not a basis for further discussion and we therefore refrain from commenting on it".

Amb. Saboia for Brazil noted that his country was a party to a number of ILO conventions and shared the ILO's goals of social progress. There was indeed room for improvement in international cooperation aimed at more effective compliance with labour standards and Brazil was prepared for a 'constructive dialogue' on the issue. But the proposal to link social and labour questions with the multilateral trade regime was "unacceptable" and, in its different forms for a 'social clause' allowing for trade restrictions, had an "essentially protectionist motivation".

It was no coincidence, Saboia said, that the pressure around this increased when developing countries, after undergoing trade liberalisation, economic reform and adjustment, had become 'more competitive'. Economic theory and recent studies had shown that it was the lack of adequate structural adjustment in the North, rather than competition from the South, that was at the root of unemployment in the developed countries. To use the "social dumping argument is therefore a politically expedient way of avoiding painful domestic options".

The concern for social standards invoked in the proposal did not stand scrutiny and introducing such a controversial issue in the delicate fabric of multilateral trade rules would seriously jeopardise the legal regime for international trade. The ensuing vicious circle of protectionism would actually undermine social standards and living conditions of millions of workers.

The proposals in the document for a system allowing GATT/WTO CPs to apply trade restrictions on the basis of an ILO mechanism for supervising compliance with conventions did not provide a valid approach to the issue, the Brazilian delegate said.

On the argument that such a multilateral link would reduce risk of "aggressive unilateralism", Saboia said accepting this reasoning would amount to giving multilateral coverage to specific country interests. There was also no guarantee that further measures, promoted under the threat of unilateral action, would not again be pressed, opening a vicious circle that would undermine the entire multilateral system and its main goal of providing reliable rules against unilateral action.

While the proposition that social progress depended upon economic development and the latter should be translated into social progress could be accepted, there was an assumption that international trade was equivalent of economic development. While such trade was an important factor, economic development was a more complex process and, to be stable and self-sustained, it depended among others on productive increase and technological improvements. Trade liberalisation itself would have widely different effects, depending on volume, nature and composition of each country's trade. To cite, as the report had done, the EU integration and blurring of boundaries between commercial and otherwise, was to ignore the degree of economic and political integration in Europe which could not be compared to worldwide trade and economic relations governed by multilateral instruments. It also left aside the elements of the European process like freedom of access to labour markets and commitments of partners to contribute directly, with substantial financial amounts, to eliminate disparities between European countries.

GATT rules and their enforcement were fundamentally different from ILO standards. GATT rules applied to concrete economic interests that could be quantified and aimed at keeping trade relations among partners on basis of openly negotiated and reciprocal rights. ILO standards were aimed at preserving and promoting values of general interest related to public order and development of international cooperation. While recognizing this difference, the ILO document had still concluded that coercive measures were needed to guarantee compliance with certain standards and that application of such measures should be left to the WTO -- as a kind of secular arm.

By this, the report questioned the very credibility of the ILO system and also ignored the fact that the GATT/WTO was a fully independent organization and not bound by rules governing procedures of the UN system bodies. The purposes and principles of the UN Charter and ILO Constitution and its Philadelphia declaration had a limited impact on the GATT jurisprudence. The proposals envisaged giving WTO CPs final responsibility in giving "teeth" to findings of ILO bodies, while application of trade restrictions would inevitably tend to be more affected by importance of specific trade and economic interests at play. Even limiting the links to 'core basic' standards did not modify the nature of the proposal -- given the known difficulties in reaching "fair, balanced and equitable conclusions" over implementation of international labour standards.

Brazil was willing to explore the other ideas for 'trade liberalization' dimension to ILO activity, but the basic equation was not between 'social progress' and 'trade liberalization' but one between 'economic development' and 'social progress'. While international trade was an important factor, sustained economic development also depended on access to technology, information and capital investments.

India's Labour Secretary, S.Gopalan, also faulted the document. Trade liberalization was only one of the aspects of structural adjustment of economies and impact of trade liberalization would be felt different in different economies and societies. Other factors than trade in goods and services were also involved: new forms of international division of labour, transnationalization and multi-nationalisation of production, spread of employment-unfriendly technologies, new demands for human capital development, new stratification of working class into highly-skilled and low-skilled, in-country and international migration of workers, the sea-change in the labour market of financial and other services. All these had implications for workers and instead of addressing them, the ILO document had been "constricted into a strait-jacket of trade-linkage to labour standards".

The debate had to be seen in terms of structural imbalances common to developed and developing countries. These imbalances, caused by market forces in the developed countries, had resulted in over-capitalization and jobless growth while in developing countries, State intervention had again created jobless growth. And while developing countries were trying to undergo rigors of structural adjustment to promote employment through growth, the developed countries were seeking to set trade linkages with labour standards which would pre-empt transnational location of their own industries.

Gopalan noted that at the June governing body meeting, the term 'mandate' was dropped out of the working party's terms of reference and "ILO has no more mandate now than earlier to deal with international trade". While dealing with some aspects of the issue, the document avoided the most crucial one as to whether there was a linkage at all. At the Conference a number of Minister and high functionaries of countries had rejected such links or expressed strong reservations. But the document had ignored all these, as well as the 1990 conclusion not to pursue this issue further in the ILO or the positions of NAM Ministers, the G15 Summit or the views at the ESCAP session in April 1994.

Linking trade and labour standards had no economic rationale and any "mindless upward equalisation" would make international trade "arthritic and ultimately paralysed". Trade-linked efforts to upgrade labour standards would only add additional layers of market distortions, worsen labour standards and reduce wages and employment in countries applying restrictions and those whose trade was restricted.

There was no reason to single out labour standards for such linkage, when other factors like technology transfer, foreign investment etc were all involved. Workers involved in international-trade-related production were often only a small percentage of entire work force and upgrading their standards along would exclude a large part of the work force. ILO would then be tackling them problem fragmentally.

ILO was based on the pillars of voluntarism, tripartism and free choice of social partners and drew its strength from the credibility of these three. Any mandatory standards, under whatever name it was sought, would contravene the ILO's constitution. Once the trade links with socalled 'basic human rights Conventions' were set, "t would open tem flood gates for vast regime of labour standards to be deluged and drowned by trade concerns and an international debate on Trade-Related Labour Standards will get to be launched," he warned. While ostensibly raised as a workers rights issue, it will be used, at least potentially, to neutralise comparative advantages in international trade and "the ILO's cake will be finally consumed by the WTO".

The New Zealand delegate said it was "unacceptable" to think of enforcing labour standards through trade, and there was no reason for linking the international trade system with labour standards. The ILO document lacked any analysis for this linkage. Restraining trade would not enhance labour standards. Sharply rejecting the Hansenne argument that such links would avoid unilateral trade measures, the New Zealand delegate said: "Unilateral trade measures for labour reasons would be apriori illegal in the GATT and would be immediately challenged".

The Argentine government delegate, while adopting a conciliatory tone and expressing concern over protectionism, said a number of developing countries had undertaken unilateral liberalisation measures in the area of trade and other economic activities, many under IMF/World Bank structural adjustment programmes. The impact of these on workers and social relations should be studied, he said.