craghavan 6:15 AM Jan 31, 1994


Geneva Jan 31 (Chakravarthi Raghavan) -- The head of the International Labour Office, Michael Hansenne has called for an international mechanism to deal with economic and social policies and international cooperation in an integrated way and has suggested that next year World Social Summit should do this.

ILO Director-General Michael Hansenne made his call for a new international mechanism in his annual report, titled "Defending Values, Promoting Change: Social Justice in a global economy - An ILO Agenda", is to the forthcoming 81st session of the International Labour Conference in June.

The ILO is the only UN agency with participation of governments, employers and workers and the annual conference of this tripartite body brings under one roof several hundred delegates and advisors from around the world. The annual report traditionally provides a focus for the general debate which enables the participants to address general policy issues on their minds.

At the Davos Symposium (of the World Economic Forum) on Friday, GATT Director-General Peter Sutherland had voiced the need for a new high-level framework to deal with economic matters -- a forum consisting of Prime Ministers, Finance Ministers and Trade Ministers with the G7 and representatives from the developing world and the economies in transition -- and with institutional support coming from the IMF, World Bank and the proposed World Trade Organization (WTO).

That proposal, for representation of the developing world and of the countries in transition at global policy making level, is likely conceptually to attract support from the world business and governments of the leading Third World countries and their economic ministries. But it is likely to run into opposition among the wider nongovernmental community, including labour and environment and development groups who already see the blighting hand of the IMF and the Bank on Third World people and policies for environment protection and sustainable development and would want a wider forum where philosophies other than the world laissez faire favoured by the IMF/World Bank/WTO.

This year's International Labour Conference, marks the 75th anniversary of the founding of the ILO, and is to be devoted to redefining ILO's role and future agenda.

Hansenne in his report has stressed that the ILO can no longer avoid, but must become party to the debate on the links between trade and social standards and find solutions that would neither advocate restrictions on trade nor the compulsory equalization of social costs.

The demand for such linkages have been advanced by the trade unions in the industrialized, and the world organizations of workers which, though drawing membership from around the world, is controlled and run by the trade union leadership from the North.

But with the world's governments anxious to conclude the Uruguay Round, and with international secretariats all careful not to rock this boat (launched by the major industrial powers), the trade/social standards issue did not come into focus.

Recently though, some Northern leaders and policy-makers have also flagged the issue of social clauses and social dumping -- President Bill Clinton of the US, EC Commission President Jacques Delors. There have also been other voices who have been writing and speaking about 'free trade' to be confined to the industrialized societies with more or less similar social norms and standards of living, with imports from others with propensity for low consumption and high savings (as in Japan) or with low wages subject to offsetting tariffs.

In effect this would extend to the entire area of trade, what was put it as an aberration to GATT some 30 years ago, namely the special arrangements governing trade in textiles and clothing where the theory of low-cost suppliers (because of low-cost wages) creating market disruption was evolved.

The Hansenne report brings into the open at the ILO for debate some of these issues and concerns (so far voiced by some of the Trade Union confederations and representatives). He warned though both against blind efforts at standardisation of wages and labour conditions as of keeping the issues and its impact on economy out of the ILO debates.

Hansenne has sought to focus on the transnationalization of production in a globalizing world economy, with national governments fast losing power to influence the course of the economy or address social issues whose solutions sometimes lie outside their power and in the hands of the powerful corporations.

As a result of the globalization of the world economy, Hansenne has pointed out quoting some UNCTAD data, the sales of the TNCs outside their countries amounted in 1992 to $5,500 billion, considerably more than the $4000 billion world trade in goods and services of which one-third is trade between TNC subsidiaries. TNCs now control approximately one third of the private sector's productive assets worldwide.

With globalisation of the world economy, international competition and the speed with which production can be shifted among countries, and governments of States could no longer cope with the problems themselves and there is need "to develop international mechanisms to monitor, analyze, regulate and advice on world trends and development, to strengthen international cooperation and formulate integrated economic and social policies to address social problems," Hansenne says.

Next year's World Social Summit, scheduled for Copenhagen, would provide an opportunity to develop international mechanisms to address in an integrated way economic and social policies, the ILO head suggests.

With the collapse of the Communist systems, he notes, the market economy is now the universally accepted standard and, within this model, the delicate balance between the State and the market has tipped most definitely in favour of the market. Everywhere the State was losing its grip over the economy and the Welfare State was being called into question.

Over its 75-year life the ILO has set universal standards, with flexibility clauses to allow for different levels of development. For many years the Communist States challenged the validity of these norms in judging them and the ILO was involved in East-West confrontations. Such a challenge to the ILO's universal standards was no longer there, though "we can foresee similar objections from those who invoke cultural, historical or religious factors in support of their claims of irreconcilable differences."

The ILO's basic philosophy is based on active tripartism within each member State -- collective bargaining between workers and employers and the State playing a regulatory role in economic and social affairs.

But the globalization of the economy has been sorely testing these assumptions, and the transnationalization of enterprises removes decision-making power further and further away from the workplace, and given the growing trend towards relocation of productive capacity "is this arrangement still valid?" he asked.

While the idea of linking trade and social standards was as old as the ILO, and had come up at the time the ILO was founded (when Britain proposed a provision in the ILO constitution), and again in 1931 when British employers complained of lack of protection against unfair competition.

But it could not be dismissed as a conditioned reflex to troughs in economic cycles and it was now more fundamental, Hansenne said. The globalization of the economy was a fundamental change.

It challenged two institutional characteristics, common to most international organizations, but with special implications for the attainment of the ILO's objective: the voluntary nature of acceptance of Conventions, which prevents them from playing a full part in regulations of international trade and the fact that the obligations of Conventions apply directly only to States, although the role of nongovernmental actors in the globalization of the economy is increasing and can determine success or failure of national social policies.

In this situation, a growing number wish to incorporate social clauses in international trade agreements to ensure that liberalization of markets is accompanied by improvements in conditions of work or atleast elimination of most flagrant abuses and forms of exploitation.

But many countries see these as a barely disguised justification for new forms of protectionism and want ILO to steer clear of the fray while others want it to play a role which deliberately was not given to it when it was created.

"To dispel these suspicions and play a truly useful role," Hansenne said, "the ILO should recognize both that its mandate requires it to be a party to this debate and yet it should not advocate restrictions to trade or compulsory equalization of social costs."

Restricting trade or compulsory equalization of social costs would be impracticable and would also be at odds with the double premise on which the ILO was based: freer trade should be sought for its potential to spur economic development and improve conditions of life and work and create jobs and the ILO should rely on cooperation rather than coercion to promote social progress.

A solution for maintaining a voluntary approach to standards while making them effective, Hansenne suggested, could be to transfer responsibility for sanctions to a "secular arm" outside the ILO. Even now, States or groups of States linked trade concessions or access to markets to compliance with certain labour standards (a reference to the GSP schemes) and this practice was bound to spread.

But the utility of this practice to the ILO was by no means clear and the ILO's "supervisory machinery could suffer if the conclusions resulting from it are used in a context of coercion", Hansenne warned.

Another solution could be to create a special procedure, along the lines of the freedom of association procedure, entailing an assessment of the social progress made possible in member States by the liberalization of international markets and opportunities afforded by the globalization of the economy.

While the concept of 'social dumping' was far too wide, and it would be Utopian to think that one could legislate a standardization of labour costs, the question was whether States are taking sufficient measures to examine the possibility of ratifying ILO standards or applying them to the extent their situations allowed.

Such an assessment could be made only by the State on a tripartite basis and no one else, not even the ILO, could decide for any member the fields in which it should act or priorities to be set, the ILO chief stressed.

But there were two minimal conditions to be accepted on the basis of reciprocity.

The first is an institutionalized tripartite setting at the national level for such an assessment, which in turn depends on a sufficient degree of freedom of association. The second would relate to basic standards which, regardless of national priorities, would be inseparable from social progress.

Thus, in addition to respect for certain basic principles, there should be minimum provision of social security and minimum level of protection against most basic contingencies in proportion to local costs.

In turn, developed countries, to have the right to examine measures taken by the developing countries, should logically renounce unilaterally imposed trade barriers and offer developing countries real and practical support to cope with the negative consequences of introducing such social measures.

For example, it might be possible to exert greater pressure on exporting countries to reduce gradually recourse to child labour in export-processing activities if at the same time they were given assistance to provide children concerned with basic services, especially school facilities.

Bilateral technical assistance was no longer a commensurate way of dealing with the problem and actions in concert with GATT might be needed to see if international trade itself could provide a source of financing for these complementary adjustment measures.

These measures could take the form of an ILO declaration and programme of action or even an international labour Convention with effective incentives for ratification: pledge of ratifying States not to resort to unilateral trade restrictions in return for greater commitment by trading partners to strive towards social progress. Coupled with the guarantee of ILO's supervisory machinery for Conventions, it would provide a "highly eclectic means of balancing reciprocal rights and obligations", he said.

The establishment of such a machinery in the ILO would have the advantage of fitting within an existing and familiar legal framework, with the Convention recognizing GATT's pre-eminent role in trade and associating the GATT in measures to give effect to such a Convention.

With an estimated 30% of the world's labour force not productively employed, with more than 120 million registered as unemployed and some 700 million underemployed, the problem was no longer confined to developing countries and few have been spared a serious and deepening employment crisis, he noted.

The main responsibility for finding answers to these questions clearly lay with national governments, but the irreversible process of globalization was greatly reducing their capacity to control the instruments of economic policy.

And while governments are not entirely helpless (as shown by some success stories), nevertheless a question to be faced was whether economic forces of international markets would suffice on their own to guarantee social progress for everyone, everywhere.

Employment and labour issues could no longer be handled effectively at national level alone and it no longer sufficed to promote ratification and application of ILO standards by member-States or provide assistance to governments and social partners in developing labour legislation.

"The factors which directly affect the attainment of ILO's objectives are no longer entirely controlled by national authorities and ILO will cease to be a major force for social justice if its influence does not extend to international policies".

But the ILO has been unable to play a greater role on the international scene. Though it has sought to influence national and international economic and financial policies (such as through the 1987 High-Level meeting on employment and structural adjustment and through dialogue with international financial institutions), the ILO is "still a long way from being accepted as a major actor on the international scene".

"It has little influence on deliberations and policy decisions of institutions which play an increasingly important role in the management of the world economy and whose influence is bound to grow still further with the globalization of trade and closer interdependence of national economies."

The absence of a truly effective forum for addressing the social aspects of international economic trends and policies "is today increasingly recognized to be a major weakness of the international system in the contemporary world", Hansenne noted and suggested that next years World Summit for Social Development should provide "an excellent opportunity to develop international mechanisms to monitor, analyze, regulate and advice on world trends and development, to strengthen international cooperation and formulate integrated economic and social policies to address social problems."

But (in the new situation) the ILO must also intensify efforts to ensure that tripartism was fully recognized at international level. All too often issues concerning the ILO and, consequently the social partners, were discussed in other bodies without their participation, Hansenne complained.

"The ILO's proper involvement in international policy-making must be one of our constant preoccupations and it is the international community's duty to indicate clearly what role it intends to assign in future to the representatives of civil society, to the economic and social actors in a more and more integrated world...A decision has to be taken quickly, and it has to be the right decision."