This paper outlines the work which CUTS is engaged in the context of Linkages between trade and labour standards, and trade and environment. It speaks about the inequities of pushing for non-trade concerns into the trade regime and also about the myths and realities on the ground.

The focus of this programme is to facilitate effective and dispassionate evidence-based dialogue in order to help both the camps of the ‘linkages’ debate to understand each others’ positions better. The goal is to reduce the heat and tension with the hope that the problems are addressed in the right manner leading to betterment of the situation i.e. good social standards and protection of the environment. We believe, that this programme has the potential of:

Resolving the conflicts arising out of the contentious discussions of incorporating labour standards or environmental standards into the multilateral trading system i.e. a sanction-based platform viz. the World Trade Organisation (WTO), and
Strengthening the existing non-sanction based institutions at both the national and international levels for effectively tackling the multifarious dimensions associated with these issues, and thus arriving at sustainable development situation.

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Introduction

The issue of linking trade with either labour standards or with environmental standards has been occupying the centre stage ever since the World Trade Organisation came into being in 1994. It has further divided the rich North and the poor South. The tragedy is compounded by the fact that it is a one-way street i.e. the rich North is the demandeur and the poor South the defender. Inherently it is inequitable because the South cannot invoke any such ground to propose or justify trade measures, sheerly because it cannot afford to. It needs trade and investment to achieve economic growth, create more jobs and get their people out of poverty.

The polarisation on the grounds of linkage was worsened by the US president, when he proposed the introduction of labour standards into the WTO and empowering it with the power of sanctions. This was one of the main causes of the failure of the Seattle ministerial meeting in November 1999.

Even in the run up to the Seattle meeting much storm was raised by several interest groups to push for getting both labour and environment standards into the sanction-based WTO system. It was these two issues on which there was complete unity among the poor developing world. They were otherwise divided on other new issues like multilateral rules for investment, and for competition policy, with various poor countries having different positions.

One has to take stock of the past to see how the international community can proceed in the future, that being the theme of this conference. Indeed the failure of the Seattle talks is ominous for the poor South too, only one factor is unnerving that of uncertainty. But progress cannot be achieved if the major trading powers such as the EU really want to move forward on their existing commitments without wanting to seek new concessions from the South. However, the signs are not positive towards this end.

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CUTS Campaign: TWIN SAL

Recently, EU’s trade commissioner, Pascal Lamy visited India in order to lobby her to move forward on the pending round of talks. From his speeches and comments, it did not appear that the EU would like to engage with India or other developing countries on the bones of contention which caused the failure of the Seattle talks.

Reverting to Seattle, in the run up, as a counter campaign, though not quite matching with the level of the noise raised by the trade unions and civil society in the USA, CUTS organised and circulated a statement opposing such linkages. Third World Intellectuals and NGOs Statement Against Linkages (TWIN-SAL) was mainly drafted by the noted trade theorist Professor Jagdish Bhagwati. He is also the chairman of the CUTS’ advisory board. TWIN-SAL was endorsed by over 100 individuals from all over the world. In this it was argued that:

Overloading the WTO with non-trade issues that are not the concern of the GATT agenda would distort and strain the multilateral trading system;
Such issues smell of protectionism actuated by competitiveness concerns;
There are genuine concerns too but the agenda continues to be contaminated by competitiveness concerns;
There are specialised agencies to deal with these issues such as ILO or the UNEP, which should be empowered to deal with violations of international agreed standards;
Such moves will weaken these specialised international agencies and strengthen the opaque WTO; and
The basic issue is that of development and poverty eradication without which it would be difficult to implement high standards by the poor countries.
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Dialogues launched

The statement attracted huge attention widely, in the media as well as strong responses from the protagonists and the antagonists. Following this, CUTS organised a panel discussion at Seattle on the sidelines of the ministerial meeting. A special Linkages issue of the CUTS flagship periodical: Economiquity was also published as a Backgrounder for this panel discussion. In this edition, the TWIN-SAL was carried along with a Counter Statement by ICFTU, among other comments on the issue of Linkage. Three important points emerged at this meeting:

A sanctions-based approach will not help progress the agenda;
Environment and labour standards are two different cups of tea and should not be mixed together; and
Dialogue needs to be continued to resolve the conflicts between the two sides and create better mutual understanding.

Another panel discussion was organised at Bangkok on the sidelines of the UNCTAD X in February 2000. This too came up with similar recommendations. At both panels, we ensured that there is a balance of speakers i.e. holding dissenting views. Interestingly at both meetings where over 70 persons attended, some people had to stand which indicated the deep interest in the issue. Two interesting remarks are worth reporting here.

Mr G Rajasekhar, representative of the Malaysian Trade Union Congress, which is affiliated to the ICFTU the main protagonists of a social clause in the WTO, was somewhat nuanced in terms of who will have the power of sanctions. His view was that if the WTO decides that there is a violation of labour standards then it should be the ILO which should have the ultimate power of imposing the sanctions.

Mr George Sebastian of the International Fisherfolks Collective pointed out that adolescent tuna is now being increasingly caught as dolphins do not swim along with them. This is by itself an ecological disaster. Secondly in the case of fishermen, young have to be initiated into the trade so that they can overcome the sea sickness. Adults cannot be trained to combat sea sickness.

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Non-trade issues do not help global welfare

There is a natural bias in the manner that I have approached the issue. Because, I firmly believe that this whole push for linking trade with extraneous factors does not help global welfare. On the contrary it will only help a few in the rich world. For example when the Uruguay Round concluded we got two new agreements through the ‘trade-related’ prefix. The first, on intellectual property rights (TRIPs) is in fact quite against the spirit of the whole WTO. The spirit of the WTO is trade liberalisation, while TRIPs is about trade restriction and benefiting few of the intellectual property rights owners, even if they are pirates. Not only that it grants a 20 year protection period to patent holders, which beats any sane economist’s common sense.

The other trade-unrelated agreement is on Trade Related Investment Measures (TRIMs), which requires poor countries to abandon any kind of conditionalities on foreign investors even at the cost of their own development priorities. These are local content requirements or export commitments by the foreign investor, which can enable the host country’s economic development.

The funny part of both these out of place agreements is that poor countries have been provided transition periods of five years to come upto the standards prevailing in the rich countries. No magician can pull a poor country out of its level of development in five years. The question, which arises, is whether Bangladesh can become Britain in 5 years.

In my opinion TRIPs should be amended and sent to WIPO, or aborted, while TRIMs should be dissolved entirely. After all entreprenuership is all about taking risks.

Be that as it may, let me revert to the subject of linkages between trade and labour standards and trade and environment standards. While fully respecting, supporting and demanding the need for better regulation domestically, handing over the powers to a supra national authority is fraught with dangers. It is not a rule on how trade needs to be conducted. Even under the present rules-based dispute settlement system, it is the powerful who dominate the show. Many a times poor countries do not even have to resources to either understand the issue or to raise it at the dispute settlement body.

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CUTS Project on Linkages

We have drawn up a global project to research and disseminate information on the two issues. The project proposal outlines a programme that needs to be undertaken to build capacities of civil society and policy makers, especially in the North, vis-à-vis appreciating the complex socio-economic issues that are currently not reflected in the ongoing debate on ‘linkages’.

The focus of this programme is to facilitate effective evidence-based dialogue in order to help both the camps of the ‘linkages’ debate to understand each others’ positions better. The goal is to reduce the heat and tension with the hope that the problems are addressed in the right manner leading to betterment of the situation i.e. good social standards and protection of the environment. We believe, that this programme has the potential of:

Resolving the conflicts arising out of the contentious discussions of incorporating labour standards or environmental standards into the multilateral trading system i.e. a sanction-based platform viz. the World Trade Organisation (WTO), and
Strengthening the existing non-sanction based institutions at both the national and international levels for effectively tackling the multifarious dimensions associated with these issues, and thus arriving at sustainable development situation.

The project would promote dialogue with parties on all sides so as to reduce the tensions and resolve conflicts. For example, the RIIA has also tentatively agreed to host a dialogue under these hallowed portals, provided money can raised. The research agenda has been divided into two axes. The first is on trade and labour standards and the second on trade and environment standards. These are being reproduced here as drafts for comments and inputs from all quarters.

A common element of both the axes is the studies on Willingness To Pay by the Consumer in the North if the goods have been produced by maintaining the best standards of labour and environment. It has been argued by some scholars that consumers would be willing to pay more for such goods, but one is not too sure. One study in Pakistan showed that of the US$10 which a consumer pays for a T-Shirt in USA, the exporter gets only US$1, while the poor cotton farmer gets a share of only $0.09 i.e. less than a dime. In a similar situation a US cotton farmer would get atleast US$1.00. Under these circumstances how will the Pakistani farmer produce cotton without using excessive chemicals and water or not employ children to work in the fields for cotton picking and such light activities.

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The Linkage between Trade and Labour Standards

CORE LABOUR STANDARDS

The Issues

Core labour standards are not being implemented properly in developing countries, which give them a competitive advantage in exports.
Linking trade and labour standards into the WTO framework has the potential of being used as a protectionist device against exports from poor to rich countries.
The monitoring mechanism in the ILO is inadequate for ensuring compliance of a country’s obligations under the ILO Conventions.
Worker productivity varies from country to country.
Labour markets are inflexible in the North and the immigration laws act as a barrier to movement of labour.
Trade unions in the world and countries are divided over the issue of linking labour standards with trade, and where there is consensus it is nuanced.

The Questions

What is the sanctity of the core labour standards? Whether there is a clear link between trade and labour standards?
Do the developing countries deliberately suppress/flout the labour standards for gaining competitive advantage in trade? Can ratification of ILO conventions alone solve the problem?
Is the labour standards issue a part of the campaign aimed at protecting the uncompetitive industries in the North?
Is there any evidence to show that labour standards have any relationship with exports?
Should productivity be a part of the discussion while examining the issue of labour standards?
Is there any evidence that depressed wages of labour in developed

CONTACT US

CUTS Centre For International Trade, Economics & Environment (CITEE)

D–217, Bhaskar Marg, Bani Park,

Jaipur 302 016, India,

Ph: 91.141.2282821

Fax: 91.141.2282485

Email: cuts@cuts.org

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