The developments on political and economic front which took place during the last few months are definitely going to have a significant impact on future trade negotiations at WTO, including the social clause issue. The election of George W. Bush as US President and selection of Qatar as the venue of next WTO ministerial meeting are two most important political developments of the recent past. On economic front, Clinton administration’s rejection of trade sanctions against Japan on whaling and the EU making it clear that the tendency to link trade with issues unrelated to trade is protectionist are definitely very significant. These happenings would not only give a new twist to the trade negotiations at WTO but also expose the position of developed countries especially, US on social clause issue.

It is good that the new US President has taken a completely different stance on linkages issue from his predecessor. But some of his appointments really put a serious question mark on his seriousness about environmental issue in US itself. Some major environmental groups of US have raised a serious concern about his appointments of Gale Norton as interior secretary and John Ashcroft as attorney general, whose anti-environmental record is clear. He also reiterated his determination to drill for oil in the Arctic National Wildlife Refuge.

The lifting of trade sanctions against Japan on whaling by former US President also reflects how genuine the US concern is about environmental issues when it comes to its own trading interest.

The upcoming meeting of the WTO in Qatar (though it is a choice out of compulsion), which does not allow public protest further strengthens the belief that developed countries are not at all interested in protecting labour rights. The hidden motive is to protect their own uncompetitive industries in the changed trading environment.

All these recent happenings clearly endorse the stand, which many developing countries have taken on the social clause issue. The successful accession of China into the WTO may also give a further strength to the South’s stand on labour and environmental standards.

Pradeep S. Mehta

Secretary General

I. Global Programme on Linkages: ONGOING RESEARCH STUDIES

TRADE AND LABOUR STANDARDS

Background:

The debate on linking trade with core labour standards has raised the following three key questions:

§ The legal question: Should trade sanction be permitted as a means of putting pressure on countries considered to be severely violating core labour standards?

§ The analytical question: If a country has poor labour standards, does it mean unfair advantage for the country’s exports?

§ The institutional question: Is WTO the right forum to discuss labour issues?

These are extremely important question in the new changed multilateral trading system. A fair amount of literature exists which addresses these questions. The proposed study intends to focus this debate in the Indian context. To identify the characteristics of Indian labour market the study will give particular attention to the following issues:

§ Separate analysis of wage and employment determination in the organized and unorganized sector.

§ The role of labour laws and institutions in wage and employment determination.

§ The role of trade in wage and employment determination.

The idea is to examine if imposing stricter norms through labour legislation have an impact on wages and employment. This will require examining both the micro conditions (labour market conditions) and the macro context. The study will largely depend on secondary sources and will evolve from an empirical investigation of those issues on which, there is gap in the existing literature.

Framework of Analysis:

The concern about the poor working conditions should lead us to think in terms of active labour market policies. However, the need for active labour market policies do not imply that the link between trade and labour standards as advocated by developed countries are automatically accepted. Active labour market policies should serve the twin objectives of stimulating growth, demand for labour in general and help developing countries go beyond specialization in primary commodities. The main question then is where does the proposed link fall in this framework?

To examine the link between trade and labour standards we need to examine how the liberalized trade regime has impacted the labour market in last ten years or so. Therefore, the notion of trade used in the proposed study also becomes extremely relevant. In the context of the proposed study, it means trade based on comparative advantage, i.e. trade between structurally different countries (the top ten countries that account for 70 percent of India's exports are developed countries). This is essential to exclude those trade flow which may arise for other reasons such as, trade which arise because of consumer tastes for variety of inter country trade based on transnational corporations attempt to reap benefits of increasing returns of scale.

VOLUNTARY SELF-REGULATION vs. MANDATORY LEGISLATIVE SCHEMES FOR IMPLEMENTING LABOUR STANDARDS.

Voluntary codes are also called codes of conduct, codes of practice, voluntary initiatives, guidelines or non-regulatory agreements are non-legislatively required commitments voluntarily made by companies, associations and other organizations to influence or control behaviour, for the stated benefit of both themselves and their communities. Can voluntary codes address the needs of consumers, workers, and citizens while helping companies to be more competitive? Can they be a supplement to and in some cases a substitute for regulations? If so then voluntary codes can be inexpensive, effective and flexible market instruments. However, voluntary codes on their own may be insufficient when the consequences of non-compliance are serious (for example, when there is a risk of harm to health, safety or the environment).

Voluntary codes are currently in use for a range of activities, including environmental protection, health and safety, labour standards, human rights, advertising and public standards of decency. Voluntary codes are directed specifically at consumers to make them concern about quality, price and choice.

It is important for those developing a new code to carefully consider the market, legal, and strategic implications at the design stage, so that it will work in the interests of business, consumers, government, and other parties concerned. Poorly designed and implemented codes may lead to a loss of credibility for participating organizations, and can affect market and public image.

(Comments and Contributions are invited)

II. News Roundup

EU VOICES SUPPORT FOR EXCLUSION OF NON-TRADE ISSUES FROM WTO AGENDA.

European Commissioner for external relations, Chris Patten, who was in India recently on an official visit, has agreed with India that core labour standards and environmental issues should be kept outside the ambit of the WTO agenda. He accepted India's concern about environmental issues being used as a means of protectionism by developed countries. “There is no question of labour standards being made a part of trade and is an issue to be dealt with by multilateral organizations other than WTO”, he stated.

In a related news, UK has also supported India's stand on the issue of labour standards. In a meeting held on 8^thJanuary 2001, between the British Secretary of State for Trade and Industry Stephen Byers and Indian Commerce and Industry minister Murasoli Maran, Byers said his government agreed with India that core labour standards should not be a part of the WTO.

LINKING TRADE WITH SOCIAL ISSUES – US PRESIDENT NOW OPPOSES BUT FEW US CORPORATIONS SUPPORT.

The new US president George W. Bush has categorically said that he is against the inclusion of labour and environmental standards in trade agreements. The new USTR, Robert Zoellick has also said that it is important to try and improve environmental and working conditions, but it should not be done in a protectionist fashion. But some US business corporations, which have traditionally opposed the linkages of trade with social issues, are now slowly changing their stance. In the previous government the situation was opposite. The Clinton administration was in favour of linking trade with social issues but business groups were opposed to it.

Recently, some of the big US corporations – including Caterpillar and Boeing have changed their long existing opposition to social concerns relative to trade and have begun exploring the option of providing support for labour and environment in the context of new round of trade negotiations.

In a letter to then US trade representative Charlene Barshefsky, Caterpillar Chief Executive Glen Barton stated that environment and labour standards “should be discussed as part of future multilateral talks.”

On the other hand in a related development some US business groups have expressed their opposition to the inclusion of labour and environmental provisions in the US-Singapore Free Trade Agreements. They fear that if modeled on the US-Jordan FTA, these provisions, though not formally binding would allow the imposition of sanctions after a consultation and arbitration procedure.

ILO WORST FORMS OF CHILD LABOUR CONVENTION COMES INTO FORCE.

The ILO Convention on the Elimination of the worst forms of child labour came into force from November 19 2000, with nearly 25 percent of the organization’s 175 members participating as formal signatories.

Now, that the convention is in force, its signatories must take immediate and effective action to prohibit and eliminate slavery, debt bondage, prostitution, pornography and other forms of abusive child labour, and ILO members who have not yet ratified the convention must gear their policies toward the effective abolition of child labour.

All members of the ILO are also legally bound to report annually to the organization on their efforts to end both the worst forms of child labour in general (as defined under Convention 138 on Minimum Age). Forty-nine countries have ratified Convention 182 since it was adopted in June 1999.

EDUCATION – A FUNDAMENTAL RIGHT

India is witnessing its largest ever social mobilization through a four leg “Shiksha Yatra” in favour of education as a fundamental human right. The two-month long march will cover a distance of 12,000 kms, moving through 20 states and hundreds of villages and towns, and directly reaching out to over a million people.

India, the largest democracy in the world, empowered with nuclear technology and a fast growing economy, has the dubious distinction of having a record 120 million children out of school and 320 million adults who are unable to read, of which 62 percent are women. Today most of the schools do not have proper buildings, 40 percent of schools do not have blackboards and in one-third of schools there is only one teacher, who is not properly supported or supervised.

A study conducted by CUTS shows that it will require anywhere between twelve to eighteen billion US dollars per annum to provide this facility. However, India does not have resources of this magnitude. In fact its total budget on education in 1998 was only US$10.246bn.

ILO URGES SANCTIONS OVER BURMESE FORCED LABOUR.

The International Labour Organization voted overwhelmingly to call for sanctions by governments, companies and international agencies against its use of forced labour. The ILO will urge its 174 members, including trade unions and employer representatives, and other international bodies to “review their relations” with Burma and “take appropriate measures” to ensure they are not abetting forced labour.

While important symbolically, the ILO’s move may have little economic effect, as many countries outside the region have already withdrawn from doing business with Burma. Nevertheless, the unprecedented decision – taken by the ILO, which has no sanction powers of its own – is an embarrassing public condemnation of Burma’s human rights record that the military junta has tried desperately to avoid. According to the Brussels-based International Confederation of Free Trade Unions, more than a million Burmese are forced to work as army porters or on construction sites for roads, railways, military installations and tourist infrastructure.

FEAR OF LOOSING JOBS BROUGHT NICARAGUAN WORKERS ON ROAD

Workers at a Nicaraguan factory branded a sweatshop in a US court case have asked for the suit to be dropped, saying protests against conditions will do them more harm than good. More than 1000 employees of the Chentex jeans plant, which is being sued over labour violations by US congressmen and activists in a landmark case, marched on the US embassy in Managua. They claim, the bad publicity received by US department stores buying from Chentex could lead them to drop its products, driving it out of business and them out of jobs.

The manager of the factory, said it had already lost more than a third of its orders since the case started in December and might have to close down a production line and dismiss 100 staff. Another plant, Jem III, closed in December with the loss of several hundred jobs. “This US boycott is a threat to our livelihood,” said Antonio Cordoba, a seamstress. “I do not live like a queen but my family eats. It is the only job I will get that pays a decent rate.”

“They were playing political games and not letting people work,” said Victoria Flores, a single mother. She said skilled workers could take home up to 2000 cordobas (US $150) a month, above the national minimum wage of 600 cordobas.

The government of Nicaragua has also launched a bitter attack on US congressmen, unions and activists. The foreign minister, Mr. Aguirre-Sacasa (a former World Bank economist), said such action would be a mistake, dealing a big blow to development. Industrialization and generation of jobs are the best way to reduce poverty in the long term. Nicaragua is the poorest country in Latin America with 50 percent unemployment and GDP of only $500mn.

NON-TARIFF BARRIERS THREATENING LEATHER COMPANIES

Non-tariff barriers in the form of ‘technical specifications’ on product quality are fast emerging as a new threat to the $2 billion Indian leather industry. Unrealistic and at times, unscientific specifications are being imposed by the increasingly quality conscious markets of the developed countries.

Mr. A. Sahasranaman, programme coordinator, regional programme for pollution control in the tanning industry in South East Asia, UNIDO said this while addressing the workshop on ‘WTO and the Indian leather industry’, organized by India’s Council of Leather Exports, on 15^th January, 2001. He also stressed on the need for effectively using the provisions of the disputes settlement cell under WTO to counter such threats.

Regarding environmental standards in Indian leather industry, he said that over the past seven years 70 percent of the problems have been solved. There are 197 effluent treatment plants in the country now. However, most of the existing problems are related to Calcutta-based tanneries. Once the proposed new leather complex comes up in Calcutta we expect to see 95 percent of the problems solved.

III. WTO IS NOT THE RIGHT FORUM TO DISCUSS LABOUR STANDARDS.

On 16^th December, 2000 CUTS Centre for International Trade, Economics & Environment (CUTS-CITEE), organized a half-a-day panel discussion on the subject: “The Social Clause and linkage at the WTO: What is at Stake?” at New Delhi, India. It was third in the series of the quarterly CUTS-CITEE’s New Delhi Working Group Meeting organized in 2000 to discuss current issues pertaining to international trade and economic policy.

Prof. Jagdish Bhagwati, Arthur Lehman Professor of Economics and Professor of Political Science, Columbia University, New York, USA, led the discussion. Other discussants were Mr. Vinod Vaish, Secretary, Ministry of Labour, Government of India, and Mr. Muchkund Dubey, former Foreign Secretary of India.

Prof. Bhagwati started off his speech by elaborating the developments, which took place before and after the Seattle ministerial meeting of the WTO. He wondered whether the debate on social clause and linkage fit into the very organizing principle of international trade. The basic objective of GATT/WTO was to protect the interest of member countries’ in the global trading system. If we put labour standards, it will wreck the WTO system. These are complex issues, which WTO cannot handle. It has to be handled by expert bodies such as ILO. Even among the developed countries there is no consensus on this issue. For example, UK is not very sympathetic to have social clause in the WTO. On the other hand, developing countries oppose this linkage.

The GOI labour secretary, Mr. Vinod Vaish also supported the views of Prof. Bhagwati. He further said that the developed countries’ concerns for labour standards are not for altruistic reasons but to further their own commercial interests. The capitalists have dominant position with in the ILO. The developed countries have certain plan at the ILO after the failure at the WTO. The whole process of selection of workers representatives to the ILO is a manifestation of this plan. The ILO pattern is not based on consensus. The voting pattern at the ILO does not reflect the concerns of the developing countries.

Mr. Muchkund Dubey stressed the need for separate consideration of economic development and human rights issues. He said that only 4.5 percent of the total work force are employed in export productions in developing countries and the remaining 95.5 percent work in domestic and informal sectors. Therefore, a miniscule portion of the problem is touched upon by the Social Clause debate.

The discussions ended with clarification by panelists. In context of India, Prof. Bhagwati said that Government of India has to learn a lot on international negotiations. On the issue of linkages, Government of India, NGOs and labour unions should work together. Many a times the government of India spokesperson is found to be ill equipped to deal with some of the issues at the WTO.

There was a general consensus in the meeting that WTO is not the right forum to deal with labour standards issue by inserting a social clause. Moreover, overloading the WTO with non-trade issues will do more harms than good to the rule based multilateral trading system.

IV. Viewpoint

“REWARD COUNTRIES FOR PROTECTION OF LABOUR AND THE ENVIRONMENT RATHER THAN REWARDING THEM FOR THE ABUSE OF BOTH”: SUSAN GEORGE

The venue of the upcoming meeting of the WTO at Persian Gulf State of Qatar is secondary to the overall purpose of the meeting. Naturally, we have to uphold human rights, but a large number of WTO members have terrible records in this regard. They could have held their meeting in Rangoon as Burma is a member in good standing of the WTO and no one has ever challenged Burmese products on grounds of slave labour. China will soon be a member of the WTO and we doubt they will stamp their packing cases “made in prison” although there are millions labouring in Chinese camps and prisons making goods for free.

We further oppose a new trading round which the Ministerial, wherever it is held, will try to launch, and we oppose the WTO in its present form. Therefore, we think that the meeting in Qatar, and the months preceding it, should provide an excellent opportunity to explain what the WTO is. Under this trading regime, a product is a product – don’t ask how it was made or harvested, by whom or under what conditions because you have no right to invoke “PPMs” or Process and Production Methods when it comes to choosing between “like” products.

Abuse of human rights is actually built into the WTO, particularly because countries, which repress their work force are rewarded. They can sell more cheaply than those, which respect human rights. The real problem is to put in place a system, which rewards countries for protection of labour and the environment rather than rewarding them for the abuse of both. Let us also show that they are obliged to hold their meeting in a repressive country because if they didn’t, protest would once more overwhelm it. The choice of venue shows their weakness – let’s capitalize on that and show that they are scared stiff of democracy.

V. Announcement

Panel Discussion: “Implementation Issues versus Expansion of the WTO”

At New Delhi on Saturday 24^th March 2001.

CUTS Centre for International Trade, Economics & Environment would be organizing a half a day discussion in New Delhi, on 24^th March 2001. This is the fourth in the series of quarterly New Delhi Working Group Meetings being organized by CUTS-CITEE to discuss current issues of interest for India in the area of international trade and economics.

The keynote speakers in the event are Mr. Nripendra Misra, Special Secretary, Ministry of Commerce, Govt. of India and Mr. Joe Cunnane, First Counsellor (Econ. & Com.), Delegation of European Commission in India.

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CONTACT US

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