Key Points
- The trade and labor standards debate is a longstanding and important
issue in both the GATT/WTO and the ILO.
- The United States has advocated the establishment of a working group
in the WTO and the universality of core labor standards.
- Many developed countries support the U.S. position, while most developing
countries oppose it.
Throughout the 1990s, both International Labor Organization (ILO) decisionmaking
bodies and World Trade Organization (WTO) agenda-setting meetings extensively
debated whether and how trade policy should address issues of labor standards.
In the WTO, labor standards were debated in ministerial conferences in
Punta del Este in 1986 and in Marrakesh in 1994. The debate became especially
heated in the last two ministerial meetings in Singapore and Seattle in
1996 and 1999 respectively. Since 1994 a working party in the ILO Governing
Body on the Social Dimensions of the Liberalization of International Trade
has debated how the ILO, in an international economy increasingly subject
to market forces that frequently denigrate labor rights, should protect
and promote core labor standards—i.e. the rights to freedom of association
and collective bargaining, the prevention of child and forced labor, and
the outlawing of discrimination.
The debate has sharply divided WTO member governments between developed
and developing countries. The latter claim that any policy or institutional
linkages between trade and labor standards would be a slippery slope to
protectionism. The U.S. has been the most vocal developed country to argue
that linkages exist and to propose that they need to be recognized and
dealt with in the WTO.
Advocates for consideration of trade and labor linkages in the WTO argue
that at least two GATT articles justify trade restrictions based on violations
of fundamental labor rights:
- Article XX on general exceptions permitting trade restrictions is
frequently cited, as it allows member governments to restrict trade
to protect “public morals” and “human life and health.”
(Amending Article XX to include core labor standards would provide for
a more specific exception.)
- Article XXIII on dumping is cited when contending that suppressed
worker rights in export industries constitute “social” dumping.
The ILO governing body has also become a venue for debate on trade and
labor standards. Although ILO worker members agreed in 1994 to suspend
discussion of “sanctions,” their explicit objective in the working
party has been to strengthen ILO capacities to promote core labor standards
and thereby raise their importance as a crucial issue in trade liberalization
policymaking.
The ILO Declaration on Fundamental Principles and Rights at Work and
its follow-up mechanism are important first steps. The declaration carefully
balances the obligations of member states “to respect, to promote
and to realize…the principles concerning the fundamental rights which
are the subject of the core labor standards conventions with the obligations
of the ILO to assist its members to attain these rights by making full
use of its constitutional, operational and budgetary resources.”
The follow-up mechanism represents an important advance in ILO capability
to respond to social problems resulting from global economic liberalization.
“The purpose is to provide an opportunity to review each year …
the efforts made in accordance with the declaration by member states which
have not yet ratified the core labor standards conventions.” The
U.S. has strongly supported the declaration and has contributed $20,000,000
for its follow-up mechanisms to assist ILO member governments to ratify
the key core labor standards conventions.
The U.S. has not explicitly proposed interpretations or amendments of
Articles XX or XXIII. Instead, since 1987 it has consistently proposed
the establishment of a working party to examine how “internationally
recognized labor standards” relate to international trade and to
the objectives of the General Agreement on Tariffs and Trade (GATT).The
U.S. position has evolved over the years to enumerate ILO core labor standards
as key benchmarks for worker rights. At the Singapore ministerial conference
in 1996, the U.S. urged WTO-ILO cooperation to find ways the two organizations
could be mutually supportive. The proposal also specified the need to
ensure the open and nondiscriminatory nature of the trading system.
In 1999, the U.S. proposal to the WTO ministerial meeting in Seattle
recommended specific issues for consideration by a working party, including
the relationship between trade, core labor standards, and social protection;
positive trade incentives; trade and forced labor; and trade-induced derogation
from national labor standards—including export processing zones.
The EU proposal for ministers in Seattle was for a “Standing Working
Forum on Trade, Globalization and Labor Issues,” representing a weak
compromise between those wanting a working party and those who considered
WTO consideration of trade and labor linkages too political for the ministerial
agenda.
Problems with Current U.S. Policy
Key Problems
- U.S. working party proposals have sustained widespread rejection by
developing countries citing legal arguments and allegations of protectionist
motivations on the part of developed countries.
- While the U.S. proposes a working group, it inadequately implements
market access agreements important to developing countries and offers
insufficient reciprocal obligations.
- The U.S. position is a precarious balance between the suggestion of
a working group to examine trade and labor linkages and demands from
U.S. unions to support a sanctions-based social clause.
Developed country support for the U.S. position on a working party in
the WTO has varied. Belgium, France, and Norway have consistently proposed
similar WTO agendas. Germany under the Christian Democrats has been unhelpful,
and the United Kingdom was not enthusiastic about any EU proposal at the
Seattle ministerial conference regarding WTO involvement in labor standards.
Developing country opposition to U.S. proposals is more unified and is
reinforced by strong legal arguments to the effect that the WTO does not
have the competence to deal with labor standards. Developing countries
contend that:
- The WTO is a commercial contract based on rules and disciplines governing
commercial activity and free and fair trade; it is not based on judgments
about other aspects of member states’ domestic policies, including
worker rights and other nontrade issues. Its rules aim to discipline
the use of trade measures and reduce barriers to trade. Member states
are free to conduct their domestic policies in whatever way they see
fit.
- To introduce judgments about member countries’ domestic policy
choices into the WTO would fundamentally change the legal nature of
the agreements. In this regard, Article XX refers to the protection
of conditions in the importing country. Introducing labor standards
would undermine existing rights, most notably negotiated rights to market
access, without introducing reciprocal obligations.
Developing countries have also thus far succeeded in staunching the establishment
of a working group on labor standards by claiming that it is motivated
by protectionist demands in the United States. Developing countries, especially
the least developed, who see their low labor costs as essential to their
export competitiveness, give considerable credibility to this charge.
Beyond their legal arguments, they contend that U.S. and EU use of antidumping
measures—permitted in the WTO when intended to prevent the sale of
imports at prices lower than the costs of production—are abused and
become essentially protectionist measures. These charges were aggravated
by President Clinton’s statement to demonstrators in Seattle that
ultimately sanctions could be used, in dire circumstances, to enforce
core labor standards.
Both the WTO Singapore declaration and the ILO Declaration on Fundamental
Principles and Rights at Work clearly reflect these apprehensions of protectionist
motivations. In the former, governments “…reject the use of
labor standards for protectionist purposes, and agree that the comparative
advantage of countries, particularly low-wage developing countries, must
in no way be put into question.” The latter “[S]tresses that
labor standards should not be used for protectionist trade purposes ….”
Persuading developing country governments that U.S. and other like-minded
governments’ motivations are not protectionist is a major challenge.
U.S. procrastination in implementing the Uruguay Round Clothing and Textiles
Agreement (CTA) only reinforces developing country resistance. The agreement
is admittedly “end loaded,” allowing the U.S. to postpone liberalizing
its most sensitive industries, often the most value-added and of most
interest to developing countries, until the final years of the 10-year
phase-in period. However, the U.S. has also tried to invoke temporary
safeguards in those industries that it is scheduled to liberalize sooner.
This procrastination in implementing a vital market access commitment
has riled many developing countries and only deepened their apprehension
of protectionism.
President Clinton’s invoking of sanctions in his meeting with labor
unions in Seattle was especially provocative because of the opposition
on the part of U.S. labor to any proposal in the ministerial to moderate
the WTO Antidumping Agreement—an important demand by developing countries.
U.S. steelworkers were at the heart of this opposition, given the surge
in U.S. steel imports over the past two years as a result of the economic
downturn in Asia. While developing countries view abuse of antidumping
as protectionist, U.S. unions see antidumping as a legitimate means to
protect jobs, so long as U.S. policy in the WTO is not effective in linking
trade liberalization with improving labor standards. Thus U.S. policymakers
are caught between resistance within the WTO toward making trade liberalization
and improving core labor standards mutually supportive versus resistance
in the U.S. to any additional trade liberalization without greater recognition
of worker rights by WTO member states.
Toward a New Foreign Policy
Key Recommendations
- The U.S. needs to relate labor standards to increasing market access
for developing countries.
- The U.S. should support even greater collaboration between the ILO
and WTO, drawing on the commitment that ILO members have made to respect
core labor standards.
- Article XX of GATT should either be reviewed in order to consider
broader interpretations or amended to incorporate evolving universal
norms regarding labor standards.
The U.S. proposal to the ministerial conference in Seattle added some
refinement to its predecessors. Earlier proposals had focused on the fact
that linkages exist and that a working party should address those labor
rights now referred to as core. The latest proposal included specific
issues that could be considered by the working party: e.g., forced or
exploitative child labor and export processing zones. More interestingly,
the proposal called for consideration of “positive trade policy incentives
and core labor standards.”
In the hard bargaining that characterizes WTO negotiations, it is difficult
to recommend amendments to agreements that are not undertaken within the
context of official negotiations. If the U.S. wants to expand its right
to examine the relationship between trade and labor standards in developing
countries, it should expect to offer quid pro quos for its proposals and
to take on reciprocal obligations.
U.S. policy should recognize that market access is a major issue for
developing countries, especially in textiles, a crucial industry in the
context of employment and development. The U.S. could accelerate its implementation
of the CTA, at least as an implicit quid pro quo, in return for developing
country support for a working party. Since the U.S. is already committed
to liberalization in the CTA, however, this concession would not represent
a fundamental balancing of rights and obligations.
An even more attractive offer would be U.S. willingness to consider a
“multilateral agreement for movement of labor,” perhaps by amending
the existing provision in the General Agreement on Trade in Services for
movement of “natural persons” (noncitizens). Such an agreement
would have to be compatible with ILO and UN conventions on migration and
migrant worker rights.
A more suitable balance could be established between developed countries’
social concern for labor standards and developing countries’ social
and cultural concerns for traditional knowledge and farmers’ rights—e.g.
protection of indigenous communities’ rights to biological resources,
and recognition of farming communities’ rights to cultivated plant
varieties. This could be done within the WTO Trade-Related Intellectual
Property Agreement.
More balance could be established within a working group by including
in its mandate an examination of developed country legislation and trade
measures involving unilateral action based on labor standards. For example,
section 301 of the U.S. Omnibus Trade and Competitiveness Act allows the
U.S. president to impose or restore restrictions on imports of any countries
that practice a persistent pattern of denial of recognized international
worker rights. The prospects for protectionist action based on Section
301 could be evaluated in a working group. Antidumping action by the U.S.
could also be scrutinized, if such action involved labor standards.
The 1996 Singapore ministerial declaration on trade and labor renewed
member governments’ trade ministers’ “commitment to the
observance of internationally recognized core labor standards.” However,
it merely noted that the WTO and ILO secretariats “still continue
their existing collaboration.” U.S. policy should vigorously press
for ILO observer status in all relevant WTO councils and committees. In
this connection, the ILO could contribute to the WTO Trade Policy Review
Mechanism assessments of labor standards with a view toward the contribution
their improvement could make to increased productivity and export performance.
The U.S. should press for more than the Singapore commitment to “existing
collaboration.” Stronger and more cooperative relations would allow
for examination—perhaps in a working group—of how the declaration
could be used for improving core labor standards as opposed to undermining
comparative advantages. This would be in keeping with the declaration’s
commitment that “…labor standards should not be used for protectionist
purposes….” Furthermore, while the Singapore declaration commits
WTO member governments to “the observance of internationally recognized
core labor standards,” the ILO declaration provides objective standards
for labor rights. In this case, the U.S. should pose the question as to
whether WTO trade liberalization is compatible with member states’
ILO commitments—in much the same way as the WTO Committee on Trade
and Environment looks at the relationship between trade measures and multilateral
environmental agreements.
A hint of movement in increased collaboration could be seen in the March
meeting of the ILO Governing Body Working Party on the Social Dimensions
of the Liberalization of International Trade. An important step beyond
the Singapore declaration and toward formal involvement of the WTO with
the labor standards issue could be a joint WTO-ILO forum to address issues
of labor standards based on the WTO Trade Policy Review Mechanism and
the ILO Country Employment Policy Review.
Finally, the U.S. should urge a review of GATT Article XX. It is crucial
that the international trading system not be subjected to disguised protectionism
in order to support environmental and social concerns. However, since
GATT was written in 1947, there has been considerable progress in defining
and refining international labor (as well as environmental) norms and
institutions. U.S. policy should address the need to update Article XX
to allow for exemptions that take into account this progress in labor
and environmental norms. Such a move would also help the WTO judge whether
trade measures taken on grounds of violations of labor standards are indeed
currently and universally accepted as such, thus alleviating fears of
hidden agendas and narrow economic interests.
Brewster Grace is Representative for Trade and Development at the Quaker United Nations
Office in Geneva. The views are those of the author only and do not reflect
those of the Quaker United Nations Office.
