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Relevant links

Labour standards-background

In the discussions on the link between trade and labour, the issue of labour standards has come at the forefront. Examples are standards on child labour, on forced labour and on working conditions. The relation between trade and labour standards is ambiguous. There are both economic and humanitarian arguments which either support or contradict linking labour standards to trade.

High labour standards raise productivity and stimulate economic growth. In addition, they have a direct impact on the social environment, which is positive from a humanitarian perspective. Linking trade to labour standards can serve as a means to enforce labour standards, which otherwise might not be respected. Although this may be good from a humanitarian point of view, it can also be claimed that imposing labour standards through trade affects the competitiveness of developing countries negatively, because the introduction of labour standards will increase the production costs in these countries. This will decrease the degree of economic growth in the future. As such, in the long run poor countries are not able to develop, which is harmful from both an economic and a humanitarian perspective.

Most developed countries are generally in favour of the inclusion of labour standards. They point at the possibility that weak labour standards in developing countries might be exploited and create unfair competition for industrialised countries in a so-called ‘race to the bottom’ in which standards are neglected for the sake of international competitiveness. Contrarily, developing countries are against the inclusion of labour standards in trade arrangements. They emphasise the negative impacts which the inclusion will have on their production costs and on the possibilities of future development. They support their point of view with the argument that developed countries were not complying with labour standards in their initial stages of industrialisation themselves. These policies have in the end contributed to higher standards in developed countries. Some developing countries fear that the rich countries will abuse labour standards as a way to protect their markets.

Thus far, international labour standards have been agreed within the International Labour Organisation (ILO). There is no direct link between the ILO-standards and trade. The organisation has adopted the International Labour Code which includes a number of Conventions and Recommendations. The Conventions and Recommendations were largely agreed in the 1998 ILO Declaration on Fundamental Principles and Rights at Work. The fundamental or core labour rights include (1) the right to organise and engage in collective bargaining; (2) the right to equality at work; (3) the abolition of child labour; and (4) the abolition of forced labour.

The ILO Conventions are overshadowed with difficulties. Among others, there remain different ideas on the definition of core labour standards. Some claim that they should be broader, i.e. to accept more issues as core labour rights. Others believe that the core should be narrower. In addition, enforcement of the defined Conventions is difficult. The ILO has a limited capacity to do so. It lacks sufficient means to deal with signatories of its conventions in case these countries violate the conventions. Furthermore, the ILO cannot undertake any action for countries which have not signed up to the agreements.

The problems of enforcing labour standards within theILO have stimulated the idea to include labour standards into the trade agenda. Unlike the ILO, the WTO has powers to enforce agreements. Nevertheless, both the ILO and the WTO have emphasised that labour standards and trade issues are separate topics and that co-operation between the two organisations can only be limited. There have been attempts by developed countries to include the issue of labour standards into a WTO declaration. The most significant attempt was during the Seattle Ministerial, when the EU, the US and Canada undertook separate attempts to create working groups on labour within the WTO. However, since no declaration was concluded in Seattle, the topic remained out of the WTO’s domain. The tough stance of the developed countries in Seattle on labour has been an important factor in the failure of the Ministerial. Since Seattle, developing countries have resisted the inclusion of the issue. To make the Doha Ministerial succeed the developed countries were more careful in addressing the issue. As a result, labour standards have not been integrated into the Doha Declaration. Developing countries are in favour of keeping the issue within the ILO or of stimulating voluntary initiatives such as Codes of Conduct or Corporate Social Responsibility (CSR) by private organisations. Meanwhile, the ILO has started technical assistance providing support to the development of workers’ and employers’ organisations in order to help enforcement of its conventions.

The EU and other developed countries have found other ways to link trade to labour standards. The EU has adopted a new Generalised Scheme of Preferences (GSP) which came into force in 2002. Under the GSP, developing countries are given preferential treatment in market access on a number of products in the EU. In this latest version of the GSP, developing countries which are compliant with the ILO Declaration on Fundamental Principles and Rights at Work are eligible for additional tariff reductions. The EU regards this “social clause” a special incentive for developing countries to promote labour standards. Critics claim that the EU might take advantage of the GSP scheme in order to upgrade labour standards in developing countries. Once labour standards are improved, the EU will have a higher chance in putting labour standards on the agenda of the WTO.

In the literature attention is paid to the arguments in the discussion on the relation between trade and labour standards. Although both pros and cons are discussed, there seems to be a tendency which supports the exclusion of labour issues in trade negotiations. Below you will find several documents related to the issue.

Publications

Pros and Cons of Linking Trade and Labor Standards, D.K. Brown, A.V. Deardorff and R.M. Stern, 2002, Research Seminar in International Economics, Discussion Paper No. 477, Michigan

The authors review the background of labour standards in trade issues followed by an overview of the arguments for and against the inclusion of labour standards in trade relations. They conclude that labour standards should not be integrated into the WTO. The authors believe that the exclusion of the issue in the Doha Declaration is the result of the political environment since the 9/11 attacks. They warn that in the future developed countries may attempt to put the issue on the WTO agenda again.

For the document click here. 

Doha Ministerial Briefing Notes on Trade and labour standards, WTO, 2001

This section of the WTO web-site sets out the organisation’s position on labour standards prior to the Doha Ministerial Meeting. It discusses how the issue of labour standards has been raised during several meetings since the establishment of the WTO in 1994. It gives an outline of the position of developed countries and of developing countries. The document underlines the WTO point of view that labour standards should mainly be dealt with within the ILO.

For the document click here.

International Trade and Core Labor Standards – A Survey of the Recent Literature, D.K. Brown, 2000, Discussion Paper 2000-05, Tufts University, Medford, United States

This paper gives an overview of literature concerning the issue of labour standards in international trade policies, including the background, establishment and enforcement of international labour standards. The paper does not offer conclusions but it gives an idea on the wide range of conclusions that can be drawn from analysing linkages between trade and labour standards.

For the document click here.

International Trade and Core Labour Standards, OECD, 2000, Policy Brief, Paris

This policy brief has been published as part of a number of studies on the relation between labour and trade. The brief focuses on the developments since the OECD published a study titled Trade, Employment and Labour Standards in 1996. The brief underlines the international consensus which has been achieved concerning the definition of core labour standards. Also, it emphasises that there is recognition for the fact that the inclusion of labour standards in trade arrangements might give rise to manipulation of labour standards for protectionists’ purposes. According to the brief there remains a gap between the recognition of labour standards and their application. Various, complementary promotional mechanisms are needed to solve the issue of core labour standards. Trade policy can only play a complementing role.

For the document click here.

The Global Labour Standards Controversy: Critical Issues for Developing Countries, A. Singh, A. Zamit, 2000, South Centre, Geneva

This document focuses on the position of developing countries in the discussion on the creation of an international mechanism to enforce labour standards. It discusses the complexities of the issue in developed and developing countries. The authors consider trade sanctions as non-optimal option to address low labour standards. Rather, they believe fast economic growth will be more beneficial. The document concludes with a section on policy implications for governments and trade unions in developed and developing countries, and in international institutions such as the ILO.

For the document click here.

Core Labor Standards and Competitiveness: Implications for Global Trade Policy, W. Martin, K.E. Maskus, 1999, World Bank, Washington D.C.

In this paper the authors analyse the ‘race-to-the-bottom’ argument, which suggests that a lack of core labour standards will cause industries in developing countries to decrease its labour standards in order to be competitive. The authors however regard labour standards as a way to increase productivity and thus competitiveness. In their eyes the ‘race-to-the-bottom’ argument is not valid. The authors argue that incorporating core labour standards into trade policy through sanctions is not advisable, because sanctions on countries with weak standards will increase the negative impact on employees in these countries. Therefore, the authors support direct remedies to the issue of improving labour standards rather than indirect measures through trade policy. They conclude that this issue should stay out of the WTO agenda.

For the document click here.

Relevant links 

ILO

This site contains information on the ILO and international labour standards.

World Bank Trade’s section on Labour standards

The web page on Labour Standards of the Bank’s Trade section offers a list of publications on labour standards and trade.

Global Trade Negotiations Home Page, Center for International Development (CID), Harvard University

This site of CID has a section on papers related to labour in trade negotiations. It offers a large number of links to documents available on-line.

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