JOINT REPORT ON MEETINGS BETWEEN THE INTERNATIONAL TRADE UNION MOVEMENT (ITUC/GLOBAL UNIONS) AND THE IMF AND WORLD BANK 14-16 January 2009, Washington

Global Unions (comprised of the International Trade Unions Confederation, Global

Public Disclosure Authorized Union Federations and TUAC), the World Bank Group, the International Monetary Fund held a series of leadership-level meetings in Washington, 14 – 16 January 2009. Bringing together leaders and staff of the World Bank, IFC, and IMF and 90 trade union delegates from 42 countries, the meetings addressed a number of subjects of mutual interest including policy coherence on decent work, climate change, and labour standards. The overarching theme of the high level meetings, however, was the economic crisis and its impact on workers. Both in discussions with IFI economists and with the leaders of the World Bank and IMF, trade union representatives emphasized the dire consequences of the crisis on employment and poverty. Though there were important debates about how best to create jobs, help the poorest people, and ensure economic recovery, both trade union and IFI representatives agreed on the severity of the crisis and the need for immediate action in terms of a global economic stimulus to confront it.

Public Disclosure Authorized This report was prepared jointly by the ITUC, IMF and World Bank.

1. World Bank, IMF, and the Global Financial Crisis

The first IMF speaker, Tam Bayoumi, Senior Adviser, considered the causes of the crisis, including lack of consumer protection, banks with inadequate leverage to support their off-balance sheet loans, financial globalization without adequate regulation, and limited attention to global monitoring. He stated that the IMF was calling for a global fiscal stimulus equal to 2% of GDP from all countries that had the fiscal capacity to expand, but noted that not all countries were in a position to do so. He also stated that the IMF was working with the Financial Stability Forum to develop an early warning exercise. The second IMF speaker, Jodi Scarlata, Senior Economist, elaborated on the issue of financial

Public Disclosure Authorized sector regulation. She noted a need for balance, saying that regulatory reform should not compromise efficiency and market innovation. The Fund had established a Financial Sector Assessment Programme (FSAP) to identify vulnerabilities in banking systems, including any weaknesses in countries’ implementation of codes.

Justin Lin, Senior Vice President and Chief Economist of the World Bank, emphasised the global reach of the current crisis, noting that while developing countries had not initially been affected because of their lack of exposure to financial markets, they were now being hurt by decreased exports, capital inflow, remittances, and commodity prices. He said that developing country growth would fall from 5.8% to 4.4% over 2008-2009 but that growth was likely to recover in 2010. Recognising that the poor would be most hurt by the crisis, he signalled a need for social protection and fiscal stimulus to support investments in infrastructure and human capital, but noted that low-income countries had

Public Disclosure Authorized little room for such spending. Regarding the WB’s role in alleviating the crisis, he said that IDA grants, IBRD loans and IFC funds would be mobilized to support the developing countries.

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The trade union (TU) representative, John Evans, TUAC General Secretary, highlighted the need for a coordinated approach to resolving the crisis and cautioned that even 2% of global GDP might be insufficient. He said that while the TU movement agreed with the IFIs on many of their statements about how to approach the crisis--especially the urgent need to take action and increase domestic spending--TUs were frustrated about how and where they could take part in the recovery process. He pointed out that recent IMF loans to countries in crisis including Pakistan, Hungary, and Latvia showed little departure from classic IMF country programmes, in that they included controversial economic policy conditions and showed little concern for distributive impact. Concluding that a new paradigm would emerge from the crisis, he urged the IFIs to discuss new structures with a broader number of actors.

In the subsequent discussion, TU representatives emphasised the need for the IFIs to recognise their responsibility for the crisis and to abandon completely their earlier calls for total flexibility in the market, which had led to an increase in precarious and informal work. TU representatives drew attention to the situation of the most vulnerable workers, and questioned whether the Millennium Development Goals had been forgotten in the midst of the financial crisis. All of the TU speakers called for workers and their unions to be involved in the regulation and supervision of the financial system. They urged the IFIs to work in partnership with the International Labour Organisation. One TU representative noted a change in the IMF’s view of the state, observing that the state was now seen as a resource rather than an obstacle.

In response, the Mr. Bayoumi conceded the IMF had underestimated the seriousness of the financial weaknesses that had caused the crisis and had failed to highlight the financial risks sufficiently to get governments to take action. Getting governments to work together, he said, would be challenging. He recognised the potential to change the international financial system, though he said it was difficult to get lenders to accept the need for prudence when times were good. Ms. Scarlata and Mr. Evans agreed that international coordination was a major challenge but the key to swift recovery from the crisis.

2. World Bank, IMF, and the Food and Energy Crisis

The WB speaker, lead economist Hassan Zaman, began by explaining the consequences of the rise in food prices, which had increased poverty by 3 to 5% worldwide. In some countries higher food prices have persisted and their impact is being accentuated by the financial crisis. This crisis is leading to a drop in remittances in developing countries as well as higher unemployment due to falling exports and commodity prices. Fiscal resources are being squeezed due to falling revenues and increasing demands on public services. However governments will need to improve the effectiveness and reach of safety nets by creating re-prioritizing expenditures, improving the targeting of existing programs, creating a “safety net czar” if appropriate within each country to oversee all programmes, and strengthening programmes which ensure nutritional supplementation.

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The IMF speaker, Stefania Fabrizio, Deputy Division Chief, warned that even though food prices had declined slightly in recent months, the factors that had contributed to the food crisis had not been resolved and prices would again rise when the economy recovers. She noted that food price increases had the strongest effects on low income countries, where declining remittances, reduced exports, and decreased foreign direct investment were already contributing to a slowdown. In many of those countries, social safety nets were weak and poorly targeted, often taking the form of general consumer subsidies, tax cuts, or high public sector wages. The IMF was prepared to help its clients confront the crisis by encouraging them to adopt vigilant monetary policies and exchange rate flexibility to help absorb shocks. The IMF’s Exogenous Shocks Facility and its Poverty Reduction and Growth Facility (PGRF) would make financial resources available to low income countries in need.

The TU speaker, Mody Guiro, President of ITUC-Africa, discussed the impacts of food and fuel price increases on the poor. High energy prices, he said, had already led to businesses closing in Africa, which had in turn increased unemployment. Turning his attention to Africa, he said that, unlike the rest of the world, rural Africa had not experienced growth. IFI structural adjustment policies that discouraged state spending on agriculture and rural infrastructure were to blame for the fact that rural Africa had been marginalized from economic development. While he welcomed the IFIs’ new attention to safety nets and their aid during the crisis, he stated that IFI help would not be sufficient: long-term investment in agriculture and rural infrastructure were needed. Countries needed to prioritise growing food and required autonomy to implement their own policies.

In the subsequent discussion, several trade unionists pointed out that neo-liberal policies, such as those promoted by the IFIs and through trade agreements, had undermined national sovereignty and forced governments to reduce social spending. They added that although the IFIs had expected to the private sector to make investments, it had failed to do so. In the energy sector, in particular, large companies had abandoned developing countries, leaving many without access to modern energy services. Other representatives made similar statements about the lack of investment—both public and private—in agriculture. A TU representative from Mexico said that a lack of support for small-scale agriculture in her country was one cause of northward migration. Kofi Asamoah of Ghana said one of the greatest challenges, was creating a safety net for workers in the informal economy, who comprise the majority of the workforce and are largely unorganized. A TU representative from Malaysia drew attention to the plight of unprotected workers and called for “global social safety nets,” noting that migrant workers in Malaysia recently forced to return to their home countries did not fit into any domestic social protection systems.

In his response to the comments, Mr. Zaman clarified the Bank’s role and response to high food prices. He agreed that research at the World Bank indicated that bio-fuels had contributed to the rise in food prices, but said that the bio-fuels produced from non-food crops were not as risky. The WB was encouraging OECD countries to drop tariffs on products from poor countries and discouraged speculation on commodities, but it had 4

limited influence on financial markets. In response to TU representatives who argued in favour of consumer subsidies, both the IMF and WB speakers said that “smart” subsidies that were well-targeted, time-bound and had a low fiscal cost were acceptable. The TU speaker concluded by stating that social protection systems must be designed in consultation with TUs and the ILO.

3. Labour Standards in IFI Operations

Fiona Murie of the Building and Woodworkers International union made the first presentation, recalling her secondment to the procurement department of the WB in 2004, which had led to the Bank’s incorporation of core labour standards (CLS) in its procurement documents. She pointed out that only two of the standards were mandatory for contractors, and that even when all four standards were mandatory the greatest challenge would be in achieving compliance. She emphasized the importance of involving labour ministries, contractors’ associations, engineers’ associations and TUs to ensure compliance with the standards. In a separate point, she asked whether the WB would articulate its position on asbestos, because it had sponsored a good practice note on banning asbestos use but had not yet implemented the note’s recommendations.

Molly McCoy of Global Unions said that the inclusion of CLS in the IFC safeguards was one of the most important accomplishments of dialogue between unions and the IFIs, particularly because it set a precedent for other parts of the WB and other multilateral development banks. She said that standardizing the complaints procedure and providing more information about the timeline for resolving complaints could improve implementation of the standards. She emphasized that the IFC should urge the third- party labour auditors to include consultation with TUs in their investigations, as many were unfamiliar with freedom of association, as was the case with a recent IFC loan to a Colombian airline.

Bernard Becq, Chief Procurement Policy Officer at the WB told meeting participants that the WB has included all four core labour standards CLSs in its standard bidding documents for civil works with a new wording harmonized with that of IFC. He announced that the inclusion of the 4 CLSs in the harmonized master procurement documents for both large and small civil works contracts used by most multilateral development banks (MDBs) was on the agenda of the next meeting of the Heads of Procurement of the MDBs to be hosted in March by the Caribbean Development Bank. He added that streamlining the use of CLS requirements in Banks-financed projects would also facilitate the inclusion of labour standards in country procurement systems, and that the WB was engaging governments in dialogue to move ahead with changes in their own legislation in this regard.

Motoko Aizawa of the IFC provided an overview of the IFC’s work to integrate core labour standards into PS2 and to encourage other lenders, including MDBs and Equator Banks, to do the same. The IFC was in the process of developing tools to implement PS2, including a new version its Labour Toolkit that includes guidance on due diligence when investing in financial institutions. She announced the launch of a dedicated website 5

available for unions to file concerns about violations of PS2, which will lead to time- bound requirements for IFC response. The IFC was preparing to report to its board of directors on PS2 implementation, as it had been three years since the standards were launched. The Labour Advisory Group would be convened to provide input on the report, she stated.

In the ensuing discussion, TU representatives emphasized the importance of effective monitoring of the labour standards, including through training and cooperation with contractors. Noriyuki Suzuki, general secretary of the ITUC Asia Pacific regional organization, commented on the uneven progress on CLS across multilateral development banks, noting that the Asian Development Bank still calls CLS “benchmarks.” Other TU speakers highlighted the role of rapid response to violations of the standards and the importance of enforcing them. The general secretary of the Building and Woodworkers International, Anita Normark, noted the significant progress on CLS, and reiterated TUs’ willingness to push for better follow up. The ITUC President, Sharan Burrow, discussed the need for convergence between MDBs, the OECD, and the ILO on CLS, citing the Better Work programme as a noteworthy example, and called for working group on labour standards across organizations.

Responding to the comments, Mr. Becq acknowledged that a fundamental issue for the Bank was to ensure compliance with CLSs during the execution of contracts under Bank- financed projects. One avenue is the complaints mechanism which allows the Bank to intervene with project executing agencies, and also its complaints database that allows some degree of broad monitoring. In response to a TU representative’s question about making ratification of ILO convention 94 (labour clauses in public procurement) a mandatory requirement from the WB, Mr. Becq answered that it was highly unlikely given that such would require the approval of the Bank Board of Executive Directors to amend Bank policy for which consensus would be difficult to obtain. Mr. Becq encouraged TUs to push for inclusion of CLS requirements with various constituencies in the Bank, in particular operational units which can pilot new initiatives in this regard rather than just focus on the procurement avenue. Ms. Aizawa of the IFC concluded that the labour standards were a win-win situation; they helped attain social goals and helped banks protect their portfolios.

4. World Bank Role on Climate Change and Green Jobs Agenda

World Bank representative Warren Evans, the first speaker in the discussion on green jobs, began by stating that the WB could not separate its climate change work from its poverty reduction mandate, nor could the climate crisis be considered without addressing the food and financial crises. Noting that the financial crisis had put climate change initiatives and clean technology investments at risk, he explained the WB’s role in helping middle income countries attain clean technology and modern energy sources through its investment fund for clean technology and its strategic climate fund. He said that while the WB was not focusing on job creation per se, it aimed to create conditions for more green jobs.

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In her presentation, Shilpa Patel of the IFC spoke of the importance of a “green stimulus” and the importance of decent jobs, noting that some environmentally friendly industries like solar panel manufacturing could have hazardous working conditions while others weren’t particularly labour-intensive. She said that “green policies” could result in reduced employment in certain sectors, but if savings and efficiency were improved in the long run as a result of the changes there could be new job creation. In the meantime, green building and retrofits were a win-win scenario, especially if financing for such projects was delivered through the local banking sector, as the IFC aimed to do.

ITUC representative James Howard affirmed that TUs supported a reduction of greenhouse gases, but cautioned about the costs of reductions for workers. Citing the example of Poland, where concerns about job loss in the mining sector resulted in opposition to EU environmental protection policies, he warned that TUs needed to be consulted early in the process to avoid a situation like the one in the EU. Compensation, training, and new investment was crucial to ensuring workers’ support of climate change measures that could adversely affect their jobs. Addressing the IFIs, he called for the WB to advocate for green jobs at the UN level and said that both the WB and IFC should encourage more investment in green jobs.

In the subsequent discussion, Peter Waldorff of Public Services International emphasized the importance of public sector investment in creating green jobs, as well as the role of unions in creating transparency. He also inquired about the WB’s investments in fossil fuels projects relative to its investments in clean technology. TU representatives from Sierra Leone and India highlighted the impact of climate change on workers in developing countries. Gladys Branche of Sierra Leone said the public received very little information about climate change and its impact, and that the poorest countries lacked the technology and capacity to properly confront the problem.

In his response, Mr. Evans said the WB was an information resource for all parties involved in climate change negotiations, though the Bank itself played a limited role. Fossil fuels projects, including restructuring projects, accounted for about 20% of the Bank’s energy portfolio, whereas climate change projects accounted for 40%, he said of the Bank’s own activities. Ms. Patel acknowledged that more awareness raising was needed on climate change issues. In his final comments, Mr. Howard questioned whether the Bank was doing a disservice to its client countries like China by not raising awareness about the risks of their investments in fossil fuels.

5. Preliminary Discussion on World Band Pension Reform Policies

Global Unions representative Molly McCoy introduced the session by explaining that the World Bank and Global Unions had agreed to hold an in-depth technical meeting on pension reform in 2009 that would serve as a follow-up to a 2003 meeting held on the same subject. The TU speaker, Ana Knezevic of Croatia, then described the case of Croatia, where the pension system had suffered serious problems since a WB-sponsored reform that required workers to shift their savings to a second pillar. Particularly after the financial crisis, when there had been significant reductions in the value of the system, 7

pensions had fallen to among the lowest levels in Europe. According to recent WB research, 70% of pensioners were below the poverty line in Croatia. It was thus timely to discuss the result of the Bank’s pension reforms, she said.

Robert Holzmann of the WB’s social protection department then spoke of the Bank’s conceptual framework for pension reforms, noting that an enabling environment for such reforms was required and reforms may not succeed everywhere. The Bank took the existence of mandatory contributory schemes in most countries as a given, but recognized that in many countries not everyone was covered. It was necessary to provide some sort of social assistance-type benefits to cover the vulnerable elderly in those countries. The unfolding financial and employment crisis is bound to have a major impact on pensions in all countries, he said, but the Bank was advising countries not to undertake crisis- induced policy reversals pending further analysis and under a long-term view.

In discussion, TU representatives raised the problem of devising successful approaches to pensions to help those with no state pension, particularly for the poorest people. Miriam Luz Triana of Colombia stated that unemployment resulting from the crisis was making it more difficult for workers to make pension contributions. Laxman Basnet of Nepal commented that there, too, the economic crisis was putting strain on the pension system because many migrants were returning home and needed to be integrated into the system somehow. Gocha Aleksandriya of Georgia said that unions had initially been consulted on pension reform in 2006, but the government ignored union input and instead created individual plans in which workers had to manage their own individual pension schemes. Pensions had now fallen to an extremely low level but the WB was failing to make recommendations for action. In Italy, said another TU representative, there was a clear differentiation between financial investments and public funds and the Bank needed to bear that experience in mind. David Boys of Public Services International stated his union’s opposition to privately administered schemes, which were subject to significant corruption and did not lead to equitable outcomes. Pensions needed to be considered as deferred wages and it was appropriate to define the benefits to be received as a result.

In his response, Mr. Holzmann agreed that it was essential to help the poorest elderly with some form of means-test old-age allowance, and it was important also to have pension schemes that allow labour mobility across professions, sectors and time. He said that the issues would be discussed in more technical detail at a future meeting.

6. Policy Coherence on Decent Work Issues

Stephen Pursey of the International Labour Organization began his presentation by insisting that the current economic crisis demanded greater policy coherence, given that as many as 50% of working people in the developing world could end up living on less than $2 per day. The goal of decent work for all was closely related to other development objectives including reducing poverty and achieving growth, and had been endorsed by the UN General Assembly. He noted that an example of positive collaboration on decent work was the IFC-ILO Better Work programme, but that the World Bank’s Doing Business report, with its “perverse results on the labour market” and “strange ratings” 8 continued to be a sore spot. Although the IFIs and ILO were sharing research and reports through the Policy Coherence Initiative, there was a need for more high-level, “policy- relevant” coordination. Returning to the topic of the crisis, Mr. Pursey said that policy coherence and interconnected rules for the governance of globalization were essential to recovery.

Next, ITUC general secretary Guy Ryder spoke on the accomplishment of making decent work an agreed objective before turning his attention to the Doing Business report, which he called the worst example of incoherence. Doing Business, he said, weakens the position of those fighting for basic liberties and was in direct opposition to the policies of the ILO. Mr. Ryder noted that while the Policy Coherence Initiative was a limited process due to cultural differences between institutions, the crisis magnified the immediate need for policy coherence between international institutions.

Noting that there was still incoherence within the WB on labour issues, Ana Revenga of the WB began her presentation by detailing the shift in the WB’s understanding of labour markets, noting that the Bank no longer considered the labour market to be the same as other markets because it was not perfectly competitive due to issues like discrimination and power imbalances. There was good work in the Bank on improving labour market indicators, she said, though many of the existing diagnostic tools were not well-suited to low income countries because of their large informal sectors. She asserted that the creation of quality jobs was a core strategy of poverty reduction.

Houria Sammari of the IFC then presented an overview of the IFC’s Better Work program, an example of demonstrated cooperation between the ILO and WB on achieving decent work. The Better Work programme presented companies with an opportunity to use good labour standards to make their business more sustainable. She explained that the programme used tools developed jointly between the WB and ILO to assess core labour standards in the garment sector, and eventually in other sectors as well.

In the discussion that followed, TU representatives from Georgia and Nepal cited examples of WB policies in their countries that were inconsistent with the goal of promoting decent work. Gocha Aleksandriya of Georgia criticized the Doing Business report’s bias in favour of deregulation, saying that his government was “obsessed” with deregulation and was calling for even further deregulation during the crisis. He called for the “Employing Workers Index” to be removed from the Doing Business report. The general secretary of the Trade Union Confederation of the Americas, Victor Baez, responded to a point that WB representative Robert Holzmann had made about workers opting to be in the informal sector, saying that in fact, workers did not choose informality but were forced into it by increasingly deregulated labour markets.

7. Meeting with World Bank President Robert Zoellick

World Bank president Robert Zoellick began his remarks by tracing the trajectory of the crisis from a financial crisis to an economic crisis to an eventual employment crisis, stating that it may well be the worst crisis in 50 years. The World Bank Group would 9

help vulnerable countries with IDA grants and credits, IBRD loans and increased IFC lending. The Bank expects to triple IBRD lending to nearly $100 billion over the next three years. The Bank’s assistance would focus on a few key areas: safety nets, infrastructure, and increasing jobs and supporting SMEs. He emphasized that the global crisis would require a global response. Increased donor resources would be needed to confront the crisis. Noting that the IFIs participated in the G20 meetings and other fora focused on the crisis, Mr. Zoellick welcomed a dialogue with the TU movement on the recovery process. He reiterated the WB’s commitment to core labour standards, stating that labour standards requirements like those in use at the IFC would soon be extended to the Bank’s procurement work. He disagreed with the notion that labour standards were unaffordable in a crisis. He then opened the floor for discussion.

In his response to Mr. Zoellick’s remarks, ITUC general secretary Guy Ryder said that working people felt let down because they had not seen a fair share of the benefits of globalization and economic growth. He questioned whether the WB’s resources would be adequate to confront the crisis, and expressed concern that the shortfall would compromise attainment of the Millennium Development Goals. Recalling the comments made by TU representatives earlier in the meetings, he said that unions agreed that the crisis called for a global policy response. He expressed concern, however, about how to get governments to work together. Commenting on the ongoing dialogue between the WB and the international trade union movement, Mr. Ryder suggested that Mr. Zoellick instruct country-level Bank staff increase consultations with TUs, as country level consultation was still inconsistent. He also complemented the Bank’s attention to core labour standards, particularly within the IFC, but raised concern about its reticence to remove the Employing Workers Index from its Doing Business publication. Doing Business did disserve to both working people and the WB, he said.

In their comments to Mr. Zoellick, TU representatives elaborated on several of the points put forth by Mr. Ryder, including calling for the Bank to change its Doing Business report because it undermines workers’ human rights. Representatives from several countries presented figures about worsening unemployment and its repercussions, especially for informal workers and rural agricultural workers. Fred van Leeuven of Education International warned of the dangers of falling short on MDG commitments, especially the goal on universal primary education, and said the Bank should hold the donor community to its commitments to development goals. He challenged the WB’s policy of promoting unqualified people in charge of classrooms as a response to teacher shortages, saying that quality education required quality teachers. Other TU representatives commented on the need for capacity building to enable better engagement between the WB and unions, and offered the assistance of TUs in making this possible.

Mr. Zoellick responded to each of the points raised by trade unionists in turn. Regarding the crisis, he said the Bank was encouraging fiscal expansion programmes where countries could afford them. He stressed the importance of rebuilding the banking system, as it would be difficult to repair the global system without it. For African countries facing crisis, the WB had put together a Global Food Crisis Response Program to reduce the negative impact of high and volatile food prices on the lives of the poor in a 10

timely way by financing for food, fertilisers, seeds, social protection measures, etc.. He agreed that the every effort should be made to achieve MDGs. On the Doing Business report, he stated that WB needed to include more information on countries’ application of the core labour standards, which were mentioned in the report. He said that the Employing Workers Index could be modified on areas such as the length of the workweek so that countries were not given incentives to go below a certain minimum floor. Regarding TU consultation, Mr. Zoellick stated that he supports enhanced Bank – trade union partnerships at the country level and encouraged unions to report any issues with country level interactions to him. He also said he was open to the idea of joint capacity building with unions.

8. Meeting with IMF/World Bank Executive Directors

Thirteen executive directors or their alternative from the World Bank and IMF attended a separate meeting with TU representatives. ITUC General Secretary Guy Ryder welcomed the executive directors to the meeting and provided them with a short summary of the meeting’s proceedings. He emphasised some of the international trade union movement’s major objectives in confronting the crisis, including ensuring a coordinated fiscal stimulus, re-regulation of markets, the possibility of a “new Bretton Woods,” and combating growing inequality. He also addressed some specific concerns of the trade union movement, such as the WB’s role in promoting and implementing core labour standards in its projects and its continued use of the controversial Employing Workers Index in its Doing Business report.

Following his remarks, several executive directors made statements, beginning with the IMF Executive Director from Italy, who commented that the IMF was “taking a hard look” at its previous policies and was pushing governments to adopt fiscal stimulus programmes. The IMF alternative executive director for China said that the IMF had not paid sufficient attention to the financial sector or to developments in advanced economies. He disagreed, however, that the IMF should consider labour standards because there were “no universally agreed labour standards”. The WB executive director for the United States highlighted the role of governments in the G20 process, and suggested TUs access the process through their own governments. He agreed that ensuring core labour standards in WB projects must remain a priority, and encouraged TUs to continue to monitor the Bank’s work in this area. The IMF executive director from Canada said he generally agreed with his colleagues on approaches to resolving the crisis but emphasised that solutions must recognise the diversity of country circumstances. Finally, a representative of the IMF executive director’s office for Anglophone Africa concluded by stating that a new growth model was necessary: the previous model, which encouraged producers to constantly cuts costs and whose aim was “money at all costs,” had led to the crisis.

9. Meeting with IMF Managing Director Dominique Strauss Kahn

IMF Managing Director Dominique Strauss Kahn began by emphasising the importance of TU – IMF dialogue, recalling the positive meeting in November 2008 between TU 11

representatives and the IMF around the G20 process. He focused on the economic crisis, expressing particular concern about its effects on the countries of central Europe. The IMF supported strong fiscal stimulus in response to the crisis, he said, though it wasn’t appropriate for some countries because of problems like debt sustainability. Mr. Strauss Kahn noted that in many emerging market countries, capital flows had dried up, ending any possibility for expansionary policies and forcing governments to decide “what to cut.” He said that IMF was including conditionality on social safety nets in its recent loans to countries in crisis, but that countries like Latvia had to fix fiscal problems like the large wage increases they had previously implemented. Speaking of the G20 process, he raised questions about the democratic legitimacy of the exclusive group and the possibility for involving civil society in the process. In the long term, he said, it was possible to draw lessons from the crisis on the need for financial supervision and the importance of shifting values away from the greed that had contributed to the crisis.

In his comments to Mr. Strauss Kahn, ITUC general secretary Guy Ryder asked about the IMF’s role in ensuring a coordinated fiscal stimulus. He inquired about the IMF’s participation in discussions and how TUs could get access to the process. He challenged the IMF on conditionality, noting that the conditions attached to many of the new loans to countries in crisis did not seem like a departure from the “old” IMF. Finally, he asked how serious the prospect for global governance reform was, and whether there was truly a possibility for a “new Bretton Woods.”

In their questions to Mr. Strauss-Kahn, TU representatives raised specific cases of countries in crisis: Iceland, Pakistan, Latvia, and Hungary. Their comments focused on the conditionality attached to recent IMF loans to those countries, including reducing public sector wages and cutting pensions benefits. Wanja Lundby Wedin, president of the ETUC emphasised the importance of social safety nets, especially unemployment insurance, in easing the consequences of the crisis. She also stressed the need for dialogue between the IMF and the TUs, and invited the IMF to take part in an upcoming conference of the European Trade Union Confederation on the crisis.

Responding to the TU comments, Mr. Strauss Kahn reiterated the importance of coordinated fiscal stimulus and emphasised that there should be no free-rider countries, especially in the EU. He said that the IMF’s role in multilateral consultations on the crisis was to provide information, but not to police the proceedings. Addressing the specific country cases, Mr. Strauss Kahn defended the IMFs programmes, explaining that in each case there were limited options for the country and that the programmes were designed in an emergency, leaving little time for consultation on alternate measures. There were costs to achieving stability, he said, and he recognised that the most vulnerable were the most affected by the crisis. He said the IMF accepted the anger directed at it and governments, and was open to discussing the impacts of programmes with TUs. Looking forward, a new global early warning system had to be put into place, and multilateralism would be key to a new Bretton Woods.

10. Follow-up on previous commitments

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John Garrison of the WB’s Civil Society Team reported on the surveys and case studies carried out by ITUC, IMF, and the WB to assess the breadth and quality of labour union – IFI relations at the country level. All three institutions carried out opinion surveys among their staff in 2007 to gage the knowledge level of each other, measure the intensity of interaction, and gather suggestions for improving relations. The IMF survey found that its staff valued the interaction with trade unions and that the proportion of country teams meeting with trade unions during country ‘missions’ increased from 63% in 2006 to 67% in 2007. The survey carried out the by WB found that while interaction of Bank staff with trade unions is widespread (89% of respondents declared having contact with trade unions during the past two years) and is increasing, these exchanges were hampered by lack of knowledge and arrogance on both sides. The ITUC, for its part, found that country-based staff has an equally high level of knowledge of Bank and Fund activities in their countries, but reported that it dialogue with the WB had a more positive impact (41%) than with the IMF (25%).

The ITUC, IMF, and WB collaborated on case studies carried out Bulgaria and Zambia, in which telephone interviews were carried out with country-based staff of all three institutions. All those interviewed agreed that the contact so far had allowed the unions, Fund and Bank to learn about each other’s policy analysis and positions. However in one country, unions expressed disappointment with the level of discussion and in both they felt their advice was not taken into consideration by the IFIs. A point on which all parties appeared to agree was that the level of discussion could improve if unions were to have greater access to information, economic training, and more regular contact.

Molly McCoy of Global Unions provided a short summary of the WB-TU focal points, which were created to provide a more structured exchange of information between various World Bank departments and trade union representatives. A number of the existing focal points were sector-based, covering such sectors as education, transportation, and health. Ms. McCoy noted that there was significant variation in the degree to which focal points functioned effectively: some, such as one created to address issues in the energy sector, were not operational, whereas others, such as those dealing with education and HIV/AIDS were in regular communication. She noted that the Global Unions Washington Office had recently participated in a meeting with the World Bank focal points to improve the functioning of the focal points. She also stated that a new focal point on gender had been established earlier in the week at the Global Unions-IFI technical meetings on gender.

Elizabeth Lule of the WB’s ACTAfrica department reported on joint work since the first technical meeting between ACTAfrica and the Global Unions AIDS programmes as well as ongoing work in the IFC to develop workplace HIV/AIDS programmes. She cited the Bank’s work with Education International on HIV-positive teachers and that between its collaboration with International Transport Workers Federation as examples of good practice, but noted that there had been more difficultly with cooperation in the health sector. Ms. Lule said the WB could play a brokering role between unions and country- level HIV/AIDS Commissions, and said that the Bank wanted to encourage unions to play a role in WB HIV/AIDS programmes. 13

Robert Holzmann of the WB reported on the secondment process initiated in the year 2000, comprising TU involvement in five WB departments. Though the outcomes of the secondments had generally been quite good, the WB was facing increasing difficulty in funding future secondments. The terms of reference were currently under discussion with donors on a new secondment on labour markets issues.

Jeremy Mark of the IMF emphasised recent discussions between TUs and the IMF on broad economic issues at the headquarters level and the improvements the in consulting TUs at the country level. He noted a change in attitudes at the IMF, leading to more openness towards consultations with unions, parliamentarians and NGOs.

In the subsequent discussion, TU representatives from Zambia and Senegal expressed interest in the WB’s HIV/AIDS work and voiced concerns about limits on TUs’ access to resources from the Global Fund, to which Ms. Lule responded that there were some difficulties working with the Global Fund, particularly with regard to countries where corruption had led to suspension of activities. A representative from Education International said that more could still be done with regard to HIV/AIDS programmes in the education sector.

Several trade unionists spoke on the importance of consultation. David Cockroft, general secretary of ITF, put forth a detailed proposal for joint capacity building to enable better communications between the WB and unions and more thorough discussions at the initial point in project design. Touria Larech of Morocco emphasized the need to distinguish TUs from NGOs. She said that dialogue was particularly important during the crisis, a matter on which Lucilene Binsfeld of CUT Brazil concurred. The general secretary of the ITUC-Asia Pacific expressed appreciation to the IMF for its interaction with ITUC- AP. He indicated that the regional organisation would be organising a dialogue with the ADB in May 2009. Bob Harris of Education International said the heads of institutions like the ILO and OECD were responding to the crisis, but the meeting with executive directors of the IFIs the previous day showed many government representatives still did not appear to understand the situation. James Howard of the ITUC raised the resurgence of conditionality as a theme for discussions and the need for TU-IMF interaction on G20 working groups on the crisis.

In his response to the comments, Mr. Garrison said the IMF and Bank understood that civil society organisations considered their positions were not taken into account sufficiently, but emphasize that governments would have to remain the WB’s first interlocutors. Responding to Mr. Holzmann’s earlier comments, Ms. McCoy said that unions looked forward to having the next secondment working as soon as possible as the lack of such secondments had been unfortunate. She said that unions had noted and welcomed Mr. Zoellick’s commitments to a rapid feedback mechanism for countries where consultation issues were problematic. Mr. Mark said that the IMF would be seeking to improve consultation, but explained that recent emergency loans to middle income countries had been completed without consultation because they had been negotiated very rapidly—sometimes in as few as ten days. As for low-income countries 14 with ongoing economic crises, the possibilities for consultation were very different, and listening to unions would remain very important, he said.

11. Conclusions

During the concluding session, representatives of each of the three participating organizations—The IMF, the World Bank Group, and Global Unions—expressed their appreciation for the dialogue process between TUs and the IFIs. Jeremy Mark of the IMF welcomed the meeting and said the IMF accepted with the utmost seriousness the responsibility to play a significant role in tackling the crisis. Robert Holzmann of the WB called the discussions encouraging, and said that it was not unexpected that the focus had been on the economic crisis. He noted that progress had been made in the dialogue between IFIs and the TU movement and highlighted especially the progress on core labour standards. Remaining differences on issues such as Doing Business could hopefully be discussed further in a technical meeting which should take place as soon as possible, along with a technical meeting on pension reform. Speaking on other ongoing issues, Mr. Holzmann said that a TU secondment could hopefully be finalised shortly, and that the Bank was ready to include an academically qualified union nominee on its Trust Fund’s Technical Advisory Group, if the TUs nominate a suitable candidate that fulfils the required criteria. More generally, he said that there was a new openness to discuss policy issues at the country level. The WB is currently discussing mechanisms to operationalize an “(early) warning system” to follow up on important issues of country related dialogue. To conclude, Mr. Holzmann expressed his farewell as regards his involvement on the TU-IFI dialogue, since he is taking up a new position within the Bank.

Guy Ryder of the ITUC thanked the IMF and WB for their participation, and said that the yardstick for the union presence in the dialogue was the extent to which unions could make a difference. By interacting better and in a more informed way with the IFIs that could certainly be the case. It was essential that whatever was agreed in Washington be translated to the national level, and it was the responsibility of both the unions and the IFIs to carry this out.