Les Grandes Lignes De L Action Seront

CONFERENCE « SOCIAL STANDARDS AND GLOBALISATION » Turin, 26 – 27 November 2004

Promoting international labour standards within the EU external policy and the international industrial relations : issues document

This paper suggest some basic themes and questions for discussion in the Conference.

18 November 2004 Promoting international labour standards within the EU external policy and the international industrial relations : issues document

Introduction The links between globalisation and promoting core labour standards form the cornerstone of trade union action in Europe and around the world. Trade unions share a vision of globalisation which focuses on individuals, respects the dignity of all, improves people's well-being in terms of freedom, prosperity and security, provides opportunities for decent work and meets their fundamental needs. We find ourselves in a paradoxical situation as a result of the report by the ILO World Commission on the Social Dimension of Globalisation: Despite general support for promoting core labour standards and an increased awareness of the vital role of social development in sustainable development as a whole, the situation in terms of core labour standards and, more generally, of fundamental social rights, has not improved in any significant way.

What action can the European trade union movement take to safeguard and develop core labour standards? This document identifies the instruments available to trade unions in Europe and distinguishes between legal tools (the ILO's international labour standards), as opposed to negotiated contractual agreements. It examines also the role of European trade policy in promoting social standards. It also highlights a number of questions which may help to guide discussions at the conference.

1. Unequal global development 1.1 The impact of globalisation The report of February 2004 by the ILO World Commission on the Social Dimension of Globalisation complements several reports compiled over the past few years by international institutions (UNCTAD, World Bank) on the impact of globalisation and highlights the following points (see Annex 1): . The rapid growth in trade in goods and services has not benefited all countries, especially developing countries. The positive impact of globalisation has been felt mainly in industrialised countries and 12 developing countries. . Despite measures in all countries to liberalise investment, only 10 developing countries have benefited from such measures. The concentration of investment towards rich countries is still much greater than that of trade or services. . Liberalisation of financial markets, which became widespread in the late 1980s, has generated little growth and has brought with it social and fiscal deregulation. . Globalisation incurs substantial social costs, wider disparities in income between rich and poor countries and among the populations in these countries, including in industrialised countries.

2 . Unemployment has risen. . Structural adjustment policies have impacted negatively on conditions in developing countries, particularly in the fields of education, health and labour law. The impact of globalisation in trade in goods and services on developing countries is a complex subject. With the help of investment, emerging countries have been able to modernise their industrial resources and develop new skills. The best working conditions and remuneration are almost always to be found among local workers in international companies. But their ability to take advantage of this and use it to generate real development is still dependent on government policy: for example, despite several decades of relocation on a massive scale via maquiladoras1, Mexico continues to provide inexpensive and low-skilled labour for US firms. The arrival of multinationals in emerging countries can be extremely damaging. They disrupt local production, which in turn can trigger rapid and far-reaching restructuring. This is especially true of countries in Eastern Europe in the wake of the fall of the Berlin Wall, as exemplified in the Czech Republic by the takeover of Skoda by Germany's Volkswagen. The desire to attract and retain foreign investment can force wages down and dilute social standards. Multinationals relocate to countries where wages are lower as a result of violations of workers' fundamental rights or lax social legislation. It is also important to note the increasingly widespread tendency among multinational companies to invest in export processing zones (EPZ), a practice characterised in many cases by government promises to guarantee the absence of trade unions in such zones. Relocation between southern countries is just as much of an issue as that between northern and southern countries. Multinationals may decide overnight to pull out of one country and set up in another. In the textile industry, for example, Morocco and Tunisia, which reaped the rewards of relocation by companies during the 1990s, are now experiencing severe difficulties as a result of competition from China. This is compounded by the fact that the likelihood of action by governments against multinationals is dwindling since production and distribution structures, which used to be well-established in particular countries, are now evolving into a long chain of suppliers, sub- contractors and distributors located around the world.

1.2 Globalisation tests European social heritage In Europe, the debate on relocation has been raging since the early 1990s, at which time it focussed primarily on concerns over the de-industrialisation of "old Europe" and the competitiveness of the European economy. The link between relocation and social standards was made very directly, especially by trade unions, when Hoover relocated from France to Scotland where anti-trade union legislation was in force. The breakdown of the WTO ministerial conference in Seattle in 1999 placed the issue of social standards firmly on the international agenda. Over the past two years, these fears have been heightened following the

1 Foreign-owned assembly plants producing goods for export 3 spectacular economic rise of China and the accession of Central and Eastern European countries to the European Union. Upon closer inspection of the figures, these fears may appear somewhat exaggerated, not least since the magnitude of the phenomenon remains limited in relation to the size of our economies and the level of trade between developed countries, which remain predominant. Secondly, the impact of relocation has not yet led to major imbalances in external trade outside Western Europe2. However, the concerns prompted in Europe by relocation are not completely unfounded. Although in practise it is impossible to place an accurate figure on the profit and loss generated by relocation, its effects are nonetheless very real and have had a negative impact on some activities and regions such as textiles, computer assembly and electrical appliances. It is also possible that this trend is on the increase. The rise in relocation projects is quite staggering. Restructuring mainly affects the industrial sector but is also becoming increasingly commonplace in the services sector, including among the highly skilled in largely knowledge-based services. The massive outsourcing of call centres since the late 1990s looks set to continue. The mere suggestion of an increasing threat is enough to heighten social insecurity, which itself has acute macroeconomic repercussions by encouraging restrictive economic policies focused on reducing labour costs. Social insecurity is testing Europe's social heritage, which is increasingly being viewed as an obstacle to economic efficiency.

2. Safeguarding rights and establishing standards in Europe and around the world 2.1. The ILO and international labour rights: a fundamental instrument The fundamental social principles and rights emanating from the ILO system of regulations and the 1948 Universal Declaration of Human Rights are the only binding and universal standards by which to guarantee that development of world trade does not pit workers against each other in competition and does not give rise to a path enabling governments to lower wages, taxes, social benefits and other forms of social protection. It is important to remember that the link between globalisation and social standards was set out in the preamble to the ILO Constitution adopted in 1919: "The failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries".

The World Summit for Social Development held in Copenhagen in 1995 demonstrates the desire of the ILO to focus less on drawing up new conventions and more on strengthening a number of existing core conventions. In 1998, the ILO Declaration of Fundamental Principles and Rights at Work and its Follow-up set out core, universal labour standards together with a monitoring mechanism to promote application of core standards.

2 At the same time, the growth in exports linked to other activities, which is a sign of sustained competitiveness in these sectors, has offset these extra imports. 4 Above all, it provides a new paradigm of "international labour regulation. […] In a bid to progress beyond the regulatory model, [it] suggests achieving specified objectives by allowing the parties involved greater freedom to decide which resources to use, while at the same time providing a practical assessment of their efforts"3. Nevertheless, since the early 1990s, the ILO's system of standards has weakened against the backdrop of pressure to deregulate labour markets, the emergence of private regulations and checks (social labelling, codes of conduct, social rating, etc.) and severe restrictions on budgets and staff. Only the activities involved in monitoring the 1998 declaration on fundamental rights are not subject to these restrictions. In addition, there is a gulf between international recognition of core labour standards and their practical application. A study conducted by the OECD revealed that there was no evidence of any substantial progress in recent years in connection with respect for trade union freedoms and the right to collective bargaining in many of the countries which had ratified the relevant ILO conventions. In contrast though, it did conclude that ILO systems in place to monitor the application of core standards had been shored up in recent years and that the scope of the various mechanisms to promote such standards had been extended.

2.2 The role of the EU in promoting fundamental social rights Compliance with labour standards forms an integral part of the European social model. A key section of Community legislation, comprising a whole range of standards pertaining, in particular, to health and safety at work, equal opportunities and preventing all forms of discrimination as well as information for and consultation of workers via works councils, has been in place since the Community's inception4. Furthermore, ever since the Maastricht Treaty's Social Protocol, the social partners have been able to conclude collective agreements either in addition to or instead of social directives. Finally, by lending constitutional value to the EU's Charter of Fundamental Rights, the Draft Treaty establishing a European Constitution (signed in Rome on 29 October 2004) offers the European Union an opportunity to attribute a social dimension to its relations with third countries, specifically in terms of its trade policy.

Nevertheless, the European Union certainly does not represent the ideal when it comes to controlling the social consequences of globalisation. In terms of ILO standards, there has been a slowdown in the number of ILO conventions being ratified by the majority of EU Member States over the past 20 years 5. This situation is 3 Deblock, « L’organisation mondiale du commerce. Où s’en va la mondialisation ?», Editions Fides, Quebec, Canada, 2002 4 The Charter of Fundamental Rights of the European Union, the Council of Europe's Revised Social Charters, the European Convention on Human Rights, the Social Charter (1989), recommendations on social security and the social agenda adopted by the Nice European Council. 5 ETUC, A guide to social rights in Europe, Vade-mecum / ICFTU, Internationally recognised core labour standards in the EU: report for the WTO General council review (Geneva, 25 and 27 October 2004) 5 prompting other third countries (both industrialised and developing) not to ratify ILO instruments. This will ultimately jeopardise the interests of workers in southern countries and will weaken the entire system of ILO standards. EU Member States have also delayed ratifying the Council of Europe's Revised Social Charter. So far, the European Commission has shown no interest in this Charter. There were some developments vis-à-vis the candidate countries for EU accession but this was very limited. ETUC has long called upon the EU to actively promote this instrument of social policy which is vital to social cohesion and therefore to the security of Europe as a whole. Finally, it is important to highlight the primacy of the economic pillar of the European Union – or at least its competition policy, the single market and the single currency – over the social one (lack of any real European social policy). In this context, the EU's recent enlargement will be a test of its ability to ensure cohesion within a much wider area. This situation raises the question of how consistent the EU's internal and external policies really are and how able the EU is to help control the social effects of globalisation.

1. Are the ILO's international labour standards equal to the challenges of a globalised economy, which is largely characterised by internationalisation of major groups? 2. Should the scope of labour standards be extended? 3. How can more effective checks be conducted at local, national and international level as to whether fundamental labour rights are being observed in countries which have ratified the relevant conventions? What are the roles of trade unions and NGOs respectively? 4. How can binding international regulations on human rights at work be combined with voluntary, non-binding instruments in a standardised system? 5. How can the European Union establish itself as a more credible force vis-à-vis its partners in southern countries and what steps can be taken to plug the gaps in ratification of conventions by EU Member States?

3. Promoting fundamental social rights within the international trade system (WTO): good intentions but no real EU policy 3.1 The debate on the impact of social standards on international trade The failure to introduce a framework of international labour standards into the WTO system of international trade at the WTO's ministerial conference in Seattle in 1999 reignited the debate on the link between social standards and international trade. How can respect for fundamental labour rights, which are non-negotiable, be reconciled with enabling poor countries to exploit their comparative advantages in world trade? And this prompts another question: How do social standards affect international trade? Economists' responses to this question draw a distinction between "core labour standards" and "social standards". A study by the OECD (first published in 1996 and subsequently updated in

6 2000) on "international trade and core labour standards" explains that "standards" pertaining, for example, to working time and the minimum wage can affect countries' competitive advantage and can impact on trade competition, while "fundamental social standards" simply safeguard standards in connection with universally recognised rights and do not affect comparative cost advantages. According to this analysis, any attempt to harmonise wages at international level can only be justified if governments subject workers in export sectors to ludicrous constraints designed to reduce labour costs to below the level that may be considered "normal" in a particular country. In the face of such arguments, trade unions emphasise the support from independent trade unions in developing countries for core labour standards and their involvement in action to defend them. Moreover, although there may be justification for the fear that the argument of social standards may be used for protectionist ends, no one denies that the competitive pressure brought about by globalisation poses a threat to social protection, social standards and, in a more general sense, sustainable development (see point 1).

3.2 EU's good intentions put to the test In the wake of Seattle and keen for the WTO conference in Doha to succeed, the developed countries have been much more cautious on the issue of social standards. In July 2001, the European Commission set out the principles underlying its action in the area of social standards and trade in a Communication entitled Promoting core labour standards and improving social governance in the context of globalisation. It first of all recalls the European Union's objective of staunchly safeguarding core labour standards. It then underlines its choice of an incentive-based approach (section 3.2, Rejection of sanction-based approaches in trade policy). Lastly, the Communication confirms that "the EC's means of action available under poverty-reduction strategies should be coordinated so as to cover, inter alia, the social aspects of development", whilst at the same time reiterating that poverty and the scale of the informal sector are often the main reason why core labour standards are not satisfactorily implemented in developing countries. With this in mind, the Commission is proposing a number of instruments designed to tackle the problem of insufficient application of core labour standards more effectively. The instruments focus in particular on making ILO instruments more efficient and enhancing cooperation between the ILO and the WTO. However, the Commission's position on this point is ambiguous: "The EU should continue its efforts to launch a regular international dialogue on trade and social development, including core labour standards". In May 2004, the Commission adopted a new Communication entitled The social dimension of globalisation – the EU's policy contribution on extending the benefits to all, incorporating the conclusions of the report by the ILO's World Commission on the Social Dimension of Globalisation. A resolution adopted by the ETUC Executive Committee highlighted the relative conceptual changes in this communication in contrast with the 2001 communication mentioned above: the most recent Communication details an approach which tends towards

7 incorporating the social dimension, decent work and sustainable development into the European Union's multilateral trade policy and international cooperation, and that of its Member States. Nevertheless, in the view of ETUC, the issue of international acceptance and practical implementation of such an integrated policy remains wide open. Finally, the new Doha Round (Doha Development Agenda) was adopted without any mention of social standards. At the same time, the People's Republic of China is a member of the WTO and this has produced a situation whereby one of the world's foremost economic powers, which until now remained outside the international trade system, is opening up its markets to companies in other countries – particularly in Europe – whilst failing to respect workers' rights. China has failed to ratify conventions on fundamental social standards such as those on forced labour, freedom of association, collective bargaining and discrimination at work. On 1 August 2004, the framework agreement completing the Doha Round was adopted and contained two major areas of progress for developing countries as a whole: a commitment to eliminate export subsidies and to exclude the "Singapore issues" from negotiations under the Doha work programme. On the other hand, though, the agreement is rather weak in the areas of special and differential treatment (S&D) for developing countries.

1. What scope is there for trade union action to encourage respect for fundamental rights within the multilateral trade system? 2. What conditions should be set for the completion of the Doha Round to allay the concerns of the trade union movement, specifically regarding: - provisions on special and differential treatment for developing countries; - issues to be exempted from negotiations within the WTO on the GATS to protect key public services such as education, healthcare and water from unfettered liberalisation of trade? 3. What Policy Coherence Initiatives should be promoted as a matter of urgency – in accordance with proposals made by the ILO's World Commission – in particular for sectors most affected by liberalisation of trade policy, i.e. textiles? 4. What proposals should be made to shore up links between the WTO and the specialist UN agencies on social and environmental issues, including the International Labour Organisation (ILO)? 5. Does the presence of China in the WTO open up new opportunities for/pose new threats to trade union action on social standards, particularly in the context of abolishing import quotas for textile products as from 1 January 2005? 6. What alliances should the trade union movement forge with NGOs and employers, both of whom are putting pressure on governments but for different reasons?

8 3.3 The Generalised System of Preferences (GSP): a real opportunity to promote workers' rights in EU trade relations The GSP is the only system available to the European Union to promote in binding form workers' rights with trading partners. Several of the EU's bilateral and regional agreements contain references to social issues, including core labour standards, in particular its free-trade agreements with South Africa and Chile and the Cotonou Agreement between the EU and 77 African, Caribbean and Pacific (ACP) countries. But although these social clauses apply to the trade-related aspects of these agreements, they are not binding. The GSP is a mechanism whereby the EU can grant reduced customs duties to a number of poor countries. In 1998, social standards were introduced on an incentive-based system6. Under the new GSP, which is due to be adopted in 20047, the EU may grant additional tariff reductions to countries which comply with ILO standards or which pledge to promote the eight core conventions and fundamental social rights. Sanctions (benefits available under the GSP will be withdrawn) will be applied in cases where fundamental rights are infringed. Trade unions may recommend such measures. In the past, the ICFTU and ETUC jointly condemned child labour in Burma and Pakistan and violation of freedom of association in Belarus, criticism which resulted in Burma being suspended from the GSP in 1997. The new system offers a number of important benefits over its predecessor: - the former drugs, social and environment schemes would be replaced by a new category – the GSP+ – providing special incentives for countries that accept the main international conventions on social rights, environmental protection and governance, including the fight against drugs production and trafficking. - the GSP would focus on the countries most in need, such as the LDCs and the most vulnerable developing countries (small economies, land-locked countries, small island states, and low income countries) . - rules of origin would be improved to facilitate acquisition of origin through regional cumulation, thus promoting the regional cooperation. On the other hand, the GSP is somewhat limited in two areas: Firstly, coherence between the EU's internal and external social policy: How can trade partners be expected to respect social standards which the Member States of the European Union sometimes violate themselves? For example, the United Kingdom is notorious for its continued breaches of ILO conventions 87 and 98. Secondly, the effectiveness with which the GSP can promote social standards is relative and the question of its protectionist effect remains open: many countries with weak social standards are not involved in the globalisation process and exploitation of the workforce in such developing countries is often as much of a problem in the informal and domestic sector

6 In contrast to the USA, which uses a system of trade sanctions against countries which fail to respect workers' rights. 7 The new system will apply from 1 January 2006 until 2015. 9 as it is in export sectors. For example, most children who work do so not only in the export sector but also in the informal and domestic sectors.

1. Is the GSP compatible with the failure to implement core labour standards in the Member States? How will the new 25-member EU deal with sanctions if conventions are violated? 2. How can the GSP be coordinated with other Community policies on development and investment as part of an effective policy to combat poverty? Using corporate social responsibility (CSR) instruments at international level?

4. Instruments falling within Corporate social responsibility Along side international labour standards, are a number of voluntary instruments, which fall within the so-called “soft law”. There are two codes of conduct which international companies, governments and trade unions have pledged to support: - ILO Tripartite Declaration of principles concerning multinational enterprises and social policy - OECD Guidelines for multinational companies, revised in June 2000

Another aspect of the debate on corporate social responsibility – the Global Compact – is neither a regulation nor a code of conduct but rather a platform based on values designed to promote global citizenship. Companies are requested to support ten fundamental principles drawn from the Universal Declaration of Human Rights, the ILO Declaration of Fundamental Principles and Rights at Work, the World Summit for Social Development held in Copenhagen in 1995 and the declaration by the UN Conference on Environment and Development held in Rio (Earth Summit). Alongside these instruments are a number of voluntary initiatives: - Numerous corporate codes of conduct have been adopted unilaterally. These do not always include core labour standards. - Since the early 1990s, 'new' codes of conduct have developed and have been adopted by companies distributing or manufacturing high-class international products, specifically by relocating production. These codes of conduct are designed to tackle situations in which labour standards are not applied due to the absence of appropriate decisions by governments and the international community. The codes also apply to sub-contractors and suppliers working for the companies in question. - Framework agreements are agreements negotiated between a multinational company and an international trade union organisation regarding the company's international activities.

10 They are designed to establish solid relations between the parties in order to formulate "principles" on which to base professional relations and good working practises. Under certain conditions, such framework agreements may be legal and political in scope.

1. What progress has been made via the framework agreements concluded between multinational companies and industry federations? 2. How can the role of European works' councils be strengthened to promote workers' rights? 3. What steps can be taken to ensure that the sub-contracting chain complies with the duties and obligations set out in codes of conduct?