Trade Unions and the Global Economy: an Unﬁnished Story

Trade unions and the global economy: An unﬁnished story

Labour Education 2001/3-4 Nos. 124-125

Contents

Editorial V

Trade unions and the global economy: An unfinished story (Written by Robert Kyloh, Faith O’Neill and Carmel Whelton) Chapter I: Origins of the Bretton Woods institutions and the World Trade Organization 1 Chapter II: Fifty plus years of trade union lobbying on finance and development 4 Chapter III: Growing criticism of the Bretton Woods institutions and the first signs of reform 14 Chapter IV: Labour issues at the IMF and the World Bank 25 Chapter V: The evolution of the global trading system and impact of the World Trade Organization 30 Chapter VI: From Singapore to Seattle 35

Global economy: The outlook in the regions Recent developments in Africa, by Mohammed Mwamadzingo 41 Trends in the Asian and Paciﬁc region, by C. S. Venkata Ratnam 48 Countries in transition: The great transformation – successes (?) and failures (!), by Frank Hoffer 58 The international ﬁnancial institutions in Latin America and the Caribbean, by Alvaro Orsatti 65

III

Editorial

lobalization, liberalization, adjustment, privatization. These words Ghave become slogans over the last 20 years. Their proponents promised a world of growth. The trickle-down effect of a global economy would, not immediately but in the medium term benefit all, jobs would be created, poverty would retreat and social justice would emerge through the invisible hand of the market. International financial institutions (IFIs) were put in the driving seat, preaching the good word. They no doubt had good intentions and the need for devastated economies to adjust and restructure was more than real. Yet the magic pill did not work. Consider this: out of the world’s 6 billion inhabitants, 2,800 million survive with less than US$2 a day and 1,200 million of those have only half that amount. The average income in the 20 richest countries is 37 times that of the 20 poorest countries. The stock-market value of the ten largest multinational companies is higher than the gross domestic product of 150 of the 189 member countries of the United Nations. More than 130 million children do not attend school and more than 250 million children are at work for most of the day. Africa spends on the reimbursement of its huge foreign debt twice the amount it spends on health. These figures do not come from trade unions or disgruntled non- governmental organizations. They come from the IFIs themselves. They clearly show that something is wrong with the way the global economy is left to operate at the present time. Globalization is not people-friendly. It lacks a social dimension. Incorporating social concerns and core labour standards into the policies and operations of the IFIs was the central theme of an international symposium organized for trade unions by the ILO’s Bureau for Workers’ Activities (ACTRAV). The symposium, entitled “Strengthening workers’ participation in the United Nations system and the Bretton Woods institutions” took place in September 2001. This issue of Labour Education is entirely devoted to the work of this important gathering. It includes background material as well as keynote contributions. They point to the failure of the policies of the IFIs to address the negative consequences of globalization on workers around the world and show where such policies run contrary to ILO core Conven- tions, in particular the Convention on the right to bargain collectively, and on universally accepted provisions for social protection. The documents contained in this publication were written in the spring of 2001 and thus prior to the World Trade Organization (WTO) ministerial meeting in Doha, Qatar. Amidst calls for greater openness and transparency, the IFIs have grad- ually become more receptive to dialogue with global trade unions. Rep- resentatives from the International Monetary Fund (IMF), the World Bank and the WTO took part in the symposium. If anything, these discussions

V have demonstrated that the need for such dialogue has increased. Preju- dices have to be overcome. Mutual trust has to be established. One way of contributing to that would be for the IFIs to go beyond occasional meetings with international trade union organizations and respect their own promise of engaging in genuine consultations with trade unions at national level when designing, implementing and assessing their programmes. The much-desired cooperation between the WTO and the ILO has yet to materialize, despite repeated calls to this effect by the trade union movement, including at the last WTO ministerial meeting in Doha. The success of trade liberalization, structural adjustment and economic integration at regional or world level will in the ﬁnal analysis de- pend on how far they meet the aspirations of people and how far they command social, as well as economic, support. That in turn depends on the quality and vision of the policies and on the involvement of key ac- tors, including those representing workers, in their elaboration and implementation. From the level of discussions that took place at the ACTRAV symposium, where, it should be stressed, all components of the international labour movement took part, there is no doubt about both the commitment and the sense of responsibility that trade unions display in addressing all the issues linked to globalization. They want constructive dialogue and involvement. By setting up a World Commission on the social dimension of globalization, the ILO can contribute both to promoting and to fostering such dialogue, as IFIs will be invited to join in, in addition to employers’ and workers’ organizations and governments. This issue of Labour Education is aimed at providing the key elements for such a dialogue to lead to tangible results in shaping a global economy with a human face. Globalization has so far failed to respond to legitimate demands that should be at the top of its agenda. Today, however, there are opportunities to change course. These should not be missed.

Manuel Simón Velasco Director ILO Bureau for Workers’ Activities

Special thanks go to the ACTRAV team that prepared the background documents reproduced in this issue: Robert Kyloh, Faith O’Neill and Carmel Whelton.

VI Trade unions and the global economy: An unﬁnished story

Chapter I Origins of the Bretton Woods institutions and the World Trade Organization

Haunted by the ghosts of Versailles, the booming 1920s, the depression of the 1930s and the horrors of the Second World War, the leading governments, in the summer of 1944, fashioned an international ﬁnancial architecture designed to promote peace, ﬁnancial stability and economic growth.

n the New Hampshire mountain resort War. Some of the best and brightest lead- Itown of Bretton Woods, John Maynard ers of the trade union movement lost their Keynes and Harry Dexter White ham- lives in this period. But trade unionism’s mered out the details of this new architec- principled stand for freedom, workers’ ture. The World Bank and the International rights and dignity allowed it to assume a Monetary Fund (IMF), the “Bretton Woods strong leadership position after the war in institutions”, were created. The former democratic nations and at the interna- was to provide the resources for infra- tional level. structure and hard plant investment nec- The international financial and trade essary for economic development; the lat- institutions have increasingly assumed ter, with a more diverse set of tasks, would greater influence and responsibility in help both developed and developing moulding the global economy in recent countries overcome deficits in their bal- decades. The international trade union ance of payments and specify the internal movement has used what political muscle economies and discipline that would cor- it has to encourage a multilateral approach rect such imbalances. The Bank and the to trade, finance and economic develop- Fund, operating out of Washington, would ment, while also attempting to mitigate bring sound economics and the world of the negative consequences of policies em- reputable finance to the task of economic anating from these international institu- development. tions, particularly those impacting on A few years later, an international trade workers and the poor. Trade unionists organization (ITO) would be envisaged to have argued that economic growth must promote world trade and full employment. be accompanied by a social floor that en- The treaty to establish the ITO was never sures that everyone – men and women, the sent to the United States Senate, and in its young and the very old – benefit from stead an interim skeletal set of trade rules economic prosperity. the General Agreement on Tariffs and Trade (GATT) constituted the global trade architecture for the next 50 years. The The International Monetary Fund (IMF) World Trade Organization (WTO) only recently replaced the GATT, greatly expand- The International Monetary Fund (IMF) ing GATT’s original mandate to cover all was set up initially with 29 member coun- aspects of market and trade liberalization. tries to promote international monetary The trade union movement emerged cooperation, to promote exchange rate sta- equally devastated from the Second World bility, to assist in the establishment of a

1 multilateral system of currency transac- The World Bank Group tion payments, to make general IMF resources available to members subject to The International Bank for Reconstruction adequate safeguards, and to shorten the and Development (IBRD, commonly re- duration and lessen the degree of disequi- ferred to as the “World Bank” or “World librium in the international balance of pay- Bank Group”) was originally established ments of members.1 The Articles of Agree- to help with European reconstruction after ment provide for a Board of Governors, an the war. Its first loan was to France, fol- Executive Board, a Managing Director and lowed by the Netherlands, Denmark and a staff of international civil servants. The Luxembourg. The Marshall Plan was Board of Governors is formally the high- launched soon afterwards and the Bank est decision-making body and consists of was then able to concentrate on assisting finance ministers or central bankers from developing countries; next in line for help all member countries; however, the real were Chile, Mexico and Brazil. power resides with the Executive Board The Bank comprises two major organ- composed of 24 directors. They are ap- izations: the IBRD as such and the Inter- pointed or elected by member countries or national Development Association (IDA) groups of countries. This Board meets sev- which was established in 1960. Three other eral times a week and deals with a wide organizations are associated with the Bank range of policy and operational matters, but are legally distinct from it. The Inter- including surveillance of members’ ex- national Finance Corporation (IFC) was change rate policies, provision of IMF fi- set up in 1956 to fund private enterprise nancial assistance to member countries (mostly industrial) projects in developing and discussions about key economic is- countries. The United States initially ob- sues. The IMF has described itself as a “fi- jected, arguing that sound private enter- nancial cooperative, in some ways like a prise would always attract funds. The credit union”.2 This is because on joining, IFC’s Articles of Agreement (Article I) each country pays a sum of money, called therefore specifically restricted IFC invest- its “quota”, of which 25 per cent must be ment to “cases where sufficient private paid in hard currency and the remainder capital is not available on reasonable in its own currency. Each country’s voting terms”. The International Centre for Set- power in IMF decisions is related to the tlement of Investment Disputes (ICSID) size of this quota, on which the maximum provides arbitration services for invest- amount of financial assistance a member ment disputes. The Multilateral Invest- can get from the IMF is also based. For ex- ment Guarantee Agency (MIGA) insures ample, at the end of last year the quota for foreign investment against non-commer- the United States was just over 37,000 mil- cial risks in developing countries, includ- lion special drawing rights (SDRs), ing expropriation, war and insurrection. whereas the total for a small country like The Bank has more than 180 members Côte d’Ivoire was just over 300 million and loans and credits outstanding to SDRs. This represents a fundamental dif- about 90 developing and transitional ference between the Bretton Woods insti- countries. It thus has a far-reaching impact tutions and the United Nations system. In on the global economy and poverty re- the latter, the financial contributions of duction. In over 50 years of existence the member States vary according to the econ- Bank has loaned more than US$470 billion omic wealth of the country but the voting to developing countries.3 The IDA is strength of all member States is the same, largely financed from grants from donor regardless of their size or wealth. nations and lends to about 80 lower- income countries. IDA loans are interest- free and have a maturity period of 35 to 40 years. Given these fairly innocuous be- ginnings and their clear mandate to “do

2 good”, how did it come about that by the trade union movement now position itself late 1990s these institutions had become in relation to them to best promote the in- so comprehensively criticized and the terests of its members and the poor? These “lightning rod” of anti-globalization pro- are some of the questions raised in this testers and development activists? How issue of Labour Education. have the reforms implemented in response to these criticisms impacted on the day-to-day policies and programmes of Notes these institutions? What role has the in- 1 IMF: Articles of Agreement, Article I. As of late ternational trade union movement played 2000, IMF membership had reached 182 countries in the critical analysis and reform process and its total ﬁnancial resources were about US$280 now under way within them? What fur- billion. ther reforms can be expected from them in 2 IMF Survey Supplement, Sep. 2000, p. 9. the next few years and how should the 3 Up to the end of June 2000.

3 Trade unions and the global economy: An unﬁnished story

Chapter II Fifty plus years of trade union lobbying on ﬁnance and development

Attempts by the international trade union movement to inﬂuence the key international economic institutions and global economic policies can be traced back to at least the mid-1950s.

he 1950s and 1960s were an economic national level, however, the union move- T“golden age” in the developed world. ment was split by the cold war and certain By the end of the 1940s, production in the internal differences. United States was expanding rapidly, exports were booming and unemployment was very low. But after the lifting of price The 1950s and 1960s: Halcyon years controls, inflation started to become a concern. The United States economy was be- Throughout the 1950s Eastern Europe and coming the pivot around which the world the Soviet Union also recorded impressive economy turned. Throughout the 1950s, economic growth, with a particular em- economic performance in the United States phasis on the expansion of steel and other remained robust and attention started to large-scale industries, transportation and focus more on the distribution of income. power generation. By the time Soviet sci- By contrast, Europe first had to over- entists put the space satellite Sputnik into come the devastation of war and rebuild orbit in the latter months of 1957, the pres- the foundations of a strong peacetime sures for an arms build-up, the space race economy. Despite this, it was making more and the cold war were growing. rapid progress than the United States to- Throughout this period the world op- wards the development of a comprehen- erated on a set of fixed exchange rates. sive welfare state. In the United Kingdom, Governments set the international values the findings of the 1942 Beveridge Report of their currencies, then bought and sold were making their way into policy and the currencies to maintain those values. The ordinary worker was the beneficiary. In American dollar was convertible into gold the rest of Europe, aid through the Mar- at a fixed rate of US$35 an ounce. The vast shall Plan had helped to kick-start econ- majority of governments also imposed re- omic recovery and, fortunately, growth strictions on capital movements into and was self-sustaining by the time these for- out of their countries. They were thus not eign resources came to an end. The trade subjected to the dramatic and destabiliz- union movement was involved with the ing capital movements that have been wit- implementation of the Marshall Plan and nessed in the last decade. The IMF assisted close cooperation between unions, em- the process by lending to countries with ployers and governments was seen as a balance of payments difficulties. In 1952, necessary condition for rebuilding indus- the Executive Board approved proposals try and promoting higher productivity. for “standardized stand-by arrange- Partly as a result of this, the post-war ments”, and in the 1960s various financing period saw a strengthening of national facilities were created along with special trade union power in Europe. At the inter- drawing rights (SDRs).

4 The 1950s and 1960s were the age of 1960s owing to a deterioration in their economic certainty in the developed terms of trade brought about by “soft” world: Keynesian demand management prices for agricultural products in global policies were applied; exchange rates markets and the upward trend in the price changed every few years on average; com- of their imports. panies reviewed the prices of their products once a year; interest rates moved perhaps twice a year, and so on. A company’s The First Development Decade “real-economy” decisions – on its stocks, payroll and fixed investment – were corre- According to some well-informed ob- spondingly infrequent. The collective bar- servers, it was against this background gaining process was therefore reasonably that the United Nations, as opposed to the predictable. Employers did not require the World Bank, took the lead in the interna- degree of labour market flexibility they tional development debate by proposing often seek today in order to cope with econ- the First Development Decade in the omic shocks created by wild swings in the 1960s, with the emphasis on a global exchange rate and other variables outside framework for accelerated development their control.1 From time to time there was and calls for increased private investment tentative evidence of an emerging wage- and substantial increases in official devel- price spiral but the inflation thus generated opment aid (ODA) to lift growth rates be- was never sufficient to undermine busi- yond 5 per cent in the developing world.2 ness and consumer confidence for long The establishment of the United Nations enough to destabilize economic growth. Conference on Trade and Development This economic security contrasted starkly (UNCTAD) in 1964 and the expanding in- with mounting geopolitical tensions which fluence of the G77 throughout this period reached extreme levels during the Cuban were other key factors impinging on the missile crisis in October 1962. development debate. Attempts by the in- Economic life was definitely less cer- ternational trade union movement to in- tain for those living outside the industri- fluence the key international economic in- alized countries. For many developing stitutions and global economic policies can countries in Asia and Africa, it was a be traced back to at least the mid-1950s. period of decolonization and experimen- Despite the fact that organizations like the tation with development policies. Al- International Confederation of Free Trade though this was eventually to give rise to Unions (ICFTU) at that time had minimal some notable economic success stories in resources and technical capacity to devote South-East Asia, economic progress in the to global economic issues, they were able remainder of Asia and much of Africa and to prepare and periodically issue state- Latin America was deeply disappointing. ments concerning major developments. With populations growing rapidly, econ- For example, in 1954 the ICFTU adopted omic growth per capita in the developing its first comprehensive statement on full world as a whole over the 1950s was esti- employment which included references to mated at less than 2 per cent, although the need for global economic expansion, nominal growth rates in excess of 5 per greater liberalization of international cent were sometimes achieved. The popu- trade, increased aid to developing coun- lation explosion and the unequal distribu- tries and the establishment of a special tion of the benefits of growth meant that United Nations fund for economic devel- social progress was slow and uneven, with opment. These were positive contribu- overall levels of poverty and illiteracy ris- tions to the global economic debate and ing in most developing regions. Even the meant that, from the outset, a primary small trade surplus that developing coun- focus of the international trade union tries enjoyed with the developed world in movement was on trying to improve econ- 1950 had become a deficit by the early omic conditions in the developing world.

5 Trade union concerns about economic Despite the fact that the IMF and the conditions in developing countries were World Bank were starting to exert in- emphasized further in the mid- to late creased authority over the global econ- 1950s, when the ICFTU mounted a cam- omy, they were not the main concern of paign for increased foreign investment in the trade union movement at that time. developing countries and began express- Most trade union activities and recom- ing concerns about the impact of unstable mendations concerning the global econ- commodity prices and world food re- omy during the period in question were serves on the economic and social condi- directed at national governments, because tions in developing countries. A campaign they had more discretionary economic also started at this time to promote in- power than today. To the extent that they creased international aid flows to devel- attempted to influence policy towards the oping countries. Clearly, the international Bretton Woods institutions, trade unions trade union movement was “doing its bit”, were usually positive and their statements with very limited human and financial re- were designed to strengthen these institu- sources, to promote some components of tions. In the mid-1960s, for example, the what would soon become the basic objec- ICFTU made detailed proposals for inter- tives of the First Development Decade. national monetary reform calling for in- With the benefit of hindsight, it might creased reserves for the IMF. These re- be argued that the international trade forms were particularly important for de- union movement, like most other organ- veloping countries because they were izations, governments and individuals in- suffering acute balance of payments diffi- volved in the economic development de- culties, and greater international liquidity bate at that time, failed to anticipate and was seen as a necessary precondition to identify a number of other important is- allow developed countries to increase for- sues and barriers to development. For ex- eign aid flows. In 1962, the ICFTU began ample, insufficient attention was devoted a campaign to increase the resources avail- to securing the external resources neces- able to the World Bank’s International De- sary for universal education and the es- velopment Association, which had been tablishment of basic social safety nets in established two years earlier, so that it developing countries. Trade unions and could extend more “soft” loans to devel- others could also have been more critical oping countries. At the same time, the of domestic corruption, unstable govern- trade unions were calling on the IMF “to ments, excessive military expenditures liberalize its operations, particularly with and the failure to implement land reform a view to assisting developing countries, in some countries. These were just some of and to actively consult trade unions about the factors that would contribute to econ- the policies it was advocating”. omic stagnation and conflict in many de- Over the course of the 1960s, economic veloping countries in the period ahead. growth in the developing world was rela- Shortly thereafter, the trade union tively rapid, averaging around 6 per cent movement became concerned at the poli- a year. But growth alone did not generate cies that were being implemented to cur- economic development, and in fact by the tail inflationary pressures in developed end of the decade there were mounting countries. These policies restrained econ- problems, including increased poverty, omic growth and led to a global recession growing unemployment and a dramatic in 1957-58. In response to these economic widening in income inequalities.3 By con- conditions the ICFTU began a campaign trast, in the mid-1960s there was an im- to organize a World Economic Conference pression that the major economic prob- involving the key economic powers of the lems of the United States and its main trad- time, with a view to securing support for ing partners in the North had been solved. coordinated action to stimulate economic The American economy was expanding at growth and restore full employment. a healthy rate and unemployment was

6 5 per cent and declining. And yet, by the buying and selling their “floating curren- end of the 1960s, the Bretton Woods sys- cies”.5 During this monetary crisis, the tem of exchange rates was under siege. trade union movement issued recommen- The war in Viet Nam and the race to put a dations calling for coordinated policies to man on the moon had pushed the United stimulate growth and offset the employ- States into a ballooning deficit, consuming ment and social impact of the crisis. In what resources that might otherwise have been would become a frequently heard request, devoted to promoting greater equality at affiliated national union centres were called home and additional assistance to the de- upon to lobby national governments on veloping world. The fixed exchange rate global economic issues, and sent a set of rec- system could not sustain a high American ommendations to respond to the interna- deficit coupled with increased inflation. In tional monetary crisis. 1970, the ICFTU underlined the urgent Throughout this period, floating ex- need for: a more flexible administration of change rates worked better than expected, the fixed exchange rate system; measures with a few notable difficulties. If a coun- to lower interest rates; steps to expand the try’s exchange rate floated downward, the institution of SDRs with the IMF in order price of that country’s goods became to increase international reserves; and as- cheaper to export and flooded other mar- sumption of responsibility by the IMF for kets, resulting in a loud protectionist clam- finding ways to stimulate increased aid our from the industries affected. Wide flows to developing countries. The inter- swings in exchange rates were causing ex- national trade union movement was main- port and import shifts, leading to calls for taining its positive perspective in respect import restrictions, quotas and “volun- of the principal international financial in- tary” export agreements. The trade liber- stitutions and promoting multilateralism. alization gains of the GATT came under heavy fire. The first global oil crisis of 1973-74 led 15 August 1971: to a sea change in global economic poli- The end of economic certainty cies. Oil prices quadrupled and double- digit inflation reared its head. People On 15 August 1971, the US President an- stood in long queues at the gas pumps. Oil- nounced that the United States would no importing developing countries were hit longer undertake to maintain a specific ex- hardest because the price of goods they ternal value for the US dollar.4 With a few exported stayed the same or decreased, short words, the underpinnings of the care- while the price of imported goods like oil fully crafted IMF gold reserve system had went up. One immediate response of the disintegrated. Governments agreed to the international trade union movement was “quick fix” Smithsonian Agreement in De- to ask national trade union centres to start cember 1971 that allowed currencies to fluc- lobbying governments for a global meet- tuate within a 2.25 per cent band around ing to consider ways of recycling the sur- their central rates. This lasted less than two plus funds of oil-exporting countries to de- years, and most currencies were floating veloping countries at low and concession- against one another by early 1973, when the ary interest rates, and for measures to European Community countries intro- reflate the global economy. duced a “joint float” for their currencies In many developed countries, inflation- against the dollar. By mid-1974, recom- ary pressures sparked by the oil crisis were mendations from the IMF Committee on exacerbated by a wage-price spiral, and Reform of the International Monetary Sys- this encouraged a resurgence of neoclassi- tem were being implemented and guide- cal economic thought and a stronger em- lines were adopted for the management of phasis on monetary policy. In the second the floating exchange rate system. By 1979, half of the 1970s, the Administration of central banks spent over US$40 billion on President Carter in Washington attempted

7 to counter a strong upward inflationary omic growth; productive employment; push from wages and price settlements, and basic needs (food, housing, clothing and especially from rising energy prices, and public transport). At the core of the with an increasing reliance on tight mon- strategy was a shift to a pattern of econ- etary policy. Consumer price increases omic growth that was more employment- were into the double-digit range and the intensive, more equitable and more effec- Federal Reserve discount rate was around tive in the battle against poverty.7 These 12 per cent in 1978 and 1979; over the same were policies that the trade union move- period, the unemployment rate in the ment could support politically and dis- United States jumped from around 5 per seminate. For the trade union movement, cent to just over 7 per cent. the existence of the WEP and highly qual- In the 1970s, economic growth rates in ified teams of ILO economists in the de- the developing world started to taper off, veloping regions of the world helped to particularly in Africa. Problems associated overcome the problem of having only a with growing income inequalities, wide- very limited trade union research and pol- spread poverty, rural-urban migration and icy development capability. The trade the expanding informal sector started to union movement was, however, critical of attract attention, becoming the focus of the the WEP from time to time because it failed United Nations system and especially of to emphasize adequately the importance the ILO’s World Employment Programme of labour standards in promoting a bal- (WEP). According to those associated with anced approach to employment. Interna- the origins of the WEP, this provided “a tional trade union movement participa- framework of ideas within which ‘new’ in- tion in the dialogue about the global econ- gredients were fitted and which amounted omy continued to expand, and from 1977 to a new development strategy”.6 Some onwards, the ICFTU began preparing an- components of this new strategy included: nual reviews of the world economic situa- a clearer definition of employment and tion. Another important development was poverty problems; identification and stim- the adoption in 1978 of a Development ulation of appropriate technologies by sec- Charter entitled “Towards a new econ- tor; the importance of education and omic and social order”, which strongly human resource development; and the supported the ILO’s “basic needs and em- stimulation of a virtuous circle linking ployment strategy”. Involvement of the employment creation, improvements in international trade union movement with income distribution, consumption of local the annual G7 (later G8) summits also production and productive employment. dates from this period. The international trade union movement Meanwhile in Washington, the Fund found a close ally and a source of new found itself the subject of often acute con- ideas on economic development when the troversy. It responded by assuming a more WEP and ILO regional employment teams active public profile and established its were established in the mid-1970s. The first Office of External Relations in 1980. ILO started to generate innovative ap- Its Managing Director, Jacques de proaches to the integration of macro- Larosière, gave more speeches than any of economic, sectoral and microeconomic his predecessors.8 The country work of the policies. Orthodox development policy Fund was growing: in 1978 there was a 50 was based on the promotion of a single ob- per cent quota increase which significantly jective, namely, faster economic growth. increased IMF resources, and in 1980 the This theory basically assumed that after a Fund decided to play a more proactive role time lag the benefits of economic growth in adjustment policies and to provide bal- would “trickle down” to the poor. The ILO ance of payments assistance over longer questioned this assumption and began ad- periods and in larger amounts.9 By 1981, vocating policies that would explicitly and the IMF had programmes with more than directly promote three objectives: econ- 40 countries, many more than the ten a

8 year it had averaged in 1974-78.10 Even rel- levels of employment in developing coun- atively wealthy nations like the United tries would stimulate demand for prod- Kingdom and Italy were asked by the IMF ucts imported from the industrialized to put their fiscal or monetary houses in world. Unfortunately, despite attempts by order. the union movement to publicize this perspective, it failed to have a fundamental impact on policy in industrialized coun- The second oil crisis: tries. The world falls into recession The Bretton Woods institutions now took centre stage and held it for the next The second oil crisis in 1979 again plunged two decades, effectively determining the global economy into deep chaos. In the economic policy throughout Africa and North, inflation accelerated further and much of Latin America. This process balance of payments problems were exac- started in the second half of 1982, when the erbated. Policy-makers made the fight IMF intervened to reschedule Mexico’s against inflation a top priority: monetary debt and introduce a major structural ad- policy was tightened further and interest justment programme. In the months that rates jumped sharply, with the discount followed several other countries facing se- rate in the United States averaging over 15 vere debt servicing difficulties received per cent in 1980. High real interest rates led similar support, subject to similar condi- to capital inflow and an appreciation of the tions, from the IMF.11 The conditions at- dollar, while fiscal restraint resulted in tached to financial support from the Bret- strong contraction in global demand. With ton Woods institutions had two major Ronald Reagan and Margaret Thatcher in components. First, stabilization policies control of the two main “Anglo-Saxon” were required and usually included fiscal economies, the economic environment was discipline to cut budget deficits, reduc- to become ripe in the years to come for tions in public expenditure, currency de- those wishing to dismantle the welfare valuation, and removal of import controls state, make labour markets more “flexible” and export subsidies. Second, this was and diminish trade union power. combined with structural adjustment pro- In the South, rising real interest rates in grammes designed to reorientate the econ- countries that needed to borrow and the omy towards privately owned export- appreciation of the dollar compounded producing sectors, for the most part the the emerging debt crisis, while the terms agriculture sector and other primary pro- of trade for primary commodity exporters ducers. The policies applied included deteriorated further. This led to another in- trade and financial market liberalization, ternational debt crisis and a major threat privatization, deregulation of labour and to international capital markets when product markets, public sector staff cuts Mexico defaulted on its debts in 1982. and a strengthening of property rights. Before the Mexico crisis, the interna- Cutting government expenditures often tional trade union movement had meant reduced spending in areas like mounted a major campaign to support the education and health, which worsened recommendations of the Brandt Commis- poverty and income inequality. Public sec- sion, which had emphasized the inter- tor staff cuts swelled the ranks of the dependence between the economic for- underemployed and those trying to scratch tunes of developed and developing coun- out a living in the informal sector. For many tries. The Brandt Report had rightly countries in sub-Saharan Africa and Latin emphasized that economic support from America, this was a period of stabilization industrialized countries for the develop- and adjustment without growth. ing world should not be seen as charity or Throughout the remainder of the 1980s as a cost, but rather as a mutually benefi- and early 1990s, there was a consolidation cial investment. Faster growth and higher of what subsequently became known as

9 the “Washington Consensus”. In fact the response to the structural adjustment pro- international debt crisis intensified, grammes of the 1980s and 1990s, the poverty became more widespread and ICFTU, the World Confederation of underemployment reached extreme levels Labour (WCL) and many national union in most developing countries. The Bretton centres put their political weight behind Woods institutions responded with some attempts to make more transparent the partial modifications to their standard sta- process by which economic policy was bilization and structural adjustment pro- being determined in developing countries. grammes. For example, the mid-1980s saw Economic reform packages for a given the beginning of a second phase of Bretton country usually emerged from hasty and Woods programmes intended to promote secret discussions between Washington- growth with adjustment. The idea behind based representatives of the Bretton this was that if growth fell below some pre- Woods institutions and the most senior determined level more resources would be political leaders of the country and their made available to boost the economy. This financial advisers. The trade union move- was soon followed by a third phase of pro- ment called on the World Bank and the grammes that emphasized growth, adjust- IMF to involve national trade union cen- ment and policies designed to mitigate the tres in country-level negotiations about adverse social impact of economic re- economic reforms. The Bretton Woods informs. However, the core elements of sta- stitutions responded to requests for in- bilization and adjustment programmes creased transparency by claiming that de- were maintained and imposed on an ever- cisions about these matters were the re- increasing number of governments; these sponsibility of the national governments programmes involved substantial cur- concerned and something with which they rency devaluations, dramatic reductions could not legitimately interfere. in government expenditure in order to bal- The international trade union move- ance fiscal budgets, tight monetary pol- ment and national centres were also highly icies and high interest rates, privatization, critical of the impact of Bretton Woods pol- the introduction of user fees in areas like icies on freedom of association, collective health and education, and increased bargaining, minimum wages and other in- labour market flexibility. dustrial relations issues. Such criticisms The introduction of stabilization and were brushed aside by the senior manage- adjustment programmes on such a wide ment of the international financial institu- scale was the impetus for a significant ex- tions. In response to union concerns that pansion in contacts between the interna- loan conditionality might impair the abil- tional trade union movement and the Bret- ity of governments to implement interna- ton Woods institutions. In the view of the tional legal obligations concerning free- trade union movement, the early 1980s dom of association and collective bargain- were “amongst the hardest for working ing, the IMF Managing Director sent a people all over the world since 1945”, and written message to one union seminar as- the trade union movement claimed it was suring the international trade union move- responding by increasing the “depth and ment that any such concern was “com- breadth of its policies on world economic pletely unwarranted”. In the message, he problems and sought to coordinate lobby- stated that the Fund was required to re- ing of the major intergovernmental meet- spect the domestic, social and political ob- ings”.12 This dire economic situation led to jectives of its members, and that it would more effective cooperation between a be unthinkable for the Fund to require number of international trade union or- that, as a condition for using its resources, ganizations, and the union movement be- a member country apply any measure that came more visible and vocal in interna- would limit in any way such fundamental tional meetings devoted to economic de- rights of individuals.13 Throughout the velopment and adjustment issues. In 1980s and most of the 1990s, a very large

10 number of cases before the ILO Commit- observers have noted that “the United Na- tee on Freedom of Association and Com- tions system largely remained on the side- mittee of Experts on the Application of lines” in the debate about adjustment in Conventions and Recommendations con- the 1980s.14 There was, however, one im- cerned breaches of freedom of association portant exception, and that was the work resulting from reforms implemented as coming out of the United Nations Chil- part of structural adjustment and stabi- dren’s Fund (UNICEF) on “adjustment lization programmes. Government de- with a human face”, which was critical of fence in many of these cases rested on the the orthodox approach and sought to put fact that they were implementing condi- human concerns and people at the centre tions demanded by the IMF and the World of development. This approach was sub- Bank. sequently expanded in the human devel- The trade union movement regularly opment reports of the United Nations reiterated demands about the need for dia- Development Programme (UNDP). The logue and concerns about the impact of ad- trade union movement, at both interna- justment policies on industrial relations, tional and national levels, used some of unfortunately without much initial suc- the arguments contained in these various cess. International unions also organized reports during the late 1980s and early many regional or subregional conferences 1990s to attack stabilization and adjust- in Africa, Latin America and Asia during ment programmes, but the movement and the second half of the 1980s and early its allies failed to attract the necessary po- 1990s. Many of the recommendations and litical support among the most powerful resolutions adopted at such conferences Northern governments to force any fun- were critical of policies and programmes damental changes on the Bretton Woods implemented by the Bretton Woods insti- institutions. tutions, but, generally speaking, the econ- The international trade union move- omic policy alternatives proposed by the ment was becoming more vocal and criti- trade unions were not comprehensive or cal of the World Bank and IMF policies and country-specific. programmes but remained optimistic With limited financial resources and about its ability to influence the Bretton weak technical economic capacity at both Woods institutions. An ICFTU report in international and national levels, the 1988 claimed that “the IMF has shown trade union movement was not able inde- some flexibility in the design of its recov- pendently to develop detailed alternative ery programmes […] Some steps have also economic strategies for all the countries been made towards the construction of a subjected to orthodox stabilization and framework for closer coordination of the adjustment policies. The movement there- economic policies of the major industrial fore had to rely on friendly organizations countries. The ICFTU may fairly claim to in the United Nations system to undertake have contributed to these shifts”.15 In its the necessary research to underpin a crit- 1992 report on contacts with the Bretton ical analysis of adjustment policies. Un- Woods institutions, the ICFTU made the fortunately, by the mid-1980s, the ILO’s following comments: WEP was in decline and the ILO ran into political barriers when it tried to launch a Each of these meetings [between ICFTU high-level meeting on structural adjust- delegations and senior Bretton Woods ment. This meeting and the background staff] resulted in further progress, con- research for it were designed to highlight tributing in practical terms to a growing the social and labour implications of ad- awareness of the need to take poverty and justment policies. Although the meeting living standards into account in the design did eventually take place in 1987, without of policies. One concrete result was seen in the participation of the United States and 1987 when the World Bank, the UNDP and other key Northern governments, keen the African Development Bank set up a

11 project called the Social Dimensions of Ad- against the negative social impact of econ- justment (SDA). The ICFTU could claim a omic adjustment programmes. By 1994 the share of the credit for the existence of this ICFTU noted: programme, […]16 The previous decade saw these two insti- The SDA was one programme which tutions [IMF and World Bank] assume a po- was supposed to mitigate the worst social sition of unparalleled importance for most impact of the economic reforms but failed developing and formerly communist coun- to deliver any fundamental change in the tries and they now provided the single economic fortunes of Africa. most important influence on their econ- The international trade union move- omic policies.18 ment also appeared relatively optimistic about its impact on the annual meetings of From the early 1990s onwards, the the IMF and the World Bank, which they ICFTU started holding national confer- began attending in an observer capacity in ences on the social dimension of adjust- the late 1980s. However, the ICFTU ment in Eastern European countries (Hun- pointed out that because there were no gary 1991; Romania 1992; Bulgaria 1993; speaking arrangements for non-govern- Poland 1994), which promoted dialogue mental organizations (NGOs) at these an- between national trade union leaders and nual meetings, the value of trade union World Bank and IMF officials. In some statements depended on affiliates getting cases, follow-up meetings between trade their national governments to take up unions and officials from the World Bank ICFTU proposals in their speeches. It was and the IMF were arranged in the hope that claimed that this process had worked well this would lead to ongoing contacts and a on several occasions.17 more open and transparent policy development process. Unfortunately, in the early 1990s this objective was not achieved and The focus on Central the process of designing economic reforms and Eastern Europe in Eastern Europe remained the exclusive in the early and mid-1990s domain of the international financial institutions, finance ministers, central bankers Relations between the international trade and their advisers. union movement and the Bretton Woods Consequently, trade unions endeav- institutions took on a new dimension in the oured to influence Bretton Woods policies early 1990s, following the political changes in Eastern Europe through various other in Central and Eastern Europe. The intro- channels, including more regular contacts duction of a market economy, coupled with between senior trade union leaders from the dire economic circumstances of a num- both the WCL and ICFTU and the leader- ber of countries in the region, meant that ship of the World Bank and the IMF (see the influence of the Bretton Woods institu- box on the WCL and the Bretton Woods in- tions increased even further. Many of the stitutions in Chapter III). Again, the inter- reforms they recommended and the con- national trade union movement seemed ditions attached to loans were similar to the optimistic about the impact of this ap- stabilization and adjustment programmes proach. In reporting on one such meeting which they had been advocating in devel- in the mid-1990s, the ICFTU noted that the oping countries. International trade unions IMF Managing Director had addressed the like the ICFTU, WCL and the International conference and this supposedly provided Trade Secretariats (ITSs) rallied to support evidence of the increased interest of the both existing national unions in the region IMF and the World Bank in contacts with implementing internal political reforms the trade union movement. and emerging unions that were trying to defend the interests of their members

12 Notes 8 Pennant-Rea, R.: “Preacher and policeman”, in The Economist, 26 Sep. 1981. 1 Pennant-Rea, R.: “Hard pounding this gentle- 9 IMF Survey Supplement, Sep. 2000. man”, in The Economist, 24 Sep. 1983. 10 The Economist, 26 Sep. 1981, loc. cit. 2 Emmerij, L. et al.: Ahead of the curve? UN ideas 11 IMF Survey Supplement, Sep. 1999, p. 29. and global challenge (Bloomington, Indiana University 12 ICFTU: Report of the 13th World Congress, June Press, 2001), p. 44. 1983, p. 49. 3 ibid., p. 60. 13 ibid., p. 57. 4 Gold, J.: Legal and institutional aspects of the in- 14 Ahead of the curve?, op. cit. ternational monetary system: Selected essays, Vol. II 15 ICFTU, Report of the 13th World Congress, op. cit., (Washington, IMF, 1984), p. 18. p. 51. 5 See the article on the international monetary 16 ICFTU, Report of the 15th World Congress, March system published in The Economist, 29 Nov. 1980. 1992, p. 44. 6 Ahead of the curve?, op. cit., p. 63. 17 ibid., p. 45. 7 ibid., p. 69. 18 ICFTU, Activities Report, 1991-94, p. 66.

13 Trade unions and the global economy: An unﬁnished story

Chapter III Growing criticism of the Bretton Woods institutions and the ﬁrst signs of reform

Perhaps because of the Asian crisis and subsequent contagion and the growing public discontent with their policies, the Bretton Woods institutions announced a range of reforms to their procedures and programmes towards the end of the 1990s.

y the mid-1990s, the truth about the and programmes to trade unionists. The Bstructural adjustment policies of the union movement responded positively to Bretton Woods institutions was becoming these invitations and considerable effort well known. Most independent analyses of went into preparing comments on certain their impact were extremely negative and publications. For example, a significant ef- the number of policy-makers, NGOs, aca- fort was made to influence the contents of demics and other elements of civil society the World Development Report 1995: Work- that were highly critical of these institu- ers in an integrating world. Probably as a re- tions was beginning to mount, as shown, sult of this work, the Bank acknowledged for example, by the “50 Years is Enough” for the first time that trade union “voice” campaign launched by the United States could have positive economic value. Des- Network for Global Economic Justice. In- pite this, the Bank remained sceptical deed, the annual meetings of the Bretton about the economic impact of collective Woods institutions in recent years have be- bargaining and critical of bargaining at income a “lightning rod” for anti-globaliza- dustry, regional or national level. It was tion protesters. At the same time, the Bret- around this time (1994) that the ICFTU and ton Woods institutions started to come several ITSs decided to open a small two- under attack from various “right-wing” person Washington office to act as a con- supporters and some conservative govern- tact point with the Bretton Woods institu- ments and isolationist groups. tions. In recent times this office has been It was against this background that able to provide the international trade these two international financial institu- union movement with extremely valuable tions started to try to improve their public and up-to-date information and analysis image and give the impression of greater on the IMF and the World Bank. The office transparency. The World Bank was ini- has also facilitated new and deeper dia- tially more successful than the IMF in this logue between the Bretton Woods institu- regard. These efforts included inviting tions and a wide range of trade union or- representatives of the international trade ganizations, and has made follow-up of union movement and other international discussions much more systematic. organizations like the ILO to make com- The approach of the international trade ments on the drafts of their flagship pub- union movement to the Bretton Woods lications (the World Development Report institutions was further diversified by sec- and the World Economic Outlook).1 The Bret- tor-level initiatives of a number of ITSs.2 ton Woods institutions also started to put (See boxes describing the activities of Ed- considerable resources into organizing ucation International, the Public Services training seminars to explain their policies International, the International Transport

14 Workers’ Federation and the International The Asian crisis led to a further inten- Federation of Building and Wood Workers.) sification of contacts between the interna- In the latter part of the 1990s, dialogue tional trade union movement and the between the international trade union leadership of the World Bank and the IMF. movement and the Bretton Woods institu- Throughout 1998 and 1999, trade unions tions was dominated by the Asian econ- organized a myriad of meetings in the omic crisis and consequent attempts to re- Asian region and produced many publi- form and strengthen the international fi- cations concerning the economic crisis, nancial architecture. The Asian economic making policy proposals to restore econ- crisis, which spread rapidly into Latin omic stability and growth. Representa- America and Eastern Europe, revealed the tives of the Bank and the Fund were in- enormous discrepancy that exists between volved in many of these activities. The for- an increasingly sophisticated and dy- mer Managing Director of the IMF, Michel namic international and financial world Camdessus, has subsequently often re- and the lack of a proper institutional ferred to the positive collaboration be- framework to regulate it. The crisis also tween the Fund and the international trade gave brutal emphasis to the spiralling dis- union movement during the Indonesian parity between rich and poor, highlighting economic and political crisis. While it is the fact that, despite unparalleled econ- difficult to assess the impact of these con- omic growth, increasing numbers of tacts on the economic policies adopted by people remain trapped in abject poverty. the Bretton Woods institutions and Asian

The WCL and the Bretton Woods institutions The World Confederation of Labour (WCL) has Director of the IMF in order to obtain more actively lobbied the World Bank and the IMF, precise knowledge of the operations of these arguing for similar policy proposals as the institutions. ICFTU. Discussions between the WCL and the ● This was followed by the organization of reg- Belgian representatives at the Bretton Woods ional seminars; IMF and World Bank staff institutions began informally in the 1970s. were invited to participate in detailed discus- Discussions in the 1970s and 1980s centred sions with trade union representatives. mainly on the role and power of multinational ● enterprises. The nature of this relationship has WCL delegations have visited the IMF and evolved since the late 1980s, as the WCL has World Bank headquarters in Washington for tried to establish a more structured relationship discussions with both technical staff and the with the IMF and the World Bank. The aim was leadership of these organizations. In recent twofold: years, this has become an annual event. In March 2001, the WCL and representatives of ● to increase the awareness of affiliated trade the Bretton Woods institutions met in Wash- unions about the impact that IMF and World ington; emphasis was placed on the need to Bank policies were having on the economic set up more structured links between the and social policies in their countries; and Bank and the Fund and trade unions. Both the ● to make the leadership and staff of the IMF IMF and the World Bank responded positively and the World Bank understand that struc- to this proposal but so far have not taken con- tural adjustment programmes and other poli- crete steps to establish a structured link. cies should not be drawn up without paying ● In 1998, the WCL opened an office in Wash- due attention to their consequences for ington with one part-time staff member re- poverty and workers’ rights. sponsible for the follow-up work with the IMF and the World Bank. During the 1990s, contacts between the WCL ● The WCL is now considering establishing a and the Bretton Woods institutions became working party on the Bretton Woods institu- more frequent and more qualitative. tions so that their policies can be monitored ● In 1989-90, an economist from the Belgian more closely and contacts between the reg- trade union ACV-CSC worked for several ional organizations of the WCL and the Bret- months in the office of the Belgian “country” ton Woods institutions strengthened.

15 Education International Public Services International and the International Transport Education International (EI) was formed in Workers’ Federation January 1993 by the merger of the Interna- tional Federation of Free Teachers Unions Public Services International (PSI) and the In- (IFFTU) and the World Confederation of Or- ternational Transport Workers’ Federation ganizations of the Teaching Profession (ITF) have sought to engage the IMF and the (WCOTP). Since its formation it has worked to World Bank in dialogue on a range of issues counter the negative impact of structural ad- including quality in public services, privatiza- justment and “education reform” on education and contracting-out issues, structural tion systems, and employment conditions in adjustment and general cutbacks in public the education sector. EI has successfully urged services. and assisted its affiliates to lobby at the na- A formal partnership has been estab- tional level to press the World Bank to hon- lished between the World Bank, PSI and ITF our commitments to triple lending for edu- with the ICFTU and the Organisation for Econ- cation, which it made at the 1990 “Education omic Co-operation and Development’s for All” Conference organized by the United (OECD) Trade Union Advisory Committee Nations Educational, Scientific and Cultural (TUAC), known as the Public Enterprise Re- Organization (UNESCO), UNICEF, UNDP and form and Labour Network (PERL-NET). The the World Bank. Network was established to develop constructive dialogue between the Bank and labour organizations on issues surrounding public sector reform and its consequences. governments, many observers have ac- Neither the PSI nor the ITF have yet reported knowledged that collaboration with the any significant policy advances achieved through PERL-NET, but it is seen as an impor- Bretton Woods institutions and the Asian tant step in strengthening dialogue and a Development Bank in the context of the recognition in itself of the increasing strength Asian crisis probably helped to promote a of labour’s voice in the World Bank. higher degree of social dialogue in some In contrast to EI, PSI has reported that re- countries of the region. Questions remain, quests to affiliates to lobby Executive Direc- tors of the Bank and thus address the Bank at however, regarding the durability of this the political level, have met with almost total dialogue. failure. PSI has attributed this to a lack of confidence amongst affiliates to tackle their own government or senior Bank officials on such Poverty reduction and debt relief seemingly technical issues. PSI has responded to this challenge and sought to meet the become top priorities needs of its affiliates with a range of information and campaign materials, including a Perhaps because of the Asian crisis and new, Internet-based publication called Stop subsequent contagion and the growing the world. This explains globalization and its consequences for PSI members, analyses the public discontent with their policies, the organizations and institutions which govern Bretton Woods institutions announced a and impact on the global economy, and ex- range of reforms to their procedures and plains why and how PSI and its affiliates can programmes towards the end of the 1990s. seek to influence global economic policy. At their annual meeting in September 1999, the two institutions agreed to place poverty alleviation at the centre of their duction as the primary goal. An enhanced programmes in the poorest member coun- Heavily Indebted Poor Countries (HIPC) tries by making a series of changes to the initiative for debt relief was announced system and structure under which conces- following a major internal review by the sional lending and debt relief are afforded Bank and the Fund. It was also decided to developing and transitional countries. that all concessional lending and debt re- The IMF replaced the much criticized lief should be underpinned by a poverty Enhanced Structural Adjustment Facility reduction strategy, summarized in a (ESAF) with a new Poverty Reduction and poverty reduction strategy paper (PRSP) Growth Facility (PRGF), with poverty re- to be endorsed by the Executive Boards of

16 gets are appropriately identified and at- The International Federation tained. They must be prepared by country of Building and Wood Workers authorities, in accordance with the principles embedded in the CDF, for submission The International Federation of Building and 5 Wood Workers (IFBWW) has campaigned to the Bank and the Fund. The need for since 1996 for the inclusion of core labour broader consultation at national level was standards in the procurement guidelines, given added emphasis in the World Bank’s standard bidding documents (SBDs) and loan World Development Report 2000/2001. The agreements of the World Bank. The IFBWW has worked with its affiliates to engage the report asserts that sustained achievement Bank at headquarters and at operational level of poverty reduction requires empower- in borrowing countries. ment of the poor, strengthening of civil so- In October 2000 the Bank announced that ciety organizations – including trade it would consider upgrading the optional sub- unions – and the building of alliances be- clauses on labour contained in the SBDs to the status of “mandatory”. The Bank staff ac- tween the poor and the non-poor. Despite knowledged that the texts were unlikely to the apparent commitment of the World include clauses incorporating the core labour Bank and the IMF to increasing consult- standards – such as freedom of association ation with civil society, there is evidence and the right to bargain collectively. However, Bank officials did indicate that they were con- that more is needed. Five full PRSPs have sidering the inclusion of some wording to give now been endorsed by the Executive effect to ILO Convention No. 182, in order to Boards of the IMF and the World Bank;6 ensure that the worst forms of child labour trade unions in Burkina Faso, the United are not employed on projects funded by the Republic of Tanzania and Uganda report Bank. The revised SBDs were due to be published in May 2001; at the time of writing, that there was little or no consultation with 7 these changes have not been implemented trade unions in the PRSP process. In the but dialogue is continuing between the Bank case of Bolivia, the Bretton Woods assess- and the trade union movement on the issue. ment claims that the Government made a bona fide effort to develop a participatory approach to the formulation of the strategy, the Bank and the Fund before lending or but also notes that NGOs and civil society debt relief were effected.3 PRSPs will also groups have raised questions as to whether provide context to the Bank’s Country As- some consultations were unduly influ- sistance Strategies (CAS) (see box for de- enced by local decision-makers, whether tails of the PRGF, CAS and the Compre- vulnerable groups were well represented, hensive Development Framework (CDF). specifically women and indigenous people, The fact that developing and transition and whether the methodology used pro- countries have strategies for poverty re- moted real participation, in that it was duction is not new, but the Bretton Woods highly structured and the agenda of the dis- institutions have acknowledged that past cussions was not sufficiently flexible. The strategies “vary significantly in scope, international trade union movement has depth, and participatory thrust. They do responded favourably to the stronger em- not always make clear the causal links be- phasis on civil society consultation incor- tween public action and poverty reduc- porated in the PRSP process, and has tion, and may not reflect a participatory sought to support it. The ICFTU has pro- approach [...] The goal is to help catalyse duced a Trade Union Guide to PRSPs for its more poverty reduction”.4 affiliates, aimed at encouraging and assist- PRSPs are intended to facilitate this ing trade union involvement in the process. goal by defining how financial assistance In July 2001, an ICFTU delegation meeting will be focused on bettering the situation with representatives of the Bretton Woods of the poorest members of society. The institutions expressed disappointment at PRSP process has been designed to include the lack of substantial progress in securing more systematic consultation with civil so- effective trade union participation in the ciety to ensure that poverty reduction tar- PRSP process. The trade union movement

17 PRGF, CAS and CDF The Poverty Reduction and Growth Facility The Comprehensive Development Frame- (PRGF) is a lending facility for low-income coun- work (CDF) is essentially a process or way of tries, with poverty reduction as its primary goal; doing business which is intended to achieve the specific measures supported by the PRGF greater development effectiveness. The CDF is loan arrangement have to be derived from the rooted in the same macroeconomic approach PRSP. The IMF claims that the PRGF’s emphasis that has always characterized the IMF and the on country leadership and enhanced collabora- World Bank, but it recognizes the need to give tion with the World Bank mean that IMF condi- equal consideration to social, structural and in- tionality is less extensive and more focused stitutional policies. The CDF takes a holistic ap- on the Fund’s core areas of responsibility than proach to development policy, acknowledging before.1 the need for such policies to be developed In theory at least, this should create a more through consultation with civil society and with coherent and country-led approach to poverty external donors.2 reduction, with a clear role for civil society par- Accordingly, the strategies should be: ticipation. ● country driven, involving broadly based par- The Country Assistance Strategy (CAS) is the ticipation by civil society and the private sec- main basis for Board review of the World Bank Group’s assistance strategy for borrowers from tor in all operational steps; the International Development Association ● results-oriented, and focused on outcomes (IDA) and the International Bank for Recon- that will benefit the poor; struction and Development (IBRD). The CAS doc- ● comprehensive, in recognizing the multi- ument describes the Group’s strategy based on dimensional nature of poverty; but also pri- an assessment of priorities in the country; it in- oritized, so that implementation is feasible in dicates the level and composition of assistance both fiscal and institutional terms; to be provided based on the strategy and the ● country’s portfolio performance. Key elements partnership-oriented, involving coordinated of the CAS are discussed with the government participation of development partners (bi- prior to Board considerations, but it is not a ne- lateral, multilateral and non-governmental); gotiated document. Any difference between and the country’s own agenda and that of the Bank ● based on a long-term perspective for poverty are highlighted in the CAS document. reduction.

1 See IMF factsheet on Poverty Reduction and Growth Facility (PRGF), Mar. 2001. 2 CDF principles were ﬁrst outlined in World Bank President James Wolfensohn’s address on “The challenge of inclusion” given in Hong Kong in autumn 1997 and further elaborated in his address on “The other crisis” given to the annual meetings in 1998. has proposed that civil society consulta- prior general agreement of the govern- tion should be a condition of PRSP ap- ment;8 the need for government agreement proval and has requested the IMF and the should be removed. Gender is not yet World Bank not to endorse any future being addressed in a strong and consistent PRSPs developed without consultation manner in the PRSP process. The World with trade unions. No commitments have Development Movement examined the been given by the World Bank or the IMF gender content of interim PRSPs (I-PRSPs) in this regard. PRSPs should contain and PRSPs and concluded that, whilst gen- clearer and more detailed information der is at least mentioned in almost all concerning the level of consultation and cases, there are very few direct proposals the parties to it. This would be made eas- to counter the poverty consequences of ier if the World Bank took a more uniform gender inequality. Balanced, broadly approach to civil society consultation in all based civil society consultation could re- aspects of development assistance. While sult in PRSPs designed to help women in theory the Bank strongly supports con- overcome many of the additional hurdles sultation in the CAS process (for example), they face in escaping poverty. Gender dis- in practice this is only pursued with the crimination prevents women from obtain-

18 ing access to land, credit and ownership of assets. In employment, reducing inequali- The cost of debt ties can increase women’s access to and opportunities within employment, and Uganda’s total debt in 1998 was US$3.6 billion; debt service has consistently consumed lead to an increase in women’s income and more than spending on health and education. national income. Investments in education Uganda has one of the lowest life expectan- for girls and women can have major ben- cies in the world – 40.2 years in 1994. efits in terms of bringing down child mor- Burkina Faso is one of the poorest countries tality, reducing overpopulation, boosting in the world; its total debt is two and a half production and increasing women’s voice times the country’s total annual exports, and in local and national affairs. more than half of annual gross national product (GNP). Total debt in present value terms The PRSP process is proving to be slow. has risen by 20 per cent in two years. As of June 2001, only five countries had completed PRSPs and another 36 had in- Mozambique is another of the world’s poor- 9 est countries and is unable to make two-thirds terim PRSPs. More than 80 countries are of scheduled debt service repayment. After eligible for concessional lending and HIPC three attempts to cut debt, Mozambique will debt relief. This means that more than 75 continue to pay nearly US$1 million per week countries have still to complete PRSPs; and spend almost as much on debt service as there is therefore much to be done. The on the health service. Bretton Woods institutions have defended In 1996, Nicaragua paid US$221 million in the lengthy time frames involved in PRSP debt service; this was over 50 per cent of gov- formulation by citing the need for a qual- ernment revenue. The average debt to exports ratio for 1994-96 was 763 per cent. itative approach. Hastily developed strategies are likely to be poorly devised, …these countries are eligible for HIPC debt lack consultation and be inherently prone relief. to failure. These are legitimate concerns, shared by the trade union movement. Bangladesh paid debt service of almost However, whilst quality must be achieved, US$700 million in 1998, about the same this must not be used as a “catch-all” ex- amount as the country spent on health. For every dollar received in aid grants the coun- cuse to avoid acknowledging and ad- try spends US$1.04 dollars on debt service. dressing the many logistical and institutional problems facing governments in the Nigeria’s debt is estimated at over US$30 billion, 14 per cent of Africa’s total debt. Since PRSP process. The commitment of greater 1980, debt and education spending have technical and financial resources to the been broadly reversed, with debt rising from process is necessary to speed things up. 1.9 per cent to 8 per cent of GNP, and educa- Whilst poverty reduction strategies tion spending falling from 6.4 per cent to 1.3 per cent. In 1996, Nigeria paid out US$104.45 should help to improve the focus of future in debt service for every dollar received in aid financial assistance, the benefits will be di- grant. Even so Nigeria is only paying a little minished if countries must continue to over half of its scheduled debt. struggle with the hangover of existing Haiti has a debt-to-export ratio of 300 per debt. Trade unions are particularly con- cent. Its debt was US$302 million in 1980 and cerned that continued emphasis by the that has more than tripled since then. In 1997 Bank and the Fund on reduced social ex- it was US$1.1 billion, almost 40 per cent of penditure in order to receive debt relief GNP; 1996 figures for debt service repayment show that more resources were spent on re- and other assistance will work at cross paying debt than were spent by the Govern- purposes with the stated objective of the ment on health. PRSP process. It is not clear to what extent …these countries are not eligible for HIPC a poverty reduction strategy can be truly relief. Why not? country-led and -owned if it must always be developed within the parameters of a Source: Jubilee 2000UK web site http://www. proven track record of following pro- jubilee2000uk.org grammes supported by the IMF and the

19 World Bank. The need for efficient and ef- particularly difficult to understand. The fective debt relief is clear. ICFTU has already questioned the exclu- The crippling burden of debt under- sion of Nigeria,13 the most indebted coun- mines financial assistance not just in the try in Africa, and Haiti, the poorest coun- form of loans from the Bank and the Fund try in the Americas; both these countries but also other development aid. All too are classified by the World Bank as severely often, these funds are used to service ex- indebted low-income countries. Not only isting debt rather than for the intended is the number of countries limited, but the purpose of poverty reduction and devel- progress of granting debt relief under the opment. To make matters worse, the HIPC initiative has been slow.14 By Sep- amount of money available in the form of tember 2000, only ten countries had development aid declined steadily during reached the so-called HIPC “decision the 1990s. The reduction in debt service point”, that is, the point at which the Exec- will not be enough to compensate for the utive Boards of both the World Bank and fall in aid grants, which in 1997 were only the IMF determine that a country’s debt 59 per cent of those in the peak year of 1991. cannot be brought to sustainable levels by In 1999, the IMF undertook a major in- other means and that at least partial can- ternal review of the Heavily Indebted Poor cellation is required. In the autumn of 2000, Countries (HIPC) initiative. The review re- the Bank and the Fund announced an ac- sulted in an enhanced HIPC initiative celerated poverty reduction and HIPC which the World Bank and the IMF de- process, based on increased technical as- clared to be “deeper, broader and faster”. sistance to the countries concerned and a The Bank and the Fund have stated that the more flexible approach to the criteria for principal objective of the debt initiative for receiving debt relief. Consequently, by July heavily indebted poor countries is to bring 2001 a total of 23 countries had requests for the country’s debt burden down to sus- debt reduction approved and three more tainable levels,10 subject to satisfactory pol- are pending. The IMF claims that the pack- icy performance, so as to ensure that ad- ages will lift US$34 billon – half of what justment and reform efforts are not put at they owe – from the shoulders of these risk by continued high debt and debt ser- countries.15 However, when the 41 HIPC vice burdens.11 The poor countries for countries are viewed as a group, external which debt burdens are said to constitute a debt as a proportion of GDP will decline risk to development are those which are el- from 99.5 per cent in 2000 to 94.5 per cent igible for concessional loans from either the in 2001, which is an extremely modest de- IDAor the IMF’s PRGF. This would amount crease. By June 2001, despite efforts to im- to some 80 countries, but the number qual- prove the performance of the HIPC initia- ifying for the HIPC initiative is reduced by tive, only Uganda and Bolivia had reached another qualifying criteria that the country the so-called “completion point” in the must face an “unsustainable debt situation” process and are now receiving debt relief. even after full application of previously Significantly, only Chad has reached the agreed debt relief mechanisms (such as the “decision point” since December 2000, in- application of “Naples terms” under the dicating a slowing down in what is already Paris Club agreements). A total of 41 coun- a less than speedy process.16 tries were identified by the IMF as eligible The World Bank and the IMF have for partial debt cancellation by the end of taken limited action to accelerate the 2000.12 This does not compare favourably process and have announced that special with the Jubilee 2000 proposal (endorsed by measures will be taken to assist the 11 post- the ICFTU), which covered 52 very poor conflict countries which make up the ma- and heavily indebted countries, including jority of the 19 remaining countries to meet some that are excluded from the HIPC ini- eligibility criteria.17 The international trade tiative (Bangladesh, Gabon, Haiti, Nepal union movement considers that much and Nigeria). Some of these exclusions are more needs to be done to increase the num-

20 ber of countries eligible for HIPC assistance and to increase the level of debt write-off Streamlining loan conditionality provided to the countries concerned. Trade at the IMF unions have proposed that respect for The IMF has indicated a desire to streamline human rights, including fundamental loan conditions and has identified three workers’ rights, should be a precondition major aspects to this: for HIPC debt relief. The World Bank and 1. Reassessing the scope of conditionality – the IMF have not given any indication of i.e. what policies are to be covered by the their willingness to review the list of HIPC Fund’s conditionality – particularly in structural areas. countries. For the fortunate few, the debt 2. Choosing the appropriate degree of detail reductions should grant at least temporary of conditionality – i.e. how these policies relief, but there is concern that even the re- are to be monitored. duced levels of debt may not be at sustain- 3. Clarifying the boundaries between what is able levels. The international financial in- covered by conditionality and what is not, stitutions determine sustainable levels on as well as between the Fund’s conditional- the basis of growth projections. In simple ity and that of other institutions. terms, the World Bank and the IMF assume that the country’s economy will grow at a certain rate and that exports will provide a Köhler, has expressed his intention to given return; this figure is used in the cal- streamline conditionality and give greater culation of debt-to-export ratios, which scope for national ownership of IMF- must not exceed 250 per cent. If the coun- funded programmes (see box). try’s economy does not perform as well as Despite this, there is little indication expected, there is a risk that the debt will that the Fund will be any less stringent in become unsustainable; in other words the requiring specific structural adjustment country will not have enough money to run measures such as reductions in public ex- itself and service the debt. penditure, privatization and trade liberal- In the context of the recent general ization. This was confirmed by the Fund’s slow-down in the global economy, this be- First Deputy Managing Director, Stanley comes a real concern. The biannual World Fischer, at an IMF press conference in May Economic Outlook released on 26 April 2001 2001, when he said that, while more contained IMF predictions that the global streamlined conditions were designed to economy will grow by only 3.2 per cent in strengthen conditionality and make it 2001, compared with 4.8 per cent in 2000. more effective, there was no intention of If the global economy is slowing down, it replacing macroeconomic conditionality is extremely unlikely that developing and by governance conditionality. transition economies will meet their pre- Indeed, during discussions between an dicted growth levels, and therefore even ICFTU delegation and representatives of rescheduled debt is likely to remain un- the Bretton Woods institutions in July sustainable. 2001, it was confirmed that there has not been much substantive change in the macroeconomic aspects of the condition- Modifications to conditionality ality attached to Bretton Woods assistance. and privatization programmes Nonetheless there are some signs of improvement. For example, the World Bank Financial assistance from the Bretton and the IMF have acknowledged that in Woods institutions has gone hand in hand many countries, rapid privatization has with some form of conditionality since the had disastrous consequences. Recently 1950s and, as already indicated, the scope they have also conceded that the pace of of conditionality increased dramatically in financial sector liberalization was some- the 1980s and 1990s. More recently, how- times excessive in previous stabilization ever, the IMF’s Managing Director, Horst and adjustment programmes. Several

21 World Bank studies have revealed that in many cases, government privatization The Bretton Woods institutions policies adopted at the behest of the World and privatization Bank and IMF have led to massive re- The December 2000 CAS for Uganda criticizes trenchments, a decline in services accom- the fact that many privatization schemes re- panied by rising prices and a failure to im- main incomplete and warns that Bank fi- prove overall economic efficiency. nancing for a new hydroelectric project is “tied to milestones in the sector reforms, in- The failure of privatization has been cluding progress towards the privatization of most pronounced in countries which lack the Uganda Electricity Board”. an appropriate legal and institutional en- An October 2000 IMF Article IV report crit- vironment, properly functioning financial icizes the Mali Government for “insufficient institutions and an adequate regulatory progress” in privatizing key sectors such as cot- ton, energy, telecommunications and trans- framework; this could certainly be said of port. It urges the authorities to show “re- most developing countries and many tran- newed resolve” in pushing ahead with pri- sitional ones. This fact is reflected in a vatization. number of recent country reports pre- The same policies are expounded to in- 18 dustrialized countries: pared by the Bank and the Fund. These In November 2000, the IMF urged the admissions have been welcomed by trade Spanish Government in an Article IV report to unions, but they must be reflected in adopt “further measures to enhance compe- changes in contemporary policies. In prac- tition in key areas such as electricity”. tice, it appears that privatization remains a frequent contingent of Bank and Fund support for the development of key ser- ments were made in the context of a coun- vices. Laudable policy “changes” at head- try struggling to recover from the devas- quarters level thus appear not to have been tating effects of prolonged civil war. translated into change at country level, With regard to privatization and trade and there is little evidence of a new, less liberalization, trade unions believe that: market-driven approach in country-level ⅙ Fund and Bank resources should be interventions of the Bank and the Fund. available to develop and modernize Similarly, although past mistakes have publicly owned enterprises where ap- been acknowledged, there appears to be propriate. little substantive change in the trade liberalization and investment policies being ex- ⅙ Countries’ desires to achieve food se- pounded by the international financial in- curity and promote job creation should stitutions. Despite claiming to be more be respected. flexible in relation to requiring developing ⅙ There is a need for infrastructure de- countries to remove trade barriers, they velopment and diversification of ex- seem to retain a strong commitment to port industries to make an export-led export-oriented development strategies. development strategy feasible. For example: The January 2001 IMF Article IV con- ⅙ Privatization and liberalization sultation report for Haiti praises the Gov- schemes should be accompanied by in- ernment’s open trade policy, one of the stitutional and regulatory support, least restrictive in the region, despite the which has been lacking in the past. hardships that unrestricted agricultural imports have created for small farmers. The “push to privatize” is particularly Also in January 2001, the Article IV re- strong in areas of social protection. In Jan- port for Mozambique was critical of the uary 2001, the World Bank launched a new Government’s attempts to protect domes- social protection sector strategy “From tic food production and processing, citing Safety Net to Springboard”. The strategy them as “troubling evidence of an inward- makes it clear that the Bank will continue oriented industrial policy”. These com- to promote the scaling back of state-run

22 old-age pension schemes in favour of pri- sions on “Social security – Issues, chal- vate defined-contribution schemes. This lenges and prospects” recognizing that policy is based on the contentious pre- “[social security] is an indispensable part sumption that private market-based of government social policy and an im- schemes are more efficient vehicles for de- portant tool to prevent and alleviate livering social protection. poverty. [...] The State has a priority role in The Bank’s strategy recommends the facilitation, promotion and extension against publicly owned and administered of coverage of social security.”19 The re- programmes such as comprehensive old- sponse of the Bretton Woods institutions age pensions, unemployment insurance to these recommendations and trade and vocational training. The Bank’s policy union concerns has not been encouraging. is to encourage governments to scale back public schemes in favour of multi-pillar Notes systems in which a substantial share of pensions are voluntary and privately managed. 1 For example, Public Services International Social security reforms were a major played a particularly strong role in drafting the topic of the July 2001 consultations be- World Bank’s World Development Report 1997: The State in a changing world, and were subsequently tween the Bretton Woods institutions and asked to participate in an electronic consultation on the ICFTU, with the latter pointing out the preparation of the World Development Report that: 2000/2001: Attacking poverty. ⅙ 2 These initiatives are described in greater detail In several republics of the former So- in the ICFTU’s “Millennium mapping” document. viet Union, pension reforms funded by 3 This means that approximately 80 countries the World Bank have entirely elimi- will be required to formulate PRSPs. In March 2001, nated the public pillar. 77 countries qualified for PRGF lending. In July 2001, ⅙ 79 countries qualified for IDA lending. In November 2000, the Bank and the 4 World Bank Group: Poverty Reduction Strategy Fund endorsed the Argentinian Gov- Paper, Internal Guidance Note, 21 Jan. 2000, p. 1. ernment’s proposal to dismantle the 5 IMF: Communiqués of the Development Commit- public pension scheme. This plan was tee, 27 Sep. 1999. only abandoned by the Government in 6 Bolivia (Mar. 2001), Burkina Faso (May 2000), the face of massive popular opposition. Mauritania (Dec. 2000), United Republic of Tanzania (Oct. 2000) and Uganda (Mar. 2000). Trade unions believe that social safety 7 Combatting growing world inequality and renewed nets are an imperative, and should include threats of international financial instability, statement by the ICFTU, TUAC and ITS to the spring 2001 meet- old-age pensions, unemployment benefits ings of the IMF and the World Bank (Washington, and child support, as well as maternity, 29-30 April, 2001). sickness and injury benefits. In their view, 8 “Country Assistance Strategies (CASs): Ten fea- the World Bank and the IMF should give tures of a good CAS”, at the World Bank web site: positive encouragement and support to http://www.worldbank.org/html/pic/cas/tenfeat. governments in this regard. Trade unions htm 9 are not alone in this view. The United Na- I-PRSPs summarize the current knowledge and analysis of a country’s poverty situation, describe the tions General Assembly Special Session existing poverty reduction strategy and lay out the (UNGASS) in Geneva in 2000 concluded process for producing a fully developed PRSP in a that international financial institutions participatory fashion. should participate in an ILO-led process to 10 The IMF considers a debt-to-exports ratio encourage and support governments in above 250 per cent to be unsustainable. developing a comprehensive system of so- 11 See World Bank web site: http://www.world- cial safety nets, including retirement pen- bank.org/hipc 12 sions, unemployment benefits, child sup- The countries in question were: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central port, and maternity, sickness and injury African Republic, Chad, Congo, Côte d’Ivoire, Demo- benefits. The International Labour Confer- cratic Republic of the Congo, Ethiopia, Gambia, ence in 2001 adopted a series of conclu- Ghana, Guinea, Guinea-Bissau, Guyana, Honduras,

23 Kenya, Lao People’s Democratic Republic, Liberia, 16 Information obtained from the World Bank Madagascar, Malawi, Mali, Mauritania, Mozam- web site: http://www.worldbank.org bique, Myanmar, Nicaragua, Niger, Rwanda, Sao 17 This intention was announced at the Minister- Tome and Principe, Senegal, Sierra Leone, Somalia, ial Level Meetings of the IMF’s International Mone- Sudan, United Republic of Tanzania, Togo, Uganda, tary and Financial Committee and the World Bank’s Viet Nam, Yemen and Zambia. Development Committee, held in Washington (29- 13 Nigeria was originally classed as an HIPC 30 April 2001). country but was removed from the list in 1998. 18 See, for example, the World Bank Country As- 14 See Combatting growing world inequality and resistance Strategy (CAS) released for Slovakia in Jan- newed threats of international ﬁnancial instability, op. cit. uary 2001 and the November 2000 CAS for Jamaica. 15 See IMF factsheet Debt relief for poor countries 19 ILO: Provisional Record No. 16, International (HIPC). What has been achieved?, Apr. 2001. Labour Conference, 89th Session, Geneva, 2001.

24 Trade unions and the global economy: An unﬁnished story

Chapter IV Labour issues at the IMF and the World Bank

Historically, the Bretton Woods institutions have been extremely reluctant to promote core labour standards and have hidden behind a narrow interpretation of their constitutions.

ne of the major issues to dominate di- called on the Bank and the Fund to sup- Oalogue between the Bretton Woods in- port the ILO’s work. Fully integrating the stitutions and the international trade Bretton Woods institutions in the promo- union movement during the latter part of tion of the ILO Declaration was a key ob- the 1990s was that of workers’ rights. A jective of two major high-level ICFTU mis- first major step was taken in 1995 when the sions to Washington (in January 1999 and international trade union movement suc- October 2000). These two missions took cessfully lobbied the World Bank over the consultations with the Bretton Woods in- content of the World Development Report stitutions to new levels by focusing lobby which that year was devoted to labour is- efforts on their Executive Directors (the sues. The trade unions convinced the Bank government representatives on their to adopt a relatively positive perspective Boards), rather than just dealing with their about the impact of trade unions and to leadership and staff. support the concept of collective bargain- The October 2000 ICFTU mission to the ing, at least at a decentralized level. Fol- Bretton Woods institutions yielded lowing the adoption of the ILO Declaration promises of closer collaboration on vari- on Fundamental Principles and Rights at ous issues and some interesting discus- Work in 1998, considerable effort has gone sions about establishing a “TUAC” trade into getting the Bretton Woods institutions union consultative-type structure within to promote the Declaration and all the core the institutions. This is unlikely to happen labour standards. Historically, the Bretton in the near future, but James Wolfensohn, Woods institutions have been extremely President of the World Bank, did propose reluctant to promote these standards and some staff exchanges and training pro- have hidden behind a narrow interpreta- grammes between global unions and the tion of their constitutions or Articles of Bank. However, the discussions on core Agreement which, they claim, prohibit labour standards with the World Bank them from interfering in national political were particularly difficult. According to affairs and require them to promote only the joint ICFTU-IMF-World Bank report policies that have a beneficial economic on the October 2000 meeting, Mr. Wolfen- impact. In the past they have argued that, sohn noted the Bank’s constraints on core because of these rules, they have a partic- labour standards, including the difficulty ular difficulty in promoting the core Con- in imposing them on unwilling countries ventions concerning freedom of associa- and internal dissent on the Bank’s Board tion and collective bargaining.1 It was of Directors, but welcomed increased con- therefore significant that the 1998 G8 meet- sultation with the ICFTU and agreed to de- ing of Finance and Labour Ministers in velop a workable mechanism for it. Para- London, where trade unions were present, doxically, the discussions with the IMF

25 seemed more productive. The abovemen- medium-sized enterprises with greater tioned report also states that, on core autonomy in setting wages. labour standards, staff indicated that the This report was issued without consul- Fund management and staff fully sup- tation with the ILO and despite the fact ported the objective of improving social that the IMF’s Managing Director has com- conditions of labour, including the obser- mitted his institution to promoting all the vance of labour standards, and called for core Conventions. More specifically, in di- enhanced ILO surveillance of the imple- alogue between senior officials of the ILO mentation of such standards. and Bretton Woods institutions in the last The mission of the Executive Commit- year, it was reported to the ILO Governing tee of the WCL in March 2001 discussed Body that an agreement had been reached the same questions with the World Bank whereby the Bretton Woods institutions and the IMF, with similar results. Mr. would accept the principles of collective Wolfensohn said that the Bank agreed with bargaining underpinning Convention No. core labour standards, except those related 98. Article 4 of Convention No. 98 allows to freedom of association. However, he ex- the parties to determine at what level col- pressed his willingness to discuss this lective bargaining should take place; the issue with the Bank’s Board. The WCL fol- IMF report might be seen as advising the lowed up with a letter in May 2001 to re- Government of South Africa to infringe mind Mr. Wolfensohn of the commitments that principle. made on this issue. No response had been On a more positive note, there was a received at the time of writing. change in tune from the World Bank in the On the WCL proposal to include core months following the October 2000 trade labour standards in Article IV discussions union mission to Washington. This can be and in PRSP/PGRF documents, Horst attributed to follow-up work by the Kohler, the Managing Director of the IMF, ICFTU, but may also be related to corre- indicated that the Fund was trying to de- spondence that Public Services Interna- velop a “trust-building” relationship with tional (PSI) initiated in early 2001 with Dr. countries and was therefore attempting to Robert Holzmann, Director of the Social limit the scope of loan conditions. Mr. Protection Unit at the World Bank. This Kohler reassured the delegation that, after correspondence included the issue of the Asian crisis, the social dimension was World Bank support for the ILO core in the minds of chiefs of missions, staff and labour standards. Dr. Holzmann informed country directors. However, the WCL del- PSI that: egation found that IMF staff were reluctant to read core labour standards into the The Bank fully and unambiguously sup- Fund’s statutes without a clear political ports the promotion of all four core labour signal from the IMF’s Board. standards (elimination of child labour, a Trade unions still observe important ban on forced labour, equal opportu- contradictions in the Fund’s stated policy. nity/anti-discrimination, and the right of In the first half of 2001, the IMF released freedom of association and collective bar- its Article IV report on South Africa in gaining). To this end the Bank has: (i) de- which it severely criticized the lack of flex- veloped a training course for Bank staff on ibility in the labour market and strongly trade union relationships; (ii) developed a recommended greater decentralization of tool kit on CLS for Bank staff preparing the country’s collective bargaining system. CASs; (iii) explored with the ILO and the According to an IMF summary of its own International Confederation of Free Trade report, the Fund recommended that Unions (ICFTU) the involvement of unions labour legislation be reviewed regularly to in the PRSP process; (iv) encouraged coun- eliminate labour market distortions, and try directors and mission leaders to estab- that the collective bargaining system be lish working relations with trade unions in decentralized to provide small and client countries; and (v) established an an-

26 nual consultation process with the ICFTU. cludes specific recommendations on This promotion is in line with the 1998 ILO labour policy for the Government of Pres- Declaration. ident Vincente Fox, most notably proposals for increasing the “flexibility” of Mex- There is also some encouragement in ican labour. In concrete terms, the report the fact that the Bank’s social sector strat- recommends that current regulations egy policy document acknowledges that mandating severance pay, collective bar- “labour is often poor people’s main or only gaining, exclusion contracts, obligatory asset” and that “respect for basic labour benefits, restrictions on contracts for tem- rights [is among] the first and best ingre- porary employment and apprenticeships, dients for dealing with risk and enhancing seniority-based promotion schemes, com- welfare”. Accordingly, the Bank now re- pany-sponsored training programmes quires an appraisal of the application of and company payments to social security core labour standards in the CAS of coun- and housing plans should all be reviewed. tries eligible for concessional lending, i.e., the Bank’s poorest client countries. To aid its staff in this, the Bank has prepared a Financial market reforms and “tool kit”2 explaining the core labour stan- the Bretton Woods institutions dards and how they should be incorporated in the Bank’s activities. The Bank has The trade union movement has also stated that it will now systematically con- pressed for better regulation of interna- sult with trade unions in the preparation tional financial markets. Global efforts for of CASs for these countries. Although reform have been centred on five key these are significant improvements, trade areas: enhancing transparency of market unions question the rationale of limiting and lending information; improving inter- reviews of core labour standards to only national standards; strengthening finan- those countries eligible for concessional cial sectors; heightening private sector in- lending; the process should be extended to volvement in crisis prevention and resolu- all countries preparing a CAS. In addition, tion; and modifying IMF financial the CAS is not the only possible vehicle for facilities. The aim is to predict and prevent the integration of core labour standards in a crisis from developing, rather than the IMF and the World Bank. Core labour merely reacting as a crisis unfolds. standards should become a part of all Bank The international trade union move- and Fund operations, as mandatory element has made a number of proposals to ments of the Bank’s SBDs and other con- enhance transparency and consultation tractual documentation. within the framework of the Bank and the Trade unions urge the Bank and the Fund. In December 2000, the ICFTU, to- Fund to ensure that lending programmes gether with a number of environmental are at least consistent with the promotion and developmental NGOs, made an ap- of core labour standards. Consideration peal for greater transparency at the Bank should be given, for example, to prevent- and for the release of a much broader ing labour market reforms from leading to range of documentation, such as all CASs a de facto negation of workers’ rights. and Article IV reports, regardless of the Changes in labour codes should not re- government’s position. The IMF, as a par- strict access to unionization and collective ticipant in the International Stability bargaining; the recommendations of the Forum, should insist that private discus- Bank and the Fund are not always consis- sions be opened to public scrutiny and that tent with this principle. For example, a public hearings be held to which trade new World Bank report on Mexico, enti- unions, other representative organizations tled A Comprehensive Development Agenda and the ILO would be invited. for the New Era, was formally presented in In addition to improving transparency, Mexico on 21 May 2001. The report in- the IMF is helping to increase country

27 necessarily prevent a further financial cri- Enhancing transparency at the IMF sis, and that international financial archi- The IMF claims that its goal is to “make timely, tecture should begin, amongst other reliable data readily available to financial things, “bailing in” the private sector. markets and the public”. While Mr. Kohler mentioned the newly cre- ● A total of 49 countries (developing and in- ated IMF capital market department, to dustrialized) subscribe to the IMF’s Special date there have been no major IMF policy Data Dissemination Standard (SDDS), which changes vis-à-vis the major global financial encourages member countries to provide detailed and reliable economic and finan- players. Likewise, no concrete steps have cial data. been taken by the IMF to “bail in” private ● The Fund also encourages members to re- sector creditors to contribute to resolving lease Public Information Notices (PINs), de- financial crises. Obligatory standstill scribing the IMF Executive Board’s assess- arrangements could be implemented in ment of a country’s economy and policies. times of financial crisis, whereby a tempor- According to the IMF, over 80 per cent of countries now release this information. ary moratorium would be placed on debt ● Since September 2000, the IMF has an- repayments to all creditors, both private nounced a “general policy of voluntary and public, and private sector bank credi- publication” of staff reports and other tors would have to participate in compre- country papers. The IMF now releases staff hensive debt rescheduling arrangements. reports prepared following Article IV con- These measures would enable reschedul- sultations, unless governments specifically object. About 90 per cent of staff reports ing of debt without obliging countries to are now published. default on loans. Again, trade unions have supported these proposals. Source: Progress in strengthening the architecture of the international financial system, IMF factsheet, Similarly, the IMF is making slow July 2000. progress in utilizing its newly assumed mandate of surveillance of offshore financial centres to put in place further measures for controlling unregulated and un- liquidity before a crisis strikes. It devel- supervised private international financial oped Contingent Credit Lines (CCLs) in flows that transit through these centres.4 1999 as a new instrument of crisis preven- There are, however, some indications tion. CCLs are a new form of lending that the IMF may be taking a less dogmatic whereby the Fund will lend in advance of a crisis to help countries protect themselves from it; usually, the Fund lends after crisis Enhancing transparency has struck. This potentially innovative ap- at the World Bank proach is inherently limited by conditions that are so strict that no country has been The World Bank has taken steps to release a given CCL status and received funds. greater amount of documentation surrounding lending programmes. Trade unions have supported sugges- ● Since September 2000, all CAS documents tions that the private sector should share are released, unless a government specifi- in the prevention and resolution of finan- cally objects; approximately 85 per cent of cial crises. The IMF has appeared to agree, all CASs are now public, but there is often stating that better involvement of the pri- a considerable delay between completion vate sector in crisis prevention and resolu- of the strategy and its publication. tion can limit moral hazard, strengthen ● PRSPs will not receive Executive Board en- dorsement unless governments agree to market discipline by fostering better risk making them public. assessment, and improve the prospects for ● 3 The Bank has been reviewing its informa- both debtors and creditors. In fact, at the tion disclosure policy since autumn 2000. March 2001 meeting with the WCL dele- The review should be completed during the gation, Mr. Kohler admitted that the avail- summer of 2001. ability of more adequate data would not

28 approach to international capital mobility, Reforming the international which was previously encouraged regard- financial system less of circumstances. The international trade union movement urges ⅙ In the February 2001 Article IV report the IMF and the World Bank to take rapid steps for Tunisia, the IMF notes the Govern- to reform the international financial system. The necessary measures would include: ment’s worry about the potentially ● improved fiscal and monetary policy coor- destabilizing effects of full capital mar- dinated between the currency blocks of the ket liberalization. The IMF mission dollar, euro and yen in order to generate states that “it was indeed premature to more stable parities; envision a broad scale liberalization of ● recognition of the rights of governments financial market transactions”. to control foreign capital inflows and outflows in the interest of domestic macro- ⅙ The November 2000 Article IV report economic and social stability; for the Russian Federation notes that ● agreement on the right of developing and “in view of the need to avoid a poten- transitional countries to operate a temporary tially sharp increase in capital outflows debt standstill when circumstances require; [...] the staff recommend temporary ap- ● a mandatory role for the private sector in standstills and in comprehensive debt proval of the exchange restrictions and rescheduling programmes; [other measures]”. ● binding international standards for the pru- dent regulation of financial markets covering capital reserve standards, limits to short- Notes term foreign currency exposure, and controls and certification on derivatives trading and 1 The Freedom of Association and Protection of other forms of highly leveraged investment; the Right to Organise Convention, 1948 (No. 87), and ● ensuring that banking systems are trans- the Right to Organise and Collective Bargaining Con- parent and bound by effective disclosure vention, 1949 (No. 98). criteria; 2 Referred to in Dr. Holzmann’s statement. ● developing an effective early warning sys- 3 See IMF factsheet on Progress in strengthening the tem based on improved information on cur- architecture of the international financial system, July rency flows, private debts and reserves; 2000. ● the establishment of a currency transac- 4 Combatting growing world inequality and renewed tions tax to reduce speculative currency threats of international financial stability, Joint state- flows and to raise resources for the support ment by the ICFTU, TUAC and ITS to the spring 2001 of poverty alleviation. meetings of the IMF and the World Bank, Washing- ton (29-30 April 2001).

29 Trade unions and the global economy: An unﬁnished story

Chapter V The evolution of the global trading system and impact of the World Trade Organization

At the Marrakesh meeting that founded the WTO in 1994, most governments, whether of the North or South, had no idea of the cataclysmic change they had just agreed to or the dimensions of the journey they would soon embark on.

hile the United States and the United tle support and much opposition, never WKingdom could agree on the basic forwarded the treaty to Congress for rati- tenets of the Bretton Woods institutions at fication. the close of the Second World War, the ar- The General Agreement on Tariffs and chitecture undergirding the international Trade (GATT), an interim arrangement de- trading system was much more difficult to signed to last until the ITO became opera- negotiate. The United Kingdom advanced tional, was used instead to set interna- a proposal to make full employment pol- tional trade rules. It was not an interna- icy an international obligation1 and sought tional organization. It was legally so to maintain preferential trade treatment insignificant as to be deemed not to need for Commonwealth countries. The United Congressional ratification. Its constituent States pushed for a rules-based trading parties were not members but rather “con- system that would lower international tracting parties”. Nevertheless, it rose to trade barriers. At the United Nations Con- the challenge and became a small, well- ference on Trade and Employment in Cuba run international secretariat in Geneva in early 1948, parties reached a compro- dedicated to lowering customs tariffs and mise in the Havana Charter, a treaty in- facilitating international trade disputes tended to create a new international trade through panel hearings. organization (ITO). In the Havana Char- Its principal function was to achieve ter, countries agreed to “take action de- lower tariffs on international trade in signed to achieve and maintain full and goods. It performed this function ad- productive employment”2 while recogniz- mirably well, with average tariffs in de- ing that the avoidance of unemployment veloped countries falling from about 40 or underemployment was not of domestic per cent to their current levels of less than concern alone, but was a necessary condi- 5 per cent. tion for the achievement of the general The contracting parties agreed to a purpose and objectives of the new trade short set of GATT principles. These in- organization.3 The Charter also recognized cluded non-discrimination, national treat- that “measures relating to employment ment, transparency (publication of rules) must take fully into account the rights of and reciprocity. These principles, among workers under inter-governmental decla- others, became the legal bedrock of the rations, conventions and agreements”.4 GATT and its successor, the WTO. Over But after negotiating the Havana Charter, the years, the GATT dispute settlement the internationalist tide was turning in the system produced a commendable body of United States. The Korean War had jurisprudence breathing life into the orig- started, and President Truman, seeing lit- inal GATT text.

30 The GATT contracting parties met over States at earlier stages of industrial devel- a successive number of “rounds” to nego- opment. In 1971, GATT granted two sets tiate further tariff reductions. They spent of waivers, each valid for ten years. The their first negotiating rounds successfully first allowed industrialized countries to lowering tariff barriers erected during the grant preferences to developing countries, disastrous 1930s. International trade shepherding in the implementation of the unions supported these efforts. Generalized System of Preferences (GSP). There were 22 original GATT contract- The second permitted developing coun- ing parties, including 11 from developing tries to exchange preferences among them- countries. But as more and more develop- selves. Trade unions have always strongly ing countries broke free of colonial rule supported preferential tariff rates for de- and became GATT contracting parties, veloping countries. they began to question the merits of the The European Community conse- post-war international trade system. The quently implemented a series of Lomé United Nations Conference on Trade and Conventions to grant, among other things, Development (UNCTAD) was established non-reciprocal, preferential access to prod- in 1964 to provide advice to developing ucts originating in certain African, countries on international trade and in- Caribbean and Pacific (ACP) States. Dur- vestment and assist them in their efforts to ing Lomé Convention negotiations, trade integrate into the world economy on an eq- unions urged that trade and aid provisions uitable basis. Despite the existence of be linked to the observance of minimum UNCTAD, developing countries often international labour standards and that lacked the specific expertise and analyti- trade unions be consulted at all levels in cal trade policy skills to contribute effec- the planning and implementation of pro- tively in international trade negotiations. grammes funded under Lomé Conven- They pushed for greater access to tions. Northern markets but found that their As countries were beginning to recog- chief exports, including agricultural prod- nize the different trading needs of devel- ucts, were not even on the negotiating oping countries, the Bretton Woods system table. Instead, the Europeans and the of exchange rates was coming apart at United States continued to increase their the seams. The new system of flexible subsidies to agricultural production and exchange rates was causing swings in ex- agricultural exports. ports and imports, leading to “new pro- When Asian producers began to com- tectionism” in the form of (for example) pete seriously with Northern textile man- voluntary export restraints (VERs). This ufacturers, developed countries first im- threatened to eviscerate some of the hard- posed quotas and then regularized the quota system into the Multifibre Arrange- ment in 1974. This was originally con- Third Lomé Convention (1984) ceived as a temporary measure to enable the textile industry of the developed world Trade union demands: to adjust to market forces. The dismantling ● Education and vocational training. of the Multifibre Arrangement was one of ● Rights for migrant workers. the South’s main achievements during the ● Better working conditions. Uruguay Round. It should be completely ● Social and trade union rights. abolished by 2005. ● Active participation of women in develop- Developing countries had long been ment programmes. critical of the GATT principle of non- ● Greater trade union role in implementing discrimination, which treated all trading the Convention. partners equally, regardless of their level ● Funds to allow unions to contribute to de- of economic development. They called for velopment policies. rules allowing preferential treatment for

31 won gains under the GATT trading sys- The Uruguay Round began in Punta tem, as the GATT was not prepared or del Este in September 1986. It got off to an equipped to deal with such “non- inauspicious start. Industrialized coun- transparent” measures. tries wanted the rigours of GATT proce- A new type of trade liberalization was dures to apply to other disciplines like in- therefore envisaged that would not stop at tellectual property, investment and trade borders. The Tokyo Round of GATT nego- in services. Multinational pharmaceutical tiations dealt with more than tariff barri- companies were seeking enhanced patent ers. It covered subjects such as govern- and trademark protection in developing ment subsidies, government procurement, countries. Developing countries were regulation of product standards and adamantly opposed to the GATT covering strengthening anti-dumping rules. new subjects, especially intellectual prop- Throughout the Tokyo Round, the inter- erty, until they could achieve a more level national trade union movement called for playing field in the area of trade. They the establishment of comprehensive world were seeking the end of the Multifibre commodity agreements, the extension of a Arrangement and vastly improved access global system of tariff preferences related to Western agricultural markets. The to the degree of economic development of Cairns Group of Northern and Southern a country and the adoption of a GATT agricultural exporting countries, led by clause to facilitate a smooth transfer of in- Australia, was established to pry open the dustrial activity to developing countries. European agricultural market. European The trade union movement was also countries were mostly seeking to protect engaged in a long-running campaign to es- their agricultural subsidies system. The in- tablish a link between international trade ternational trade union movement sought agreements and respect for a minimum a strengthened GATT role, the mainte- level of basic workers’ rights through a nance and extension of concessionary workers’ rights clause. Unions pointed to treatment of developing countries, the the GATT Preamble, which states that en- opening up of world trade in agricultural suring full employment is an important products, the linkage of measures on trade objective of international trade. Trade in services to codes of conduct on the ac- unions also sought measures for the ad- tivities of transnational corporations, the justment of industries and employment introduction of a workers’ rights clause re- creation under socially acceptable condi- lating specified ILO labour standards to tions. The establishment of a tripartite trade in the GATT, and the encouragement committee was requested under the aus- of policies to ease the adjustment of estab- pices of GATT to limit the negative social lished industries to trade-induced changes repercussions of changing patterns of in the structure of employment. National trade. National trade union centres were trade union centres were also asked to put active in approaching governments to pressure on national governments in all of seek support for these proposals. these areas. By the mid-1980s, further cracks were The Uruguay Round talks were com- beginning to show in the GATT edifice. In- plicated and long-drawn-out, but no one dustrialized countries, above all the ever envisaged that a new world trade or- United States, were under heavy domestic ganization would emerge at the end of the pressure to increase protectionism. Gains discussions. Why and how did such a seis- made in reducing both tariff and non-tariff mic shift come about? barriers during the Tokyo Round were First, throughout the 1980s, the United considered insufficient. Some said that States had dusted off its domestic trade without enhanced access to new markets, remedies and was using them aggres- American business support for the entire sively against perceived trade rule viola- international trading system was in jeop- tors. A “Special 301” section of the Trade ardy.5 and Competitiveness Act, 1988, specifi-

32 cally targeted countries with inadequate intellectual property provisions. To many The Trade Policy Review countries, any rules-based multilateral Mechanism (TPRM) trading system was better than the arbi- The TPRM was established on a provisional trary use of unilateral trade remedy mea- basis in 1989 as a part of the GATT, but it be- sures. Second, the United States was ac- came a permanent feature of the new WTO. tively pursuing a policy of bilateral or tri- It is one of the most innovative reforms to lateral free trade agreements to achieve emerge from the Uruguay Round. The TPRM reviews countries’ economic performance to many of its trading aims. For example, the ensure compliance with WTO obligations. The North American Free Trade Agreement review focuses on: (NAFTA) included provisions relating to 1. macroeconomic conditions (trade policy intellectual property, investor-state invest- regime); ment provisions and trade in services. The 2. micro-topic issues (information on imports underlying message was “if we can’t do it and exports); and with you, we will do it without you” and 3. information on industrial and sectoral no country was prepared to risk losing ac- policies. cess to the huge American market. Third, The purpose of the mechanism is to con- American-led multinationals mobilized to tribute to “improved adherence by all Mem- 6 push for new trading rules. Fourth, the bers to rules, disciplines and commitments debt crisis and corresponding structural made under the Multilateral Trade Agree- adjustment programmes, which trauma- ments”. The mechanism also contributes to achieving “greater transparency and under- tized so many economies and social pro- standing of the trade policies and practices of grammes across the South, sapped the will Members”. The main goals of a country re- to ﬁght (and the resources) of many de- view are to provide a detailed picture of the veloping countries. At the Marrakesh trade regime of individual WTO member States and encourage governments to follow meeting that founded the WTO, govern- WTO rules and disciplines. Technically, there ments adopted 29 multilateral agreements are three review cycles based on share of covering everything from intellectual world trade: 7 property to textiles. The World Trade Or- ● the “Quad” Members (United States, ganization came into being in January 1995 Canada, European Union and Japan) every to administer multilateral trade agree- two years; ments, act as a forum for trade negotia- ● a group of 16 developing countries every tions and settle trade disputes. It is fair to four years; and say that at Marrakesh most governments, ● all the other Members every six years. whether of the North or South, had no idea of the cataclysmic change they had just agreed to or the dimensions of the journey Developing countries were not as suc- they would soon embark on. The United cessful in achieving their aims. In return States achieved most of its aims with the for the above (considerable) concessions, new trade organization. Developed coun- they achieved very modest gains in agri- tries agreed to marginally open up their culture and an end to the Multiﬁbre agricultural markets, committing them- Arrangement. Although this latter was no selves to make further concessions in new pyrrhic victory, the lengthy deadlines negotiations at the turn of the century. De- agreed for its dismantlement did some- veloping countries accepted legal rules to what sour the taste of triumph. protect private intellectual property with The developing countries also agreed a phased timetable for their implementa- that all WTO obligations were enforceable tion. A new framework was envisaged for through a novel multi-step dispute settle- negotiating trade in services, and it was ment process. To move beyond the inher- even possible to adopt a modest agree- ent problems of reaching consensus for the ment on investment measures related to adoption of panel reports, negotiators trade in goods. agreed on the idea of “negative consen-

33 sus”, whereby a panel report was auto- countries. For example, Argentina spent matically adopted unless all countries re- over US$80 million to achieve higher lev- fused to adopt it. Foreseeing that, under els of plant and animal sanitation and this new system, most panel reports would Hungary spent over US$40 million to up- be adopted, the negotiators created an in- grade the level of sanitation of its slaugh- dependent Appellate Body to provide a se- terhouses alone.10 TRIPS is the most glar- curity blanket or a “safety valve” against ing example of this “positive regulation”, “bad panel decisions”.8 The Appellate whereby governments are called on to Body is made up of seven well-qualified move beyond harmonizing their laws and international trade and finance experts, adopt legislation protecting the rights of lawyers or diplomats. While the first Ap- intellectual property holders – with en- pellate Body comprised four members forcement procedures to ensure that it is from developed countries, the balance has done satisfactorily. By joining the WTO, a now shifted, with developing countries government assumed a “single undertak- providing the majority of members. ing” and accepted all agreements. This The WTO is a significantly different an- was different from the system of GATT imal compared to its GATT predecessor – codes from the Tokyo Round, which al- probably much more so than its negotiators lowed governments to sign some codes ever realized. The WTO has put in place an and not others. enforceable legal regime governing most aspects of the global trading economy. The dispute settlement provisions are binding Notes and much more effective than those of the original GATT. Judges, particularly at the 1 Kapstein, E.B.: Sharing the wealth: Workers and appellate level, have a great deal more the world economy (New York, W.W. Norton and Com- pany, 1999), p. 88. power to interpret rules and develop new 2 Havana Charter for an International Trade Or- law. The rule of law is supreme. ganization, Article 3(1). Where the GATT tried to subtly har- 3 ibid., Article 2(1). monize different regulatory or adminis- 4 trative systems around the world, the ibid., Article 7(1). WTO now calls for major changes in do- 5 Ostry, S.: Reinforcing the WTO (Occasional Paper mestic regulation. The WTO is moving to- 56, 1998, Group of Thirty). 6 wards real global integration, in contrast Ostry, S.: “The future of the world trading system”, 47th Annual Economic Outlook Conference, to the GATT’s mandate to realize “shallow University of Michigan, 19 Nov. 1999, p. 5. integration”. To meet new WTO commit- 7 These included the 1994 General Agreement on ments, governments will have to make Tariffs and Trade, a General Agreement on Trade in sweeping changes to many domestic poli- Services (GATS), and Agreements on Trade-Related cies, laws and administrative regulations Aspects of Intellectual Property (TRIPS) and Trade- and procedures. World Bank economist Related Investment Measures (TRIMS). An Agree- ment on Agriculture and an Agreement on Textile Michael Finger estimates that a typical de- and Clothing were also agreed. veloping country must spend US$150 mil- 8 Steger, P.: The Appellate Body and its contribution lion to implement requirements under to WTO dispute settlement, Statement at the Univer- three WTO agreements (those on customs sity of Minnesota Law School, 15-16 Sep. 2000. valuation, sanitary and phyto-sanitary 9 Finger, J.; Schuler, P.: Implementation of Uruguay measures, and trade-related intellectual Round Commitments: The development challenge (Black- property rights).9 This is more than the an- well Publishers Ltd., 2000), p. 525. nual development budget of many poorer 10 ibid.

34 Trade unions and the global economy: An unﬁnished story

Chapter VI From Singapore to Seattle

After a glimmer of hope in Singapore, Seattle saw popular conﬁdence in the multilateral trading system fall to an all-time low in both the industrialized and the developing countries. The Qatar ministerial meeting failed to address the key trade union demand on core labour standards.

t the first WTO ministerial meeting in meeting of GATT, where there was no ASingapore in 1996, the ICFTU focused ICFTU representation. its campaign activities on securing the cre- A second ministerial meeting in ation of a working group on core labour Geneva in May 1998 was devoted to cele- standards within the WTO. This was not brating the 50th anniversary of the GATT. approved by the heads of State, but the in- For the first time, the WTO became the clusion of text on core labour standards in object of public demonstrations by anti- the final ministerial declaration was seen globalization groups which at times as a success in at least establishing the sub- turned violent. ject of labour standards as an issue for dis- In preparation for Seattle, the ICFTU cussion within the WTO. After heated de- developed a four-part strategy on the basis bate, the following text on core labour of an in-depth three-day seminar held in standards was agreed: Geneva in December 1998. First, the ICFTU would develop the overall argu- We renew our commitment to the obser- ments and rationale to support the strat- vance of internationally recognized core egies of the campaign. Next, through re- labour standards. The International Labour gional and subregional activities, affiliates Organization (ILO) is the competent body would be informed about the goals and to set and deal with these standards, and discuss them. National affiliates would we affirm our support for its work in pro- then be called upon to lobby their govern- moting them. We believe that economic ments aggressively. In addition, the ICFTU growth and development fostered by in- created a task force on Trade, Investment creased trade and further trade liberaliza- and Labour Standards (TILS) composed of tion contribute to the promotion of these representatives of national affiliates, ITSs, standards. We reject the use of labour stan- TUAC and ETUC to develop and coordi- dards for protectionist purposes, and agree nate this campaign. The establishment of that the comparative advantage of coun- a web site and email discussion group tries, particularly low-wage developing were also effectively utilized to develop countries, must in no way be put into ques- and implement this campaign. The latter tion. In this regard, we note that the WTO has remained since Seattle as a central and ILO secretariats will continue their ex- means of communication for the labour isting collaboration. movement on WTO issues. The third ministerial meeting in Seattle At the Singapore meeting, some in November 1999 changed the paradigm 30 trade unionists took part as NGOs but for WTO ministerial meetings. The meet- worked together as a trade union team. ing was a complete fiasco. The matter of re- This can be contrasted with the Marrakesh solving disagreement on the new head of

35 the WTO had diverted attention away from put forward over half of the proposals sub- the trade agenda in Geneva. The parties in mitted by WTO members regarding the is- Seattle were still too far apart, and trade sues that should be included in the draft negotiators consequently failed to reach ministerial declaration.1 The sophistication agreement on launching a new “Millen- and expertise of Southern governments nium Round” of trade talks. But another was due to their enhanced access to greater part of the Seattle story was provided by trade data information and more detailed the tens of thousands of peaceful protest- policy analysis. With an empowering sense ers and a few violent ones who staged sit- of control, developing countries led the ex- ins and disrupted the city’s downtown odus from Seattle – disheartened by North- area. How did it ever come to this? ern arrogance, secrecy and intransigence. First, after months of planning using The Seattle meeting was generally re- the World Wide Web, email and the Inter- garded as a step forward by the trade union net, people joined together in a rally orga- movement. On the plus side, unions built nized by the trade union movement to ex- successful coalitions and effectively deliv- press concern about the social impact of ered their message of universal solidarity. trade liberalization. Electronic communi- As one union leader noted: “Before Seattle cation had revolutionized people’s ability we were dead in the water on trade. The to communicate, strategize and organize big companies had their way completely. in order to voice their demands and mo- Now we’ve raised the profile of this issue bilize forces for change. and we’re not going back.”2 But second, electronic communication On the core labour standards agenda, also significantly contributed to people’s a number of closed meetings were held, new-found awareness, appreciation and chaired by Costa Rica. The “Costa Rica understanding of what international trade Document” which was emerging from the rules meant in their daily lives. Just as discussions proposed the creation of a dis- people associated structural adjustment cussion group which would address trade, programmes in Africa with higher primary globalization, development and labour school fees and lower school enrolment, so with a view to promoting a better under- they also associate TRIPS obligations with standing of the issues involved through a high pharmaceutical prices. Women have substantive dialogue among governments long understood that, because of their dif- and relevant NGOs. It was proposed to ferent roles and responsibilities at home open participation in the discussion group and in the market place, international trade to other relevant international organiza- rules have a different impact on them. tions such as the ILO, World Bank and Vastly improved communication struc- UNCTAD, and to make factual summaries tures meant that international trade rules of the discussions publicly available. The were no longer solely within the purview Costa Rica Document was on the table of government trade negotiators. Trade when the ministerial meeting was sus- rules now belonged to everyone. pended, and as such was not formally Third, Seattle turned the spotlight on adopted by that meeting and does not the culture of secrecy that had always have the status of a consensus text. Its pre- permeated international trade negotia- ambular paragraphs are significant in that tions. The famous “green room” discus- they effectively place the WTO in an in- sions, where self-selected groups gathered ternational context which exceeds the to negotiate privately, were roundly criti- scope of the WTO mandate. The text re- cized by those developing countries that calls that the members of the WTO have could not get a seat inside the room. agreed that their relations in the field of Fourth, at Seattle, developing countries trade and economic endeavour should be had assumed a mantle of strength and com- conducted with a view to raising stan- bativeness never before demonstrated dur- dards of living, ensuring full employment ing international trade negotiations. They and a large and steadily growing volume

36 of real income and effective demand. It In response, Public Services Interna- also reaffirms the WTO pledge to imple- tional (PSI) and Education International ment the commitments assumed in the (EI) have joined forces to campaign for the Copenhagen Declaration on Social Devel- protection and promotion of their mem- opment, including the goals of poverty bers’ interests in relation to trade in ser- eradication, the promotion of full employ- vices. This alliance stems from the vulner- ment and social integration, and the ability of government services under pledge contained in the Rio Declaration on GATS. PSI and EI are particularly con- Environment and Development of 1992 cerned about the potential drain on the that “All States and all people shall coop- skills base in the public sector created by erate in the essential task of eradicating increased international mobility and re- poverty as an indispensable requirement duction of working conditions where the for sustainable development, in order to use of foreign labour is used to undermine decrease the disparities in standards of liv- local wages and conditions. ing and better meet the needs of the ma- Other ITSs are also steadily developing jority of the people of the world.” sector-based initiatives particular to the The Costa Rica Document also recalls concerns of their own affiliates. Common the Singapore ministerial declaration and strategies include information and cam- welcomes the work being undertaken in paign materials aimed at enabling affili- the United Nations system, including the ates to engage with national governments ILO Working Party on the Social Dimen- on issues surrounding trade and labour sion of Globalization in particular, the standards. ITSs have also sought to de- adoption of the ILO Declaration on Fun- velop direct contacts with WTO officials, damental Principles and Rights at Work inviting them to attend meetings and sem- and its Follow-Up.3 inars and participate in policy discussions The text goes beyond the Singapore De- with ITS staff and affiliates. claration and represents an inherent un- But the true test of the multilateral trad- derstanding (at least among those members ing system will be at Qatar. Is it possible to that supported the text) that the WTO needs devise an international trading system that to operate in cooperation and collaboration meets the competing and often conflicting with the entire system of international gov- needs of countries and people at such var- ernance and to develop effective policy to ied levels of economic development? Will accommodate not just the issue of core developing countries use their new-found labour standards but also the broader de- political and numerical clout to stop a new velopment agenda, sustainable develop- round, agree to a limited round, or promote ment and environmental protection. a “development round” devoted to a Southern agenda? How will the 200 plus regional trade agreements notified to the From Seattle to Qatar WTO to date impact on the negotiations? Trade negotiators will be hard pressed to After Seattle, popular confidence in the reach a final agreement at Qatar, even if the multilateral trading system fell to an all- expected restrictions on protesters allow time low in both the industrialized and the government officials easy access to the developing countries. Since then, the WTO meeting rooms. has worked hard to restore a “business-as- ANorth-South chasm is developing, usual” atmosphere by concentrating on its with the North trying to persuade the South built-in agenda including agriculture, to agree to a new round of trade liberaliza- trade in services and select intellectual tion and many developing countries want- property negotiations. In March 2001, ne- ing to “take a breather” and slow down the gotiators agreed to broad guidelines for fu- negotiation process. They are not convinced ture bargaining on opening services mar- that scarce government funds should be kets to foreign competition. spent on implementing WTO obligations

37 for some drugs in Africa, but even cheaper PSI and EI join forces drugs will be too expensive for many AIDS sufferers. A series of special one-day ses- PSI and EI have launched a joint campaign publication entitled Great expectations: The future sions, at the instigation of African coun- of trade in services. The document informs af- tries, is discussing TRIPS and affordable ﬁliates about the issues surrounding GATS medicines in the run-up to Qatar. Possible which are of importance to their members and solutions include strengthening the pub- seeks to create support for campaign action. The campaign operates at global, re- lic health safeguard provisions of TRIPS to gional and national level and uses network- ensure that governments have a clear right ing and publicity to lobby governments at to override patents in the interests of pub- national level and within the WTO itself. lic health, longer implementation periods PSI and EI support affiliates in campaign and a moratorium on any dispute settle- action. They have undertaken to: track and oppose the privatization of health care and ment action that would impede access to education; track United States companies affordable drugs. that are providing health services in other Dismantling over 30 years of trade- countries; share information on education in- distorting textile quotas will also not be stitutions promoting cross-border services; and tell target nations about the effect of without pain and economic disruption – these companies on their health or education particularly for the millions of women systems. working in the textile and clothing indus- PSI and EI have produced two publications try worldwide. in a new series entitled Common concerns for The European Union is pushing for the workers in education and the public sector which address the potential effects of GATS launch of an “ambitious new round” at on health and education services. They are: Qatar, to include new themes like compe- The WTO and the General Agreement on tition policy, environment issues and sub- Trade in Services: What is at stake for public stantially expanding the rules governing health? and The WTO and the Millennium Round: What is at stake for public education? private sector investment across national In March 2001, PSI endorsed an NGO’s borders. The United States was pressing sign-on campaign entitled “Stop the GATS at- for lower tariff barriers on agriculture and tack” that calls for a moratorium in the GATS services, but now appears to be prepared negotiations. to accept the much wider European negotiating agenda. But none of this represents the agenda rather than on building roads or schools. of many of the Seattle protesters. Their They are rightly concerned that they may calls for greater openness, enhanced inter- be brought to dispute settlement for violat- nal and external transparency and new ing Uruguay Round commitments that modalities for public participation at the they simply cannot afford to implement. WTO have not been met. There have been Vague promises of new and additional re- no fundamental changes in any WTO pro- sources hold little sway, given the scant cedures since the Seattle debacle. Even rel- technical assistance they have received atively minor efforts to reform, such as al- since Marrakesh and the magnitude of the lowing the public to attend TPRM reviews, development challenges confronting them. have been solidly rebuffed. The Appellate The WTO obligations themselves are Body toyed with the idea of allowing lim- often at cross purposes with human de- ited external participation during the au- velopment needs. The TRIPS Agreement tumn 2000 Asbestos Panel hearing. Con- puts the protection of intellectual property cerned parties were permitted to submit rights before basic health rights like access “friends of the court” briefs and the Ap- to cheap, affordable medicines. This pellate Body received 17 submissions, in- means more expensive and more limited cluding from ICFTU-ETUC, Greenpeace HIV/AIDS drugs in Africa. After a loud and the American Public Health Associa- public outcry, some pharmaceutical com- tion. Within hours of the deadline they panies have proposed differential pricing were all rejected on spurious grounds.

38 Workers at Qatar: A trade union agenda The WTO needs: ● Clarification that countries can maintain the ● A full assessment of the economic, social, right to exempt public services (for example, labour, gender, environmental and develop- education, health, water and postal services) mental impact of previous WTO negotiations and socially beneficial service sector activities and the potential impact of any further ne- from any WTO agreement covering the ser- gotiations. vice sector. ● Some form of formal structure to address Workers want: trade and core labour standards, with the par- ● ticipation of the ILO, such as a WTO negoti- Greatly enhanced debt relief and a substan- ating group, a WTO working group, a WTO tial increase in development assistance for de- committee or a WTO standing working veloping countries that respect human rights, forum. Such a body should also address wider including fundamental workers’ rights. issues of social development, with particular ● The WTO provisions for special and differen- attention to the impact of trade policies on tial treatment to enable developing countries women. to have increased flexibility, to ensure they ● Increased transparency and financial assis- have the liberty to take tariff-freezing, tariff- tance to ensure that all members (particularly raising or import-limiting measures when the least developed countries) are able to necessary. take part fully in all WTO activities and pro- ● Improved market access for developing coun- cedures, including its disputes settlement tries (addressing tariff peaks and tariff esca- mechanism. lation in their areas of interest) particularly ● Specific consultative structures for trade for least developed countries. unions at the WTO, including for the TPRM. ● Review of the TRIPS intellectual property The scope of the TPRM should be expanded agreement to incorporate developing coun- to include trade-related environmental, social try concerns, particularly in the area of access and gender concerns, including core labour to life-saving drugs as with HIV/AIDS med- standards. External transparency is further re- ication. quired in the conduct of all WTO negotiations. ● Multilateral agreement to extend the ● Environment, health and safety rules to take Uruguay Round implementation deadlines precedence over WTO rules. for developing countries.

One of the big North-South fault lines with less severe adverse consequences at Qatar will concern core labour stan- than countries without such institutions.4 dards, with some in the North at least vo- WTO members must seize the oppor- calizing support for their inclusion and the tunity they have at Qatar to build a new South vehemently resisting. More work consensus around a social, environmental, needs to be done to explain the strong link development-oriented, democratic, ac- between core labour standards and im- countable, transparent and fairer rules- proved trade competitiveness and work- based world trading system. Building this place productivity. For example, the consensus will require active dialogue and OECD 2000 study on international trade debate with the social partners and other and core labour standards concluded that members of civil society. countries which strengthen their core labour standards can increase economic efficiency by raising skill levels in the Conclusion workforce and by creating an environment which encourages innovation and higher Trade unions have only been modestly productivity. The study also found that successful in advancing their globalizing countries that develop democratic institu- social justice agenda with the Bretton tions – including respect for core labour Woods institutions and the WTO. The standards – before the transition to trade ACTRAV symposium provided an oppor- liberalization will weather the transition tunity to receive an update on the most re-

39 cent developments at the WTO and within ⅙ How can national- and local-level affil- the Bretton Woods institutions from rep- iates be better used in trade union resentatives of these organizations who strategies concerning the international participated in panel discussions with financial, development and trade or- trade union representatives. Following ganizations? these discussions, the symposium also ⅙ What strategies can national union cen- provided an opportunity for the trade tres and individual unions use to effect union movement to engage in internal dis- change at the Bretton Woods institu- cussions and to reflect on what should be tions? the next steps in promoting the trade ⅙ union agenda at the WTO and within the How can trade unions better cooperate Bretton Woods institutions. among themselves to mitigate the neg- In addition to this paper, participants ative influences of the Bretton Woods at the symposium had at their disposal re- institutions? ports on developments in the relationship ⅙ With regard to the global economy, between the trade union movement and should trade unions devote more at- the international financial institutions at tention to working and forming al- regional level. This enabled participants to liances with the media, NGOs, envir- discuss technical capacity constraints that onmental groups, individual employ- may exist among union structures at re- ers and employers’ organizations? gional and national level and that impinge on the ability of the union movement to in- The WTO is facing its big test: a new fluence the policies and programmes of round of trade liberalizing negotiations or the IFIs. a “Balkanized” group of stronger regional From the material presented in this trade pacts. How can the trade union paper, it is evident that the Bretton Woods movement position itself to bring the institutions and the WTO are moving their greatest pressure to bear on both sets of agendas forward at an accelerating pace. processes? Without additional resources, trade unions will not be in a position to research the issues, analyse the implications for Notes unions and workers, and devise strategies 1 Chadha, R.: Developing countries and the next to advance the trade union agenda effec- round of WTO negotiations (Blackwell Publishers Ltd., tively on the global economy. 2000), p. 432. These considerations give rise to a 2 George Becker, President of the United Steel- number of questions that might be con- workers of America, quoted in Time, 13 Dec. 1999. sidered by trade unions. They include the 3 The full text of the “Costa Rica Document” is following: contained in Annex III of the Evaluation Report on ⅙ the ICFTU Campaign for Core Labour Standards in What should be the key trade union the WTO, prepared for the Norwegian Confedera- priorities vis-à-vis the WTO and the tion of Trade Unions by Mark Anner. Bretton Woods institutions in the im- 4 OECD: International trade and core labour stan- mediate and medium term? dards, (OECD, 2000), p. 14.

40 Global economy: The outlook in the regions

Recent developments in Africa

The place of trade unions in Africa is particularly important at a time when workers are confronted with complex challenges arising out of globalization of the economy and increased worldwide competition. In this context, trade unions in Africa urgently need to develop new and effective responses in order to inﬂuence the speed and direction of the process of globalization and liberalization.

Mohammed Mwamadzingo Regional Specialist in Workers’ Education ILO Office in Addis Ababa

n an effort to improve policies of the in- widening the gap between rich and poor Iternational financial institutions (IFIs), and demand policies aimed at stimulating particularly the IMF and the World Bank, recovery in developing and transition trade unions have been trying, nationally countries. They point to the need for and internationally, to engage them in di- higher rates of economic growth in Europe alogue and to convince them of the need and Japan. for more socially oriented and long-term There is much scope for unions to in- policies. fluence decisions at international levels. Meetings with the heads of the IFIs Policies of the IMF, the World Bank and the have been held in Washington and else- World Trade Organization (WTO) directly where. affect the lives of working people. So do World Bank and IMF representatives policies of the Organization for African have taken part in seminars with trade Unity, the African Development Bank, and unions and in some cases have sought the European Union. to involve them in the implementation The issues currently affecting workers of projects. Both sides have gained from and their organizations that could warrant the experience. The IMF and the World the proposed “stock-taking” exercise, with Bank have started to become more sen- respect to the policies and priorities of the sitive to the social implications of their IFIs under consideration could include policies. (but are not limited to) the following: African trade union leaders, with their ⅙ Popular constructive engagement be- counterparts in the industrialized coun- tween trade unions and the IFIs tries, have consistently called for vigorous concerted action to promote a world econ- ⅙ Employment creation omic recovery and reduce the risk of fu- ⅙ Alleviation of poverty ture recessions. Union delegations have urged the IFIs to build a stronger social di- ⅙ Structural adjustment programmes mension into the process of opening up ⅙ HIV/AIDS pandemic and its influence world trade to competition. They ask for on development reforms of under-regulated stock markets and for action to reduce poverty. The ⅙ African debt crisis, HIPC initiatives unionists fear that the emerging crisis is and PRSPs

41 How to create jobs in Africa the unskilled and to adopt new strategies to assist unemployed workers. Trade unions the world over demand ac- Various trade union forums have been tion from political leaders in all countries called to address these issues in Africa. to keep the promise they made at the UN’s These include the regional educators’ Social Summit in Copenhagen in 1995. workshop on “the role of trade union ed- This set a target of worldwide full em- ucation in employment creation in Africa” ployment in conformity with the rules of organized by the International Confeder- the International Labour Organization ation of Free Trade Unions (ICFTU) and its that protect workers from exploitation. African Regional Organization (ICFTU- This would be achieved through the fol- AFRO) (Nairobi, September 1999), the lowing measures: trade union educators conference (Kam- pala, October 1993) and the ILO/ICFTU- ⅙ Giving the public sector a greater role AFRO workshop on “Employment cre- in creating more jobs. This would in- ation and the informal sector: The trade clude investment in roads, bridges, union role” held in Johannesburg in May schools, clinics and other infrastruc- 1999. ture; support for industrial restructur- These forums have underscored the ing and counter-cyclical investments. importance of the active participation of ⅙ Improving education and training (fo- trade unions in national economic deci- cusing in particular on the transition sion-making. It is the only way to guaran- from school to work), public works tee the incorporation of their concerns into programmes, vocational counselling development programmes. They should and enhanced opportunities for skill campaign to be consulted on all matters development (especially for women). that affect workers’ well-being. They should ensure that they are part of the na- ⅙ Increasing purchasing power espe- tional budgeting process as well as the in- cially through increases in national vestment plan formulation. minimum wages with the objective of satisfying basic needs. ⅙ Providing citizens with adequate state- Trade unions and poverty backed health care, social security and alleviation in Africa education. Poverty is an issue that has preoccupied Unfortunately, the response to these trade unions in Africa for a long time. It is demands has been lukewarm. Indeed, the also a subject in which the IFIs have re- onset of economic liberalization policies cently displayed a lot of interest. For in- has reduced concern for creating jobs. In- stance, the dedication of the World Bank’s stead they have brought about retrench- World Development Report 2000/2001. At- ments in both the public and the private tacking poverty, is another sign that the formal sectors, with economies still unable Bretton Woods institutions have adopted to provide significant employment oppor- a new approach to Africa’s development tunities even in the most dynamic sectors. dilemma.1 All this, coupled with the new threats Africa is a continent rich in poverty. of globalization, has brought about a de- Africa enters the twenty-first century cline in union membership and finances. comprising some of the world’s poorest It seems clear that the survival of unions countries. Average income per capita is depends on the availability of more and lower than at the end of the 1960s. Almost better jobs for the labour force. This in turn half of sub-Saharan Africa’s 640 million requires workers with skills to fill new jobs people live on no more than 65 American as they become available. And that re- cents a day. The average GNP per capita quires unions to help provide training for for the region is US$492, but in 24 coun-

42 tries GNP per capita is under US$350, with the organized sector of the economy often the lowest incomes found in Ethiopia support extended families. (US$100), the Democratic Republic of the In addition to their economic role as Congo (US$110), Burundi (US$120) and representatives of the workers, trade Sierra Leone (US$130). This is absolute unions take on a social policy and human poverty. development role as well. Trade unions in Unlike the IFI chiefs, trade union lead- Africa are proactively involved in a num- ers in Africa do not need to look for scien- ber of human development campaigns. tific definitions of poverty. To them They monitor and denounce child labour. poverty does not require academic dis- They promote gender equity. They pro- course or statistical references. They feel it, vide education and training for their mem- live in it and are affected by it. Even among bers. They demand governments that are their own trade union members, a major- accountable to the people. They promote ity are well within the poverty bracket. The conflict resolutions and combat arms pro- working poor, the unemployed, the land- liferation. They educate members about less, those without basic skills, rural folk HIV/AIDS. Some unions have also re- and the retrenched could be classified as cently organized workers in the informal poor, and most belong to or were once sector and helped them with entrepre- members of trade unions. Their leaders are neurial and other skills training. They are convinced that poverty has not been given often instrumental in pressuring govern- the priority it deserves. Neither governments to prefer policies which require the ments nor the development partners have creation of jobs rather than those which fully played their part. do not. In December 1999, the World Bank and the IMF said in a joint statement that their new approach to reduce poverty “recog- Trade unions and structural nizes the increasing evidence that en- adjustment policies trenched poverty and lack of economic opportunities and asset endowments can The IMF/World Bank-sponsored struc- themselves be impediments to growth”. tural adjustment programmes (SAPs) con- They also emphasized the importance of tinue to be embraced by many govern- “the active involvement of civil society” in ments in Africa, with disastrous implica- the implementation of poverty-reduction tions for the labour movement. Of strategies. The ICFTU/TUAC/ITS April particular importance has been the degen- 2000 statement expressed agreement with eration of living standards and economic the IFIs’ newly found concern for poverty recession caused by the massive devalua- reduction and for civil society participation of national currencies, reduced public tion, but only to the extent that “it trans- spending and high external debt pay- lates into concrete policy changes”. ments. There are a number of ways in which In effect, the implementation of econ- trade unions can contribute to poverty re- omic reforms has also made the realization duction. A genuine dialogue with trade of the general objective of trade unions – unions throughout the process of struc- to defend and improve the living stan- tural adjustment, especially in privatiza- dards of their members – more difficult. tion and other structural reforms, can For example, privatization and retrench- make the reforms more effective and more ment policies have brought about an in- palatable. crease in the cost of living, deteriorating Collective bargaining for productivity- social infrastructure and above all declin- related wage increases is the most direct ing trade union membership. contribution of trade unions to poverty re- The ICFTU-AFRO can boast that trade duction, in that union members include unions have been in the forefront in offer- the working poor in Africa and incomes in ing alternative policy prescriptions to off-

43 development and economic policies and Trade unions’ new approach to the need to establish a broad consensus structural adjustment programmes about the purposes and timing of reform This project on new approaches to structural through widespread consultation. Al- adjustment programmes, which commenced though both the IMF and the World Bank in April 1998, sponsored by the Netherlands have expressed increasing concern about Trade Unions Confederation (FNV) and the the social dimensions of structural adjust- Trade Union Solidarity Centre of Finland (SASK), is a natural follow-up to the national ment and demonstrated a willingness to conferences held in many African countries. meet and discuss their policies with unions, The project countries are Benin, Chad, Ghana, they have not in practice undertaken the in- Niger and Zambia. depth reform needed to manage a world The activities carried out and studies con- economy that is failing to serve the needs ducted at the national level have shown that it is not just the government that is interested of the majority of the world’s population. in seeing more prosperous countries. The Many of the countries with which the participation of all stakeholders including IMF and the World Bank are most closely employers, workers, NGOs, academicians, engaged have only recently established a women’s groups, youth, the international community, etc., is a clear testimony to this. democratic basis for government. The Because everyone stands to lose or gain ac- process of economic reform and the way cording to whether policies are implemented in which the dialogue between govern- or not. ments and the IMF and the World Bank is The results of the activities carried out dur- conducted, can have a profound impact on ing this ﬁrst phase of the project showed that trade unionists on the African continent the process of political reform and the should be proud that, in one way or another, building of democratic institutions in- they will be part of a reoriented development cluding free trade unions. process. However, this assumes that the strate- Meeting the conditions required by the gies adopted in the studies will serve to dis- seminate information through the media and Bretton Woods institutions places consid- to train civil society. It is, therefore, important erable strain on the still-fragile mecha- that such an initiative should be further en- nisms for participation and accountability. hanced and supported to widen the beneﬁts. In many cases structural adjustment programmes have provoked political crises that have set back both democracy and de- set the negative effects of implementing velopment, particularly in countries economic reforms. In fact, much ICFTU, where governments have failed to consult ICFTU-AFRO and International Trade Sec- and involve organizations of civil society retariats (ITS) work has been done to re- organizations, including trade unions. In- spond to these crises, with some success. deed, in an increasing number of African The ICFTU has organized, and continues countries, the IMF and World Bank have to organize, several regional and national hired pro-deregulation consultants on conferences on the subject of economic re- labour market issues rather than use the forms. The basic objective of these confer- expertise of the ILO. Cases in mind are ences has been to assist national unions to Chad, Senegal and Uganda. Pressure from make an impact on government policy and the IMF and the World Bank to cut public on public opinion in general, by providing spending has in many cases gravely weak- a forum where government, employers, the ened social security systems. ILO, the IMF, the World Bank, the media Trade unions, nationally and interna- and other interested groups could discuss tionally, including the ITS, have consis- national economic and social policies based tently criticized the policies of the IMF and on an agenda set by the trade unions.2 the World Bank and highlighted the ab- The fundamental problem with the IMF- sence of an adequate social dimension to and World Bank-supported adjustment their SAPs in developing and transition programmes is that they have not taken into countries. They call for changes in econ- account the close connection between social omic reforms to make them more respon-

44 sive to the needs of Africa on the basis of HIV/AIDS pandemic in Africa consultation with unionists and other stakeholders. Areport released on 20 February 2001 by Unions also believe that all IMF and the United Nations states that HIV/AIDS World Bank agreements with national is now considered “the most formidable governments must be made public. SAPs development challenge of our time”. must incorporate the principles of trans- The report was issued in preparation parency, consultation, adequate levels of for the General Assembly Special Session social spending, good governance and re- on HIV/AIDS held in New York in June sponsible financial management. National 2001. consultative committees, including trade HIV/AIDS is now found everywhere in unions and other organizations of civil so- the world, but has hit hardest in sub- ciety, are needed to decide and monitor the Saharan Africa. Africa is home to 70 per use to be made of funds released under ad- cent of adults and 80 per cent of children justment programmes in general. living with HIV, and to three-quarters of Thus, as well as proposing changes to the people worldwide who have died of the direction of their economic and finan- AIDS since the epidemic began. During cial policies, the trade unionists have ad- 2000, an estimated 3.8 million people be- vocated a widening and opening of the re- came infected with HIV in sub-Saharan lations between the IMF and World Bank Africa, and 2.4 million people died. AIDS and other international institutions, no- is now the primary cause of death in Africa. tably the ILO, the Economic and Social At the national level, the 21 countries Council of the United Nations and the with the highest HIV prevalence are in trade union movement. This, however, Africa. In Botswana, South Africa and does not in any way mean the labour Zimbabwe, one in four adults are infected. movement has only been interested in crit- A child born in Zambia or Zimbabwe icizing the SAPs. The trade union move- today is more likely than not to die of ment could not have accepted to be part of AIDS. In many other African countries, the the structural adjustment participatory re- lifetime risk of dying of AIDS is greater view initiative (SAPRI) process in Africa than one in three. had that been the case. Whilst the World Bank is proud that it The main aim of the trade union call for is offering generous extra funding to fight more consultations with the Bretton AIDS, trade unions in Africa point out that Woods institutions is the need for more so- the money is a loan and not a grant and so cially oriented and long-term policies. The will increase African debt still further. And inadequate attention given to poverty al- the reason extra funding is needed is that leviation, employment creation and social African countries are being pressured into dimensions in general is a matter of seri- buying patented drugs from big manufac- ous concern to unions. The fact that the turers at exorbitant prices, rather being al- “social protection” has become a concern lowed to import the same drugs in generic gives some indication that the Bank is reform from India, Brazil and other low-cost sponding to trade union demands. producers. However, although issues like child labour, social security, pensions, etc., are being given some consideration, aspects Promoting core labour standards related to labour markets and workers in particular are conspicuously absent in There is now general agreement that good most documents and operations. In other governance is an important prerequisite words, there still exists a “social deficit”. for long-term socio-economic develop- Providing adequate education and health ment. However, the struggle for good gov- care for all their people must be the objec- ernance is plagued by uncertainties. For tive of all countries. instance, the Bretton Woods institutions

45 On this matter, the ICFTU and its affil- Trade unions’ attempts towards iates, including those in Africa, have cam- decent and productive paigned for many years for a social di- employment in Zambia mension to structural adjustment and to promote dialogue between unions and the Trade unions in Zambia consider employment creation important for the social and econ- Bretton Woods institutions over the policy omic progress of their country. In a national response to the crisis. One of the most seminar (December 2000), the Zambia Con- prominent issues in this dialogue has been gress of Trade Unions invited other social the role of core labour standards in devel- partners to continue prodding the Govern- opment, social policy and good gover- ment to formulate and implement a national employment and labour market policy in nance. The eight core ILO labour stan- which all stakeholders are involved. In 1997, dards enshrined in ILO Conventions cov- at the initiative of the trade unions the Gov- ering freedom of association, the right to ernment engaged social partners to design a collective bargaining, the abolition of child national labour market policy. The participants were concerned that the draft national and forced labour and the promotion of labour market policy has not been brought equality at work, are among the most up for national debate which would enable highly ratiﬁed ILO instruments. stakeholders to agree on key parameters be- Trade unions in Africa are taking the fore the policy’s implementation. They were lead in defending workers’ human rights also concerned that the Interim Poverty Re- duction Strategic Paper (dated 7 July 2000) in the global economy by supporting the compiled by the Government of Zambia, with campaign for the inclusion of a workers’ the assistance of the Bretton Woods institu- rights clause (based on the core labour tions, has not given the issue of employment standards) in international trade agree- creation the prominence it deserves. ments in order to eliminate unfair trade competition deriving from labour exploitation. have pushed for changes not only in macroeconomic structures but also in labour laws, which they argued were too Africa’s debt crisis, the HIPC initiative costly for poor countries and too restric- and PRSPs tive for employers. This provided an av- enue for many governments to relax basic In April 1999 the ICFTU-AFRO organized labour laws, exposing workers to a high a conference in Libreville, Gabon on the degree of job insecurity. African debt crisis. The conference aimed For example, in Zimbabwe the Labour at enabling unions to respond to the crisis, Relations Act No. 16 of 1985 was amended as well as give proposals for more worker- in 1992 as part of the labour market dereg- friendly debt relief and development ulation giving employers the right to hire strategies. It provided a forum for trade and ﬁre. Wages too were liberalized. Em- union leaders to exchange experiences and ployers have responded to this amend- formulate a forward-looking policy on ment by terminating workers’ careers at how best to manage their national will. Nonetheless, some progress has been economies in order to avoid recurrence of achieved. But IFIs and multilateral and bi- high debt, while also ensuring equitable lateral donors must go further to make it economic growth and development. absolutely clear to the remaining dictator- The conference brought together ships around the world that they will not ICFTU-AFRO affiliates and friendly orga- be allowed to continue the repression of nizations from 45 African countries and their people. The IMF and the World Bank was assisted by the participation and con- should become part of a worldwide strat- tributions of the ILO, the IMF, the World egy to uphold human rights, and indeed Bank, the United Nations Development there are already some links between their Programme, the Organization of African activities and human rights. Unity, the United Nations Economic Com-

46 mission for Africa, Global Coalition for Conclusion Africa, the European Union, the Jubilee 2000 debt relief coalition, ITSs and trade Trade unions in Africa, like their counter- unions from developed countries. parts elsewhere, have been calling for The overall conclusion of the confer- high-level national bodies that would dis- ence was that the trade unionists called cuss major economic and social policy is- for: the cancellation of debt to low-income sues, reach a consensus on the road to be African countries that respect human taken and recommend that it is taken by rights; the observation of core labour stan- the IFIs. Such bodies would include the dards; and adherence to policies that effect main stakeholders, including representa- meaningful social development and effect tives of the trade unions. good governance, transparency, account- Already, positive responses from IFIs ability, popular participation and respon- have been described as notable and im- sibility in their economic management. pressive in their attitude to trade union Participants were unanimous in re- concerns. These responses need to be ce- affirming the eight core ILO labour stan- mented. The result should be that stake- dards that comprise the human rights of holders such as the trade unions should workers as the best yardstick. These assert have a say in how workers’ destinies are the right of workers to form and join decided in the assembly of structural ad- unions, and to negotiate conditions of em- justment loans. For these consultations to ployment that are fair and appropriate for be effective, unions should be consulted at their country’s level of employment. They the stages of design, implementation, outlaw forced labour which prevent work- monitoring and evaluation. ers from having a say in where they work or in the terms of their employment, seek to end discrimination in employment, Notes which stops particular groups of workers such as women or migrant workers from 1 World Bank: World Development Report 2000/ beneﬁting from trade growth, and seek 2001: Attacking poverty (Oxford University Press, 2001). to end the commercial exploitation of 2 For example, besides participating in practi- children. cally all pan-African and subregional conferences organized by ICFTU-AFRO, the Bretton Woods insti- The conference endorsed the position tutions have taken part in the national conferences that adherence to the eight basic ILO stan- on the social dimensions of adjustment. The national dards would prevent the most extreme conferences have been held in Benin, Burkina Faso, forms of exploitation, ensure social justice Cameroon, Central African Republic, Chad, Gabon, Ghana, Guinea, Kenya, Malawi, Mali, Mauritius, Mo- and equity and ensure that development rocco, Mozambique, Niger, Rwanda, Senegal, Togo, goes hand in hand with the improvement Uganda, United Republic of Tanzania, Zambia and of workers’ rights. Zimbabwe.

47 Global economy: The outlook in the regions

Trends in the Asian and Paciﬁc region

The Asian miracle has highlighted the beneﬁts of globalization. The region has witnessed a consistently high rate of economic growth. Yet, this is also the region that accounts for the largest number of people trapped in poverty. The Asian crisis in 1997 has underlined the need for caution and for making international ﬁnancial institutions rethink their policies and programmes.

C. S. Venkata Ratnam Professor, International Management Institute New Delhi (India)

n examination of global capital flows priority areas, distorting social choices, Ain the years preceding the East Asian and even leading to de-industrialization. crisis is revealing. The proportion of pri- The role of multinationals in pressurizing vate capital flows and short-term, specu- national governments to lower labour lative portfolio capital increased steadily standards and in violating labour stan- during the period from 1990 to 1996, one dards in several Asian countries, for ex- year before the crisis struck some East ample, in export processing zones (EPZs) Asian economies. Malhotra (1997) points in Bangladesh and in some infrastructure out that the proportion of global overseas projects in Pakistan, remains questionable. development assistance (ODA) in 1996 The footloose character of foreign cap- was less than the private capital flows to ital received much attention after the just one Asian country, i.e. the People’s Asian financial crisis. Even the IFIs have Republic of China (US$42.3 billion). come to realize that there is a need for reg- Consider just one revealing statistic: ulating the speed and sequencing of capi- compared with an anticipated demand for tal movements. The Asian crisis has led the developmental capital of nearly US$1.5 IFIs to review their policies in a number of trillion in developing Asia over the next other areas. The question is to what extent decade, the funding potential of interna- they are really committed and capable of tional financial institutions (IFIs) is esti- translating new ideas into action with pos- mated at around US$25 billion per year. itive and tangible results. The resources of IFIs such as the World Bank for concessional lending are dwin- dling while those of the International Fi- The death of the nance Corporation, the World Bank’s pri- “Washington Consensus” vate sector investment arm, are increasing. This means that concessional lending for Williamson (2000), originator of the phrase poverty reduction has shrunk but private the “Washington Consensus”, argues that sector lending, particularly to multi- the meaning he envisaged was a summary national companies, has expanded. of the lowest common denominator of pol- There is concern in some Asian coun- icy advice handed out by the Washington- tries that foreign capital and multinational based institutions (which include the companies are expanding into non- United States Treasury, the Federal Re-

48 serve Board, the IMF and the World Bank). The intervention of the ILO and the The subsequent use of the term, however, campaigns by the international trade began to signify neo-liberal or market- union movement, however, paved the fundamentalist policies. He agrees that way for inputs from trade unions in the there is no consensus on a wider agenda development dialogue at national, re- and the policies designed to eliminate gional and international levels. Again, the poverty should go beyond the original Asian crisis played a signiﬁcant role in that version of the Washington Consensus. evolution. Both the IMF and the World The IFIs focused on economic reforms Bank began to reconsider their formerly and liberalization. They have not, at least cold relationship with organized labour in until recently, paid attention to rising un- developing countries (O’Brien, 2000). The employment and poverty. Their interest in evidence of the new attitude can be seen the labour market was to make it “ﬂex- in the structural adjustment loans to the ible” through liberalizing retrenchment, Republic of Korea, which called for dia- lay-offs and closures, and stringent con- logue with unions and social protection for trols against strikes. There was no corre- workers. In this, the contribution of the sponding interest in checking employer Korean trade union movement and the militancy and lockouts. Even new rules support extended by the international provide for guaranteed returns for capital trade union movement deserve apprecia- (in infrastructure projects involving for- tion. eign direct investment (FDI) by multi- The truth remains that the IFIs had sin- nationals in Asia), not security of jobs gularly failed to foresee the impending cri- and/or incomes for labour. sis. Even a year before the crisis they were Initially, the IFIs took the view that na- lauding the miracle and hailing the ro- tional economic policies were within the bustness of the Korean economy. The IFIs sovereign domain of the respective gov- simply reacted to the crisis. The Asian De- ernments and that they were merely ten- velopment Bank (ADB) (2000, p. 23) noted dering advice, which becomes conditional that “as many as 60-85 per cent of loans in when they refer to funds they lend. It was Indonesia are non-performing, compared for the governments to decide whether to with 20-30 per cent in Korea and Malaysia, consult trade unions and other civil society and 50-70 per cent in Thailand”. Yet, the institutions. The IFIs wanted the govern- IFIs keep supporting privatization. The ments to do as they were told because IFIs ADB (2000, p. 134) goes to the extent of believed that, unless adjustment pro- saying that “reforms must ensure that the grammes were carried out as planned, gov- private sector, not the government, is in ernments would not be able to balance charge of raising production, creating jobs, their budgets, honour their commitments and increasing income levels”. There is lit- to IFIs and repay the debts. Therefore, they tle appreciation of the fact that most of the did not show much interest or merit in gov- developing and some of the newly indus- ernments discussing the policies with trialized economies (NIEs) and transition other institutions in civil society because it economies are in such dire straits that the might signal permission to deviate sub- domestic private sector has neither the will stantially from the Washington Consensus. nor the capacity to measure up to this It was only when IFIs’ policies faced re- daunting task. peated reversals and failures all around, Almost no country in the region had and when criticism began to mount, that felt it necessary to create social security they became concerned about the need to systems when their economies were develop a wider political consensus for booming. Apart from the Republic of their policies in the countries concerned. Korea, crisis-affected countries were not Even so, the IFIs were more content to enable to create credible social safety nets. gage in a policy dialogue with civil society When the crisis hit and the need was great- institutions other than trade unions. est, the capacity to establish social safety

49 nets was weak. Large-scale job reductions Rodrick (1997) expressed concern about without income or social security con- whether social disintegration is the price of tributed to social and political unrest. economic integration. With mounting pres- Juan Somavia (1999), Director-General sure over ever-increasing social problems of the ILO, observed that “there are mar- which are perceived to be the by-product ket failures with devastating conse- of the market-fundamentalist policies that quences on the horizon. The so-called IFIs have pursued, there is a growing real- Washington Consensus, which stemmed ization of the need to rethink the IFIs’ pol- out of the Bretton Woods institutions in the icy advice and show concern for social and 1980s and 1990s, is objectively dead. That economic implications on the poor and the consensus died in the turmoil of the Asian vulnerable sections in developing coun- crisis. It was too ideological, too simplistic tries. Within the IFIs, introspection began: and too detached from the real life of Joseph Stiglitz, the former World Bank Se- people. The pendulum is swinging back. nior Economist, questioned the IMF’s res- The challenge for us is to have very prac- cue formulae; the IMF became sensitive to tical solutions, very value-oriented solu- the social costs and the World Bank un- tions, and to understand the complexity of veiled its plan to involve civil society in the problems in which we ﬁnd ourselves.” working out development strategies. These calls for changes did not occur The Development Committee of the overnight. They are not advocated just by World Bank/IMF requested in October trade unions. Even within the IFIs there is 1998 that the World Bank should “work rethinking about the failure of the Wash- with the United Nations, the Fund and the ington Consensus and, in fact, the Bretton other partners to develop general princi- Wood institutions themselves are now ples of good practice in structural and so- looking at development holistically within cial policies”. The World Bank responded the framework of the ILO Philadelphia De- with a draft outlining general principles in claration, realizing that “poverty anywhere the following four areas: is a danger to prosperity everywhere”. ⅙ achieving universal access to basic social services, including access to edu- The need for reforms cation, health care, reproductive health, and sanitation and safe drink- ing water; All IFIs have poverty reduction as an over- arching objective. The real social challenge ⅙ enabling all men and women to attain in the region is to improve the quality of secure and sustainable livelihoods and life for around 900 million people who live decent working conditions; with the below the dollar-a-day poverty line. Al- provision of full employment, compli- ready in 1995, the World Social Summit in ance with core labour standards and Copenhagen reinforced the need to pay at- sustainable development; tention to the social effects of economic ⅙ promoting systems of social protection changes. The World Bank has recognized consistent with a country’s level of de- the role of workers and made them the velopment, sustainable and supportive focus of attention in its 1995 World Devel- of informal mechanisms. The docu- opment Report entitled Workers in an inte- ment recognized that safety nets grated world. In 1996, the United Nations should not foster permanent depen- Development Programme’s (UNDP) dency and should strengthen the local Human Development Report underlined the economy; and fact that human development should be the goal and economic development ⅙ social integration “to foster societies should be the means (UNDP, 1996). It later that are safe, stable and just; promote called for globalization with a human face respect for diversity; achieve equity be- (UNDP, 1999). tween women and men; foster toler-

50 ance and protect human rights; and en- The following proposals could be hance the participation of all groups of added to this list: people in their economies, societies and ⅙ give an equal say, if not stake, to all natural environments”. member countries in the governance of IFIs as proposed by the South-South It is quite obvious that the World Bank Commission; drew inspiration from the conclusions of ⅙ the UN Social Summit at Copenhagen in redistribute wealth from richer parts of 1995 while formulating the aforemen- the world to its poorer parts on the tioned agenda. basis of democratically developed and The new lending strategies of the IMF designed pacts (Van der Hoeven, 2000); and the World Bank now require countries and which seek to borrow funds to draw up a ⅙ monitor foreign aid not only by the poverty reduction strategy paper (PRSP), donors but also by groups of other aid in which they identify targets for reducing recipient countries (as the American poverty. This is separate from the struc- aid under the Marshall Plan to Europe tural adjustment participatory review ini- after the Second World War was moni- tiative (SAPRI) launched by the World tored by the European countries them- Bank in July 1997 in eight countries. Nepal selves) (Van der Hoeven, 2000). and Bangladesh in Asia are part of the ﬁrst stage PRSP and SAPRI initiatives respectively. The Emergency Structural Adjust- IFIs and trade unions ment Facility (ESAF) has been trans- formed into a Poverty Reduction Guaran- Despite the overtures to the International tee Fund (PRGF). Confederation of Free Trade Unions The IMF and the World Bank have been (ICFTU) and the International Trade Sec- advocating “bottom-up participation” and retariats (ITSs), the IMF and the World a strategic partnership with civil society. Bank still have to recognize the special and To make IFIs pay more attention to so- distinctive contribution that trade unions cial policy, suggestions offered by Brown can make in social and economic develop- (1998) deserve attention. They include: ment policies and programmes. There is ⅙ imposing international taxes aimed at no mention of either the role of trade preventing the avoidance of taxes by unions or the need to improve labour multinationals at home and abroad and rights as part of PRSP initiatives. for the revenue gained in this way to IFIs’ policies generally paid attention be fairly distributed; mainly to product and capital markets, but not labour markets. Further, IFIs have ⅙ bringing “social clauses” into multilat- been advocating privatization and wage eral trade and investment agreements depression (World Bank, 1996 and 1997) to set basic standards for labour rights regardless of the nature of the private en- and global trade and production; terprise and the conditions of unemploy- ⅙ making IFIs (the World Bank/IMF) ac- ment and poverty in the developing coun- countable to recipient as well as donor tries. The result has been a steady increase countries; in unemployment and poverty. Given the ⅙ absence of credible systems of compensa- strengthening the UN’s implementation tion and social security beneﬁts for af- and monitoring of the relevant elements fected people, the unmitigated conse- of the human rights framework (mostly quences caused untold suffering for vast economic and social rights); and sections of vulnerable communities in sev- ⅙ proposing international guidance in eral countries. The new human resource the form of, for example, “principles of policies pursued by multinationals and best practice in social policy”. emulated by domestic enterprises in these

51 countries in the wake of liberalization, “there should be more carrot than stick in privatization and globalization (LPG) the social clause. Instead of threatening have undermined trade unions and col- sanctions, it could instead be framed in lective bargaining, replaced representative such a way that market access and access systems of workers’ participation in man- to trade agreements be offered to countries agement with direct systems of workers’ that make particular efforts to raise labour association in management, and led to a standards”. fall in union membership. Trade unions in the region believe that The IFIs tried to advocate policies they can make a contribution to increased aimed at sensible economics. In the trade, employment, growth and living process, they initially tried to isolate poli- standards and hence the reduction of tics from economic decision-making, un- poverty. Further, they are convinced that dermined trade unions and other civil so- strengthening democracy, social participa- ciety institutions and ignored the interests tion and peace would also make an im- of labour. portant contribution to international sta- There is, as yet, no convincing evidence bility. They also hold the view that that the policies of IFIs – particularly cap- “achieving the successful development of ital and trade liberalization measures – sustainable economic relations will de- will automatically result in growth with a pend upon a shared vision of the social more equitable distribution of wealth. goals of economic growth and develop- Everyone knows there are winners and ment, not on a narrow free-market agenda losers in the process, but there are appre- based on business promotion alone”. To- hensions about who the winners are and wards this end, attention needs to be paid who the losers. Compensation to the af- not only to political, economic and cultural fected is talked about, but not delivered. aspects, but also the fourth pillar – the so- When it is delivered, it is usually too little cial pillar based on respect for fundamen- and too late. tal workers’ rights and consultation with While increasing segments of the inter- trade unions, on both the general and spe- national labour movement, led by the ciﬁc priorities of the various pillars of ICFTU and ITSs, are advocating the inclu- cooperation. sion of workers’ rights clauses into international trade agreements, unions in some Asian countries are resisting the linkage Developing genuine dialogue between international trade and international labour standards because they re- As O’Brien (2000, p. 545) notes, differences gard it as “protectionism” by developed between trade unions and IFIs are over countries. This does not mean that these ideology and opposing interests: “Even if unions are happy with the labour stan- IFIs are willing to review and reconsider dards in their countries. They worry that the policy paradigms, neoliberal ideology with widespread unemployment and opposes political interference in the mar- poverty, any sanctions against their coun- ket such as international labour standards tries’ trade and economy might further re- or social dimensions of SAPs.” Trade duce the prospect for jobs. unions in the region are, therefore, like However, some trade unions (for ex- some governments, caught in a dilemma: ample, in Australia) have tried to convince should they cooperate with IFIs’ policies their colleagues in Asia that the “social that hurt their interests? Even where there clause” is not about reducing social pro- is interaction between the two, they have tections and existing living standards; it is different goals. Trade unions want to in- about labour’s rights, not wages or wage ﬂuence the IFIs’ policies to give due atten- costs; it should be seen as a mechanism to tion to social effects. IFIs want trade raise, not lower, people’s material living unions to support their policies to give standards. As Harcourt (1997) argues, these a sense of ownership and partner-

52 ship. IFIs are also keen to get the help of and information sharing. For example, trade unions in containing corruption and trade union officials have been consulted improving the quality of governance. Both with regard to the Bank’s assistance strat- seek reciprocal influence. Much depends egy in the Republic of Korea and in the de- on who influences and who is influenced. velopment of a social protection strategy The ICFTU has had the foresight to pro- in Thailand. Country teams are encour- vide leadership to persuade both their af- aged to consult with trade unions in filiates and the IFIs about the need for di- preparing Country Assistance Strategies alogue and mutual understanding. Un- (CAS) and as part of the Comprehensive doubtedly, over a period of time, such a Development Framework (CDF) process. dialogue will promote a two-way concern The World Bank staff have also begun to for both product markets and labour mar- encourage governments to consult trade kets, reduce the pitfalls of taking positions unions in the process of writing their and making decisions based on an incom- PRSPs. plete understanding and an ideological The World Bank is now committed to perspective. Interactions will help both strengthening its in-house expertise in sides to cooperate and accommodate and order to support the dialogue with trade to cease treating each other as adversaries. unions. To this effect, its staff underwent In January 1999, the ICFTU and the training. Its Social Protection Unit con- World Bank had their first high-level meet- ducts training courses for staff on trade ing to discuss ways and means to increase unions and has developed a web site with dialogue with trade unions. This signalled details on industrial relations and contact the World Bank’s acknowledgement of the information for national trade union orga- contribution that constructive relations nizations in Bank client countries and de- with unions could make to socio-economic veloped an online tool kit on core labour development. The purpose of the World standards which includes encouragement Bank’s dialogue with the trade unions has of consultation with trade unions. The involved three main objectives: enhancing World Bank has also published a booklet, familiarity and trust; exchanging concerns Working together: The World Bank’s partner- and views; and transferring knowledge. ship with civil society (World Bank, 2000) Between January 1999 and May 2001 at which is supposed to serve as a general re- least 25 meetings were held between the source guide for civil society organizations Bank and international union organiza- (including trade unions). tions. Besides the ICFTU, the ITSs and the World Confederation of Labour (WCL) also participated in several of these meet- Assessment of trade union strategies ings. The World Bank has also sent officials to attend and interact with union confer- The responses and strategies of national ences at international and regional levels. trade unions vis-à-vis the IFIs take differ- Within the Asia-Pacific region, the World ent forms according to the various con- Bank has either participated in or invited texts within Asia-Pacific in terms of the na- trade unions to a number of conferences ture of state, industrial, political and ideo- during 1999-2001. The World Bank also logical aspects, and the state and status of joined the Asian Development Bank in unions, among others. inviting trade unions and representatives In several Asian countries trade unions of other civil society institutions at re- are not quite convinced that trade liberal- gional conferences in Bangkok and Manila ization and promotion can bring positive during 1998 and 1999 respectively. outcomes in terms of higher living stan- The World Bank staff are also engaged dards and more employment. The trade in ongoing dialogue with trade unions as union statement to the third summit of part of their consultation with civil society. ASEM (Asia-Europe Meeting) in Seoul on This includes both informal discussions 20-21 October 2000 asserts that if the free

53 market model advocated by ASEM leads measures to deny basic trade union rights to a concentration of the benefits of growth to workers in certain key sectors. In India, in the hands of multinational corporations, dissatisfaction with the performance of working people throughout the region will services/utilities under public ownership reject ASEM. Trade unions are particularly has resulted in a general loss of sympathy concerned about one of the ASEM instru- for the workers in SOEs. Assertion of con- ments: the Investment Promotion Action sumer rights and citizen’s rights through Plan (IPAP) concerning multinational com- consumer courts and public interest litiga- panies, which extol the absence of strikes tion has further undermined union power. as an effective investment incentive. The Trade unions can best win public support trade unions recommended the integration when they articulate the woes of the con- of the OECD guidelines on multinationals sumers and the public than when they nar- into the IPAP as part of a process of build- rowly define and defend their members’ ing a successful framework of rules con- interests. When the State and employers cerning the treatment of foreign direct in- get together and want privatization, the vestment within the ASEM area, including best response for trade unions is to form a a review of the legislation and behaviour broader coalition with a wider public and of EPZs in different countries in order to mobilize opinion on whether and how pri- avoid social dumping. vatization is going to harm public interest. In Thailand, unions in state-owned en- A notable feature of Singapore’s ad- terprises (SOEs) overplayed their hand in justment and the trade unions’ response to their strong opposition to privatization it concerns the proactive stance taken by through strikes and other disruptive ac- the Singapore National Trade Union Con- tions to pressure the Government to back gress (SNTUC). The SNTUC has ad- off from its commitment to further priva- dressed the issue of liberalization and tization. In retaliation, the Government re- globalization by stressing support and ac- moved the unions representing workers in tive participation in the provision of skills the SOEs from coverage under the Labour training for their members. Similarly, the Relations Act and established new laws Malaysian and Korean unions have ac- regulating and significantly reducing the tively mobilized support for the creation power of the unions in SOEs. and/or improvement of safety nets for In Singapore and to a large extent in those affected by the adjustment process. Malaysia, if privatization was taking place, The Australian unions’ experience with it was for reasons other than performance. social accords and labour law reforms While privatizations in Malaysia were shows that it is not an unmixed blessing to fraught with allegations about lack of have a Labour Party in power. In India, transparency, Singapore did not face such too, trade unions have realized the hard wrath from its critics. In both countries, way that political parties, regardless of SOEs fared better because, if the State re- their differences, ideological or otherwise, sorted to privatization, it was to redefine tend to act similarly in tackling economic its role voluntarily rather than due to pres- problems with inputs from IFIs. sure from IFIs. And, in Malaysia, despite a privatization programme, the state sector was growing anyway under the Govern- The legacy of the past ment’s encouragement to bumiputeras (sons of soil). Unlike most other Asian Colonial influence persists in many parts countries privatization did not lead to of the region even though colonial rule mass-scale downsizing. ended some decades ago. For example, the The same tendency observed in Thai- South Asian industrial relations system land has been noted in South Asia, partic- continues to inherit British “diseases” and ularly in India. In Pakistan too, the State that in the Republic of Korea and the has intermittently imposed draconian Philippines, the American diseases.

54 Ideology dominated trade unions in the the union movement in Fiji which was fac- Asia-Pacific region, with the World Feder- ing a number of problems. Solidarity ation of Trade Unions (WFTU) and the among trade unions at the regional and in- ICFTU orchestrating support of diametri- ternational levels is, however, much lower cally opposite ideologies. Since the end of than it could or should be. the cold war in 1989, the influence of the The achievements of social dialogue at WFTU has, however, declined in the region. the national level in countries such as the Business interests demand that the de- Republic of Korea (Korean Tripartite Com- veloped countries take advantage of mission), the Philippines (the Social Ac- tightly controlled unions and low labour cord between employers’ federations and standards. The political interests of devel- trade unions) and Singapore (arrange- oping countries seek to underwrite rapid ments for retrenched workers and Skills economic growth through FDI attracted Developments Programme) should serve by cheap and compliant labour. Many as beacons for the trade union movement countries in the region do not have inde- in dealing with the challenges emerging pendent unions. The State effectively con- due to liberalization, privatization and trols rights to freedom of association and globalization. The key trade-offs negoti- to collective bargaining. Therefore, there ated by trade unions in Asia to overcome are problems for unions in establishing a the challenges of the economic crisis (see transnational political role to restrain IFIs box) highlight the positive role of trade which are essentially intergovernmental unions. organizations with their own vision of Despite the positive results of trade economic development. union actions in some countries in the re- Although governments associated gion, overall trade unions are getting with trade unions (for example, in Aus- weaker with not only a declining mem- tralia, Poland or the United Kingdom) bership base but also the emergence of de- have been pursuing the same policies as centralized, enterprise-level bargaining. their political opponents (whether liberal, In several cases, changes in labour laws as conservative or of a different kind) and a result of liberalization and globalization unions are finding it a liability to have their have not been to the advantage of work- own party in power when they have to ers. There is a need for unions to rethink fight policies which ignored or under- their strategies to mobilize support for a mined social and labour issues, the gen- return to the industry framework where it eral impression seems to be that at least previously existed. labour-led governments consult with their unions and in some cases trade unions were able to extract concessions on the Seizing the opportunity content, extent, speed and sequencing of reforms. The first and foremost challenge of trade unions concerns the attack on rights at work, human rights and sustainable de- A changing environment velopment. Trade unions need to develop concerted action at the local, national, re- There is a strong intervention by interna- gional and international levels to rally tional union bodies – WCL, ICFTU and support for core labour standards embod- ITSs – which needs to be further strength- ied in the 1998 ILO Declaration on Funda- ened. But it has to be built through grass- mental Principles and Rights at Work. The roots participation, not official interna- concept of decent work advocated by Juan tional union structures alone. Regional co- Somavia, Director-General of the ILO, is operation among trade unions was intended to gain support for an agenda apparent recently when unions in Aus- based on workers’ rights, job creation, so- tralia and New Zealand came to the aid of cial protection and social dialogue. Trade

55 Key trade-off to save or create jobs through social dialogue at national level in ASEAN countries ● Philippines. A Social Accord on Industrial Har- and funded by the Government, allocates mony and Stability (1998) between the Em- training subsidies of up to 80 per cent of ployers’ Confederation of the Philippines and course fees, and 70 per cent of absentee pay- two major labour federations, namely the roll for training conducted during normal Trade Union Congress of the Philippines hours of work. (TUCP) and the Labour Advisory and Consul- ● Malaysia. A Tripartite Committee on Re- tative Centre (LACC), provided for six months’ trenchment has been set up to monitor re- “mutual restraint” on lay-offs and industrial trenchment. It encourages reference to disputes. At regional level, the Department Malaysia’s Tripartite Code of Conduct for In- of Labour and Employment (DOLE) organized dustrial Harmony, in particular the passages re- tripartite conferences on the theme “Saving lating to retrenchment which stipulate a range jobs and saving industries”, culminating in of alternatives to retrenchment. The Govern- “Regional Social Accords”. ment has introduced legislation (following ● Singapore. A Tripartite Panel on Retrenched consultation with the tripartite National Workers (February 1998) provides for: (1) de- Labour Advisory Council) requiring employers velopment of a network of information on re- to notify the Labour Department of prospec- trenchments before they occur to match job tive lay-offs one month in advance. The new vacancies; (2) exploration of alternatives to law also aims to expand labour force partici- retrenchment through redeployment, adjust- pation of married women through increasing ments in working time and wages, and train- ﬂexibility of working time. A data bank was ing possibilities; and (3) advice on training established by the Federation of Malaysian opportunities and use of a skills development Manufactures (FMM) and the Malaysian programme (December 1996) as an alterna- Trades Union Congress (MTUC), to facilitate tive to lay-offs. The programme, spearheaded mutual data exchange on jobs available and by the National Trades Union Congress (NTUC) retrenched workers seeking employment.

Source: Globalization and change: Social dialogue and labour market adjustment in the crisis-affected countries of East Asia, ILO-EASMAT, 1999, background paper presented at the ILO/Japan Asian Regional Tripartite Seminar on Industrial Relations and Globalization, Bangkok, 31 August-2 September 1999.

unions should inﬂuence the IFIs to incor- able poor and those in non-traditional porate these basic elements of human forms of work – the unorganized/infor- progress into their developmental assis- mal sectors, the migrants, the minorities, tance programmes. and even the unemployed – in their com- The IMF and the World Bank are in- munities. volved in poverty reduction in 40 heavily The IFIs are now in a mood to take the indebted poor countries, four of which – civil society institutions into their conﬁ- Cambodia, Mongolia, Nepal and Sri dence and engage them in the dialogue for Lanka – are in Asia. Trade unions should ensuring wider participation, concern for approach their national governments and social effects, respect for human rights, insist that they be fully and explicitly in- sustainable development and good gover- cluded in the poverty reduction consulta- nance. Here lies the opportunity for trade tion process and the preparation of PRSPs. unions, through unity at local level and Trade unions should form strategic solidarity at regional and international partnerships/alliances with other ac- levels, to impress upon their respective tors/institutions in civil society, including governments and IFIs that they have a pos- cooperatives, communities, and con- itive outlook and approach to develop- sumers, environmental and human rights mental issues. groups. They should transcend the boundaries of the workplace and the narrow concerns of their membership and articulate wider social concerns of the most vulner-

56 References Somavia, Juan: Trade unions in the 21st Century, Keynote speech to mark the launch of ILO’s In- Asian Development Bank: Asian Development Outlook ternet debate on organized labour, Geneva, ILO, 2000 (Manila, 2000). 1999. Brown, G.: Can there be a global standard for social pol- UNDP: Human Development Report (New York, 1996). icy? The social policy principles as a test case, Har- —: Human Development Report: Globalization with a vard lecture by UK Chancellor of Exchequer, No- human face (New York, 1999). vember 1998. Van der Hoeven, R.: Assessing aid and global gover- Harcourt, T.: Who’s afraid of the big bad world? – Trade nance: Why poverty and redistribution objectives mat- union approaches to the global economy (Melbourne, ter, Employment Paper 2000:8, Geneva, ILO, Australian Trade Union, 1997). 2000. Malhotra, K.: Emerging trends in Asia and possible re- Williamson, J.: “What should the World Bank think sponses by civil society, paper prepared for presen- about the Washington Consensus?”, in The World tation at the 7th General Assembly of the Asia Bank Research Observer, 15(2), August 2000, Partnership for Human Development (APHD), pp. 251-264. Marbel, South Catabato, Philippines, 26-28 No- World Bank: World Development Report 1995: Workers vember 1997. in an integrated world (Washington, DC, World O’Brien, R.: “Workers and world order: The tentative Bank and Oxford University Press, 1995). transformation of the international union move- —: Bureaucrats in business, Washington, D.C. (Wash- ment”, in Review of International Studies, 2000, ington, DC, World Bank and Oxford University pp. 533-555. Press, 1996). Rodrick, D.: “Has Globalization Gone Too Far”, in —: World Development Report 1997: The State in a chang- California Management Review, 1997. ing world (Washington, DC, World Bank and Ox- —: “How far will international economic integration ford University Press, 1997). go?”, in Journal of Economic Perspectives, 14(1), —: Working together: The World Bank’s partnership with Winter 2000, pp.177-186. civil society (Washington, DC, World Bank, 2000).

57 Global economy: The outlook in the regions

Countries in transition: The great transformation – successes (?) and failures (!)

Transforming the former planned economies into market economies has certainly been one of the greatest challenges governments have been facing in recent decades. The goal of the transition process was clear: improving the welfare of the people through democracy and market economy. However the transition path was unknown and has been hotly debated throughout the whole period.

Frank Hoffer Senior Specialist on Workers’ Activities ILO Bureau for Workers’ Activities

hen the Soviet system collapsed in lived with an ideology that provided dog- W1989 in Central Europe and two matic but clear answers to a complex world years later in the heart of the ‘Empire’, the was quite happy to have another infallible people and the elites turned to western ideology at hand. The invisible hand of the governments and their global financial in- market replaced the visible hand of the stitutions for advice on how to transform party in their view of the world. their countries into prosperous and de- “The irony of it all is that the modern mocratic societies. At this stage there was critique of utopian social engineering was massive public support for radical change based particularly on the Bolshevik ap- and a naïve enthusiasm for self-regulat- proach to the transition from capitalism to ing market economies. The old system communism, and the shock therapy ap- was – this should not be forgotten in the proach tried to use many of the same prin- light of later nostalgia – totally discredited ciples for the reverse transition. It is almost on grounds of efficiency, justice, ecology, as if many of the western advisors just freedom and democracy. The system col- thought the Bolsheviks had the wrong lapsed in 1989 because virtually nobody textbooks instead of the whole wrong ap- was prepared at that time to defend it. proach. With the right textbooks in their briefcases, the ‘market Bolsheviks’ would be able to fly into the post-socialist coun- The “shock therapy” tries and use a peaceful version of Lenin’s methods to make the opposite transition.”1 Given the frustration with a state-led econ- The message delivered by the interna- omy and a state-led society in particular, tional mainstream was very simple LSP the younger elite was very receptive to the (liberalize, stabilize, privatize). The issue idea of adopting a radical market-orien- of institution building was added later but tated transition strategy, the so-called still regarded as a second, medium-term shock therapy. But it was also attractive be- step, because only the first three measures cause it promised an easy fix through very could be taken immediately. few strategic decisions. An elite that had

58 For Stanley Fischer, then Acting Man- fers, and widespread corruption took aging Director of the International Mone- place in all these countries. It has been ar- tary Fund (IMF), the evidence of 25 tran- gued extensively in the literature that the sition economies proves that mainstream focus on macroeconomic liberalization economic advice works. The faster the and stabilization underestimated the need transition, the faster the recovery.2 for comprehensive industrial and regional The reasons for the different perfor- policy and active labour market policy to mance of countries, according to the IMF, avoid industrial decline and the loss of are seen in the more adverse initial condi- skilled workers who found better paying tions of some countries and in the incon- jobs abroad. sistency of the reform implementation in Even in the most advanced CEE coun- the less successful ones. The different ini- tries growth rates are such that catching tial conditions do not require fundamen- up with Western Europe will take more tally different approaches to transition. than a generation and there are still many The same medicine should be given to all hurdles ahead. The EBRD expresses con- “patients”. cern about the growing trade deficits and In a recent staff paper the IMF insists the overvalued currencies in Poland and on these and other points: Hungary. Monetary stabilization policy cannot be maintained in the long run if In the countries of Central Europe and the governments fail to deal with their struc- Baltic, commitment to macroeconomic sta- tural weakness. bilization came sooner and implementation Compared with the failure in the Com- of structural reforms was firmer. These coun- monwealth of Independent States (CIS), tries have re-joined the ranks of middle-in- however, there can be no doubt that the come countries and can claim to have com- development in the CEE and the Baltic pleted their transition, or at least the basic States was more successful. The drop in first stage of it. In the next stages, these coun- output has been massive in CIS countries tries face the challenges posed by accession and none has yet achieved any sustainable to the European Union (EU), and, more gen- economic recovery. Unemployment and erally, by the process of catching-up with the underemployment are high, wages have richer nations. The mainstream view is that fallen dramatically, the pension system Russia and other countries of the Common- has virtually collapsed in several countries wealth of Independent States (CIS) can and and 30 to 50 per cent of the population live ought to follow a similar path, but there is below the poverty line. The access to pub- increased appreciation of the difficulties of lic health care and quality education is be- institution building and of the power of coming more and more income depen- vested interests to derail the process of re- dent. Public health is in decline. Diseases form in the interim.3 like tuberculosis are spreading and life ex- pectancy has fallen dramatically. The It should be kept in mind that millions poverty-induced, massive growth of pros- of people have been left out of this suc- titution led to a dramatic increase in sex- cessful transition. Even in Central and ual disease and the threat of an HIV cata- Eastern Europe (CEE) the cost of transition strophe is mounting. In some countries has been unexpectedly high. According to like Tajikistan even absolute poverty and the European Bank for Reconstruction and famine are a bitter reality. Development (EBRD), only five transition Six states suffered from war or civil countries recorded in 2000 a higher GDP war. Most of the CIS countries do not qual- than at the beginning of the transition in ify as truly democratic. The majority are 1989.4 A massive collapse in output, high governed by authoritarian or even dicta- and persistent unemployment, growing torial presidents. In the most recent period income disparities, declining expenditure most regimes in the CIS have become more on education, health care and social trans- authoritarian and less tolerant towards

59 free speech, freedom of association and was no easy way out of the messy econ- fair and democratic elections. So one of the omic, social and political heritage of the strongest arguments for rapid transition – failed Soviet development strategy. to reach a point of no return – seems to be It seems to be a bit too easy to put all the questionable. At least if this question is not blame for failed reform on the lack of polit- limited towards private property but in- ical skills or lack of leadership in those cludes the issues of freedom, democracy countries. Also the difference between slow and respect for individual and collective and fast reforming countries is too simple, human rights.5 because some countries started pretty fast and slowed down later, while others started slowly and speeded up reform later, or lib- Reasons for success and failure eralized but were reluctant to privatize. Hungary has probably one of the longest Throughout the transition period, debate and slowest transition processes in Central focused not so much on the general goals and Eastern Europe, because many changes as on the priorities, sequencing and tim- (in particular concerning small-scale priva- ing of the transition process. While every- tization and entrepreneurship) date back to body agrees that the different starting the 1970s. Coming out of the Yugoslavian point explains to some extent the different type of socialism, Slovenia had longer ex- result, this is insufficient to explain the perience with market mechanisms and watershed between the CIS countries and semi-private property than the other so- the Central and Eastern European states. cialist countries. Hungary and Poland have Ex post obviously everybody is eager to been comparatively slow in privatizing associate themselves and their advice with bigger enterprises, while the Czech Repub- the success stories while blaming failures lic, Kazakhstan and the Russian Federation on reasons outside the reach of the adviser. did a fast but inefficient job. So is the IMF: While there are very different patterns of transition among the successful coun- We conclude that the basic strategy advo- tries, they have four things in common: cated by market-orientated proponents of ⅙ They managed to build the necessary reform a decade ago is correct: namely that institutions for a modern and efficient both stabilization policies and structural society. reforms, particularly privatization, contribute to growth; and that the faster is the ⅙ They had better starting conditions in speed of reforms, the quicker is the recov- relation to infrastructure, education, ery from the inevitable initial recession, industrial and cultural traditions, etc. and the more rapid is the growth ... The an- ⅙ They are neighbouring countries to the swer [for failing to implement this basic European Union (EU). growth strategy] must lie elsewhere, in the political realm, in the lack of effective po- ⅙ They were given the perspective of EU litical or societal support, and in problems accession at a fairly early stage of tran- of governance. sition.

So while the Czech Republic, Hungary, It is crucial for successful transition to Poland and Slovenia implemented the build a broad range of functioning institu- right advice, the failure in the CIS coun- tions and there is clear correlation between tries lies in the political realm. Critics of those countries that managed to do so and the IMF tend to turn the argument the those closest to the EU. Therefore it might other way round and blame its advice – be worth looking at the impact of the EU forced upon the countries through credit and its Member States on these countries. conditionalities – for all the hardship of the The European impact can be grouped in transition. Both views ignore that there four areas:

60 Orientation: for the Eastern European eased the transition process. This was par- countries the collapse of the system was ticularly the case in Poland. Hundreds of also the moment of national liberation and thousands of workers from Central and the return to Europe as a cultural identity. Eastern Europe worked (some worked il- Many people saw the highly institutional- legally, but they earned money neverthe- ized and socially orientated western Euro- less) in the EU countries. This helped pean market economies as a system they many people to survive during the worst wanted to join, not just economically but period of transition and also allowed some also politically and culturally. to accumulate money to set up their own business. Substantial investment – not Guidance and institution building only by big multinationals but also by the through the accession process: the acces- famous Mittelstand – had, by and large, a sion process institutionalized this orienta- positive impact in providing not only cap- tion. It obliged candidate EU members to ital but also new technologies and work reform economic and social policies. It also practices. disciplined the political elites. They know that the criteria for EU accession are not purely economic but also require genuine Attracted by the European model democratic elections, independent judiciary and institutionalized social dialogue The very presence of the European model and support for the development of a civil and the political decision to offer accession society. Even if many CEE countries are in- and integration to the Central and Eastern creasingly frustrated about the way the EU European countries was of crucial impor- has been slowing down the accession tance in reducing the institutional vacuum process, they continue to see EU member- that occurred in all countries when the ship as a crucial element in their national party state disappeared. The “guidance” development strategy. through the orientation towards the EU compensated to some extent the deﬁcien- Multi-level know-how transfer: the ex- cies of the shock therapy concept. Those change between these countries was not countries closest to the EU have been limited to the young elite but took place at doing best and those that have a chance to different levels. The broad-based technical join the EU in the foreseeable future have assistance concept of the EU fostered dia- also done better than others. So the orien- logue and understanding between many tation and the adaptation towards the institutions of a civil society. This was com- highly institutionalized and regulated Eu- plemented by bilateral, regional and local ropean Union might have been better initiatives. It involved politicians, man- guidance than the more simple IMF model agers, trade unionists, scientists, state bu- that, at least in its popularized form, basi- reaucrats, civic rights groups, students and cally argued that with a few macro deci- ordinary citizens. People of these transition sions a country can be set on a successful countries had to adapt to a modern demo- transition path. cratic society and market economy. Many Critics rightly point out that the demo- local and regional initiatives created mu- cratic processes and the development of tual communication between Eastern and civil society is still insufficient in CEE Western Europe. Private sector know-how countries and the transition is socially un- transfer was achieved through foreign di- fair and excludes too many people. How- rect investment on the one hand and em- ever, compared with the CIS countries, the ployment (at times illegal) of East Euro- achievements are nevertheless impressive. pean workers in EU countries, on the other. For the States of the former Soviet Union EU accession is not an option because of Financial transfers: last but not least, ﬁ- their size, location and level of develop- nancial assistance and debt forgiveness ment. If “guidance” through possible EU

61 accession is not available to fill the gap in proach was applied throughout the re- the transition strategy, the need for insti- gion. Credits and conditions were agreed tution building, industrial and regional behind closed doors. This approach was policy, social safety nets and social dia- certainly not helpful in promoting the de- logue has to be clearly and explicitly part velopment of democratic institutions and of a deliberate policy of transition. civil society. The cultural traditions of most CIS By widely neglecting the social impact countries differ substantially from CEE of the transition strategy it was actually countries and the institution-building impossible to build a consensus for re- process would have been more difficult in form. This confirmed the reformers in their any case. But there can be no doubt that opinion that good things for the people the transition strategy for the CIS coun- have, when necessary, to be done against tries was insufficient. The major criticism their will. President Yeltsin and the young is not what has been done, but what is technocratic and sometimes elitist mod- missing. If rampant corruption has per- ernizers failed to maintain and broaden verted the transition process in all these the initial public support for reforms that countries and the level of governance has is essential for success. Instead of trying declined in some cases to the level of hard to build a broad alliance for reform “criminal self-regulation”, the purely they relied increasingly on presidential technocratic reform approach has to bear and executive power to push through the some responsibility for this. The reformers master plan. Unfortunately, but probably and their international advisers under- not surprisingly, this approach turned estimated that the push for LSP in an more and more into a corrupt system of under-institutionalized society leads to a insider enrichment. power equilibrium among corrupt state officials, criminals and new oligarches that transforms society into a state of perman- Improving governance: ent crisis and decline. The Russian case The IMF supported or at least allowed itself to be identified with an authoritarian Today, it is nearly universally accepted and technocratic top-down approach to re- that good governance and institution form. The IMF was fully supportive of a building are crucial for getting out of the president and a reform team that did not mess in the so-called slow transition coun- care about “effective political or societal tries. The IMF recognizes, for example, support” for its politics. Instead of an open that ready-made reform packages deliv- debate over the reform policy and search- ered by international experts do not work ing for a broader reform consensus the re- properly. Worldwide experience shows formers presented the agreements with that economic programmes are most likely the IMF as a fait accompli that had to be ac- to succeed when they are “owned” by the cepted unconditionally. And, again and country implementing them. The question again, the IMF gave credibility and credits now for Russia is whether it will develop to those reformers who did not fulfil the its own economic reform programme and conditionalities and presided over wide- seek support for it from civil society. spread fraud, corruption and a disastrous If a programme is to win the support of privatization programme, that allowed a society, it needs to deal with the immedi- group of oligarches to hijack the country. ate concerns of the people: decent em- Admittedly, the IMF was not free in its ployment, social security, access to health decision because of strong pressure from care and education and fair income distri- its major shareholders for nearly uncondi- bution. The people have to be involved in tional support for President Yeltsin. But the reform debate instead of being objects the approach was not limited to Russia. or even victims of reform. Such an ap- The same secretive and authoritarian approach could create genuine “ownership”,

62 but it would mean a substantive departure on tight conditions. The aid recipient from the IMF-supported reform practice of should: have a reform strategy orientated the last decade. towards economic growth, high levels of The mainstream advice in the past employment and social justice; develop a strongly underestimated the need for in- reform strategy that will invest in the institution building. When this advice was stitutions of a civil society; and promote accepted, it remained a very sterile con- independent media, genuine social dia- cept. Institutions were just understood as logue, independent NGOs and efficient formal institutions. But it needs more than law enforcement. Such a reform strategy a decree to make a nation’s judiciary inde- has a chance of being supported and pendent. It needs more than a decree to en- “owned” by Russian civil society. Without sure transparency and accountability. Top- a stronger civil society, it will be impossi- down institutionalization can only work if ble to challenge the vested interests of there is a bottom-up response, if people get post-Soviet capitalism. involved. Otherwise even brilliantly designed rules will be abused and converted into instruments of insider enrichment. Social dialogue as an element Russia faces a typical transition of civil society dilemma. On the one hand, it needs functioning public institutions to overcome A genuine social dialogue would promote corruption, legal nihilism and bureau- the launching of a set of checks and bal- cratic arbitrariness. On the other hand, cor- ances and would be an important element ruption, legal nihilism and discretionary in achieving fairer income distribution bureaucratic procedures prevent the de- and better working conditions. How velopment of authentic institutions. might the State and the international ﬁ- Instead of a democratic society and a nancial institutions speed up the develop- market economy, a corrupt political capi- ment of efficient social dialogue through talism is taking root in Russian society. affirmative actions? Instead of further Democracy is – as Russia is learning the deregulating the labour market through a hard way – much more complex than hav- new labour code, efforts should be made ing an election every four years. It needs to enable representatives of stakeholders, public debate and a broad variety of insti- such as trade union leaders, to defend their tutions, pressure groups, trade unions, po- interests and those of civil society. If the litical parties and independent media to IMF is serious about Russian “ownership” create accountability and transparency. of a reform package, a labour code that While the need for the rule of law, good abolishes most workers’ rights for collec- governance, transparency and public active representation is a non-starter. countability is widely shared, the question Putting people in the driving seat of re- is how to achieve it. The liberal approach, form can only start in places where people allowing the free development of institu- are directly affected and, in some form or tions like civic movements, political par- another, already organized. A more demo- ties, independent media or trade unions cratic and transparent industrial relations has proven insufficient. system at the enterprise and the local lev- Neither markets nor institutions have els seems to be one of the more realistic risen phoenix-like from the ashes of old starting points for successful institution Soviet power structure. They have had to building and enhancing efficiency and be built. This needs time and investment. democracy. Former totalitarian regimes have to trans- The former state trade unions today fer their power to the free market and civil have only limited authority with the work- society. ers and are often not fully independent Foreign aid and advice should help. from management or local state authorities. Aid and debt relief should be agreed only However, if anyone has voiced concern and

63 taken some action about unpaid teachers, public bids that reject the request of doctors and industrial workers it has been their employees to enter into genuine the trade unions. Their organizational ca- collective bargaining about working pacity is weak but who else in Russia could conditions and wages. organize a day of action with several mil- ⅙ Institutionalizing an efficient system of lion participants throughout the country? voluntary but binding conciliation and Ex-Soviet trade unions might be arbitration. Trade unions or employers among the few weak post-totalitarian so- should have the possibility to start ar- ciety candidates to become a force for bitration procedures, if they think the strengthening governance and democracy. other side does not fulﬁl obligations To support and speed up this process, under the collective agreement. The ar- governments should promote social dia- bitration commission should consist of logue to build a consensus, establish the two representatives of each side and a “ownership” of a sound reform strategy neutral chairperson. and reaffirm workers’ rights, including the all-important right to collective bargaining. Governments should also take other An important next step could be to cre- steps, including: ate an institutional and policy framework from these ideas. These would be guide- ⅙ Being an exemplary employer. It should lines for encouraging “stakeholders” to perform a transparent and genuine so- become “owners” of Russian civil society cial dialogue with the representatives of as a whole. its employees on restructuring public services and state-owned enterprises. ⅙ Creating effective tripartite bodies. The Notes work of tripartite bodies should focus 1 on visible results. This requires that all Stiglitz, J.: Whither reform? Ten years of transition, Keynote address to the World Bank’s Annual Con- sides enter into genuine dialogue and ference on Development Economics, April 1999. keep the promises made in the negoti- 2 Fisher, S.: Russian Economic Policy at the Start of ation process. the new Administration, Keynote address, Moscow, 6 ⅙ April, 2000. Providing adequate assistance to trade 3 unions and employers’ organizations IMF: “Transition economies: An IMF perspective on progress and prospects”, in IMF Issues Briefs, to strengthen their training capacity to 00/08, 2000. ensure high levels of competence and 4 Süddeutsche Zeitung, 23 April 2001. professionalism in collective bargain- 5 Economically there was never the danger of a ing and the work of the various tripar- return to the planned economy because the very tite institutions. breakdown of this economy was the starting point of change. Even if some bureaucrats would have liked ⅙ Promoting effective collective bargain- it, it was just as impossible as going back to a broken- ing by excluding those employers from down car and trying to drive it again.

64 Global economy: The outlook in the regions

The international ﬁnancial institutions in Latin America and the Caribbean

Where trade union action vis-à-vis the IFIs is concerned, Latin Amer- ica and the Caribbean differ from other world regions in so far as their unions are geographically that much closer to the Washington- based headquarters of the International Monetary Fund and the World Bank.

Alvaro Orsatti* Trade union adviser Argentina

n the mid-1980s, ICFTU’s Interamerican Development Bank (IDB) tasked with con- IRegional Organization of Workers trolling and monitoring its programmes. (ICFTU-ORIT) came out against the new The PSI and the International Transport debt crisis phenomenon and adopted the Workers’ Federation (ITF) joined the first real continental trade union strategy labour network on company reform and on the influence that the international fi- privatization, PERL-NET, with the back- nancial institutions (IFIs) exert on national ing of the International Monetary Fund economic policy in Latin America and the (IMF) which provides the framework for Caribbean. Unions in the United States studies being done on the Mexican supported this action.1 In fact, the conti- telecommunications sector and the elec- nental trade union family extends to the tricity sector in Argentina and Brazil. US organizations – including the Ameri- The specific, geographical characteris- can Federation of Labor–Congress of In- tic of Latin American and Caribbean trade dustrial Organizations (AFL-CIO) – which unionism can be seen in the agreements are themselves members of the ICFTU- which have been concluded with other ORIT and of the regional organizations of civil society organizations and led to the Global Unions. setting-up of the Hemispheric Social Al- In addition, some of the International liance (ASC). Trade Secretariats (ITSs) in the American Thus, trade union efforts vis-à-vis IFIs region now have offices in the United is complemented by the work being done States. This is the case for Public Services with regard to the interamerican bodies, International (PSI) and Union Network In- most notably the IDB (which here is con- ternational (UNI) which have their re- sidered to be the third IFI), the Organiza- gional headquarters and liaison office re- tion of American States (OAS) and the spectively in Washington. Economic Commission for Latin America The ICFTU-ORIT recently created a joint and the Caribbean (ECLAC). Since 1994 working group with the Inter-American these three bodies have been technical advisers to the Free Trade Area of the Amer- * Alvaro Orsatti is a trade union adviser for Union Network International-Americas (UNI-Americas), icas (FTAA), with the regional and conti- for the ICFTU-ORIT and for the Bank employees’ nental integration dimension dominating union in Argentina. these relations.2

65 Trade union assessment of the IDB plying the reformed services, with no legal safeguards. The most systematic study performed by Decentralization and outsourcing are the Latin American and Caribbean unions also being encouraged with the same aim into IFI action was carried out in the 1990s of increasing the presence of the private by the PSI regional office. The conclusion sector. Project adjudication and execution was that the IDB systematically approved favour so-called NGOs which in fact have loans that directly or indirectly violated close ties with the ruling political party. North American standards, the ILO’s in- Such projects tend to get increased fund- ternational labour standards and national ing as more and more service provision legislation. passes to the private sector. Programmes that receive IDB backing A good example of the way in which tend to substitute fee-paying services for the private sector is being encouraged in the basic services that were previously this regard is the promotion of information provided free of charge to the poorest seg- technology (IT) and new administrative ments of the population. In addition, these techniques in services. When project spec- programmes fail to specify any service ifications are presented, they often include quality indicators, assume no responsibil- a non-negotiable IT component forcing ity for any impact they might have on the service providers to buy and install a large populations concerned and do not address equipment base. It is clear that a central- environmental concerns. ized ministry cannot responsibly decen- Reforms are implemented in a legal tralize without having a vast computer void. The constitution usually makes the network. Without IT, the administrators State responsible for public service provi- and accountants will not be able to control sion and, as a result, existing legislation the geographically spread private service does not cover private enterprise provid- providers who use different payment sys- ing such services. The IFIs have special tems, different levels of responsibility and strategies for dealing directly with parlia- different kinds of service contract. ments, joining forces with other donors However, there are a number of ques- and investing in advertising and public re- tionable specifications for the IT systems lations campaigns to promote their pro- required by this decentralization. Firstly, grammes. Project adjudication documents the IDB actively promotes the acquisition and information are not published. of hardware, software and services from The policies imposed by the IDB are companies contracted by the Bank itself. drafted by loan managers and consultants Senior civil servants who use the loans to working out of Washington or hired on the buy this technology may indulge in acts of international markets and who have little corruption in so far as purchases of IT or no commitment to the country they are equipment are negotiated on an individ- dealing with nor any real knowledge of the ual basis. Project auditors cannot know ex- public institutions that they are restruc- actly whether the equipment was really turing. They are often incompetent and acquired and installed correctly. The fu- may, sometimes, directly benefit from the ture maintenance and updating costs are recommendations and directives that they impossible to forecast. The technology is issue, even though they are not citizens not designed for the specific economic and of the countries whose policies they are social context of the recipient country. drafting. There is another snag: projects designed by the IDB are not publicly discussed, they are not approved by parliaments and na- Promoting the private sector tional assemblies, and users and their representative unions are not consulted. Projects often seek to promote the private Attempts by PSI-affiliated unions to es- sector by awarding it the contracts for sup- tablish a dialogue with the IDB, the World

66 Bank and, often, government leaders in collective agreements applicable to state- their own countries, have been rebuffed or owned companies and the government; channelled into complicated and fruitless when IFI documents explicitly refer to pub- discussions. lic sector employees as “risks for the suc- The public sector unions, for instance, cessful completion of the project”; when are told that the information is on the IDB campaigns are run to discredit workers on web site, when it clearly is not; that the grounds of an alleged lack of motivation or project has yet to be approved, when in qualifications; when labour regulations fact it has been; that the country’s office is and protection mechanisms are ignored not authorized to give out this kind of in- and new, productivity-based wage policies formation, when it is; or that the country’s are put in place alongside more precarious office does not have the information re- short-term employment contracts. quested, when it does. IDB action has also resulted in high public sector unemployment. In fact, specific formulas are used to cut the payroll, Labour issues as in the water sector where the reduction concerns “the number of employees per Labour rights, and essentially freedom of connection”. In health care, ministry staff association and the right to collective bar- are cut or the skills requirements altered gaining, are violated when the IDB im- without giving the affected employees the poses new conditions of employment for necessary training. In every sector, operat- public services and civil servants, side- ing costs are being cut in relation to in- stepping contracts and trade unions. vestment costs. Labour rights are also infringed when the IDB rules that functionaries should be transferred from one area to another with- Trade union resistance out first consulting their trade union representatives. These rights are also violated Arecent report revealed a multitude of na- when the IDB commissions work audits tional trade union strategies for opposing and promotes reclassification for public governmental policies influenced or dic- employees and union members without tated by the IFIs.3 Generally, the central in- informing, consulting or calling on the ex- strument has been mass demonstrations in perience of their organizations. front of parliaments or national assemblies The IDB shuns labour rights when it with the aim of presenting a request for a pressures governments to lay off public broad-based advisory committee. sector workers using so-called “voluntary These actions have mostly been the re- retirement” schemes, ignoring the terms of sult of inter-trade union alliances (when the existing labour agreements. It is also in there is more than one national trade union violation when it imposes fiscal con- centre), and are sometimes accompanied straints on governments, preventing them by the business sector, political parties, from meeting their contractual obliga- peasant and indigenous organizations, the tions. As a result, the reforms take no ac- Church, student groups, community asso- count of the experience, knowledge and ciations and NGOs. concerns of organized workers in the sys- On several occasions, the unions have tem being restructured. A number of or- also used legal channels, lodging com- ganizations have, moreover, condemned plaints with the national judiciary about the fact that when consultations have ac- the unconstitutionality of certain pro- tually been held they have only included posed reforms and, in one instance, call- government-controlled labour groups. ing for a referendum. The trade union Labour law is infringed when IDB ac- movement has also approached other bod- tion violates constitutional standards, na- ies, from the United States Government to tional laws on public services and existing the ILO itself.

67 Success has been mixed. In some cases spective Governments created labour the unions have actually succeeded in hav- commissions and ﬁnally shelved their pro- ing the government bill in question jects. In Panama the 1990 demonstrations scrapped. In other cases, while the union led to the suspension of the privatization strategy has resulted in the temporary sus- of three of the four companies concerned, pension of the planned measures, they although some years later the plans resur- were simply taken up again for considera- faced and were partially implemented. In tion by a subsequent government. This has the most recent campaign against the pri- happened with planned privatizations, so- vatization of the water supply, the trade cial security reforms, reforms of labour union movement won the support of the codes and other economic policy measures. National Assembly. In Uruguay, the refer- The most frequent causes for union re- endum opposing the privatization law sistance are planned privatizations of na- was backed by 70 per cent of citizens, and tional electrical utilities – Panama in 1990, the measures in question were thereby re- Dominican Republic in 1991 and 1992, pealed, although the same proposals Costa Rica in 2000 and Honduras in 1997. reared up again a few years later. In the Similar action has been staged against Dominican Republic, the Supreme Court plans to privatize water distribution refused to accept the unions’ demand, (Panama, 1990 and 1999), the ports (Peru, claiming that the Constitution does not ex- 2000), the cement industry (Panama, 1990) pressly oppose the kinds of action being and the postal services (El Salvador, 1996). proposed by the Government. The case of Costa Rica is particularly interesting, with simultaneous demonstrations being staged in all of the main Social security reform towns and cities culminating in a four-day general strike. In the Dominican Republic, One particular case of privatization con- the strategy consisted of challenging the cerns social security when the proposal is Government’s decision in the Supreme to restructure the traditional pay-as-you- Court on the basis of an article in the new go pension system through the introduc- Constitution that prevents public sector tion of pension funds. Between 1997 and companies from changing into anything 2000, the trade unions ran into proposals other than cooperatives. of this kind in Argentina, Colombia, El Sal- In Uruguay, in 1991, the Government vador, Guatemala, Honduras and Panama. gained parliamentary approval for a law In Panama, trade unions adopted a po- that left it free to implement measures li- litical strategy using existing mechanisms able to lead to the privatization of state- for trade union participation via a pro- owned companies. The Uruguayan trade gramme of seminars attended by civil ser- union movement, in association with po- vants, employers and health care workers litical parties and other social organiza- as the basis for new negotiations and con- tions, then created the Commission for the sultations, together with a policy for the Defence of the National Heritage and State reinvestment of social security reserves. Reform in order to launch a constitutional In Argentina, the trade unions resorted mechanism enabling legally binding ref- to legal appeals both for the second stage erendums to be held on speciﬁc subjects if of the provisional reform and for the a certain percentage of the population deregulation of the autonomous health signed a petition to that end. To do this, care system, on the basis of worker contri- the Plenario Intersindical de Trabajadores- butions. The judiciary found in favour of Convención Nacional de Trabajadores the unions, suspending the provisional (PIT-CNT) staged a series of demonstra- health care reforms. In Colombia, as a re- tions and ran a television campaign. sult of trade union action, the Government The initial result of these actions was suspended its planned measures and positive. In Costa Rica and Peru the re- pledged to reach a national agreement

68 with Congress and the presidential candi- duction of duty on industrial and agricul- dates. In El Salvador, the measures were tural output). simply suspended, while in Panama the In Honduras, the unions ran a cam- unions won trade union representation on paign highlighting the measures provided the social security council. Union action in in the Constitution with regard to tax re- Guatemala and Honduras delayed by sev- form, and more speciﬁcally the obligation eral years the adoption of the planned to assess in advance the population’s abil- measures even though these were in the ity to pay, as a key element linking the min- process of being applied. In the Domini- imum wage to the cost-of-living index. The can Republic, meanwhile, the unions constitutional reform pushed through in struck a deal on employer contributions Honduras in order to promote tourism was (70 per cent of the total contribution) and condemned by the unions which claimed a combined pension system whereby one that it jeopardized national sovereignty. part remained pay-as-you-go (for public In Guatemala the central trade union sector workers), while the other became bodies, with the support of the NGOs and fully funded (for private sector workers). a number of businesses, staged demonstrations outside the building where the commission set up by the Government to Labour reform discuss the VAT issue was meeting, and in front of the UN mission to Guatemala. As The recent legislative changes made to a result, plans to increase VAT were can- the labour codes, prompted by the IFIs, celled. All similar measures have been have come in for sharp criticism in Do- blocked by trade union action. In Panama, minican Republic, Ecuador and Panama. however, another attempt is now being In Ecuador, as a result of the pressure made. brought to bear by the unions in the courts to have the reform declared anti-constitutional, the judiciary cancelled many of the The ICFTU-ORIT strategy provisions and thereby caused certain of the articles of the reformed Labour Code ORIT union action towards the IFIs has two to be repealed. Other, more positive pro- objectives: concrete participation in con- visions were instead incorporated, such as sultation activities and participation in IDB the creation of joint management-labour programmes speciﬁcally set up to for a committees that now have to be consulted trade union presence. ORIT has also se- during collective bargaining. In Panama, cured observer status with the Trade Union no sooner had the unions lodged com- Technical Advisory Council (COSATE) of plaints about the violation of fundamen- the OAS Inter-American Labor System. tal labour rights with the ILO and the The most ambitious initiative, al- United States’ Generalized System of Pref- though still at the preparatory stage, is for erences than most of the IFI recommenda- the creation of the IDB-ORIT Working tions on subjects such as direct dismissal Group. The programme of the last ORIT and the scrapping of overtime rates were Congress (15th Congress, Washington, repealed, with the suspension of collective 2001) summarized the various lines of bargaining agreements only limited to two work approved to date. ORIT also partici- years. pates in strategy development and dis- IFI recommendations in other areas of semination work, including those con- economic policy were also opposed by the cerning the IFIs, alongside other civil soci- unions in Guatemala (VAT increase), Hon- ety organizations, in the framework of the duras (tourism promotion by selling land Hemispheric Social Alliance. in border regions), the Dominican Repub- The 15th ICFTU-ORIT Congress con- lic (scrapping of food, electricity, transport tinued to work on its strategy for dealing and education subsidies) and Panama (re- with the IFIs. In a document entitled

69 Decent jobs, strong unions, fair societies the further achieved by a plan for the system- point is made that “the IFIs responded atic condemnation of violations of funda- promptly to the threat of the major banks mental labour standards, and spotlighting going bankrupt during the Asia and Russ- those violations resulting from the imple- ian crises in 1997 and 1998 respectively, but mentation of the structural adjustment pro- they took years to come up with programmes imposed by the IFIs. Moreover, a grammes, and modest and highly condi- campaign pushing for the systematic and tional ones at that, for reducing the debt of effective involvement of the ILO in IFI – and the poorest developing countries”. The WTO – action will ensure that human and document goes on to stress that “the mul- trade union rights offer an unavoidable tilateral system as it stands is not sufficient framework governing the day-to-day action to guarantee achieving the objectives of so- of these institutions and systems. Finally, cial justice. Moreover, each entity takes care there was the recommendation that the ILO of its own agenda, avoiding coordinating should play a full part in the work of the its actions with those of other institutional, IDB-ORIT working group (see below). governmental and non-governmental As regards social security (the resolu- players. The IFIs have been reluctant to tion on “Guaranteed Social Security for enter into dialogue with the representa- All”), ORIT feels that the IFIs – and the tives of civil society and have gone as far World Bank in particular – and the finan- as to refuse the participation of other mul- cial capital markets perpetuate the myth tilateral organizations in relevant issues that privatization reform serves to increase under discussion, as was the case for the economic growth. The ORIT proposal is to ILO at the WTO’s Singapore conference.” dismantle the myths and inconsistencies In this context, ORIT confirmed that the of such arguments. trade union approach to globalization “in- With regard to housing (the resolution cludes the idea of reforming the IFIs and on “Decent Housing for All”), campaigns regulating the money markets with a view will be launched asking the supranational to protecting the interests of communities bodies to incorporate and develop actions and states. Changes to the global economy for the promotion of housing as part of must safeguard the human dignity of all, their social policies. It is recommended that and this implies bolstering the social as- the UN proposal – whereby public and pri- pect of the United Nations and the Inter- vate resources equivalent to at least 3.6 per American System. The unions must sys- cent should be mobilized for integrated so- tematically be official dialogue partners in cial housing projects – be implemented in pan-American institutions and forums, in order to break out of the current housing the same way as they are now being ad- crisis and initiate development plans. mitted to UN social summits.” Finally, concerning international jus- There were eight resolutions on the tice (resolution on “Justice, a Refuge from various aspects of this subject. They in- Impunity”), the ICFTU-ORIT calls on gov- cluded a reference to fundamental princi- ernments in the region to take a positive ples and rights at work (Resolution on stand on attempts to establish an Interna- “Core Labour Standards”). This resolution tional Penal Code and a standing Interna- suggests that the IFIs – and the WTO – be tional Criminal Court, and to push pressured to include fundamental princi- through the necessary legal and institu- ples and rights at work in their policies and tional reforms to that end. programmes, along with a workers’ rights’ clause in the sections concerning their projects, loans and funding. The IDB-ORIT working group This approach calls for an ILO presence in the IFIs (the resolution on “the Social and The working group, which the IDB claims Democratic Dimension in Integration offers the first-ever institutional link be- Processes and the ILO”). This aim can be tween trade union organizations and a

70 multilateral development bank, was cre- parallel activities in one of the ministerial ated at the end of 1999. It meets twice a meetings of FTAAmember States. The em- year. The initial agreements require the IDB phasis on continental integration was to respect the ILO’s core labour standards. maintained with the organization of two It was also agreed that the Bank would in- People’s Summits (at the Summits of form its national representatives that trade Heads of State and Government in Santi- union organizations should be included in ago and Quebec in 1998 and 2001 respec- the action plans for civil society consulta- tively), and included work done at the tions. Finally, joint research programmes WTO summit in Seattle in 1999. are being planned with the ILO investigat- The ASC’s strategic proposals, devel- ing globalization and its impact on labour oped in stages, cover a wide range of dis- markets and child labour. ciplines. When the ASC was formally cre- The agenda also includes union pro- ated, a document entitled Alternative for the posals on opportunities for taking part in Americas was adopted. It essentially criti- the design, implementation and assess- cized the FTAA and NAFTA and sug- ment of IDB projects and the reform of so- gested alternatives in a wide range of areas cial services in the Americas. Conse- such as human rights, the environment, quently, it examines how the unions could the labour situation, immigration, the role participate in the IDB’s annual meetings of the state, gender equality, investment, and associated seminars, the incorporation international ﬁnances, intellectual prop- of labour rights in the IDB’s government erty rights, market access and the rules on acquisitions policy, and systematic consul- origin, services, and dispute resolution. tation with parliaments and IDB execu- Each chapter was entrusted to one or more tives directors with regard to these rights. NGOs according to their specializations, The resolutions of the 15th Congress and of particular note is the chapter on the provided for a number of OAS-related labour situation which was entrusted to projects, including joint action within the ICFTU-ORIT. COSATE for promoting fundamental Three major forums were set up: the labour rights and action plans at national Democratic Forum devoted to the obsta- and regional level. Also, in view of the cles, challenges and proposals for democ- entry into force of the OAS San Salvador ratic participation; the Social Forum de- Protocol, there may be a chance of calling voted to the issue of social exclusion, the on the Interamerican Human Rights Com- social agenda and a proposal for the de- mission and the Interamerican Human velopment of a social charter for the Amer- Rights Court and, in addition, lodging icas; and the Alternatives Forum devoted complaints with the ILO as part of an in- to the responses given to the content of ne- tegrated human and labour rights strategy. gotiations and an alternative development Finally, campaigns can be run to encour- model. Additional forums were created age governments to sign up to the Inter- such as the Parliamentary Forum (relating american Convention Against Corruption, to the Latin American Parliament and the adopted in Caracas in 1996. Panamerican Congress of the Americas (COPA)), the Cultural Forum, the Indige- nous Forum, the Women and Youth ASC’s trade union proposal Forum, the Peasants Forum, the Labour Forum, the Ethics Forum, the Education The Hemispheric Social Alliance (ASC) Forum, the Environment Forum and the was formally created in 1999 by the Human Rights Forum. ICFTU-ORIT and a group of NGOs that At the last meeting of the Alternatives had already been working on the North Forum at the Second People’s Summit American Free Trade Agreement (NAFTA) (ASC, 2001), the overall strategy appears since the early 1990s. This joint work to go beyond purely trade union issues, began in Belo Horizonte in April 1997 with laying the emphasis on the reform of the

71 institutions of the UN system, including of society. Instead, countries should adopt the Security Council and the international economic development policies as pro- financial and commercial institutions, posed by the United Nations’ Economic with the aim of greater global and inter- Committee in its alternative plan for socio- american democratization. These reforms economic recovery and transformation. “must take place in consultation with the Moreover, if the IMF and the World Bank societies of all countries and be guided by fail in their management of the interna- the aim of serving mankind. Sustainable tional financial system by not contributing development, democracy and peace based to sustainable and productive develop- on justice and the respect for human dig- ment, then they should be radically re- nity must not continue to be the instru- structured or replaced by new institutions. ments of the leading multinational cor- In this context, the United Nations should porations and major nuclear powers.” establish a neutral panel or international The ASC also indicates that the “pri- court of arbitration to rule on the cancella- mary obligation” of the IFIs – and of the tion of the debt in countries where this is states and multinationals – is to “respect considered legitimate, without the partic- and ensure human rights for all. In this ipation of the IMF which is a creditor and way, human rights must not be a comple- liable to be manipulated by its most pow- ment to negotiations but the legal frame- erful members. Multilateral agreements work for international economic rela- should be concluded on new forms of reg- tions”. In this regard it stated that “the in- ulating speculative capital, such as the ternational community and the states, Tobin tax. faced with violations, either through action or omission, by multilateral bodies and multilateral companies must individ- Notes ually or via international cooperation 1 As far back as 1984, the ICFTU-ORIT Conference adopt effective measures to prevent, on a “New Approaches to the Crisis” (Cuernavaca, negate or punish violations of these rights Mexico) resulted in an important document that in- wherever they occur”. troduced this material in the context of an analysis of The ASC furthermore considers that the rights and wrongs of the imports substitution period. Two years later, the “Debt and Development” the packages of neo-liberal policies termed conference (Buenos Aires, September 1986) came up structural adjustment programmes (SAPs) with the “People First, Debt Later” declaration and imposed by the IFIs “increase the pressure subsequently established three other approaches pre- for demonizing the state and adopting the sented at the 12th Congress (Caracas, April, 1989). The prior diagnosis indicated that “the IMF, defending the idea that the market can do everything bet- interests of international financial capital, is the insti- ter, with the effect that there is a growing tution that is the most to blame for the design of gov- tendency towards privatization and trade ernment policies that have caused impoverishment liberalization policies”. It is also felt that and misery among the masses of workers and peas- the SAPs involve a high level of interfer- ants in Latin America and the Caribbean by giving priority to the need to comply with financial obliga- ence in the responsibilities of the state tions over the needs of the people”. since they are imposed without civil so- 2 This project began in 1994 with the aim of de- ciety being given any opportunity to par- termining to what extent the IFIs implement US pol- ticipate in them or evaluate them. icy decided in Congress (the Sanders-Frank 1994 Two guidelines are proposed with re- amendment to the Foreign Aid Appropriations bill) gard to the IFIs and their policies. First with regard to the social dimension of IFI participation. These policies call on American executive di- there is the recommendation that the or- rectors of IFIs to ensure that their institutions guar- thodox conditions for structural adjust- antee internationally recognized labour standards ment demanded by the World Bank and and develop mechanisms to identify the negative im- the International Monetary Fund should pact that IFI activities have on these rights. The loans and projects examined refer to the privatization and be ignored because they have failed to re- restructuring of areas of public services such as elec- solve the debt crisis and have caused mas- tricity, water, health care, education and social se- sive suffering among the poorest sections curity funded by the IDB – and by the International

72 Bank of Reconstruction and Development (IBRD) – 3 The survey was carried out during the 15th in Belize, Brazil, Chile, El Salvador, Guatemala, ORIT Congress in Washington DC (April 2001) and Nicaragua and Trinidad and Tobago. The project is targeted the heads of 16 affiliated or associated na- based on training project assessment teams in a trade tional trade union centres. The central question asked union environment for subsequent channelling referred to the existence of concrete trade union ac- through training seminars and public forums. The tion over the past ten years organized to oppose gov- PSI’s regional office speciﬁcally handles interference ernment projects or implementing measures result- actions in the US Congress with regard to the failure ing from an explicit recommendation by IFIs by sign- to comply with the amendment. ing letters of intent or other less speciﬁc mechanisms.