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European Journal of Industrial Relations © 2000 SAGE (London, Thousand Oaks, CA and New Delhi) ISSN 0959-6801
Volume 6 Number 3 pp 349–370
George Tsogas Luton Business School, UK
Labour Standards in the Generalized Systems of Preferences of the European Union and the United States ABSTRACT ▪ This article introduces an analytical framework for the study of labour standards in trade and compares and contrasts the approaches of the United States and the European Union in introducing a social clause in their Generalized Systems of Preferences. It explores the distinctive characteristics of the two approaches, assesses their industrial relations outcomes and proposes a set of policy guidelines.
Introduction The idea of a ‘social clause’ in trade agreements has a long history, predating the establishment of the International Labour Organisation (ILO) in 1919; but it has acquired special significance within the context of today’s global economy.1 The linking of labour standards to trade has been debated at length by economists and trade theorists (Bhagwati, 1994; Fields, 1990; Piore, 1990; Sengenberger, 1994), international trade and human rights lawyers (Alston, 1993; Compa, 1993) government policymakers (Marshall, 1987), international trade union bodies (ICFTU, 1998; IMF, 1988) and a plethora of NGOs and activists. However, as Trebilcock (1998) observes, the debate ‘has often sounded like a dialogue among the deaf. Positions are taken but the arguments do not engage’. Nonetheless, during the last few years the debate has largely moved away from whether there should be a link between labour standards and trade, to evaluations on how this can be realistically achieved, as part of a model of sustainable development for Third World countries. This change of attitudes could be attributed to the aftermath of the Asian economic crisis in the 1990s; even supporters of laissez-faire capitalism had to concede the need for regulation to safeguard against market extremities. The election of left-of-centre governments in most European 0959-6801[2000/11]6:3;349–370;014887
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countries, along with the strengthening of campaigning, ‘direct action’ and other citizens’ movements, also substantially aided that process. Numerous publications – primarily non-academic – have examined different forms of international labour regulation, such as business social accountability, labelling schemes, child labour and social clauses in trade. Most writers tend however to approach the subject from their own disciplinary, institutional or empirical perspectives; interdisciplinary approaches are far less common; there is no common theoretical perspective, nor a clear set of distinct theoretical approaches and ‘debates’. For example, the fact that many trade union representatives have written on social clauses does not mean that there is a trade union debate that implies a specific theoretical perspective. Labour standards in trade, or international labour regulation in general, are campaign-driven issues (as manifested in the streets of Seattle in November 1999), pursued by various groups and movements and for different purposes; not a theoretically or scholarly driven discourse. Most literature has focused primarily on the merits of social clauses; a small segment has concentrated on assessing and analysing the validity of the various arguments raised (Krueger, 1996; Lee, 1997; Scherrer, 1996; Tsogas, 1999); while very little has been written on the actual or potential industrial relations and labour market outcomes of social clauses. The first aim of this article is to highlight the topic and stimulate further research from an industrial relations point of view. Second, I seek to break away from the abstract debate on labour standards in trade and focus on two ‘actually implemented’ worker rights programmes: those established in connection with the Generalized Systems of Preferences (GSPs) of the USA and the European Union. I approach this task from an empirical perspective, addressing the effects of these two schemes. Understanding what has been achieved can help assess the potential of social clauses, what pitfalls to avoid and hence how initiatives within the framework of the World Trade Organization (WTO) might genuinely advance the interests of working people, and not only those of the corporate community. I introduce an analytical framework and emphasis on the industrial relations outcomes of the worker rights provisions in GSP programmes. On this basis I construct a set of policy propositions. Inevitably, other aspects of GSP programmes, such as trade policy, developmental or economic perspectives, are beyond the scope of this article. I dispense with a detailed review of the US GSP statute and procedure since that has been provided elsewhere (Amato, 1990; Ballon, 1987; Frundt, 1998; PerezLopez, 1990; US General Accounting Office, 1994; Zimmerman, 1991); but treat the EU statute more generously, since insertion of labour standard clauses in its GSP is very recent and has passed practically unnoticed. 350
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International Labour Regulation: An Analytical Framework As the global economy diminishes the regulatory capacity of the nationstate, transnational forms of labour regulation are created to fill the vacuum. This change of regulatory regimes is neither smooth nor unproblematic, particularly for organized labour. Labour movements have traditionally relied on domestic legislation to improve labour standards, but plant relocations and capital flight have weakened labour’s power in collective bargaining, diminished its political impact and eroded its structures and basis (Stone, 1996). Alternative forms of transnational labour regulation are yet to become established, but the trend is unmistakable and the opportunities for labour activism at both national and transnational levels are considerable (Munck and Waterman, 1999; Waterman, 1998). There is already a wealth of experience in introducing labour standards clauses in trade regimes, or attempting to do so. These can be classified with reference to the type of trade relationships involved, into four types: unilateral, bilateral, multilateral and regional (Tsogas, 1999: 353–4). The unilateral approach involves two main variants: first, corporate social responsibility, which includes various social labelling schemes and voluntary corporate or industry codes of conduct regulating labour standards in supply chains (Murray, 1996; NEF/CIIR, 1997; Tsogas and IDS, 1998; US Department of Labor, 1996); second, child or forced labour clauses in national trade regimes that ban all imports made by such labour. The bilateral track involves worker rights clauses in legislation regulating trade relationships between a country and one or more trading partners. The multilateral track embraces attempts to incorporate a labour standards clause in the GATT and its successor, the WTO (De Wet, 1995; Leary, 1997; Wachtel, 1998). Finally, the regional track includes social clauses in regional trade agreements such as the North American Agreement on Labor Cooperation (NAALC), the labour ‘side agreement’ of NAFTA (Compa, 1995 & 1997; Cook and Katz, 1994; Griffin, 1997) and the Social Charter of the EU.
Rationale for a Generalized System of Preferences The USA, the European Community and other industrialized countries2 established GSPs in the early 1970s, in order to promote economic development in Third World countries through trade. It was believed that the best way for developing countries to escape from poverty was to pursue export-led development. GSP programmes were intended, first to encourage their exports by granting preferential tariff treatment, and 351
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second to facilitate the accumulation of capital needed for further industrialization. Tariff concessions are unidirectional; developing countries are not required to reciprocate. GSP programmes typically specify eligibility criteria for countries and products. The USA, for example, excludes countries with a communist government, oil-producing members of OPEC, those that have expropriated US property without compensation, and those that aid terrorism. Excluded products include those that compete with domestically produced goods or are covered by other trade agreements, such as apparel and textiles or certain agricultural products. The developmental outcomes of GSPs have not always been clear. In the United States, corporations have taken advantage of the tariff-free provisions of the GSP to relocate labour-intensive production to beneficiary countries. Most benefits of the scheme have gone to countries that need it less. In 1983, 80 percent of GSP imports in the United States came from the ‘newly industrializing economies’ of Korea, Taiwan, Hong Kong and Singapore, before these were ‘graduated’ from the scheme in January 1989 because of the advances in their economic development. More recently, as tariffs have been cut worldwide, the significance of GSPs as tools of economic development has declined.
Overview of Labour Standards in the US Generalized System of Preferences The GSP of the USA, established in 1974, offers duty-free treatment to specified products that are imported from designated beneficiary developing countries. The Trade and Tariff Act 1984 made eligibility conditional on respect for ‘internationally recognized workers’ rights’, defined as freedom of association; the right to organize and bargain collectively; prohibition of forced or compulsory labour; prevention of child labour; and acceptable conditions with respect to minimum wages, hours of work, and occupational safety and health (Perez-Lopez, 1990: 224). The legislation details an annual petition and review process, for alleged workers’ rights violations in beneficiary countries. Petitions may be filed by individuals, organizations or any other party with ‘a significant economic interest’ in the subject of the petition (Amato, 1990: 98). The United States Trade Representative (USTR) has to decide whether to accept or reject a petition and, if a review is pursued, whether a temporary ‘suspension’ or full ‘removal’ is warranted.3 A general review was conducted by the USTR in 1985 and 1986 (no other general review has been conducted since) under its legal obligation to examine periodically labour practices of all beneficiary countries. Since 1987 the annual cycles have taken place, except in 1994 when the statute was suspended pending resolution of the budget crisis. If a petition is 352
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rejected it may be repeated in subsequent years, as in the cases of El Salvador and Guatemala. The results of the petition process up to 1995 are summarized in Table 1. Recently, the US GSP programme has suffered from short-term renewals and uncertainty about its future. The last long-term authorization GSP expired in 1993; since then there has been a series of short-term and retroactive renewal. But its effects are diminishing. Since the conclusion of the Uruguay Round, United States tariffs on most GSP-eligible industrial products at have been drastically reduced. At the same time, the number of trade pacts that offer preferential tariff arrangements is growing. The USA, for example, extends duty-free treatment to imports under the North American Free Trade Agreement (NAFTA), the US–Israeli Free Trade Agreement, the Caribbean Basin Initiative and the Andean Initiative. The Clinton Administration has also proposed an expansion of NAFTA to other western hemisphere nations and, in the future, the development of a Free Trade Area of the Americas and elimination of trade barriers in the Asia–Pacific region. As the number of preferential tariff agreements expands, the value of tariff preferences under GSP will decline as beneficiary countries are increasingly either participating in alternative preferential arrangements or competing with producers who enjoy preferential treatment under other arrangements. As far as labour standards are concerned, the study of GSP statutes, processes, and records of implementation can help inform conclusions that could be used in other trade schemes that incorporate labour standards clauses. Evaluation of Outcomes: Objectivity of the Review Process The objectivity of the review and petition process comes into question, in terms of the criteria employed by the petitioners when selecting countries on the one hand, and those adopted by the US government when judging the merits of each case, on the other. Petitions have been filed by a multiplicity of trade union, solidarity and human rights organizations; but the great majority have come from the AFL-CIO and the International Labor Rights Fund, a Washington-based human rights organization.4 A petition is likely to be accepted only if backed by detailed documentation and substantiated; this demands dedicated research staff and resources that only big organizations can afford. The criteria underlying the selection (or non-selection) of countries for petition have not always been transparent, but foreign policy considerations, cold war sentiments and economic nationalism seem important. Frundt (1998: 68) argues that while groups such as the ILRF act from genuinely internationalist concern for rights abuses, the ‘highwage nationalists’ of the official labour movement ‘often endorsed petitions for protectionist reasons’. In the mid and late 1980s the AFL-CIO 353
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Chile Guatemala Haiti South Korea Nicaragua Paraguay Philippines Rumania Surinam Taiwan Zaire Central African Rep. Indonesia South Korea Taiwan Thailand Turkey Burma Central African Rep. Haiti Israel Liberia
1987–8
1988–9
Accepted for review
1985–6 (General review)
Annual review cycles
Burma Central African Rep.*
Chile*
Nicaragua* Rumania Paraguaya*
Removed or suspended
Continuing review
Israel Malaysia
Indonesia South Korea Taiwan Thailand Turkey
Guatemala Haiti South Korea Philippines Surinam Taiwan Zaire
‘Taking steps’
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El Salvador Guatemala Indonesia Philippines Thailand
El Salvador Guatemala Haiti Singapore Surinam Zambia
Denied for review
TABLE 1. Results of the US GSP Workers’ Rights Petitions, 1985–95
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Malaysia Syria Venezuela
Turkey
1989–90
Benin Dominican Rep. Indonesia Nepal Thailand
El Salvador Guatemala Israel Philippines
1990–1
Bangladesh Colombia El Salvador Sudan
Guatemala Malaysia Turkey
1991–2
El Salvador Mauritania Panama Sri Lanka Thailand
1992–3
Bahrain El Salvador Fiji
Removed or suspended
Continuing review
‘Taking steps’
Haiti Liberia Syria
Indonesia Thailand
Liberia
Benin Dominican Rep. Haiti Nepal Syria
Colombia
Guatemala Honduras Indonesia Malaysia Mexico
Sudan
El Salvador Syria
Bangladesh Benin Dominican Rep. Haiti Nepal
Bangladesh Peru Yemen
Syria
El Salvador Guatemala Indonesia
Fiji Sri Lanka
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Accepted for review
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Annual review cycles
Denied for review
Removed or suspended
Guatemala Indonesia Malawi Oman 1993–4
‘Taking steps’
Mauritania Panama Thailand Colombia Mexico Morocco Sri Lanka
Mauritania
Bahrain El Salvador Guatemala Indonesiab Thailand
Costa Rica Malawi Panama Paraguay Peru Oman
Maldives
Guatemala Indonesia Thailand
El Salvador
*Subsequently reinstated. a Paraguay suspended for one year. b The USTR placed Indonesia under review in June 1993, initially until February 1994, when it announced that Indonesia’s ‘under review’ status would be suspended. c Petition withdrawn.
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1994–5
Costa Rica Dominican Rep. Haiti Malaysia Malawi Maldives Oman Pakistan Paraguayc Peru
Continuing review
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Accepted for review
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concentrated on countries which had gained the greatest advantage from duty-free access to the US market, such as Singapore, South Korea and Taiwan. In drawing up these petitions, the AFL-CIO did not consult unions in the countries concerned. Meanwhile, countries in Latin America where gross violations of human and worker rights were occurring (Chile, El Salvador, Guatemala) were ignored. In the case of Singapore, the National Trade Union Congress (NTUC) accused the AFL-CIO of hypocrisy and bullying as well as lack of courtesy in failing to consult a fellow member of the International Confederation of Free Trade Unions (ICFTU). By contrast the ILRF, for example, asserts that it would first consider labour conditions in a country but would not file a petition without making contact and seeking common ground with local unions and other interested organizations (Harvey, 1994). The openness of a particular country to outside scrutiny, its political relationship with the USA and the links that any local unions or human rights organizations may have with international bodies can also be decisive. In 1986, Taiwan protested against its selection for review as what it saw as a gross double standard by comparison with the Chinese mainland (Amato, 1990: 110). The more open developing countries are, or the closer they are politically to the USA, the more likely they are to have their labour practices placed under scrutiny. On the other hand, American organizations may often have to maintain loose links with those in target countries, as these might be accused of collaborating with ‘foreigners’, whose motives may seem unclear, in investigations that may damage the national economy or the status of the regime. Frundt (1998) provides evidence of such attitudes among central American governments and employers. Certain governments (as in Malaysia) see labour rights concerns as ‘western imperialism’ and are hostile towards any action that involves the issue. In cases of oppressive regimes, international exposure of an unfavourable labour rights record can be counterproductive, with detrimental effects on the tolerance of unions or the safety of their leaders and activists. On the other hand, the unwillingness of various US administrations even to accept for review petitions against countries that have been well known for human and worker rights violations brings into question the objectivity of the review process and the underlying commitment to human and worker rights. The very few countries suspended from the GSP had either governments disliked by the USA (Nicaragua, Syria) or minimal trade with it (Rumania, Paraguay, Burma, Central African Republic, Liberia, Sudan, Mauritania). The case of Chile (Adams, 1989) was the exception that indeed validated the above rule: it was temporarily suspended from the GSP and used as a showcase (or a scapegoat) to cover previous decisions that had raised many questions about the actual motives of the whole operation (Harvey, 1994 and 1998). 357
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From 1987 to 1990, petitions against El Salvador (at the highest point of civil strife and the activities of death squads) were denied for review, while Nicaragua under the Sandinista government was among the first countries to be removed from the GSP programme by the Reagan administration, even though a US trade embargo was in full force. In 1987, the USTR refused to accept for review the GSP status of El Salvador, relying on State Department sources that classified trade union members as antigovernment guerrillas ‘subject to government mistreatment for security reasons’. It further argued that ‘it is appropriate for the Salvadorian armed forces to arrest, interrogate and imprison trade unionists whom the Department of State considers to be opponents of the Duarte government’ (Amato, 1990: 117). Even if a petition is accepted for review, a simple promise by the foreign country’s government, often coupled with intensive lobbying or introduction of some new legislation with no guarantee for enforcement, can be enough for the USTR to declare that the country in question is ‘taking steps’ to comply with ‘internationally recognised worker rights’ – if political and economic reasons so impel. So great had been the discontent among organizations fighting for workers’ rights that in March 1990 ILRF (with the AFL-CIO and other unions and human rights groups as joint plaintiffs) filed a lawsuit alleging failure to enforce the GSP statute consistently, inadequate screening of petitions, and lack of clear criteria. Though the case was dismissed, the judge noted ‘an apparent lack of standards in the legislation’, as there was only ‘a vague requirement to review from time to time’ (Tonya, 1992: 649; Travis, 1992: 184). Though the Clinton Administration has shown greater interest in worker rights violations, foreign policy considerations still play a key role in USTR findings (Dunne, 1994; Harvey, 1998). The experience since 1985 has shown that worker rights considerations are usually at the bottom of the priorities of US government agencies. ‘National security’ and economic interests, seen through the lens of politics during the 1980s, overwhelmingly take precedence over concerns for human and worker rights. Frundt attributes this lapse of enforcement to a less sinister cause: unfamiliarity of USTR and US embassies’ personnel with labour issues. In that respect, he sees a ‘transformation of the GSP’ taking place during the Clinton years, largely as a result of ‘having a democrat in the White House and a new USTR with a labour background’ (1998: 68–70). Impact on GSP Beneficiary Countries The impact of a review of labour standards on a GSP beneficiary country depends upon the extent of its trade relations with the USA: the closer the relationship and the bigger the share of that country’s exports destined for 358
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the USA, the more crucial the potential impact. Petitions against Malaysia and Indonesia (both with extensive trade links with the USA) have attracted considerable attention, unlike the cases of Rumania and Mauritania. Unfortunately, no country-specific research has been carried out to assess the labour market and industrial relations effects that withdrawal of GSP benefits could have, particularly in cases where industries or products with significant local importance are involved. Very often the mere threat of reviewing a country’s record of labour rights can have considerable effects. In 1992, a petition filed against Indonesia by ILRF and Asia Watch was accepted for review. The government’s response was substantial: it employed a well-known law firm with good connections with the USTR to file a 4000-page response to the allegations and sent a five-member government delegation to Washington (ILRF, 1992: 4–5). Indonesia’s benefits under the GSP programme cover about 14 percent of the country’s exports to the United States, worth $600 million in 1992 (Cohen, 1993). Nevertheless, the outcome was that Indonesia’s position in the Asia Pacific Economic Cooperation (APEC) forum and the Clinton Administration’s eagerness to expand links with that region, pushed worker rights issues aside. The petition was unsuccessful and Indonesia’s record on labour rights hardly improved (Free Labour World, May 1995: 1). Nonetheless, the GSP review shed more light into labour rights abuses in Indonesia and exposed further the government’s brutal stance in labour relations (McBeth, 1994). In contrast, during the same year (1992) the Guatemalan government (not at the forefront of US foreign policy after the end of the cold war), in an effort to save its GSP benefits, rushed through its parliament a revision of the labour code which had languished for years (ILRERF, 1992). Impact on the United States ‘Selective enforcement’ (Witt, 1988) of worker rights provisions has reduced the effectiveness of the GSP legislation and introduced discrimination in the worker rights petition and review process. Nevertheless, the function of a mechanism for reviewing labour standards for over 10 years has produced a wealth of experience. First, it has had a significant impact on the US labour movement. Well before NAFTA, the GSP helped to amplify the labour movement’s awareness of international issues while the AFL-CIO found a new arena for international involvement. The collapse of the Soviet Union and the end of the cold war transformed its attitudes and altered the scope of its international activities. El Salvador is typical of that change in orientation. In 1988, Americas Watch petitioned the USTR to review the country’s trade preferences on the grounds of well-documented repression of trade unionists. The American Institute of Free Labor Development (AIFLD, 359
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AFL-CIO’s regional centre in Latin America, an institution often linked with CIA funding) angrily opposed the petition (Garver, 1989), perceiving the eradication of the ‘communist’ guerrilla forces as the priority of the Salvadorian government. But in a total U-turn in the 1990s, the AFLCIO itself filed petitions against El Salvador that were instrumental in placing the country ‘under review’ in 1990 and 1991 and influenced the reform of its labour code in 1994 (Davis, 1994). Second, the GSP review mechanism has given birth to a plethora of labour think-tanks, lobbying groups, and ‘professional’ solidarity and networking organizations, with a distinct international orientation, previously unknown in the US labour relations scene. Moreover, GSP petitions helped decisively in building up a global network of unions, human rights organizations, NGOs, church and development agencies, labour lawyers and individual activists committed to the rights of working men and women. Thus GSP petitions have, in practice, expanded the scope of international labour solidarity. Third, the GSP labour rights review process has generated extensive information and enormous experience on monitoring labour rights violations and enforcement of labour laws in diverse countries across the globe. This valuable knowledge and expertise have been channelled in the 1990s into advocacy and research on issues such as child labour, social labelling schemes, corporate codes of conduct and other forms of international standard setting, effective monitoring and enforcement of labour regulation.
Labour Standards in the Generalized System of Preferences of the European Union The EU has operated a GSP since July 1971, offering preferential duty (ranging from zero to 85 percent of the Common Customs Tariff, but not normally duty-free as in the American system) to a list of developing countries’ products. Beneficiaries include Asian, African, Latin American, and East European countries (Business Europe, 1994: 1). A major reform of the scheme was carried out in 1994–5. The final text (Council Regulation 3281/94) granted special incentives to countries that observe certain labour standards, and withdrawal of GSP privileges from those that do not. Specifically, it was stipulated that from 1 January 1998, additional reduction on duties would be given to countries with ‘domestic legal provisions’ giving effect to ILO conventions 87 and 98 on freedom of association and the right to organize, and 138 on minimum age for employment. There were provisions for total or partial temporary withdrawal of GSP benefits in cases of practice of any form of forced labour or export of goods made by prison labour. 360
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A review and consultation process is prescribed: Member States, any ‘natural or legal persons, or associations not endowed with legal personality which can show an interest in such withdrawal,’ may bring violations to the Commission’s attention. Consultations and any subsequent investigations take place within the ‘Committee for the Management of Generalised Preferences’, comprising representatives of the EU Member States and chaired by a representative of the Commission, which can initiate an investigation. Within a time period specified in the announcement, all interested parties, including the country concerned, can submit their views. The Commission may consult ‘economic operators and the competent authorities of the beneficiary country concerned’, dispatch its experts for on-the-spot investigations and hold hearings if parties ‘likely to be affected by the result of the investigation’ show that ‘there are particular reasons why they should be heard orally’. Finally, the Commission decides whether temporary withdrawal of preferences is ‘unnecessary’ or else makes a submission to the Council of Ministers, which decides any action by qualified majority. The Special Incentive Arrangements on Labour Standards In 1998 two Council Regulations (1154/98 and 2820/98) revised the GSP and the scope of its labour standards provisions. They clarified the special incentive arrangements and the procedures involved. It specified the level of additional tariff concessions granted to countries that have introduced and applied the ILO Conventions Nos 87, 98, and 138: a reduction ranging from 15 to 35 percent of the Common Customs Tariff for industrial and 10 to 35 percent for agricultural products. To benefit from these reduced tariffs, GSP countries countries must apply to the Commission, detailing the legislation incorporating the ILO Conventions and specifying the measures taken to implement and monitor that legislation. The special incentive arrangements can be temporarily withdrawn, totally or partially, if the beneficiary country failes to fulfil its obligations. Such decision may be reached after internal consultations between the Commission and the GSP Committee, but with no involvement from outside interested parties. The final decision is made by the Council by qualified majority. A final revision of the GSP scheme from July 1999 to December 2001 was carried out in late 1998 (Council Regulation 2820/98). It stipulates the future drawing up of ‘a non-exhaustive list of criteria specifying cases of reasonable doubt’ in relation to the special incentive arrangements for labour rights. This list will be compiled by the Commission with the involvement of the customs authorities and will specify products, producers, and exporters. 361
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Outcomes of the EU GSP The introduction of a social clause in the GSP of the EU has presented important opportunities and compares favourably with the American practice. However, at this stage it remains to be seen how it will work in practice. The scheme became fully operational in 1998–9. Therefore, outcomes are very limited, in comparison with those in the USA; nonetheless, the scheme seems to suffer from some of the same weaknesses. In June 1995, the ICFTU, the European Trade Union Confederation (ETUC), the International Textile, Garment and Leather Workers’ Federation (ITGLWF) and the European Trade Union Committee/Textiles, Clothing and Leather (ETUC/TCL) made a joint submission to the European Commission, regarding the practice and extent of forced labour in Pakistan (ICFTU, 1998). The trade union submission called for the EU to initiate an investigation, in conformity with the EU Regulation on the GSP. At the same time, the ICFTU and ETUC made a joint submission concerning the practice of forced labour in Burma (Myanmar). The Commission accepted the arguments put forward and in January 1996 initiated an investigation into forced labour in Burma. Following a process of hearings, in March 1997 the Council of Ministers took the decision to suspend the GSP benefits of Burma indefinitely, until its government brings the practice of forced labour to an end. In the case of Pakistan, however, at the time of writing the Commission had still not made any recommendation to the Council of Ministers that the EU should even initiate an investigation (much less take action), although no challenge has been made to the evidence presented in the trade union submission. During the same period, the government of Pakistan deployed a range of tactics to block any EU investigation, ranging from diplomatic pressure through its embassies in the EU Member States to various attempts to cast doubt on the validity of the report. Additionally, Member States themselves, particularly those with trade ties with Pakistan, were not willing to push forward the investigation, fearing retaliation and cancellation of contracts in that country. Not surprisingly – faced with such a stalemate and considering the costs involved for the preparation of compelling reports – trade union organizations in Europe have assigned GSP petitions a low priority. Instead, efforts have been concentrated on encouraging countries, in collaboration with local trade unions, to apply for the special incentives. Mongolia and Uruguay have the encouragement of the ICFTU, but, so far, only Moldova and Russia have applied officially (in June and July 1999, respectively). There is an expectation that more east European countries (such as Ukraine) will follow, as well as Sri Lanka (Howard, 1999). 362
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The impact of GSP workers’ rights conditionality on the European labour movement has been much different from the impact in the United States. While GSP conditionality provided an opportunity for the US labour movement to engage in a new kind of labour internationalism, previously unknown, the same result has not so far materialized in Europe. There could be three possible reasons. First, labour standards in the EU GSP were introduced in a post-cold war era, less ideologically charged, and with totally different campaigning priorities for trade unions and NGOs. Second, the EU labour movement had already developed a significant level of international orientation and activity, though primarily within European boundaries, in the years preceding and following the ‘1992’ deadline. Additionally, European-related activities have taken up considerable attention and resources. Besides, EU trade with developing countries, especially in manufacturing and high-technology products that are often at the centre of arguments on labour standards in trade, has historically been much less than that of the USA. There has thus been little economic incentive to scrutinize the conditions under which competitive products from third world countries are made.
A Comparison of the Two Approaches The analysis above showed that social clauses in both GSP systems share considerable weaknesses. There are significant differences in the sets of labour standards chosen. The USA does not embrace ILO Conventions (very few of which it has ratified) but puts forward its own selective interpretation of ‘basic’, ‘internationally recognized’ labour standards. As Alston (1993: 8) illustrates, ‘the US legislation does not contain any detailed standards at all. It simply misappropriates some of the terminology developed by the ILO.’ The EU scheme does embrace ILO Conventions and international treaties. However, the set of labour standards chosen is narrow and a double standard is adopted. For a developing country to qualify for additional tariff concessions, freedom of association, the right to organize and bargain collectively, and minimum age for employment are taken into account, whereas in cases of withdrawal of GSP privileges, only use of forced or prison labour is considered. Thus a country that outlawed trade unions and collective bargaining would not qualify for additional tariff concessions but could enjoy the same GSP status as one that respects all democratic freedoms. It seems that, according to this peculiar EU ‘carrot and stick’ approach, exploiting children and organizing death squads against trade unionists are less serious breaches of human rights than running forced labour camps! Apart from bordering on the bizarre, this dual character of the EU system also sets a worrisome precedent. One of the basic ILO principles 363
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is the universality of its standards: the labour standards are the same for all countries regardless of the stage of development or the economic and political situation. And this is particularly so when fundamental rights, such as freedom of association, are at issue. A two-tier system has specifically and repeatedly been discouraged. The EU GSP, despite undoubted good intentions, seems to foster exactly that. To make matters worse, no labour standards regarding non-discrimination and equal treatment are included in the GSP provisions. On the positive side, however, there is a commendable element of encouragement (some ‘carrot’, not only ‘stick’). The scheme is not just punitive in character but also rewards good labour standards practice. By contrast, one of the significant features of the US system is its lack of a developmental perspective. Any cooperation between the USA and the beneficiary developing countries in order to tackle the root causes of worker rights violations and to promote economic and social development is on an ad hoc or temporary basis.5 Additionally, in the US system the social partners have no formal status. Unions are marginalized, in the role either of victim or of ‘petitioner’ in the review process. The involvement of employers (local or US) is limited to lobbying or behind-thescenes activity. Further, the whole system is run and tightly controlled by the state apparatus. Federal bureaucrats investigate the petitions, judge the merits of each case, and execute unilaterally the decision, with a complete lack of transparent rules (other than US foreign policy considerations). The process is influenced only by lobbying from various interest groups. Some of these features appear equally in the EU scheme. For example, the whole process is run tightly by the EU bureaucracy. The involvement of the European Parliament, unlike in many other EU initiatives, is notably absent. The system is potentially open to excessive lobbying from various interest groups. So far, the whole procedure has been conducted not only away from public accountability, but in deep secrecy. It is symptomatic that this researcher was confronted with great difficulty in obtaining any information on the workings or even the composition of the Generalized Preferences Committee. As far as substantive issues are concerned, both schemes favour unilateralism, in the provisions of the law and, in the US case, in actions resulting from its review process; an approach that Alston (1993) labels ‘aggressive unilateralism’. In essence, both the EU and the United States use their economic and political might as a leverage to demand (at least in theory) improvement in conditions of employment from their trading partners (nowhere though in either scheme there is a mention of labour standards in the USA or the EU respectively). Experience has shown that over the last 15 years, the USA has simply exercised its economic and political power over countries which the 364
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government dislikes and whenever it deems it appropriate to do so. Similarly, in the EU, the process of petition and review is a political matter; any eventual withdrawal of preferences is a decision to be taken in the Council by qualifying majority, where a small group of countries can block action. Burma’s suspension was a fairly uncontentious decision, considering the country’s record on forced labour and human rights. But when a more problematic situation arose in the case of forced labour in Pakistan, a country with economic ties and geopolitical significance for the EU, the system came to a halt. There was a lack of political will even to start the review process, let alone proceed with the enforcement of the GSP statutes.
GSP as a Forerunner for a Multilateral Regime? Labour rights conditionality under GSPs has provided substantial practical experience on the pitfalls and accomplishments of linking trade with labour standards, and can contribute valuable lessons to the effort to include a social clause in a multilateral trade regime, such as the WTO. First of all, as far as the choice of labour standards is concerned, the solution is easily available. Social clauses should be based on those eight Conventions reaffirmed by the ILO in 1998 as constituting ‘core’ labour standards and by definition applicable under all circumstances and for all countries, regardless of their stage of economic and social development (ILO, 1998). These cover: Freedom of Association and Protection of the Right to Organise (No. 87); Right to Organise and Collective Bargaining (No. 98); Forced Labour (No. 29); Abolition of Forced Labour (No. 105); Minimum Age (No. 138); Equal Remuneration (No. 100); and Discrimination (Employment and Occupation) (No. 111). No two-tier systems or dual approaches should be allowed, nor a selective interpretation of ‘internationally recognised labour standards’. It is also equally important that the set of labour standards chosen applies impartially to all trading partners. The administration of the review and petition processes has also revealed considerable weaknesses. These processes must be open to public scrutiny, not under the control of unaccountable bureaucracies and the influence of lobbying groups. Separate and accountable bodies should investigate the petitions, judge the merits of each case, and enforce the decisions. Additionally, any party should be able to initiate worker rights reviews, including ‘non-interested’ parties without an economic stake in the dispute. That approach would signal a departure from traditional international trade law jurisprudence, towards a ‘softer’ and more democratic approach, and would give anyone the ability to 365
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challenge country practices without having to demonstrate that they are themselves affected by the practices challenged. This could help ward off criticisms of ‘disguised protectionism’, as commonly aired against labour standards advocates who are obliged to demonstrate a vested interest in the case. Trade sanctions should not be applied before cooperation among all parties involved (developed countries, beneficiary developing countries, and the social partners themselves) can be achieved. The overall aim of social clauses in trade should be to further the economic and social progress of developing countries. Last but not least, there is a big lesson to be learned from the interconnection of workers’ rights trade conditionality with economic, foreign, and ‘national security’ policies. As shown by practice in both the USA and the EU, when workers’ rights issues are determined unilaterally by government, inevitably their administration is connected to other policy instruments. In consequence, labour standards clauses in bilateral trade agreements are often perceived by governments as a set of upper boundaries of commitment in that area. If outcomes of trade conditionality of labour standards are in agreement with other policy objectives (as in the cases of Burma for the EU and Nicaragua for the USA), so much the better; if not (as with Pakistan for the EU and El Salvador for the USA) then labour standards are simply ignored. These weaknesses can be overcome only when a social clause is incorporated in a multilateral forum, such as the WTO, with a common set of labour standards applying impartially to all trading partners. In the meantime, there can be no effective and honest labour standards regime in bilateral trade agreements if adminstration is subordinate to political or ‘national security’ considerations. Workers’ rights are, after all, human rights, and as such their respect should take precedence in policy formulation of democratic states. What are the prospects of an effective social clause in the WTO? The signs are better now than at any other time since 1948, when the issue was first considered. There is now a sustained and broadly-based grassroots movement that supports labour standards in trade; it is no longer an issue confined to trade union or intellectual circles. Thanks to the Seattle protesters, most of mainstream world media devoted lengthy analyses and reports to international labour and trade union issues, for an increasingly aware readership. For the first time, labour standards in trade make headline news. Fuelled by the excesses of global free markets, international labour standards have now become a topic for consumer, environmental and human rights groups; they are not seen as a merely economic problem, but rather as a human rights issue that demands the attention and protection that a multilateral body, such as the WTO, could rightly provide. 366
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NOTES 1 I use the terms ‘international labour standards’, ‘worker(s)’ rights’, ‘worker rights conditionality’ and ‘social clause in international trade’ interchangeably, and I assume that they collectively refer to the same concept. For a definition see also IMF, 1988: 9–11. For a historical review see Charnovitz, 1986: 62–7, and 1987; French, 1994; Hansson, 1983: 11–29. 2 Thirteen other countries (Australia, Belarus, Bulgaria, Canada, Czech Republic, Hungary, Japan, New Zealand, Norway, Poland, Slovak Republic, Switzerland, and the Russian Federation) currently operate GSP programmes. However, none of these includes social clauses. 3 ‘Suspension’ allows for reinstatement if improvements in worker rights are deemed to have been made. ‘Removal’ requires all aspects of the economic and political situation in the beneficiary country to be reviewed before readmission. 4 Full details of petitioning organizations can be found in Tsogas, 2000. 5 See Frundt (1998) for a detailed discussion of the approach adopted in central America and the Caribbean.
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GEORGE TSOGAS is a Senior Lecturer in Human Resource Management at Luton Business School, Luton University. He has researched and written on labour standards in trade, and corporate social responsibility. ADDRESS: Luton Business School, Luton University, Park Square, Luton, Bedfordshire LU1 3JU, UK. [e-mail:
[email protected]]
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