International labour standards

Labour provisions in free trade deals are to ensure fair, sustainable economic development

ILO Viet Nam Director, Chang-Hee Lee, provides insights into the meaning of labour issues in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to Viet Nam. The accord was signed by 11 countries on 8 March, forming a market of 500 million, representing 13.5 per cent and 15 per cent of the global economy and trade, respectively.

Comment | 23 March 2018

Labour rights were among the key issues for the final round of CPTPP negotiation, before the signing. Can you explain what it is all about and why it is important?

Economists expect that CPTPP, together with the EU-Viet Nam free trade agreement (FTA), will bring robust economic gains for Viet Nam, in the form of price competitiveness of Vietnamese exports in major foreign markets and more foreign direct investment (FDI), accelerating economic growth and creating millions of jobs, including in small and medium-sized enterprises. More importantly, it will help facilitate domestic reforms in many areas, creating environment for competitive economy.

The Government of Viet Nam has pursued the global economic integration agenda vigorously. The determination was confirmed by the adoption of the Party Resolution No. 6 in 2016. I believe it will pay off not only economically but also socially.

CPTTP, together with EU-Viet Nam FTA, is the so-called new generation of FTAs, which place a great emphasis on labour rights, as well as environmental sustainability, to ensure that the free flow of trade will contribute to sustainable development and also enable workers and businesses to enjoy fair share of economic gains.

Suppose that country A, which is more developed, and country B, which is less developed, are in trade relations. It is natural that workers’ wages are higher in country A than country B, reflecting their levels of productivity and development. This does not constitute unfair competition. However, if country B allows underage workers to produce export goods in poor working conditions at unacceptably low wages when country A does not allow, it can constitute unfair competition against globally agreed rules. There is a global agreement on a set of basic rights which should be respected by all countries, regardless of the level of economic development. They are clearly defined in the 1998 ILO Declaration on Fundamental Principles and Rights at Work. The labour-related chapter of CPTPP and EU-Viet Nam FTA aims to enforce these rights.

What does the labour chapter of CPTPP mean to Viet Nam?

The new generation of FTAs requires all participating countries to adopt and maintain the rights as set out in the 1998 ILO Declaration in their laws, institutions and practices. They are embodied in 8 core conventions of the ILO, that underpin 1) freedom of association and the effective recognition of the right to collective bargaining (as defined in ILO Convention 87 and 98), 2) the elimination of all forms of forced or compulsory labour (ILO Convention 29 and 105), 3) the effective abolition of child labour (ILO Convention 138 and 182), and 4) the elimination of discrimination in respect of employment and occupation (ILO Convention 100 and 111).

All member states of the ILO, including Viet Nam, are bound to respect these rights. They are seen as universal rights in the modern society. However, Viet Nam is yet to ratify three core conventions (Convention 87, 98 and 105) related to freedom of association, right to collective bargaining and elimination of forced labour.

The chapter 19 on labour of CPTTP is based on the 1998 ILO Declaration. It also establishes links between the implementation of 1998 ILO Declaration and trade conditions within a time frame, including possible sanctions.

Putting aside the trade implications, I would like to emphasize that Viet Nam should use this as an opportunity to modernize its labour laws and industrial relations system in time-bound manner.

From ILO point of view, how far has Viet Nam progressed to get ready for the implementation of CPTPP’s labour chapter?

Viet Nam has already recognized this obligation and taken steps to meet it through the process of labour law and institutional reform currently underway. Prime Minister Nguyen Xuan Phuc reaffirmed the need for this reform on 17 January when attending the 2018 planning conference of the Ministry of Labour, Invalids and Social Affairs.

In fact, Viet Nam has made steady improvement of its labour law framework in the process of its move towards socialist market economy since the Doi Moi. In recent years, legal protection has been gradually extended to cover workers in the informal economy, while minimum wage fixing has become a tripartite process with the participation of representatives from the Government, workers and employers through the National Wage Council.

However, some weaknesses in labour laws and institutions related to industrial relations remain. There have been more than 6,000 strikes since mid-1990s and all of them were wildcat strikes, not initiated by trade unions. This is a clear sign that workers do not feel their rights and concerns are addressed and that the process established for resolving problems is not working properly. It is not uncommon to find in Viet Nam that trade union leaders at the workplace are senior managers of enterprises, which is unacceptable in almost all countries in today’s world. Union rights are workers’ rights, and unions are organizations of workers, free from interference of employers.

By channelling workers’ voices through collective bargaining and social dialogue, trade unions and labour relations system contribute to political and social stability, while contributing to shared prosperity. It is what experiences of other countries show us in modern market economy.

I believe that the Labour Code revision and further renovation of labour relations system in line with the 1998 ILO Declaration and in full consideration of the national context will definitely help in this respect.

In addition, as I mentioned earlier, Viet Nam needs to move towards the ratification of the remaining three core conventions – Convention 87 on freedom of association, Convention 98 on the right to collective bargaining, and Convention 105 on elimination of the forced labour. Viet Nam is already committed to doing so under the EU-Viet Nam FTA’s sustainability chapter.

What will the ILO do to support Viet Nam for that aim?

Since Viet Nam’s joining the ILO in 1992, ILO has always worked not only with the Government, but also with the Viet Nam General Confederation of Labour (VGCL) and Viet Nam Chamber of Commerce and Industry in modernizing labour laws, in improving national policies and in strengthening capacity of national partners for ensuring decent work for all women and men.

ILO will double its efforts to support reforms of labour laws and industrial relations, not just to fully implement CPTPP’s and EU-Viet Nam FTA’s labour obligations, but also to build and improve legal framework and industrial relations system, which can serve needs of workers, businesses and society, with political stability and shared prosperity. I am convinced that Viet Nam will successfully complete this mission for its own future – a future built on higher productivity, innovation, fair sharing of economic gains, recognition of voices of workers and employers, and political and social stability.

Are there any relations between Industrial Revolution 4.0 and CPTPP, If yes, what are they? What would Viet Nam’s labour force prepare to meet these new requirements?

Combined together, the Industrial Revolution 4.0 and FTAs will accelerate changes in the economy and labour markets. Overall, we can expect the Industrial Revolution 4.0 and FTAs to have positive potential of facilitating structural transformation of Viet Nam’s economy and also upgrading productivity and profile of the country’s industries.

CPTPP and EU-Viet Nam FTA, once ratified, will bring robust economic gains for Viet Nam, in the form of price competitiveness of Vietnamese exports in major foreign markets and more FDI, accelerating economic growth and creating millions of jobs, including in small and medium-sized enterprises.

At the same time, technological changes symbolized by the Industrial Revolution 4.0 will profoundly reconfigure the nature of jobs – both quantity and quality – in manufacturing and services. ILO’s study shows technological changes will affect virtually all sectors, particularly manufacturing industries. For example, ILO estimates that 86 per cent of all wage workers in Viet Nam’s textile, clothing and footwear industries could face a high risk of automation in the future. The Industrial Revolution 4.0 would destroy some jobs but at the same time create new types of jobs.

This is a complex challenge individual workers are ill prepared to cope with. Individual workers cannot anticipate what jobs will disappear and what new skills would be on demand in the future. Individual workers should not be left alone to find new jobs, when they lose jobs due to structural and technological changes.

Then, who should take initiatives to help Viet Nam prepare for changes caused by CPTPP and IR 4.0?

The Government needs to improve its capacity to design and implement active labour market policies, which will forecast changes in job market, develop vocational training tailored to new demands, upgrade its education system, and provide social protection during the transition from one job to another. And it should be done in public-private partnership, with genuine involvement of industries and enterprises, who demand workers with new set of skills and education.

Also, there is a need to develop proper regulatory framework to provide appropriate protection to workers in new forms of employment. Let me take example of uber or grab drivers. They are now part of our daily life, and they are the results of Industrial Revolution 4.0. Are they workers? Are they employees? Are they covered by the protection provided by the Labour Code? These are questions which should be answered in the process of Labour Code revision. When the Labour Code was revised in 2012, there was no uber or grab drivers. Labour market is changing so fast in the technology era, and labour laws and institutions need to be updated. Upcoming Labour Code revision in the context of CPTPP should address these regulatory challenges, in full consideration of the impacts of Industrial Revolution 4.0.

Also, trade unions have important roles to play. Supposing uber and grab drivers are workers, though not employees, are they eligible to organize or join trade unions? This is the question trade unions need to answer and, if answer is yes, need to develop policy and carry out campaign to represent those workers in new forms of employment in the context of IR 4.0.

What does CPTPP and required changes mean for trade unions in Viet Nam?

I think it offers a golden opportunity for trade unions under the umbrella of VGCL to modernize its organization and functions to better represent worker’s voice.

With Doi Moi and deeper global integration, trade unions have made some adjustments to their functions, with more emphasis on representing workers’ voices through collective bargaining. However, some gaps remain. There have been more than 6,000 strikes since mid-1990s and all of them were wildcat strikes, not initiated by trade unions. This is a clear sign that workers do not feel their rights and concerns are addressed and that the process established for resolving problems is not working properly. It is not uncommon to find in Viet Nam that trade union leaders at the workplace are senior managers of enterprises, which is unacceptable in almost all countries in today’s world. Union rights are workers’ rights, and unions are organizations of workers, free from interference of employers.

To comply with the requirements of CPTPP and EU-VN FTA and more importantly to fulfil Viet Nam’s obligations as ILO member state, there should be changes.

In your view, how have industrial relations developed in Viet Nam over the past time?

VGCL has a proud history of fighting for independence in 1930s and 40s, fighting for national sovereignty and unification in 1960s and 70s, and supporting Doi Moi since mid-1980s. Under the socialist economy, the role of VGCL was to encourage workers to become more productive for national economic development, while taking care of workers’ cultural and welfare needs at the workplace. Wages and working conditions were basically set by the Government.

With deepening market economy, however, the situation has changed since 1990s. Wages and working conditions are no longer set by the State, but by employers, especially in private sectors. Without collective organizations of workers which means trade unions are capable of negotiating with employers, workers, particularly unskilled or semi-skilled workers, will have to accept whatever contractual terms employers offer in market economies.

There is no balance of bargaining power between parties to employment contract. Modern labour laws recognize that 1) there is inherent imbalance between individual workers and employers in determining wages and working conditions, 2) workers have the right to organize or join organizations for bargaining collectively with employers on equal footing, and that 3) trade unions should enjoy protection against employers’ interference or discrimination.

Several rounds of revision of Labour Code for the last two decades have made some improvements in this regard. Trade unions under the umbrella of VGCL have also made some progresses and adjustments to their roles to better represent workers in the market economy. But there are some key remaining gaps in the legal system and policies.

You just talked about improvements and adjustments VGCL has made. Can you tell more about it?

For example, VGCL has adopted new ways of organizing workers across different localities and sectors. Previously, upper level union just approached employer or manager of a company, requesting the enterprise to set up grassroots unions. Once agreed, it was just left to employers to set up unions, which are often composed of senior or middle managers, without participation of majority of workers. Recently, many unions now take bottom-up approach to organizing workers. This means that union leaders meet workers, explaining what protection and benefits unions can provide and why workers need unions. Through this way, unions become organizations of workers, not just another administrative body at the workplace.

Also, some unions at industrial zones try to negotiate with multiple number of employers for better wages and working conditions than legal minimum conditions. These are very positive developments. And in virtually all market economies, this is what and how unions work.

Then, what impacts CPTPP and EUVN FTA would have on trade unions and workers?


CPTPP and EUVN FTA require Viet Nam to respect and promote the 1998 ILO Declaration, particularly Convention 87 on freedom of association and Convention 98 on right to collective bargaining. In a nutshell, it asks unions to be unions – in other words, it requires unions to be organizations of workers, as they are in most member states of the ILO. I think it offers a golden opportunity for trade unions under the umbrella of VGCL to modernize its organization and functions to better represent worker’s voice.

As I said earlier, trade unions have made gradual but steady improvement to their work in representing workers. However, gaps remain. There have been more than 6,000 strikes since mid-1990s and all of them were wildcat strikes, not initiated by trade unions. This is a clear sign that workers do not feel their rights and concerns are addressed and that the process established for resolving problems is not working properly. It is not uncommon to find in Viet Nam that trade union leaders at the workplace are senior managers of enterprises, which is unacceptable in almost all countries in today’s world.

Union rights are rights of workers. In most ILO member states, there are legal provisions which ensure union’s independence from employers, free from interference or discrimination by employers, and unions’ autonomy in managing their own internal affairs, free from undue administrative interference, within the rules set by the national laws and in line with international labour standards. And that is universal rules and principles of trade unions and labour relations, embodied in the 1998 ILO Declaration, which is required by CPTPP and EU-Viet Nam FTA.

Some say that freedom of association is not necessarily good in the current economic and political context of Viet Nam. What do you think?

Freedom of association is a universal guiding principle of modern industrial relations regardless of stages of economic development – it is a foundation for industrial relations not only in developed countries, but also in low income nations. This is a basic human and labour right, recognized by all member states of the ILO and UN systems.

Nobody wants to see fragmented and weak unions. As we have seen from the experiences of Cambodia and Indonesia, proliferation of competing and fragmented unions is not good for protection of workers’ rights and advancement of workers’ interests, and also not good for business performance.

Transition towards industrial relations based on freedom of association can be managed and coordinated to create a industrial relations system with greater degree of social and political stability. And I do believe Viet Nam has all the conditions to manage the transition towards industrial relations based on freedom of association with support of social partners (VGCL and VCCI) under the leadership of the Party. After all, it was Mr Nguyen Ai Quoc (Ho Chi Minh) who almost 100 years ago (in 1919) advocated freedom of association for all Indochinese people – he was far sighted. It was possible a century ago, and it should be possible now.

And international experiences show that effective trade unions contribute to social and political stability by channelling voices of workers into policy-making affecting the world of work and workers, while contributing to shared prosperity by collective bargaining and social dialogue. There are numerous global researches which show statistical evidence for positive link between effective unions and industrial relations, and shared prosperity and social stability.

How would you comment on the ongoing Labour code revision? Which particular areas should be given a focus to meet the requirements of the CPTPP labour chapter?

I understand that the Government is working on the Labour Code revision, in light of the CPTPP and EU-Viet Nam FTA requirements, and plans to submit the draft revised Labour Code to the National Assembly by May 2019. Industrial relations chapters are the key not only in terms of CPTPP and EU-Viet Nam FTA but also for the overall objective of modernizing the way work is regulated in modern Viet Nam.

In a modern market economy, conditions of workers, including wages, are determined through social dialogue and collective bargaining between representatives of workers and employers, empowered and conditioned by industrial relations-related laws and regulations. This is a weakness of the current Labour Code, which would have to be improved in consistency with the 1998 ILO Declaration. During its revision process, a due consideration should be also given to ratification of Conventions 98 and 87, as it provides a universal principle based on which modern industrial relations is built in most ILO member States.

Having said that, however, there are many important issues which will affect businesses, workers and the entire society, including employment contracts, discrimination, retirement ages, wages, and working hours.

Equally importantly, there is a fundamental question about the scope of Labour Code application – Does it apply to only workers and employers in the formal economy, or only to workers with employment contract? How about Uber and Grab drivers? Viet Nam has a workforce of more than 53 million, which include 29 million own-account workers and contributing family workers, mostly in informal economy, and 23 millions are in wage employment. How many of them will be officially covered by the Labour Code? This may be the first question to be answered.

In this context, I would like to emphasize the importance of full participation of trade unions, business representatives and other stakeholders throughout the process of Labour Code revision. Whether labour law reform becomes successful or not depends on how the need of workers for better protection and security, and the need of businesses for flexibility can be accommodated in a balanced manner. Balancing needs of workers and employers is possible only when their representatives participate in the process.