The ILO and globalization

The following is a selection of recent events and publications that have addressed issues concerning globalization and its social consequences. This selection is not intended to be comprehensive, but only to highlight the more significant developments. The texts reproduced are not complete, but only extracts of parts relevant to the social aspects of globalization.

In view of the wealth of information available on the many different aspects of globalization, the first section of this paper groups together the various reports and studies published. This has the advantage of highlighting the different shades of opinion in the assessment of the effects of globalization. The second section covers various high-level conferences and meetings that have addressed this subject, reflecting the policy positions adopted.

This document is not exhaustive, and has been prepared on the basis of internal information and elements to be found in the public domain, mainly through Internet sites. Wherever possible, full document and Internet references are given for the texts and events included. Links imply neither responsibility for, nor approval of, the information contained in those other Web sites on the part of the ILO.
 

A. Events

1. Seventh Meeting of Ministers of Trade of the Hemisphere
Quito, 1 November 2002

Ministerial Declaration of Quito [Link]

In the Ministerial Declaration of Quito, Ministers responsible for trade –

• reiterated that the negotiation of the FTAA will take into account the broad social and economic agenda contained in the Miami, Santiago and Quebec City Declarations and Plans of Action with a view to contributing to raising living standards, increasing employment, improving the working conditions of all people in the Americas, improving the levels of health and education and better protecting the environment.
• also proposed to secure, in accordance with their respective laws and regulations, the observance and promotion of internationally recognized core labour standards, renewing their commitment to observe the International Labour Organization (ILO) 1998 Declaration on Fundamental Principles and Rights at Work and its Follow-up, acknowledging that this organization is the competent body to promote, set and deal with these core labour standards.
• noted that the Inter-American Conference of Ministers of Labour (IACML), acting on the Declaration and the Plan of Action of the Quebec City Summit, established at its Ottawa Conference (2001) a Working Group on the Labour Dimensions of the Summit of the Americas process, to examine inter alia questions of globalization related to employment and labour, and would appreciate receiving a report on the results thereof.
• rejected the use of labour or environmental standards for protectionist purposes. Most ministers recognized that environmental and labour issues should not be utilized as conditionalities or subject to disciplines, the non-compliance of which can be subject to trade restrictions or sanctions.
• considered that the establishment of the FTAA, through increased trade flows, trade liberalization and investment in the Hemisphere, would contribute to growth, job creation, higher standards of living, greater opportunities, and poverty reduction in the hemisphere. For this to be possible, the establishment of the FTAA would promote the application of policies oriented to economic development, promoting the generation of employment and the effective operation of labour markets in the hemisphere.
• reiterated the importance of agriculture for the economies of the region, the integral and non-discriminatory treatment of which in the FTAA negotiations will contribute to generating employment, reducing poverty and fostering social stability.

2. G-20 Finance Ministers' and Central Bank Governors' Meeting
Delhi, 23 November 2002

Communiqué [Link]

In the Communiqué, Finance Ministers and Central Bank Governors of the G-20 –

• reaffirmed their conviction that increasing integration of the global economy is producing benefits, including improvements in living standards and reduction of poverty, and their commitment to maximize these benefits through domestic policies, strong institutions, and enhanced international cooperation.
• reviewed the nature and pace of economic integration, which is at the heart of globalization, and its implications for the world community. They agreed that globalization has been delivering rising living standards generally, including to many of the world's poor. The benefits of globalization can be maximized, and associated risks mitigated, through the pursuit of appropriate domestic policies and a healthy external environment. The IFIs also have a role to play in this process. Their own experience, as revealed by the G-20 case studies to be published shortly, and by the evidence presented at the Globalization Workshop in Sydney, shows that strong institutions, a climate that fosters savings and investment, transparency, and the rule of law, coupled with increased investments in infrastructure and human capital in developing countries, are essential ingredients for promoting growth and reducing poverty.
• noted that the process of globalization, however, has not yet delivered its potential in reducing poverty in some of the world's poorest countries. Reduction of the remaining trade and related barriers and phasing-out of trade-distorting subsidies would contribute to spreading further the benefits of globalization, including to the poorest developing countries.
• recalling the partnership between developed and developing countries, reflected in the Monterrey and Johannesburg Conferences, reaffirmed their shared commitment to achieving the Millennium Development Goals, particularly in Africa through supporting NEPAD. They recognized that development assistance can enable poorer nations to build capabilities for exploiting the benefits of more integrated markets, reduced economic distance between nations and greater exchanges of global information and knowledge. Development assistance can play a valuable catalytic role, including in the provision of global public goods. They welcomed the increases in international development assistance recently announced by some countries recognising the need for higher ODA. They also welcomed the commitment made by the Development Committee at its September meeting this year to the implementation and full financing of the enhanced HIPC initiative.

3. EU-Canada Summit
Ottawa, 19 December 2002

Joint Statement

In the Joint Statement, European Union and Canadian leaders –

• stressed that the current global economic situation compels them to pursue every possible avenue to promote economic growth and prosperity through the liberalization of trade and investment.
• reaffirmed their commitment to the open multilateral trading system based on WTO. To that end, they agreed to give priority to, and work closely together for, the successful and timely completion of the Doha Development Agenda for the benefit of both developing and developed countries. At this point, this provides the most expeditious way to enhance market access.
• noted that the UN Millennium Summit, together with the other major UN conferences of the last decade, including those in Monterrey and Johannesburg, has provided a comprehensive set of principles, goals, and commitments to guide the work of the international community in the fields of peace, security, human rights, poverty reduction and sustainable development.
• were determined that focus should now be on implementation of the goals and commitments, including the Millennium Development Goals, and reiterated the commitment made in Monterrey to make concrete efforts towards the target of 0.7 per cent of gross national product (GNP) as official development assistance to developing countries.
• agreed on the important link between trade and development, and the need to strengthen the capacity of developing countries to take part in international trade negotiations, as well as their capacity to exploit more effectively the opportunities offered by the liberalization of international trade.

4. XIII Conference of Heads of State or Government of the Non-Aligned Movement
Kuala Lumpur, 24-25 February 2003

Final Document [Link]

In the Final Document, Heads of State or Government of the Movement of the Non-Aligned Countries –

• recognized that the globalized economy offers great opportunities, but expressed concern that its benefits are very unevenly shared and its costs unfairly distributed, and that developing countries face difficulties in responding to that central challenge.
• also welcomed the recognition by developed countries that the needs of the developing countries cannot be met solely by a focus on the market economy, and called for a recommitment to and an urgent resumption of international actions aimed specifically at improving the global environment for development, such as aid on concessional terms, measures to counter the instability and weakness of commodity markets, preferential tariffs for developing country exports, debt reduction, mechanisms for the transfer of technology and basic reforms in the international financial architecture.
• noted that the gap between the developed and developing countries, especially the least developed countries (LDCs), continues to widen, and that the problems deriving from poverty and social injustice have been significantly aggravated.
• remained deeply concerned over the continued marginalization of the developing countries from the benefits of globalization, and persistent income and economic gaps between the developed and developing countries. As globalization deepens, the technological, financial and productive gap between the developed and developing countries, including the digital divide, increases. Hence, the Non-Aligned Movement is of the belief that the central focus of international development efforts should be on the creation of an enabling international economic environment, which is critical for developing countries to acquire the requisite capacities to successfully compete and fully benefit from globalization. They called therefore for an equitable international economic order. They also called for measures to ensure that developing countries participate in and benefit from globalization, in particular through their full and effective participation in the processes of decision making on world economic problems.
• recalled the United Nations Millennium Declaration, which commits all Member States at the highest level to make globalization a positive force for all the world's people and seeks to ensure that the benefits of globalization are shared evenly by all as a central challenge for the international community; and called upon all Member States to remain focused on the development needs of the developing nations and the achievement of the Millennium Development Goals, including the target of halving poverty by 2015.
• expressed their deep concern about the increasing social pressure that developing countries are facing as a result of decreasing or negative economic growth, widening poverty and soaring unemployment. In this regard, they called upon the international community, in particular the financial and development multilateral institutions, to establish innovative and new financial mechanisms to help developing countries to meet their immediate social and economic demands as they implement their long-term development programmes.
• while subscribing to the values of environmental protection, sound macroeconomic management and the promotion and protection of all human rights, in particular the right to development, expressed concern at the “new protectionism” in the form of labour standards, environment standards, other social and human rights standards and technical standards, which is coming to the fore. The Heads of State or Government totally rejected all attempts to use these issues as conditionalities or pretexts for restricting market access or aid and technology flows to developing countries or linking them to multilateral trade negotiations.
• again expressed deep concern over the declining level of Official Development Assistance (ODA) and the lack of concrete commitments by the developed countries in the Monterrey consensus.
• again reaffirmed the need to establish an open, rule-based, accountable, transparent, predictable, just, secure, equitable, development-oriented and non-discriminatory global trade system.
• noting that FDI is crucial for the economies of Members of the Non-Aligned Movement, reiterated the importance of promoting and abiding by the principles of good corporate governance by both foreign investors and host governments.
• reiterated the need to promote the integration of the three pillars of sustainable development - economic development, social development and environmental protection - as interdependent and mutually reinforcing pillars.
• reiterated the Movement's commitment to the accelerated implementation of and follow-up to the Copenhagen Declaration and Programme of Action, as well as its full support to the outcome of its five-year review and appraisal as contained in “Further Initiatives for Social Development” adopted by the 24th Special Session of the United Nations General Assembly [Copenhagen+5]. They also reiterated their request to the international community to fulfil its commitment and fully cooperate in the implementation of the goals of the Copenhagen Declaration and Programme of Action, as well as the Special Session. The international community must maintain the momentum generated by the Social Summit geared to the eradication of poverty, the generation of full employment, the promotion and achievement of social integration and the attainment of broad social development, while taking action to mitigate those aspects of globalization which have an adverse impact on developing economies. The strengthening and sustaining of an enabling environment for social development, implementation of the POA and its follow-up is necessary.

5. European Council
Brussels, 20-21 March 2003

Presidency Conclusions

In the Presidency Conclusions, the European Council –

• stressed that the promotion of sustainable growth and the creation of more and better jobs must remain firmly at the top of the Union's agenda. This can be done by pursuing growth and stability-oriented macroeconomic policies, pressing ahead with economic reforms, taking decisive action to increase employment and modernise the European social model, and implementing the sustainable development strategy adopted at Göteborg. At the same time, and despite recent progress, this reform agenda must now also address more effectively the challenges from ageing populations if it is to secure the long-term sustainability of public finances.
• to push ahead with reform, the European Council identifies the following priorities, among others:
• raising employment and social cohesion. There has been real progress on employment but reaching the 70% employment rate Lisbon target by 2010 will require far-reaching structural reform aimed at full employment, higher productivity and quality in work. EU labour markets must become more inclusive, with employment opportunities extended to all, at the same time as they become more adaptable to economic conditions. Member States will need to undertake substantial tax-benefit reforms, increase incentives for entering employment and labour market participation, and reduce gender specific differences on the labour market. Life-long learning should be promoted, and closer cooperation in enhancing transparency about skills standards across Europe encouraged.
• giving priority to innovation and entrepreneurship.
• stressed that the Union is committed to promoting a high level of social cohesion based on the principles of solidarity and social inclusion.
• bearing in mind the need for overall coherence between its internal and external policies, underlined that the Union is actively committed to keeping its leading role in promoting sustainable development on a global scale by translating into concrete actions the political ambitions agreed in Johannesburg, Doha and Monterrey along the following lines, among others:
• ensuring effective follow-up to the commitment made in Monterrey on the realization of the 0,7% target for ODA;
• the enhancement of corporate social and environmental responsibility both at EU level and internationally; means of promoting sustainable and fair trade.

6. Ministerial Meeting between the European Union, Mercosur, Bolivia and Chile
Athens, 27 March 2003

Joint Communiqué

In the Joint Communiqué, Ministers –

• reaffirmed that the fight against poverty, especially the elimination of extreme poverty, constituted a common and shared goal that should be pursued by their governments and societies.
• expressed concern about the current international economic situation and reaffirmed that a steady return to economic growth was essential to reduce unemployment and promote social equity. In this regard, they stressed the importance of a strong, sustainable world economic recovery and the role of free and equitable trade and effective market access, to the creation of a more competitive and dynamic economic and social environment in their countries.
• also recalled the consensus achieved at the Monterrey Conference on Financing for Development on the objective of improving access to markets in industrialized countries, as an essential factor for the eradication of poverty and underdevelopment and the repayment of foreign debts. They also stressed that an increase in Official Development Assistance (ODA) and other resources would be required if developing countries were to achieve internationally agreed development goals and objectives, including those contained in the Millennium Declaration.
• exchanged information on the latest developments in their respective integration processes. They reaffirmed their strong belief that open regional integration played an important role in promoting economic growth, trade liberalization, and economic and social development, as well as in facing the primary challenge of reducing poverty and inequality and the construction of a more inclusive and just society, all of which were essential to the consolidation of democracy.
• reiterated the importance they attach to strengthening the multilateral trading system enshrined in the WTO. In this regard, they called for a successful mid-term Ministerial in Cancun and a timely conclusion of negotiations on all items included in the Doha Development Agenda.

7. XI Institutionalized Ministerial Meeting between the Rio Group and the European Union
Athens, 28 March 2003

Declaration [Link]

In the Declaration, Ministers –

• underlined the importance of solidarity in an increasingly globalized world and expressed their commitment to the UN Millennium Development Goals and towards working together in order to address the challenges posed by globalization, while ensuring the benefits of the opportunities deriving therefrom.
• also underlined the importance of furthering their respective integration processes and deepening bi-regional trade, investment and developing sustainable social policies. These represent important means of combating poverty and social exclusion and of ensuring that the benefits of globalization accrue equitably to all sectors of their societies. They also highlighted the importance they attach to a strengthened rules-based multilateral trading system and reaffirmed their commitment to a successful and timely conclusion of the negotiations on the Doha Development Agenda, by the end of 2004.
• attached the highest priority to improving social conditions worldwide. To that effect, policies at the national and international levels and in all spheres (economic, financial) should aim at reducing social inequalities and ensuring adequate levels of well-being. Ministers also held an open debate on “Social Cohesion and Democratic Governance in a new Economic Environment”. They recognized that serious social problems, such as unemployment and social exclusion, continue to affect their regions and called for political, social and economic reforms. Globalization and technological change pose new challenges, which can only be faced by building new competitive structures and more inclusive societies and by improving the international financial institutions, inter alia, to prevent and avoid crisis. Furthermore, market access conditions should be promoted within the framework of the Doha Development Agenda in order to face the new economic challenges. Their treatment needs to be addressed locally and internationally, with cooperation and reforms in both dimensions, so as to create opportunities and reduce poverty.
• in the light of the new international economic conditions, reaffirmed their intention to cooperate in order to build stronger and more competitive economies, based on technological innovation, new productive investment, know-how and specialization. They recognized the importance of combining these elements with social inclusion, with the aim of boosting economic growth, while improving the living standards of workers and their families.
• recognized that an economic and social strategy set to renew the basis of economic growth must combine macro-economic policies and economic reforms, along with structural policies and the modernization of social welfare. Economic and social reforms should form an integral part of a strategy that combines improved competitiveness and enhanced social cohesion.
• underscored the importance of strengthening international cooperation in order to combat poverty and promote social equity, taking into account the positive interaction between social progress and economic growth.

8. OECD Ministerial Council Meeting:
Agenda for Growth and Development
Paris, 29-30 April 2003

Chair's Summary [Link]

• There was a large measure of agreement on the nature of the challenges they [the OECD countries] face in maintaining and enhancing growth in the longer run, including the impact of demographic change, increasing productivity, and achieving appropriate labour market flexibility. Addressing these challenges is not easy, and policy solutions can not simply be imposed on communities.
• For most countries, efforts to improve participation and employment are a priority. Education and training, the removal of barriers to entry into the workforce, and measures to encourage older people to stay in work were all identified as common policy prescriptions. Allowing all to play their full part in society and the economy is important both to generate growth and to improve social cohesion and well-being. In considering labour market reform, the right balance must be struck between removing rigidities, protecting vulnerable workers, making work financially worthwhile, and providing an adequate level of social security.
• There was emphasis on how to improve productivity to drive growth - notably on the need for an environment which encourages innovation and enterprise, the take-up of new technologies and investment in skills, knowledge and ideas. Many Ministers noted that trade liberalization would enhance domestic competition and innovation.
• It was noted that at Doha, Monterrey and Johannesburg, OECD Members affirmed their commitment to promoting sustainable economic growth, achieving the United Nations Millennium Development Goals, and lifting many millions of people out of poverty.
• Ministers agreed there was scope to do more to assist developing countries, particularly in Africa, to gain from globalization. This will require a focus on capacity building and coherence of other policies necessary to encourage growth.
• Investment - domestic and foreign - is vital for financing economic development. Confidence to invest requires political stability, sound economic policies, absence of corruption, and good governance in both the corporate and public sectors. ODA flows are a complementary and necessary source of funding.
• Business must also be partners in the development process. The OECD Guidelines for Multinational Enterprises have encouraged businesses to take into account not only economic and financial factors, but also the developmental, social and environmental implications of their undertakings.
• On WTO negotiations, Ministers were clear on a balanced outcome for all, with development being central to the negotiations and a commitment to making the decisions needed.

B. Publications

1. Inter-American Development Bank

Annual Report 2002 [Link]

The Annual Report 2002 stresses that social sector projects accounted for $2.13 billion, or 46.8 per cent of the year's non-emergency loan approvals. Investments in poverty reduction and social equity are cross-sectoral and include financing in the social sectors as well as other sectors. In 2002, 69 per cent of the total lending volume ($2.8 billion) and 58 per cent of the number of operations (42) were classified under these headings. As part of the Heavily Indebted Poor Countries (HIPC) Initiative, the Bank in 2002 delivered debt relief to each of the four eligible member countries for a total of approximately $123 million. Mechanisms to enhance consultation with civil society groups and other stakeholders involved in Bank operations continued to be developed and used throughout the year. Numerous consultations were held, many of them focused on discussions of the Bank's draft strategies on poverty, sustainable growth, social sector reform, competitiveness, integration and the modernization of the state. Throughout the year, the Bank continued its dialogue with the Inter-American Regional Organization of Workers (ORIT).

The Report indicates that the Board of Governors considered matters related to the international financial scenario, the impact of external agents on the stability of the region's economies, the fight against poverty, and the role of the private sector in the development of the region. The Board approved a resolution to reinforce the Bank's ability to offer new products and improve some of its current instruments; to respond more efficiently and effectively to crisis; and to pay special attention to specific aspects such as mitigating social impact and reducing poverty.

The Report notes that the reduction of poverty and the promotion of social equity in Latin America and the Caribbean is one of the Bank's overarching objectives. During 2002, the Bank undertook numerous lending and non-lending activities in pursuit of this goal. In the course of the year, the Bank's new Poverty Reduction and Social Equity Promotion Strategy was developed and delivered to the Policy and Evaluation Committee of the Board. This strategy provides guidelines to be followed in this area, highlights the need for specific goals and targets for poverty reduction and equity promotion in the region in line with the Millennium Development Goals, and underscores specific policy actions in the areas of income generation for the poor, human development, social protection and inclusion. The Report also stressed that the main goal of the Bank's Competitiveness Strategy, prepared during 2002, is to help improve the economic and institutional environment for private sector development and enhanced productivity.

The Report indicates that a new Social Development Strategy was developed and delivered to the Policy and Evaluation Committee of the Board to guide the Bank's actions in social development for the next five to 10 years. The objective of the strategy is to help countries accelerate social progress by fostering human and social environments conducive to the well-being of all, with special emphasis on poverty reduction and equal opportunity.

2. World Bank

Global Economic Prospects and the Developing Countries 2003: Investing to Unlock Global Opportunities [Link]

The Report stresses that, in the long run, new opportunities for technological advances (often driven by globalization), together with more stable macroeconomic policies and an improved business climate, have the potential to accelerate growth and to increase investment ratios in developing countries that currently lag behind. The outlook for reductions in global poverty, while generally positive and of the same order of magnitude as in the previous report, is marginally dimmer because of the absence of robust recovery today. However, because international financial flows have at times fluctuated widely, they have sometimes proved damaging to growth and poverty reduction. The international community and developing countries have to search for mechanisms to provide greater stability in integration.

The Report indicates that global competition is creating new opportunities for developing countries. In virtually every region, FDI is a driving force of globalization and rose relative to total capital expenditure during the 1990s. Four changes in the organization of business are particularly important for developing countries. First, the rise of foreign investment in services is creating a new source of competition - and potential productivity gains - in developing countries, where staid state companies have often monopolized production for decades. Second, production networks that span the globe, once barely a dot on the horizon of international business, have now become a central feature. Third, with growing concerns about risk, investors are becoming increasingly sensitive to investment climates in developing countries, and the result is that money is moving to the countries with large, rapidly growing, and relatively stable economic environments. Finally, long-term private investment financing for infrastructure has fallen off to levels that may prove persistent.

The Report indicates that harnessing globalization requires reducing barriers to competition. To raise the productivity of both foreign and domestic investment, developing countries have to harness the full force of competition inherent in globalization. Too often they have not done so. While there are clearly examples in which targeted interventions - such as fiscal incentives, export processing zones (EPZs), or support for economic clusters - may indeed lead to higher investment levels (and the jobs and related spillovers that go along with them), there is, unfortunately, little evidence that such initiatives can be systematically successful. Instead, they tend to work best when they work in support of broader reform packages, either to catalyze support for emerging opportunities (such as clusters) or to create transitional mechanisms and initial constituencies for reform that can be progressively expanded (such as EPZs). But more broadly, investment incentives will generally not make up for serious deficiencies in the investment environment or generate sustained growth. To encourage productive investment and benefit from globalization, governments must tackle the challenges of promoting competition and entrepreneurship and of undertaking complementarily productive public investment in areas such as education.

The Report notes that international agreements on investment and competition policies can provide benefits through reciprocity. But agreements on investment policy are likely to have strong development effects only if they deal with the big issues facing developing countries. Thus competition agreements should focus on restraints to competition that hurt developing countries. Therefore, unlocking global opportunities begins with the efforts of developing countries to improve their investment climates. Deployed well, investment policies and policies to unleash competition can accelerate economic growth and reduce poverty. This report offers a general framework and lessons, but each country has to formulate its own development strategy. Nonetheless, the international community, working together, can help through development assistance, voluntary collaboration, and well-conceived international agreements. For these efforts to have greatest effect, they have to tackle the most pressing investment and competition problems—and that is the challenge ahead.

ILO Governing Body documents on international policy developments concerning the social dimension of globalization