ACTRAV WORKING PAPER - Worker's activities

reductions in trade barriers through regional or multilateral trade agreements;
rapid expansion of foreign direct investment by multinational companies;
reduced barriers to international capital transfers, resulting in massive equity funds and other speculative financial flows across national borders; and
modern communication facilities resulting in a dramatic increase in the speed of such transfers.

It appears to many workers that these trends have enabled capital markets to capture control of the political process and their demands now drive the decision making process. Governments, regardless of their political persuasion, appear increasingly powerless to make decisions on economic or social policy without carefully considering how the young money market managers will react and the effect this will have on the national currency or balance of payments. At the same time, many workers believe these developments have encouraged macho-managerialism which is reflected in competition between companies to cut labour costs and shed labour for the sake of impressing equity fund managers and forcing up the stock market value of the enterprise.

An alternative, and majority view among economists and politicians, sees recent moves towards free trade and increased international investment as the most positive economic development in the past century. According to this perspective, the more efficient allocation of resources and exploitation of comparative advantages between countries will raise productivity, boost economic growth and provide increased prosperity for all. It is argued that consumers benefit from a wider choice of products and services at lower costs. It is portrayed as a win-win situation. Moreover many high profile individuals and organisations consider that increased economic interdependence will improve the prospects of lasting peace and stability. They see a strong link between the integration of national economies and military security.

The official ILO perspective on these issues lies somewhere between these polarised positions. The Organisation is generally optimistic about the net impact of free trade and increased foreign investment on economic growth and the level of employment. However, it acknowledges that as economic competition across national borders intensifies the incentive for employers and governments to reduce labour costs is augmented. This may have made governments more reticent to ratify, or implement, International Labour Conventions. Also the risk of labour exploitation and inequalities is heightened in an increasingly interdependent world economy.

The ILO views globalisation as "policy-driven". The changes that have occurred result from deliberate and carefully considered government decisions to open their borders, to promote trade and facilitate international investment. The prevailing international economic environment is not the product of exogenous factors that must be fatalistically accepted. The ILO therefore advocates that the process should be more carefully controlled, or governed, primarily by national governments to ensure that the economic benefits of increased trade and foreign investment are fairly distributed; that certain basic labour rights are universally recognised and applied; and that states are encouraged to progressively implement other labour standards as globalisation increases economic growth and provides opportunities for promoting social progress. In this governance process a supporting role is envisaged for coordinated action by relevant international organisations in assisting national governments reach a balance between economic efficiency and social equity.

Government guidance of globalisation is not a goal in itself and it is not necessarily intended to slow the pace of economic integration. On the contrary, the overriding objective is to avoid exacerbating undesirable labour market practices which are already generating a "backlash" against open economies and fuelling protectionist tendencies. For example, in the United States opposition to NAFTA, suspicions of the World Trade Organisation, and the proliferation of low-wage insecure jobs has generated considerable public resistance to further trade liberalisation at either the regional or multilateral level.

The trade union movement in the United States estimates that in the first three years of operation NAFTA has resulted in the loss of 420,000 jobs for American workers. Similar concerns about globalisation are evident across industrialised countries and unrest will spread to the newly industrialised countries as workers perceive that their job prospects are being undermined by even cheaper labour in China and Indonesia. To arrest these trends and reduce resistance in the electorate to trade liberalisation will require the establishment of institutional arrangements that effectively prevent exploitation and promote a fair distribution of the benefits of economic integration.

This paper addresses a series of questions related to these concerns. Section two of the paper places the present globalisation debate in a historical context. It reviews how previous periods of trade liberalisation led, after a considerable lag, to the establishment of institutions and mechanisms to help govern and control the excesses of open economies and market forces. Section three is concerned with quantitative indicators about the magnitude of recent increases in trade and foreign investment flows; it also touches on the variation in trends between regions. Section four considers the consequences of globalisation, concentrating on the qualitative impact on workers and trade unions. The final section describes the ILO and trade union response to these trends and makes some tentative suggestions to further develop this initial response. In particular the final section concentrates on the proposals to enhance the governance of globalisation and examines what additional economic policies and institutional linkages are required to moderate, and thereby sustain, moves towards a global market.

2. Governing Globalisation - A Historical Perspective

According to most characterisations of recent trends, the world has never witnessed anything like the current economic transition and disintegration of economic borders. While it is true that these developments are unprecedented in extent and magnitude, in substance there have been important precursors. Over one hundred years ago at the time of the industrial revolution a number of similar trends emerged. In this period the level of international trade expanded dramatically and in fact the share of trade (exports and imports) in national GDP was higher in the period from 1870 to 1913 than it is today. Moreover, at that time there were similar expectations and propaganda generated about the rewards to be derived from an open economy. Workers were told that a combination of free trade and technological advances would create a new era of prosperity, improvements in working conditions and advances in the relative position of the poor.

Rapid economic advances did take place during the nineteenth century but the expectations of workers were not realised in their life times. Instead the massive investments in technology and increases in trade that occurred during this period only resulted in increased returns to capital. At the same time workers who moved from a relatively secure and sustainable livelihood on the land to the urban slums and "sweatshops" that were created to produce textiles and other goods for export saw their living standards decline.

Several authors have described how the advent of industrialisation led to a new class of factory owners who argued that economic survival depended upon the existence of a cheap and abundant supply of labour. They used their political influence to reduce the protection provided to domestic agricultural industry. The resulting increase in foreign competition led to a reduction in agriculture prices and forced the least efficient farmers and tenants to leave the land. Labour flooded to the cities and these workers had little, if any, choice but to accept relatively low wages and poor conditions. Many authors have described how the traditional ways of life and the labour market norms that had governed society for centuries, were torn apart during the Industrial Revolution. Workers became raw materials to be bought and sold as labour market flexibility reached its peak.

The long term ramifications of these developments for social peace and economic stability were apparent to at least some employers and policy makers at the time. For example in the early 1800's the industrialist Robert Owen made proposals to regulate working conditions in each nation in accordance with minimal international standards. From this early stage it was evident to some people that open economies and the pressure of international trade competition could exert a powerful negative influence on working conditions in the absence of coordinated action at the international level to protect and promote better labour standards. On the workers' side there were various conferences held and organisations formed throughout the second half of the last century that advocated international action to improve the distribution of income and the welfare of workers.

These warnings and proposals for coordinated action to help govern the first wave of globalisation fell on deaf ears. No concrete action was taken to prevent the abuses of open economies from escalating into significant social and political tensions. With the benefit of hindsight authors such as Karl Polanyi, writing at the end of the second World War, argued persuasively that the unravelling of economic and labour market regulations in the nineteenth century caused such social and political upheaval in the early twentieth century, that it culminated in the collapse of the world economy and two world wars.

It would seem that many powerful policy makers from the Polanyi generation saw these developments through similar eyes and decided to try to prevent a reoccurrence of these events. This commenced at the international level with the Paris Peace Conference in January 1919 which established a Commission on International Labour Legislation. David Morse has pointed out that while some of the delegates to the Peace Conference may have thought it surprising that labour should be given a prominent priority in their deliberations, "there was general recognition that the ferment and instability which characterised the world of labour and industry in 1918 and 1919, particularly in Europe, called for immediate and constructive action." Perhaps the most lasting contribution of the Peace Conference was the drafting of the Constitution of the ILO which dedicated the institution to promoting "lasting peace through social justice". From the outset, the promotion of social justice provided the Organisation with a mandate to influence key components of national and international economic policy. Specific reference is made in the Preamble of the Constitution to the "prevention of unemployment, the provision of an adequate living wage".

It is evident from the preamble to the Constitution that the founders did not conceive of the ILO's mandate in narrow legal or technical terms. They laid down principles of justice and humanity as the guiding lights for the Organisation, which were to be pursued, pari passu, with economic prosperity. The objectives of the Organisation were to be attained through establishing international labour standards and the collection and distribution of information on labour and industrial conditions. These were, and remain today, important means of action to influence social and economic developments. Whether or not they provide the Organisation with sufficient power to ensure these social principles are translated into practice when they are perceived by some to be inconsistent with their short term economic interests is of paramount importance to the debate about globalisation. This issue is examined in the final section of this paper.

After the second World War and the experience with hyper-inflation during the inter-war period, as well as the demise of the gold standard, the set of international institutions with an economic mandate was expanded. The Bretton Woods institutions were established to promote economic development, maintain "sound money" and safeguard the international financial system. To maintain a sense of balance between these desirable economic objectives and broader social and labour concerns, the ILO mandate in the fields of international trade and macroeconomic policies had already been made more explicit. Meeting in Philadelphia in mid-1944, prior to the end of the war, the ILO Conference adopted a Declaration of basic principles. The Declaration of Philadelphia entrusted the ILO with a special responsibility to examine all international economic and financial policies and measures in order to ensure that they were compatible with social policy objectives and consistent with promoting the welfare of people. The inclusion of these unambiguous obligations in the Philadelphia Declaration reinforced the concept of a reciprocal relationship between economic and social policy after the economic catastrophe of the Great Depression and the Second World War, which wreaked havoc and hardship on the working men and women of the world.

The Declaration made clear that the competence of the Organisation extended beyond labour market policies into fields as diverse as fiscal, monetary, trade and development policy. The Philadelphia Declaration states that the achievement of social objectives requires "effective national and international action, including action to expand production and consumption, to avoid severe economic fluctuations, to promote the economic and social advancement of less developed regions of the world, to assure greater stability in world prices of primary products, and to promote a high and steady volume of international trade..." Therefore the ILO has always recognised, and has had to contend with, the limitations imposed on the world of labour by exogenous factors like the collapse of the international financial system, economic recession and the vagaries of world trade.

In adopting the Declaration of Philadelphia the world's leaders recognised the importance of creating a system of checks and balances in the international system to balance economic development, the promotion of trade, protection of the international financial system and promote social advancement. A problem was that primary responsibility for each of these desirable objectives was assigned to different institutions at the international level, with considerable overlap, and adequate measures to facilitate their coordination and consistent application were never created.

The ILO has usually been more of an interested observer and commentator on global economic developments, rather than a key influence upon the design of policy. After the creation of the Bretton Woods institutions, the ILO sought to exert some influence in the international economic domain, but it was traditionally excluded from the "cosy club" of finance ministers, central bankers and representatives of the international financial institutions with real power over macroeconomic policy and economic reforms. Consequently, a coordinated approach between the ILO and the international financial institutions, as foreseen by key policy makers in the wake of the second World War, has never operated effectively.

This should not come as a real surprise since the role and influence of the ILO at the international level is, at best, comparable to that of a labour ministry in the national policy framework. Both the ILO and labour ministries are often excluded from the discussions and decisions on economic issues that have a profound impact on employment, poverty and social development, yet are expected to help shape and implement labour and social policies to make them consistent with parameters created by monetary, fiscal and industry policies. It often seems that the establishment of economic and social policy resembles the putting together of a "jig-saw" puzzle: finance and economic ministries, in partnership with the international financial institutions, take decisions that result in most pieces of the puzzle being firmly placed on the board, leaving small spaces for those pieces that correspond to labour and social policies. However, because these are the last components to complete the total picture their shape is already virtually determined and little scope exists for manoeuvre.

The ramifications of this restricted policy formulation process critically depend on the prevailing economic trends. For example, during several decades following the Second World War, consistent economic growth and near full employment in industrialised countries provided a favourable backdrop against which the ILO could develop and implement international labour standards that contributed to a more equitable distribution of economic growth.

Moreover throughout this period the level of world trade and foreign investment had returned to much more moderate levels than those that prevailed either at the end of the nineteenth century or the levels we witness today. This conducive economic climate, combined with a heightened social conscience following prolonged periods of depression and war, were instrumental factors in facilitating the adoption and wide ratification of international labour standards on freedom of association and the promotion of collective bargaining. Important aspects of the ILO supervisory mechanisms were also conceived during this time. During this prolonged period of relative economic prosperity an implicit social pact between capital and labour, in most industrialised countries, kept the share of national income accruing to profits and wages in fairly constant proportions and prevented a destructive struggle over income shares from igniting inflationary pressures.

The relative economic calm and social progress that prevailed between the late 1940s and the mid 1970s also meant that the Organisation was not pressed to fully explore the implications of the Philadelphia Declaration for ILO action in the fields of international economic and financial policies. In short, there was no great pressure for a "show-down" with the Bretton Woods institutions to determine how this mandate to oversee national and international financial and economic policies could be exercised. Instead ILO activities in the economic domain were concentrated upon more operational components and expanding technical cooperation activities in areas where it had a relatively exclusive mandate, such as the development and fuller utilisation of human resources in developing countries.

At the national level, as part of the post-war reconstruction, policy makers deliberately made provision for institutional arrangements that would balance economic and social objectives. This included fostering strong independent trade unions and promoting collective bargaining. The precise methods for implementing these policies varied between the developed nations but generally included labour legislation that strongly supported freedom of association and the right to strike, the establishment of national tripartite mechanisms for dialogue over economic and social issue, and the use of improvements in pay and working conditions in the public sector to set patterns that would eventually flow throughout the workforce. Protection was also extended to those outside the labour market through the development of a comprehensive social security system that would cushion the impact of market forces on the poor, unemployed, sick and the aged.

Given that institutional mechanisms were never created to enable the ILO to exercise a monitoring role over the social impact of economic and financial policies, as had been foreseen in the Philadelphia Deceleration, the importance for workers of national level controls were intensified. Fortunately the social contract between capital and labour worked relatively efficiently for several decades in most industrialised countries ensuring a balance between economic and social imperatives. However, when the oil crises hit in the 1970's and stagflation too, policy makers responded by reigning in the fiscal deficit and re-examining whether they could afford the social contract that had held society together for the last few decades. Attention focused on new ways to control wage demands as consumer prices jumped and double-digit inflation frightened investors. Traditional incomes policies, which relied on consensus and compromise, were rejected in favour of demand restrictions, labour market deregulation and the pruning back of trade union rights. Control of inflation had replaced full employment and harmonious industrial relations as primary objectives of government policy.

It was evident however that in order to change labour market norms and disrupt traditional collective bargaining practices, much more would be required than changes to labour legislation and the fostering of anti-trade union sentiment. Unless market forces were accentuated it would require a prolonged period of mass unemployment to discipline trade unions and make workers more fearful about maintaining their current jobs and thus more malleable. In theory governments could have enhanced the impact of market forces in the economy and the labour market through various methods. For example, governments could have chosen to concentrate on strengthening competition between existing local companies through a concerted attack on monopolies, strengthening of unfair trading legislation, greater support for consumer organisations and promotion of new micro-enterprises. Increased competition in product markets between local enterprises would have introduced an anti-inflationary bias and encouraged employers to adopt a tougher stance in collective negotiations with trade unions without diminishing the total level of jobs in the country. While many governments experimented with certain of these concepts a concerted attack in this direction was precluded by the links between and vested interests of the existing major enterprises and conservative politicians. An alternative route had to be found.

Consequently, to the extent that domestic competition in product markets was promoted, this was achieved through the commercialisation and privatisation of public enterprises. This approach meant that a traditional base for organised labour was weakened and opportunities for the expansion of existing commercial enterprises were created. In addition, during the 1980's, politicians of varying political persuasions were convinced about the virtues of foreign competition and mobile capital as a way to inject the market more forcibly into the world of labour and thereby contain inflation. By opening the domestic market to greater competition they would "stiffen the backbone" of management in their resistance to trade union demands for higher wages and simultaneously force industry to implement cost cutting efficiency measures. At the same time by securing reciprocal trade openings in competitor countries, scope was created for the largest and most aggressive domestic companies to expand internationally and reap profits by moving production facilities off-shore if trade unions were not prepared to accept lower real wages and compromise on working conditions. The race to the bottom had began.

As we can see globalisation is certainly not a spontaneous process, nor the result of only exogenous forces. Rather it results primarily from a series of deliberate decisions by governments who were mindful of both the benefits of trade for economic growth and the trouble it would cause traditional trade unions. Governments have decided to open their economies with the dual objective of generating faster economic growth and greater discipline in the labour market. By pursuing these dual objectives, governments are in danger of destroying the institutional mechanisms that they promoted at national level to moderate the worst excesses of market forces in the wake of past experiences with globalisation. Given that international institutional mechanisms for governing globalisation were never put into operation, a continuation of these national level trends may mean there will be no controls over the social consequences of increased competition for trade and foreign investment. In these circumstances questions arise about the sustain ability of open economies. Fear about the impact of open economies is already spreading rapidly in many industrialised countries and the protagonists of the protectionist creed are to be found across the political spectrum. These issues are taken up further in Sections 4 and 5.

3. Recent trends in trade and investment: globalisation or polarisation?

This section outlines some key statistics and quantitative indicators related to the expansion in trade and investment. The analysis is far from exhaustive and is merely designed to provide a glimpse into the magnitude of the globalisation process.

The word "globalisation" gives rise to connotations of a universal development that includes all regions, all countries and all persons. However, the term "globalisation" is something of a misnomer, since one of the greatest problems with the rapid expansion of trade and investment is that, so far, the trends have been exclusive - rather than inclusive. In other words, certain regions and particular countries are participating in a dramatic fashion, while others have been bypassed. Globalisation therefore raises major equity questions at the international level, in addition to legitimate concerns about the impact on low-skilled jobs and income distribution at the national level.

A few facts help to illustrate the concentrated nature of foreign investment and trade expansion. The share of trade (exports plus imports) in national GDP, the so-called trade ratio, has increased in most regions over the last twenty or thirty years but the rate of change varies significantly. In Asia the expansion has been dramatic, going up from around 67% in 1960 to about 100% by 1992; for the OECD region as a whole the increase has been less spectacular but still strong (from around 40% in 1950 to about 58%in 1992); in Latin America the growth has been very moderate; while in Africa the trade ratio actually declined between 1950 and 1992.

The IMF has estimated that the regions share of world trade fell from 3% in the mid-1950s to 1% in 1995.

By contrast - Hong Kong, South Korea, Singapore and Taiwan - with total annual exports six times larger than the whole of Africa - have been increasing their exports by more than 10% a year for the last two decades. Other Asian countries such as China, India, Vietnam and Indonesia have benefited significantly from rapidly increasing international trade.

The uneven pace of change is also reflected in the growing importance of intra regional trade which has increased more rapidly than interregional trade. This trend has been facilitated by the establishment of regional trading blocs such as the European Union, NAFTA; MERCOSUR and more recently the Asian free trade Agreement (AFTA) and the Asian-Pacific Economic Cooperation (APEC) agreement. The exclusive nature of trade is also evident from the fact that about a third of all world trade is estimated to consist of intra-firm trade between multinational parent companies and their foreign subsidies. While trade between different multinational companies constitute another third of all trade in the world.

The stock of foreign direct investment (FDI) is now estimated at over 2.5 trillion dollars, and has been growing at a rate double that of world trade, which in turn has been increasing at about twice as fast as the growth of world output. In the early 1990s, FDI slowed somewhat but accelerated dramatically again from the middle of the decade. In total there are about 40,000 multinational companies in the world, yet only 100 of the most powerful multinational corporations account for approximately one-third of all FDI. The economic power is also reflected in the level of sales of the multinational enterprises which topped 5 trillion dollars in 1992, which surpassed the total value of world exports, yet they employ only 2-3 percent of the global work force.

Companies based in industrialised countries accounted for about 95% of FDI outflows in the 1980s and received about 75% of the inflows. This has altered somewhat in the 1990s and by the middle of the decade the OECD share of FDI outflows and inflows had decreased to 85% and 65% respectively. This change was largely due to the rapid growth of FDI in East Asia. In particular the expansion of FDI in China in the first half of the 1990s was dramatic. In 1993 and 1994 transnational investment grew rapidly, and in this period over 80% of the increase went to China. More recently the level of FDI into China has moderated slightly but still remains very significant. It is notable that foreign investment into China from the US and Japan continues to expand while the pace of new investment originating from Hong Kong and Taiwan, which were the leading sources of investment in the initial phase of China's opening to the outside world, has now slowed.

Of the remainder of the increase in transnational investment, the vast bulk went to just nine countries: Singapore, Argentina, Mexico, Malaysia, Indonesia, Thailand, Hong Kong, Taiwan and Nigeria. By comparison, the 47 poorest countries in the world received only 0.7% of total world investment by multinationals, and Sub-Saharan Africa's share of FDI among developing countries continues to decline.

FDI is only about one-third of all private investment in developing countries. Deregulation and privatisation have generated a major increase in cross border investment in stocks and shares. But again this is concentrated in about a dozen mainly middle-income countries in Asia and Latin America.

Given these trends, it is safe to assume that Asia will rival Europe and North America as the focal point of the global market in the very near future. However, Latin America's recovery from the debt crises remains fragile and highly dependent on US economic developments. When the prolonged, yet mild, economic upswing in the United States finally stalls, the prospects for continued recovery in South America appear slim. Like Central and Eastern Europe, it has not attracted the same scale of foreign investment as Asia. More dramatic, however, is the continuing plight of Africa. The poorest African countries - with their mass of subsistence farms - have been left completely behind. The conclusion is clear: countries exporting primary commodities have failed to expand their export earnings and have been bypassed by multinational companies in the manufacturing and service sectors which are seeking to relocate their operations. Instead structural adjustment programmes have deepened dependence on primary commodities and the resulting development patterns fall well short of that required to generate Asian-style manufacturing-led and export-led growth. Low labour costs are not a sufficient condition to attract foreign direct investment.

It is notable that these regional dichotomies in economic growth, trade and foreign direct investment may provide potential for dialogue, and possible joint action, by trade unions and employers' organisations at the international level. While employers in OECD countries may be oblivious to the plight of the developing world, international employers' organisations cannot completely ignore the concerns of their affiliates in the poorest countries. African employers are informed and concerned that globalisation is exacerbating disparities in the world economy. In early 1997, a high level meeting of African employers reached the following conclusion:

"For African countries, the major concern is that globalisation must not lead to the widening of the gap between the industrialised and developing nations. Strategies must be put in place in order to ensure that Africa takes its rightful place in the global economy."

The fact is, this gap has been widening over the last few decades and without concerted action the trend will continue. Trade unions in Africa and those in South Asian nations such as Pakistan, Bangladesh, Nepal and Sri Lanka, have also focused on the mounting disparities between their economies and the East Asian "tiger" economies. The danger is that employers and governments in Africa and South Asia will be convinced that they need to compete for foreign direct investment through a further lowering of labour standards. This would only serve to exacerbate problems created in these regions through free trade zones, labour market deregulation and restrictions on the activities of trade unions. To avoid competitive deregulation of this nature the process of globalisation requires greater coordination between relevant international institutions and governments to focus competition on more productive outcomes. We return to this issue in the final section of the paper.

4. The impact of globalisation on workers and trade unions

It is difficult to distinguish and precisely delineate the impact of globalisation on the trade union movement in the industrialised and newly industrialised countries that are unambiguously participating in this process. Part of the problem in attempting to systematically assess the consequences of globalisation arises from the fact that this process has been superimposed on other fundamental cyclical and structural changes that were already generating significant challenges and causing trade unions to adjust. These included a prolonged period of slow economic and employment growth; rapid technological change; significant demographic changes and associated challenges to the social welfare system in many countries; the expansion of the services sector in industrialised countries and the continued growth of the informal sector in developing and transitional countries; an explosion of non-traditional forms of employment, including part-time, casual, contract labour, homework, tele-working; the feminisation of the labour force; the increasing importance of labour migration; and the emphasis placed on numerical and functional flexibility in all labour markets.

Some of these factors are desirable in their own right, but clearly they have altered our perspective of the average worker and complicated the task of a trade union movement attempting to attract and service potential members. It is difficult to dispute the fact that, in the short term at least, this combination of factors has exerted a negative influence on trade union membership density, the coverage of collective bargaining and the industrial relations strength of trade unions.

When we go beyond these factors and consider the impact of increased competition in product markets, the liberalisation of capital markets, the expansion of trade and the growth of foreign direct investment, we can fully appreciate that the environment in which trade unions must operate today is more complicated than that which prevailed twenty or thirty years ago. In many cases globalisation has no doubt encouraged employers, and some governments, to adopt a more hostile reaction to the claims unions make on behalf of their members, and even to oppose actively the traditional functions of trade unions. This process began with moves by governments to decentralise collective bargaining systems, remove administrative extensions to collective agreements and weaken minimum wage regulation. These initial developments have been overtaken by more extreme measures which aim to inhibit collective bargaining at all levels while expanding managerial prerogative and the scope for employers to unilaterally determine employment conditions, or in some countries, the promotion of individual employment contracts. These trends have been encouraged by international organisations like the OECD and IMF which have praised the United Kingdom and New Zealand styled industrial relations reforms and have encouraged other governments to emulate these models.

In many countries the influence of trade unions has been further eroded by government neglect, or abolition, of tripartite forums for consultation over broad economic and social issues. In extreme cases, the continued existence of trade unions is being attacked more directly through stringent restrains on the organising activities of unions and attempts to erode their financial base.

A more elementary factor undermining the bargaining strength of trade unions, and contributing to the prevailing militant industrial relations milieu, stems from the reduced opportunity for trade unions to limit the extent of competition over wages and employment conditions in an interdependent world economy. Today labour costs are seen as a key indicator of competitiveness by employers and investors in traditional manufacturing or service industries that are still dominated by "Taylorists" forms of production. The financial markets virtually demand that enterprises in these industries adopt aggressive and continuous cost cutting measures.

By comparison, in previous decades when national economic borders were less porous, employers saw some virtue in accepting collective bargaining at the industry level, or even national level, because it provided a degree of certainty particularly when skilled labour was in short supply, and helped equalise labour costs across companies. In some countries where enterprise bargaining was the norm, like the United States and Canada, pattern bargaining was widely practised. As a result, wage adjustments and employment conditions between competing enterprises in the same industry were relatively similar and income differentials were narrow.

In economies that were at least partly sheltered from foreign competition, employers were able to pass labour cost increases on to the consumer in the form of higher prices, especially if industry-wide collective bargaining resulted in similar wage increases among the major firms. Since an increase in labour costs was unlikely to lead to a distinct competitive disadvantage for the individual enterprise, employers were more inclined to adopt a longer term perspective on labour relations. They were more likely to recognise that productivity could be increased in a harmonious industrial relations environment and that trade unions could help channel worker grievances in a constructive manner. This made settlement of labour disputes less costly.

This strategy was attractive to employers when markets were fixed within national boundaries and companies were immobile. With global competition, the possibilities for collusion between employers in their approach to trade unions has vanished and labour costs have become an important component in the competitive strategy of most enterprises. For trade unions this has meant the end of the era of certainty about collective bargaining and increased concern for their members about the continuity of employment relationships.

Another complication for trade unions derives directly from the increased importance of multinational enterprises in domestic economies. This has exacerbated power imbalances between labour and capital. Indeed the global marketplace is potentially perilous for the powerless individual worker confronted by a large conglomerate that is determined to compete purely on the basis of low labour costs and short-term profit margins. All large enterprises may not fit into this characterisation, however, even in those cases where employees in multinational enterprises are organised, the potential for management to pit employees of the company in one nation against those in another has increased significantly. As John Evans has pointed out "increasingly it is not the firms themselves which have to compete but the workers in different countries bidding for their jobs with the same employers".

This delocalization process, which involves closing a production unit in a relatively high cost location, followed by the establishment or expansion of the same companies facilities in a low-cost location, is a significant explanation for the growth in FDI over the last decade. An alternative route chosen by many companies in industrialised countries is to create, or expand, subcontracting arrangements with producers in low-cost developing countries. In either case the impact is the same: the bargaining strength of employers is enhanced and trade unions in industrialised countries are constantly confronted by representatives of management threatening company closure, or a curtailment of operations, unless labour costs are reduced.

The exceptions to this general characterisation are often to be found in industries that have shifted to new forms of work organisation, where emphasis is placed on innovation and knowledge. In these enterprises less emphasis is placed on lowering labour cost to improve profitability and instead competition between enterprises focuses more on the quality of the product, service to the customer, marketing techniques and technological advances.

The negative consequences of globalisation for workers are magnified in particular industries. It is essentially in low-tech industries like steel, textiles and clothing that the competition from low cost producers is most intense and is exerting downward pressure on wages and employment. These industries have traditionally constituted the "back-bone" of the union movement. Claims that these jobs will be replaced by non-manual positions in the service sector is little consolation to someone who has worked in a steel mill for the last thirty years.

Few can understand the impact of these forces more clearly than workers in the clothing and textiles industry. Today there are 160 countries producing fashion goods for export into the markets of only 30 nations. This forces countries, companies and workers into unprecedented competition with each other. Most of the 30 million jobs in this sector world-wide are low paid, insecure and often based in Export Processing Zones where workers' rights are often suppressed. Wages are often below subsistence levels and declining in real terms. Overtime is increasingly obligatory and often unpaid. Millions of children are employed in this sector. Management by terror is common.

In many respects labour conditions in industries like textiles are returning to the standards that prevailed prior to the establishment of the ILO. This industry, perhaps more than any other, demonstrates that the traditional link between increased economic prosperity and improved labour standards has disappeared. As indicated in the second section of this paper the textile industry was in the vanguard of the industrial revolution and the deterioration in labour standards that occurred in the last century. In that period "sweatshops", industrial diseases and gross forms of worker exploitation were the price paid for free trade and the global aspirations of profit seeking employers. Today, after many decades of marginal improvements, the textile industry is regressing to a level of labour standards that were thought to have disappeared long ago. In the last few years of the twentieth century, manufacturers in the textile industry whether they are producing in the developing world or within the OECD region, are ignoring national laws and international labour standards with impunity.

5. Governing Globalisation in the 21st Century

The trade union movement clearly appreciates that the forces unleashed by globalisation are mighty and likely to magnify over time. It has been described by the International Confederation of Free Trade Unions as the "greatest challenge" facing trade unions. A challenge implies that there is a contest: an opportunity to prove one's ability to meet the test, and to channel these trends in a positive direction, thereby building a more prosperous and equitable world. If trade unions and other groups concerned with promoting social and economic progress are to mitigate the serious problems and maximise the potential benefits provided by the new economic framework, it will require concerted action and support from international organisations with a mandate to promote socially sustainable economic growth. The final section of this paper examines the policies being adopted by trade unions at different levels to meet this challenge and also looks at the contribution the ILO could make to these endeavours.

(a) Rebuilding strong trade unions and promoting collective bargaining

The first priority for trade unions occurs at the "grass roots" level where concerted action is required to reverse their declining numerical and industrial relations strength. Responsibility for recruiting and rebuilding a large, cohesive and motivated trade union membership lies with the national trade union centres and their affiliates at branch and lower levels. The restoration of a more even balance of power between management and labour is the first prerequisite for relinking economic and social progress. Moreover, it is the foundation stone on which action at higher levels can be built. The ILO cannot intervene directly in the organising activities of trade unions, but it should be endeavouring to ensure that the general legislative and industrial relations environment is conducive to this objective. The ILO has a Constitutional obligation to foster collective bargaining and should not, therefore, merely be another academic observer of industrial relations trends, producing descriptive publications of the latest fads.

Rather, the ILO has a responsibility to reiterate, in a clear and unambiguous manner, that free collective bargaining by representatives of freely chosen organisations of workers and employers is normally the best and preferred way of determining terms and conditions of employment. The ILO must constantly remind governments that they have an obligation to provide a legal framework which encourages both the development of freely chosen representative organisations and the establishment and strengthening of collective bargaining. The extent to which the ILO has adequately fulfilled this advocacy task, in the face of trends towards individual employment contracts and unilateral decisions on wages and employment conditions by management, remains debatable.

For their part, trade union centres around the world are attempting to grapple with the organising challenge and have been experimenting with innovative strategies that include altering the image of unions and focusing recruitment campaigns specifically on women and young workers; expanding the financial and human resources devoted to recruitment; placing an increasing proportion of women in prominent leadership positions; providing additional legal, insurance and other commercial services to members; integrating informal sector workers and those in non-traditional working arrangements into the mainstream of the union; establishing linkages and common campaign strategies with NGOs and community groups on social issues. The extent to which these internal union reforms are being implemented varies from country to country but no national centre can afford to ignore them. Nor can union centres afford to waste scarce resources on inter-union competition and political infighting.

(b) Multinational Agreements, Codes of Conduct and Social Labelling

The second level on which the labour movement is responding to the globalisation challenge is concentrating on particular industries or sectors of the economy. This may often involve action within an industry but across national boundaries. For example, the development of resources and a climate that is conducive to transnational collective bargaining with multinational enterprises is a high priority for many international and national trade union centres. The establishment of information networks about the bargaining practices and agreements reached by multinational companies in different national settings is a starting point for facilitating coordinated collective bargaining at this level.

The ILO can also contribute to this endeavour. Since the early 1950s, the ILO has devoted considerable resources to industrial committee meetings which bring together the tripartite constituents of a particular sector or industry from a spectrum of countries. The stated purpose of these meetings is to discuss common concerns that have a labour dimension in that particular sector and devise consensual conclusions to these problems. As might be expected, in recent years, many of these meetings have been devoted to topics related to globalisation. However, certain of these meetings have been criticised by the participants because they degenerated into "talk-shops", having minimal impact on their major concerns.

The root problem seems to be that some participants have lacked the will, and the authority, to tackle the most pressing problems in their industry. Trade union representatives frequently find it is more profitable to discuss international industry level issues directly with management in forums outside the ILO. Given the inability of the participants to reach consensus and the absence of concrete results, the International Labour Office has reduced the number of sectoral meetings as a cost cutting measure. Indeed the complete abolition of these forums has been mooted. However it would seem that in an increasingly interdependent global economy, with the same multinational companies operating in all corners of the world and a convergence of technology and other trends within most industries, the benefits to be derived from dialogue between employers, trade unions and governments in such sectoral meetings should have increased.

It is perhaps worth recalling that the initial aim of these meetings was to provide a framework for international collective bargaining on an industry-by-industry basis. While re-establishing that objective might be overly ambitious at the moment, these meetings could contribute to the maintenance of open economies and restraint on protectionist tendencies if both employers and trade unions are represented by people with a legitimate stake in the industry and have the authority to negotiate on sensitive and substantive issues. For example, they could concentrate on ensuring that core international labour standards are implemented in all countries where their industry operates. This could entail devising specific industry level campaigns to promote core labour standards (see definition below) and mechanisms to monitor their implementation.

From a more general perspective, trade unions must build upon progress made recently at the industry level to encourage employers to accept greater social responsibility. For example, several experiences with codes of conduct in the clothing and textile industry whereby a major chain of retail establishments in an industrialised country ensures that its subcontractors in both industrialised and developing countries adopt acceptable labour practices and abide by national labour legislation, have proven successful. Similarly, labelling campaigns such as "Rugmark" have the potential, if properly managed and promoted, to improve consumer awareness about products made with unacceptable labour practices, such as child labour. The trade unions appreciate that these responses will only be effective if they are accompanied by tripartite or independent monitoring mechanisms and also well designed consumer awareness campaigns.

The ILO is already involved in research concerning these innovative approaches and the Organisation should assist in future to advertise and promote best practice with these schemes. In addition it may be worth exploring whether the ILO could, or should, become directly involved in the monitoring of enterprise codes of conduct. Advocates of codes of conduct have drawn parallels between the financial auditing that private enterprises are required to implement by law and the need for a form of "social auditing". Regarding their finances, enterprises normally have both an obligation to conduct both internal and external, or independent, audits.

At present there are several non-governmental organisations, and even accounting firms, preparing to undertake this task. However, the ILO has a considerable comparative advantage over other organisations for taking on this role. For example, the ILO has an unparalleled knowledge of labour standards and working practices, it is a tripartite organisation and has the independence and respect of both employers and workers that is required for this external monitoring role, and it has a decentralised field structure that covers the developing world where the monitoring process must be concentrated. Against this it could be argued that the ILO has no mandate to become some form of international labour inspection service nor the labour resources to implement this task. However both these shortcomings could be quickly overcome if the political will existed to extend ILO activities in this direction. Moreover, this could be a potential additional source of revenue for the ILO since the other organisations becoming involved in the monitoring of codes of conduct have a commercial base and charge the parent company fees for this service.

Section two of this paper described how policy makers from previous generations grappled with the problem of trying to govern globalisation at the international level to ensure that the process proceeded in a more equitable and socially responsible fashion.

In the last few years attention has again focused on institutional mechanisms at this level. Action is required to influence both national economic policies and the implementation of core international labour standards. Naturally the trade unions look to the ILO to play a central role in constructing this conducive international climate. However, as was noted previously, the influence of the ILO on international economic policy has never really matched the expectations of the founders. Recently the fears generated by globalisation - and the failure of the international financial and trade institutions to calm these anxieties - has created an opportunity for the ILO to reassert itself in the international economic debate and reclaim the mandate that was given to the ILO in 1919 and reaffirmed in 1944.

The ILO made a promising start towards meeting this challenge in the lead-up to the Copenhagen World Summit for Social Development in 1995. However it might be argued that the Organisation has, so far, failed to capitalise on this impressive new beginning. Follow-up by the United Nations system generally on the commitments made by governments at Copenhagen has been slow and lacked real impact. This stemmed, in part, from divisions among the United Nations Specialist Agencies about competing priorities and mandates. In addition, certain of the progressive economic policy prescriptions advocated by the ILO as a response to globalisation, in the lead-up to the Summit, are in danger of being diluted or forgotten altogether.

The international trade union centres and many individual trade union leaders actively participated in the debates leading up to the Summit, and at the Summit itself. The ILO, although initially hesitant, was encouraged to take this event seriously and devoted considerable time and resources to the preparation of the event and to the negotiations over the wording of the Summit Declaration and Action Programme. The ILO put primary importance on measures to reduce poverty and moving the objective of full employment back to the top of the political agenda. On paper, at least, this was achieved as the Copenhagen Declaration committed participating governments to "the goal of eradicating poverty in the world, through decisive national action and international cooperation, as an ethical, social, political and economic imperative." Moreover, the world's leaders made it clear that the most efficient way to reduce poverty was through "promoting the goal of full employment as a basic priority of our economic and social policies and to enable all men and women to attain secure and sustainable livelihoods through freely chosen productive employment and work". At national level they promised to put the creation of employment, and the reduction of unemployment, at the centre of their strategies and policies.

Governments also committed themselves to promoting jobs that were adequately remunerated with decent and humane conditions of work. They committed themselves to safeguarding the basic rights and interests of workers, and to formulating their policies through tripartite consultation. In other words the trade union movement achieved a commitment at Copenhagen to promote quality jobs. Furthermore, they successfully pushed for the ILO to be given a special mandate, at the international level, to promote these objectives.

While at the time the ILO and the trade union movement celebrated these successes, a more sober evaluation of their impact and subsequent development is now needed. For the purpose of this paper, it is important to note that the ILO background documentation for the Summit, and the Summit conclusions, were very positive about the labour market implications of globalisation. Although the documents acknowledged that there were risks and transitional problems associated with these developments, the bottom line of ILO reports prepared in 1995 and 1996 was that globalisation would generate more rapid economic growth and social benefits. ILO reports - like those of the OECD, IMF, and the World Bank - argued that free trade and greater reliance on market forces, would lead to more efficient allocation of resources in the world economy, and thus to higher rates of growth and employment creation. The ILO clearly identified itself with the optimists rather than the pessimists on this issue.

The World Employment Report for 1996/97 expands on many of the issues raised in previous ILO papers. With regard to the central topic of globalisation, the Report appears even more optimistic than previous publications. It argues that:

"There should thus be a stronger stake in international cooperation to ensure a stable, open and expanding world economy. Continued growth in world trade will mean mutually beneficial expansion of markets, which in turn will lead to higher growth of output and employment. Similarly, freer flows of foreign direct investment and other forms of direct investment will mean a more efficient allocation of resources and also higher growth."

Many trade unions would probably question whether such conclusions are warranted given that the full ramifications of globalisation remain unclear. As the ILO points out in the same report, there is a significant hurdle involved in promoting the adoption of this positive view about globalisation. This is because in the period since 1979, when the process towards globalisation has accelerated, the rates of global economic growth have decreased significantly and unemployment has increased dramatically. There would thus seem to be a gulf between the theory, which claims that free trade and globalisation lead to faster growth, and the realities that we have observed over the last two decades.

Both the ILO and the conclusions of the Social Summit based their optimism on assumptions about the management or governance of globalisation, arguing that the sustain ability of trade liberalisation and global economic integration would depend on whether it could be managed in a socially just manner. It is difficult to find fault with this logic. However, the key questions concern the precise mechanisms that should be used for this purpose and the plausibility of ensuring international economic and financial policies are made compatible with social objectives.

To date, the ILO has provided, at best, only a partial response to these questions. The ILO has argued that the responsibility for successful management lies first and foremost with national governments. While acknowledging that the process of globalisation and trade liberalisation limits room for manoeuvre - individual states now have less control over all the factors that affect the level and the quality of employment - at the same time, the ILO asserted that the perception that governments were helpless bystanders in the face of market forces was demonstrably wrong.

Working from this premise, in the World Employment Report of 1995, the ILO called for a commitment to coordinated macroeconomic expansion and faster growth from the major industrialised countries. This call was repeated in subsequent ILO documents. Crudely summarised, the ILO argued that the major industrialised countries should be prepared to tolerate higher fiscal deficits in the medium term and should also jointly relax monetary policy and allow interest rates to fall. The key to the success of any such strategy would be simultaneous action across a broad spectrum of industrialised countries so that capital markets could not penalise any particular country through massive capital outflow.

At the core of these reports was evidence to demonstrate that, despite claims to the contrary, there had been no fundamental change in the labour market which would justify abandonment of the full employment objective. Later ILO reports elaborated on the initial message and advocated that the adoption of a more expansionary macroeconomic environment should be complemented by other measures, including an incomes policy, to mitigate the impact on inflation and the balance of payments that might otherwise occur in a sustained and substantial upswing. The ILO argued that faster growth was a necessary but not a sufficient condition for full employment. The long term unemployed and other people who lacked the necessary skills for employment in the expanding sectors of the economy would require additional assistance. An important role was therefore given to training and employment creation activities to help the most disadvantaged members of society.

We should not underestimate the importance of the primary message, which was the continuing relevance of full employment and the need for faster growth to achieve this objective. This was of fundamental importance because, although no government would admit it, the majority of policy makers have abandoned full employment and now concentrate on what they describe as the non-accelerating inflation rate of unemployment (the so-called NAIRU). As the name implies, this is the rate of unemployment that is necessary to stop inflation from escalating. This varies from country to country but is estimated to be roughly between 6 and 8 percent for most industrialised countries. Thus in reality for most economic policy advisors there now exists a floor below which unemployment should not fall. The widespread acceptance of the NAIRU concept is a powerful indication of how far values and priorities have changed in recent decades.

At the same time it is accepted as sound economic policy for Central Banks the world over to set precise targets for inflation and to dedicate monetary policy to the achievement of this objective. More importantly, the inflation target for most industrialised countries has progressively diminished over time. At present inflation, as measured by the consumer price index (CPI), is in the range of 1% - 3% for most OECD countries. The real rate of inflation may be even lower since many observers, including the Chairperson of the US Federal Reserve, have suggested that the CPI fails to capture fully the impact of switching between products when prices rise and it also inadequately reflects improvements in the quality of products. In the USA, official studies have suggested that the CPI may overstate the real level of inflation by around 1%. Even the International Monetary Fund acknowledges that global inflation is at its lowest in 30 years and is expected to remain low.

Arguably, therefore, inflation has been effaced from the economic system in most industrialised countries yet macroeconomic policy remains targeted on this phantom from previous periods. Perhaps of more concern is the competition that governments and Central Banks are now engaged in to demonstrate their anti-inflationary credentials to financial markets and equity fund managers. In the unreal world of paper assets and instantaneous capital transfers the pursuit of "sound money" means that price stability, or even negative inflation, becomes a priority for governments trying to attract capital inflow regardless of the impact on employment or social cohesion. It is not just inflation that receives precedence over employment growth. Governments have established other targets, like budget deficit levels, government debt levels and public expenditure levels, that are also often incompatible with strong employment growth.

In further developing the ILO message on macroeconomic policy more can be done to highlight the mistakes of a myopic concentration on reducing inflation. Governments must be convinced to make employment growth and full employment primary policy targets with an equivalent status to inflation. Low inflation and full employment should be joint objectives. At present, employment growth remains a secondary or residual objective. At various times the ILO has raised the possibility of having precise employment targets included in the conditions attached to structural adjustment loans made by the Bretton Woods institutions. This notion has received broad tripartite support. In future dialogue with the World Bank and the International Monetary Fund, the ILO should make the implementation of precise employment targets a top priority. The ILO and the Bretton Woods institutions should work together in defining employment targets, as well as macro-economic targets, and in establishing credible programmes to reach both sets of targets.

It is evident that, to date, the arguments advanced by the ILO on macroeconomic policy have not produced any dramatic reversal in the economic policies of industrialised countries nor in the developing world. This is because the policies being prescribed, such as allowing more flexibility with fiscal policy and facilitating interest rate reductions, directly contradicted the dominating deficit mania in countries like the United States and the "straight-jacket" European countries have created for themselves through the criteria for monetary union. In short, to fully implement the policies suggested by the ILO, industrialised governments would have to modify some of their most precious and politically important objectives.

For these reasons, the adoption of expansionary macroeconomic policies was never going to be popular with finance ministries, the powerful money market managers or the international financial institutions in the short term. This does not mean that the advice is flawed. However, it does require courage and perseverance to get the message across to policy makers. Consequently, the ILO must be prepared to adopt a long term perspective. The Organisation has an obligation, set out in the Philadelphia Declaration, to construct a plausible alternative economic paradigm to that currently dominating policy and to gradually win converts to this alternative faith. This will not be achieved in one or two years. Rather it is a policy that must be pursued with determination over a decade, or more, if it is expected to produce results.

(d) International Coordination of Economic and Social Policies

Unfortunately, faster economic growth in industrialised countries will not be a panacea for the problems of globalisation. It would help reduce unemployment and related social problems in the OECD countries. Any subsequent increase in imports by industrialised countries may also help stimulate expansion in other regions, however, this will not mitigate the mounting inequalities and disparities between regions and countries. As noted in section 3 of this paper, the benefits of increased trade and foreign capital flows are very unevenly spread between nations. At best, therefore, faster economic growth among industrialised countries is a necessary, but not sufficient, condition for managing globalisation and maintaining popular support for open economies.

There is probably no simple or perfect solution, to the problems of regional economic inequalities and the uneven patterns of trade and investment. There is no doubt that many of the countries currently by-passed by the globalisation process need to implement structural reforms in capital and product markets. Many of the same countries would benefit from greater transparency in government decision making and more robust resistance to corruption. Domestic economic and political reforms of this nature are normally part of the standard prescription advocated by the Bretton Woods institutions and other organisations interested in promoting development. The ILO has traditionally recognised the merits of these reforms and supported their implementation. In addition, however, the ILO has argued that market enhancing reforms should be complemented by improvements in infrastructure to support agriculture and industry, plus the provision of effective and appropriate social protection and labour market programmes to assist those adversely affected by structural changes.

Unfortunately many of the developing countries that have experimented with profound economic reforms have failed to strike a balance between promoting economic efficiency and protecting social values. As the pressures of increased competition intensify in the global economy, the probability that developing countries can secure an economic and social equilibrium diminishes further. In response to these developments the ILO has suggested that the international economy, just like national economies, requires certain instruments and institutions to control and regulate market forces and steer them towards the goals set at the Social Summit.

The ILO argued in the lead-up to the Social Summit and again more recently for greater coordination between financial organisations like the IMF, development organisations like the World Bank, trade organisations like the World Trade Organization and the ILO itself - which is responsible for the social and labour sphere. In 1995 the Director General of the ILO set the objective of "establishing the ILO as an institutional partner in international discussions on the improvement of the world social and economic situation" and he pledged to make it a leading player in a new "coordinated international employment strategy".

This represented a return to similar objectives expressed in the Philadelphia Declaration some fifty years earlier and it is an objective that the trade union movement should fully endorse. However, this raises several questions that require careful consideration. First and foremost: is this objective realistic? There are several observers who would suggest that both the Bretton Woods organisations and the ILO are essentially ideologically driven institutions and the notion that they can really work together while remaining honest to their respective mandates and political masters is unrealistic. According to this view, increased emphasis on coordination will simply entail considerable bureaucratic effort, and a redirection of scare resources within the ILO away from practical and independent activities that service the needs of ILO constituents, with more time and resources being devoted to meetings between the staff of the respective international organisations and the preparation of comments on each others activities. In short, more bureaucracy and political infighting for little practical change in policies. A more pessimistic perspective, from the point of view of the trade union movement, would be to expect closer coordination to result in increased influence by the Bretton Woods institutions over the ILO and the erosion of an independent perspective on macroeconomic issues.

Since the ILO and the Bretton Woods organisations have been in progressively closer contact over recent years, these are not merely theoretical issues. From a trade union perspective the impact of closer coordination is at best problematical. There has been a great deal of rhetoric about the merits of working together and certainly the public statements of the IMF Managing Director and various World Bank Presidents have suggested increased concern for social issues and the employment impact of the policies advocated by their institutions. There have also been various publications and speeches by members of the international financial institutions that have acknowledged the positive contribution of trade unions and the benefits that can be derived from a degree of collective bargaining.

On the other hand these have all been statements of principle with little or no implications for the day-to-day policies of the institutions concerned. There are also many cases where the Bretton Woods institutions have asked the ILO for comments on their papers but have decided not to implement suggestions subsequently supplied. It is also notable that some senior level contacts between the various institutions have produced outcomes that may not necessarily advance the objective of promoting full employment or concern for the social impact of economic reforms. Perhaps the most significant single event in the recent dialogue between the ILO and Bretton Woods institutions occurred when the ILO Director General addressed the Interim Committee of the IMF in 1995. The ILO Director-General concentrated on one issue in his speech to the Committee: the need for greater coordination of economic and social policy at the international level. He reiterated the suggestion contained in the 1995 World Employment Report that the ILO could fill the vacuum on employment issues and become a partner - the social pillar - working with the IMF, World Bank and World Trade Organisation. Implicit in his speech was the notion that this would work through regular meetings of the Executive Heads of these four organisations.

In his speech, the Director-General also mentioned the need for a political mechanism to guide this partnership. He raised the possibility of using the Interim Committee as the basis of this mechanism. He also asked whether it might be possible to invite Employment Ministers to the Interim Committee from time to time. This concept might be further developed because it is the non-governmental constituents of the ILO, and in particular the trade unions, who exercise considerable political and industrial relations power, and can therefore influence the implementation of economic reforms. By comparison, for the most part, Employment Ministers are subordinate to Finance Ministers. What would be novel and important for the international coordination of economic and social policy would be to open meaningful channels of communication between Finance Ministers and the social partners.

The press statement released by the IMF after this meeting did not contain any specific comment on the Director General's proposal. It merely noted that the Committee had a fruitful discussion with Mr. Hansenne and agreed that cooperation should be strengthened in light of the Social Summit conclusions. According to the press release, cooperation should help IMF missions "to acquire a better understanding on labour markets and social protection issues, and ILO staff to further integrate in their own policy advice the view of the Fund on macroeconomic policies and targets for the country concerned". There are grounds for concern with this statement. The reason trade unions are interested in promoting cooperation between the ILO and the IMF is to influence the conditionality attached by the latter to their loans and to promote tripartite discussions at the country level prior to implementation of economic reforms. The above quoted statement says the IMF is ready to receive information from the ILO about labour market and social protection issues but there is no suggestion that their macroeconomic policies will be altered in light of the considerations brought to bear. On the other hand, the ILO seems to be undertaking to accept IMF views on macroeconomic policies and to promote these concepts with its constituents.

There would appear to be strong grounds for revisiting these issues and renegotiating the terms of this voluntary agreement between the ILO and the IMF. In so doing the ILO should be prepared to push for the establishment of precise employment targets in the conditionality attached to structural adjustment loans, as was suggested above. To date, the Bretton Woods institutions have rejected this suggestion on the ground that employment targets would be too difficult to monitor accurately. If this is the case, the relevant national statistical offices merely need to upgrade the resources they devote to the collection of labour market information. It would seem that the real problem preventing the Bretton Woods institutions from making this policy change is ideological, or political, rather than a technical deficiency.

It has also been an objective of the trade union movement to broaden the range of parties involved in discussions about structural adjustment programmes and economic reforms. Both the ILO and the trade unions have argued for more than a decade that the probability of prematurely interrupting the reform process would in most cases be dramatically reduced if there was a popular mandate for the changes. Yet in virtually all countries structural adjustment programmes and other economic reforms continue to be determined through confidential negotiations between officials of the international financial institutions and a very few key domestic officials, normally limited to the political leader, the Minister for Finance and perhaps a few technocrats. Naturally, when economic policy that is going to have draconian effects on living standards emerges from such a process, its political heritage is considered less than legitimate. In many cases the few domestic actors involved in the negotiations succumb to negotiation fatigue and readily accept conditions that have adverse social implications.

If the domestic negotiating team was drawn from a wider circle of government representatives, and included ministers responsible for Health, Education, Social Security and Labour - who are obliged to handle the consequences of budget cuts and reductions in living standards - the resistance to pressure exerted by international bankers would perhaps be more rational and rigid. To stiffen the backbone of government negotiators and ensure that structural adjustment programmes get the widest political support and thus increase their chances of longevity, they should be subject to wider consultation and even negotiation. Ideally, not only the ministers responsible for labour and social policies but also representatives of national trade unions and employer organisations should be involved.

Institutions like the IMF and World Bank have traditionally claimed that this would retard an already inefficient and slow decision making process. More recently, however, their tune has begun to change and their rhetoric mentions participation and dialogue, but the reality at the country level has not changed significantly. The IMF and World Bank often argue that adjustment policies are the sovereign property of the domestic government and they, as outsiders, do not have the authority to invite the social partners to the negotiating table. This privilege and responsibility rests with the government. However in many developing countries the only true political opposition is the trade union movement. In these circumstances the government is unprepared to provide the additional public exposure and credibility to its political opponents that involvement in negotiations would ensure. Unfortunately narrow sectional and political interests prevail over what is economically and socially efficient and reasonable. If the Bretton Woods institutions were prepared to utilise their influence to broaden the dialogue over structural adjustment programmes this would be another major step towards effective cooperation with the ILO.

If the Bretton Woods institutions were to fulfil these two conditions: the introduction of employment targets and genuine tripartite dialogue about economic reform measures at the country level, it would be possible to envisage a significant improvement in coordination of international economic and social policies. This would be a major step towards the quadripartite institutional arrangement for the international governance of globalisation that the ILO Director General advocated two years ago.

(e) International labour standards and globalisation

The final component in this discussion about the governance of globalisation concerns the implementation of fundamental labour standards. For the trade unions this issue is central to the sound management of the globalisation process and the continued expansion of international trade. The international trade union movement has consistently argued that measures are required to better promote the implementation of fundamental labour standards and, as a last resort, penalise those states that continue to pursue competitive advantage through the violation of fundamental labour rights.

In response to this trade union stance there has emerged a broad ranging consensus about the desirability of promoting fundamental labour standards and there is even a tentative tripartite agreement that the mechanisms available within the ILO for supervising the implementation of the fundamental standards need to be upgraded. However the concept of penalties for non-observance, and the possibility of a link between implementation of core labour standards and trade sanctions, remains firmly contested by many developing country governments and employer's organisations.

Despite the absence of a complete consensus, the terms of this debate concerning labour standards and globalisation have narrowed considerably over the past few years. For the most part, discussions now focus on different interpretations of analytical studies about the economic impact of imposing labour standards. There is also a relatively rational discourse concerning alternative processes, or mechanisms, for securing compliance with the core Conventions. The degree of pure political posturing in the debate has diminished.

One factor facilitating a more rational debate was the establishment of a tripartite agreement about the definition, or limits, of fundamental labour rights and a decision to reaffirm their universal validity. This was important because there are now 180 International Labour Conventions and a similar number of Recommendations covering a broad spectrum of issues. From this considerable list all sides now agree that the core ILO Conventions are those concerning prohibition of forced labour and child labour, freedom of association and the right to organise and bargain collectively, equal remuneration for men and women for work of equal value, and non-discrimination in employment. More precisely:

Conventions Nos. 29 and 105 on the abolition of forced labour;
Conventions Nos. 87 and 98 on the rights to freedom of association and to bargain collectively;
Conventions Nos. 111 and 100 on the prevention of discrimination in employment and equal pay for work of equal value; and
Convention No. 138 on the minimum age for employment (child labour). This is expected to be supplemented by a new convention on the most exploitive forms of child labour in 1998-99.

This set of fundamental human rights standards was first established in the conclusions reached at the Social Summit and subsequently confirmed in discussions within the ILO, the OECD and other forums. The tripartite constituents in the ILO have also acknowledged that the seven core Conventions that cover these issues can be looked upon as a precondition for the exercise of all other worker rights.

The promotion of these core Conventions has been a principal priority for the ILO during the last two years, and the rate of ratifications has increased somewhat. For both the trade union movement and the ILO, ratification of Labour Standards is obviously important but all parties recognise that this is no guarantee that the principles contained in the Conventions will be implemented. That is why the debate concerning review and revision of the supervisory mechanisms within the ILO assumes importance. During discussions within the ILO Governing Body in March 1997 it was possible to observe the emergence of a tentative tripartite agreement on the desirability of strengthening the ILO supervisory mechanisms. The precise measures to be implemented will be the subject of further discussion and refinement during 1997-98. There is a general expectation that this process will culminate in mid-1998 with mechanisms to allow closer supervision of ILO core standards even in countries where they have not yet been ratified. At present, complaints concerning freedom of association can be made by the social partners or governments against any member state regardless of whether it has ratified the relevant convention. No equivalent procedure exists for the other core Conventions. The various options now being considered for strengthening the supervisory mechanisms would apply to the core Conventions other than freedom of association, where the existing procedures would be retained.

The promotion of core labour standards and improvements in the ILO supervisory mechanisms could, in a small way, contribute to the governance of globalisation. If these measures are combined with increased media attention and public awareness when the core Conventions are violated, there is a chance that governments and employers will hesitate before infringing fundamental labour standards. However no one should be under the illusion that these steps alone will be sufficient to prevent increased economic interdependence between nations from leading to a vicious downward spiral of labour standards. The existing ILO machinery on freedom of association has certainly contributed to the protection of worker rights but it has never been a sufficient deterent to prevent thousands of trade union representatives from being discriminated against, imprisoned or even murdered. Similarly the reforms now being contemplated will not lead to the complete abolition of bonded labour, the end of child exploitation or the disappearance of discrimination in the workplace. The short term profit margins that unscrupulous entrepreneurs can accrue through these practices increases exponentially as global economic interdependence expands. Unfortunately moral persuasion, which will remain the only weapon in the ILO armoury against labour exploitation, will not wound, or ward-off, those that stand to gain financially from employing children in dangerous jobs or maintaining slave labour.

This naturally brings us to the vexed issue of the linkage between trade measures and international labour standards, which is sometimes referred to as the "social clause". This relationship has been debated for more than a century and is currently back in the spotlight because of the dramatic expansion in trade and economic interdependence. In the last year this issue, dominated discussions at the first World Trade Ministerial (WTO) Meeting in Singapore; has been the subject of detailed analytical research and forthright debate within the OECD; has consumed the European Commission at various times and received general support from a broad cross-section of European Governments; has received forceful support from the US Administration in various domestic and international forums; and has been firmly resisted by many developing country governments and employers' associations.

Of all these recent events concerning the relationship between trade and labour standards the WTO Ministerial Meeting received the most publicity throughout the world. In the Declaration issued at the conclusion of this meeting Trade Ministers stated their "commitment to the observance of internationally recognised core labour standards". This was a significant breakthrough for the trade union movement because it was the first time that Ministers of Trade from a broad range of industrialised and developing countries had unambiguously committed themselves to the implementation of core international labour standards. They also indicated that they thought the ILO was the competent body to determine and promote these standards. Trade Ministers also agreed that labour standards should not be used for protectionist purposes and that the comparative advantage of low wage developing countries should not be put into question. As indicated below this fully accords with the trade union position. Finally they encouraged the secretariats of the WTO and the ILO to continue their existing collaboration on this issue.

Despite prolonged discussions within the ILO about labour standards and trade related matters the Organization, as a whole, has not yet reached a definitive position on a linkage between these two concepts. The diverse and complex composition of the ILO constituency can cause stalemates to occur on highly sensitive issues. However, this same structure is a major source of strength. After all, the world we live in is equally diverse. We must ultimately reach a consensus that reflects this complexity. That is why the ILO is the right place for a truly global debate on a global issue. Thus regardless of what happens in other forums and what happens regarding the revision of ILO supervisory mechanisms, it is imperative that momentum is maintained on the trade and labour standards issues within the ILO. Moreover as reported above Trade Ministers certainly expect collaboration between the WTO and the ILO, on this issue, to be maintained.

The prospects

Updated by TH. Approved by GQ. Last updated: 21 January 1998.