TMC-1999 -- Globalization and restructuring in the commerce sector: Their impact on employment and working conditions

This report has been prepared by the International Labour Office as the basis for discussions at the Tripartite Meeting on the Human Resource Implications of Globalization and Restructuring in Commerce. It reviews the impact of restructuring and globalization in the commerce sector -- and increasing liberalization of the market-place -- especially the emergence of new distribution circuits, the growing use of new information and communication technologies on the personnel in this sector. The report examines the implications of these changes in employment, labour relations and working conditions.

Background to the Meeting

The Meeting is part of the ILO's Sectoral Activities Programme, the purpose of which is to facilitate the exchange of information between constituents on labour and social developments relevant to particular economic sectors, complemented by practically oriented research on topical sectoral issues. This objective has traditionally been pursued by holding international tripartite sectoral meetings for the exchange of ideas and experiences with a view to: fostering a broader understanding of sector-specific issues and problems; developing an international tripartite consensus on sectoral concerns and providing guidance for national and international policies and measures to deal with related issues and problems; promoting the harmonization of all ILO activities of a sectoral character and acting as a focal point between the Office and its constituents; and providing technical advice, practical assistance and support to the latter to facilitate the application of international labour standards in various economic sectors.

At its 267th Session (November 1996) the Governing Body of the ILO decided that a meeting on human resource implications of globalization and restructuring in commerce would be included in the programme of sectoral activities meetings for 1998-99. At its 268th Session (March 1997) the Governing Body decided that the meeting should be tripartite, that it should be composed of 75 participants and that the following 25 countries should be invited: Burundi, Canada, China, Colombia, Cyprus, Czech Republic, Egypt, France, Germany, Ghana, Italy, Japan, Republic of Korea, Luxembourg, Madagascar, Mali, Nepal, Nicaragua, Peru, Portugal, Slovenia, Suriname, Switzerland, Thailand and Turkey. It was also proposed to place the following countries on a reserve list from which further invitees would be drawn in the event that a government in the first list declined the invitation: Algeria, Argentina, Benin, Brazil, Croatia, Dominica, Ethiopia, Finland, Grenada, Guatemala, Morocco, Nigeria, Tunisia, United Arab Emirates, United Kingdom, Zambia. Furthermore, 25 private employers' and 25 workers' representatives were invited. The Governing Body decided that the purpose of the Meeting would be to exchange views on experience of the emerging circuits of distribution and their impact on employment and working conditions of commerce personnel; to draw up practical conclusions that include guidance and proposals for further action; and to adopt a report on the discussion. The Meeting may also adopt resolutions.

Background to the report

Technological breakthroughs, the international mobility of enterprises and rapidly spreading competition-driven changes are now deeply affecting the organization and human resource strategy of commercial firms. Due to globalization and the growing interdependence of markets, an increasing proportion of the world labour force is engaged in activities that are linked to international trade and capital flows. The number of workers employed in export- and import-competing industries has grown significantly. Labour markets have thus become more and more interlinked. One of the main reasons productivity has grown faster in wholesale/retail trade than in other sectors since the early 1970s is that wholesalers and large retail chains have invested heavily in information technology (IT).

Technological changes, coupled with a steady decline in communication and transport costs, have thus been a major factor behind global integration. Governments are increasingly seeking to improve the international competitiveness of their economy rather than shield it behind protective walls. Developing countries have made tremendous progress in education and steady improvements in physical capital and infrastructure, thus boosting their productive capacity and enabling them to compete in world markets. This shift in development strategy has been reinforced by communication technologies which have made the world easier to navigate. However, the labour and social impact of globalization implies that political, business and union leaders must accept their share of responsibility and pay heed to international labour standards, thus contributing to an improvement in working conditions, including in the commerce sector. This report outlines the social impact of globalization and restructuring in commerce. Chapter 1 shows recent trends in employment in the commerce sector worldwide. Chapter 2 highlights the ongoing process of internationalization, mergers and acquisitions in the commerce sector and their effects on employment, earnings and productivity, while Chapter 3 analyses the ongoing liberalization process in the sector and its effects on employment. Chapter 4 reviews trends and changes resulting from the introduction of new technologies, in particular information technology and electronic commerce and their impact on employment in the commerce sector, while Chapter 5 describes changing consumer demands, new retail formats, and gives indications on training and qualification needs in the sector. Chapter 6 of the report examines the impact of restructuring and globalization on industrial relations in the commerce sector and indicates some of the responses of the social partners to the challenges posed by these processes. The last chapter refers to voluntary initiatives in the commerce sector and discusses the ILO's role in ensuring decent employment and working conditions in the sector. The report concludes with a list of suggested points for discussion.

Acknowledgements

The information on which this report is based comes from a variety of sources. Valuable information was provided by a number of employers' and workers' organizations and the International Federation of Commercial, Clerical, Professional and Technical Employees (FIET), which replied to a questionnaire on issues dealt with in the report. Further contributions to the report were provided by Professor José Paulo Zeetano Chahad (Brazil) and Professor Peter B. Doeringer from Boston University, United States. ILO publications, studies from other international organizations and research institutions were also frequently consulted. The report was prepared on the basis of contributions made by Paula Repo, an external expert, and by an ILO team composed of Claude Duchemin, John Sendanyoye and Brigitte Steck (Salaried Employees and Professional Workers Branch), Frances Papazafiropoulos (Official Documentation Branch) and Messaoud Hammouya (Bureau of Statistics).

The report is published under the authority of the International Labour Office.

Introduction

This report, which deals with the impact of globalization and restructuring in the commerce sector on employment and working conditions, is published only a few months from the advent of the third millennium. What is now referred to as "globalization", which has left such a mark on the social and economic landscape of the end of the twentieth century, is a modern and more extreme form of what has long been a determining factor in the evolution of commerce. It is even possible to discern some sort of continuity from ancient trade routes -- beginning with the caravans, through the Phoenicians' sea-lanes and the Hanseatic towns, to today's electronic commerce. From this perspective, the "information highway" would appear as a modern and more global equivalent of the legendary Silk Road or spice routes. The appearance of general merchandise stores at the end of the nineteenth century and mass distribution chains which flourished from the second half of this century have left a deep imprint on commerce's structure in diverse countries, without for all that completely displacing more traditional forms of distribution. Distance marketing, and more particularly its more recent Internet-based varieties, is in turn engendering fundamental social and economic changes: removal of distance constraints; the absence of physical interaction during the purchase and payment functions; the need to revise education and training policies and programmes; the concurrent destruction and creation of certain categories of jobs as well as the transformation of others, etc.

Often associated with the search for new products or the pursuit of new markets, international trade has often also been, for better or worse, a catalyst for social change. A principal ILO objective has, from the very beginning, been to ensure that international trade contributes to general social progress without adversely affecting working people and their families. Indeed, the Preamble to the Organization's Constitution affirms that "... the failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries". This principle remains valid today, as confirmed at the 86th Session of the International Labour Conference in June 1998 by the adoption of the ILO Declaration on Fundamental Principles and Rights at Work.

All over the world, globalization and the restructuring of commercial distribution circuits are reinforcing the linkages between internal and external trade. At the same time, there is a parallel growth in informal sector commerce in a number of developing countries. While regulations and rules which govern the operations of commercial actors remain mostly local or national in scope, the expected growth in electronic commerce seems increasingly to call into question the ability of the public authorities to fully impose their prerogatives on national markets. Electronic-based distance transactions are, in effect, less amenable to any kind of control than the transfer of material products. This development increases consumer clout, at least for those with effective purchasing power, while raising a number of new public policy concerns.

In its report to the Tripartite Meeting on Productivity and Employment in Commerce and Offices (1994), the ILO noted that "Enhanced competition, greater consumer consciousness and especially the widespread acceptance of market economics have made governments, employers and workers in all parts of the world more aware of the need to satisfy customer demands in order to thrive in the market-place ..." and that "With global, rather than simply local, competition, new products and services can come on to the market with astonishing speed."⁽¹⁾

It is evident that these developments have a continuing effect on employment, working conditions and industrial relations, not only in commerce but also in such contiguous sectors and related activities as manufacturing, marketing, transport, finance, logistics, management, communications and data processing. There are often high hopes in various countries that increased investment in commerce and the infusion of new commercial technology and know-how would encourage economic growth, directly or indirectly generate significant numbers of new jobs, and contribute to improved working and living conditions. However, these hopes are frequently balanced by contradictory concerns, mainly related to fears of an emergent global social order almost entirely dictated by market forces.

As noted in the Report of the Director-General of the ILO to the 85th Session (1997) of the International Labour Conference:⁽²⁾

By a strange irony of history, the "dawning of a new age" is no longer expected to occur with the end of the class struggle ... This time will only come now once the State has been stripped of its social and economic prerogatives and a global civil society emerges which is answerable only to the laws of economic rationality, itself the sole guarantee of a future so full of prosperity and promises that people forget the harshness of their present circumstances. This new form of the ideology of progress persists in affirming ... that human progress is more important that actual human beings ...

The Report of the Director-General, Juan Somavia, to the 87th Session (1999) of the International Labour Conference⁽³⁾ similarly highlights those concerns when it observes that "Globalization has brought prosperity and inequalities, which are testing the limits of collective social responsibility". This is particularly relevant in the context of globalization and restructuring of commerce, where new technologies and changes in production and distribution systems have led to changes in social consciousness. As stated in the same Report "increasing consumer choice and access to knowledge and new means of communications have made individuals and social institutions not merely subjects but also potential actors in the process of globalization".

1. ILO: Productivity and employment in commerce and offices, Tripartite Meeting on Productivity and Employment in Commerce and Offices, Geneva, 1994, pp. 1 and 6.

2. ILO: The ILO, standard setting and globalization, Report of the Director-General, International Labour Conference, 85th Session, Geneva, 1997, p. 6.

3. ILO: Decent work, Report of the Director-General, International Labour Conference, 87th Session, Geneva, 1999, pp. 1 and 2.

1. Globalization, restructuring and employment in commerce

Whether or not the impact of globalization has yet been fully felt on the employment market at national level it has, in any event, brought about qualitative changes in the global economic environment affecting workers throughout the world. Economic liberalization and restructuring have increased foreign takeovers through mergers and acquisitions, resulting in modern distribution circuits associated with new technology, innovative management styles, different approaches to work and new employment arrangements. However, these developments have yet to fully penetrate the national markets of many developing countries. Traditional commercial structures and trading methods continue to prevail in countries such as Bangladesh, Gabon, Lebanon and Sri Lanka, where few chain stores have emerged and no significant acquisitions or mergers have taken place involving foreign companies with local enterprises. Consequently, both the Confederation of Gabonese Employers (CPG) and the Association of Lebanese Industrialists report that there is little or no visible link in their countries between globalization and employment.

The situation is entirely different in the industrialized countries, where there is growing debate over the magnitude of the impact that trade with low-wage countries is having on national employment. Recent ILO studies suggest that, on balance, trade with developing countries and the relocation of industries have only been minor factors contributing to the rise in unemployment and the declining wages of unskilled workers in the industrialized countries. The job-loss pessimists also overlook the significant reverse benefits that are derived from trade and investment links with developing countries. While, in many cases, economic liberalization undoubtedly gives rise to short- or medium-term social costs, these are outweighed by greater long-term gains compared to the alternative of protectionist policies.

1.1. Some regional trends

The effect that globalization has had on employment in the commerce sector varies throughout the world. Over the past few years the number of workers employed in import and export industries, or those with which they are in competition, has grown significantly, as have the linkages among labour markets worldwide. Despite this increase, however, their number remains small as a proportion of overall employment. In the industrialized countries, for instance, an average of almost 70 per cent of workers are employed in the service sector, most of whose end-products are not easily traded beyond national borders. Similarly, in many low-income developing countries, the bulk of employment remains in subsistence or traditional agriculture or in the urban informal sector -- and the products of these sectors are largely intended for the home market and are only minimally affected by globalization. Nevertheless, the impact of global economic competition is being felt by a growing number of workers, who are apprehensive that intensifying globalization will generate worldwide pressures to lower wages and labour standards.

A major hurdle in assessing employment trends in the commerce sector is the paucity of accurate national statistics. Even in countries in which they are regularly received, most are current only up to 1997. The significant time lag in their receipt means that, while available data are sufficiently appropriate for ascertaining long-term trends, they are deficient when applied to the analysis of the current situation in quantitative terms. Unlike the data on the countries appearing in figures 1.1-1.6, the statistics presented in the statistical annex at the end of the report include not only those for wholesale and retail trade but also those for hotels and restaurants, as this corresponds with Major Division 6 of the International Standard Industrial Classification of all Economic Activities (ISIC, revision 2, of 1968). However, an evaluation of the situation for each of the countries in figures 1.1-1.6 indicates that the inclusion of the hotels and restaurants sector does not significantly affect analysis of the general trend in the wholesale and retail trade.

ILO data shows that, in general, employment in wholesale and retail trade in most industrialized countries has risen over the last few years compared to overall employment. As may be noted from figure 1.1 and figure 1.2, employment in the commerce sector as a proportion of total employment in the industrialized countries varies from 12 per cent (Finland) to 20 per cent (Australia). The sector recorded employment growth in a majority of these countries, with Finland, the Netherlands and Ireland showing the highest gains of more than 4 per cent between 1995 and 1997. However, in Sweden and Portugal the sector lost jobs at the rate of about 1.5 per cent during the same period.

1.1.1. Western Europe

In the European Union, 4.7 million commercial companies, representing 30 per cent of all European enterprises, provide the essential link in the distribution of goods and services between producers and the more than 370 million consumers. An overwhelming 95 per cent of these enterprises are small and medium sized, employing on the average fewer than ten workers each. The commerce sector is the second largest employer in Europe, with more than 22.5 million workers -- accounting for 16 per cent of total employment. In addition, while other sectors have been shedding workers, the commerce sector in the European Union generated 1.5 million new jobs between 1985 and 1995, or half the number of those lost in the manufacturing industry and 15.5 per cent of all new jobs created during the period.

Box 1.1
Employment in the commerce sector in Finland

According to the Employers' Confederation of Service Industries of Finland (LTK), a huge structural change took place during the first four years of the 1990s. Subsequently, from 1994 to 1998 the number of people working in the commerce sector grew as follows:

Year

Retail

Wholesale

Other

Total

1994

125,700

73,400

43,100

242,200

1998

136,900

91,200

46,300

274,400

In line with work tasks which continue to evolve, the priority need for the sector has become a more highly qualified and continuously trained multi-skilled professional workforce. Increased automation did not, as feared, reduce employment in commerce which had declined to a minimum in 1994. Given that Finland has the highest level of card purchases in Europe, workers have long been familiar with direct debit and credit card transactions. Training emphasizes public relations, customer service and data processing skills. Wholesale companies require, in addition, foreign language skills. Efforts continue to be made to continuously raise education standards, and commercial schools provide a three-year business administration diploma which includes six months of practical experience. Stakeholders in the sector are directly involved in planning of the curriculum for the business administration diploma.

Employment in commerce has increased in most Western European countries such as Cyprus, Norway, and Turkey, and stayed stable in France, Italy, Malta and Switzerland.

Box 1.2
Employment in the food retail trade in Switzerland

Consolidation within the food retail trade in Switzerland has resulted in a reduction in the density of commercial enterprises, calculated on the basis of 10,000 inhabitants. Employment has similarly declined. In 1995, the proportion of annual revenue from the food trade for both Migros and Coop was 61 per cent. This may be explained by the market power of these retailers, the range of their product choice as well as the opening of new branches and the extension of floor space of old stores. As in numerous other countries, there has been a replacement of staff by increased floor space since the new self-service systems require less customer service and therefore fewer personnel. According to the Swiss Federal Office for Economic Development and Labour (OFDE), 60 per cent of workers in this segment of the commerce sector are employed in small and medium-sized companies with less than 250 workers, while the rate for all the other segments is 75 per cent. The same agency considers that the only way jobs will be safeguarded from the effects of consolidation in the food retail trade is if the big operators which now dominate the market are able to generate a corresponding number of jobs lost from small retailers.

Source: OFDE.

1.1.2. North America

In North America, commerce's share in total employment increased slightly in Canada but declined in the United States between 1985 and 1997 -- even though the sector generated 4 million new jobs during this period.

Retail trade is one of the largest and most diverse sectors in the United States economy. According to an ILO-sponsored study, in 1996-97, there were 1.6 million retail establishments ranging from gas stations and automobile distributors, to restaurants and food stores, to department and speciality clothing stores. These rang up annual sales of US$2.2 trillion in 1997 and employed over 20 million workers. In relative terms, retail sales amount to about 27 per cent of GDP (S&P, 1998) and almost one in five jobs in the United States economy is in retailing. Retailing has been a growth sector with the number of establishments increasing by about one-third between 1972 and 1992 (S&P, 1998); the sector now surpasses manufacturing as a source of jobs. While growth has required the industry to attract more workers, it remains a relatively low-wage sector with few unions and is dominated by a young, female and poorly educated workforce. Average hourly earnings were approximately $8 in 1996, or about 60 per cent of those in manufacturing. Because retailing is seasonal and many workers are employed only part time, annual earnings rank even further behind those in manufacturing. The most likely skills requirements projected for the sector as a result of globalization are indicated later in this report.

1.1.3. Central and Eastern Europe

In the transition countries of Central and Eastern Europe, globalization and market liberalization have, in some countries such as the Slovak Republic, resulted in sectoral concentration, an increasing number of joint ventures, the entry of international own-brand distribution chains or the increasing role of purchasing centres. The employment impact has, however, not been uniform, with the employment share of the commerce sector increasing in some countries but declining in others.

Figures 1.3 and 1.4 indicate that in the transition countries, the share of commerce in total employment is relatively low compared with other groups of countries. In 1997, it varied from 8 per cent in Hungary to 13.6 per cent in Romania. It may be noted, however, that while total employment declined in these countries, employment in the commerce sector rose on average by 6 per cent annually between 1995 and 1997, with the highest annual growth of 11 per cent recorded by Latvia.

Box 1.3
Employment effects of the entry of multinationals
in the Czech commerce sector

The entry and expansion of multinationals in the Czech domestic market has brought with it a growth in job opportunities. There were over 30 multinational companies active in retail and wholesale trade in the Czech Republic at the end of 1998, employing a total of some 40,000 workers. The largest employers are Euronova (6,000 employees), Julius Meinl (4,000 employees), Delvita (3,000), Tesco (3,000), Plus Discount (2,500), Billa (2,000), Ikea (2,000), Kaufland (1,700) and Spar (1,000).

Most sector workers are in small companies employing one to 19 workers (totalling approximately 250,000), followed by companies with 20-99 employees (about 138,000). In certain instances, entry by multinationals such as Penny and Plus into the domestic market has been employment-neutral as this has occurred through the acquisition of operations from local entrepreneurs. Also in some cases, the disappearance of strong cooperatives, such as five in Northern Bohemia employing a total of 3,000 workers, has contributed to significant job losses in the sector.

New supermarkets and hypermarkets are planned, which will undoubtedly create additional job opportunities. These new stores are owned by multinational companies, with very strong capital investment capabilities and the resources to absorb "temporary losses" over a number of years during an initial period, with the aim of increasing market share. There are therefore concerns for eventual job losses as competition pushes small companies out of business.

Since 1990, when over 400,000 licences for "purchasing and further sale" were issued, the commerce sector has been able to absorb 130,000 workers who had lost their jobs in industry, agriculture and transport. There are fears, however, that the unregulated expansion of multinationals into the domestic commercial distribution network will shortly result in the disappearance of traditional town centres with their small shops, which provide easy access to inhabitants without cars. Similar apprehension is expressed for medium-sized local stores, as these may be unable to react flexibly enough to price reductions and sales promotions by multinational affiliates. Another important drawback to job growth -- overlooked during the process of large-scale privatization -- is the fact that multinational distribution chains do not give sufficient preference to domestically produced goods.

Source: Reply to ILO questionnaire.

1.1.4. Asia and Pacific

During the period preceding the 1997 economic and financial meltdown, the Asia and Pacific region recorded dramatic trade-driven economic and employment growth rates. Between 1985 and 1997, the commerce sector created about 400,000 new jobs in Hong Kong, China, increasing its proportion in total employment by 7.7 points. More moderate gains of between 1 and 5 points were registered in China, Indonesia, the Republic of Korea, Pakistan, the Philippines and Thailand. Commerce's share of employment also increased in Fiji, Malaysia, the Solomon Islands and Sri Lanka, but by much less than in the abovementioned countries. It declined in Bangladesh, India, Myanmar and Singapore. In Australia and New Zealand the rate of employment growth in the commerce sector has been higher than that of overall employment. In Japan, although commerce generated a million new jobs during the same period, its share in overall employment declined. According to the Japanese Federation of Textile, Garment, Chemical, Commercial, Food and Allied Industries Workers' Union (ZENSEN), job creation in the sector expanded up to 1994 and then started to decline from that year to 1997, especially as a result of technological changes (bar codes, increased computerization, logistical advances, etc.). Bipolarization between high-skilled and low-skilled employment, mainly in jobs requiring the accomplishment of repetitive tasks, was increasingly evident. In addition, the recent economic and financial crisis in Asia, where Japanese commercial operators play a major role, has aggravated the difficulties of a number of distributors pushing them towards restructuring of their operations through the shedding of jobs. As a result of a fall in its revenue and heavy indebtedness, for instance, Daiei, a major Japanese retailer, recently embarked on a vast restructuring plan to be implemented over several years. During 1999, the group intends to reduce its workforce through early retirements and the transfer of workers to less well-paid positions in its affiliates.

1.1.5. Latin America and the Caribbean

In Latin America the share of commerce in total employment ranged from 14.6 per cent in Costa Rica to 29.4 per cent in Peru during the 1996-97 period (figure 1.5), while the annual employment growth in commerce was less than that of employment as a whole. Nevertheless, the growth rate has been significant, as may be noted from figure 1.6, which covers a representative number of countries in the region.

With particular regard to the MERCOSUR countries (Argentina, Brazil, Paraguay, Uruguay), disaggregated data in table 1.1 show that the growth of employment in the commerce sector has been higher than or roughly equal to both GDP growth and overall growth in employment, with the exception of Argentina. In Brazil and Uruguay, growth in employment within the commerce sector has been even more rapid than the annual rate of growth of the labour force, thereby helping to relieve pressure on the labour market to create jobs.

Table 1.1. MERCOSUR countries: Production, employment and productivity growth, 1990-97
(non-agricultural sectors, annual rates %)

Country

Argentina

Brazil

Paraguay

Uruguay

1. GDP

5.5

2.8

2.7

4.2

2. Labour force

3.0

2.7

5.6

1.9

3. Total employment

1.8

2.5

5.6

1.4

4. Employment in the commerce sector

0.8

4.8

n.a.

4.5

5. Non-agricultural productivity

3.6

0.3

-2.7

2.8

6. Non-agricultural informal sector¹

1.6

1.9

1.4

0.3

¹ Annual growth of informal employment share. n.a. = not available.
Source: Panorama Laboral '98, ILO, Lima, Peru.

In any case, the evolution of employment in the commerce sector of the MERCOSUR countries has not led to any significant change in the relative share of this sector of total job creation, as may be observed from table 1.2. In this way, given the short period of time under consideration, the evolution of employment in the commerce sector shows a similar pattern of behaviour to that of the output of the sector, whose share of GDP has remained constant in every country.

Table 1.2. Commerce sector: Production and employment in the MERCOSUR countries, 1990-96

Country

Argentina

Brazil

Paraguay

Uruguay

1990

1996

1992

1995

1991

1996

1990

1996

1. Sector production as % of GDP¹

16.0

16.0

7.6

6.8

26.8

26.0

12.6

12.4

2. Sectoral employment as % of total non-agricultural employment

20.4

19.2²

21.0

21.8

n.a.

23.1

18.5

20.8

3. Employment in small firms as % of total employment³

14.9

18.7

24.0

25.2

29.0

29.7

11.0

10.3

4. Urban open unemployment rate (total) (%)⁴

7.5

17.3

4.9

4.6

5.1

5.5

9.2

12.4

¹Argentina: commerce including hotels and restaurants; Brazil: GDP -- factor cost concept; Paraguay: commerce including financial sector; Uruguay: commerce including hotels and restaurants. ² 1997. ³Small firms: enterprises with ten or less employees. ⁴ Argentina: urban area; Brazil: six metropolitan regions; Paraguay: Asuncion area; Uruguay: Montevideo area. n.a. = not available.
Source: Official national statistics.

In line with the trend observed in other countries of Latin America and a number of countries in Asia, the share of commerce sector employment represented by small businesses has risen, as mentioned previously in the text. This trend cannot be attributed solely to growth in open unemployment, since it has been observed both in Argentina, where unemployment levels have risen sharply, as well as in Brazil and Paraguay, where unemployment levels have remained relatively stable. Employment of workers in small service sector businesses, which include commerce businesses, appears to form part of a reorganization of the labour market in response to the challenges that it faces.

As shown in figure 1.7, there was an increase in the volume of employment within the commerce sector from 1996 to 1998 in Brazil, in line with the general service sector trend, while there was a decline in employment in manufacturing industries. It is in the latter sector that the impact of globalization has been most problematic, obliging it to undertake a major structural adjustment in order to boost competitiveness in response to the process of trade liberalization that began in 1990. This, in turn, entailed a sharp increase in labour productivity and a reduction in employment levels. In percentage terms, while there was an overall reduction of 2 per cent in employment, and an 8 per cent reduction in processing industries, commerce sector employment grew by approximately 2 per cent. It may be concluded from this that the formal commerce sector has aided in reducing the negative impact on employment of the restructuring that has occurred in other sectors.

It should nevertheless be noted that the rate of increase of employment in the commerce sector has recently slowed in Brazil. This is due in part to a relative loss of momentum of the Brazilian economy as a whole, following the waning of the consumer euphoria that resulted from the success of the Real Plan. This may be seen in figure 1.8, which shows a sharp reduction in retail employment between 1996 and 1998, while wholesale employment maintained its growth trend during this period. Although this reduction in retail employment may have been influenced by the level of activity, there is strong evidence to suggest an accelerated modernization process for retail sales, most notably as a result of the computerization of many functions that were previously performed by employees. Between January 1996 and November 1998, retail commerce employment fell by some 1.6 per cent while total commerce employment rose by a similar percentage.

Commerce in the Caribbean has generally experienced a drop in employment relative to the overall economy, with losses of between 4 and 6 percentage points recorded in Barbados, Bermuda and Trinidad and Tobago. Less steep losses have been noted in the Bahamas, British Virgin Islands and the Netherlands Antilles.

1.1.6. Sub-Saharan Africa

In Africa, as in other developing regions, globalization and restructuring in commerce are bringing about striking changes. Traditional commercial operators (petty traders, hawkers, etc.) continue to function side by side -- and sometimes in competition with -- modern retailers such as shopping malls and supermarkets, particularly in the major urban agglomerations. However, the lack of any data, let alone reliable up-to-date sector-specific statistics, makes it extremely difficult to determine both the relative weight of commerce in employment and comparative trends of sectoral contributions to the generation of new employment. The meagre data available from a handful of countries in the region indicate that for the period 1985-86 to 1990, the change in commerce's share in employment in sub-Saharan Africa ranged from about ten points in the Central African Republic to a decline of about ten points in Chad. In between these two extremes, there were significant increases in the share of the sector in Botswana, Ethiopia, Kenya, Mauritius, Niger and Swaziland and a slight rise in Zimbabwe. The sector's share of employment declined in Burundi, Côte d'Ivoire, Ghana, Malawi and Togo. Figure 1.9 shows that in South Africa, commerce recorded the third highest employment growth (about 27,000 additional jobs or 3.9 per cent) from 1994 to 1997. During the same period, the only other sectors in the formal economy to make net contributions to employment were other private service sectors (about 34,000 extra jobs or 11 per cent) and the public sector (86,000 more jobs or an increase of 4.8 per cent). Manufacturing lost 95,000 jobs or 6.4 per cent while construction dropped 14.2 per cent (51,000).

1.1.7. The Middle East and North Africa

In the majority of Middle Eastern and North African countries, such as Bahrain, Egypt, Jordan and the Syrian Arab Republic, commerce increased its share in total employment by between 1 and 5 percentage points from 1984 to 1995. The absolute numbers resulting from some of these increases were very substantial since, in Egypt for instance, employment in the sector grew from around 1 million to 1.5 million jobs during the same period, bringing the share of commerce in total employment to 10.3 per cent. However, in others such as Tunisia, the proportion declined slightly.

1.2. The role of the informal sector in employment generation

While it is difficult to determine the exact nature of the relationship between globalization and the continued growth of the informal sector, the fact remains that the sector, much of which is comprised of retail activities, is an important provider of jobs -- sometimes the most important -- in a great number of developing countries. As may be expected of activities which remain, for the most part, unregistered and outside national statistics, informal sector data is difficult to gather and of doubtful accuracy when available. However, according to the ILO's World Labour Report 1997-98, there seems to be a consensus on the steady growth of the informal sector in almost all developing countries, with the exception of the newly industrializing countries (East Asia). In Latin America, for instance, 15.7 million new jobs were generated between 1990 and 1994, of which 8.4 in every 10 were in the informal sector. Informal sector employment grew in the region at an annual rate of 4.7 per cent, compared to 1.1 per cent in the formal sector.

In Asia, it is estimated that the informal sector absorbs between 40 and 50 per cent of the urban labour force, although significant variations may be found between the newly industrializing countries (less than 10 per cent before 1997), and countries such as Bangladesh, where the sector's employment share is as high as 65 per cent. According to the Bangladesh Employers' Federation, there has recently been a loss of jobs in the formal sector due to restructuring. However, employment in the small service industries, which are classified as informal sector and not reflected fully in the official statistics, has increased. In South-East Asia, more and more workers who have lost their jobs in the modern sector as a result of the economic crisis that has shaken the region since 1997 are having to look for survival in the urban informal sector. The quality of these jobs may not be of the same level as those in the formal sector but this employment is, by and large, steady and sustained.

In Benin, as is generally the case in the rest of sub-Saharan Africa, the informal sector represents, after agriculture, the second biggest provider of jobs, and encompasses mainly crafts and micro-commerce. The proportion of informal sector commercial activity carried out in fixed premises is -- at 17.2 per cent -- very much lower than that carried by semi-itinerant operators (40.1 per cent) and hawkers (42.7 per cent). These statistics demonstrate the precarious nature of commercial activity in Benin's urban centres and reflect the situation in other developing countries, where informal commerce only represents one of the elements of a survival strategy for a sizeable number of the population. The Uganda Manpower Survey of 1989 (the latest available data) similarly identified commerce (trade and restaurants) as the dominant segment in urban employment; indeed it accounted for 40.22 per cent of informal sector employment. Table 1.3 highlights the relative employment weight of informal sector segments in Uganda in 1989. It should be noted that the relative share of commerce would certainly be significantly higher if the trading aspects of the non-trade/restaurants activities were taken into account. The importance of the informal sector in employment generation is underlined by the fact that the same survey indicates that while the formal sector accounted for only 5.5 per cent (378,227 jobs) out of a total labour force of about 7 million people, the urban informal sector employed 978,227, representing 13.7 per cent.

Table 1.3. Structure of informal sector activities in selected Ugandan urban centres

Industry

Per cent

Food processing

9.94

Clothes/shoes

10.41

Metal fabrication

9.94

Wood products

5.99

Handicrafts

3.15

Construction

4.26

Garages

1.73

Trade/restaurants

40.22

Transport

4.10

Services

8.99

Other

0.47

NS

0.79

Total

100.00

Source: Uganda National Manpower Survey (table 4.42), 1989.

Informal sector commerce typically includes the selling of various consumer items, such as food, charcoal, firewood, newspapers, books and household items -- which may be sold at kiosks, market stalls and verandas or by means of hawking. It also includes the preparation and serving of food, drinks and meals in small restaurants, kiosks, markets and open spaces (grilling of meat, chicken and corn, etc.). In a number of countries with a significant tourism sector, the selling of locally made carvings and handicrafts in major urban centres is a considerable source of employment and income.

By and large, the dramatic growth of micro-enterprises and the related expansion in the use of casual labour in developing countries has increased the possibility for multinational companies to indirectly utilize the labour of informal sector workers through subcontracting arrangements. Homeworkers and children are often to be found at the very end of extensive global production and distribution chains.

1.3. Some effects of globalization in the commerce sector,
with particular reference to women

Despite the fact that commerce has registered significant net employment growth in industrialized countries, the rate of unemployment in the sector remains higher than for the economy as a whole (figure 1.10). In contrast, as shown in figure 1.11, the rate for the transition economies is substantially lower.

In general, commerce employs more women than other sectors. Women's participation in the sector is highest in a number of countries in Latin America and countries undergoing economic transition; indeed, on average, the proportion of women employed in commerce is higher than for the economy as a whole.

Box 1.4
Employment and gender differentiation in the retail trade in Canada

Retail trade is Canada's second largest employer. In 1993 it accounted for 13 per cent of all paid employment, and employment in the sector continues to experience sporadic growth. Over the years, jobs in retailing have become increasingly feminized and deskilled. Non-standard forms of employment predominate. According to the Canadian Chamber of Commerce, total employment in the retail sector in Canada stood at 1.7 million in 1990, with unemployment from the sector at 6.6 per cent. By 1997, total employment in the sector still stood at 1.7 million but the unemployment rate had dipped slightly to 5.8 per cent.

In 1995 women represented 51 per cent of the retail trade workforce, and 46 per cent of all persons employed in sales occupations. According to figures on the distribution of women workers -- by size of establishment, trade group and occupations -- female employment in the retail trade of Ontario exhibited distinctive features. Women were concentrated in very small enterprises (i.e. with less than five employees) as well as large establishments (i.e. over 500 employees). They were more likely to work in enterprises selling general merchandise, women's clothing, dry goods, drug stores, florist shops and tobacconist shops as opposed to motor vehicle sales and repair companies, and enterprises selling hardware, furniture, appliances, liquor and beer. Women tended to be concentrated in the following occupations: cashier (91 per cent), non-commission salesperson (84 per cent) and tailor/seamstress (73 per cent). Male workers, in contrast, were mainly in commissioned sales positions (74 per cent), and warehouse occupations (95 per cent).

Source: ILO, Multinational Enterprises Programme Working Paper No. 79, 1997.

Although commerce generally experienced a higher loss of jobs relative to the rest of the economy in most industrialized countries in 1997, this situation was the reverse in Australia, Japan and Spain, where losses in commerce were fewer than in other sectors.

Up to the 1970s most discussions on salaried employment were either implicitly or explicitly based on the model of a "standard" employment relationship with the following characteristics: the existence of only one employer and workplace; the existence of an indefinite work contract; full-time work; and the existence of some degree of social and legal protection.

Although even during the 1970s this standard employment relationship was far from universal (especially in many developing countries), non-standard or atypical forms of work are today on the rise in many countries.

According to a study by the ILO Governing Body Working Party on the Social Dimensions of the Liberalization of International Trade, the difficulty in obtaining comprehensive data and differences of definitions in this area make cross-country comparisons difficult. Analyses of trends within countries and within groups of countries are somewhat more reliable. Part-time work has increased since the mid-1970s in most of the countries for which data are available: in the 12 countries that were already members of the European Union in 1987, part-time work, as a share of total employment, rose from 8.9 per cent in 1987 to 10.2 per cent in 1990 and to 12.2 per cent in 1997. Temporary employment has increased since the mid-1980s in all the sample countries except Japan, where it has remained largely unchanged, and the Republic of Korea, where it has decreased substantially. In many developing countries, non-standard employment often takes the form of "unprotected" employment without a written work contract or without legally established social security coverage. Although this kind of "informal" paid work is of course not new, available data for a sample of Latin American countries indicate that unprotected salaried employment has increased in all of them since the early 1990s.

It is hard to tell whether globalization is the main factor responsible for this, but there are reasons to believe that some correlation exists. A more quantitative assessment of the correlation is still largely an issue for future research. In addition to globalization, developments on the supply side have also contributed to the surge in certain forms of non-standard employment, such as part-time work, which is very important in the commerce sector. When it was a question of choice, it has so far been mainly women who have opted for this arrangement, which enables them to combine paid employment with family responsibilities.

In the great majority of countries, women are the most affected by unemployment in the commerce sector. This may be attributed to a number of factors -- but the most significant is their higher representation in low-skilled, part-time and precarious employment. In 1997, among the countries for which data was available, the greatest gender difference in the unemployment rate in commerce was in Poland (4.7 per cent unemployment for the sector as a whole, compared with 18.7 per cent for women in the sector). Among the transition countries, only Latvia and Lithuania had lower rates of unemployment for women in commerce than the overall sectoral rate. Similarly, Australia and the United Kingdom were the only industrialized countries in which women's unemployment in the sector was lower than the overall sectoral rate. In Asia, where employment in commerce has been particularly hard hit in recent years -- and more especially following the 1997 economic and financial crisis -- there are indications of women workers having been disproportionately more affected compared to men, even if hard data is rather limited.

The impact of globalization and restructuring on employment in commerce therefore clearly has important consequences for gender and equality-related policies and initiatives throughout the world.

Box 1.5
The clothing distribution channel in France

Retail trade is one of the most important sectors of the French economy, accounting for 13.3 per cent of employment. Retailing is characterized by low wages, a workforce that is mostly young and female, and a relatively large share of part-time employment. Within the retail sector, clothing retailers account for almost one-half of all employment, 57 per cent of sales, and more than 15 per cent of all firms.

Greater size and the introduction of new computer technology and other modern management practices have dramatically changed the nature of the internal organization of retailers, and of the job duties that are performed. Part-time work is more prevalent, the skill composition of work has been altered, and productivity has increased.

These changes, however, have not stimulated much growth in jobs. Neither have they substantially altered the nature of work in clothing retailing. The retail trade sector remains characterized by low earnings, high female labour force participation (55 to 60 per cent), high employee turnover, and weak unionization. Part-time employment and part-time labour contracts have become more pronounced in recent years, particularly in hypermarkets and supermarkets. The increase of part-time employment is an indicator of labour flexibility for employers, but of "precarious" work for employees.

Today, the clothing retailing sector plays an active role in the traditional textile clothing "filière"; it has completely changed the rules of competition and especially the content of jobs among both producers and retailers. A new model for regulating and controlling clothing commodity channels has been emerging since the early 1990s. It combines flexible production and lean distribution, with a complete mixture of short-term and long-term contracts aimed at the delivery system. Many of the changes in structure and organization of clothing retailing are also being felt through the entire "filière". The largest retailers have had a substantial impact on the upstream apparel and textile manufacturing sectors. These retailers have emphasized the importance of reducing the prices charged by manufacturers, improving the delivery speed and completeness of orders, and the shifting of various additional services to the manufacturing sector. Retailers have also developed new partnerships with subcontractors and have stimulated traditional manufacturers to alter manufacturing practices, relationships between manufacturers and the retail sector, as well as cooperation among manufacturers and subcontractors.

Source: ILO.

The rise in "non-standard" work does not necessarily mean a higher degree of precariousness. Part-time or temporary work may be chosen freely by certain individuals. For example, in 1997, 58.5 per cent of part-timers in the 15 EU countries did not want a full-time job, and a further 9.5 per cent combined part-time work with school education or training. The share of voluntary part-timers was even higher among women.

* * *

This chapter has attempted to demonstrate the extent to which employment growth, in general, and the proportion of employment in commerce in total employment, in particular, have been influenced by globalization and restructuring. It is extremely difficult, however, to establish the exact correlation between globalization and employment in the commerce sector as other economic, political and technological factors need to be taken into account.

The employment situation in the commerce sector generally improved during the 1990-97 period. In a majority of countries the number of workers in the sector increased. Similarly, the proportion of commerce in total employment increased in one country out of two.

The magnitude of commerce's contribution to employment between 1990 and 1997, and hence its importance to economic well-being in different regions of the world, is best viewed in absolute terms. In the 24 industrialized countries for which statistics are available, approximately 6 million new jobs were created in the sector. The sector also generated 1.5 million new jobs in 19 transition economies for which data are similarly available. In the 17 Asian and Pacific countries reviewed, a remarkable 40 million jobs, half of them in China alone, were created during the same period. Six million new jobs were created in 27 countries in Latin America and the Caribbean during the same period.

The share of commerce in total employment for the 35 countries studied was 18 per cent: it accounts for 15 per cent in the industrialized countries, 12 per cent in countries in economic transition, 17 per cent in the countries of Asia, and 20 per cent in Latin America. It is also worth noting that the sector's annual employment growth is significantly higher than for overall employment in a majority of countries. At 6 per cent and 4 per cent respectively, the transition countries and Latin America recorded the highest growth rates for the sector between 1995 and 1997.

The commerce sector's ability to retain the present employment levels or, better yet, to raise its employment capacity will largely depend on the continued increase in purchasing power and economic growth.

Other specific aspects of employment related to the impact of globalization and restructuring are covered in Chapters 2, 3 and 4.

2. Internationalization and new commercial circuits

2.1. Recent trends

Trade in distribution services takes place mainly through both commercial presence and cross-border supply. The two major components, wholesale trade and retailing, are supplied primarily through commercial presence, but this may change in the light of recent technical developments. Trade in franchising and other distribution circuits is usually undertaken on a cross-border basis, whereas commission agent services are supplied cross-border and through commercial presence.

2.1.1. The changing face of retailing

Retailers play a critical role in the marketing process. Not only do they transfer goods from producers to customers, they also channel information back from consumers. The importance of retailing is underlined by its immense size; in the United States alone it employs about 25 million people. The "new-style" retailers seem to have adopted a philosophy and a new operating style. Rather than monitor the inventory of each item themselves, they move much of the responsibility for ensuring product availability to suppliers. Suppliers accomplish this by monitoring sales at the point of sale on a real-time basis through computerized links. They then automatically replenish stock when inventory levels run low. Payments are made through automated bank-to-bank transfers to suppliers, eliminating much paperwork.

Dramatic gains in distribution and marketing efficiency are realized when manufacturers and retailers work together. "Partnering" between these two groups represents a major departure from their previous antagonistic relationship; it recognizes that both are part of a single process -- which can be greatly streamlined and simplified -- for distributing products to customers. Partnering thus provides the advantages of vertical integration without its attendant drawbacks. It has roots in the "quick-response" movement in the clothing industry. In the grocery business, it is known as Efficient Consumer Response (ECR) (see Chapter 4).

Apart from facilitating partnerships, technology is having an impact on retailing inasmuch as electronic shopping is replacing much store-based retailing. For many time-pressured customers, shopping online or via a catalogue for next-day delivery provides greater time value than a trip to the mall or shopping centre.

Catalogue retailers might be the most affected by electronic shopping. Although electronic shopping has some of the same limitations as catalogue retailing, such as delivery times, it can provide customers with much more information than catalogues.

Retailing, entertainment and recreation are also converging. Entertainment companies, such as Walt Disney, Warner Bros., Discovery Communications Inc., Sony and Viacom, are moving into retailing in a big way, while retail developers are rapidly adding entertainment options to their new and existing developments. In the rediscovery of the link between shopping and entertainment, there is a much more explicit focus on using entertainment to differentiate the retail experience from conventional and electronic retailing. Some new retail developments incorporate nightclubs, zoos, virtual-reality rides, comedy clubs, target ranges, musical revues and stadium-style cinemas. Retailing is also converging with learning. Customers can develop expertise in new areas and parents make their limited time with their children more meaningful. Customers come to such stores not just to buy products or learn skills but to browse, socialize and be with other people. They also spend more than in a traditional shopping centre.

Finally, it is expected that regional internationalism will prevail rather than a full-blown globalization of the retail industry. Given that the supply function is not sufficiently globalized, global retailers would have to deal with different suppliers in different parts of the world, erasing much of their scale advantage. Retailers will therefore probably try to dominate a particular area (because of shared costs) rather than spread out thinly throughout the world.

2.1.2. International mergers and acquisitions

Mergers and acquisitions (M&A) are only one approach to internationalization. Alternatively, companies can participate in joint ventures or build up their own foreign subsidiaries through organic growth. However, M&A activity is dominating foreign direct investment (FDI) flows among the leading developed economies.

In 1998, European retailers were the most active purchasers and targets of international retail trade M&A activity. Retail trade was globally the tenth most active industry. The total value of cross-border deals in retailing accounted for $17,967 million in 1998. In the wholesale trade, North America was a more important target than Europe. The total value of cross-border deals in wholesaling accounted for $6,553 million in 1998.

The annual value of international retailing M&As increased from $1,729 million in 1991 to $17,967 million in 1998. The annual value of international wholesaling M&As increased much less, from $1,675 million in 1991 to $6,553 million in 1998.

Among the strongest United States performers in foreign retail markets are:

Wal-Mart, now the largest retailer in Mexico and Canada, with major plans for Germany and Brazil through acquisitions (see box 2.1). The company recently bid £6.7 billion for the United Kingdom's Asda.
The Gap, now with 15 stores in Japan. Next in line for expansion are countries with strong textile industries. The company is contracting with local manufacturers and in adjacent low-wage countries to assure competitive pricing for apparel.
Toys 'R' Us, now the largest toy retailer in Japan, attributing its successes to its sourcing strategy.

Among the strongest European performers in foreign retail markets are:

Metro group AG (Germany), which entered a joint venture with Turkey's largest supermarket retailer and acquired Netherlands retailer Makro. Metro's foreign presence will include the United Kingdom, Spain, Portugal, Greece, the Netherlands, Belgium, the Czech Republic and Poland.
Carrefour SA (France), which grew to 323 hypermarkets worldwide with the opening of its first store in Poland. About 60 per cent of the company's revenues are now generated by its 207 foreign stores.
Pinault-Printemps-Redoute (France) which sees most growth generated by foreign business. The retailer bought a Swedish mail-order firm and 40 per cent of Brylane, the largest United States-based mail-order company. It plans to open buying offices in Hong Kong and Shanghai and expand retail activities and building materials distribution in Latin America.

One retailer in Asia is poised to take advantage of the consumer spending rebound when it occurs:

Jasco Co. Ltd. (Japan) has followed a strategy of diversifying its interests as a local retailer and shopping centre developer. To attract United States companies to its shopping centres, it negotiates major land deals, expanding its operations with local acquisitions. It is also thriving on leveraging cost-saving technology solutions.

Box 2.1
Wal-Mart

Wal-Mart stores in the US

2,435 (includes 565 Wal-Mart Supercenters): during the fiscal year that ended (FYE) 31/1/99, Wal-Mart opened 37 discount stores, closed one, and relocated or expanded two additional stores, and opened 123 Supercenters (including 88 discount store replacements).

SAM'S Clubs in the US

451 clubs: during the fiscal year that ended 31/1/99, Wal-Mart opened eight new Sam's Clubs, and relocated or expanded five additional clubs.

Wal-Mart Stores International

Wal-Mart Stores, Inc. (WMT) operates 704 units: Argentina (13), Brazil (13), Canada (152), Germany (95), Mexico (410), and Puerto Rico (14), and under joint venture in China (3) and the Republic of Korea (4).
During the fiscal year that ended 31/1/99, Wal-Mart opened or acquired 114 international units -- Argentina (4), Brazil (6), Canada (9), China (2), Germany (74), Republic of Korea (4), Mexico (14), and Puerto Rico (1).

History

First Wal-Mart opened in 1962 (Rogers, AR).
First SAM'S Club opened in 1983 (Midwest City, OK).
First Supercenter opened in 1988 (Washington, MO).
First International Store opened in 1991 (Mexico City).

Company trade territory

Wal-Mart serves more than 90 million customers weekly in 50 States, Puerto Rico, Canada, China, Mexico, Brazil, Germany, Argentina and the Republic of Korea.

Total employees

United States -- more than 780,000.
Internationally -- more than 130,000.
Total employees -- more than 910,000 worldwide.

Employment

FYE 31/1/99: 910,000 -- 10% increase over the previous year. In 1997-98 Wal-Mart created 105,000 jobs -- a 16 per cent increase in its workforce.

2.1.3. Leading companies

The largest wholesalers are from the United States and Western Europe. Among the major wholesalers included in the list Global 500, there are, however, only three European ones -- two from Germany and one from Ireland (see table 2.1). Among the list of Global 500 retailers, there are three from Asia and three from Europe. The rest are from the United States (see table 2.2).

Table 2.1. Top wholesale trade companies among Global 500, 1997

Company

Global 500
revenues
rank

Revenues

Profits

$ millions

% change
from 1996

$ millions

% change
from 1996

McKesson Corporation

174

20 857.3

32.8

154.9

15.7

Supervalu Inc.

222

17 201.4

3.9

230.8

31.8

Franz Haniel & Cei. GmbH

226

16 907.1

0.9

177.6

-13.6

Ingram Micro Inc.

233

16 581.5

37.9

193.6

75.0

Fleming Companies Inc.

254

15 372.7

-6.8

25.4

-4.9

Sysco Corporation

281

14 454.6

7.9

302.5

9.2

Bergen Brunswig Corporation

387

11 660.5

17.3

81.7

11.1

Cardinal Health Inc.

415

10 968.0

23.8

181.1

61.9

Edeka Zentrale

465

9 887.3

-8.3

46.8

19.2

Total

-

133 890.4

-

1 394.4

-

Source: Fortune Magazine (New York).

Table 2.2. Top general merchandise companies among Global 500, 1997

Company

Global 500
revenues
rank

Revenues

Profits

$ millions

% change
from 1996

$ millions

% change
from 1996

Wal-Mart Stores Inc.

8

119 299.0

12.4

3 526.0

15.4

Sears, Roebuck and Co.

50

41 296.0

8.0

1 188.0

-6.5

K-Mart Corporation

76

32 183.0

2.4

249.0

0

J.C. Penney Co. Inc.

87

30 546.0

29.2

566.0

0.2

Dayton Hudson Corporation

107

27 757.0

9.4

751.0

62.2

The Daiei Inc.

120

25 882.2

-8.5

9.9

0

Federated Department Stores Inc.

246

15 668.3

2.9

536.0

101.6

Groupe Pinault-Printemps

256

15 280.0

-2.8

488.8

21.1

MYCAL Corporation

262

15 005.8

-7.3

83.2

-39.1

Karstadt Group

300

13 720.4

-14.1

93.6

141.3

Marks & Spencer PLC

308

13 536.5

8.8

1 361.2

13.7

The May Department Stores Co.

344

12 685.0

0.7

775.0

2.6

Takashimaya Co. Ltd.

431

10 463.9

-8.7

67.7

-19.1

Total

-

373 323.1

-

9 695.4

-

Source: Fortune Magazine (New York).

In Europe, the top 20 retailers include retailers from Germany, France, the United Kingdom and the Netherlands. In Asia, Japan is very dominant. Among the top 35 retailers, Australia has two companies and the Republic of Korea one company. The rest are from Japan (see table 2.3). Table 2.4 shows employment in some of the largest retail companies in different countries.

Table 2.3. Top Asian retailers among Asia 1,000, 1998 ($ millions)

Asia Week
1,000
rank

Company

Country

Main business

Sales

Net
profit

Assets

Equity

Market
capitaliz-
ation

29

Ito-Yokado

Japan

Retailing

25 867

582.4

16 318

7 756

22 820

62

Coles Myer

Australia

Retailing

14 305

289.8

4 983

1 872

4 964

74

Woolworths

Australia

Retailing

12 867

207.9

3 039

1 021

3 880

106

Takashimaya

Japan

Department
stores

10 269

68.4

7 312

1 775

2 439

130

UNY

Japan

Department
stores

8 702

106.1

5 123

1 792

3 275

136

Mitsukoshi

Japan

Department
stores

8 413

-320.6

5 165

276

1 302

152

Daimaru

Japan

Department
stores

7 251

11.4

3 603

587

619

231

Seibu Dept. Stores

Japan

Department
stores

5 073

4.2

3 736

98

-

241

Isetan

Japan

Department
stores

4 880

21.2

4 350

990

2 116

267

Marui

Japan

Department
stores

4 531

158.9

6 011

3 265

6 316

279

Tokyu Dept. Store

Japan

Department
stores

4 312

-127.1

3 827

597

232

284

Matsuzakaya

Japan

Department
stores

4 214

-29.7

2 167

637

887

349

Hankyu Dept. Stores

Japan

Department
stores

3 445

9.6

2 804

833

1 144

369

Nagasakiya

Japan

Clothes
retailing

3 226

-35.0

3 144

9

158

484

Kintetsu Dept. Store

Japan

Department
stores

2 491

4.8

1 401

106

-

510

Seven-Eleven Japan

Japan

Convenience
stores

2 371

504.2

4 877

3 514

29 947

512

Parco

Japan

Fashion
stores

2 356

6.8

1 846

429

242

561

Best Denki

Japan

Electronics
retailing

2 202

-29.4

1 550

788

884

573

York-Benimaru

Japan

Retailing

2 166

52.3

839

655

1 419

650

Lotte Shopping

Korea,
Rep. of

Department
stores

1 906

21.4

2 137

304

-

652

Joshin Denki

Japan

Electronics
retailing

1 904

-27.5

1 157

489

104

673

Chiyoda Co.

Japan

Shoe
retailing

1 853

20.9

1 261

531

252

723

Deodeo Corp.

Japan

Electronics
retailing

1 735

-97.9

1 358

518

422

724

East Japan Kiosk

Japan

Retailing

1 734

-8.2

n.a.

n.a.

-

739

Tobu Dept. Stores

Japan

Department
stores

1 689

n.a.

n.a.

471

-

743

Amway Japan

Japan

Household
goods retail

1 681

191.1

911

524

1 646

773

Odakyu Dept. Store

Japan

Department
stores

1 615

-32.6

n.a.

n.a.

-

807

Senshukai Co.

Japan

Retailing

1 545

3.5

1 046

526

290

829

Sogo

Japan

Department
stores

1 498

5.2

3 018

341

205

834

Cécile

Japan

Mail-order
sales

1 482

-21.7

807

350

297

899

Aoyama Trading

Japan

Clothes
retailing

1 338

82.2

2 155

1 835

1 765

917

Daikuma

Japan

Discount
stores

1 308

13.8

493

n.a.

-

918

Keiyo

Japan

Household
goods retail

1 308

5.7

792

350

192

926

Marutomi Group

Japan

Shoe
retailing

1 291

-4.1

824

181

38

987

Nagoya Mitsukoshi

Japan

Department
stores

1 193

8.2

n.a.

n.a.

-

n.a. = not available.
Source: Asia Week.

Table 2.4. Employment in some of the largest companies

Name of company

Country of origin

Number of employees

Wal-Mart Stores

United States

825 000

Sears Roebuck

United States

296 000

J.C. Penney

United States

260 000

K-Mart

United States

258 000

Kroger

United States

212 000

Metro

Germany

177 470

Jardine Matheson

United States

175 000

Dayton Hudson

United States

149 500

Coles Myer

Australia

148 346

Safeway

United States

147 000

Koninklijke Ahold

Netherlands

142 020

Limited

United States

137 100

Home Depot

United States

130 000

Tesco

United Kingdom

124 172

Carrefour

France

123 437

American Stores

United States

121 000

May Department Stores

United States

116 000

Federated Department Stores

United States

114 700

J. Sainsbury

United Kingdom

114 042

Delhaize "Le Lion"

Belgium

107 208

Ito-Yokado

Japan

102 617

Daiei

Japan

100 000

Woolworths

Australia

100 000

Winn-Dixie Stores

United States

95 000

Karstadt

Germany

94 463

Albertson's

United States

94 000

Toys 'R' Us

United States

93 000

CVS

United States

90 000

George Weston

Canada

83 000

Groupe Auchan

France

81 000

Publix Super Markets

United States

76 750

Asda Group

United Kingdom

76 619

Walgreen

United States

70 500

Groupe Pinault-Printemps

France

63 301

Lowe's

United States

58 504

Migros

Switzerland

57 051

Republic Industries

United States

56 000

Great Atlantic & Pacific Tea

United States

52 400

Promodès

France

50 781

Safeway

United States

50 580

Groupe Casino

France

49 990

Kingfisher

United Kingdom

49 225

Marks & Spencer PLC

United Kingdom

48 200

Costco

United States

42 750

Otto Versand

Germany

41 476

MYCAL

Japan

38 322

Jusco

Japan

41 177

Inchcape

United Kingdom

37 889

Seiyu

Japan

19 752

Takashimaya

Japan

17 101

Source: Fortune Global 500 (1998).

2.1.4. Foreign affiliates of wholesalers and their share in sales figures

According to the World Trade Organization in a document on distribution services (1998), two sources of information are available for trade in distribution services through foreign affiliates. Until recently, it states, the United States was the only country which collected such statistics on a regular basis, but now the Statistical Office of the European Communities has also begun work in this area.

The United States data suggest that wholesale trade is the largest single component of distribution services and accounts for a significant proportion of all services trade through affiliates. Wholesale services sold to foreign persons by affiliates of United States firms were nearly $15 billion in 1995, representing 9 per cent of total American sales of services through affiliates (see table 2.5).

Table 2.5. Sales of services to foreign persons by foreign affiliates of US wholesale and
retail trade companies, 1995 ($ millions)

All countries

Canada

Europe

Latin
America
and
other west.
hemisphere

Other countries

Total

Of which:

Total

Of which:

France

Germany

Netherlands

Switzerland

UK

Australia

Japan

Wholesale

14 977

746

8 491

741

535

857

774

926

2 071

3 669

658

1 075

Retail trade

1 133

138

761

(D)

251

10

30

100

57

177

(D)

4

(D) Suppressed to avoid disclosure of data of individual companies.
Source: World Trade Organization (WTO). Data from the survey of current business, 1997, quoted in WTO: Distribution services, Background note by the secretariat, doc. S/C/W/37, Geneva, 1998.

Wholesales services bought from affiliates of foreign companies by people in the United States exceeded $9 billion in 1995, which amounted to 7 per cent of total American purchases of services from foreign affiliates (see table 2.6).

Table 2.6. Sales of services to persons in the United States by US-based affiliates of foreign
retail and wholesale trade companies, 1995 ($ millions)

All countries

Canada

Europe

Latin
America and
other west.
hemisphere

Other countries

Total

Of which:

Total

Of which:

France

Germany

Netherlands

Switzerland

UK

Australia

Japan

Wholesale

9 363

105

3 202

41

2 339

213

293

249

5

6 051

0

5 885

Retail trade

575

41

207

26

0

41

34

185

48

279

0

125

Source: WTO. Data from the survey of current business, 1997, quoted in WTO: Distribution services, op. cit., Geneva, 1998

Services provided by retailers constitute a much smaller proportion of total trade in services. In 1995, United States sales and purchases of retailing services through affiliates amounted to only $1.1 billion (less than 1 per cent of services sales) and $0.6 billion (less than 0.5 per cent of services purchases), respectively.

The most important markets for the United States in wholesale trade were Japan and Germany but in retail trade the United Kingdom replaced Germany. Sales of professional and commercial equipment and supplies -- in particular related to computers -- account for a large share of the sales of American affiliates. Affiliates of Japanese and United Kingdom companies provided the largest amounts of wholesale services in the United States, whereas those from Germany and the United Kingdom were the most important in retail trade.

2.1.5. Foreign companies and their share of wholesale and retail turnover in Europe

In 1997, the Statistical Office of the European Communities (Eurostat) presented the first foreign affiliates trade (FATS) statistics which provide information on demographic, employment and financial aspects of foreign affiliates operating in wholesale and retail trade in the European Union. The statistics showed -- perhaps not surprisingly -- that the enterprises of all countries were to a great extent nationally owned. While seven of the nine countries studied had less than 2 per cent foreign-owned enterprises, Ireland and Italy had a much larger proportion (17 per cent and 16 per cent) respectively. Fifty-eight per cent of the non-national enterprises were owned by companies or individuals from other European Union countries, though in the United Kingdom, the owners of 63 per cent of foreign-owned enterprises belonged to countries outside the EU.

According to the WTO, foreign-owned enterprises account for a significant share of the total turnover of the wholesale and retail trades in the European Union. On the whole, turnover is greater for foreign enterprises owned by extra-EU countries than those owned by other EU countries, but this reflects the importance of non-EU enterprises in the United Kingdom and the Netherlands, and is not the pattern in other EU countries.

Box 2.2
Operation of international firms in Poland speeds up
the globalization processes in commerce

The access of Poland to the WTO and the bilateral agreements it reached with the European countries (and others) have provided opportunities for Polish trade firms to join the globalization trend. At the same time these firms set favourable conditions for foreign investors in the sector of business services.

The scale of the globalization of Polish commerce may be mainly attributed to the influx of foreign capital, which takes the form of direct investment of foreign business networks.

The foreign retail business enterprises enter the Polish market mainly by:

strategic alliances and interception of property assets from the firms operating in the Polish market, and formation of its own networks on such a basis, e.g. Globi, Robert, Savia;
investments, e.g. Auchan, Leclerc, Geant;
franchising, e.g. Rema 1000, Spar, Yves Rocher.

The most characteristic feature of the globalization of retail trade in Poland is the development of networks of large spacious commercial establishments distributing consumables:

networks of supermarkets (e.g. Globi, Robert, Rema 1000);
networks of hypermarkets (e.g. Auchan, Geant, Hit);
networks of discount stores (e.g. Netto, Plus, Sezam, Tip);

and to a lesser extent with non-food goods (e.g. Ikea, Nomi, Rossman, Leroy Merlin).

Another form of the globalization of the retail trade in Poland is the development by foreign firms of:

networks of consumer-oriented convenience stores (e.g. Star Market at petrol stations);
networks of specialized shops offering branded products and a high standard of customer service, usually to well-to-do customers (e.g. Pierre Cardin, Yves Rocher);
direct sales (transactions at the client's home or office, e.g. Oriflame S.A. (cosmetics firm); Lux; a Swedish producer of vacuum cleaners; Avon (an American cosmetics firm).

The globalization of wholesale trade is taking the form of:

establishment of contracted distribution channels by foreign manufacturing enterprises; different varieties of such distribution channels have been formed by, among others, Procter & Gamble, Unilever, Danone, Tchibo, Bonduelle;
organization of networks of independent retail stores around a common distribution centre, e.g. Comi Polska, a branch of a French capital group Intermarché;
organization of distribution based on the logistical considerations:

distribution centres that take over from the enterprise basic logistics functions, such as: expedition of goods, their storage and collection; the role of a wholesale intermediary;
centres of logistics services organized and run by specialized enterprises, which render various services on order (storing, coding of goods, paletting, etc.). The logistics centres' services are based on integrated information systems of all the participants of the distribution channel (producers, wholesalers, retailers), e.g. Raben Logistic Sp. z.o.o. in Gabki near Poznan.

Source: Ministry of Economy, Department of Commerce and Services, Warsaw, 1999.

2.1.6. Affiliates of United States and European companies in developing countries

The WTO reports that, unfortunately, there are no comprehensive statistics on the importance of affiliates' trade in other parts of the world. There is apparently considerable investment in Asia and the Pacific from United States companies such as J.C. Penney, Toys "R" Us, Price Club, Compaq Computer, Wal-Mart, Levi Strauss, Tower Records, Ace Hardware, McDonald's, Kentucky Fried Chicken, IBM and K-Mart. Other major companies established in the region include Marks and Spencer, HMV, Virgin (United Kingdom), Siemens (Germany), Makro (Netherlands), Gucci (Italy), Carrefour and Delifrance (France), and a number of Japanese wholesalers such as FamilyMart. Companies, such as Wal-Mart, J.C. Penney, Makro and Carrefour, are also reported to have established a presence in several Latin American countries such as Argentina, Brazil and Chile.

The enterprises mentioned above provide an interesting spectrum of reasons for the internationalization of distribution services. Some of these companies, such as Compaq Computer and Levi Strauss, are better known as manufacturers, and their emergence as exporters of distribution services is likely to derive from their competitive edge in the manufacture of the underlying products.

Compaq Computer's entry into distribution probably reflects the advantages of vertical integration for manufacturers of consumer durables for which pre- and post-sales service are important. Levi Strauss's decision to market its own products may stem from the desire to eliminate the negative "vertical externality" arising from the successive mark-ups charged when the distribution chain is made up of independent enterprises.

McDonald's and Kentucky Fried Chicken provide restaurant services, but their sales of food not consumed on the spot constitute distribution services. Their competitive advantage is related not only to the underlying product, but also to the manner in which the sales are made, involving attributes such as speed and simplicity. Companies such as Marks and Spencer have successfully developed retailing brand names which perform a quality-certification function for consumers. Finally, there are the companies, like Wal-Mart, whose advantage derives primarily from their retailing format, i.e. the manner in which they offer products for sale and conduct sales.

2.1.7. Franchising as a popular form of entry to the markets
of emerging and transition economies

Franchising is still new to most emerging and transition economies. With the exception of a few countries, there are no statistics on franchising operations. In recent years, however, there has been a marked tendency for international retailers to enter the markets of these economies through franchising. In many countries, the concept of franchising has been introduced by the multinationals -- and in many cases they dominate the franchising in these countries.

According to the "Guia do Franchising", an annual survey prepared by the Brazilian Franchising Association (ABF) and Editora Globo, 14 per cent of all franchises operating in Brazil, amounting to 102 companies, are headquartered outside the country. Among these foreign franchises, almost two-thirds, or 66 companies, are headquartered in the United States, followed by Italy and France, with eight franchises each. However, the sales of these foreign franchises accounted for 36.3 per cent of the total sales of franchises (see table 2.7).

Table 2.7. Sales of foreign and domestic franchises in Brazil, 1996-98 ($ millions)

1996

1997

1998

Total market sales

11 500

12 075

12 728

Locally owned sales

7 300

7 665

8 048

Total foreign sales

4 200

4 410

4 680

US-owned sales

2 100

2 205

2 315

Exchange rate: US$1.00=R$1.17 (June 1998).
Source: Brazil Franchise Census, specialized trade publications; trade contacts.

Prior to the political changes in 1989-90, franchising was practically non-existent in Hungary. Despite its short history, however, franchising is developing rapidly in some sectors. Today, there are about 150-180 franchise systems in the country, representing 2-3 per cent of the retail sector. In terms of dollar value, an estimated 40 per cent of the systems are foreign, while 60 per cent are Hungarian-owned. The bulk of franchises are found in the fast food sector, followed by other retail operations, including clothing, photo services, copying/printing, petrol stations, business services and hotels.

The United States is the leading investor in Hungary (35 per cent of total foreign direct investment), with investments is in a variety of sectors: food, telecommunications, automotive, household consumer products, apparel and services.

Official Hungarian statistical reports do not keep any records on franchising and there are no statistics on the sales of the foreign franchises. The following statistics are unofficial estimates based on information from the Hungarian Franchise Association and official government statistics on the retail trade (see table 2.8).

Table 2.8. Number of foreign and domestic franchises in Hungary, 1995-97 (estimate) ($ millions)

1995

1996

1997
(estimate)

Domestic franchises

318

350

385

Foreign franchises

212

230

255

US franchises

106

115

128

Total

530

580

640

Source: Hungarian Franchise Association.

Although franchising is a relatively new industry in the Czech Republic, there were about 30 franchisers operating in the country at the end of 1997, the majority of which were foreign (see table 2.9). These franchising companies are now operating hundreds of individual units (shops, restaurants, etc). Retail and fast food dominate the industry. The majority of international retailers who have entered the Czech market in recent years have done so through franchising. These include Next (United Kingdom), Mothercare (United Kingdom), and Future Kids (United States).

Table 2.9. Major foreign franchisers in the Czech Republic, 1997

Germany

Italy

France

United Kingdom

United States

OBI (household,
hobby),
Nord-West-Ring
(shoes wholesale),
Family Frost
(frozen food),
Zimbo Czechia
(meat,
delicatessen)

Stefannel (fashion
boutiques),
Versace (fashion
boutiques),
Ungaro (fashion
boutiques),
Versus (fashion
boutiques),
Sergio Rossi
(fashion boutiques)

Yves Rocher
(cosmetics),
Kookai, (clothing)
Lacoste (clothing)

Marks & Spencer
(clothing),
Mothercare
(mother and baby
clothing and
accessories),
Next
(family fashion)

McDonald's,
Kentucky Fried
Chicken,
Pizza Hut,
TGIFriday's,
Dunkin Donuts,
Future Kids
(computer training
for children),
Holiday Inn,
Choice Hotel
International,
Rentex-Hertz

Source: The Central and Eastern European Business Information Center (Washington).

2.1.8. Made in emerging economies and consumed in industrialized countries

As discussed earlier, the distinction between manufacturing, wholesaling and retailing sectors is becoming increasingly blurred. In many cases today, the function of the wholesale distribution subsector itself may be partially or fully undertaken by the manufacturer, while some retailers are active in both wholesale distribution and manufacturing.

Companies like Levi Strauss, which both manufacture and market their own products, are increasingly relocating their manufacturing plants from industrialized to emerging economies. Levi Strauss Americas, a division of Levi Strauss & Co., announced in February 1999 that it will close 11 of its 22 manufacturing plants in the United States and Canada and lay off about 5,900 people, or 30 per cent of its workforce in North America. The company is shifting a large portion of manufacturing for the American and Canadian markets to contractors throughout the world; at present 60 per cent of its manufacturing is carried out overseas. It markets brand name apparel in more than 60 countries. The company employs a staff of about 1,900 people at its San Francisco headquarters, and approximately 30,000 people worldwide. It operates 41 production facilities and 27 customer service centres in more than 50 countries.

While low-tech products are increasingly made in developing countries, an increasing proportion of those products are sold to consumers in industrialized countries. According to an overview of human development published by the UNDP in 1998, consumption per capita had increased steadily in industrialized countries (about 2.3 per cent annually) over the past 25 years, spectacularly in East Asia (6.1 per cent) and at a rising rate in South Asia (2.0 per cent). Yet these developing regions were far from catching up to levels of industrialized countries, and consumption growth had been slow or stagnant in others. Indeed, the report states that the average African household at the time of writing consumed 20 per cent less than it had 25 years previously. Globally, the 20 per cent of the world's people in the highest-income countries accounted for 86 per cent of total private consumption expenditures -- the poorest 20 per cent, a minuscule 1.3 per cent.

An OECD study on the employment outlook in 1997 suggested that the incidence of imports from emerging economies to OECD countries was especially high in sectors characterized by both relatively low earnings and a high incidence of manual labour, e.g. textiles and clothing. It identified six sectors which were net importers, i.e. sectors in which the value of imports from the emerging economies exceeded the value of the sector's exports to these countries. These sectors were textiles and apparel, wood products, rubber and plastics, computer equipment, transport (other than aircraft and motor vehicles) and a variety of light consumer products such as toys.

Apparel manufacturers and retailers are increasingly turning to low-cost suppliers abroad to supplement their domestic production. Free trade agreements have contributed to this phenomenon. For example, the North American Free Trade Agreement (NAFTA) provides reduced or duty-free entry and eliminates most quotas for apparel products from Mexico and Canada that meet certain rules of origin. Under the US Special Regime Program, apparel assembled in Mexico from United States-formed and cut fabric is allowed quota-free and duty-free entry into the United States market. Finally, under the US Special Access Program for the Caribbean, also known as the 807A Program, certain apparel products assembled in participating countries from fabric wholly formed and cut in the United States are afforded quota-free entry and preferential duties upon re-entry into the United States.

While apparel is more and more made in emerging economies, apparel manufactured in the United States is increasingly made by immigrants from developing countries. Joel Kotkin, of Pepperdine University, estimates that in Los Angeles, which is America's biggest manufacturing centre, the clothing business has become the second largest employer after the entertainment industry. This renewal has been spurred by a new generation of Asian, Middle Eastern and Latin American immigrants.

On the other hand, John Dunlop, a former US Secretary of Labor who is studying the links between America's textile, clothing and retail industries, claims that "labour costs no longer decide the global economy: time is the critical issue". Oscillating fashions, promotion schedules and seasonal offerings demand flexibility. Nike's distributors have to order their shoes from Asian suppliers months in advance -- a system which relies on the shoes staying in fashion. When the enthusiasm of American teenagers for Nike cooled last year, the system clogged up with unsold sneakers.

2.2. Employment effects

2.2.1. Acquired firms are more likely than non-acquired firms
to lose jobs: The case of the United States

Comprehensive data covering mergers and acquisitions among both large and small firms in all industries were not available in any country before 1998. Most studies on mergers before that date were therefore based on special industry databases or samples of large firms for which appropriate data could be compiled. The newly available information from the Longitudinal Enterprise and Establishment Microdata (LEEM) file, produced by the United States Small Business Administration (SBA) Office of Advocacy in cooperation with the United States Bureau of the Census, enables analysts for the first time to examine the sources and effects of United States merger and acquisition activity. This analysis focuses on industries, establishments and employment by employment size of firm.

Of the 5.5 million private sector establishments with employees in the United States in 1990, 3.8 million were still active and had employees in 1994. Among these surviving establishments, 98,924 (2.6 per cent) had been acquired by another firm some time between 1990 and 1994. These acquired establishments employed 5.25 million people in 1990 -- accounting for 6.9 per cent of 1990 employment in all surviving establishments. They came from 43,085 different source firms. By 1994, these firms were part of 31,555 acquiring firms, and their aggregate employment had dropped 3.3 per cent to just over 5.07 million. In comparison, employment in the surviving establishments that had not been acquired rose by 470,000 or 0.7 per cent (see table 2.10).

Table 2.10. Job change in acquired and non-acquired surviving establishments
by industry, United States, 1990-94

Industry division

Acquired establishments

Non-acquired establishments

1990
employment

Net
change

Job
gains

Job
losses

1990
employment

Net
change

Job
gains

Job
losses

Manufacturing

1 360 870

-5.6

16.9

-22.5

15 313 215

-2.7

14.1

-16.9

Transportation,
communications,
public utilities

244 726

0.8

25.1

-24.3

4 342 876

-0.8

18.6

-19.4

Wholesale trade

287 712

-2.7

22.3

-25.0

4 799 006

2.4

21.1

-18.7

Retail trade

951 737

-12.6

12.7

-25.3

14 542 342

-2.6

15.1

-17.7

Finance, insurance,
real estate

644 857

-14.6

19.6

-34.2

4 695 374

-3.5

18.9

-22.4

Services

1 622 009

7.8

29.4

-21.6

22 560 140

7.2

22.6

-15.5

Other

135 696

-3.8

26.8

-30.6

4 720 166

-5.5

22.5

-27.9

All industries

5 247 607

-3.3

21.3

-24.6

70 974 100

0.7

18.6

-18.0

Source: US Small Business Administration: Office of Advocacy.

In absolute terms, the largest number of acquisitions occurred in retail trade (about 29,000 or 30 per cent of all acquired establishments), followed by finance and services (about 22,000 or 23 per cent each) (see table 2.11).

Table 2.11. Acquired establishments and their employment by industry, United States, 1990-94

Industry division

Establishments acquired

Employment acquired

Number

Per cent of industry

Number

Per cent of industry

Manufacturing

8 371

3.1

1 360 870

8.2

Transportation, communications, public utilities

5 090

3.4

244 726

5.3

Wholesale trade

9 372

2.9

287 712

5.7

Retail trade

29 291

3.1

951 737

6.1

Finance, insurance, real estate

22 473

6.4

644 857

12.1

Services

22 434

1.6

1 622 009

6.7

Other industries

1 893

0.5

135 696

2.8

All industries

98 924

2.6

5 247 607

6.9

Source: US Small Business Administration: Office of Advocacy.

2.2.2. Greater risk of jobs loss in the acquisition of large firms

Surviving establishments owned by large firms (with 500 or more employees in 1990) were five times more likely than small firm establishments to be acquired: 9.2 per cent of large firm establishments were acquired, compared with 1.6 per cent of small firm establishments.

Employees in large acquired firms were also more likely to lose their jobs. Business locations acquired from large firms by large firms lost 9.3 per cent of their employment on average, while those acquired from small firms by small firms gained 1.1 per cent. Those acquired from large firms by small firms lost almost 40 per cent of their employment and those acquired from small firms by large firms gained 18.5 per cent.

In contrast to the overall 6.7 per cent employment losses in establishments acquired by firms already in existence in 1990, the employment in establishments acquired by new firms started after 1990 grew substantially, on average by 6.2 per cent. Establishments acquired by new firms from small source firms grew even faster, by 11.1 per cent.

2.2.3. Among acquired establishments net job loss rate
is higher in retail than in wholesale

In only two of the major industries did acquired establishments have positive job growth in 1990-94, and in both of these major industrial groupings in the United States -- transportation, communications, and public utilities; and services -- the average job growth rates in the surviving acquired establishments exceeded those in non-acquired establishments. Service establishments in both categories had both above-average job-creation rates, and below-average job loss rates, resulting in unusually high net job growth rates for surviving establishments.

The finance, insurance and real estate industry had the highest net job loss rate for acquired establishments, primarily because of a high rate of job destruction. The acquired establishments in retail trade also had a high net job loss rate, mainly as a result of a low rate of job creation. Wholesale trade had a low net job loss rate, mostly due to a high rate of job creation (see table 2.10).

2.2.4. Displaced workers often end up with part-time jobs and lower earnings

In the United States, the total number of workers displaced between January 1995 and December 1997 (regardless of how long they had held their jobs) was 8 million. A total of 3.6 million workers were displaced from jobs they had held for at least three years. In both groups, 76 per cent of displaced workers had been re-employed when surveyed in February 1998.

In the wholesale trade 79.8 per cent of all displaced workers, and 74.7 per cent of those who had three or more years of tenure were re-employed. In the retail trade, 73.6 per cent of all displaced workers and 75.1 per cent of those who had three or more years of tenure were re-employed by February 1998. Altogether 1,882,000 workers were displaced in wholesale and retail trade (see table 2.12).

Table 2.12. Total displaced workers in the United States in January 1995-December 1997
by selected characteristics and employment status in February 1998

Occupation and industry of lost job

Total number
(thousands)

Per cent distribution by employment status in February 1998

Total

Employed

Unemployed

Not in labour force

Managerial and professional
specialty

1 708

100.0

82.6

8.7

8.8

Technical, sales and administrative
support

2 650

100.0

75.5

9.8

14.7

Service occupations

853

100.0

69.2

16.5

14.3

Precision production, craft and
repair

924

100.0

81.8

10.7

7.5

Operators, fabricators and
labourers

1 510

100.0

71.1

15.1

13.8

Farming, forestry and fishing

138

100.0

73.2

18.8

8.9

Agricultural wage and salary
workers

114

100.0

79.5

15.9

8.2

Non-agricultural wage and salary
workers

7 634

100.0

76.4

11.5

12.1

Private wage and salary workers

7 189

100.0

76.3

11.7

12.0

Construction

636

100.0

79.5

15.3

5.2

Manufacturing

1 782

100.0

74.6

11.3

14.2

Durable goods

992

100.0

78.6

10.8

10.6

Non-durable goods

791

100.0

69.5

11.8

18.7

Transportation and public utilities

524

100.0

81.0

7.7

11.3

Wholesale and retail trade

1 882

100.0

74.8

10.4

14.8

Wholesale trade

347

100.0

79.8

10.1

10.1

Retail trade

1 535

100.0

73.6

10.5

15.9

Finance, insurance and real estate

511

100.0

77.9

11.3

10.8

Services

1 815

100.0

77.0

12.9

10.1

Government workers

444

100.0

77.1

8.5

14.4

Source: Bureau of Labor Statistics (BLS).

A surprisingly high proportion of those 508,000 wholesale and retail trade workers who had three or more years of tenure on the full-time job they lost ended up with a part-time job (58,000) or with lower earnings in their new full-time job (149,000) (see table 2.13 and figure 2.1).

Table 2.13. United States displaced workers who lost full-time wage and salary jobs in
January 1995-December 1997 and were re-employed in February 1998 by industry of
lost job and characteristics of new job (in thousands)

Industry of lost job

Total

Re-employed in February 1998

Part
time

Full- time
total

Earnings of the full-timers relative to those of lost job

Self-
employed
or family
workers

20% or more
below

Below but
within 20%

Equal or above
but within 20%

20% or more
above

Total who lost full-time
wage and salary jobs

2 413

265

1 984

417

334

501

426

164

Mining

16

-

11

4

2

2

-

5

Construction

126

8

109

23

17

36

11

9

Manufacturing

691

88

564

140

72

132

106

39

Durable goods

403

47

340

71

55

85

65

15

Primary metal industries

15

2

10

4

2

2

2

3

Fabricated metal products

55

6

49

15

9

6

8

-

Machinery, except electrical

77

10

62

16

10

17

12

5

Electrical machinery

59

4

55

5

14

15

6

-

Transportation equipment

72

13

59

8

9

18

13

-

Automobiles

25

2

22

6

4

7

4

-

Other transportation
equipment

47

11

37

2

5

11

9

-

Nondurable goods

289

41

224

69

17

47

41

24

Transportation and public
utilities

183

15

161

58

30

23

24

8

Wholesale and retail trade

508

58

406

84

65

102

103

44

Finance, insurance, and real
estate

202

23

171

33

43

52

27

8

Services

541

61

431

59

81

112

127

49

Professional services

328

54

253

38

39

60

90

22

Other service industries

213

8

178

21

42

52

38

28

Public administration

85

7

76

4

13

26

20

2

Source: BLS.

In February 1998, the median job tenure in the retail trade was only 1.8 years in the United States. Job tenure of retail trade sales workers was even shorter -- 1.2 years. In January 1983, it had been 1.6 years. In the retail trade, the median job tenure is shorter than in any other industry, and the job tenure of retail trade sales workers is shorter than in any other profession. In wholesale trade, the median job tenure is much longer -- 4.1 years.

2.2.5. The scale of transnational corporations puts local enterprises
out of business -- especially in developing countries

According to the WTO, foreign-owned wholesale and retail trade enterprises are more important in their share of employment than in numerical terms, suggesting that foreign enterprises are on average much larger than national enterprises. In the document on distribution services it issued in 1998, the WTO stated that about 1 million persons in the European Union were employed by enterprises owned or controlled by interests outside the country in which the enterprise operated.

In emerging and transition economies, the local firms are finding it even harder to compete with the multinationals than those in industrialized countries. The chief advantage of the foreign-owned enterprises is size.

Latin America serves as a good example of emerging economies. Overall among developing regions of the world, Latin America and the Caribbean were the star performers in 1997 in attracting foreign direct investment (FDI) from transnational corporations (TNCs).

Latin America's family-owned corner shops and small supermarkets have found it hard to match the low unit costs of the foreign giants and the bargaining power they wield over suppliers. In Brazil, for instance, intense competition forced the owners of four of the top dozen supermarket chains to sell out in 1996. Carrefour's Brazilian operation extracts net profit margins of close to 4 per cent, compared with only around 1 per cent in France.

Carrefour arrived in Brazil in the 1980s and, by cutting margins and increasing volumes, has become one of the country's leading supermarket chains. In 1998, Wal-Mart of the United States began opening stores. Meanwhile, the arrival in São Paulo of Blockbusters, the United States video rental chain, is set to shake up the overpriced local market.

Although the foreign-owned stores are larger -- i.e. the number of employees is higher than in domestically owned stores -- their sales/worker are much higher than in small stores. For instance in Brazil, where food retailing accounts for 2.5 per cent of GDP and 4.2 per cent of employment, traditional retail formats, such as minimarkets, counter stores, street markets, and individual street vendors, account for 64 per cent of sales and 93 per cent of employment, while modern high-volume formats such as supermarkets and hypermarkets account for the remaining 36 per cent of sales and 7 per cent of employment.

2.2.6. Multinationals challenge the locals to boost their labour productivity

A recent study by the OECD estimated the productivity levels in various manufacturing and service sectors. The United States is the undisputed leader among the big economies. At the bottom of the league, according to the OECD, is Australia. But the data showed rapid "catch-up" towards United States levels in Japan and Europe throughout the 1960s and 1970s. Since 1985, however, American productivity advantage over most continental European economies has actually widened.

The differences in labour productivity are attributable to differences in the establishment scale, capital and especially technology intensity, and employee skill level (education and training).

Comparative studies on the labour productivity of foreign and domestically owned companies concentrate heavily on the manufacturing sector. The studies suggest that the labour productivity of foreign companies is higher than that of domestically owned companies -- even in the United States. A US Bureau of Economic Analysis (BEA) survey published in 1996 covered establishments owned by investors from six major investing countries: Canada, France, Germany, Japan, the Netherlands and the United Kingdom. One of the main findings of the analysis was that the labour productivity of the establishments of the six countries varied significantly from country to country, but each country's establishments had higher labour productivity than US-owned establishments in the same industries.

In developing countries, the differences in the labour productivity of locals and multinationals are even more marked. In Brazil, for instance, labour productivity in the modern Brazilian food retail formats (supermarkets and hypermarkets) is about half that of United States food retailers, but in traditional formats it is just one-eighth of the American level, bringing down the sector's overall total to only 14 per cent of the United States standard. With so much scope for improving productivity, food retailing is a highly attractive sector for international operators.

However, the locals in both Latin America and Central and Eastern European transition economies have started to fight back against the multinationals who are overrunning them. A sharp drop in the cost of retailing technology has also helped the indigenous chains. They can now afford to install the stock-control and logistics computers that have contributed so much to the giants' efficiency.

In Latin America, a number of retailers are already successfully defending themselves. One of them is Brazil's Companhia Brasileira de Distribuicao (better known as Pao de Azucar, the name under which its supermarkets trade). Like so many other Latin American businesses, it is a family firm that has recently undergone far-reaching changes. It has brought in professional managers, and expanded and modernized by raising capital through share issues. With net sales of 3 billion reals ($3 billion) in 1996, Pao de Azucar is Brazil's second largest retailer, with 155 supermarkets, ten hypermarkets and 11 discount food stores (plus a chain of electrical shops). Pao de Azucar is spending around half of its annual investment budget of almost $250 million on new stores, but the rest is aimed at increasing the productivity of existing shops. All this has implied investing in information technology and doubling the size of its central warehouse in São Paulo. The firm increased its sales per employee by 11.6 per cent in 1996. According to Luiz Antonio Viana, Pao de Azucar's chief executive, this gain was achieved by introducing incentive bonuses and flexible working practices. But the highest return on investment, he says, comes from refurbishing the firm's old-fashioned neighbourhood supermarkets because many of these occupy prime locations -- an advantage that newcomers cannot always match.

The locals have also successfully implemented other strategies which help them to boost their productivity. Besides the implementation of modern logistic processes linked to modern information systems, the Czech retailers have begun to join forces through mergers. For example the first and the third largest Czech firms, Interkontakt and M-holding, merged in 1997 to create Interkontakt group, the largest distribution chain in the Czech Republic. Retailers are joining forces in organizations such as Czech Marketing Distribution (CMD) and by forming alliances. For example, to obtain volume discounts, smaller firms are forming "purchasing alliances" to buy in bulk from suppliers, and "voluntary alliances" to deal with selected wholesalers.

Table 2.14. Growth and labour productivity in the distribution sector in OECD countries in 1979-94

Country

Growth in the distribution sector, 1979-94

Value added

Employment

Labour productivity

United States¹

3.84

1.76

2.04

Japan

4.74

0.58

4.14

Germany

2.22

0.96

1.24

France

1.84

0.18

1.65

Italy

2.47

1.46

1.00

United Kingdom

2.53

0.72

1.80

Canada

2.86

1.51

1.33

Australia

1.94

1.97

-0.02

Austria²

3.13

1.31

1.80

Belgium

0.82

-0.11

0.93

Czech Republic

n.a.

3.13

n.a.

Denmark

2.20

-0.96

3.19

Finland

0.89

-1.10

2.02

Greece

1.61

3.15

-1.50

Hungary

n.a.

n.a.

n.a.

Iceland

n.a.

1.51

n.a.

Ireland

n.a.

1.70

n.a.

Korea, Republic of

7.42

4.50

2.80

Luxembourg

3.46

1.40

2.02

Mexico

1.12

1.28

-0.16

Netherlands

3.42

1.61

1.79

New Zealand

n.a.

n.a.

n.a.

Norway

n.a.

0.40

n.a.

Poland

n.a.

n.a.

n.a.

Portugal

1.55

0.42

1.13

Spain

1.93

1.36

0.56

Sweden

2.79

-0.64

3.45

Switzerland

n.a.

n.a.

n.a.

Turkey

n.a.

n.a.

n.a.

n.a. = not available.
1 Distribution and retail trade include restaurants. ² Includes machinery and equipment rental and leasing.
Source: World Trade Organization.

3. The market-place becomes more liberal

3.1. Recent trends

3.1.1. Liberalization of foreign direct investment and competition laws go hand in hand

In many countries the liberalization of trade and foreign direct investment (FDI) policies has been accompanied by the establishment of competition authorities.

By 1997, at least 143 countries and territories had enacted FDI-specific legislation. Initially, many investment laws were intended to control the entry and operations of foreign companies; however, recently, most countries have adopted frameworks designed to attract investors and create a favourable investment climate.

Since 1990, some 30 developing countries and transition countries have introduced anti-trust laws. In all, nearly 80 countries now have such laws.

There are a number of competition policy-related concerns in the distribution sector. The most pertinent issue is the possible anti-competitive consequences of vertical relations between manufacturers and distributors. In addition to vertical restraints, several types of regulation have received attention, in particular restrictions on pricing, promotion, large-scale outlets, shop opening hours, and zoning and planning laws.

It is striking that many of the regulations that affect the distribution sector are often implemented by local governments and municipalities, which have a powerful influence on the authorization of new stores and the conditions of operation. Distributors are therefore confronted not only with national differences in policy, but also divergent national, regional and local attitudes.

The European Commission has developed a specific policy for four types of distribution: exclusive selling whereby a producer undertakes to sell only to a particular distributor in a given territory; exclusive buying whereby a distributor undertakes only to take supplies of the product in question from a single producer (found in particular for beer and petrol); franchising, whereby a franchisee is allocated an exclusive territory in which to exploit the know-how and intellectual property rights of the franchiser and sell in a standardized format; selective distribution whereby distributors are chosen on the basis of objective criteria necessary for the efficient distribution of the product in question and these distributors can only sell either to final consumers (to whom they normally provide a service in addition to the product), or to other selected distributors who fulfil the objective criteria. This system is found in particular for highly technical products -- e.g. certain consumer electronics -- or luxury goods -- e.g. perfumes.

The development of new international distribution circuits has prompted many to call for an increased coordination of competition policies. Some economists have argued, according to the WTO, that vertical relations (ranging from full integration to certain vertical controls) serve primarily to improve internal efficiency of the vertical structure while others have pointed to possible anti-competitive effects from vertical foreclosure, but the debate has produced few clear conclusions.In the trade context, tensions have arisen because of the perceived negative effect of vertical relations between domestic manufacturers and distributors on market access for foreign goods. A recent subject of dispute at the WTO provides a good example of this. On 18 May 1995, the Eastman Kodak company filed a complaint with the United States Government alleging that Fuji and its network of domestic wholesalers and distributors sustained anti-competitive practices to limit the Japanese market access of Kodak films and print paper.

In its document on distribution services, the WTO points out that the arrangements which have aroused concern include selective distribution, exclusive dealing, exclusive territories and retail price maintenance.

It goes on to say that the impact on conditions of competition in the distribution sector depends on whether and how competition authorities intervene. On balance, competition authorities have tended to adopt a relatively permissive approach towards non-price-based vertical arrangements, especially in the case of consumer durables like cars. The attitude to price-based arrangements has changed over time. A case in point is the United States, where retail price maintenance was exempted from anti-trust penalties in order to prevent chain stores and discount houses from undercutting branded goods prices specified by manufacturers and charged by smaller retailers. Despite this exemption, there was an erosion of retail price maintenance, which contributed to the boom in chain stores, discount houses and large retail outlets. Since distribution services have a close relationship with trade in goods, the trade regime for goods inevitably has an effect on the distribution sector. While the liberalization of trade in goods has facilitated the growth of trade in distribution services, the persistence of certain barriers to trade in goods also has a negative spillover effect on trade in distribution services.

Restrictions in the form of complex customs clearance procedures, differences in product standards, burdensome practices for certification and testing of products are among the non-tariff barriers which adversely affect the distribution trade. Still according to the WTO, there is evidence to suggest that technical harmonization and the removal of barriers caused by differences in national product regulations and the elimination of border controls can greatly encourage the internationalization of distribution.

A number of WTO Members have undertaken to eliminate barriers and restrictions to trade in the services sector, including in the distribution services sector. However, commitments to full liberalization in the distribution services sector are rare. Some Members have undertaken commitments in the wholesale (34) and retail (33) services, and a smaller number on commission agents services (21) and franchising (23) (table 3.1). Even though many Members have not made commitments in any of these sectors, member States with commitments account for, on average, around 90 per cent of the GDP of all member States (see table 3.2).

Furthermore, according to the WTO, foreign investment regimes restrict market access in many countries. Wholesalers and retailers rely most heavily on the freedom to establish a commercial presence. Hence, barriers which limit the ability of firms to establish a commercial presence and to employ nationals from their home country affect these distribution services more significantly than franchising and commission agent services.

The general foreign investment regime crucially affects conditions of market access in many countries. Limitations on foreign investment, including those on the extent of foreign ownership (for instance, limiting foreign equity ownership to specific levels), on the type of legal entity required (such as the requirement to incorporate locally), on the ownership of specific assets (such as land), and on the scope of operations (restrictions on number and location of outlets) also have a strong effect on this sector. Similarly, the requirement to form a joint venture with local suppliers curtails the freedom of foreign suppliers to decide on the optimal business arrangement. More generally, the application of economic needs tests to determine whether new entry will be allowed, reduces regulatory transparency and leaves administrators with a high degree of discretion.

Given the high labour intensity of distribution (especially in retailing), the sector is affected by limitations on the employment of expatriate workers. Nationality requirements for staff prevent firms from minimizing labour costs through international recruitment. Residency requirements for managers and directors de facto disadvantage foreign suppliers even when the requirements are imposed on all distributors. Immigration policy, visa restrictions, and levies and charges for social security also impact on the sector.

Table 3.1. Numerical summary of WTO member States' commitments on Modes 1, 2 and 3
in distribution services, 1988 (number of member States and percentage share of GDP)

Sector

Member States with commitments (% share of GDP of all member States)

Member States with full commitments on Modes 1, 2 & 3

Cross-border supply
(Mode 1)

Consumption abroad
(Mode 2)

Commercial presence
(Mode 3)

Full

Limited

Unbound

Full

Limited

Unbound

Full

Limited

Unbound

Commission
agents

21
(86%)

2
(0.04%)

3
(0.04%)

14
(97%)

3 + 1
(3%)

3
(0.04%)

16
(98%)

1 + 1
(2%)

2
(0.04%)

19
(99.96%)

0
(0%)

Wholesale trade

34
(92%)

4
(0.06%)

9
(2%)

19
(93%)

5 + 1
(5%)

11
(35%)

18
(60%)

3 + 1
(5%)

5
(0.1%)

29
(99.9%)

0
(0%)

Retailing

33
(92%)

1
(0.004%)

6
(2%)

19
(92%)

7 + 1
(6%)

7
(2%)

22
(93%)

4 + 1
(5%)

1
(0.004%)

30
(99.98%)

1 + 1
(0.02%)

Franchising

23
(89%)

1
(0.03%)

10
(4%)

13
(96%)

0
(0%)

10
(5%)

11
(92%)

1 + 1
(3%)

1
(0.03%)

20
(99.9%)

1 + 1
(0.06%)

Notes: Full: complete sectoral coverage, no market access or national treatment limitations. Limited: incomplete sectoral coverage or market access/national treatment limitations. Unbound: both market access and national treatment unbound or market access unbound.
Unless otherwise indicated (as in the second column), percentages for each subsector are calculated as a share of GDP of all member States with commitments in the sector.
Source: WTO, Distribution services, 1998, op. cit.

Table 3.2. Numerical analysis of the limitations maintained by WTO member States in distribution services, 1998
(number of member States and % share of GDP)

Sector

Limitations
on sectoral
coverage
applying to
Modes
1, 2 & 3

Cross-border supply
(Mode 1)

Consumption abroad
(Mode 2)

Commercial presence
(Mode 3)

Only
horizontal
limitation

Sector-specific
limitation

Only
horizontal
limitation

Sector-specific
limitation

Only
horizontal
limitation

Sector-specific
limitation

Market
access

National
treatment

Market
access

National
treatment

Market
access

National
treatment

Commission
agents

14
(46%)

1
(31%)

1
(6.8%)

0
(0%)

2
(2.1%)

0
(0%)

0
(0%)

3
(31%)

1
(1.3%)

1
(0.7%)

Wholesale
trade

23
(98%)

0
(0%)

3
(38.5%)

1
(2.4%)

1
(0.05%)

1
(29%)

0
(0%)

7
(3.1%)

8
(48.5%)

1
(0.05%)

Retailing

24
(98%)

1
(0.2%)

4
(36%)

3
(35%)

2
(0.3%)

0
(0%)

1
(0.6%)

7
(2%)

8
(21.9%)

1
(0.6%)

Franchising

11
(60%)

4
(33%)

4
(6%)

1
(3%)

4
(32%)

0
(0%)

0
(0%)

11
(39%)

4
(4%)

0
(0%)

Note: Some member States have maintained limitations on sectoral coverage as well as horizontal and sector-specific limitations. The figures in the rows do not, therefore, add up to the number of member States with limitations. Percentages for each subsector are calculated as a share of GDP of all member States with commitments in the sector.
Source: WTO.

Discrimination against foreign firms can also be through taxation or subsidization, though tax incentives sometimes also favour foreign investors. Performance and local content requirements can have the effect of modifying competitive conditions against foreign investors. Discrimination against foreign workers can also be through taxation or subsidization, denial of access to benefits and amenities, restrictions on the rights of dependants and unfair treatment in the workplace.

Limitations on cross-border trade of distribution services include measures such as discriminatory taxation of goods delivered by mail. Consumption abroad is typically constrained by limitations on foreign currency and spending abroad imposed on travellers, and sometimes by travel restrictions.

For example, the Republic of Korea previously had a permit system which restricted floor space and the number of stores for foreign investment. In January 1996 these restrictions were lifted and the permit system was changed into a notification system. In the same vein, in Indonesia the law on foreign investment barred entry of foreign firms in the distribution sector. By Presidential Order, a foreign trading house was only allowed to set up representative office for agency activities and could not conduct sales or marketing. However, in January 1996 a deregulation programme was announced, allowing foreign export traders to deal in any product, and to establish 100 per cent foreign-owned import traders to supply areas like export processing zones. Furthermore, since June 1996, foreign manufacturers have been allowed to directly conduct wholesale activities of their own products and to buy complementary products from related companies abroad for wholesale. Since March 1998, similar liberalization steps have been taken in retailing.

3.1.2. Differences in regulations on licence and opening hours have widened

National regulations on the creation of enterprises, siting and rental of commercial premises and opening hours are very different, and in recent years these differences have widened. Some countries have liberalized regulations, while some have tightened them.

In Belgium, Italy and Japan, for instance, licences or diplomas are required to open a shop. By way of contrast, in France, Germany, Portugal and the United Kingdom, only some activities, such as the sale of arms and munitions and that of alcoholic beverages, are regulated.

As regards the construction of commercial premises, specific regulations requiring the authorization of stores above a certain size threshold have been in force since the 1970s in Belgium, France and Italy. In 1996, France tightened its legislation on the establishment of large stores (Loi Raffarin) making it mandatory for administrative authorization to be sought before opening any store larger than 300 m². At the beginning of 1996, Spain introduced similar legislation. Zoning regulations can also hinder the establishment of large stores. In the United Kingdom, strict planning laws -- part of the explanation for high land prices and rents -- make it harder to build mega-stores. For example, it recently took Costco, an American-style discount warehouse club, two years to obtain outline planning permission for a new store. Costco is now planning to open a further 47 new warehouses in the United Kingdom, selling more than 3,500 products at discounts ranging up to 40 per cent. A recent report on productivity conducted by the McKinsey Global Institute, quoted in an OECD report on Regulation and performance in the distribution sector (1997), found that, on average, selling-space in the United Kingdom was 40 per cent more expensive than in the United States and 20 per cent more than in France.

One of the most representative examples of differentiation between "national policies" are regulations relating to opening hours, legislation which can have an important impact in border areas. In Austria, for example, consumer demand led to an increase in cross-border shopping to countries where hours were more liberal -- and this sped up deregulation to some extent. At present, regulations on opening hours differ substantially across the OECD area. In a number of countries, opening hours are completely free, although local authorities (states or municipalities) can often introduce some restrictions. In other countries, opening and closing hours are tightly regulated and limits are imposed on the total weekly opening hours of shops.

In 1998, Italy abolished most of its license regulations and allowed shops to be open much longer. If a shop takes up less than a certain number of square metres, no permission is now needed to start trading and shopkeepers are able to sell more or less what they want; there are no longer separate licenses for 14 different categories of merchandise.

In Japan, until 1992, any firm that wanted to set up a large shop had to ask permission from existing small ones -- and these rarely voted to commit commercial suicide. Japan was therefore dominated by shops employing two people or fewer, accounting for 14 per cent of total retail sales, double the figure for the United States. In 1992 the law was relaxed. Anyone who wanted to open a big shop merely had to seek permission from local government committees.

Over the past few years, Austria, Denmark, Germany, Greece, Japan, the Netherlands and the United Kingdom have all liberalized regulations on shop opening hours, which were previously rather restricted.

In Norway, on the other hand, legislation was adopted in 1998 preventing larger shops from opening on Sundays. Stein Erik Hagen, the owner of RIMI , the country's biggest supermarket chain, was quick to notice that the new law allowed all but the largest petrol stations to open on Sundays. Hence his announcement, on 23 July 1998, that in partnership with a Swedish company, ICA, he would be buying 1,500 filling stations from Statoil, the national oil company, for 26 billion kroner ($3.4 billion).

Box 3.1
The Large-Scale Retail Store law in Japan

More than any other factor, the Large-Scale Retail Store (LSRS) law which was introduced in 1974 has shaped Japanese retailing over the past decades; now, its deregulation is bringing major change.

The law required retailers planning to open a Category I store to submit a detailed business plan to the local Business Regulation Council (Shogyo Chosei Kyogi, in Japanese) for approval. Next, the opinion of the local chamber of commerce had to be obtained. It then went to the Ministry of International Trade and Industry (MITI), where further input from local officials and residents was collected. The final permit often included a number of changes to protect local retailers, such as a reduction in floor space. The process took between one year and 18 months. Needless to say, this process -- difficult enough for Japanese retailers and developers -- was seen as an almost insurmountable problem by foreign retailers.

The revision of the LSRS law in 1991 (effective from January 1992) aimed at simplifying the process of opening large stores. First, the minimum size of Category I stores was doubled from 1,500 to 3,000 m². Second, the task of examining applications for new stores was transferred from the local Business Regulation Council to the LSRS Council, a MITI advisory body. Third, larger stores were allowed to stay open until 7 p.m. -- an hour later -- without special permits, and the number of compulsory closing days was changed from four a month to 44 a year.

One immediate effect of the 1991 revision to the LSRS law was to shorten the procedure for opening new stores. The maximum time required for the various applications and approvals was set at 12 months. With the shorter lead time, a greater percentage of proposed projects have come to fruition since retailers have been better able to react to the business environment and build new store development into their planning. Before revision, there was a 30 per cent withdrawal rate within a year of the application date.

The LSRS law was revised further in May 1994. The following changes comprised the main body of the second revision:

opening of new stores of up to 1,000 m² was liberalized;
tenancy changes were liberalized;
permits were no longer required for sales at non-store locations;
stores could now stay open until 8 p.m. without a special permit;
store holidays per year were reduced from a minimum of 44 days to a minimum of 24 days.

Particularly significant was the fact that no lengthy application process was required for stores under 1,000 m². Other elements of the revision were considered positive mainly because they made large retailers' lives easier.

The newly acquired ability to stay open until 8 p.m. was welcomed by department stores but it also created some new problems. If stores continued to open at 10 a.m. as previously, the one-hour increase in work hours would necessitate a shift-work system.

Estimating the extent to which regulation increased costs for retailers is difficult. But before the latest revision in the law, each new store opening required 20 different kinds of permit relating to 18 different laws, 45 administrative requirements and more than 200 pages of documentation, leading to an annual expenditure of 60 million yen.

Source: Japan External Trade Organization (JETRO).

3.2. Employment effects

3.2.1. Liberalization of distribution favours high-value shop formats likely to increase jobs

The transformation of retailing involves innovation in the form of new store formats focusing either on increasing efficiency through scale economies, or on increasing value to the customer through specialization in a particular product group.

Policy-makers are in a position to influence the kinds of formats that retailing entrepreneurs develop. By modifying anti-competitive practices they can foster job creation in high-value formats.

A study published in The McKinsey Quarterly (1994) suggests that product market barriers have restricted the development of high-value formats in favour of high-efficiency ones in France, Germany and Japan, and that this has ultimately harmed employment. Indeed, in the United States weaker constraints have resulted in a shift beyond high-efficiency to high-value for47mats and created jobs. Deregulated retailers in the United States created almost five jobs for every 1,000 working-age people between 1980 and 1990. In France, Germany and Japan, on the other hand, jobs have disappeared. In France, the drop was highest (-3.6 jobs for every 1,000 working-age people). In Germany (-2.1) and Japan (-2.3) the loss of jobs was almost the same.

3.2.2. Liberalization also encourages large stores which endanger traditional self-employment

The main argument for restricting competition is the well-being of small shops and workers.

Germany's publishers claim that price-fixing allows them to subsidize less popular but worthier tomes out of the profits from bestsellers. Take away the subsidy, they say, and sales would shift to discounted pulp titles, forcing good books off the shelves and small bookshops out of business, and concentrating power among a few greedy publishers and retailers. The German shopworkers' union and retailers' associations opposed the liberalization of existing rules on the business hours of stores in 1996, by arguing that the livelihoods of shopkeepers would be destroyed, the customers would quickly disappear to distant hypermarkets and the jobs would be lost.

In France, the license and price competition legislation which subjects the opening of large shops to administrative authorization and prohibits the resale of goods at a loss was justified in terms of the need to stop hypermarkets, such as Carrefour and Leclerc, from driving small shopkeepers out of business. By hobbling new large stores, the argument goes, the Government is merely giving the small ones a chance.

There are a number of studies on the impact of the Japanese Large-Scale Retail Stores (LSRS) law of 1974 which restricted the establishment of large stores. The broad conclusion that has emerged from these studies is that this law had a profound effect on the establishment of large stores and on the size and density of retail outlets; the impact of its liberalization has been substantial (see box 3.1). The number of new stores of over 500 m² is increasing by almost 12 per cent a year. In addition, traditional "mom and pop" stores are disappearing and are often integrated in the larger convenience chains, such as 7 Eleven. The liberalization of the LSRS law has also contributed to structural changes in the supply chain. In the past, manufacturers wished to standardize price setting across stores and often set prices to reflect the higher costs of small stores. Larger stores were not allowed to set lower prices but received volume rebates of special promotions for short periods. Currently, large retail stores often negotiate directly with manufacturers.

There are also a number of studies on the impact of the liberalization of opening hours. The results point to the same kind of employment effects as the studies on the liberalization of restrictions on the establishment of large-scale outlets.

Liberal opening hours strengthen the position of large firms, as these are generally better able to respond to longer opening times. Some small shops (e.g. convenience stores) may gain, but the majority will lose market share against larger shops. This is particularly likely in the food segment of the market, where smaller supermarkets and general food stores are likely to lose market share.

Consumer welfare is markedly enhanced when opening hours are liberalized. Longer hours allow consumers more time to make their choice and thus enhance the "entertainment" value of shopping. The employment effects of longer opening hours are unequivocally positive, mainly due to an increase in threshold labour, but possibly also as the result of increased sales.

In a working paper for the OECD, Dirk Pilat suggests that protecting small shops from large-scale outlets to save employment may not be needed. The developments over the past decades suggest that small shops continue to have an important place in advanced retail systems, particularly outside the mass food market. Small shops are increasingly becoming more specialized and customer-oriented. In addition, they are increasingly finding ways to remain competitive relative to large stores, for instance by engaging in cooperative arrangements, such as franchising, that allow them to reduce costs and achieve economies of scale. Many of them also find their own specialized "niche" in the market. However, small supermarkets and general food stores are likely to disappear due to competition from larger outlets (and small specialty stores), but this process is unlikely to affect overall retail employment.

Indeed, modern retail formats are quite labour-intensive. Large stores often need significant threshold labour, in particular if they are open during the evening and on Sundays, or if they are service-oriented, and are therefore quite labour-intensive compared with traditional supermarkets or hypermarkets. Small specialty stores are often highly service-oriented and also require a high level of staffing. Thus, the distribution sector in the United States, arguably among the most advanced in the world, has continued to show rapid employment growth over the past 15 years. Furthermore, the liberalization of the LSRS law in Japan over the past five years appears not to have led to employment losses. More importantly, analysis at OECD in the context of the OECD Jobs Study suggests that slowing down adjustment by engaging in protectionist measures, whether internationally or domestically, is not the best answer to employment and unemployment concerns.

3.2.3. Flexible forms of work increase employment opportunities

The pressure for more flexible opening hours stems partly from a view that short opening hours are in conflict with a general demand for more flexible working hour arrangements. This demand arises partly due to greater diversity in working hours in the economy as a whole, as well as the higher participation of women in the labour force.

In the United States, according to analysis by Harriet Presser of the University of Maryland, one employee in five now works mainly outside conventional nine-to-five hours; and one in three families with children is what she calls a "split-shift couple", with one partner working chiefly outside normal daytime hours.

The initial regulation of opening hours was mostly intended to create a common day of rest (often Sunday) and to prevent employees from being forced to work excessive hours. Trade unions and shop employees have sometimes opposed the liberalization of opening hours, fearing that employees might be forced to work longer hours. However, in many countries working hours are already regulated in labour legislation. Additional legislation on shop opening hours to prevent employees from working long hours may thus not be required (see box 3.2).

Another important concern for employees is whether or not firms are willing to pay a premium for evening and weekend hours, which depends primarily on the relative bargaining strength of employees and firms in the distribution sector. The low degree of organization and the large share of part-time and informal labour in this sector suggest that the employees' bargaining strength may be relatively low.

Box 3.2
The new collective agreement of Carrefour France

At Carrefour France (53,000 employees), the statutory introduction of a 35-hour week in 1999 has given the trade union and management the opportunity to overhaul completely the enterprise-level collective agreement. This fresh start has allowed them, at the same time, to introduce a gradual cut in working time, create 1,000 jobs and considerably upgrade the concept of part-time work. For the employees themselves, this has implied that from 1 June 1999 onwards, their working time was reduced to 35 hours (instead of 35¾ hours of actual work) and they obtained a sixth week of paid annual leave. Part-time employees (35 per cent of staff) were granted, amongst other things, a 2.1 per cent pay increase. The working time of managers will henceforth be calculated in days; managers will now work 214 days a year, which gives them an additional week's leave. Extra days worked will be paid at a premium rate or into a time-savings account. A staggered time schedule (from 29 to 41 hours per week) will be introduced to take account of peak and slack hours in the stores to ensure there is a balance of 35 hours on average per week over the year. Employees will be given, three weeks in advance, a detailed "schedule of duties" to be divided among them in accordance with their preferences. For its part, the management will be able to stagger their work schedules; they also obtained an overall freeze in pay increases in 1999 and a freeze (for those already employed) or the elimination (for new employees) of the seniority bonus which only existed in some stores.

Source: Les Echos (Paris), 1 Apr. 1999, p. 21.

A survey of about 5,000 retail workers in the United Kingdom suggests that a majority of Sunday workers in the retail sector see no disadvantages to working on Sunday. Most choose to do so for financial reasons and about 70 per cent receive at least one and a half the normal pay rates for working that day. This, at least, was partly the case for the food segment of the market; however, fewer Sunday workers in do-it-yourself (DIY) stores received premium payments -- or received lower premiums. A substantial proportion (34 per cent) of these workers were on part-term contracts of less than ten hours a week, suggesting that they only worked on Sundays. A follow-up study showed that managers of these stores were more dissatisfied with Sunday working than most of the other categories of workers. For managers, Sunday opening often meant extra work, most working one in three Sundays. Many managers felt "forced" to work on Sunday under contract or career pressures.

In the United States where regulations concerning licences or opening hours do not restrict the operation of stores, more than one-half of all cashiers are on part-time schedules. Hours of work often vary depending on the needs of the employer. Generally, cashiers are expected to work weekends, evenings, and holidays to accommodate customers' needs. However, because of this, many employers offer flexible schedules. For example, full-time workers who work on weekends may receive time off during the week. Because the holiday season is the busiest time for most retailers, many employers restrict the use of vacation time from Thanksgiving until the beginning of January. Most of the working conditions of the cashiers apply also to retail sales workers.

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Updated by BR. Approved by OdVR. Last update: 28 September 2000.


	Country
	Argentina	Brazil	Paraguay	Uruguay

1. GDP	5.5	2.8	2.7	4.2
2. Labour force	3.0	2.7	5.6	1.9
3. Total employment	1.8	2.5	5.6	1.4
4. Employment in the commerce sector	0.8	4.8	n.a.	4.5
5. Non-agricultural productivity	3.6	0.3	-2.7	2.8
6. Non-agricultural informal sector¹	1.6	1.9	1.4	0.3
¹ Annual growth of informal employment share. n.a. = not available. Source: Panorama Laboral '98, ILO, Lima, Peru.


	Industry	Per cent

	Food processing	9.94
	Clothes/shoes	10.41
	Metal fabrication	9.94
	Wood products	5.99
	Handicrafts	3.15
	Construction	4.26
	Garages	1.73
	Trade/restaurants	40.22
	Transport	4.10
	Services	8.99
	Other	0.47
	NS	0.79
	Total	100.00
Source: Uganda National Manpower Survey (table 4.42), 1989.


Company	Global 500 revenues rank	Revenues		Profits
Company	Global 500 revenues rank	$ millions	% change from 1996	$ millions	% change from 1996

McKesson Corporation	174	20 857.3	32.8	154.9	15.7
Supervalu Inc.	222	17 201.4	3.9	230.8	31.8
Franz Haniel & Cei. GmbH	226	16 907.1	0.9	177.6	-13.6
Ingram Micro Inc.	233	16 581.5	37.9	193.6	75.0
Fleming Companies Inc.	254	15 372.7	-6.8	25.4	-4.9
Sysco Corporation	281	14 454.6	7.9	302.5	9.2
Bergen Brunswig Corporation	387	11 660.5	17.3	81.7	11.1
Cardinal Health Inc.	415	10 968.0	23.8	181.1	61.9
Edeka Zentrale	465	9 887.3	-8.3	46.8	19.2
Total	-	133 890.4	-	1 394.4	-
Source: Fortune Magazine (New York).


Asia Week 1,000 rank	Company	Country	Main business	Sales	Net profit	Assets	Equity	Market capitaliz- ation

29	Ito-Yokado	Japan	Retailing	25 867	582.4	16 318	7 756	22 820
62	Coles Myer	Australia	Retailing	14 305	289.8	4 983	1 872	4 964
74	Woolworths	Australia	Retailing	12 867	207.9	3 039	1 021	3 880
106	Takashimaya	Japan	Department stores	10 269	68.4	7 312	1 775	2 439
130	UNY	Japan	Department stores	8 702	106.1	5 123	1 792	3 275
136	Mitsukoshi	Japan	Department stores	8 413	-320.6	5 165	276	1 302
152	Daimaru	Japan	Department stores	7 251	11.4	3 603	587	619
231	Seibu Dept. Stores	Japan	Department stores	5 073	4.2	3 736	98	-
241	Isetan	Japan	Department stores	4 880	21.2	4 350	990	2 116
267	Marui	Japan	Department stores	4 531	158.9	6 011	3 265	6 316
279	Tokyu Dept. Store	Japan	Department stores	4 312	-127.1	3 827	597	232
284	Matsuzakaya	Japan	Department stores	4 214	-29.7	2 167	637	887
349	Hankyu Dept. Stores	Japan	Department stores	3 445	9.6	2 804	833	1 144
369	Nagasakiya	Japan	Clothes retailing	3 226	-35.0	3 144	9	158
484	Kintetsu Dept. Store	Japan	Department stores	2 491	4.8	1 401	106	-
510	Seven-Eleven Japan	Japan	Convenience stores	2 371	504.2	4 877	3 514	29 947
512	Parco	Japan	Fashion stores	2 356	6.8	1 846	429	242
561	Best Denki	Japan	Electronics retailing	2 202	-29.4	1 550	788	884
573	York-Benimaru	Japan	Retailing	2 166	52.3	839	655	1 419
650	Lotte Shopping	Korea, Rep. of	Department stores	1 906	21.4	2 137	304	-
652	Joshin Denki	Japan	Electronics retailing	1 904	-27.5	1 157	489	104
673	Chiyoda Co.	Japan	Shoe retailing	1 853	20.9	1 261	531	252
723	Deodeo Corp.	Japan	Electronics retailing	1 735	-97.9	1 358	518	422
724	East Japan Kiosk	Japan	Retailing	1 734	-8.2	n.a.	n.a.	-
739	Tobu Dept. Stores	Japan	Department stores	1 689	n.a.	n.a.	471	-
743	Amway Japan	Japan	Household goods retail	1 681	191.1	911	524	1 646
773	Odakyu Dept. Store	Japan	Department stores	1 615	-32.6	n.a.	n.a.	-
807	Senshukai Co.	Japan	Retailing	1 545	3.5	1 046	526	290
829	Sogo	Japan	Department stores	1 498	5.2	3 018	341	205
834	Cécile	Japan	Mail-order sales	1 482	-21.7	807	350	297
899	Aoyama Trading	Japan	Clothes retailing	1 338	82.2	2 155	1 835	1 765
917	Daikuma	Japan	Discount stores	1 308	13.8	493	n.a.	-
918	Keiyo	Japan	Household goods retail	1 308	5.7	792	350	192
926	Marutomi Group	Japan	Shoe retailing	1 291	-4.1	824	181	38
987	Nagoya Mitsukoshi	Japan	Department stores	1 193	8.2	n.a.	n.a.	-
n.a. = not available. Source: Asia Week.


Name of company	Country of origin	Number of employees

Wal-Mart Stores	United States	825 000
Sears Roebuck	United States	296 000
J.C. Penney	United States	260 000
K-Mart	United States	258 000
Kroger	United States	212 000
Metro	Germany	177 470
Jardine Matheson	United States	175 000
Dayton Hudson	United States	149 500
Coles Myer	Australia	148 346
Safeway	United States	147 000
Koninklijke Ahold	Netherlands	142 020
Limited	United States	137 100
Home Depot	United States	130 000
Tesco	United Kingdom	124 172
Carrefour	France	123 437
American Stores	United States	121 000
May Department Stores	United States	116 000
Federated Department Stores	United States	114 700
J. Sainsbury	United Kingdom	114 042
Delhaize "Le Lion"	Belgium	107 208
Ito-Yokado	Japan	102 617
Daiei	Japan	100 000
Woolworths	Australia	100 000
Winn-Dixie Stores	United States	95 000
Karstadt	Germany	94 463
Albertson's	United States	94 000
Toys 'R' Us	United States	93 000
CVS	United States	90 000
George Weston	Canada	83 000
Groupe Auchan	France	81 000
Publix Super Markets	United States	76 750
Asda Group	United Kingdom	76 619
Walgreen	United States	70 500
Groupe Pinault-Printemps	France	63 301
Lowe's	United States	58 504
Migros	Switzerland	57 051
Republic Industries	United States	56 000
Great Atlantic & Pacific Tea	United States	52 400
Promodès	France	50 781
Safeway	United States	50 580
Groupe Casino	France	49 990
Kingfisher	United Kingdom	49 225
Marks & Spencer PLC	United Kingdom	48 200
Costco	United States	42 750
Otto Versand	Germany	41 476
MYCAL	Japan	38 322
Jusco	Japan	41 177
Inchcape	United Kingdom	37 889
Seiyu	Japan	19 752
Takashimaya	Japan	17 101
Source: Fortune Global 500 (1998).


All countries		Canada	Europe						Latin America and other west. hemisphere	Other countries
			Total	Of which:						Total	Of which:
				France	Germany	Netherlands	Switzerland	UK			Australia	Japan

Wholesale	14 977	746	8 491	741	535	857	774	926	2 071	3 669	658	1 075
Retail trade	1 133	138	761	(D)	251	10	30	100	57	177	(D)	4
(D) Suppressed to avoid disclosure of data of individual companies. Source: World Trade Organization (WTO). Data from the survey of current business, 1997, quoted in WTO: Distribution services, Background note by the secretariat, doc. S/C/W/37, Geneva, 1998.


	1996	1997	1998

Total market sales	11 500	12 075	12 728
Locally owned sales	7 300	7 665	8 048
Total foreign sales	4 200	4 410	4 680
US-owned sales	2 100	2 205	2 315
Exchange rate: US$1.00=R$1.17 (June 1998). Source: Brazil Franchise Census, specialized trade publications; trade contacts.


	1995	1996	1997 (estimate)

Domestic franchises	318	350	385
Foreign franchises	212	230	255
US franchises	106	115	128
Total	530	580	640
Source: Hungarian Franchise Association.


Germany	Italy	France	United Kingdom	United States

OBI (household, hobby), Nord-West-Ring (shoes wholesale), Family Frost (frozen food), Zimbo Czechia (meat, delicatessen)	Stefannel (fashion boutiques), Versace (fashion boutiques), Ungaro (fashion boutiques), Versus (fashion boutiques), Sergio Rossi (fashion boutiques)	Yves Rocher (cosmetics), Kookai, (clothing) Lacoste (clothing)	Marks & Spencer (clothing), Mothercare (mother and baby clothing and accessories), Next (family fashion)	McDonald's, Kentucky Fried Chicken, Pizza Hut, TGIFriday's, Dunkin Donuts, Future Kids (computer training for children), Holiday Inn, Choice Hotel International, Rentex-Hertz
Source: The Central and Eastern European Business Information Center (Washington).


Industry division	Acquired establishments				Non-acquired establishments
	1990 employment	Net change	Job gains	Job losses	1990 employment	Net change	Job gains	Job losses

Manufacturing	1 360 870	-5.6	16.9	-22.5	15 313 215	-2.7	14.1	-16.9
Transportation, communications, public utilities	244 726	0.8	25.1	-24.3	4 342 876	-0.8	18.6	-19.4
Wholesale trade	287 712	-2.7	22.3	-25.0	4 799 006	2.4	21.1	-18.7
Retail trade	951 737	-12.6	12.7	-25.3	14 542 342	-2.6	15.1	-17.7
Finance, insurance, real estate	644 857	-14.6	19.6	-34.2	4 695 374	-3.5	18.9	-22.4
Services	1 622 009	7.8	29.4	-21.6	22 560 140	7.2	22.6	-15.5
Other	135 696	-3.8	26.8	-30.6	4 720 166	-5.5	22.5	-27.9
All industries	5 247 607	-3.3	21.3	-24.6	70 974 100	0.7	18.6	-18.0
Source: US Small Business Administration: Office of Advocacy.


Industry division	Establishments acquired		Employment acquired
Industry division	Number	Per cent of industry	Number	Per cent of industry

Manufacturing	8 371	3.1	1 360 870	8.2
Transportation, communications, public utilities	5 090	3.4	244 726	5.3
Wholesale trade	9 372	2.9	287 712	5.7
Retail trade	29 291	3.1	951 737	6.1
Finance, insurance, real estate	22 473	6.4	644 857	12.1
Services	22 434	1.6	1 622 009	6.7
Other industries	1 893	0.5	135 696	2.8
All industries	98 924	2.6	5 247 607	6.9
Source: US Small Business Administration: Office of Advocacy.


Occupation and industry of lost job	Total number (thousands)	Per cent distribution by employment status in February 1998
Occupation and industry of lost job	Total number (thousands)	Total	Employed	Unemployed	Not in labour force

Managerial and professional specialty	1 708	100.0	82.6	8.7	8.8
Technical, sales and administrative support	2 650	100.0	75.5	9.8	14.7
Service occupations	853	100.0	69.2	16.5	14.3
Precision production, craft and repair	924	100.0	81.8	10.7	7.5
Operators, fabricators and labourers	1 510	100.0	71.1	15.1	13.8
Farming, forestry and fishing	138	100.0	73.2	18.8	8.9
Agricultural wage and salary workers	114	100.0	79.5	15.9	8.2
Non-agricultural wage and salary workers	7 634	100.0	76.4	11.5	12.1
Private wage and salary workers	7 189	100.0	76.3	11.7	12.0
Construction	636	100.0	79.5	15.3	5.2
Manufacturing	1 782	100.0	74.6	11.3	14.2
Durable goods	992	100.0	78.6	10.8	10.6
Non-durable goods	791	100.0	69.5	11.8	18.7
Transportation and public utilities	524	100.0	81.0	7.7	11.3
Wholesale and retail trade	1 882	100.0	74.8	10.4	14.8
Wholesale trade	347	100.0	79.8	10.1	10.1
Retail trade	1 535	100.0	73.6	10.5	15.9
Finance, insurance and real estate	511	100.0	77.9	11.3	10.8
Services	1 815	100.0	77.0	12.9	10.1
Government workers	444	100.0	77.1	8.5	14.4
Source: Bureau of Labor Statistics (BLS).


Industry of lost job	Total	Re-employed in February 1998
		Part time	Full- time total	Earnings of the full-timers relative to those of lost job				Self- employed or family workers
		Part time	Full- time total	20% or more below	Below but within 20%	Equal or above but within 20%	20% or more above	Self- employed or family workers

Total who lost full-time wage and salary jobs	2 413	265	1 984	417	334	501	426	164
Mining	16	-	11	4	2	2	-	5
Construction	126	8	109	23	17	36	11	9
Manufacturing	691	88	564	140	72	132	106	39
Durable goods	403	47	340	71	55	85	65	15
Primary metal industries	15	2	10	4	2	2	2	3
Fabricated metal products	55	6	49	15	9	6	8	-
Machinery, except electrical	77	10	62	16	10	17	12	5
Electrical machinery	59	4	55	5	14	15	6	-
Transportation equipment	72	13	59	8	9	18	13	-
Automobiles	25	2	22	6	4	7	4	-
Other transportation equipment	47	11	37	2	5	11	9	-
Nondurable goods	289	41	224	69	17	47	41	24
Transportation and public utilities	183	15	161	58	30	23	24	8
Wholesale and retail trade	508	58	406	84	65	102	103	44
Finance, insurance, and real estate	202	23	171	33	43	52	27	8
Services	541	61	431	59	81	112	127	49
Professional services	328	54	253	38	39	60	90	22
Other service industries	213	8	178	21	42	52	38	28
Public administration	85	7	76	4	13	26	20	2
Source: BLS.


Country	Growth in the distribution sector, 1979-94
Country	Value added	Employment	Labour productivity

United States¹	3.84	1.76	2.04
Japan	4.74	0.58	4.14
Germany	2.22	0.96	1.24
France	1.84	0.18	1.65
Italy	2.47	1.46	1.00
United Kingdom	2.53	0.72	1.80
Canada	2.86	1.51	1.33
Australia	1.94	1.97	-0.02
Austria²	3.13	1.31	1.80
Belgium	0.82	-0.11	0.93
Czech Republic	n.a.	3.13	n.a.
Denmark	2.20	-0.96	3.19
Finland	0.89	-1.10	2.02
Greece	1.61	3.15	-1.50
Hungary	n.a.	n.a.	n.a.
Iceland	n.a.	1.51	n.a.
Ireland	n.a.	1.70	n.a.
Korea, Republic of	7.42	4.50	2.80
Luxembourg	3.46	1.40	2.02
Mexico	1.12	1.28	-0.16
Netherlands	3.42	1.61	1.79
New Zealand	n.a.	n.a.	n.a.
Norway	n.a.	0.40	n.a.
Poland	n.a.	n.a.	n.a.
Portugal	1.55	0.42	1.13
Spain	1.93	1.36	0.56
Sweden	2.79	-0.64	3.45
Switzerland	n.a.	n.a.	n.a.
Turkey	n.a.	n.a.	n.a.
n.a. = not available. 1 Distribution and retail trade include restaurants. ² Includes machinery and equipment rental and leasing. Source: World Trade Organization.


Sector	Member States with commitments (% share of GDP of all member States)	Member States with full commitments on Modes 1, 2 & 3	Cross-border supply (Mode 1)			Consumption abroad (Mode 2)			Commercial presence (Mode 3)
Sector		Member States with full commitments on Modes 1, 2 & 3	Full	Limited	Unbound	Full	Limited	Unbound	Full	Limited	Unbound

Commission agents	21 (86%)	2 (0.04%)	3 (0.04%)	14 (97%)	3 + 1 (3%)	3 (0.04%)	16 (98%)	1 + 1 (2%)	2 (0.04%)	19 (99.96%)	0 (0%)
Wholesale trade	34 (92%)	4 (0.06%)	9 (2%)	19 (93%)	5 + 1 (5%)	11 (35%)	18 (60%)	3 + 1 (5%)	5 (0.1%)	29 (99.9%)	0 (0%)
Retailing	33 (92%)	1 (0.004%)	6 (2%)	19 (92%)	7 + 1 (6%)	7 (2%)	22 (93%)	4 + 1 (5%)	1 (0.004%)	30 (99.98%)	1 + 1 (0.02%)
Franchising	23 (89%)	1 (0.03%)	10 (4%)	13 (96%)	0 (0%)	10 (5%)	11 (92%)	1 + 1 (3%)	1 (0.03%)	20 (99.9%)	1 + 1 (0.06%)
Notes: Full: complete sectoral coverage, no market access or national treatment limitations. Limited: incomplete sectoral coverage or market access/national treatment limitations. Unbound: both market access and national treatment unbound or market access unbound. Unless otherwise indicated (as in the second column), percentages for each subsector are calculated as a share of GDP of all member States with commitments in the sector. Source: WTO, Distribution services, 1998, op. cit.


Sector	Limitations on sectoral coverage applying to Modes 1, 2 & 3	Cross-border supply (Mode 1)			Consumption abroad (Mode 2)			Commercial presence (Mode 3)
		Only horizontal limitation	Sector-specific limitation		Only horizontal limitation	Sector-specific limitation		Only horizontal limitation	Sector-specific limitation
		Only horizontal limitation	Market access	National treatment	Only horizontal limitation	Market access	National treatment	Only horizontal limitation	Market access	National treatment

Commission agents	14 (46%)	1 (31%)	1 (6.8%)	0 (0%)	2 (2.1%)	0 (0%)	0 (0%)	3 (31%)	1 (1.3%)	1 (0.7%)
Wholesale trade	23 (98%)	0 (0%)	3 (38.5%)	1 (2.4%)	1 (0.05%)	1 (29%)	0 (0%)	7 (3.1%)	8 (48.5%)	1 (0.05%)
Retailing	24 (98%)	1 (0.2%)	4 (36%)	3 (35%)	2 (0.3%)	0 (0%)	1 (0.6%)	7 (2%)	8 (21.9%)	1 (0.6%)
Franchising	11 (60%)	4 (33%)	4 (6%)	1 (3%)	4 (32%)	0 (0%)	0 (0%)	11 (39%)	4 (4%)	0 (0%)
Note: Some member States have maintained limitations on sectoral coverage as well as horizontal and sector-specific limitations. The figures in the rows do not, therefore, add up to the number of member States with limitations. Percentages for each subsector are calculated as a share of GDP of all member States with commitments in the sector. Source: WTO.