Working Party on the Social Dimensions of the Liberalization of International Trade
FIRST ITEM ON THE AGENDA
Continuation of discussions concerning the
programme of work and mandate of the Working Party
(b) Progress report on country studies on the
social impact of globalization
1. The Working Party suggested that the Office undertake a series of case-studies to analyse the social impact of globalization and trade liberalization in a number of countries.(1) This document informs the Working Party on progress to date.
2. As stated in the document presented to the Working Party in March 1997,(2) the Director-General wrote to some 15 member States to inquire about their interest in the project. Eight of them have confirmed their participation: Chile, Jamaica, Jordan, the Republic of Korea, Mauritius, Poland, South Africa and Switzerland. The possible participation of two other countries (Bangladesh and Venezuela) is being discussed. The Working Party welcomed this result. The very positive response rate and diversity of countries are encouraging.
3. In view of the interest that has been expressed in this project and the specificity of the work involved, the Director-General has set up a special team. This team has begun to contact the countries concerned with a view to undertaking an exploratory mission. An analytical framework has been prepared in order to ensure thematic unity of the studies and, as far as possible, a certain degree of comparability. This framework specifies the purpose of the project and the subjects on which the studies will focus.
Purpose of the project
4. The purpose of the exercise is to make up for the paucity of precise data, which has fuelled controversy, and to help the Members of the Organization to achieve a clearer focus in taking a stand on this issue. Efforts will therefore be made to provide the Governing Body with the results of detailed analyses of the social impact of globalization and to promote dialogue on this subject. As was recalled in the March 1997 document,(3) special attention will be paid to conditions and measures (promoted by the public authorities or negotiated by the social partners) which have contributed to enhancing the benefits of globalization while containing the social costs.
5. The final output of the exercise would consist in country studies on each of the countries concerned as well as a synthesis report. These would be submitted for discussion at a Governing Body session in 1999. The synthesis report prepared by the special team would focus chiefly on the main results of the country studies but would also draw on the results of other authoritative studies in this field. Depending on the progress achieved, a progress report may be presented for information to the Governing Body session in autumn 1998.
6. The studies will be drafted by the special team in close collaboration with the countries and with the participation of the multidisciplinary teams and field offices. A preliminary version of each study should be submitted for tripartite discussion in the country concerned.
Subjects covered by the studies
7. It is proposed that a common analytical framework be used for the country studies; before becoming operational the framework should be discussed with the authorities of the countries concerned. The framework focuses on three subjects.
(a) Trends since the beginning of the 1980s in certain
indicators measuring the globalization process on
the one hand and social progress on the other
8. It would be useful to shed some light on the debate by presenting some indicators on the nature of globalization. Since this term is somewhat vague and sometimes gives rise to confusion, it is suggested that the focus be on the dimensions of the process that are most easily measured and grasped. For each country, therefore, trends in international trade and foreign investment flows since the beginning of the 1980s will be examined. The choice of this period is justified by the fact that during that decade many countries liberalized their legislation on foreign trade and investment. A number of social indicators will, of course, also be presented for the same period: employment, unemployment, wages, poverty, wage distribution according to level of education and sex, and conventional indicators of conditions of work, in particular. The situation of each country with respect to the core labour standards will be briefly recalled.
(b) Impact of international trade and foreign investment
9. There are many theoretical publications on the subject of the social impact of trade liberalization. It appears that under certain conditions this can have the effect in developed countries of an improvement in the employment situation and relative wages of skilled workers, to the detriment of low-skilled workers. The reverse apparently occurs in the less developed countries. However, a number of authors emphasize the key role of another aspect of globalization, namely technological progress, and the complex manner in which it interacts with trade. Technological progress tends perhaps to improve the relative situation of skilled workers in all countries, including the least developed ones. This is why globalization, albeit a potential source of growth in overall wealth, is accompanied by worsening inequality in the countries involved in the process. The Trade and Development Report, 1997, published by UNCTAD, shows that this is a very real risk.
10. A quantified econometric analysis of the causalities at work is beyond the scope of this project. Moreover, it is difficult to isolate the impact of globalization from other factors such as macroeconomic policy and structural change. All of this means that the conclusions drawn will have to be tempered with a certain amount of modesty. Nonetheless, simple comparisons based on conventional methodologies may prove useful. For example, the studies would briefly examine the nature of foreign investment-exporting and/or -receiving sectors. Trends in wages, productivity, employment and conditions of work in these sectors would be compared to those of the rest of the economy in order to show how far the sectors affected have benefited from the trade liberalization process. It would also be interesting to make an international comparison in order to verify whether the convergence predicted by theory has in fact occurred. An attempt will also be made to assess the impact of globalization on importing sectors. Lastly, it would be interesting to present, to the extent possible, the results of studies that have already been published on the impact of globalization on conditions of employment and methods of work organization in certain sectors.
11. An effort will also be made to analyse the knock-on effects of the affected sectors on other sectors. For example, it has been suggested that the sectors benefiting from globalization characteristically have a more highly skilled workforce compared to that of unaffected sectors. In this case, the effect would spread to other skilled workers, so that skilled workers in general would benefit from globalization to the detriment of unskilled workers, resulting in worsening inequality, even if the wealth of the economy as a whole increased. In more general terms, the studies will discuss the situation of certain categories of society who face the risk of remaining on the sidelines of globalization, for example persons with a low level of education or the inhabitants of certain rural areas.
(c) The role of institutions and public authorities
12. Some studies emphasize the influence of labour market institutions on the complex interrelationship between trade and technological progress, on the one hand, and wages and employment, on the other. For example, the vocational training system facilitates the re-employment of displaced workers, but many countries may find it difficult to bear the financial cost of such a system and it is therefore important to identify training measures that are cost-effective and properly targeted. Moreover, it is probably easier to introduce new technologies in a climate of social stability. Lastly, to ensure that the positive effects of globalization are not confined to exporting sectors, barriers to investment in these sectors should be lifted.
13. The studies will also look at government responses to globalization in the countries concerned. For example, faced with growing wage inequalities or precariousness, governments may have sought to strengthen or adapt the social safety net or may have amended legislation. As part of a longer-term strategy, they may have used other means, such as training measures. From this standpoint, it would be useful to identify examples of measures that have succeeded in meeting the requirements of a globalizing economy while mitigating the risk of marginalization of certain categories of society.
Geneva, 16 October 1997.
1. See documents GB.265/WP/SDL/1/1 (March 1996) and GB.268/WP/SDL/D.1 (March 1997).
2. Document GB.268/WP/SDL/1/1.
3. Document GB.268/WP/SDL/1/1.