GENEVA (ILO News) - The social dimension of globalization will once again dominate the agenda of the International Labour Organization's Governing Body meeting for its 273 ^rd session over the next two weeks, in Geneva. Among the items under discussion: private sector initiatives addressing social issues, a first set of studies on the impact of globalization on individual economies - in this case, Chile, Mauritius and the Republic of Korea -, and the follow-up to the adoption by the International Labour Conference last June of the ILO Declaration on fundamental principles and rights at work.

Private sector social initiatives

Increasing calls on businesses to be accountable for the social and environmental impact of their operations and the need for enterprises to protect their image have, in recent years, led to numerous private sector initiatives designed to display commitments to good labour practices and to influence the behaviour of consumers and business partners. Such voluntary methods include codes of conduct, labelling programmes and various investor initiatives which together "constitute an important element in the international debate on the social dimensions of economic development", according to a background document submitted to the Governing Body ¹ .

Codes of conduct - written policies, or statements of principles, outlining a commitment to particular business conduct - originated in their modern forms in the early XX ^th century. Those of concern address labour practices including "forced or child labour, employment discrimination, freedom of association and collective bargaining, levels of wages, occupational health and safety, and other workplace-related issues". The number of codes of conduct has multiplied in the 1990s largely in response to pressure from non-governmental organizations (NGOs), workers' organizations , shareholders and consumers - in the form, at times, of boycotts and negative publicity campaigns - as well as from the media.

"Most of the codes which have propelled the topic into the spotlight are operational codes in large retailing and manufacturing operations engaged in international trade", the document points out. The world's largest multi-national enterprises (MNEs), in particular US-based MNEs in the textile, clothing and leather industries, "have led the trend toward usage of codes as a means of responsible sourcing".

Of some 215 codes studied by the ILO, three quarters contain provisions on occupational safety and health while two thirds address the issue of freedom from discrimination in employment. Slightly less than half concern child labour and roughly one quarter prohibit forced labour, sometimes including prison labour. Approximately 40% relate to wage levels but only 15% make any references to freedom of association and collective bargaining. How good labour practices are defined for any issue selected is a matter of choice; in many cases, the self-made definitions differ from principles underlying fundamental labour standards.

Implementation can be problematic. "Not infrequently, codes launched with much publicity in an import country are unknown, unavailable or untranslated at producing facilities", says the ILO document adding that the absence of standardized principles and procedures make it very difficult for consumers and investors to assess the value of the claims formulated and feeds suspicions about internal monitoring processes.

Labels used on products or their packaging by companies to promote their image are another way to send messages to potential buyers and business partners. Numerous new labels have flooded the market since the 1970s with claims relating to animal rights, to the environment and, more recently, to social issues such as child labour.

While some social labels have been developed by individual enterprises, many are administered independently by consumer groups, NGOs, trade unions, enterprise associations or any combination thereof. Some apply to specific goods such as hand-knotted rugs, soccer balls or cut flowers. Others are more general and cover different products in the clothing industry, for example, or agriculture. "Labels", says the document, are more likely to concern "products bought and consumed publicly or associated with social identity (such as clothing, footwear, food and luxury goods)".

"Rooted in the concerns of consumers, media and civil society campaigns, many social labelling programmes target consumers in developed countries and producers in developing countries", notes the document. "The programmes appear primarily in export markets involving retail trade, and with market niche products, affluent consumers and eye-catching circumstances".

Social labelling programmes have different effects, "both helpful and adverse", the document suggests. They may serve to improve working conditions or compliance with labour laws. Some have raised funds for education programmes for former child workers. But they can also place an added financial burden on participating enterprises and threaten jobs. Some child labour labelling initiatives have drawn criticism for allegedly driving child workers into less formal sectors where they face even greater exploitation.

"What appears evident is that the market alone, without a coherent international framework, has been ineffective to date in developing uniform and generally accepted standards that could help promote benefits and prevent the risks of labelling efforts", warns the ILO document. Such internationalized standards, it argues "could prevent confusion among consumers arising from the diversity of criteria used, lack of clarity of meaning among various labels, risk of lost credibility with unverifiable claims, and chance of illegality under national and international regulation".

In certain developed countries, investor initiatives aimed at promoting social change while maintaining good economic returns have grown in significance, forming what is known as the socially responsible investment (SRI) movement.

SRI makes its weight felt through several mechanisms: Investment fund screening whereby investment or divestment of publicly traded stock from investment portfolios is based on social performance criteria, and shareholders initiatives designed to influence company behaviour. In the United States today, "more than US$ 1 trillion is estimated to be under SRI management of some kind, of which US$ 529 million are invested in socially screened portfolios, including mutual funds". And the phenomenon is growing rapidly: socially screened portfolios in that country grew by a factor of 227% between 1995 and 1997. The investors involved tend to be "public retirement and pension funds, colleges and universities, religious groups, and social investment funds including mutual funds".

In some countries, shareholder initiatives focusing on labour practices also appear to be growing in numbers. Action may include the filing of shareholder resolutions, submitting questions at annual shareholders meetings, publishing so-called shadow annual reports or engaging in various forms of disruption. "Formal shareholder activism reached a record level in 1996 in the United States" with more than 650 shareholder-sponsored resolutions recorded and, to a lesser extent, in Japan (54 resolutions) and Germany (39).

"Private initiatives aimed at promoting certain principles and social objectives have become a universal reality", says the document pointing however at limitations that are inherent in their very nature:

• A lack of transparency and of participation by the supposed beneficiaries.
• The selective nature of the issues addressed, reflecting the variable concerns of the public.
• The wide variety of methods of implementation, including supervision and inspection, which make it virtually impossible to verify the credibility of the claims put forward or to assess their concrete impact.

But whatever their limitations may be, private sector initiatives are proliferating, giving rise "to a growing need for an external source of reference and legitimacy", the document concludes, leaving it to the Governing Body's Working Party on the Social Dimensions of the Liberalization of International Trade to consider whether, and to what extent, the ILO should respond.

Country Studies

The Working Party will also discuss a series of country studies designed to analyse the social impact of globalization. Studies on Chile, the Republic of Korea and Mauritius have been completed while studies on Bangladesh, South Africa and Switzerland are under way. Summaries of the completed studies will be presented at the Governing Body.

The first three studies show that while globalization poses significant challenges in the economic and social spheres, no country is lacking the political will to continue with the liberalization of trade. Globalization in any case is not thought to be the main reason for social problems, which can be more often attributed to domestic causes, notably access to education and training.

According to the first study, Chile provides one of the most remarkable examples of rapid integration into the world economy. Since the mid-1980s, Chile's GDP has grown uninterruptedly at a healthy annual average of 7%. With a favourable macroeconomic environment characterized by low inflation, the Chilean economy has created over 1.5 million jobs since the mid-1980s bringing the unemployment rate to under 6%. During the same period, poverty has been halved to one quarter of the population and health indicators point to substantial overall improvements.

The Chilean experience shows that trade liberalization can stimulate job creation while at the same time raising national income. However in spite of its considerable successes, the study notes that income distribution in Chile is relatively uneven by international standards, with the richest one-fifth of the population earning 57% of national income and the poorest one-fifth a mere 4%. Recent trends point to an aggravation of inequalities and the distribution of opportunities is also very unequal as a result of an educational system stratified by social origin. Policies need to address this problem, the study concludes, otherwise the Chilean model may become trapped in a low-productivity logic that could limit the country's economic potential and endanger social stability.

If access to education appears as a potential shortcoming in Chile, it is cited as a demonstrated asset in the Republic of Korea . Until the end of 1997, the Republic of Korea was widely regarded as one of the most spectacular success stories of modern economic history. Its exports have risen from negligible levels in the 1960s to a highly noticeable level of 2.5% of total world exports in recent years.

The causes for Korean success in international trade include a government-led export strategy and consistently rising worker productivity, which is mainly attributable to education. The study says that "education has traditionally been a major priority for the country." Today the country boasts educational levels that surpass some developed countries. In addition, the ILO study says that education has helped to alleviate the pressures towards the labour-market and income inequality typically associated with rapid economic growth, technological change and trade liberalization.

However, the downside of the Korean model came into sharp focus in the aftermath of the Asian financial crisis, which demonstrated that certain aspects of the globalization process thus far were likely to prove unsustainable, including a lack of corporate transparency, reliance on short-term capital flows for finance of long-term investments and, importantly, repression of basic labour rights until recently.

Following an IMF funded stabilization package and commitments to undertake structural adjustment, the Government and society are in the midst of large-scale industrial restructuring and reform of banks, social security and the labour market. The ILO study examines a range of policy issues that arise in a context where the objective is to speed up the adjustment while making the globalization process socially sustainable. Among these issues are: improving the training system; reforms of labour law to ensure respect for trade union rights; improving the social safety net; helping financially troubled but nonetheless viable industries; strengthening labour relations at the enterprise level.

The Korean study also shows that, in the wake of the Asian crisis, the creation of a national tripartite committee helps to create consensus among government, employers and workers on the most urgent measures, while paving the way for a growth path based on an open economic system which is socially sustainable.

Mauritius has been another success story in the past decade and a half - it has even been referred to as an African miracle. All indicators since the early 1980s point to a society that has vastly improved its living standards while extending socio-economic benefits such as education, health care and housing to virtually the entire population. The ILO analysis attributes much of the progress to the country's functioning democracy and the stable social climate that prevails there. It adds that "there is little doubt that international trade and global markets played an important, positive role in Mauritius' recent success." Unemployment rates have declined sharply since the 1980s and trade-related sectors accounted for most of the new jobs.

However, the ILO study says that there are now strains in the labour market possibly linked to an exhaustion of the Export Processing Zone strategy operating since the early 1970s. The unemployment rate has risen in the 1990s, to 6% according to official government estimates, and to over 10% based on the international definition of unemployment.

Finally, some general preliminary lessons emerge from these studies. In particular, core labour standards and certain social institutions, such as a well-functioning social safety net and training, appear to be appropriate policy responses to globalization, not only from the social point of view, but for reasons of basic economic efficiency.

ILO Declaration and its Follow up

Following the adoption last June by the International Labour Conference of the ILO Declaration on fundamental principles and rights at work and its follow up, the Governing Body will examine the measures and provisions needed to give effect to the Declaration's follow up. The follow-up has two aspects. One is an annual review of countries that have not ratified one or more of the Conventions relating to the four categories of fundamental rights ² . The other is a global report, which will deal, each year, with one of these four categories of rights in turn for all countries, irrespective of whether or not they have ratified the Conventions relating to these rights.

The crucial question for the current Governing Body "is how to introduce as quickly as possible (that is to say, during the biennium 2000-2001) the two components of the follow up." The Governing Body will debate various modalities and will be asked to decide whether it wishes to begin the annual reviews from 1999 onwards and to produce the first global review for the year 2000. It will also be asked to decide on the subject area to be treated in these first implementations of the follow-up.

Employment Policy Reviews and Training

On the Governing Body's Committee on Employment and Social Policy schedule are a series of employment policy reviews, which have been established to provide support to member States in the design and formulation of policies and programmes leading to full employment and greater respect for workers' basic rights.

Employment policy reviews are under way for developing countries (Barbados, Brazil, Côte d'Ivoire, Kenya, Pakistan and Thailand), a transition country (Ukraine) and OECD member countries (Austria, Denmark, Ireland and the Netherlands). The last four countries were selected largely on the basis of their relative success in either reducing the level of unemployment or maintaining comparatively low unemployment rates in recent years through innovative employment and labour market policies. A comparative report on these four countries will be presented at a high-level meeting in Geneva on 25-26 February 1999.

Following the publication of the ILO's World Employment Report 1998-99, its implications for ILO work will be also on the agenda of the Committee on Employment and Social Policy. The report shows that it is important not to confine action to training alone, but to take a broader perspective on human resources development. This vision is already reflected in the programme for the International Labour Conference in the year 2000, which includes a major item for general discussion on human resources development and training.

The Committee's agenda also comprises a review of the ILO's job creation programmes, ILO policies and activities concerning vocational rehabilitation, and the effect to be given to the Resolution concerning Youth Employment, adopted by the International Labour Conference in June 1998. The resolution provides guidelines to member States and to employers' and workers' organizations on the design and implementation of policies to address youth employment policy issues. It contains a call for an international strategy for youth employment.

The Governing Body, composed of 28 government members ³ , 14 employer members and 14 worker members, convenes three times annually. It is the executive arm of the ILO and takes decisions on the implementation of ILO policies and programmes. Ten of the government seats are permanently held by major industrialized countries. The remaining members are elected for three years by governments, workers and employers respectively, taking account of regional distribution.

1 Overview of global developments and Office activities concerning codes of conduct, social labelling and other private sector initiatives addressing labour issues. Working Party on the Social Dimensions of the Liberalization of International Trade. International Labour Office, Geneva, November 1998. GB.273/WP/SDL/1.

2 Freedom of association and the effective recognition of the right to collective bargaining; elimination of all forms of forced or compulsory labour; effective abolition of child labour; and elimination of discrimination in respect of employment and occupation.

3 Argentina, Bangladesh, Brazil*, Canada, China*, Colombia, Congo, Egypt, France*, Germany*, Guinea, Hungary, India*, Italy*, Japan*, Republic of Korea, Mauritius, Nigeria, Panama, Poland, Russian Federation*, Saudi Arabia, Suriname, Swaziland, Thailand, Turkey, United Kingdom*, United States*.
(* = members holding non-elective seats as States of chief industrial importance).