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268th Session
Geneva, March 1997


Report of the Subcommittee on Multinational Enterprises

1. The Subcommittee on Multinational Enterprises met on 17, 18 and 24 March 1997, chaired by Ms. J. Perlin (Government, Canada). Mr. B. Noakes (Employer, Australia) and Mr. A. Baldassini (Worker, Argentina) were the Employer and Worker Vice-Chairpersons, respectively.

Follow-up and promotion of the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy
(First item on the agenda)

(a) Summary of reports submitted by governments and by employers' and workers' organizations for the sixth survey on the effect given to the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy(1)

(b) Report of the Working Group entrusted with analysing the reports submitted by governments and by employers' and workers' organizations(2)

2. The representative of the Director-General (Mr. Abate, Chief of the Bureau for Multinational Enterprise Activities) noted that in November 1996, Ms. L. Guertin (Government, Canada) was appointed as Chairperson of the Subcommittee. On 13, 14 and 15 January 1997 she had chaired the meeting of the Working Group which met in Geneva to analyse the summary of replies for the sixth survey. However, having assumed other responsibilities, it was no longer possible for her to continue as Chairperson. The Government of Canada had accordingly designated Ms. J. Perlin to replace Ms. L. Guertin.

3. The Chairperson conveyed Ms. Guertin's regrets at not being able to continue. As a result of the flexibility and spirit of compromise demonstrated by the social partners, the meeting of the Working Group had been very successful. Ms. Guertin had briefed her on the discussions that had taken place in January 1997, and had stressed the importance of the issues dealt with by the Subcommittee, especially at a time of accelerating economic globalization and increasing foreign direct investment (FDI) flows. The significance of the matters that had been addressed and the kind of information and analysis that had resulted from the sixth survey were also evident from the reports.

4. The Chief of the Bureau for Multinational Enterprise Activities recalled that the former Committee on Multinational Enterprises had approved the questionnaire for the sixth survey, which covered the years 1992, 1993, 1994 and 1995. The questionnaires had been despatched to all ILO constituents in May 1994, and all replies received up to 30 September 1996 were taken into account for the preparation of the summary of reports. He drew attention to table 1, which gave a breakdown of the origin of replies by region and country; table 2, which contained details of the participation of employers' and workers' organizations; and table 3, which listed those countries that had never replied to any of the six surveys. The reports for the sixth survey came from the major home countries of MNEs and the main recipients of FDI in different regions of the world. They gave a relatively good indication of the degree of observance of the Tripartite Declaration and the social and labour problems relating to FDI. It was regrettable that allegations made in the replies could not be verified. He emphasized that the Office and the Governing Body gave preference to tripartite replies whenever possible. Where this was not the case, copies of reports sent direct to the ILO by employers' and workers' organizations were forwarded to the governments concerned for their comments. In all cases where comments were received, their content was accurately reflected in the report. As regards the response rate on the part of the social partners, the Office had asked the International Organisation of Employers (IOE) and the International Confederation of Free Trade Unions (ICFTU) to encourage more employers' and workers' organizations to make known their views. He recalled that the Governing Body had decided, at its 229th Session in February-March 1985, to set up a Working Group to analyse the summary of reports prior to their examination by the full Committee. So far, the Working Group had met in 1986, 1989, 1992, and most recently in January 1997.

5. Mr. Noakes (Employer Vice-Chairperson) welcomed Ms. Perlin to the Subcommittee and asked that she convey his best wishes to Ms. Guertin with whom he had appreciated working in the preparation of the report of the Working Group. He commended the Office on the quality of the summary of reports,(3) which reflected the extensiveness and vast amount of information that had been provided on the activities of multinational enterprises (MNEs) and the effect given to the Tripartite Declaration. The number of replies and their comprehensiveness were indicative of the interest in the survey. The introduction to the summary of reports provided an interesting historical overview of all the surveys. The changes in the periodicity of the surveys over the years demonstrated that they could be undertaken less frequently, without giving rise to undue concern. In most cases different respondents from the same country did not examine or comment on each other's replies. Neither the accuracy nor factuality of the information in the replies had been verified, and this should be borne in mind particularly in cases where certain allegations were made. The format of the report of the Working Group(4) had been changed, making the document easier to read and understand. For the first time footnotes had been used extensively, showing the origins of the responses. They also made it possible to determine to some extent the weight or importance of particular observations. He drew attention to the fact that employers' organizations were cited much less frequently in the footnotes than governments and workers' organizations, even though, as paragraph 9 and table 2 indicated, there were more replies from employers' than from workers' organizations. However, that was not evident from the footnotes: this could give rise to the perception of a lack of balance in the replies. However, in reality there was no imbalance. As regards comments about the length, level of detail and complexity of the questionnaire (paragraph 20 of the report), they would be addressed in the recommendations. On the whole, the analysis of the reports presented a very positive view of the effect given to the Tripartite Declaration and the impact of the activities of MNEs. The conclusion was that in general MNEs had observed the principles of the Tripartite Declaration as regards employment and equality of opportunity and treatment, as well as in their approaches to wages and benefits, the training of workers and occupational safety and health (OSH) practices. The role of MNEs in the world economy was very significant, and their contribution to increasing job opportunities, raising standards of employment and promoting economic growth and development was widely acknowledged. There was some criticism of the practices of MNEs in the reports, but even if they were thought valid, they were far outweighed by the positive observations in the replies. In general, the Employers' group was satisfied with the positive tone of the analytical report. In its view the findings provided an appropriate basis for considering the conclusions and recommendations, on which the Employers' group would be putting forward some proposals.

6. Mr. Baldassini (Worker Vice-Chairperson) noted that, under Ms. Guertin's excellent chairmanship, the Working Group had achieved good results, and he asked that Ms. Perlin convey to her the appreciation of the Workers' group. He commended the Office on the quality of the documents presented. The fact that the response rate for the sixth survey exceeded that for previous surveys was encouraging. It attested to the importance of continuing the exercise as a means of obtaining a fuller picture of the effect that was given to the Tripartite Declaration. The document(5) could be used widely in the Office. With reference to the report of the Working Group, he noted that the origin of the replies by region seemed to be balanced -- 19 countries each from the Americas and Asia, and 24 from Europe. Africa was the region from which the smallest number of countries had participated in the survey. The home countries of the 100 largest MNEs in the world, as well as the major host countries to MNEs in Asia, the Americas and Africa, were well represented. The Working Group had carried out the analysis of the replies with objectivity, and the concerns expressed by respondents were reflected. The inclusion of footnotes for the first time in its report had made it possible to identify the origin of replies. The Workers' group attached considerable importance to the periodic reviews of the effect given to the Tripartite Declaration. Follow-up was essential in order to obtain information on the degree to which that voluntary instrument was being implemented and its effects in practice. Given the impact of economic globalization and the rise in interregional FDI flows, follow-up seemed to be of even greater importance today. He expressed gratitude to those who had submitted replies and noted the need for their continued participation in future surveys. The Workers' group supported the conclusions and recommendations, which were the outcome of an intense and lengthy discussion. He noted with appreciation the work done by the Employer Vice-Chairperson, whose sense of justice, objectivity and spirit of cooperation had made it possible for the Working Group to reach agreement on a number of delicate issues. Referring to the first sentence of paragraph 120,(6) he stated that such practices were "in flagrant violation" of the principles of the Tripartite Declaration and "damaging" to the ethical approach which should be adopted by MNEs for dealing with such issues. As regards the first sentence of paragraph 129,(7) there was growing interest in setting up EPZs in various parts of the world. If incentives with implications for the exercise of trade union rights were indeed being offered, then workers and their organizations would be very concerned. The Workers' group drew attention to such situations where they might exist and called for follow-up on the conduct of MNEs in the zones and their attitudes to trade union rights. Sometimes anti-union attitudes had been adopted, contrary to the principles of the Tripartite Declaration and in violation of ILO Conventions Nos. 87 and 98. As regards the frequency with which employers' and workers' organizations appeared in the footnotes, he noted that it reflected the origin of certain observations and that it did not affect the balance or objectivity of the report in any way.

7. The representative of the Government of the United States expressed appreciation for the contributions of the Employers' and Workers' Vice-Chairpersons and their activities in the Working Group, which played an essential role in sifting through the massive amount of information contained in the replies to the survey. He noted with satisfaction the work carried out by the Office for the preparation of the summary of replies. He appreciated the objectivity of the report of the Working Group. The credibility of the report, as well as that of the Subcommittee, rested on that objectivity, and he thanked the members of the Working Group for their balanced approach and the integrity with which they had analysed the replies. The reports confirmed the appropriateness of adopting a voluntary approach to promoting the principles of the Tripartite Declaration. It seemed to have been widely supported in different parts of the world and would appear to be the right way to go about making the principles contained in the instrument operational. The balance that was inherent in the Tripartite Declaration was important for its "continued vitality". The tripartite support that it had received over 20 years attested to its staying power, the wisdom of the original drafting, and the continued applicability of its principles. He called for greater attention to be given to the language used when summarizing the replies. Referring to the reply by the Government of the United States to questions concerning paragraphs 1 to 7, he noted that the adoption of the Model Business Principles (MBPs), which had been discussed in previous meetings of the Subcommittee,(8) constituted "a very important initiative" on the part of his Government. In its reply, the Government stated that it had introduced the MBPs and "called upon" US companies operating overseas to "promote and abide by them". However, in the summary, "urged" instead of "called upon" was used. There was a difference between "calling upon" and "urging". There had been considerable cooperation with respect to the MBPs. However, the Government was not "urging" enterprises in the sense of imposing any legal obligation. He stressed that the MBPs were "entirely voluntary" and the Government had "called upon" MNEs to incorporate them in their operations. Similarly, the word "respect" should be replaced by "obey" in the second sentence of the reply to the questions relating to paragraphs 8 to 12 to conform with the actual text of the Government's response concering observance of US laws and regulations by domestic and multinational enterprises. He reiterated his appreciation of the Office's work on the survey, which his delegation considered to be important and a priority in the work of the Office. He again thanked the Employers and Workers for their excellent contribution to the results of the discussions in the Working Group. His Government could support the conclusions and recommendations of the report of the Working Group.

8. The representative of the Government of Namibia shared the satisfaction expressed by earlier speakers as regards the quality of the documents prepared by the Office. She took note of the summary of her Government's reply which should be updated.

9. The representative of the Government of China said that the figure "140 million" in the Government's reply relating to paragraphs 1 to 7 was not correct, and should be changed to "14 million".

10. The representative of the Government of Austria noted with appreciation the quality of the two documents. The most interesting conclusion that could be drawn from the reports was that MNEs' activities rarely conflicted with the policies of host countries. In most States they were obliged to apply the same laws as local enterprises and were subject to the same supervisory mechanisms. In many cases they were found to have had a positive influence on social policy and on the host economy. Where there were shortcomings, they were not different from those of national enterprises. He referred in particular to the positive conclusions in paragraphs 205 and 206 of GB.268/MNE/1/2. The questionnaire covered matters pertaining to industrial relations, employment, training and occupational safety and health, which were already handled by other units within the ILO and dealt with under other reporting procedures which did not distinguish between national and multinational enterprises. In addition, given the positive findings of past surveys and the fact that the situation described in the present report was hardly likely to change in four years, he had questioned the need for another survey. He mentioned his country's difficulties in obtaining information to prepare its report for the sixth survey. He supported the conclusions and recommendations, but had reservations about the proposal to conduct another quadrennial survey. In his view, the resources for carrying out that activity could be put to better use in other areas. Another survey might be considered at a later time when more wide-ranging changes would have taken place, and the ILO's survey could constitute a response to those changes. With the increasing globalization of trade, industrialized countries might be affected by difficulties in the coming years, and it might then be appropriate to have other surveys.

11. In replying to points raised by speakers, the Chief of the Bureau for Multinational Enterprise Activities stated that, as stated in paragraph 24 of GB.268/MNE/1/1, the information provided by governments and by employers' and workers' organizations would be circulated within ILO headquarters, the field offices and MDTs for use as appropriate. Further information provided by the Government of Namibia would be included in the document for use within the Office. As regards the data on employment in MNEs in the reply by the Government of China, the figure of "140 million" quoted by the Office, had been supplied by the Ministry of Labour of China. However, as requested, the change would be made. With respect to the observations made by the representative of the Government of Austria concerning future surveys, it was for the Subcommittee to decide on that matter.

12. In response to the statement by the representative of the Government of Austria, Mr. Baldassini said that the positive effects of MNEs could be better appreciated as a result of having obtained information through the periodic surveys. Citing examples of past and ongoing labour disputes concerning collective dismissals by certain multinationals in Europe, he noted that MNEs did not always respect the principle of tripartism and engage in tripartite consultations. Such conflicts occurred every day somewhere in the world. While both national and multinational enterprises might be involved in such action, only examples of the latter were being given because of the focus of the Subcommittee's discussions. As regards the Tripartite Declaration, there was no supervisory mechanism similar to those which existed to monitor compliance with ILO Conventions and Recommendations, which provided procedures for the submission of complaints in the event of non-observance of those instruments. It was therefore vital to have some means of updating the body of knowledge on the conduct of MNEs. It would be meaningless to have the Tripartite Declaration without being able to know whether or not in practice effect was being given to its principles. To question the utility of the periodic surveys was tantamount to saying that the Tripartite Declaration, and indeed the Subcommittee, were of no use. In conclusion, he called for support for paragraph 203 of GB.268/MNE/1/2 recommending a seventh survey.

13. Mr. Noakes stated that the question of the continuation of the surveys was specifically addressed in one of the recommendations and that it would be dealt with when the conclusions and recommendations were discussed. That would seem to be the most appropriate time to do so, since the Subcommittee would have examined the entire document. He reminded the Subcommittee that since 1980 the frequency of the surveys had gradually increased from two, to three, to four years, and the constant progression might seem to indicate that the next survey should cover a longer period. As regards the question of the continuation of the survey, the Employers' group had an open mind in that regard. With respect to the footnotes, the information preceding the start of each section of the report clearly showed that the number of replies from employers; organizations exceeded those of the workers' organizations throughout the report. However, that was not evident from the footnotes. Consequently, their underrepresentation in the footnotes might give, to an outsider, the idea of an imbalance in the views reflected in GB.268/MNE/1/2 when, in reality, that was not the case.

14. As regards the "perception of a lack of balance", which the Employer Vice-Chairperson had mentioned, the Chief of the Bureau for Multinational Enterprise Activities pointed out that, while more employers' than workers' organizations may have replied to the survey, they had not all provided extensive replies. Very often they had agreed with the observations made by the governments of their respective countries. Therefore, in the drafting of the analytical report, and as the Working Group had realized in the course of its meeting in January, there was little more that could have been brought out. Consequently, the "perception of a lack of balance" was unwarranted since there was in fact no such imbalance.

15. The Subcommittee proceeded with the adoption of the different paragraphs of the Report of the Working Group as follows: paragraphs 23 to 39; paragraphs 40 to 57 (the word "non-discrimination" in paragraph 40 would be replaced by "discrimination"); paragraphs 58 to 83; paragraphs 84 to 94; paragraphs 95 to 117; paragraphs 118 to 177 (the word "employers'" in the question preceding paragraph 172 would be replaced by "employees'"); paragraph 178; paragraphs 179 to 182; paragraphs 183 to 196; paragraph 197.

16. As regards the conclusions and recommendations, the Subcommittee adopted unanimously:

17. The meeting of the Subcommittee was then suspended to allow the Employers' and Workers' groups to meet in order to consider those parts of the conclusions and recommendations which they were unable to discuss in the course of their earlier consultations.

18. When the Subcommittee reconvened, the Employers' group put forward a series of amendments to the recommendations, which the Workers' group was unable to accept.

19. Following subsequent consultations the Officers decided that it was necessary once again to suspend the meeting and reconvene the Working Group in order to deal with the changes proposed to its report.

20. The Working Group then met on 19 March and negotiated agreed texts which would revise the relevant paragraphs in its original report.

21. At the Subcommittee's third sitting on Monday, 24 March 1997, the Working Group submitted the texts of the revised recommendations. The following decisions were then taken by the Subcommittee with regard to paragraphs 209 to 239 of GB.268/MNE/1/2.

22. The conclusions contained in paragraphs 209, 210, 211, 214, 216, 218, 220, 222, 223, 225, 227, 229, 231, 233, 235 and 239 were adopted by the Subcommittee. Paragraph 238 contained both a conclusion and a recommendation. The last sentence containing the recommendation was deleted. The conclusion in the amended paragraph was adopted. Paragraph 238 then read as follows: Deregulation has opened up avenues for MNEs to acquire assets in public utilities and industries in which the involvement of foreign private capital was either prohibited or restricted. The survey revealed that those changes have had a major impact on employment, wages, working conditions, training and industrial relations in many of the enterprises concerned.

23. The recommendations contained in paragraphs 212, 213, 217, 219, 221, 224, 226, 236 and 239 of GB.268/MNE/1/2, as revised by the Working Group, were adopted unanimously by the Subcommittee.

24. The recommendations contained in paragraphs 215, 228, 230, 232, 234 and 237 of GB.268/MNE/1/2 were not amended. They were adopted unanimously by the Subcommittee.

25. The texts of all the recommendations are reproduced in the Appendix.

26. The Subcommittee --

(c) Promotional activities, technical advisory services, completed studies
     and current
research by the Office(9)

27. The Chief of the Bureau for Multinational Enterprise Activities, introducing the paper, noted that because of the work on the survey in 1996, there had been a reduction in promotional activities, technical advisory services and research since the last meeting of the Subcommittee. Between December 1995 and December 1996, the Office had undertaken promotional activities in South Africa, Malaysia, Philippines and the Czech Republic.(10) The Tripartite Declaration had been translated into Vietnamese and Mongolian and was ready for publication. The instrument would therefore be available in 30 languages. The text of the Tripartite Declaration would be made available on the ILO's on-line information system (headquarters) as well as on CD-ROM in early May. Steps would also be made to make it accessible via the Internet. As regards research, two working papers were published. One working paper on the courier service industry and another dealing with women workers and working conditions in retailing, were in the final stages of preparation. Unfortunately, another working paper on retailing had suffered setbacks, but attempts were being made to overcome this. The Office would welcome some guidance, should members of the Subcommittee wish to indicate the priority areas on which they would like to see greater focus in the promotional activities, technical advisory services and research.

28. Mr. Noakes noted with interest the activities that had been carried out and those that the Office proposed to undertake. The Employer members had no particular comments to make.

29. Mr. Baldassini noted with regret that owing to limited resources there had been a lower level of promotional activities and technical advisory services. Were it not for the participation in the three seminars mentioned in the Report, there would have been no involvement in any major promotional activities. The meetings in question had been organized by the Bureau for Workers' Activities (ACTRAV), national workers' organizations, and the International Confederation of Free Trade Unions (ICFTU). The situation was critical. Since 1995 the Office had not been able to obtain the necessary funding to organize, in conjunction with the Organization of African Unity (OAU), the regional seminar mentioned in paragraph 6 of GB.268/MNE/1/3. He expressed the hope that plans to hold the national tripartite round table in the Philippines (which also dated back to 1995) would come to fruition.(11) The Worker members fully supported the initiatives to make the Tripartite Declaration accessible to a greater number of the ILO's constituents. It welcomed the translation of the Tripartite Declaration into Vietnamese and Mongolian and the steps being taken to make it available on CD-ROM and the Internet. The scarcity of resources had also constrained the ability of the Office to respond to requests by the ILO's constituents for research on labour issues relating to the operations of MNEs in different sectors. Since the Subcommittee had last met, two working papers had been published and work on three others initiated. The Workers' group was deeply concerned about the adverse impact that the limited human and financial resources were having on the programme on Multinational enterprises, especially at a time when MNEs accounted for about 70 per cent of world trade, 75 per cent of FDI flows, and when their activities were having significant social and labour effects.

30. The representative of the United States Government noted the importance of the promotion of the Tripartite Declaration and expressed appreciation for the paper prepared by the Office. He reported on developments that had taken place in the United States since the last meeting of the Subcommittee. The US Department of Commerce had set up an award and programme entitled the "Best Global Practices Programme" as a means of furthering the MBPs. The purpose of the award was to encourage the US business community to develop voluntary codes of conduct and to adopt practices that showed exemplary corporate citizenship. He recalled that the MBPs focused on the following five areas of activity: (1) provision of a safe and healthy workplace; (2) fair employment practices, including avoidance of child and forced labour and avoidance of discrimination based on race, gender, national origin, or religious beliefs; and respect for the right of association and the right to organize and bargain collectively; (3) responsible environmental protection and environmental practices; (4) compliance with US and local laws promoting good business practices, including laws prohibiting illicit payments and ensuring fair competition; and (5) the maintenance, through leadership at all levels, of a corporate culture that respects free expression consistent with legitimate business concerns, and does not condone political coercion in the workplace; that encourages good corporate citizenship and makes a positive contribution to the communities in which the company operates; and where ethical conduct is recognized, valued and exemplified by all employees. The purpose of the Best Global Practices Programme was to encourage the US business community to develop voluntary codes of conduct and practise exemplary corporate citizenship. The Best Global Practices Award would be granted to a US multinational that exhibited "extraordinary leadership" in one or more of the five areas covered by the MBPs during the last three years of operation. The Programme provided an information clearing house for companies working to develop voluntary codes of conduct. The Subcommittee would be kept informed of the awards made under the Best Global Practices Programme. Noting the promotional value of the Programme, he pointed out that it was compatible and consistent with the Tripartite Declaration, and would help to further the visibility of these principles and the promotional activities undertaken by the Office.

Developments in other organizations(12)

(Second item on the agenda)

31. The Chief of the Bureau for Multinational Enterprise Activities introduced the paper, which described briefly the work of eight organizations which had codes, guidelines or similar texts relating to MNEs and carried out activities that either directly or indirectly related to MNEs.(13)

32. Mr. Noakes noted with interest the information contained in the paper. Referring to paragraph 22, which stated that "consideration could also be given to revising the OECD's Guidelines for Multinational Enterprises to include core labour standards, that were not explicitly covered" at present, he stated that his group had no knowledge of developments in this area. He asked whether the Office could provide further information as to whether there was a firm intention to revise the Guidelines, or whether this was simply being put forward as a possibility. As regards paragraph 33 concerning the Multilateral Agreement on Investment (MAI), the Employer members understood that it was not an incorporation of the Guidelines into the MAI that was being considered, but rather, "some association of the Guidelines with that Agreement". He requested further clarification on that issue.

33. Mr. Baldassini noted with satisfaction the content of the Office paper, which would be very useful to workers. Future reports should include information on cooperation between the ILO and the institutions covered in the report. The fact that the organizations mentioned were involved in activities pertaining in one way or another to MNEs attested to the economic and social importance of multinationals. Information was needed that would make it possible to assess the level of the ILO's involvement in those institutions. He asked whether the Office had contacts with regional or international organizations other than those mentioned in the paper, and if so, what contribution it made to their work. The Workers were of the view that the ILO should try to give a social dimension to investment-related matters dealt with in those institutions. The 1996 Annual Report of the World Trade Organization included a chapter on trade and FDI which focused on the economic, institutional and legal linkages between world trade and FDI. The costs and benefits of FDI were examined, as were the implications for competition among recipients of FDI. That question was of great interest. He referred to the WTO's Ministerial Conference (Singapore, December 1996) at which it had been decided to set up three working groups to deal with investment, competition policies and government procurement. The issues covered could be of great relevance to the ILO's work on MNEs. The UN Secretary-General's report to the 48th Session of the Subcommittee on the Prevention of Discrimination and Protection of Minorities had noted the impact and influence of MNEs' activities on the full observance of human rights, especially economic, social and cultural rights. The report also mentioned the "right to development", taking into account the relevant instruments, including international standards. In conclusion, he thanked the Office for the information provided, which would be helpful in the work of the Subcommittee.

34. The representative of the Government of the United States noted that the document concerning developments in other organizations was a source of useful information.

35. The Chief of the Bureau for Multinational Enterprise Activities expressed the Office's appreciation for the information supplied by the representative of the Government of the United States on the Best Global Practices Programme. Along similar lines, the Office proposed, in the Programme and Budget for 1998-99, to undertake the preparation of a compendium of codes of conduct used by those MNEs that were pace-setters in that regard. In that way, other enterprises could repeat those initiatives, if they wanted and were able to, adapting them to their specific situation. In reply to Mr. Noakes's question concerning the revision of the OECD Guidelines, he said that there had been discussions involving the OECD's Business and Industry Advisory Committee (BIAC) and Trade Union Advisory Committee (TUAC) and the Committee on International Investment and Multinational Enterprises (CIME). The ILO exchanged information with those organizations. He was not certain whether the OECD had yet taken a decision on the matter, but based on the information that he had to date, it would appear that the OECD Guidelines might be attached to the MAI without being an integral part of it. The Office was following that issue very closely and would keep the Subcommittee informed. In response to Mr. Baldassini's inquiry about the ILO's efforts to collaborate with the OAU in the organization of a regional tripartite seminar, he noted that efforts to obtain the necessary funding were under way and that the ILO continued to work closely with the OAU. As regards the round table in the Philippines, the ILO was in contact with the Government and the employers' and workers' organizations and it was expected that the round table would take place some time soon. The ILO interacted with many of the organizations mentioned in GB.268/MNE/2, and in the next report an effort would be made to describe the nature and scope of that interaction. The ILO also dealt with regional institutions, but because of the constraints on resources, those contacts were somewhat limited. For 1998-99 there were proposals to involve MDT staff in promotional activities. If approved, that would enable the Office to extend its work in this area, including with regional organizations. The issue of working closely with the WTO was a rather sensitive one given the ongoing discussions within the Governing Body. Consequently, the Office needed to ensure that its activities in that regard would have the support of its constituents. On the question of the UN's activities in the field of human rights, the ILO's position on those matters, including MNE/FDI and labour issues, was made known to the UN Commission through the Office's relevant technical services.

36. The representative of the Director-General (Assistant Director-General responsible for ILO enterprise activities) replied to the points made by the Worker Vice-Chairperson concerning the limited resources for carrying out the programme on MNEs. He acknowledged that the work had been done by a very small staff of three professionals and one secretary. This was indeed a small team, given the large volume of work, and also compared with the staff resources in other international organizations involved in similar matters. He noted that the budget proposals for the next biennium remained unchanged. In conclusion, he said that the question of the allocation of resources for ILO programmes was a matter for the Governing Body to decide.

37. The Employer Vice-Chairperson expressed his deep gratitude to the Chairperson for the way in which she had conducted the proceedings of the Subcommittee and the meetings of the Working Group. She had been of considerable assistance in enabling the members of the Working Group to reach agreement on the difficult issues under discussion. He sincerely appreciated Mr. Baldassini's great courtesy and willingness to give consideration to the Employers' point of view. Without the cooperation of Mr. Baldassini and his colleagues it would not have been possible to conclude such difficult negotiations. He thanked the Government representatives for their participation and their useful contributions to the outcome of the discussion. Finally, he thanked the representative of the Office for the counsel which helped to bring the deliberations to a close, and the secretariat and interpreters for their services.

38. The Worker Vice-Chairperson noted with great appreciation the role played by the Chairperson in the Working Group through such difficult discussions, and her help in getting the parties to reach a consensus. The Chairperson and the Chief of the Bureau for Multinational Enterprise Activities had given advice which enabled the parties to reach an agreement. He expressed the hope that the experience gained would be useful, and that in the future the conclusions and recommendations would not give rise to as many inconveniences. He deeply appreciated Mr. Noakes's flexibility and his balanced approach to dealing with the issues. He was grateful to the Government representatives for their collaboration which was a determining factor for the outcome of the discussions. In conclusion, he thanked the Office and the interpreters for their support services.

39. The representative of the Government of Italy complimented the Chairperson for her work and expressed his appreciation for the way in which the Employers' and Workers' groups succeeded in reaching a common agreement on the matters discussed.

40. The Chairperson noted that her task had been greatly facilitated by the commitment and willingness of the parties to reach a compromise. She expressed her deep gratitude to the members of the Working Group for their hard work, which had made it possible to reach agreement. She noted with appreciation the constructive comments by all members of the Subcommittee.

Geneva, 24 March 1997.

(Signed) J. Perlin,
Chairperson and Reporter.

Point for decision: Paragraph 26.


Texts of recommendations adopted by the Subcommittee

199. The information provided by governments and by employers' and workers' organizations which responded to the survey is significant. Since it covers core areas of the ILO's activities, the Working Group recommends the Governing Body to call on the Director-General to ensure that the technical departments at headquarters (HQ) and the multidisciplinary teams (MDTs) in the field make use of this information and take into account the issues raised when designing programmes to assist governments and employers' and workers' organizations in ILO member States.

203. Private capital flows and the activities of MNEs will continue to play an important role in the global economy in the years to come, and the labour-related aspects of these developments will have to be addressed. The ILO's Tripartite Declaration sets out guidelines concerning the roles and responsibilities of governments, the social partners and MNEs in dealing with the key labour issues. Consequently, the Working Group recommends that a seventh full-scale survey covering the years 1996, 1997, 1998 and 1999 be carried out.

204. The Working Group notes that because of the extensive nature of the questionnaire, a number of respondents had difficulties in responding to the sixth survey. Therefore the questionnaire to be sent out in connection with the seventh survey should be shorter, yet cover the main issues dealt with in the Declaration. The draft text of the questionnaire should be examined by the Subcommittee in November 1998 and despatched early in 1999, and the replies thereto should be examined by the Subcommittee and the Governing Body in November 2000.

207. The Working Group reiterates that the issue of economic and social development is a shared responsibility in which governments set national priorities, and enterprises in both the public and private sectors, as well as labour, have important roles to play. The passing of national laws and regulations remains the responsibility of governments, and the laws and regulations must be fully respected. Good social practice, based on full respect for international labour standards, in particular Conventions Nos. 29, 87, 98, 100, 105, 111, 122 and 138 and their accompanying Recommendations, is particularly desirable and highly recommended.

208. The Working Group recalls that many positive steps have been taken in setting policies that take into account the respective concerns of the tripartite partners on economic and social issues. The principles of the Declaration are valid for both foreign and local enterprises. While there are specific provisions addressed to governments, employers (including MNEs) and workers, it is essential that the addressees work both separately and collectively, to give full meaning to the objectives of this instrument.

212. The Working Group is aware that cost and quality considerations might be among the main reasons for which local sourcing and local processing continue to be relatively limited in many contexts. It recognizes that more needs to be done to improve the capabilities of local enterprises so that they would be able to meet the demands of MNEs. Governments, in consultation and cooperation with MNEs and potential local suppliers, need to explore what can be done, and to develop strategies in this regard. Given the potential of linkages for generating employment and contributing to the development of less developed areas, the Working Group urges MNEs as well as national enterprises, to collaborate with governments in promoting, wherever practicable, the use of local raw material and other intermediate inputs for the manufacture of parts and equipment.

213. MNEs play a significant role in the introduction of modern technologies and this has implications for employment. Given that job creation is of fundamental importance, the Working Group urges MNEs and governments, when discussing investment arrangements, to have regard to the importance of using technologies which generate employment, both directly and indirectly. "To the extent permitted by the nature of the process and the conditions prevailing in the economic sector concerned, MNEs should adapt technologies to the needs and characteristics of the host countries."(14) MNEs "should also, where possible, take part in the development of appropriate technology in host countries."(15)

215. The Working Group considers that governments have the responsibility of instituting a process of education as regards equality. It recommends that the Governing Body urge governments not only to make policy pronouncements and issue legislation on equality of opportunity and treatment, but also to put in place effective enforcement measures and education programmes, in consultation with the social partners. Recognizing that this problem is not particular to MNEs, it is essential that national enterprises get involved in whatever initiatives may be taken to eliminate discriminatory practices.

217. The Working Group shares the concerns expressed about the negative consequences which arise from the lack of secure and stable employment. The creation of an environment in which opportunities for freely chosen, productive and full employment are maximized is one of the principal goals of any government. The Declaration urges MNEs to play a positive role in this sphere. In order for them to do so, there need to be arrangements whereby foreign and local enterprises can take part in consultations with the relevant government entities responsible for investment and related matters. The Working Group calls on the Governing Body to urge multinational enterprises, through active manpower planning, to endeavour to provide stable and secure employment for their employees and to "observe freely negotiated obligations concerning employment stability and social security."(16) The Working Group also calls on governments, in cooperation with multinational enterprises as well as national enterprises, to provide some form of income protection to workers whose employment has been terminated. Given that unemployment can lead to serious social unrest, the need for cooperation at either tripartite or other appropriate levels in identifying ways and means of minimizing dismissals and lay-offs, and in putting in place institutional and other mechanisms to deal with the effects of such decisions, cannot be overemphasized.

219. The Working Group reconfirms the important role of training in promoting sustainable development. Improvements in productivity, in the quality of goods and services, and in the capacity of locals to assume technical and managerial positions in both national enterprises and MNEs, depend to a great extent on training. The quality of the workforce is critical to the development of a country's technological capabilities and its competitiveness in world markets. Training should be responsive to the demands of the labour market, and in this regard, the MNEs are urged to communicate in good time their skills requirements to governments and provide appropriate training for employees. The Working Group recommends that the Governing Body urge governments, in cooperation with all the parties concerned, to develop policies at all levels for vocational training and guidance closely linked with employment and give consideration to the question of training in rural areas.

221. Higher wages and better living standards are the results of economic growth and development. The Working Group recommends that the Governing Body call on multinational enterprises to offer wages, benefits and conditions of work "not less favourable to the workers than those offered by comparable employers"(17) in the countries concerned. "When multinational enterprises operate in developing countries where comparable employers may not exist, they should provide the best possible wages, benefits and conditions of work within the framework of government policies."(18) The Working Group further recommends that the Governing Body call on governments to take measures to ensure respect for the principle of non-discrimination in employment in any of its forms and to promote collective bargaining in determining wages and working conditions.

224. The Working Group reiterates the importance of a safe and healthy work environment. The economic impact of occupational injuries, diseases and fatal accidents is significant and the human cost extremely high. Attempts need to be made at every level by all concerned, to bring about radical improvements in this respect. The Governing Body may wish to request governments, and through them, employers' (including MNEs) and workers' organizations, to work closely in bringing about improvements in the application and enforcement of OSH norms and in raising awareness about safety issues. The Governing Body may wish to urge multinational enterprises to "maintain the highest standards of safety and health in conformity with national requirements, bearing in mind their relevant experience within the enterprise as a whole, including any knowledge of special hazards."(19) "In accordance with national practice multinational enterprises should cooperate fully with the competent safety and health authorities, representatives of the workers and their organizations, and established safety and health organizations."(20) The provision of safety instructions in languages that are easily understood by the workforce, and establishing cooperative arrangements at enterprise and national levels, should be encouraged. "Where appropriate, matters relating to safety and health should be incorporated in agreements with the representatives of the workers and their organizations."(21)

226. The Working Group is of the view that a peaceful industrial relations climate is a sine qua non for investment, growth and social stability. Free, responsible, independent and strong employers' and workers' organizations are essential for the proper functioning of tripartism in any country. It recommends that the Governing Body draw the attention of governments to the importance of respecting freedom of association which, according to the Declaration of Philadelphia, is one of the fundamental principles of the ILO and essential to sustained progress. "Workers employed by multinational enterprises as well as those employed by national enterprises should, without distinction whatsoever, have the right to establish and, subject only to the rules of the organization concerned, to join organizations of their own choosing without previous authorization. They should also enjoy adequate protection against acts of anti-union discrimination in respect of their employment."(22) Governments, as well as employers' and workers' organizations, should be urged to pay special attention to the social and labour effects of special initiatives to attract FDI, to respond in appropriate ways to the concerns of the different parties, and to promote a climate of industrial peace based on the principle of freedom of association and the right to collective bargaining. The Working Group recommends that the Governing Body call on governments that have not yet done so, to ratify and fully implement Conventions Nos. 87 and 98 in accordance with the Tripartite Declaration.

228. The Working Group considers collective bargaining to be important for shaping labour-management relations. Collective bargaining should be a natural, and perhaps the preferred, method for labour and management to deal with matters relating to the terms and conditions of employment. Interference in the bargaining process should be avoided since outcomes attained under such circumstances are unlikely to have widespread support. The Working Group therefore recommends that the Governing Body call on governments, employers' and workers' organizations to promote collective bargaining as a key element in industrial relations. Governments and the social partners should develop specific programmes to make their members and the public aware of the importance of collective bargaining for fostering peaceful industrial relations. Information and facilities for the negotiation and conclusion of collective agreements should be made available and those involved should be given the authority to make final decisions on the matters under discussion.

230. Labour-management consultations are essential for developing a meaningful and mutually beneficial partnership between employers and the workforce. These contribute to minimizing uncertainty, building trust, reducing tension, and to the prevention of disruptive action or disputes. The adoption of ILO Recommendation No. 94 concerning consultation and cooperation between employers and workers at the level of the undertaking, and Recommendation No. 129 concerning communication within the undertaking, attests to the importance of consultations. The Working Group requests the Governing Body to call upon governments, and through them, employers' and workers' organizations in ILO member States, to give effect to the aforementioned Recommendations and to adhere as closely as possible to the provisions of the Tripartite Declaration on this subject.

232. The examination and settlement of grievances should be a routine matter. Grievances should be handled expeditiously, and the procedures for doing so should be clearly specified and made known to workers and their representatives. The Working Group wishes to recall that the provisions of Recommendation No. 130 provide adequate guidelines in this respect. The Governing Body may wish to draw to the attention of governments, and through them, to employers' and workers' organizations, and MNEs, the need to bear in mind the provisions of Recommendation No. 130 concerning the examination of grievances within the undertaking, with a view to their settlement.

234. Procedures for the settlement of industrial disputes should normally be provided for in collective agreements, but where the parties thereto may be unable to resolve their differences through direct discussions, facilities for voluntary conciliation machinery should be available. The Working Group recommends that the Governing Body urge governments, and through them, employers' and workers' organizations, and MNEs, to use the provisions of Recommendation No. 92 concerning voluntary conciliation and arbitration, as guidelines for the settlement of disputes.

236. The Working Group recommends that the Governing Body: request the Director-General to intensify, including through closer cooperation with governmental organizations involved in activities relating to FDI, economic development, human rights, and particularly workers' rights, ILO activities to promote the Declaration by giving greater publicity to this instrument and to the fact that its principles need to be respected; urge governments and employers' and workers' organizations to cooperate more actively with the Office, as well as through independent activities of their own, in publicizing and promoting the Tripartite Declaration in their respective countries; call on governments and employers' and workers' organizations to incorporate in their training programmes, meetings, etc. a discussion of the Tripartite Declaration and the social aspects of FDI and MNE operations. In carrying out such activities, they are encouraged to call on the ILO (MDTs, ILO Area Offices and the relevant services at HQ) for assistance.

237. Listed in the Annex and Addenda to the Tripartite Declaration, are the international labour Conventions and Recommendations which the Governing Body considers to be of direct relevance to this instrument. The Working Group wishes to reiterate that the instruments in question provide useful guidelines for addressing social and labour problems to which the activities of MNEs may give rise. It therefore recommends that the Governing Body call on governments, and through them, on employers' and workers' organizations, to apply to the fullest extent possible, the principles of the Conventions and Recommendations in the annex and addenda.

239. Interest in setting up EPZs, SEZs and similar arrangements for promoting export-oriented industries continues to gather momentum in different regions. According to the replies to the sixth survey, EPZs are widely regarded as an important means for job creation. However, certain common labour problems persist in a number of zones and individual enterprises operating under EPZ-type regimes, as a result of which the choice of EPZs as a strategy for industrial development and employment continues to be called into question in some quarters. The Working Group therefore suggests that questions pertaining to employment and workers' rights, as well as the degree of observance of the Tripartite Declaration in EPZs, SEZs, as well as in different deregulated industries and sectors, be included in the seventh survey.

1. GB.268/MNE/1/1.

2. GB.268/MNE/1/2.

3. GB.268/MNE/1/1.

4. GB.268/MNE/1/2.

5. GB.268/MNE/1/2.

6. "In some countries subtle means were reportedly used to discourage the emergence of unions or to weaken those that already existed."

7. "It was among EPZ host countries that the tendency to offer incentives limiting the exercise of trade union rights, was most noticeable."

8. GB.264/13, para. 5.

9. GB.268/MNE/1/3.

10. GB.268/MNE/1/3, paras. 2 to 10 and 14.

11. GB.268/MNE/1/3, para. 10.

12. GB.268/MNE/2.

13. The United Nations Conference on Trade and Development (UNCTAD), the World Bank, the Organisation for Economic Co-operation and Development (OECD), the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting, the World Health Organization (WHO), the Food and Agriculture Organization of the United Nations (FAO), the European Commission, and the Southern Cone Common Market (MERCOSUR).

14. ILO. Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, 2nd edition, 1991, para. 19.

15. ibid., para. 19.

16. ibid., para. 25.

17. ibid., para. 33.

18. ibid., para. 34.

19. ibid., para. 37.

20. ibid., para. 39.

21. ibid., para. 39.

22. ibid., para. 41.

Updated by VC. Approved by NdW. Last update: 26 January 2000.