Blog post
Can trade liberalization and social progress go hand-in-hand?
A new report by the ILO says trade agreements with labour provisions have increased significantly in the last two decades, which may provide more comprehensive commitments to enhancing workers’ rights.
12 November 2013
Early attempts by industrialized countries to include labour provisions in the multilateral trade framework were not successful.
The first Ministerial Conference of the then newly created World Trade Organization (WTO) in December 1996 all but closed the door on the controversial issue of the 'social clause'—the linking of labour standards with trade liberalization.
Yet, despite the absence of such provisions on the global stage, labour standards have increasingly become part of bilateral and regional trade negotiations. Today, trade unions and civil society are investing substantial resources in advocating for the inclusion of labour provisions in trade agreements and the issue is on the agenda of an increasing number of trade negotiators.
According to a recent report by the ILO, trade agreements with labour provisions have increased significantly in the last two decades, both in absolute and relative terms. Fifty-eight trade agreements included labour provisions in June 2013, up from 21 in 2005 and just 4 in 1995. Although labour provisions tend to be concentrated in North-South trade agreements, there is a modest but increasing trend to integrate labour provisions into trade agreements among developing and emerging countries (South-South trade agreements).
There are, however, widely divergent views on their effectiveness. While some consider them a panacea for improving labour standards and working conditions, others criticize them as mere window dressing or even disguised protectionism. The discussion on whether trade liberalization upholds or improves labour standards, rather than puts them at risk, is an important part of the debate about making globalization more socially sustainable.
There are a number of rationales for including labour provisions in trade agreements. From a social perspective the rationale is the safeguarding of social protection, while from an economic perspective labour provisions are tools against unfair competition, the main idea being that violations of labour standards can distort competitiveness (“social dumping”) and should be addressed in a manner similar to that employed against other unfair trading practices.
Additionally, there is concern that trade liberalization without the necessary safeguards may lead to a race to the bottom as regards labour standards. There is also a human rights rationale, whereby labour provisions can be used as a means of ensuring respect for labour-related human rights that reflect values universally accepted by the international community. Through cooperative activities and dialogue such provisions can also be used as a catalyst for improvement of labour standards by increasing the labour-related implementation capacity of the countries concerned.
About 40 per cent of trade agreements that include labour provisions have a conditional dimension. This implies that compliance with labour standards entails economic consequences – in terms of an economic sanction or benefit. Conditional labour provisions are typical of many of the trade agreements concluded by the United States and Canada.
The remaining 60 per cent of trade agreements that include labour provisions are exclusively promotional in nature. These provisions do not link compliance to economic consequences but provide a framework for dialogue, cooperation, and/or monitoring and are found mainly in EU, New Zealand and South-South trade agreements that consider labour issues.
In some cases, the improvement of labour standards has been made a condition for ratification of the agreement. This has been particularly the case in agreements with the United States, where the political process plays a strong role in setting the conditions for ratification. There are examples where pre-ratification conditionality has contributed to significant reforms of domestic labour legislation and practice. For example, in Oman, such reforms resulted in workers being granted the right to form and join trade unions, under certain conditions. In Bahrain and Morocco, protection against anti-union discrimination was reinforced.
In other instances, labour provisions of trade agreements may have contributed to facilitating labour law reforms and strengthening the enforcement framework. In the case of Peru, for instance, this included an extension of the authority of labour inspectors to sanction the fraudulent use of temporary contracts and outsourcing, as well as lowering the legal requirements regarding strikes. In Panama, a number of legislative amendments were adopted in relation to the trade agreement with the United States to improve freedom of association and enhance the legal protection of short-term contracts.
Complaint mechanisms, where available, have rarely been activated. The study finds that complaint mechanisms were used in four cases, all of them involving the United States. So far, no complaint has given rise to a decision of a dispute settlement body or even led to sanctions. Some of the complaints have, to varying degrees, had effects on labour standards in the countries concerned.
Labour provisions in trade agreements increasingly refer to ILO instruments, particularly the 1998 Declaration on Fundamental Principles and Rights at Work, and, in the case of recent EU agreements, also to ILO conventions.
Equally important, the ILO report says that none of the agreements studied show signs of protectionism by the governments concerned. In all cases where issues were raised regarding alleged non-compliance with a given labour provision, a significant effort was made to resolve the issue without resorting to sanctions.
Although much more research and work needs to be undertaken, there is growing evidence that trade negotiations may provide political momentum and leverage for comprehensive commitments to enhancing workers’ rights.
| ©ILO Photo/K. Cassidy |
Yet, despite the absence of such provisions on the global stage, labour standards have increasingly become part of bilateral and regional trade negotiations. Today, trade unions and civil society are investing substantial resources in advocating for the inclusion of labour provisions in trade agreements and the issue is on the agenda of an increasing number of trade negotiators.
According to a recent report by the ILO, trade agreements with labour provisions have increased significantly in the last two decades, both in absolute and relative terms. Fifty-eight trade agreements included labour provisions in June 2013, up from 21 in 2005 and just 4 in 1995. Although labour provisions tend to be concentrated in North-South trade agreements, there is a modest but increasing trend to integrate labour provisions into trade agreements among developing and emerging countries (South-South trade agreements).
There are, however, widely divergent views on their effectiveness. While some consider them a panacea for improving labour standards and working conditions, others criticize them as mere window dressing or even disguised protectionism. The discussion on whether trade liberalization upholds or improves labour standards, rather than puts them at risk, is an important part of the debate about making globalization more socially sustainable.
There are a number of rationales for including labour provisions in trade agreements. From a social perspective the rationale is the safeguarding of social protection, while from an economic perspective labour provisions are tools against unfair competition, the main idea being that violations of labour standards can distort competitiveness (“social dumping”) and should be addressed in a manner similar to that employed against other unfair trading practices.
Additionally, there is concern that trade liberalization without the necessary safeguards may lead to a race to the bottom as regards labour standards. There is also a human rights rationale, whereby labour provisions can be used as a means of ensuring respect for labour-related human rights that reflect values universally accepted by the international community. Through cooperative activities and dialogue such provisions can also be used as a catalyst for improvement of labour standards by increasing the labour-related implementation capacity of the countries concerned.
About 40 per cent of trade agreements that include labour provisions have a conditional dimension. This implies that compliance with labour standards entails economic consequences – in terms of an economic sanction or benefit. Conditional labour provisions are typical of many of the trade agreements concluded by the United States and Canada.
The remaining 60 per cent of trade agreements that include labour provisions are exclusively promotional in nature. These provisions do not link compliance to economic consequences but provide a framework for dialogue, cooperation, and/or monitoring and are found mainly in EU, New Zealand and South-South trade agreements that consider labour issues.
In some cases, the improvement of labour standards has been made a condition for ratification of the agreement. This has been particularly the case in agreements with the United States, where the political process plays a strong role in setting the conditions for ratification. There are examples where pre-ratification conditionality has contributed to significant reforms of domestic labour legislation and practice. For example, in Oman, such reforms resulted in workers being granted the right to form and join trade unions, under certain conditions. In Bahrain and Morocco, protection against anti-union discrimination was reinforced.
In other instances, labour provisions of trade agreements may have contributed to facilitating labour law reforms and strengthening the enforcement framework. In the case of Peru, for instance, this included an extension of the authority of labour inspectors to sanction the fraudulent use of temporary contracts and outsourcing, as well as lowering the legal requirements regarding strikes. In Panama, a number of legislative amendments were adopted in relation to the trade agreement with the United States to improve freedom of association and enhance the legal protection of short-term contracts.
Complaint mechanisms, where available, have rarely been activated. The study finds that complaint mechanisms were used in four cases, all of them involving the United States. So far, no complaint has given rise to a decision of a dispute settlement body or even led to sanctions. Some of the complaints have, to varying degrees, had effects on labour standards in the countries concerned.
Labour provisions in trade agreements increasingly refer to ILO instruments, particularly the 1998 Declaration on Fundamental Principles and Rights at Work, and, in the case of recent EU agreements, also to ILO conventions.
Equally important, the ILO report says that none of the agreements studied show signs of protectionism by the governments concerned. In all cases where issues were raised regarding alleged non-compliance with a given labour provision, a significant effort was made to resolve the issue without resorting to sanctions.
Although much more research and work needs to be undertaken, there is growing evidence that trade negotiations may provide political momentum and leverage for comprehensive commitments to enhancing workers’ rights.