Globalization boosts economic growth But risks widening social inequality

GENEVA (ILO News) - Concluding its 276 th session, the Governing Body of the ILO agreed to review and expand arrangements for the continuation of its Working Party on the Social Dimensions of the Liberalization of International Trade, which was established in June 1994, with a view to examining all aspects of the relationship between trade liberalization and social progress relevant to the ILO's mandate. The Working Party will continue to meet and function, with a final decision on the specific mandate and title to be agreed at the next Governing Body in March.

The Governing Body also discussed ILO Programme and Budget proposals, the future agenda of the International Labour Conference (ILC) and agreed on the nomination for a group of experts who will be charged with implementing the Follow-up to the ILO Declaration on Fundamental Principles and Rights at Work , which was adopted by the ILC last year.

A decision was also taken to send a direct-contacts mission to Colombia to evaluate the situation regarding freedom of association and continuing widespread violence, including murders and disappearances of trade unions. This mission should complete its report by 15 may 2000. Following examination of the mission report by the Committee on Freedom of Association, the Governing Body, in June 2000, will take a decision on the advisability of appointing a Commission of Enquiry.

On Myanmar, the Governing Body agreed to decide at its March session whether or not to place on the agenda of the ILC in June 2000, an item entitled "Action recommended by the Governing Body under article 33 of the Constitution" in response to repeated refusals by Myanmar to comply with ILO Commission of Inquiry findings that forced and slave labour was rife throughout the country. Article 33 allows the Conference to adopt measures likely to "secure the observance" of the recommendations of a Commission of Inquiry.

Social Impact of Globalization

A report prepared for and discussed by the Governing Body pointed out that globalization is good for the world's economy but tough on its workforce, which must cope with an increasing onslaught of competition and an accelerating rate of technological change, often with reduced government resources.

The report, prepared for the ILO Governing Body's Working Party on the Social Dimensions of International Trade, rejects any protectionist solutions. It says that adequate strengthening of globalization's "social pillar" via improved education and training, social safety nets, the adoption of labour legislation that combines the need for economic adaptability with that of protection of vulnerable groups and observance of core international labour standards "can greatly contribute to making globalization successful and socially sustainable."

It concludes that while trade liberalization does stimulate economic activity and boost productivity, it also risks widening social inequalities in the absence of measures to limit the shock of increased international competition in the lives of working people.

The report says that trade liberalization is only one factor among many in the process of globalization. It defines globalization as "a process of rapid economic integration among countries driven by the liberalization of trade, investment and capital flows as well as rapid technological change."

It also concludes that the public perception of globalization is evolving in most countries and a social dimension is emerging in the form of greater political awareness and in the form of corporate codes of conduct, social labels and concerted efforts to come to grips with such problems as child labour and indecent working conditions.

The scope and intensity of the phenomenon leave few countries or workers untouched: "Compared with past episodes of economic history, globalization involves enterprises and workers of nearly all countries, in goods as well as services sectors ... whereas in the past practically only industrial workers were concerned by international competition."

The report finds that because the liberalization of trade and investment regimes does stimulate the production of goods and services and generates positive economic results, globalization does "hold the prospect of rising standards of living." However, the ILO warns that "the process is neither instantaneous nor painless."

In spite of the difficulties associated with trade liberalization and globalization, none of the countries studied expressed a desire to adopt protectionist solutions, opting instead "to improve the benefits of globalization while minimizing its costs."

The report points out that "trade is associated with greater labour market turnover, with particularly detrimental consequences for workers with only modest transferable skills."

In contrast, "the adoption of new technology in response to greater pressures from international competition has tended to increase the demand for skilled labour, to the disadvantage of unskilled workers", the report says.

Globalization has little discernible impact on eliminating social inequalities or promoting social progress. Gaps between winners and losers from globalization have generally tended to deepen as income gaps widen and state resources to improve the lot of least privileged citizens diminish.

Resources to aid disadvantaged groups appear to be tightening: "The study documents a near-universal trend towards lower taxation on high incomes, suggesting that the tax system is becoming less redistributive." Between 1986 and 1998, 67 out of 69 countries examined "had witnessed a decline in the maximum tax rate on high incomes."

If the trend continues, the report warns, "governments will soon be deprived of an important mechanism that can help correct rising income inequalities."

The report also highlights concerns of developing countries that globalization "has rendered their economies more vulnerable to international shocks, especially where their export base is very narrow and their exposure to changes in the terms of trade is correspondingly high."

It underscores concern about the volatility of short-term capital flows, notably in countries where internal financial institutions are probably too weak to sustain the large swings in short-term capital movements engendered by free capital mobility: "there is a danger that short-term capital flows, far from being a mere reflection of economic fundamentals, will determine exchange rate fluctuations and, consequently, output and employment."

Commenting on the report, the ILO Director-General Juan Somavia said that the experience of the countries studied "demonstrates that the world cannot divorce social and employment issues from other developments in the global economy if the processes of globalization are to prove sustainable."

Declaration follow-up: Nomination of a group of experts

The Governing Body approved a list of seven persons to serve as ILO Declaration Expert-Advisers (IDEA) under the Follow-up of the ILO Declaration on Fundamental Principles and Rights at Work. They followed a proposal from the Director-General of the ILO, Juan Somavia, who had nominated this group of experts charged with presenting the conclusions of annual reports from countries which have not ratified one or more of the ILO's seven fundamental Conventions. 1

The seven eminent persons 2 will examine information compiled by the International Labour Office on the basis of replies from member States concerned, supplemented by information from employer and worker organizations. Starting in March 2000, they will present to the Governing Body their comments on annual reports established under the follow-up of the Declaration, drawing its attention to "aspects that seem to call for more in-depth discussion". A first review of annual reports will be conducted by the Governing Body at its session in March 2000.

The Programme, Financial and Administrative Committee examined the funding requirements and allocations for meeting the ILO's four strategic priorities: promoting and realizing fundamental principles and rights at work, creating greater opportunities for men and women to secure decent employment and income, enhancing social protection and promoting social dialogue and tripartism.

In his statement to the Committee, Juan Somavia said that the ILO had "reached an important milestone in the overall reform of the programme and budget process". Besides the organization of the ILO's technical programmes around the four strategic objectives and eight high-profile InFocus Programmes covering such areas as health and safety at work, the promotion of small and medium-sized enterprises, the elimination of discrimination and gender inequality, the promotion of the ILO Declaration on Fundamental Principles and Rights at Work and the elimination of child labour, an in-depth reform of the ILO's system for monitoring, evaluation and reporting has been started.

A transfer of resources from headquarters to the regions allow an increase of the ILO's technical cooperation programme from $179 million in the biennium 1998-99 to an estimated $215 million in 2000-01. The follow-up to the Declaration on Fundamental Principles and Rights at Work, the International Programme on the Elimination of Child Labour (IPEC), the other six InFocus Programmes, action on gender equality and employers' activities have been strengthened. Technical cooperation on employment is expected to reach some $134 million in 2000-01 compared with $113 million in 1998-99, the largest field of work of the ILO.

Myanmar

The Governing Body placed on the agenda of the 88 th Session of the International Labour Conference in June 2000 an item entitled: "Action recommended by the Governing Body under article 33 of the Constitution - Implementation of the recommendations contained in the report of the Commission of Inquiry on Forced Labour in Myanmar (Burma)".

Article 33 of the ILO Constitution states that "in the event of any Member failing to carry out within the time specified the recommendations, if any, contained in the report of the Commission of Inquiry ... the Governing Body may recommend to the Conference such action as it may deem wise and expedient to secure compliance therewith."

The Governing Body also decided to ask the Director-General to submit an updated report to the March 2000 session on the measures taken by the Government to give effect to the recommendations of the Commission of Inquiry.

The Committee on Employment and Social Policy prepared the general discussion that will take place at the 88 th Session (2000) of the International Labour Conference concerning human resources training and development in order to meet the demand for new skills and reform of public and private training systems.

Another item on the agenda of the Committee dealt with ILO policy and activities with respect to economic and financial crises. The Committee concluded that unemployment benefits can play a significant role in preventing and mitigating the negative social consequences of crises. It also highlighted the importance of comprehensive employment and social protection policies.

The ILO's new InFocus programme on Socio-Economic Security will assess reforms in unemployment benefit systems so as to determine best practice schemes for different degrees of economic and labour markets. In addition, the InFocus Programme on Crisis Response and Reconstruction aims at the development of a coherent and comprehensive capacity to respond in a timely and effective manner to different crises by facilitating the socio-economic integration of those most directly affected by crises.

The Committee also registered significant policy developments with regard to the ILO's relations with the Bretton Woods institutions. Recent frank and direct dialogue between the Director-General of the ILO, the Managing Director of the IMF and the President of the World Bank have demonstrated that at the political level there is greater convergence and a willingness to cooperate. For the first time this year the ILO participated in the annual meeting of the World Bank and the interim committee of the International Monetary Fund

In June 1999, the International Labour Conference reviewed the role of the ILO in technical cooperation. The Governing Body's Committee on Technical Cooperation discussed at the present session an implementation plan enhancing the relevance and effectiveness of ILO technical cooperation, improving its quality, visibility and efficiency and strengthening partnerships with ILO members, the UN system, the Bretton Woods institutions and other actors in civil society.

The ILO's Committee on Freedom of Association examined 33 of the 96 cases pending before the Committee.

1 Freedom of association and collective bargaining (No. 87 and 98); Forced labour (No. 29 and 105); Non-discrimination (No. 100 and 111); and Minimum age (No. 138).

2 Dr. Ahmed El Borai (Egypt), Professor and Head of Labour Legislation, University of Cairo; Ms. Maria Lado (Hungary), Director of the Institute of labour Research (ILR), Budapest; Ms. Nora Lustig, Senior Adviser and Chief of the Poverty and Inequality Advisory Unit, Inter-American Development Bank, Washington, DC; Mr. Jean-Jacques Oechslin (France), former chairperson of the Executive Committee of the International Organization of Employers (IOE) and former Chairperson of the ILO Governing Body; Ms. N.A. Roldan-Confesor (Philippines), Presidential Adviser for Human Resource Development and International labour Affairs, Office of the President, Government of the Philippines; Ms Zoe Mumbi Tambo (Zambia), Executive Director of the African Centre for Democracy and Human Rights Studies, Banjul (Gambia); Mr Robert White (Canada), former President of the Canadian Labour Congress and Vice-President, United Auto Workers' Union.