Trade, Employment and Labour Standards A Study cf Core Workers’ Rights and International Trade ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT ORGANISATIONFORECONOMICCO-OPERATION ANDDEVELOPMENT andwPhuriscuhanctamtoeAirnttioclfeor1ceofonthe30CtohnvSeenpttieomnbesrign1e9d61i,ntPhaeriOsrgoannis1a4ttihoDnecfoermbEecrono19m6i0c, Co-operationandDevelopment(OECD)shallpromotepoliciesdesigned: -toachievethehighestsustainableeconomicgrowthandemploymentandarising standardcflivinginMembercountries,whilemaintainingfinancialstability,and thustocontributetothedevelopmentoftheworldeconomy: -tocontributetosoundeconomicexpansioninMemberaswellasnon-member countriesintheprocessofeconomicdevelopment:and -tocontributetotheexpansionofworldtradeonamultilateral,non-discriminatory basisinaccordancewithinternationalobligations. TheoriginalMembercountries oftheOECDareAustria,Belgium,Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the UnitedKingdomandtheUnitedStates.ThefollowingcountriesbecameMemberssubse- quentlythroughaccessionatthedatesindicatedhereafter:Japan(28thApril 1964), Finland(28thJanuary1969),Australia(7thJune1971),NewZealand(29thMay1973), Mexico(18thMay 1994),theCzechRepublic(21stDecember 1995)andHungary (t7htehOMEaCyD19(9A6r)t.icTlhee1C3oomfmithsesiOoEnCoDftChoenEvuernotipoena)n.Communitiestakespartintheworkof LECOMMERCE,PuLbl’iEeMePnLfOrIan9EaTisLsEoSusN1eORtitMreES:DUTRAVAIL Unegtudesurlesdroitsfondamentauxdestravailleursetrechangeinternational ©OECD1996 Applicationsforpermissiontoreproduceortranslateallorpartofthis HeapdubloifcPautbiloincsathioounlsdSbeervmicaed,eOtEo:CD 2,rueAndre-Pascal,75775PARISCEDEX16,France. FOREWORD This studyhas beenpreparedinresponse to arequest giventothe OrganisationbyOECDMinisterstoundertakeananalysisofareaswherefurther progresswithliberalisationandthestrengtheningofthemultilateralsystemmay be required. One such area was trade, employment and internationally recognisedlabourstandards,includingbasicconcepts,empiricalevidenceon tradeandinvestmentpatterns,andcurrentmechanismsforpromotinghigher labourstandardsworld-wide. ThestudybeginswithaReportagreedbythetwoOECDCommittees whichoversawthework,i.e.theEmployment,Labourand SocialAffairs CommitteeandtheTradeCommittee. TheagreedReportreflectsthefindings ofadetailedanalyticalreportoftheOECDSecretariataswellasextensive discussionsbythetwoCommitteesandotherCommitteesinvolvedinthework, notablytheCommitteeonInvestmentandMultinationalEnterprises. The Secretariat'sanalyticalreportitselfispresentedaftertheagreedReportandis publishedundertheresponsibilityoftheSecretary-GeneraloftheOECD. ThisreportwaspreparedbyCorinneDelechat,MariarosaLunati,Anne RichardsandRaymondTorres,withspecificcontributionsfromRolfAlter, StephanieBade,CrawfordFalconer,EvdokiaMoise,NicholasVanstonand CraigVanGrasstek,underthegeneralsupervisionofJohnMartinandJacques deMiramon. 3 3 CONTENTS Foreword ... ... Abbreviations 2 JointReportonTrade,EmploymentandLabourStandards bytheEmployment,LabourandSocialAffairsCommittee andtheTradeCommitteeoftheOECD 9 Selectionofcorelabourstandardsandtheirimplementation., 10 Linksbetweencorelabourstandards,trade,economic developmentandemployment 11 Mechanismstopromotecorelabourstandardsworld-wide 14 Introduction 21 PARTI 21 LABOURSTANDARDSTNOECDANDSELECTED NON-OECDCOUNTRIES Selectionofcorelabourstandards 25 ILQConventions 28 UNprovisionsonworkers’rights 38 Observanceofcorelabourstandardsiiiselectedcountries 39 Notes 21 PARTII 75 POSSIBLELINKSBETWEENCORELABOUR STANDARDS,TRADE,FOREIGNDIRECT INVESTMENT,ECONOMICDEVELOPMENT ANDEMPLOYMENT Economicpropertiesofcorelabourstandards 22 Corelabourstandardsandtradeperformance 88 Corelabourstandardsandtradeliberalisation Corelabourstandardsandforeigndirectinvestment i'b'a Trade,employmentandwages 5 Notes. 145 PARTIH 149 MECHANISMSTOPROMOTE CORELABOURSTANDARDSWORLD-WIDE AnoverviewoftheILOmonitoringsystem 154 Thecontributionofdevelopmentco-operationprogrammes 161 Proposedmechanismsininternationalorganisations 169 Regionalandunilateralgovernmentactions 178 Internationalstandardsfortheconductoffirms 190 Private-partymechanisms 199 AnalyticalAppendix 215 CoreLabourStandards,EconomicEfficiencyandTrade Annex... 233 MethodsAppliedinPartII,“Corelabourstandards andtradeliberalisation” IndexofcompliancewithTLOConventions87and98 233 Indicatorsoftradeliberalisation.. 236 References ... 239 6 ABBREVIATIONS AFL-CIO AmericanFederationofLaborandCongressofIndustrial Organizations BIAC BusinessandIndustryAdvisoryCommitteetotheOECD BICE BureauInternationalCatholiquedel’Enfance CEACR CommitteeofExpertsontheApplicationofConventionsand Recommendations(ILO) CEDC ProgrammeonChildreninEspeciallyDifficultCircumstances CFA CommitteeonFreedomofAssociation(ILO) CIME CommitteeonInternationalInvestmentandMultinationalEnterprises (OECD) CWIN ChildWorkersinNepalConcernedCenter DAC DevelopmentAssistanceCommittee(OECD) DNME dynamicnonmembereconomy EBRD EuropeanBankforReconstructionandDevelopment EC EuropeanCommunity EPZ export-processingzone EU EuropeanUnion FDI foreigndirectinvestment GATT GeneralAgreementonTariffsandTrade GDP grossdomesticproduct GSP GeneralisedSystemofPreferences ILC ConferenceCommitteeontheApplicationofConventionsand Recommendations(ILO) ILO InternationalLabourOrganisation ILRERF InternationalLabourRightsEducationandResearchFund IMF InternationalMonetaryFund 10 input/output 7 1PEC InternationalProgrammeontheEliminationofChildLabour(ILO) ISO InternationalOrganisationforStandardisation rro InternationalTradeOrganisation MFN most-favourednation MNE multinationalenterprise MOU memorandumofunderstanding NAALC NorthAmericanAgreementonLaborCooperation NAFI'A NorthAmericanFreeTradeAgreement NAO NationalAdministrativeOffice NBER NationalBureauforEconomicResearch NGO non-govemmentalorganisation QRs quantitativerestrictions srrc StandardInternationalTradeClassification SRI sociallyresponsibleinvesting TPRM TradePolicyReviewMechanism(WTO) TUAC TradeUnionAdvisoryCommitteetotheOECD UN UnitedNations UNCTAD UnitedNationsConferenceonTradeandDevelopment UNESCO UnitedNationsEducational,ScientificandCulturalOrganisation UNICEF UnitedNationsInternationalChildren'sEmergencyFund USITC UnitedStatesInternationalTradeCommission USTR USTradeRepresentative WTO WorldTradeOrganisation 8 JOINTREPORTONTRADE,EMPLOYMENT ANDLABOURSTANDARDS (bytheEmployment,LabourandSocialAffairsCommittee andtheTradeCommitteecftheOECD) SincetheendoftheUruguayRound, theissue oftradeandlabour standardshascometotheforefrontofthepolicyagenda. Theprotractedrisein unemploymentinmanyOECDcountriesandin wageinequalityin some countrieshasledsomeobserverstolookforexternalexplanations,including claimsofunfairtradepracticesassociatedwithcompetitionfromfirmsthat allegedlybasetheircomparativeadvantageonlowlabourstandards. Thisview ischallengedbythosewhoseeinternalstructuralrigiditiesasthekeyfactor behind unemployment and growing wage inequality and who claim that differencesinlabourstandardsdonothaveanysignificantimpactontradeflows orforeigndirectinvestment. Thedebatehasfocusedonthehumanrightsdimensionofcertainlabour standards.Itisarguedthatsomelabourstandardsreflectbasichumanrightsand thatallcountriesintheworldshouldthereforeadheretothesestandards.Claims arealsomadethati)thoselabourstandardsthatembodybasichumanrightscan stimulateeconomicdevelopmentandarethereforeintheinterestofallworkers (andcountries)intheworld;andii)observanceoftheselabourstandardscould neutraliseprotectionistpressures,thussecuringsupportforfreehade. However,therearesignificantdifferencesofopiniononhowsuchlabour standardscanbepromoted. Sometaketheviewthattheinternationalcommunity shouldexertpressureonthosecountriesthatdonotobservethesestandards,with thepossibilityoftradesanctionsasalastresort.Othersremainunconvincedthat new internationalpromotionmechanisms arerequired, in addition to those availableintheInternationalLabourOrganisation(ILO), andfearthatthe defenceofhumanrightswouldbecapturedbyprotectionistinterests. More fundamentally,theissuearisesastowhethereconomicdevelopment(associated, forexample,withtradeliberalisation)willgraduallyimprovelabourstandards,or whetheradditionalactions(forexample,throughtheimpositionofconditionality criteriaininternationaltradeagreements)areneeded. 9 InJune 1994,MinistersinvitedtheOECD Secretariattoundertakean analysisof“areaswherefurtherprogresswithliberalisationandthestrengthening ofthemultilateralsystemmayberequired”. Theseareasincluded“trade, employmentandinternationallyrecognisedlabourstandards,includingbasic concepts, empirical evidence in trade and investmentpatterns, and current mechanismsCorpromotinghigherlabourstandardsworld-wide”. Respondingto thismandate,theTradeCommitteeandtheEmployment,LabourandSocial AffairsCommitteebeganjointlyananalyticalprogrammetoexamine these issues, in close co-operationwith otherrelevant OECD Committees and Directoratesaswellasotherinternationalorganisations,inparticulartheILO. Theattachedstudyistheresultofthisexercise.Itspurposeistoshedsomelight ontheanalyticalaspectsofthisissue,whilealsoevaluatingmechanismsto promotecorelabourstandardsworld-wide. Selectionofcorelabourstandardsandtheirimplementation Thedebateontradeandlabourstandardshasbeenmademorecomplex becauseofalackofagreementonalistofthelabourstandardsthatarerelevant tothisissueandtheirdefinition. EfeatIofthestudyidentifiesasmallsetof labourstandards,termed“core”forthepurposesofthestudy,whicharewidely recognised to be of particular importance: elimination of child labour exploitation,prohibitionofforcedlabour,freedomofassociation,therightto organiseandbargaincollectively,andnon-discriminationinemployment. Thechoiceoftheselabourstandardsisbasedprimarilyonthefactthatthey embody importanthuman rights and that they derive from the Universal DeclarationofHumanRights. Theuniversalityofthesebasiclabourrightshas beenhighlightedintheconclusionsoftherecentWorldSocialSummit. In addition,threeUnitedNationsacts(theCovenantonEconomic,Socialand CulturalRights,theCovenantonCivilandPoliticalRightsandtheConventionon theRightsoftheChild),whichcontainrelativelydetailedprovisionsoncore labourstandards,havebeenratifiedbyover120countries,suggestingthatthese standardsreceivenear-universaladherence. Itisalsoimportanttonotethatall countrieswhicharemembersoftheILOsubscribetotheprinciplesoffreedomof associationandcollectivebargainingbyvirtueoftheirmembership. CertainILOConventionsprovideforinternationallynegotiateddefinitionsof corestandards:Conventions87and98providedetailedprovisionsonfreedomof association,therighttoorganiseandcollectivebargaining; Conventions29and 105establishtheprohibitionofallformsofforcedlabour: andConvention111 10