Stake Of Labor And WTO Stake of Labor in the WTO Seven years of trade negotiations at last gave birth to the World Trade Organization (WTO) in 1995, the U.S. labor movement was one of its leading skeptics.
A world trade organization, labor supporters argued, would only accelerate the headlong rush to laissez-faire by dismantling national regulations. It would overwhelm attempts by nations to defend living standards and the ability of unions to fight for wages and health and safety lawsand it would make it harder for nations to defend the rights of workers to join unions. Labor lobbied hard against the WTO.But now, ironically, the WTO could become a critical venue for advancing workers’ rights worldwide. For the WTO has the power to review nations’ domestic laws that create unfair trade advantages including, potentially, labor laws. The WTO could define fair trade to include labor standards. Such linkage would be a historic change in the world’s trading regime, and labor’s stake in it.
The idea of linking labor rights with trade policy has been around since shortly after World War II when efforts to create an international trading regime began in earnest.However, the WTO represents the first opportunity since 1948 to give the issue serious attention. Proponents of linking labor rights to trade rules build on the conventional case for free trade.
For international commerce to be free, markets within countries must not be rigged to encourage exports and discourage imports. This is the fundamental principle of free trade and it is the central precept of the WTO. Labor markets are a special case, because they are not conventional free markets. Minimum-wage laws and guarantees of free collective bargaining change the wages that market forces might otherwise produce.
But the economic mainstream in advanced industrial countries has long accepted that some regulation of wages and working conditions can enhance overall economic efficiency, as well as fairness. If employers are compelled to treat workers decently, they will deploy them more productively. By that logic, certain labor practices common in undemocratic countries, such as child labor, prison labor, and denial of the right to form unions, can be seen as unfair trade practicesand, potentially, violations of WTO principles that trade should reflect acceptable rules of market competition. Since wages affect all traded products and services, labor issues are central to the ultimate credibility of the WTO as the arbiter of a consistent rule-based international trading system. To the extent that wages are artificially held down because labor rights are abrogated, an indirect subsidy is extracted from these workers by their governments’ policies, which arguably violate the WTO’s free trade philosophy.During the WTO’s second-year review in late 1996 in Singapore, the United States actively sought to link labor rights with trade. However, this effort was blocked by a coalition of Third World nations (who saw the initiative as a form of protectionism) and the European Union (which was then dominated by conservative governments).
Nonetheless, the attempt put the U.S. government on the side of trade-labor linkage and forced WTO members to officially consider the issue of linkage for the first time. Even Sir Leon Brittain, the Thatcherite vice-president of the EU who actively opposed trade-labor linkage, was compelled by sister EU governments to affirm that “labor standards and other apparently domestic political issues are now the legitimate concern of the WTO because they are concerns of our constituents.” The United States, according to the U.S.
Trade Representative’s office in Geneva, will continue pushing for linkage.THE ORIGINS OF THE WTO Established in the wake of World War II, the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT) formed the third pillar of the Bretton Woods system, which included economic development loans through the World Bank and monetary stabilization via the International Monetary Fund. While the IMF and the World Bank date to the original Bretton Woods conference of June 1944, trade rules were first addressed in a 1946 meeting that set tariff levels and developed a draft charter for an International Trade Organization (ITO) that was presented at the 1948 UN Conference on Trade and Employment in Havana. John Maynard Keynes, the original architect of the Bretton Woods system, had hoped to develop worldwide trading rules that would avoid the destructive protectionism prevalent during the Great Depression, while preserving a commitment to full employment.
The ITO charter contained sections on employment, commodity agreements, business practices, international investment, and services. However, the ITO was to be stillborn. And the prominence of employment in the construction of the 1948 ITO would be lost in the creation of the 1995 WTO. Between 1946 and 1948, the start of the Cold War had closed what, in retrospect, was a very narrow window for postwar internationalism in the United States that included an activist role for government.GATT was far weaker than the proposed ITO, but even GATT was opposed by the American right, as an infringement on American sovereignty.
Conservative commentator Fulton Lewis, Jr., coined the slogan, “a GATT in your ribs,” from the popular James Cagney and Edward G. Robinson Hollywood genre of the day, in which guns, in gangster slang, were called “gats.” When in 1950 the Truman administration realized that it lacked congressional support, the ITO died.
In its place the key trading nations adopted the earlier and more limited 1946 agreements and established the “provisional” GATTpending a final transformation into some type of permanent treaty obligation. It took longer than expected47 yearsto convert the provisional GATT into a permanent WTO, whose structure and provisions are not terribly different from the original 1948 ITO, except that the primary employment purpose of world trade became lost amid the free trade ideology popularized since then.W hen the WTO replaced GATT on January 1, 1995, all of the GATT rules and its 47 years of precedents were folded into the WTO.
Broader in scope than GATT, the WTO establishes rules of open trade in a variety of industries, including manufacturing, services, and agriculture, as well as intellectual property. A December 1997 agreement adds financial services and banking. National laws restricting the rights of foreigners to buy banks must be swept aside. While GATT relied solely on pressure and persuasion, the WTO has the powerthrough its trade policy review processto pass judgment on domestic laws, regulations, and practices that affect trade. Although the WTO has not yet added basic labor rights to the list of fair trade practices subject to its rulings, decisions about how far the WTO can go to enforce labor rights will likely be reached within the next five years.Labor’s best hope for mitigating the effects of competition from low-wage countries will thus be decided under the aegis of the WTO, where the battle lines are being drawn between a handful of industrial countries that seek to link trade rules with labor rights and an alliance of Third World countries with their corporate patrons who resist doing so.
(These developing nations have been joined by some industrial-country governments, notably Australia, New Zealand, and Great Britain under John Major’s Tory government.) Low wages do provide a comparative advantage, often legitimately, because they reflect lower productivity. Low wages can help poor countries promote exports and develop economically.
But if the world trading system embraces rules that uphold a minimum set of labor rights, this could prevent artificially low wages. A linkage of labor rights and trade rules would help promote a “high-road” form of development in the Third World by relieving those countries of a competitive race to the bottom in which they are pressed to guarantee a union-free and regulation-free labor market to a Nike or Wal-Mart supplier.If labor rights become part of the regulatory regime governing international trade, countries that deny basic labor rights to their workers will no longer enjoy an artificial competitive advantage, and workers will be less threatened by their corporate employers with flight to low-wage sanctuaries that offer an unfree labor market through government policies that produce low wages.
The only international institution that monitors labor rights today is the International Labor Organization. Since 1919, the ILO has sought to eliminate labor practices that stifle human progress. Its constitution states that the “failure of any nation to adopt humane conditions of labor is an obstacle in the way of other nations which desire to improve the conditions in their own countries.” Over the years the ILO has produced conventions that it then asks its member countries to adopt. Central to this process is a set of five categories of conventions that form what are called core labor standards, which address practices concerning prison labor, bonded labor, child labor, discrimination, and rights of labor to organize and bargain collectively.The ILO has historically played a much less significant role in global trade than GATT because it could only resort to moral suasion. While the ILO has achieved some limited success by investigating and publicizing gross violations, and by exerting pressure on countries through human rights campaign techniques, it cannot issue sanctions or other penalties.
Without the economic power to pressure nations that fail to adhere to its core labor standards, the ILO lacks any real leverage. But if the WTO were to take up labor standards, the ILO vision would receive a huge boost. HOW THE WTO WORKS Bureaucratically, the WTO is an organization of some 500 highly paid professionals, mostly lawyers, who work in a building in Geneva that resembles a stylish nineteenth-century chateau an interior of dark wood, plush leather furnishings, and floor-to-ceiling windows.Sitting alongside the Botanical Gardens just off Lake Geneva, the building feels more like a placid retreat than a working edifice. At a distance from the hurly-burly of domestic politics, government representatives and the WTO staff make significant decisions about international trade out of the public’s view.
It has no written bylaws, makes decisions by consensus, and has never taken a vote on any issue. It holds no public hearings, and in fact has never opened its processes to the public. Its meeting rooms do not even have a section for the public to observe its activities. And its court-like rulings are not made by U.S.-style due process.Yet the WTO today rivals the World Bank …