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Time to Link Labor Rights and International Trade?
Labor Rights and World Trade
Labor rights in recent years increasingly have become a consideration in United States trade policy. The NAFTA treaty between Canada, Mexico and the United States contains labor and environmental side agreements, and the Clinton administration sought to place labor rights on the agenda of the World Trade Organization. For many years the U.S., from time to time, has pursued worker rights bilaterally with its trading partners, multilaterally in GATT negotiations and in the International Labor Organization; and there are other straws in the wind.
Human rights groups, organized labor and the U.S. Department of Labor have recently focused public attention on the use of child labor in the manufacture of clothing in other countries which is sold by major retail chains in the U.S. Sweatshops on both coasts of the United States and chicken processors where working conditions compare unfavorably with Chicago meat packers at the turn of the last century have also been exposed, reminders that our own country has yet to achieve perfection in the implementation of labor rights. Several high visibility U.S. corporations including Levi Strauss, Reebok and Starbucks who manufacture abroad, have adopted human rights policies and are taking greater interest in the working conditions in their overseas subsidiaries and suppliers (1996. More recently attention has been focused on working conditions in Apple's giant supplier manufacturing operations in China.) Other companies continue to seek the lowest common denominator in labor costs and work practices in their international manufacturing operations.
Two Republican governors, William Weld of Massachusetts and Pete Wilson of California signed legislation in 1996 limiting purchases by their states on human/labor rights grounds. The California law penalizes state contractors who knowingly furnish the state with goods made by forced, convict or indentured labor. Governor Wilson proclaimed that "Today we are sending a clear message to those who oppress the weal--these violation of humanity will not be tolerated. If you do business with a company that uses child or slave labor, you will not do business with the state of California. " The Massachusetts bill restricts the commonwealth from doing business with the country of Burma. These symbolic gestures are indicative of increasing concerns among voters over issues of labor rights and trade and the increasingly muddled politics on this issue in the United States. For example, in contrast to Wilson's and Weld's actions, Republicans in the 104th congress blocked the extension of President Clinton's "fast track" negotiating authority because they oppose tying labor and environmental standards to trade agreements, an approach accepted by President George H.W. Bush. [In July 2012 the Obama administration cleared American companies to invest in Myanmar (Burma) following the implementation of reforms by a new government last year following five decades of repressive military rule.]
The United States has made labor rights a consideration in bilateral dealings with its trading partners and has pursued labor rights and free trade on a regional basis and multilaterally with international economic and trade organizations including GATT, the World Trade Organization, and the International Labor Organization. However, support for this policy is far from unanimous, even within the Clinton administration. The Treasury Department under Lawrence Summers was lukewarm at best on this issue.
Free traders look at efforts to link labor rights and trade with skepticism as do many developing countries who view links between trade and labor rights as U.S. protectionism in the guise of human rights as well as an intervention in their sovereign affairs. Some developed countries, most notably the UK, also are leery of efforts to link trade and labor rights. Many favor multilateral efforts over unilateral or bilateral efforts by the United States or other individual countries.
The purity of U.S. motives to improve the lot of workers in other lands would be more credible if our citizens and leaders were more supportive of humanitarian and developmental aid to poor countries of the world. Sadly, support even for increasingly meager levels of U.S. non-military foreign aid had been declining in recent years as isolationist demagoguery by national political figures has increased, and the public mood has become more xenophobic. Moreover, as pointed out by Clinton's Secretary of Labor, Robert Reich, "There is something hypocritical about an advanced nation, any advanced nation, demanding high labor standards in other countries when it does not demand the same high labor standards of itself." [He might well have added that our "Jekyll and Hyde" actions in Latin America do not inspire confidence in the sincerity of U.S. human rights concerns in other lands.] There has been progress in the enforcement of labor laws under the Clinton administration, and there would have been more but for the anti-labor agenda of leaders in the 104th Congress.
Employer organizations in the U.S. and in other industrialized countries oppose trade sanctions over labor rights issues. Abraham Katz, head of the U.S. Council for International business and president of the General Council of the International Organization of Employers, recently asserted those organizations' opposition to the use of trade measures of any sort to deal with the problem of child labor. "Whether such measures are the product of legislation or well-meaning activities such as labeling schemes or consumer boycotts, the results could be disastrous for the children affected," he said. According to Katz, the U.S. should confine its efforts to promote labor rights to working through the International Labor Organization. Although the ILO's efforts are laudable and worthwhile, the organization lacks effective enforcement powers to assure the implementation of its labor rights conventions in the workplaces of the world. Nevertheless, Katz opposes U.S. policy of trying to get the World Trade Organization to "begin to address the issue of worker rights and trade and how they interact and how each affects the other," In the words of Mickey Kantor, former U.S. Trade Representative and current  Secretary of Commerce. Of course employers who oppose or are lukewarm supporters of worker rights and collective bargaining in the United States hardly can be expected to embrace them in other countries with resulting inconvenience and higher labor costs for their foreign subsidiaries. More deserving of credibility are employer concerns over the stability in trade relations and the very real and practical problems that would result from "turning the spigot on and off over rights [or other] issues.
Human rights and labor rights and environmental considerations are either scorned or considered to be beyond the scope of international trade theory. For example, there is no discussion or even mention of labor rights or human rights in Paul Krugman and Maurice Obstfeld's text, International Economics Theory and Policy. The helping hand has no place in the free trade ideology of the invisible hand. Human and labor rights are irrelevant--trade, with each country pursuing its own comparative advantage unfettered, automatically maximizes economic benefits. Even if that is true in a macro sense, among nations, common sense tells us that the benefits of investment and trade do not flow automatically to workers in advanced countries who are dislocated by shifts in trade flows nor to the majority in countries where a minority, sometimes in cooperation with multinational corporations, us their power to exploit a powerless majority. The banana, coffee and sugar plantation workers of Central America can attest to that. Nevertheless, once the economists are in agreement, free trade policy, in their minds is a settled issue. Leaving trade policy solely to economists is like entrusting decisions of war and peace to the generals of of the accused solely to the police and prosecutors.
Fortunately, unenlightened or unconvinced by the elegance of trade theory, many believe that children's rights, human and political rights, freedom of association and due process in the workplace are of equal or perhaps greater importance than maximizing economic benefit. One day the trade economists may find themselves in the position of the professor who said, "That may work in practice, but it'll never work in theory."
The contribution of trade sanctions to eliminating apartheid and establishing democracy in South Africa is an example of the efficacy of sanctions despite arguments from some employers and free traders, when trade measures were being debated, that sanctions would hurt black South African workers, just as Katz said this year (1996) in reference to the current cases of exploited children in Asia and Latin America. Employer pronouncements on worker rights are even less persuasive than those of economists on trade policy. The views of both should be heard, but neither should be accorded the final word.
It must be noted, however, that the conditions in South Africa, which made the situation ripe for trade sanctions, are not present in every country. In South Africa, well organized and tenacious resistance inside the country gained widespread sympathy and support around the world for action against the atrocities committed against blacks by the white South African government. Moreover, the country's relatively small size and location were such that national security and economic considerations for the U.S. were less significant than, for example, in the case of the Soviet Union, China or even Saudi Arabia where the U.S. has withdrawn Overseas Private Investment Corporation [OPIC] benefits on worker rights grounds with no observable effect. In cases of large or especially critical countries, unilateral action which may result in the singling out of U.S. interests for retaliation is impractical and hard to apply. Multilateral action by industrial democracies in the World Trade Organization, the ILO, the United Nations, the World Bank, or even by agreement of the major industrial nations, is preferable, yet difficult to achieve.
Nevertheless, multilateral actions have accomplished worthwhile results as they did, when conditions ripened, in the case of the transition of post-Franco Spain, with the encouragement of West European countries and the inducement of membership in the European Community, to a democratic country where political and human and labor rights are observed. That is, the EC told Spain, upon the Generalissimo's demise, "If you want to join the club, here are the rules." A similar transition is under way in the former communist countries of east Europe who are being instructed by the EC in West European political, labor and environmental standards.
In some countries where human and labor rights are denied, local advocates of such rights have been "disappeared," jailed or otherwise repressed by governments who view normal union and human rights activities as a threat to their continuation in power and to their economic development policy of assuring investors from developed countries of the cheapest possible labor and a union free, as opposed to a free union, environment. This policy is still pursued by a number of countries despite recent OECD findings indicating a positive relationship between the acceptance of labor rights and economic growth and that no advantage in economic growth results from the repression of core worker rights.
Clearly, then, effective linkages between trade and labor rights, although they sound good to those who advocate them, are, in practice, not easy to bring about. Developing a consensus in the United States for linking trade and labor rights is difficult, and even more so among the world's industrialized countries. Nevertheless, the effort is one that should be made, and the concept that trade and labor rights are related seems to be gaining support, perhaps because many of the abuses of children and women and workers generally are repugnant to citizens around the world, when they are made aware of them. These practices are impossible to defend once they are exposed on the evening network news. Men and women of good will and determination can bring about the public support needed for developing a consensus on how to pursue both the implementation of worker rights and free trade.
Recent experience seems to indicate that many consumers in developed countries are willing to pay more for a garment or other product made under humane conditions once they are made aware of the issues and that many retailers are sensitive to criticisms of the working conditions in the factories of their suppliers. One might hope that the superstar athletes and other celebrities may also have second thoughts about lending their names to products made by young children working long hours in deplorable conditions. The public is increasingly questioning the fairness of a system under which huge celebrity endorsement contracts are used to market products at high prices and immense profit to poor children in rich countries, products made by exploited women and children in the most impoverished and repressive countries of the world.
Economic development based on the exploitation of women and children, and men as well, forced to work long hours for low wages in unsafe or unhealthful conditions is not in the interest of the citizens of the developed countries whose corporations are making the investments; nor is it in the interest of the citizens of the developing countries who are competing for the investments with the sweat of their most vulnerable citizens. Only when such investments bring actual economic progress, widely and equitably shared, safer and more healthful working conditions and the observance of basic labor and human rights should they be supported by democratic industrialized countries. Multinational corporations, when they export their technology to a foreign land, must not leave the health and safety and environmental portion of the technology behind in their home country. They just be called to account for their defense that "all local laws have been complied with" an excuse too often offered for environmental pollution, substandard health and safety conditions and transgressions of elementary, civilized worker rights long ago prohibited in advanced countries.
Experience under NAFTA to date supports the value of linking labor rights and trade. The treaty would not have been ratified without the addition of labor and environmental side agreements. The introduction of these considerations made possible the removal of trade barriers among the three signatory countries. The treaty has resulted in a mutually beneficial exchange of information and ideas and scrutiny of labor rights and environmental practices in each country. Such activities promote strengthened domestic enforcement of labor and environmental standards, which is preferable to the fines or trade sanctions provided in the side agreement for a "persistent pattern or failure to enforce" such laws. Progress is being made on all three fronts--trade, labor rights and environmental conservation. This, in turn can serve as an example for similar arrangements elsewhere in the hemisphere and beyond.
Thus, there need by no conflict between free trade and the promotion of labor rights and other democratic values. These goals can be mutually supportive if they are pursued simultaneously in a pragmatic, realistic and flexible fashion, taking into account the level of economic development and the interests in the importing and the exporting country as well as national security and foreign policy objectives.
The U.S. interest will be served by continuing to pursue both free trade and labor rights simultaneously on all fronts--multilaterally through the WTO, ILO, World Bank and OECD and regionally as in NAFTA and the Caribbean Basin Initiative; on a bipartite basis with out trading partners; and unilaterally where appropriate. We should not shrink from the use of trade sanctions where they are likely to bring positive result where other mechanisms have failed.When the power of persuasion fails, the persuasion of power may be necessary.
[I wrote the above paper in 1996 while serving as a political appointee in the Clinton administration. Since then events indicate that my views at that time on introducing labor and environmental considerations in trade negotiations were overly optimistic.]
Addendum--from the NYTimes 7-18-12. For the first time since the fall of the USSR, a bipartisan coalition in Congress has agreed to normalize trade with Russia but with a provision that Russia be held responsible for human rights abuses. President Obama supported normalizing trade with Russia but he opposed mixing trade and human rights issues. The President's view reflects the traditional views of the foreign policy and economics establishment which are skeptical of measures that impede unalloyed free trade.
7-18-12NYTimes "In Trade Deal With Russia, U.S. Plans Sanctions for Human Rights Abuses
- After Decades, U.S. to Extend Trade Deal to Russia - NYTimes.com
Legislators have agreed to normalize ties for the first time in decades, but the move to impose sanctions defies President Obama, who lobbied against mixing the issues.