Trade and Labour Standards

 

Posted below – An attack on expected linkage between trade and labour standards by the new US Congress by Bhagwati et al in the Financial Post, and a response by Global Unions.

Fast-track renewal could lead to tougher demands on the poor
By Jagdish Bhagwati, Alan Deardorff, Koichi Hamada, Parvin Krishna and Arvind Panagariya
Published: February 2 2007 02:00 | Last updated: February 2 2007 02:00
From Profs Jagdish Bhagwati, Alan Deardorff, Pravin Krishna, Arvind Panagariya and Koichi Hamada.

Sir, We are faced today with the election of several new Democrats who are simply terrified by trade with the poor countries and its alleged, unproven deleterious effect on the wages of unskilled American workers (the article “Technology, not globalisation, is driving wages down” by Jagdish Bhagwati, FT January 4, showed that there is little evidence for this allegation). Many of them mistakenly consider such trade to be a threat even to the well-being of the American middle class.

It seems increasingly probable, therefore, that the renewal of fast-track authority for President George W. Bush, if granted by the Congress, will lead to the US demanding tougher preconditions for future trade liberalisation from poor countries than are already in the trade promotion authority enacted in 2002. For example, instead of the requirement that each nation enforce its own labour and (domestic) environmental standards, the new fast-track demands are likely to ask for the raising of these standards, as desired by Senator Carl Levin and other Democrats in the case of the Central American Free Trade Agreement. It is also highly probable that those seeking trade liberalisation will concede it as a price to be paid. In fact, you report (” ‘Old-school’ Democrats urge trade deal”, January 31) that the Business Roundtable is likely to drop its opposition to such demands.

But while bipartisan support may materialise behind such a move, recall that bipartisanship is no guarantor of virtue: the Smoot-Hawley Tariff of 1930 was also a bipartisan piece of legislation. Major developing countries such as India and Brazil, both with better credentials on union rights – surely President Luiz Inacio Lula da Silva is arguably the most remarkable trade union leader today – and on global warming than the US, which has not signed the Kyoto protocol, oppose the demands for inclusion of such standards in trade treaties, seeing them as constituting generalised, non-transparent and invidious export protectionism by fearful rich-country trade unions and politicians acting out of fear and self-interest to raise the cost of production abroad rather than from the altruism and empathy they occasionally profess.

Edward Alden, in his Comment article “Bush is right to push for renewal of his fast-track trade policy” (January 31) suggests that “for the rest of the world, it is worth paying such a price” for the fast track to be renewed. Perhaps he should let the rest of the world speak for itself.

Sir,
Friday’s letter from Professor Jagdish Bhagwati and his colleagues arguing against measures to achieve the respect of labour standards (“Fast-track renewal could lead to tougher demands on the poor”, Financial Times, 2 February 2007) entirely misses the point.  As recognised by many well beyond the trade union movement, the key issue nowadays is the continuing shift in power from labour to capital, as evidenced by the declining share of wages in gross output.  This trend would be exacerbated if Professor Bhagwati’s advice were adopted, since it is facilitated by a situation whereby companies are able to threaten workers that unless wages are kept in check, they will shift production to other countries where they are less constrained by any need to respect fundamental workers’ rights.  The continuing expansion of production in the world’s five thousand-plus export processing zones, many of them in China, bears witness to the fact that these are no empty threats.

Secondly, it should be noted that the only recent example of effective defence of labour standards in a comprehensive bilateral agreement signed by the US, that of the Jordan-US free trade agreement, provides for both the enforcement of domestic labour standards and the respect of internationally recognised labour standards – hence there is no contradiction, as suggested by Professor Bhagwati, between one and the other.  Far from bringing the world trading system to its knees, the inclusion of labour standards in trade agreements would actually create some linkage between trade and higher living standards, thereby providing some legitimacy for the contention that trade is good for working people.

Finally, whatever the positions of the governments of developing countries, their duly elected trade union leaders – representing the workers whose production creates the exports in question, lest that be forgotten – have stated time and again that they support the integration of strong commitments to ILO standards in trade treaties.  Such references would constitute a minimum guarantee against extremes of exploitation and in support of the basic representational rights that could enable workers to receive a fair share of the wealth they create.

Yours sincerely,
Guy Ryder
General Secretary
International Trade Union Confederation
Brussels