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The Debate Over Globalization

The Debate Over Globalization. Dimensions of Globalization Box 12.2: Globalization: The Good, the Bad, and the Unequal U.S. Trade Policy. “Finding Lessons of Outsourcing in Four Historical Tales”. Domestic workers are always vulnerable to competition from foreigners willing to work for less

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The Debate Over Globalization

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  1. The Debate Over Globalization • Dimensions of Globalization • Box 12.2: Globalization: The Good, the Bad, and the Unequal • U.S. Trade Policy

  2. “Finding Lessons of Outsourcing in Four Historical Tales” • Domestic workers are always vulnerable to competition from foreigners willing to work for less • Between 1870 and 1910, 60m Europeans, mostly young males w/ few jobs skills, emigrated • Boosted U.S. labor force by 24% • Sent industrial wages tumbling • Wages declined 1-1.5% for every 1% increase in immigration during 1890s and early 1900s • Wages dropped even more steeply in fields dominated by immigrants • U.S. labor unions turned against immigration in 1890s • In 1870, wages were 136% higher in U.S. than in Europe, by 1913 gap closed by half • By 1921, when U.S. limited immigration, flow of immigrants was easing due to increase in European wages

  3. “Finding Lessons of Outsourcing in Four Historical Tales” • Politics can slow down transforming effects of new technology • Transportation revolution of late 19th century every bit as life-changing as advent of Internet and high-speed data communication today • Cost of shipping wheat between New York and Liverpool fell by half between 1830 and 1880, by half again between 1880 and 1914 • Industries and workers hurt by imports assembled coalitions that persuaded politicians to erect high tariffs • U.S. remained high tariff country for much of early 20th century • In Germany, political reaction was more radical • Result: militarism and economic isolation mounted

  4. THE WORLD TRADE ORGANIZATION (WTO) • Formed in 1995 to administer free trade agreements (the General Agreement on Tariffs and Trade, or GATT) and handle future trade negotiations. • Provides framework for over 140 countries, including U.S., to negotiate reciprocal, nondiscriminatory trade agreements. • Attempts to reduce tariffs and other barriers to trade such as quotas, domestic subsidies, and discriminatory government procurement policies. • Resolves trade disputes.

  5. THE WORLD TRADE ORGANIZATION • In theory, resolution of trade disputes seeks to balance WTO’s principles of free trade with national sovereignty to establish standards “necessary to protect human, animal or plant life or health.” • In practice, strong presumption in favor of free trade. National standards often ruled to be illegal trade barriers. • Debate between ‘free trade’ and ‘fair trade.’ • Free trade is the removal of all trade barriers. • Fair trade is the incorporation of labor, environmental, public health, and other standards into trade agreements, as well as ability to impose trade sanctions on countries that violate these standards, to prevent ‘social dumping.’

  6. THE WORLD TRADE ORGANIZATION • WTO imposed penalties in November 2004 on U.S. exports ranging from apples to textiles, escalating trade dispute Bush administration has struggled to defuse by unsuccessfully urging Congress to repeal legislation aimed at protecting American steelmakers • EU joined in complaint by Brazil, Canada, Mexico, South Korea, Japan, India, and Chile • Source: Associated Press, 11/27/04

  7. THE INTERNATIONAL LABOR ORGANIZATION • Chief international authority on labor standards that adopts and then promotes minimum labor standards on particular issues. • Specialized agency of United Nations • Its Declaration on Fundamental Principles and Rights at Work (1998) establishes set of core labor standards, “fundamental to the rights of human beings at work”: • Freedom of association and collective bargaining • Abolition of forced labor • Nondiscrimination in employment and pay • Elimination of child labor • Since labor standards are not legally enforceable, ILO relies on publicity, diplomacy, and technical assistance, not legal or economic punishment, to encourage compliance.

  8. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) • 1992 free trade agreement between United States, Canada, and Mexico • Eliminates tariff and nontariff trade barriers • Allows companies of signatory countries to invest, sell services, and bid on government contracts in all three countries, and protects intellectual property rights. • NAFTA provides for capital mobility, but not labor mobility: companies are free to invest in all three NAFTA countries, but individuals are not free to work outside their home country. • Important side agreements address labor and environmental issues.

  9. THE NORTH AMERICAN AGREEMENT ON LABOR COOPERATION (NAALC) • NAFTA side agreement to promote labor standards. • NAALC provides eleven guiding principles that the three countries commit to promote, including union activity, but these are not uniform standards and they are not enforced through trade sanctions. • Explicit emphasis is on cooperation to promote compliance with existing domestic laws. No new laws are required nor are there restrictions on future laws. • Compliance is dependent on “sunshine factor” or “naming and shaming” of violators. • Poor track record on union issues, but perhaps reasons for optimism?

  10. THE EUROPEAN UNION • Integrated community of 27 European nations progressing towards a true economic union. • (Bulgaria and Romania joined in 2007) • Includes common external tariffs, extensive capital mobility across member countries, elements of common monetary and fiscal policies, and labor mobility. • Noninflationary economic growth, not labor and social standards, is explicit priority of EU. • EU has long embraced the “reasoning that the social caboose would be pulled by the economic locomotive.” • Because EU is more than simply free trade zone, EU-level political institutions can issue laws and standards.

  11. THE EUROPEAN SOCIAL CHARTER • EU concern with labor standards because of • respect for basic human dignity and • fears of social dumping from member nations with lower standards and labor costs to countries with more generous standards and higher labor costs. • The Community Charter of Fundamental Social Rights of Workers (or “Social Charter”) was adopted in 1989. • Outlines standards for various labor issues such as fair pay, equal treatment for men and women, health and safety protections, freedom of association and collective bargaining (including the right to strike), and information, consultation and participation rights for workers. • To fulfill information, consultation, and participation standards, 1994 directive mandates establishment of European Works Councils.

  12. EUROPEAN WORKS COUNCILS • Traditional works council is workplace-level committee of employees elected to represent all workers (except senior executives) in dealings with management. • Companies with significant operations in at least two EU countries must establish European Works Council (EWC) • Transnational, company-level committee of employees from these different operations. • Has consultation and information rights on issues that affect workers in more than one country. • Lacks codetermination rights.

  13. “EU Eases the Way for Merger Accords” • EU ministers have approved long-awaited legislation designed to make it easier for companies to merge across countries’ borders within EU • But included ee-protection clauses business had opposed • Legislation must now be approved by European Parliament • Agreed to follow German rules on ee participation in mergers (most pro-worker in entire EU) • Under German law, workers representatives serve on supervisory boards of most large companies • Source: Wall Street Journal, 11/26/04

  14. TRANSNATIONAL COLLECTIVE BARGAINING • With increased globalization and increased multinational corporate activity, labor unions are under pressure to collaborate across international borders. • From simple messages of solidarity to sympathy strikes. • From sharing information to coordinated lobbying or public pressure campaigns. • From helping establish unions in developing countries to coordinated collective bargaining. • While global initiatives of corporations are facilitated by WTO and NAFTA, international activity by labor unions are not (with the limited exception of European Works Councils). • True coordinated collective bargaining across borders is rare.

  15. THE INTERNATIONAL CONFEDERATION OF FREE TRADE UNIONS (ICFTU) • Worldwide federation of 200+ national union federations from 150 countries representing 157 million union members. • Members include AFL-CIO (U.S.) and Trades Union Congress (Great Britain). • Main objectives are to facilitate consultation, communication, and cooperation among unions internationally. • Also pushes for multinational corporations to adopt codes of conduct that respect basic workers’ rights. • World Federation of Trade Unions (WFTU) also promotes union solidarity-although it has been shunned by ICFTU because of its ideological ties with Communism.

  16. CORPORATE CODES OF CONDUCT • Written statement of standards that company voluntarily pledges to follow in its business activities. • Often specifies fair business practices, labor standards, environmental concerns, corporate citizenship and ethics, and respect for relevant laws. • In terms of labor practices, common concerns are child labor, discrimination, and health concerns. Respect for unionization is less commonly included. • Can be written by transnational governmental organizations such as the ILO, government agencies, and most frequently labor unions, allied organizations, and individual corporations. • Example: ICFTU has issued model code of conduct encouraging unions to use strong codes to initiate dialogue with a company on globalization and labor rights, to create climate of worker awareness of human rights issues.

  17. CORPORATE CODES OF CONDUCT • Have been particularly prominent in apparel and footwear industry—Reebok, Nike, Levi Strauss and many others who utilize worldwide contractors (attacked as “global sweatshops” by critics). • Because codes are voluntary and rely on publicity rather than legal power, most important problems with them are content and enforcement. • When companies create their own codes, they can define or exclude standards to serve their self-interest. • Does USI participate in the Fair Labor Association and/or the Workers Rights Consortium (‘anti-sweatshop’ organizations)? Should it?

  18. GLOBALIZATION AND LABOR RELATIONS • Private sector unions are struggling to maintain viability of collective bargaining in face of globalization and threat of moving production to low-wage countries. • Traditional industrial unions have lost thousands of members. • With New Deal industrial relations system under fire from globalization, important to consider alternative institutional mechanisms for governing global workplace. • Enforceable international labor standards and transnational collective bargaining have potential to support domestic-level collective bargaining. • Continued emphasis on ‘free trade’ rather than ‘fair trade’ likely to keep organized labor on defensive.

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