Labour Clauses in Trade Agreements and Trade Preferences

1. Labour Clauses in Trade Agreements and Trade Preferences Prepared for and presented by Esther Busser, ITUC, at the ITC-ILO training on “International Trade and Labour Markets“, which was held in Turin on 3-7 May 2010

2. What are labour clauses or labour provisions? labour standards which establish minimum working conditions, terms of employment or worker rights any norm on the protection provided to workers under national labour law and its enforcement any framework for cooperation in and/or monitoring of these issues. Source: World of Work report 2009 ILO/INST

3. What do they contain? Normative provisions like the adherence to core labour standards (1998 Declaration or ILO core Conventions C.87, C.98, C.100, C.111, C.29, C.105, C.138, C.182) Provisions related to the enforcement of national labour law Provisions that raise labour standards progressively Provisions for cooperation and technical assistance on labour issues

4. How are they structured? Wide variety of labour provisions in trade agreements Side agreements or provisions in the main body of the agreement Incentive/sanction based or promotional Sanctions: taking away trade concessions, fines, trade sanctions, suspension of cooperation activities Incentive based: additional trade concessions if improvements are made in labour legislation and enforcement Promotional: cooperation, capacity building, technical cooperation and information sharing

5. Why labour clauses? Social dimension of globalization and social effects of trade and trade liberalization have increased the demands for labour clauses To avoid a race to the bottom and ensure protection of workers’ rights To address the growing power of business and the decreasing power of workers and governments To address growing inequalities

6. Where do we find them? In free trade agreements (FTAs) In regional trade agreements (RTAs) In preferential schemes: Generalised System of Preferences (GSP) (these are unilateral concessions) No labour provisions in WTO

7. Evolution of labour clauses US: more incentives/sanctions based US clauses focus more on enforceable provisions US: continuous improvement in labour clauses based on closing loopholes EU: focus on decent work and consultations with workers and employers. EU provisions are mainly promotional and focus on cooperation, positive incentives and technical assistance

8. Questions Has your country signed bilateral trade agreements that contain labour provisions? Do you think such provisions are needed? Do you think they are useful?

9. Labour provisions in detail: the EU EU/South Africa (2000): the agreement contains a reference to the core labour standards but there are no procedures for resolving disputes just cooperation on various labour and social issues. EU/Chile (2003): The agreement covers general human rights as well as social cooperation and recognises the core labour standards’ importance for social development. Provides for cooperation on various labour and social issues

10. Labour provisions in detail: the EU EU-Cariforum (2008): compliance to CLS, no weakening or failing to apply national labour legislation to attract investment; coooperation and monitoring; amicable solution of differences not resulting in trade sanctions EU-Korea (2009, not yet ratified): realizing and promoting CLS; implementing ratified ILO Conventions; no weakening of labour legislation to attract investment; cooperation framework

11. Labour provisions in detail: the US NAFTA (1994): The NAFTA trade agreement includes a side agreement, the North American Agreement on Labour Cooperation (NAALC). The NAALC provisions are based on enforcement of national labour law by the partner countries. It includes references to 11 basic labour principles. The enforcement mechanism is weak and most of the core labour standards, including freedom of association and the right to collective bargaining, are not subject to any form of complaints procedure. DOL consultations-ministerial consultations-evaluation committee of experts (ECE)- ministerial consultations-ministerial council special session-dispute settlement-fines and possible suspension of trade benefits Parties could even weaken labour law further in order to escape persistent cases being brought by other NAFTA countries. Fines up to US$ 20 million in case of child labour, OSH and minimum wage

12. Labour provisions in detail: the US US/Jordan (2001): The agreement includes provisions on enforcement of domestic labour legislation in the body of the agreement, and provides for dispute mechanisms. The agreement also includes “strive to ensure” language with regard to the binding of core labour standards and with regard to the non-lowering of standards. The agreement includes a review process, which is based on extensive consultations that can ultimately lead to fines or the withdrawal of trade benefits. The provisions do not include the right for the public to submit complaints about labour rights violations. Therefore its effectiveness depends on the willingness of the governments to pursue enforcement

13. Labour provisions in detail: the US US/Cambodia (1999): a textiles agreement was negotiated with Cambodia that allocated additional textiles quotas for access to the US market in exchange for compliance with international labour standards and Cambodian legislation. The agreement was monitored by the ILO. All companies are part of the project and peer pressure has been an important element of success. The project also included training of workers and management at the factory level. The project managed to improve compliance with labour standards in Cambodia, although the situation is far from perfect. Working conditions and wages, as well as productivity and quality of products improved. Although the results are positive, the project has been costly and requires strong commitment from employers, workers and government. The issuing of export licenses has played an important role as well

14. Labour provisions in detail: the US CAFTA-DR(2006): Labour provisions in CAFTA provide a three-part cooperative approach. Firstly, the Agreement requires that all parties shall effectively enforce their own domestic labour laws in seven areas (but there is no stipulation that these must be in line with international standards). Secondly, they will work with the ILO to improve existing labour laws and enforcement. And thirdly, strategies will be built to improve workers’ rights (consultations, training programmes, financial resources and public participation). However, countries are not obliged to include procedural guarantees or sanctions to correct detected breaches. Moreover, the ILO core Convention on Discrimination is not included in the agreement

15. Labour provisions in detail: the US Peru and Panama: The labour provisions in these agreements now include a commitment to adopt and maintain the ILO core labour standards in domestic labour laws. They also include a commitment not to weaken labour laws “in a manner affecting trade or investment”. They include the commitment to effectively enforce domestic labour laws (including the core labour rights and laws on minimum wages, health and safety and maximum hours). The regular dispute settlement mechanism of the agreement applies with regular trade sanctions or monetary assessment

16. Labour provisions in detail: other countries Mercosur: the member governments signed a Social and Labour Declaration in 1998. This document is far reaching and goes beyond the core ILO conventions, covering also social dialogue, employment promotion, unemployment protection, health and safety and social protection. The Declaration mandated a Commission to monitor adherence to the Declaration and to advise on measures to ensure adherence. COMESA (1994):This agreement provides for cooperation on employment conditions and labour law.

17. Labour provisions in detail: other countries Canada/ Costa Rica : Signed in 2001, this bilateral contains an agreement on Labour Co-operation that takes the same name and same format as the labour agreement in NAFTA. The parties are obliged to embody in their labour law the principles enshrined in the ILO Declaration on Fundamental Principles and Rights at Work and to enforce these laws effectively. There are procedures for review of a country’s compliance in the event of a complaint by the other party Taiwan, China, Nicaragua (2008): commitment to certain minimum labour standards; no weakening of labour laws to attract investment and cooperation on labour issues

18. Some results No labour provision in trade agreements has led to any trade sanctions Some provisions have been used Under NAALC, 37 submissions were presented by 2008 but none went beyond ministerial consultations. The NAALC has been largely abandoned as tool for cross-border labour dispute resolution Many cases were followed up by cooperation activities Procedures are long and cumbersome Fines, if any, remain low Only a few cases resulted in direct substantial improvement of workers’ situations

19. Some results Under the US-Jordan agreement the AFL-CIO and the National Textile Association requested the US government to invoke the dispute settlement procedures. Serious violations of core labour standards, particular of migrant workers in QIZs, who are excluded from coverage of the labour code No complaint procedure for trade unions. US administration promised to address the issue Media coverage mainly resulted in some improvements Labour inspection increased but Jordan refrained from enforcing the provision excluding migrant workers from the labour code Labour code has yet to be fully reformed to address migrant worker issues

20. Some results Under the CAFTA-DR agreement complaints were filed by the AFL-CIO and Guatemalan unions in 2008. 5 cases including two killings of trade unionists In 2009 DOL issued its report sustaining the complaint (failure of labour inspectors to conduct inspections over employers’ protections; repeated failure of inspectors to use police power to access facilities when companies refuse access; failure of the labour ministry to impose of enforce fines for impeding inspections or other violations of law; repeated failure of courts to enforce orders Despite violations DOL gave the government 6 months to act on recommendations After 6 months sufficient steps were taken and new cases were needed for a dispute settlement case. New material on violations was sent in 2009 and DOL is now reviewing this

21. GSP There are 11 unilateral GSP schemes Adopted by Australia, Belarus, Canada, the EU, Japan, New Zealand, Norway, Russia, Switzerland, Turkey and the US Only two of them include conditional labour provisions Percentage of imports covered is low in most cases Some additional ratifications of ILO Conventions Preferences have been accorded despite being cited by ILO bodies for labour standards violations

22. EU GSP GSP and GSP+ All ILO core conventions Withdrawal of trade preferences in case of systematic and serious violations of the fundamental conventions Additional preferences for full compliance with these conventions Withdrawal of preferences for Burma/Myanmar and Belarus

23. US GSP Petitions accepted and investigated in 57 cases Petitions were rejected in 54 cases In 13 cases the benefits were wholly or partially suspended In 34 cases the country in question took steps In 5 cases there was a reinstatement of benefits following a suspension

24. Some lessons learned Cooperation and technical assistance do help but are not enough Incentives can help, but GSP preferences are not a long term option Language such as “strive to ensure that laws recognise and protect core labour standards” (such as in the Jordan agreement) is not sufficient. Nor is the requirement that countries only enforce their domestic labour laws very helpful (Chile, Singapore, Morocco, Australia, Bahrain, CAFTA-DR, and Oman). The inclusion of the commitment to ensure the ILO core labour standards are incorporated and implemented in domestic labour law therefore is a major improvement in the Peru and Panama agreements. Labour provisions and disputes should not be subject to separate procedures, but to the same dispute settlement, enforcement mechanisms and selection criteria as the commercial provisions in the agreement. The earlier US FTAs contained a loophole that allowed governments to avoid complying with labour obligations on the basis of prosecutorial discretion. The new text clarifies that any decisions with respect to allocation of enforcement resources must not undermine the commitment to enforce the core labour standards. Improving social and labour standards is mainly a matter of commitment A good labour clause cannot replace a badly negotiated economic part

25. Trade union position on labour clauses Commitment by both parties to the effective implementation of core labour standards and other basic decent work components. There is need for a clear statement that parties to the agreement will ratify the ILO standards concerned. The Sustainable Development chapter should fall under the same standard provisions as everything else in the FTA and be subject to the same dispute settlement treatment as all other components in the body of the agreement. Both parties should submit regular reports on general progress to implement all the commitments made under this agreement, including the Conventions protected by the ILO Declaration on Fundamental Principles and Rights at Work and any other instruments that may be mentioned.

26. Trade union position on labour clauses Both parties must make an engagement to respect the OECD Guidelines on Multinational Enterprises and the ILO Tripartite Declaration on Multinational Enterprises and Social Policy, and not to lower labour standards in order to attract foreign investment. Such an engagement must specify that it extends to all parts of their territories, so as to prevent the agreement resulting in an expansion of production in export processing zones (EPZs). Provision should be included for ongoing sustainability impact assessments (SIAs) and for action to be taken on the basis of their findings.

27. Trade Union position on labour clauses It is essential that governments be required to act on the basis of social partners’ formal submissions of communications. This should be a binding mechanism whereby recognised workers’ and employers’ organisations on both sides of any FTA should be able to submit such requests for action. Such complaints should be treated within a specified time period and form part of an ongoing follow-up and review process to ensure that governments address such complaints effectively. Complaints about social problems should be subject to consideration by genuinely independent and well-qualified experts. Their recommendations must be part of a defined process for adequately rapid treatment of the issues raised, particularly in order to maintain pressure on any governments that allow violations of workers' rights on their territories.

28. Trade Union Position on labour clauses A Trade and Sustainable Development Forum providing for consultation with workers’ organisations, employers’ organisations and NGOs should be established, with a clearly defined, appropriate balance between those three groups of members. This should meet at least twice a year, and should enable Forum members to raise social issues and problems for public discussion. The agreement should provide for fines. These must be high enough to be of a sufficiently disincentive nature. The proceeds from such fines should be directed towards improving social standards and working conditions in the sectors and areas giving rise to the problems concerned.

29. Trade Union Position on labour clauses Technical and development assistance should be provided in the FTA, linked where relevant to cooperation with multilateral agencies and especially the ILO. Additional forms of incentives, including trade incentives should also be included. Other important ILO conventions relevant to decent work that should be encompassed in the agreement. These include those identified as "priority conventions" by the ILO Governing Body in its 1993 decision (Convention 122 on Employment Policy, Conventions 81 and 129 on Labour Inspection and Convention 144 on Tripartite Consultation), other Conventions enjoying widespread support at the ILO (including Convention 155 on Occupational Safety and Health, Convention 102 on Social Security, Convention 103 on Maternity Protection, and Convention 135 on Workers’ Representatives), and certain other essential ILO instruments (namely the Promotion of Cooperatives Recommendation, 2002 (No. 193), the Human Resources Development Recommendation, 2004 (No. 195) and the Employment Relationship Recommendation, 2006 (No. 198)).

30. Consultations Consultations with trade unions often do not take place Consultations with business generally take place and business lobbies often drive trade negotiations Some countries have formal consultation mechanisms

31. Consultations EU Economic and Social Committee (EESC): this is a consultative body that gives representatives of the EU’s socio-occupational interest groups, and others, a formal platform to express their points of views on EU issues. Its opinions are forwarded to the larger institutions - the Council, the Commission and the European Parliament. Mercosur Consultative Commission: The Economic-Social Consultative Forum is the organ representing the economic and social sectors and consists of equal numbers of representatives from each State Party. The Economic-Social Consultative Forum has a consultative function and expresses its views in the form of Recommendations NEDLAC: At Nedlac, the South African government comes together with organised business, organised labour and organised community groupings on a national level to discuss and try to reach consensus on issues of social and economic policy. The Trade and Industry Chamber considers matters pertaining to the economic and social dimensions of trade and it includes the negotiations on SACU and WTO.

32. Sustainability Impact Assessments (SIAs) Each EU FTA includes and SIA Assessment of economic effects, environmental effects and labour or social effects University of Manchester http://www.sia-trade.org/ BUT: The results are not affecting the negotiations or positions in negotiations

33. Decent Work Indicators ILO work on DW indicators 90 countries 10 year period Conclusions: widening Decent Work gap across the globe, especially in South Asia and Sub-Saharan Africa Only slight improvement in higher income countries

34. Decent Work indicators Employment opportunities Adequate earnings and productive work Decent hours Combining work, family and personal life Work that should be abolished Stability and security of work Equal opportunity and treatment in employment Safe work environment Social security Social dialogue, workers’ and employers’ representation Economic and social context for decent work

35. Questions Do you think labour provisions are needed? Do you think they are useful the way they are designed?

36. Further info ILO/INST World of Work report 2009 Thomas Greven, 2005, social standards in bilateral and regional trade and investment agreements, FES occasional paper No.16 ITUC: Trade union guide to Bilaterals: do’s and don’ts www.gurn.info Topic: Trade