Social and ecological sustainability in the globalized economy : proceedings of a conference sponsored by the Friedrich Ebert Foundation, New York, Helmsley Hotel, Wednesday, April 21, 1999. - [Electronic ed.]. - New York, [1999]. - 21 Bl. = 60 Kb, Text
Electronic ed.: Bonn : FES Library, 2001

© Friedrich-Ebert-Stiftung


I. Introduction

Two decades ago, the process of the growing integration of markets for goods, services and finance – the phenomenon now known as globalization – held the promise of producing a rising tide of wealth that would lift humanity’s collective boat.

Today, the promise remains unfulfilled. As the UNDP’s 1997 Human Development Report concluded, „some boats are more seaworthy than others; the yachts and ocean liners are indeed rising in response to new opportunities, but the rafts and rowboats are taking on water and some are sinking fast."

The widening inequality gap and grinding poverty that afflict a startlingly high percentage of the world population have led to a stark reappraisal of globalized production patterns. Was the original promise of globalization a false one? Can globalization be reshaped, reconfigured, or reinvented so that it will benefit not just the yachting set, but those who ride rafts and rowboats?

This reappraisal is taking place among all sectors of society and from all corners of the globe.

  • In Asia, economic crises have turned the tide in many developing countries against further liberalization. So far, this reversal of sentiment is mostly directed toward financial flows. However, as prices for low-skill manufacturing plunge, many developing countries are beginning to question the development model of export-driven growth.
  • In industrialized countries, experts are engaged in a raging debate over globalization and the benefits of trade liberalization. Critics charge that economic interdependence is undermining democracy and threatening systems of social security.
  • For the mostly female workforce in export processing zones (EPZs), the benefits of higher wages in manufacturing enterprises are often offset by higher costs of living in newly urbanized areas, health dangers due to poor working conditions, and environmental degradation.
  • Consumers are undertaking – with greater frequency – successful campaigns to focus attention on exploitative conditions under which many goods are produced. Some companies have been singled out for boycotts.

Against this backdrop, the Friedrich Ebert Foundation organized a conference to discuss problems that have arisen from globalized production patterns, especially with regard to export-oriented industrialization in developing countries.

The goal was to assess the feasibility of different policy approaches to regulate export industries, while bearing in mind the general desirability of an international division of labor and the necessity for developing countries to earn hard currencies by securing trade balance surpluses.

The key questions before conference participants were: Which form of governance is most likely to achieve the double feat of continued political support for trade liberalization in the North and South, while at the same time guaranteeing an equitable distribution of its gains among all the stakeholders? What sort of institutions or regimes need to be created in order to make global production patterns sustainable, particularly in developing countries?

The Friedrich Ebert Foundation invited international experts in the fields of sustainable development, human rights, the environment and labor to explore these issues at a daylong conference titled „Global Production and Sustainable Development" in New York City on April 21, 1999. The event took place during the seventh session of the United Nations’ Commission on Sustainable Development (CSD 7). One of the overarching issues that the commission deals with in its work is the sustainability of consumption and production patterns. The conference aimed at linking this important issue to development policy, by discussing the effects of development strategies based on export driven growth on social and environmental sustainability.

The conference was held in advance of the UN Commission on Sustainable Development’s annual conference, held in New York April 19-30.

The issues were tackled by three panels made up of experts in the fields of sustainable development, human rights, the environment, and labor. The first panel looked at social and environmental consequences of global production, the second focused on good governance and human rights, and the third examined new initiatives toward sustainable global production.

The opinions expressed by speakers were as diverse and wide ranging as their backgrounds. However, they reached a clear consensus: the system is not working, and it must be fixed.

The solutions ranged from those at the micro level to those at the macro level. On banana plantations and coffee fields in Central America, small-scale farmers and agricultural workers are receiving fair prices for their products and labor through the efforts of the Fairtrade Labelling Organizations International. In New York, the Council on Economic Priorities Accreditation Agency is urging corporations to adopt a new set of workplace standards. Other speakers argued on behalf of systemic changes in the ways that governments, global governance regimes, and the corporate world function.

II. Proceedings of the Conference

Panel I: The Consequences of Global Production


Franklyn Lisk, Director, UN Liaison Office
International Labour Organization (ILO)


Bradford Gentry, Co-Director, Yale/UNDP Public-Partnership Program
Yale University, School of Forestry and Environmental Studies

Indira Saxena, Commonwealth Trade Union Confederation (CTUC) of India

David Schilling, Director, Global Corporate Accountability Programs,
Interfaith Center for Corporate Responsibility (ICCR)

Franklyn Lisk
„The Role of the ILO in Global Production and Sustainable Development"

For the ILO, the debate over global production and sustainable development involves three key issues: risks for workers; challenges for policymakers; and the role of international organizations such as the ILO.

The ILO has a strong social mandate. This social mandate has been reinforced in recent years perhaps most importantly by the Declaration from the World Conference on Sustainable Development, as well as the ILO’s decision to get involved in issues of trade liberalization from the point of view of social dimensions. It is in this context that the ILO has been working on behalf of the social dimensions of the liberalization of international trade.

Turning to the three key issues, the ILO’s commitment to worker rights is well known. This commitment was enshrined in the annual conference of June of last year by the adoption of the new ILO Declaration on Fundamental Principles and Rights at Work.

For the ILO therefore, globalization, or any process which puts the rights of workers and their well-being at risk, is a concern of the ILO. And not only from the point of view of lowering standards. For the ILO, the „race to the bottom" is an issue of crucial importance because international labor standards have a major role to play in ensuring a more equitable process of globalization, a process which – to use a cliché – needs a human face.

One of the areas of globalization that the ILO is investigating is that of EPZs. While EPZs provide investment promotion opportunities, they also are the source of serious violations of national and international labor standards.

The challenges to policymakers can be narrowed to three issues: trade, finance and debt. The essential challenge is how to manage the process of globalization so that its impact on growth will be positive and the manner in which economies are integrated into the global economy is not disadvantaged. There is also the need to ensure that growth and benefits that emerge from the process of globalization contribute substantially to objectives having to do with employment and equity – especially gender equity, an area of particular interest to the ILO.

Active labor market policies are an important part of the mix. It is imperative that these policies grow out of a social dialogue and that they provide at least some measure of a social safety net, when necessary.

In developing countries, and particularly the least developed countries, policymakers will have to pay attention, in the context of globalization, to the need to strengthen their domestic administrative and technical capacities so that they can form policies and implement programs which ensure that integration into the global economy generates sufficient jobs. And not just jobs that are productive, but jobs that are socially satisfying.

Lastly, the ILO, sees a number of opportunities for international organizations in the debate over globalization and its impact on our member states. The United Nations has emphasized the importance of coordination of these activities within the system, so that the ILO and UN may work in the same direction.

The ILO is going through a major transition in ways that deal directly with the subject of this conference. The new director-general, Juan Somavia, the former Chilean ambassador, is a well-known UN diplomat and internationalist. Mr. Somavia has identified „four pillars" for the ILO: employment; international labor standards; social dialogue; and social protection, towards which all work of the ILO will be geared in the future. In addtion, Mr. Somavia has identified gender issues and development as main, cross-country issues for the ILO.

The ILO will devote a substantial amount of its resources and energy toward promoting the Declaration on Fundamental Principles and Rights at Work. This document is significant in that it is not intended to be curative, but rather promotional. The ILO’s aim in this regard is to provide to member states with the right type of technical support so that they can fulfill their legal and constitutional obligations through the implementation of appropriate labor standards.

Further, there are strong indications that Mr. Somavia will bring the ILO much closer to the UN system than it has been in the past. This will mean that the ILO will work more closely with the international financial institutions. For example, the ILO next week will be part of the UN delegation attending the meeting of the Bretton Woods Institutions.

Bradford Gentry
„Foreign Direct Investment and the Environment: Boon or Bane?"

Is FDI good or bad for the environment? Is it a boon or a bane?

According to Mr. Gentry, it depends on the investor and the level of enforcement. It also depends on whom you ask. The ‘baners’ argue that FDI leads to higher levels of pollution, consumption and environmentally unsound development. The ‘booners’ respond that FDI improves the environment because it brings higher levels of technological and managerial resources to bear on environmental concerns.

A better question may be whether developing countries can use FDI to promote sustainable growth and environmental goals at the same time. Mr. Gentry believes the answer is yes. In fact, he said, FDI is probably the best vehicle available to integrate sound environmental and investment goals. If FDI has the potential to harm the environment, how is that possible?

First of all, sustainable development will require massive injections of private investment. Of all types of international private capital flows, FDI is the more desirable. It is comparatively stable and promotes economic growth more broadly than other types of capital. It also brings access to knowledge and production methods.

Secondly, foreign direct investors generally do not pick locations based on environmental considerations. Labor costs are much more important. That means that host country governments can integrate environmental policy into their investment promotion frameworks, without fear of driving away investors.

Host country governments can shape their own markets in a variety of ways, Mr. Gentry said. They can determine ground rules and set prices for the use of environmental resources. They can make deals to establish training programs on environmental management systems. With more and more portfolio investors seeking to prove links between good environmental and good financial performance, foreign direct investors may come along willingly, Gentry said.

„The implication, at least within the environmental community, is that both those who think FDI is a boon and those who think it is a bane can be working within a common framework for action. The ‘baners’ can focus on the establishment and implementation of regulatory frameworks. This gives host country governments a room ot maneuver, to put in place clear and predictable frameworks that require certain environmental behaviors."

The ‘booners,’ meanwhile, should encourage host country governments to seek out progressive foreign direct investors, for example those that fund primary education on the environment or sponsor training programs for small- and medium-sized enterprises. However, these regulatory functions can not be undertaken by host country governments alone, Mr. Gentry emphasized. The role of local governments is shifting from that of ‘doers’ to that of ‘enablers’ who put frameworks in place and oversee how those frameworks are implemented.

„But it’s not enough to have these stringent environmental laws on the books. There need to be vehicles for implementation, and that’s where NGOs and other sorts of people need to be involved, in a variety of informal and formal ways, locally and internationally."

In response to questions from the audience, Mr. Gentry explored areas in which NGOs and other non-state actors could in the short-term encourage industries to improve their environmental performances.

„The easiest place to start would be to say, ‘What have companies been telling their shareholders and their customers about their investments in EPZs? How great are they as environmental actors? Are they living up to their self-proclaimed standards everywhere they operate? If they are, how do we use them to help bring the rest of the industry up to that standard. If they are not, how can we instrumentalize that knowledge to embarrass them into doing what they already say they’re doing?"

Mr.Gentry also suggested that non-state actors build coalitions with multinational corporations that have good environmental records in EPZs to pressure governments to enforce environmental regulations against companies that with poor environmental records.

Indira Saxena
„Globalization: Opportunity or Threat for Employment and Development?"

In theory, host countries reap tremendous financial rewards from EPZs. Sadly, the theoretical promise has remained largely unfilled in practise, Ms. Saxena said. Jobs pay poorly and work conditions are oppressive, exploitative and dangerous. In many cases, the cost of imports exceeds the gains from exports.

Women, who account for the vast majority of EPZ workers, suffer the most, she said.

„In India, there are more than 80,000 workers directly involved in EPZs, and 90 percent of them are women. Countless numbers of these workers are invalidly involved in these EPZs. Many names of employees are not listed: officially, they are ‘not there.’ They work without social security and in highly unsafe conditions, with a constant threat of job loss. They are denied their rights to freedom of association."

Investors, meanwhile, are faring well. EPZs offer lucrative packages to attract foreign capital. These packages promise cheap labor and infrastructure, duty-free imports, and easy access to markets. „Despite all these privileges, EPZs serve no good to a country’s development. An auditor general’s report in India concluded that the amount of money they use to pay for imports is much higher than they earn from exports," Ms. Saxena said.

Was there no „trickle down" effect from EPZs, an audience member asked. Ms. Saxena conceded that there are limited cases in which EPZs have improved working conditions and raised workers’ wages in response to rising production. However, these cases are few in number.

Ms. Saxena recalled the case of a female EPZ worker in India who quit her job because of unsafe and inhumane conditions. When her employer refused to pay for work already done, the woman turned to Saxena’s CTUC, which intervened on her behalf. The result was disappointing. The employer denied that the worker had ever been on the payroll. „These workers have no union rights," Ms. Saxena said.

What strategies are being used by groups such as Saxena’s to organize women EPZ workers? What problems are they encountering as they take companies to task for violations of worker rights?

EPZ workers in India have no right to associate. However, some trade unions have succeeded with organization efforts. The obstacles, however, make it nearly impossible for them to do so, she added. „The moment the employer finds you are going to visit the office of a woman activist or union, they immediately sack you without even one day’s wages. Workers are scared. They do not want to lose even one day’s wages. So, they stick to their sweaty conditions. They even die there."

In light of these problems, the key question facing policymakers experimenting with globalization has been how to remove barriers and distortions posed by tariffs and subsidy policies with reasonable speed, without creating further dislocations and distortions in the functioning of the market economy.

„This has become a very, very big issue which is affecting workers," Ms. Saxena said.

David Schilling
„Beyond Job Creation: The Social Impact of Export Processing Zones"

Many developing countries look to EPZs as a springboard to sustainable development. Can EPZs really fulfill that function? So far, they are not, Mr. Schilling concluded.

„A case could be made that in the first wave 15 years ago, there were some countries that were able to use EPZs as a means by which to generate the development of domestic industry. I don’t think that’s happening now. The kinds of industries that are set up in these zones – textiles, apparel, electronics, some automobile assembly – are low-wage, low-skilled operations. What is the potential for that to be the first step toward sustainable development?"

For the individual worker, Schilling’s organization has found that EPZs rarely serve as a stepping stone for employers trying to lift themselves up by their bootstraps. An EPZ expert in Bangladesh who has interviewed thousands of female EPZ workers reported that none stayed on the job more than five years. „That’s it, they’re out. It’s not like it’s a platform for further development," Schilling said.

Another disappointing finding is that EPZs do not appear to promote community development, Schilling said. „We talk about this as ‘pass-through development’ instead of sustainable development. One of the characteristics of EPZs is that the benefits accrue elsewhere. If the owner of the factory comes from Taiwan, Hong Kong or South Korea, some of the profits from the contract go back to the those countries."

„The producer, whether it’s Walmart or the Gap, sells the product in the consuming country and value accrues certainly to the company and the shareholders of the company. But with the exception of the wages of the workers, very little accrues to the community. That’s a huge concern," Schilling said.

International financial arrangements force governments into export-oriented economies. „Once that happens, it’s hard to know where that will lead. In order to get that investment, do you really have to lower your labor standards? Do you really have to lower the enforcement of your labor code? If that’s the price for doing business, we really have to examine where this globalization process is going. In the end, we do not want that process to be marginalizing people and to contribute to the disparity between the wealthy few and the poor many. I think we can do better," Schilling said.

In some cases, groups such as Schilling’s are successfully pressing companies to do the right thing by their workers. Schilling recounted the case of Margarita del Angel, a General Motors factory worker in Mexico. Under Mexican law, workers are entitled to share in 10 percent of company profits. In the year in question, the GM plant had done well financially. Workers, however, received a $50 bonus with their Christmas paychecks.

The ICCR held shares in GM. Schilling arranged a meeting between del Angel and then-CEO Roger Smith. „Mr. Smith looked into it and ended up dispensing more profit-sharing." The salient point, Mr. Schilling said, is that workers need to be able to organize so that they can protect their own rights.

The idea that the corporate sector is becoming more socially responsible is one that is increasingly advanced today. Is such an argument valid, an audience member asked. And, is it possible to measure corporate social responsibility?

Mr. Schilling’s group comprises 275 religious institutions with shares in hundreds of companies, and who are trying to use their role as shareholders to bring effective change. „We started in 1971 and, at that time, corporate social responsibility was not on the screen at all at most countries."

„I think we have to say there is a tremendous upsurge in interest and, to some degree, commitment toward corporate social responsibility. But we have to clarify what that means. There are some companies that see themselves to be socially responsible, and have begun to put out the appropriate policy statements. The question is, what resources are being used, what kinds of training programs are there, what kind of outreach is there to the communities where they are operating? If a company has a code of conduct, is it being implemented? Is there internal training? What kind of monitoring is going on?"

There are ways to measure corporate social responsibility, but it is easier to measure quantitative rather than qualitative areas. „For example, we believe companies, particularly those operating in the free trade zones, have to have clear statements around women’s rights. There are some ways to measure that. If you give pregnancy tests, as a condition of employment, that’s clearly wrong."

It is also important to find out whether corporate social responsibility is a mandate from top management, or a project of a company’s communications or public relations arm. „We have very different discussions with companies where the top management has sat down and worked out its values and code statements, versus when it comes from the public relations department," Mr. Schilling said.

Panel II: Human Rights and Economic Development


Stephen P. Marks, Director, United Nations Studies Program
Columbia University


Mark Barenberg, Professor
Columbia Law School

Ronald Blackwell, Director, Department of Corporate Affairs
American Federation of Labor – Congress of Industrial Organisations

Clarence Dias, Director
International Center for Law in Development

Mark Barenberg
„International Regimes: Sufficient to Fill the Global Governance Void?"

Professor Barenberg outlined four key points relating to transnational global governance regimes, paying particular attention to regimes affecting labor and social conditions.

While some see a „global governance gap," Professor Barenberg instead finds transnational governance regimes to be pervasive – but highly problematic. First of all, they are systematically biased toward wealth creation – or, at least, ideologies of wealth creation – rather than the redistribution of wealth-creating capacity (another way of saying sustainable development). These governance regimes also are biased in favor of economic power. Political power globally aligns itself with economic power and affluent states, to the exclusion of states and individuals lacking power and wealth.

Regimes are also highly fragmented. Vertically, they are fragmented into local, state, regional and international regimes. China, for example, has 175 official export processing zones. Unofficially, China has more than 2,000 EPZs, many of them „self-declared." Horizontally, regimes are fragmented by subject area. These subject areas are technically outside of labor and social conditions, but bear heavily on these areas. Some even affect labor and social conditions to a greater degree than does direct labor regulation. Examples include the International Monetary Fund and World Bank regimes (and the conditionality attached to their public loans), and regulations over global capital markets, hot capital, international banking, and efforts at multilateral liberalization and regulation of long-term capital flows and the Multilateral Agreement on Investment (MAI).

Trade-related regimes (WTO, NAFTA, bilateral treaties and unilateral trade sanctions embodied in domestic law) have a tremendous indirect, but perhaps more powerful, effect on social conditions than ILO standards or direct labor regulation.

Another powerful regime is that of immigration law, which remains an area of sovereign authority that, in a quiet way, has survived globalization. It is not hyperbolic, Professor Barenberg asserted, to say that our world is one of global apartheid. Immigration laws keep workers territorially trapped. The great pools of underemployed labor in low wage countries do not have equal access to the accumulated physical and human capital of high-wage countries.

Labor markets and production chains, through which wealth-creating capacity is created, destroyed or redistributed, also are complex and fragmented. Professor Barenberg identified five categories of labor, each of which poses distinct problems of governance.

  • Workers in domestic markets and workplaces not directly linked to global trade, production or finance, especially the vast pools of rural workers and urban, informal sector workers.
  • Workers in transterritorial circuits of migration. These workers, whether they be in New York City’s Chinatown or China’s Fukien Province, move through transterritorial circuits of underground labor recruitment, transportation and supervision. These underground networks themselves provide a kind of governance structure. They are beneath the state, but heavily shaped by surrounding official regimes.
  • Workers in different countries who make products that compete in international export markets, and workers in different countries who compete among themselves for FDI. „This is the simplest form of the race to the bottom – workers in export processing zones," Professor Barenberg notes.
  • Workers in different countries but in workplaces with production and distribution chains linked contractually across borders.
  • Workers performing services for multinational corporations, linked or aggregated under a single administrative hierarchy.

These classifications are more than „arid taxonomy," said Professor Barenberg. Legal strategies for protecting labor standards and labor rights within transnational corporations are different from those aimed at production and distribution chains that are contractually linked. Consider, for example, labor standards embodied in multinational codes of conduct, whether they are unilateral or multilateral, public or private, voluntary or mandatory. If multinational codes are applicable exclusively to workplace conditions within transnational corporations, they may not reach similar labor abuses in cross-border enterprises that are linked contractually through subcontracting chains or even-more indirect multiple chains of contractual relations.

What comes to mind immediately for Professor Barenberg is the question of China’s integration into the world economy. China has a workforce of 600 million, but many of those workers would not be reached by a multinational code. A similar disjuncture occurs when a country tries to apply its domestic law outside its borders. The United States’ anti-discrimination law, Title VII, for example, applies to subsidiaries of U.S. multinationals, but it does not reach subcontractors or any other workplaces not owned or controlled by U.S. multinationals.

Solutions will require local action and creative thinking, according to Professor Barenberg. Universal rights, he emphasized, are meaningful and effective only if they are put into local context by local worker organizations on the ground," he said. These organizations must specify, particularize and interpret rights, monitor violations, and participate in dispute resolution processes.

Creativity is needed in the development of mechanisms to redistribute wealth from rich to poor countries, and within rich countries, to „avoid the recurring nightmare of economic dualism, polarization and uneven development." One example is drawn from the European Union, where structural funds automatically redistribute public capital from countries with above-average standards of living to those with below-average standards of living.

„We expected to see races to the bottom as a result of economic integration in Europe, but we were pleasantly surprised by a few races to the top," Professor Barenberg noted. „What seems to be crucial is that the governance structure created a central deliberative body that was charged with a mandate of looking at best practices throughout the EU, and then requiring a harmonization upward toward best practice."

Ronald Blackwell
„Corporate Global Sourcing and Labor Rights Violations"

Are global governance regimes as pervasive as Professor Barenberg claimed? Mr. Blackwell holds the alternative view, that we are living in an „ungoverned economic space" in which workers are forced to surrender their fundamental freedoms in order to put food on the table.

Mr. Blackwell described a disturbing disjuncture between societal ethics and the ethical structure under which the world economy is expected to function. He drew a historical parallel to slavery in the United States.

„Slavery is unjust because it violates the most fundamental norms of human rights. However, the way you organize an economy, the way you price slaves, and the products they produce, and the costs to raise them, that can motivate human institutions, both public and private, to support slavery," Mr. Blackwell noted.

The world economy today is organized in a way that supports indecent wages and working conditions. Mr. Blackwell pointed to New York City’s Chinatown. „Not only are those circumstances horrible and unacceptable, but there’s nothing in those sweatshops that can change those circumstances. Because in that sweatshop, the power is not even in the contractor that owns the sweatshop, or the apparel company that buys from that contractor. The power is not in the apparel industry. The dynamic under which it is moving has nothing to do with Chinatown. The dynamic under which it is moving is international."

„What the retailers say when they estimate a price-point is, ‘Make this price and we’ll buy it. If you can’t make that price, we won’t buy it.’ That price can’t legally be made in the United States. The choice to the manufacturer is to go out of business, to leave the country, or to go underground. This explains why sweatshops are back in the United States, and they’re back with a vengeance," Mr. Blackwell said.

Even a medium-sized chain such as Nordstrom has thousands of suppliers worldwide. „A large percentage of them change every year, and they will claim they have no responsibility, no knowledge of how (products) are actually produced. That kind of sourcing strategy is exactly (responsible) for the kind of exploitation, oppression and abuse that is so rampant in the world today," he said.

The fundamental problem with regulatory structures, Mr. Blackwell said, is that our economy is international, while the structures remain largely national and local, which renders them ineffective for the purposes for which they were designed.

States have no incentives to pass progressive labor legislation because if they do so, they will lose jobs or fail to attract them in the first place. Workers have no incentive to demand their rights because to do so will cost them their jobs. „Do I want my rights, or do I want a job? No worker should have to make that choice, but the current disjuncture in our governance structure requires workers to make that choice, and that’s what we have to straighten out," Mr. Blackwell said.

Solutions must encompass the public and private spheres. On the public side, Mr. Blackwell suggested that states condition trade and investment on respect for fundamental labor rights. In the United States, 10,000 workers a year are fired for activities protected under freedom of speech and association, Mr. Blackwell said. It is worse in developing countries, where EPZs are set up to avoid unionization. Mr. Blackwell learned first-hand how the system works during a tour of an EPZ in the Dominican Republic: „We went in representing the Amalgamated Clothing Co. of New York. It was carefully explained to us, ‘You will never have to deal with a trade union in this zone. You will get all the labor you want, at the right price, fully loaded, and much better than you would get anywhere else in the Caribbean.’ This was proven to be true when we unsuccessfully tried to enter the same facilities several days later with representatives of local unions. The armed guards made sure that nobody could enter the facilities without special permission from management."

Government protection of fundamental freedoms in the workplace will open the door to the creation of workers organizations. These organizations will constitute one mechanism to redistribute the value created by corporations. „If we had this kind of mechanism, we would eliminate the perverse incentive for oppressing workers to gain an advantage in attracting capital in order to provide employment."

In the private sphere, the governing structure of corporations must be changed so that they no longer are run primarily for the private benefit of shareholders. „The social responsibility of corporations is to create wealth for society, that’s why national laws suffer the existence of corporations. Yet we have laws that regulate the way they’re owned, the way they’re governed, and the way they’re financed in such a way that they are for the exclusive benefit of only one of the constituents of the corporation – the shareholder."

„Now, shareholders are very important. Because they bear residual risks, they deserve residual control rights, a place in the governance of companies, and a large claim on the residual income that results from the successful activities of the company. But they’re not the only party in a corporation that bears residual risks. When working people contribute first-specific knowledge, they too invest in that company."

„If you leave in place the current structure of lack of enforcement of fundamental worker rights, social and environmental standards, and you let corporations run for the private benefit of shareholders only, there is nothing after that you’re going to be able to do to constrain them."

Clarence Dias
„Economic and Social Rights as Human Rights"

Is the world witnessing the twilight of human rights? Mr. Dias fears the answer is yes. Five years ago, then-UN Secretary-General Boutros Boutros-Ghali spoke of human rights as the „spirit of our age and the reality of our times." Today, Mr. Dias sees a „global pandemic of neoliberal economics threatening to erase 50 years of painstaking protection and realization."

The gap between rich and poor countries is growing at a staggering rate. Quoting from John Gray’s False Dawn: The Delusions of Global Capitalism, Mr. Dias predicted that the „ultimate effects of the emancipation of market forces from social and political control will ensure that the age of globalization will be remembered as another turn in the history of servitude." And no segment of society is hurt more by globalization than women, Mr. Dias asserted. Globalization is resulting in the „economic enslavement of women and the re-enslavement of once-liberated women."

Human rights instruments – particularly economic, social and cultural rights – are a tool to bring market forces under social and political control. To be effective, these rights must be taken seriously. Mr. Dias outlined a strategy for tackling this problem.

Economic, social and cultural rights are not just aspirations, they are rights under law. But these rights lost ground during the Cold War. Civil and political rights were emphasized, to the detriment of economic, social and cultural rights. Individual rights took precedence over group and collective rights. Rights against the state overshadows rights claimed against non-state actors. „And what about the role of empowerment from below, in securing one’s human rights, in asserting and claiming one’s human rights collectively, rather than passively waiting for the state to protect one’s human rights?"

Mr. Dias turned for an answer to the International Covenant on Economic, Social and Cultural Rights. The ICESCR contains 31 articles. Enshrined in these articles, however, are just four economic rights. Briefly stated, they are the right to work, the right to an adequate standard of living, the right to health, and the right to education. Two more articles deal with social rights. One lays out the fundamental importance of the family and the right to protection of the family, the other deals with the right to social security and social insurance. One article deals with cultural rights – the right to take part in cultural life, the right to a cultural identity, the right to pluralism and diversity in societies, and the rights not to be dominated by majoritarian or minority ethnic politics.

The obligation to respect these rights, that is to say, to not violate these rights, is owed by all entities – state and nonstate, individual and collective. Obligations to promote and fulfill these rights are subjects for negotiation between actors in the public and private sectors. „It’s imperative that we take economic, social and cultural rights seriously by attempting to enforce them at every level – local, regional, national, and international," Ms. Dias said.

Keynote Address:
H.E. Mr. Kamalesh Sharma

Ambassador Extraordinary and Plenipotentiary
Permanent Representative, Permanent Mission of India to the United Nations

„Trade Policy and Sustainable Development – A View from the South"

Poverty is the biggest polluter." Prime Minister Indira Gandhi’s words remain as true today as when she uttered them in 1972, according to Ambassador Sharma. „Without the eradication of poverty, any other measures will be ineffective or transitory at best, as poverty creates unremitting pressure on the environment. The linkage of poverty eradication with sustainable development is, therefore, a central one."

The South believes that the WTO has an important role to play in coordinating trade and environmental policies in a mutually supportive way. An open, non-discriminatory and equitable multilateral trading system will create a more efficient allocation and use of resources, and contribute to an increase in production and incomes, and to lessening demands on the environment.

With respect to the interface between trade and the environment, the South generally believes that the existing provisions of the 1984 GATT are adequate to deal with trade measures taken pursuant to legitimate environmental objectives contained in existing MEAs, and that trade measures pursuant to future MEAs should keep in mind the provisions of multilateral trading systems.

However, much more needs to be done by developed-country WTO members toward full implementation of existing agreements and achieving an enlightened view of equitable global trade expansion. „This has become particularly urgent in the era of globalization," the Ambassador stated, „because globalization is an opportunity for some, but a grave threat to others."

„Let me tell you a metaphor, which I thought was very pertinent in the high noon of Reaganomics, of the neoliberal, freewheeling market. It was said that the American society was a society of opportunity, which everyone could access. This was to say that if poverty exists, what you have to examine is not the economic system, but the poor themselves. So, the whole spotlight would focus on people, who, for a variety of reasons – sociological or educational – were not in a position to join the society of opportunity."

„To transpose this argument into the global argument was largely unspoken, but very much evident in all policy formulation," the Ambassador continued. „That this is a world of opportunity, and this world of opportunity can be created along the free market system, and if many societies have not been able to plug into this world of opportunity, it was the fault of their statism, state control, lack or empresarial encouragement, corruption, or mismanagement of public resources."

„The Washington Consensus was based on the belief that whatever the IMF or the Worldbank does is basically the correct way to proceed in producing the kind of world to which I have been referring, with some course correction from time to time, but no structural change or revolution in viewpoint. The belief was that nothing is broken, so we don’t have to fix it."

But the recent series of economic collapses around the world have resulted in two important realizations, the Ambassador stated. One is that something is broken, and it needs to be fixed. The other realization is that the consequences of economic failure in the developing world are not economic, but rather social and political, the Ambassador said. That, the Ambassador added, is the „human face" of globalization.

Panel III: Making Global Production Sustainable


Rainer Braun, Program Officer
Friedrich Ebert Foundation


Judith Gearhart, Project Director
Council on Economic Priorities Accreditation Agency (CEPAA)

Julie Pereira, Executive Secretary
Fairtrade Labelling Organizations International (FLO)

Matthew Quinlan, Manager, Coffee & Agroforestry Program
Conservation International

Judith Gearhart
„Corporate Initiatives for ‘Better’ Business in Developing Countries"

Companies compete for business on the basis of price, quality and style. Why not also compete on the basis of social accountability? That’s one of the goals toward which Ms. Gearhart is working on, as part of the CEPAA’s efforts to promote better workplace conditions worldwide. A growing number of transnational companies are beginning to see workplace conditions as an important dimension of their routine quality control, not only because it affects product quality, but also because it affects the company’s reputation among concerned consumers.

One example of companies engaged in positive competition is Nike and Reebok’s response to the crisis in Indonesia. After Suharto fell, inflation rates were rising in Indonesia, so the government mandated a minimum wage increase of 15 percent. Several months later, Reebok increased wages an additional 20 percent and in October of 1998, Nike announced a wage increase of 25%. The press quoted Nike saying it was prompted to this increase after surveying workers, however, it was significant that Reebok had preceded them with a wage increase.

Were these increases sufficient? According to a Sweatshop Watch wage survey, a greater increase was needed. It is difficult to pin down what exactly is a decent wage, but it is even more difficult to make a significant increase in wages when other companies in a sector do not. This example signals that companies are starting to realize that decent wages and work conditions make good business sense. The pay-off comes in terms of a more secure reputation, stable relations with suppliers and improved productivity.

One of many tools available to a company seeking to improve its social image is CEPAA’s auditable standard for workplace conditions, Social Accountability 8000 (SA 8000). The standard is based on principles enshrined in ILO conventions and human rights treaties, and covers eight areas – working hours, compensation, free association and collective bargaining, forced labor, child labor, health and safety, discrimination and discipline. One of its more controversial elements is a wage component. „Some of our critics say that’s aspirational, but we think it is an essential part of the debate on workplace conditions. In the auditing process, compensation issues often go hand in hand with problems in free association and collective bargaining. Similarly, health and safety problems can reflect an abuse of overtime hours, or vice versa." Ms. Gearhart said.

The standard was born out of a growing realization in the 1990s that individual corporate codes of conduct were frequently ineffective, inconsistent, unenforced and failed to include even basic labor rights such as freedom of association and collective bargaining, Ms. Gearhart said.

What SA8000 does is take international norms and write them up in very practical ways, in effect ‘translating’ them into management language so they can be used in the workplace setting. When you are talking to factory managers, you need to put directives into terms that are very specific. For example; the company: shall not engage in or support the use of child labor; shall ensure that workers’ representatives have access to their members in the workplace; and shall ensure workers always have one day off in every seven-day period.

Once more companies understand that socially responsible policies make them both more efficient and more competitive in the marketplace, countries will have less incentive to compete to offer lower wages and more flexible labor regulations. „I participated in a conference in Peru in December, where local NGOs are still trying to bring the human rights debate into the mainstream. One strategy is to show companies that respect for human rights is also becoming a business issue, and lack thereof will make it increasingly difficult to compete for multinationals’ business. One of the interesting things these NGOs were saying to Peruvian companies was: ‘Look, international standards like SA8000 are in increasing demand among U.S. and W.European multi-nationals. Central American factories are already implementing them and Peru will fall behind the curve if you don’t realize your company’s image is linked to its social image.’

Countries face a similar dilemma to most of the companies wanting to improve workplace conditions and pay better wages; they face the challenge of attracting investment while also promoting human development.

Julie Pereira
„Trade as a Win-Win Situation: The Example of Fairtrade"

How does a small-scale coffee grower stay in business when his bag of beans brings less at market than it cost to produce? Some simply give up. Others stay in the black with the help of retail schemes such as the one offered by Fairtrade Labelling Organizations International, the international umbrella organisation of Transfair and Max Havelaar initiatives worldwide. Fairtrade products cost a little more at the check-out stand so that producers can get a fair return on their labor.

„What we’re trying to do with Fairtrade is actually link producers and consumers much more closely. It’s a niche market. There are people out there who are willing to pay more for a product because they understand there is a problem with bargaining power in trade. Out of that, a lot of people are getting a lot of benefit," Ms. Pereira said.

The Fairtrade concept dates to the 1950s with the establishment of European „charity shops" specializing in products from the South. „The idea was borne out of frustration of the development agencies of not being able to move beyond traditional aid. It really became one of the more sustainable kinds of aid."

A decade ago, Fairtrade entered the mainstream retail market. Goods bearing the Fairtrade label started appearing on supermarket shelves throughout Europe. Today, the 17 foundations which together own the Fairtrade label market 7 products – coffee, tea, honey, sugar, bananas, cocoa, and chocolate – with a retail value of about $300 million a year. Fairtrade coffee sales account for 2 percent of the world market. In Switzerland alone, Fairtrade controls about 15 percent of the banana market. In the Netherlands, 89 percent of consumers recognize the Fairtrade name.

Why is a retail scheme such as Fairtrade necessary? Pereira blames the formidable power of transnational corporations, as well as trade liberalization policies in developing countries. „Take the example of coffee. Prices are set on the New York Stock Exchange, and they fluctuate daily. Obviously, a small-scale farmer has very little impact on those prices, which are below the cost of production. So, very quickly, a farmer gets into a cycle of debt. The cost of credit can be very high. In Central America, for example, interest rates can go up to 50 percent around harvest time."

„We believe that trade is very important for development, but we feel that it’s necessary to take care that trade doesn’t just strengthen the stock in the trading relationship. Fairtrade is an opportunity for producers to trade at prices they would normally trade at if they came in at a level playing field and had similar bargaining power as the import buyers of their products," Ms. Pereira said.

The difference between the Fairtrade label and codes of conducts is frequently misunderstood. „When you buy a pair of shoes made by a company that has a code of conduct that is thoroughly monitored, you know that those shoes were made by somebody working in certain conditions. When you buy a Fairtrade packet of coffee, you are making an economic transfer to that producer. That producer is earning more for that product than another producer would. So it’s quite different."

Fairtrade and similarly structured programs are no solution to trade inequality, Pereira conceded. To stay in business, Fairtrade is able to label only mass-market products, and contracts only with producers capable of meeting stringent quality and delivery criteria. „That means we’re not targeting the weakest or the most disadvantaged producers around the world. We’ll never be able to help the women basket weavers at home. Nevertheless, it is an exciting concept, and it does many, many good things," Ms. Pereira said.

Despite its limitations, Fairtrade’s market and products are expanding. Fairtrade is currently preparing to launch sales in the United States and market its first manufactured goods.

Matthew Quinlan
„Sustainable Economic Opportunities in a Globalized Environment"

El hambre habla mucho más fuerte que la ecología. Hunger speaks much louder than ecology. That’s how a Latin American coffee grower responded when Mr. Quinlan tried to convince him of the benefits of good land stewardship.

The point was not lost on Mr. Quinlan, who has witnessed first hand the devastating consequences of highly intensified coffee production on small-scale farmers in Latin America.

„Transnationals got heavily involved, especially in indigenous communities, which ended up turning traditional systems of labor exchange and redistribution of wealth into very unique and beneficial mechanisms for assuring crop at low cost. This transformation created a movement from a system of high biological and economic diversity to one in which you have one product highly dependent on a volatile market," Mr. Quinlan said.

The impact on biodiversity is evident to even the casual observer. Forested coffee fields that at one time supported 75 percent of the species found in neighboring forests now only support 20 percent. „Farmers are very aware of it. One of them said to me, ‘I remember when my grandfather used to count 10 of these rare parrots every day. Now I’m lucky if I see one in 10 years." Producers experienced soil loss, hybrid burnout, and lower quality.

There has also been a great social cost. „To have indigenous systems that were once self-regulators of a community’s conduct turned into mechanisms of exploitation has deep impacts that last generations. It means kids leave and go to the city because they see no future in a system that their own parents couldn’t get out of."

What about solutions? Mr. Quinlan pointed to several possibilities.

  • Collective bargaining with the buying houses. Small-scale producers need to organize themselves so that they negotiate better terms. „We worked with three producers who have been selling to the local market in Chiapas (Mexico). They organized and together they were able to get 300 percent more just by bringing all their coffee in together, instead of individually trickling in. Now, they’re exporting to the international market."
  • Quality control. The only way to get a quality price is by selling a quality product.
  • Technical assistance. Small-scale producers need to find alternatives to agrochemicals, which are no longer available or priced out of their range. The best alternatives are those which require nothing more than labor and natural materials.
  • Organizational development. Small-scale producers and co-ops need to learn how to take advantage of economies of scale and how to supply a consistent product.
  • Credit. Small-scale farmers and co-ops can’t bring a product to market unless they can pay off intermediaries first.
  • Outside pressure. „How do we get somebody like Proctor & Gambel to incorporate these concepts? First of all, they’re going to need customers to tell them to do it, and pressure from governments and aid agencies."

© Friedrich Ebert Stiftung | technical support | net edition fes-library | September 2000