Occasional Papers: International Development Cooperation - Trade Union Program

Globalizing Social Justice:
Positions of the International Trade Union Organizations
on the Reform of the World Trade and Financial Systems

Erwin Schweisshelm
Friedrich Ebert Stiftung

Change Through Trade?

Developments in the last few years have clearly demonstrated that the structures of international trade and the manner in which policies of international financial institutions affect national economies play a crucial role in the living and working conditions of hundreds of millions of workers, women and men, especially in the countries of the southern hemisphere.

Generally speaking, the economic policy paradigms in the nineties - liberalizing international trade structures, deregulating national protective mechanisms and privatizing public services - have brought about competition among governments in which some states have lost and some have gained. Both the majority of OECD countries and some threshold countries have benefited; in certain cases, privatization and deregulation were certainly overdue, and some of the measures taken have been beneficial in their effects (1). The losers are mainly the developing countries in South and Central Asia and also most of the African states which are stagnating economically, or are in fact on the verge of economic collapse; in addition, major sections of the workforce, and especially women and children, in Central America and the tiger economies of East Asia are negatively affected. About half the developing world´s share of world trade of 27% (1999) has been generated by only seven countries: China, South Korea, Mexico, Malaysia, Thailand, Indonesia and Brazil (2). The other half was shared by the remaining 130 developing countries. The share of world trade of sub-Saharan Africa has shrunk by half since 1980 in spite of structural adjustment programmes.

Income imbalances have also increased in the majority of those countries which, in overall economic terms, have gained - as proved by the growing number of people living in abject poverty. The World Bank, amongst others, has confirmed that the worldwide GINI-coefficient, gauging income differences within and between national economies, more than doubled from 1:30 in 1960 to 1:70 in 1997. According to a joint report by the UN, the World Bank, IMF and the OECD of June 2000 there are, in fact, only three countries which are sucessfully fighting poverty: Mauritius, China and Vietnam .

The democratic decision-making processes of national governments have often been undermined, discrimination and massive exploitation at the workplace by the violation of fundamental workers´ rights are increasingly influencing worldwide trade, while the power of multinational companies continues to grow. By giving priority to greater liberalization in its action programmes, the WTO further aggravates these developments.

Even the concrete steps planned for the next WTO-round will pose, in general, a further threat both to workers and to the self-employed in the informal sector and in small-sized industries. The proposed agreements or negotiations on

affect the lives of billions of people without offering them the opportunity to become themselves involved in this process (except via governments which in many cases are authoritarian and undemocratic). There is almost no topic on the WTO agenda which does not affect the daily lives of people, political activities and the world of work. The WTO expects national governments to review domestic legislation in these areas if it turns out to be „barriers“ to liberalized trade (3), but is not willing to discuss workers´ rights and the impact of trade liberalization on sections of the population in need of protection. Protests during the WTO-Meeting of Ministers in December 1999 indicated that the member governments of  the WTO will have to show a greater measure of flexibility on these issues, if they wish to turn around the deepening unpopularity of the WTO.

These processes have been in part further aggravated by interventions of the World Bank and the International Monetary Fund. The International Confederation of Free Trade Unions (ICFTU) holds the view that 56 years after their inception, the Bretton Woods organizations must undertake deep-seated reforms in order to contribute significantly to economic justice and stability in this world. In the eyes of many observers, structural adjustment programmes by the World Bank in the African, Latin American and other countries will considerably worsen the situation in the medium term in social fields such as education or healthcare, with the well-known consequences of even greater poverty amongst groups which are particularly vulnerable (4).  For example, the World Bank approved a „Country Assistance Strategy“ for Ecuador with the result that the country´s expenditure for education dropped from 5.5% in 1995 to 2.83% in 2000. In view of the already existing low rate of schooling in Ecuador, it may be anticipated that this will make futile any attempt at eliminating child labour in the country. In Canada, where merely about a third of the unemployed are receiving benefits after drastic cuts in the unemployment insurance, compared to 80% in 1990, the IMF demands a further lowering of standards. And IMF-staff recently complained about the intention of the Canadian Government to improve the regulations for maternity protection and educational leave.

And the programmes of the International Monetary Fund for fighting the so-called Asian crisis need to be regarded with a great deal of skepticism. The recipes which had been used in the previous crises in Latin America made matters even worse in South-East Asia because in Asia, unlike Latin America (with large State deficits, unrestrained monetary policy and uncontrolled inflation), problems did not originate from the State sector. South-East Asian countries, with the exception of Thailand and Indonesia, produced budgetary surpluses and practised restraint in monetary policy at low inflation. It is well known that it was the private sector and its excessive debts, insolvent banks, real estate speculation etc. that caused the crisis and that the outflow of short-term investment capital was merely the final event which triggered the crash.

Although the export and the stock markets are on their way back to recovery, domestic demand has collapsed in countries such as Indonesia owing to a considerable increase in unemployment and a drastic decline in incomes. In particular, female and migrant workers continue to suffer greatly from the crisis. In Korea, unemployment continues to be higher than before the crisis even though the country is being regarded as a model case of successful transformation due to its growth rates. The economic upswing is a far cry from being stable, for example in Thailand the banking sector is still suffering from 40% bad loans, yet some individual governments - in the face of international euphoria - are already relaxing their efforts at building up functionable social security systems for the next crisis. It is no irony of fate that Malaysia, which resisted IMF-conditions by introducing capital flow controls, has at least so far fared better in the crisis than many other countries. Even the World Bank admits as much in the Global Development Finance Report 2000: with the actions taken the government had reached its goals, notably to stabilize interest and exchange rates at costs lower than expected.

The Positions of the International Trade Union Movement: More Than Just Social Standards

The course of the WTO-Conference of Ministers in Seattle in November 1999 for the first time focussed media and worldwide public attention on the protests against the world trade regime. Yet the protests also demonstrated that there exist major political differences between the various groups concerned.

Many globally-active non-governmental organizations (including CUTS, Third World Network) are demanding a radical transformation of the world trade regime.  Some are  even suggesting abolishing the World Trade Organization (WTO) altogether.

In contrast, the international trade union organizations, such as the International Confederation of Free Trade Unions (ICFTU), the International Trade Secretariats (ITS), the Trade Union Advisory Committee of the OECD (TUAC) and also the labour representatives in the International Labour Organization (ILO), believe that trade and investments continue to supply the potential for contributing to greater economic growth, more jobs and the struggle against worldwide poverty. ICFTU speaks out clearly in favour of world trade and against protectionism. Yet WTO needs to improve its instruments on a broad scale so that trade and investments may serve social development and contribute to a better implementation of the fundamental human rights of workers rather than their denial. International economic relations and trade regulations need to be changed and made democratic by taking account of a development-policy, social and ecological perspective in a comprehensive manner.

It is therefore the goal of the ICFTU to incorporate a social clause into the agreements and procedures of the WTO. This is to be seen in the context of respect for the fundamental conventions of the ILO, notably

The international trade union organizations are aware of the fact that the concept of a social clause is a very long-term objective. It is therefore their aim that in a first step the WTO should establish a formal permanent working group which is directly accountable to WTO´s General Council (in analogy to the Committee on Trade and Environment) and draw up proposals and recommendations for it on how to integrate in practice enforcable core labour standards into the procedures, mechanisms and regulations of the WTO. It has been proposed that the ILO should be part of this process and acquire consultative status with the WTO. The Commission´s working programme should include a study on how trade and respect for core labour norms  could be backed up by positive incentives, and also by proposed measures for those cases where trade liberalization is accompanied by a violation of such norms.

The ICFTU is convinced that such a system of minimum standards will

The ICFTU is not - as is sometimes maintained in this debate - a one-dimensional, single-issue organization with a limited agenda of „trade and social standards“; the trade unions stand for a large number of additional demands which have been articulated and supported at both the global level and in the preparatory talks of, for example, the German Trade Union Confederation (DGB) with the German Government. They include In analogy, the international trade union movement calls for a reform of the international financial architecture in order to ensure a stable basis, sustainable growth and a balanced development in the world economy. From the point of view of the trade unions, first positive developments in this respect are the declarations, albeit verbally, by the IMF and the World Bank to regard poverty reduction as a „leitmotif“ in their work (7) and to consider the active participation of the civil society an important element for the evaluation of these efforts (8). According to the trade unions, the currently relatively calm situation on the financial markets could by used to rethink completely the conditionalities attached to the structural adjustment programmes of the IMF and World Bank with their disastrous social consequences and to incorporate the following social components into their strategies Moreover, the trade unions call for extensive action by an independent international commission with the participation of the international public for the regulation of international financial markets. Their proposals are concerned with, for example The positions of the international trade union movement thus reflect a broadly-based agenda of economic and development policies. Yet if you compare on the one hand the range of issues at stake and of organizations „to be influenced“ and on the other the resources available to the International Trade Union Movement you will be reminded of a statement by Albert Camus: „you must imagine Sisyphus to have been a happy man“.

1) Yet there are also negative examples: in the past decade, Argentina privatized almost all profitable public services and introduced drastic cuts in welfare expenditure. Trade barriers were largely dismantled, the national currency „dollarized“, thus relinguishing an independent monetary policy. Nevertheless, unemployment, though very high to start with, further increased in the course of the last two years and is now in excess of 15% in the urban areas, while real wages have continually gone down at the same time.
2) Although Mexico and Korea are OECD-countries, they are counted as part of the developing world for the sake of simplifying statistics and owing to their domestic income distribution; and the remaining countries are all Asian tiger economies.
3) Decisions by WTO are binding under international law and can be enforced by sanctions, if required; no other UN-organization has such powers.
4) This is confirmed in principle by the analysis of the so-called Meltzer Commission (established in 1998 as one of the conditions to ensure that the US-Administration made its  required quota payments to the IMF) which has certified that the Bretton woods organizations
· in the case of IMF, have institutionalized economic stagnation instead of economic growth,
· in the case of the World Bank, have contributed only marginally to the fight against poverty,
· and are largely characterized by bureaucratic procedures and expansion of  institutional power.
5) It must be noted that in particular American „big business“ was well-represented in Seattle and contributed US$ 9.2 m to the costs of the Conference of Ministers; a donation of US$ 250,000.- allowed sponsors to take part in both the opening and concluding ceremonies with five guests and a gala dinner with the Ministers of Trade.
6) A danger not to be ignored in this context, however, is that of corporatist inclusion.
Incidentally Joseph Stiglitz, the former chief economist of the World Bank, also supports the view  that workers´participation may influence positively economic adjustment processes. With a view to the Asian crisis he writes: „ We should be clear: workers in much of the world have ground for suspicion. Capital market liberalization in East Asia did not bring the benefits that were promised, except to a few wealthy individuals. It did impoverish many – both through lower wages and increased unemployment. Worse still, workers have seen decisions that affect their lives and livelihoods being seemingly forced upon their countries, with hardly a nod towards the concerns of the workers, apart from sermons about the virtues of bearing pain. I believe, for instance, that there is some chance that some of the disastrous economic decisions that were made in responding to the Asian crisis would not have occurred had workers had a voice (let alone a voice commensurate with their stake in the outcome) in the decision making. And even if similar decisions had been made, at least workers would have felt that they had had their say.“ Joseph Stiglitz, Democratic Development as the Fruits of Labour, Keynote Address to the Industrial Relations Research Association, Boston, January 2000, p. 18
7) See Joint Declaration of WB and IMF of December 1999 and the introduction of a Poverty Reduction and Growth Facility (PRGF) to replace the Enhanced Structural Adjustment Facility (ESAF).
8) In respect of the IMF, however, events in connection with the new appointment to the office of Director and discussions about the report of the Meltzer Commission leave the impression that the American Administration does not support these positions. The resignation of Jo Stiglitz and more recently of Ravi Kanbur, author of the World Development Report 2000/01, indicate that it is more of the same, in a new package.
9) It must be noted that the DGB strongly supported the campaign Jubilee 2000; however,  the public engaged in the development policy discourse probably did not quite register this. But even the HIPC debt relief campaign of Cologne 1999, which falls far short of the Jubilee-2000 demands, has so far produced few results, as even the heads of states had to admit when they met for the G8 meeting in Okinawa in July 2000.
10) Developments so far are, however, a far cry from it: in a 60-pages documentation of the World Bank on Columbia the trade unions are mentioned just once under the topic „Risks“ - as potential opposition against structural adjustments recommended by the IMF. The Colombian  trade union movement in question counts more than 80 assassinated members amongst its ranks.
11) The Japanese Government´s initiative during the Asian crisis in 1997 of building up an Asian Monetary Fund was prevented by the Americans who were afraid of greater Japanese economic domination.
12) Support for the Tobin Tax is increasing both amongst governmental and non-governmental representatives: the Canadian Parliament voted in its favour in 1999, the same applies to Brazil; an international meeting of parliamentarians in Brussels in 2000 submitted signatures in favour of its introduction from members of parliament from 16 European countries (including 14 Germans), USA and Canada; in the European Parliament, a resolution failed only because four Trotskyist delegates denied their support because they were afraid that the Tobin Tax would strengthen Capitalism. And many organizations of the civil society worldwide are in support of this initiative, including the „Netzwerk zur demokratischen Kontrolle der Finanzmärkte“ from Germany.


Declaration of the 17th Congress of the ICFTU, April 2000 on „International Labour Standards and Trade“

Joint Declaration of DGB and JTUC-RENGO (February 2000) on the coordination of international monetary policy in the run-up to the G8-meeting in Okinawa

Securing the conditions for reducing poverty and achieving sustainable growth: Statement by the ICFTU, TUAC and ITSs to the Spring 2000 meetings of the IMF and the World Bank, 13-3-2000

PSI-Focus, 1/2000

Joseph Stiglitz, The Insider: What I learned from the economic crisis, from: The New Republic, 17-4-2000

Walden Bello, Meltzer Report on Bretton Woods, Focus on Trade, Nr 48, April 2000

ICFTU, New Opportunities for Trade Union Involvement in IMF/World Bank Poverty Reduction Strategies, Brussels, June 2000

Peter Bakvis/James Howard, ICFTU, Reform of the Global Financial Architecture and the Role of International Financial Institutions, FES July 2000

Tillmann Elliesen, Globalisierung et. Al., E+Z 2000: Nr 7-8

Peter Wahl, Zwischen Hegemonialinteressen, Global Governance und Demokratie: Zur Krise der WTO, IPG, 3/2000

* Many thanks to James Howard, Director, Employment and International Labour Standards, International Confederation of Free Trade Unions (ICFTU) for his critical comments.

Responsible: Erwin Schweisshelm
Department for Asien-Pazifik
Phone: *228/883-518
Fax: *228/883-575