For other versions of this document, see http://wikileaks.org/wiki/CRS-96-661
------------------------------------------------------------------------------
Order Code 96-661 E
CRS Report for Congress
Received through the CRS Web
Worker Rights Provisions and Trade Policy:
Should They Be Linked?
July 30, 1996
Mary Jane Bolle
Specialist in Labor Economics
Economics Division
Congressional Research Service ~ The Library of Congress
Worker Rights Provisions and Trade Policy:
Should They Be Linked?
Summary
Should promotion of worker rights around the world be linked to
international trade policy? That is, should the United States encourage its trading
partners to grant their workers some basic level of worker protections or labor
standards in return for the opportunity to trade with the United States?
The worker rights question has arisen most recently as Congress examines
importation of goods produced by child labor. It may also arise as Congress debates
proposals to allow or, conversely, prohibit worker rights provisions in "fast-track"
renewal legislation: legislation to renew Presidential authority to negotiate trade
agreements on a fast-track basis -- with mandatory deadlines, limited debates, and
no amendments by Congress. Previous fast-track authority expired April 16, 1994.
The linking of worker rights and trade policy around the world is in an early
stage of development. The United States has required some trading partners to
adhere to a basic set of internationally recognized worker rights since the 1980s. In
addition, the labor side agreement to the North American Free Trade Agreement
(NAFTA) required signatories to adhere to their own worker rights laws. However,
members of the new World Trade Organization (WTO) are not bound by any such
requirements. The United States is pushing for a discussion of the worker-rights trade
policy link at the WTO Singapore Ministerial Conference scheduled for December,
1996.
While there is no consensus on what constitutes worker rights, the term has a
number of definitions. The 1984 amendments to the Generalized System of
Preferences (GSP) defined internationally recognized worker rights to include: (a)
the right of association; (b) the right to organize and bargain collectively;
(c) a prohibition on the use of any form of forced or compulsory labor; (d) a minimum
age for the employment of children; and (e) acceptable conditions of work with
respect to minimum wages, hours of work, and occupational safety and health.
Legislative options for codifying into law child labor prohibitions include banning
the importation of goods produced with child labor, and imposing sanctions on all
trading partners that do not prohibit child labor. Legislative options for linking
reauthorization of Presidential fast-track negotiating authority with worker rights
include adopting voluntary business guidelines for U.S. multinational corporations
with operations abroad; requiring that goods for import into the United States be
clearly labeled as to conditions under which they were manufactured; and encouraging
continuation of the labor standards-and-trade policy debate in the International Labor
Organization and the WTO.
Those in favor of linking worker rights provisions with trade policy include most
organized labor groups and citizens actively concerned about humanitarian effects of
child labor and/or sweatshop conditions. Those opposed include many in the business
community and the International Chamber of Commerce.
Contents
Current Congressional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Why Are Worker Rights an Issue Now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Economic Effects of Linking Worker Rights and Trade Policy . . . . . . . . . . . . . . 6
Findings of an OECD Study: Freedom of Association and Collective
Bargaining Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Minimum Wage and Child Labor Standards . . . . . . . . . . . . . . . . . . . . . . . . 7
If There Is Linkage Between Worker Rights and Trade Policy, Should it
Be Mandatory or Voluntary? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Linkages Already in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Voluntary and Mandatory Linkages . . . . . . . . . . . . . . . . . . . . . . . . . 10
Strictly Voluntary Linkages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The International Labor Organization (ILO) . . . . . . . . . . . . . . . . . . . 14
Voluntary U.S. Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
What Are the Prospects for Further Linking Worker Rights and Trade Policy in
the WTO? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The U.S. Position on Trade Policy and Labor . . . . . . . . . . . . . . . . . . . . . . 16
Those For and Against the Trade Policy-Labor Rights Link . . . . . . . . . . . 16
Organizations and Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Trading Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Arguments For and Against LinkingLabor Standards to Trade Policy . 4
Table 2. Hourly Compensation Costs for Production Workers in Manufacturing 8
Table 3. Chronology of Labor Rights Provisionsin Major U.S. Laws and
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 4. Worker Rights Provisions in Various Documents . . . . . . . . . . . . . . . 13
Table 5. 1996 For a Debating the Labor Rights-Trade Policy Link . . . . . . . . . 17
Worker Rights Provisions and Trade Policy:
Should They Be Linked?
Should promotion of worker rights around the world be linked to trade policy?
That is, should the United States encourage its trading partners to grant their workers
some basic level of worker protections or labor standards in return for the opportunity
to trade with the United States? Should the United States also issue penalties, if
trading partners do not adhere to basic worker rights? The Congress has grappled
with these questions for more than a decade.
The worker rights question has arisen again most recently as Congress examines
the issue of U.S. importation of goods produced by child labor. It is also expected
to arise as Congress debates proposals that would either allow or, conversely,
prohibit worker rights provisions in "fast-track" renewal legislation: legislation that
would renew Presidential authority to negotiate trade agreements on a fast-track basis
-- with mandatory deadlines, limited debates, and no amendments by Congress.1
Previous fast-track authority expired April 16, 1994.
The linking of worker rights and trade policy around the world is in an early
stage of development. The United States has unilaterally required some trading
partners to adhere to a basic set of internationally recognized worker rights since the
1980s. In addition, the labor side agreement to the North American Free Trade
Agreement (NAFTA) required signatories to adhere to their own worker rights laws.
However, members of the new World Trade Organization (WTO) are not bound by
such requirements. The United States is pushing for a discussion of the worker-rights
trade policy link at the WTO Singapore Ministerial Conference scheduled for
December 1996.
While there is no consensus on what constitutes worker rights, the term has a
number of definitions. For example, the 1984 amendments to the Generalized System
of Preferences (GSP)2 defined internationally recognized worker rights to include:
(a) the right of association;
(b) the right to organize and bargain collectively;
(c) a prohibition on the use of any form of forced or compulsory labor;
(d) a minimum age for the employment of children; and
(e) acceptable conditions of work with respect to minimum wages, hours of
work, and occupational safety and health.
1
For more information on the fast-track issue, see U.S. Library of Congress. Congressional
Research Service. Fast Track Authority: Negotiating Objectives for Multilateral and
Preferential Trade Agreements, by George D. Holliday. CRS Report 95-904. Washington,
August 14, 1995. 21 p.
2
Section 503 of P.L. 98-573, added provisions to Section 502(a)(4) of the Trade Act of 1974.
CRS-2
To cover the worker rights-and-trade policy issue this report first, briefly
summarizes current congressional consideration of the worker rights-and-trade policy
issue, linking the arguments for and against. Next, it looks at economic reasons why
the worker rights issue is surfacing now. After that, it surveys existing vehicles that
link worker rights and trade policy, and possible actions Congress might take to try
to resolve the current worker rights-and-trade dilemma.
Current Congressional Issues
As mentioned, Congress is wrestling with two worker rights issues. One is the
use of child labor to produce goods for importation into the United States. The other
is attaching worker rights provisions to legislation that would renew presidential
authority to renegotiate trade agreements on a fast-track basis. A recent event that
raised congressional concern with the child labor issue began after publicity that
television celebrity Kathie Lee Gifford had lent her name to a line of clothing allegedly
produced by child labor under sweatshop conditions.3
Congressional response to the child labor issue has included both hearings and
legislation. Oversight hearings have been held by the House International Relations
Subcommittee on International Operations and Human Rights. In addition, bills have
been introduced that would: prohibit the importation of goods produced abroad with
child labor (S. 706, Harkin; and H.R. 2065, Frank); require the Secretary of State to
establish a set of voluntary guidelines to promote socially responsible business
practices for U.S. businesses operating in foreign countries (H.R. 910, Evans); amend
the Foreign Assistance Act of 1961 to withhold U.S. assistance from countries
determined to be violating the human rights of working children (H.R. 3294, Moran);
and impose certain sanctions on countries that do not prohibit child labor (H.R. 3812,
Christopher Smith).
The worker rights-and-fast-track issue surfaced during consideration of the 1995
fast-track renewal bill reported by the House Ways and Means Committee (H.R.
2371, H.Rept. 104-285). This bill, as reported, would have prohibited the inclusion
of worker rights provisions in trade agreements negotiated and implemented under
fast-track procedures. Specifically, it would have done this by limiting trade
agreements negotiated under fast track procedures until at least December 15, 1999,
to subjects covered by five stated negotiating objectives. These objectives did not
include worker rights or environmental issues that were the subject of separate side
agreements to NAFTA.4 The Senate bill (S. 577) contained no such limitation on
subjects that could be included in trade agreements.
3
Green, Paula L. Sweatshop Issue Puts Textiles in Hot Seat. Journal of Commerce, July
15, 1996, p. 1A.
4
These five principal objectives were: (1) to obtain more open, equitable, and reciprocal
market access; (2) to obtain the reduction or elimination of barriers and other trade distorting
policies and practices; (3) to further strengthen the system of international trading disciplines
and procedures; (4) to foster economic growth and full employment in the United States and
the global economy; and (5) to develop, strengthen, and clarify rules and disciplines on
restrictive or trade-distorting import and export practices.
CRS-3
At the heart of the worker rights-fast-track debate in Congress are divergent
views on whether or not worker rights should be linked to trade p policy. One side
argues for broader worldwide adherence to worker rights provisions. This side
argues that the failure of developing countries to adhere to worker rights standards
places some import-competing American industries at a competitive disadvantage in
trade, and shifts employment opportunities to developing countries. The other side
argues for free trade, and against any requirement that trading partners impose labor
standards (worker rights translated into law or practice). They argue that mandating
international adherence to labor standards is a form of protectionism that can actually
dampen worldwide economic growth for all nations. Table 1 characterizes arguments
of each.
The congressional debate on linking labor rights provisions to trade policy is also
echoed, with equal fervor, in the international arena, among more than 120 members
of the new World Trade Organization (WTO) established by the Uruguay Round of
Agreements under the General Agreement on Tariffs and Trade (GATT).
Representatives from the United States and other developed countries have been
urging the formation of a "working group" in the WTO to discuss the relationship
between trade policy and worker rights. Conversely, representatives of developing
countries argue strongly that such discussion could lead to the imposition of basic
worker rights requirements, which could increase their labor costs and impair their
ability to compete in the international marketplace.
Why Are Worker Rights an Issue Now?
Labor standards worldwide have become an issue now for two reasons. One is
the expansion of trade in recent years. One is humanitarian: To some, labor
standards issues reflect a genuine concern for workers as human beings, in the same
way that environmental issues reflect genuine concern for the well-being of the planet.
Humanitarians see labor standards as a counterforce to an increasingly competitive
world economy in which the rights of workers are being overrun by the greed of
multinational corporations.
CRS-4
Table 1. Arguments For and Against Linking
Labor Standards to Trade Policy
AGAINST FOR
1. The main purpose of trade 1. There is a fine line between competing
agreements is to promote trade and on the basis of comparative advantage
economic growth. Trade and "social dumping" (competing by
agreements are probably not the denying workers basic rights). Labor
best mechanism for resolving non- standards help to define the boundary.
trade issues (such as labor rights).
Non-trade issues tend to detract 2. Labor standards for all trading partners
from the main purpose of the trade help fend off a "race to the bottom" that
agreements while not resolving the comes when businesses are forced to roll
non-trade issues. back minimum wages and standards so
that they can remain internationally
2. The best way to improve competitive against businesses in countries
labor standards is to permit private where a lack of standards makes the cost
capital to flow unimpeded and to of doing business considerably lower.
allow economies to export freely.
As developing countries grow, they 3. Many workers and unions see
will be more likely to adopt higher multinational corporations as predators. If
labor standards. Workers do not labor standards are uniformly enforced,
earn high wages just because a companies would be prevented from
minimum wage is ordered. Real engaging in exploitative labor practices.
growth in income is the result of
growth in productivity. 4. Global growth is a balancing act,
supported by a broad base of consumer
3. From the perspective of the demand in developing countries. For
international investor, strong worker workers to be consumers, they must
protections create disincentives to receive a rising share of the gains from
invest because they reduce increasing productivity and economic
comparative advantage and inhibit expansion. Labor standards help promote
the most efficient use of labor, these gains.
thereby restraining economic
growth. 5. Labor standards could discourage
"runaway plants" because they lessen the
4. From the perspective of labor cost differences between countries.
some economists, in the long run,
economies unencumbered by trade 6. Labor standards would not interfere
restrictions are able to achieve and with natural comparative advantage in
maintain a higher level of efficiency various countries because minimum wages
and a higher level of growth because and labor standards are only one basis for
their natural comparative advantage comparative advantage. Others include:
is a forceful engine driving (a) infrastructure; (b) available workforce
productivity growth. size; (c) workforce education; (d) level of
technological development; and (e) natural
5. From the perspective of the resource base.
developing country, labor standards
CRS-5
AGAINST FOR
could cut off employment 7. Trade sanctions in some environmental
opportunities and delay the treaties are already used. Why should the
emergence of these countries as rights of workers be given a lower level of
developed countries. protection?
6. Requiring international 8. Developed nations have, through
labor standards is inconsistent with democratic evolution, made a social
the goal of reducing tariff and contract, assuring citizens a healthful
nontariff barriers. Requiring environment, safe working conditions,
international labor standards can be decent retirement and health insurance,
disguised protectionism. and a safety net for the disabled. One way
or another the nation's products must bear
7. The issue of international the cost of this contract; they cannot
labor standards raises issues of compete in price with those of countries
sovereignty: Does one country have using comparable technology but having
the right to force its domestic policy no such contract for its citizens.
goals on another country?
The other reason labor standards have become an issue now is a growing
concern among some groups who have observed parallel trends in the U.S. economy:
U.S. plants have been relocating to low-wage countries abroad and worker earnings
have been stagnating, while imports have been increasing over the past decade or two.
Such groups, suspect that trade, and especially imports, may be at least partly
responsible for the wage changes and appear drawn toward protectionist policies.
What do the trade data and earnings data show? Imports as a percent of U.S.
Gross Domestic Product (GDP) have risen from about 4% to nearly 10% of GDP
between 1970 and 1994. Over an overlapping period, between 1975 (earliest year for
which comparable data are available) and 1994, real total hourly compensation for
manufacturing workers declined about 2%.5 In addition, wage inequality between
skilled and unskilled workers has increased: Workers in the top quintile of earnings
have seen their adjusted personal income rise 15% between 1969 and 1993, while
those in the bottom quintile have seen theirs decline by 22%6
Evidence from the research community on the contribution of trade to this wage
behavior is still being debated. Findings from a number of studies so far vary widely,
and suggest that trade may account for as little as near zero, or as much as 30%-50%
of the wage inequality.
5
Hourly total compensation figures from the Bureau of Labor Statistics (contained in
unpublished data for 31 countries) were adjusted by the consumer price index for all urban
consumers, contained in table B-56 (p. 343) of the Economic Report of the President,
February 1996.
6
Worsening American Income Inequality. Is World Trade to Blame? by Gary Burtless, The
Brookings Review, Spring 1996. pp. 26-31.
CRS-6
Regardless of trade's actual contribution to the wage inequality, some workers
and labor representatives in the United States are looking for ways to protect U.S.
workers. Some see linking worker rights to trade policy as a way of doing this.
Economic Effects of Linking Worker Rights
and Trade Policy
Findings of an OECD Study: Freedom of Association and Collective
Bargaining Standards
Nevertheless, the Organization for Economic Cooperation and Development
(OECD), which includes mostly developed countries, has recently released a study
(actually a non-technical summary that precedes publication of a book anticipated for
fall, 1996) that looks at the economic effects on output and trade flows of linking to
trade policy the only two "core labor standards" for which data are available:
freedom of association and freedom to bargain collectively.7 The OECD was not able
to find data on the economic relationship between trade policy and the core labor
standard prohibiting child labor.
The OECD study finds that the effects of greater freedom-of-association and
collective bargaining rights on output are likely to be negligible compared to the
effects of other factors such as shifts in technology, raw material prices, and terms of
trade (the volume of exports that can be traded for a given volume of imports).
"More generally," the study concludes, "the actual economic effects of core labor
standards are likely to be small."8
The OECD study finds that the effect of freedom of association and collective
bargaining rights on trade flows is also expected to be small. Specifically, it finds that:
! Empirical research suggests that there is no correlation at the
aggregate level between the degree of observance of freedom-of-
association rights and real-wage growth in countries with which the
United States trades. (Therefore, adoption of these labor standards
would not necessarily increase the price of imports, and therefore
help wages of U.S. workers making competing products.)
! There is no evidence that low-standards' countries enjoy a better
global export performance than high-standards' countries.
(Therefore, adoption of freedom of association and collective
7
Other identified core labor standards are: 1) prohibition of child labor; 2) prohibition of
forced labor; and 3) freedom from discrimination. This discussion of the OECD study is
mostly taken from pages 5 and 6 of: Trade, Employment and Labour Standards. Report of
the Education, Employment, Labour and Social Affairs Committee and the Trade Committee
to the Council at Ministerial Level. Organization for Economic Cooperation and
Development. May 21, 1996. 10 p. (Summary of longer report due out September 1996.)
8
Ibid.
CRS-7
bargaining rights would not necessarily reduce the volume of
imports, and thus remove pressure on U.S. companies to keep
production costs on import-competing products low through various
means including pressure on wages.)
Minimum Wage and Child Labor Standards
Questions remain about how or whether a minimum wage standard (not included
in most listings of core labor standards, as discussed below) and a child labor
standard adopted around the world would affect U.S. wages through slowing imports
from developing countries. The OECD study does not address the effect of either of
these requirements, but additional analysis may offer some insight:
CRS-8
Table 2. Hourly Compensation Costs for Production Workers in Manufacturing
(Ranked in descending order for 1994)
Compensation as a Percent of U.S.
Country Compensation Compensation in U.S. Dollars
1975 1985 1990 1994 1975 1985 1990 1994
Switzerland 96 74 140 145 6.09 9.66 20.86 24.83
Belgium 101 69 129 134 6.41 8.97 19.22 22.97
Austria 71 58 119 127 4.51 7.58 17.75 21.73
Japan 47 49 86 125 3.00 6.34 12.80 21.42
Norway 106 80 144 122 6.77 10.37 21.47 20.91
Netherlands 103 67 123 122 6.58 8.75 18.29 20.91
Denmarkd 99 62 120 120 6.28 8.13 17.96 20.44
Finland 72 63 141 110 4.61 8.16 21.03 18.89
Sweden 113 74 140 110 7.18 9.66 20.93 18.81
France 71 58 102 100 4.52 7.52 15.23 17.04
Germany 100 74 147 160 6.35 9.60 21.96 27.31
Luxembourg 101 59 110 -- 6.35 7.72 16.37 --
United States 100 100 100 100 6.36 13.01 14.91 17.10
Italy 73 59 119 95 4.67 7.63 17.74 16.16
Canada 94 84 106 92 5.96 10.94 15.83 15.68
Australia 88 63 88 80 5.62 8.20 13.07 13.66
United Kingdom 53 48 85 80 3.37 6.27 12.71 13.62
Ireland 48 46 79 -- 3.03 5.92 11.76 --
Spain 40 36 76 67 2.53 4.66 11.33 11.45
Israel 35 31 57 53 2.25 4.06 8.55 9.14
New Zealand 50 34 56 52 3.21 4.47 8.33 8.93
Greece 27 28 45 -- 1.69 3.66 6.71 --
Singapore 13 9 25 37 0.84 2.47 3.78 6.29
Korea 5 9 25 37 0.32 1.23 3.71 6.25
Taiwan 6 12 26 32 0.40 1.5 3.95 5.55
Hong Kong 12 13 21 28 0.76 1.73 3.20 4.80
Portugal 25 12 25 27 1.58 1.53 3.77 4.57
Mexico 23 12 11 15 1.47 1.59 1.64 2.61
Sri Lanka 4 2 2 -- 0.28 0.28 0.35 --
Pakistan 3 2 -- -- 0.21 0.32 -- --
India 3 3 -- -- 0.19 0.35 -- --
Source: U.S. Bureau of Labor Statistics (BLS), Hourly Compensation for Production Workers in Manufacturing, 31
Countries or Areas (unpublished data) April 1995. (Most recent data available.)
Note: This table was made by juxtaposing two separate BLS tables, instead of calculating other-country compensation
as a proportion of U.S. compensation. Therefore, the numbers on the two sides of the table do not always coordinate.
BLS, in its notes on these tables emphasizes that "because compensation is partly estimated, the statistics should not
be considered as precise measures of comparative compensation costs." Daily exchange rates were used to convert
hourly compensation costs to U.S. dollars.
CRS-9
Regarding minimum wage requirements: Table 2 lists manufacturing
compensation levels, by country, for a number of years since 1975.9 Because
minimum wages would all be proportionately related to the average wages for a given
country, minimum wage requirements would appear to have little effect on overall
cost structure, and therefore little economic effect on wages in the United States.
Regarding child labor requirements: It can be argued that banning child labor
would merely shift employment to older family members. To the extent that child
labor is not replaced by adult workers, the supply of goods made with child labor
could decline, which could raise their prices somewhat. This could reduce pressure
on prices of competitive U.S. goods, and possibly help to marginally raise wages of
workers who produce them.
If There Is Linkage Between Worker Rights and Trade
Policy, Should it Be Mandatory or Voluntary?
Many argue that ultimately worker rights will be linked to trade policy. For
them, the question in the debate is, through what mechanism should they be linked:
Should the linkage be voluntary (with no penalties) or mandatory (with penalties for
noncompliance)? Since worker rights and trade policy are already linked through a
number of vehicles -- some mandatory and some voluntary, congressional options
include: further enforcement of these vehicles as well as adding onto them; adopting
new laws to extend or tighten the worker rights-trade policy link; or revisiting and
possibly revising the existing linkages. These are summarized in table 3.
Those in favor of a mandated worker rights-trade policy link argue that outside
intervention is needed to "level the international playing field." The reasoning is that
recognition of a worker's right to organize, bargain collectively, and strike creates
positive pressure on wages. As wages rise, workers have more income to spend on
imported goods. Simultaneously, as foreign wage rates rise, U.S. corporations will
have less incentive to relocate in an attempt to reduce labor costs.10
9
Some observers may be interested in relative wage levels in various countries as an indicator
of potential attractiveness of those countries as a site for labor-intensive manufacturing
operations. Of course, wages do not tell the whole story. Imports and exports are affected
importantly by the interaction between wages and productivity which together determine unit
labor costs of production. This report does not include a separate table on either productivity
levels for the respective countries or unit labor costs. Productivity levels for the whole
country may be somewhat irrelevant to the issue of whether or not a corporation will set up
a plant there. The reason is that productivity in specific manufacturing facilities abroad which
are producing for export with U.S. technology may be considerably higher than productivity
for the country as a whole.
10
Opening statement of Representative Sanders, Committee on Banking, Finance, and Urban
Affairs, Subcommittee on International Development, Finance, Trade and Monetary Policy.
Hearing on Labor and Environmental Standards, Wednesday. March 23, 1994. 103d
Congress, 2d session, Serial no. 103-129. p. 34.
CRS-10
Those in favor of a voluntary linkage, and against intervention, often concur with
the theory that "a rising tide lifts all boats." They argue that free trade without
additional mandatory encumbrances allows each country's natural comparative
advantage to serve as an engine for economic growth. As a country grows, it
naturally shifts its concern from economic survival to improved welfare for its
workers and citizens.
Linkages Already in Effect
As mentioned, both mandatory and voluntary linkages of worker rights and trade
policy are already being used, as identified in table 3. Specific worker rights
provisions associated with major linkages are listed in table 4.
Voluntary and Mandatory Linkages. Several U.S. laws incorporate both
mandatory and voluntary linkages. The Trade Act of 1974, as amended defined
internationally recognized worker rights and authorized the U.S. Trade Representative
(USTR) to suspend benefits and impose duties or trade restrictions to counteract
persistent patterns of conduct that deny internationally recognized worker rights.
The 1984 amendments to the Generalized System of Preferences -- GSP11,
and the 1990 amendments to the Caribbean Basin Initiative12 -- give special trade
status to other countries that adhere to a set of U.S.-defined "internationally
recognized worker rights." Penalty for noncompliance is prohibition of preferential
tariffs.
Also, the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-104)
specifies as principal negotiating objectives of the United States regarding worker
rights: a) to promote respect for worker rights; b) to secure a review of the
relationship of worker rights to GATT articles, with a view to ensuring that the
benefits of the trading system are available to all workers; and c) to adopt as a
principle of the GATT that the denial of worker rights should not be a means for a
country or its industries to gain competitive advantage in international trade.
11
19 U.S.C. 2461 et seq., Title V of the Trade Act of 1974, as amended, Sections 502(a)(4)
and (b)(7).
12
19 U.S.C. 2701, et seq., Caribbean Basin Economic Recovery Act, Subtitle A, Section 212
(b)(7).
CRS-11
Table 3. Chronology of Labor Rights Provisions
in Major U.S. Laws and Trade Agreements
U.S. Law or
Year Agreement Labor Rights Provision
1969 General Agreement Article XX permits discrimination against products
on Tariff and Trade produced by prison labor.
(GATT)
1984 Amendments to the Congress first defined internationally recognized worker
Trade Act of 1974 rights in Sec. 502(a)(4) of the Trade Act of 1974, as
(P.L. 93-618, as amended, to include:
amended by Sec. (a) the right of association;
503 of P.L. 98-573) (b) the right to organize and bargain collectively;
(c) a prohibition on the use of any form of forced
or compulsory labor;
(d) a minimum age for the employment of
children; and
(e) acceptable conditions of work with respect to
minimum wages, hours of work, and
occupational safety and health.
Sec. 301 Authorized the U.S. Trade Representative
(USTR) to suspend benefits and impose duties or trade
restrictions to counteract persistent patterns of conduct
that deny internationally recognized worker rights.
1984 Amendments to the Sec. 502(b)(7) prohibits preferential tariffs to trading
Generalized System partners that do not take steps to afford their workers
of Preferences, Title internationally recognized worker rights (as defined in the
V of the Trade Act Trade Act of 1974 as amended).
of 1974, as amended
(P.L. 98-573)
1988 Omnibus Trade Act Sec. 1101 specifies as principal negotiating objectives of
of 1988 the United States in trade agreements: a) to promote
(P.L. 100-418) worker rights; b) to secure a review of the relationship of
worker rights to GATT articles, to ensure that the benefits
of the trading system are available to all workers; and c)
to adopt as a principle of the GATT, that the denial of
worker rights should not be a means for a country or its
industries to gain competitive advantage in international
trade.
1990 Amendment to the Sec. 212 (b)(7) prohibits preferential tariffs to trading
Caribbean Basin partners that do not afford their workers internationally
Initiative recognized worker rights (as defined in the Trade Act of
(P.L. 101-382) 1974 as amended).
1992 Jobs Through Sec. 802 prohibits use of export promotion funds from use
Exports Act (P.L. in activities that contribute to violation of internationally
102-549) recognized worker rights (as defined by the Trade Act of
1974 as amended).
CRS-12
U.S. Law or
Year Agreement Labor Rights Provision
1993 North American Authorized U.S. participation in the NAFTA labor side
Free Trade agreement that required the United States, Canada, and
Implementation Act Mexico each to enforce its own labor laws. Permitted
(P.L. 103-182) sanctions if a country does not enforce its own laws
relating to child labor, minimum wages, or occupational
safety and health, where the failure is trade-related and
covered by mutually-recognized labor laws.
1994 Uruguay Round Sec. 131 requires the President to seek a working party in
Agreements Act the new WTO to examine the relationship between
(P.L. 103-465) internationally recognized worker rights and trade.
1995 Amendment to the Sec. 1621 applies worker rights requirements (as defined
International by the Trade Act of 1974 as amended) to international
Financial financial institutions.
Institutions Act
(added by Sec.
526(e) of P.L. 103-
306)
CRS-13
Table 4. Worker Rights Provisions in Various Documents
Trade Act of 1974,
Sec. 502(a)(4) GATT/WTO NAFTA Labor Side Agreement
[P.L. 93-618 as Each country's laws
amended by P.L. 98- ILO Convention or in these areas are
573], and Principle 1969 GATT Principles each party enforceable with
incorporated into *core worker Agreement U.S. Agenda in the is committed to sanctions under
PROVISION other U.S. laws rightsa (Article XX) WTO as of 6/96 promote NAFTA
Right of association T T* 87 T T
Right to organize and
bargain collectively (with T T* 98 T T
implied right to strike)
Prohibition of forced or
compulsory labor T T* 29,105 T T T
Minimum age for T T 138 T (Elimination of T T
employment of children exploitative forms of
child labor)
Acceptable conditions of
work with respect to all
three below:
-minimum wages T T T
-hours of work T (min wage)
-occupational safety and
health T (occ s & h)
Freedom from employment
discrimination T* 111 T T
Equal pay for men and
women T* 100 T
Workers' compensation T T
Migrant worker protection
T T
a
Number indicates specific ILO convention. Source: U.S. Library of Congress, Congressional Research Service. Trade Agreements and the International Labor Standards of the
ILO, by Lois McHugh. [Washington] June 30, 1994. CRS Report 94-535. p. 4.
CRS-14
Other sources not indicated in headings or in table 3: For U.S.-WTO Agenda, see
footnote 21, p. 15, and the paragraph it attaches to. For NAFTA Labor Side
Agreement see U.S. Congress. North American Free Trade Agreement Supplemental
Agreements and Additional Documents. Message from the President of the United
States. November 4, 1993. H.Doc. 103-160, pp. 48-83.
The labor side agreement to the North American Free Trade Agreement links
worker rights and trade policy with some voluntary and some mandatory provisions.
It includes a list of 11 voluntary "guiding labor standards principles," and identifies
three of these as enforceable by sanctions. Any member country may bring a
complaint against another country for not enforcing its own child labor, minimum
wage, or occupational safety and health laws, where the failure affects trade and is
covered by mutually-recognized labor laws.
Strictly Voluntary Linkages
The International Labor Organization (ILO). The International Labor
Organization (ILO) has been working since 1919 to promote a worker rights-trade
policy link. The ILO adopts international labor standards that member countries may
choose to ratify and incorporate into their domestic laws. The ILO requests and
publishes information on each signatory's compliance with the labor standards which
that nation has adopted: the ILO has no enforcement powers.
Since its establishment more than 75 years ago, the ILO (with a current
membership of 174 countries) has adopted 177 labor conventions. Many deal with
very limited labor areas, such as merchant seamen, and are ratified by very few
countries. Six of these ILO conventions (marked with an asterisk [*] on table 4) have
been adopted by more than 100 countries.13 As such, they are often cited as basic
human rights that countries are obligated to meet, and that ought to be incorporated
into the laws of all member countries. In addition, at the June 1996 International
Labor Conference, the ILO members adopted a resolution to develop a child labor
convention that will address abusive labor practices affecting children. Taken
together, these could be considered the seven core international labor standards.
The United States, concerned with matters of sovereignty, has adopted only 12
of the 177 ILO conventions. However, this statistic may be misleading. While some
countries that have ratified ILO conventions have tended to ignore them in practice,
the United States has adopted and enforces strict domestic labor standards legislation
that largely conforms to the ILO norm, and may, in some instances, exceed it.
Voluntary U.S. Programs. In addition to the voluntary and mandatory linkages
between worker rights and trade policy mentioned above, several U.S. programs have
encouraged U.S. businesses operating abroad to maintain certain labor standards in
13
Nine ILO conventions have been ratified by more than 100 countries. These nine include
all the conventions indicated with an asterisk on table 4 except No. 87 (right of association).
However, more than 100 countries have ratified an earlier version of No. 87, No. 11, which
identifies right of association specifically for agricultural workers.
CRS-15
their operations around the world.14 Public pressure on businesses to produce goods
in a responsible manner has helped move the linkage forward. Earlier, however, some
efforts were also made by Congress to codify some of these programs into law. In
addition, some international organizations have set forth codes of conduct for firms.
These codes include the ILO Tripartite Declaration and the Organization for
Economic Cooperation and Development (OECD) Guidelines for Multinational
Enterprises.15
Finally, administrative efforts have also been undertaken: The Clinton
Administration has drawn up a list of "model business principles," for U.S. firms
doing business around the world. These encompass: 1) a safe and healthy workplace,
and 2) fair employment practices, including: a) avoidance of child and forced labor
and discrimination, and b) respect for the rights of workers to associate, organize, and
bargain collectively.16
What Are the Prospects for Further Linking Worker
Rights and Trade Policy in the WTO?
While Congress is focusing in the issue of linking child labor prohibitions to trade
policy, Administration delegates are also looking to the upcoming Singapore
Ministerial Conference of the World Trade Organization (WTO -- to be held on
December 9-13, 1996) to consider the worker-rights-trade policy issue.
U.S. promotion of the worker rights-trade policy link was required in the
Uruguay Round Agreements Act (URAA, P.L. 103-465, Dec. 8, 1994). This is the
Act that implemented the Uruguay Round agreement. More specifically, Section 131
of the URAA required the President to seek a "working party on worker rights."
Such a working committee would examine the relationship of internationally
recognized worker rights to GATT and WTO Articles and objectives.
Lack of an international consensus on such a working party has resulted in
organizing activity by other international groups whose meetings serve as "staging
areas" where positions are developed and some consensus is reached between parties
sharing views on trade policy and labor. These activities include meetings of ministers
14
See Perez-Lopez, Jorge F. Promoting International Respect for Worker Rights Through
Business Codes of Conduct. Fordham International Law Journal. Vol. 17, No. 1, 1993, pp.
1-47. Programs encouraging U.S. businesses to maintain labor standards when operating
abroad include the following guiding principles for U.S. companies doing business in the
respective countries: the Sullivan Principles (South Africa), the MacBride Principles
(Northern Ireland), the Slepak Principles (former Soviet Union), and the Miller Principles
(People's Republic of China and Tibet), Maquiladora Standards of Conduct (Mexico), and
Subcontractor/Supplier Codes of Conduct (for U.S. corporations that source globally). Many
of these, developed by various governmental and nongovernmental groups and individuals,
have been the subject of legislative efforts to codify them.
15
Ibid.
16
Administration's Draft Business Principles. Inside U.S. Trade. March 31, 1995. p. 9.
CRS-16
of the G-7 countries, the OECD, and Quadrilateral ministers. Table 5 tracks some of
these meetings. A spokesperson for the Department of Labor (DOL) Bureau of
International Labor Affairs reports that, "We're not asking WTO to take over for the
ILO. WTO should not be a global enforcer of labor standards. The WTO may have
the role to the extent there is a trade relationship. However, nobody has said we look
to WTO to be to labor standards what it is to tariffs."
The U.S. Position on Trade Policy and Labor
According to a spokesperson at the DOL Bureau of International Labor Affairs,
the Administration's position is that it would like the Singapore Ministerial to issue
a declaration: 1) recognizing the importance of labor standards and their relationship
to trade; 2) establishing a working group to study the trade-labor issue; and 3) making
recommendations as to how the WTO will proceed on this issue.
Secretary of Labor Robert B. Reich has indicated that the United States, at this
point, is pushing for recognition of only five core labor standards: (1) freedom of
association; (2) the right to organize and bargain collectively; (3) prohibition of forced
labor; (4) non-discrimination in employment; and (5) the prevention of exploitation
of young children.17 The United States is not pushing at this time for a minimum
wage standard, or for standards governing minimum age of workers, limiting work
hours, or mandating occupational safety and health protection. Nor is it seeking
sanctions against countries not adhering to these or their own labor standards.
Secretary Reich has also spoken out against using core labor standards to pursue
an agenda of protectionism, or as a method to counter legitimate comparative
advantage based on lower wages. "Such an agenda would be wrong and would be
self-defeating. We do not advocate it, nor would we accept it."18
Those For and Against the Trade Policy-Labor Rights Link
Organizations and Interests. In the United States, according to the DOL
Bureau of International Labor Affairs, organized labor is strongly in favor of forging
some link between labor standards and trade. Moreover, labor interests are also
trying to motivate union organizations in other countries. One such organization is
the International Confederation of Free Trade Unions (ICFTU). This is an umbrella
organization -- a European-based multilateral organization that has coordinated
meetings for the International Labor Organization (ILO). ICFTU General Secretary
Bill Jordan has said, "If there is any rule in fair trade, it must be that no country's
products be successful over those products which carry the cost of freedom."19
17
Statement of U.S. Secretary of Labor Robert B. Reich at the Plenary Session of the ILO
Conference, Geneva, Switzerland, June 11, 1996. Press release by the Office of Public
Affairs, U.S. Information Agency.
18
Ibid.
19
Obtained from Reuters, June 14, 1996, as a statement made to a news conference on release
of a report prepared for the ICFTU annual conference in Brussels at the end of June 1996.
CRS-17
Table 5. 1996 For a Debating the Labor Rights-Trade Policy Link
Date Forum Outcome
April 1-2, Meeting of G-7 Ministers agreed that the relationship between trade
1996 Ministers, Lille, and labor should be raised in the "appropriate
France fora."a
April 15, 1996 Meeting of Informal meeting of delegation chiefs of developing
developing countries to lay out objectives for the Singapore
countries in Ministerial expressed opposition to U.S. demands
Geneva, that WTO begin work on the relationship between
Switzerland trade and labor standards. Many argued that the
International Labor Organization (ILO, which has
no enforcement powers) would be the best forum to
examine the links between labor standards and trade
flows. Some representatives expressed fears that
labor standards could function as protectionist
measures.b
April 19-21, Kobe, Japan Ministers from Canada, the European Community,
1996 28th Japan, and the United States continued planning for
Quadrilateral the Singapore Ministerial Conference of the WTO
meeting and agreed that the relationship between trade and
labor standards should be discussed at the
Singapore Ministerial Conference with a view to
determining how to proceed.c
May 21-22. OECD Committee reported that it has found no clear link,
1996 Ministerial either positive or negative, between "core" labor
meeting in Paris standards and trade performance. The study
reportedly maintains alternatively that: a) the
absence of core labor standards in developing
countries does not constitute an unfair trade
advantage over developed countries; and b) a
developing country that adopts labor standards is
unlikely to experience a significant decrease in
exports. These findings have been cited as both
supporting the U.S. goal of including labor
standards on the agenda of the December 1996
WTO ministerial in Singapore, d and alternatively, as
calling into question the desirability and
effectiveness of using trade sanctions to improve
labor standards.e
a
OECD Panels to Consider Report that Downplays Trade, Labor Links. Inside U.S. Trade. April
12, 1996, p. 11.
b
Developing Countries Lay Out Objectives for Singapore Ministerial. Inside U.S. Trade, April 26,
1996, p. 8.
c
Kobe Quad Statement. Inside U.S. Trade, April 26, 1996, p. 9.
d
See OECD Panels to Consider Report that Downplays Trade, Labor Links, Inside U.S. Trade, op.
cit.
e
Trade Scene: The Rich Man's Club, by Richard Lawrence. The Journal of Commerce, May 9,
1996, p. 6A.
CRS-18
On the other hand, some business communities in the United States and abroad
are opposed to establishing a labor rights-trade policy link. This group encompasses
representatives of business, including the International Chamber of Commerce (ICC),
who are making their perspectives known to the ILO. The ICC argues in a March 26
statement that labor issues are better addressed in the ILO, which was founded for the
purpose of assisting in raising labor standards and improving working conditions
throughout the world. The ICC stated: "The great majority of business representative
organizations in the world have long been in favor of improving labor standards and
promoting workers' rights through the ILO process and not by the use of trade
sanctions, whose direct effect would first and foremost threaten the jobs and
livelihoods of workers themselves."20
Trading Partners. Former U.S. Trade Representative Mickey Kantor has
pointed out that, of developed countries, only France and Belgium were supportive
of a link between labor and trade policy at first. More recently, the EU has moved to
support this proposal. 21 Developing countries, (Brazil, India, Egypt, Bangladesh,
Hong Kong, and the Philippines) have tended to oppose the link. Some of the most
vocal critics of the U.S. position have been some of the developing Asian countries.22
Options for Congress
The immediate question facing Congress relates to what approach to worker
rights, if any, Congress might consider both in promoting standards prohibiting child
labor and in debating the renewal of Presidential fast-track negotiating authority.
In the area of child labor, Congress might, as suggested by pending bills, take a
number of actions including the following: prohibit importation of goods produced
with child labor (S. 706, Harkin; and S. 2065, Frank); direct the State Department to
adopt voluntary guidelines to promote responsible business practices for companies
operating in foreign countries (H.R. 910, Evans); impose economic sanctions on
countries that do not prohibit child labor; amend the Foreign Assistance Act of 1961
to withhold U.S. assistance from countries determined to be violating the human
rights of working children (H.R. 3294, Moran); or impose certain sanctions on
countries that do not prohibit child labor (H.R. 3812, Christopher Smith).
In the area of fast-track renewal legislation, besides the option of either allowing
or, conversely, prohibiting worker rights provisions in fast-track renewal legislation,
there are three other approaches: First, the voluntary code of conduct for businesses
that President Clinton has proposed that U.S. multinational corporations adhere to
20
ICC Urges Singapore to Address New Issues, Excluding Labor. Inside U.S. Trade, April
19, 1996, p. 15.
21
Kantor Says Singapore Should Launch Work on Labor, Corruption. Inside U.S. Trade,
March 5, 1996, pp. 1, 27.
22
Developing Countries Lay Out Objectives for Singapore Ministerial. Inside U.S. Trade,
April 19, 1996, pp. 1, 23.
CRS-19
when doing business abroad could be recognized by law. Such a code could
incorporate one of the definitions of worker rights included in table 4.23
Second, labor standards could be considered an element of value in consumer
goods (as is already happening). Thus, Congress could pass a law stipulating that
goods for import into the United States be clearly labeled as to the conditions under
which they were manufactured, and let consumers adjust their demand for imported
products made under various labor conditions. Problems with the "Rugmark" label
in India suggest that some external organization would need to assure the accuracy
of labels.24 Labor standards would be paid for by one or more of the following:
consumers willing to spend extra for goods made under certain conditions; workers
and employers, to the extent that decreased demand might stem from higher prices.25
Spokespersons for foreign manufacturers have characterized enforcement of this
option as an impossible task, citing the hundreds of thousands of very small
manufacturers in the developing world.
Third, Congress could focus on encouraging the trade-labor standards debate in
the ILO and the WTO. There appears to be a general consensus among ILO members
on the six ILO conventions that constitute the basic human rights labor standards. At
the June 1996 International Labor Conference, the ILO members adopted a resolution
to develop a child labor convention that will address abusive labor practices affecting
children. For the most part, the conventions agree with wording in U.S. legislation
that Congress has added since the 1970s. The ILO Director-General has indicated his
willingness to attend the Singapore Ministerial meeting of the WTO and also
expressed his opinion that the ILO should play a role in addressing labor standards in
trade policy.
23
Administration Releases Details on Voluntary Business Principles. Daily Labor Report,
May 31. 1995, p. A-4.
24
In 1993 India launched a carpet certification program called Rugmark. Under the program,
government monitors are supposed to inspect exporters' looms to certify that children are not
employed, and then tag carpets with a certification seal. Factories of Children. The
Washington Post, May 21, 1995, p. A-1.
25
Freeman, op. cit., pp. 80-87.
------------------------------------------------------------------------------
For other versions of this document, see http://wikileaks.org/wiki/CRS-96-661