Text of the speech at the First South Cone Congress on Labour Law in Regional Integration, Buenos Aires, Argentina, 20 October 2000.
1.1.- The issue of “social dumping” or the inclusion of the so-called social clauses in the multilateral trade system is not new, having already been raised at the end of the Tokyo Round of the General Agreement on Tariffs and Trade (GATT) in 1979, gaining greater recognition following the creation of the World Trade Organisation (WTO) in 1995, more precisely regarding preliminary attempts to establish an agenda for a new round of negotiation, the Millennium Round, to be introduced in Seattle, United States of America, in December 1999.
1.1.1.- The debate that followed became polemic there being immediately verified a polarisation position between, on one side, the developed countries, avid defenders of inclusion of the social clauses in the multilateral trade system; and on the other, the developing countries, fervent opponents of the same. The WTO credibility crisis and the intense participation of non-governmental organisations animated the attempts and the result, watched live all over the world, was the collapse of the initiative for a new round and the postponement of treatment of the issue.
1.1.2.- My presentation today intends to analyse the issue from an international trade law perspective. As such, it has been divided as follows:
1.- This INTRODUCTION;
2.- A BRIEF HISTORY OF THE HEGEMONY AND PROTECTIONISM OF GATT AND THE WTO;
3.- THE ARGUMENT FOR “SOCIAL DUMPING”;
4.- THE PROTECTIONIST UTILISATION OF THE SOCIAL CLAUSES;
5.- THE PRESENT STATUS OF THE ISSUE AND THE DIVERSE POSITIONS; and
6. – CONCLUSION.
2.- A BRIEF HISTORY OF THE HEGEMONY AND PROTECTIONISM IN GATT AND THE WTO.
2.1.- The issue as to collaboration between the powers for exploitation of the less-developed countries is not new in the commercial context nor in the political arena. In the middle of the 19th century, for example, the British Empire, the US, France and Holland had actively collaborated in the smuggling of heroin to China in such way to create in that country a consumer product which necessarily had to be acquired abroad, with the goal of eliminating the Chinese trade balances. The US took advantage of the English foreign policy to come to control 10% of the trade of this malignant drug to China.1 For those sagacious English strategists such as Benjamin Disraeli, the fact was not eluded that the expansion of British commercial trade was dependent on the politics of agreement with the other powers.4
2.2.- GATT was signed to by 23 countries in 1947 and went into effect in 1948. GATT was one of the international treaties celebrated at the end of the Second World War as part of a new post-conflict international order, much the same as other international treaties. Like these other treaties, GATT was largely inspired by the US, which at the time dominated international trade relations in a world destroyed by military conflict. The negotiation to which GATT was applied almost had no developing country participation.5 GATT’s principle goal was to regulate international exchange relations to bring a certain legality to an area notoriously infamous for the lack of same.
2.3.- This regulation, nonetheless, had very narrow boundaries in that the US did not allow for rules that compromised its hegemonious trade and its capacity for, unilaterally, modifying the rules of the game and establishing its own sanctions. One scandalous example of this game with marked cards was the exclusion of the agricultural sector from the GATT regime, rightfully the commercial area of major world tradition and one of the most important sectors for the developing countries. In GATT, similar to the other international treaties created at the time, the US maintained a virtual veto power as to consensual decision, as it had imposed the rules.
2.4.- In any case, GATT was seen as a progress of before the existence of normal international rules to regulate world trade. The modifications in the legal regime to GATT were made by the so-called rounds, all convened by the US, with the exception of the last, the Uruguay Round, convened by Japan. In 1986, the principal trade partners of the US, Japan and the then designated European Economic Community, suffered the unilateral and illegal commercial measures adopted by the US, prompted by an interest in maintaining the relative commercial competitiveness that they were consistently losing.6 The developed countries soon had an understanding, creating an agenda of negotiations to ensure the maintenance of their hegemonic interests. This agenda consisted of inclusion in the GATT regime of the so-called new areas, including services, technology and investment. Said agenda initially suffered the opposition of the developing countries that wished for the inclusion, in the order of multilateral commerce, of the traditional areas such as the agriculture and the textile sectors, as well as for a greater improvement to the dispute resolution system that had been ineffective and permitted abuses.
2.5.- During the Uruguay Round, an agreement was achieved that permitted the immediate inclusion of the new areas in the multilateral regime and promised the access of the traditional sectors from the year 2000. Also created, together with the WTO, was a new dispute resolution system with a double degree of jurisdiction. From a hegemonic point of view, the Uruguay Round results were highly positive for the developing countries. In fact, in the five years following the creation of the WTO world prosperity became more circumscribed as to the US and to the European Union (EU). During the more than 50 years of free trade rhetoric in GATT and in the WTO, the world agricultural sector continues to be jettisoned from the multilateral system and distorted by infamous subsidies executed by EU, Japan and the US.
2.6.- As a result, under the protection of the WTO, the concentration of revenue in developing countries increased; the participation of these countries grew; a worldwide financial volitility was established; a worldwide economic crises was unleashed; misery and lack of hope in the developing countries was fomented. According to WTO statistics, both Latin America as well as Asia had worse development as to the trade of products in the 4 years following 1995 as compared to the same period before.7 The prices of the agricultural products of which export the greatest part of the developing countries depended,8 decreased approximately 30% from 1998. The Common Market of the South (MERCOSUL), a meritorious initiative, is shipwrecked from a commercial point of view, relegated to a sad situation of administrative exchange, in consideration of the enormous domestic institutional difficulties of its principal partners, Argentina and Brazil. The crises has even affected the developed economies, such as that of Japan. Indeed in Asia, the Philippines, Thailand, Indonesia and Malaysia all had dramatic economic problems. India, the most populated of the 136 members of the WTO, had no noteworthy benefit from the new system.
2.7.- The dispute resolution system of the WTO, the depository of many hopes, did not achieve many objectives within these five years for the reason of important9 procedural failures and serious institutional insufficiencies in the area secretariat management decisively compromising its credibility.10 From the 31 appellate cases decided before the WTO, 18 were related to confrontation between the developing and developed countries, of these 13 won by the developed countries, more than 2/3, and only four by the developing countries, two of which with denial of implementation. Brazil was the champion in said defeats, succumbing in four of the five panels in which was directly involved against developed countries, followed by India with three defeats and no victory; Korea with two defeats and one victory; and Argentina with two defeats and no victory.11 All told, some of these defeats represented institutional attempts at treaty modification to the detriment of the judicial order and the interests of the developing countries. In its turn, the US, notoriously the greatest violator of international trade law rules, won 23 of 25 cases in which it had been involved before the WTO since its creation.12
2.8.- Thus, the WTO dispute resolution system was converted into an instrument of affirming the hegemonic policies of the developing countries and became dreadful as the automatic clauses of the Understanding regarding Dispute Resolution authorised trade sanctions potentially severe, such as the one placed on Brazil in the amount of US$ 1.6 billion in the litigation against Canada concerning illegal incentives in the aeronautics industry.
3.- THE SOCIAL DUMPING ARGUMENT
3.1.- More than a hundred years ago, in 1892, the US Republican Party leader, MacKinley, stated that the Country would not be able to prosper with a trade system that did not recognise the differences in social conditions between the US and Europe. The open competition between highly paid employment in the US and not well paid employment in Europe would eliminate American workers from the market or would decrease their salaries, either situation undesired.13 A hundred years of history have demonstrated the equivocal manner in which the radicals of that time were wrong, what has not impeded the demagogues of today from making the same fallacious argument.
3.2.- So-called “social dumping” is the comparative and relative advantage of the developing countries over the developed countries in terms of international exchanges on the basis of the lower labour cost of the former. This advantage is considered “unjust” by the protectionists when, in reality, such lower cost is a result of the developing stage and, many times, from the misery that afflicts a great part of the world. In fact, from the economic point of view, it has been demonstrated that:12
a) industrial mobility has little to do with low salaries, depending more on industrial and technological development;
b) the developed countries continue as profitable exporters of industrialised products;
c) the decline of employment in the industrial sector of the first world reflects the growth of opportunities in the service sector; and
d) export from the developing countries to the developed countries represents only 2% of the GNP of the former.
3.3.- According to the defenders of the argument for social “dumping”, the lower cost of production also takes into consideration the transfer of some industries with intensive labour to the developing countries.13 Such situation would be of detriment to all workers, some losing their jobs (those of the developed countries), others because they would be condemned to receiving low salaries, what would assure that the poorest would remain poor. Thus, the present situation of the multilateral trade system allows that companies pay third world salaries for the manufacture of products which are subsequently sold at first world prices.16 These arguments are normally presented in several forms: one more direct, as mentioned above, by ultra-nationalist demagogues politicians, and the other speciously put forth under the sacred mantle of the workers’ rights protection. Both, in reality, have the same objective: trade advantages and protection.
3.4.- Regarding the workers’ rights protection, in 1919 the International Labour Organisation (ILO) was created, an agency responsible for the creation and monitoring of labour standards. The ILO has no powers to impose sanctions for the violation of its rules, depending of the voluntary adhesion and on the pressure of international public opinion. The ILO is a forum for debate among governments, civil society, labour unions and employers association, which results in normative convention, labour standards and values, subject to ratification by the member countries. There are over 170 international labour conventions presently in force, although the number of countries which ratify the same varies considerably.17 The country signatories to the convention are obliged to follow its terms, which must be incorporated into domestic law, and are subject to the supervision of the ILO. The ILO provides technical assistance to the countries and has the power to investigate violation of the terms of the conventions of the signatory countries.
3.5. – The defenders of the “social dumping” phenomenon have difficulties, but do no intimidate, in the presentation of arguments justifying the migration of the issue regarding labour standards of the ILO to the WTO, in the same way as they have succeeded with the neutralisation of rights resulting from the IMF treaty.18 The first of these states that the access to domestic market of the developed countries, a privilege, must be accompanied by greater social justice and high level labour standards. The second states that trade measures must be used to promote human rights and principal labour standards. The third and last states that globalisation brings as a result the right of harmonisation of labour standards based on the principle of equal remuneration for assembly work.
3.6 These arguments are specious, fallacious, cynical. It is known that the best labour standards are better promoted, implemented and defended in conditions of economic development. We, lawyers with professional experience in the developing countries, know very well that many labour protection laws are not observed when the economic situation presents such adversity that a consensus is formed for their renouncement for the common good. On the other hand, the greater promoter of human rights is economic development and employment. And salary “harmonisation” would be the guarantee of absolute unemployment in the developing countries. What is the trade the developing country would “harmonise”, income coming only from infamous subsidies of the Common Agricultural Politics of the EU at US$ 350 billion annually?
4.- THE PROTECTIONIST UTILISATION OF THE SOCIAL CLAUSES.
4.1.- If the concept of “social dumping” becomes consecrated by the multilateral trade system and, consequently, inserted into the treaties that comprise the scope of the WTO, the imposition of “antidumping” rights against the countries accused of such practical will be allowed. The “dumping” question the object of the “Antidumping Agreement” is one of most controversial with the scope of the WTO. An outdated protectionist instrument, “dumping” was already regulated in the US from 1916 and instructed the creation of an abusive, arbitrary and unilateral system, maintained until today by this country, as such system was already placed by it in a higher position than WTO treaties in the constitutional hierarchy of legal norms.
4.2.- According to the “Anti-Dumping” Agreement, “dumping” takes place when a product is introduced into the commerce of another country at less than its normal value, if the price of the export of the product from one country to another is less than the comparative price, in the normal course of negotiations, for a similar product when destined for the domestic consumer in the exporter country.19 The ascertaining of “dumping” practice permits the imposition of “anti-dumping measures”, exceptional tariffs, with the objective of protecting domestic industry from the illicit practice, by means of the neutralisation of the improper and consistent advantage to the difference between the price used in the domestic market and the one introduced in the foreign market. The possibility of imposing “anti-dumping” law on social issues would allow for the creation of a tariff, to be deposited by the consumer country, equalising the effect to the salary difference of a worker in India as well as in Holland, for example, as to the final product. The Indian worker would gain nothing; on the contrary, he would probably lose his job!
4.3.- If the employment effect of the “anti-dumping” arsenal would be so devastating on a developing country that it would break observance of the domestic legal system, by the forced option of survival, then this country would be motivated by the developed country members to rely on the dispute resolution system of the WTO, where they will be decidedly and unappealably condemned and subject to horizontal compensation as to their exported products, also to import tariff increase. In this turn, the creation of social labelling system of products of each country, an idea possibly inspired by the debasing impositions of the courts of the Great Inquisition or of yellow stars of David of Hitler, would create pariah countries, on the periphery of the international community, making difficult economic development opportunities and social affirmation of populations for reason of the lack of access of its products to foreign markets.
4.4.- As to social formalities, a proposal was presented at the 85th annual meeting of the ILO by its Director-General, Mr. Michel Hansenne.20 According to this proposal, addressed would only be information on working and production conditions and having nothing to do with the same initiative within the scope of the WTO. Certain developing countries with great representation, such as China, India, Brazil, Indonesia, Pakistan, Egypt and Philippines, refused said proposal of social formalities and denounced as a disguised social clause with the end purpose of utilising the labour standards as trade protection. The proposal was removed to the great disappointment of the defenders of the concept of social dumping.21
5.- THE PRESENT STATUS OF THE ISSUE AND THE DIVERSE POSITIONS.
5.1- In US law, which as a result of its idiosyncratic constitutional rules has primacy over international treaties, their is a tie between labour standards and foreign trade which has been long standing. Notwithstanding, successive North American governments have not applied the legislation due to their inconsistency and consequent illegality with respect to international trade law. The principal law, but in no way the only, binding the two themes is the so-called General System of Preferences, that eliminates applicable tariffs on a certain number of products. In a general manner, the principal conventions of the ILO that consecrate the said basic labour principles are:
a) Convention 87 (the right to associate);
b) Convention 98 (the right to organise and collectively negotiate);
c) Conventions 100 and 101 (job opportunity equality and non- discrimination);
d) Conventions 29 and 105 (forced labour prohibition); and
e) Convention 138 (child labour prohibition).
These principles might be complemented, according to the US position, by specific provisions related to salaries and work conditions).22
5.2.- The EU position differs from that of the US only in rhetorical presentation, in that it proposes collaboration between the various international agencies as to the issue of the social clauses, a euphemism signifying support to the tie between the international trade and labour themes, but without sanction.23 Well, sanctions comprise part of the essence of international trade, as much in the multilateral order of GATT and the WTO, as much as in the unilateral orders of domestic law. Similarly, the Organisation for Economic Co-operation and Development (OECD) has supported the tie between the social clauses and the WTO. Such attitude is not surprising as the OECD frequently acts as a hegemonious power lobby, being the “shameful cartel” organiser during the Uruguay Round for having sponsored the adoption of the immigration laws of the US as to its principal members, making impossible the access of the service providers of the developing countries, for the ends of the General Trade Agreement as to service, one of the treaties signed in Marrakesh.24
5.3.- The developing countries, generally, vehemently oppose the intent of the US and EU, their so-called protectionism, while defending the prevalence of these principals within the scope of the ILO.25 Accordingly to such countries, the first effect of social clause tie to the multilateral system would be the strengthening of the protectionism lobby and unilateral appeal proliferation encouragement and boycotts already executed by some countries. This would reduce the export of manufactured products and those of some of the developing countries. In this first phase, the less developed economies could be reached. As a second, the infection would spread out to emerging economies as China, India, Brazil, Argentina etc. All and all, this initiative is arbitrary and counter to the letter and the spirit of international trade law.26
5.4.- At the first WTO ministerial conference, held in Singapore, December 1996, a new round of negotiation was introduced to the multilateral trade system. The result of the agreement was that:
a) member countries of the WTO support the basic social principles consecrated by the ILO conventions;
b) the ILO is the relevant agency for addressing the social clauses;
c) social standards are better promoted by growth and development; and
d) the social clauses may never be utilised for trade protectionism purposes or to reduce the relative competition among the countries.27
5.5.- Such consent did not impede the reemergence of the issue concerning the relation between the social clauses and the international exchanges at the ministerial conference of the WTO which took place in Seattle in December 1999, where was discussed the entering into of a new round negotiations on the multilateral trade system. Notwithstanding the clear terms of the Singapore Declaration, the US and EU as typically intended to revisit the issue upon the same basis and with the same arguments as ever. Such position forced the Group of 15, at the preparatory meeting for Seattle, in Bangalore, India, “to reject any relation between the trade and social clauses. It was reminded that this issue had already been conclusively decided in the Ministerial Declaration of Singapore. It was decided to conclusively refuse any other new attempt of discussing the issue within WTO”.28
6.1.- The ashes of the failure of the third ministerial conference of the WTO in Seattle had buried for the moment the issue as to the relation between the social clauses and the international trade. The attempt to include the subject in the multilateral trade order, understood as the motivation for such action as well as the conduct of the process by the WTO secretariat, had contributed not only to the failure of the meeting but also to the enormous loss of credibility of the Organisation. We understand that the issue should only be discussed within the scope of the ILO and within the sphere of corporate governance of the companies involved in international trade activities.