by Martin Khor

Geneva 1 November 99-- The United States has proposed that the WTO establish a Working Group on Trade and Labour to deal with six issues and to produce a report in two years.

It is a controversial move, certain to generate greater tension and division as WTO Members struggle to make progress on an already overloaded agenda for the Seattle Ministerial meeting just a month from now.

The issues to be discussed by the Working Group include but go far beyond "core labour standards" that had been earlier proposed, and rejected, as an issue for the WTO in 1996 during the WTO Ministerial Conference in Singapore. The additional issues include employment, social protections and safety nets, child labour, and derogation from national labour standards (including in export processing zones).

Moreover, the proposal would like to link some of these topics (employment, labour standards, social protection, derogation from national labour standards) not only to trade but also to investment.

The US proposal was made by its WTO Ambassador, Rita Hayes, at the end of a morning informal heads-of-delegation meeting on Saturday 30 October - which was discussing the part of the ministerial draft text relating to the Least Developed Countries and technical cooperation.

The way the proposal was introduced at the end of the session, delegates did not have time to comment on it at the meeting. But many diplomats from developing countries later privately expressed dismay at the US move at such a late stage of the Seattle preparatory process, on a subject they have long made clear is taboo for them as an issue even for study or discussion at the WTO.

"We are also shocked by the breadth of the proposal that includes so many issues besides labour standards that we had already rejected," said one developing-country diplomat. "This is simply unacceptable. We are already behind time with the negotiations and this labour proposal will certainly complicate matters further and set us back."

After the US introduced the proposal at the informal HOD, just about lunch time, the Chairman of the General Council, Amb. Ali Mchumo of Tanzania indicated that the US proposal would be discussed at the informal HOD this week, perhaps Wednesday.

But Mchumo was reminded by India's Amb. S. Narayanan that there were other proposals, more directly related to the WTO work and the Seattle agenda, that had been introduced in the beginning of October 1, and the informal HOD process had not been able to discuss them.

Mchumo said these too would be taken up for discussion.

At a press briefing, Amb. Hayes stressed that the US was not intending to set up a protectionist vehicle or a Trojan Horse through its proposal, and that the Group's mandate would only be to "discuss and analyze" and not to formulate rules. After two years of discussion, the Group would submit a report to the next Ministerial Conference.

However, when asked what would happen if the Working Group after two years recommended that WTO rules were inadequate and should be changed, and whether there could then be negotiations for changing the rules, Hayes said: "I do not want to prejudge the issue. I won't say one way or the other. We are looking for an unbiased study."

To a question why, if there was no intention to change the WTO's rules, such a study process could not be carried out outside the WTO, for example in the ILO, Hayes said there has not been an initiative in other organisations to do this.

In a paper "Proposed establishment of a working group on trade and labour" distributed at Saturday's WTO informal meeting, the US proposed that at the Seattle meeting, WTO Ministers should agree to establish a WTO Working Group on Trade and Labour.

The group would have a "clearly delineated mandate, operate under the supervision of the General Council and produce a report for consideration by Ministers.

The paper said that globalisation, including concerns over job security, has given rise to concerns over the effects of the multilateral trading system on living standards and employment opportunities of working men and women around the world. The WTO should make an important contribution to this debate and the Working Group is an appropriate vehicle.

It said the proposal for a new Working Group at Seattle is "reflective of the objectives contained in the WTO's preamble and the agreement in Singapore."

In particular, the US saw the work of its proposed Working Group as being limited to the following issues:

* Trade and employment -- examination of the effects of increased international trade and investment on levels and composition of countries' employment;

* Trade and social protections -- examination of the relationship between increased openness in trade and investment and the scope and the structure of basic social protections and safety nets in developed and developing countries.

* Trade and core labour standards -- examination of the relationship between economic development, international trade and investment, and the implementation of core labour standards;

* Positive trade policy incentives and core labour standards -- examination of the scope for positive trade policy incentives to promote implementation of core labour standards;

* Trade and forced or exploitive child labour -- examination of the extent of forced or exploitive child labour in industries engaged in international trade; and

* Trade and derogation from national labour standards -- examination of the effects of derogation from national labour standards (including in export processing zones) on international trade, investment and economic development.

"The objective of the Working Group in the first two years will be to produce a report on its discussions for consideration by WTO Members at the Fourth Ministerial Conference," said the paper. The Group would consult and collaborate with the ILO, IFIs and UNCTAD, and to facilitate this, the WTO would welcome a request by the ILO for observer status.

In a section on Rationale, the paper says WTO Members subscribe to the belief their trade and economic relations should be conducted with a view to raising living standards and ensuring full employment. These objectives reflect the underlying principle of the WTO that further trade expansion can support improved opportunities for the greatest number of people.

"Further research in this area will examine the consequences of expanded trade on employment and social protections, and is entirely consistent with the conclusion stated in Singapore that economic growth and development fostered by trade contributes to the promotion of improved labour conditions. Moreover such work would fully conform to the commitment at Singapore that labour standards issues should not be used as a means to undermine comparative advantage or for protectionist purposes.

"At Singapore Members renewed their commitment to the observance of internationally recognised core labour standards and supported WTO and ILO collaboration. Members also recognised that WTO and ILO had different mandates and that while ILO is charged with the development and supervision of labour standards, WTO is charged with promotion of the liberal international trading system. The proposed approach again is fully consistent with the Singapore consensus."

However, this claim in the US paper is certain to be disputed.

The Singapore Ministerial Declaration had made clear that the ILO is the competent body to set and deal with labour standards, and that the WTO and ILO secretariats will continue their existing collaboration.

And at that time, ILO and WTO officials clarified that this 'collaboration' was only for exchange of documents and reports.

There is no indication in the Singapore document and statements at the Ministerial meeting where they were adopted that there would be any future work programme on labour issues at the WTO.

Moreover, in his statement at the closing session of the Singapore Ministerial, the chairman of that meeting, Singapore Trade Minister Yeo Cheow Tong, interpreted the paragraph on labour in the Singapore Ministerial Declaration to mean that "it does not inscribe the relationship between trade and core labour standards on the WTO agenda" and that "there is no authorization in the text for any new work on this issue."

He also said: "Some delegations had expressed the concern that this text may lead the WTO to acquire a competence to undertake further work in the relationship between trade and core labour standards. I want to assure these delegations that this text will not permit such a development."

The Malaysian Trade Minister, Rafidah Aziz, who had played a leading role among developing countries during the Singapore Ministerial, gave the same interpretation after the meeting, as follows: "There will be no more talk of labour standards in the WTO. No way, no discussions, no continuing work, nothing."

It is difficult or impossible to justify, as the US paper does, how the US proposal of a new WTO Working Group on labour is "fully consistent with the Singapore consensus", especially since the proposed issues for the Group goes far beyond even the "core labour standards" that had been rejected by Ministers in Singapore as an issue for discussion in the WTO.

At her press briefing, Amb. Hayes said she told the WTO meeting that US agreed the ILO is the lead agency for labour standards issues but the WTO must have a supportive and constructive role to examine trade and labour. Many workers who manufacture the traded products see the WTO as disinterested in their concerns on trade liberalisation. By appearing unresponsive, the WTO risks losing their support. "It is vital for the WTO's credibility to be strengthened by agreeing to consider trade related labour issues," she said.

She added the Working Group's mandate is only to discuss and analyze. There would be no rules and procedural constraints. It was thus clear, she said, that there is no threat to any WTO member.

"I asked for constructive consideration from other Members and we hope it won't create any undue anxiety. Our public, in developed and developing countries, have already placed these issues on the agenda and we are facing these issues from our domestic constituencies, and we must respond to their concerns."

Asked why the US, wanting to promote workers' rights, had ratified only 11 of the 178 ILO conventions, and only one of the five relating to core labour standards, Hayes said ratification is a very complex issue in a federal republic, and moreover non-ratification does not mean non-adherence. As to when and whether the US would ratify the Conventions, she said, "We will reflect on that and see how we will do."

On the nature of the Working Group's work and issues, Hayes said some issues were more difficult than others. "We hope to get answers to questions that people are concerned about. If the study shows the WTO isn't good for the workers then we have a problem here. The WTO is for trade liberalisation and must look how it affects the people responsible for making the goods we trade. If we find what we do is not for their benefit we need to address it."

Hayes was asked what would happen if in two years the study showed that the WTO trade system did have negative effects on workers and the rules were inadequate and should be changed? Would the process on trade and labour then move into negotiations for an agreement or change of rules?

She said that she did not want to prejudge, and would not say one way or the other. "We are looking at an unbiased study."

Asked further why the US wanted the study to be conducted at the WTO and not at the ILO or other bodies, since the WTO is a rule-making body and that would imply a possibility of rules changing or being created, Hayes said "we are not seeking to set up a protectionist vehicle or a Trojan Horse nor a conspiracy to undermine comparative advantage (of developing countries)." She also said that there has not been an initiative in other organisations to do this. (SUNS4542)

Martin Khor is the Director of Third World Network.

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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