In Global Trade, Labor Standards Have a Long History
Wednesday, July 18, 2007
The Democrats in Congress can help improve working conditions abroad—but only if, ultimately, the free trade deals go through.
Trade liberalization is rarely easy. Most gain from trade, but some lose, at least in the short-term. The struggle between these interests complicates the political process, especially in an open, democratic system like ours. Less competitive industries and less efficient firms will lose. But the core political problem is the broader effect of trade on workers, wages and income.
Pressure on wages goes beyond trade liberalization. Richard Freeman of Harvard points out that in 1980, about 980 million workers were available to engage in the world economy. But now, including China, India, and Russia in the global marketplace, the world’s active workforce has more than tripled to roughly 3 billion. With this development, it is not surprising that trade agreements and trade promotion authority hang precariously on the inclusion of labor rights in future trade agreements. Many see labor provisions as a key safeguard in a rapidly changing world.
The economic incentive to trade duty-free with the United States is a profound one.
Imposing labor standards on U.S. trade policy is not new. The McKinley Act of 1890 restricted imports produced by prison labor. In 1947, Article XX (e) of the first version of the Global Agreement on Tariffs and Trad (GATT) acknowledged the right of nations to restrict trade in items produced by forced labor. Since then, labor standards have been incorporated into virtually every part of U.S. trade law: The Generalized System of Preferences (GSP) in 1974, Section 301 of the Trade Act of 1974; the Caribbean Basin Economic Recovery Act (CBERA) in 1983; the Andean Trade Preference Act (ATPA) in 1992; the Overseas Private Investment Corporation (OPIC); the Multilateral Investment Guarantee Agency (MIGA); and the North American Free Trade Act (NAFTA) in 1994.
Of these initiatives, the GSP program has had the most far-reaching influence over labor standards for U.S. trade partners. Created in the Trade Act of 1974 to promote growth in developing countries, the program was modified in 1984 when Congress began requiring GSP beneficiaries to meet core labor standards set by the International Labor Organization (ILO). Today, 143 developing countries and territories in the GSP program must meet these labor obligations in order to export roughly $25 billion worth of duty-free goods (excluding textiles and apparel) to the United States. Failure to take steps to afford these rights jeopardizes a country’s GSP status for some or all of their products.
Enforcement of these obligations has affected the treatment of workers in developing countries. Since 1984, 15 GSP beneficiaries have been sanctioned for worker rights violations. Seven countries remain subject to suspended benefits. Many more nations have corrected problems to avoid suspension. For example, in November 2000, Swaziland modified its constitution to guarantee better protection of worker rights in order to qualify for GSP benefits. Around the same time, Uganda took steps to ensure that labor officials were enforcing recent legislation. Recently, Uganda initiated a new industrial court that will address labor issues, and posted labor inspectors in each district of the country. In addition, a new legal structure has been put in place to improve labor-management relations in the Ugandan textile sector.
These same ILO standards are addressed within the text of U.S. Free Trade Agreements (FTAs). The 15 partners in U.S. trade agreements have made notable efforts to realize these rights. In Morocco, for instance, a comprehensive new labor law went into effect in 2004 to combat child labor, reduce the work week, periodically review the minimum wage, improve worker health and safety, address gender equity in the workplace, promote employment of the disabled, guarantee rights of association, and prohibit employers from taking actions against workers because they are union members. Similarly, the Costa Rican government is taking steps to create a better environment for workers. The government has issued new administrative guidelines to deal with anti-union activities and increased the Ministry of Labor budget by 25 percent between 2002 and 2005, strengthening enforcement and labor official training efforts. Thirty-seven new labor court judges have also been appointed to address a backlog of labor cases in the judicial system.
These developments highlight only some of the results of established U.S. trade policies on labor standards in developing countries. It is true that the recent exposure of labor standards violations in Jordan, a U.S. free trade partner, shows that trade commitments are not a panacea. Active enforcement and monitoring efforts complement trade agreement labor measures. Nonetheless, the economic incentive to trade duty-free with the United States is a profound one, and those interested in raising global labor standards have used previous U.S. trade preference agreements to create change rather effectively for a long time. Meanwhile, current talks between Congress and the White House also give reasonable hope that U.S. trade policy will continue to promote labor development.
Robert Rogowsky is an adjunct professor on International Trade, School of Public Policy, George Mason University. Eric Chyn is a graduate student at American University and works in the office of the U.S. Trade Representative, which is part of the Executive Office of the President. The views he expresses here are his own—he does not speak for his or any other government office.
Image credit: 'No Entry' by Flickr user EdTarwinski.
Image credit: 'No Entry' by Flickr user EdTarwinski.