Creating Decent Work in the Era of Global Value Chains

Singapore – Today, some 60 to 80 per cent of the 20 trillion US dollars recorded gross exports are linked to the production of multinational firms in global value chains.

International trade has undergone dramatic changes over the last three decades. It has gone from countries trading finished goods ‘at arm’s length’, to a complex system of trade through global value chains, with countries and firms taking part in specific segments of production. Today, some 60 to 80 per cent of the 20 trillion US dollars recorded gross exports are linked to the production of multinational firms in global value chains.

As such, what does globalized trade mean for workers? Who benefits?

Work in the Era of Global Value Chains, a workshop jointly held by the Friedrich-Ebert-Stiftung (FES) and Just Jobs Network in Singapore on 28 November 2017, examined how workers’ rights have been affected by the current international trade model of global value chains, and how production processes can be more inclusive to benefit both employers and employees.

Today, one in seven jobs are in global value chains, according to Sabina Dewan, President and Executive Director of the Just Jobs Network. Countries compete to claim a stake within this mode of production, and have enacted policies geared towards attracting foreign direct investment, which have created new challenges for workers.

An imbalance of power exists as the current model has created oligopsonistic markets—where many suppliers compete for orders from few buyers. This leaves supplying firms unable to negotiate, creating downward pressures on wages and working conditionsL in order to remain competitive, firms have cut costs through wages, and have created unideal working conditions, often in violation of labour laws.

Also as a result, workers face a multitude of challenges from globalised trade: increasing work hours, lower wages, and less job security, as jobs become increasingly contractual and seasonal. In contrast, multinational firms enjoy higher profits owing to lower production costs and favourable taxation schemes.

However, ”Asians still view global trade positively,” said Dr Matthias Helble, Senior Economist at the Asian Development Bank Institute. He cited the Spring 2014 Global Attitudes Survey by the Pew Research Center that trade is seen by a majority of those in the region as creating jobs and boosting wages. More than 85 per cent of Asians surveyed viewed trade as good for the economy, lifting people out of poverty in countries such as Viet Nam, India, and Indonesia.

Workshop experts presented case studies looking at global value chain integration in Myanmar, Thailand and Viet Nam within the garments, footwear and electronics industries, and what sort of challenges it has posed to their industries.

Common challenges include high labour turnover, difficulties in attracting and retaining talent; firms trapped in low-skilled, labour intensive production; and deteriorating bargaining power and regard for employee welfare. Firms are unable to negotiate better terms, to have meaningful input into the production process, or level-up skills for employees to move into industries of high-skill labour. Moving into higher-skilled, higher value-add industries remains difficult or unattractive, as policies are geared towards export through low-cost labour.

In addition to this, serious violations of labour standards and human rights occur, despite social clauses being incorporated into trade agreement, such as with the European Union, according to Veronica Nilsson, Programme Manager at FES.

FES is committed to promoting better employment conditions by providing policy recommendations to minimize the negative impact on workers from the changes in international trade, according to Adrienne Woltersdorf, Director of the FES Office for Regional Cooperation in Asia.

“We are trying to fix the modern phenomena of global value chains with old recipes, operating using institutions with roots in the 19th Century.” There is therefore a need to design new policies, extrapolating from examples presented by researchers.

As part of this initiative, FES launched Core Labour Standards Plus (CLS+), a regional project to create and promote a set of binding labour standards in trade and global value chains to be included in international trade agreements to ensure proper working conditions in the face of globalisation. The CLS+ project aims to go beyond the Core Labour Standards, as defined by the International Labour Organization, by also including living wages, working hours, and workplace health and safety standards. ###

For more information about the regional work by FES on trade, labour and social dialogue contact Veronica Nilsson, programme manager at the FES Office for Regional Cooperation in Asia.

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