"The integration into global supply chains has created huge opportunities for developing countries […] however as research shows not always for workers."
With this introductory statement to the working session on "Making trade benefit workers" at the WTO Public Forum in Geneva on 27 September 2017, Hubert R. Schillinger, director of the FES-Geneva Office, referred to the fact that leading global companies, often based in the global north, have shifted most parts of their production to developing countries—and with this have changed the nature of global trade.
As Schillinger pointed out, the shift was supposed to be a great opportunity for developing countries to become a part of the global economy. However, there is evidence that this narrative has mostly provided false promises—especially for workers in southern supply chains, who do not benefit from trade.
Linking trade and decent work in global supply chains is an important element of the regional project Core Labour Standards Plus (CLS+) managed by the FES Office for Regional Cooperation in Asia (link to project brochure). The WTO Public Forum provided a timely opportunity to discuss the key findings of the project.
Dr. Do Quynh Chi, director of the Research Centre for Employment Relations, Vietnam, presented an in-depth field study of workplace conditions in the garment, footwear, and electronics sectors in Vietnam. The study demonstrates that, while Vietnam as a whole apparently profited from trade liberalization over recent years—looking at aggregated indicators like GDP or export growth—workers have not profited from these gains. On the contrary, northern “brand companies” use their power in negotiations with supply companies to secure their cheap-labour workforce. As a result, workers suffer from massive overtime work and shrinking wages, which in the first place ensure the cheap consumer products sold in the Global North (link to study).
Subsequently, Henner Gött from the University of Göttingen presented a progressive Model Labour Chapter to address precisely these irregularities which could be used in future bilateral EU trade agreements. The chapter covers the most relevant factors—promotion, compliance, and enforcement of labour standards. It also includes a collective complaint mechanism that could be used by trade unions and other civil society organisations in case of non-compliance with the agreement (link to Model Labour Chapter).
The issue of labour standards in global supply chains is already a major concern in the EU trade agenda.
"We have been strongly supporting a trade policy that contributes to the respect of labour rights and the multilateral labour governance […] is a key objective of the EU trade policy," said Paolo Garzotti, deputy head of the EU Mission to the WTO.
According to Garzotti, labour chapters will be part of any ongoing negotiations on trade agreements, which also provide an active engagement for civil society actors, especially workers and employers. Furthermore, companies that export to the EU would be obliged to comply, among others, with the core labour standards.
Still, for Garzotti beside these efforts, domestic policies in the Global South remain one of the crucial parts in providing structures in which workers can benefit from trade. "In the end, trade is not a silver bullet," he added. "It is a tool that always leads to benefits and disadvantages and, therefore, the goal must be that benefits outnumber disadvantages."
Georgios Altintzis, trade policy officer at the International Trade Union Confederation, demonstrated how developing countries are locked in a prisoner’s dilemma. Providing cheap workforce has long been their only comparative advantage and opportunity to integrate into global trade, he assessed, explaining how enforced labour standards could destroy this advantage.
Supply chains from the Global South should, instead, should group themselves together or by government initiative in consortiums to form their own brand companies, selling their own products on global markets, Altintzis went on to recommend. In this way, these companies can capture more parts of the value of end-products for themselves, increasing their prospects at providing better working conditions for their workers and reinvesting their profits in their states of origin.
Following this reasoning, Altintzis proposed that developing countries should stop introducing trade agreements with developed countries, since this "[…] shrinks their governance space to introduce industry policies which effectively ensure labour standards." Instead, developing countries should cooperate in the international system more closely, while the US and the EU would have the responsibility for making labour standards and other obligations mandatory in their trade agreements.
"If they [developing countries] could form a unified bloc with no one breaking ranks, their international bargaining power would increase significantly, but again in competition with each other they are forced into a race to the bottom and again into a prisoner’s dilemma," Altintzis concluded. ###
Matthias Pesch is an intern at the Geneva office of Friedrich-Ebert-Stiftung. For more information on the CLS+ project, contact Veronica Nilsson, Programme Manager at the FES Office for Regional Cooperation in Asia, based in Singapore.
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