Vol. VI, Bulletin No. 5.                                                                        April 3, 2001

How Property-Rights Protection Reaches Across National Borders

The Secrets Hidden in 'Trade' Agreements

An article on the front page of the March 11 New York Times' business section bore this headline: "NAFTA's Powerful Little Secret." The article's opening paragraph:

"Their meetings are secret.  Their members are generally unknown. The decisions they reach need not be fully disclosed. Yet the way a small group of international tribunals handles disputes between investors and foreign governments has led to national laws being revoked, justice systems questioned, and environmental regulations challenged.  And it is all in the name of protecting the rights of foreign investors under the North American Free Trade Agreement [NAFTA]."
Under NAFTA, as the Times pointed out, corporations in the United States, Canada, and Mexico have some unusual transnational powers.  They can reach across borders into a neighboring country, mount legal challenges against the government for laws, regulations, and even jury verdicts, and gain fines or policy reversals in cases deemed in violation of NAFTA's rules on property rights.

Examples of How Transnational Rights Are Invoked

Here are three of the specific cases cited by the Times (the sentences in quotes are taken from the Times story; the sentences in parentheses, from other sources):

Trade agreements used to deal with the elimination of tariffs and non-tariff barriers in the cross-border movement of goods and services. Now they're about much, much more. NAFTA illustrates that fact. It provides cross-border protection of the rights of investors and other kinds of property owners. Not only that.  Its rules on property rights have teeth, otherwise known as sanctions.

Better than anything else I've read, a report issued by the Canadian Auto Workers describes the "incredible new rights and powers" that NAFTA, in its Chapter 11, gives to private corporations, regardless of their nationality.  Because of the new corporate legal right "to sue governments of other countries for passing laws which affect their actual or future business activities and profits,...governments can no longer implement legislation to protect environmental, health, and social standards without risking one of these investor-to-state lawsuits," the report says.

If the present plans of the U.S. government prevail, such cross-border protection of individual and corporate property rights will be extended to the whole 34-nation Free Trade Area of the Americas (FTAA). An early draft of an FTAA agreement will be reviewed April 20-22 at a Summit of the Americas in Quebec City, Canada.  Demonstrators there will probably outnumber those at the World Trade Organization summit in Seattle in late 1999. Their chief theme at Quebec, as at Seattle: trade-agreement bias in favor of property rights to the detriment of worker rights and other human rights.

U.S. Trade Official Favors Adding 'Values' to Trade Agreement

In an interview last month with the Washington Post, Robert B. Zoellick, the new U.S. Trade Representative and thereby the lead official in negotiating and implementing trade and investment agreements for the Bush Administration, gave some clues to his approach. The resulting article in the March 13 Post was headlined "Getting Out in Front on Trade: New U.S. Representative Adds 'Values' to His Globalization Plan."  The sections of the article that support the headline:

The USTR Website contains a "public summary of the U.S. Position" on labor issues in the FTAA. Its sole mention of a specific issue: "We have proposed a provision that countries should not relax their labor laws to encourage investment."  There is not a word explaining that provision. Nor is there any reference to child labor or forced labor. Rather, most of the summary lists all of the obstacles to reaching "the necessary consensus" on worker rights.

Is the U.S. position on labor issues more "out front" and more "fully aligned with our values" when it is presented in private negotiating sessions?  No, not according to a non-journalist who has heard an insider describe it face to face.

The IMF's Bias Against Worker Rights

Despite U.S. legislation urging the International Monetary Fund to incorporate basic labor standards in its programs, "the predominant view at the IMF is that a country's adherence to those standards is usually not relevant to its macroeconomic condition and thus not directly relevant to the IMF's mission."  So says a recent report of the U.S. General Accounting Office.

What explains this "predominant view"?  The GAO writes:

"Conventional economic theory treats certain social policies, such as labor and environmental standards, as government interventions that can inhibit the efficient operation of markets and, in turn, overall economic growth.  According to Treasury officials, since most IMF staff and country representatives are trained as economists, they are reluctant to pursue policies that their training tells them could be counter to IMF's goal of encouraging economic growth. As one Executive Director at the IMF expressed [it], the implication of promoting social standards in a country is higher unemployment."
The GAO report, titled "Efforts to Advance U.S. Policies at the Fund" (GAO-01-214), examines three Congressionally mandated U.S. policies: 1) sound banking principles, 2) audits of military expenditures, and 3) labor policies. Of those three,  the U.S. efforts to advance policies had the poorest results in the labor area, according to evidence provided in the report. The U.S. Treasury, the U.S. agency responsible for dealing with the IMF, and the U.S. Executive Director at the IMF "have not had much success in incorporating labor standards issues within Fund programs," in the words of the report. In plain language, the efforts have been a failure.

Labor Standards None of IMF's Business, Except to Undermine Them

GAO experts examined whether the IMF included labor standards issues in the programs of five borrowing countries: Argentina, Ghana, Kazahkstan, Mexico, and Thailand.  It had not.  Nor had its staff even discussed adherence to core labor standards with those governments. To the contrary, in at least the case of Argentina, the IMF "discussed reforms to enhance labor market flexibility," and as a result Argentina agreed on the need to decentralize collective bargaining.

In a footnote, the GAO report says: "In certain countries, the Fund has focused on increasing the flexibility of members' labor markets. Such conditions [in IMF programs] have been viewed by some as possibly counter to the goals of the U.S. labor standards mandate."  As indeed they are.  In other words, for the IMF promoting labor standards is not within its proper scope of work, but undermining them is. The GAO report passes over this contradiction.

According to a Treasury official quoted by the GAO, the Fund's policy "is due in part to conflicting academic literature on whether certain labor standards have beneficial or detrimental effect on economic growth." Note the qualifier: conflicting academic literature. But in face of this disagreement, the Fund clearly has its preference, and it is not on the side of labor standards. Usually that kind of preference is called a bias.

At a conference sponsored by the Washington College of Law and the AFL-CIO in late February, a leading economist, Joseph Stiglitz, speaking from his own first-hand observation of international financial institutions, charged that they too frequently are guilty of an "imbalance" in how they evaluate research. Since there's seldom "an open and shut case on anything," he said, the important question is "What is the weight of the evidence?"  He criticized "the selective use of data on one side or other" to justify predetermined decisions, particularly in regard to policies that inhibit unions and collective bargaining.

Email from Head of Garment Workers International

'Be Relentless in Exposing Their Hypocrisy'

 Nobody in the world has visited more sweatshops than Neil Kearney, general secretary of the International Textile, Garment, and Leather Workers Federation, headquartered in Brussels.  After reading HRFW's March 8 article, "Enough! One Nike Scandal Too Many," he wrote: "Good to see your most recent comments."  He added these comments of his own:
We are increasingly finding suppliers saying they cannot meet the standards set down in most good codes given the prices they are being paid by clients in the US and Europe and given the delivery timelines demanded.  Recently in China one manufacturer told me he was under constant pressure from overseas buyers to break the law on working time. From my own observations, I believe him.

Most merchandiser and retailers have now adopted codes of conduct. Some are not very good but others demand respect for the core conventions of the ILO and set limits on working time and provide for the payment of a living wage. However, demanding first-class standards cannot work when the same merchandisers and retailers are only willing to pay fifth-class prices and want delivery yesterday.

Very few are any different. Nike, Reebok, Adidas, the Gap, H and M [a large European retailer]--all are constantly pushing down prices [they pay for products] and giving shorter and shorter lead times. They cannot have it both ways.

One executive of a leading merchandiser recently told me that the delivery schedule problem could easily be solved by the designers producing their blueprints a couple of weeks earlier. But, it appears nobody in these companies considers it sufficiently important to tackle this issue. Until they do, I think we have to be relentless in exposing their hypocrisy.
                                                                                    --Neal Kearney, March 15

Winning Friends and Influencing People

Question: ver.di is the name just adopted for which of the following?

The final answer: D.  The new organization, created last month at a congress in Berlin, has an unusual kind of name for a union: it's short and it's all in lower case, even at the beginning of a sentence. ver.di is the short form for Vereinte Dienstleistungsgewerkschaft (United Public Service Workers). It becomes the biggest trade union in the world, with a membership of three million people in Germany's governmental and private service sectors.   In merging five unions, ver.di erases their five acronyms, DAG, HBV, DPG, IG Medien, and OTV--a merciful contribution to ending public confusion.

I find that writers on labor--myself included--often go overboard in using union acronyms.  LCT, CUEPECS, FBSI, SPSI, TUCP, CGT, KOZ, CFTUK, COSATU, UTM, CUT, WCL, ORIT-CIOSL, FAT, CROC, and the like make sense within certain circles but are off-putting to outsiders.

Along the same line: Do you know what an ITS is?  It stands for International Trade Secretariat, an international grouping of unions by industry sectors, such as transport, metal, and journalism.  Ten years ago there were 16 ITSs.  Now, because of mergers, there are 10. And because of greater sensitivity to public relations, they're gradually getting away from the ITS jargon and calling themselves "global unions."  Check their Website: www.global-unions.org.

What You Can Do About U.S. Child Labor

Hundreds of thousands of children work under dangerous and grueling conditions as hired laborers in U.S. agriculture. These boys and girls risk serious illness, including cancer and brain damage, from exposure to pesticides, and suffer high rates of injury.  They routinely work 12 hours a day, six or seven days a week, for little pay.

Human Rights Watch is launching a major campaign to correct the failure of the U.S. government to protect child farmworkers.  The Watch's Website provides background information on this grievous failure and what you can do about it.  For additional information, check the Website of the Child Labor Coalition.

Human Rights for Workers: Bulletin No. VI-5, April 3, 2001
Robert A. Senser, editor
Copyright 2001
hrfw@senser.com. (Send e-mail)

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