Vol. XI, Bulletin No. 7                                                    August 7, 2006

Bush Sticks To 'Engagement' With China

His Trade Agency Claims U.S. Department of Labor Is
A 'Most Effective Mechanism' for Labor Progress There

The Bush administration has flatly rejected the latest AFL-CIO petition demanding trade action against China for its brutal suppression of worker rights.  The President's Office of the U.S. Trade Representative (USTR) said that, as in the case of a similar petition rejected two years ago, there was no need even to investigate the petition's merits.

A July 21 USTR statement conceded that "there are serious concerns with labor rights and working conditions in China," and that "clearly China has much more to do in the area of worker rights," and also that "there remains much room for improvement," but added: "There is evidence of real progress," thanks in part to the U.S. policy of "engagement" with China. It credited the U.S. Department of Labor's programs with being one of the "most effective mechanisms available" in pursuing that policy.

AFL-CIO Secretary-Treasurer Richard Trumka on July 21 denounced the rejection "a travesty" and called the claim about effective mechanisms  "hollow rhetoric."   He said that the AFL-CIO will "work aggressively with Congress to push the Administration to protect and value workers' rights everywhere and to support fair trade policies that uplift workers in the U.S. and abroad."  In a letter to the President, 29 members of Congress and 11 U.S. senators supported the petition, which the AFL-CIO had submitted jointly with Rep.Chris Smith (R-NJ) and Rep. Ben Carin (D-MD).

$10,000,000 in U.S. Labor Department Projects To Advance Labor Rights in China

The USTR statement said that the U.S. Labor Department "is seeking to advance labor rights in China through a number of programs" in labor law and workplace safety and education projects costing nearly $10,000,000.  What a joke.

Here is an agency whose mission, under the law that established it in 1913, is "to foster, promote, and develop the welfare of working people," and whose creation, according to the Department's own history, was the direct result of a half-century campaign by organized labor for a "Voice in the Cabinet."  What has happened to it in the past six years?  It has achieved a first in the proud history of U.S. labor departments. It has become another anti-worker and anti-union voice in the Presidential cabinet.

Now this Department of Labor -- this shadow of its historic self -- is supposed to help the government of China advance labor rights!  How, exactly?  Not, of course, to help China's workers advance their rights by organizing.  The USTR statement is silent about that need, as is the Department's Website. After all, can you imagine it training Wal-Mart workers in the meaning of freedom of association?

The DOL Website does reveal that the Department outsources much of its China work to private groups.  For example, of the $10,000,000 for its China programs, $2,300,000 covers mine safety activities in a four-year grant awarded to the National Safety Council, which has a safely non-union "alliance" with the Department's Mine Safety and Health Administration.

Free-Trade Democrats Hobble Their Party

The rigidity of the free-trade wing of the Democratic Party harms ordinary American workers and also the Party's own chances of winning elections. That was the conclusion reached by Steven Pearlstein, business columnist of the Washington Post, in his July 26 column titled: "A Winning Strategy for the Democrats: Barter for Free Trade."

The Democratic Party would be politically wise to position itself between two extremes:  between the "protectionist policies of the union left" and the "you're on your own economics of the laissez-faire right," according to Pearlstein.  "But the problem," he wrote, "is that, when you scratch the surface, the free-trade members of the Democratic establishment turn out to be more committed to Part A of the formula, more globalization, than they are to Part B, making sure that the benefits of globalization are widely shared....And if push comes to shove, which it always does in trade politics, they'd welcome more globalization, even without the compensatory social policies."

How does Pearlstein know this?  Because, at a Brookings Institution July 25 symposium, key members of the Democratic free-trade elite told him so:

"At the conference's closing session, I asked former Treasury secretaries Robert Rubin and Larry Summers and former deputy Treasury secretary Roger Altman if any of them would be willing to support a 'time out' on new free-trade initiatives until there was some tangible progress toward greater economic security for U.S. workers. To a man, they recoiled at the idea."

Summers, according to a transcript of the question-and-answer session, won applause when he said: "Steve, you keep wishing we agreed with you....We think what you're advocating is dangerous and damaging to American interests."

In his column, Pearlstein had the last word:

"The idea here isn't to kill free trade  It's to take it hostage.  Right now, the defection of formerly free-trade Democrats has made it impossible to get any trade treaty or trade negotiating authority through Congress.  That's a big problem for the business community, particularly big corporations such as Lucent, AIG, and General Electric.  Democrats now have a perfect opportunity to deliver what the business community wants -- and to demand in exchange programs designed to provide workers more economic security.  But such negotiations will never succeed it influential Democrats give away the store in advance by signaling they support all trade liberalization, unconditionally.

"No guarantees of health care, pension, expanded unemployment insurance -- no more trade deals.  It's a simple message even chief executives can understand.  Voters, too."

Assigning the Highest Possible Value to Unfettered Globalization

Pearlstein has exposed an enormous liability burdening the Democratic Party, and the country.   Democrats like Summers and Rubin -- and Bill Clinton and Joe Leiberman -- have an incestuous partnership with the Republican Party on free trade and investment. For them, the unfettered march toward unconditional globalization trumps everything.  Free trade is regarded as so sacrosanct that it dare not be used, even temporarily, in a political trade for any other national goal.

Actually, the deal Pearlstein proposes won't fly.  A growing number of Democrats, and some Republicans too, realize that today's free trade system is dysfunctional -- rotten, in plain English -- harmful to American workers and to foreign workers, and that to support it, even in some trade-off for a very desireable goal, is dumb.

The July 25 symposium was sponsored by the Brookings' Hamilton Project, which Pearlstein describes as "an effort by the (Bill) Clinton economic braintrust to generate new ideas and a Democratic election agenda."  In the political campaigns now under way, both for the Congressional election in November and for the 2008 Presidential nomination. the Democratic candidates should clearly and firmly reject the agenda of the Party's Rubins/Summers/Clinton(Bill) wing, for the sake of the Party and the country. 

Are you listening, Hillary?

Need for Business Human Rights Norms

A common global standard for business with regard to human rights is needed, a top business executive and a top Asian labor leader agreed in keynote speeches they gave June 26 at a Bangkok consultation held by John Ruggie, special representative of the UN Secretary General on human rights and transnational corporations. 

Alan Hassenfeld, chairman of Hasbro Toys, and Govindasamy Rajasekaran, secretary general of the Malaysian Trades Union Congress, both said that the debate on human rights issues is not reaching laggard companies. According to the MTUC leader, only a small percentage of companies worldwide have embraced any policy on corporate social responsibility, a neglect which he regretted especially because of the downward trend in national labor legislation and enforcement.

The two-day meeting
focused on monitoring and correcting worker rights abuses in supply chains.  Among the 76 participants from 20 countries were representatives from Gap, Kmart/Sears, Nike, BP, Asics, Total, Puma, and Pentland.

With the help of the Friedrich Ebert Stiftung, as well as the German Marshall Fund of the United States, Ruggie's office organized the consultation to gather material for a report on human rights and transnational corporations that he is to make next year to the UN Human Rights Council, the successor to the UN Commission on Human Rights.  The next of Ruggie's regional consultations will take place in Bogota, Colombia, on January 18-19, 2007.

The Business and Human Rights Resource Center maintains a special Website section with a wealth of information dealing with Ruggie's assignment at http://www.reports-and-materials.org/UN-Special-Representative-public-materials.htm.  For further background, check HRFW's own articles on the controversy, including "Why Global Norms for Business Matter," "'Special' Treatment for UN Global Norms," and "Former Neo-Conservative at the Crossroads."

Code Monitoring Does Little for Workers

Don't count on code of conduct monitoring to wipe out sweatshops. That's the message conveyed, minus the word "sweatshops," in two new studies on how well the monitoring of overseas suppliers affects their compliance with the labor codes of Nike, Hewlett-Packard, Hasbro, and other multinationals. 

One study, titled "Meaningful Change: Raising the Bar in Supply Chain Workplace Standards," covers the code monitoring initiatives of the global apparel, footwear, toy, and electronics industries, which together employ an estimated 40,000,000 or more workers in factories owned and operated by overseas suppliers of multinationals based in the United States and other highly industrialized countries.  The study's conclusion: "While monitoring is an essential and valuable tool, monitoring alone has not proven to cause positive change for workers at the factory level."

The title of the second study is "Does Monitoring Improve Labor Standards? Lessons from Nike."  The short answer to the question is No.This study  uses information gathered by Nike itself -- data from factory audits of working conditions for the 600,000 workers in over 800 Nike suppliers in 51 countries. 

The study's three authors, members of the MIT Sloan Management School faculty, praise Nike for its "significant efforts and investments...to improve working conditions among its suppliers," but they add that, as shown by evidence from Nike's own internal reporting, "monitoring alone is not producing the significant and sustained improvements in workplace conditions that many had hoped for."

Systemic Changes Supported, But Much Too Vaguely

Both studies suggest that "systemic" changes are needed, but offer little in the way of a reform agenda for the highly competitive world in which the overseas suppliers operate.  According to the Sloan/MIT research, for example, working conditions appear to improve significantly when monitoring is combined with "tackling some of the root causes of poor working conditions -- by improving the ability of suppliers to better schedule their work and improve their quality and efficiencies."

The two studies, prepared as background information for work being pursued by John Ruggie, the UN special representative on human rights and multinational corporations, are among the papers available on the Business and Human Rights Resource Center Website at http://www.business-humanrights.org/Updates/Archive/SpecialRepPapers

Here's an idea for a supplementary study:  Has the publicity on codes of conduct misled the public and thereby dampened public pressure on multinationals to initiate significant improvements in the working conditions of their overseas workers?

Linking Global Rights with Responsibilities

"The fundamental principle is unassailable: it is never a good thing to have rights without responsibilities."  Howard Mann, a senior international law advisor of the Canada-based International Institute for Sustainable Development, makes that point in an interview published in new Amnesty International report, "Human Rights, Trade and Investment Matters."  The fundamental flaw in today's foreign investment agreements, he says, is that they grant powerful rights to investors without any corresponding responsibilities,

The Organization for Economic Cooperation and Development (OECD) has over the years tried to conclude a multilateral agreement on investments, but failed because of strong objections against its focus on investor rights to the exclusion of corresponding obligations.  Meantime, however, about 2,400 Bilateral Investment  Treaties (BITs) have quietly become law, all tilted in favor of investor rights.  Even though they are fraught with human rights consequences, the BITs, and the BIT-like provisions of free trade agreements, rarely get any attention from the media or human rights groups.

Under those agreements, for example, foreign companies benefit from strong enforcement provisions of their rights, to the point that they are able to bypass local courts and the host government completely and submit a dispute to binding arbitration.  By contrast, victims of human rights abuse by a foreign investor get little or no help under these laws, according to a three-year study by the Institute.

The United States currently has 39 BITs in force, plus many comprehensive bilateral or regional free trade agreements with BIT-like investment provisions.   These agreements cover an amazingly large amount of ground, both in defining investment and in protecting investment and investors.  Take a look at the many kinds of investment they protect.   A company, of course, but also:

shares, stock, and other forms of equity in a company; bonds, debentures, and other forms of debt interest in a company; contractual rights (e.g., construction or management  contracts); intangible property, including rights such as leases, mortgages, liens, and pledges; plus intellectual property, such as copyrights, patents, industrial designs, trademarks, trade secrets, and trade names. 

What an Investment Agreement Fair to All Would Look Like

In an effort to strike a more balanced approach, the Institute last year prepared a Model International Agreement for Sustainable Development.  In its preamble it says that the agreement seeks "an overall balance of rights and obligations in international investment between investors, host countries and home countries."  Mann, a co-author of the model, explains:  “It redirects international investment agreements away from a simple set of investment rights and government obligations to an inter-connected set of rights and obligations for investors and governments alike, with additional recognition of the role of civil society and local communities in this mix. No existing agreements do that.
Mann adds:  “The existing approaches do not, in our view, have a long-term future [because they will be recognized as unfair]....One can argue about many of the details [of the model], but we believe that the fundamental principle is unassailable: it is never a good thing to have rights without obligations.”

It is never a good thing to have rights without responsibilities.  Why shouldn't that principle also be applied to rights granted in all trade agreements?   

See the Amnesty International report, "Human Rights, Trade and Investment Matters," for more information about the IISD's work and about the importance of recognizing that international investments have a human rights dimension. 

U.S. Moving On, After WTO Talks Flop

For trade policymakers in industrial nations, the collapse in July of the World Trade Organization's global trade negotiations was not the utter disaster that some pundits made it out to be. That's because the United States, like other major trading powers, has other attractive options for pushing its trade agenda. It can concentrate more on bilateral (country-to-country) and regional trade agreements.  And the U.S. Trade Representative (USTR) has long pursued that option.

The Economist in its August 5 issue explains the advantage for large countries:  "In a global trade round, the big players lock horns with each other....Outside the multilateral system, however, the biggest powers are free to pick off smaller economies one by one."
USTR's latest success in that strategy came on July 20 when the House of Representatives passed the U.S.-Oman Free Trade Agreement.  The victory did not come easily.  Thanks in part to Oman's poor record in combating human trafficking, and thanks mostly to growing disenchantment with the administration's trade policy even among Republicans, the vote in favor of this FTA was unexpectedly close:  221 to 205.  A Congressional vote on a U.S.-Peru FTA is expected in September.

Both FTAs fail to come anywhere close to having balanced provisions on investor rights and duties.  Both fail to come anywhere close to meeting the fair labor standards necessary for AFL-CIO endorsement.  Among the many non-governmental groups opposing the Peru FTA is the Sierra Club, which issued a statement titled "Don't Trade Away Our Environment."

Human Rights for Workers: Bulletin No. XI-7   August 7,. 2006
Robert A. Senser, editor
Copyright 2006
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