Chapter III

WTO AND LABOUR STANDARDS

 90

CHAPTER - III

WTO AND LABOUR STANDARDS

This chapter discussion the economic properties of core

labour standards, and addresses the relationship between the
observance of core labour standards and trade performance. This
section is then mirrored by a discussion of the relationship between
the observance of core labour standards and patterns of foreign
direct investment - including in expert processing zones.
There are five core labour standards demands by European
Unions and United States to bring forth into the WTO discipline.
But, incidentally, ILO already deals all these issues. And,
surprisingly the US has ratified only one among the five, although
it is demanding all the five core labour standards to draw within
WTO. Although it is true that developing countries are also very
much suspicious on these standards. Suppose, they fear that if
they promised to abolish child labour and they failed to keep their
promise, they could be vulnerable to retaliation under the WTO
dispute settlement mechanism. If they are forced to improve the
case of child labour and other issues of labour standards, they
would increase their costs and they would export less. That would
make them more and more marginalized and poorer still, and
would surely make labour standards worse. And, not by accident
but as a grand design the labour standards question protects some
firms and workers in richer countries.
The five Core Labour Standards are as follow.
 91

1. Freedom of Association
2. Freedom to organise and bargain collectively
3. Freedom from forced or compulsory labour
4. A minimum age for the employment of children, and
5. Measures setting minimum standards in respect of
conditions of work (Surendra Bhandari: 2002).
Labour rights activities want trade agreements and World
Trade Organization (WTO) rules to include social clauses, with
trade sanctions to enforce core labour standards, because they
believe that globalisation creates a race to the bottom in working
conditions. Like the corporations that wanted to move enforcement
of intellectual property rights to the WTO, many of these activists
are live that the WTO is an extraordinarily powerful and effective
agency - the "tough crop" that could enforce labour standards with
the high stick of sanctions. Make labour standards part of the
international rules of trade, their argument goes, and countries will
lose the incentive to repress standards.
The starting point for WTO involvement in labour standards
in the traded goods sector should be to adapt Article XX of the
General Agreement on Tariffs and Trade (which was incorporated
into the WTO). This article lists exceptional circumstances in which
members can depart from their obligations under the agreement,
including Article XX(e) permitting countries to ban imports of goods
produced using prison labour. Article XX(h), which authorizes
countries to impose otherwise prohibited commodity agreement
that "Conforms to criteria" acceptable to member countries, might
also be adapted to permit trade measures authorized by the ILO
 92

under its supervisory procedures (Kimberly Ann Elliott Richard B.

Freeman: 2003).
The WTO should build on Article XX (e) by adding a provision
that allows countries to sanction the specific sector of a country
that has violated core labour standards, if the ILO has determined
that there is indeed a violation. As currently written, Article XX (e)
allows members to take action only against imports implicated in
the labour standards violation - not imports in unrelated sectors.
This element should be retained to prevent any country from using
labour standards problems in one sector of a trading partner to
block LDC exports in unrelated, higher-value added sectors with
"good" jobs, such as electronics (Moran 2002).
Similarly, to minimize the risks of protectionism, any revision
of Article XX (e) should focus on egregious and narrowly defined
violations of standards - based on ILO supervisory evidence, and
subject to WTO review, Justas actions under Article XX currently
are. To define violations eligible for Article XX action, it would be
natural to include, in addition to forced labour and the worst forms
of child labour (which usually involve coercion), de jure national
policies that discriminate on one of the prohibited grounds (that is,
gender, race, ethnicity, political opinion, religion, or social origin)
that employers can exploit to promote exports. Such explicit, illegal
discrimination appears to be rare, however, and the ILO approach
emphasizes promotional measures, so there is no possibility of
disputes in this area.
It would be more difficult to identify actionable violations of
freedom of association and bargaining rights. Guidelines should
 93

focus on the egregiousness of the violations and on its relation to

trade. In additions of the examples of legal restrictions on unions in
export processing Zones, evidence that union organizers are de
facto barred from entering such zones or are fired or arrested for
trying to organize an exporting firm could be considered actionable.
In these and other cases, an additional useful criterion would be
whether or not the country is cooperating with the ILO to remedy
problems.
In addition to identifying the range of violations that would be
actionable, there is the question of which agency should make the
determination. One of the weaknesses of the current dispute
settlement process for Article XX cases is that WTO panels with no
expertise on environmental issues, for example, rule on the
legitimacy of environmental claims. To avoid putting trade dispute
settlement panelists in the position of having to investigate the
legitimacy of claims on labour standards violations, the wealth of
information produced by the ILO supervisory stem should be used
instead. Countries invoking Article XX (e) against a trade-related
core labour standards violations should be required to present
evidence from the ILO supervisory process, as described in the next
chapter, before taking any action. (Kimberly Ann Elliott Richard B.
Freeman: 2003)
In cases involving forced labour (by adults or children) or
discrimination where the targeted country has not ratified the
relevant conventions, the country invoking Article XX should offer
evidence from other independent sources, for example the UN
Human Rights Commission or respected non-governmental
 94

organizations such as Amnesty International or Human Rights

Watch. In this case, the defendant country could appeal to the ILO
to conduct an independent investigation, and if the claim of a
violation is not upheld and the trade measure is not removed, the
defendant country could then file a dispute with the WTO.
Experience with the WTO's Dispute Settlement Understanding
and with trade-environment disputes suggests that multilateral
trade rules provide safeguards that would prevent protectionists
from exploiting the trade-labour link as a trade barrier (Elliott
2000a, 1999-200 1). The Dispute settlement Understanding reduces
the threat that protectionists could exploit an expanded Article XX
in a number of ways. Restrictions on unilateral trade measures
mean that trade threats cannot be used as a tool of "aggressive
unilateralism", as they were on intellectual property, for example,
to force countries to change their polices or to agree to negotiate
new multilateral rules. The key is for the trading rules to limit
government discretion and to require that trade measures related
to social issues are subject to multilateral review and discipline.
The WFO settlement system has also demonstrated that it
can protect small, poor countries from unjustified or arbitrary
discrimination against their exports. Several LDCs have challenged
US trade measures, including those based on environmental
concerns, and have prevailed in the panel ruling forced the United
States to modify its policies. In one case, a panel ruling forced the
United States to revise its clean air regulations on gasoline that
discriminated against imports without a legitimate rationale. The
appellate body ruling that allowed the United States to ban shrimp
 95

imports that threaten endangered sea turtles did not result in a

proliferation of new trade bans for nominally environmental
purposes. Though not satisfactory to everyone, the WTO system in
this and other cases has shown itself capable of distinguishing
protectionist trade barriers from legitimate attempts to address
environmental issues.
Finally, the WTO could consider expanding the General
Agreement on Trade in Services to cover the cross-border provision
of "worker agency services". Workers' associations provide a variety
of services that support markets. These associations alleviate
market failures associated with collective action problems,
workplace public goods, and imperfect information; and they
discipline practices that border on coercion and create
countervailing market power to the anticompetitive market power of
finns.
Moreover, the services provided by workers' associations
encompass not just bargaining over compensation but also
workplace safety monitoring, grievance and dispute settlement,
training and education, and management of other services, such as
child care, pensions, and health insurance (Richardson 2000;
Stiglitz 2000; Freeman and Medoff 1984). It would be consistent
with the WTO's mission to encourage the liberalization of "trade" in
such market-supportive services. The ILO could also provide advice
on how to develop these rules and could assist in training workers'
(and employers) organizations on how best to take advantage of
them. Again, trade and labour working together can do more than
either can do separately.
 The environmental issues are probably not as controversial as
those that concern labour standards. At the Marrakesh Ministerial
Meeting, the International Confederation of Free Trade Unions
(ICFTU) introduced an innocuous sounding proposal for the
inclusion of a social clause in the Uruguay Round Agreement. The
proposal stated, The contracting parties agree to take steps to
ensue the observance of the minimum labour standards specified
by an advisory committee to be established by the GATT and the
ILO (International Labour Organisations), and including those on
freedom of association and the right to collective bargaining, on a
the minimum age for employment, discrimination, equal
remuneration and forced labour. The United States and European
Union supported the idea that a social clause should be included in
the WTO framework. The pressure for inclusion did not come
only from the government concerned. The proposal was supported
by trade unions and non-government organization from the develop
countries. The idea behind the social clause is that imports of
products from countries or enterprises that do not comply with
certain minimum labour standards will be restricted or prohibited.
Conversely, preferential treatment can be granted to counties or
enterprises that comply with the minimum labour standards.

3.1 A Historical overview of the Trade and Labour standards

The last century and particularly the past two decades have
seen an explosion of activity seeking to regulate labour conditions
at the transactional and international level. This activity has
progressed on three fronts: thought the definition of international
 97

labour standards, through widespread ratification of core

international labour instruments, and through increasing resort to
such standards in the activities of the United Nations, international
financial institutions, regional and bilateral trade systems,
unilateral foreign assistance and trade measures, transnational
litigation, and voluntary corporate codes of conduct and social
labelling efforts. These developments have been stimulated in large
part by a rapidly globalising economy.
On the most basic level, the need for international labour
standards is the same as the need for international human rights
standards generally. The theory behind the international human
rights movement (and correspondingly, the labour standards that
constitute human rights) is that human beings are universally
entitled to a certain minimum standards of treatment. Accordingly,
many areas of human life that traditionally were viewed as falling
within the domestic jurisdiction of sovereign states are now subject
to international regulation, oversight, and scrutiny. These include
the rights of women, children, and persons in the criminal justice
system, racial and religious minorities, and certain general labour
rights. The modern idea of human rights, as set forth in the
Universal Declaration of Human Rights, conceives of such rights as
universal, equal and inalienable, deriving from the inherent dignity
of human beings and necessary to the peace and security of
nations.
Given the widespread protection of certain fundamental
labour rights in international human rights instruments, the ILO
has identified its four "core" labour standards as fundamental
 98

human rights. The purpose of freedom of association, non-

discrimination, and the prohibitions on child labour is to protect
the basic life and well being of workers around the world. These
core standards are incorporated in the major human rights treaties
as well as in the eight widely ratified core LW conventions.
In addition to the values underlying the international human
rights system, labour rights bring another card to the table. To the
extent that they implicate competitiveness in international trade
substandard labour conditions can constitute an unfair trade
practice. The international prohibition against the use of prison,
forced, and other coercive labour, for example, may be viewed from
a human rights perspective as a fundamental protection of the
right of the person not to be compelled to work under slave like
conditions. Coerced labour may also be viewed, from the
perspective of international competitiveness, as a means of gaining
an unfair advantage in the international trade arena.
Labour standards encourage states to compete through skills
development and productivity, rather than through low wages.
Indeed, a substantial body of evidence suggests that adherence to
the core labour standards (freedom of association/ collective
bargaining, non-discrimination, and the prohibition of forced and
child labour may improve a nation's productivity.
International labour standards can counterbalance these
pressures on domestic working conditions by removing certain
intolerable labour conditions from the labour rights/production
costs calculus. Universal standards create a floor below which
states and managers cannot legitimately go to compete.
 The increasingly diffuse nature of employment and labour
relationships may evade the state's ability to apply traditional legal
categories to the workplace.
National governments could respond by revising labour laws
within their own border to address these developments. Corporate
mobility and layering, MNE economic power, and employment
flexibility may create an employer - employee relationship that
eludes national regulation.
The establishment of international standards may be
particularly important for migrant workers, who are uniquely
impervious to domestic protection. Migrant workers who travel to a
foreign state in search of work are notoriously under protected by
the countries in which they labour - through both lack of legal
rights and under enforcement. Migrant workers are a peculiarly
vulnerable population, who are generally very poor, often illiterate,
may not speak the language of the host country or understand its
laws, and work in low skill, unattractive sectors. They may have a
tenuous immigration status and be subject to deportation if they
complain. Perhaps most important, they lack any political or
economic voice in the host country. International standards are
uniquely capable of protecting this group.
All systems of standardization, international labour standards
play an important role in encouraging efficiency and creating a
basis for effective dialogue among transnational actors.
International standards create a common language and baseline of
acceptable employment behaviour against which the international,
 100

regional, national, and private oversight, enforcement and

compliance efforts can be measured.
Universally accepted standards create a uniform benchmark
against which organisations such as the World Bank and the IMF
can determine whether their investment projects are adversely
affecting labour conditions or whether working conditions in a
country (such as child labour) are at levels warranting investment
and technical assistance.
International labour standards also are essential to
preventing unilateral oversight and enforcement mechanisms from
undermining the international economic system. International
standards help prevent unilateral trade and foreign assistance
measures from being abused for protectionist purposes of
undermining the legitimate comparative advantages of developing
states.
International labour standards currently are being embraced
and utilized by international organisations, regional entities, states,
and private actors in a wide variety of contexts, and many current
unilateral, bilateral, and regional enforcement mechanisms seek to
promote labour rights through linkage with trade.
The demands for the inclusion of a "Social clauses" or for a
social dimension to international trade, with trade sanctions
against countries or companies that violate certain minimum
workers' rights is an issue with a long history.
 101

3.2 The Tokyo round

While the United States, supported at times by a number of
European countries, unsuccessfully argued for the inclusion of
labour standards in the GATT since 1953, it was only during the
Tokyo round (199-1979) that the debate on the issue started in
earners (Chamovitz, 1997). It was during the Tokyo round that a
number of non-tariff barriers (NTBs) to trade were raised for the
first time for inclusion in the GATT agenda. At that time, it tariffs
were falling and as a result countries turned their attention to
'other barriers' such as domestic regulation. The Tokyo Round
therefore represented the first efforts to regulate in detail the
domestic policies affecting trade (Roessler, 1996).
In response to the general perception that the GATT regime
was inadequate in dealing with the growing number of trade
distortions from disparate national regulation, an Agreement on
Technical Barriers to Trade (TBT) supplementary to the GATT was
negotiated and adopted in 1979. Developed countries, in particular
the Nordic countries and the United States (US), took advantage on
the discussion of NTBs to argue for the inclusion of labour
standards alongside other NTBs.
The US' increased demand for the inclusion of labour
standards in the GATT during the Tokyo round was partly due to
what professor Bhagwati has called the 'diminished giant
syndrome' (Bhagwati, 1993). The Tokyo Round took place during a
period of relative decline of the US' GNP and trade as other
countries, in particular Japan, became major players in the world
economy (Bhagwati, 1988). The decline in the US share of world
 102

trade and the rise of Far East countries during the Tokyo round
served to legitimise demands for fair trade (including condition free
trade to labour standards) in the US. There was a great perception
then that the emerging trade rivals were gaining unfair competitive
advantages due to low labour standards in their markets.
The US drive for inclusion of labour standards in the GATT
agenda during the Tokyo round was thus, among other reasons,
motivated by a desire to blunt competition that was coming from
emerging Asian economics, rather than actual concern about the
welfare of workers in developing countries. This, is course, had a
historical precedent: During the formative stages of The ILO, the
United Kingdom's Government, for example, wanted labour
standards linked to trade because of Britain's diminished global
economic power, which made the government weary of cheaper
imports coming from the US and some continental states
(Raghavan, 1996).

3.3 The Uruguay Round

The trade labour issue arose again during and up to the
closing stages of the Uruguay Round in Marrakesh. In 1986, the
US tried unsuccessfully to include the labour issue in the GATT
agenda at the beginning of the Uruguay Round. A year later, in
1987, the US again unsuccessfully tried to convince the GAIT
Council to establish a Working Group on the issue of international
labour standards, their relationship to the trading system and their
possible relationship to the objectives of the GATT system.
 103

Notwithstanding the above failures, the US led a group of

countries (including Switzerland and some European Union
member states) that forcefully contended for an explicit recognition
of labour standards in the final Act of the Conference that gave
birth to the WTO. Developing countries argued effectively against
any explicit recognition of the link between trade and labour
standards. In the end the issue did not attract much attention
during the Uruguay Round.
The fact that the Uruguay Round had many 'new issues' to
dealt with, explains in part why the labour standards issue did not
attract attention or support. The opponents of the linkage (mostly
developing countries) were, nevertheless, unsuccessful in their bid
to completely remove the issue from the trade liberalisation agenda.
The Trade Negotiating Committee left the issue open for possible
future discussion.
Develop countries' victory to keep the labour issue of the
multilateral trade agenda during the Uruguay Round was thus a
temporary one. The us, in particular, put the world on notice that
it intended to pursue the issue of labour standards in future
multilateral trade negotiations (Brown, et al. 1996).
The US expressed its intention to pursue the trade labour
issue in future multilateral trade negotiations at the end of the
Uruguay Round. It raised the issue again at the first WTO
Ministerial Conference in Singapore in 1996. Thus, when the WTO
was born in 1995, it already had its job cut for it in respect of the
trade and labour issue. The world's economic super power was not
 104

about to relax its push for the inclusion of the labour issue on the
multilateral trade agenda. (Bansal N.B: 2004)

3.4 The Singapore Ministerial Conference

The US, supported mainly by several developed countries,
especially Norway, brought the labour standards issue at the
WTO's first Ministerial Conference in Singapore in 1996. Norway,
and the US, in particular, advocated for the establishment of a
working grouping the WTO to study the relationship of trade and
labour standards (Singh & Zammit, 2000). The EU, on its part,
suggested the formulation of a joint ILO/WTO Standing Forum on
trade.
Sustained opposition came from many developing countries.
While there is a general perception that opponents of the trade and
labour linkage are mainly Asian countries (needless to say that this
is unfounded, given, for example, Brazil and Egypt's historic
opposition to the discussion of the labour issue in the GA'IT/WTO),
in Singapore. Opposition to the inclusion of labour standards was
shared by almost all the developing countries group of 77 (G-77)
(Africa Recovery, 1997). Confronted with this fierce opposition from
the south, several industrial countries tried to find a middle ground
by seeking a stronger co-operation between the WTO and the ILO.

3.5 Outcome of Singapore Ministerial Conference

The economic growth and development fostered by increased
trade and further trade liberalisation contribute to the promotion of
labour standards. The use of labour standards for protection
purposes used by low-wage developing countries, must not, in any
 105

way, be put into question. In this regard, the WTO and the ILO
secretariats will continue their existing collaboration (WTO, 1996).
In the discussion of the outcome of the Singapore Ministerial
conference on the labour issue, there is often an erroneous
tendency to concentrate on the written text to the exclusion of
events prior to it. The paragraph on labour standards was result of
bitter exchanges between supporters and opponents of the linkage.
The issue was so emotional and divisive that even developing
countries that were opposed to the linkage disagreed as to how to
achieve their objectives.
Some developing countries took the view that the text in
paragraph 4 should not be in the Ministerial Declaration as it sin
gave the protagonists an opportunity for bringing up the labour
standards issue in the WTO ( Egypt and Tanzania among them).
Others (led by Malaysia), however, took the view that putting the
principles contained in paragraph 4 in the Declaration would settle
the way the WTO viewed the labour standards issue once and for
all (Khor, 1997).
As fate would have it, the labour section of the Declaration
was given different interpretations even before the ink was dry. The
Singapore Trade Minister and Chairman of the conference, Yeo
Cheow Tong, interpreted the Declaration as not inscribing the
relationship between trade and labour standards on the WTO
agenda. It also did not, in his view, provide for authorisations for
any new work on the issue (Leary 1997). Instead, it identified the
ILO as the competent body to set and deal with labour standards.
 106

Developing countries, including India and Malaysia,

supported the chairman's view that paragraph 4 of the Declaration
meant that there would be no more talk of labour standards in the
WTO. How wrong they were!
The main proponents for the trade-labour standards linkage
in the WTO saw the outcome of the conference differently. The US
Acting Trade Representative Charlene Barshefsky was, for example,
reported as telling a press conference that this was the text of a
Declaration, which expressed the agreement of the conference and
that the Chairman's remarks were his own interpretation and did
not represent the collective view of the Ministers. In her view, the
Declaration did not foreclose future discussion of the labour
standards issue in the WTO. In particular, she argued that the
Members of the WTO must recognise that "issues of workers'
welfare and workers' rights are absolutely part of the trade debate,
whether we like it or not ideologically." (Khor, 1996)
The US was not the only country that interpreted the
Singapore Ministerial Declaration as mandating future work on
labour standards with in the WTO. The French Trade Minister was,
for instance, quoted as saying "the major debate on labour
standards is here to stay in the WTO. It will never go away" (Khor,
supra). Similarly, the European commission vice President pointed
out that the commission had made it clear that internationally
recognised core labour standards are essential human rights and
that the dialogue on the issue must be taken further (Khor, Supra).
The International Confederation of Free Trade Unions (ICFTU)
welcomed the Declaration saying that for 'the first time trade
 107

ministers have committed the WTO to core labour standards' (Khor,

Supra: 1996)
The Singapore Ministerial Declaration was therefore
interpreted by the supporters of the linkage as not foreclosing
further consideration of the trade and labour standards link with in
the WTO. Fears of developing countries, which were opposed to the
mentioning of labour standards in the Declaration on the ground
that it would give the proponents an opportunity to keep the issue
alive in the WTO, were therefore confirmed.

3.6 The Geneva Ministerial Conference 1998

Developed countries, led by the US, attempted once again to
have the issue discussed at the 1998 Ministerial Conference in
Geneva. In the factor of fundamental opposition from large
developing countries like Brazil and India, the issue was put on the
back burner. It may be that developed countries did not push the
issue too much in 1998 given, that the Ministerial Conference
coincided with the 501h of the GATI'/WTO.
The fact that the labour issue was quickly dismissed in view
of the fundamental opposition from developing countries did not
mark the end of the debate in the WTO. A year later, in Seattle, the
issue resurfaced with the US more determined to push its position
through.

7
 108

3.7 The Seattle Ministerial Conference on the Labour

Standards
At the Seattle WTO Ministerial Conference in 1999, the US
was again at the forefront of countries calling on the WTO to
address the labour issue. Needless to say that the United States
reinterpreted the Singapore Declaration is not having removed the
issue from the WTO agenda (Panagariya, 1999). The US President,
Bill Clinton, called for the creation of a WTO working group to
study the interaction of labour and trade issues with a view to
eventually establish a set of core labour standards, which would
allow trade sanctions against countries seen as violating those core
rights (Molatihegi, 2Q01). The US wanted the working group to
prepare a report in two years on the relationship between
international trade and employment, social protection and core
labour standards. It also wanted the proposed working group to
study the impact of derogations from national labour standards in
export processing zones on trade.
While the United States called for the incorporation of labour
issues into the GATT system during the Tokyo round was partly
due to increased competition for markets from Japan, as well as to
the 'diminished giant syndrome' referred to earlier, the position it
took at Seattle was, to a large extent, intended to gain political
mileage at home. The Seattle Ministerial conference was on the eve
of US Presidential elections, therefore President Clinton, had a
political incentive to court the US labour movement's vote, which
 109

like most developed trade unions, wanted to see the link between
trade and labour standards in the WTO established.
The European Union also called for the inclusion of labour
standards in the WTO at Seattle. Its proposal, however, was
different in form from that of the United States. The EU's proposal
advocated the setting up of joint WTO and ILO forum with a remit
to establish dialogue involving all interested parties on the issue of
the relationship between trade and labour standards.
Canada also submitted proposals on labour standards at
Seattle. It called for a WTO working group to examine the links
between trade, development, and social and environmental polices
and report to the WTO Ministerial Meeting (WTO, 1999).
No consensus could be reached during the Seattle talks on
either the European Union's or the United States' position.
Developing countries, supported by some non-governmental
organisations from the developed and developing countries,
successfully argued against any form of trade and labour linkage
within the WTO. The failure to agree on the labour standards issue
was one of the main reasons for the failure of the Seattle Ministerial
Conference, which meant that a new round of negotiations could
not be launched. The labour standards issue developed in this
way, intentionally or unintentionally by its proponents, served to
delay further trade liberalisation. Failure at Seattle was thus a
serious set back to the liberalisation of the global trading system.
The most instructive lesson to come out of Settle was that
attempts to include the labour issue on the WTO agenda could, and
 110

indeed did, distract attention and energies away from the market
access negotiation priorities of developing countries.

3.8 The Doha Ministerial Conference

Prior to the Doha Ministerial Conference, there was little
reference to labour standards in any of the preparatory
negotiations at the WTO headquarters in Geneva. Following the
change of administration in the US, the country seemed to be less
interested, while the EU, for its part, suggested that there was no
question of the issue being raised again (ICFTU, 2001). Developed
countries' trade unions, led by the ICFTU, however, continued to
lobby with their governments, as a result of which the issue was
raised again at Doha. As usual, the US was at the forefront.
Canada, Norway, Sweden and Germany supported it.
Developing countries continued with their opposition to the
inclusion of labour standards into the WTO. The Asian counties,
the G -77 and China reaffirmed that in their view the ILO was the
competent body to deal with labour standards. Zimbabwe, India,
Malaysia, Thailand, South Korea, Brazil, Pakistan and Indonesia
were at the front of the opposition to bring labour standards issues
into the WO.
As noted earlier, developed countries were not as keen as in
the GAIT rounds and the past WTO ministerial conferences. It
could, therefore, be said that the Seattle debacle was instructive to
the extend that it showed for the first time that developing
countries were no longer prepared to be passive by standers in the
shaping of the global trade agenda. Proponents of the introduction
 Ill

of labour standards into the WTO seemed to have learnt this lesson
well. They were, accordingly, less vocal in their push to place
labour issues on the WTO agenda in Doha for fear of a repeat of
Seattle (Mehta, 2001).
While the supporters of the trade labour linkage were less
vocal in Doha, they were nevertheless tactical enough to ensure
that the final declaration did not rule out a possible role for the
WTO on the issue. The Ministerial Declaration on the labour
standards states:
We reaffirm our declaration made at Singapore Ministerial
Conference regarding internationally recognised core labour
standards. We take note of the work under way in the
International Labour Organisation (ILO) on the social dimension of
globalisation. (WTO, 1996).
The Doha Declaration fell short of completely ruling out any
possible role for the WTO on labour standards. Firstly, reaffirming
the Singapore Ministerial Declaration's position is a continuation of
the legacy of that conference on the subject. It is a legacy of lack of
consensus as to what the conference decided on labour standards.
As we have already seen, the proponent's view is that the
Singapore Ministerial Declaration left an opening for future WTO
work on the labour issue, while the opponents say it brought the
matter to an end. If the US and other developed economies could
attempt to rely on the interpretation of the Singapore Declaration to
raise the issue at Seattle, there is no reason why they cannot do
the same with the Doha Declaration. At Doha, it was decided to
adopt the Singapore Declaration on the subject.
 112

Secondly, an analysis of the preparatory documents at Doha

shows that a proposal for a clear and positive statement on the
WTO position as regards labour standards was apparently not
acceptable to all the parties. A significant line, recognising the ILO
is a more suitable place to discuss labour standards that appeared
in the revised draft declaration of 27 th October 2001 was removed
from the final declaration at the behest of protagonists (Mehta,
2001).
The deleted line read, "The ILO provides the appropriate
forum for a substantive dialogue on various aspects of the (Labour
standards) issue". If this wording were retained, it would have
drastically changed the nature of the trade-labour debate in so far
as institutional role are concerned. The role of the ILO would have
been reinforced with completely different outcomes for the WTO's
future role. In short, it would have brought the debate in the WTO
to an end.
The trade labour debate in the WTO is not WTO is not over.
To think otherwise would be a catastrophic mistake. It would be to
ignore the fact that the same wording adopted at Doha has been
used to raise the labour issue in the WTO in the near past.
Developing countries, in particular, would be lured into a false
sense of security.

3.9 Labour Standards and India's Trade

The implications of imposing compulsory labour standards on
developing countries is a complex question, with many layers of
 113

argument, which requires a careful and extensive analysis.

However, the analysis of these issues here will be necessarily brief.
In their advocacy of labour standards for developing
countries, advanced countries make a distinction between the five
core labour standards and other standards, as mentioned in
Section 1. The former relate to the core conventions concerning
freedom of association and collective bargaining, freedom from
forced labour, non-discrimination and the abolition of child labour.
There is of course, a whole host of 'other' labour standards,
but in the current context of developing countries the most likely
ones at issue would include minimum wages, employment
guarantees and health and safety measures. In advocating a social
clause in the WTO or to her mechanisms to force compliance with
the core conventions, the advanced counties suggest that they are
only asking developing countries to adopt core labour standards,
and not measures such as minimum wages. The enforcement of
core labour standards is justified on the grounds that they are
basic human rights and hence no other considerations enter the
picture. It is argued, further, that the enforcement of core labour
standards will not, in any case, alter developing countries'
comparative advantage in production and trade.
This perspective raises two issues, which need to be
addressed here in view of their importance for developing countries.
The first concerns the suggestion that the implementation of core
standards has no impact on wage levels and other labour costs.
The second concerns the primacy of core labour standards, and
 113

argument, which requires a careful and extensive analysis.

However, the analysis of these issues here will be necessarily brief.
In their advocacy of labour standards for developing
countries, advanced countries make a distinction between the five
core labour standards and other standards, as mentioned in
Section 1. The former relate to the core conventions concerning
freedom of association and collective bargaining, freedom from
forced labour, non-discrimination and the abolition of child labour.
There is of course, a whole host of 'other' labour standards,
but in the current context of developing countries the most likely
ones at issue would include minimum wages, employment
guarantees and health and safety measures. In advocating a social
clause in the WTO or to her mechanisms to force compliance with
the core conventions, the advanced counties suggest that they are
only asking developing countries to adopt core labour standards,
and not measures such as minimum wages. The enforcement of
core labour standards is justified on the grounds that they are
basic human rights and hence no other considerations enter the
picture. It is argued, further, that the enforcement of core labour
standards will not, in any case, alter developing countries'
comparative advantage in production and trade.
This perspective raises two issues, which need to be
addressed here in view of their importance for developing countries.
The first concerns the suggestion that the implementation of core
standards has no impact on wage levels and other labour costs.
The second concerns the primacy of core labour standards, and
 114

whether their classification as human rights completely rules out

any discussion of the best way to proceed to implement them.
3.10 Labour Standards And The Social Clause
The environmental issues are probably not as controversial as
those that concern labour standards. At the Marrakesh Ministerial
Meeting, the International Confederation of Free Trade Unions
(ICVI) introduced an innocuous sounding proposal for the
inclusion of a social clause in the Uruguay Round agreement. The
proposal stated, The contracting parties agree to take steps to
ensure the observance of the minimum labour standards specified
by an advisory committee to be established by the GATT and the
ILO (International Labour Organisation), and including those on
freedom of association and the right to collective bargaining, on the
minimum age for employment, discrimination, equal remuneration
and forced labour.' The United States and the European Union
supported the idea that a social clause should be included in the
WTO framework. The pressure for inclusion did not come only
from the governments concerned. The proposal was supported by
trade unions and non-government organizations from the developed
countries. The idea behind the social clause is that imports of
products from countries or enterprises that do not comply with
certain minimum labour standards will be restricted or prohibited.
Conversely, preferential treatment can be granted to countries or
enterprises that comply with the minimum labour standards.
Naturally enough, the proposal for the inclusion of a social
clause was unanimously condemned into the countries of the
South, which viewed it as an attempt to introduce protectionism
 115

that would nullify the principles, on which international trade

operates, namely, comparative advantage based on factor
endowments such as the availability of cheap labour. The concern
for human rights, workers' rights or environmental protection is
thus nothing but protectionism that feels threatened by import
competition from the developing countries. Industrial production
and services have also tended to be relocated from developed
countries to developing countries with lower wage costs and this is
perceived as an additional threat. (Basudeb Guha-Khasnobis:
1997)

3.11 Economic Costs and Benefits of Core Labour Standards

Even though the implementation of core labour standards in
developing countries will no necessarily affect the costs and pattern
of production directly, a little reflection will show that the indirect
effects may be quite important, and these could involve not just
economic costs but also economic benefits. Further, the costs and
benefits of implementing core labour standards are likely to be
different for each of the various labour standards. It is also
important to appreciate that the costs and benefits would be
different if some or all of these core standards were to be
implemented simultaneously. For example, the costs to producers
of introducing equality of remuneration or non-discrimination in
employment are likely to be higher if workers also have the right to
organize and bargain collectively. To illustrate and clarify the main
issues involved, the focus in the following discussion will first be on
the freedom of association and on free collective bargaining.
 116

Subsequently other labour standards, particularly that of the

elimination of child labour, will be briefly considered.
The contention that the implementation of the two core
standards under discussion here (freedom of association and the
right to collective bargaining - Conventions Nos. 87 and 98 will
have no economic consequences for producers or for the economy
as a whole is not generally valid. At an elementary level, the
mainstream textbook model of perfect competition would posit that
the introduction of these standards would be distortionary as this
would lead to monophony in the labour market and thus to a
misallocation of resources. This is, of course, a static analysis
based on a rather restricted set of assumption and one can
envisage a dynamic model of the economy in which labour
standards reduce conflict by providing an institutionalised way of
minimizing disruption, improving cooperation between the
employees and employers and thereby encouraging the latter to
invest more. This would generate greater growth in the national
economy.
While theoretically possible, such a model with positive effects
on economic development does not correspond to the economic
conditions of most developing countries. In the longer term,
however, when a higher level of development and a more advanced
economic and institutional structure has been attained, the
economic impact of employers' and workers' associations is more
likely to be favourable.
There are a number of reasons for expecting negative effects
in the short to medium term for developing countries resulting from
 117

the compulsory introduction of freedom of association and

collective bargaining, according to the terms of ILO Conventions
Nos. 87 and 98.
The objectives of this dissertation are to examine how
environmental standards will emerge as non-tariff barriers to
India's trade in the years ahead. Indian trading communities have
expressed apprehension that standards will emerge as the most
stringent trade barriers in the post-Uruguay round scenario.
Already product and process methods adopted, by the developed
countries cause enormous injury to Indian exports though it is not
legitimised by the WTO. This project also examines what is the role
of WTO in arresting the growth of Non Tariff Barriers (NTBs) in the
form of green and labour standards and what is the recourse
mechanism available under the WTO framework. This project also
shows WTO provisions on environmental protection without
distorting trade and precisely mentions the areas where WTO can
support environmental measures through higher national
standards as compared to the accredited international standards.