final trade draft (5)

8/8/2019 Final Trade Draft (5)

1/28


2/28

2

When consumers purchase Fair Trade coffee or chocolate, they know that their money is going to

local farmers where it is then invested in health care, education, environmental stewardship,

community development, and economic independence. It is clear that, once aware, most people do

not want to buy chocolate, coffee, or any other product made with slave labor

History of Fair Trade

Few programs exist to systematically help the poor out ofpoverty and into employment or to

help laid-offworkers find new jobs. Fair Trade seeks to alleviate poverty by establishing a direct

relationship with producers and eliminating the middlemen. Specific quality standards and

requirements are imposed: child labor control, gender equity, democratic organization and respect

for the environment. This way, producers earn a living wage, community development becomes

possible and consumers can rest assured (by the certifiers) that they are buying a product that has

been made with fair labor standards.

To become Fair Trade certified, an importer must meet stringent criteria; pay a minimum price

per pound, providing credit to farmers, and providing technical assistance such as help

transitioning to organic farming. ://www.globalexchange.org/campaigns/fairtrade/coffee/

There is no reason to think that trade alone will alleviate poverty. Such results are more the

exception than the rule. Terms of trade are actually worsening for developing countries, with the

value of their exports declining relative to the value of their imports.Labor Standards Many

developing countries have entered into trade pacts where the terms of trade benefit their wealthy

trading partners far more thanthemselvesSandra Polaski TRADE, EQUITY, STRATEGY FOR DEVELOPING COUNTRIES

www.carnegieendowment.org

Concept of Linkage

The concept of linking trade to fair labor is not a new one. Should the rights to engage in

international trade be made conditional on the promotion of labor standards? The critics of such

conditionality, known as linkage, are concerned about its adverse effects. However, linkage can bedesirable. A set of rules for international trade that incorporates linkage can serve the interests of

developing countries, and in particular the less advantaged individuals within them.

Global Labor Standards

When a country refuses to enforce its own labor laws to protect its workers this perpetuates the


3/28

3

sweatshop mentality, which is unacceptable to the global community.

ILO

1. Freedom of association, collective bargaining, and industrial relations2. Forced labour3. Elimination of child labour and protection of children and young persons

4. Equality of opportunity and treatment5. Tripartite consultation6. Labour administration and inspection7. Employment policy and promotion8. Vocational guidance and training9. Employment security10. Wages11. Working time12. Occupational safety and health13. Social security14. Maternity protection15. Social policy16. Migrant workers

17. Seafarers18. Fishermen19. Dockworkers20. Indigenous and tribal peoples21. Specific categories of workers22. Final Articles Conventions

Core Labor Rights

There are four fundamental labor rights:

1) The right to organize and collective bargaining2) Elimination of forced labor3) Nondiscrimination4) Removal of children from workplace5) Minimum wages and hours6) Occupational safety

Thelabor rights generally proposed for inclusion intrade agreements are:

y freedom of associationy right to bargain collectivelyy elimination of forced labory nondiscrimination in employmenty acceptable minimum conditions of worky and removal of children from work, especially that which is dangerous or degrading.Sandra PolaskiTRADE, EQUITY, STRATEGY FOR DEVELOPING COUNTRIES www.carnegieendowment.org. p 5

Child Labor

In developing countries child labor is not only commonplace but a way of life. It is seen as a

family rite of passage, a form of apprenticeship. An estimated 120 million children between the

ages of five and fourteen are employed in developing countries Asia, Africa and Latin America.


4/28

4

The US State Department's year 2000 Human Rights Report acknowledged that some 15,000

children between the ages of 9 and 12 have been sold into forced labor on cotton, coffee and

cocoa plantations in northern Ivory Coast in recent years.

The adverse health and developmental effects of this labor on children are well known and

documented. Their work is often hazardous and exposes them to great risk and occupational

disease. The denial of education to these children violates their most basic rights and also

represents an enormous economic and social loss, in terms of reduced economic potential to the

countries in which these children live.

Data range: Data refer to the most recent year available during the period specified. Source: Multiple Indicator ClusterSurveys (MICS) and Demographic and Health Surveys (DHS).

The root of the problem: A Viscous Cycle

Inequality has risenwithin most developing countries and at the global level. World Bank poverty

figures show that the number of people living in poverty (defined as those living on less than$2 a


5/28

5

day) has increased at the global level over thepast fifteen years and is rising in most developing

regions of the world. One argument advanced by some G-77countries against including labor rights

in tradeagreements is that such provisions will not help the most exploited workers, particularly

those in thenontraded and informal sectors.

Enforcement

For a product to display the FAIRTRADE logo, it must meet standards set by Fairtrade Labelling

Organization International (FLO). The Fair Trade Certified production criteria guarantee a

minimum price and insure that no child or forced labor is used. The criteria also stipulate that

farmers' organizations should be organized democratically, that workers should be able to

participate in trade union activities. According to the European Fair Trade Association, farmers get

barely 5 percent of the profit from chocolate, whereas trading organizations and the chocolate

industry receive about 70 percent. This means that producers get only 5 cents from every dollar

spent on chocolate, while the companies get 70 cents - 14 times more!

Coffee

Critics of free markets cite the coffee industry as a prime example of globalizations evils. Though

coffee bean prices have plummeted to a historic low the price of a designer cup of coffee continues

to rise.


6/28

6

Grounds for Complaint?

Understand p. 1

Can Developing Countries Afford to Ban or Regulate Child Labor?

By Mark Weisbrot, Robert Naiman, and Natalia Rudiak1 p. 1

Chocolate

ProductionCocoa is grown principally in West Africa, Central and South America and Asia. In order of annual production size,

the eight largest cocoa-producing countries at present are Cte d'Ivoire, Ghana, Indonesia, Nigeria, Cameroon,

Brazil, Ecuador and Malaysia. These countries represent 90% of world production.

Share of countries in total cocoa beans production (2005/06 crop year forecasts)


7/28

7

Source: UNCTAD based on the data from International Cocoa Organization, quaterly bulletin of cocoa statisticsIn the early 1970s production was concentrated on Ghana, Nigeria, Cte d'Ivoire and Brazil, but it has nowexpanded to areas such as the Pacific region, where countries like Indonesia have shown spectacular growth rates in

production.

World production of cocoa beans, in thousand tonnes


8/28

8

Source: UNCTAD based on the data from International Cocoa Organization, quaterly bulletin of cocoa statistics

ConsumptionAlthough cocoa is largely produced in developing countries, it is mostly consumed in industrialized countries. For

cocoa, the buyers in the consuming countries are the processors and the chocolate manufacturers. A few

multinational companies dominate both processing and chocolate manufacturing. The following graph represents the

main consumers of cocoa, based on the apparent domestic cocoa consumption, which is calculated as grindings plus

net imports of cocoa products and of chocolate products in beans equivalent.

Share of main consuming countries in 2004/05


9/28

9

Source: UNCTAD based on the data from International Cocoa Organization, quaterly bulletin of cocoa statisticsTaking into account the data for the last 30 years it is possible to see that with the exception of eight years, there has

always been a surplus of production. The following graph presents the supply and demand balance for the last thirty

years, considering grindings as primary demand of cocoa beans.

World cocoa bean production, grindings ans supply / demand balance in thousand tonnes from 1960/61 to

2005/06 (forecasts)


10/28

10

Source: UNCTAD based on the data from International Cocoa Organization, quaterly bulletin of cocoa statistics

TradeExports

We can find that the main exporters are also the main producers of cocoa beans. Although countries like Brazil and

Malaysia are main producers, they are not necessarily large exporters due to the size of their processing industry,

which absorbs local production. In Latin America for example, the Dominican Republic exports more cocoa beans

than Brazil.

Interactive map of trade flows of cocoa beans among countries (crop year 2004/05 in tonnes)

Cameroon Cte d'Ivoire EcuadorGhana Indonesia Nigeria Dominican republic


11/28

11

Source: UNCTAD calculations based on data from the quaterly bulletin of cocoa statistics, International CocoaOrganization.

Note :

- Indonesia : for 2005 only, data are from COMTRADE (SITC rev 2 : 0721)

- Nigeria : figures are the main imports of cocoa beans from Nigerian origin for the crop year 2004/05 (computed by

UNCTAD Secretariat based on ICCO data).

Challenges

Given the variations across countries and cultures, there is no one size fits all approach to

tackling child labor issues. First and foremost, companies should adhere to national and local laws

in the country of operation. How to do so, while addressing the various dimensions and

complexities of the issue, is a challenge Source 2, p 1 Since there is no analogous world government

with the power to enforce such rules internationally, the onus is on importing countries such as the

United States to insist on the elimination of such abuses as a condition for market access. This


12/28

12

downward cycle is often perpetuated by adults who, having worked as children themselves, submit

their own children to the same life pattern. Good Practice Note

Addressing Child Labor In the Workplace and Supply Chain p 1

For Child labor:

y Strong unions are an important protection against child labory When parents are able to improve conditions through effective unions, children are much less likely to

have to work

y Active struggles against child labor tend to strengthen unions and workers rights in generaly Supporting workers struggles to organize unions and reject child labory Campaigning for institutions to adopt and enforce codes of conducty Implementing and supporting fair trade or labeling initiativesy Using collective bargaining strategiesy Promoting global labor standards in trade agreementsy Filing suit against corporations for labor rights abuses abroady Promoting access to education

If we dont use child labor, then those children will not have money and cant afford school.And this will become a cycle, low education result in low salary. However, we should solve this

problem from the basic. To boost the education and make those children more competitive in

order to get higher salary in the future.

Unfair labor often with low wages, but if we increase their wages the price of product will alsoraise.

Consumer

The power of the consumer cannot be underestimated.

The use of child labor can undermine these objectives by distorting labor markets, limiting the

growth of human capital, and negatively impacting society as a whole.persists in many parts of the

world is that people externally, educating employees on the issue, putting in place a system of

implementation that supports policy objectives, vigorously monitoring

P 13 Good Practice Note In the Workplace and Supply ChainAddressing Child Labor

Fair Labor is a Consumer Driven Phenomenon

Whether it is fair-trade coffee, conflict-free diamonds or child labor-free soccer balls, an increasing

number of businesses are differentiating and branding their products along these lines in order to

gain market advantage over competitors. The lower cost of child labor may be an illusion.

Considering the quality of work, short attention span and speed and accuracy may offset the

financial gain, affect quality of work. The use of child labor can undermine these objectives by

distorting labor markets, limiting the growth of human capital, and negatively impacting society as

a whole.


13/28

13

Campaign to Raise Awareness

Raise awareness: campaign to educate business owners and consumers

Alternatives and Implementation

Eliminate Poverty

International financial institutions like the World Bank and the International Monetary

Fund contributed to the rise in child labour when they called on countries heavily indebted

to them to reduce public expenditure on health care and new jobs. These structural

adjustment programmes have resulted in increased poverty and child labour. The World

Bank and the International Monetary Fund should rethink their loan plans to developingcountries in an effort to increase social expenditure rather than reduce it.

Government organizations and industries should be pressured to act in a socially

responsible manner and to put an end to child labour or to provide children with better

working conditions. Boycotting is not the solution because it forces children, who

otherwise have no specific training, to quit their jobs and return to the streets or to more

dangerous activities.

Encourage Education

Children need to learn how to read and write. They need social and professional skills that

only school and a nurturing environment can provide.

Some countries have compulsory schooling and some provide free public schooling.

However, in many countries, particularly for those where structural adjustment lending

has led to the privatization of schools-the cost of teaching, books, and uniforms makes it

impossible for children to get an education. Furthermore, for education to become a

solution to child labour, schools must be located close to where these children live.

Education must be free and compulsory up until the minimum legal age for employment.

Enforce Labor Laws

Most countries have laws against child labor; however, some governments support child

labour (regardless of existing laws) as a way of gaining a competitive market advantage.


14/28

14

Rehabilitate and Protect Working Children

(Encourage NGO participation)

Preventing children from working is not necessarily the best solution; children may end up

in worse situations and their families may become even poorer.

Some NGOs fight to protect working children by providing them with information on their

rights or by guaranteeing them safer working conditions. Other NGOs help children in the

transition from work to school by building centres where they are provided with

healthcare and a tailored education. The children leave these centres only when they have

learnt to be independent.

Promote Fair Trade

There is a worldwide rise in commercial agreements-which must include norms for

guaranteeing basic human rights and respect. Implementing these fair trade norms helps

prevent child labour.

The new labelling campaigns-like Rugmark or the equitable commerce label-guarantee that

the products consumers buy are not manufactured by children and that fair commercial

practices have been employed. The label also reminds companies that young consumers

should also be aware of commercial practices.

Fair trade practices guarantee a fair price to small-scale producers. In 44 developing

countries, fair trade helps keep 550 co-operatives in business. These co-operatives

consequently provide goods to 5 million people and often reinvest profits in the

community, where the money is used to build schools, medical clinics, wells, etc.

Replace Child Workers by Adult Workers

There are 800 million unemployed adults in the world; and yet, the number of working

children is estimated to be at over 300 million.

Replacing these working children with their mostly unemployed parents would result in

higher family incomes (since adults are generally paid better), and the resulting rise in

production costs would have little impact on exports sales.

Establish means to determine age in absence of official documentation

Enact an employee awareness campaign, OSHA posters

Poor countries cannot afford


15/28

15

When it is suggested that poor countries cannot afford to address the problem of child labor,

this is sometimes based on a very different argument than the one addressed in this paper. In

other words, it is possible that developing countries that acted to eliminate child labor might have

put themselves at a competitive disadvantage in certain international markets, and therefore

"price themselves out of the market."

Can Developing Countries Afford to Ban or Regulate Child Labor?

By Mark Weisbrot, Robert Naiman, and Natalia Rudiak1 p 4

Consumer with a Conscience

A number of interventionist initiatives have been launched or proposed in response to the cof-

fee markets perceived breakdown. The bestknown is the fair trade coffee campaign, in

which roasters and retailers are pressured by activist groups to sell coffee grown under specified

conditions and purchased at above-market pricesProgress and Pain Coffee is a major commodity in

international commerce.

Conclusion

Globalization

development of their country. These rights are free-

dom of association and the right to bargain collec-

tively, elimination of forced labor, nondiscrimina-

tion in employment, and removal of children from

work, especially dangerous or degrading work. It is

enforcement of laws related to these basic rights

that developed countries have proposed to include

as an obligation in trade agreements.

forcement of collective contracts and laws, unions

also play a role in political and legislative processes,

advocating for policies that benefit the poor and

near poor, including stronger labor laws, social safety

nets, and public services. In many countries, unions


16/28

16

have been the prime movers behind targeted pov-

erty alleviation programs, minimum wages, uni-

From a purely theoretical perspective using a standard neoclassical production and trade model, it

would appear that raising standards would reduce the amount of (labor-intensive) exports

supplied to the world market.

Raising wages by allowing union activity would also result in a higher relative price for the labor

intensive items and therefore fewer exports.

partial race to the bottom in terms of wages

A fundamental challenge facing policymakers and activists is how to set and enforce rules to protect

workers from repression, exploitation, and danger. Today, most labor occurs within the evolving

context of a globalized economy in which countries and communities increasingly compete for

scarce investment by lowering or repressing working conditions and wages. In this global

workplace, transnational corporations (TNCs) exercise more power than many sovereign nations.

Global institutions such as the International Labor Organization (ILO) lack the power to enforce

standards. Meanwhile, U.S. policymakers have responded inadequately to the need to establish and

enforce international regulations.

The crisis facing the worlds workers is intensifying:

At least one billion adults, more than 30% of the global work force, are unemployed or seriously

underemployed. Wages and working conditions are decliningin the U.S. by 1% annually

for the past twenty years, in poor countries at a much faster pace.

Throughout the global North the number of 3-D jobsdangerous, dirty, and difficult work

done for extremely low pay by illegal or unprotected immigrant workers is rapidly rising.

Child labor is used increasingly for production of exports in countries with massive adult

unemployment.

In China, imprisoned workers produce goods entering international commerce in competition with

the work of wage labor, even in such complex industries as aerospace. Prison labor in the U.S. formsa growing part of the manufacturing work force.. Attempts to condition trade with protective labor

standards date back nearly a century. In 1905 the Berne Convention outlawed the production or

sale of matches made with white phosphorus because of its horrible crippling effects.

In 1919, following World War I and the Bolshevik Revolution, the western capitalist nations formed


17/28

17

the International Labor Organization to regulate the conditions of work internationallyunder the

clear threat that the failure to do so could lead to a further spread of radical worker unrest. Since

then, 178 international conventions, regulating everything from freedom of association to the rights

of indigenous and migrant workers, have been established. The U.S. has ratified only eleven.

After World War II an effort was made to establish the International Trade Organization (ITO),

whose members recognize that unfair labor conditions, particularly in production for export,

create difficulties in international trade. This effort failed largely because of U.S. Senate resistance.

In its place world leaders established the Generalized Agreement on Tariffs and Trade (GATT),

which, according to economist Robert Gilpin, operates on the assumption that a liberal world of

self-adjusting free trade, freedom of capital movements, and an efficient division of labor provides

the natural and best economic order. This perspective has dominated international trade policy

throughout the past half century. The principles of free trade are codified in successive GATTagreements, most recently the Uruguay Round in 1994, which established the World Trade

Organization (WTO). Since the end of the cold war, extreme ideological support for this free

market approach has resurfaced.

Workers in both wealthy industrial and low-income countries are experiencing an unprecedented

assault against their rights, safety, and livelihood. Increasing international trade, an instrument of

accumulation for some, has for many others resulted in deepening impoverishment and oppression.

Problems with Current U.S. Policy

Key Problems

Weak and inconsistent enforcement deprives most of the U.S. measures to protect workers of any

serious impact.

When U.S. pressure has eased, in virtually every case the affected governments ignored or

reversed their worker-rights laws.

Political considerations unrelated to labor rights resulted in the dismissal or the dropping of GSPcases against such important trading partners as Indonesia and Mexico.

Trade and LaborVolume 2, Number 15January 1997 Written by Pharis Harvey, Director of

International Labor Rights Fund (ILRF).Editors: Tom Barry (IRC) and Martha Honey (IPS)


18/28

18

The Trade-Labor Standards Linkage (U.S. Department of Labor

There are two basic justifications for measures attempting to impose labor standards on

noncomplying nations by linking them to trade. Firstly, there are cases where it can reasonably be

argued that the absence of labor standards is a legitimate trade issue just as is the lack of

enforcement of intellectual property or the existence of foreign government subsidies. For example,

there is very little practical difference between a government providing a direct subsidy for an

industry and the government restricting labor rights in order to lower labor costs in an export

processing zone or in particular industry as Malaysia has done in the electronics industry. This

argument obviously has more strength if the practices that are viewed as objectionable are firm or

sector specific. However, the justification for using sanctions or countervailing duties in this

instance is subject to the same ambiguities as the use of countervailing duties as a remedy for

foreign government subsidies. The ambiguity is simply that there may be no economic costs of

foreign subsidies in many situations. There may be negative welfare consequences when the

subsidies are used in a predatory fashion or when there are industry rents in the form of "excess"

profits or wages. However, these may be atypical, in many cases the justification for countervailing

duties is quite weak from a purely national welfare perspective. Thus when one considers labor

standards and government subsidies, the similarities are there, and there is certainly some logic for

treating them in a similar manner.

The second justification for linkage is that there are valid distributional and human rights

concerns which justify the world community imposing these standards on sovereign nations. If

the global community is to put pressure on the low standard nations, then they need a tool with

some teeth, and trade sanctions have teeth. Thus this justification is similar to that of those who

wish to deny China NTR trade status, or the recent trade sanctions imposed on Haiti.

These two justifications are obviously complimentary and not competing. In fact, it is this

complementariness that has allowed the issue to obtain the status that it has. Clearly from a

human rights perspective, the ability to join a labor union can not be considered one of the most

egregious human rights abuses in the world, thus as a solely human rights issue, failure to

observe the core labor standards would be far down the list of things to be condemned by the

world community. Likewise, as solely a trade issue, and more specifically as a foreign trade

practice which has not generated significant costs for the United States, there would be limited

support for the issue as well.

Of the two justifications, which justification is considered primary may have a significant


19/28

19

influence on how the linkage is designed. If the trade issue justification is primary, the linkage

would probably be structured along the lines of the current anti-dumping and countervailing

duties legislation. If the human rights angle is the primary focus, then the GSP program would appear to be the best

model.

Opponents to linking trade and standards argue that protectionists would use the process to inappropriately restrict

trade. There may be some basis for this view. Most economist would probably agree that the protectionist in the U.S.

have misused the anti-dumping procedure due to its poor institutional design. However, the labor standards

requirement that is part of the U.S.'s GSP program has not been captured by protectionists. Likewise, the intellectual

property agreements could theoretically be hijacked by the protectionists, but that has not happened either. The lesson

is simply that the legal procedure will need to be designed carefully.

Likewise, it must be recognized that trade sanctions may actually harm many of the workers in the developing nations

that they are designed to aid, thus the sanctions would have to be imposed strategically so as to target only the

stragglers. A scenario where sanctions were imposed on a large number of nations would be self-defeating. Thus

inappropriate protectionism and the excessive use of sanctions can be avoided with a careful design of how and when

to use sanctions.

rising labor costs would cause wealthier countries to import from and invest elsewhere. Yet if the world trading system

were designed to facilitate or even reward measures to promote labor standards, poor countries could undertake them

without fear.

Recent Factors Affecting the Prospects for Linkage

empower countries, allowing them greater effective sovereignty and enabling them to improve the circumstances of the

less advantaged International Trade and Labor Standards: A Proposal for Linkage

Christian Barry and Sanjay Reddy

"There is an alternative approach to linkage, which would provide an attractive means of furthering the interests of

poorer countries. This alternative would extend the transparent, rule-based approach of the WTO system to include an

appropriate concern for labour standards (thereby excluding opportunistic actions by wealthy importing countries). It

would require that poorer countries undertake only those efforts to promote labour standards that are reasonable to

expect in light of their circumstances; while also ensuring that these countries gain by providing them with additional

access to northern markets and other forms of reward for their efforts."

Toward a New Foreign Policy

Key Recommendations

What is needed now is to strengthen both unilateral and multilateral measures so that the existing laws form the base

for more substantive reform.

The U.S. should reform the GSP Law to reduce the distorting effects of extraneous political, non-labor-related issues.

The U.S. should introduce the labor-trade linkage in other regional negotiations, such as in Asia Pacific Economic

Cooperation (APEC) and the Free Trade Area of the Americas (FTAA). The failure of any nation to adopthumane


20/28

20

conditions of labor is an obstacle in the way of other nations which desire to improve the conditions in their own

countries.-Versailles Treaty, 1918

The important first steps toward the establishment of a positive policy linking labor to trade have been taken. What is

needed now is to strengthen both unilateral and multilateral measures so that existing laws form the base for more

substantive reform and in that way the legitimate linkage of labor market conditions to trade rules will be more broadly

recognized and accepted within the governments trade-policy apparatus. This can be accomplished through the following

policy changes:

Reform the GSP law to reduce the distorting effects of extraneous political, nonlabor-related issues. This can be done

by giving the interagency GSP committee power to decidenot just to recommendmeasures to the president.

Restructure the North American Agreement on Labor Cooperation (NAFTA Labor Side Agreement) to simplify the

complaint process and broaden the issues that can result in trade remedies or fines. Now, only child labor,

minimum-wage nonenforcement, and health and safety concerns can lead to any punitive action.

Introduce the labor-trade linkage in other regional negotiations, such as the Asia Pacific Economic Cooperation (APEC)

and the Free Trade Area of the Americas (FTAA). The U.S. has limited its consideration of labor-trade linkage to

the WTO, but in Asia, the region of greatest resistance, the U.S. has remained silent. Nor has it insisted on labor

representation in regional trade talks to parallel and balance the representation of business. Labor belongs at

the table, not just serving it.

Strengthen U.S. credibility on trade-labor linkage by ratifying basic ILO human rights conventions on freedom of

association (No. 87), collective bargaining (No. 98), forced labor (No. 29), discrimination (No. 111), and child

labor (No. 138).

Pass a law limiting imports of goods produced by child labor. The Harkin bill, which has been waiting for

administration support since 1989, would do this.

Strengthen enforcement of the 1930 law prohibiting import of forced-labor produced goods and ban the export or

commercial sale of U.S. prison-made products.Instruct U.S. executive directors at the World Bank and other international financial institutions to advocate rigorously

policies that support labor rightsboth by voice and vote.

Establish a WTO working group on trade-labor linkage. If this does not happen at the ministerial meeting in December

1996 in Singapore, the U.S. should take the lead to establish an informal working group of leading countries on

both sides of the issue to reach mutual understanding in preparation for next ministerial meeting in 1998.

Put a labor-rights code in U.S. federal procurements contracts for both domestic and international purchases.

Support development assistance that helps countries draw workers from the informal into the formal sectors of their

economies. At the same time, the U.S. should oppose structural adjustment programs that drive workers into

poverty and joblessness and that place the burden of change on the most vulnerable.

These steps, many of which are available to the administration without congressional action, will signal to our trading

partners that the U.S. intends to keep this issue on the table.

Labor Standards and International Trade: A Proposal

By Sanjay Reddy, Christian Barry

pressure Accordingto this rationale, industries in developed coun-tries with higher wages would attempt to keepcompeting developing countries products out oftheir markets by claiming the latter have failed toprotect core labor standards. This defense, while


21/28

21

widely cited, fails to withstand scrutiny.a party taking any action based on labor standardswithout a prior finding by neutral panelists. Thus,the potential for abuse is constrained in the sameway for labor provisions as for any other tradedisputes. The same rules-based, neutral, suprana-tional dispute settlement approach that the global

June 7, 2006

Sanjay Reddy

Christian Barry

What can poorer countries do to promote the well being

of their people? In particular, what steps can they take

given the constraints presented by the rules of the

international economic system? What role should rich

countries play in supporting the measures taken by

poorer countries?

Poorer countries might consider policies that promote

broadly inclusive growth while ensuring equitable access

to social resources through progressive tax and

expenditure policies. They might also consider policies

that promote improvements in wages and working

conditions.

For example, they could establish minimum wages or

occupational safety and health requirements and define

rights of collective bargaining. Such measures to improve

labor standards were employed in the past by countries

that successfully enhanced the prosperity and well being

of their people.

Poorer countries, integrated into the world economy, fear

that if they take steps to enhance labor standards they

will be effectively punished for doing so, as the effect will

be to raise labor costs and thereby cause a diversion of

trade and investment toward countries with lower

standards. As a result, workers may be harmed rather

than helped by such policies.

Can the world trading system be designed so as to


22/28

22

remove this impediment to promoting labor standards?

Can it be designed so as to enable, and even encourage

the promotion of labor standards rather than to

discourage these actions, as at present?

The rules for international trade can be redesigned to

diminish the costs to poor countries of promoting labor

standards in two ways: Poorer countries that make

efforts to promote labor standards can be offered trading

concessions (additional access to export markets in rich

countries); and rich countries can be required to provide

financial transfers to poorer countries that promote labor

standards.

Redesigning the rules for global trade in this way can

encourage poorer countries simultaneously to promote

labor standards, thereby muting the labor-cost-based

competition between them that currently punishes

improvements in labor standards with diversion of trade

and investment.

New rules for global trade can lessen the collective action

problem among poor countries that makes it difficult to

raise labor standards and thereby foster an increase in

the freedom of countries to improve the lives of people.

The cost advantages of poor countries in the production

of labor-intensive goods and services are likely to

continue, even after significant labor standards

improvements.

The new rules would make substantial allowances for the

real constraints faced by poor countries, recognizing that

the appropriate level of labor standards in each country

depends on its level of development. An improved world

trading system would require each country to promote

labor standards only to the extent that is realistic and

reasonable, given the country's level of development and

social conditions, and would reward efforts rather than

outcomes.

The new rules would involve context-sensitive and

development-oriented linkage between global trade and


23/28

23

labor standards. Linkage has been widely criticized on

the grounds that it is likely to hurt those countries that it

is meant to help and that it will provide a fig leaf for

protectionism by rich countries.

Critics of linkage have asserted that it will reduce poor

countries' gains from trade by diminishing the incentive

to purchase from them the labor-intensive goods and

services in which they enjoy a comparative advantage.

These are legitimate concerns, and we share them. A

progressive world trading system can address these

concerns.

It will be infeasible for rich countries to employ

provisions promoting labor standards for protectionist

ends if these provisions form part of a rule-based and

transparently adjudicated system. Indeed, under the

proposed system, rich countries will be required to

provide additional concessions to poor countries that

demonstrably take efforts to promote labor standards.

The WTO system has been widely praised for creating a

rule-based system for the governance of international

trade. There is no reason that this desirable feature

cannot be extended to incorporate labor standards within

that system.

A new set of rules for global trade will empower rather

than constrain poorer countries. It will permit

governments that wish to promote labor standards to do

so more easily, without fear of diminished opportunities

to trade.

It will also encourage governments that are not inclined

to promote labor standards to do so. In this way, new

rules for global trade can provide powerful assistance to

workers in poor countries whose interests are not being

advanced by their governments, because governments

are either unable or unwilling.

New rules for global trade can enhance the freedom of

poorer countries to promote labor standards while taking


24/28

24

advantage of trade to foster growth. Developing countries

should present these ideas for the renovation of the

world trading system in forthcoming WTO talks.

The commitment of poor countries to promote labor

standards, and that of rich countries to provide additional

trading opportunities and financial resources to poor

countries that promote labor standards should both be

incorporated into the single undertaking of all WTO

members. Under new rules for global trade countries

could have greater real sovereignty and be enabled and

encouraged to implement policies that best serve the

interests of their people.

uted the gains from trade, expanded domestic demand

(including for agricultural products), and gradually in-creased savings and investment by the broad workingmasses. Japan after World War II and South Korea andSingapore more recently followed such strategies. Re-spect for most of the basic labor standards was integralto the development strategy in these countries, althoughtrade unions were repressed for a number of years inSouth Korea and limited in Singapore.In the case of South Korea, efforts by workers them-selves, changing political leadership, and external pres-sure applied as a condition for the countrys member-ship in the Organization for Economic Cooperation andDevelopment (OECD) eventually prevailed and genuinefreedom of association was added to the successful policymix. This recognition of the role of unions was critical to

the countrys management of the effects of the Asian fi-nancial crisis in 19971998. A tripartite commission (gov-More recently, Cambodia has made dramatic progressin creating an export apparel sector under terms of abilateral textile agreement with the United States. Thatagreement provides a basic level of access to the U.S.market for Cambodian apparel, with additional marketaccess awarded on a yearly basis if progress is made inrespecting worker rights. The arrangement has led to thecreation of 200,000 jobsalmost half of total formal sec-tor employment in Cambodia. These jobs are relativelywell paid by local standards, and the agreement has ledto noteworthy improvements in worker rights and work-ing conditions. Freedom of association has been ex-

panded, and unions are beginning to grow in number,competence, and responsibility. Cambodia may be onits way to developing the kind of institutional structuresand peaceful dispute settlement mechanisms that havehelped countries such as Singapore and South Korea togrow rapidly and to withstand and adjust to externalshocks while sustaining broad-based development.

Globalization has caused a virtual race to the bottom. the attention of these groups in a positive way andforce them toexamine the question of market


25/28

25

opening in concrete, specific terms.This has already happened at the bilateral level.Jordan, Singapore, and Chile approached nego-tiations with the United States with a stated will-ingness to include labor terms in bilateral tradeagreements. U.S. trade unions, members of Con-gress, and others who had been skeptical of fur-

ther trade liberalization engaged with the gov-ernments and their counterpart organizations inthose countries. They ended up supporting thetrade agreement with Jordan and have indicatedConversely, resisting a tradelabor linkage hasbeen a loselose strategy for developing coun-tries. When they refuse in trade negotiations toagree to enforce their own labor laws and protectthe most basic worker rights, they reinforce theperception that they do not intend to competeon comparative advantage but rather by allowingabuse of workers at levels of exploitation that areunacceptable to the international community.Such extreme labor exploitation undercuts em-ployment conditions elsewhere, both in industri-alized countries and in other developing coun-tries. This further weakens support for trade andmarket opening, creating a vicious cycle.p. 8

their imports. This has happened despite the factthat the composition of their exports has movedsteadily from raw materials to manufactured goodsover the last two decades. Theoretically this moveup the production ladder should improve devel-oping countries terms of trade and overall in-comes. However, the manufacturing processes havebeen concentrated in low-skilled jobs, where

highly mobile global producers and buyers havebeen able to drive labor costs to extremely lowlevels by playing developing countries against oneanother. Thus the move into manufactured goodshas not produced the increase in incomes that wasseen in earlier industrializing countries.There is no reason to think that trade liberal-ization in itself will alleviate poverty or lead to abroad distribution of the gains from trade. Em-pirical evidence suggests that such results are morethe exception than the rule. However, provisionscan be written into trade agreements that pro-mote more favorable outcomes for income dis-tribution and poverty alleviation. Protections forworkers rights and basic labor standards are just

such provisions. They can improve the rules andinstitutions that determine the balance of rightsand power between employers and workers, lead-ing to better distributive outcomes. But instead,most existing trade and investment pacts have putin place elaborate protections for overseas inves-

LEVERAGE


26/28

26

a new strategic opportunity for developing countries to link trade with domestic policies that promote poverty

alleviation, more equitable income distribution, and better working conditions. This linkage can generate greater market

access for developing countries and at the same time disseminate the benefits of trade liberalization more broadly to their

citizens, creating a true win-win outcome. Polaski, Sandra, trade and Labor Standards: A Strategy for Developing

Countries Jan 2003

Solutions

the struggle to eliminate forced labor in the form of slaverywas won only a century ago. That struggle was waged onmoral, economic, and development grounds, just as the debate over core labor standards is carried on to-day. P 19 Carnegie endowmentpetuates this poverty to subsequent generations. The solution for countries interested indevelop- ment is to find a way to intervene to break this cycle of povertIt is

Human rights groups are pressuring companies to pay their foreign workers a livable wage. Humanrights organizations celebrate the 50th anniversary of the Universal Declaration of Human Rights.This includes the right to a job, food, housing, healthcare and education. .Fair Trade corrects marketimbalances by guaranteeing a minimum price for small farmers' harvest, and encouraging organicand sustainable cultivation practices. Fair Trade farmer cooperatives are assured a minimum of

$1.26 per pound. With a fair and stable income, coffee growers are able to invest in their families'health care and education. The Fair Trade system currently benefits 550,000 farming families in 20countries. Consumers can purchase Fair Trade coffee at approximately 7,000 retail locations in theUS.http://www.globalexchange.org/campaigns/econ101/laborday.html

The "fair trade" stamp on fair trade coffee, tea and chocolate means several things.

First, it means that the farmers who grew the coffee beans, tea leaves or cocoa beans

were paid a fair price for their crops. Some companies pay farmers less than the cost

of production for their coffee beans thereby leaving farmers to live in poverty. To be

fair trade certified, a company must pay farmers at least $1.26 per pound of coffee.

Second, to be called fair trade coffee, the coffee bean farmers must work in

conditions that are "fair". This fairness includes the strict prohibition of child labor.

It also means that working conditions should be safe. Third, there should be direct

trade between the coffee farmers and the coffee companies, eliminating a costly

middle man. Coffee farmers can create production groups that sell to coffee

companies and thereby keep profits for their farms and their families. The profits

from fair trade coffee, tea and chocolate are (and should be) used in a way that

farmers feel best to strengthen communities with better education, better resources

and organic certification. the cocoa farmers are Ghanna are so poor that few of them

have even tasted the final product of their labor

a very dark side to our chocolate consumption. In riveting detail, the series profiled youngboys who were tricked into slavery, or sold as slaves, to Ivory Coast cocoa farmers. Ivory


27/28

27

Coast, located on the southern coast of West Africa, is by far the world's largest supplier ofcocoa beans, providing 43% of the world's supply. There are 600,000 cocoa farms in IvoryCoast which together account for one-third of the nation's entire economy.

A Dark Side to the Chocolate Industry

An investigative report by the British Broadcasting Company (BBC) in 2000 indicated thesize of the problem. According to the BBC, hundreds of thousands of children are beingpurchased from their parents for a pittance, or in some cases outright stolen, and thenshipped to the Ivory Coast, where they are sold as slaves to cocoa farms. These childrentypically come from countries such as Mali, Burkina Faso, and Togo. Destitute parents inthese poverty-stricken lands sell their children to traffickers believing that they will findhonest work once they arrive in Ivory Coast and then send some of their earnings home.But that's not what happens. These children, usually 12-to-14-years-old but sometimesyounger, are forced to do hard manual labor 80 to 100 hours a week. They are paidnothing, are barely fed, are beaten regularly, and are often viciously beaten if they try to

escape. Most will never see their families again.

Is There Slavery In Your Chocolate?

John Robbins

http://www.associatedcontent.com/article/1637122/chocolate_slavery_and_buying_fair_trade.html?cat=22

slaves were considered a capital investment. Now disposable

Knowledge is Power

1) Educate yourself further. Good sources of information include:

y Global Exchange (www.globalexchange.org)y The Child Labor Coalition (www.stopchildlabor.org)y Anti-Slavery (www.antislavery.org)y Unfair Trade (www.unfairtrade.co.uk)y Fair Trade (www.fairtrade.org/html/english.html)y Abolish: The Anti-Slavery Portal (www.iabolish.com)y For information on specific chocolate companies, see www.radicalthought.orgy Kevin Bales' book Disposable People (University of California Press, 2000) is a

thoroughly researched expose of modern day slavery.

3) Buy Fair Trade chocolate and/or coffee for gifts that show you care about fairness foreveryone. Or sell Fair Trade chocolate and/or coffee as a fundraiser for your church, school,or community group.

5) Contact the big chocolate companies, and ask them to buy Fair Trade cocoa. Hershey


28/28

Foods Corp. can be reached at 100 Crystal A Drive, Hershey, PA 17033; (717) 534-6799.Mars, Inc. can be reached at 6885 Elm Street, McLean, VA 22101; (703) 821-4900. Tellthem that you expect something to be done immediately to ensure that cocoa imported intothe U.S. is not harvested by enslaved children.

6) Support the Fair Trade campaign by joining organizations such as Global Exchange. Theycan be reached at 2017 Mission Street, #303, San Francisco, California 94110; (415) 255-7296; [email protected]

7) Support the anti-slavery movement by joining organizations such as Anti-SlaveryInternational. They can be reached in the U.S. at Suite 312-CIP, 1755 MassachusettsAvenue, N.W., Washington, D.C. 20036-2102. The main office is Anti-Slavery International,Thomas Clarkson House, The Stableyard, Broomgrove Road, London SW9 9TL, England

(John Robbins is the author of many best-sellers, including Diet For A New America, andhis recently releasedThe Food

Revolution. He is the founder of EarthSave

By preventing children from attending school not only is their current development affected butalso their future, and their childrens future. This is a perpetual cycle condemning them to lives of

poverty.

By ensuring an education for all we would put an end to the cycle. Perhaps our vices ofchocolate and coffee would cost another dime..if a consumer can identify slave-producedgoods, would avoid them despite their lower price. But consumers do look for bargains,and don't usually stop to ask why a product is so cheap. It is certainly sobering to realizethat by always looking for the best deal, we may be choosing slave-made products withoutknowing what we are buying.

final trade draft (5)

Documents