6:39 AM Mar 31, 1995

LABOUR: ILO OFFICE OUTLINES TRADE LINK STUDY PLANS

Geneva 30 Mar (Chakravarti Raghavan) -- The Governing Body of the International Labour Organization resumed Friday the debate on social dimensions of trade liberalization

The inconclusive debate on it in the working party of the Governing Body, in November last, showed a good deal of polarization within the tripartite body -- among governments of the North, between governments of the North and South, between employers as a group and the international workers group, workers organizations from the North, and some of the Southern workers groups.

There is some division within the South too in that some of the governments of the Latin American region seem willing to support some ILO discussions on the social dimensions, but not any links with trade. But some others are opposed, viewing the moves in the ILO as a first step towards protectionist trade sanctions in the World Trade Organization (WTO).

The recent meeting of Labour Ministers of the Non-Aligned and other developing countries in New Delhi opposed the trade-social dimensions linkages.

While the US administration has been leading this debate in the ILO (and trying to bring up the issue in the WTO) -- with US organized labour unions (which however accounts only for about 10-15 percent of US labour) using its links with the administration and the Democrats (now a minority in the Congress) to push this -- the European Union has adopted a general posture of support for labour standards, but with its own member-States divided on it. France and a few others are pushing for this, while the UK is opposed.

The Copenhagen Social Summit and the debate in other UN bodies and specialized agencies have not so far shown any movement towards convergence of views, leave aside a consensus.

The ILO discussions, in four sessions of the working party on Friday and Monday, are due to be resumed against this background.

The ILO Director-General, Michael Hansenne, has been pushing this issue and suggested some kind of agreement to enable ILO to judge observance of "core" (undefined) "standards" and for the WTO to impose trade sanctions. But he faced a great deal of resistance from the South countries, both at the last ILO Conference and the November working party discussions.

He now appears to be attempting to bring the issue in by the backdoor. He is suggesting a mandate for the ILO office to undertake an objective analysis of how far the newly industrializing competitors to the developed countries pass on to workers some of the benefits of growth from trade liberalization, arguing that such an analysis would be effective in forestalling protectionist tendencies in the industrialized countries.

The ILO secretariat could interpret a mandate from the working party and the governing body -- probably the best that could be hoped for in the current state of polarization and divisions on the issue -- to continue the discussions to direct ILO activities of research and analytical work in this direction, as it has done so far.

In November last, the ILO office was asked to produce a preliminary outline. The suggestion of the Philippine Chair, Mrs Maria Nieves Roldan-Confessor, that a document with a "broader analysis of the wider issues of social implications of trade liberalization" was modified by Brazil that such a body should not only look at trade liberalization but economic development as a whole.

In presenting an outline now, the ILO office has taken as its point of departure an empirical analysis and comparison of concrete repercussions of trade liberalization at the social level.

It has done so by interpreting the references of Roldan-Confessor, in presenting the working party report to the Governing Body, to the Canadian government delegate's remark of its "interest" in a comparative analysis of how and to what extent member-countries were able to translate the benefits of economic liberalization into parallel progress in social development and difficulties encountered.

Since governments have chosen to be ILO members, it says, even those "resolutely hostile to any social dimension being imposed from outside" did not contest the need to pursue social progress in conjunction with trade liberalization.

This is an area where a great deal remained to be learnt, and the ILO could take some heat out of the debate by trying to fill gaps in knowledge and promote a better understanding of the interplay between trade liberalization and social dimensions.

By an "empirical approach", the overlap with activities of other organizations could be avoided. In what it calls a "conceptual framework", the ILO secretariat stresses the governments becoming ILO members are committed to "promote social progress in good faith and as far as each country's level of development allows".

This possibility should normally increase with trade liberalization, it says, but the difficulty lay in the very complexity of the trade liberalization phenomenon that made it not easy to analyse effects of reduction of tariffs and other barriers to flow of goods and services, in isolation from the simultaneous process of removing barriers to international flow of capital which often enhanced or compounded some of these effects. Effects of trade liberalization would also be difficult to isolate from those of economic growth in general.

In this situation, the ILO secretariat suggests, it would be unrealistic to base the analysis too exclusively on trade liberalization. also rather than reasoning in statistical terms, it should be seen in terms of dynamics and differentials (higher than average rate of trade growth).

Referring to what it terms "ambivalence of trade liberalization at the social level," the paper notes that multilateral trade liberalization programmes could be expected to yield significant benefits to participating countries in the form of reciprocal opening of national markets, leading to an increase in overall demand for goods and services and greater efficiency arising from specialization in production.

While the normal consequences of the gains from expansion of trade would be an increase in rate of output growth, benefits of trade liberalization could not be disassociated from cost of adjusting to new patterns of production -- shifting from less competitive activities to more competitive ones. The shift of capital and labour to such activities often involved loss of jobs in less competitive activities and the process had to be facilitated by adjustment measures.

Trade liberalization would thus result in gains and losses: net gains in the economy as a whole and the population at large, but losses to particular groups of workers -- losses which tend to be localized or concentrated while the gains are more diffused.

Hence for trade liberalization to command wide political and social support, it must be accompanied by appropriate adjustment measures.

The ILO secretariat goes to argue that public opinion in the socially most advanced countries would more readily accept adjustments and difficulties involved in liberalization "if it can see similar efforts being made by its newly industrializing competitors to pass on to their workers some of the benefits of the growth that goes with trade liberalization".

"An objective analysis of these parallel efforts, carried out with the tripartite backing of the ILO, could thus prove effective in forestalling latent protectionist tendencies in the longer established industrialized countries".

In terms of indicators of social progress due to impact of trade liberalization (to be agreed upon for further work), the ILO secretariat notes the need to distinguish between those that directly concerns and those for the population as a whole. For the last, the benefits would show up in indicators like increase in per capita incomes and purchasing power. For the working population, it would have to be evaluated in terms of employment and real wage trends -- with separate examination of export and import sectors -- working hours, industrial accidents, incidence of child labour, as well as progress in labour legislation and social security, especially those reflected in the rate of ratification of international labour conventions.

But many of these "indicators", suggested by the secretariat, would appear to go beyond the so called "core" labour standards -- the parameters sought to be used to suggest linking trade with minimum labour standards, and not wages and the like.

Also, as trade policy economist, Jagdish Bhagwati, has recently pointed out, if compliance with "core" standards is to be judged in terms of "results", as the US is insisting in respect of Japan on market access, with only 15% of its labour force in private sector unionized, the US would be in violation of the "core" labour standards, raising the question of who is to impose trade sanctions against the US.

Trade liberalization, the ILO papers says, could only create conditions for social progress through economic growth. The translation of potential benefits into actual ones would depend on market forces and government policies.

Hence the objectives of liberalization and social progress should focus on roles voluntary actions and institutions have played in distributing benefits of trade liberalization and gradual reduction of adjustment problems -- to enable international community to draw appropriate lessons for use.

The ILO office suggests its analysis should focus on:

* efforts at defining a coherent policy and the extent to which social partners are involved,

* extent to which guarantee of basic freedoms on labour market go hand in hand with trade liberalization,

* efforts to provide support for industrialization and redeployment of industries - in terms of labour legislation and better administration to enforce them,

* policies and measures to facilitate adaptation of workers to structural changes of trade liberalization and reintegration into the employment market,

* efforts to extend or adapt social protection schemes, and

* role of labour relations systems, freedom of association and collective bargaining in the equitable distribution of benefits of liberalization and adapting to changes brought about by it.