Vol. VIII, Bulletin No. 7                                                          July 1, 2003 


Worker Rights and International Trade Are
Not Enemies, Says Economic Institute's Book

"From the arguments of the two sides [globalization enthusiasts and worker rights activists], it would appear that labor standards and trade are polar opposites, fire and ice, that cannot be fruitfully combined....We reject this dichotomization of the debate. Rather than being polar opposites, globalization and labor standards are complementary ways to raise living standards in LDCs [less developed countries]. They are intrinsically related not by some artificial grafting but by the way globalization works.

"The appropriate metaphor is that of Siamese twins who share the vital organs and cannot be separated. One may be stronger than the other but neither can advance without the other;  and the effort to separate them endangers both."

That intriguing analysis comes from a new book, "Can Labor Standards Improve Under Globalization?", published in June by a distinguished think tank, the Institute for International Economics.  To the question posed in the title, the authors, Kimberly Ann Elliott of the Institute and Richard B. Freeman of Harvard and the London School of Economics, answer with a Yes, But--.

Concerted Efforts Required To Make Progress

The improvement won't come from the free market alone, they say; it "requires concerted efforts by activists, forward-looking multinational corporations, the International Labor Organization, and the world trading community, including the World Trade Organization."  As part of those efforts, they recommend the WTO alter its rules to allow a very limited use of trade sanctions for serious violations of worker rights.

That is the book's most controversial recommendation, but it is carefully crafted to make sense within the traditional norms of international trade and within a particular sphere where globalization and worker rights intersect most directly -- special industrial areas, usually called export processing zones (EPZs). These are set up by governments in the developing world solely to produce goods for export, mostly to American and European consumers.  A total of about 37 million people, most of them women, work there. And depriving them of the protection of their own country's labor laws is a major incentive that governments grant to foreign corporations that invest in those zones.  

Elliott and Freeman attack that incentive with a cutting economic term: trade distortion. "Violations of core labor standards to attract foreign investment or to promote exports," they write, "are a trade distortion as much as subsidies or other forms of aid to traded sectors."  Moreover, they charge that "allowing violations of labor standards and laws in EPZs...undermines the legitimacy of international trade rules."

Export Zones Should Become 'Globalization at Its Best'

That situation should be turned around completely, they urge, by transforming EPZs into models of "globalization at its best."  Among their suggestions on how to accomplish this:

The co-authors mince no words on the WTO: "That the WTO chooses to ignore [violations of worker rights] fits the worst image of the organization as sensitive to violations of trade rules that harm business but insensitive to distortions that harm workers....There is no reason for the WTO to shy away from trade related violations of core labor standards" (the italics are the authors').

In the final sentence of the book, Elliott and Freeman summarize its central theme:

"Globalization and labor standards are not mortal enemies but complementary ways -- Siamese twins, in our analogy -- to make modern economic growth work better for all."

Hello, Bangladesh: Please Take Note

The government of Bangladesh has never made a secret of the fact that it attracts foreign investment by suppressing worker rights. It made that clear, first, in its 1980 law establishing the Bangladesh Export Processing Zone Authority as the governmental organ to promote investment in the EPZs, and then in its 1985 decree exempting zone employers from requirements to respect labor laws protecting workers. The government circulated a slick brochure assuring potential investors that "law forbids formation of any labor union in the zones, [and] strikes within the zones are prohibited."

Nowadays, that message goes out over the Internet.  Among the many attractions cited on the Zone Authority's Website are wages as low as $22 a month and "production oriented labor laws," including one that "forbids formation of any labor union in EPZs."

Under U.S. law, Bangladesh, like other poor countries, is granted duty-free entry of its exports to the United States if, among other conditions, it is "taking steps to afford internationally recognized worker rights to workers in the country (including any designated zone in that country)."  But Bangladesh has failed to meet that requirement, the AFL-CIO pointed out in a 1990 petition to the U.S. government.  "Because of its serious and widespread labor abuses," the petition said, "Bangladesh obviously fails the worker rights test that developing countries must meet to qualify for GSP [General System of Preferences] privileges under the Trade and Tariff Act of 1984."

A major abuse cited in that petition (I have a copy on my desk) was that, in the EPZs, the government "explicitly denies a large portion of its labor force freedom of association," as well as other rights found in Bangladesh's own labor laws. The government did not dispute that statement. It simply claimed it needed time to adjust the zone's labor policies. So the U.S. Trade Representative (USTR) allowed Bangladesh more time and continued its duty-free privileges.

Now skip 13 years. The 120,000 workers, mostly women, employed in Bangladesh's EPZs are still denied the right to organize and other protections of Bangladesh's labor laws. So the AFL-CIO has once again petitioned the USTR to deny Bangladesh special trade benefits unless it reverses discriminatory labor policies. But the other week a high-level committee of the Bangladesh government announced that it needed more time -- two or three years more. Will USTR agree, or will it start enforcing the law?

'A Sure Formula for Keeping a Poor Country Poor'

"The systematic suppression of the rights of its workers is a sure formula for keeping a poor country poor," the AFL-CIO said in June 1990 in petitioning the U.S. Trade Representative to prod Bangladesh to begin respecting the rights of its working men and women.

In 1990 Bangladesh ranked 136th in the world in the UN's Human Development Index (HDI), which measures a country's achievements in terms of life expectancy, educational attainment, and adjusted real income. Last year it was 145th.

A Tipping Point in Nike's Future?

In a surprise move late in June, the U.S. Supreme Court disappointed Nike, the world's largest shoe manufacturer, by declining to hear Nike's appeal of a California court decision that put it on a hot seat. So now Nike is still on a hot seat. It must finally stand trial on a charge filed five years ago that it violated California's consumer fraud legislation by repeatedly denying that its products are made in sweatshops.

Nike's lawyers may find some wiggle room to avoid a trial, as they have done so far. But if the trial proceeds, says a publication of the Yale Center for the Study of Globalization, it opens up a possibility that Nike might undergo a radical change as a result of sweatshop revelations in court.  It "could become the world's leader in improving labor standards across the world." The ripple effect, according to this speculation, would be to "substantially influence labor standards, corporate transparency, and accountability in the 51 countries in which Nike does business."

Reading a nonfiction best-seller, "The Tipping Point: How Little Things Can Make a Big Difference" by Malcolm Gladwell, caused me to wonder whether real (not just rhetorical) reform might come to the world's sweatshops through some surprising event. Could the California trial be that tipping point? Unlikely. But you never know. After all, you can't predict tipping points. 

In any case, check the electronic publication YaleGlobal for its article "Nike Versus Sweatshop Critic: Back to California" and an accompanying editorial comment. 

Multinationals Fight Human Rights Law

Business organizations are mobilizing to nullify a U.S. law that is being used as a tool to hold multinational corporations accountable for egregious human rights violations. The law they are targeting is the Alien Tort Claims Act (ATCA), which Congress passed in 1789 and updated in 1992 with the Torture Victims Protection Act.

ATCA allows foreign victims to sue in U.S. federal courts for violations of the "law of nations," which federal judges have interpreted to cover genocide, war crimes, extrajudicial killing, slavery torture, unlawful detention, and crimes against humanity.  It was a class-action lawsuit filed under ATCA in 1996 that two years later persuaded Swiss banks to settle the long-standing claims brought by survivors of Holocaust victims.  More recently, ATCA cases have been filed against leading multinationals for alleged complicity in gross human right violations in Burma, Colombia, Ecuador, Nigeria, Indonesia, Sudan, and a few other countries.

These cases have thus far produced no significant victories for plaintiffs. Yet some multinational executives are having nightmares because some courts, instead of dismissing the complaints, are letting them go to trial, as did a district court in Miami in February (see "Honing Tools for Progress").  So organized business, both in the U.S. and abroad, is intensifying pressure on Congress and the White House to intervene. The U.S. Department of Justice did so in May by filing a 30-page brief asking the U.S. court of appeals in San Francisco to dismiss Doe et al v. Unocal Corporation, an ATCA case now being heard by the court.

Business and Human Rights Groups Press Opposite Arguments

In Paris the International Chamber of Commerce, with member companies in more than 130 countries, has issued a statement declaring: "The practice of suing companies in the U.S., whether domestic or foreign, for alleged events occurring in third countries is an unacceptable extraterritorial extension of U.S. jurisdiction."  Among the other objections raised by the International Chamber, as well as by a wide range of U.S. business groups, is that the statute is out of date and impedes the ability to do business in the global economy.

On their part, human rights, environmental, and labor organizations have mounted a campaign to explain why the law is especially needed today. The American Anti-Slavery Group, for instance, supports a class action law suit filed under ATCA by Sudanese victims against the multinational Talisman Corporation for allowing the government of Sudan to use Talisman's airfields, roads, and vehicles to conduct "ethnic cleansing" of non-Muslim Sudanese in southern Sudan.

An environmental NGO, Earthrights International, calls the Justice Department anti-ATCA position "outrageous." Earthrights' statement has links to the Justice brief and to a rebuttal.

The International Labor Rights Fund, which serves as lead counsel for several ATCA cases charging Unocal, Coca-Cola, and other corporations with violating fundamental human rights, has prepared a comprehensive report titled "The Alien Tort Claims Act -- a Vital Tool for Preventing Corporations from Violating Fundamental Human Rights." Among other things, the report responds to four "fictions" being used against ATCA. 

'Modernizing' Overtime Pay by Cutting It

"U.S. Department of Labor Proposal Will Secure Overtime for l.3 Million More Low-Wage Workers."  That's what the headline of an April 3 U.S. Department of Labor press release said. What it didn't say -- and the accompanying press release didn't either -- was that under that proposal millions of white-collar workers would lose their legal right to overtime pay:  in other words, after working 40 hours in a week, they could be required to work for nothing.

In fact, more than eight million employees could lose that legal protection. That is the conclusion reached in "Eliminating the Right to Overtime Pay," a briefing paper released on June 26 by the Economic Policy Institute after a careful study of the Labor Department's plans to revise federal wage-and-hour regulations.  

The greatest impact, according to the study, would come from dramatically increasing the number of jobs classified as professional, administrative, or executive, and thus ineligible for the overtime pay requirement. Among the specific occupations likely to be affected if the Labor Department adopts the rule changes are: reporters, technical writers, surveyors, draftsmen, bookkeepers, dental hygienists, lab technicians, licensed practical nurses, paralegals, cooks.

These and other changes, says the Labor Department, are needed to modernize outmoded regulations. Ross Eisenbrey, EPI's policy director and co-author of the report, says that the changes "would create, in effect, a massive subsidy to employers paid for by their employees."

Union Isn't Foreign to the Foreign Service

I've almost given up writing letters to the editor. Seldom do I get a response. Even more rarely do I see my letter in print. But the other day I emailed a letter to the Foreign Service Journal, the monthly magazine of the American Foreign Service Association (AFSA). A reply from Steve Honley, the editor, alerted me to his plans to run my letter in a future issue.  

My letter glowed with praise for the magazine's June issue, dedicated to how and why AFSA, 30 years ago, transformed itself into a union after 45 years as a professional and fraternal organization. Articles by five leaders of that transformation give inside accounts of those exciting years in which AFSA made history and thereby improved the Foreign Service.

Many in top management at the time -- and many rank-and-file diplomats -- thought that a union, as an "adverserial" organization, had absolutely no place in the State Department and its Foreign Service. They fought hard against change, but they lost. Fortunately, enough leaders on both sides -- employees and senior managers -- realized that the change made sense, and they've been proven right. The record of the past three decades at State, as I say in my letter, discredits "the notion that a union must be an enemy of management, and management an enemy of a union."

The Journal article that I find particularly instructive is one by Herman J. Cohen, a labor attaché who rose to senior ranks, including assistant secretary of state for African affairs.  Under the title "AFSA Becomes a Union: Bread-and-Butter Issues," Cohen explains the practical difference a union can make even in the Foreign Service.  

One difference that he illustrates from his own experience is the right to challenge outmoded or unfair rules and regulations. In the 1970s State, by regulation, did not pay kindergarten allowances to personnel abroad, on the basis of a U.S. government survey showing that only a minority of the 50 states provided free public school kindergarten. Cohen asked to see the survey, and found that it was dated 1955. Pursuing the issue, he checked the source, the Department of Health, Education, and Welfare, and learned that its much more recent survey, in 1968, showed most states providing free public school kindergarten.  

"When I presented this to the allowance people," Cohen writes, "they acknowledged that a revision of the regulations would be appropriate. The bureaucracy had never bothered to [update its information] because nobody had complained. At some point after that, kindergarten started to be covered. This experience further convinced me that a union was needed to prod the bureaucracy to do its job."

AFSA's Website has the full text of Cohen's article and the others that "Focus on AFSA's 30 Years As a Union."  The story about a union in the State Department may well be instructive even to people already familiar with the benefits of unionization.  But maybe I'm prejudiced. I became a member even before AFSA officially became a union, and remain a member even after retiring from the Foreign Service 20 years ago. 


Human Rights for Workers: Bulletin No. VIII-7          July 1, 2003
Robert A. Senser, editor
Copyright 2003
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