Are International Labor Standards Needed to Prevent Social Dumping? - Finance & Development - December 1997 - Stephen S. Golub

US PRESIDENTIAL task force composed of apparel industry representatives, unions, and human rights activists recently agreed to codes of conduct for labor practices by multinational corporations; in response to negative publicity, Nike, the athletic shoe and apparel company, hired former US ambassador to the United Nations Andrew Young to conduct an independent investigation of its labor practices; and the Federation of International Football Associations announced it would not buy soccer balls made with child labor. These events point to a growing concern in industrial countries about labor standards in the developing world. But developing countries have also expressed concern that the industrial countries’ new emphasis on labor standards is just protectionism in disguise. In the first decades after World War II, the developed countries (the North) took dramatic steps toward trade liberalization in the context of negotiations surrounding the General Agreement on Tariffs and Trade (GATT). At that time, most developing countries (the South) were pursuing protectionist import-substitution policies and calling for a new international economic order to redress the alleged unfairness of the international economic system, while remaining, for the most part, on the sidelines of GATT negotiations. More recently, high unemployment rates in Western Europe and stagnant wages of unskilled workers in the United States have contributed to a new ambivalence in the developed countries about the benefits of trade with developing countries. Many fear that Northern wages and benefits are being forced down by unfair competition from countries with much lower labor costs—so-called social dumping. Meanwhile, the experiences of the East Asian miracle countries, along with the collapse of communism, have persuaded much of the developing world and the economies in transition to liberalize trade and participate actively in the new World Trade Organization (WTO), the GATT’s successor. One manifestation of this ironic reversal of positions is the emergence of international labor and environmental standards as a major issue on the post-Uruguay Round trade agenda. Labor unions and human rights activists in developed countries argue that market access in the North should be conditioned on raising labor standards in the South, to prevent social dumping and a “race to the bottom” in wages and benefits. Trade sanctions imposed in response to violations of labor standards are sometimes referred to as a “social clause.” Developing countries tend to view such social clauses as disguised protectionism and have fought vigorously against initiatives by the United States and other developed countries to give the WTO a role in the area of labor standards.