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The Shoe is now on the Other Foot

Arvind Panagariya

In a recent report entitled Unfair Advantage: Workers' Freedom of Association in the United States under International Human Rights Standards (August 31, 2000), Human Rights Watch offers a stunning indictment of the laws governing worker rights and their enforcement in the United States.  Based on systematic field research in California, Florida, Michigan, New York and numerous other states, the report offers an unusual window to the violations of worker rights that happen routinely in the country.

The report also reveals a danger underlying the proposed link between trade and labor rights that has not been recognized to-date: the link may lead to trade wars between developing and developed countries in which each accuses the other of violations of labor rights.

But consider first the assessment of the laws themselves as presented in the report.  Addressing the U.S. laws on the rights of workers, the report states, “Millions of workers are expressly barred from the law's protection of the right to organize.  The U.S. legal doctrine allowing employers to permanently replace workers who exercise the right to strike effectively nullifies the right. Mutual support among workers and unions recognized in most of the world as legitimate expressions of solidarity is harshly proscribed under the U.S. law as illegal secondary boycotts.”

The report is even harsher when it comes to the protection of worker rights actually conferred by the existing laws.  Based on the first-hand evidence gathered from field studies in a large number of states, it concludes, “Many workers who try to form and join trade unions to bargain with their employers are spied on, harassed, pressured, threatened, suspended, fired, deported or otherwise victimized in reprisal for their exercise of the right to freedom of association.”  The report goes on, “The cases studied in this report are not isolated exceptions in an otherwise benign environment for workers' freedom of association.”

Led by Jagdish Bhagwati, many of us have argued for the past several years that the U.S. agenda on the proposed social clause in the WTO charter is one sided.  Issues such as child labor, minimum wage, freedom of association and rights to bargain collectively figure prominently on its list.  But because of the deficiency of its own laws, rights of workers to strike without the fear of retrenchment and to organize secondary boycotts are conspicuously missing from it.  The Human Right Watch report echoes and effectively validates this argument.

But more importantly, the report brings to light an aspect of the proposed trade-labor link that has not been recognized to-date.  The inability to enforce labor laws satisfactorily even by the greatest power on earth suggests that delegating the WTO the power to enforce higher labor standards runs the risk of wracking the trading system.

Thus, suppose that a consensus can be forged among nations on the desirable minimum labor standards.  As a concrete example, take the recent ILO Convention on the Worst Forms of Child Labor, 1999 (C182).  This convention has been signed by all 175 members of the ILO with a promise to rapidly ratify it.  What will happen if this set of standards is enforced through the WTO instrumentality?  We can be sure that either we will achieve no progress in the standards or end up in a trade war.

To invoke trade sanctions against a country, we must first determine whether it is effectively enforcing the standards.  But how is this determination to be made?  Should we simply accept the government’s word for it or ask an independent agency such as the Human Rights Watch?  If the former, no country is likely to be found in violation and little progress on the standard will be made.  And if the latter, every country is likely to be found in violation and trade war can scarcely be avoided.

To-date, while assessing the role of trade sanctions in enforcing labor standards, proponents of these sanctions have focused exclusively on the possibility of their use by developed against developing countries.  But in view of the lax enforcement of labor laws in developed countries themselves, we must worry equally about sanctions by developing on developed countries.  And, indeed, there is much danger of developing countries imposing sanctions on one another.   Thus, a disaster is likely to visit the trading system if labor standards are enforced through trade sanctions.

Some may argue that since trade sanctions by developing countries on developed will hurt their own national interests, they are unlikely to target the latter.  This is a naïve argument.  Trade policy in developing countries is driven as much by producer interests as in developed countries.  Anyone who doubts this fact need look only at the large number of anti-dumping actions India has taken recently against both developed and developing countries.

A sad dimension of the debate on trade-labor link has been the failure of our leaders to inform the American public why India opposes such a link.  Last year, just prior to the Seattle conference, the London Financial Times noted in an editorial (November 3, 1999) that most western governments “admit privately that they lack a persuasive intellectual case” for linking trade and labor.  It is a pity that despite this, our leaders have not made enough of an effort to counter the public opinion in the United States.

With the election of George Bush as the President, we may think that the pressure for trade-labor link will now disappear.  But there is no room for such complacency.  The House and Senate are evenly divided between Democrats and Republicans.  But more importantly, in four years time, a Democrat is likely to be back in the White House.  None of the past three presidents who failed to win the popular vote, as Bush has, got a second term.  Our best bet remains convincing the American public of the futility of the link sought by their government. 

 Economic Times, December 20 2000