reforming world trade: the social and environmental priorities

8/7/2019 Reforming World Trade: The social and environmental priorities

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G L I The Socialand Environmental

Priorities

Caroline LeQuesne

Oxfam Publications


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Oxfam UK and Ireland 1996A catalo gue rec ord for this book is available from the British Libra ryISBN 085 598 346 9

Publishe d by Oxfam (UK and Ireland) 274 Banbury R oad, O xfordOX2 7DZUKAvailable in Ireland from Oxfam in Ireland, 19 Clanw illiam Terrace,Du blin 2.Available in N ort h A merica from H um anities P ress, 165 FirstA ven ue , Atlantic H igh lan ds, NJ 07715-1289, USA

This book is co-published b y me m bers of the international Oxfamgro up in Au stralia, Ca nad a, New Zealan d, the USA, and the UnitedKing dom a nd Ireland. Contact address es are prin ted on the backpag e. It is pub lished as a contribution to public debate, and read ersare invited to con sider its conc lusions.

Oxfam (UK and Ireland ) is a member of Oxfam Internaional an d isregistered as a charity no. 202918Designed and typeset by Oxfam Design Department 701/M CA /96Set in 10/12.5 point Palatino w ith Franklin Gothic Book and DemiPrinted by Oxfam Print Unit on environment-friendly pape r

This book converted to digital file in 2010


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ContentsAcknowledgements ivIntroduction 1Chapter one: The Uruguay Round 8

FromGATTtoWTO 8W inners and losers 10Unresolved issues 21

Chapter two: International trade and labour standards 28The garments industry in Bangladesh 28Codes of Co nduc t 40The role of the ILO 43The case for a social clause 47Lessons from o ther trad e agreem ents 59The way forward 65

Chapter three: R econciling trade and sustainabledevelopment 67Profits and pollution have ns 67International trade, economic growth, and theenvironment 71The WTO: an inadequate framework for sustainabledevelopment 75Sustainable natural resource manage ment 85Case study: promotion of a sustainable banana trade 88Institutional reform 91

Chapter four: An agenda for reform 94The case for reform 94

Notes 103


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AcknowledgementsMany people, both Oxfam staff and others, have contributed tothe development of this book, by sharing their experience andoffering helpful criticism and advice.I am especially grateful to Ruth M ayne for her substantial inputto the analysis, particularly in chapter two. I have draw n heavilyon her work on the ILO, its Conven tions, and social clauses, andon her research on flexible labour markets in Chile andhom ewo rking in the UK.

Thanks are also due to Belinda Coote and Tasneem Nahar, forinformation about the garm ents indus try in Bangladesh; to staffand counterparts in the Dominican Republic; to Kevin Watkinsfor his ideas and valuable observations throughout the writingprocess; and to Charles Arden-Clarke, Senior Policy Advisor,WWF International, for particularly constructive comments andcritique.Caroline LeQuesneOxford, March 1996


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IntroductionInternational trade not only gives rise to impenetrable andseemingly endless rounds of GATT negotiations and freneticactivity on the floors of commodity m arkets: it also has profoundeffects on people's livelihoods and their most basic social andeconomic rights. For millions of the w orld's poorest people, trad eis involved in every aspect of their day-to-day struggle to survive.Trade can support livelihoods: production for export cangenerate income, em ployment, and foreign exchange which p oorcountries need for their development. But without adequatesafeguards, trade can also destroy livelihoods, cause environ-mental destruction , or lead to unaccep table levels of exploitation.International trade is currently integrating national economiesand labour markets more tightly together as the flow of goodsand services across borders ex pands . At the same time, the rapidexpansion of foreign investment into many countries is erodingbou nda ries betw een labour m arkets. The overall effect is to lockproducers, both North and South, into an increasinglycompetitive system, bringing the threat that lower social andenvironmental standards will increasingly be used to facilitatetrade expansion.Formidably powerful and publicly unaccountable transnationalcompanies (TNCs) present particular problems. Their growingstrength and mobility have been facilitated both by technologicaladvances, and by the progressive withdrawal of investmentcontrols by governments and by the GATT/World TradeOrganisation (WTO). They are now increasingly able to exploitdifferences in social and environmental standards betweencountries, with a view to maximising profits, creating globalprodu ction systems over which governm ents hav e little control.This carries with it the threat of a constant do w nw ard pressure onthese standards as countries compete with each other to offerforeign investors the most 'favourable' conditions. Under these


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circumstances it is not surpr ising tha t rapid trade liberalisation is,in m any areas, und erm ining livelihoods.This report will make the case that world trade rules shouldtherefore be reformed to protect people's basic rights, and topromote sustainable development.The social and environmental costs of exportexpansion in Ch ile...Oxfam's experience of working with poor com munities in Chileoffers a case in point.1 Chile is often hailed as a shining exam ple ofthe success to be won through economic liberalisation, marketderegulation, and integration into global markets. The economygrew at a rate of 8 per cent in 1995, the agricultura l export sector isboom ing, official u nem ploym ent rates are low, and w ages hav erisen in real terms in recent yea rs. Behind such positive statistics,however, lie serious social and environmental problems whichrarely app ear in official figures.Where production of commercial export crops is dominated bylarge-scale producers and foreign companies, it is they, ratherthan the rural poor, who will receive the major benefits from tradeexpansion. In Chile, specialised production of fruit for exportmarkets has emerged as an importa nt source of foreign exchange,accounting for 13 per cent of total earnings in 1993. From 1974-1990, expo rts of fresh fruit grew at 25 per cent each year. Over halfof fruit exports, how ever, are controlled by just five TNCs.Chile's export expansion and competitive success have to a largeextent been built on the basis of a cheap and flexible labourmarket. Research commissioned by Oxfam shows that employ-ment growth has taken place largely in low-paid, low-qualityjobs, with an increase in temporary work, sub-contracting andhomework, and in the use of cheap female labour. Oxfamsup po rts projects in the fruit export sector, where 83 per cent ofthe labour force is em ployed on a tempora ry basis, between 40-50per cent of work ers have no contract, and pa y an d conditions areamong the worst in the country. Temporary workers are


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generally paid piece rates, are not entitled to social securitybenefits such as sickness and maternity payments, and have noemp loyment protection or basic trade u nion rights.Carmita is one of almost a million seasonal fruit w orkers in Chile.During the four-month season, she often w orks 16 hou rs a d ay,seven d ays a week. Most of the day is spent standing, w ith just aten-minute break in the evening.Despite Chile's economic success, 43 per cent of workers stillearned less than the am ount necessary to cover their basic nee ds,in 1992. As a result, although open unemployment has fallensignificantly in recent years, one in three of the pop ulatio n werestill living in poverty in 1994. Rural Chile experienced one of themost dramatic increases in inequality on record betw een 1987 and1990 and overall income inequality increased further between1992 and 1994 as wages failed to keep pace with rises inproductivity. A report by the UN Research Institute for SocialDevelopment has concluded that precarious low-wage employ-ment is now the major cause of pov erty in Chile today.2Chile's export success has also been based on the rap id extractionand export of natural resources und er lax environm ental regula-tions. This has brought with it correspondingly high environ-mental costs. One of the major problems is the intensive use offertilisers and pesticides needed to meet the requirements ofexport markets. According to a former Oxfam partner organisa-tion, AGRA, around 4 million kilos of pesticides are routinelyused every year on the 220,000 hectares of land devoted to fruitprod uction for the export market.Between 1985 and 1992 importsof pesticides grew at an annual average rate of 12.3 per cent, andby 1992 imports of agro-chemicals represen ted 28 per cent of totalagricultural im ports. Some of them, such as Paraqu at, Parathionand L indano, are amon g the 'dirty do ze n '- some of the mo st toxicpesticides in the world.3According to Carlos Vidal, a union leader representing fruitworkers in the Aconcagua valley, the centre of the fruit exportboom in Chile:

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The water's full of pesticides from the fruit production. This area used tobe famous for water melons and now they don't grow properly any more.They chuck fertilisers and pesticides everywhere - it doesn't matter thatthe earth is dead because the fruit trees thrive artificially.W orkers often hav e to work in the fields immediately after c ropshave been sprayed, or sometimes even during spraying , withou tadequate protective clothing; while women working in theconfined spaces of packing plants and greenhouses are partic-ularly exposed to the damaging effects of pesticides. Theseinclude skin complaints, nervous disorders, muscular wasting,sterility, nausea, a higher incidence of miscarriages, and anincreased rate of malformed babies. In the regional hospital atRancagua, in one of the main fruit producing areas, investigationshave sho wn that of the 90 babies born w ith a range of neural tubedefects in the first 9 m onths of 1993, every one was the child of anagricultural w orker from the fruit farms. The Rancagua figure forthese defects is three times the national average .Carmita is in poor hea lth and ha s been told tha t she will soon beunable to work. She suffers from persistent skin complaints andkidney infections, illnesses common among seasonal workers inthe fruit sector, which are believed to be linked to constant expos-ure to pesticides. The chemicals also have irreversible effects onwidlife, and contaminate rivers, un derg rou nd springs, and soils.

...and the costs of increased com petition in the UKBy driving down labour costs, and keeping environmentalstandards low, Chile has been able to remain competitive ininternational markets. Some 8,000 miles away, in the north ofEngland, comparable economic forces are at work. The UKclothing and textile industry h as been facing increasing com peti-tion, both from Europe and from countries in the South. In alabour-intensive industry like this, one of the easiest ways ofstaying com petitive is to cut labour costs. Com panies have takenadvantage of the government's weak employment legislation tosub-contract certain stages of the production process to sweat-shops and homeworkers at very low wages. As most small


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businesses and homeworkers are classified as self-employed, ornot registered at all, they a re rarely covered by collective ba rgain-ing agreements or government legislation. This legal loopholemeans that large num bers of people, often w om en or im migrants,are working for dismal pay, with no job security and negligibleemploym ent rights, and in poor co nditions.Although 'homeworking' can be lucrative for highly skilledconsultants in service industries, many traditional hom ew orkersare unskilled, and therefore vulnerable to exploitation. Themajority of them are women, and many of them are caughtbetween the need to earn an d the need to be at hom e to look afterchildren. Homeworking is often portrayed as the ideal solutionfor wom en to achieve both goals bu t in reality the piece-work rateis usually minimal, and women have to work so hard that theyhav e little time or energ y for child care. Homeworkers frequentlysuffer poor health and safety conditions. The ho urs are long an dirregular, the work m onoton ous an d isolating.As one hom eworker in the garm ents industry recently reported:I have no advantages by working from home except that I can look aftermy children. I am being paid a very low piece-work rate, and have neverreceived work on a regular basis. My two children are suffering fromasthma and I think it is because of my work. Our heating and lightingcosts have more than doubled...Once or twice I have asked my employerregarding regular work and a pay increase, but he said, 'I am only goingto give this, take it or leave it.' With no choice I have to carry on becauseI know that all employers are the same. The thing that really hurts me isthat the employers treat us like slaves, not w orkers.4A survey by the West Yorkshire Homeworking Unit in 1992found that the average estimated hourly rate of pay forhom eworkers w as 1.16. The highest rate w as 3.00 per ho ur forclothing work , with som e workers receiving 50 pence or less perhou r. This compares with average earning s in the West Yorkshireregion of 6.23 per hour.5In a world w here labour markets are becoming increasingly integ-rated through the mechanism of international trade and


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investment, the challenge is to prevent such experiences frombecoming the norm as international competition threatens todrive stand ards dow n both in the industrialised co untries, and inthe South.This task is m ad e even more urg ent by the proliferation of region-al free-trade agreements, several of which involve huge swathesof the world . There are plans for a free-trade area covering all ofNorth and South America. The USA and EU are discussing atransatlantic free-trade area, the EUhas recently concluded a free-trade agreement with MERCOSUR (the customs union linkingBrazil, Argentina, Urug uay , and P aragu ay), and the Asia-PacificEconomic Co-operation (APEC) forum envisages free trade by2020 amo ng its 18 mem bers, which include the USA, Japan, an dChina. M any regional agreem ents env isage a rate of liberalisationboth faster and broa der than the WTO.6

This report focuses o n the WTO, and makes the case that it has sofar failed to create a viable framework for the social andenvironmental regulation of international trade. Although theAgreement signed at the end of the Uruguay Round includes acommitment to promo ting sustainable development, its rules arefocused almost entirely on the na rrow er objective of trade expan-sion. Developing country governments have reacted stronglyagainst the suggestion that minimum social and environmentalstand ards sho uld be established within the WTO, fearing that thiscould encourage protectionist action. They point out, with con-siderable justification, that poverty is the real cause of lowstand ard s, in that poore r countries lack the financial an d ad minis-trative capacity to implement, monitor, and enforce legislation;and they claim th at access to No rthern m arkets is vital to raisingstand ards. At the same time, how ever, the world cannot afford aglobal trading system which subordinates all other considera-tions to trade expansion .Oxfam believes that the WTO should therefore be reformed tocreate an international regulatory system which protects theenvironm ent and safeguards peop le's basic rights, w ithout jeop-ardising legitimate trade interests. The WTO's first Ministerial


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Meeting in Singapore in December 1996 offers a significantopp ortunity to review the links betwee n trade and environm ent,and trade and labour, and therefore to prom ote sustainable devel-opment.The report is in four chapters: the first pro vide s an overview of therecently completed Uruguay Round, and demonstrates how thegreatest economic benefits resu lting from the Agreement will goto the industrialised nations. At the same time, the social andenvironmental costs of trade liberalisation mean that a growingnumber of people in both North and South face the risk ofincreased marginalisation. The chapter also examines thoseissues wh ich were left out, or only partially addressed , durin g theUruguay Round negotiations, and focuses in particular on twoareas: trade and labour standards, and trade and environment.The second and third ch apters use case studies from O xfam's ow nprogram me experience to make the case for minim um social andenvironmental standards in international trade agreements, andthe final chapter offers an agenda for reform, with recommend-ations both for the Singapore Ministerial Meeting, and for thelonger term.


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CHAPTER ONE: THE URUGUAY ROUND

From GATT to WTO

On 15 April 1994, trade m inisters from 117 governm ents met inM arrakesh , Morocco, to s ign the Final Act Embodying the Results ofthe Uruguay Round of Multilateral Trade Negotiations. TheM arrakesh meeting was the culmination of more than seven yearsof negotiations under the General Agreement on Tariffs andTrade (GATT). The 'Final Act', which entered into force on 1January 1995, comprises over 400 pages of principal text, withanother 18,000 pages of market access details, and it extendsmultilateral trade rules to almost every area of internationalcommerce. Two sectors which had previously been outside GATTrules, agriculture and textiles, were brought within the rules-based system, while comprehensive agreements were alsoreached on investment, trade in services, and trade-relatedaspects of intellectual property.The Uruguay Round broke new g round in bringing internationaltrade rules to bear on areas that had previously been consideredthe sovereign domain of national governments. Previous inter-national trade negotiations had focused primarily on tariff-cutting, but with customs duties at generally low levels forindustrial goods in developed countries, the focus of the U ruguayRound was broadened to include the wide range of non-tariffbarriers which are used to protect domestic producers.In addition, the Urug uay Round resolved to replace the GeneralAgreement on Tariffs and Trade (GATT), still a provisional legalentity nearly half a cen tury after its creation in 1947, with a muchmore powerful and permanent World Trade Organisation(WTO). The main functions of the WTO, which currently(February 1996) has 119 mem bers, are: to supervise imp lemen tation of the Uruguay Round accords; to act as a forum for ongoing multilateral trade negotiations;8


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to settle disputes using a streng thened semi-judicial dispu tesprocedu re w hich no longer allows trad e offenders to blockdecisions against them .

To join the WTO a prospective mem ber has to accept every part ofthe Uruguay Round Agreement, treating it as a 'single under-taking'. This marks a significant depa rture from the GATT, manyof whose provisions were contained in voluntary codes andpractices. Although the WTO attempts to reach decisions byconsensus, whe re this is not possible it adhe res to the principle ofone-member, one-vote (as did its predecessor, the GATT),making it unique among multilateral institutions. (Both the IMFand the World Bank operate a weighted voting system, withvoting power linked to the am ount of money contributed to thebudget.) However, if the history of the GATT is any indication,there is still likely to be a notable imbalance within the W TO inpower relations between the developed and the developingcountries. The agenda of the Uruguay R ound is itself testam ent tothe superior bargaining power of the industrialised countries,who succeeded in getting issues like investment and intellectualproperty righ ts onto the agenda , in spite of the initial oppositionof Southern governm ents, while issues of concern to some of thepoorest countries in the South, such as progress on commodityprices, were notably absent from the negotiations .Had the Uruguay Round failed to result in an agreement, theindustrialised countries could well have descended into cycles oftrade retaliation and cross-retaliation, a process in which devel-oping countries, with their limited retaliatory powers, wouldalmost certainly have suffered. The agreement which hasemerged, however, is weighted very firmly in favour of the indu s-trialised nations and the transnational corporations (TNCs)which are mostly based there.


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Winners and losersAccording to the triumphant declaration of Peter Sutherland,then D irector-General of the GATT, on the eve of the M arrakeshsigning cerem ony, all coun tries will emerge as winners from theUruguay Round. Major international institutions like the WorldBank, OECD, and the GATT have justified the whole Round interms of the huge financial gains which it is apparently going toyield. Estimates of the increases in annual world trading incometo be generated by the Agreem ent by 2002 have risen in d izzyingleaps and bo un ds, starting at $213 billion according to a W orldBank-OECD study, rising to $234 billion in a subsequent GATTsecretariat analysis, and culminating in revised claims of some$500 billion by 20057However, the corresponding social and environmental costs ofthe Agreem ent have not figured in any of the official calculations.Moreover, even by their own evidence, these estimates look agood deal less impressive when distributional considerations aretaken into account. According to the World Bank-OECD study,for exam ple, less than one-third of the gains it predicted w ould goto the South, with China and a few upper-income South-EastAsian countries the principa l beneficiaries. The lion 's share of theincrease, an estimated $80 billion, wou ld accrue to the EuropeanUnion, and the US national income w ould rise by $19 billion. Sub-Saharan Africa, the world's poorest region, would actually loseincome - an estimated $2.6 billion, due in part to a loss ofpreferences in the European market.Distributional effects take place within countries, as well asbetween them, of course, with some groups of people likely togain or lose much m ore from increasing trade liberalisation thanothers. This is particularly the case for poor producers. Withoutfar-reaching structural reforms, including agrarian reform, toenable the poor to participate in markets on more equitable terms,the distribu tion of benefits from comm ercial markets w ill largely10


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reflect existing inequalities in power and opportunity. Forexam ple, while Brazil is expected to see a significant expansion ofsoya cultivation under the Uruguay Round Agreem ent, the mainbeneficiaries are likely to be powerful commercial interests.Brazilian soya cultivation is dominated by large landholdings,and has historically been associated w ith displacem ent of small-holder produ cers, and deforestation.Many women in developing countries may also see few of thebenefits of trade liberalisation, because they a re mainly involvedin trade in the informal economy. This is partly because of thebarriers they face to entering the formal employment market,including gender discrimination, and their lower levels of educa -tion, and limited m obility. Women living in poverty are often sodisadvantaged in terms of their access to training, producerservices, and infrastructure generally, that they are unable to takeadvantage of liberalisation measures. Narrow economic grow thstrategies, including strategies to facilitate trade liberalisation,therefore do not necessarily advance these women's interestsat all.For those women who are in formal industrial employment, acombination of trade-related economic measures and trends ininternational trade have brought an expansion of employmentopportunities. However, as we shall see in the case of garmentworkers in Bangladesh, examined in chapter two, these changesgenerate a complex set of gains and losses. W hile employment iscrucial for these women, and has in some cases brought them anincome and a new-found independence, status, and self-confidence, it is important not to over-estimate the long-termimpact. There is a very real danger that, for as long as wom en haveonly their cheap, unskilled labour to offer, their working condi-tions will deteriora te, the insecurity of their jobs will increase, andtheir standa rd of living will remain low.8As for the distribution of gains and losses between nations, theagreements reached demonstrate that the focus of the UruguayRound was on issues primarily of concern to the industrialcountries, such as intellectual property and investment. Long-

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standing problems facing primary commodity exporters,how ever, were not dealt with, while agricultural over-productionin the North, and discriminatory protectionism, were onlypartially addressed. These areas are examined in more detail inthe following sections.Primary commoditiesAlthough primary commodities are of diminishing significancein international trade flows, they are of great importance to someof the wo rld's poo rest countries and peop le. Some 30 countries inAfrica and 18 in Latin America depend on primary commodityexpo rts for mo re than half their export ea rnings. Yet for well overa decade, primary commodity exporters have faced the worstdepression in wor ld markets since the 1920s. Between 1980 and1993, prices for non-oil primary commodities fell by more thanhalf in relation to prices for manufactu red goods. The estimatedannu al loss to developing countries over this period w as around$100 billion: more th an twice the tota l flow of aid in 1990.Falling commodity prices also have significant environmentaleffects by reducing the scope for internalising the environm entalcosts of production and trade (i.e. incorpo rating the costs of env ir-onmental degradation associated with commodity extraction orproduction into the market price). While higher commodityprices are not a panacea for environmental problems, fallingprices bring particularly adverse effects. In particular, the u nder-pricing of natural resources and environmental goods leads toinequitable, wasteful, and environmentally destructive patternsof production and consumption - in direct contradiction toAgenda 21's call on governments to ensure that 'commodityprices ...reflect environmenta l, social, and resource costs'.9Inadequate investment and lack of international support fordiversification away from commodity dependence is compound-ed by Northern p rotectionism . One of the most effective ways fordeveloping countries to escape dependence on volatile prim arycommodity markets is to add value to their exports throughlocal processing. This practice is actively discouraged by the12


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industrialised countries, however, who impose import tariffswhich rise with the level of processing.The practice of tariff escalation not on ly prevents poore r coun triesfrom diversifying away from primary commodities intoprocessing activities, but also further intensifies environmentalpressure . Japan and the EU, for instance, both impose a highertariff on plywood than on logs. The aim, in both cases, is to protectpowerful dom estic timber indus tries. The effect is to increase theenvironmental degradation in exporting countries, since logshave a lower unit value than plywood, and mo re w ould have to beexported to generate the equivalent am ount of foreign exchange.Some evidence also suggests that processing activities them selvestend to be less environmentally damaging than extraction. AnAustrian study recently found that mining bauxite to makealumina uses about 10 per cent of the total energy used in makingthe final aluminium product, and produces 90 per cent of thewastes while accounting for only 10 per cent of the profits. Thesecond stage, processing alumina into raw alum inium , uses about80 per cent of the energy and produces 9 per cent of the wastes,while accounting for 20 per cent of the profits. In con trast, the finalstage of manufacturing refined m etal goods generates 70 per centof all profits while requ iring only 10 per cent of the total energyuse and producing only 1 per cent of the wastes.10 The primaryproducer thus gains the least benefit, and suffers the mostenvironmen tal pollution from wastes.Developing countries could reasonab ly have expected significantprogress in addressing these issues during the Uruguay Round.They were disappointed. Tariff escalation in some of the areas ofmost relevance to them , including beverages, oilseeds, and fish,will continue at between 8 per cent and 26 per cent, reducing thebenefits of the Agreement for the world's poorest countries.Moreover, for the poorest comm odity producers in sub-SaharanAfrica, there are justifiable fears that the Uruguay RoundAgreem ent will jeopardise trade prospects in European m arkets.This is because the Agreement will lower tariffs for all countries ,thereby reducing the trade preferences currently offered by the

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EU to Africa under the Lome Convention.11 Projectionsby theOECD in 1994 suggested that the resulting loss in foreignexchange earnings from 2002 could amount to over $2 billionannually for sub-Saharan Africa (including South Africa).

Protectionism in manufactured goodsIf developing countries are to reduce their dependence onprim ary comm odities and expand their exports of manufacturedgoods, they clearly need access to markets. However, theUruguay Round only partially addressed the huge number oftrade barriers which they face. While their share of exportsentering industrial country markets duty free will double, theproportion attracting tariffs of 10 per cent or more will remainrelatively high - and far higher than for goods traded betw een theindustrial countries themselves.In theory, WTO rules require all countries to respond toliberalisation by their trade partners by offering equivalentmeasures. This has not been happen ing, partly because develop-ing countries have been liberalising their economies unilaterally,often as a result of structural adjustment policies (SAPs), as wellas under GATT obligations, in which case the industrialisedcountries are technically not required to reciprocate. In thePhilipp ines, for exam ple, average tariffs w ere reduced from over41 per cent in 1981 to around 20 per cent in 1995 und er SAPs, whileimport restrictions were removed from 2,800 product categories.There have been no com parable reductions in the industrialisedcountries.Poor countries have also faced an array of non-tariff barriers(NTBs): contrary to a commitment made at the beginning of theUruguay Round to 'roll back' such restrictions, they actuallyincreased during the 1980s. Evaluating the implications of theUruguay Round Agreement for NTBs is made difficult by thevery different interpre tations w hich have been placed on its pro -visions. It is likely that m any NTBs will remain intact, albeit unde ra different guise. While so-called 'vo lun tary export restraints ' will14


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be phased out, for instance, other 'safeguard' measures willprobably fill the gap. Other departures from WTO rules willeither be phased out over a long period or left partially intact.Nowhere is this better illustrated than in the phase-out of theMulti-Fibre Arrangement (MFA), the most significant NTB whichhas faced the world's poorest countries for over 20 years. TheMFA was originally introduced in 1974, supposedly as a 'temp-orary ' dep arture from GATT principles, in order to allow indust-rialised countries to adjust their own domestic textile industries toThird World imports by imposing bilateral quotas. In practice,these were both arbitrary and discriminatory. For most Southerncountries, it has also been very damaging, since textiles andclothing account for a quarter of all manufacturing expo rts fromthe South. The overall cost of the MFA to developing countrieshas been estimated at around $50 billion a year - abou t equal tothe total flow of development assistance provided by Northerngovernments.Under the Uruguay Round Agreem ent, it is to be phased ou t overa ten-year period. Tariffs will also be lowered. This has beenhailed as one of the principal gains for developing coun tries. Butthe Agreement on textiles is heavily 'end-loaded', with most ofthe benefits coming at the very end of the ten-year pe riod. It alsocontains a provision allowing importing countries to take 'safe-gu ard ' measures und er certain circumstances to protect their ow nindu stries, including both tariff increases and restrictions on thequan tities of imports. Furtherm ore, as we shall see in chap ter tw o,it is by no m eans clear that all Sou thern countries will autom atic-ally benefit from the phase-out, as it is currently cons tituted.AgricultureThe Uruguay Round negotiations were dom inated by the issue ofagricultural trade, which was brought'within the GATT Agree-ment for the first time. The industrialised countries could havetaken this opportunity to introduce thoroughgoing reforms oftheir wasteful and inequitable agricultural policies, typified bythe EU's Common Agricultural Policy, which has been

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responsible for massive subsidised overproduction, bringingdevastating effects for some Southern countries.W ith surplu ses m oun ting througho ut the 1980s and early 1990s,the EU and US indulged in a strategy of out-subsidising eachother in order to expand market share. The consequences werefelt m ost sharply by developing countries, w ho saw wo rld pricesfall to their lowest level in real terms since the Great Depression.Non-subsidised exporters were hit hardest: Argentina saw itsexport earnings d rop by 40 per cent betw een 1980 and 1987 as aresult of falling prices for cereals and oilseeds. Subsidised exportsalso underm ined rural livelihoods by flooding local markets w ithcheap imported food.The Uruguay Round's Blair House Agreement on Agriculture,which was hailed as the start of a new era in world agriculturaltrade, claimed to change all this. In reality, the results are consid-erably less impressive, since the US and EU agreed a system ofpermissible subsidies which enabled them to maintain currentlevels of produ ction and exports.Briefly sum m arised, the Agreem ent has three parts: a reduction indomestic income support by 20 per cent; a reduction in thevolum e of subsidised exports by 21 per cent and in the value ofsuch exports by 36 per cent; and the conversion of all importbarriers into tariffs. However, because of the reference yearschosen, against which these comm itments will be measured, boththe US and EU were able to announ ce that their obligations ha dalready been met, and there wou ld be no further subsidy cuts.Developing countries were given som e concessions: the least dev-eloped countries are not required to implement the Agreement,while the others are only obliged to make cuts of two-th irds thosespecified for other countries (for exam ple, cuts in value of subsid-ised exports of 24 per cent instead of 36 per cent), and hav e tenyears to do so instead of six. But the new obligation on them toreduce restrictions on agricultural im ports by 13 per cent over thelifetime of the Agreement will further exacerbate the foodsecurity problems they already face. In man y areas, this is likely to16


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intensify the trend tow ards increased rural unem ploym ent, w ithits corollary of rural-urban migration, reduced production ofbasic food staples, and deteriora ting welfare.Parallel developments in Mexico under the NAFTA (NorthAmerican Free Trade Agreem ent) offer an insight into wha t mightbe anticipated. In Mexico, maize accounts for almost two-third s ofagricultural production in some areas of the country, wheremillions of households depend for their survival on farmingsteep, ecologically fragile hillsides using traditional methods ofcultivation. Under the NAFTA Agreement, restrictions on USmaize imports are being progressively withdrawn, along withprice supp ort to Mexican farmers. This is threa tening the viabilityof millions of Mexican sm allholdings. Average y ields in Mexicoare less than a quarter of those in the US, where farmers benefitnot only from prod uction subsidies (which account for one-thirdof the value of maize output), but also from a wide range ofirrigation and marketing subsidies. It has been estimated thatfewer than one in ten Mexican maize producers could compete inan unprotected market, leading to predictions that up to 2.4million peasan t producers and their families could be forced offthe land.Already it is clear that it is the poorest w ho will lose most from theBlair House A greement. This is not entirely surpr ising, given thatthe poorest countries - where agricu lture accounts for as much astwo-thirds of employment - were not even consulted about itsfinal text. The Agreement is, in practice, a bilateral agreementnegotiated in confidence by the EU and US, where agriculturerepresents less than 5 per cent of national income and employ-ment.The regulation of TNCsThe real winners from the Uruguay R ound a re the transnationalcorporations, wh o have seen their pow ers and scope increase on apheno menal scale. The 100 largest TNCs control over one-third ofthe stock of foreign investm ent, while 40 per cent of world tradetakes place within companies.12 General Electric, General M otors,

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and Ford have between them assets roughly double the GDP ofMexico; while the ten largest TNCs control assets which represen tthree times the total income of the world's poorest 38 countries(excluding China and India), with a popula tion of over one billionpeople. The influence of these companies on the outcome of theUruguay Round is particularly reflected in the agreements onintellectual property, services, and investment, where the rightsof developing country governments in relation to foreign invest-ors have been severely eroded .Trade Related Intellectual Property Rights (TRIPS)The insistence, on the part of the industrialised countries, thatTRIPS be considered in the Uruguay Round is a classic exam ple ofdouble standards. While the U ruguay Round A greement an d theWTO are supposed to prom ote trade liberalisation and free tradeflows, the TRIPS Agreement actually tightens monopoly controlover technology and reduces the opportunities for new com-mercial rivals.The Agreement is clearly biased towards the interests of N orthernTNCs which control over 90 per cent of the world's patents. Iteffectively requires developing countries to enforce a patentsystem m odelled on those of the US and the EU, and extends theperiod of patent protection for substantially longer than existingmeasures provide for in many developing countries.13 There arevery real concerns that, by rewarding monopoly throughenhanced royalty collection, it will also cause the costs oftechnology transfer to rise, once again penalising developingcountries.Some of the most significant effects of the Agreem ent will be feltby local communities. In October 1992, a 500,000 strong rally offarmers in Karnataka forced the issue of trade related intellectualproperty rights (TRIPS) onto the political agenda. They wereprotesting against the proposed introduction of TRIPS into theUruguay R ound, fearing that it w ould rob them of their freedomto use, reprod uce, and modify their seeds and plant m aterial.18


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Under the new Agreement, WTO members are required toprovide for the protection of plant varieties either throughpatents, or through an effective national system of royalty collec-tion. This could lead to companies being able to purs ue claims onpatented seeds with the full w eight of international tr ade law , andthe implicit threat of sanctions against governments, behindthem . As a result, farmers could be penalised for saving seeds forplan ting in future seasons, or for exchange with o ther farmers.Furthermore, the Agreement recognises only private rights andmakes no provision for the protection of intellectual propertywhich is held communally, such as traditional knowledge ofplants or seeds. Once genetic material has been modified, nomatter how slightly, it can be patented by corporations or individ-uals, who thus gain all the financial benefits. An individual orcom pany can collect a plant from a develop ing country, modify itor isolate a useful gene, and paten t a new plan t variety or productthat contains it, without having to make any payment to thecommunities whose traditional knowledge enabled the plant tobe identified in the first place. Farmers in developing countrieswill have to pay high charges for the new seeds, pesticides, andPharm aceuticals developed from their genetic resources.14The TRIPS Agreement will have far-reaching environmentalimpacts, too. By loading incentives for the protection of geneticdiversity in favour of industry rather than local people, it is likelyto promote forms of breeding that encourage uniformity ratherthan diversity; and by reducing farm ers' access to good seed, theAgreement is likely to have, in the words of a Friends of the Earthreport, 'widespread and irreversible impacts on traditional agri-cultural systems'; and it clearly conflicts with the goals of theBiodiversity Convention by preventing or discouraging theconservation of agricultural and plan t diversity.15

Foreign direct investmentForeign direct investment (FDI) can play a significant role in thedevelopment process, through employment creation, training,and the transfer of technology. How ever, the terms on which such

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investm ent takes place are being increasingly biased in favour ofthe corporate interests behind it. Investment patterns are alsoextremely uneven, with just a handful of Southern countriesreceiving the bulk of FDI.The Agreem ent on Trade-Related Investm ent M easures (TRIMS)will not allow developing country governments to insist, as acondition of market access, that foreign companies meet mini-mum requirements for using local materials in the productionprocess. Governm ents w ill no longer be able to oblige these firmsto export a specific share of their produc ts, or limit their im por t ofcomponent parts. The WTO Agreement on Trade in Services(GATS) separately addresses issues relating to companies oper-ating in the services sector. Under GATS, national governmentsmay no t restrict the entry of firms into sectors such as advertising,banking, and insurance which operate in other GATS memberstates. Other aspects of investm ent practice which benefit TNCs atthe expense of poorer countries, such as transfer pricing,restrictive business practices, and excessive profit repatriation,were conspicuous by their absence from the Uruguay Roundagenda.

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Unresolved issuesOne of the most impor tant tasks of the first M inisterial Meeting ofthe WTO in Singapore at the end of 1996 is to review progressm ade to date in implementing the Uruguay R ound Agreement.This in itself will be a huge undertaking. Many o ther issues, somenew, some unresolved from the Uruguay Agreement, are alsojostling to find space on the Singapore agenda. Chief am ong themare investment and competition policy, labour standards, andfurther w ork on trade and environment.InvestmentScarcely before the ink was dry on the Uruguay RoundAgreement, which accords foreign investors formidably wide-ranging and unprecedented powers, a new initiative wasannounced which will extend their scope still further. The OECDstated in a com m unique in May 1995 that it was to start work on afree-standing M ultilateral Agreement on Investm ent (MAI), to beopen to both OECD members and non-members alike, with anestimated completion date of summ er 1997. This wo uld go m uchfurther than the TRIMS Agreement, which essentially preventsnational governments from imposing trade-related restrictionson investments by foreign companies. The MAI, which is beingprom oted most strongly by the EU, would remove all remainingnational policy tools for regulating foreign investment and TNCactivities. It would 'gua ran tee generally free entry and establish-ment for foreign investors, full national treatm ent for establishedinvestments and high stand ards of investment p rotection'.16

The WTO Council for Trade in Goods, at their five-year review in2000, is due to consider whether TRIMS 'should be comple-mented with provisions on investment policy and competitionpolicy'.17 The EU's strategy appears to be to bring forward bythree years the possible negotiation of an investment agreementunder the WTO by proposing to have the subject added to the21


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agenda by the WTO trade ministers at their December 1996meeting in Singapore. The fact that some of the major indust-rialised coun tries have chosen to begin their own negotiations oninvestment w ithin the OECD rather than in the WTO presents amajor challenge to the multilateral trad ing system. It also furthermarginalises the U N 's role in global economic an d social issues.18The EU's proposals are based on a number of principles. Theseinclude: Foreign companies should have the legal right to invest andoperate com petitively in all sectors of the econom y. Host govern ments shou ld treat foreign investors as least aswell as national investors. Only transparent, narrowly defined, and well-justified excep-tions from the general right of entry for foreign investmentshould be permitted. No new restrictions should be introduced, and any area unde rtreaty obligation gradually liberalised.Foreign investment can be of great benefit, provided that it isintegrated into an appropriate policy context. Governmentsshould continue to have the right to regulate the terms andconditions for the entry and operation of foreign investment invarious sectors of the nationa l econom y. It is a particularly criticalissue for developing countries, since control of foreign invest-m ent is essential in order to deve lop dom estic capacity and allowlocal enterprises to become more com petitive.The proper place for any negotiations on investmen t is within theUN, where the rights and obligations of bo th foreign investors aswell as of governm ents and their citizens can be considered in anopen and transparent way.19

International trade and labour standardsAnother issue which is likely to be discussed at Singapore isinternational trade and labour standards. In Marrakesh, thesignatories to the WTO Agreement could not agree on any22


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reference to a social clause . All that could be agreed w as a commit-ment to discuss 'suggestions for the inclusion of additional itemson the agenda of the WTO's work p rog ram m e' (para 8 (c) (iii) ofthe Decision on the Establishment of the Preparatory Com mitteefor the WTO). There was, however, reference to the importanceattached by certain delegations to the relationship betw een tradeand internationally recognised labour standards in the conclu-sions of the Chair of the Trade Negotiations Committee.Identifying a link between trade and labour standard s is nothingnew , however. The preamble to the ILO Constitution, written in1919, states that 'the failure of any nation to adopt humaneconditions of labour is an obstacle in the way of other nationswhich desire to improve the conditions in their own countries.'This logic was taken further by the 1947 UN Conference on Tradeand Employm ent, which attempted to extend the principles of theBretton Woods framew ork to internationa l trade. Article 7 of theresulting H avana Charter is extremely explicit in making the linkbetween international trade and labour standa rds:The Members recognise that unfair labour conditions, particularly inproduction for export, create difficulties in interna tional trade, and,accordingly, each Member shall take whatever action may be appropriateand feasible to eliminate such conditions w ithin its territory.The International Trade Organisation (ITO), for which thisCharter was drafted, never came into being. But if the poin t tha tunfair labour conditions can 'create difficulties' in internationaltrade was compelling to the authors of that Charter nearly 50years ago, it is even more relevant in today's increasingly inter-connected global economy.The suggestion that there can be and should be thresholds forparticipating in the international trading system is also not new.Trade rules and restrictions are already used to prevent the theftof intellectual property, while provisions for banning importsmade by prisoners, and for taking measures to protect someaspects of the environm ent, already exist under G ATT Article XX.There is no reason w hy similar protection could not be providedfor a wider range of labour and environm ental principles.20

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Trade and environmentIn order to dem onstrate its concern w ith environm ental issues, in1971 the GATT set up a working party on EnvironmentalM easures and Internationa l Trade (EMIT). In fact, it had preciselythe opposite effect, since it failed to meet for over 20 years. Notuntil the end of 1991, at the instigation of the Eu ropean Free TradeAssociation, did it hold its first meeting.

New life was breathed into the consideration of trade and envir-onment concerns when the Uruguay Round members took thedecision in 1994 to set up a new Committee on Trade andEnvironm ent (CTE). Its manda te is to make 'ap prop riate recom-m enda tions on w hether any modifications of the provisions of themultilateral trading system are required, compatible with theopen, equitable and non-discriminatory nature of the system ' inorder to make trade and environmental policies mutuallysupportive.The Com mittee's agenda currently includes multilateral environ-mental agreements, exports of domestically prohibited goods,charges and taxes for environmental purposes, ecolabelling, andthe effects of environmental measures on trade. W hat it does notconsider is the effect of trade m easures on the environment, and inparticular the impact of the Uruguay Round on prospects forsustainable development.Oxfam 's experience is that livelihoods - indeed, surviva l - for theworld's poorest people depend fundamentally on the wealth ofthe natural env ironm ent and on resources such as soils, trees, andwater. Working in partnership with community groups tocombat poverty in over 70 countries of the world, Oxf am has seenat first hand how unregulated international trade can lead toenvironm ental degradation, which in turn deepens poverty.As these concerns become more and more inter-related, it isbecoming essential to see them as one problem. Trade andenvironment issues therefore cannot be addressed in isolation:development issues must also be considered. A narrow24


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The Uruguay Round

perspective on trade and environment which misses out ananalysis of poverty and developm ent risks becoming p art of theproblem, not part of the solution. For this reason, during thereview of the CTE's work in Singapore, ministers should take theopportunity to extend its terms of reference to encompass thebroade r concept of sustainable dev elopm ent, as outlined below inchapter three.This should not prove to be incompatible with the WTO'sm andate since, in theory, the WTO is already com mitted to theprinciple of sustainable development. Its stated objectivesinclude 'allowing for the optimal use of the world's resources inaccordance with the objective of sustainable development';'raising standards of living'; and 'ensuring full employment'.21The WTO shou ld no t study these issues in isolation, how ever, bu tin collaboration with appropriate intergovernmental agencies(including UN EP, UN DP, UNCTAD, and the CSD), and shouldalso seek the advice and experience of non-governm ental organ-isations (NGOs) and citizens' groups.The effects of trade liberalisation on social andenvironmental standardsUnder certain conditions, trade liberalisation can have a positiveimpact on labour and environmental conditions through a moreefficient allocation of resources and increases in productivity,leading to social development and higher wages. It can alsocontribute towards higher economic growth and inward invest-ment, and create resources which can be used for environm entalprotection. None of these impacts is automatic, however; theydep end rather on certain kinds of intervention.In brief, there are three main aspects to the relationship betweentrade policies and environmental and labour issues. First, pressurefor deregulated trade, if unchecked, can lead to the degradation ofthe environment and the exploitation of workers. Second, ifenvironmental and labour regulations are lax or weakly enforced,this can lead to a downward spiral of standards, as foreigninvestment seeks out the lowest production costs. Third, the

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existing rules governing international trade can themselves preventor discourage governments from taking measures to safeguardlabour and environmental standards. It is these relationships w hichthis report will now exam ine in more detail, with a view to proposingrecommendations on labour and environmental standards forconsideration both in Singapore and in the longer term.The following chapter starts with a case study of the garmentsindustry in Bangladesh, and examines how global economicintegration and growing competition are pitching garmentworkers around the world into competition with each other,exerting downward pressure on wages and conditions, andincreasing job insecurity: employment creation in one countryoften means job losses in another. It will also set out a range ofmeasures to address these problems, from codes of conduct, tointernational standards, and finally international regulation.One of the easiest ways to remain com petitive in labour-intensiveindustr ies is to cut labour costs.22 This can be achieved by relocat-ing factories to regions with abundant (often female) labourreserves, with weak labour laws and lax enforcement. O r it can beachieved by sub-contracting produc tion to sweatshops and hom e-workers, at home or overseas. This allows companies to evadelabour regulations and collective bargaining agreements andmaintain flexibility in the face of rapidly changing markets. Bothstrategies are common in the international garm ents industry.A similar dynamic can be observed with regard to environm entalstand ards. Countries with w eak, or lax enforcement of,environmental standards have a competitive advantage in theglobal market-place, and put pressure on other countries toreduce, or at least not improve, the rigour of their own environ-mental requirem ents. In chapter three, draw ing on experience ofour project partners in Mexico, we outline the environmentalcosts of this competitive p ressu re.Moreover, current rules for international trade liberalisation oftenentail market access agreements which can be used to overrideenvironm ental regulations. Using a case study of shrimp farming26


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in the Philippines, we make the case that WTO rules should bechanged to enable countries to impose consumption or importtaxes on the grounds of unsustainable production, and in extremecases to prohibit im por ts or exports. Finally, a case study focusingon the social and environmental costs of banana cultivation, and onthe difficulties facing attempts to promote preferential access forfairly and sustainably produced bananas, will dem onstrate in moredetail the need for WTO rules to be reformed to perm it countries todiscriminate between imports on the basis of the way they havebeen produced.Com plete harmonisation of social and environm ental standards isneither practical nor desirable, and is not sought in any existingtrade agreements. But this report will make the case that weaksocial and environmental regulations are not a source of legitimatecomparative advantage, but an unacceptable form of exploitation.World trade rules should therefore be reformed to protect people'sbasic rights, and to promote sustainable development.Many citizens' groups and NG Os would argue , how ever, that theWTO has no competence in these areas, and that its reputation forsecrecy and exclusivity, together with its distance from the UNsystem, and dominance by Northern governments and TNCs,make it an inappropriate forum in which to make decisions onsocial and environm ental issues.These are legitimate concerns. In the consideration and analysis ofthe social and environmental regulation of international tradewhich is developed in the next two chapters, and in therecommendations which follow in chapter four, it is notenvisaged that the WTO itself would play the lead role in eitherarea. The ILO is clearly the most appropriate body to makejudgem ents over labour s tandards and , in the absence of a com-parable environmental body, it is proposed that an Inter-governmental Panel on Trade and Sustainable Development beestablished to develop standards for environmental protection.The WTO itself is in urgent need of reform to make it moretransparent, democratic, and accountable, and a range ofproposals are made in chapter four to work tow ards this.

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CHAPTER TWO:INTERNATIONAL TRADE AND LABOUR STANDARDSThe garments industry in BangladeshOn the night of 21 November 1995, 30 armed men smashed theirway into the offices of the Bangladesh Independent GarmentWorkers' Union (BIGU). They held the union's lawyer, FawziaKarim Feroze, at gun-point, ripped off her sari, soaked her inpetrol, and tried to set her on fire. They threatened to shootanyone who spoke out. Then they went on the rampage, firinginto the air, destro ying files, break ing wind ow s, and even tried toset fire to the w hole building.23This is not the first tim e that the BIGU has been a target of attacks.Found ed in December 1994, it cam paigns for better cond itions forwomen in the garments industry, and has had some notablesuccesses. It is clearly seen as a threat by some in the indu stry, whofear that their competitiveness an d profits are at stake.In this chapter we will focus on the competitive pressures facing thegarments industry in Bangladesh, and on measures that can betaken to improve labour standards in the factories. The process of'competitive impoverishm ent' is not inevitable bu t depend s on thepolicies and actions of retailers, governments, and internationalbodies. Together with workers' and consumers' organisations,Oxfam is working to ensure that these bodies uphold and respectthe internationally agreed rights of all peop le to a decent and securelivelihood. The roles of consumer pressure, codes of conduct, ILOConventions, and the WTO are explored, and the case is made,subject to certain conditions outlined later in this book, for theintroduction of a social clause which would link membership of theWTO to respect for certain minim um labour standard s.From a modest beginning as a non-traditional export sector,which earned 4 million in 1981, the garm ents in dustry inBangladesh has witnessed a phenomenal growth. In 1994-95,28


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export earn ings from this sector reached 1.2 billion, making it thelargest export earner for Bang ladesh, contributing 57 per cent oftotal foreign exchange earnings. Garment making has alsobecome the largest source of employment generation. Over 1.2million people, 90 per cent of them wo men, wo rk in the garm entsector and its ancillary industries.24 Today Bangladesh has some2,400 garm ent factories, mostly located in an d a rou nd the capitalDhaka, and the southern port cities of Chittagong and Khulna.Much of their produc tion is destined for the US and Europe.25Several factors currently threaten the industry, however,suggesting that its success is built on insecure foundations. As thetable below demonstrates, output per worker is very low. Thebulk of prod uction is also low value-a dded; the finished garm entsare intended for the lower end of the market, so the profit marginsare small, leaving Bangladesh in a highly vulnerable position asmarkets become more competitive.26

Table 1 Comparative output per worker in the garments industryCountry Person minutes per basic shirtUSA 14.00Hongkong 19.75South Korea 20.75Sri Lanka 24.00Bangladesh 25.00Bangladesh is also depe nden t on external sources for its textiles.Just 4 per cent of the 2.25 billion yards of fabric required by theindustry in 1994 could be supplied by local textile manufacturers;the rest was im ported, mainly from Asian textile producers. N otonly does this lack of backward linkages in the economy reducethe profits which Bangladesh can make - one estimate suggeststhat only 30 per cent of the total value of exported garmentsremains in the country, with the other 70 per cent paid out forimported fabrics - it also adds considerably to the turn-aroundtime on production.27 On e exporter recently observed,

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Orders currently take about four months, when what we really need toachieve is a 30-day turn-around on orders. We have to import all ourfabrics so we need credit letters, we have import bills and money is heldup longer. The only survival for us is the development of a textilesindustry here in Bangladesh.2SIt will be extrem ely difficult for Bangladesh to make this signifi-cant new step without a sure, steady future for its markets. Thephasing-out of the Multi-Fibre Arrangement (MFA) is makingthis both m ore urgen t - because the industry will have to becomemore competitive - and more difficult - because its future mar-kets are becom ing less secure.29 For while the effect of the MFA ondeveloping countries as a who le has undo ubted ly been a negativeone, some coun tries, including B angladesh, have paradoxicallybenefited from it in some ways. One of the factors behind thegarments boom in Bangladesh was the search for ways throughthe barrier of the MFA by firms from the Asian NICs (newlyindustrialised countries). In the early 1980s the industrialisedcountries placed relatively few quota restrictions on clothingexports from Bangladesh, m aking it an attractive location for EastAsian firms tha t had u sed u p all the export possibilities allowed tothem in their home country u nde r the MFA. A study of foreigndirect investments in Bangladesh in the late 1980s found that over40 per cent of the com panies involved w ere from the Asian NICS;and 70 per cent of the investments w ere in the clothing industry.30While the MFA gave Bangladesh some degree of competitiveadva ntage in terms of m arket access over established com petitorssuch as China, Hong Kong, and India, its phase-out will meanBangladesh w ill have to compete with its giant neighbo urs und era free market regime.31 Since Bangladesh cannot currently com-pete in terms of productivity nor, any longer, in terms of marketaccess, there is a significant d anger that it will resort to exploitingstill further the final factor of its competitive advantage: lowlabour costs.A large pool of cheap labour has been critical to the industry'ssuccess. As one prom inent exporter pu t it, 'Only a cheaper pricewill make the orders come to me.'3230


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Table 2 Comparative average hourly wages in the garments industry33CountryGermanyUSASouth KoreaMexicoPolandSri LankaChinaIndiaNepalBangladesh

Hourly wage in US$25.0016.005.002.401.400.450.350.350.300.15

However, new competitors are already appearing in the region,notably V ietnam, which h as a skilled labour force of over 130,000people in the garments industry and had, in 1992, an installedproduction capacity of about 110 million garments per year. Itslabour is one of the cheapest in the world. Vietnam is activelyexploring new export markets and man y major Eu ropean bu yershave already set up there. Cambodia and Laos may also event-ually become suppliers of garments in international markets.Some evidence suggests that business is already beginning toleave Bangladesh for these new produc tion sites.34 If Bangladeshlowers the standards of working conditions in its factories stillfurther in order to remain competitive, the prospects for itsworkers will be grim.

Case studySelina Akhter became a garment worker when she was just 14years old. Both her parents had died and Selina was dep end ent onher unc le's family. 'I had to earn my keep an d there seemed to beno other job for me.' She started as a 'helper', and very soonbecame a machine operator, earning 450 taka per month as herbasic wage. She has worked in different garment factories ever

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since; now, 11 years later, she is still a mach ine operator, a nd hersalary is only 1,400 taka despite h er long experience.35She currently works in a small factory in the Mirpur district ofDhaka. The ho urs are long and gruelling. Most of the factories shehas worked in do not observe the eight-hourly du ty rule:We are usually given targets for a day which are set so high that it'simpossible to fulfil them in eight hours. Say they ask us to finish 2,000pieces in oneshift. Usually 10-12 hours go in meeting the target. On topof it, we have frequent night duties, especially before the shipment.This factory and m any others either postpone p aying ov ertime oravoid it altogether. Selina always ha s three mo nth s' overtime p aypen ding ; sometimes she d oesn 't get it at all:If you are absent for one day, the managem ent deduc t three days' wages

from your income. You could complain to your supervisor, line chief, oreven to the production manager. But don't expect any redress.On e of the main reasons wh y w orkers like Selina keep changingjobs is that the factories sim ply dism iss them: sometimes becauseit's a lean period; sometimes if a worker is seen as a troublemakerby spea king out a nd p rotesting ; or sometimes if a worker falls ill.They are powerless against such arbitrary treatment. As Selinasays, she had to submit a written application along with herpho togra ph to each of the factories w here she has w orked, bu t inonly one factory was she ever given any appo intment docum ent.

The impact on womenThe vast majority of women working in the factories are youngwomen like Selina, who have migrated from rural areas to thecities in search of employment.36 For them, working in garmentfactories represents a release from more manual, poorly paid, orunpaid forms of rural employment. Because of the destitutionthey have left behind, even an exploitative industrial environ-ment provides a means of freedom from the miseries ofoppression, hun ger, and poverty.37

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It has also enabled m any wom en to enjoy a new-found indep end-ence and status. Their lives have changed since they joined thegarment factories. Most of them used to stay inside their homes,not venturing outside by themselves. Now they are no longerafraid to move freely, and are more likely to have a decision-making role in the family.38 They are also less dep end ent on theirparents, and more able to resist a forced early marriage. Thecontinued success of the garm ents in dustry is therefore critical tothese young w om en.It is impor tant, at the same time, no t to overestim ate the effects ofthis revolution. While em ploym ent in the garm ent factories m ightimp rove the terms on which yo ung w om en are able to negotiatethe social relations that subordinate them, the underlyingstructures of gender inequality do not automatically disappea r inthat process, any more than they did in nineteenth-centuryLancashire when thousands of young women went to work intextile mills.39Nevertheless, women are becoming more aware of their rights,and gradually, in spite of the double bu rde n of em ploym ent andfamily responsibilities, and despite the male-dominated unionhierarchies, they are beginning to assert them .

Union demandsOn 26 July 1995 the front page of one of Dhaka's English dailynewspapers, the Financial Express, was emblazoned with theheadline: 'Garment workers demand minimum pay, 8hr workday'. At a press conference the prev ious day , General Secretary ofthe National Garment Workers' Federation, Amirul Huq Amin,accused the garments industry of conditions amounting to'mo dern slavery', and launched the start of a sustained campaignof rallies and protests to draw attention to working conditions.W omen have been m arching in the streets to dem and the right toone day off a week, which they regard as a 'legal and humanright', the right to payment of the m inimum wa ge, and a stand ardworking week of 48 hou rs. Garment wo rkers have to work 14-16

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hours a day, and are rarely paid the amount to which they arelegally entitled. 'We hav e to work from 8am to 10-1 lp m sevendays a week', claimed Am in. 'W e have no holiday.'There has been no shortage of reports into the grim workingconditions in many of the factories.40 The neglect of health andsafety issues was most recently and graphically brought topeople's attention by a fire at Lusaka Garments Factory in theIbrahim pur area of Dhaka in Augu st 1995, which left nine youngpeople dead. The seven-storey building housed three garmentfactories, and it is thoug ht that m ost of those who d ied w ere killedin the stamp ede do w n the narro w staircase.This sort of tragedy is all too frequent in Bangladesh's garmentfactories. In the last five years, at least 50 work ers have lost theirlives in similar fires. The worst was at Saraka Garments in theM irpur area of Dhaka five years ago, when 30 peop le died. M ostfactories ignore the legal requirement to hav e fire-fightingequipment in the building, and some have locked gates duringworking hou rs, mak ing it impossible for wo rkers to escape.In theory, the workin g d ay in factories is from 8am to 4.30pm withhalf an hour for lunch, but m any w orkers often have to wo rk un til8pm, or even later if there are deadlines to meet. Overtime isfrequently paid late, and sometimes not at all. Often workerswork seven days a week, without the statutory d ay off p er w eek.Eid an d ho liday bonuse s, to which w orkers are traditionally entit-led, are frequently no t given. Some factories penalise wo rkers forbeing late by docking their salary; if a worker is absent for threeconsecutive d ays (e.g. du e to sickness), she can be fired.The Bangladesh Factory Act of 1965 is routinely ignored. Itstipulates, for example, that workers are entitled to a weeklyholiday, and that no worker shou ld be allowed to work more than60 ho urs per w eek or 10 hours pe r day. Bangladesh Labour Law 19(a) states that a worker has to be given three mo nth s' notice beforetermination of employment: this is frequently ignored, andgarment workers are liable to be fired on the spot. The govern-ment has declared that the minimum wage for garment workers34


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should be Tk. 950 per month, but few employers abide by thatrule. Ap prentices often get just Tk. 300 per month.Incidents of sexual harassment of women frequently take place,both by m anagers w ithin the factories, and by local you ths whenthe wom en are walking to and from wo rk. This explains w hy safetransport home after late shifts is one of the women's maindemands. The demands presented by the National GarmentW orkers' Federation to the Governm ent last year also include:

implem entation of m inimum w age regulationpayment of salary and overtime within the first week of themonth

provision of a medical doctor and health facilities provision of clean toilets, safe drinkin g wa ter, canteen andrecreation room Eid and other holiday bonuses three m on ths' paid leave for childbirth no work during government holidays.Although Bang ladesh has ratified ILO Conven tions 87 and 98 onfreedom of association and the right to organise, and in spite ofthe fact that their own laws in principle also guarantee unionrights, most managers do not allow unions to operate in theirfactories. Many w orkers are therefore afraid to join union s in casethey lose their jobs.The industry also has a vast chain of sub-contracting units , someno larger than the front room of a hou se. If they have fewer than25 employees, they are not covered by the Factories Act, andconditions are even harder to monitor. Two years ago when aworke rs' strike broug ht pro duction to a halt in a garm ent factoryin Bangladesh, instead of conceding the demand for a festivalholiday, the management merely sub-contracted their orders.Export schedules were thu s maintained but the workers lost theirjobs.41

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More recently, the whole workforce at Titas Apparels in Dhakawere fired, after union members went on strike. Titas ApparelsGarment Workers' and Employees' Union was formally regis-tered in June 1995. Later in the year, it presented a list of dem andsto the factory management, covering payment of the minimumwag e, and full a nd p rom pt pay m ent of overtime, legal holidays,paid sick leave, and com pensation in case of accidents. They alsorequested an end to managem ent intimidation of union mem bers.They received no response, and took the issue to the govern-ment's Labour Department. When the employers continued tofail to respond, the union called a strike. The strike began on 27December. On 30 December, the owners closed the factory,sacking all 350 workers.42A dd ed to the ongoing problem s of low productivity, and lack ofbackw ard linkages in the economy, the indu stry in Bangladesh iscurrently facing an additional burden because of the extremelyserious political crisis, which is resulting in lost orders and forcingfactory closures. This has been gathering momentum over thepast 18 m onths bu t now , following the controversial parliamen t-ary elections of 15 February 1996, which w ere boycotted by themain opposition party, political disturbances, civil unrest, andprotrac ted 'har tels', or enforced mass strikes of all public servicesand private enterprises, have dramatically increased. Overseasbuyers are understandably becoming reluctant to place orderswith Bangladeshi firms since they now risk significant delays inproduction deadlines.Bangladesh offers an interesting illustration of the links betw eentrade liberalisation and labour s tand ards because of the pressu reit is currently experiencing to improv e its comp etitive adva ntage,particularly as a result of the phasing out of the MFA. However,the conditions in Bangladeshi factories are currently no worsethan in man y others in Asia and Latin Am erica. Over the past 20years there has been a phenomenal increase in the number ofcompanies setting u p in the Free Trade Zones of the D ominicanRepublic, for example, many of them making textiles andclothing.43 Aroun d three-quarters of the workers are wom en, andthe conditions they complain of are similar to those in36


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Bangladesh: long hours without adequate breaks, forced over-time, intimidation and harassment at work, poor salary (oftenbelow the minim um wage), and arbitrary dismissal.Measures to improve conditionsThere is clearly an important role for government to play inimprov ing factory conditions, both in enacting legislation, and inensuring compliance with it. However, in an increasingly globaleconomy, it is becoming even more difficult for governmentssignificantly to improve conditions on their own: internationalmeasures are therefore also needed, and a number have beenprop osed . A brief exam ination of one of them , the Harkin Bill, willserve to emphasise the importance of ensuring that minimumstandards are appropriate and equitable as well as feasible.In 1993 US Senator Tom Harkin put down a Bill in the USCongress which wo uld p rohibit the import into the US of g oodsmade with child labour. The immediate effect of the Bill inBangladesh was dramatic: as many as 40,000 children wereprom ptly th row n ou t of the factories, and m any m ore have beenforced to leave since. Studies by UNICEF and others indica te tha tmany of them were driven to find work in more dangerousoccupations under even harsher conditions: breaking bricks allday in the glaring sun, for example, or prostitution. In 1995Harkin reintrodu ced the Bill (The Child L abour D eterrence Act).Although it has still to be passed, the pressure it created wasenough to push the BGMEA (Bangladesh Garment Manufac-turers' and Exporters' Association) to sign a Memorandum ofUnderstanding (MOU) with the ILO and UNICEF which wouldbring an end to child labour in the garment factories. While inprinciple this is, of course, to be welcomed, in Oxfam's view,based on our experience in Bangladesh, the MOU, which wasfinally signed on 4 July 1995, has some serious flaws.For exam ple, evidence suggests that many thousa nds of childrenwere sacked - often without receiving the pay owing to them -before the terms of the MOU came into effect.44 This enabledfactory owners to avoid making provision for the children to

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receive the schooling wh ich the MO U envisages for them . M anyof these children are likely now to be in even more exploitativeemployment.There is no birth registration in Bangladesh, and therefore no w ayof verifying a person's age. Furtherm ore, poor nutrition can resultin late development. A child wh o looks ten years old could easilybe 14 or older. The operation of the MOU w ill be based on a 'rapidassessm ent' of child ren's ages, which will inevitably be very sub-jective. The 'expert's' opinion will presumably take precedenceover the child's claim, thereby seriously und erm ining his or herrights.Moreover, by focusing on the child labour issue alone, the MOUdoes nothing to tackle the much broader issue of factoryconditions in general. It would be more effective to press for betteroverall standards, which would include shorter shifts for child-ren, together with education provision in the factories themselves(where it could be more effectively monitored), and thereby helpto eradicate the poverty which is the root cause of this kind ofchild labour. Introducing measures to ban child labour almostovernight, without adequate provision for and investment ineducation and pov erty alleviation (a responsibility of bo th n ation-al governme nts and the international co mmunity), is likely to becounter-produ ctive, and simply shift it to a less visible (and m oreexploitative) part of the economy. Although the MOU contains acom mitment to paying children 300 taka per m onth as an incent-ive towards undergoing schooling, unions and some NGOs areconcerned that this will not be sufficient: many children couldearn more than that by working, and for some, maximising theam ount they can earn no w is critical to their survival.45That ample scope exists for introducing better conditions isillustrated b y the example of the Bantai factory in D haka, one of asmall number of factories which are beginning to address socialissues. Its manager, Saidur Rahm an, has already im plemen ted anumber of schemes which both benefit its workforce and, heclaims, make good economic sense. A health-care scheme, crecheand school are offered, for example. A doctor linked to Dhaka38


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Community Hospital (which is supported by Oxfam) runs aweek ly surgery in this factory, and in several others: those pay inginto the health scheme are also entitled to attend the hospital a ndhave full hea lth cover for their imm ediate families. Althou gh theworking day is very long (a basic 10-12-hour day), overtime semi-comp ulsory at busy times, and even here no unions are set up, th epay is good, and workers get regular breaks. Rahman isconvinced his manage ment style is both profitable and replicable:It's good economics, as well as good conditions. Contented people workwell and stay w ith the factory over time - it's good for business.

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Codes of conductThere are a number of ways in which pressure to improveconditions in the factories can be generated. These range fromconsum er pressu re in importing cou ntries, to national and inter-national pressure on governments and business to ensure theratification and implementation of relevant ILO Conventions,and finally to international regulation of labour standards viatrade and investment agreements. They are largely comple-mentary strategies, and Oxfam is pursuing them all in its inter-national campaign to improve the situation of garment workersworldwide.46At first it may seem that the garm ents ind ustry is not an easy areafor consu mers to exert their influence on. Very few manufacturerssell direct to the public. The long manufacturing chain, ofteninvolving a number of different companies and sub-contractors,an d covering several different cou ntries , can make it difficult forconsumers to link brands to manufacturers. On the other hand,retailers are in a un ique position: since they prod uce designs andthen take patterns around to manufacturers until they find thebest deal, it is ultimately they who are responsible for what isproduced , where, for w hat wages, and under w hat conditions. Inthe UK, just seven retailers account for nearly half of the totalmarket value in the sector, and dominate total sales. High-streetclothing retailers, therefore, can be the prim ary link betw een con-sum ers and the clothing manufacturers, and ou r main assurancesor knowledge ab out conditions of man ufacture should be able tocome through them.One tool which can be used to encourage retailers and manufac-turers to imp rove stan dard s across an industry is a voluntary codeof conduct. Such codes are being developed by a wide range ofNG Os, consumer groups, unions, and workers' organisations, andare having some success. The European-wide Clean ClothesCampaign, for example, was launched in 1990, and includes40


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provision for a 'w indow trademark' which would be awarded tothose retailers who make significant progress towards certainstandards. The mark would be displayed, so that retailers couldadvertise themselves as sellers of 'clean clothes', and their ongoingbehaviour w ould be regularly and independently monitored.47Oxfam is currently developing its own code, or 'Challenge toRe tailers', to use in its cam paign to encourage im prov em ents forworkers in the garmen ts industry. It is based on ILO Conventions,and starts from the principle that retailers and manufacturersshould accept responsibility for the social and employment con-ditions unde r which their prod ucts are m ade , throu gho ut the sub-contracting chain, whether at hom e or overseas.Representatives of workers should be involved in the interpret-ation of the Conventions, and in the development of moredetailed standards which are appropriate to the local situation,and in the verification process. All the provisions of the codeshould apply equally to temporary and permanent workers, andto hom eworkers. It should be translated into local languages andprom inently displayed in the place of w ork.The Code should set some fundamental principles as aims towh ich com panies shou ld direct their efforts. Com panies are to bejudged by their progress tow ards im plemen tation of these goals,rather than their immediate achievement. This will enable com-panies to enter into serious dialogue with their suppliers in astrategy of positive engagement, rather than taking the simplerroute of imm ediately w ithdraw ing their business. On the issue ofchild labour, for example, there are a range of measures whichcould be taken to improve conditions for children: they includeoffering part-time schooling within the factories, training, andprotection from haz ardo us em ploym ent, as well as better w agesfor adults (so that they w ill be less likely to need to send childrenout to work). However, if a particular supplier is unwilling tomake reasonable progress towards meeting these standards,particularly w here other su ppliers are ready to do so, this shouldbe a major factor in deciding whether a trading relationshipshould continue.

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Reforming World Tra

reforming world trade: the social and environmental priorities

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