Appropriate Role of the WTO in Addressing Labor Standards

Subject: Business
Type: Analytical Essay
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Introduction

The relationship between international trade and labor standards is a key issue today. The relation defines the link between developing countries and advanced industrialized nations. International enforcement of labor standards is justifiable from two frontiers of arguments. The first one opines that “unfair” labor conditions and practices exist in many countries and trading partners and call for the need to offset an occurrence through appropriate trade policy measures in a bid to level the playing field (Elliott & Richard 2003). The proponents of the argument include organized social and labor activists. Secondly, other social activists contend that developing countries put their workers in abusive and exploitative working conditions and under suppressed wages and remuneration terms. Such arguments point at the need to have clearly defined international labor standards and effective enforcement mechanisms to preserve human dignity in the pursuance of economic interests (Anderson, 1998). Some of the existing international labor standards are enforced through diverse mechanisms and international bodies such as the World Trade Organization (WTO) among regional and bilateral trade agreements.

The World Trade Organization (WTO)

The World Trade Organization (WTO) refers to an intergovernmental organization whose mandate is to regulate international trade. Its official commencement dates to January 1995 as formulated by the Marrakesh Agreement. Initially, it had 123 nations as its member states during its commencement (WTO 2017). It served to replace the General Agreement on Tariffs and Trade (GATT) that regulated international trade. In accordance with its preamble, GATT’s purpose was to significantly lower tariffs, trade barriers as well as eliminate preferences on mutually beneficial basis. The WTO was formulated to deal with the regulation of trade between countries through the provision of a framework for negotiating trade agreements as well as a dispute resolution process (Maskus 2002). Such standards are aimed at enforcing the adherence to WTO agreements by trading countries that have signed and ratified the WTO agreement. Most issues dealt with by the WTO derive from previous trade negotiations such as the Uruguay Round (1986–1994). All measures are taken with the view of raising standards of living and ensuring full employment (Brown 2001). To achieve its objectives, it undertakes a series of trade liberalizing agreements reached on consensus from the WTO’s members forming the General Council.

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Labor standards under the World Trade Organization (WTO)

Labor Standards in the World Trade Organization refer to the binding rules forming part of the principles and jurisprudence applicable within the rule making structures of the World Trade Organization (WTO). The labor standards play a critical role within the WTO. Despite them being a backbone in the WTO, they form a prominent issue facing the WTO hence generating academic and economic debates (Rodrik 1997). The scope to which the WTO recognizes labor standards is based on the principles established in Conventions of the International Labor Organization (ILO), and renowned human rights treaties such as the International Bill of Human Rights.

Core Labor Standards

The core labor standards are identified by the ‘Declaration of the Fundamental Principles and Rights at Work’ by the International Labor Organization (ILO). They are widely acknowledged for their relevance and importance and maintaining fair practices in the global labor market. Besides, the core labor standards are universally applicable, irrespective of whether the appropriate conventions have been ratified or the development levels of a given country and the existing cultural values (Pauwelyn 2001). The standards comprise of qualitative but not quantitative standards since they do not establish any specific level of working conditions, health and safety standards or even minimum and maximum wages. Despite their nature, they are not aimed at undermining the comparative advantage held by either country participating in a trading affair with another state. It follows that the so called ‘core labor standards are essential human rights recognized in widely ratified instruments of human rights such as the Convention on the Rights of the Child (CROC), which exists as the most widely ratified human rights agreement with a total of 193 parties, as well as the ICCPR that has 160 member states (Schott 2010). The core labor standards include:

  • Freedom of association (ILO Convention No. 87 and 98): under this concept, workers are capable of joining independent trade unions, free from the influence of the government and their employers. Therefore, nobody should be penalized or discriminated for being a member of a given trade union. It allows for full participation in the unions activities without fear or any form of intimidation thereof.
  • The right to collective bargaining (ILO Convention No. 87 and 98): this is an advanced protection mechanism in negotiating for better working terms and conditions. It gives workers the opportunity to negotiate with their respective employers for improved terms on a collective basis rather than individually (O’Rourke 2013). Literally, it is important in the essence that it raises the bargaining power.
  • The prohibition of all forms of forced labor (ILO Convention No. 29 and 105): it seeks to prevent slavery and servitude by recognizing human dignity and the need to respect such dignity. Such includes security from slavery and prison labor as well as preventing workers from being coerced to work under duress.
  • Elimination of the worst forms of child labor (ILO Convention No. 138 and 182): worst forms of child labor include slavery and similar concerns particularly debt-bondage, child trafficking serfdom, and the use of children in armed conflict (Basu 2009). Measures to address the issue of the worst forms of child labor under the labor standards include the implementation of a minimum working age as well as the establishment of certain working conditions for children.
  • Non-discrimination in employment (ILO Convention No. 111): it is a human rights concept that denotes equal opportunity and treatment for all people. It prohibits differential treatment in the work place unless under extreme circumstances those are completely justifiable (Bagwell & Robert 2001). Generally, under non-discrimination, the central argument is equal pay for equal work regardless of age, gender, race, social status, and physical conditions (ILO Convention No. 100).

Notably, very few countries have ratified majority of the conventions that harbor the core labor standards such as the ILO (International Labor Organization) convention and other agreements. The main reason behind this is domestic constraints. However, such a position does not negate them as well as their applicability among nations because they are also recognized in the (Universal Declaration of Human Rights) UDHR (De Wet 2005). Besides, they also form part of international customary law thus commanding adherence and respect from various states.

Role of the WTO in addressing Labor Standards

The World Trade Organization plays a critical role in addressing the issue of labor standards. The effect of linking core standards to the WTO in assessing the measures in place to address labor standards raises different issues (Golub 1997). They include the preventive measures of WTO and their effects particularly on the dispute settlement process as well as on potential trade sanctions predicated on non-compliance. Others include the prospect of losing market access because of violations of core standards. The economic and political overheads of exposure and dispute settlement exist as the prime incentives for compliance to the outlined standards.

Individual countries adopt their trade measures as well as formulate the policies applicable in commercial activities. Some of the policies and measures adopted by different countries may differ or conflict not only among the states but also among the core labor standards (Wilkinson & Steve 2000). Policies and measures that are allegedly in contravention of the obligations and expectations of the labor standards are subject to the WTO dispute settlement procedures. The failure of informal consultations prompts a member to request formal consultations that mostly lead to the institution of a dispute settlement panel. The process follows quasi-judicial procedures that entail extensive submissions and hearings form the concerned parties with the dispute settlement panel legally assessing the case. For instance, if a case of violation is established, the settlement committee is bound to give a verdict ordering for the rectification of the law to breed compliance. In other instances, the policy or measure might be struck off to avoid further violation. Additionally, the findings of the dispute settlement panel are subject to appeal by the losing party or aggrieved entity for review (Maskus 2009). In the appellate stage, they are addressed as questions of law as opposed to an examination of factual issues. As opposed to the dispute settlement panels, the findings and recommendations delivered by the Appellate Body remain final and legally binding to the disputing parties unless the Council (all Members of the Dispute Settlement Body) agrees on refuting the adoption of the appellate report. From the foregoing, it is clear that the WTO assists in dispute resolution besides breeding compliance to the outlined labor standards issues.

After the adoption of the final finding and resolution from the dispute resolution process, the violating member state is under an obligation to implement the findings and ruling within a reasonable timeframe demarcated by the panel (Hoekman & Michel 2009). Therefore, the WTO also plays a role in the implementation process of decisions arrived at for parties ruled to be in contravention of labor standards. In some situations, one party may face difficulties in implementing the ruling. In instance of difficulties and inability to implement its obligation, a member is at liberty to offer compensation. However, the compensation is of a temporary nature and does not completely replace the aspect of compliance. If the member is unable to materialize the compliance, she becomes impaired and hence is entitled to withdraw concession, therefore, reducing market access rights. The WTO is capable of implementing such measures by ensuring compliance a well as sanction those that fail to comply (Payne 2001). Primarily, the market access rights aim at addressing the sector and product concerned. However, they may eventually influence other products and sectors with an objective of exerting effective pressure on the failing Member state and command the implementation of the reached decision. Practically, the prospects of imposing the sanctioning measures suffice to bring about a change in attitudes of domestic players.

The dispute settlement system adopted by WTO is useful in accessing violation of core labor standards for a number of reasons. The first one is based on the strict timelines and expediency in addressing any matter before it. Ideally, it is a trademark of the WTO dispute settlement process to operate under strict time schedules in addressing disputes before it (Scholte, Robert & Williams 1998). Ranging from consultations to implementation, the settlement process should not go beyond 15 months. Practically, complex cases take longer time; hence, it is clear that the WTO system surpasses what courts, both national and international, mostly take. Therefore, it is capable of providing the appropriate substantial and procedural means of investigating and assessing the facts of a case.

Despite offering a good avenue that is capable of addressing various issues under international trading activities, there are some shortcomings evident in this aspect. Doubts arise on whether governments are most likely willing to employ this instrument in enforcing labor standards (Bolle 2016). First, most of the violations appear to be politically sensitive, therefore translates to an exposition of the government weaknesses if at all the issues is to be referred to the WTO dispute settlement panel. Politically motivate matters have destabilizing potentials if exposed uncontrollably. Second, governments might be unwilling to institute cases of minor economic impact because they are driven by the economic problems occasioned to the respective industry (Haufler 2013). Ideally, political and financial and political costs cannot be incurred to solely defend labor standards abroad with negligible economic impact. In such a situation, political and economic pressures override the violation of labor standards. Third, many governments can be unwilling to bring any cases on violation for settlement because they fall short of demonstrating full compliance with the core standards. The maxim of equity ‘he who seeks equity must come with clean hands’ disqualifies them in varying aspects. If they are unable to demonstrate their compliance, they cannot claim violation of such standards on their part. Specialists assert that various governments collude and refrain from incurring limitations resulting from the multi-lateral dispute settlement procedures (Dawson 2013).

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The WTO also enhances core labor standards by providing an international legal framework aimed at the attainment of a fair and stable globalization process. Such is achieved through the creation of a level playing field. The WTO recognizes the fact that the achievement of a decent work in the globalized economy necessitates attention from the international community hence the reason behind its existence (Addo 2015). The establishment of the WTO is a response by the world community to the challenge of maintaining fair labor practices to regulate aspects of trade, finance, human rights, and labor among others. The WTO contributes to the existing legal framework through the elaboration and promotion of international labor standards to ensure that international economic development and growth tag along with the notion of decent work. The WTO’s unique structure ensures that governments, employers, and workers alike back the outlined standards. Besides, it has promoted the international legal patchwork on social standards to provide a level playing field in the world economy (Porter, 2015). The freedom of association and collective bargaining as advocated for in labor standards lead to better labor-management, cooperation, and consultation to reduce the number of costly labor conflicts and promote social stability among nations. Moreover, the beneficial impacts of labor standards remain key in attracting foreign investors (Vosko 1997). In choosing nations to invest, many foreign investors rank the quality of workforce as well as social and political stability far above low labor costs. Similarly, little or no evidence exists in support of the position that countries with little respect to labor standards are extra competitive in the globalized economy.

In many situations, governments control foreign trade relations in the global arena. Under such circumstances, it is challenging to evaluate how responsive labor standards claims can be brought and handled within the WTO (Bown 2016). A mainstay of WTO rules cannot take unilateral action without going through the WTO dispute settlement. Interests of labor standards are better protected under the WTO core standards as opposed to legal regimes where countries are at liberty to unilaterally impose their standards besides recourse to doctrines of extraterritorial use of local law (Murphy & Anysley 2013). Given the various constraints outlined, failure to comply with core labor standards occasions the following measures or a threat thereof pursuant to the WTO rules:

  • Invoking of unilateral countervailing duties such as surcharge and tariff increase as being unilaterally imposed. They have the effect of lowering the country’s global economic market and weaken its link with other state in relation to trade. In many instances, such penalties apply on goods produced in contravention of the core standards, and subject to dispute settlement review upon grievance by the aggrieved party (Mehmet, Errol & Robert 2013).
  • Unilateral Elimination of products and services from the Generalized System of Preferences (GSP) privileges and subjected to the bounds of tariff bindings or tariff increase. The member state ceases to experience the preferential treatment enjoyed while in the blanket WTO, thus incurring extra expenses in its global trading activities.
  • Withdrawal of tariff concessions as well as an increase tariff rates beyond the bindings upon the goods concerned to cap the maximum gains made by the violating country (Trubek, Jim & Jeffrey 2016). The overall effect is that other member countries gain a competitive advantage over such a country.
  • Imposition of quantitative restrictions that may extend or stretch to a total ban on the importation of goods produced in the complete disregard of core standards. Such a sanction seeks to reduce the volume and quantity of goods consumed in the market. Such a reduction translates to reduced economic gains upon the violating party.
  • Formulation of similar penalties and sanctions on other goods that may not necessarily relate to the violated core labor standards is also another option. Such a position might be rarely invoked but it is applied in some situations to demonstrate seriousness and the need to comply with the outlined core labor standards.
  • Imposition of restrictions of market access to services that is particularly independent of the subject leading to the violation of core standards may also be used to enhance the level of compliance (Hassel & Nicole 2016).
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The trade measures imposed by the WTO in instances of insufficient compliance with the core labor standards take two broad categories. They may be a response to the violations regarding the manufacture of certain goods and services or as a response to insufficient acquiescence with the required standards in general. Therefore, they can broadly be regarded to as product-related measures and general sanctions. It is not always clear in the current WTO dispensation with regard to which of the two measures is prioritized, but it is perceived that both measures are being implemented.

The Product-related trade measures refer to very specific responses adopted to cap the importation of products manufactured or produced in a manner fickle with the core labor standards. From this perspective, the core labor standards denote the process and production methods (PPMs). The PPM model holds that products must be made in a certain manner regardless of the fact that such manner may not be depicted in the substance and quality of the said goods and services (Chossudovsky 1993). For instance, goods and services procured through exploitative forced labor and child labor or even under social dumping conditions might be ruled non-compliant with core labor standards. Similarly, those produced in violation of the principles of non-discrimination may face an import ban, or face restrictions implemented through the imposition of extra charges.

The rationale behind the use of product-related measures as per the WTO rules is essentially a matter of convenience in leveling the playing field (Rahnema & Victoria 1997). Contempt of definite labor standards is apprehended as an alteration of competition remedied at importation through border measures. Product-related measures differ from general sanctions. In the case of product relate-measures, disrespect for core labor standards by the government and employees occasions action by the international community or governments of the importing countries (Easterly 2006). It follows that only products and sectors remain target as a way of promoting or bringing about a change in the labor relations as well as promote best practices in the labor market. General sanctions by the WTO act independent of the specific product-related measures. Primarily, their imposition occurs in areas that are more likely to result in such necessary or anticipated changes in an efficient manner (Philip 2007). Therefore, it follows that it may be possible to aim at exports with an objective of boosting the production of domestically marketed or consumed products and services alike.

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Comparing the two approaches, the aspect of product-related measures or sanctions appears more effective compare to the general sanctions approach. For instance, under the product-related tenet, it is necessary for the complainant state to vividly demonstrate that production of the contented goods and services occurred under conditions in contravention of the adopted minimal standard (Jean-Michel 2011). Additionally, it must be deliberated as to whether any further criteria should be employed such as wages alone or a fair price on the export market. From any given perspective, the approach appears to be more suitable in the adjudicative process and dispute settlement in WTO as opposed to the practicability of imposing general sanctions to improve the general situation of labor relations to any member state. The adoption of a product-related approach is capable of alleviating concerns raised by LDCs especially the fears that labor are imposed with a view of only promoting protectionist import restrictions by the developed countries that usually harbor a hidden agenda (Collier 2008). However, it still faces challenges for a number of reasons; prominent to it being the lack of a globally uniform core standards code, binding all nation and with respect to the provision of goods and services. Such a scenario would accord unions and governments a voiced bargaining position when negotiating better terms and conditions for investment in the domestic and foreign fora. Further, common global standards serve to counter a race to the bottom by assisting to counter the prevalent dilemma that imposing standards inspires the diversion of investment.

The enforcement tools of WTO are only beneficial as a threat on the imposition of sanctions. Such threats are efficient in bringing about the anticipated changes in the perceptions of domestic constituents (Postnikov & Ida 2014). In instances where the threat fails, the imposed measures are likely to negatively affect the work force as well as the sector where labor standards need be improved. Restrictions of trade and the subsequent sanctions are not advantageous in enhancing labor standards. Further, the issue of temporary compensation poses a challenge. A party acting in violation of WTO rules is obligated to remit compensation in as much as it is not capable of remedying the violation. Literally, the remedy is not much helpful even if temporary in the purview of labor standards (Alessandrini 2010). The reason behind this is that it may be used as an avenue of postponement and to circumvent implementation of the particular core labor standards. The use of the Trade Policy Review Mechanism (TPM) as an instrument to assess the state’s compliance with core labor standards on a regular basis faces one challenge. The examination of the trade policy of member states tends to be more general without any particular measures (Don & Terrence 2013). Primarily, it is used as an assessment by the state as well as a source of information as opposed to bring about the resolution of outstanding issues. The other problem with the WTO approach is that it lacks the jurisdiction over labor standards. For instance, the only place where labor standards are mentioned within the entire WTO Agreements is in Article XX e of the GATT that touches on the products of prison labor (Rittich 2005). Such silence and lack of prominence on labor standards in the WTO agreement weakens its capability to enforce them.

Conclusion

A succinct exploration attempting to link labor standards, the WTO rules, as well as a critical evaluation of the enforcement levels and challenges reveals great potentials as well as limitations alike. However, it is clear that the WTO plays a critical role in addressing the controversies surrounding the issue of international core labor standards. Despite all nations enjoying their sovereign status, it is good to adopt an international measure to control the pursuit of economic interest in a bid to protect and uphold human dignity a well as preserve the interests of developing countries from the developed nations. Looking at the vast nature of the global market, it is a challenge3 for the WTO to solely ensure strict adherence to the global core labor standards. However, better results can only be attained through a close cooperation between the WTO and other international labor organizations such as the ILO to collectively contribute towards a purposeful implementation of the core labor standards in the world. Notably, the role played by the WTO in upholding core labor standards is clearly depicted in the dispute settlement process regarding what matters necessitate adjudication as well as in the imposition of general sanctions as well as product-related sanctions. A case for reforms must be tailored at developing a broad and universally binding code of labor standards.

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