International Labor Standards in the World Trade Organization and the International Labor Organization

By Brown, Drusilla K. | Federal Reserve Bank of St. Louis Review, July 2000 | Go to article overview
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International Labor Standards in the World Trade Organization and the International Labor Organization


Brown, Drusilla K., Federal Reserve Bank of St. Louis Review


For some time, the United States has attempted to draw labor standards under the umbrella first of the General Agreement on Tariffs and Trade (GATT) and then the World Trade Organization (WTO). The apparent purpose is to attempt to use the enforcement mechanisms of the GATT, and now the WTO, to improve compliance with what the United States considers to be fair labor standards.

Most recently, the United States attempted to place the issue of labor standards on the agenda for the Millennium Round at the Seattle Ministerial Meeting in 1999. As in the past, President Clinton appeared to seek a joint working party between the WTO and the International Labor Organization (ILO). However, he went further and suggested that the United States might impose sanctions against countries that violated core labor standards.

By contrast, during the Singapore Ministerial in 1996, the Clinton Administration claimed that its objective--with regard to labor standards--was only to signal U.S. workers that competition from low-wage countries would not be intensified due to the denial of basic human rights. Administration officials went to some lengths to dispel the view that the United States intended to use trade sanctions to uphold labor standards. The U.S. delegation only sought to link the maintenance of an open world trade system to the promotion of core labor standards and to establish a working party to identify inks between labor standards and WTO rules. [1]

The United States has had virtually no success with either attempt. The Singapore Ministerial Declaration stated that the ILO was the appropriate body for addressing labor standards internationally During the Seattle Ministerial, the delegates were unable to agree on any language concerning labor standards.

LINKAGE BETWEEN CORE LABOR STANDARDS AND TRADE DISCIPLINES IN THE WTO

Given the U.S.'s inability, thus far, to establish labor standards as an explicit aspect of the WTO agenda, the United States is left with the option of linking labor standards to existing trade disciplines. There are several provisions in the WTO Agreement that could, at least potentially provide such a link. These are discussed below. [2]

Anti-Dumping

According to Article VI of GATT 1994, exports may be subject to an anti-dumping duty if a product is being exported at a price below its normal value and the sale of the product can be shown to be causing or threatening to cause material injury to domestic producers. It has been argued that selling products produced under sub-par working conditions constitutes social dumping. A product can be shown to be selling below its normal value if there is evidence of price discrimination. That is, the product can be shown to be sold at a higher price in a third-country market. Another way to show a product is selling below its normal value is on the basis of a constructed production cost. In this case, dumping occurs when the good is sold at a price below the cost of production. Therefore, under current WTO rules, the investigative authority would be prohibited from asserting that a violation of core labor standards has occurred, which can only be shown to have depressed the cost of production, unless the violation a lso resulted in a below-normal price.

Countervailing Duties

Alternatively government-enforced wages and working standards that depress the cost of production can be seen as an export subsidy that might be subject to countervailing duties if injury to the domestic industry can be shown. However, under GATT Article XVI, a subsidy must take the form of a financial contribution by the government or other public body, an income support, or a price support. Suppression of core labor standards does not involve an income transfer, an income support, or a price support and, thus, is unlikely to be viewed as a subsidy eligible for a countervailing duty.

Even if government-enforced suppression of wages can be seen as a regulation of prices, violation of labor standards does not meet other criteria of Article XVI.

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