Labor's Stake in the WTO

By Wachtel, Howard | The American Prospect, March-April 1998 | Go to article overview

Labor's Stake in the WTO


Wachtel, Howard, The American Prospect


When seven years of trade negotiations at last gave birth to the World Trade Organization (WTO) in 1995, the U.S. labor movement was one of its leading skeptics. A world trade organization, labor supporters argued, would only accelerate the headlong rush to laissez-faire by dismantling national regulations. It would overwhelm attempts by nations to defend living standards and the ability of unions to fight for wages and health and safety laws--and it would make it harder for nations to defend the rights of workers to join unions. Labor lobbied hard against the WTO.

But now, ironically, the WTO could become a critical venue for advancing workers' rights worldwide. For the WTO has the power to review nations' domestic laws that create unfair trade advantages--including, potentially, labor laws. The WTO could define fair trade to include labor standards. Such linkage would be a historic change in the world's trading regime, and labor's stake in it.

The idea of linking labor rights with trade policy has been around since shortly after World War II when efforts to create an international trading regime began in earnest. However, the WTO represents the first opportunity since 1948 to give the issue serious attention.

Proponents of linking labor rights to trade rules build on the conventional case for free trade. For international commerce to be free, markets within countries must not be rigged to encourage exports and discourage imports. This is the fundamental principle of free trade and it is the central precept of the WTO.

Labor markets are a special case, because they are not conventional free markets. Minimum-wage laws and guarantees of free collective bargaining change the wages that market forces might otherwise produce. But the economic mainstream in advanced industrial countries has long accepted that some regulation of wages and working conditions can enhance overall economic efficiency, as well as fairness. If employers are compelled to treat workers decently, they deploy them more productively. By that logic, certain labor practices common in undemocratic countries, such as child labor, prison labor, and denial of the right to form unions, can be seen as unfair trade practices--and, potentially, violations of WTO principles that trade should reflect acceptable rules of market competition.

Since wages affect all traded products and services, labor issues are central to the ultimate credibility of the WTO as the arbiter of a consistent rule-based international trading system. To the extent that wages are artificially held down because labor rights are abrogated, an indirect subsidy is extracted from these workers by their governments' policies, which arguably violate the WTO's free trade philosophy.

During the WTO's second-year review in late 1996 in Singapore, the United States actively sought to link labor rights with trade. However, this effort was blocked by a coalition of Third World nations (who saw the initiative as a form of protectionism) and the European Union (which was then dominated by conservative governments). Nonetheless, the attempt put the U.S. government on the side of trade-labor linkage and forced WTO members to officially consider the issue of linkage for the first time. Even Sir Leon Brittain, the Thatcherite vice-president of the EU who actively opposed trade-labor linkage, was compelled by sister EU governments to affirm that "labor standards and other apparently domestic political issues are now the legitimate concern of the WTO because they are concerns of our constituents." The United States, according to the U.S. Trade Representative's office in Geneva, will continue pushing for linkage.

THE ORIGINS OF THE WTO

Established in the wake of World War 11, the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT) formed the third pillar of the Bretton Woods system, which included economic development loans through the World Bank and monetary stabilization via the International Monetary Fund. …

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