D+C Development and Cooperation (No. 6, November/December 2001, p. 16 - 17)

Non-governmental organisations and civil society groups have played a major role in putting pressure on corporations to adopt better social and environmental standards. The movement, especially of consumers’ organisations, is particularly strong in the United States. In Germany, fair trade and eco-labelling are at the top of NGO demands.

The World Trade Oganisation’s ministerial meeting in Qatar and the subsequent planned new negotiation round in November will also rekindle the row in this powerful institution over social and environmental protection standards. At first sight, the positions of the non-governmental actors appear very clear. In the latest annual report of the Confederation of German Industry (BDI) its new president, Michael Rogowski, categorically rejected the demand of many trade unions and NGOs that these standards be implemented. He said the BDI was prepared to accept only “declarations of self-obligation” by German industry.

These declarations, also called ‘codes of conduct’, have had a great response in the USA. Global Reporting Initiative, a US-based organisation dedicated to standardising corporate sustainability reporting, estimates that more than 2,000 companies voluntarily report their social, environmental and economic practice and performance. The codes have also found a degree of favour even among prominent critics of market radicalism. They see the codes as a proven way to make up for the apparent inability of national governments to wring concessions from multinationals.

Origins of codes of conduct

The Organisation for Economic Cooperation and Development (OECD) and the International Labour Organisation (ILO) were the first to develop such codes as recommendations in the 1970s. But companies in the North hardly took them up, and in many countries of the South working conditions actually worsened in following years. Since the beginning of the 1990s trade unions, human rights groups and organisations in development cooperation have sought to persuade multinationals to adopt individual codes.

The main issue is what means are available to monitor and verify the companies’ compliance. Since the firms submit compliance reports privately to their industry associations, accountability to consumers and the public remains minimal. Many NGOs are attempting to close this loophole, for without independent control the companies are hardly willing to apply their own code of conduct. But the independence of some NGOs has not lasted long. They quickly fell into financial dependency on the companies they were supposed to control. However, others that depend less on orders from their ‘target’ companies have been successful. In some industries they have been able to exert pressure on firms and squeeze concessions from them. The ‘Rugmark’ label to prevent child labour, for example, ensures that a growing number of children in India and Nepal no longer have to work like slaves in carpet factories and instead can attend school. The cut flower trade also gave in after 10 years of criticism and entered an agreement with NGOs and trade unions which guarantees observance of social and environmental standards on plantations in Ecuador, Kenya and Zimbabwe.

Cut flower production and carpet manufacture, however, are relatively weak economic sectors. It is much more difficult to assert codes of conduct in the mainstream international textiles business with annual sales in billions. But aggressive campaigns by labour groups, NGOs and student activists in the US have forced clothing companies to adopt stringent codes of conduct. After a particularly scandalous case of the slave-like working conditions of Thai workers in a factory owned by the California-based El Monte clothing company became public in 1995, the Clinton administration saw itself compelled to set up a special body to monitor working conditions in this sector. Made up of manufacturers, NGOs, trade unions and US Department of Labour representatives, the Apparel Industry Partnership (AIP) forged a code of conduct for clothing firms. The code stipulates that companies pay the local minimum or prevailing wage, that their workers be at least 14 years-old, and that employees work no more than 60 hours per week (although they may work unlimited voluntary hours). In November 1998 the AIP created the Fair Labour Association (FLA) to implement and monitor this code.

Anti-sweatshoop movement

Controversy arose when several unions and NGOs withdrew from the AIP, claiming that its provisions were too weak (they relied on voluntary enforcement and set no standard for a living wage), and that its monitoring was neither independent nor transparent (its external inspection system gave manufacturers too much control over which factories were investigated and by whom, and its monitoring reports did not have to be released to the public). The industry-backed FLA has attempted to address the concerns of the student anti-sweatshop movement that gained momentum through demonstrations at several US universities in 1997 and 1998. The FLA, which plans to begin certifying manufacturers by the end of 2001, calls for internal monitoring as well as external surveillance from an FLA-approved list of monitors, who will make announced and unannounced factory inspections.

Some student activists sided with the criticisms of the unions and NGOs, leading the United Students Against Sweatshops (in collaboration with university administrators and labour rights experts) to establish the Worker Rights Consortium (WRC) in 2000 as a more radical alternative. With support from the AFL-CIO and the Union of Needleworkers, Industrial and Textile Employees (UNITE), the WRC advocates a living wage for garment workers, independent unions, unannounced factory investigations and full disclosure of factory conditions. The WRC has support from more than 80 universities, compared with the 155 universities that have signed on with the FLA.

“Corporations in the apparel industry are making concessions that would have been unthinkable just a few years ago”, noted the US magazine Foreign Policy. But it took a great deal of effort to achieve that. “Activists cannot press for change in every industry all the time”, Foreign Policy added. Thomas Greven and Christoph Scherrer, a professor at the University of Kassel and the holder of Germany’s only Chair of Globalisation, also say these campaigns have clear limits. “In the case of some companies, such as Nike, it has taken a high and ongoing level of mobilisation to achieve even minor progress in working conditions in Southeast Asian factories,” say the authors of two studies on the subject. They add that it is doubtful if public pressure can be maintained in the long term. “To date, social movements have developed cyclically and if they are unable to get the concessions they are targeting anchored in law when they are at the height of their powers of mobilisation, their successes prove to be more of a passing phenomenon,” they say. That applies above all to strategies which use public campaigns to appeal to consumers’ conscious buying behaviour. For even buying patterns which involve the consumers’ immediate health and well-being, such as in the case of contaminated food, soon re-assert themselves after an initial scare. This behaviour pattern will assert itself even faster if campaigns focus on the manufacturing process rather than the product itself, because consumers feel less personally involved.

Greven and Scherrer sum up: “If supervisory authorities or monitoring bodies do not have sufficient resources, the organisations that speak up for better working conditions in the world’s factories will find it difficult to convince the public time and again that [..] a specific transnational company is violating its own code of conduct. That is why the two put their faith in an internationally binding regulation on observance of core labour rights, linked with an effective sanctions mechanism: a social clause in the WTO. They believe this would hit the mark not only among image-conscious brand article producers, but also all companies in WTO member countries that offer their products across borders.

Trade unions support
social standards

The major trade union federations and many NGOs in the North share this view. The International Federation of Free Trade Unions (IBGF) and also the German Trade Unions Federation (DGB) aim to come out for social standards based on the ILO core labour norms adopted in 1998. These provide for freedom of association, the right of collective bargaining, elimination of all forms of forced labour, abolition of child labour and the ending of all types of discrimination. The DGB believes that even a strengthened ILO, which is commonly regarded as a toothless tiger, would scarcely be able to help assert the core labour norms. The WTO is seen as the more powerful instrument. That is why the trade unions plan an international Day of Action on November 9, parallel to the WTO ministerial round in Qatar. Demonstrations, stop-work actions and public events will underline their demand for WTO implementation of social standards.

But many governments in the South fear that the WTO standards would above all be meant to promote protectionism in the industrialised nations and keep competitive products out of the markets of the North. Some trade unions, such as in Brazil, Malaysia and the Philippines, are now in open conflict with their governments. But other unions, for example in India and Singapore, support their governments’ stance against social standards. Many NGOs in the South as well as some in the North share the fears. Martina Schaub, of Germanwatch, believes that in cases of doubt WTO standards would be applied selectively. It is also doubtful if social clauses could be asserted against important trade partners such as India or China.

Making social clauses enforceable
for poor states

Werner Oesterheld, an official with the North-South Network of the DGB’s Education Centre, says: “We must find levels at which social clauses are enforceable. Their location is less important.” This demonstrative impartiality misjudges the real situation in the WTO. For it is precisely the organisation’s sanctions mechanism, the Dispute Settlement Body (DSB), to which all protagonists of social clauses relate, that clearly expresses the unequal balance of power within the WTO. To go through the long and expensive DSB procedure a complainant country needs economic experts, lawyers and the necessary money. So it hardly surprising that more than half the complaints lodged to date have come from the so-called ‘Quad’ group (the USA, Canada, the EU and Japan). Some have come from threshold countries such as Brazil, India and South Africa. But in only a few cases have member states classified as ‘developing countries’ invoked the DSB process. In addition, only one country can lodge a complaint against another. If sanctions are applied they are based on the assessed level of damage. Therefore the Quad group members can pay out of their ‘petty cash’ any sanctions imposed on them due to successful complaints against them by a developing country. In reverse, sanctions against a developing country mean either remedying the offending situation immediately or facing financial ruin.

The criticism from the South thus is based on verifiable experience. Nevertheless, the fight for international and binding social standards must be given priority over the Sisyphean task of achieving control of codes of conduct. But the WTO is the wrong place for that.