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International Labour Standards:
Crucial to China's Development

Address by Lee Swepston ©
Wuhan, 26 & 27 October 2002

I am very pleased to be addressing this key gathering of law professors and professionals in China. This is a concrete manifestation of the rising awareness that social development and economic development go hand in hand, and that failing to put into place a basic set of workers' rights at a very early stage will hold back the changes that China is now pursuing.

Globalisation is the blessing and the curse of the modern world economy. It is seen as the saviour of export economies, as the death of inefficient State-owned companies, and the chance of developing countries to tap into the world economy and achieve the development they have been missing. Others see it as a licence to exploit workers in poorer economies, and as a channel to export jobs from richer countries to poorer ones. They see it as the enemy of social progress for the profit of capitalism. In Seattle two years ago, as in Washington and other places where the world's financial institutions were meeting, protestors called for an end to globalisation because, they said, its inevitable consequence is the exploitation of workers and the ruin of the world's ecology.

China is now joining the international trading system, and its economy is feeling the costs and the benefits of doing so. Overall, the benefits are obvious, and you can already see them. But what are the effects on workers, and to what extent can national and international labour law make a contribution to the debate? We at the ILO think that some of the answers, at least, can be found in our discipline.

A few weeks ago the ILO and the Asian Development Bank held a joint meeting in Manila on the subject of development and labour standards. The conclusions that the two organizations reached, and that emerged from the research and consultations we carried out jointly, were the following:

Failing to take account of labor standards harms development in definite and measurable ways. Respect for basic human rights at work, and for the legal and regulatory structures necessary to give effect to them, helps workers, employers, and economies as a whole. It is essential for poverty reduction.

This does not mean that developing countries should be pushed to adopt a form of regulations and protections that will stifle flexibility, competitivity and growth. There are costs involved for all the actors that must be managed before the benefits become evident, but there are short-term as well as long-term gains to be made. The difficulty in practice is to find the appropriate level of regulation and protection in each case.

What are these core standards, and why were they adopted? It is useful to review what has happened at a world level, and relate it to the present situation in China.

The ILO was established in 1919 as one of the outcomes of the First World War. In 1914, before that conflict began, there had been a first globalizing economy, which bore striking resemblances on a smaller scale to the situation today. But one of those resemblances was the low level of protection for many of the workers who were affected by globalisation - production workers in particular, but this extended also to all categories of working people. There were gross inequalities in both incomes and in protection, and a struggle by some countries to profit by giving workers low pay and small protection, in order to improve their competitive position. This was one of the main reasons for the World War, and had to be addressed in the peace conference that brought the War to an end.

The ILO therefore was created, as a tripartite organization that united governments with representatives of workers and employers. Its essential purpose was, and remains, creating a system of labour standards applicable to the entire world.

After the end of the Cold War and the dismantling of opposing socio-economic blocks, for the first time since 1914 we have returned to a virtually universal market economy, though of course a vastly larger one than existed at that time - and with the crucial difference that this time the developing world is closely implicated in it. There was a relatively brief period in the early 1990s when the dominant expectation was that the combination of democracy and this universal market economy would by themselves create the growth opportunities that had been so lacking. The growth that materialized certainly was impressive in many places - but both within and between countries, it was very uneven. Some benefited, others did not; the position of many improved but others saw that the relatively secure position they had worked out for themselves and their children came under threat. This same situation is now operating in China itself, with an explosive growth in economic opportunity and in the wealth of many segments of society, but with other parts of the nation lagging much further behind.

This inequality of resources and of levels of protection is one of the major characteristics of today's globalizing economy. In that first globalized economy in 1914, mentioned earlier, the differences in levels of protection, wages and labour costs were not so great between European and American countries, though there were some participants who had much lower protection. Today, the difference in labour costs between Germany and Vietnam, for instance, is enormous. This makes the importance of labour costs a much greater factor in this globalized economy, and means that it is much more intimately tied into decisions about where to locate enterprises, and sources of purchasing.

As the new universal market economy developed at the end of the Cold War, it became clear that the old problems of poverty, lack of development, and defects of social justice, were still there. Not only had they not gone away; due to the increased transparency of the global economy, they were more visible than earlier. They could not be hidden, and they could not be justified by referring to cultural differences. A general consensus began to emerge that a rights-based approach to development should be pursued.

In fact, during the Asian financial crisis of the mid-1990s and the suffering it caused, ILO studies concluded that the crisis had been much deeper and much longer than necessary, essentially because of the lack of standards of social protection for workers, for unemployment insurance and to regulate the conditions under which workers could be laid off.

In this new situation in the early 1990s, one of the ILO's basic Constitutional maxims became increasingly relevant in the new global context. As the 1944 Declaration of Philadelphia of the ILO states: 'poverty anywhere constitutes a danger to prosperity everywhere'. It became necessary to rethink the basic principles on which social progress should be based.

By the time of its 75th anniversary in 1994, the ILO had become aware that it needed to review and update its mandate and its methods of work. World leaders and other thinkers were increasingly looking to the world of work as one that would be necessary to carry the world economy into the future, as the growing inequalities in the world economy were manifested in unequal distribution of incomes and in concentrations of highly-profitable companies in some countries, surrounded by seas of deepening poverty.

Why is the contribution of the ILO, and of international labor standards, important at this point in China's developing history? As already indicated, we believe that history has shown that it is important to adopt standards at the national level protecting workers' rights and regulating industrial relations, to accompany and sustain economies as they develop. Indeed, as this audience will recognize, the existence of a system of law itself is a crucial element in development.

One of the conclusions the ILO has reached - and this one is shared by virtually the entire development community - is that there is a core of fundamental workers' rights that is essential to development. They are enabling standards, and if they are in place then the other rights that working people need can be put in place as a consequence.

It was not difficult to decide what these core standards were. The ILO had long considered that freedom of association and the right to collective bargaining; the abolition of forced labour; and non-discrimination in employment and occupation were basic to its mandate. In Copenhagen in March 1995, the World Summit for Social Development added the elimination of child labour to this list. It recalled that these standards are based on the ILO Conventions on these subjects and stated that even those countries that had not ratified the relevant Conventions should take action to respect their principles.

Around the same time, the OECD decided to base its first study on trade and labour standards (which came out in 1996) on this same short list of ILO standards. This OECD study concluded, among other things, that respect for core labor standards did not have negative consequences for the economies and trade of developing countries.

The next important step was taken by the Ministerial Meeting of the World Trade Organization in Singapore, in December 1996. It reaffirmed the commitment to international labor standards, stating that they belong to the competence of the ILO, which should be supported in promoting them. Secondly, labor standards should not be used for protectionist purposes and particularly not for denying the comparative advantage of developing countries from lower wages.

In June 1998 the International Labour Conference adopted the Declaration on Fundamental Principles and Rights at Work and its Follow-up, which includes the same list of principles. Its acceptance by the Conference includes the affirmation that all Members, even if they have not ratified the Conventions in question, have an obligation arising from the very fact of membership in the Organization, to respect, to promote and to realize, in good faith and in accordance with the Constitution, the principles concerning the fundamental rights which are the subject of those Conventions. The ILO itself, in turn, has the obligation to assist the countries in meeting these obligations.

The Global Compact, which was proposed to the international business community by the Secretary-General of the United Nations in Davos, in early 1999, also adopted the four categories of this Declaration as its labor principles. This is part of the larger movement taking a promotional approach to the implementation of labor standards through mostly voluntary action by the business community, with the wider participation of civil society. This additional element lends strength and depth to the long-standing international mandatory and supervisory approach, and is a vital supplement to it.

The voluntary and promotional approach represented the Global Compact and the ILO Declaration, as well as the corporate responsibility movement more generally, might have led to expectations that the system of international law and supervision would be undercut. This does not, however, appear to be the case. The ILO launched a campaign for the ratification of its fundamental Conventions immediately after the Copenhagen Summit in 1995. This campaign has now led to nearly 400 ratifications of these eight Conventions, and most of them are now approaching universal ratification levels.

Where does all this take us, and how does it relate to the situation in China?

China has been carrying out a review of its involvement in the international economy, and of the rules by which it works. There has been a basic recognition that a law-based approach, as a necessary complement to the rights-based approach becoming accepted on a world scale, has to be put into place if prosperity is to be achieved and maintained.

It has also undertaken a serious commitment to international labour standards, and is now bound by 23 ILO Conventions. As concerns discrimination at work, China ratified the Equal Remuneration Convention, 1951 (No. 100) in 1990, the first international human rights Convention it ratified, and I have been making regular visits to China for the last three years to work with the Government and the social partners for the ratification of the ILO's wider Discrimination (Employment and Occupation) Convention, 1958 (No. 111). A second core subject is child labour - the Worst Forms of Child Labour Convention, 1999 (No. 182) was ratified earlier this year, and the Minimum Age Convention, 1973 (No. 138) was ratified three years ago. We have just received a request for assistance for the ratification of the ILO's two core Conventions on forced labour, though for now we are still discussing simply how to discuss it. The remaining subject, on which discussions are at a very preliminary stage, is freedom of association and the right to collective bargaining, and we expect this to take a longer time.

We will continue to work with China, as China continues to explore its commitments to international law, and to development of labour standards that conform more nearly to international Conventions. You here at this meeting are convinced of the utility of labour law, and the benefits of adopting and applying laws that protect workers on a basis of equality and fairness. Our experience tells us that this is not only the right thing to do, it will also carry real benefits for development.

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