Developing countries in the world trade regime
Developing countries in the world trade regime

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Developing countries in the world trade regime

4.2 Environmental and labour standards

Question

Look back at Section 1. Why do trade unions in rich countries take up the cause of poor environmental and working conditions in developing countries as they did at Seattle? And why are developing country governments unwilling to have these issues raised in international trade negotiations?

It may seem puzzling that developing countries’ governments were apparently so dead set against protecting the environment or improving the working conditions of their own people. My short answer is that developing countries’ governments saw these noble objectives, promoted by well-intentioned individuals and organisations, being hijacked by employers and trades unions in ‘sunset’ industries in the developed world in order to restrict imports from countries that threaten them with cheaper products. To avoid the restrictions, developing countries would have to incur the additional costs of implementing higher environmental and labour standards, making their products uncompetitive.

What is meant by ‘environmental and labour standards’? To begin with the environment, the GATT/WTO framework already allows countries to restrict imports if they pose a danger to human, animal or plant health, based on the characteristics of the product (contaminated seafood, for example). Implicitly, this concerns dangers posed to the importing country. The issue is whether this should be extended to imports produced by processes (for example, fishing techniques) that do not embody the standards of the importing country, or damage the environment in the exporting country, or that damage the ‘global commons’ (such as the atmosphere, oceans, or endangered plant or animal species).

Labour standards (often referred to in European debates as the ‘social clause’), likewise, mean many things to many people. The GATT/WTO already permits restrictions on the import of goods produced by slave or prison labour; the question is whether this should be extended to other practices that people find exploitative or abhorrent, for example child labour. Some supporters of labour standards go further and call for restrictions on the import of goods produced by workers who do not receive wages or other benefits on a par with those in developed countries.

There are both economic and moral arguments against the imposition of external standards. Consider labour standards. Low wages give developing countries an advantage in international markets in selling goods produced using unskilled labour. Imposing costly labour standards such as higher payments to labour would deny them this advantage and deny developed country consumers cheaper goods. From this perspective, to say that low wages give developing countries an ‘unfair’ advantage is no more valid than saying that workers in developed countries have an ‘unfair’ advantage because machinery is more widespread and advanced in those countries.

None of this is to condone the deplorable disregard of environmental standards and working conditions in most developing countries. But I am arguing that is a matter to be left to environmental activists and trade unions in those countries, with technical and financial assistance from sympathetic outsiders; they have nothing to do with trade policy, unless the product itself poses a threat to the importing country. Indeed labour or environmental standards, or trade sanctions used to enforce them, can end up harming the very causes they are intended to promote. For example, workers who lose their jobs with firms that cannot implement higher environmental standards may turn to other, more environmentally harmful, activities (such as chopping down trees) in order to survive. Similarly, banning the import of goods produced by child labour, without providing any alternative source of livelihood, can force children into a life of crime or prostitution. Nor will the external imposition of wage and benefit standards help adult workers whose employers cannot afford to implement them: workers may lose low paid jobs, and surely low wages are better than no wages.

Nor do I wish to belittle the genuine concern of citizens in developed countries who feel strongly about these issues. However their support for environmental and labour standards necessarily implies that they are willing to pay more in the form of higher prices for goods whose imports they wish to restrict. They would be better advised to donate the same amount to charities and activist groups working towards providing better alternatives in the developing world. They should also apply pressure on their own governments to reduce barriers to the import of agricultural products, clothing, footwear and simple processed manufactures which the world's poor can sell to them.

It is also often argued that some environmental and labour standards amount to imposing one country's social norms on another. One society might find it repugnant to kill a particular species of animal, which is a staple food or source of livelihood in another country. Landmark disputes that have come to the WTO include American restrictions on imported tuna and shrimp caught with nets that might have killed dolphins and sea turtles, respectively. One society might believe that labour standards should include workers' participation in decision making while another might regard this as anathema. However, one should not push this argument about alien norms too far, lest one end up regarding even basic human rights as culturally relative.

But again, trade restrictions are not the answer. Just as there are international agreements on human rights, there are also agreements such as the Montreal and Kyoto protocols negotiated outside the WTO framework to try to tackle activities that have environmental effects (depletion of the ozone layer and global warming, respectively) beyond a country's borders. Other international agreements regulate trade in endangered species, hazardous wastes, and genetically modified organisms. Conventions of the International Labour Organization prescribe and monitor mutually agreed labour standards, though the ILO cannot enforce them.

Beyond these global norms, it should be left to each country to set its own standards, and the degree to which it is willing to compromise on them in the interests of economic development. The West, it must be recalled, industrialised on the strength of tariff protection of its new industries, highly polluting technologies, and brutal exploitation of labour both at home and in the areas under colonial domination. Yet it now tries to impose free trade, environmental and labour standards on much poorer countries. The experience of developed countries shows that people themselves demand better standards as they become richer. Why is this privilege being denied to the world's poor?

Activity 1

I have made a strong argument about a controversial subject on which sharp disagreements abound. Look back at the arguments in the preceding paragraphs. Then think of a particular environmental or labour standard you have heard about through the media and write some brief notes as follows. Do you agree with its objectives? Who gains and who loses from the imposition of such a standard? Are there any better ways in which to meet its objectives?

Discussion

You will have used your own example. As an illustration, think of the emotive issue of child labour. If this were to be effectively banned in developing countries, the costs of export industries (such as garment making) would rise in those countries, as employers either closed down or hired adult workers at higher wages. Firms and workers in developed countries who produce garments that compete with imports would gain; consumers in those countries would lose by having to pay more. In developing countries, the child workers would lose (if no better alternative were provided), as would those making a living from the occupations in which the displaced children would end up (typically, begging, street vending and domestic services), where competition would increase. The adults who replaced the children would gain, but they would have to be paid higher wages and the industry's sales would be reduced, so they would be fewer in number than the children they had displaced.

Rather than an outright ban, a better way to tackle the problem might be to provide funding to improve the education, health and nutrition of the children who are withdrawn from work, so as to prepare them for more productive jobs through which they could contribute to their families when they grow up. To improve these employment opportunities, it is important to dismantle the barriers that developed countries have imposed on simple manufactures exported by developing countries. Temporary financial compensation could also be provided to the families; this would not amount to large sums, as the children's cash contribution to their families is typically small.

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