Workers' rights in the global economy

Workers’ rights have come under increased pressure under recent years in developing as well as developed countries. This is often associated with globalization, which refers to the integration of markets in the global economy. This changing nature of international trade is one of the downward pressures on working conditions.

International production today is dominated by global value chains. The production process is split up into different pieces, which are outsourced to the countries that can boast the most attractive conditions, i.e. lowest costs. Multinational enterprises can easily switch their production between countries in search of the most favourable conditions. They operate as local monopsonies by setting the prices while the local suppliers are price-takers. This asymmetric power relationship leads to a race to the bottom regarding workers’ conditions, which is accentuated by weak labour market institutions and a surplus of labour.

This is why Friedrich-Ebert-Stiftung, from its Office for Regional Cooperation in Asia based in Singapore, has set up a project to promote and develop binding labour standards in trade and global value chains. It should not be allowed in the 21st century for companies to compete by violating fundamental rights at work, such as the right to form trade unions and bargain collectively. Yet this is exactly what is happening. Social clauses have been developed to protect workers’ rights in trade agreements, but they have turned out to be ineffective as governments either lack the political will or strength to actually enforce labour rights.

The project focuses on four countries representing three different trade regimes: Bangladesh, Cambodia, Pakistan and Vietnam. Four case studies have been undertaken by academic experts to explore the labour/trade nexus and assess the compliance with labour standards in the sectors of textiles and garments, footwear and electronics.

Both Bangladesh and Cambodia benefit from the EU’s “Everything But Arms” arrangement (EBA), which gives them full duty-free and quota-free access to the EU for all their exports with the exception of arms and armaments. The observance of labour standards in Bangladesh is however poor. This is most striking in Export Processing Zones (EPZs), where workers are prevented from organizing and bargaining collectively, but also outside these zones the right to form trade unions is restricted. Recent strikes and demonstrations have led to arrests and beatings of trade union leaders. Furthermore, wages do not allow for decent living standards, and overtime is often obligatory.

The case study for Cambodia shows that the modest improvements in working conditions in the garment and footwear industry, especially with regard to compliance with minimum wages achieved under the preferential trade agreement with the US, have come under increasing pressure because of competition with neighbouring countries such as China and Vietnam, declining export prices and higher wages (although well below living wages). According to the ITUC Global Rights Index 2016, Cambodia is one of the worst countries for workers in the world.

In January 2014, Pakistan qualified for the EU Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+), which is an instrument to encourage third countries to comply with human rights in return for duty-free access to EU markets. Before applying, Pakistan had to ratify 27 ILO conventions. Despite this, breaches of labour rights are widespread. The bulk of workers in the garment industry work in the informal economy, which deprives them of any rights. Many of them are paid less than the minimum wage, which is already too low to maintain a decent living. Moreover, the right to organize and collective bargaining is not protected in Pakistan’s EPZs.

The case study of Vietnam confirms that the race to the bottom is an economic reality. There is a declining respect of workers’ rights and a decline in the price paid by international brands for apparel they import to the US. However, domestic companies, and especially former state-owned enterprises, have overall better labour practices than foreign owned firms. Compliance with labour standards is the best in the garment industry followed by the footwear industry, and is the worst in the electronics industry, including in the areas of occupational safety and health, working hours and living wages. Workers face forced overtime of up to 100 hours per month.

Research carried out within the project confirms that imposing social conditions in trade can have a positive impact on workers’ rights and society more broadly if they are well designed, with a proper enforcement mechanism.

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Veronica Nilsson is programme manager at Friedrich-Ebert-Stiftung (FES) Office for Regional Cooperation in Asia. For more information on the project email info(at)fes.asia.