Book Review: Social Dialogue and the International Financial Institutions: The case of Eastern Europe by Christina Hießl

     Christina Hießl's 2010 book Social Dialogue and the International Financial Institutions: The case of Eastern Europe is an important contribution to the nascent study of the inter-relationship between international financial institutions such as the World Bank and the International Finance Corporation and trade unions and employer groups.  Based on case studies, careful examination of country loan agreements and interviews with trade union officials at international confederations and in Central and Eastern European nations, the book assesses whether and to what extent the views of trade unions and workers are taken into account by IFIs in the design and implementation of country loan programs and policies.

     Social dialogue - the practice of including worker and employer representatives in the formulation of national fiscal and social policy - is as European as baseball is American.  Not only is the practice of social dialogue entrenched at the national level of many EU member states like Germany, Denmark, Spain, France and the Netherlands - it is entrenched at the EU level and in the OECD.  Thus, the question of whether Eastern and Central European nations - many of which are or aspire to be members of the EU - have strong social dialogue mechanisms is an important one to explore, as is the particular question of whether trade unions in these nations participate in social dialogue with international financial institutions such as the IMF and the World Bank which have had such a big impact on the economies of these nations since they emerged from communism in the early 1990s.

     The need for exploration of these questions is emphasized by the author, who notes that there is little written material on the subject of IFIs and social dialogue, especially in the context of the current global economic crisis when many long-established members of the EU like Greece, Italy, Portugal and Spain are in the position of having to seek aid from the IMF to bolster their faltering economies and weakened banking systems. 

     In an interesting background section, the author notes that trade unions were involved in the implementation of the Marshall Plan (overseen in part by the World Bank) in immediate post-World War II era Europe.  Later, the World Bank and IMF increasingly adopted a neoliberal economic approach while the International Labor Organization developed and advocated for an employment-intensive approach to economic growth.  The author recounts that the IFIs started taking steps in the late 1980s "in the direction of" acknowledging the importance of social policy, with a couple of meetings between the ILO and IMF.  The ILO reported on a high number of violations of the rights to freedom of association and collective bargaining in countries with IMF programs, however.  As late as 1999, the IMF had doubts about freedom of association and collective bargaining.  The author points out that since 2001, the attitudes of the World Bank and IMF have slowly begun to thaw towards these core labor rights - though complete acceptance is a distance dream.  In a milestone in the developing relationship between IFIs and social rights, since 2006 core labor standards have been a compulsory element of International Finance Corporation projects.  Despite this and a few other bright spots in the incremental (some might say glacial) process of change outlined in the book, the author found few instances of actual engagement between the IFIs and trade unions in Central and Easter European countries.  The author ascribes causation to various factors, not all arising from unwillingless on the part of the IFIs.  Some contributing factors include lack of capacity on the part of some trade unions, active interference and prohibition by governments and lack of social dialogue infrastructure in some Central and Eastern European nations.

     In examining case studies and discussing interview results, the author highlights the tension between IFI official emphasis on "rule of law" and "institution-building" while IFI policies often underming both, in contrast to EU emphasis on important educational and social dialogue infrastructure.  In doing so, she makes the important point that the process of changing the hearts and minds of IFIs like the World Bank and IMF with the goal of improving social dialogue with trade unions and employer groups in the implementation and development of loan programs and project will be a long and arduous one.  Social Dialogue and the International Financial Institutions: The case of Eastern Europe will form an important building block in making this process happen.

Crisis of Youth Unemployment in Europe

Interesting article by Walter Laqueur about the potential for the collapse of the European Union as a result of the current Euro crisis in the most recent issue of The New Republic.  Laqueur draws parallels between high youth unemployment in today's Europe with that of 1920s and 1930s Weimar Republic, and the possibility that youth with their hopes for an economic future dashed may be easily swayed by demagogues.  Not discussed in the article is the high incidence of unemployment among racial minorities and the children and grandchildren of third country national immigrants to the EU, who suffer unemployment at even higher levels than other European youth.

What does Mexico's entry into the Trans-Pacific Partnership mean for worker rights?

The race is on.  On June 18, 2012, Mexico was formally invited to join in the negotiations for the Trans-Pacific Partnership, a free trade agreement spanning 4 continents with shores touching the Pacific Ocean.  Canada received its invitation to join the negotiations the following day.  The other 9 members of the TPP are Peru, Chile, Singapore, Australia, New Zealand, Vietnam, Brunei, Malaysia and the United States.  Three weeks later, on July 9, 2012, the United States Trade Representative officially submitted its proposal for Mexico’s TPP membership to the U.S. Congress, starting the 90-day clock for the members of Congress and the public - especially worker rights groups, human and women’s rights advocates, fair trade specialists, environmentalists and other members of the free trade counter-culture - to have an impact on the way the TPP is framed and operates.

Mexico’s membership in the TPP represents a critical moment for fair trade advocates and worker rights groups.  On the one hand, many activists deride the TPP as simply a bigger, badder version of the NAFTA.  In contrast, the USTR touts the TPP as a “high standards” free trade agreement with sophistication and minimum standards nations must meet in order to gain admission to the club.  Entrance to this club is no insignificant achievement, as TPP membership could provide access to 60% of global gross GDP.

A third alternative view might be that incorporating all three NAFTA member states into the TPP allows the Obama Administration to indirectly fulfill its campaign promise of renegotiating the NAFTA without actually tackling the messy task of re-opening a free trade agreement that is nearly 20 years old.  In fact, 20 years ago the NAFTA itself was being negotiated in the months before a major U.S. election.  Despite the fact that the NAFTA was being negotiated by a Republican administration and today the TPP is being negotiated by a Democratic administration, the debates and issues are strikingly similar.  In some areas, such as the Investor-State arbitration provisions of the foreign direct investment chapter of the NAFTA (the infamous NAFTA Chapter 13), there has been little change over the last 20 years.  Free trade advocates and critics alike note that draft TPP FDI provisions do not appear to differ much from NAFTA Chapter 13.  The final outcome appears not to be set in stone, according to news reports that the Government of Australia does not want to submit to such an Investor-State provision.  There have been significant developments in labor chapter provisions of the free trade agreements the U.S. has negotiated since the NAFTA, however.

The labor chapter of the NAFTA, which is actually a side agreement to the main FTA called the North American Agreement on Labor Cooperation, has been considered to be one of the most flawed aspects of the NAFTA arrangement.  On the one hand, the NAALC is a template for subsequent labor chapters in U.S. free trade agreements, with the NAALC’s requirement to “effectively enforce labor laws” remaining a cornerstone of labor chapters of U.S. FTAs with Jordan, Morocco, Bahrain, Oman, all 5 Central American nations and the Dominican Republic, Colombia, Panama and South Korea - as well as the labor chapters of FTAs the U.S. has with TPP member states Chile, Singapore, Australia and Peru.  On the other hand, since the U.S.-Jordan FTA was finalized in 2000, labor (and environmental) provisions have been incorporated directly into the main text of U.S. FTAs.  Post-NAFTA U.S. FTA labor chapters have also left behind the artifice of a hierarchy of labor rights set forth under the NAALC under which freedom of association, the right to collective bargaining and the right to strike form a tier of rights subject to minimal enforcement under the NAALC while minimum wage, child labor and occupational safety and health are part of a different tier of rights for which member states could potentially be liable for trade sanctions for enforcement failures (though this potentiality has never reached actuality during the 18 years of the NAFTA’s existence).

Similarly, while the NAALC does not refer to international labor standards, all subsequent U.S. FTAs obligate signatories to comply with core labor standards set forth by the International Labor Organization (freedom of association and the right to collective bargaining, protection from workplace discrimination, child labor protections and occupational safety and health protections).  While the NAALC has its own rather precious enforcement mechanism separate from the dispute resolution mechanisms of the NAFTA, subsequent U.S. FTAs make violations of the labor chapter subject to some variation of the main trade enforcement mechanism of the FTA.  For example, labor petitions under the Central American-Dominican Republic FTA are subject to international arbitration.  The arbitration process has been invoked with regard to a 2006 labor petition filed in relation to Guatemala under the CAFTA-DR.  The first tier of review of labor-related petitions under post-NAFTA FTAs is the same as that for the NAALC, however, with review conducted by “National Administrative Offices” or “National Contact Points” within member states’ labor ministries.

With all its faults, however, it is arguable that the NAALC is one of the few international agreements under which the U.S. is subject to any meaningful international scrutiny for its labor practices, especially those involving immigrant workers, and that the Government of Mexico is the only entity with the clout and moxy to engage in such scrutiny, no matter how diplomatically couched NAALC reports prepared by the Government of Mexico may be.  The NAALC is also the only U.S. FTA labor chapter to explicitly provide protection for migrant workers (a provision inserted by Mexico during the negotiation process), and one of a few modern U.S. FTA labor chapters that does not attempt to exclude application to sub-federal entities such as U.S. states or Canadian provinces.  Over the years, Mexico has accepted and reviewed 9 labor petitions alleging the U.S. and various U.S. states have failed to effectively enforce labor laws in connection with immigrant workers, challenging the U.S. to better protect Mexican and non-Mexican immigrant workers alike.  Currently, the the Government of Mexico is reviewing a petition filed by the Service Employees International Union that alleges recent anti-immigration legislation passed by the State of Alabama violates the NAALC.

The NAFTA member states are entering an interesting phase in their relationship with one another as they become a part of the TPP, especially when it comes to labor issues.  While the U.S. has not always recognized the fact that the Government of Mexico is more than its equal and a worthy adversary in disputes such as the NAFTA Trucking Dispute and with regard to NAALC labor petitions, Mexico’s record over the past 18 years speaks for itself, especially in the fact that Mexico boldly raised duties on U.S. agricultural and industrial products in retaliation for U.S. failure to comply with NAFTA trucking provisions.  Unfortunately for many international human and labor rights advocates, one of the areas in which the Government of Mexico has been particularly successful is in deftly blocking efforts by the U.S. Government to interfere in Mexican labor affairs.  While it has always been a misleading mischaracterization to describe Mexico as a country without labor standards, the Mexican labor market and labor administration systems have some persistent and somewhat intractable flaws, especially the widespread protection contract practice whereby employers enter into collective bargaining agreements with trade unions without genuine and effective participation of the workers themselves.  This system has remained largely intact since the advent of the NAFTA and the NAALC in part due to the deft and sophisticated maneuvering of the Government of Mexico.  This deft maneuvering is spurred in part by the well-founded fear of Mexican policy-makers that labor conditionality in an FTA with the U.S. might mean the devolution of labor laws to what many Mexicans and others throughout the world deem to be poor labor standards in the U.S. such as inadequate protection against unfair termination from employment and the lack of requirement that maternity leave be paid.

Mexico’s entrance into the TPP provides for the opportunity for a “do-over” when it comes to labor conditionality.  The timing of Mexico’s invitation to participate in the TPP is particularly unfortunate, however, as less than a month prior, the Worker Rights Center in the State of Puebla (Centro de Apoyo al Trabajador de Puebla or CAT Puebla) was forced to shut down as a result of death threats made against the leaders and personnel of the Center and their families as well as the kidnapping and beating of one of the Center’s leaders.  In 2003, CAT Puebla and its international allies filed NAALC petitions with the Canadian and U.S. labor departments regarding labor abuses in the garment manufacturing industry and failures of the Governments of Mexico and Puebla to effectively enforce labor protections.  The petitions were pending until December 2008, arguably with little benefit deriving from review by the U.S. and Canadian governments as the violence, threats and malignment of CAT Puebla and the workers the Center represents escalated in subsequent years.  In addition, in late 2011 a petition was filed with the Canadian and U.S. labor departments alleging that the Government of Mexico had not complied with its NAALC obligations when it unilaterally changed the legal structure of a government power company and by doing so dissolved one of the most power independent unions in the country.  This petition was amended in May 2012 to add more allegations relating to disability and gender discrimination.  It appears as though the Government of Mexico was not publicly pressured to address and resolve either situation prior to its invitation to participate in the TPP.

Though touted as a sophisticated high standard FTA for which countries must meet certain conditions to become members, it is unclear what standards and conditionalities Mexico had to meet in order to have its application for membership readily accepted by the existing members.  While there may have been behind-the-scenes labor-related conditionality negotiations between Mexico, the U.S. and other TPP trading partners, publicly it appears as though the Government of Mexico was invited to join the TPP without serious scrutiny of some of the country’s less desirable labor-related practices.  In contrast, labor conditionality has been a key point in incorporating Vietnam into the TPP, as U.S. Secretary of State Hillary Clinton has stated that a goal of the TPP with regard to Vietnam is to lower trade barriers and improve labor and environmental standards.  In addition, it appears that significant technical assistance and financial aid has been provided to Vietnam to help that country improve labor standards.  As labor conditionality does not seem to have played a large role in the inclusion of Mexico in the TPP by the USTR and its counterparts in the executive branches of the other TPP member states, this may be left to the legislative authorities and the public over the next 3 months.

Another wrinkle affecting worker rights issues and the incorporation of Mexico into the TPP is the fact that because of the 90-day period of review of the entrance of Canada and Mexico into the TPP, neither country will be able to participate in ongoing negotiations during trade rounds during this period.  Both countries agreed to be subject to any provisions of the TPP finalized before the 90-day period ends.  The next round of negotiations is scheduled to occur in Leesburg, Virginia in October 2012.  TPP negotiators hoped to finalize negotiation of a number of key chapters of the TPP, including the labor chapter, during the most recent negotiations held in San Diego, California which took place in the first week of July 2012.  While the TPP labor chapter is yet to be shared with or leaked to the public, the chapter is likely to look more like post-NAALC labor chapters than the NAALC.  The AFL-CIO has called on the USTR to negotiate a labor chapter that looks like the labor chapter in the U.S.-Peru FTA, with full international arbitration and sanctions applicable to failures to fulfill obligations set forth in the labor chapter.  According to a comprehensive special report published by Inside Trade on May 18, 2012, such a model does appear to be on the negotiation table.  According to Inside Trade, the TPP labor chapter will require member states to ensure that their laws comport with the ILO Declaration on Fundamental Principles and Rights at Work.  Vietnam and Brunei and other TPP member states has expressed reservations about making labor chapter obligations subject to binding settlement resolution, however.

Questions also remain as to whether the TPP labor chapter will be finalized by the time Mexico and Canada are fully able to participate in negotiations later this year.  Their participation and/or non-participation in this negotiation process could have significant ramifications for the content and applicability of the TPP labor chapter.  Will both nations accept the provisions as negotiated, the way new member states accept and adopt the European Union acquis of existing directives and regulations?  What will the status of the NAALC and its migrant worker protections be once the TPP is negotiated?  Will Mexico agree to be subject to labor conditionality in a TPP chapter which it did not actively negotiate?  Does adoption of the TPP labor chapter sight unseen provide the Government of Mexico political cover for a back-door renegotiation of the NAALC?  Will Mexico have an opportunity to insert protections for migrant workers in the final text of the TPP, or will the negotiation of the TPP be like the negotiation of the NAFTA, where the issue of migration is too hot to handle politically for the U.S., Canada, Australia and other migrant receiving nations in the TPP?  What of the Philippines, a geographically likely potential participant in the TPP, a country with both Asian and Hispanic roots, having once been a Spanish colony like its Latin American brethren?  The consensus of TPP partners is that the Philippines is not ready for membership in the TPP, but there is movement to provide assistance to the Philippines to meet the conditions that other South East Asian nations  (Singapore, Brunei, Malaysia and Vietnam) have met in order to join the FTA.  Immigration and migrant worker protection could be a key concern for the Philippines if it were to join the TPP.  The Philippines and Mexico, along with China and India, have the highest backlog of family-based visa applications to the United States.

While the advancement of labor and environmental conditionality in the accession to free trade agreements such as the TPP - as well as the continued growth and improvement in the comprehensiveness and quality of labor and environmental provisions - are both good signs and provide more options for advocacy and discussion in the context of free trade, it appears the fundamental mechanisms for global development have not changed much in the 20 years since the NAFTA negotiations first began.  Advancements in the comprehensiveness and quality of labor chapters may not necessarily result in the mitigation of the impacts free trade and foreign direct investment policies can have on the quality of life of people who are subject to those policies.  It remains to be seen whether the TPP is more of the same or a significant departure from the past.  Finally, the lack of public references to labor conditionality in acceptance of Mexico’s application to be a member of the TPP indicates that not much has changed since 1992.  It could be that Mexico, like Colombia, is being rewarded for its enthusiastic embrace of the U.S. War in Drugs these last few years.  Regardless of the why and how - questions that will be difficult to answer until the historical record is made public years after the less-than-transparent TPP negotiation process is finalized - it is clear that there is little time for all of the issues to be properly aired and addressed and for labor conditionality to be inserted into the process before Mexico and Canada are full partners in the free trade agreement, with all the privileges and market access that entails.