Contribution to a seminar in New Delhi (November 1995) on social clause in trade agreements.

The social clause as a global social bottom-line

Let me shortly introduce myself. I am working for a small independent, voluntary and non-governmental organization called India Committee of the Netherlands (ICN). The ICN is not a project-funding organization, but does research and educational work on India and its relations with Europe and The Netherlands. Within Europe we carry out campaigns in solidarity with (organizations of) the poor and oppressed in India. These campaigns are aiming to expose and if possible change those western policies that harm the poor, as well as to promote western policies and developments that support the struggle for social justice and sustainable development in India. The ICN works on the basis of consultation of and collaboration with many organizations in India.

Some issues we have worked on and its results are:

  • the export of Dutch fishery trawlers to India backed up by development aid, which was harming the artisanal fishermen. This form of 'aid' has been stopped.
  • Dutch and European development aid to India, which we have consistently criticised for the fact that it has largely benefitted Dutch export industries and a small elite in India. An example was the export of large amounts of chemical fertilizers. The fertilizer aid has been considerably reduced and a larger part of Dutch aid is now pro-poor oriented.
  • the export of European milk powder and butter oil to India's Operation Flood programme. Although this programme has some good elements, we e.g. criticised the cross-breeding programme and the fact that milk made from recombined European milk products was sold below the price of indigenous milk, thereby depressing the milk price of the local farmers. The latter has been stopped.
  • conversion of India's debt to The Netherlands of almost 4.000 crores rupees into support for employment guarantee programmes for agricultural labourers. At the same time we campaigned to make agricultural labourers the most important target group of Dutch and European development aid to India. The Dutch government is in principle willing to support good employment guarantee programmes.
During 1993 and 1994 we have, among other issues, focused on different elements of the relation between India and the European Union (EU). That is how we started to look at the concept of linking European trade with minimum labour standards, preferably as an element in a socalled development compact or contract between India and the European Union (the inspiration for these contracts comes from development contracts which The Netherlands has recently signed with Bhutan, Costa Rica and Benin). Such a compact or contract should in our view be based on reciprocity, mutual obligations and a strong participation from civil society. This compact could be build upon the present 'cooperation agreement' which was recently signed by India and the EU. As part of such a contract we propose:
  1. A considerable multi-annual contribution to the 'right to survival' in India by supporting employment guarantee programmes for agricultural labourers, including large-scale participation of women and ecological regeneration.
  2. A joint action programme against global warming with by far the main burden on the EU through e.g.:
    • setting and implementing targets for the reduction of the emission of greenhouse gasses by the EU
    • financial compensation from the EU to India and other countries for the detrimental excess of greenhouse gasses emitted
    • transfer of technology from the EU to India for energy saving programmes.
  3. Economic incentives by the EU - e.g. by tariff reductions - to stimulate the export of India's (and other developing countries') products which are produced under basic minimum labour standards like absence of child labour and mutually agreed environmental standards, with matching obligations and programmes to improve the implementation of these standards in the North.
Besides the above-suggested elements of a development compact between India and the EU - which could become 'a model for North-South relations - other elements could be included as part of a dynamic social, economic and political relationship. But even apart from being possible elements of a development contract - which can give these elements a larger and more interrelated impact and scope - the above-mentioned proposals are worthwhile in themselves.

Although we have lobbied with the European Commission and the European Parliament on the development compact, thus far this idea has not gained much ground. With regard to trade however the European Union has since January 1995 introduced a new 'General System of (trade) Preferences' (GSP) for developing countries, which include (the announcement of) a social and environmental clause. The two main elements with regard to the 'social clause' are:

  1. An additional tariff cut of yet unknown magnitude on top of the trade preferences for developing countries if the following ILO-formulated minimum labour standards are adhered to: freedom of association, the right to organize bargain collectively and minimum age for admission to employment. This is called the 'special incentive arrangement'. These additional tariff cuts and their precise form and extent will only go into effect from 1998 onwards, as the EU first wants to await the discussions on the social clause in the World Trade Organization and the International Labour Organization.
  2. Temporary withdrawal, in whole or in part, of the trade preferences for a country in the case of e.g. forced labour and prison labour but also in case of 'failure to comply with obligations under the Uruguay Round to meet agreed market-access objectives' and 'manifest cases of unfair trading practices' (see Annex I for the full text of the 'special incentive arrangement' and 'temporary withdrawal etc.). This arrangement has already gone into effect from January 1st 1995. Complaints can be made by any member state, legal entity or person. If the EU feels there is enough evidence, they will start further investigation, lasting at least one year.
The ICN is generally positive about the social clause in the GSP, because it feels that there is a balance between positive incentives (e.g. carpets or garments with a certified trade mark that they are free of child labour have easier access to the EU than other products) and sanctions in case of extreme human rights violations like forced labour. The International Confederation of Free Trade Unions (ICFTU) has suggested the EU to look e.g. into the use of forced labour in Pakistani export industries.

The ICN is also in favour of a social clause in multilateral trade agreements. Our arguments are the following:

  • the minimum labour standards envisaged as part of a social clause are nothing more than basic human rights. These have little to do with the level of development and should be 'traded away'.
  • a social clause can act as a 'social bottom-line' for competition in the world market. This is especially important for developing countries with produce many labour-intensive goods. Countries who want to abide by minimum labour standards like freedom of organization and non-use of forced labour should not be 'punished' because other countries 'outcompete' them by suppressing trade unions or using bonded or forced labour. This is especially important for developing countries with produce many labour-intensive goods. To give a concrete example: if India wants to implement its child labour laws seriously, leading to a price increase, it should not be undercut by countries who increase their low-paid child labour force.
  • a social clause could provide a basic international social framework with multilaterally controlled incentive- and sanctioning-mechanisms, which might even prevent bilateral actions on labour standards which stem from more protectionist motives.
  • a social clause is not a panacea for social justice, but it can help to create a basis for it and it can help to improve labour standards in extreme cases. A social clause does not prevent national processes towards social justice, but can reinforce these processes.
Some additional points should be made:
  • incentives to improve the compliance with ILO Conventions on labour norms should come first. Sanctions should come in the second place, but should not be absent, especially in the case of forced labour and lack of freedom to organize and bargain collectively.
  • campaigning for a social clause should be combined with campaigning for debt conversion (for social development) and better access of developing countries to the markets of developed countries.
  • campaigns against the violation of minimum labour norms by specific (multinational) companies, targeted consumer boycotts and the development of alternatives like certification and labelling of products on labour standards like child labour, will benefit from a social clause.
In the course of the discussion on the social clause some arguments are brought forward which I explicitly like to refute. Probably the most important argument against the social clause is that it will be used for protectionist reasons. Partly these motives are undoubtedly there, but that does not mean that basic labour rights should not be internationally enforced as they protect the rights of workers worldwide - even more in developing than in developed countries where usually the standards are higher than the bare minimum. Sometimes it is stated, in order to strengthen the argument about the social clause as just a new form of protectionism, the social clause implies the same wage-levels for workers in developed and developing countries. This is clearly not true and nobody is arguing for that. If this element would be part of a social clause - which in practice is unthinkable - we would be against a social clause, because it would then indeed be a clear-cut protectionist instrument.
Opponents to the social clause in developing countries often suggest that the developed countries and western companies are all very much in favour of the social clause and that this already shows that it is only in their own interests. This is not true. Many governments and the largest part of the business community is against it or at least wary of it, because it could interrupt free trade on their conditions and harm business interests.

Gerard Oonk
India Committee of the Netherlands

November 1995


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