Do-It-Yourself Labor Standards

While the WTO dickers, companies are writing the rules

There aren't likely to be many breakthroughs at the World Trade Organization meeting, which began in Qatar on Nov. 9. Even if the WTO can overcome security fears and conflicting agendas, it won't get near an agreement about global labor and environmental standards--two sticking points that have blocked a new trade round since the 1999 fiasco in Seattle.

Yet as governments continue to squabble, outlines for some standards are taking shape. The movement is being driven by Western corporations and the factories in developing countries that supply them. Spurred by incessant complaints from consumer and human rights groups, more companies are deciding they have little choice but to commit to some sets of standards under debate at the WTO (table).

Employers in several developing countries are even asking for independent monitoring of their factories to attract or retain orders from Western companies. Their requests have thrust the International Labor Organization (ILO) into a new role as factory-labor cop. Bangladesh clothing makers have agreed to expand an ILO child-labor inspection program to include other basic workplace rights, such as prohibitions against forced labor and the freedom to form unions. Philippine garment makers have begun outside labor auditing, while Cambodia's apparel firms have agreed to ILO inspections in exchange for higher U.S. export quotas. "It's hard to have people poking their noses into a private business, but we have come to accept that labor standards are good for the economy and the people of Cambodia," says Roger Tan, secretary-general of Cambodia's Garment Manufacturers' Assn.

FILLING THE GAP. What's happening here is that in the absence of action by the WTO, the private sector is slowly drawing up the global economy's labor and environmental standards. So far, more than 240 codes of conduct have been promulgated in the U.S. and Western Europe, according to a survey by the Organization for Economic Cooperation & Development. Roughly half cover the environment and half emphasize labor rights, requiring companies to adhere to local labor laws and to ILO principles such as the right to unionize. Many originate from individual companies and promise no outside oversight. But more than 26 codes, mostly those from associations of companies and nonprofit groups, require member firms to allow independent inspections of their facilities or those of suppliers. Since most inspections so far have found at least some problems, the process can be costly to employers.

In the long run, the spread of private-sector standards may force global bodies such as the WTO to step in. As factories and farms are scrutinized by a patchwork of oversight bodies, they may reach a point at which centralized rules would be easier to deal with. Historians point to the U.S. in the 1930s, when Congress created most of the modern regulatory agencies to bring order to a welter of state rules. "The global economy needs a floor of core labor standards," says ILO Director-General Juan O. Somavía. "It could be five years, but labor rules are going to be there."

The Cambodian experiment offers the closest example so far of the sort of enforceable standards advocates are pushing the WTO to create. In 1999, the Clinton Administration signed a three-year trade pact that grants up to 14% annual increases in the U.S. quota of garment imports from Cambodia if the Cambodians meet the ILO's core labor standards. Although the process has led to strikes, angering some employers, the Cambodian government has made inspections mandatory for any garment factory that wants to export to the U.S.

Despite the turmoil, most local factory owners see the costs as worthwhile, says association head Tan. The ILO, which had never conducted factory inspections other than for child labor, hired seven Cambodians and gave them three months of training. The first inspections took place in June, and the ILO now is working with employers to get them to correct problems they found, including excessive overtime. The Bush Administration hasn't yet decided whether to renew the program when it expires in December. But Tan says Cambodian firms want to continue either way to satisfy the labor codes of Western apparel companies.

WILLING PARTICIPANTS. As such codes proliferate, employers in other low-wage countries are starting to see a competitive edge in enforceable labor standards. About 70% of the 1,000 garment factories in the Philippines have been inspected this year by outside labor auditors under a program the industry initiated. Now, the Employers' Confederation of the Philippines is working to include all industries as a way to compete with lower-cost countries, says President Donald Dee. "We want to make it clear in everyone's mind that if they buy Philippine products, they know they're not made in a sweatshop," says Dee.

In Bangladesh, the garment makers' association has agreed to allow the ILO to monitor its 2,000-odd member factories for adherence to the agency's core labor rules. The plan builds on a partially successful child-labor program the ILO has run since 1996, which removes children from the factories and helps them enroll in school.

Meanwhile, the drumbeat of pressure from anti-sweatshop campaigns in the U.S. and Europe is driving an increasingly diverse array of industries to embrace emerging standards schemes. Western companies that sell bananas, chocolate, coffee, and timber have agreed to independent oversight of the farms in developing countries that produce their raw materials. Like most garment makers, they have done so only after getting hit with charges of environmental or labor abuses.

On Oct. 1, for example, the U.S.-based Chocolate Manufacturers Assn. (CMA) and British chocolate makers penned a pact with anti-slavery groups and the ILO to monitor cocoa farms after media exposés of child slavery in West Africa. The British group and the CMA, which represents companies such as Hershey Foods Corp. and Mars Inc., pledged an initial $2 million. But "it may be that, down the pike, global labor standards through international organizations like the WTO will make more sense" than private efforts, says CMA President Larry Graham.

Of course, private labor and environmental rules are still in their infancy. Inspectors often don't know what they're doing. And companies can't respect rights such as freedom of association in repressive countries such as China. Still, the movement seems likely to keep expanding, no matter what happens in Qatar.

By Aaron Bernstein in Washington

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE