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Trade Unions

Speakers from the trade union movement and groups closely aligned with trade unions represented both international and domestic organizations. Neil Kearney represented the International Textile, Garment and Leather Workers’ Federation; Mike Grace, the Communications Workers of America; Roland Schneider, the Trade Union Advisory Committee to the OECD (Organisation for Economic Co-operation and Development); Barbara Shailor, the AFL-CIO; Richard Clayton, Service Employees International Union; Peter Chapman, Shareholder Association for Research and Education; and Katie Quan, the Center for Labor Research and Education, Institute of Industrial Relations, University of California, Berkeley.

INTERNATIONAL TEXTILE, GARMENT AND LEATHER WORKERS’ FEDERATION

Neil Kearney, presenter

The International Textile, Garment and Leather Workers’ Federation (ITGLWF) is an International Trade Union Secretariat bringing together 217 affiliated organizations in 110 countries, with a combined membership of more than 10 million workers. The ITGLWF is funded by subscriptions from its affiliated organizations, and its education and development aid programs are funded by donor organizations.



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3 Trade Unions Speakers from the trade union movement and groups closely aligned with trade unions represented both international and domestic organizations. Neil Kearney represented the International Textile, Garment and Leather Workers’ Federation; Mike Grace, the Communications Workers of America; Roland Schneider, the Trade Union Advisory Committee to the OECD (Organisation for Economic Co-operation and Development); Barbara Shailor, the AFL-CIO; Richard Clayton, Service Employees International Union; Peter Chapman, Shareholder Association for Research and Education; and Katie Quan, the Center for Labor Research and Education, Institute of Industrial Relations, University of California, Berkeley. INTERNATIONAL TEXTILE, GARMENT AND LEATHER WORKERS’ FEDERATION Neil Kearney, presenter The International Textile, Garment and Leather Workers’ Federation (ITGLWF) is an International Trade Union Secretariat bringing together 217 affiliated organizations in 110 countries, with a combined membership of more than 10 million workers. The ITGLWF is funded by subscriptions from its affiliated organizations, and its education and development aid programs are funded by donor organizations.

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KEY POINTS Codes of conduct have largely failed to improve compliance with international labor standards (ILS), in part because existing monitoring systems are not effective. The multiplicity of codes has hindered compliance. Social auditors are not governed by adequate standards, and they lack training in basic labor rights issues. Just as important, workers and unions need to be involved in the monitoring process. Widespread establishment of independent trade unions could solve the problem of noncompliance with ILS. Mr. Kearney noted that horrendous abuses of workers occur every day in the supply chain of the apparel industry as workers are punished and abused for simply exercising, or trying to exercise, rights contained in ILS. These violations occur in Guatemala, Dominican Republic, Cambodia, China, Lesotho, India, and Pakistan, and the majority of those whose rights are violated are women. Exploitation of labor in the apparel industry is happening because of intense competitive forces emanating from retailers in the United States and Europe, the increasing number of factory owners who are multinational corporations (MNCs) and owe allegiance to no country, the failure of governments to enforce their own labor legislation for fear of driving away foreign investment, and the apathy of consumers in the West who simply don’t care under what conditions a product is made. Labor rights abuses are occurring in a context of more than 180 International Labour Organization (ILO) Conventions and Declarations, the ILO Tripartite Declaration concerning Multinational Enterprises and Social Policy, the OECD Guidelines for Multinational Enterprises, and more than 10,000 codes of conduct, whether these are company codes, multi-company codes, or multi-stakeholder codes. For the past decade the emphasis has been on voluntary measures by business instead of mandatory and enforceable laws, and this approach has failed miserably. Many codes are shams, focused on welfare issues rather than core labor rights and designed to protect brand-name integrity, not to affect the way factories are managed. For instance, there are only 150 SA8000-certified plants in the apparel industry because this program requires the recognition and implementation of the ILO’s 1998 Declaration. In fact,

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some codes make matters worse for workers, such as the American Apparel Manufacturers Association WRAP program, which does not recognize any of the basic labor standards, including child labor. Unfortunately, even the more enlightened codes are facing implementation difficulties because of the lack of training of social auditors in the basic issues of ILS and national labor laws. For example, many auditors simply ask whether a plant is unionized and, if the response is negative, do not try to discover whether the workers have been denied freedom of association. The major concerns of workers in the apparel industry are low wages and excessive overtime, and it is in this area that social auditors have had to contend with massive falsification of records by management. They have not been up to the task. The entire social auditing industry needs to be upgraded in terms of training and standards; the ILO is the organization best equipped to do this. Companies’ management systems are incapable of ensuring compliance with ILS, and no code other than SA8000 requires that proper management systems be established. Finally, workers are not consulted or informed about the existence of codes and how they can be used to improve working conditions. It is clear, said Mr. Kearney, that individual company codes should be abandoned because the best way to ensure compliance is through multi-stakeholder codes; these in turn should be merged to reduce the number of codes and the excuse for inaction that this provides to factory management. But the best way to enforce compliance with ILS is to empower workers by building up independent trade unions and encouraging collective bargaining; ensuring that freedom of association is a reality and not just on paper would go a long way toward eliminating violations of ILS. Workers and unions should also be actively involved in the monitoring and auditing process because they are the ones closest to the problems. This can occur only if governments adopt and enforce labor legislation, and the ILO establishes global standards. A global economy requires global monitoring and regulation. Where national governments fail to enforce their own laws, for whatever reason, effective means to enforce those laws should be given to the ILO, which currently has neither the means nor the authority to undertake this task. To this end, the labor movement favors a linkage of trade and labor rights through a close working relationship between the ILO and the World Trade Organization (WTO). On the corporate side, retailers and merchandisers need to be made liable for the working conditions under which their goods are produced.

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COMMUNICATIONS WORKERS OF AMERICA Mike Grace, presenter The Communications Workers of America (CWA) is a federation of unions representing more than 740,000 workers in both the private and public sectors. CWA members are employed in telecommunications, broadcasting, cable TV, journalism, publishing, electronics, and general manufacturing, as well as airline customer service, government service, health care, education, and other fields. The CWA is financed by dues payments from its member unions. KEY POINTS The complexity of developing a database should not prevent action. A database will be useful to unions because it will provide a more complete picture of a country’s labor rights climate and thus allow unions to pressure employers to abide by ILS. It could also assist management to better judge the risk of foreign direct investment decisions and manage global human resources. Governments should not view ILS and the database as threats but rather as an opportunity to improve the condition of workers around the world and to identify best-practice policies. Mr. Grace pointed out that violations of ILS occur on a regular basis even in the United States, leading one to imagine how many more must occur in developing countries with minimal administrative and enforcement capabilities. Although the international policy of the CWA still remains focused on assisting the development of free trade unions, it is now also concerned with the establishment and enforcement of ILS; the two missions are tightly linked and mutually supportive. The CWA is well aware that monitoring compliance with ILS is a very complex issue, but it strongly urges that this complexity not result in inaction or in watering down the goals of the National Academies project. CWA is pleased that the National Academies are soliciting the views of unions because the voice of workers and their interests have largely been excluded from the process of globalization. There have been many instances where the information contained in

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the proposed database would have benefited the CWA in its efforts to protect and promote workers’ rights. Mr. Grace cited the case of an organizing drive at a call center in California operated by a major telephone company; when it became clear to the company that the workers were going to vote for union representation, it simply closed the facility and fired all of the workers. Although the company was able to successfully defend its actions in court, both the intense press coverage and the numerous lawsuits, including a filing by the Mexican telecommunications workers union under provisions of the labor side accord of NAFTA (North American Free Trade Agreement), showed the potential power of international pressure. But this pressure is effective only if the information and data upon which it is based are reliable and sound. Although the existence of the database in and of itself will not prevent such violations of the right to freedom of association, it will at least provide unions and other interested parties with a more complete picture of a country’s labor standards climate. This is all the more important for the CWA because the companies to which its members belong are increasingly global in scope as a result of the deregulation and privatization of communication monopolies around the world. Information on compliance with ILS will assist the CWA in its negotiations with companies and perhaps allow it to pressure employers to abide by ILS in the countries in which they operate. Thus, it might lead to a better enforcement of ILS in foreign factories. Monitoring of compliance with ILS should not be viewed by developing countries as a protectionist plot or as a means to impose sanctions but rather as a mechanism that can be useful to them. For instance, because the database will make information on best practices in labor relations around the world readily available, it could help raise workers’ living standards. Companies should take a positive approach as well; more and comparable data on labor standards will lead to better management of human resources and will assist in decision-making about foreign investments. The database could also lead to stronger ties between unions and management. TRADE UNION ADVISORY COMMITTEE TO THE OECD Roland Schneider, presenter The Trade Union Advisory Committee (TUAC) was founded in 1948 and is an international trade union organization of 56 national trade unions

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representing 70 million workers in 30 countries. It represents the views of trade unions to the OECD and is supported by the contributions of its member union centrals. KEY POINTS Monitoring and enforcement of labor standards should not be viewed as the imposition of western values, but as an opportunity to increase growth prospects. A reputable database would allow greater pressure to be brought on companies and countries. Labor standards have received considerable attention in Europe: A German Parliament study concluded that labor standards should be linked with trade, and the German government will now issue an annual report on compliance with ILS and create a blacklist of those countries not in compliance. The European Parliament has called on the European Commission to draft a proposal for including in trade agreements labor standards that establish strong monitoring and enforcement. Codes of conduct are useful, but the downside is the privatization of labor rights compliance; thus, codes of conduct should be viewed as a complement to national and international law, not as a substitute. The OECD Guidelines for Multinational Enterprises now include all core labor standards (previously it included only those related to trade unions), and a recent review added language that in practice might allow their extension down the supply chain. Mr. Schneider believes that it is important for developing countries to understand that the enforcement of ILS is not a backdoor means to impose western values or to hinder the economic advance of poor countries. Neither is it a way to impose global wages and working conditions. The argument put forth by opponents of ILS—that they will hinder economic growth—is simply wrong; they will, in fact, enhance economic growth by facilitating democratic workplace procedures and by preventing developing countries from becoming victims of a race to the bottom brought on by the never-ending quest of MNCs for lower labor costs.

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Mr. Schneider noted that the issue of ILS has received considerable attention in Europe, with the emphasis on taking the high road to development. A report commissioned by the German Parliament to study the risks and opportunities inherent in globalization was released in June 2002. It included chapters on trade and social standards, social justice, and sustainable development, and it called for a strengthening of the ILO and its capacity to enforce ILS, and for linking trade agreements and labor standards both at the bilateral and multilateral levels. In particular, it called on the WTO to explicitly link trade privileges to compliance with ILS and to allow the application of sanctions in the case of violations of ILS. Finally, the German government was asked to issue an annual report on compliance with core labor standards, highlighting countries in violation (that is, making a blacklist of noncompliant countries). The European Parliament recently charged the European Commission with drafting a proposal for including core labor standards in trade agreements and establishing a strong monitoring mechanism with remedies for noncompliance. It also called on the European Commission to define more precisely corporate social responsibility in the context of company policy and European Union social policy. To improve compliance, the European Parliament has suggested that the European Union fund employee and management training in corporate social responsibility and provide financing to groups that monitor corporate activities and to countries that have adopted and are enforcing ILS. In addition, it called on private and public pension funds to state explicitly their ethical criteria in judging investment options. With respect to corporate codes of conduct, a recent European Union Green Paper noted that such codes are not adequate substitutes for binding national laws and regulations covering employment; because corporate codes gravitate to the lowest common denominator, they should be viewed as complements to the administration and enforcement capabilities of governments. Mr. Schneider concluded by discussing the OECD Guidelines for Multinational Enterprises. The Guidelines were first issued in 1976 in response to concerns that companies were becoming too powerful; they were revised in 2000. The Guidelines are not legally binding, but companies that flaunt them can be pressured through the National Contact Points. Each OECD country is required to establish a government-run National Contact Point that is responsible for conducting an annual review of the Guidelines and hearing and resolving complaints, from unions and other interested parties, that companies have violated the Guidelines. The Guide

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lines cover a wide range of business practice, including labor relations, and the latest review added new elements important to the discussion of monitoring compliance with ILS.1 First, the employment and industrial relations section of the Guidelines now includes all of the core ILS as set forth in the 1998 ILO Declaration; thus, it is reasonable to assume that the proposed National Academies database should also include all of the core labor standards. Second, the application of the Guidelines has expanded to include the operations of companies in countries that do not adhere to the Guidelines; how this will play out in practice is not clear, but the opportunity now exists to extend the application of the Guidelines throughout the supply chains of MNCs. Lastly, the review process at the National Contact Point has been strengthened; what is important here is that the enforcement of the Guidelines relies on the threat of public disclosure, and the accompanying bad publicity, to alter company behavior. A comprehensive and reputable database could be used by concerned parties to pressure companies with operations in countries where core labor rights are being violated. AMERICAN FEDERATION OF LABOR, CONGRESS OF INDUSTRIAL ORGANIZATION Barbara Shailor, presenter The American Federation of Labor, Congress of Industrial Organization (AFL-CIO) is an umbrella organization of private- and public-sector unions that seeks to promote the political and economic interests of union members. It has 66 member unions with more than 13 million members. It is financed by its member unions. Ms. Shailor noted that many of the questions surrounding the adoption and enforcement of ILS are not new; in fact, they date to the founding of the ILO in 1919. In recent years, the issue has garnered increased public attention as a result of the financial crises in Asia, Russia, and Argentina; the protests associated with the WTO meeting in Seattle; and the ongoing academic and policy debate in industrialized countries about linking trade 1   More information concerning the OECD’s Guideline for Multinational Enterprises can be found in OECD (2000), The OECD Guidelines for Multinational Enterprises: Meeting of the OECD Council at the Ministerial Level, Paris: Author.

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KEY POINTS The intellectual debate about linking labor standards and trade has been won; now it must be resolved in the political arena. Enforcement of labor rights has never been easy at the national level, and it will be even more difficult at the international level. There is no system comparable to that proposed by the National Academies, and it is hoped that the project will result in the development of new indicators of compliance. benefits and adherence to labor rights. Ms. Shailor argued that the intellectual debate has been won and, in the near future, the notion of tying respect for basic labor rights to trade agreements, and ensuring their enforcement, will be generally accepted. The creation and enforcement of labor rights have always been difficult at the national level, to say nothing of the problems encountered in the international context. In the United States it took tragic events, including a horrendous fire in a textile plant in New York City, to spur the government to pass legislation establishing workplace standards. The primary obstacle to the enforcement of labor rights, particularly in the United States, has not been inadequate government efforts but rather the business community. Unlike its European counterparts, U.S. business has never accepted the legitimacy of unions and, as a consequence, has worked hard to thwart workers’ legitimate rights to freedom of association and collective bargaining. If workers can still be denied the right to freedom of association in the United States, one can only wonder at the difficulties that exist in developing countries. The AFL-CIO strongly supports the efforts of the National Academies to develop a database on compliance with ILS. Such information will assist the labor movement in its efforts to secure better working conditions around the world. There is no comparable database on compliance, and it is hoped that this project will lead to the creation of new indicators of compliance. At the very least, it will provide a useful service by bringing together data not previously found in one data set and by making it easily accessible to all interested organizations and individuals.

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SERVICE EMPLOYEES INTERNATIONAL UNION Richard Clayton, presenter The Service Employees International Union (SEIU) has 1.5 million members and is the largest union in the AFL-CIO. It organizes workers in the building service, health care, industrial, and public sectors. KEY POINTS The potential exists to use pension fund assets to pressure companies, and also countries, to enforce ILS compliance, but the problems include a lack of reliable, extensive, and comparable data. In addition, many governments do not believe that enforcing ILS is in their economic interests. Any database should try to include the informal economy, and it should be interactive, allowing for comments of concerned parties. Mr. Clayton stated that the SEIU has been very successful in the United States in pressuring companies, through its work with pension fund administrators, to adopt labor policies that protect fundamental workers’ rights. Pension funds in which SEIU members participate are pressured to invest in companies that have labor policies consistent with the interests of workers. Pension fund assets of SEIU members total more than $1 trillion; this represents an enormous source of leverage, one that has been used domestically and could also be used in the international arena as well. If pension fund administrators can be convinced that taking into account a country’s labor standards will result in safer returns from international markets, this could radically shift the argument in favor of stricter compliance with ILS. Mr. Clayton noted two obstacles to this effort, however; sound and detailed data that are comparable across countries are currently unavailable, and many governments in the developing world believe that adopting and enforcing ILS will deter foreign investors and thus not be in their economic interests. Reliable data on labor standards and on government enforcement efforts are generally not available, and even when they are, as in the case of child labor, there is some question as to whether they are comparable across

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countries. The problems of data reliability and compatibility are even greater in the informal economy, which is very large in most developing countries and for which there are relatively few usable data. A good argument can be made that using pension assets to financially pressure companies that operate in foreign countries that do not uphold core ILS will encourage governments to enforce ILO conventions and other workplace protections. This effort has already begun with the emerging markets index developed by the California Public Employees’ Retirement System (CalPERS). CalPERS manages more than $130 billion in assets for 1.3 million members. CalPERS rates countries according to numerous criteria; countries are placed in either the permissible or the impermissible investment category, and CalPERS investment managers are not able to invest in companies with operations in countries in the impermissible category. One of the criteria used for rating a country is “productive labor practices”; because of the way the index is derived for each country, a country cannot receive a “permissible” rating if it does not meet the labor standards test. Included in the productive labor practices category are criteria such as ratification of ILO core labor standards, the quality of labor legislation implementing those standards, the capacity of the government to enforce its labor legislation, wages and hours of work, the impact of foreign export processing zones, and health and safety conditions. The analysis of labor conditions in the various countries is done by Verité, an independent, nonprofit social auditing and research organization. Verité uses worksite visits and interviews with government officials, companies, nongovernmental organizations (NGOs), and unions, as well as written documentation and statistics from a variety of sources. But it does not gather data on the informal economy. Mr. Clayton believes that the National Academies project should not duplicate this omission in the effort to develop a database. Because of the large number of workers involved in the informal economy, failing to measure the informal economy can give a distorted view of a country’s record in abiding by international labor standards. Another point of interest is that the CalPERS system is dynamic: A country that improves its labor rights compliance sufficiently can move from the impermissible to the permissible category.

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SHAREHOLDER ASSOCIATION FOR RESEARCH AND EDUCATION Peter Chapman, presenter The Canadian Shareholder Association for Research and Education (SHARE) is a nonprofit organization founded and supported by trade unions. It helps pension funds build sound investment practices, protect the interest of plan beneficiaries, and contribute to a just and healthy society. KEY POINTS Revelations of unfair labor practices can seriously affect a company’s valuation. Shareholder groups want monitoring to be transparent and carried out by independent auditors and to involve local groups. Reporting should include discussion of how monitoring was conducted. Freedom of association and collective bargaining need to be more aggressively monitored, as compliance with these core labor standards will in and of itself take care of most labor rights violations. Mr. Chapman alleged that recent corporate scandals have brutally exposed the fact that not all corporate liabilities are shown on a firm’s balance sheet. Although financial fraud lay behind most recent corporate revelations, companies might also have hidden liabilities with respect to the labor standards under which foreign workers are producing their products. Investors should be just as concerned about the labor rights records of companies as they are about financial misdeeds; the reason is that a firm’s reputation, and thus its stock price, can be severely damaged by consumer boycotts and worker lawsuits in response to working conditions that violate ILS. The reputational risk is real: In a recent survey of Canadians, 55 percent of the respondents said that they considered conditions of production when they bought products, and 44 percent said that ethical concerns had led them to boycott a company’s product in the previous year. Even if the percentages are somewhat lower in the United States, the risk is still enormous.

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Mr. Chapman made the point that shareholders have raised the issue of labor standards in numerous ways, with perhaps the most well-known being resolutions at annual meetings; last year there were 35 such resolutions at the annual meetings of American companies. These resolutions typically ask companies to adopt policies supporting the ILO’s Declaration on Fundamental Principles and Rights at Work, to establish external monitoring processes for their foreign suppliers, and to report annually on compliance. Both CalPERS and NYCERS (New York City Employees’ Retirement System, which has 351,000 members and $40 billion in assets) have, either directly or indirectly, adopted the ILO standards as the appropriate measure of labor rights. Shareholder groups prefer that independent auditors be used for monitoring and that this involve local religious and human rights groups and trade unions, as well as international NGOs. The involvement of these groups lends legitimacy to the process and provides some assurance that the monitoring process is not only objective but also operating in a real-time framework that overcomes the problem of compliance slippage between audits. Mr. Chapman argued that reporting should be as open and transparent as possible. Reporting has improved somewhat in recent years, with Wal-Mart and Nike issuing corporate responsibility reports, for example. But much more is needed in order to provide investors with data that will allow them to judge how companies are managing labor standards in their supply chains. Important elements of any monitoring report should include the following information: how worker interviews were conducted; what written documentation was consulted; how many times monitoring took place; what percentage of plants were in compliance; what major problems existed; what remedies were adopted; and what the results were. Mr. Chapman noted that the monitoring and reporting process in the apparel industry emphasizes child labor issues and pays little attention to the rights to freedom of association and collective bargaining. This should

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be reversed, Mr. Chapman said; focusing on protecting the right of workers to join and form unions will in and of itself take care of the child labor issue. CENTER FOR LABOR RESEARCH AND EDUCATION, INSTITUTE OF INDUSTRIAL RELATIONS, UNIVERSITY OF CALIFORNIA, BERKELEY Katie Quan, presenter The Center for Labor Research and Education at the University of California, Berkeley, uses its skills in labor education, labor research, and facilitation to bring together labor leaders, union members, students, and faculty for the purpose of examining issues such as organizing, public policy, and leadership development. KEY POINTS There are four distinct types of monitoring regimes, and it is not possible to determine which is most effective. Clearly, codes do make a difference, but unions may be just as important a factor in securing compliance with ILS. Forced labor and freedom of association may seem easy to define but, in fact, are subject to varying interpretations. Ms. Quan argued that labor rights violations in the U.S. apparel industry have a long history, and to this day there are grave problems with late payments, failure to pay the minimum wage, and intentional miscalculations of overtime hours. As can well be imagined, the problem is even worse in foreign factories in Asia and Latin America where there is a shortage of independent and technically competent monitoring and adequate enforcement institutions and mechanisms. Monitoring has taken many forms, which can be grouped into four categories:

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internal dependent—salaried company employees do the monitoring; external dependent—auditors contracted by the company do the monitoring; external independent—NGOs with no financial dependence on the company do the monitoring; and labor union—labor unions do the monitoring. Ms. Quan recently convened a workshop on monitoring, which attempted to determine which type of monitoring regime is most effective. But because many factories are covered by a multiplicity of codes and monitoring techniques, it was next to impossible to devise a method for ranking the effectiveness of the types of monitoring. Complicating the issue is the fact that distinctions between the major types of monitoring are blurring (e.g., external independent NGOs have begun receiving fees for their services, while maintaining the right to make independent reports and assessments). Not surprisingly, case studies have revealed that it is not always codes and monitoring that led to better working conditions; the formation of independent trade unions and the pressure exerted by consumer groups have also been important elements in enforcing ILS. Perhaps the most surprising aspect of Ms. Quan’s workshop was the lengthy discussions on the seemingly simple definitions of forced labor and freedom of association. Although the definition of forced labor would seem to be straightforward, many of the workshop’s participants argued that the traditional interpretation should be substantially widened to include the following situations: excessive coerced overtime, low wages, and lack of vacation and sick leave are the norm; access to bathrooms and restroom facilities is restricted; employers maintain possession of workers’ passports and other critical documents; and employees are forced to pay recruitment fees to brokers. Questions also arose about the definitions of freedom of association and collective bargaining and whether these are situation-specific. For example, what is to be made of the notion of “parallel means of representation”—workers join associations or workplace groups, but union activity in the strict sense is absent? Some countries have very few unions. Others do not permit truly independent unions free of control by management or by government or both, but bargaining takes place through different mechanisms. This is the situation in China today. Although this is not collective

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bargaining in the traditional sense, workers’ views are being presented to management. On the other hand, is collective bargaining taking place when the bargaining between unions and management occurs in a context in which workers have historically been forced to join unions, such as in Indonesia during the Suharto era? How can we determine the presence or absence of freedom of association and collective bargaining in cases where the demarcation lines between management and so-called worker representation are not obvious? One way to judge is to look at the content of the agreements and determine whether the agreements are available and agreeable to workers.