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Five Significant Topics

The two forums brought together representatives from three broad constituent groups. These groups—trade unions, multinational corporations (MNCs), and nongovernmental organizations (NGOs)—were asked to present their views and strategies for implementing and monitoring compliance with five international labor standards and to discuss barriers they have encountered along the way. The specific standards they were asked to examine were the four core standards of the International Labour Organization (ILO) (see Appendix D) and acceptable conditions of work from U.S. trade law. Five significant themes, or topics, emerged from the speakers’ presentations at the two forums: codes of conduct, compliance, monitoring, reporting, and the National Academies database. This chapter summarizes speakers’ comments on these five themes.

CODES OF CONDUCT

There was general agreement among the panelists at both forums that corporate codes of conduct are not an adequate substitute for the binding laws and regulations laid down by national and local governments. The recent privatization of labor rights enforcement that these codes represent was acknowledged to be a serious matter of concern. Participants posed the idea that codes should be viewed as complementary instruments to national and international law, not as replacements. Roland Schneider (Trade Union Advisory Committee [TUAC]) argued that the standards set in codes



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2 Five Significant Topics The two forums brought together representatives from three broad constituent groups. These groups—trade unions, multinational corporations (MNCs), and nongovernmental organizations (NGOs)—were asked to present their views and strategies for implementing and monitoring compliance with five international labor standards and to discuss barriers they have encountered along the way. The specific standards they were asked to examine were the four core standards of the International Labour Organization (ILO) (see Appendix D) and acceptable conditions of work from U.S. trade law. Five significant themes, or topics, emerged from the speakers’ presentations at the two forums: codes of conduct, compliance, monitoring, reporting, and the National Academies database. This chapter summarizes speakers’ comments on these five themes. CODES OF CONDUCT There was general agreement among the panelists at both forums that corporate codes of conduct are not an adequate substitute for the binding laws and regulations laid down by national and local governments. The recent privatization of labor rights enforcement that these codes represent was acknowledged to be a serious matter of concern. Participants posed the idea that codes should be viewed as complementary instruments to national and international law, not as replacements. Roland Schneider (Trade Union Advisory Committee [TUAC]) argued that the standards set in codes

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should exceed those in national law and local practice and not simply adhere to the lowest common denominator. Business representatives, including Anna Walker (United States Council for International Business [USCIB]), Tom DeLuca (Toys “R” Us [TRU]), and Debbie O’Brien (Business for Social Responsibility [BSR]), noted that many multinational corporations have devoted more resources to implementing and monitoring codes and have integrated the ethos of labor rights compliance into all aspects of supply-chain management. Other participants argued that although codes have had a beneficial effect overall, there is considerable room for improvement. Indeed, the problems associated with the proliferation of codes and monitoring regimes led Marcela Manubens (Phillips-Van Heusen Corporation [PVH]) to state that codes have failed to achieve the necessary level of commitment on the part of companies and their supply chains, as evidenced by continuing widespread violations of labor rights, and have probably outlived their usefulness. The most common complaint was that the number of corporate codes has grown unmanageable and needs to be reduced through merger and elimination. Roger McDivitt (Patagonia, Inc.) favored the development of a standardized industry or universal code because this would eliminate the excuse of factory managers that the plethora of codes with which they must comply is confusing. Echoing this argument, Neil Kearney (International Textile, Garment and Leather Workers’ Federation [ITGLWF]) said that company-specific codes should be abandoned in favor of multi-stakeholder instruments because the former focus on welfare issues rather than on meaningful aspects of workers’ rights, protect companies’ brand-name reputations but not workers, and rarely involve participation by unions and workers. Kearney attributed the fact that there are only 150 SA8000-certified1 plants in the apparel industry to the requirement that companies (a) commit to the ILO’s fundamental labor rights and (b) change management systems to identify labor rights violations. David Schilling of the Interfaith Center on Corporate Responsibility (ICCR) said that a study in the late 1990s showed that only 10 percent of the codes had any provisions for dealing with violations of freedom of association. 1   Social Accountability 8000 (SA8000) is a workplace standard that covers all key labor rights. Compliance with the standard is certified through independent, accredited auditors who are overseen by Social Accountability International. More information can be found at <www.sa-intl.org> [12/8/2002].

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COMPLIANCE Responsibility for enforcing compliance with core labor standards ultimately rests with the state. All panelists supported this proposition. However, there was almost as much agreement on the related observation that governments in developing countries, as well as some in industrialized countries, are neither willing nor able to undertake this task. Therefore, the international bodies currently responsible for monitoring compliance with international labor standards (e.g., the ILO) must be given some “teeth” if they are to be truly effective in enforcing, rather than simply monitoring, compliance with international labor standards (ILS). In the absence of state or global enforcement, compliance rests with the multitude of codes, guidelines, declarations, and conventions dealing with the issue of labor rights. However, Neil Kearney pointed out that all of these initiatives suffer from inadequate or nonexistent enforcement mechanisms. In addition, Pharis Harvey of the International Labor Rights Fund (ILRF) and Marcela Manubens, among others, noted that the efforts of employers, unions, and NGOs to enforce labor standards represent the privatization of labor rights enforcement and are supplanting the role of government authorities. Although all the panelists considered this to be an unhealthy situation, they also believed it to be currently unavoidable because global economic structures are not being balanced by global rules and enforcement mechanisms. Corporate codes of conduct, and the accompanying implicit or explicit threat to withdraw product orders from noncompliant factories, are another means to enforce labor rights. Company participants generally felt that compliance with labor standards had improved significantly since the first code was established in 1991. Companies have created extensive monitoring systems, incorporated compliance with ILS into their everyday operations, and taken steps to help governments improve enforcement of labor laws. However, Stephen Coats of U.S./Labor Education in the Americas Project (US/LEAP) said that for this method to be truly effective in increasing compliance with international labor standards, it would have to be done at the industry or cross-national level. Otherwise, firms or countries could gain an unfair competitive advantage through noncompliance. Moreover, Robert Zane (Liz Claiborne) was optimistic that with the ending of the apparel quota system in 2005, compliance with ILS will dramatically improve because the number of countries and plants from which any given

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apparel company sources products will decrease. This, in turn, will increase a company’s share of orders from any particular factory and give that MNC more leverage in enforcing compliance. Peter Chapman of the Shareholder Association for Research and Education (SHARE) noted that, in the United States in 2001, there were 35 occasions in which such shareholder resolutions had been proposed; these shareholder resolutions typically ask the company to support the ILO’s Declaration on Fundamental Principles and Rights at Work, to establish an external monitoring program, and to report annually on compliance. Linking labor standards to trade agreements is a strategy that has generated an enormous amount of academic research, policy debate, and public commentary. Contrary to the common perception, the United States has been linking trade privileges with labor rights compliance for years. Pharis Harvey noted that, in the early 1980s, labor rights provisions were attached to both the Generalized System of Preferences (GSP) and OPIC (Overseas Private Investment Corporation), and that unions and NGOs used these trade and investment agreements to file numerous petitions arguing for the withdrawal of trade and investment privileges because of violations of labor rights. Many union and NGO participants, including Neil Kearney, Roland Schneider, and Stephen Coats, argued that the trade/labor linkage is by far the most effective means to enforce compliance. One example of this is the Cambodia–U.S. trade agreement, highly commended by Debbie O’Brien, in which increased quotas for garment exports to the U.S. are conditioned on compliance with ILO labor standards. It addresses the concern of those like Bipul Chattopadhyay of India’s Consumer Unity & Trust Society (CUTS), who contended that punitive systems that utilize trade sanctions inflict the greatest harm on those whose interests are supposedly being protected—the workers. Mila Rosenthal of the Lawyers Committee for Human Rights (LCHR) cautioned that basing assessment of compliance on the proposed National Academies database would be very difficult. Vietnam was used as an example; although Vietnam is nearly exemplary in its adherence to core ILO labor standards, it still does not allow freedom of association. In addition, even though there is no evidence of systematic usage of child labor in factories, child labor does exist in home work and piecework industries. How would these facts be incorporated into an overall assessment of the country? Dennis Smith of the Commission for the Verification of Corporate

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Codes of Conduct (COVERCO) in Guatemala said that cultural and political factors can complicate the interpretation of freedom of association. Measuring compliance with freedom of association, or the lack thereof, is fraught with difficulty, not the least of which is that implementation, and thus the definition, can vary depending on cultural context.2 While the number of hours worked and whether or not bonuses were paid are issues that are not affected by country-specific factors, this is not the case with labor rights such as freedom of association. Katie Quan of the Center for Labor Research and Education, Institute of Industrial Relations, at the University of California, Berkeley, said that, in a recent workshop, the definition of forced labor was expanded to include lack of vacation time, low wages, and restricted access to restroom facilities. If the application of core labor standards can vary according to the cultural and political setting, then great caution is necessary in drawing conclusions about compliance. MONITORING Forum participants discussed monitoring in the context of company codes of conduct. Participants felt that monitoring is necessary when government enforcement of labor laws is inadequate. And governments don’t enforce labor laws when they lack the financial means, the political will, and the technical expertise. Numerous panelists stressed that governments should not view monitoring as a threat to their economies or as a mechanism for imposing western values, but as a method of increasing growth prospects through higher standards. There was universal agreement that the most credible types of monitoring with consumers and advocacy groups are external independent and labor union monitoring. It is not unusual, however, for a single factory to be examined by monitors falling within two or three of these categories, and the blurring of distinctions between these different types of monitor 2   It should be noted that the ILO has done a great deal of work toward developing a universal definition of freedom of association over the years. However, a definition applicable to all cases in all locations remains somewhat elusive, and the ILO’s Fact-Finding and Conciliation Commission on Freedom of Association and the Freedom of Association Committee of the Governing Body of the ILO continue to examine compliance on a case-by-case basis. See, for example, ILO (1996), Freedom of Association: Digest of Decisions and Principles of the Freedom of Association Committee of the Governing Body of the ILO, 4th ed., Geneva, Switzerland: Author.

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ing in recent years has made it empirically difficult, if not impossible, to determine which type of monitoring is most effective in increasing compliance with ILS. There was general agreement on the methods that a monitor must follow in order to be effective. The almost universal problem of a dearth of reliable and detailed written documentation means that monitors must rely on interviews with workers, company representatives, and unions and other civil society groups. In addition, as noted by May Wong of the Asia Monitor Resource Center (AMRC) and Dennis Smith, monitors must exercise complete control over their reporting; have unfettered access to the worksite and workers and to payroll and other employee records; and conduct the monitoring over a period of time, not just as a one-time “snapshot.” Without exception, the panelists felt that the monitoring process would be enhanced by the participation of local unions, NGOs, and religious groups. Such collaboration with local groups lends legitimacy to the results and improves the quality of and access to information. Local groups can also help overcome frequent problems with “compliance slippage,” a problem whereby factories fail to implement agreed-upon remediation efforts and relapse in their compliance with labor standards. Labor standards monitoring is a complex and time-consuming endeavor; many components of the process still face substantial technical difficulties. REPORTING Panelists generally agreed that reporting with respect to codes of conduct should be as transparent as possible; it should be carried out at least annually (some panelists preferred six-month intervals); and it should allow for comments by external stakeholders. Possible items in monitoring reports include number and location of interviews and who conducted them; written documents consulted; local groups consulted; number of times plants were monitored; percentage of plants in compliance; problems found; remediation efforts undertaken; and results of the remediation efforts.

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Union and NGO panelists argued that the reporting system is in dire need of improvement. Reporting should include meaningful quantitative goals, and it should focus much more on the ILO’s core labor standards. Reporting on noncompliance is important only to the extent that remediation strategies are identified and enacted. Gregg Nebel of adidas-Salomon AG said that reporting has had the effect of increasing expectations, and consequently more company resources are being allocated to remedial actions. DATABASE There was little disagreement among panelists about the lack of reliable data at the national level and comparable data at the international level. Mike Grace of the Communications Workers of America (CWA) said that the complexity of creating and maintaining such a database should not lead to inaction and that, once the National Academies database is created, there will be no comparable database in terms of credibility and coverage. Most panelists supported the idea of a database, but Anna Walker and Robert Zane voiced concern about the cost of the database and the lack of specificity about potential uses for the information. In addition, Mila Rosenthal warned that the database should not have as an end result a ranking of countries based on aggregate data; she argued that such a ranking would be very difficult to do because of the breadth of indicators and the enormous variance in methodologies and accuracy among national data collection systems. One suggestion that would address the latter problem came from Stephen Coats who said that the project should include efforts to strengthen the ability of national governments to collect and analyze data. Panelists made numerous general recommendations for sources of data, including the ILO, trade unions, and local and international NGOs. Several union and NGO participants, among them Richard Clayton of Service Employees International Union (SEIU), Mila Rosenthal, and Carol Pier of Human Rights Watch (HRW), argued that the database should include indicators measuring the informal economy3 because it is here that many 3   The term “informal economy” generally refers to all economic activities by workers and economic units that are—in law or in practice—not covered or insufficiently covered by formal arrangements. The term encompasses a broad range of workers, enterprises, and entrepreneurs that spans many sectors of the economy in both rural and urban contexts.

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labor rights violations occur. Omitting the informal economy would substantially distort a country’s compliance record. Barbara Shailor of the AFL-CIO hoped that the National Academies project would result in the development of new indicators of compliance that would more accurately reflect workplace conditions. In a similar vein, Carol Pier suggested that indicators be devised to measure the general “climate” of labor relations. Many participants forcefully recommended that the database be open and accessible to all interested organizations and individuals, transparent in terms of its methodology, upgraded regularly, and interactive in nature. Interactivity means that the database would be structured to allow comments from the public and, if need be, corrections based on these comments. An open dialogue and the ability to challenge the results will act as a peer review process and increase the legitimacy of the data. Representatives from unions agreed that the database would be useful in their negotiations with companies, and it would increase the role of unions in the monitoring process. Mike Grace noted that CWA’s previous efforts to highlight worker exploitation in developing countries were attacked on the grounds that CWA’s information was biased, but this will not be the case with the National Academies database. It will provide a complete picture of the labor rights climate in many foreign countries, and this information could be used in bargaining with management to pressure companies to comply with ILS. Governments could also use the database to learn how other countries treat their workforces and what this has meant in terms of social development and standard of living.