This text was first published in German language in the Swiss Peace News, FriZ 3/98 (15 June 1998).
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Putting the Cart before the Trojan Horse

In 50 years of GATT (General Agreement on Tariffs and Trade) the multilateral trade system has intensified the uneven distribution of the riches and the access to resources, both between North and South, between West and East, and within each region. Is it possible to work towards a more just distribution by introducing a social clause into the trade agreements, as NGOs and trade unions are suggesting?1

By Marc Riel*

Since the "free" market refers to the freedom of the Transnational Corporations (TNCs) to maximize their profits on the backs of the majority of the people in the world, a number of people have tried for some time to come up with a way to counterbalance this. An old idea which keeps creeping up is the social clause in all its variants, sometimes linked to an environmental clause and a democracy clause. These clauses give rise to fierce controversy for several reasons: They can be used by the industrialized states for protectionist purposes; they legitimize the institutions of neoliberalism and give the machinery of exploitation a softer face; they do not deal with the causes of exploitation, but only with the symptoms; they can increase the oppression and exploitation of people working in the underground economy; they are aimed at states and their population and not against the TNCs whose profits are multiplied by the oppression; experience shows that more powerful states are less likely to be brought to international courts and more often take others to court than smaller states.

Which Social Clause?

The social clause consists in a number of criteria that a state has to comply with in order to benefit from certain preferential treatments regarding trade, or to escape certain trade sanctions. These criteria usually refer to the conventions of the International Labor Organization ILO and typically include the right to freedom of association and collective bargaining, the abolition of forced labor, the prevention of discrimination, equal pay for work of equal value and the prohibition of child labor. These ILO conventions have been signed by a number of countries. The ILO however has no executive power beyond that of a simple reprimand.

A poll with non-governmental organizations (NGOs) and trade unions of the South commissioned by Swiss NGOs2 shows that even most of the proponents of the social clause do not trust the WTO in social matters. Nevertheless-and this inconsistency in their position may well be linked to the financial and logistic dependency of many Southern NGOs and unions on Northern capital-friendly organizations like ICFTU-, the proposal of ICFTU (International Confederation of Free Trade Unions), the World Federation of Trade Unions (WFTU) and the European Trade Unions Confederation (ETUC) dominates in practical discussions on the social clause. In this proposal, the ILO takes the role of an arbitration court, but the World Trade Organization WTO is planned to have executive power. The effect of this would be to give legitimacy to the WTO. This is even an admitted goal of the ICFTU. In the words of Bill Jordan, its General Secretary: "The world market needs a social dimension, or it will fail." The Committee on External Economic Relations of the European Union harbors similar fears concerning the environment: "The committee stresses once again [.] that, if the World Trade Organization (WTO) is incapable of reconciling the needs of environmental protection with existing WTO rules and disciplines, the entire multilateral trading system will come under serious threat from outraged public opinion."3

Southern NGOs and trade unions as well as some of their Northern partners express themselves rather carefully and raise some doubts and a list of demands which must be fulfilled in order for them to support the introduction of a social clause. These include the granting of sufficient time to comply to alleged offenders and the allocation of funds for the changes to be achieved in that period of time.

Existing Examples of a Social Clause

Perhaps the oldest social clause is the ban of prison work in article XX of the GATT. This clause is applicable only to the export sector and offenders cannot be taken to any international court for it, so it is not used against the USA, where in different states jeans produced in prisons are marketed under the labels "Gangsta Blues" and "Prison Blues", and telephone marketing is being done out of prison cells at dumping prices.

Since 1971, the European Community grants preferential tariffs for the export of industrial goods to countries victims of (neo-)colonialism-in the framework of the Generalised System of Preferences (GSP). The newest GSP contains a social clause which became effective on 1 January 1998. This clause provides for granting additional tariff preferences to those countries who prove they have implemented the ILO conventions on union rights, collective bargaining and child labor in their laws and are enforcing them. Besides this social clause in the form of an incentive, the same GSP contains a punishing social clause: On the basis of a complaint from the ETUC and the ICFTU, the EU Commission started investigating child labor charges against Myanmar (Burma) on 16 January 1996 under that clause, and on 24 March 1997 the European Council adopted the withdrawal of tariff preferences until such time as the military regime put an end to those practices.

A similar GSP program of the USA, introduced in 1974 as market oriented substitute for assistance for development, contained from the start a strict democracy clause reflecting the cold war concepts of "the enemy". In 1984, the GSP criteria were supplemented with a social clause. A complaint of 1993 against Malaysia showed that the US government was not willing to impose sanctions against the interests of the US transnational corporations in the electronics business. It seems therefore that the social clause is not so much used directly in a protectionist way against competing economies-protectionism is rather carried out by applying the social clause opportunistically and selectively.

An attempt at introducing a kind of social clause directly against TNCs are codes of conduct, which are proposed by NGOs like the Berne Declaration as a pragmatic measure. TNCs agree to abide by certain rules and thus will not be targeted by boycott campaigns. With the introduction of social and environmental guarantee labels, TNCs have successfully integrated such initiatives into their image production. In this sense, the same question arises as with the WTO, to what extent such social clauses provide legitimacy to the TNCs. Their logic of exploitation is not fundamentally challenged. In addition-in the age of outsourcing4-it is extremely difficult to monitor the subcontractors to make sure they comply to the rules agreed with a TNC.

Interrupting the vicious circle

It is probable that a social clause in the multilateral trade system, if it is applied, would improve the lot of the workers in the formal sector of the economy of the countries sanctioned. However, as long as the TNCs retain their political and economical power, this will lead to increased pressure on the underground economy where the ILO conventions could hardly be enforced, and to which parts of the production would be subcontracted. The first victims would be children, despite the social clause against child labor.

NGOs and trade union confederations like the ICFTU are aware of the fact that imposing trade sanctions alone will not provide a solution to child labor. To take away their jobs without providing them with an economical and social alternative is bound to deteriorate the situation of working children. Therefore, the ICFTU suggests combined programs offering children opportunities for education including income compensations. Such programs must be supported. However, without questioning the liberal world order, the conditions which led to child labor to begin with5 continue to exist. Thus children are taken out of situations of dependency, while other children instantly take their place in the sweatshops.

Let's globalize the resistance!

International agreements like the Universal Declaration of Human Rights, environmental norms or the ILO conventions on labor rights were arrived at through grassroots struggle, even if this struggle was at times made somewhat easier by the remainders of enlightened, humanist perception the capitalist actors have of themselves. These agreements are worth no more than the continuous mobilizing of grassroots movements and activists worldwide for their enforcement and for gaining further freedom of movement against the Lords of neoliberalism, because in the enforcement phase their humanist tinge routinely gives way to the logic of profits. In a world in which two thirds of the world trade is under the control of TNCs, and half of is that taking place within the TNCs, among the subsidiary companies of one TNC, it is imperative to bring together and coordinate the struggles of grassroots movements and activists in various parts of the world and not to let the capitalist actors and the constitutional states serving them dictate the rules of the game to us. An attempt in this direction is the creation in Geneva in February this year of the PGA (Peoples' Global Action against "Free" Trade and the WTO), presented in this issue of FriZ (Swiss Peace News). Let's unite our efforts and dismember the transnational corporations!

* Marc Riel ist Mitarbeiter des Pressebüro Savanne, das die zweimonatliche Zeitung die hyäne herausgibt.


1 Various documents pertaining to the social clause can be found on
2 Catherine Schümperli (Declaration of Berne) and Michel Egger (Bread for all), "Umfrage zum Thema Sozialklausel bei NRO und Gewerkschaften des Südens", Dossier des Jahrbuchs Schweiz-Dritte Welt 1996, IUED (Institut universitaire d'études du développement), Geneva.
3 Report on the communication from the Commission to the Council and the European Parliament on trade and environment (COM(96)0054 - C4-0158/96), 14 October 1996.
4 Outsourcing: Subcontracting of parts of the manufacturing process to external production units. These usually smaller firms are often dependent on the larger company placing the order. Therefore the latter dictates the conditions.
5 See Claude Meillassoux, « L'économie de la vie - Démographie du travail », Editions Page deux, Lausanne, 1997. Especially the chapter « Troubles de croissance ».

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