Transcript of Seminar and Panel Discussion on "A Role for Labor Standards in the New International Economy?"

IMF News, September 29, 1999

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• Published: September 29, 1999

Overview

• Event: Seminar and Panel Discussion on "A Role for Labor Standards in the New International Economy?"
• Date and time: September 29, 1999, 2:40 p.m., Wednesday
• Location: Hampton Room, Omni-Shoreham Hotel, Washington, D.C.
• Organizers/cooperators noted in the transcript: IMF, AFL-CIO, World Bank, ILO
• Panelists (as listed in the transcript):
  • Stanley Fischer, First Deputy Managing Director, IMF
  • Robert Holzmann, Director, Social Protection, the World Bank
  • David Smith, Director, Office of Public Policy, AFL-CIO
  • Jagdish Bhagwati, Arthur Lehman Professor of Economics, Columbia University
  • Eduardo Aninat, Minister of Finance, Chile
  • Eddy Lee, Director, Economic Analysis, ILO

Standards initiative and international architecture

• Context and rationale:
  • Standards as part of reforming the international financial system by setting objective standards for behavior in multiple areas.
  • At the time of the seminar, "48 international standards" existed (not all equal in importance).
  • Areas with existing IMF expertise and standards mentioned: data standards, transparency in fiscal accounts, transparency in monetary and financial systems, and monitoring of Basel core standards for banking.
  • World Bank producing standards for social policies; ILO promoting "core labor standards."
• Two-fold idea of standards:
  • Help countries identify "good, if not necessarily best practice" and strive to attain them.
  • Encourage investors to take observance of those standards into account in decision-making.

Monitoring, compendium, and approaches

• Monitoring architecture discussed:
  • Creation of a compendium of international standards (described as a loose-leaf folder into which standards would be placed), with compendia for each country showing performance relative to standards.
  • Uncertainty about precise monitoring modalities; mix of institution-specific monitoring where IMF/Bank have expertise.
• Methods under consideration:
  • Self-assessment by countries.
  • IMF "transparency reports" and special data dissemination standard seen as working well; 46 countries agreed to observe the special data dissemination standard (as stated in the transcript).
  • General Data Dissemination Standard (GDDS) described as a process (not a standard) to help countries raise statistical capacity.

Core labor standards: nature and institutional roles

• Definition and scope (as described by panelists):
  • Core labor standards described as qualitative and rights-based (not quantitative rules like minimum wage levels).
  • Listed elements of core labor standards in the discussion:
  • Prohibition of forced labor
  • Elimination of exploitative child labor
  • Equal opportunity / anti-discrimination (including gender)
  • Freedom of association
  • Right to collective bargaining
• Institutional positions and division of labor:
  • ILO: promoter and guardian of core labor standards; adopted the Declaration of Fundamental Principles and Rights at Work; enhanced surveillance discussed (including reporting on countries that have not ratified specific conventions).
  • IMF: focused on macroeconomic stability and structural reform; willing to analyze/present others' analyses (including social welfare, environment, and labor standards) in surveillance but not to develop technical solutions or become primary implementer.
  • World Bank: focused on social policy best practices; promotes and encourages core labor standards but, per its Articles of Agreement, cautious about using core labor standards as lending conditionality—particularly where political considerations (e.g., freedom of association) might be implicated.
  • Consensus in discussion: cross-institutional cooperation (IMF, World Bank, ILO) and coordination of roles; reluctance expressed to have every agency try to do everything.

World Bank perspective and operational practice (Robert Holzmann)

• Historical drivers of Bank engagement:
  • Social consequences of adjustment programs (1980s)
  • Assistance to transition economies in Eastern Europe
  • Re-examination after the Asian financial crisis
• Bank publication referenced: "Managing the Social Dimension of the Crisis, Good Practices and Social Policies" (paper delivered to the Development Committee)
• Best-practice groupings in the Bank publication (6 areas; three emphasized in the seminar):
  • Macroeconomic policy
  • Safety nets
  • Education, housing, labor market policies
  • Role of correct and timely information
• Specific Bank actions and positions:
  • Embrace of the UN social principles and promotion of good social policy practice.
  • Bank sees prohibition of forced labor, equal opportunity, and child labor standards as operationally embraced with directives to avoid Bank lending that violates these.
  • On freedom of association: legal constraints in Bank articles (concerns about political considerations and obligations); Bank promotes but does not use freedom of association as lending conditionality.
  • Operational measures the Bank has taken or begun:
  • Encouraged staff to engage trade unions on missions and country strategies.
  • Special training for Bank staff to understand and engage productively with trade unions.
  • Increased cooperation with ILO for technical advice.
  • Research into economic linkages between core labor standards and development.
  • Encouraged interaction with trade unions (seminars, meetings, including with AFL-CIO).

AFL-CIO economic case for international labor standards (David Smith)

• Core proposition:
  • Core labor standards advance human dignity and human rights and are consistent with, and reinforcing of, sustainable economic development objectives.
• Historical and economic arguments cited:
  • Experience in developed countries: adoption of labor protections contributed to development of a broad middle class, domestic consumption base, and sustained development.
  • Argument that freedom of association and collective bargaining help produce a better distribution of income, strengthen domestic demand, and reduce vulnerability to crises.
  • Reference to empirical associations (work by Tom Palley and others) linking adoption of core labor standards with higher medium-term growth (as discussed in the transcript).
• International implications:
  • Concern about "race to the bottom" from export-led growth that squeezes wages and undermines domestic demand.
  • Argument that core labor standards are good for the international economy by preventing destructive competition on worker protections.
• Recommendations for international financial institutions:
  • Article IV reviews should routinely report on status and enforcement of labor standards (with ILO help).
  • Structural Adjustment Facility and other conditionality mechanisms: argue that conditionality that has required labor market flexibility could similarly require adherence to core labor standards.
  • Bank country assistance strategies and loan assessments should routinely apply core labor standards assessment, by analogy to environmental assessments.

Governance, rights vs. consequences, and multiple instruments (Jagdish Bhagwati)

• Value-judgment transparency: Bhagwati stresses stating value judgments up front.
• Nuanced position:
  • Endorses aspirations/rights (including union rights) but raises practical and political-economy complexities regarding implementation, sequencing, and country heterogeneity.
  • Warns of applying standards in a way that inadvertently favors powerful countries or is inconsistent across countries.
• Practical instruments emphasized as alternatives or complements:
  • Impartial, symmetric review mechanisms (analogy to WTO trade policy review) to evaluate country conformity.
  • Civil-society pressure, moral suasion, and voluntary instruments (e.g., SA 8000 social labeling) as powerful complementary tools.
  • Cautions against sanctions for reasons of political effectiveness and credibility.
• Importance of appropriate institutional roles: support for ILO as primary domain; Fund and Bank to contribute coordination, input, and technical expertise without taking over mandates.

Chile / country-perspective (Eduardo Aninat)

• Institutional and policy notes:
  • Chilean context: post-democracy labor reforms; institutional/legal frameworks to expand freedom of association and collective bargaining.
  • Chile reported approximately "16 percent of the active labor population involved in collective bargaining" (as stated in the transcript).
• Practical cautions:
  • Hesitation about embedding quantitative labor requirements into trade agreements or imposing uniform labor prescriptions across countries at different development stages.
  • Pointed example on minimum wages: Chilean minimum wage described as in the "order of $20-to-$25 as a minimum wage per month" (as stated in the transcript) in contrast to hourly wages in the U.S. or Europe—argument used to illustrate country differences and the need for respect of differences.
• Operational policy initiatives referenced:
  • Pension reform and capitalization system: described as creating a national saving/wealth base (pension holdings described as equivalent to "half of our gross domestic product as a net portfolio of workers savings accounts" in the transcript).
  • Initiative to create voluntary worker savings accounts (Protract law referenced as in the Senate) to assist workers during job transitions—emphasis on labor market dynamics and active safety nets.
• Key considerations raised:
  • Mobility of labor across borders (free movement) identified as a complex, underdeveloped area contrasted with mobility of capital and goods.
  • Importance of sequencing, institutional design, and attention to informal labor markets and distributional effects.

ILO position and enforcement mechanisms (Eddy Lee)

• Affirmation of a role for international labor standards:
  • Political legitimacy grounded in ILO’s history, Copenhagen Social Summit (1995), and the Declaration of Fundamental Principles and Rights at Work (adopted more recently).
• ILO surveillance and enforcement enhancements noted:
  • The Declaration extended supervisory coverage to countries that have not ratified specific conventions (surveillance now applies beyond ratifying states).
  • Production of a new global report on country performance in meeting core conventions.
  • Increased technical assistance to countries committed but facing difficulties in meeting standards.
• Complementarity of approaches:
  • Private sector voluntary initiatives (market-driven) can be complementary to public international supervisory machinery but are not substitutes.
  • Importance of impartial review mechanisms and coordination among international organizations for information exchange and to avoid cross-purpose activity.

Open issues and unresolved tensions (as discussed)

• Conditionality:
  • Strong resistance expressed (noted in the transcript) to treating labor standards as standard Fund conditionality; debate on whether and how conditionality could include labor standards remains unresolved.
• Monitoring and reporting modalities:
  • How to monitor and how to present country performance (self-assessment vs. external assessment vs. partnership models) remains under active consideration.
  • Use of the IMF’s Article IV process: propositions to report routinely on labor standards status, but practical, legal, and political complications discussed.
• Rights vs. economic consequences:
  • Tension between respecting freedom of association as an inviolable right and analyzing economic outcomes from collective bargaining that may reduce employment or affect macroeconomic objectives.
• Selection of standards:
  • Question of why certain rights were chosen as "core" and not others; political economy and sequencing concerns raised (why these core standards, not a broader set of rights).
• Instruments and sequencing:
  • Range of instruments proposed: ILO supervisory machinery, Fund/Bank analysis and engagement, voluntary corporate codes (e.g., SA 8000), civil-society pressure, country-level policy design (social safety nets, active labor market policies), and international review mechanisms.

Key figures and exact statements preserved from the transcript

• 48 international standards (phrase used to describe the inventory of standards at the time)
• 46 countries agreed to observe the special data dissemination standard (as stated)
• Examples of unemployment ranges and rates cited for Chile:
  • Historical unemployment: "10, 13, 15, 16 percent" (example ranges cited in the transcript)
  • From 1988/1989 up to last year unemployment "has moved between 5.5 to 6 percent to 8, 8.5 percent" (as stated)
• Chile collective bargaining incidence: "16 percent of the active labor population involved in collective bargaining" (as stated)
• Chilean minimum wage example: "in the order of $20-to-$25 as a minimum wage per month" (as stated)
• Pension funds: described as "the equivalent of half of our gross domestic product as a net portfolio of workers savings accounts" (as stated)

Transcript of Seminar and Panel Discussion on "A Role for Labor Standards in the New International Economy?", September 29, 1999.

References

• Canada and the IMF
• Chile and the IMF
• Indonesia and the IMF
• India and the IMF
• Mexico and the IMF
• United States and the IMF
• Conditionality
• Special Data Dissemination Standard
• IMF Policy Advice -- A Factsheet
• The IMF and the World Trade Organization -- A Factsheet
• Transcripts
• PRESS CENTER
• Stanley Fischer
• https://www.imf.org/en/home