2002 REPORT TO 

CONGRESS ON LABOR ISSUES AND THE 

INTERNATIONAL FINANCIAL INSTITUTIONS 

UNITED STATES DEPARTMENT OF THE TREASURY 

 

 

 

 

 

 

 

 

 

 

 

 

OFFICE OF THE 

UNDER SECRETARY 

FOR INTERNATIONAL 

AFFAIRS

March 31, 2003 
TABLE OF CONTENTS 

 

EXECUTIVE SUMMARY.................................................................................................. i 

I. Introduction........................................................................................................... 1 

II. Treasury Department Policies and Practices........................................................ 2 

III. IFI Policies and Practices ..................................................................................... 4 

 A. World Bank Group............................................................................................ 4 

 B. Asian Development Bank................................................................................. 6 

 C. Inter-American Development Bank .................................................................. 9 

 D. African Development Bank............................................................................. 10 

 E. European Bank for Reconstruction and Development ................................... 12 

 F. International Monetary Fund........................................................................... 14 

IV. Labor Issues and the Broader Development Agenda......................................... 14 

Text of Law..................................................................................................... . Appendix 1 

Core Labor Standards...................................................................................... Appendix 2 

Extracts from the IDA-13 Agreement............................................................... Appendix 3 
2002 REPORT TO CONGRESS ON LABOR ISSUES AND THE 

INTERNATIONAL FINANCIAL INSTITUTIONS 

EXECUTIVE SUMMARY 

This report is presented in compliance with section 526(e) of the Foreign Operations, 

Export Financing, and Related Programs Appropriations Act, 1995 (Pub. L. No. 103-

306), which directs the Department of Treasury to urge the establishment of a process 

within the International Financial Institutions (IFIs) to evaluate borrowing member 

countries’ recognition of internationally recognized worker rights, and to include the 

status of such rights as an integral part of the IFIs’ policy dialogue with each borrowing 

country. The Act requires that Treasury report annually to Congress on the IFIs’ 

progress toward these two goals, as well as on efforts to establish formal procedures to 

screen projects and programs funded by the IFIs for any negative impact on 

internationally recognized worker rights. 

The Treasury Department’s strategy is to maintain the forward momentum in the IFIs’ 

recognition of core labor standards1 (CLS) as an important issue to be integrated into 

their development agenda. To this end, Treasury encourages enhanced cooperation 

among the IFIs and the International Labor Organization (ILO), uses opportunities such 

as multilateral development bank (MDB) replenishment negotiations to establish best 

practices on CLS policies, and monitors and takes appropriate action on individual 

lending and non-lending programs that come before the respective Boards of Directors 

for decision. 

Highlights of Recent Activities: 

Based on U.S. advocacy in the IDA-12 replenishment negotiations, which concluded in 

July 2002, CLS are being mainstreamed into the World Bank’s (www.worldbank.org) 

development policies and practices. For example, the Bank, in consultation with the 

ILO, recently produced a new website on a “Core Labor Standards Toolkit for Staff 

Preparing Country Assistance Strategies.” The toolkit is a direct consequence of the 

replenishment negotiation’s recommendation that CASs include a diagnostic review of 

core labor standards and is intended to assist staff in fulfilling this recommendation. 

 

1

 For the purposes of this report, the terms “internationally recognized workers’ rights” and “core labor standards” 

are used interchangeably and refer to the International Labor Organization (ILO) Conventions 29, 87, 98, 100, 105, 

111, 128, and 182. 

i
The U.S. helped secure commitments on CLS in the Asian Development Bank

(www.adb.org) latest replenishment agreement of late 2000. A direct result has been 

that the ADB formalized its relationship with the ILO based on a Memorandum of 

Understanding (MOU) signed in May 2002. Under the MOU, the Bank seeks to promote 

the ILO’s current work agenda by encouraging Developing Member Countries (DMCs) 

to promote employment generating growth, and to observe international labor 

standards, social protection, and gender equity. The MOU covers a range of possible 

collaborative activities with the ILO in Bank operations, including exchanges of relevant 

information on research and best practices and technical assistance related to labor 

market assessments, identifying social protection interventions, and other related areas 

where the ILO has the expertise. 

The Inter-American Development Bank (www.iadb.org) has a wide array of programs, 

loans, and technical assistance operations, which attempt to address labor market 

issues. For instance, the Bank is financing programs in Brazil and Mexico to keep 

children in school and out of the labor market. 

The International Monetary Fund (www.imf.org) and the ILO continue to cooperate at 

the field level in the review of labor codes, wage policies, and social protection 

mechanisms, and the two institutions exchange drafts of their annual reports for 

comment. The U.S. Executive Director (ED) continues to raise labor issues in Board 

discussions of country programs and conditions, with some effect. For example, Peru 

passed a law in December 2002 which addressed some of the collective bargaining and 

right to strike issues that the U.S. Executive Director raised in June 2001.

Development Agenda 

The Administration’s development agenda focuses on two goals: increasing economic 

growth and increasing economic stability. The MDBs can do a better job in spurring the 

economic growth needed to combat poverty and improve people’s lives if they place 

greater attention on two aspects of the development agenda that underlie most success 

stories: (1) the factors that enable people and countries to become more productive; 

and (2) better measuring, monitoring and managing for development results in individual 

projects as well as country assistance strategies. 

From the start of the Administration, we have pursued hallmark reforms in the MDBs in 

both of these complementary areas. We have also worked to achieve an increase in 

the proportion of assistance to the poorest countries delivered in the form of grants 

rather than loans. Treasury believes that this development agenda is important to 

improving the economic and social well- being of individual workers and their families, 

and that it complements U.S. efforts to promote CLS. 

ii
iii
1

 

2002 REPORT TO CONGRESS ON LABOR ISSUES AND THE 

INTERNATIONAL FINANCIAL INSTITUTIONS 

I. INTRODUCTION 

This report is presented in compliance with section 526(e) of the Foreign Operations, 

Export Financing, and Related Programs Appropriations Act, 1995 (Pub. L. No. 103-

306) (hereinafter referred to as the Act).2 The Act requires the Department of Treasury, 

in conjunction with the U.S. Executive Directors (USEDs) of the International Financial 

Institutions (IFIs), to urge the IFIs to: adopt policies encouraging borrowing countries to 

guarantee internationally recognized worker rights and include the status of such rights 

as an integral part of the policy dialogue with borrowing countries; use the relevant 

conventions of the International Labor Organization (ILO) in the development of these 

policies; and establish formal procedures to screen projects and programs for any 

negative impact in a borrowing country on internationally recognized worker rights. The 

Act requires that Treasury report annually to Congress on the IFIs’ progress toward 

these goals, as well as the extent to which each borrowing country guarantees 

internationally recognized worker rights. 

The objectives of this report are to: (a) outline the procedures that the Treasury 

Department follows to promote the systematic integration of internationally recognized 

worker rights into IFI operations and analytical work and (b) discuss developments in IFI 

policies and practices toward this end. The report also touches briefly on the overall 

development agenda that the Treasury Department is pursuing in the multilateral 

development banks (MDBs) because of its relevance to improvements in the living 

standards of individual workers and their families. 

The report covers the period between October 1, 2000 and September 30, 2002. 

 

Interpretation of the Legislation 

The Act requires that Treasury urge the respective institutions to use the relevant ILO 

conventions on internationally recognized worker rights in developing their policies.3

 

These are: the right of association; the right to organize and bargain collectively; a 

prohibition on the use of any form of forced or compulsory labor; and certain minimum 

2 For the text of the law, see Appendix 1. 3 In the legislation mandating this report, the International Financial Institutions (IFIs) are defined as the 

International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD - 

the World Bank Group), the Inter-American Development Bank Group (IDB), the Asian Development 

Bank Group (AsDB), and the African Development Bank Group (AfDB). The IMF is broadly responsible 

for macroeconomic policy recommendations and short-term balance of payments financing, while the 

multilateral development banks (MDBs) promote economic development through sector specific project 

and program loans and technical assistance. While not specifically identified in the legislation, the 

European Bank for Reconstruction and Development (EBRD) is also included as an IFI for purposes of 

this report.
labor standards that take into account differences in development levels among nations, 

including a minimum age for the employment of children, acceptable conditions of work 

with respect to minimum wages, hours of work, and occupational safety and health. 

Public debate and discussion at the international level have produced a slightly different 

definition of the paramount international labor rights and standards than those identified 

in the legislation. The international definition of labor standards that is most widely 

recognized is described in the ILO's Declaration on Fundamental Principles and Rights 

at Work, whose standards are usually referred to in the U.S. as core labor standards 

(CLS). The CLS have received widespread international recognition and have been 

used in multilateral discussions in such fora as the United Nations, the Organization for 

Economic Cooperation and Development (OECD), and the World Trade Organization 

(WTO). CLS include: the right of association; the right to organize and bargain 

collectively; a prohibition on the use of any form of compulsory or forced labor; 

nondiscrimination in employment; and the elimination of exploitative child labor. CLS are 

considered, by the international community generally, to be applicable universally and 

irrespective of the state of economic development of particular countries. 

Treasury focuses primarily on CLS in developing policies and engaging on labor issues 

at the IFIs, but also includes those minimum labor standards specifically outlined in the 

legislation and other labor issues often associated with IFI programs. This report, 

therefore, includes, besides information on CLS issues, information on significant efforts 

by the IFIs on social safety net issues, workplace health and safety, and certain other 

minimum standards related to labor. 

The Act also requires a report on the extent to which each borrowing country 

guarantees internationally recognized worker rights. This requirement is currently being 

met by the State Department’s Country Reports on Human Rights Practices, which is 

issued annually. This report evaluates human rights and worker rights conditions in all 

countries receiving foreign assistance from the United States; in all countries that are 

members of the United Nations; and in any other countries or territories that the 

Department of State considers merit inclusion in the report. 

II. TREASURY DEPARTMENT POLICIES AND PRACTICES 

Treasury supports the IFI’s recognition of CLS as an important issue by encouraging 

enhanced cooperation among the IFIs and the ILO, using opportunities such as 

replenishment negotiations to establish best practices on CLS among the different IFIs, 

and monitoring and taking appropriate action on individual lending and non-lending 

programs. 

With the U.S. taking a leadership role, the treatment of CLS was incorporated into 

recent replenishment agreements at the World Bank and the Asian Development Bank. 

As part of the twelfth replenishment of the International Development Association (IDA12), the World Bank agreed to include a review and analysis of CLS in the Bank’s 

2
Country Assistance Strategies (CASs).4

 The Bank began to implement the IDA-12 

agreement in 2000. The thirteenth IDA replenishment (IDA-13) reinforced both the 

importance of CLS and their treatment in CASs. Consequently, these issues were 

addressed in the IDA-13 report agreed among forty donor countries in July 2002 and 

subsequently were formally approved by the World Bank’s Executive Board and by the 

Bank’s Board of Governors (see Appendix 3 for extracts from the IDA-13 Agreement). 

The U.S. also secured commitments on CLS in the Asian Development Fund’s most 

recent replenishment (ADF-8), which went into effect in January 2001. 

• Donors recommended that the ADB address the CLS on two fronts. First, that the 

ADB mainstream CLS considerations in planning its projects and programs. 

Second, that the ADB continue to support direct investments in projects that will 

enable the ADB and its Developing Member Countries to address CLS issues in 

a more holistic manner. (paragraph 77) 

• Donors recommended that the framework and action plan for addressing CLS 

issues in the design and implementation of ADB operations be completed as 

soon as possible so that it will be applied in ADF-8. (paragraph 78) 

• Donors recommended that the ADB formalize its relationships with international 

organizations that promote CLS. (paragraph 80) 

 In connection with these recommendations, Donors requested that a report on progress 

on the planned framework and action plan on CLS be provided to Donors at a Midterm 

Review of ADF-8 to be held immediately preceding the ADB’s 2003 Annual Meeting. 

With regard to individual lending and non-lending programs, the Treasury Department 

has internal guidelines for engaging CLS issues at the MDBs and the IMF. These guide 

the development of internal Treasury positions on CLS issues and inform U.S. 

Executive Directors (USEDs) for their interventions at the Executive Board and staff 

levels. 

Working with the respective USED office, the Treasury Department reviews all MDB 

loans and grants to ensure that proposed projects and programs address CLS where 

appropriate. In addition, Treasury and the USED offices review all MDB Country 

Assistance Strategies (CASs) to ensure that CLS are addressed. The CASs are the 

primary documents used to express the institutions’ policy approach to individual 

borrowing member countries. In addition, the Treasury Department reviews IMF Article 

IV surveillance reports, program proposals, and program reviews, for consistency with 

core labor standards and related labor issues. These collaborative efforts guide the 

development of internal Treasury positions on CLS issues and serve as the basis for 

USED interventions at the Boards of Directors. 

 

4 The CAS is the basic planning document used by the World Bank setting out how the Bank intends to 

use its lending and other programs to help countries meet their development goals. 

3
III. IFI POLICIES AND PRACTICES 

Following is an institution by institution description of cooperation with the ILO as well as 

details on actions being taken to incorporate CLS in policies and programs that the IFIs 

fund: 

A. World Bank Group 

The World Bank engages with trade unions in numerous ways: consultations with union 

members who are stakeholders in Bank projects; national consultation with unions as 

members of civil society; international policy dialogue on economic and social issues; 

research on the economic effects of collective bargaining; and training programs for 

both Bank staff and trade unions. The Bank also holds meetings with international trade 

union representatives twice a year. 

CLS are being mainstreamed into the Bank’s development policies and practices, and 

the Bank and the ILO have a productive ongoing dialogue. This is reflected in a number 

of informative Bank websites dealing with such topics as CLS, social protection and 

labor, and the Bank’s relationship with the ILO and trade unions. 

One of the more recent additions, reported in the Fall 2002 edition of ILO Focus, is the 

Bank’s new website on a “Core Labor Standards Toolkit for Staff Preparing Country 

Assistance Strategies.” This online toolkit provides a 3-step process for: 

• Understanding CLS and their relevance to development and poverty reduction 

(this includes the IDA-12 and IDA-13 recommendations); 

• Locating information on CLS on specific countries; and 

• Diagnosing CLS in the CAS (including examples). 

The toolkit is a direct consequence of a recommendation from the IDA-12 replenishment 

negotiations, reaffirmed in the IDA-13 report, that CASs include a diagnostic review of 

CLS. The toolkit is intended to assist staff in fulfilling this recommendation. The ILO 

provided technical input to the Bank for preparing the toolkit’s information package, 

which according to an ILO staff paper, provides “a major incentive for both the ILO and 

the World Bank to encourage their field staff to engage in needed country-level dialogue 

on CLS and related labor and employment issues.” 

 

Other key activities that the Bank has engaged in include: 

• Bank research supports the standards related to harmful child labor, forced labor, 

and gender equality in the labor market. Policy dialogue and technical 

assistance with client countries reflect such findings. 

4
• In addition to engaging in policy dialogue with borrowing countries, the Bank’s 

work on child labor includes improving partnerships with other relevant 

international organizations, including the ILO and UNICEF, and non-government 

organizations (NGOs); giving attention to child labor issues in Bank lending 

activities; requiring compliance with applicable child labor laws and regulations 

in specific projects where exploitative child labor is otherwise likely to occur; and 

designing specific projects or components of projects to combat the most harmful 

forms of child labor. 

• Contracts with private sector employers issued by the International Finance 

Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) 

include requirements not to employ child labor or forced labor. 

• The Bank has repeatedly made it clear that it has not and would not support 

projects in which forced labor was or would be employed. 

 

• Promotion activities to encourage an atmosphere conducive to the achievement 

of CLS include policy dialogue with international trade union organizations and 

the ILO, a training program for Bank staff on how to work with trade unions, and 

the Global Child Labor Program, which, in partnership with other international 

organizations and NGOs, engages in projects to reduce harmful child labor. 

• The Bank engages in a number of activities to support a positive role for unions 

in development. The World Bank has been engaged with trade unions – at firm, 

country, and international levels – for several years and staff level dialogue with 

trade unions is encouraged. 

• The Bank has undertaken analytical work, e.g., on the economic impacts of 

freedom of association and collective bargaining, to understand better how CLS 

can contribute to its mission. 

As a result of these efforts, CLS are now being incorporated into CASs, most 

importantly in those countries where the issue is of major consequence. The following 

text is extracted from the Bangladesh CAS of February, 2001, and the Indonesia CAS of 

March 2001, and is provided as an indication of the nature of the treatment of CLS in 

the World Bank’s policy dialogue with these countries. 

Bangladesh: Bangladesh has ratified six of the eight International Labor 

Organization conventions on core labor standards, but not the two pertaining to 

child labor. Despite the formal ratification, the Government still restricts freedom of 

association in export processing zones to attract foreign investment. Discrimination 

against women and religious minorities in the labor market and extensive 

trafficking in both women and children primarily for forced prostitution continue, 

notwithstanding efforts by the Government to address these social problems. The 

issue of child labor is particularly worrisome because 6.3 million children below 14 

years of age, constituting 12% of Bangladesh's labor force, are working and out-of5
school. Improvement is, however, expected in the future as a result of the growing 

support of the Government, civil society and international organizations for efforts 

to abolish child labor and provide working children with alternatives that would 

allow them to resume schooling. 

Indonesia: Sound labor market policies are equally important for raising the 

economic prospects of the poor, as they are helped by a development strategy that 

favors a rapidly expanding demand for labor and fosters equitable and just labor 

conditions (see Box 2.3). Among donors, the ILO has the lead in this area. 

Box 2.3: Labor Policies in Transition. The broader political changes have opened 

up labor policies. In 1998, the Government ratified the ILO convention on freedom 

of association and issued a regulation opening up trade union registration. As a 

result, new labor unions have sprung up, challenging the only union allowed in the 

Suharto era. But there are questions about the capacity of business and labor to 

handle the changes and concerns that implicit alliances between Government, 

employers and even military and police may persist. Moreover, breakdown of law 

and order in parts of Indonesia have adversely affected labor relations. Law and 

order and fair economic relations will require cooperation among Government, 

employers and employees, and reform of the legal and judicial system, the police 

and the military. Issues for medium-term consideration involve: (i) further 

development of the labor relations framework covering the formation of trade 

unions, collective bargaining, and settlement of industrial disputes; and (ii) 

regulations governing employment standards, covering issues such as working 

hours, wage determination, and job security. Longer-term reform will also involve a 

sustainable system of social protection, including reform of the inefficient 

government-run Jamsostek social insurance scheme. 

In the case of Bangladesh, the U.S. Executive Director welcomed the frank discussion 

of child labor and gender equity issues, but also urged bank officials, in cooperation with 

the ILO, to raise a variety of labor issues in its policy dialogue with the government, 

including workplace representation, depoliticization of the labor movement, and internal 

union democracy. 

In the case of Indonesia, the U.S. Executive Director likewise expressed support for 

inclusion of labor issues and noted that the CAS benefited from inclusion of labor 

groups in the consultation process. The USED also noted that enactment of proposed 

labor legislation would be an important step in ensuring the expeditious and equitable 

resolution of individual and collective labor disputes. While the Government 

subsequently submitted the legislation, the unicameral House of Representatives (DPR) 

delayed consideration of the bills. 

B. Asian Development Bank (ADB) 

Per the Asian Development Fund’s seventh replenishment agreement (ADF-8), the ADB 

has formalized its relationship with the ILO based on a Memorandum of Understanding 

6
(MOU) signed in May 2002. Under the MOU, ADB agrees to uphold the ILO’s work 

agenda by encouraging developing member countries (DMCs) to promote employment 

generating growth and to observe international labor standards, social protection, and 

gender equity. The MOU covers a range of possible collaborative activities with the ILO 

in ADB operations, including exchange of relevant information on research and best 

practices and technical assistance related to labor market assessments, identifying 

social protection interventions, and other related areas for which the ILO has expertise. 

In July 2002, a high level mission from the ILO visited the ADB to discuss possible 

collaboration in mainstreaming CLS in the 2003-2005 ADB country level operations. 

Specifically, the ILO is regarded as a possible resource for technical assistance in 

incorporating CLS into the Summary Labor Market Assessment, a required exercise in 

preparing all new/revised country assistance strategies and programs. 

The ADB and the ILO have also continued to work together on a regional technical 

assistance (RETA) project on best practices on CLS and other labor standards. The 

findings of the RETA will be used to draft an ADB Handbook on Labor Standards that 

will provide practical guidelines for ADB staff and development practitioners. The RETA 

has already produced recommendations that are being followed up through further joint 

work. The first collaborative project will address the worst forms of child labor. Currently, 

the ADB and the ILO are exploring the possibility of collaborating on work to address 

this issue in Bangladesh where child labor is both a cause and consequence of poverty. 

Other developments of particular relevance to labor and CLS include: 

• As part of the joint work on the RETA, the ADB and the ILO co-hosted a Regional 

Workshop on CLS at the ADB Headquarters in September 2002, attended by 

ADB staff and delegations from developing market economies in the region. The 

ILO also provided consultant services on developing guidelines on Summary 

Labor Market Assessments which were incorporated in the ADB Handbook on 

Poverty and Social Analysis. 

• In September 2001, the ADB Board approved the ADB Social Protection Strategy

(SPS) based on a framework prepared in 2000. Under the SPS, the ADB is 

committed to ensure that all relevant ADB interventions should be designed in 

accordance with CLS and other labor standards; that all ADB-financed suppliers 

of goods and services, contractors, and consultants will comply with the country’s 

labor legislation and with CLS; and these aspects will be monitored as part of the 

ADB’s regular loan review process. 

The SPS committed the ADB to (i) supporting assessments of social protection 

issues and priorities in the context of country poverty analysis and country 

strategy and program; and (ii) based on such assessments, developing a 

selective portfolio in social protection covering four key issues. The issues are: (i) 

support for establishing social protection systems; (ii) targeting vulnerable 

population groups and gender issues; (iii) providing support for sound financial 

management and good governance practices; and (iv) where possible, working 

7
with existing national commissions for social protection to ensure consistency in 

covering social protection issues across programs. 

A detailed progress report of the implementation of the SPS was submitted in 

October 2002 for the information of the ADB Board. The report indicated that a 

significant number of ADB loans are designed to help eliminate violations of labor 

standards, such as improvement in the living conditions of former bonded 

laborers, reducing child labor by retaining children in school, and promoting 

occupational health and safety in the workplace. For example, one highway 

construction project linking Viet Nam and Lao PDR includes appropriate border 

controls to detect illegal movement of women and children; and the civil works 

contractors will not be allowed to employ child labor. 

• The ADB has consulted with labor unions and other international financial 

institutions by participating or hosting regional conferences/meetings to discuss 

relevant issues. In particular, the ADB has kept up a dialogue with the 

International Confederation of Free Trade Unions – Asian and Pacific Regional 

Organization (ICFTU). Also, through its NGO Center, the ADB works with NGOs 

on a number of issues at the regional level, including child protection, disability, 

and care for the elderly. 

• One of the strategic aims of the ADB’s interventions in the education sector is to 

improve and expand access for disadvantaged groups, including ethnic minorities 

and girls, by providing them greater opportunities for employment upon completion 

of schooling, and participation in society in general through improved quality of 

education. Interventions aimed at increasing access and bringing out-of-school 

children to school reduce the rates of children’s participation in the labor force. 

This is being done through construction of schools in remote areas, curriculum 

development, provision of textbooks, stipends for the poor and girls, policies for the 

recruitment, training and retention of teachers to improve quality and ensure 

greater representation of disadvantaged groups in the teaching force, institutional 

capacity building, etc. The emphasis on improving the quality of education leads to 

the greater perceived value of education and increasing enrollments and 

attendance in schools. A number of ADF-funded primary education projects 

contribute to reduce child labor. 

• The ADB has also created six social protection specialist positions, five of which 

have been filled and assigned to the operations departments covering the five 

regions. Between 2000 and 2002, a total of 14 training events on social 

protection (comprising in-house seminars and in-country or regional workshops) 

have been tailored to ADB staff needs and DMC clients, focusing on key areas 

covered under the SPS. An ADB social protection network and website have 

been set up to assist ADB operations staff. In parallel, the ADB Library has 

acquired a significant inventory of literature on labor markets and social 

protection. 

8
C. Inter-American Development Bank 

The IDB and the ILO have engaged in active cooperation in a number of areas related 

to CLS. The Bank is working jointly with the ILO on the development of a technical 

cooperation project aimed at providing technical assistance to the labor ministries of its 

member countries. This technical assistance would be delivered through the 

International Labor Organization project “Fundamental Principles and Rights at Work” in 

the context of the XII Inter-American Conference of Labor Ministers that operates at the 

International Labor Organization Office for the Americas in Lima. This group is also 

receiving funding from the U.S. Department of Labor. Funding is expected to be 

approved by early 2003. The Bank has formally organized a High Level Working Group 

with the Inter-American Regional Organization of Workers (ORIT), the most important 

umbrella union organization operating in Latin America. The next activity of the working 

group will be the organization of a structured dialogue about the impact of globalization 

on workers and labor markets. 

The IDB has a wide array of programs, both loans and technical assistance operations, 

which attempt to address labor market issues. The Bank is financing a number of 

operations related to work force training both with governments and civil society 

organizations, the biggest of which is an operation in Mexico that finances training 

activities both at the national and at the state level. 

Specific noteworthy activities include the following: 

• The Bank has initiated a set of pilot programs to reduce or eliminate child labor. 

The purpose of supporting these programs is to test out and thoroughly evaluate 

new methodologies in the region. The IDB also is financing programs that keep 

children in school (and thus out of the labor market) such as Bolsa Escola 

(Brazil) and Oportunidades (Mexico). These programs pay families to keep 

children in school, which together with efforts to provide basic health services to 

the children, addresses a key economic motivation for child labor. 

• The Bank has acted as a conduit for practical exchanges of knowledge and 

operational experience between its member countries. One example was using 

Mexican participants, who had developed experience, to help Argentina design a 

model for establishing a decentralized framework for training. The Bank has also 

supported important reforms in borrowing countries, often with technical 

assistance, such as the collaboration with the Chilean government in the design 

of the recently enacted unemployment insurance system in Chile. 

9
• The Bank has adopted an encompassing approach to combat discrimination, and 

there is a wider Bank program on discrimination and social inclusion, of which 

employment discrimination is an important issue. The Bank adopted an action 

plan in May 2002 for a series of actions (creation of training courses, sponsorship 

of conferences, increased staff training), research and operations to address 

social inclusion. 

• The social development strategy and the competitiveness strategy, drafted by the 

Bank, both contain explicit references and discussion for developing a Bank 

approach to the CLS. This includes consideration in Bank country papers, 

research and projects. Currently, the overall Bank social and economic review of 

projects (CESI) has the ability and jurisdiction to screen projects for CLS issues. 

The Bank has also engaged in the organization of a number of meetings with civil 

society to discuss the issue of CLS in the context of trade agreements and 

integration. 

In order to improve the visibility of the IDB’s labor market focus, the annual Economic 

and Social Progress Report (IPES 2003), prepared by the Bank’s research department, 

is going to be dedicated to labor market issues. As the IPES is a highly visible Bankwide collaborative effort, it is expected that this period will show important advances 

both in research and in policy analysis in areas related to the labor market performance. 

D. African Development Bank Group (AfDB) 

There is an existing AfDB/ILO Memorandum of Understanding (MOU), which became 

effective in 1990. Like the ILO, the AFDB has adopted a new vision, geared more 

towards the needs of its member countries. To take into account this new focus, the 

heads of the two institutions, during their discussions at the AfDB headquarters at the 

end of 1999, called for the negotiation of a new AfDB/ILO Framework Agreement that 

should take into account the respective new visions of the two organizations. 

Consequently, the Bank initiated negotiations in 2000 with ILO officials to conclude a 

new cooperation agreement that would strengthen collaboration between the two 

organizations and be more consistent with current best practices and mutual priorities. 

The Board of Directors has recommended the new AfDB/ILO Framework Agreement for 

approval by the Board of Governors. 

The new Agreement, which is for an indefinite period, provides that the envisaged 

partnership between the Bank Group and the ILO shall focus on: 

• Joint operational activities in regional member countries, including technical 

assistance activities in line with their respective priorities, skills, and capacities; 

• The promotion of networks between regional development institutions through 

formal and informal mechanisms; 

10
• The development of policies and procedures, particularly in the promotion of 

employment, international standards and rights at work, gender issues, social 

promotion and social dialogue; 

• Studies and research in areas of ILO competence; and 

• Human resources development and training for African member countries 

including cooperation between the Joint Africa Institute and the ILO’s Turin 

Training Centre. 

The on-going dialogue between the Bank and the ILO on CLS is reflected in a 

multinational project on capacity building for Disability Rehabilitation for Malawi, Zambia 

and Zimbabwe. This was developed by the Bank in collaboration with the ILO and 

approved by the Board in October 2000. ILO participation focused particularly on social 

protection and equality of employment opportunities aspects of the project. 

The AfDB’s position paper on CLS developed in 1998 still provides the framework for 

the Bank’s approach to CLS. This approach also reflects four difficult factors particularly 

relevant for the Bank’s African member countries: (1) rising unemployment due to 

decline in manufacturing industries; (2) slow growth or stagnation in GDP, accompanied 

in many cases by declines in primary commodity prices, leading to fiscal difficulties and 

redundancies in the public and private sectors; (3) wars and civil strife which have led to 

the displacement of populations and further disruption of economic activities; and (4) 

problems of governance. These factors have exacerbated the problems of restrictions 

on freedom of association; prevalence of child labor (with major implications for 

education and training); gender discrimination in employment; and incidences of forced 

or compulsory labor mainly in commercial agricultural production. 

The Bank’s overall approach with regional member countries on CLS issues is based on 

discussion, dialogue, consensus building and support. The Bank Group’s activities and 

policy dialogue with regional member countries on poverty reduction, primary education, 

gender, environment and governance help to address root causes of discrimination, 

authoritarianism and child labor. These are some of the priority areas of the African 

Development Fund’s eighth and ninth replenishments (ADF VIII and ADF IX). 

Elements of the Bank’s strategy for implementing its CLS strategy include the 

sensitization and training of Bank staff; the inclusion of CLS issues in Country Strategy 

Papers; the incorporation of CLS issues, where relevant, in new and revised policies; 

and the dissemination of relevant information through workshops, seminars and 

conferences: 

• The new Country Strategy Papers (CSPs) developed since 1999 contain a 

section, as a standard component, which focuses on ratification and 

implementation of international labor conventions, collective bargaining rights, 

gender and discrimination issues in work, and child labor. The focus is on 

11
assessing the degree of borrower compliance with CLS as defined by the ILO, 

and whether the existing capacity to enforce the standards is adequate. 

• Relevant Bank Policies and Guidelines developed or approved since 1999 

contain sections on CLS. Examples are: 

- Integrated Water Resources Management Policy, which was approved by the 

Board in April 2000, includes issues relating to freedom of association and 

collective bargaining, the relationship between water availability and 

health/environment of workers, and the impact of water projects on child 

education; 

- Education Policy, in whose preparation the ILO took an active role by 

contributing sections and participating in workshops which reviewed the draft 

Policy; 

- Policy on Good Governance, which prioritizes freedom of association and 

organization and respect for labor standards and regulations; 

- Guidelines on Project Design and Economic Analysis, which provides 

concrete ways of integrating gender and CLS issues in project design. 

E. European Bank for Reconstruction and Development (EBRD) 

The mandate of the EBRD differs somewhat from that of the other MDBs in two 

important respects. First, lending is targeted toward providing transitional rather than 

development assistance. The Bank's mandate is to foster the transition from centrally 

planned economies in Eastern Europe and the former Soviet Union to open-marketoriented economies. Second, the EBRD focuses on financing projects, as opposed to 

structural or sectoral reform programs. 

In 1992, the EBRD and the ILO entered into an agreement for cooperation providing for 

(i) an exchange of information and documents; (ii) mutual consultation; (iii) attendance 

at Annual and other meetings; and (iv) technical cooperation between the two 

organizations. The agreement was ratified by the Bank’s Board of Governors as 

Resolution No. 28, dated 10 July 1992. 

Since 1999, the EBRD has included a review of labor issues in its Country Strategy 

papers. As is the case in other institutions, the U.S. Executive Director works to ensure 

that relevant labor issues are consistently reviewed in all Country Strategies. 

At the project level, health and safety due diligence are an integral part of the 

environmental due diligence conducted on all projects. The extent of labor due 

diligence depends on the context of the project. For example, the EBRD examines 

labor issues where a project is likely to lead to a significant reduction of the work force, 

12
e.g. in connection with the preparation of privatizations, large-scale equity investments, 

or on corporate loans to enterprises with large numbers of employees. In such cases, 

the social impacts associated with work force reductions are assessed as part of project 

due diligence, and where appropriate, the EBRD may mobilize complementary donor 

grant funds to co-finance mitigation measures. 

In addition, all the financial intermediaries that the EBRD provides financing to are 

required not to finance any activities that violate core labor standards. 

The EBRD focuses in particular on ensuring the health and safety of workers in the 

projects that it supports. Such requirements are usually part of an Environmental Action 

Plan (EAP) that is completed for a project. For example, as part of the EBRD's preprivatisation restructuring loan to SNP Petrom, a large Romanian petrochemical 

company, an EAP was developed for two of the company's refineries. Eight of the 51 

agreed actions in the EAP deal with occupational health and safety improvements, 

emergency response plans, and health and safety training. Specific time-bound actions 

required include: 

• Development of an objective-oriented, health, safety, and environment training 

program, including identification of training centers capable to implement such a 

program; 

• Holding emergency response/oil spill response training and drills;

• Provision of adequate personal protective equipment; 

• Provision of adequate safety and warning signs; 

• Provision of safety literature to employees such as safety rules and regulations, safe 

procedures for equipment operation, etc.; 

• Inspection of the administration buildings and general facilities to verify compliance 

with sanitary and hygienic norms; and 

• Inspection of sites for compliance with fire safety rules.

Following the detailed mitigation actions prescribed in an EAP is a covenant of the 

EBRD's loans. 

F. International Monetary Fund (IMF) 

The IMF and the ILO continue to cooperate at the field level in the review of labor 

codes, wage policies, and social protection mechanisms, and the two institutions 

exchange drafts of their annual reports for comment. Additionally, the ILO meets with 

senior management and board members of the Fund every two years to further 

enhance cooperation, and the ILO regularly sends observers to spring and fall meetings 

of the International Monetary and Financial Committee (IMFC). 

The Treasury Department, in coordination with the Department of Labor and the State 

Department, regularly reviews IMF Article IV surveillance reports, program proposals, 

and program reviews for consistency with core labor standards and related labor issues. 

In reviewing IMF programs, Treasury believes it important to protect and, where 

appropriate, to advance CLS and minimum labor standards. At the same time, the 

13
Treasury Department recognizes that the IMF’s core mission is to provide balance of 

payments and macro-economic policy support and guidance. 

There is some reluctance by many member countries to address CLS issues in the IMF, 

particularly given widely supported efforts underway to focus IMF conditionality more 

narrowly. However, the USED continues to raise critical labor issues in Board 

discussions on a regular basis. For example, in a Board statement in January 2001, the 

U.S. expressed concern that proposed reforms to the Argentina labor code could have 

significant effects on the structure and conduct of collective bargaining and the future of 

labor-management relations. The USED urged IMF staff to report on the new labor law 

in greater detail and to ensure its consistency with key ILO standards. In a March 2001 

Board discussion on Peru, the USED urged the Peruvian government to ensure that its 

laws on collective bargaining and the right to strike are consistent with ILO standards. 

In a July 2001 Board discussion on China, the USED encouraged Chinese authorities to 

support core labor standards, including freedom of association and collective bargaining 

and welcomed movement by the government to phase out restrictive policies on labor 

mobility. In a statement to the Board in February 2002, the USED noted the efforts of 

the Thailand government to improve labor standards and welcomed authorities’ 

restoration of trade union rights to employees of state enterprises, but expressed 

concern over the apparent failure to protect workers who attempt to unionize. In a 

review of the Dominican Republic’s Article IV Consultation in June 2002, the USED 

encouraged authorities to fully implement laws protecting the right of workers to freely 

engage in collective bargaining and organizational activities. Most recently, during a 

Board review in September 2002, the USED welcomed the Mexican government’s 

intention to undertake labor market reforms and encouraged authorities to be respectful 

of core international labor standards. 

While it is difficult to attribute outcomes to specific USED interventions, it is worth noting 

that positive actions have occurred in some of the countries mentioned above. In the 

case of Argentina, the ILO’s Committee of Experts has noted with satisfaction various 

measures the Government had taken in 2001 to provide trade union associations 

merely registered with rights and benefits similar to those of unions legally recognized. 

In the case of Peru, Congress passed a law in December 2002 that addressed some of 

the ILO’s primary objections to the 1992 labor law. The new law allows apprentices to 

join unions, reduces the number of individuals required to form a union, recognizes the 

right to strike, and allows for collective bargaining by sector. In Thailand, the Central 

Labor Court ruled in September 2002 that 21 union members fired by a television 

station be reinstated to their former positions, mirroring recommendations made in 

March by the ILO’s Committee on Freedom of Association.5

IV. LABOR ISSUES AND THE BROADER DEVELOPMENT AGENDA 

The Administration’s broader development agenda focuses on two goals: increasing 

economic growth and increasing economic stability. A central theme of the pro-growth 

policy has been productivity growth through job creation in the private sector. Higher 

 

5

 See U.S. Department of State 2002 Human Rights Report for additional details. 

14
productivity is essential for rising living standards and reduction in poverty. Put another 

way, the labor force will benefit from increased productivity, which will lead to higher 

economic growth, more jobs, and greater individual well-being. 

The Treasury Department believes the MDBs are important instruments in helping to 

raise economic growth and prosperity around the world. But while the MDBs have the 

strong support of the United States, we also believe that the effectiveness of these 

institutions in enhancing sustainable economic growth and development, and making a 

difference in the lives of the people, can be substantially improved. 

We are convinced that the MDBs can do a better job in spurring the economic growth 

needed to combat poverty and improve people’s lives if they place greater attention on 

two aspects of the development agenda that underlie most success stories: (1) the 

factors that enable people and countries to become more productive; and (2) better 

measuring, monitoring and managing for development results. We have also worked to 

achieve an increase in the proportion of assistance to the poorest countries delivered in 

the form of grants rather than loans. 

Productivity Growth: Treasury believes the MDBs could be more effective in helping 

countries achieve improved living standards if they prioritized their efforts to address the 

basic causes of low productivity -- such as poor policies, low business investment, and 

inadequate education and health care -- that are now holding countries and people 

back. Without productivity-led economic growth that creates widespread employment, 

progress on poverty reduction and CLS will be elusive. 

The need for sound policies is fundamental. This includes establishing the basis for 

sustainable domestic economic growth. It also encompasses outward-oriented 

engagement with global markets and investment. In every country there is no substitute 

for honest leadership committed to good and publicly accountable economic 

management. Progress in meeting the economic and social goals of the Millennium 

Declaration is heavily contingent on improving the quality and productivity of resource 

use. We therefore have successfully encouraged stepped up efforts by the World Bank 

(and the IMF) to strengthen public expenditure tracking and fiduciary management and 

are urging that these efforts be intensified. 

Treasury also wants to accord priority to human resource development, including 

investments needed to improve delivery systems for health, education, water, and 

sanitation. These social sector investments increase individual productivity and have 

major spillover benefits economy-wide. Conversely, the absence of basic services, 

such as clean water and sanitation, makes the prospects for economic progress more 

remote. 

We believe that this development agenda is important to improving the economic and 

social well being of individual workers and their families and that it complements U.S. 

efforts to promote CLS. 

15
APPENDIX 1: Text of Law 

P.L. 103-306, SECTION 526 (e) 

Section 526 (e) of P.L. 103-306, the Foreign Operations, Export Financing, and Related 

Programs Appropriations Act, 1995, passed on August 23, 1994, as amended, states: 

(a) The Secretary of the Treasury shall direct the United States Executive Directors of 

the international financial institutions (as defined in Section 1701(c)(2) [of the 

International Financial Institutions Act]) to use the voice and vote of the United States to 

urge the respective institution: 

(1) to adopt policies to encourage borrowing countries to guarantee 

internationally recognized worker rights (within the meaning of Section 507(4) of 

the Trade Act of 1974) and to include the status of such rights as an integral part 

of the institution’s policy dialogue with each borrowing country; 

(2) in developing the policies referred to in paragraph (1), to use the 

relevant conventions of the International Labor Organization, which have set 

forth, among other things, the right of association, the right to organize and 

bargain collectively, a prohibition on the use of any form of forced or compulsory 

labor, and certain minimum labor standards that take into account differences in 

development levels among nations including a minimum age for the employment 

of children, acceptable conditions of work with respect to minimum wages, hours 

of work, and occupational safety and health; and 

(3) to establish formal procedures to screen projects and programs funded 

by the institution for any negative impact in a borrowing country on the rights 

referred to in paragraph (1). 

(b) The Secretary of the Treasury shall submit to the committee on Banking, Finance 

and Urban Affairs of the House of Representatives and the Committee on Foreign 

Relations of the Senate by the end of each fiscal year a report on the extent to which 

each borrowing country guarantees internationally recognized worker rights to its labor 

force and/or progress toward achieving each of the goals described in subsection (a) of 

this section.
APPENDIX 2: The Core Labor Standards 

The internationally recognized core labor standards and their corresponding ILO 

conventions are: 

• Freedom of Association (ILO Convention 87) - The right, freely exercised, of 

workers and employers, without distinction, to organize for furthering and 

defending their interests.

• Right to Organize and Collective Bargaining (ILO Convention 98) - 

Protection for workers who are exercising the right to organize; non-interference 

between workers’ and employers’ organizations; promotion of voluntary collective 

bargaining.

• Forced Labor (ILO Conventions 29 and 105) - Suppression of forced labor for 

certain purposes (political coercion; labor mobilization for economic 

development; labor discipline; punishment for participating in strikes); prison 

labor permitted under state supervision and in accordance with due process of 

law. 

• Minimum Age (ILO Conventions 138 and 182) - Minimum age for employment 

not less than the age of completion of compulsory education (normally not less 

than 15 years). Convention 182, the Worst Forms of Child Labour Convention, 

was adopted at the ILO’s General Conference in 1999 went into effect in 

November 1999. This convention prohibits the employment of children in 

especially abusive situations such as prostitution, pornography, armed conflict, 

and bonded labor. 

• Equality of Opportunity and Treatment (ILO Conventions 100 and 111) - 

Equal remuneration for men and women for work of equal value and equality of 

opportunity and treatment in respect of employment and occupation. 

There are five core labor standards. Freedom of association and the right to organize 

and bargain collectively are sometimes combined under one rubric for a total of four, 

most recently in the ILO’s Declaration on Fundamental Principles and Rights at Work. 

Note also that there are seven ILO conventions that are relevant. Freedom of 

association (Convention 87) has been interpreted to mean the right of all citizens to 

associate in defense of their rights, free from government interference. Convention 98 

(right to organize and bargain collectively) obligates the government parties to protect 

workers from reprisal by employers and to promote collective bargaining. As workers 

associate for the purpose of collective bargaining with their employers, the two are often 

combined. 
APPENDIX 3: Extracts from the IDA-13 Agreement (July 25, 2002) 

Deputies stressed that forging development partnerships should start at the country 

level, with government commitment and ownership of the development program and 

strong participation of civil society, the private sector, labor organizations and other 

stakeholders, and especially representatives of poor people. Deputies observed that 

such consultation needs to complement countries’ democratic political processes, 

including parliamentary processes. In that connection, they urged IDA to work with 

other donors to help build countries’ capacity to make their own policy and program 

processes more participatory and inclusive and to build institutions for implementation 

that represent diverse interests. At the same time, IDA and other donors should 

continue to encourage adoption of sound economic and social policies in country 

programs. Deputies encouraged IDA to increase the use of sector-wide approaches 

(SWAps) with a view towards improving the integration and effectiveness of donor 

financing. 

 Paragraph 11 

Within this framework of broad-based and equitable growth, public expenditures should 

focus on investments in people, especially through expanding education, health and 

basic infrastructure and through curbing non-productive uses, including excessive 

military expenditures. Efforts should be made to increase the transparency and 

accountability of the public expenditure management system. Structural reforms are 

essential not only to increase efficiency and expand markets but also to build up the 

assets of the poor through access to land, credit and information. Well functioning 

labor markets, including the implementation of core labor standards, are also key 

to expanding job opportunities and increasing real wages. In addition, as 

pressures on land, water and other natural resources intensify, environmental 

sustainability must become a stronger focus of national policies, both to protect the 

natural assets on which long-term growth depends and to reduce the vulnerability of 

poor people to environmental degradation and to natural disasters. 

 Paragraph 33 

Social Protection. Deputies noted that the World Bank’s Social Protection Sector 

Strategy links social protection activities ⎯ reducing the vulnerability of poor men and 

women and improving their ability to cope with adverse economic shocks, natural 

disasters, ill health and disability ⎯ to the broader agenda of poverty reduction. They 

emphasized the contributions to poverty reduction that could be made by 

eliminating harmful child labor, making labor markets more equitable and inclusive, 

implementing legal reforms to protect poor people’s right to assets (e.g., women’s 

property rights), and strengthening community-based coping mechanisms, including 

through social funds. Deputies encouraged IDA to strengthen its consultations and 

collaboration with international organizations, such as the International Labor 

Organization (ILO), in its work with countries on labor issues.

 Paragraph 41 
Highlight in the CAS the results of core analytical work as part of the justification for the 

proposed level and composition of IDA’s financial and advisory assistance. This core 

analytical work comprises: 

• Social, Structural and Sectoral Analysis. This analysis comprises a Poverty 

Assessment (PA), or equivalent poverty analysis, which looks at the dimensions 

of poverty and its determinants, including the analysis of poverty and social 

impacts of key reforms that have been undertaken or are being contemplated; 

and a Country Economic Memorandum (CEM), or equivalent economic analysis,

which focuses on structural, sectoral and institutional reform priorities for 

sustainable growth and poverty reduction, including the analysis of the social and 

environmental impacts of these reforms. These assessments also include the 

analysis of gender equality and labor markets (including core labor 

standards) and provide recommendations on the policies and institutions 

identified as particularly weak in the CPIA. They can be prepared by IDA, other 

donors or the country itself and can be presented as an integrative report on 

social, structural and key sectoral policies or as separate ESW products. 

 Annex III: Recommendations/Actions