COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 24.07.1996 
COM(96) 402 final 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
THE TRADING SYSTEM AND 
INTERNATIONALLY RECOGNIZED LABOUR STANDARDS 

THE TRADING SYSTEM AND 
INTERNATIONALLY RECOGNIZED LABOUR STANDARDS 
Contents 
1. Introduction 
2. The international debate and the definition of core labour standards 
(a) Earlier deliberations in the European Union 
(b) The OECD study 
(c) The work of the ILO 
(d) The G7 conference on employment (Lille, 1-2 April 1996) 
and the Lyons G7 summit (28-30 June 1996) 
(e) The social summit 
(f) Definition of "core" labour standards 
3. Action taken by the European Union 
(a) Unilateral action 
(b) Bilateral cooperation with third countries 
4. Multilateral action 
(a) Consolidating the role of the ILO 
(b) The WTO 
1. Introduction 
At the end of the Marrakesh ministerial meeting in April 1994 the link between the 
multilateral trading system and internationally recognized labour standards was one of the 
subjects mentioned in the Presidency conclusions on which some participants requested 
the WTO to do further work. 
Since Marrakesh, the question has been discussed and debated in international 
organizations and the Council. The Commission has stated its position in its 
communication on market access,1 namely that "the Singapore ministerial conference ... 
could take the lead in the discussion and set up a WTO working party to look into the 
question of the links between international trade and working conditions." 
The conclusions of the 113 Committee, which the General Affairs Council formally 
noted on 13 May 1996, state that the possibility of this question being discussed within 
the WTO should be explored. The Community would continue to take an active part in 
related work done in other international fora. 
Meanwhile in Geneva, at about the same time and whilst preparations were under way for 
the ministerial conference to be held in Singapore this December, the United States and 
Norway submitted two non-papers which discuss the question of internationally 
recognized labour standards and the multilateral trade system (Annex I). 
The paper submitted here goes into more detail regarding the prospects for a discussion in 
the WTO and addresses the key issue of respect for the comparative advantage derived by 
the developing countries from their access to large, low-wage workforces. 
COM(96) 53 final. 
Economie development, which is promoted by trade liberalization, is a necessary 
condition of social progress. It is axiomatic that improved social protection becomes a 
political objective in the developing countries as soon as national income reaches a level 
capable of sustaining such protection. The long-term aim must therefore be to help these 
countries create the requisite conditions for promoting the growth of domestic demand 
and improving living conditions. Each state has the sovereign right choose what labour 
laws it will enact and the choice made will reflect both the country's level of economic 
development and its political and social priorities. However, the need for development 
must not be taken as a pretext for abusive practices at the workplace or, particularly, to 
justify non-adherence to a universally agreed core of labour standards. 
The European Union's interest in the question of core labour rights stems from the social 
roots of the Union itself, namely the principles of solidarity, social cohesion and respect 
for fundamental rights. It also arises out of its duty to defend the principles of democracy 
and human rights, a duty reflected, inter alia, in its external policy taken in its widest 
sense. For instance, the objectives of the T.E.U. (article F2) of the CFSP and the 
development cooperation policy include developing and entrenching democracy and 
promoting the rule of law and respect for human rights and fundamental freedoms. And 
all the Union's Member States have signed the United Nations Charter, the Universal 
Declaration of Human Rights and the International Covenants on Civil, Political, 
Economic, Social and Cultural Rights, and a number of other universal and European 
human rights instruments. Among International Labour Organisation instruments, apart 
from the ILO Constitution, mention can be made of Conventions n°s 29 and 105 on 
prohibition of slavery and forced labour, Conventions n°s 87 and 98 on freedom of 
association and right to collective bargaining, Conventions n°s 100 and 111 on equal 
remuneration and non-discrimination and Convention n° 138 on minimum age for 
employment. The general principles common to these international instruments have 
been accepted by the international community as universally binding, taking also into 
account the Vienna Declaration and Programme of Action, adopted by the World 
Conference on Human Rights in June 1993, the Declaration of the Copenhagen Social 
Summit of March 1995, and other similar instruments approved by consensus by recent 
world conferences. The European Community insists that they be respected by all its 
partners and acknowledges its own corresponding obligations in this respect, as 
demonstrated by its current bilateral treaty practice. 
Neither the European citizen nor the political authorities may therefore remain indifferent 
to infringements of human rights in the context of work, whether these take the form of 
slavery, forced labour, exploitation of children or the prohibition of association and 
collective bargaining. 
Yet the European Union does not ask countries aï a different stage of development from 
iis own, or having different social structures, to align their social policies on those of the 
Union. Nor does it seek an economic outcome that would deprive countries with 
abundant, cheap, but comparatively unskilled labour of the option of exploiting these 
advantages. What it does seek is guarantees that fundamental freedoms will be respected 
since this will bring about working and living standards corresponding to the level of 
economic development and the social structures of the countries concerned. 
2. The international debate and the definition of core labour standards 
(a) Deliberations in the European Union 
The Community has not yet issued a detailed statement on the substance of this question 
but some pertinent statements of the Commission's or the Community's position 
regarding the link between trade and core labour standards exist. 
The Commission's White Paper, "Growth, competitiveness, employment - The challenges 
and ways forward into the 21st century", emphatically concluded that neither failure to 
respect international labour standards nor, more generally, labour cost differentials can be 
construed as contributory factors in Europe's difficulties in the areas of competitiveness 
and unemployment. The White Paper recognizes that these difficulties stem from 
structural distortion within the Community and, consequently, does not propose placing 
trade restrictions on countries with low wage costs. Rather, the measures it proposes 
relate to need to set multilateral rules instead of taking unilateral measures, to devise 
positive economic cooperation policies, to refrain from resorting to trade discrimination 
as a means of leverage, and to prepare discussions about the best way to promote 
adherence to existing and future agreements on social policy (Annex II). 
Then, when he addressed Parliament's Committee on External Economic Relations on 29 
March 1994, Sir Leon Brittan emphasized the fact that placing social matters on the 
agenda of the WTO was one of the Commission's clear aims. 
The European Parliament has continued to contribute to the debate on this issue, most 
recently in a Social Affairs Committee opinion on the links between trade and social 
standards, which calls on the Commission to campaign for the creation of a working 
group on trade and social standards by the Singapore Ministerial Conference. 
In Marrakesh, the Commission stated that the WTO should also discuss matters such as 
the exploitation of children, forced labour and refusal to allow freedom of speech or 
association. It underlined the need to ensure adequate safeguards against unilateralism or 
unwarranted protectionism and the right of developing countries to make the most of 
their comparative advantages. 
There is also the 1994 White Paper on European social policy, which examines the link 
between social policy and international trade, advocates discussion of the question in the 
WTO and calls for observance of fundamental social rights - particularly those of 
collective bargaining and freedom of association - and the questions of forced labour and 
child labour to be taken into account. The conclusions of the June 1994 Corfu European 
Council consider that social aspects should be discussed by the World Trade 
Organization whilst the Social Affairs Council of 27 March 1995 held a major discussion 
on the subject and the General Affairs Council of 12 June that year issued the following 
conclusions: 
"The Commission and the Member States will make an active contribution to the studies 
in progress, particularly within the OECD. To that end, the Council requests the 
Commission to provide its own assessment of the situation for the Union's internal 
discussions." 
More recently, the Commission sent the Council a paper on a market access strategy for 
the European Union which mentions multilateral negotiations and the possibility of study 
programmes on some of the topics proposed by the Ministers in Marrakesh. In view of 
the direction taken by the international debate on the link between labour standards and 
trade, the Commission called for a gradual approach based on fundamental human rights 
which would not undermine the right of developing countries to use their comparative 
advantage of abundant, cheap labour. The Commission concluded by proposing that the 
Singapore conference should establish a WTO working party to look into the question. 
Finally, as already mentioned, the 113 Committee looked into the possibility of these 
matters being discussed in the WTO and came to the conclusion that this merited 
consideration. The Committee communicated its conclusion to the Council which took 
formal note on 13 May 1996. 
(b) The OECD study 
This study began in 1994 following a Ministerial request to undertake an analysis of 
"areas where further progress with liberalization and the strengthening of the multilateral 
system may be required ...", these areas included "trade, employment and internationally 
recognized labour standards". 
The discussion of the study took place under the responsibility of the OECD Trade 
Committee and the Committee on Employment, Labour and Social Affairs and lasted two 
years as the issue is a very controversial one. At the very end an agreement was reached 
on a joint report to the Ministers. No consensus was reached on the study itself which 
has been presented only on the responsibility of the OECD Secretariat General. 
The Study is divided in three parts: 
1. The Study lists a set of "core" labour standards: freedom of association and 
collective bargaining, elimination of exploitative forms of child labour, 
prohibition of forced labour, non-discrimination in employment. 
These core labour standards have the characteristics of human rights, they are 
universally recognized and they are framework conditions for other labour 
standards. They are embodied in ILO Conventions and United Nations' 
instruments. 
The OECD study innovates when its speaks of "elimination of exploitative forms 
of child labour instead of "elimination of child labour"; it underlines that ILO 
Convention on Child Labour (No 138) sets out a minimum age for Child Labour 
but has no provision on exploitation and abuses. The UN Convention on the 
Rights of the Child (adopted in 1989) contains such provisions. As a matter of 
fact the Governing Body of the ILO has expressed its intention to include an item 
on child labour in the agenda for the 1998 International Labour Conference with 
the objective to strengthen the arsenal of ILO standards with a binding instrument 
geared to banning the most intolerable forms of child labour. 
2. Part two of the study focuses on the role that core labour standards might perform 
in the economy. It is the "analytical part" of the study. The analysis is limited and 
the study itself refers to the difficulties encountered in this part. 
The study concludes that the economic effects of core labour standards are likely 
to be small; developing countries must not fear that core standards would 
negatively affect their economic performance or their international competitive 
position. Regarding the relationship between trade flows and core standards, the 
study underlines that there is no evidence that low standards countries enjoy a 
better global trade performance than high-standards countries. The strongest 
finding is that there is a positive association over time between successfully 
sustained trade reforms and improvements in core standards. 
On the question of foreign direct investment, the study concludes that while 
labour standards may not be systematically absent from the location decisions of 
OECD investors in favour of non-OECD destinations, aggregate FDI suggest that 
core labour standards are not important determinants in the majority of cases. 
Host countries may be able to enforce core labour standards without risking 
negative repercussions on FDI flows. 
Regarding the unemployment question, especially the concern that trade with low 
standards countries has an impact on the unemployment of unskilled workers 
and/or growing wage inequality in the industrialized countries, the study shows 
that the shift in total employment associated with changes in trade patterns should 
be small although there is no consensus among researchers on the magnitude of 
the trade impact on sectoral employment patterns relative to the impact of other 
forces, e.g. technological progress and institutional changes. 
3. Concerning the mechanisms, the main problem was the role of the WTO and to 
place on an equal footing the existing mechanisms to promote core labour 
standards (as ILO) and the possible inclusion of new mechanisms in the World 
Trade Organization. The final text approved recognizes the differences of 
opinion among the OECD Member States. 
When discussed in Paris at the Ministerial Council (21/22 May), the Ministers 
have committed "to continue working for the promotion of core labour standards 
around the world. They welcomed the conclusions of the OECD report on trade, 
employment and labour standards as making an important contribution to the 
understanding of this issue. They encouraged Member governments to discuss 
these conclusions as well as the Secretariat's analytical report on the subject, with 
a wider, non-member audience, with a view to considering any further action; this 
discussion could start in the context of the Policy Dialogue with Dynamic Non-
Member Economies due to take place in the autumn". 
(c) The work of the ILO 
(i) Working group on the social dimension of liberalizing international trade 
In 1994 the Governing Board set up the above tripartite group to discuss all 
pertinent aspects of this question. After its first few meetings, because of the 
difficulties encountered, the group agreed that it would not pursue the aspect of 
trade sanctions and would suspend further discussion on whether to create a 
linkage between international trade and labour standards by introducing a social 
clause and a penalty mechanism. 
At Its last meeting, in March 1996, the group agreed guidelines for further work, 
particularly that it should examine the consequences of the globalization of the 
economy to see what might be done to take advantage of the positive 
consequences and attenuate the negative ones. It was also decided to send 
member states a questionnaire (since done), carry out country-by-country studies 
and analyse the work done by other international bodies such as the OECD. 
10 
The group will also press on with its work on the elimination of child labour and 
the ratification of core standards (see (ii)). It will be holding its next meeting in 
November this year just before the Singapore ministerial meeting, and the 
possibility of issuing a statement in advance of this meeting has been mooted. 
(ii) Work in fora other than the ILO 
Child labour: Here the need is beginning to be felt for a new convention to cover 
the harshest forms of child labour, since existing conventions cover only the 
minimum age at which children may begin to work. The Governing Body has 
decided to place the matter on the agenda for the International Labour Conference 
to be held in June 1998. 
Examination of ILO policy on standards: In November 1995 a group established 
by the Governing Body made a detailed examination of ILO policy on labour 
standards. Similarly, the Governing Body is examining the possibility of 
extending the control mechanisms which apply to freedom of association to the 
areas of forced labour and equal treatment (although neither governments nor 
employers had expressed themselves in favour). Also in November 1995, the ILO 
launched a campaign to encourage ratification of its basic Conventions. This took 
the form of the Director-General of the International Labour Office sending all 
member states a questionnaire requesting them to explain what obstacles to 
ratifying the Conventions they had encountered. 
(d) The G7 conference on employment (Lille, 1-2 April 1996) 
and the Lyons G7 summit (28-30 June 1996) 
The question of basic social standards was discussed at the G7 conference held recently 
in Lille. The communiqué agreed by the economy and labour ministers stressed the 
"importance of enhancing core labour standards around the world and examining the 
links between these standards and international trade in the appropriate fora". 
The matter was raised again at the G7 summit in Lyons in the discussion on broadening 
the WTO agenda with a view to the forthcoming Singapore Ministerial Conference. The 
heads of state recognized "that there is a will to address the question of the relationship 
between trade and internationally recognized core labour standards." 
11 
(e) The social summit 
Some guidelines are therefore already emerging from the debates within the OECD and 
the WTO. Firstly, it would seem that consensus is emerging regarding the principles 
which should be recognized as "core labour standards". These could be regarded as 
encompassing the fundamental human rights set out in the Universal Declaration and 
therefore recognized everywhere. They could directly improve working conditions and 
therefore represent a framework within which other standards could become established. 
They could be regarded as prerequisites for social development. 
The principles underlying labour standards are best reflected in the relevant ILO 
Conventions, as was recognized in the final declaration of the Copenhagen social 
summit, which states that the countries concerned will make every effort to provide 
quality employment and defend the fundamental rights and interests of workers. To this 
end they will freely promote adherence to the provisions of the relevant ILO 
Conventions, namely those on the prohibition of forced labour and child labour, the 
freedom of association, the right to organise, collective bargaining and the principle of 
non-discrimination. 
(f) Definition of core labour standards 
The fact that heads of state and government throughout the world accept these labour 
standards is highly significant since it confirms their universality and helps consolidate 
their position as fundamental rights. 
While the UN, the ILO and other international organizations have adopted a wide range 
of human rights as well as labour standards, some of which are quite detailed in nature, 
the international discussion on trade and fundamental workers' rights has during recent 
years focused on a minimum core of rights generally recognized as universally 
applicable. Particular attention has been paid to the prohibition of slavery and forced 
labour, freedom of association and right to collective bargaining, elimination of 
discrimination in employment and suppression of the exploitation of child labour. 
12 
Slavery and forced labour are prohibited in a number of international instruments, 
including the Universal Declaration of Human Rights, the International Covenant on 
Civil and Political Rights, the Slavery Convention of 1926 with subsequent 
supplementary conventions as well as ILO conventions Nos 29 and 105. These 
prohibitions have a long and firm standing in international law and are part of the general 
principles of international law from which no derogation is allowed (peremptory norms 
of international law). 
Freedom of association and the right to form and to join trade unions are recognized in 
the Universal Declaration of Human Rights and the ILO Constitution. Two ILO 
Conventions in particular, Nos 87 and 98, as well as the International Covenants of 1966, 
provide more detailed rules on the subject, including the right to collective bargaining. At 
least the general principles expressed in these instruments are part of the general 
principles of international law. 
The elimination of discrimination is generally recognized in virtually all international 
human rights instruments. Article 26 of the International Covenant on Civil and Political 
Rights contains a general non-discrimination clause which is applicable to the field of 
economic and social rights as well. Moreover, discrimination with respect to the rights 
recognized under each particular instrument is prohibited in, inter alia, Article 2 of the 
Universal Declaration, Article 2(2) of the International Covenant on Economic, Social 
and Cultural Rights and in relevant ILO instruments. ILO Convention No 111 concerning 
Discrimination in Respect of Employment and Occupation and ILO Convention No 100 
concerning Equal Remuneration for Men and Women Workers for Work of Equal Value 
are particularly relevant in this context. It is beyond doubt that, for instance, the formal 
exclusion of segments of the population from the labour market on the basis of race or 
sex would be a violation of general international law. 
As to the question of the exploitation of child labour, Article 10(3) of the International 
Covenant on Economic, Social and Cultural Rights and Article 32 of the 1989 
Convention on the Rights of the Child provide that children must be protected from 
economic exploitation and from performing work of a hazardous or harmful nature. 
States are asked to provide for a minimum age for admission to employment. ILO 
Convention No 138 contains more specific rules in this respect. While, for instance, the 
use of young children in works that can be harmful to their health or development is 
clearly illegitimate and may in fact constitute slavery and forced labour as well, the ILO 
has started the preparations of a new convention which would clarify the question what 
constitutes illegal exploitation of child labour. 
13 
3. Action taken by the European Union 
Given the principles underlying the European Union's own policy, what action can it take 
in this matter? We need to act on a broad canvas, because different social problems will 
require a different unit of EU policy instruments. For example, in the field of child 
exploitation, we must bear in mind that, while a small minority of children are exploited 
in export-driven industries, many more are being found in subsistence farming or local 
construction projects* 
(a) Unilateral action 
The issue of human rights and, more specifically, labour standards is already a feature of 
the new GSP arrangements,2 which provide for two types of measures. 
The first concerns the possibility of withdrawing some or all preferences granted to 
countries which countenance slavery or forced labour. 
The possibility of withdrawing GSP benefits as a punitive measure is in itself not new. It 
is inherent in the unilateral character of the GSP and has been used in the past to sanction 
discriminatory commercial practices or fraud. In such cases, specific reference is made to 
forced labour in all its forms, as defined in the Geneva Conventions of 25 September 
1926 and 7 September 1956 and in ILO Conventions 29 and 105. 
The withdrawal of benefits is decided by the Council on a proposal from the Commission 
following an enquiry into the matter. This procedure gives each party concerned the 
opportunity to state his case after evidence has been taken by the management committee. 
The second type of measure consists of "special incentive schemes" the main aim of 
which is to help beneficiary countries improve the quality of their development by 
adopting more advanced social and environmental policies. 
Thus, in the area of labour standards, additional preferences may be granted from 
1 January 1998 to countries which so request and which comply with ILO 
Conventions 87 and 98 on freedom of association and the right to collective bargaining 
and with Convention 138 on child labour. 
The implementation procedures and the degree of preferences granted (supplementary 
margin) will be defined on the basis of a Commission report which will take into account 
the results of studies carried out by other international bodies such as the ILO, WTO and 
OECD. 
Council Regulation (EC) No 1256/96 of 20 June 1996 and Council Regulation 
(EC) No 3281/94 of 19 December 1994. 
14 
(b) Bilateral cooperation with third countries 
Respect for and promotion of human rights and democracy is one of the general 
objectives of the Community's development cooperation policy. 
At bilateral level the cooperation agreements concluded between the EU and third 
countries cover economic and social cooperation. 
Thus, in collaboration with other international bodies (World Bank, ILO), the Union is 
organizing and financing financial and technical assistance programmes to promote 
education and jobs for women. These programmes include: a) the building of schools; b) 
vocational training; c) training for secondary school teachers (where positive 
discrimination in favour of women is common); d) "informal" education (targeting 
children who left school at a very early age, adults, people in rural areas, etc.). This 
assistance may be granted either to governments or to non-governmental organizations. 
In the light of the international commitments entered into at the World Summit in 
Copenhagen and following the example of the recent agreements concluded with, for 
instance, Pakistan and Bangladesh, the Union intends to incorporate social development 
objectives into its cooperation agreements with third countries, making specific reference 
to the need to safeguard workers' basic rights as laid down in the relevant ILO 
instruments, including those banning forced labour and child labour and upholding the 
right to association and collective bargaining and the principle of non-discrimination. 
In the same vein, the 1995 OECD Development Aid Committee Declaration on the 
"Development Partnership in the New Global Context" defines strategies for abolishing 
child labour in as efficient a manner as possible, which means combating poverty (by 
taking action at the level of individual families), investing in education, creating 
employment opportunities for adults and promoting the participation of women in 
economic development. 
The International Labour Office has also suggested that families who send their children 
to school be compensated for loss of earnings. 
Reference to Human Rights 
The European Union has developed a policy on human rights and fundamental freedoms 
that covers a broad range of external relations activities. In November 1995, the 
Commission published a paper entitled "The European Union and the external dimension 
of human rights policy: from Rome to Maastricht and beyond*. 
n 
Since 1992 all agreements concluded between the European Union and third countries 
have been required to incorporate a clause defining human rights as a basic element of 
such agreements. This clause, which relates to all rights - economic, social and cultural 
as well as civil and political - was further developed by the Commission in its 
Communication of May 1995 on "the inclusion of respect for democratic principles and 
human rights in agreements between the Community and third countries". 
4. Multilateral action 
Without playing down the importance of the contribution of major international 
institutions which through the medium of political dialogue are in a position to exert 
indirect influence on the promotion of universal labour standards, this paper focuses 
primarily on the International Labour Organization, whose specific role it is to assess 
issues related to the promotion of labour standards, and the World Trade Organization, 
which is the natural forum for debating the links between trade and labour standards. 
The promotion of labour standards will entail improving the ILO's efficiency and 
upgrading its monitoring systems. Furthermore, without seeking to politicize the 
multilateral trade system, it is surely unacceptable for the international community to 
turn a blind eye to human rights violations in the name of trade liberalization? 
This issue takes on even greater significance in the light of the links between economic 
development, trade liberalization and social progress, as highlighted by the OECD and 
the ILO. Thus, trade liberalization will boost economic development and thus improve 
living conditions, while social conditions maintained at an artificially low level will act 
as a break on growth. 
(a) Consolidating the role of the ILO 
The ILO has mechanisms for monitoring the application of international labour 
conventions. The Committee of Experts on the Application of Conventions and 
Recommendations examines the reports that Member States are required to submit on a 
regular basis concerning their application of the conventions they have ratified. The 
conclusions of this Committee are then debated by the International Labour Conference. 
There is also a Committee on Fteedom of Association which is competent to examine 
trade union issues arising in all Member States, regardless of whether they have ratified 
the relevant conventions or not. The ILO's constitution also provides for a complaints 
procedure that can be initiated by each of the tripartite members of the organization 
where a Member State fails to apply a convention it has ratified. This may lead to the 
case being referred to a Commission of Inquiry, although it must be stressed that none of 
these procedures result in the imposition of sanctions. 
16 
The Organization can deploy positive measures such as dialogue with the country 
concerned and technical assistance, and has developed a programme for the gradual 
elimination of child labour in the world - the "IPEC" programme. 
The ILO system thus relies on persuasion and a pro-active approach. Its procedures have 
a moral impact, particularly on public opinion, but are not coercive. The pressure brought 
to bear by governments, employment bodies and the trade unions also plays a very 
important role. 
The ILO has already initiated an internal debate on ways and means of making the 
Organization more effective. EU policy on labour standards must take due account of this 
debate, the main proposals of which include the following: 
- Support for ILO dialogue and direct contacts with governments and for the 
Organization's technical assistance activities, particularly the IPEC programme, 
for which funding is required. 
- Support for the idea of making respect for universal labour standards implicitly 
mandatory for all ILO members, regardless of whether they have ratified the 
relevant conventions or not. This would mean introducing a procedure similar to 
that applied to freedom of association, under which an inquiry can be launched 
without the prior consent of the government concerned. 
- Targeting unacceptable forms of child labour. In 1998 the ILO will assess the 
options for conducting inquiries, producing reports and developing programmes 
aimed at encouraging children to attend school (direct aid to families, free meals 
at school). 
- Improving the ratification rate. The International Labour Office has already 
launched a campaign to step up ratification by asking governments to ratify 
conventions or explain why they are unable to do so. 
17 
Other measures that might be envisaged include projects along the lines of the "Good 
Practice Codes" initiated by governments and by the private sector. For example the EU 
Code of Conduct, initially aimed at European firms operating in South Africa in 
particular, is applied on a voluntary basis, and concerns company policy on the terms of 
employment, the criteria for investing abroad and the conditions imposed on suppliers. 
In addition to the Tripartite Declaration of Principles concerning Multinational 
Enterprises and Social Policy adopted by the International Labour Office, further 
measures could be taken to make these initiatives more transparent and to raise their 
profile. 
Another area that might be looked into is the ILO's contribution to the issue of "social 
labelling". A growing number of private initiatives are being launched along these lines, 
and there are already programmes designed to inform consumers about the social 
conditions in which products have been manufactured. It is not a question of the ILO 
launching its own "social labelling" programme, but of providing technical assistance and 
safeguarding against such initiatives being hijacked for protectionist purposes. The rules 
of the WTO can also play an important part here. 
(b) TheWTQ 
The interdependence of trade liberalization, economic development and social progress 
has been the subject of intense debate in the international institutions since the Marrakesh 
Conference. The main issues under discussion are: 
the convergence of the objectives pursued by the multilateral trade system and the 
promotion of labour standards; 
a multilateral approach to respond to the emergence of unilateral trade policies 
linked to the promotion of labour standards; 
the impact of the application of universal labour standards on international 
competition, particularly with regard to the products of developing countries. 
(i) Convergence of objectives 
In the current GATT/WTO texts, only Article XX(e) links prison labour and trade 
restrictions and authorizes contracting parties to impose or step up sanctions on products 
manufactured by prison labour. Article XX specifies that these measures may not be: 
taken in such a way as to entail arbitrary or unjustified discrimination; applied between 
parties where the same conditions apply; or used as a disguised means of blocking trade. 
Article XX is restrictive in its approach, authorizing measures that limit trade. The 
inherent risk is that this approach will be exploited for protectionist purposes which 
would be contrary to the objectives of promoting labour standards. Economic 
development, the growth of trade and social progress together form a virtuous circle, and 
the correct approach is therefore to liberalize, not restrict trade. 
18 
Seen in this light, the objectives of the multilateral trade system do not seem so 
incompatible with the promotion of universal labour standards. 
It should not be forgotten that the membership of the WTO, the UN and the ILO is 
essentially made up of the same States; it is therefore safe to assume that the principles to 
which they have voluntarily subscribed under the auspices of these three bodies are 
complementary. 
The Marrakesh Agreement which established the World Trade Organization emphasizes 
the link between free trade, economic development and social progress by echoing the 
GATT preamble in recognizing that "relations in the field of trade and economic 
endeavour should be conducted with a view to raising standards of living, ensuring full 
employment and a large and steadily growing volume of real income arid effective 
demand". 
Ultimately, given that trade liberalization goes hand-in-hand with the freedom of the 
individual to negotiate and conclude employment contracts, it is essential that it also be 
linked to the freedom of workers to negotiate their living and working conditions. 
The Havana Charter (Annex III) referred to unfair working conditions and envisaged the 
introduction of labour standards, particularly with regard to export products. The General 
Agreement on Tariffs and Trade was initially confined to tariff questions, and it was not 
until the Tokyo Round that the impact of non-tariff measures on trade was acknowledged. 
This paved the way for the negotiation of codes on subsidies, import licences, customs 
value, and so on, thus extending the application of the GATT's multilateral rules to cover 
non-tariff issues. 
The conclusion of the Uruguay Round ushered in a new era. The World Trade 
Organization is a very different animal to the GATT, not only because its sphere of 
application has been further extended to cover other areas such as services, but also from 
an institutional point of view. The WTO is more than just a collection of rules agreed by 
contracting parties; it provides an institutional framework for the discussion of every 
aspect of trade.3 The creation of a working group on the links between trade and 
internationally recognized labour standards therefore would not necessarily entail 
repercussions as regards trade disciplines. 
The creation of such a group within the WTO should not be seen as an alternative to the 
reinforcement of the ILO. On the contrary, in view of the ILO's dual international role as 
a legislative and supervisory body, the two things should be seen as complementary. 
The Marrakesh Agreement establishing the World Trade Organization, Article III, 
page 1: "The WTO shall facilitate the implementation, administration and 
operation, and further the objectives of this Agreement and of the Multilateral 
Trade Agreements". 
19 
(ii) The need for a multilateral framework 
Examples of links between trade and labour standards in the real world of economics and 
politics can be found both in unilateral preferential policies (GSP - USA/EU) and in 
regional integration systems such as NAFTA. Unilateral, bilateral and plurilateral 
projects of this kind establish differing criteria and procedures, gradually building up a 
body of regulatory texts that are not always coherent, and not always consistent with the 
principles of free trade. 
Another important factor is the pressure of public opinion, which, increasingly concerned 
by the humanitarian aspects of working conditions throughout the world, is calling on 
governments to intervene by imposing restrictive import measures. This trend has led to 
the creation of consumer organizations and activities such as "social labelling" and 
boycotts of products from certain countries. A well-known example of "social labelling" 
is the "Rugmark Foundation", which issues "social" certificates to makers of hand-made 
carpets. Boycotts, on the other hand, run the risk of being manipulated for protectionist 
purposes where similar products are manufactured locally. 
The private sector has already started to respond, and some firms (particularly those 
active in the clothing and footwear sectors) have adopted codes relating to the labour 
standards applied by their subsidiaries and suppliers. 
In the absence of a multilateral framework with regard to the links between trade and 
labour standards there is a risk that multilateral trade measures that can only have a 
destabilizing effect on the progress made in liberalizing trade with the conclusion of the 
Uruguay Round negotiations. In the years to come, the WTO must consolidate its 
position as the body responsible for managing the world trade system. This task will be 
rendered more difficult if the WTO has to contend with unilateral trade restrictions which 
are incompatible with multilateral rules and which will lead to a series of dispute 
settlements that can only sap the Organization's credibility. 
(iii) Competitiveness and developing countries 
Developing countries regard the debate on labour standards within the WTO as an 
attempt by the developed world to impose labour standards and pay levels which are out 
of proportion to their level of development, under threat of trade reprisals. As they see it, 
either they lose their competitive advantage, or the industrialized countries use labour 
standards as an excuse to raise trade barriers to protect the weaker sectors of their 
economies. 
20 
The debate thus tends to take the form of a North-South conflict between high pay 
economies and countries with low salaries. This serves only to muddy the waters, further 
reducing the chances of achieving the political consensus that is essential if a genuine 
debate is to be launched within the WTO framework. 
It is therefore vital that the developing countries be reassured that the aim is not to 
weaken their competitive position on the international market by providing guarantees 
against protectionist abuses of the system. The first such guarantee would be to confine 
the debate to the promotion of universal labour standards, firmly ruling out any 
discussion of salary differentials. 
This option is backed up by the findings of an OECD report which confirms that the 
developing countries' fears that the application of universal labour laws will affect their 
competitive position are not justified. On the contrary, the application of such standards 
could theoretically boost their economic performance in the long term. 
In view of the unilateral initiatives being taken by governments and the private sector, the 
fact of discussing all these issues in a multilateral forum is in itself a guarantee that 
protectionist moves will be resisted. 
It is important to stress that the WTO lacks the requisite expertise in the field of labour 
standards, and that coordination with the ILO is therefore essential. 
Conclusions 
The European Union has traditionally been at the forefront in promoting international 
human rights. Its partners clearly regard it as having historic responsibilities to discharge 
in this respect, and it does so with the means at its disposal under both its external policy 
and its development aid policy. 
An international consensus is currently emerging on the need to promote certain core 
labour standards regarded as universal and comprising human rights-related aspects, 
specifically the abolition of forced labour and slavery, the elimination of child labour, 
freedom to organize, the right to collective bargaining and non-discrimination in 
employment. The EU Member States on the 113 Committee felt the possibility of raising 
the question of labour standards within the WTO was worth considering. 
It is important to strike a balance between the strengthening of the International Labour 
Organization, as the specialist body for labour standards, and the opening of talks in the 
WTO. 
The WTO has a key role to play with regard to the question of the comparative 
advantages enjoyed by the developing countries and their right to define their own 
national policies. Discussion of these issues within the WTO will promote free trade and 
limit the scope for abuse of unilateral measures or private initiatives liable to degenerate 
and play into the hands of protectionists. 
21 
The point of departure for these talks would be the convergence between the aims of the 
multilateral trade system and the promotion of core labour standards, as reflected in the 
preamble to GATT, incorporated in the Marrakesh Agreement, which links the 
liberalization of trade with economic development and social progress. The avenue of 
approach should therefore be the development of trade within an open non-discriminatory 
multilateral system, rather than trade restrictions. 
Against that background, the incorporation of social issues within the WTO work 
programme should be a settled objective for the EU. The Commission therefore proposes 
that the Council agree to the Commission putting forward, at the Singapore Ministerial 
Conference, the creation of a working party to examine the link between the multilateral 
trading system and core labour standards, and to explore the areas in which the WTO 
might act in conjunction with other international bodies to help promote such standards. 
With this in mind, the Commission would also suggest that the Council approve a written 
paper setting out the EU's position on these issues, with a view to registering it as soon as 
possible in Geneva. 
22 
, , all Annex 
WTO Ministerial Conference - Singapore, 1996 
Core Labor Standards and the Multilateral Trading System 
Elements of an Agreement 'to.' 
Non-Pnpcr from the Delegation of the United States 
May 15, 1996 
1 An agreement at Singapore would recall the objectives of the multilateral trading system and 
the desirability of promoting internationally-recognized core labor standards. Noting that 
promotion of core labor standards is likely to strengthen the long-term economic performance of 
all countries, WTO members would recognize this in a declaration designed to take advantage of 
the opportunity to further strengthen and develop support for the trading system At the same 
time, and in the same declaration, WTO members would reiterate their support for an open, non­
discriminatory trading system, pledge to seek further trade liberalization and to avoid 
protectionist acts or actions calling into question the legitimate comparative advantage of WTO 
members. Such a multilateral policy statement would not in itself create new or enforceable 
WTO rights or obligations. The Marrakesh Déclaration on Coherence in Global Economic 
Policy-making is a possible model. 
2 The declaration at Singapore would be strictly related to "core" labor standards, based on the 
following human rights standards agreed to by WTO members in the U.N. and other multilateral 
for*. 
o Freedom of association 
o Rjght lo organize and bargain collectively 
o Prohibition on forced labor 
o Elimination of exploitative forms of child labor 
o Nondiscrimination in employment or occupation 
Limiting the labor standards discussed to the above should ease the concerns of WTO members 
hat addressing this issue could -k|id to an economic discussion of wage rate differentials. 
3. The agreement in Singapore should set in motion a follow-on examination in the WTO (as a 
WTO working party) tasked with identifying linkages between the objectives and provisions of 
the WTO and core labor standards, related work in other organizations, primarily the ILO, and 
ways in which WTO might cooperate further in this area with other institutions, the results of 
the working party's efforts should be taken Up at a subsequent Ministerial meeting with a view to 
considering how the WTO could contribute to furthering the observance of core labor standards 
and to define modalities foi such action, within the context of maintaining an open, non­
discriminatory trading system 
1\ 
MayH/1996 
coze 
PROMOTION. OFCABOUR STANDARDS IN THE CONTEXT OF INTF.RNATiONAL 
TRADE - Norwegian approach 
Norway is deeply coromined to the promotion of internationally recognized labour standards, 
viz.freedom of-association, the right to organize and bargain collectively, prohibition of forced 
labour, elimination of exploitative forms of child labour and non-discrimination in employ­
ment or occupation. While primary responsibility for the promotion of these standards rests 
with national governments and the social partners, the international community has a shared 
responsibility to monitor progress and assist national efforts to improve these standards. 
Globalization of the economy and a more open and dyaamic international trading system have 
contributed to a renewed focus on labour stAndards in the context of trade. Trade is seen both 
as a means to improved standards through trade-led economic growth, as well as an area of 
international interaction ba>c<i on «i common obligation to respect and promote basic human 
rights, of which these labour standards arc an intégrai part. 
A recent OECD-study has indicated that trade can be associated with improvements in labour 
standards. Norway is interested in a follow-up of the study, with the objective of involving a 
wider circle of countries and especially the developing countries, in an open discussion of the 
most effective strategies for raising labour standards globally, and how'trade can contribute to 
this end Norway has taken the initiative to a workshop in the OECD, with participation of 
non-members, to introduce the study and the conclusions which can be drawn from it. Such 
discussions would also be supportive of the ongoing efforts of ILO to improve the monitoring 
and implementation of labour standard conventions, including a new convention on child 
labour. 
Norway foresees a discussion m the WTO-context, to clarify the issues and to identify 
possible linkages which can be addressed wnthin WTOs area of competence. In this context, 
we recognize the importanccof avoiding the introduction of unilateral trade measures A 
discussion in WTO, drawing^, on the work of other international organizations, could 
embrace efforts to improve labour standards as an integral pan of a strategy for economtc 
growth and increased ir«ulc It could also contribute towards demystifying beliefs that low 
labour standards bring trade benefits 
Closer relations between national and regional labour reseaich institutions could also contri­
bute to a non-confrontational discussion in this area. 
Norway believes that a strategy of non-confrontational dialogue involving ail parties con­
cerned and taking into account all effective.means to assist nauonal efforts to improve labour 
standards gradually would have the best chance of success in raising these standards globally 
and in improving the welfare of the people involved. The WTO. for its part, should examine 
how the multilateral trading system could contribute to the achievement of these goals 
ik 
EXTRAIT DU LIVRE BLANC 
ANNEX H 
(f) Improve competitiveness 
Trade and economic policies cannot sub­
stitute for the development by business both 
of saleable products and of the means to 
deliver them to world markets on ,time and 
at the cost and quality needed. As to social 
costs, the fear of so-called social dumping 
would be misplaced if it related to a belief 
that in certain countries the level of social 
protection is kept artificially low in order to 
gain a competitive advantage elsewhere. 
We should not accept too simple a picture 
of high-wage industrial countries and low-
wage developing countries. Differences in 
worker wages alone can be misleading. It is 
true that modem technology spreads much 
faster and more easily than in the past to 
different areas of the world. But poorer 
education, lower skill levels, lower levels of 
capital investment overall and inadequate 
infrastructure can all offset the possible 
1 advantage to be derived from low wages. 
j 
This is not to say that the Community has 
! no difficulty in competing with labour-
! abundant countries. But European competi­
tiveness is falling not principally because of 
the impact of international social cost dif­
ferentials in some sectors, but because we 
ourselves suffer structural distortions in 
Europe. In developing countries, more ela­
borate social protection becomes a gener­
ally held political objective as national 
income rises to a level where those objec­
tives are attainable. In the long run, a major 
part of the solution will consist in helping 
tKese countries to set up the conditions nec­
essary for the development of domestic 
demand and rise in the standard of living. 
! The search for greater competitiveness both 
by trade and other policies does not imply 
1 that social protection should be under­
mined in Europe or ignored abroad. We 
j are rightly proud of our record in this 
I respect, which compares with the best in the 
world, and we are right to remain com­
mitted to establishing European-wide stan­
dards for social protection wherever appro­
priate. 
The Community and its Member States can 
take every opportunity to raise with the 
countries concerned the need to bring for­
ward their own legal changes. We can 
encourage this by positive measures, for 
instance by providing legal advice or tech­
nical cooperation where required. These are 
legitimate objectives of development aid 
and economic cooperation. But trade policy 
is not an instrument for the achievement of 
those objectives. We rightly object to unilateral action by 
others to impose on Europe their view of 
how the world should be run. The interna­
tional organizations responsible for multi­
lateral rules must themselves judge Com­
munity compliance with these rules. The 
same principle must apply to judging 
others' compliance. 
* 
There are three fronts on which to act: 
(i) Inform better the current Community 
debates on social dumping, explaining 
why the Community wants multilateral 
rule-making and should not allow indi­
vidual countries to set up as the unilat­
eral judge of others' domestic laws or 
of others' compliance with interna­
tional agreements; 
(ii) Develop a positive Community econ­
omic cooperation policy to increase 
social standards worldwide but without 
i introducing unilateral trade discrimi-
I nation as a lever; 
(iii) Prepare for the discussions that will be 
necessary, in the International Labour 
Organization and elsewhere, after the 
Uruguay Round, of how best to 
strengthen compliance with current 
and future agreements in the field of 
social policy. 
^^ 
Annex III . 
United Nations Conference on Trade and Employment - Havana. April, 1948: - Article 7; Page T 
Fair Labour Standards: 
1. The Members recognize that measures relating to employment must take fully into account the 
rights of workers under inter-governmental declarations, conventions and agreements. They 
recognize that all countries have a common interest in the achievement and maintenance o, 
fair labour standards related to productivity, and thus in the improvement of wages and 
working conditions as productivity may permit. The members recognize that unfair labour 
conditions, particularly in production for export, create difficulties in international trade, 
and, accordingly, each Member shall take whatever action may be appropriate and feasible to 
eliminate such conditions within its territory. 
2. Members which are also members of the International Labour Organisation shall co-operate 
with that organization in giving effect to this undertaking. 
3. In all matters relating to labour standards that may be referred to the Organization in 
accordance with the provisions of Articles 94 or 95, it shall consult and co-operate with the 
International Labour Organisation. 
ZC 
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