International trade is evolving. But will it benefit workers?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kitrhona Cerri, Executive Director, TASC Platform, Geneva Graduate Institute, Maria Mexi, Senior Advisor, Labour and Social Policy, TASC Platform, Geneva Graduate Institute

• A mutually beneficial relationship between trade and labour is needed for equitable globalization.
• Multistakeholder cooperation can support the implementation of labour provisions in trade policies.
• Responding to the climate crisis, protecting workers’ rights will also ensure a just energy transition.

Workers around the world are suffering the consequences of unprecedented disruption to international trade at the hands of COVID-19, climate change, geopolitical conflicts and rapid digital technology shifts. Inequality, poverty and decent work deficits are on the rise.

As the next decade is likely to be defined by increased trade wars, geopolitical confrontation and a convergence of environmental, societal and economic global risks that could lead to a ”polycrisis”, fostering equitable globalization and establishing a mutually beneficial relationship between trade and labour is more important than ever.

Trade as a % of global GDP remains high Image: World Bank

Why trade-labour synergies matter

Trade plays a major role in the world economy, accounting for nearly 60% of total global GDP. It can be a powerful vehicle for inclusive growth, expanding development opportunities and raising labour standards, and has benefited certain workers of different skill levels in both developed and developing economies.

Highlighted in the 2030 Agenda for Sustainable Development, it has helped to increase opportunities to transition to formal employment and to lift millions of people out of poverty, including women, migrant workers, young people and other vulnerable groups.

Unfortunately, not all workers and businesses have benefited equally from trade. Job polarization, exploitative work and income inequality have led to the increased public scrutiny of trade liberalization and, specifically, trade agreements. In this context, efforts to ‘’cultivate greater social justice’’ and ensure that the benefits of trade are fairly distributed to all workers, and among and within countries are crucial. Governments, social partners and civil society all have a significant role to play.

The rise in trade agreements with labour provisions Image: ILO Labour Provisions in Trade Agreements Hub

The power of cooperation

Though there has been inertia in combining trade and labour policy at the multilateral level, there are bright spots demonstrating appetite and opportunities for a new level of international, multistakeholder collaboration in this space. About half the trade agreements concluded between 2011-20 included labour provisions, compared to only 22% in the previous decade. Beyond references to labour standards, new structures are evolving for implementation, cooperation and enhanced multistakeholder involvement.

While the implementation of these fast-evolving policies can be challenging, examples on the ground demonstrate how powerful cooperation and multistakeholder involvement can be.

1. Establishing new mechanisms

Around the world, civil society and labour unions are driving efforts to establish new mechanisms – legal, political, economic, as well as development cooperation and monitoring – that are intended to make labour provisions enforceable and effective.

In India, consultation and dialogue facilitated by the rights organization Global Labor Justice between local government, garment workers and suppliers, and international business (including H&M, the GAP and PVH) resulted in the signing of the landmark, legally binding Dindigul Agreement in 2022. Women workers now have the power and support to monitor, prevent and remediate gender-based violence and harassment in the workplace.

In Mexico, the Facility-Specific Rapid Response Labor Mechanism put in place by the US-Mexico-Canada Agreement – largely the result of advocacy by US unions and labour advocates – has been critical in enforcing workers’ freedom of association and collective bargaining rights by targetting specific factories and giving the US and Canada the right to block imports.

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2. Advancing labour standards

Cross-border social dialogue and collaboration among trade unions and stakeholders is proving to advance stronger government commitment to labour standards’ implementation as in the European Union-Republic ofKoreaagreement.

In Uzbekistan, trade sanctions and civil society activism were critical in achieving the successful abolition of forced and child labour, while in Georgia, trade union and civil society consultation mechanisms put in place as part of the Association Agreement with the EU significantly contributed to the adoption of labour reforms in 2019 and 2020 that brought the country closer to the ILO’s fundamental standards.

3. Strengthening supply chain practices

Efforts to implement due diligence in supply chains and global framework agreements (GFA) are equally instrumental in advancing labour standards; for example, the GFA between the French multinational utilities company ENGIE, the global union federations IndustriALL, BWI and PSI, and French trade unions enables over 170,000 workers in more than 70 countries to collectively build power and advance their rights to sustainable employment, equal pay and social protection through dialogue and cooperation.

In addition, paying a living wage or living income price, combined with better purchasing practices, as exemplified by the Dutch chocolate brand Tony’s Chocolonely and its efforts to end inequality in the cocoa chain and promote a living income model, can be game-changers for workers’ rights. Paul Schoenmakers, Tony’s Head of Impact, says: “Through their supply chains, companies have a crucial role to play in making international trade work for workers. The one thing they must do is to make sure they don’t underpay for the resources they need.” The German and Dutch governments are supporting a framework for living wage and living income benchmarks in supply chains.

Overall, the lessons learned are that strong and well-institutionalized multistakeholder cooperation can contribute to an environment more receptive to long-term improvements in labour standards, raising public awareness of labour conditions, putting labour issues on the political agenda, and facilitating rigorous monitoring of compliance.

A just transition

As trade evolves, a new wave of cooperation is needed to bring benefits and opportunities for workers along complex supply chains; for example, as trade in digital services involving the gig economy proliferates and becomes more important in promoting climate and circular economy objectives. The environmental transition is largely a labour issue, and trade policy alone cannot provide adaptation to the profoundly disruptive effects of climate change while still ensuring a “just transition”. Integrating trade and labour market policies that promote economic growth and development while also improving workers’ well-being is critical to achieving broader social justice objectives.

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What is the World Economic Forum doing on trade facilitation?

The Global Alliance for Trade Facilitation is a collaboration of international organisations, governments and businesses led by the Center for International Private Enterprise, the International Chamber of Commerce and the World Economic Forum, in cooperation with Gesellschaft für Internationale Zusammenarbeit.

It aims to help governments in developing and least developed countries implement the World Trade Organization’s Trade Facilitation Agreement by bringing together governments and businesses to identify opportunities to address delays and unnecessary red-tape at borders.

For example, in Colombia, the Alliance worked with the National Food and Drug Surveillance Institute and business to introduce a risk management system that can facilitate trade while protecting public health, cutting the average rate of physical inspections of food and beverages by 30% and delivering $8.8 million in savings for importers in the first 18 months of operation.

Worker representatives and international business are already stepping up to the plate; collaboration with governments is crucial to ensure labour clauses in trade agreements are not just disguised protectionism. The US’s worker-centric trade policy and the regulatory trends in the EU and elsewhere on supply chain due diligence may provide an opportunity to deepen the relationship between trade and labour norms. As labour provisions are becoming an integral part of a growing number of trade agreements, the time has come to take a coherent, coordinated and collaborative approach to the trade-labour nexus.