The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.
- Decisions in the WTO are typically taken by consensus among all members and they are ratified by members’ parliaments. Trade frictions are channeled into the WTO’s dispute settlement process, where the focus is on interpreting agreements and commitments and how to ensure that members’ trade policies conform with them. That way, the risk of disputes spilling over into political or military conflict is reduced.
- By lowering trade barriers through negotiations among member governments, the WTO’s system also breaks down other barriers between peoples and trading economies.
Thus the impact on industrial relations under WTO assumes significance for the following reasons
- Globalization of business and the pressure on industries to have universal labor standards.
- flexibilization of labor markets;
- increasing labor migration;
- rising a typical and non-standard forms of employment;
- changes in work content and working conditions;
- Skills mismatch, multi-skilling and the need for lifelong learning.
It is here that two most important international organizations come into focus to protect the growing threat to the way of globalization towards labor and their problems.
- One of them is the International Labor Organization (ILO) which focuses on labor issues. ILO examines the problems of the workers of the member countries. They are discussed with the international labor conference (a tripartite body of ILO).
- The second is the World Trade Organization (WTO) whose primary purpose is to open trade for the benefit of all. WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributes to economic growth and development.
Labour rights have been finding reflection in regional and bilateral Preferential Trading Agreements beginning with the U.S. negotiation of the North American Free Trade Agreement (“NAFTA”) with Mexico and Canada in the early 1990s.
There are two broad categories of provisions relating to labour standards in PTAs:
- Conditional elements: These contain legally enforceable provisions accompanied by incentives, sanction mechanisms as well as dialogue and monitoring.
- Promotional elements: These focus mainly on supervision and/or capacity building provisions in relation to labour.
The Trade and Labour linkage is a sensitive and controversial issue for many countries, particularly developing countries. There are both proponents and opponents to the debate. Existing literature indicates that:
- there is no link in increased world trade and a decline in labour conditions;
- mandating high labour standards will not improve average wages and working conditions in developing countries
- nor will low labour standards provide developing countries with an unfair advantage in their export trade or drive FDI.
At the WTO, the Singapore Ministerial Declaration in 1996 dealt with the trade and labour relations. Two key elements of the Declaration were:
- Rejection of any use of labour standards for protectionist purposes
- Acknowledgment of the key issue that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question under the WTO agreements.
