U.S. Investment in Vietnam and Human Rights

The governments of the United States and the Socialist Republic of Vietnam will soon launch negotiations for a treaty to protect American investment and investors in Vietnam. The proposed treaty, called a BIT for Bilateral Investment Treaty, offers a natural opportunity to include human rights provisions, but so far there is no sign that the present U.S. administration plans to do so.

The 40 BITs that the United States already has with other countries do not have any human rights provisions. A new BIT with Vietnam could change that pattern, however, if Congressional advocates of international human rights get mobilized.

According to a report adopted unanimously by the UN Human Rights Council in June, the present BIT pattern creates an “imbalance” that weakens the host government’s obligations on human rights. The report, authored by Professor John Ruggie of Harvard, states:

“Investor protections [under BITs] have expanded with little regard to States’ duties to protect [human rights], skewing the balance between the two. Consequently, host States can find it difficult to strengthen domestic social and environmental standards, including those related to human rights, without fear of foreign investor challenge, which can take place under binding international arbitration.”

A joint U.S.-SRV statement on June 25 announced the decision to initiate the BIT negotiations. Separately, it also “noted the benefit of an open and candid dialogue on issues relating to human rights.” But it said nothing about the impact that U.S. investment in Vietnam – topping $12,000,000,000 in 2007 – has on the rights of Vietnamese workers and others.

The U.S. will use its standard “model agreement” as the starting point for negotiations with Vietnam. It defines “investment” so broadly that it includes patents, copyrights, trademarks, and other forms of intellectual property rights, and lays down strong enforcement mechanisms, including access to international arbitration for the investor.

Another “model BIT” has been developed by a Canada-based NGO, the International Institute for Sustainable Development (IISD). After extensive research, IIISD found that existing BITs are “one-sided instruments” that guarantee extensive protection of of the rights of foreign investors but without any corresponding investor responsibilies. The IISD model corrects that imbalance. (See “Linking Global Rights with Responsibilities": scroll down to the next-to-last item.)

Congressional concerns about this issue is reflected in the Trade Reform, Accountability, Development, and Employment Act, introduced on June 4. Among its provisions is that BIT protections of investor rights could no longer override a country’s efforts to protect the rights of its own workers.

It is probably too late to enact that bill into law, but it’s not too late to hold hearings on the proposed U.S. Bilateral Investment Treaty with Vietnam. Up till now, Congress has rubber-stamped BIT after BIT without drawing any public attention. It’s time to let the sunshine in.

Both Senators Obama and Clinton have pledged to review the labor provisions of trade agreements under a Democratic administration. They don't have to wait that long. They can insist that the Senate review the proposed BIT with Vietnam for its impact on the human rights of Vietnam's workers.

So one big question is: Will Congress rubberstamp the U.S.-Vietnam BIT without studying how it impacts the rights of Vietnam's working men and women? Another is: Will it rubberstamp that BIT without studying how facilitating more investments to Vietnam will facilitate the transfer of American jobs to the Socialist Republic of Vietnam?

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To Embed Human Rights in Multinationals

Australia’s Parliament has agreed to a policy fostering the integration of human rights into the operations of Australian multinational enterprises. The Parliamentary motion to that effect, adopted on June 23, had the support of the government and all political parties, major and minor.

The United States would benefit from a similar initiative. Australia’s decision grows out of factors that also resonate in the United States: an increased awareness 1) that some multinationals are engaged in behavior overseas thatis not tolerated at home, and 2) that present international rules don’t cope with the problem. (See “Where business and human rights intersect” by Andrew Hewett, executive director of Oxfam Austratlia.)

In Canberra the policy calls for “the development of measures to prevent the involvement or complicity of Australian companies in activities that may result in the abuse of human rights.” In Washington, legislation calling for the same thing probably could not be enacted this year, but a bill, and hearings on it, would serve as a helpful preparation for action by Congress and the new Administration next year.

Australia’s decision follows in time, and in spirit, a report on a “Framework for Business and Human Rights” adopted on June 18 by the UN Human Rights Council. That report, authored by Professor John Ruggie of Harvard, outlines a three-pronged plan to realize the State duty to protect human rights, the business responsibility to respect human rights, and the joint obligation to establish better access to remedies for human rights violations.

Under this plan, the most difficult challenge arises from what Ruggie calls “weak governance zones,” the areas where the government is unable or unwilling to exercise its authority and in which multinationals have expanded and prospered. The Ruggie report, recognizing the importance of filling this vacuum, puts all options on the table, including home State regulation of the multinational corporation’s foreign operations.


Traditionally, that option – “exercising extraterritorial jurisdiction” of business -- is a No-No. After extensive study by experts, Ruggie identified this consensus: international law does not require home States to regulate corporations abroad, but does not flatly prohibit it (i.e., permits it under certain circumstances), and there is an increasing tendency to encourage it.

As a stakeholder in the global economy, the government of Australia is beginning to take advantage of the latitude it has to exercise a duty it has at home and abroad. The United States, with a much larger stake, should do likewise.


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Hooked on the Presidency

Looking over the field of men anxious to run for President at the beginning of 1976, James Reston wrote in his New York column: “Once hooked on the Presidency, it is an appetite more addictive than dope.” In “Who’s Hooked?” an op-ed piece that the Times did not print, I diagnosed the media as suffering from the very same addiction.

“Although it is true, as Reston says, that the appetite for the Presidency ‘consumes men as physical as George Wallace of Alabama and as intellectual and promising as Gene McCarthy of Minnesota,’” I wrote, “it also consumes news reporters and dominates their output.”

I marveled at the volumes written and spoken in speculation about election outcomes months before the ballots were printed. Laid end to end, those words “would reach far into outer space, and several times around Mars, where they would have about as much meaning as they have here,” I wrote.

I marveled, too, at the armies of reporters and photographers following Presidential aspirants everywhere. “Partial demobilization of this entourage need not put reporters on unemployment compensation rolls,” I wrote. “They could find productive employment writing about problems – gut problems – that concern people.”

Obviously, that 1976 critique of mine, which I found while cleaning out some old files, holds true for the media today. Why this obsession with the Presidency?

Well, it is, after all, the most powerful job in the United States and the world. Okay, but this is a democracy. The excessive focus on the President adds to that power, and it crowds out other voices.

Just listen to the claims that Presidential candidates make. “Just elect me, and I’ll solve ______[fill in the current problems].” Nonsense, of course. Thank God and the constitution, the President is not all-powerful. Yet through obsessive attention to the Presidency, the media pays little attention to the other power centers that share in national decision-making on matters small and large.

Take trade policy. It is one of the most important issues being debated by John McCain and Barrack Obama. Yet the media generally covers it only superficially, and sometimes sensationally.


Even the late Tim Russert, for all his knowledge of the political scene, was weak in bringing much enlightenment to a complex issue like trade. In fact, he was probably at his weakest in the March debate between Hillary Clinton and Barrack Obama.

He introduced a series of questions on NAFTA not by quoting what Clinton or Barrack had said, but what Al Gore had said back in 1993: “If you don’t like NAFTA and what’s done, we can get out of it in six months.” He then asked: “Will the U.S. President say we are out of NAFTA in six months.”

Russert reformulated the question twice for Clinton (once because he was not satisfied with Clinton’s qualified No) and then once for Obama, to which Obama replied: “I will make sure that we renegotiate, in the same way that Senator Clinton talked about, [using] the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced….”

(For details, check my March 6 posting “The ‘Opting Out” NAFTA Distraction,” based on the actual transcript.)

Although Russert got his point “buttoned” up to his satisfaction, the hurried exchange did more to confuse than to enlighten the public on NAFTA. That’s par for the course in the media when dealing with trade issues.


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Hooked on Free Trade Religion

Then there’s the print media’s addiction to the present system of “free trade.” The worst offender of all, in my view, is the New York Times. Liberalization of trade is a sacred component of its liberal faith, promulgated throughout the paper, not only on the editorial pages but in the business section and in the weekly Magazine. Dissenters seldom get any space, not even in the news pages.

Also, facts embarrassing to the policy line get buried or ignored. In a national poll conducted in mid-June, 56 percent of voters surveyed said that NAFTA needs to be renegotiated. Even 49 percent of Republicans agree, according to a June 18 release by an independent polling organization, Rasmussen Reports. The story appeared on Fox News, but not in the New York Times.

On June 8 the New York Times Magazine ran its latest defense of free trade, “This Global Show Must Go On” by Tyler Cowen, professor of economics at George Mason University. Among other things, Cowen criticizes a proposed “’timeout’ from globalization” when the actual proposal is for a timeout in trade negotiations (there already is a de facto timeout, and world trade is actually accelerating, as Cowen acknowledges).

Another economist, Dani Rodrik, has written an economic response to Cowen in an article, “Globalization anxiety as mass hysteria?” on his Weblog. Here’s his first sentence:

“Those who are puzzled by globalization anxiety and attribute it to collective irrationality (see Tyler Cowen’s piece in the NYT) overlook a fundamental aspect of markets – their ‘embeddedness’.”

Read the full text here. Enjoy.

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Who Cares About Bangladesh?

I’ve been neglecting my Blog because I am working on a long-delayed project: writing the last chapter of a book. But in my email I just got a press release about Bangladesh, which has a special place in my heart because long ago I researched the plight of women workers in the garment industry there. The email told me that in Bangladesh it’s still the same old story of human exploitation.

Every time I think that the campaign against sweatshops is succeeding, I learn about a story like this one. The government of Bangladesh, with the help of an American law firm, continues to crack down on the rights of workers. I’ve stopped keeping track of how many times the International Labor Organization seeks to shame Bangladesh for its repressive activities, without any success.

The workers in the country’s booming Export Processing Zones have recently taken the initiative to form a union through which they hoped to protect their rights. But the government has again intervened to crush the worker initiative.

This latest chapter in a story that goes back 20 years is told in the press release just issued by head of the International Textile Garment, and Leather Workers Federation, Neil Kearney.

In his testimony before the ILO Committee on the Application of Standards in Geneva on June 6, Kearney described the workers’ plight and said: “Garment workers in Bangladesh, mainly women, cannot be allowed to drop further into serfdom.”

Accordingly, the committee censured Bangladesh, as it has many times before. Once again, Bangladesh provides evidence that U.S. trade legislation needs to be strengthened to protect the rights of hundreds of thousands of women workers in Bangladesh, who are essentially part of our labor force.

Who cares?

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Preparing Trade Policy Reforms

The United States will reform its trade policy no matter who occupies the Oval Office next year. That’s the prediction of Sherwood Brown (above, center), U.S. Senator from Ohio, long an advocate of fair trade.

Brown is leading a Congressional initiative to do the groundwork for that policy. On June 4 he introduced a bill to 1) review all existing trade agreements, 2) renegotiate those agreements based on that review, and 3) set the terms of new trade agreements.

The bill proposes policy requirements that broaden the protection of the public interest in trade and investment policy. For example, protecting the rights of foreign investors could no longer override a country’s efforts to protect the rights of its own workers.

Under current law and practice, President Bush has signed trade agreements on his own authority before sending them to Congress for approval under an expedited procedure that permits no amendment. Under Brown’s bill, the President could sign a trade agreement only after it gets the approval of both Houses of Congress.

The bill’s full title is the Trade Reform, Accountability, Development, and Employment Act of 2008, or TRADE Act for short. Although the bill is unlikely to be enacted this year, it should help develop an improved version for 2009.



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This UN Work Seems Back on Track

“We’ve had a train-wreck. Please get the train back on track.” That’s what a representative from a developing country told Professor John Ruggie of Harvard when he took over his job as Special Representative of the UN Secretary General for Business and Human Rights three years ago.

Now everything is back on track. At least it appeared to be on June 3 when Ruggie presented a report of his work to UN Human Rights Council in Geneva.

Back in 2005 two big stakeholders in globalization – the major international business organizations and leading human rights organizations – were sharply divided over what, if anything, the UN should do about ending human rights violations by multinational corporations. Now they seem to be on track together in supporting a proposal that Ruggie laid out in oral and written reports still under discussion by the Human Rights Council.

Ruggie has proposed an extension of his mandate in order to move “the discussion from the level of general principles to greater operational detail.”

I don’t yet have the Council decision, but in the meantime the full report and a massive amount of other material – much more than you’ll want to read – can be found on the Business and Human Rights website:
http://www.business-humanrights.org/Documents/RuggieHRC2008

I have doggedly covered this human rights controversy from its very beginning. A certain amount of doggedliness was needed to pursue a story almost completely ignored by the media. “Global Norms Put Heat on Business,” published on January 6, 2004, was the first of my 12 reports on my Human Rights for Workers website. Then, before this brief articlet, I had four detailed ones on this weblog. (See the "categories" list at the right and check the "John Ruggie" label.)

Three of them turned out to be the first media analysis of the report that the Council is now discussing. You’ll find them listed last (under Robert Senser, Human Rights for Workers) in the chronologically arranged “responses, commentary & related articles” at
http://www.business-humanrights.org/Documents/RuggieHRC2008

I have doggedly covered this human rights controversy from its very beginning. A certain amount of doggedliness was needed to pursue a continuing story almost completely ignored by the media. “Global Norms Put Heat on Business,” published on January 6, 2004, was the first of my 12 reports on my Human Rights for Workers website. Then, before this brief article, I had four detailed ones on this weblog.

Three of them turned out to be the first media analysis of the report that the Council is now discussing. You’ll find them listed last in the chronologically arranged “responses, commentary & related articles” at
http://www.business-humanrights.org/Documents/RuggieHRC2008

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Red Flags for Multinational Business

Don’t get involved in mass programs to force people to move from their communities.

That piece of advice is so obvious that it hardly seems worth flagging for the attention of executives of multinational corporations. But there it is, number one on list of nine “red flags”for business on how to act responsibly in the many “high risk” areas of the global economy.

Launched at a seminar in London on May 23, the “red flags” initiative seeks to alert corporate executives to changes in the law and in the expectations for complying with it. The initiative identifies the increased liability risks for companies operating internationally, particularly in high-risk zones.

Each of the nine “red flags” listed on the initiative’s website has a summary of the relevant laws (domestic and international) and a relevant court case or two. The topmost redflag, for example, explains: “The threat or use of violence to force people out of their communities can be a crime under international law.” A court in Japan is hearing a lawsuit against a Japanese company charged with involvement in forced resettlement of people in Indonesia prior to construction of a dam.

Take these other “red flags”:


“Providing the means to kill.” A court in the Netherlands imprisoned a Dutch businessman for allegedly providing chemicals that the Iraqi military used against Kurdish civilians in 1988. An appeals court upheld the conviction and increased the sentence to 17 years.

“Allowing use of company assets for abuses.” The liability exists even if the company did not authorize or intend illegal use of company property, for example. In a case pending in U.S. courts, Indonesia villagers charge that Indonesian armed forces protecting the company’s facilities tortured them on company property.

“Handling questionable assets.” Handling, managing, or hiding funds associated with criminal activities exposes companies to prosecution and lawsuits. In 2005, an American bank pled guilty and paid a $16,000,000 fine to clear up criminal charges covering suspicious transactions involving the assets of Chilian dictator Augusto Pinochet.

Two international NGOs, International Alert, and the Fafo Insitute, formally launched the Red Flags initiative, after months of preparatory work by an informal group of lawyers, researchers, and diplomat of several countries, including the United Kingdom and Canada.

They have spotted a trend whereby national laws are gradually becoming tools for protecting human rights worldwide. “When it comes to human rights abuses, the law-free zones are shrinking,” says an informative article in TheLawyer.com.

But the "law-free" zones still are huge in number and size, so much so that navigating within them is perilous for multinationals. I am not a multinational executive myself, but I understand why some of them favor adopting a set of rules that fill in the lawless areas.

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New World vs. Old World Trade Policies

-- The flow of foreign direct investment (FDI) into developing countries (including China) grew more than 10-fold in the past 15 or 16 years. It reached $379,070,000,000 in 2006.

-- The services sector – banks, communication, education, hotels, restaurants, and public utilities, for example – now outpaces manufacturing in attracting FDI. In 2005 the services sector accounted for about three-fifths (61 percent) of global FDI stock (up from 49 percent in 1990).

-- Although the number of multinational corporations with headquarters in developing countries is increasing, they still are dwarfed by those based in industrialized economies. The total foreign assets of the top multinationals based in developing economies, for example, in 2005 amounted to the total foreign assets of a single U.S. multinational, General Electric, the largest multinational in the world.

-- Foreign affiliates of the 78,000 multinational corporations based in the United States, Europe, and Japan have tripled their workforce. In 2006 the number of people on their payrolls stood at 73,000,000 (not counting people hired by contractors and subcontractors), up from 25,000,000 in 1990.

Those are a few of the fascinating statistics in Development and Globalization: Facts and Figures, just issued by the United Nations Conference on Trade and Development (UNCTAD). They illustrate the transformations the world has undergone since 1990.

What implications do these and other transformations have for world trade and investment policies? The question is seldom addressed. But there are some exceptions.


Awareness is growing that at least the investment chapter of the typical trade agreement needs revision. UNCTAD’s 2007 Trade and Development Report, for example, criticized most bilateral “North-South” free trade agreements for restricting the options that poor countries have for adopting FDI policies suitable for their own circumstances.

On October 1-2, over 30 negotiators representing more than 25 countries assembled in Singapore for the 1st Annual Forum of Developing Country Negotiators. There they discussed (as a forum report put it) “their common challenge: finding the appropriate balance between the need to attract more foreign direct investment and the need to serve a wide range of public policy objectives, including economic development.”

That same challenge facing developing countries is analyzed in a report expected to be approved by the June meeting of the Human Rights Council. The report; written by Professor John Ruggie of Harvard, devotes seven paragraphs to the “adverse effects” of the current one-sided policy of protecting foreign investors and investments. These protections, Ruggie writes, have been expanded “with little regard to States’ duties to protect to protect [human rights], skewing the balance between the two [the State and the foreign investor].”

“The State Duty to Protect” human rights is a major theme of the Ruggie report, titled Protect, Respect and Remedy: a Framework for Business and Human Rights. Pope Benedict XVI stressed the same theme, mostly using the same terms, in his address to the UN General Assembly on April 18.

When will U.S. policymakers listen to these voices? Until they do, expect the backlash against globalization to continue, or even to intensify. See previous postings this month.


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The Backlash Against Globalization

“In general, do you think that free trade agreements like NAFTA, and the policies of the World Trade Organization, have been a good thing or a bad thing for the United States?”

“Bad thing” was the answer of 48 percent of Americans in a poll conducted at the end of April. “Good thing” was the answer of 35 percent. In the 10 years since that question was first asked, support for global trade policies has never been weaker.

A bipartisan negative attitude on trade seems to be emerging. Half (50 percent) of Democrats rated current trade policy as bad in the April poll. So did 40 percent of Republicans – and 52 per cent of Independents.

These results, released May 1 by the Pew Research Center, are more bad news for and about globalization. It should be another warning to present and future U.S policymakers on trade that the status quo won’t do and that tinkering with it won’t do either.


A column by Robert Skidelsky, a British author, draws a global picture of what is at stake. In “The Moral Vulnerability of Markets,” he writes:

“Today, there seems to be no coherent alternative to capitalism, yet anti-market feelings are alive and well, expressed for example in the moralistic backlash against globalization. Because no social system can survive for long without a moral basis, the issues posed by anti-globalization campaigners are urgent – all the more so in the midst of the current economic crisis.”

Excuse this self-promotion: In an article published in the October 24, 1998, issue of America magazine I wrote: "The cry for global solidarity [for respecting worker rights] sends a powerful message to world policymakers. Failure to heed it risks a perilous backlash: an upsurge in protectionism, exaggerated nationalism, and paranoia about international bureaucracies."


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Populist Ideas from Harvard’s Summers

“Populism,” or pre-election pandering to the ungrounded fears of workers. That’s the dismissive accusation leveled against trade policy reforms proposed by the two Democratic candidates for the U.S. presidency, Senators Clinton and Obama. Now a distinguished American economist has come forward to give their populism a good name.

Lawrence Summers, former U.S. Secretary of the Treasury, does so in a two-part article in the Financial Times, which is not a populist organ. Without mentioning the debate or the debaters, Summers explains why U.S. workers have a legitimate basis to oppose current U.S. trade policy. He urges revising it “to focus on the issues in which the largest number of Americans have the greatest stake.”

As a mainstream economist, Summers expresses his continued support for global economic integration – but not its present form. He emphasizes that economic integration will stagnate unless the workers of the United States and other countries grow convinced that it benefits them, and not just its “business champions.” So he argues strongly for the need to develop “a strategy to promote healthy globalization.”

His strategy has two components:

-- Domestic: “strengthening efforts to reduce inequality and insecurity.”
-- International: “focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global corporations.”


Summers, 53, now a professor at Harvard, which he headed for five years as president until two years ago, draws on a parallel in American history for the current need to focus international economic diplomacy more on preventing harmful competition between countries:

“There is a reason why progressives in the early part of the 20th century sought to have the federal government take over many kinds of regulatory responsibility. They were concerned that competition for business across states, and their ease of being able to move, would lead to a race to the bottom.

“Financial regulation is only one example of where the mantra of needing to be ‘internationally competitive’ has been invoked too often as a reason to cut back on regulation. There has not been enough serious consideration of the alternative – global cooperation to raise standards.”

Here Summers adds: “While labor standards arguments have at times been invoked as a cover for protectionism, and this must be avoided, it is entirely appropriate that U.S. policymakers seek to ensure that greater global integration does not become an excuse for eroding labor rights.”

In his two-part article (one published on April 28, the other on May 4), Summers acknowledges that two U.S. policymakers detected the present predicament years ago: former U.S. Secretary of Labor Robert Reich and economist Paul Samuelson.

Summers’ ideas add to the doubts that a growing number of economists have about U.S. trade policy. That policy is deeply entrenched, however, and might well continue more or less as is (even by inserting a supposedly improved labor chapter into NAFTA). Hopefully, however, the next occupant of the White House will be wise and strong enough to initiate a broad strategy to promote healthy globalization.



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Multinationals, Human Rights, and UN – III

(Reporting on the Ruggie Report – III)

Can anything concrete come out of the report that Professor John Ruggie prepared for the June session of the UN Human Rights Council? After all, the report offers just a “framework” for business and human rights, not a program of action.

Yet the report is far from a compilation of abstractions. I find that it contains a bundle of specific policy ideas that, if taken seriously by the Council and even only a few major UN members, will improve the protection of individuals, organizations, and weak governments against what Ruggie calls “corporate-related human rights harm.”

Take Ruggie’s incisive criticism of the present foreign investment system. He describes how trade and investment laws have expanded the legal rights of foreign investors without matching responsibilities, and thereby undermined the State’s duty to protect human rights, “skewing the balance between the two.”

This imbalance creates human rights predicaments for both “host States” and “home States.” A major example cited by Ruggie: “host States can find it difficult to strengthen domestic social and environmental standards, including those related to human rights, without fear of foreign investor challenges, which can take place under binding international arbitration” – that is, under a procedure that often favors the investor, a flaw not mentioned by Ruggie.

His report provides enough information on this imbalance to strengthen already existing campaigns to correct it. And the various issues that Ruggie highlights should be instructive to Congress next year when it formulates U.S. trade and investment policy to replace “trade promotion”legislation and other policies conducive to moving jobs offshore. Ruggie’s insights will also be useful in the almost certain renegotiation next year of the 15-year-old North American Free Trade Agreement (NAFTA), which set the pattern for the imbalances written into subsequent U.S. bilateral trade agreements.

Another concrete matter covered in Ruggie’s “framework” concerns the Paris-based Organization for Economic Cooperation and Development (OECD), of which the United States and 39 other industrialized states are members. The OECD Guidelines for Multinational Enterprises are “currently the most widely applicable set of government-endorsed standards related to corporate responsibility and human rights,” as Ruggie points out.

In analyzing the Guidelines, he explains why and how they should be revised to make their human rights provisions more specific, and how their administration needs improvement. The case he makes is sure to assist trade union leaders and others who have long pressed for similar reforms.

So the report does indeed have much potential value on the practical level. Moving from the potential to the actual, of course, will depend on a variety of “actors,” or “stakeholders,” including the institution that commissioned the report, the Human Rights Council.

Ruggie concludes his report with this sentence: “The Human Rights Council can make a singular contribution to closing the governance gaps in business and human rights by supporting the framework, inviting its further elaboration, and fostering its uptake by all relevant social actors.”

Note the term that appears in that sentence and elsewhere in the report – governance gaps. The gaps exist “between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences….How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.”

He restates, and reemphasizes, that challenge in his concluding paragraphs: “As has happened throughout history, rapid market expansion has also created governance gaps in numerous policy domains: gaps between the scope of economic activities and actors, and the capacity of political institutions to manage their adverse consequences. The area of business and human rights is one such domain.”

The greatest value of Ruggie’s 28-page report, in my view, is that he contributes much toward an evolving paradigm of business and human rights under globalization. Policymakers need such a conceptual framework to make sustainable progress toward integrating business and human rights in principle and in practice.


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Multinationals, Human Rights, and UN - II

(Reporting on the Ruggie Report – II)

“Unfeasible, unnecessary, and counter-productive.” That’s how the U.S. Council for International Business denounced a 2003 document titled the “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights,” or Norms. The opposition of the U.S. government, too, was vigorous, so much so that Amnesty International publicly called upon U.S. Secretary of State Condoleezza Rice to put an end to U.S.’s “undermining” the Norms.

The document that provoked so much controversy, pro and con, was the handiwork of the UN Subcommission for the Promotion and Protection of Human Rights, made up of 26 independent human rights experts. A U.S. academic, David Weissbrodt, professor of law at the University of Minnesota, was the expert most responsible for researching and drafting the Norms.

Polarization, human rights organizations vs business, doomed the Norms, but not the basic idea behind it. Three years ago (in April 2005) UN Secretary-General Kofi Annan appointed Professor John Ruggie of Harvard to carry on what is essentially the same project. His mandate includes “identifying and clarifying standards of corporate responsibility with regard to human rights.”

Where to find those standards? Weissbrodt culled them from three dozen UN treaties and other international instruments, including ILO conventions and recommendations. Ruggie started by looking elsewhere. He commissioned a study of 320 cases of alleged corporate-related human rights abuse reported on the website of the Business and Human Rights Centre during a 33-month period that ended in December 2007. He then had each case coded for the rights the alleged abuses impacted from among those listed in seven key UN human rights documents, including the four core worker rights conventions of the ILO.

Ruggie’s empirical study identified 12 labor rights and 17 non-labor rights. That means “there are few if any internationally recognized rights [that] business cannot impact – or be perceived to impact – in some manner.” Ruggie’s conclusion: there are no limits to the rights that companies “should take into account.” On this basis, he judges that the Norms would be inadequate, even for protecting a corporation’s own interests, since they identify only “a limited set of rights for which [a corporation] may bear responsibility.”

As a result, in the report that will be considered at the June session of the Human Rights Council, Ruggie lays a heavy human rights burden on corporations. Part of it is the moral and legal responsibility of exercising "due diligence."

“To discharge the responsibility to respect [human rights] requires due diligence,” Ruggie emphasizes. One of his specific recommendations is that companies should look for guidance in the Universal Declaration of Human Rights and the core worker rights conventions of the ILO. “The principles they embody comprise the benchmarks against which other social actors judge the human rights impacts of companies.”

Drawing on his recent research and consultations, Ruggie sets down four elements of a company’s basic due diligence process:

Written policies: To give the aspirational language meaning, more detailed guidance in specific functional areas is necessary.

Impact assessments: Many problems arise because companies fail to consider the potential human rights implications before new activities are launched. After getting launched, activities should reviewed on an on-going basis.

Integration: Isolating human rights considerations in a company is a mistake that can lead to inconsistent or contradictory actions by product developers, lobbyists, sales teams, or procurement officials. Leadership from the top is essential to embed respect for human rights throughout a company.

Tracking performance: Monitoring and auditing processes are needed to get updates of human rights performance. Confidential channels, such as hotlines, can provide useful feedback.

How will organized business react to Ruggie’s ambitious new framework? No explosion so far. Nobody should be surprised by this report, though. In his speeches, interviews, and previous reports, Ruggie has been clear about where he was heading. His style throughout the past three years has been a model of openness as he went about

-- convening 14 multi-stakeholder consultations on five continents.
-- initiating more than two dozen research projects, some with the assistance of global law firms and other legal experts, nongovernmental organizations (NGOs), international institutions, and committed individuals.
-- generating more than 1,000 pages of documentation as the foundation of his framework.
-- receiving about 20 formal “submissions” (comments) from governments and other stakeholders..
-- presenting two extensive reports on his mandate to the Commission on Human Rights and its successor, the Human Rights Council [in 2006 and 2007], prior to this one]

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Multinationals, Human Rights, and UN - I

As the United Nations prepares to celebrate the 60th anniversary of the Universal Declaration of Human Rights this December, a report commissioned by the UN is challenging governments and business to focus on corporate-related abuses of human rights.

Titled “Protect, Respect, and Remedy: a Framework for Business and Human Rights,” the just-released report is on the agenda of the UN Human Rights Council’s June session in Geneva. Its author, Professor John Ruggie of Harvard, is the Special Representative of the UN Secretary General on the issue of human rights and transnational corporations.

His report describes and endorses “ways to reduce or compensate for the governance gaps created by globalization, because they permit corporate-related harm to occur even where none may be intended.” Governance gaps? It is a key concept of the report. Ruggie defines it as the vacuum “between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences.” He goes on to explain what it means in one crucial area.

“Take the case of transnational corporations,” he writes, and goes on to illustrate how the gaps have evolved under recent globalization:

[Corporate] legal rights have been expanded significantly over the past generation. This has encouraged investment and trade flows, but it has also created instances of imbalances between firms and States that may be detrimental to human rights. The more than 2,500 bilateral investment treaties currently in effect are a case in point.

While providing legitimate protection to foreign investors, these treaties also permit those investors to take host States to binding international arbitration, including for alleged damages resulting from implementation of legislation to improve domestic social and environmental standards – even when the legislation applies uniformly to all businesses, foreign and domestic. A European mining company in South Africa recently challenged that country’s black economic empowerment laws on these grounds.

At the same time, the legal framework regulating transnational corporations operates much as it did long before the recent wave of globalization. A parent company and its subsidiaries continue to be construed as distinct legal entities. Therefore, a parent company is generally not liable for wrongs committed by a subsidiary, even where it is the sole shareholder, unless the subsidiary is under such operational control by the parent that it can be seen as its mere agent.

Ruggie gives examples of how “the transformative changes in the global economic landscape” are not reflected in current laws, regulations, and bureaucratic procedures. Also vital in contributing to the governance gaps is the reluctance of the host and home countries to risk taking on the transnationals.

“This dynamic is hardly limited to transnational corporations,” Ruggie adds. “To attract investments and promote exports, governments may exempt national firms from certain legal and regulatory requirements or fail to adopt such standards in the first place.”

Under international law, Ruggie points out, “States have a duty to protect against human rights abuses by non-State actors, including business, affecting persons within their territory or jurisdiction,” as also discussed in his earlier (2007) report on his mandate. In this report he finds that “there is increasing encouragement at the national level for home States to take regulatory action to prevent abuse by their companies.”

Here, in opening a long section on “the state duty to protect,” Ruggie makes an implied criticism of human rights experts. “Within governments and beyond,” those experts have a good understanding of the “general duty” of States to protect human rights. But “less internalized is the diverse array of policy domains through which States may fulfill this duty with respect to business activities…at home and abroad.”

In other words, governments have available human rights tools that often remain unused or under-used. Ruggie devotes five pages to them. He urges viewing them as “an urgent policy priority …necessitated by the escalating exposure of people and communities to corporate-related abuses, and the growing exposure of companies to social risks they clearly cannot manage adequately on their own.” Three examples:

-- Revising international investment agreements to ensure that the rights protecting investments abroad are balanced with responsibilities to respect the host country’s domestic environmental and social standards.
-- Adopting policies more proactive in preventing harmful corporate involvement in “conflict zones,” including the use of Security Council-approved sanctions as appropriate to each situation.
-- Redefining fiduciary duties, as the UK recently has done, to require corporate directors to “have regard” to matters such as “the impact of the company’s operation on the community and the environment.”

In concluding his special section on the State duty to protect human rights, Ruggie reaffirms: “The human rights regime rests upon the bedrock role of States. That is why the duty to protect is a core principle of the business and human rights framework. But meeting business and human rights challenges also requires the active participation of business directly.”

He then turns to his second principle, the corporate responsibility to respect human rights. So will I, in my next posting.

4/21/08
Reporting on the Ruggie Report - I

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The Latest on Business and Human Rights

What are the steps that governments could take to bring multinational corporations fully under the rule of law? That paraphrases one of the controversial questions that Professor John Ruggie of Harvard will answer in a report that he has prepared as the Special Representative of the UN Secretary General on Human Rights and Business.

The report, which will be considered by the June meeting of the UN Human Rights Council in Geneva, is expected to be released in the next week or two. Though it won’t make a splash in the media, it is eagerly awaited by many business people and human rights types.

I have been following, and writing about, the controversy ever since it exploded in the former Human Rights Council (then called a commission) when an advisory group of experts published a document entitled “Norms on the Responsibilities of Transnational Corporations with regard to Human Rights,” or Norms for short, in 2003.

The proposed Norms, distilled from UN treaties and agreements, met sharply divided reactions. At one extreme, leaders of organized business strongly opposed them, mainly because they seemed to be obligatory. At the other end, many human rights people (including me) generally favored them as a way to balance the global rights of business with some matching responsibilities.

Professor Ruggie was appointed in July 2005 to resolve the controversy. A political scientist wise in the ways of humans, societies, and the UN, Ruggie has succeeded in calming tempers. For nearly three years now, he has been vigorously proactive, talking with all groups having a stake in the controversy, persuading many of them to comment in writing, arranging for authoritative reports on specific points, and publicly communicating his approach in a series of speeches and articles. One of his first acts was to bury the term “Norms,” which had become overburdened with emotions.

A by-product of Ruggie’s openness and transparency is that the complex issues involved are now on the public record, thanks to an archive maintained by Business and Human Rights Resource Center, headquartered in London with offices in Hong Kong, South Africa, and the United States, and world accessible through a voluminous Website.

So we can already know where Ruggie stands on most points at which business and human rights intersect. Most refreshingly, his stance is one that recognizes the complexities of his project, and does not oversimplify them with easy slogans appealing to one side while infuriating the other.

At an international business forum held at the World Bank last October, Ruggie discussed his perspective on business’s twin roles as rule makers and what he calls “rule takers.” Here is an excerpt from his remarks, lengthy because his insights are not easy to summarize and because they tip off what will almost certainly be a major aspect of his upcoming report:

Business already is deeply involved in global governance—quite apart from its influence on individual governments. Employers associations, along with labor, have been constitutionally represented in the ILO since 1919. Today, business participates as a rule maker in such diverse areas as setting global telecommunications standards and protecting intellectual property rights.

Through bilateral investment treaties and host government agreements, companies can seek to insulate their direct foreign investments from future legislative or regulatory changes in host countries, including policies that promote human rights. And they are able to proceed directly to binding international arbitration, bypassing the host country’s courts, if they believe that their investments are adversely affected by such regulatory changes.

But while business has become a direct participant in the system of global governance, it has proven a far greater challenge to render it subject to international rules for harms committed abroad—to make business a global rule taker, in other words. For example, a parent company generally is not legally liable for wrongs committed by an overseas subsidiary, even where it is the sole shareholder, unless the subsidiary is under such close operational control by the parent that it can be seen as its mere agent. And sourcing goods and services from contracted suppliers generally is considered an arms-length market exchange, even for sole suppliers, not a related-party transaction.

To be sure, each legally distinct entity within a corporate group or network is subject to the laws of the countries in which it operates. But host country governments and courts often are unable or unwilling to confront major global corporate players. And the group or network as a whole is not governed directly by international law.

In short, we see an emerging trend whereby business as rule maker increasingly operates in a single global economic space; but business as rule taker largely continues to operate in the world of separate national jurisdictions, with only a thin overlay of relatively weak international institutions and legal instruments.

In the area of human rights, the main bridges between these two worlds are lawsuits where they are permitted, thus far primarily under the US Alien Tort Claims Act; “naming and shaming” campaigns by NGOs; and self-governance or multi-stakeholder initiatives that corporations adopt voluntarily.

To put it simply: we need stronger bridges. History suggests that such a pronounced divergence between rule maker and rule taker may not be politically sustainable—that pushback against globalization driven by increased populism, protectionism and various forms of fundamentalism is likely to occur unless ways can be found to establish more effective transnational means of governance, covering all key international players, including business.

Many who speak for victims of corporate related human rights abuses have advocated drafting a binding international legal instrument as their preferred answer. But let us recall that the recently adopted United Nations Declaration on the Rights of Indigenous Peoples was twenty-two years in the making—and it is not now, nor will it soon become, a legally binding treaty. So whatever long-term aspirations one has, and however meritorious they may be, victims cannot wait a quarter century—they need help now.

My own approach to this challenge is to build up from what we’ve got—and aim to close “law free” zones where they exist.

Call that a carefully charted path between opposing arguments. It is more accurate, I believe, to say that Ruggie is trying to establish a common ground -- a new paradigm -- for business and human rights that the corporate world would be wise to recognize. His upcoming report promises to outline a major step in that evolving process.

Many people see no need for such a new paradigm for business. They accept the prevailing paradigm as a good one, subject perhaps to some tinkering, but essentially the best achievable, at least for this generation. Naturally, they oppose Ruggie’s enterprise and any cooperation with it.

But many others, although agreeing that the prevailing paradigm does not promote an inclusive globalization, contend that Ruggie’s paradigm is unsatisfactory for one reason or another. They, too, can make a contribution by presenting a paradigm that might be better.

For me this is not a one-time story, but a developing one with dramatic consequences for the future, whichever way it goes. I’ll be following it closely. So keep tuned to Human Rights for Workers Too by bookmarking http://humanrightsforworkers.blogspot.com/. See you there again soon.


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Imbedded in WTO: Human Rights for Some

Does the WTO promote human rights? No, it does not. At least that would be the unqualified answer of the WTO and trade experts generally. But that answer should be qualified, and one trade expert, Susan Ariel Aaronson, nails down a partial qualification in a new study.

“Human rights are seeping into WTO deliberations and activities,” says Aaronson, associate professor in the business and international affairs schools at George Washington University and co-author of "Trade Imbalance: the Struggle to Weigh Human Rights in Trade Policymaking" (Cambridge 2008).

Aaronson makes clear that the WTO has no mandate on human rights and that the various trade and investment agreements under its umbrella make no explicit mention of human rights as such. Yet “a wide range of human rights concerns” arise in day-to-day WTO operations, and she documents examples in the following categories:

-- “Members use trade waivers and exceptions to promote human rights at home or abroad.”
-- “They occasionally bring up human rights during accessions and trade policy reviews.”
-- “They have amended the TRIPS agreement to make it clear that nations can use the public health exception to TRIPS in times of public health emergencies.”
-- “Human rights concerns have even entered into trade negotiations (e.g., food security).”

John Ruggie, the UN secretary general’s special representative on business and human rights, who is preparing a report on business and human rights for the UN Human Rights Council, commissioned Aaronson’s study. Her overall conclusion is that although nation-states are limited by WTO agreements in their ability to advance human rights, they still have a good deal of leeway to do so at home and abroad.

Outside the paramaters of this study is another fascinating dimension to the global network of trade and investment agreements. Here, too, there is no explicit mention of human rights, but that doesn’t mean they are non-existent.

Actually, human rights linkages are evident in a surprising number of WTO trade agreements. That’s especially so for two major WTO concerns: the protection of intellectual property rights and the protection of the rights of foreign investors. Check the Universal Declaration of Human Rights. Its article 27 proclaims the right to the protection of various types of intellectual property; and article 17, “the right to own property alone as well as in association with others” and the right not to be arbitrarily deprived of property.

These particular human rights are implemented at the WTO (or multilateral) level by two key global agreements: more than amply by the “Trade-Related Aspects of Intellectual Property Rights” (TRIPS) agreement and, less satisfactorily (from the typical investor’s perspective) by the “Trade-Related Investment Measures (TRIMs)” agreement.”

Country-to-country (bilateral) agreements carry this implementation even further, with TRIPs and TRIMs protections strengthened beyond WTO requirements. Take, for example, the administration’s trade agreement with Colombia, which Congress has just shelved. The Colombia FTA devotes

-- 33 pages to protecting intellectual property rights, 11 of them on enforcement alone
-- 35 pages to protecting foreign investment, very broadly defined, 13 of them on enforcement through dispute settlement procedures in which only the investor can bring a claim.

Again, there is no mention that the rights involved are human rights. That omission holds true for a bundle of other WTO-protected rights in this FTA, as well as across-the-board in all multilateral and bilateral trade agreements.

This is not a semantic quibble. It is an issue that leads to a fundamental question: is the present global trade regime serving the common good or not?

In response to demands that the WTO start protecting the human rights of workers, the usual answer is that the WTO does not do human rights. The truth is otherwise. The WTO does indeed do some human rights, and that limited mission is imbedded in the policies and rules of the whole trade and investment regime.

Open acknowledgment of this fact – by putting an end to mislabeling – would turn the spotlight on who now benefits from the human rights provisions that the WTO promulgates globally, but under other names. Such transparency would reveal the way that selected human rights are woven into the very fabric of the WTO. It would expose the inequity, the lack of inclusiveness, of a WTO system that ignores the human rights of stakeholders indispensable to the global economy – the world’s working men and women.

My congratulations to Professor Aaronson for her provocative study. It should be complemented by an analysis on how extensively the WTO and its agreements support the human rights of global business without acknowledging the human rights principles of the enterprise.


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Life After Corporate Codes of Conduct?

Even with factory monitoring, corporate codes of conduct can’t be relied on as the tool to eliminate sweatshops, and must be replaced by a new way to achieve that purpose. That’s the conviction of two pioneers in the anti-sweatshop movement:

-- Neil Kearney, head since 1988 of the global labor federation that now represents 10,000,000 garment and shoe workers in 110 countries, and

-- the United Students against Sweatshops (USAS), whose affiliates in more than 200 universities, colleges, and high schools just celebrated their national organization’s 10^th anniversary.

Kearney, who has visited sweatshops in more than 140 countries, assesses the current working conditions in his industry as worse than they were a decade ago. In a talk to a recent European Union conference on corporate social responsibility, Kearney painted what he called “all in all, a pretty depressing picture.” The specifics he cited, according to a press release of his organization, the International Textile, Garment, and Leather Workers’ Federation (ITGLWF):

“While some reduction in child labor had occurred and health and safety had improved, wages in the sector had fallen by 25 percent in real terms over the past decade, and working hours had increased with a 60-hour work week now widely accepted as the norm…Employment was less secure, and abusive treatment of workers was more common.

“On key compliance issues like freedom of association and collective bargaining no progress had been achieved. Indeed, in some cases social auditors are promoting employer-dominated worker committees as alternatives to genuine trade unions.”

Meantime, USAS and the implementing arm it founded, the Worker Rights Consortium, have also been disappointed about achieving their anti-sweatshop goals. Factory violations of codes of conduct persisted. More serious, some key factories adhering to the code closed down in recent years. In the highly competitive global marketplace, they were not rewarded with enough business to keep them afloat.

Increasingly, therefore, especially over the past year or two, both the global garment union and USAS/WRC became convinced that code-dependent systems are too fragile. Instead of just tightening up the language and enforcement of the codes, they concluded that a new approach was needed. Both are preparing for a life beyond corporate codes of conduct. Each is working on a successor system adapted to its own environment.

But could the international labor market of the garment and shoe industries be such a jungle that it can never be civilized? Kearney and his ITGLWF are well into the process of finding out.

Global Cooperation Born of a Tragedy in Bangladesh

It started during a garment factory disaster in Bangladesh in mid-2005. There Kearney had his first direct contact with Inditex, the giant Spain-based global clothing retailer, which imported from a factory whose collapse killed over 61 workers and injured many more. From low-key cooperation to bring relief to families of the dead and to the injured, Inditex and the global union went on to deal with labor problems elsewhere in the multinational’s supply chain.

“Inditex and ITGLWF soon concluded that global problems required global solutions, implemented locally,” says Kearney Late last year the two sides signed what Kearney calls a “trail-blazing international framework agreement.” Under it, Inditex recognizes the ITGLWF as the chain’s global trade union partners throughout its supply chain.

The agreement has typical code provisions -- no child labor, no forced labor, no discrimination, no excessive working hours, no unsafe or unhealthy workplaces – adds another, “payment of a living wage,” and affirms a stronger “right of all workers to unionize and bargain collectively as the cornerstone of decent work.” But to insure that the standards aren’t empty words, the agreement also puts in place a: a labor-management relationship that extends beyond the domestic and into global levels, including not only direct suppliers but contractors and subcontractors.

Does it work? The Inditex Framework Agreement now has five major garment manufacturing companies under its umbrella. About 1,100 workers dismissed for union membership or activity have been reinstated. Moreover, in February, two Inditex suppliers signed company-level agreements with ITGLWF affiliates in Cambodia. Significantly, Kearney outlined these achievements in a presentation in Phnom Penh before Her Majesty, Queen Sophie of Spain, during her visit to Cambodia..

For its part, United Students against Sweatshops has been working for two years on a plan to transform how its anti-sweatshop policies are implemented. Its “Designated Suppliers Program” would require that university logo apparel be made only in factories producing mainly for the collegiate market and certified as paying a living wage and meeting other labor standards. Moreover, it would require licensees, such as Nike, adidas, Wal-Mart) to pay those factories a price sufficient to meet those standards.

Those responsibilities of course need more than a one or two-page code of conduct. In fact, the Designated Suppliers Program needs 11 pages to spell out its requirements on transparency, the living wage standard and how it is determined, licensee obligations, implementation, and enforcement, including binding arbitration.

So far 40 major universities – including Duke, Georgetown, the University of Wisconsin-Madison, and other 1990s pioneers in adopting codes of conduct – have given written support to DSP. So far, that support has not yet reached the critical mass needed to put DSP into operation.

Both ITGLWF and USAS/WRD are engaged in heroic struggles that pit modern Davids against today’s Goliaths. What side is the U.S. government on? In a contorted act, it is on both sides. The rhetoric aims to cheer David and his side. But the administraion’s zeal for Free Trade Agreements puts it firmly on the side of multinational Goliaths.

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HOORAY! A Little Step Forward

At long last, cross-border investing is in the spotlight for something other than money-making. It is starting to get attention for its effect on people other than the investors themselves.

Here’s what’s happening. Over the years international agreements – numbering at least 2,500 - to protect the rights of international investors have proliferated to the point that they cover most of the globe. Now, there is growing challenge to the ubiquity of those agreements and increasing pressure to have the protected investment rights balanced with corresponding responsibilities. Or (from another perspective) to balance investor rights with corresponding rights of host governments and their citizens.

Last November, the 19 governments that are member states of the Common Market for Eastern and Southern Africa, Comesa for short, took a pioneering step by adopting an area agreement that will, when put in effect, cover private investment flows into and within Comesa. Its terms will include minimum requirements on labor standards and respect for human rights.

Another sign of the way the breeze is blowing: a two-day meeting in Singapore last October brought together more than 30 government officials who negotiate international investment agreements for over 25 countries. Briefings by experts served to strengthen the negotiating capacity of developing countries in light of three circumstances:

-- The increasing complexity of the model agreements proposed by the United States, Canada, and other major countries.
-- The stark disadvantage faced by developing countries when dealing with wealthier nations, which throw greater resources into the negotiating process.
-- The uncertainties of investor-state arbitration in settling disputes.

The meeting enabled the developing country negotiators to network and to share ideas on how to achieve an appropriate balance between the need to attract more foreign direct investment and the need to serve the country’s own public policy directives.

Developing countries don’t have the help that rich countries get from their Paris-based Organization for Economic Cooperation and Development (OECD). But the Singapore meeting was only the beginning, as indicated by its formal name: the First Annual Forum of Developing Country Negotiators.

The forum’s co-sponsor, the International Institute for Sustainable Development, has just made another contribution toward highlighting the significance of “International Investment Agreements, Business and Human Rights: Key Issues and Opportunities.” That’s the title of a 43-page report that the Institute’s Howard Mann prepared at the request of John Ruggie, the UN Special Representative on Business and Human Rights.

The report addresses this basic question: Does the present international investment agreement (IIA) regime play a positive role in embedding human rights principles into the values and institutional practices of global capital markets?

Answer: No, it does not, and it often plays a negative role by preventing a government from requiring a foreign investor to respect the country’s own labor and environment regulations. ”IIAs limit the right of states to regulate, and these limits may extend to the state duty to protect and promote human rights,” the report states.

Investment agreements go into great detail on the rights of foreign investors and how those rights can be enforced. But “there is no enforcement mechanism against [foreign] corporations, as there are no obligations falling upon them.”

The Institute’s report received no attention from the media. Hopefully, its message will live on, however, since Ruggie will draw on it for a report to the Human Rights Council later this year.

Why do I keep harping on this subject? Because:

1. International investments are a major force in shaping globalization.
2. Investment policy, as written and enforced, now takes priority over the labor policies of governments in the developing world.
3. This absence of pro-worker policies facilitates the job outflow from the United States and other industrial countries.
4. Reform of investment agreements is absolutely necessary, and future trade negotiations must insure that investment agreements balance the rights of foreign investment with corresponding responsibilities, including the responsibility to respect the human rights of workers.
5. Current demands to reform trade and investment policy fall short in that they neglect to cover the practices discussed in the IISD report.

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Students Still Teaching Elders about Ethics

“Stop using sweatshop labor!” That’s the rallying cry of a group of students at the University of Houston in their campaign to persuade the school’s administrators to stop doing business with sweatshops that produce sweaters, T-shirts, caps, and other athletic items bearing the University’s logo.

On Monday (3/31) dozens of students will participate in a dramatic protest starting at noon in front of the campus library. It will feature a mock funeral ceremony , complete with a coffin, symbolizing the death of worker rights at UH. A “funeral”procession will follow, wending its way through the campus and ending at the office of President Renu Khator, who just took office two months ago.

One of her first acts was to appoint a committee to study the sweatshop issues that an activist group, the UH Students against Sweatshops, has been raising since June last year. Tim O’Brien, a graduate student in history and head of SAS at UH, sees the committee as “nothing more than a publicity stunt,” and said so in an interview with the Houston Chronicle.

His frustration is that Khator, like her predecessors, is not calling on SAS to help in solving the problem. Her new committee, headed by an economics prof, has six other members, including one student representative, who is not O’Brien or a SAS member.

SAS has the support of the UH student government association, which in January passed a resolution in favor of SAS’ twin goals: that UH join the Worker Rights’ Consortium, an independent monitoring organization, and endorse its Designated Suppliers Program, a plan for a new source system of sweatshop-free factories.

In a March 3 letter to O’Brien, President Rhator, after scolding SAS for an “antagonistic manner,” defended the university’s position as follows:

-- Although not a member of the Worker Rights Consortium, “our current practices embody the same spirit and commitment to worker rights.”
-- Adidas, one of the three largest vendors of apparel at UH, is a member of the Fair Labor Organization (FLA), “an organization created to promote a uniform international labor standard and to improve working conditions worldwide.”
-- The other two UH vendors, Collegiate Licensing Corporation and Barnes & Noble, “have adopted a code of conduct consistent with that of the FLA.”

Pointedly, Rhator mentioned that, as a newcomer, she depended on a cabinet briefing for her knowledge of the UH’s “spirit and commitment to worker rights.” The cabinet’s perspective is predictable. She would be wise to supplement it with a briefing from SAS. So far she has declined to meet with SAS.

“It is absolutely clear,” she writes, “that the University of Houston is committed to fair labor practices.” SAS is not impressed by her assurances about UH’s commitment, however. I can understand why.

How does a university carry out that commitment when the university routinely buys goods from countries where sweatshops thrive? The question is important to anyone proud of the UH logo displayed on those goods. To answer it truthfully, madam, some of your students are very much better informed than your cabinet.

The University of Houston is not the first university to face this crisis. It is not a crisis of “disruptive behavior,” as the university states, but a crisis of conscience. In the late 1990s some of the country’s leading universities – Duke, Georgetown, and the University of Wisconsin – underwent similar crises, and came to understand that their students knew how to make a genuine commitment to worker rights. I urge you and your committee to look into the experience of these “peer institutions” too.

Because of the victories achieved by those campaigns to end university complicity with sweatshops, I wrote in February 1999: “Thank the Lord for the college students, many of them just freshmen and sophomores, who are teaching their elders powerful lessons in global ethics.”

In the past decade, many universities have recognized the wisdom of listening to their students, even to students who have engaged in sit-ins and other disruptive behavior. Later, those universities wondered why they didn’t start listening much earlier. When will the elders of the University of Houston start listening?



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The Dishonesty of Economists about Trade

Trade policy is likely to grow into a larger issue in the course of the Presidential campaign. A good thing, I used to think. But is it?

A lot depends on how economists succeed in framing the issues as advisors to the candidates and as commentators in the media. Sadly, most economists cannot be trusted to portray the issues honestly.

That’s my view. Dean Baker, an economist who is co-director at the Center for Economic and Policy Research in Washington, D.C., has a similar view. He holds that “economists have been extraordinarily dishonest in their interventions in public debates over trade policy.”

He develops his case at length in an article, “Trade and Inequality: The role of economists,” in the March 15 issue of the Real World Economics Review. Leading his indictment is this charge: economists “have acted to conceal the fact that a substantial group of workers, quite likely the majority of the workforce, can expect to be losers from the recent path of trade liberalization.”

Baker’s analysis of economic theory applied to current trade patterns leads to this conclusion: “The winners are likely to be owners of capital and highly educated workers, with the rest of the populations ending up as losers.” This outcome isn’t accidental, he explains; “it is literally the mechanism through which the economy experiences gains from trade.”

Baker blasts the major media outlets for the “enormous respect” they show for the trade policy ideas of mainstream economists and for the ridicule poured on those who disagree.

As it happens, the March 16 New York Times has an example of that. It features a discourse “Beyond the Noise on Free Trade” by N. Gregory Mankiw, professor of economics at Harvard and onetime advisor to President Bush and to Mitt Romney in his Presidential campaign.

In his first paragraph, Mankiw writes: “No issue divides economists and mere Muggles more than the debate over globalization and international trade. Where the high priests of the dismal science see opportunity through the magic of the market’s invisible hand, Joe Sixpack sees a threat to his livelihood.”

Unfortunately in his view, the Muggles and Joe Sixpack don’t benefit from economic courses such as his at Harvard, and doesn’t understand that “trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity.” As a result, the general public is “less likely to take its cue from Adam Smith than from Lou Dobbs.”


For Mankiw, Senators Clinton and Obama have erred in making Nafta the “latest whipping boy of the ant-globalization crowd.” What consoles him is that their “populist rhetoric” will disappear after the election, and like President Bill Clinton, will rely on the advice of economic moderates like Robert E. Rubin, former Treasury Secretary.

Harvard economist Dani Rodrik on March 16 posted a short item on his weblog titled “Why doesn’t the public buy the economists’ advocacy of free trade?” The posting in full:

“Greg Mankiw bemoans the huge gap between the economics profession and the common people on free trade. Unlike him, I tend to think the fault with economists, who have traditionally proselytized free trade rather than communicated what economics really teaches on trade. Dean Baker offers a sensible guide.”

Rodrik’s words, really teaches, link to an earlier (September 22, 2007) posting praising an analytical paper by Robert Driskill, professor of economics at Vanderbilt, who Rodrik says “knows the theory of comparative advantage as well as anyone else.” Here is a quote from that Driskill paper:

“Unfortunately, most economic writing on the welfare implications of trade is not a balanced weighing of the evidence, or a critical evaluation of the pros and cons of arguments, but rather more akin to a zealous prosecutor’s advocacy of a point of view. As such, this writing is designed to persuade rather than to give the reader the information needed to form an educated point of view.”

To a Driskill passage on how poorly supported positions on trade can confuse people “into false positions about what economics really says about the effects of international trade,” Rodrik added the comment: “A pervasive such false belief, for example, is that trade necessarily benefits more people than it hurts.”

That such a false belief is regularly promulgated by the New York Times is bad enough. Far more troubling is that many economists are teaching this falsehood (and others) about trade in the nation’s colleges and universities.



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