Corporate Social Responsibility, Free Trade and the Trans-Pacific Partnership

The adoption of Codes of Conduct (CoC) by Multinational Corporations (MNC) as a mechanism for ensuring respect for worker rights by both the MNC itself as well as the contractors within its supply chain is a relatively recent phenomenon. The first labor CoCs appeared in the 1990s as a response to consumer outrage over worker conditions in textile factories operated by MNCs and their contractors that were akin to indentured servitude, as well as the use of child labor. Experience with such codes over the past twenty years indicates serious shortcomings in their ability to effectively protect workers from abusive labor conditions.

The substantive content of many CoCs is problematic. It is the corporate entity itself which determines the standards for which it will be held responsible. While the majority of CoCs address compliance with domestic wage and hour laws, prohibit forced labor, child labor and discrimination, and speak to healthy and safe working conditions, most neglect to provide for protection for union organizing and collective bargaining. Thus the workers do not have an effective voice in either deciding the important work issues which should be addressed or in raising concerns about lack of enforcement of those standard which management has established.

Ensuring compliance with these CoCs has, by and large, been undertaken by the MNC itself or a third party consulting firm paid for by the MNC. Apart from the conflict-of-interest inherent in this type of monitoring, the scale and complexity of attempting to evaluate the labor practices of what can be hundreds or thousands of contractors based on a site visit by an outsider calls into question the ability of such monitoring to reveal the realities of day-to-day working conditions. For example, a fire at a garment factory in Karachi in 2012 killed almost 300 workers. All but one exit door had been locked and all the windows were barred. Three weeks previously the factory had been certified as meeting worker safety standards under SA8000 as set by Social Accountability International, which is seen by many as the gold standard for workplace certification.[1]

Lastly, even when violations are found, enforcement is often a rap on the knuckles. A former Apple executive noted, “We’ve known about labor abuses in some factories for four years, and they’re still going on. Why? Because the system works for us. Suppliers would change tomorrow if Apple told them they didn’t have another choice.”[2] Even when CoC standards are effectively enforced, the impact is limited. The workers in a specific factory may enjoy improved working conditions, but workers employed in other factories or in different industrial sectors do not benefit.

As MNC penetration into the global marketplace continues to expand with the adoption of bi-lateral and multi-lateral free trade agreements (FTAs), how can MNC impact on worker rights be more effectively managed? Basic worker rights are, after all, human rights. The Universal Declaration of Human Rights recognizes certain fundamental rights which sovereign nations have the responsibility to respect, protect and fulfil, including, inter alia: the freedom to form a trade union, the right to be free from discrimination, and the right to just and favorable working conditions which includes just remuneration and limitations on working hours. The International Labour Organisation (ILO) has identified certain worker rights as constituting fundamental rights at work: freedom of association, the right to collective bargaining, and the prohibition of child labor, forced labor and discrimination in employment and occupation. It is the role of government to enact and effectively enforce laws protecting these basic worker rights. When government fulfills that role, all workers, regardless of place of work or type of occupation, enjoy these rights. While MNC CoCs can contribute to ensuring protection for worker rights, the heavy lifting falls on government.

So the question becomes how to ensure that recalcitrant governments live up to their obligation to respect, protect and fulfill these rights. From an inauspicious start with NAFTA, FTAs have emerged as a meaningful tool to pressure governments to ensure worker rights. In recent years, FTAs negotiated by the U.S. government have included clauses requiring that states-parties adopt domestic law consistent with the ILO fundamental rights at work. The most recent FTAs also include enforcement mechanisms for non-compliance which culminate in a decision by an arbitral panel which can impose monetary sanctions and can ultimately lead to a suspension of benefits. The track record to date has seen some positive improvements in both the content and enforcement of labor rights within trading partner countries. Admittedly these enforcement processes can be lengthy and subject to political influence; on the other hand, the enforcement mechanisms can be initiated by trade unions and NGOs, thus giving workers’ representatives a voice in monitoring and enforcing rights.

The Trans-Pacific Partnership (TPP) is a multi-lateral FTA currently under negotiation among the U.S. and 11 Asia-Pacific countries.  Amidst the heated debate over the relative secrecy of the negotiations, the possible effects on American workers’ jobs and whether to approve “fast track” authority, it is necessary to ensure that any TPP ultimately ratified includes strong worker rights’ protections and that failure by states-parties to live up to their labor rights commitments is subject to effective enforcement and sanctions mechanisms.

ENDNOTES

[1]AFL-CIO, RESPONSIBILITY OUTSOURCED: SOCIAL AUDITS, WORKPLACE CERTIFICATION AND TWENTY YEARS OF FAILURE TO PROTECT WORKER RIGHTS 7 (2013), http://www.aflcio.org/content/download/77061/1902391/CSReport.pdf.

[2]Charles Duhigg & David Barboza, In China, the Human Costs that are Built into an iPad, N.Y.TIMES, January 25, 2012, available at http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costsfor-workers-in-china.html?pagewanted=all.

The preceding post comes to us from Barbara J. Fick, Associate Professor of Law at the University of Notre Dame Law School.  The post is based on her recent article, which is entitled “Corporate Social Responsibility for Enforcement of Labor Rights: Are There More Effective Alternatives?” and is available here.