UBC Home Page
UBC Home Page
UBC Home PageUBC Home Page

News Events Directories Search UBC myUBC Login

 

CANADA AND APEC: WHY WE'RE IN, WHY IT MATTERS

By: Paul Bowles1

I. Introduction

Fresh on the heels of the "Team Canada" trade missions to Asia, and as the centrepiece of ‘Canada's Year of Asia Pacific’, Canada will host the Asia Pacific Economic Co-operation (APEC) summit meeting in Vancouver in November 1997 bringing together high-ranking officials, including many Heads of State, from the 18 member economies of APEC.2 While APEC, formed in 1989, has attracted the attention of some for its "soft regionalism" and for its attempts to define and create an "Asia-Pacific community" or an "Asia-Pacific identity", the focus in this paper will be on APEC as an economic grouping.3 In this respect, APEC is interesting because it has joined the current wave of trade and investment liberalisation initiatives designed on a sub-global level. Significant here is APEC’s declaration to free trade in developed country members by 2010 and in developing country members by 2020. Given that intra-APEC trade now constitutes some 23.7 per cent of world trade (compared, for example, to intra-European Union trade at 22.8 per cent of world trade) such an initiative might be considered dramatic.

However, while the APEC meeting will doubtless attract a good deal of short term attention, it is competing for longer term attention with other trade deals which Canada has already entered, most notably the NAFTA but also the bilateral trade deal with Chile, as well as new ones such as the Free Trade for the Americas Agreement (FTAA) designed to bring free trade to the Western Hemisphere (except Cuba) by 2005. APEC may the game in town this year but it is not the only one being played; indeed, no sooner will APEC have left Vancouver, than attention will immediately be switched to the Summit of the Americas Meeting in Santiago in March 1998 which will take up the issue of the FTAA again.

This paper examines two questions. The first is why is Canada involved in so many different trade deals and how does membership of APEC fit into Canadian trade policy? How is that Canada, a traditional supporter of multilateral trade negotiations, has become a party to so many sub-global economic agreements? The answer to this, I will argue, lies in the dynamics of Canadian trade policy since the signing of the Canada - U.S. Free Trade Agreement (CUSFTA).4 Since signing that deal, Canadian policy has been designed to illustrate that the CUSFTA was a step on the road to global trade liberalisation and that Canadian free traders support for this deal does not represent a weakening of commitment to that goal. In particular, I will argue that APEC, and other sub-global liberalisation initiatives, are important to Canadian free traders because it enables them to argue that regional liberalisation agreements can be "outward looking" and complementary to multilateral liberalisation. However, such a position has required that Canadian free traders redefine these regional agreements and attempt to reposition Canada in the eyes of other trading partners most notably in Asia. Thus, Canadian enthusiasm for APEC is based not only on the desire to be a part of the much publicised and over-hyped dynamic Asia-Pacific economy (although this is undoubtedly important) but also on the underlying goals of Canadian trade policy in the post-CUSFTA period.

The second question asks whether APEC matters. As I will show, there are good reasons to be sceptical. However, I will argue that APEC deserves serious attention. My argument here will be that while liberalisation agreements, in general, represent attempts to liberalise capital and to create the conditions conducive to further capital accumulation, they are also typically accompanied by some efforts to re-regulate the conditions under which capital operates. But the extent to which this dual process of liberalisation and re-regulation operates varies according to the agreement under consideration, a point which I will illustrate by examining the way in which "labour standards" are incorporated into a variety of such agreements. In this respect, I will argue that APEC does matter - because it represents the worst type of liberalisation arrangement since the scope for the re-regulation function is minimised.

The next section examines in more detail the first question, on how APEC fits into Canadian trade policy, and Section III examines why APEC matters.

ÊII. Why We're In: Canadian Trade Policy as "Desperately Seeking Partners"

To understand Canada's current trade policy, and why we are in APEC, it is necessary to go back to the CUSFTA and the NAFTA, the seminal events in Canadian trade policy of the past half century. Until the mid-1980s, Canada's post-war trade policy had been one of support for multilateral trade negotiations under the auspices of the GATT. However, in the mid-1980s, Canada changed track with the negotiations which eventually led to the CUSFTA, and subsequently, the NAFTA. Canada's post-CUSFTA trade policy has been based on the desire to achieve the objectives of the post War policy - global trade liberalisation - but by using sub-global trading arrangements as part of the mechanism.

However, such a policy has been problematic for Canada free traders because the relationship between sub-global liberalisation agreements and multilateral trade liberalisation is by no means straightforward. Canada's free traders have therefore been seeking ways to demonstrate that the decisions to form the CUSFTA and the NAFTA are not impediments to global liberalisation; membership of APEC is part of that strategy.

The dilemmas of current Canadian trade policy are directly attributable to the stand that free traders took in the CUSFTA debate. As is well known, prominent Canadian free traders such as Richard Lipsey, strongly supported the deal. This may not seem noteworthy except for the fact that some prominent U.S. free trade supporters were not in favour of this type of regional agreement. An interesting question is how advocates of the same general approach - free trade - could come to different assessments about the merits of regional free trade agreements. How, for example, could Richard Lipsey and Jagdish Bhagwati, both fervent advocates of free trade, find themselves on opposite sides of the NAFTA debate?

The answer to this does not lie in the technical properties of alternative trade models. it lies, in part, in differing assessments of the possibilities for a successful conclusion to the Uruguay Round, but also, more importantly, in different assessments of national imperatives. Bhagwati argues that the U.S. frustration with the multilateral process in the early 1980s led it "to shift course and to embrace preferential trade agreements by initiating negotiations on the U.S. - Canada Free Trade Agreement in 1983. The failure to secure agreement from Europe and the developing countries to start a new round of multilateral negotiations at the GATT ministerial in November 1982 led U.S. Trade Representative William E. Brock to that approach."5 However, Bhagwati views such a policy as "dangerous" and has argued that U.S. involvement in regional trade agreements is a retrogressive act, a weakening of its commitment to free trade at the global level and to the multilateral process, and to be opposed.

In contrast, Lipsey viewed a regional trading arrangement with the U.S. as a progressive act for Canada, a movement towards a more liberal trading regime and away from what he regarded as the discriminatory trade and industrial policies which characterised previous Canadian trade policies. The domestic imperatives for the CUSFTA have been explicitly recognised by Michael Hart who argued that "the most obvious, if least publicised, [objective of the Free Trade Agreement] was to effect domestic economic reform."6 Similar sentiments were expressed by former Minister of International Trade, Pat Carney when she noted that part of the rationale for the CUSFTA was to "ensure that in future there is not the kind of anti-investment policies of other governments."7

This has also recently been noted by Whalley who argues that improved Canadian access to the U.S. market as envisaged under the CUSFTA was "secured by implicit side payments in the form of domestic policy disciplines undertaken by Canada and favourable to the U.S. Special bilateral policy disciplines were agreed to as part of the trade agreement on energy and investment policies; which effectively prevented the return in Canada to older policies adverse to the U.S. under the Canadian Energy Policy and the former Canadian Foreign Investment Review Agency."8

By giving up sovereignty in these areas and binding Canadian policy makers to operate within a non-discriminatory, i.e. non-nationalist, environment, the CUSFTA therefore represented a significant political victory for free trade supporters. So important was this political victory that CUSFTA supporters such as Lipsey regarded the decision to implement the agreement as "the most important to face the country in this century"9 despite the fact that "economists' objective measurements ... [did not] support the judgment that the decision is momentous."10 This locking in of domestic reforms through the CUSFTA was also important for Mexico in its entry into the NAFTA. As Lipsey explains, "the key point is that Canada's and Mexico's main motives for the [CUSFTA] and the NAFTA were outward looking. Two small trading nations (measured by GDP) that had embarked on outward-looking, market-based re-orientations of their domestic economies saw an FTA with their major trading partner, the US, as an important step in that process."11

The objective of the CUSFTA and NAFTA in terms of changing domestic policy debate has been largely met. The scope for domestic policy interventions has been reduced both by the legal text of the trade deals and by the fear of capital flight that their negation might entail. The nature of the post-NAFTA debate has therefore changed. But it has changed in peculiar ways for the pro-CUSFTA supporters because, having won the domestic political battle, they are now faced with the problem of how to reconcile their support for regional agreements with the goal of global liberalisation. The central problem that continues to dog Canadian policy makers is how to ensure that NAFTA is part of the process of global liberalisation which the Canadian free-traders have always wanted rather than an obstacle to it as the Bhagwati-type free traders fear. This has pre-occupied Canadian free traders in the academic world and policy apparatus. As Black and Sjolander have argued "at the level of foreign policy discourse ... the complementarity of regional and multilateral approaches has been emphasized - of necessity."12 This necessity remains the central problem for Canadian trade policy and the context in which Canada's support for APEC must be viewed.

Post-NAFTA trade policy has therefore taken the form of, firstly, defending NAFTA as a model of an open trading arrangement which can contribute to our understanding of how sub-global agreements can contribute to the goal of global freer trade, and secondly, and relatedly, supporting and promoting other liberalisation initiatives. Both of these policies have been particularly focussed on Asia, where they needed to be emphasized most because of both the importance and scepticism of the audience.

Consider the first policy. Soon after signing the CUSFTA, then Prime Minister Mulroney visited Singapore to reassure Asia that the CUSFTA was not an exclusionary club but one whose members were keen to remain open to trade and investment flows. That is, it was argued that the CUSFTA was not an inward looking, trade and investment diverting, regional bloc but a trade liberalising, outward looking one with which Asia could still do business.

However, while Canadian free traders were promoting the CUSFTA in this way, the view from Asia, particularly after the NAFTA negotiations had started, was quite different with the ASEAN Ministerial meetings in 1989, for example, expressing "concern on the emergence of trading blocs and other regional trading arrangements"13 and Malaysian Prime Minister Mahathir proposing that an East Asian Economic Group should be formed by Asian countries to counter the weight of NAFTA and the European Union.

The desire to calm such fears in Asia has also been evident from remarks by Lipsey, initially delivered in a lecture again in Singapore. He argued that "the EU and NAFTA are very different institutions. In particular, the former is a trading block while the latter is not. In what follows, I shall argue that although there is some cause for concern over the behaviour of the EU and the US, there is little reason to believe that the NAFTA - and the WHFTA (Western Hemispheric Free Trade Area) that may follow it - will contribute to the development of trading blocks or to rising protectionism. On the contrary, they should contribute to general trade liberalization and other new regional arrangements would do well to copy this model rather than that of the EU."14

This represents an intriguing argument using the rhetorical device of redefining a "bloc" so as to exclude the NAFTA, and subsequently any WHFTA, from the negative and exclusionary connotations associated with such the term and to reserve its use for the European context only. In order to accomplish this task, Lipsey defines a bloc as "a group of countries that have liberalised both trade and other trade-related transactions among themselves while having a unified policy towards the outside world, particularly in the form of a common external commercial policy."15 In advancing this definition, Lipsey is therefore arguing that customs unions and common markets - which liberalise trade between member countries while having common tariff levels against non-members - should be classified as a "trading bloc" but that free trade agreements - which only require liberalised trade among member countries but who set their tariff levels against non-member countries independently - should not be classified as a bloc.

To see how sharply Lipsey's redefinition differs from work other economists, consider for example the definition used by Jeffrey Schott, a noted trade economist based at the Institute for International Economics in Washington D.C. He defines a trading bloc as "an association of countries that reduces intra-regional barriers to trade in goods (and sometimes , services, investment, and capital as well)."16 This definition accords well with the first part of Lipsey's definition but then, significantly, does not proceed to the second part referring to the presence of common external tariffs. Thus, both CUs and FTAs would be classified as "blocs" on Schott's definition and the political requirements - in terms of common external policies - are therefore less in Schott's definition than in Lipsey's.

In fact, the most common approach among trade theorists is to ignore political considerations all together. In this respect, consider the definition of a bloc advanced by Jeffrey Frankel, now a member of President's Clinton's Council of Economic Advisors. In looking at regionalism in East Asia, Frankel argues: "When one asks the question whether a yen bloc is forming in East Asia one must ask whether the share of intra-regional trade and finance is higher, or increasing more rapidly, than would be predicted based on such factors as the GNP or growth rates of the countries of the countries involved. Then, even if the evidence were found that an economic bloc by this criterion was indeed forming, there would remain the separate question of whether this trend was the outcome of deliberate Japanese policy measures."17

For Frankel, therefore, the question of bloc formation is separate from the political motives of nation states and the existence of "economic blocs"can be established on the basis of examining trade and finance data alone. This method has become quite common in the economics literature with the search for "natural trade blocs" - those which trade disproportionately with each other - a frequent exercise.

Thus, while Lipsey's definition of a bloc places a great deal of emphasis on the necessity of a political superstructure capable of setting common external tariffs, other definitions, and which are more representative of the economics literature, ignore this political dimension to the point where blocs are defined by reference to trade statistics alone without reference to states as political actors at all.18 Thus, while Lipsey is correct in arguing that the term trade bloc "is one of the most common, and I believe one of the most misused, words in today's vocabulary of international trade"19 it should also be noted that the definition which he proposes is an unusual one and one designed to sell NAFTA as a "non-bloc".

But even if Lipsey's definition of a bloc is accepted the conclusion that he draws from it - that customs unions with common external tariffs are more likely to be obstacles to global trade liberalisation whereas FTAs should be seen as outward-looking - is either wrong or very controversial even within free trade circles. It is wrong on theoretical grounds in that both CUs and FTAs are capable of generating trade and investment diversion. It is controversial where the argument relies on the likely political implications of countries joining a CU or an FTA. Lipsey argues that "by its very constitution, an FTA lacks the essential ingredient of a trading block: the ability to present a common commercial policy to the rest of the world. Not having such a policy, the competitive pressures within the member countries are ... to harmonize tariffs downwards rather than upwards"20 and hence FTAs are favourable to non-member countries and to the goal of global tariff reduction. However, this view is not uncontested. For example, prominent neoliberal economist Anne Krueger argues that "FTAs are, on political economy grounds, less desirable than customs unions because they will increase opposition to global trade liberalization even more than a customs unions would."21 Similarly, Panagariya argues that "on economic grounds ... it is much easier to defend the EU than the NAFTA. As within the United States, and unlike the NAFTA, there is strong commitment to deep integration within the member states of the EU. The EU is intended to be a Common Market with a common external tariff and free capital mobility which it already has and free mobility of labour which it seeks. The common external tariff eliminates the need for rules of origin. It also provides a genuine lock on trade reform: a member state cannot raise its outside tariff without all members being willing to do the same."22

To summarize, a part of the post-NAFTA policy has been to defend the NAFTA as an outward-looking arrangement capable of contributing to global liberalisation. This repackaging of NAFTA has been particularly important in Asia , where the fear of "Fortress North America" was real and where the re-selling has been undertaken to ensure Canada's continued access to the fastest growing part of the world economy. As we have seen, this repackaging relies on redefining the nature of a bloc and asserting that FTAs are more likely to be favourable to non-members that CUs even though both of these elements are controversial even within free trade circles; they are a necessary part, however, of Canadian free traders’ arguments in order to demonstrate the compatibility of their support for both regional and global liberalisation initiatives.

To provide the proof that NAFTA is an outward-looking, trade liberalising agreement, the second element of recent Canadian trade policy has been that of actively pursuing trade agreements with other countries. Canada has subsequently signed bilateral free trade agreements with Chile and Israel, been a signatory to the Miami Declaration of 1994 which proposes to establish Free Trade of the Americas by 2005, and is a founding member of APEC. In addition, during Roy McLaren's spell as Minister of Trade, bilateral trade agreements were also proposed with South Korea, New Zealand and Singapore and the possibility of an EU-NAFTA agreement was raised. None of the latter came to fruition, although Canada has apparently further pursued the possibility of a bilateral trade deal with the EU (as has the U.S.), but they do serve to illustrate the point that Canada has, in Wonnacott's judgement, pursued a "policy that has been described as ‘seeking bilateral or plurilateral side-deals with almost any country or group of countries in sight.’"23 While it may be argued that the original CUSFTA reflected the interests of a transnational, in the North American sense, business class, the later trade and investment initiatives have not depended on such a clearly identifiable constituency for their support. Indeed, while it may be argued that such arrangements support capital in general, the state has nevertheless shown considerable autonomy in this field and has forged new arrangements without clearly articulated business support. Indeed, one of the major thrusts of the current APEC process is to increase business participation. For this reason an APEC Business Advisory Council was established in 1996 with the express purpose of soliciting from business more detailed analysis of how what measures they would like APEC to take.

Thus, the current phase of regionalism in the world economy is characterised by "multiple regionalism", that is, countries are not simply members of one trade agreement but members of several some of which may be overlapping in membership (e.g. NAFTA, FTAA and APEC in Canada's case). The hope of the free traders is that the sum of these multiple regionalisms will lead towards the end state of global free trade i.e. global liberalisation by a thousand sub-global agreements.

Canada's membership of APEC represents one part of this strategy, albeit an important one, as it demonstrates to Asian countries that Canada is willing to engage in trade liberalisation measures with them and that NAFTA can be a springboard to that since APEC involves the three North American NAFTA members. Given the importance of maintaining good relations with, and economic integration with, Asian countries, APEC is therefore viewed as an important part of Canada's current trade policy.

III. Why It Matters: APEC as "liberalisation without re-regulation"

Given this background to Canada's trade policy, it is worth asking whether APEC, as such, matters. There are two lines of argument here which might suggest that it does not. The first is that APEC is unlikely to be an effective organization and much less likely to meet its trade and investment liberalisation goals than other agreements. The reason for this is that APEC's liberalisation targets are voluntary and do not require, even formally, that all countries meet the declared targets which are, in any case, a long way off. Given the widespread support for developmentalist ideology in East Asia it must be seriously doubted whether the commitment to the neoliberal ideology of free trade will actually be implemented in full by a number of countries. Many countries in the region have adopted a state-led approach to development which has included intervention in the trade sector (of both the import substituting and export promoting varieties) and have actively used state subsidies to foster growth in some sectors and industries. A degree of scepticism is therefore warranted as to whether these policies will change to meet APEC’s voluntary guidelines. As an example of this, it is noteworthy that APEC's trade and investment liberalisation goals were announced at the Bogor APEC summit in 1994 by Indonesian President Suharto; the same President Suharto that then proceeded to launch the Indonesian ‘national car’, initially entirely imported from South Korea and immediately the subject of a trade dispute filed by other automobile exporters. It might also be noted that China's entry into the WTO is currently stalled as a result of its trade and subsidy regime and it is impossible to think that these regimes will change to meet APEC’s voluntary guidelines when they have not to meet WTO admission, a matter of much greater importance to the Chinese leadership. Whether the individual and collective liberalisation action plans which have been drawn up as part of the APEC process will actually amount to much in the long run is, therefore, an open question.

The second line of argument would view APEC as simply a part of a general process of globalization, subsumed within it, and not requiring special attention. In this respect it is interesting to note that the People's Summit, which provide a rallying point for alternative views at the 1996 Philippines APEC summit, was focussed as much on opposition to ‘globalization’ as it was on specific APEC issues. Opposition to APEC has therefore attracted the same time of populist tactics and agendas as recent G-7 and UN Summits, i.e. it is the presence of world leaders and the opportunity to voice opposition to various dimensions of the globalization process that is the key rather any than a specific targeting of the particular organization per se.

Both of these arguments contain a good deal of validity. However, there is an additional point here which makes APEC itself an important reference point for specific concern. While the second argument above may be correct in viewing the purpose of proposed and existing trade and investment initiatives, at both the international and regional levels, as supporting the requirements of capital accumulation and can therefore be seen as part of the same globalization process, there are nevertheless significant differences between these initiatives in the extent to which they incorporate mechanisms to regulate (or, more accurately, to re-regulate) the basis on which this capital accumulation takes place. Thus, while the analysis of the previous section illustrated the reasons why mainstream economists have been concerned to explore the extent to which the current phase of "multiple regionalisms" is capable of supporting the process of global liberalisation, the remainder of this section is concerned with understanding how the multiple trade and investment initiatives might affect the ability to re-regulate the liberalisation process.

Consideration of state regulation of market relations has led some to use Polanyi’s analysis of the ‘double movement’ as a tool for analyzing current re-regulation attempts at the regional level.24 As an example of this, consider Hettne’s argument that "regional cooperation as such is not a new idea, but it is now possible to see the signs of the ‘new regionalism’ throughout the world. What then is the connection between the two ideas; the ‘new regionalism’ and the double movement? Previously, the self-protection of society was carried out mainly by the state, on the level of the nation-state. This is no longer possible (for small and weak states it never was); and it is my contention that the ‘new regionalism’ should be seen as a manifestation of the second movement, the self-protection of society, on the level of the region, as a social reaction against the global market expansion which took place in the 1980s and is still the predominant trend today, albeit increasingly questioned."25

Hettne’s analysis invites us to consider not only the liberalising trends but also the attempts to re-regulate them. Hettne’s analysis is important in this respect although I do not subscribe to the view that we should privilege the regional over the national and the global as sites of opposition or to the view that we should regard, as Hettne does, globalization as being primarily economic while regionalisation is seen in primarily political terms. Rather, I think it is more accurate to view the process of globalization as emanating from both ‘spontaneous’ causes - such as technological change and the information technology revolution - and from state sponsored causes such as trade and investment liberalisation at both the regional and global levels.26 States have not only sought to liberalise capital in this way but they have simultaneously, and to varying degrees, sought to condition the terms on which such liberalisation takes place. In this sense, liberalisation has simultaneously been accompanied by re-regulation. The claim here is not as strong as Hettne’s; it is not that states have acted politically (either nationally or regionally) to actively oppose the economic process of globalization. Rather, it is that states have, as part of a dual process, both promoted liberalisation and sought to define the terms on which it has taken place. This latter process has usually been seen as necessary although it has seldom, if ever, been sufficient to redress the adverse social effects accompanying the liberalisation objectives.

However, such re-regulation efforts have varied depending on the nature of the states involved - their internal political pressures, international relationships and historical conditions. Thus, we find a variety of re-regulation regimes accompanying different liberalisation agendas. It will be the argument here that the reason why APEC deserves separate attention is precisely because the APEC agenda represents a liberalisation initiative which has given the least scope to re-regulation efforts and represents one of the most extreme cases of "liberalisation without re-regulation".27

To illustrate this point more concretely, consider one of the most important, albeit controversial, areas of re-regulation in the new global economy, namely, that relating to "core labour standards". This issue is not a new one. Indeed, its origins go back to the Nineteenth century debates in industrialising Europe about the conditions for fair trade (and the fear that countries which did not abide by reasonable labour standards would gain an unfair trade advantage) and to the efforts of social reformers to promote tolerable working conditions. The formation of the International Labour Organization in 1919 was in large part a response to this.28 The issue of labour standards has, however, returned to prominence on the trade agenda as a result of the significant change in the composition of developing country exports over the past 25 years so that developing country manufactured exports now compete directly with developed country output. This, combined with the fact that the new regionalism of the late 1980s/1990s increasingly involves trade arrangements between developed and developing countries, has meant a much higher profile for labour standards in trade negotiations.

It is not the intention here to examine in any detail the motives of countries in propelling the labour standards issue onto the trade policy agenda or to evaluate the extent to which the discussion is premised on "protectionism" or "cultural imperialism". Rather, I take as my starting point that the regulation of the conditions under which labour is performed is of critical interest to workers everywhere. That is, this area of re-regulation is important both for the potential that it offers to workers in "low standards" economies to improve their working conditions and for workers in "high standards" economies to maintain these standards in the face of competitive pressures from lower standards’ economies. From this starting point, I will examine the extent to which existing trade agreements have addressed this area of re-regulation as they simultaneously liberalise other areas which affect the ability of capital to operate. Differences between trading agreements in their re-regulation of labour standards may be important in either a strong or weak sense. In the strong case, the existence of different regulations concerning working conditions raises the possibility of what Langille refers to as "regulatory meltdown" or the "race to laxity".29 That is, with the plethora of trading agreements now in existence, the possibility arises of the re-regulation accompanying the liberalisation process being driven to the level of the least regulated as other agreements feel compelled to adopt the lowest levels of regulation. Even if this "competitive deregulation" process is not explicitly observed - and it has been in the area of financial deregulation, for example, - then, in the weaker sense, we can conclude that those agreements which have the least re-regulation measures act as a brake on the re-regulation of other agreements and as a drag on the ability to increase re-regulation efforts. It is in this respect that the differing extent of the regulation of labour standards will be analyzed.30 It is thus as an example of the re-regulation process that the discussion of labour standards takes place - other areas, such as environmental regulation, financial market regulation could also be used in this context.

The incorporation of methods of re-regulation, such as those pertaining to labour standards, into otherwise liberalising projects is, unsurprisingly, a complex and contested process. Here, I will analyze, in fairly broad brush strokes, some of the most important attempts that have made in this respect with the intention of highlighting the differences between them and to assess APEC’s record in this regard in comparison with other major liberalising initiatives.

One of the most important re-regulation efforts came with the so-called Social Charter of the European Union and which accompanied the move towards the more integrated European economy envisaged by the Single European Act (1987). That is, the EU’s objective of creating a barrier-free EU within which capital, goods and labour could move more easily was accompanied by efforts to re-regulate the conditions under which this would take place by guaranteeing some economic and social rights within the European Social Charter. While the impetus for the renewed integration of Europe came from the desire to enable European business to compete more effectively on the world market and, as such, was broadly liberalising in its vision including in labour market and social policy areas, the European Commission during the Delors’ years also attempted to complement this with measures designed to prevent ‘social dumping’, move Europe onto a high wage-high productivity growth path and ensure that the gains from liberalisation would not compromise European social solidarity. All of these motives can be found in the attempts to move Europe forward in the Social Charter. This was agreed to by 11 of the 12 member states in 1989 with the UK refusing to sign, objecting to attempts to regulate the social sphere as contrary to neoliberal economic wisdom.31 Despite UK omission, the EU proceeded with intensified activity in the social policy area. As Ross notes: "The teeth of the Social Charter were in the action program which followed (November 24, 1989), which produced a flood of new Community action. Some forty-seven different instruments were to be submitted to the Council by January 1st, 1993. The bulk of proposals for "hard" Community legislation involved living and working conditions, freedom of movement, worker information, consultation and participation, equal treatment, and health and safety. In broader social policy areas there were proposals for recommendations - nonbinding opinions - on convergence of objectives in social protection and in Community floors for social assistance for the poor."32

Some of these instruments failed to receive Commission approval and others were considerably weakened before being passed. This has led many to question the value of the social rights with Leibfeld and Pierson, for example, arguing that "EU interventions in the traditional spheres of social policy have not, on the whole, taken the form of Polanyi’s "protective reaction" against the expansion of market relations. Indeed, initiatives of this kind (the Social Charter, for example) have usually been dismal failures."33 Others are rather less pessimistic and Ramsey, for example, argues that "even if the (highly plausible) case is made that the current and proposed [social] legislation is relatively anodyne, the symbolism of rights and standards is important to the legitimacy of actions, and is likely to be a real if not powerful constraint on employers."34 The evolution of broadly defined social policy as well as the more narrowly defined workers rights in the EU is still an unfolding process and assessment of these policies remains an open question. For the purposes of this paper, the important point is that the integration of Europe associated with the Single European Act and the liberalizing of trade and capital flows which it embodied was accompanied by some attempts at the re-regulation of capital and concerns to provide some constraints on the ability of newly liberalised capital to operate.

Indeed, the EU’s attempts at re-regulation, the perceived extensive extent of its interventions, and its desire to seek convergence of national standards in some areas has acted to increase opposition to the inclusion of "social clauses" in trade agreements by many developing countries. The debate has been somewhat confused by a lack of clear terminology but in other agreements the focus of discussion has not been on the extensive regulation of working hours etc., which forms part of the Social Charter and which might best be termed ‘labour standards’, but on the inclusion of what might best be termed certain ‘core labour rights’.35

These ‘core labour rights’ or ‘internationally recognised workers’ rights’ are typically taken from ILO conventions and the more extensive Universal Declaration of Human Rights and the International Covenants on Civil and Political Rights and on Economic, Social and Cultural Rights. Agreement on an exact list of ‘core labour rights’ has proved elusive given that the ILO conventions do not coincide exactly with the UN Covenants. A recent OECD report has chosen to define ‘core labour rights’ as:

    • the elimination of child labour exploitation;
    • the prohibition of forced labour;
    • freedom of association;
    • the right to organize and bargain collectively;
    • non-discrimination in employment.36

ÊIt is essentially these labour rights which have been the subject of continuing discussion at the GATT and subsequently at the World Trade Organization (WTO). A number of industrial countries, most notably the United States, France and Norway and also supported by Canada, have been in the forefront of placing core labour rights on the international trade agenda, a position supported by a number of (usually industrial country-based) trade union organisations including the International Confederation of Free Trade Unions, the World Confederation of Labour and the European Trade Union Confederations.37 This has been resisted by many developing countries (and some industrial countries), fearing that it will decrease their ability to export, with the argument being that the WTO (and previously the GATT) is only mandated to consider trade issues. Thus, while this mandate was flexible enough to include so-called trade-related intellectual property rights (TRIPs) and trade-related investment measures (TRIMs), there is no apparent place for trade-related labour rights. These issues were discussed at the WTO meeting in Singapore in December 1996 but attempts to set up a WTO process of promoting and reporting on core labour standards were not successful. Instead, Ministers renewed their "commitment to the observance of internationally recognized core labour standards. The International Labour Organization (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalization contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage countries, must in no way be put in question."38

While no resolution to the issue of labour rights and trade has therefore been found at the WTO and the issue has been referred to the relatively weak ILO for further discussion in an apparent victory for those who oppose a trade-workers’ rights linkage, it is clear that this is an issue which is likely to remain on the international trade agenda. The issue has been discussed at recent G-7 summits, most notably at the 1996 summit in Lyon, and the OECD commissioned report has added further evidence to support to those pushing for the incorporation of core labour standards in international trade agreements. The Report concluded that "concerns expressed by certain developing countries that core labour standards would negatively affect their economic performance or their international competitive position are unfounded; indeed, it is theoretically possible that the observance of core standards would strengthen the long-term economic performance of all countries."39

The political imperatives in developed countries suggest that future WTO meetings will likewise be asked to address this issue. In terms of these political imperatives, as opposed to humanitarian concerns over working conditions, U.S. Labour Secretary Robert Reich has argued that "unless people around the world feel confident that other nations are observing core labour standards, it will become increasingly difficult as a political battle to convince voters to support additional free trade measures."40 Thus, in addition to the social forces which oppose liberalisation, even its supporters recognize the political need for the process to be subject to some forms of re-regulation if it is to remain politically defensible. In such circumstances, core labour standards as part of the ‘new international trade agenda’ are likely to remain an enduring issue.

The U.S. has in fact already included some of these core labour rights in various preferential trade programmes such as the Generalized System of Preferences (GSP) and the Caribbean Basin Initiative (CBI). In these statutes it is specified that countries receiving such programmes must have taken, or be taking, steps to ensure that basic workers rights are respected where such rights are specified as:

    • the right of association;
    • the right to organize and bargain collectively;
    • prohibition of forced labour;
    • restrictions on the use of child labour;
    • minimum acceptable conditions regarding minimum wages, hours of work, and workplace health and safety.

ÊOf course, this has led to politically motivated interpretations of which countries have complied with these rights, but the point is that they have been included as part of trade agreements. In contrast, the labour accord signed as a side agreement to the NAFTA represents a significant weakening of the inclusion of labour rights in trade agreements. It was for this reason that some opponents of NAFTA in the U.S. argued that NAFTA would lead to a lowering of labour protection. As Lee et al. argued "a NAFTA that does not contain an equivalent formulation of basic worker rights in trade [as in the GSP and CBI] would actually be a giant step backward for worker rights. NAFTA would displace other trade statutes, so worker rights now protected under the U.S. law would be left unguarded under NAFTA, at least as far as Mexico and Canada are concerned. A later ‘Enterprise of the Americas’ trade pact modelled on NAFTA would exempt all of Latin America and the Caribbean from labour rights conditions in trade with the U.S."41

Article 1 of the Supplemental Agreement to the NAFTA on Labour Cooperation states among its objectives to: "promote compliance with, and effective enforcement by each Party of, its labour law; and foster transparency in the administration of labour law."

Article 2 proceeds: "Affirming full respect for each Party's constitution, and recognizing the right of each Party to establish its own domestic labour standards, and to adopt or modify accordingly its labour laws and regulations, each Party shall ensure that its labour laws and regulations provide for high labour standards, consistent with high quality and productivity workplaces, and shall continue to strive to improve those standards in that light."

Thus, the NAFTA Supplemental Agreement does not specify what constitutes labour rights but simply requires that national laws be upheld. Thus, while appeal to a Tripartite Commission can be made to ensure that Mexico’s own (in fact, relatively good) laws on occupational safety and health, child labour and some technical labour standards are enforced, other core labour standards - such as freedom of association, for example - remain outside of the NAFTA side agreement’s remit. As an illustration of this, in one of the first cases to be heard under the supplemental agreement, the Teamsters Union and the United Electrical and Radio Workers Union, supported by the Authentic Workers Front, Mexico's only independent labour federation, filed compliant against General Electric and Honeywell for violating worker rights in Mexico. It was charged that GE and Honeywell fired workers who had tried to organize unions in the Maquiladora factories. In response GE and Honeywell admitted they had fired some workers but argued that they had not violated Mexican labour laws a conclusion which was upheld by the U.S. National Administration Office, set up under the Supplemental Agreement on Labour, which heard the complaint.42

As Leary notes, "most commentators studying the NAFTA Agreement on Labour Cooperation have found it wanting as a means of protecting labour in the three countries. Its failure to refer to internationally recognised standards, its minor reference to the ILO, its emphasis on enforcement only of each nation’s own labour laws, and its complex and time-consuming dispute settlement procedures are generally perceived as a weak instrument for protecting workers."43

However, if the NAFTA provides only a "weak instrument" for protecting workers, then APEC provides none at all. APEC, unique among the liberalisation agreements surveyed here, provides measures to liberalise trade and investment flows in the region but contains no elements, not even at the level of discussion, of re-regulation as it affects labour standards and the protection of workers. In contrast, business interests have become central to, and privileged actors in, the APEC process. The desire to incorporate business led to the establishment of the APEC Business Advisory Committee in 1996 with the specific mandate of ensuring that APEC’s work is relevant to "real world problems" - such as, harmonizing customs procedures, recognising national product standards, increasing transparency in government procurements and enforcing intellectual property rights.

However, there are no provisions for enforcing labour rights. APEC represents the view that trade and investment liberalisation will increase welfare automatically without the need to set or regulate minimum standards. The only mechanism seen as necessary to complement the market is "economic and technical cooperation" which is seen as helping "APEC members to participate more fully in and benefit from an open global trading environment, thus ensuring that liberalized trade contributes to sustainable growth and equitable development and to a reduction in economic disparities."44 Recognition of core labour standards, it would seem, have no role to play in ensuring "equitable development". Instead, economic and technical cooperation are focussed on the following themes: "developing human capital; fostering safe, efficient capital markets; strengthening economic infrastructure; harnessing technologies of the future; promoting environmentally sustainable growth; and encouraging the growth of small and medium enterprises."45 Economic and technical cooperation, therefore, does not include even as it did minimally in the NAFTA, any agreement on labour cooperation.

Neither is the issue addressed by any of APEC’s 15 sub-groups which have Committee or Working Group status. These sub-groups cover issues such as trade and investment, fisheries, tourism, energy, transportation and telecommunications. The Human Resources Development Working Group does not consider labour standards; instead it has four networks focussing on (i) executive education and development and management for organizational change; (ii) technical and professional standards and identification of skill shortages; (iii) the performance of the education systems in preparing people for rapidly changing labour markets; and (iv) the regional labour market and the use of all human resources in economic development.

Even in an area as morally unjustifiable as exploitative child labour, APEC has remained silent. Recent ILO estimates have doubled the number of children (5-14 year olds) thought to be working throughout the world to 250 million. Over 60 per cent of these are found in Asia (although not all Asian countries are members of APEC). Among its findings for APEC members, the ILO documents that survey results from the Philippines show that more than 60 per cent of working children were exposed to chemical and biological hazards and that 40 per cent experience serious injuries or illnesses; child slavery in carpet-weaving, glass manufacturing and prostitution was found in South-East Asia; in Indonesia, the Philippines and Thailand it is reported that children work in muro-ami fishing, which involves deep-sea diving without the use of protective equipment; and, it is estimated that there are some 5 million child domestic workers in Indonesia.46 Against this background, Canada's desire to "integrate youth" in APEC in 1997 looks a morally bankrupt exercise.

Thus, the same countries which have been involved in the debates over the linkage between trade and core labour rights at the WTO, at G-7 summits, at the OECD and at the ILO, have deliberately excluded consideration of this relationship within the structures of APEC. Why might this be the case? The reason for the exclusion of labour rights from discussion is not because of the dominance of ‘New Right’ ideology on the fallacy of social regulation - used to explain the U.K.’s opposition to the Social Charter in the EU for example - and there is no desire to promote the free flow of labour between member economies. Indeed, as was argued above, many of the Asian members of APEC are developmentalist rather than free market in ideological orientation. Rather, the reason for the absence of core labour standards in APEC results from the fact that APEC's modus operandi is based on consensus, and in this respect follows the example of ASEAN, with the result that any policy issues deemed controversial are not even placed on the agenda for discussion. Any controversial areas of re-regulation are therefore defined as outside of the scope of APEC and peripheral to its mandate. In this way, APEC countries who oppose linking trade and workers' rights either because they fear it will harm their export competitiveness or interfere in their domestic policies are able to prevent discussion of such a linkage. That is, if any member feels that its domestic policies may be threatened by APEC’s discussion of, and/or action on, an issue then that issue can be removed from the APEC agenda. This is precisely the case with core labour standards (and other human rights issues) for a number of APEC members. Thus, labour rights will not be part of APEC’s agenda in Vancouver. As John Klassen, Director General for APEC in the Department of Foreign Affairs, explains "it sounds like a copout, but [consensus] is an essential fact of APEC life."47 Taking an aggressive stand, Mr. Klassen further explains, would be pointless under APEC’s veto system and would undermine Canada’s ‘quiet diplomacy’.

IV. Conclusion

Canada’s enthusiastic membership of APEC is the result of policy makers attempts to cope with the contradictions of post-CUSFTA trade policy. Canadian free traders have sought to portray the bewildering array of trade and investment initiatives to which it now subscribes as a vindication of the view that "multiple regionalisms" will lead to global liberalisation. This belief is central to APEC’s operations as well, with APEC leaders, in self-congratulatory tone, declaring that they "consider it essential that regional and multilateral trade and investment should support and reinforce each other.... We are determined that the far reaching liberalization measures to which we have voluntarily committed ourselves in APEC, and the significant opening already underway in all our economies, will serve as a catalyst for further liberalisation of the multilateral trading system. We call on WTO members to build on the process of progressive liberalization and enhanced transparency which we have initiated in APEC."48

However, we should insist that APEC is not the model for further "progressive liberalisation" for it is in fact the very opposite of this - it is a regressive and dangerous liberalization based on the view that liberalisation does not require an active process of re-regulation. As the examination of core labour standards demonstrated, APEC represents the minimalist position on what might be required to protect workers’ interests compared to other liberalisation initiatives such as the EU, the WTO and the NAFTA, however inadequate these latter agreements may be. While APEC leaders view the organization as a catalyst for spurring trade liberalisation in other fora, the effect of their actions is to weaken the possibilities for including the elements of re-regulation which might afford some protection to those most vulnerable in a capital-driven liberalised global economy.

 


For more information, contact apecrin@interchange.ubc.ca
Alternatively, feel free to contact Dr. John Price or Xavier Furtado, APECRIN's Graduate Research Associate, at 604-822-3937.

Last modified on: June 20, 1997 :CJG

  
Section Menu:
Asia Pacific Business and Economic Policy Research
Asia Pacific Dispute Resolution Research (APDR)
Community Liaison
Contemporary Tibetan Studies Program (CTSP)
Program on Inner Asia
Summer Institute China Program
Buddhism and Contemporary Society Program
Past Programs
APEC Research and Information Network (APECRIN)
Asian Religions in British Columbia Project
Northwest Regional Consortium for SE Asian Studies (NWRCSEAS)
Joint IAR-APFC Globalization Research Project
China Transport and Communication Systems Project
Program in Inter-Cultural Studies in Asia (PICSA)
Program on Australasian Research (PAR)
Program on Canada-Asia Policy Studies (PCAPS)