The Economist - USA (2021-10-09)

8 Special report World trade The Economist October 9th 2021

Labourrights

Theurgetoprotect

O

naugust19thMsTai,theusTradeRepresentative,claimeda

success.Overtheprecedingtwodays,thousandsofpickup­

truckmakersinSilao,Mexicovotedtorejecttheunionclaimingto

representthem,rerunninganearliervoteinAprilthattheysaid

wasneitherfreenorfair.MsTaiwasfightingtheircorner.InMay

shetriggereda “rapidresponsemechanism”intheusmca, a trade

dealbetweenAmerica,CanadaandMexico,whichcouldhaveled

totariffsof25%onexportstoAmerica—orworse.Inhereyes,the

voteshowedthatthethreathaddelivered“promptandmeaning­

fulresultsforworkers”.

Thecaseispartofa shifttotheuseoftradepolicyasaninstru­

menttodeterhuman­rightsabuses.LedbyAmerica,thisishap­

peninginthreeways:reciprocaltradedealsliketheusmca; the

specialaccessrichercountriesgranttopoorerones;andmostex­

plosively,unilateralbans.Therehavelongbeencomplaintsinrich

countriesaboutshoddylabourstandardsinpoorcountries.But

whenitcomestothenarrowerissueofhumanrights,theseare

nowturningintoaction.

Overthepastcoupleofdecadesreciprocaltradedealshave

increasinglyincludedlabour­relatedprovisionsoncollectivebar­

gainingrights,forcedlabour,childlabourandemploymentdis­

crimination.Evidencethatthesehavemucheffectisscarce.One

studyin 2021 intotheimpactoftheeu’snon­tradeprovisions

foundnoconsistenteffectonrespectforworkers’rights.Insome

casestheofferofa tradedealwithAmericaseemedeffectiveinen­

couragingtradepartnerstopasslabourreforms,butafterthedeal

wassigned,implementationstalled.

Forlabouradvocates,thereisanobviousexplanation:thevir­

tuouscommitmentsembeddedintradedealslackteeth.America,

whichboaststhetoughestlanguageinitsdeals,losttheonlydis­

puteitfiled,onthegroundsthat,althoughtheGuatemalangov­

ernmenthadfailedtoenforceitslabourlaws,it hadnotdonesoin

a waythataffectedtrade.Theeu, whichenforcestradedealswith

dialogueandsternstatements,hasstruggledtogetVietnamto

sticktolabourcommitmentsmadeasrecentlyasJune2019.

Argumentsagainstsanctionsoftenturnintoclaimsofoldco­

lonial  meddling  in  countries’  sovereign  affairs,  of  vulnerable

workerslosingtheirjobs and of abuse by protectionist interests.

ButtheEuropeanCommission is reviewing its trade deals to con­

sidersanctionsifcountries do not live up to their commitments

or(astheFrenchandDutch suggested in 2020) to offer tariff cuts

asa rewardforpursuing  reforms.  America  is  further  ahead  with

theusmca, whichwas  implemented  in  July  2020  and  includes

lowerlegalthresholdsthat make disputes easier to win, as well as

a rapid­responsemechanism.  Eric Gottwald, a trade specialist at

theafl-cio, anAmerican union group, dismisses concerns about

protectionismasan“easy way to dismiss the work that we’re do­

ing”,whichisdealing  with  unfair  competition  and  preserving

Mexicans’humanrights.

Theustrseesenforcement  of  the  usmcaas  a  core  part  of  its

“worker­centredtradepolicy”, and boasts that it is already yield­

ingresults.Besidesthevote in Silao, it announced in August that it

hadusedtherapid­response mechanism to defend workers’ rights

ata Mexicancar­partsmaker, agreeing a deal to give them back pay

and“a commitment to  neutrality  in  future  union  elections”.

Sometimesthislookslike pandering to domestic political constit­

uents,chiefamongthem the afl-cio. And the extent to which it

reinforcesMexico’slabour reforms is still unclear. A monitoring

reportinJulyfoundthat, although the Mexican government was

meetingitsobligations as part of the usmca, many of its promised

changes“remaintobeimplemented”.

ustrofficialsexpect the volume of cases to increase as labour

advocatesinAmericaand  Mexico  learn  how  to  bring  them,  but

hopethatit thenfallsas Mexico’s institutions advance. That is not

muchcomfortforcompanies that are worried about disruption to

supplychains.TheusChamber of Commerce, an industry group,

hascomplainedabouta  lack  of  clarity  over  enforcement,  which

couldleadtoproductsbeing blocked at the border within 120 days

ofa casebeingfiled.“The regulations are clear,” says one ustroffi­

cial.Ifcompaniesareinsufficiently  aware  of  whether  rights  in

theirMexicanfacilities are being respected, she adds, “sorry, you

don’tgetcertainty.”

Thesecondwaygovernments  are  toughening  sanctions  over

humanrightsisthrough non­reciprocal trade deals between rich

andpoorcountries.The  euis  strengthening  its  generalised  sys­

temofpreferences,which makes tariff cuts for developing coun­

triesconditionalona swathe of labour standards and better hu­

manrights.That should  mean  more  stringent  conditions  and

morecarefulmonitoring.  In  2017  the  Trump  administration  an­

nounceda more“proactive” approach to enforcement, and later it

launchedinvestigations into workers’ rights in Azerbaijan, Boliv­

ia,EritreaandZimbabwe.  Since  the  scheme  lapsed  in  December

2020,Congresshasbeen discussing the addition of conditions in­

cludingnon­discrimination and women’s empowerment.

Theevidencethatthis type of enforcement actually improves

respectforhumanrights is thin, though in the eu’s case that may

bebecauseithasrarely been used, and in America incentives are

bluntedbythescheme’s expiry every few years. In theory too ma­

nystringsattachedcould be counter­productive. Britain’s Depart­

mentforInternationalTrade is mulling a reduction in the number

of conventions of the International Labour

Organisation  that  developing  countries

must  ratify  to  win  enhanced  access,  rea­

soning  that  if  conditions  are  easier  to

meet,  governments  are  likely  to  make

more effort.

Both  these  turns  in  trade  deals  have

been  driven  largely  by  political  dynamics

in rich countries, and a sense that they are

necessary to sustain support for free trade.

The third form has a different root, in Xin­

jiang, China, where a vast number of Uygh­

Howtraderestrictionsarebeingusedasa tooltoprotect

humanrights

Arguments

against sanctions

often turn into

claims of old

colonial meddling

intellectual­property  provisions  in  wtorules.  In  April  2020,  as

part  of  its  resilience  drive,  India  introduced  “production­linked

incentives”,  first  for  large­scale  electronics  manufacturing  and

pharmaceutical ingredients, and from November for ten other in­

dustries, including textiles, car parts and solar modules. If quali­

fying companies increase sales by a certain amount, they receive

cash equal to 4­6% of the gain. 

If  governments  successfully  foster  critical  industries,  their

alliances will go from nice to necessary. For when supply shoots

up, prices crash and everyone tries to export the same subsidised

products,  trade  tensions  quickly  increase.  That  was  the  lesson

from Mr Armbrust’s complaints about Chinese competitors, and

indeed  from  the  fight  between  America  and  the  euover  aircraft

subsidies. And if conflict seems likely over supply­chainreshor­

ing, it is even more inevitable from another source ofstrainon the

trading system: the wish to fight human­rights abuses.n