Problems With Current U.S. Policy.

Developed country support for the U.S. position on a working party in the WTO has varied. Belgium, France, and Norway have consistently proposed similar WTO agendas. Germany under the Christian Democrats has been unhelpful, and the United Kingdom was not enthusiastic about any EU proposal at the Seattle ministerial conference regarding WTO involvement in labor standards.

Developing country opposition to U.S. proposals is more unified and is reinforced by strong legal arguments to the effect that the WTO does not have the competence to deal with labor standards. Developing countries contend that:

1. The WTO is a commercial contract based on rules and disciplines governing commercial activity and free and fair trade; it is not based on judgments about other aspects of member states' domestic policies, including worker rights and other non-trade issues. Its rules aim to discipline the use of trade measures and reduce barriers to trade. Member states are free to conduct their domestic policies in whatever way they see fit.

2. To introduce judgments about member countries' domestic policy choices into the WTO would fundamentally change the legal nature of the agreements. In this regard, Article XX refers to the protection of conditions in the importing country. Introducing labor standards would undermine existing rights, most notably negotiated rights to market access, without introducing reciprocal obligations.

Developing countries have also thus far succeeded in staunching the establishment of a working group on labor standards by claiming that it is motivated by protectionist demands in the United States. Developing countries, especially the least developed, who see their low labor costs as essential to their export competitiveness, give considerable credibility to this charge. Beyond their legal arguments, they contend that U.S. and EU use of antidumping measures--permitted in the WTO when intended to prevent the sale of imports at prices lower than the costs of production--are abused and become essentially protectionist measures. These charges were aggravated by President Clinton's statement to demonstrators in Seattle that ultimately sanctions could be used, in dire circumstances, to enforce core labor standards.

Both the WTO Singapore declaration and the ILO Declaration on Fundamental Principles and Rights at Work clearly reflect these apprehensions of protectionist motivations. In the former, governments "... reject the use of labor standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question." The latter "[S]tresses that labor standards should not be used for protectionist trade purposes ...." Persuading developing country governments that U.S. and other like-minded governments' motivations are not protectionist is a major challenge.

U.S. procrastination in implementing the Uruguay Round Clothing and Textiles Agreement (CTA) only reinforces developing country resistance. The agreement is admittedly "end loaded," allowing the U.S. to postpone liberalizing its most sensitive industries, often the most value-added and of most interest to developing countries, until the final years of the 10-year phase-in period. However, the U.S. has also tried to invoke temporary safeguards in those industries that it is scheduled to liberalize sooner. This procrastination in implementing a vital market access commitment has riled many developing countries and only deepened their apprehension of protectionism.

President Clinton's invoking of sanctions in his meeting with labor unions in Seattle was especially provocative because of the opposition on the part of U.S. labor to any proposal in the ministerial to moderate the WTO Antidumping Agreement--an important demand by developing countries. U.S. steelworkers were at the heart of this opposition, given the surge in U.S. steel imports over the past two years as a result of the economic downturn in Asia. While developing countries view abuse of antidumping as protectionist, U.S. unions see antidumping as a legitimate means to protect jobs, so long as U.S. policy in the WTO is not effective in linking trade liberalization with improving labor standards. Thus U.S. policymakers are caught between resistance within the WTO toward making trade liberalization and improving core labor standards mutually supportive versus resistance in the U.S. to any additional trade liberalization without greater recognition of worker rights by WTO member states.

Key Problems

* U.S. working party proposals have sustained widespread rejection by developing countries citing legal arguments and allegations of protectionist motivations on the part of developed countries.

* While the U.S. proposes a working group, it inadequately implements market access agreements important to developing countries and offers insufficient reciprocal obligations.

* The U.S. position is a precarious balance between the suggestion of a working group to examine trade and labor linkages and demands from U.S. unions to support a sanctions-based social clause.