Grigoriy Zadorozhniy/2-year CD student
E-mail: grigoriy.zadorozhniy@miis.edu
Phone: (831)648-1066

Grigoriy Zadorozhniy
On Behalf of the Socially Responsible Business Roundtable
and Bechtel Corporation

Testimony before the House Ways and Means Committee on the
Linkage between Trade and Labor Rights in FTAA
March 11,2001

Grigoriy Zadorozhniy/2-year CD student
E-mail: grigoriy.zadorozhniy@miis.edu
Phone: (831)648-1066

Good morning Chairman Thomas and Members of the Committee. It is my privilege to testify this morning regarding inclusion of labor issues in the perspective Free Trade Agreement of Americas.

My name is Grigoriy Zadorozhniy, and I am a Deputy Representative of Bechtel Corporation in Latin America. I am also the President of the Socially Responsible Business Roundtable. Bechtel Corporation is a long-active member of the Socially Responsible Business Roundtable. Bechtel, an organization of some 40,000 employees generating approximately $15 billion of revenue annually, has long-standing interests in Latin America. With its almost 60-year experience in Latin America, Bechtel's annual revenues in the region account for some $1.1 billion.

Today I also represent the Socially Responsible Business Roundtable, an association formed by a group of businesspeople who do business overseas and are legitimately concerned with business ethics. These businesspeople represent corporations with a combined workforce of more than 12 million employees in the United States and some 37 million employees working abroad. This group of businesspeople is committed to
encouraging public policies that foster healthy economic growth, trade liberalization, and a well-trained and productive U.S. workforce essential for future competitiveness. The Socially Responsible Business Roundtable supports the inclusion of provisions in the FTAA to enforce labor rights. However, when claiming that, we must condition the observance of labor rights on the loyalty to trade liberalization. In order to reach consensus within the Hemisphere as well as within the United States on these issues, we propose the following:

• Inclusion of effective and enforceable internationally recognized labor standards in the core provisions of the FTAA;
• Emphasis on the cooperation among the parties with regard to observance and enforcement of labor law obligations over Dispute Resolution Procedures;
• Inclusion of the provisions that will give countries with low labor standards a certain period to adjust their labor legislation to internationally recognized labor standards and its proper enforcement; and,
• Inclusion of articles that will provide technical assistance from international organizations for promoting labor rights.

We understand that labor rights are one of the most contentious issues in foreign economic policy today. The proposal from the United States that a linkage be established between trade liberalization and the observance of labor rights provokes hot opposition from developing countries as well as skepticism from most industrialized countries. It also causes angry debates between labor union and Democrats on the one hand, and businesses and Republicans on the other. The lack of a domestic consensus on this matter undermines traditional U.S. leadership in trade negotiations. With the two parties in Congress unable to agree upon what role this issue (as well as environmental matters) will play in future trade negotiations, they have not made a new grant of fast-track negotiating authority to the President since 1994. Needless to say, in order to spur the FTAA negotiations, Latin American countries expect the U.S. to demonstrate its commitment to Presidential fast-track negotiating authority.

Inclusion of effective and enforceable internationally recognized labor standards in the core provisions of the FTAA

Given continuous objection of the AFL-CIO and other labor related organizations to the
way of enforcing labor rights that is applied in NAFTA, the Business Roundtable agrees
that labor rights provisions must be incorporated in the text of the FTAA, but not in a side
agreement as it was done in NAFTA. Universal adherence to internationally recognized core labor standards is not only a moral and ethical issue, it is also an economic issue that touches the very heart of the world's trade policies. The fact that one country does not recognize or enforce rights to freedom of association, collective bargaining, organizing, livable wages, a safe and healthy workplace, and does not honor international prohibitions against child labor and forced labor is one of the major factors in a company's decision to engage in various trade activities. In order to eliminate or reduce such a sad and inappropriate trend, we also propose to incorporate a business code of conduct. It must not necessarily be included in text of the FTAA, but it can be offered to companies operating in the Hemisphere to adhere to the principles of this code. We propose the Sullivan principles of business behavior, which are based on the following:

• To support universal human rights, particularly those of employees and communities in which the firm operates;
• To respect employees' voluntary freedom of association;
• To promote equal opportunity for all employees and ban the exploitation of children, physical punishment, abuse of women, and involuntary servitude;
• To compensate employees to enable them at least to meet basic needs and provide opportunities to increase skills;
• To provide a safe and healthy workplace and to protect the environment; and,
• To promote fair competition, including the respect for intellectual property rights and the elimination of corruption.

Emphasis on the cooperation among the parties with regard to the observance and 
enforcement of labor law obligations over the Dispute Resolution Procedures

Cooperation approach in tackling the labor issues in the FTAA should be a cornerstone. Considering NAFTA's approach to pursuing cooperative activities on labor and environmental matters, we strongly believe that a cooperative basis for implementation of labor obligations will be effective. Cooperation will encompass a wide variety of information exchange and cooperative programs on labor and employment issues. However, the negotiating parties should undertake certain steps in order to focus on a signatory country effectively enforcing its labor laws, rather than on individual employers. The latter practice encourages a public misconception about the purpose of the North American Agreement on Labor Cooperation (NAALC). We believe, that in keeping with one of the main objectives of the FTAA - to promote prosperity through increased economic integration and free trade among countries of the Hemisphere -, it would be more constructive if emphasis were on cooperative labor programs. Finally, in accordance with the cooperative spirit of our proposal, where a violation is found, emphasis should be placed on cross-border technical assistance to improve enforcement before the application of fines or the withdrawal of trade benefits.

Inclusion of provisions that will give countries with low labor standards a certain period to adjust their labor legislation to the internationally recognized labor standards and its proper enforcement

From the liberal economic point of view, low wages, poor working conditions, and exploitive labor practices are inferior goods, which makes some countries comparatively
advantageous. It is evident that some developing countries in Latin America cannot afford to meet all the requirements on labor compliance immediately after the FTAA is concluded. In order to obtain consensus from such developing countries and reach the desired outcome in the FTAA negotiations, the Agreement must provide for at least a 3-year period of adjustment. Upon economic growth due to trade liberalization, a country will gain additional resources that it can use to promote the welfare of workers and, thereby, boost standards of living.

Inclusion of articles that will provide technical assistance from international organizations for promoting labor rights

We propose to use NAALC Article 45 (Cooperation with the ILO) as an example of
collaboration with international organizations. Moreover, in pursuance with the agreed
general objectives of the FTAA as spelled out in the San Jose Declaration, the Hemispheric countries shall "further secure, in accordance with our respective laws and regulations, the observance and promotion of worker rights, renewing our commitment to the observance of internationally recognized core labor standards and acknowledging that the International Labor Organization is the competent body to set and deal with these standards." Technical assistance will encourage domestic legislators and enforcement bodies to improve laws, procedures and policy in order for their countries to meet the FTAA requirements.

Conclusion

We accept the fact that even if Congress were to make a new grant of fast-track negotiating authority that did not mandate negotiations on labor matters, the linkage would remain in U.S. policy. In order to put an end to such sharp debates over this subject both within the country as well as within the hemisphere, we call for compromise. We strongly believe that laying out the cooperative basis for observance and enforcementof labor rights obligations as well as providing developing countries with an adjustment period are two of the main components of the FTAA's success on this matter. We are also confident that offering developing countries an opportunity to obtain technical assistance from the respective international organizations will spur the improvement of labor rights' enforcement in such countries.

I thank you, Mr. Chairman, for the opportunity to testify on such an important issue to us
all. And I urge the Committee to consider this broad view of the importance of our approach to tackle the labor issues under the FTAA.