Can international labor standards benefit the development of civil societies? Or are such measures destined only to create additional trade barriers? Developing countries, which have a comparative advantage in cheap labor costs, oppose the idea of combining labor standards with trade agreements. Doing so, they fear, would rob them of their comparative advantage. Yet consumers in the developed world are growing increasingly concerned that factories in developing and emerging markets exploit workers. They are demanding improvements in working conditions.

CEPAA is currently promoting SA 8000 as an alternative to attempts to link labor standards with trade rules. SA 8000 in no way encumbers free trade, yet it encourages companies to voluntarily improve working conditions in their factories.

CEPAA is promoting SA 8000 in Asia because labor standards in many Asian countries are weak. Within the region, Japan is a logical first target. Because it is the largest economy in the region (as well as the second largest in the world), introducing SA 8000 in Japan has the potential to affect labor practices all over Asia. If Japanese companies begin requiring their suppliers to meet basic labor standards, the impact could be enormous. Moreover, because Japan is the largest donor of official development assistance in the region, it has a great deal of power to encourage Asian governments to develop their own labor laws and enforcement mechanisms.

Labor Standard Programs and the SA 8000

A variety of programs and activities have been developed to protect labor standards. Some programs are conducted at the multinational level. Others are voluntary actions initiated by private companies. Current programs, however, have several defects. Multinational standards including the ILO Conventions and the OECD Guidelines for Multinational Enterprises are not legally enforceable. Many private, voluntary actions, such as corporate codes of conduct and industry-based labeling programs, are not transparent and often are expensive to verify.

SA 8000, by contrast, is transparent and credible. It uses third-party auditors to verify labor standards compliance just as ISO 9000 and 14000 verify compliance with quality and environmental standards.

Since the introduction of SA 8000, CEPAA has conducted a series of workshops to introduce the standard to companies around the world. As of January 2000, 31 companies and factories had obtained the certification.

Project Overview

This project sets forth a strategy for introducing SA 8000 in Asia. The strategy focuses on Japan because Japanese corporations have extensive business ties throughout the region and, therefore, have a great deal of power to affect labor practices in the region. By persuading Japanese corporations to adopt the SA 8000 standard for their products and to require that supplier factories adopt the standards, Japanese corporations could dramatically improve working conditions throughout the region. As the largest donor of development assistance in the region, the GOJ also has enormous potential to influence Asian countries’ labor standards.

The strategy uses the United Kingdom’s Ethical Trading Initiative (ETI) as a model. A partnership between government, business, labor unions, and NGOs, ETI has resulted in the creation of a base code and social auditing program. The U.K. government, including the Department for Trade and Industry and the Department for International Development, provided the initial three years of funding for ETI.

The strategy is designed to be implemented over one year during 2000 and 2001. Costs are estimated to be approximately $950,000 (see Exhibit 3 for a detailed implementation schedule and estimated budget).

Structure of the Paper   

1)  Background Paper

This section describes the current state of labor issues worldwide, giving special attention to various private and public policy initiatives.

2)  Analytical Paper

This section analyses the advantages and disadvantages of national and international labor standards initiatives, as well as private and commercial initiatives. It also considers the relationship between labor initiatives and the GATT/WTO agreements, and it examines governmental and business interests in Japan.

3)  Domestic Strategy Paper

The domestic strategy paper lays out a strategy for influencing the GOJ and the public to become interested in labor policy reform. The domestic strategy consists of 1) a research strategy, 2) a political and legislative strategy, and 3) a media strategy.

4) International Strategy Paper

International organizations can be instrumental in marketing SA 8000 within Asia and in influencing trade and local labor policies throughout the region. The international strategy paper lays out a strategy for CEPAA to gain the cooperation of international organizations such as the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank (ADB), the International Labor Organization (ILO), the World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD).

5)  Negotiation Strategy Paper

The negotiation strategy paper describes how negotiations concerning SA 8000 should be approached.  The strategy identifies all stakeholders, as well as their interests and options.

6)  Exhibits

The exhibits contain additional information and sample documents.

I.    Trade and Labor Standards

World Trade and Labor Standards

While concerns about labor rights abuses have multiplied in recent years, resistance to any linkage of labor standards with trade sanctions remains strong.

·        In 1995, the World Bank drew attention to these labor issues by including a chapter on public policy and labor standards in its World Development Report. The chapter called for government and civil society intervention to ensure the establishment and enforcement of adequate labor standards, and it described the dangers of using trade sanctions to enforce labor standards.[1]

·        In 1996, trade ministers at the WTO’s Singapore Ministerial Conference “renewed” their “commitment to the observance of internationally recognized core labor standards,” but they also “reject[ed] the use of labour standards for protectionist purposes, and agree[d] that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question.” [2]

·        Most recently, at the November 1999 WTO ministerial conference held in Seattle, President Clinton called for labor standards violations to be made actionable within the WTO. However, for the time being, Clinton’s address seems only to have solidified the standoff between developed and developing country members of the international trade organization. Developing countries strongly oppose incorporating any labor standards within the WTO framework.

Nonetheless, the issue of trade and labor is not likely to go away anytime soon. Indeed, concern about the impact of trade liberalization on civil society has only grown in recent years as trade unions, human rights groups and the media have focused attention on high profile companies’ failures to provide decent wages and working conditions. Nike’s exploitation of workers was the first and perhaps best known of these cases. The media has also pursued stories about alleged abuses by Reebok, Levi Strauss, and Disney, as well as stories about child and forced labor. There has been renewed focus on the child labor that sustains Pakistan’s carpet industry, and the ILO has instructed Burma to stop the use of forced labor. The Seattle Ministerial only fueled activists’ fire by providing them a high-profile event at which to voice their concerns. 

Labor Practices in Asia

Most Asian countries have stringent legal frameworks for upholding high labor standards. Enforcement of these laws, however, is a different story. The media has reported numerous examples of labor standards violations in the region:

·        In 1998, Reuters reported that about 27 million people work in the world’s 850 export processing zones and that these workers often earn low wages and are subject to poor working conditions. The article quoted the ILO as saying, “It is a regrettable feature of many zones that both male and female workers are trapped in low-wage, low-skill jobs. They are viewed as replaceable and their concerns do not receive sufficient attention.”[3] China has 124 export processing zones.

·        In February 1999, The Economist reported on an investigation that found that workers making Disney products in a Chinese toy factory were forced to work up to 16 hours a day, seven days a week and were paid almost no overtime.[4] 

·        According to the Asia Times, a supplier to the GAP forced workers in Saipan to work over 40 hours a week in unhealthy working conditions and without overtime pay.[5]

·        The U.S. Department of State’s 1998 Human Rights Report noted that, within China, “[T]here is a high rate of industrial accidents, with most of the accidents occurring in the mining sector.” With respect to other industrial sectors, the report stated that “many factories that use harmful products, such as asbestos, fail not only to protect their workers against the ill effects of such products, but also to inform them about the potential hazards.”[6]

·         The State Department’s Human Rights Report also reported that some ASEAN countries, such as Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Burma and Cambodia, do not provide sufficient legal protection for workers and human rights. In the Philippines, for example, the State Department found that “violations of minimum wage standards were common. Many firms hired employees at subminimum apprentice rates, although no approved training was entailed in their production line work.”[7] In Thailand, says the report, “an estimated 240,000 to 410,000 (two to four percent of children between the ages six and 14) work in urban employment at particular risk of labor abuse.”[8]

·        According to the United Nations, about 70 percent of the child workers in the world live in Asia. An ILO survey asserts that “one in five Asian children between the ages of five and 14 are in the workforce” and that “the number of children in the informal sector is growing.”[9]

II.                Labor Standards Definitions & Initiatives

Labor Standards Defined

There is no consensus on what should be covered by labor standards. The ILO identifies the following eight of its more than 150 labor conventions as addressing “core” labor standards:

·        ·    Forced Labour Convention (1930)
·        Freedom of Association and Protection of the Right to Organise Convention (1948)
·        Right to Organize and Collective Bargaining Convention (1949)
·        Equal Remuneration Convention (1951)
·        Abolition of Forced Labour Convention (1957)
·        Discrimination (Employment and Occupation) Convention (1958)
·        Minimum Age Convention (1973)
·        Worst Forms of Child Labour Convention (1999)

Of these, the OECD has recognized only the following four conventions as addressing “core” labor standards:[10]

·       ·    Forced Labour Convention (1930)
·        Freedom of Association and Protection of the Right to Organise Convention (1948)
·        Right to Organise and Collective Bargaining Convention (1949)
·        Abolition of Forced Labour Convention (1957)

The World Bank has described the differences between core labor standards and standards that should not be related to international trade. In its view, core labor standards include freedom of association, the right to collective bargaining, the elimination of forced labor, exploitative forms of child labor, and discrimination; standards that are viewed as having no relation to trade are minimum wage and health standards.[11]

Many countries have ratified the ILO-defined core labor standards. However, there is no relation between ratification of core labor standards and actual protection of worker and human rights. Many developing countries have signed more of the conventions than the United States (which has signed just four).

Multilateral Initiatives

In 1977, the ILO governing body adopted the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, which provides guidelines for MNEs, governments, employers and workers in the areas of employment, training, conditions of work and life, and industrial relations.[12] In June 1998, by adopting the Declaration on Fundamental Principles and Rights at Work, all ILO members countries renewed their commitments to respect and promote in good faith the right to freedom of association and collective bargaining, the elimination of forced or compulsory labor, the effective abolition of child labor, and the elimination of discrimination with respect to employment.

A number of other institutions have attempted to promote labor standards. Like the ILO conventions, none of these involve enforceable standards:

·        The OECD Guidelines for Multinational Enterprises address global corporate activities—both the morality of corporate activities, as well as the protection of core labor standards. Since their adoption in 1976, the Guidelines have been revised several times. (The latest revision was in 1991.)[13] There is no mechanism for enforcing the Guidelines, and they only cover OECD countries. OECD countries also tried to address labor standards in the context of negotiations on the Multilateral Agreement on Investment, but these efforts were shelved with the negotiations.

·        At the first WTO ministerial conference in Singapore in 1996, ministers declared that the organization would survey the relationship between trade liberalization and labor standards and also that labor standards should not be used as protectionist measures. The WTO declared that it would cooperate with the ILO to secure labor standards related to world trade.

·        Concerned about the international inequalities that are growing with globalization, the United Nations Development Programme (UNDP) stated in its 1999 Human Development Report that “multinational corporations need to be brought within the frame of global governance, not just the patchwork of national laws, rules and regulations.”[14] The organization suggested social auditing as a possible measure for securing secure labor standards.

·         Amnesty International also has put forth a set of human rights principles for companies.[15]

Government-Business Programs

Individual developed-country efforts to promote workers’ rights in developing countries include the Clinton Administration’s Apparel Industry Partnership (AIP) and the United Kingdom’s Ethical Trading Initiative (ETI).

AIP established a code of conduct for apparel factories that produce products for export to the United States.[16] The program was initiated at the request of human rights groups and labor unions with the goal of protecting worker rights in the Caribbean. With governmental assistance, the U.S. apparel industry has been cooperating in purchasing only goods produced by factories that meet AIP standards. According to a CEPAA officer, however, AIP is not working very well because factories do not want to meet the AIP standards, which they see as burdensome.[17]

ETI is an NGO that encourages companies to consider ethics.[18] The United Kingdom’s Department for International Development and Department for Trade and Industry both participate in ETI board meetings.

Codes of Conduct

Some 230 ethical conduct programs have been established by private organizations in various countries to promote labor standards[19] (see Exhibit 10 for examples). Many of these rely on companies’ commitments to follow codes of conduct in their business activities.

According to one author, “codes of conduct are written statements of principle or policy intended to serve as the expression of a commitment to particular enterprise conduct.”[20] Codes of conduct can be separated into two categories: operational codes and model codes. The first are codes that are actually applied to business operations of companies that trade and invest internationally. The second are generic models that are not themselves enforced. The AIP code of conduct, which is enforced via independent monitoring, is an example of an operational code. The ILO Conventions and the United Nations Declaration for Human Rights are both model codes that are not enforced.

SA 8000’s code of conduct is based on the ILO Conventions and UN Declaration, but it includes a monitoring system to verify that companies comply with it.

Social Labeling and Investor Initiatives

Like social auditing programs, both social labeling programs and investor initiatives are designed to encourage ethical corporate behavior. Social labeling programs encourage ethical business conduct by allowing companies to communicate their ethical conduct directly to consumers via labels. A variety of social labeling programs have been developed. RUGMARK, for example, was established in Europe to certify that carpets imported from South Asia are not manufactured using child labor. Investor initiatives encourage companies to act ethically by enabling potential investors to screen companies based on whether or not they behave in a socially responsible manner.

III.             CEPAA and SA 8000

The Council on Economic Priorities Accreditation Agency (CEPAA) is an affiliate of the Council on Economic Priorities (CEP), an American public interest research institution. CEP has partners around the world, including in Japan where it works with the Asahi Cultural Foundation (ACF), an affiliate of Asahi Shimbun (one of the largest newspaper companies in Japan). CEP established CEPAA and developed SA 8000 after learning through its studies that corporate internal codes of conduct often don’t work very well. According to CEP, internal codes “tend to be highly inconsistent and expensive and inefficient to monitor because they are not well defined and are often not monitored by trained auditors. Such codes and their monitoring systems also tend to be weak on audibility and sensitivity to local laws and customs.”[21]

SA 8000 sets out both a standard for workplace conditions and a system for independently verifying factories’ compliance with the standard. As CEPAA explains, both the standard and the verification system draw from established business strategies for ensuring quality (such as those used by the International Standards Organization in ISO 9000 and ISO 14000).[22] A variety of professionals, including corporate executives, NGO and labor union representatives, and university professors participated in the taskforce that developed the standards. (See Exhibit 2 for a list of CEPAA advisory board members.)

SA 8000 covers nine core areas:

1)     1)   child labor;
2)      forced labor;
3)      health and safety;
4)      compensation;
5)      working hours;
6)      non-discrimination;
7)      discipline;
8)      free association and collective bargaining; and
9)      management systems (including systems that monitor the above eight criteria).

These categories are based on the United Nations Declaration of Human Rights of 1947, the United Nations Convention on the Rights of the Child and the ILO labor standards conventions.  

There are several advantages of the SA 8000 system:

·        It requires verification by CEPAA-accredited, third-party auditors every six months. Currently five corporations are accredited as auditors (SGS-ICS of Switzerland, DNV of Norway, BVQI and Interteck Testing Services (ITS) of the United Kingdom, and Underwriters Laboratories (UL) of the United States).

·        It is inexpensive relative to the cost of establishing a social auditing program from scratch or implementing an in-house verification system.

·        It sets standards for and verifies companies’ management systems for establishing and maintaining appropriate working conditions.

·        It provides SA 8000 compliant companies with a certification that can be used as a marketing tool and therefore provides an incentive for company compliance. SA 8000 certification can be displayed in catalogues and advertisements, and on business cards and posters, etc. It will become increasingly valuable as it becomes more widely recognized.

As of January 2000, 31 companies and factories around the world has obtained the SA 8000 certificate.[23] Most companies interested in the certificate are labor-intensive manufacturing businesses. The Avon Corporation obtained the certificates for their New York and Ohio factories in the United States. Dole Foods has applied for certification to prove that its labor policies are socially responsible. In at least one case, that of Toys-R-Us (a U.S. toy manufacturing company), the company requires that its contracting suppliers get SA 8000 certification.

CEPAA is now trying to gain worldwide recognition and acceptance of the new certificate. It is focusing its efforts on Southeast Asia, Central America, and East Asia. Since starting the SA 8000 program, workshops have been held in Asia, Eastern Europe and Central America.

To date, no Japanese companies have been SA 8000 certificatied.[24] However, some corporations in the textile and clothing industries, cosmetic industries, and leather industries are interested in obtaining certification in order to improve their brand image and head off the risk of being associated with poor labor practices.

On October 22, 1999, a forum was held in New York to introduce SA 8000 to Japanese corporations. In early December, representatives from the Keidanren (the Japanese Federation of Economic Organizations) visited CEPAA to ask about SA 8000.

IV.      Japan and Its Influence in Asia

Japanese Trade within Asia

Japan’s imports have increased in recent years. According to International Monetary Fund (IMF) statistics, Japan imported about US$ 235 billion in 1990. The value grew to US$ 274 billion in 1994 and about US$ 350 billion in 1996. Of 1996 imports, over half (US$ 190 billion) came from developing countries, and Asian countries accounted for over two-thirds (about US$ 130 billion) of this subtotal.[25]

A large portion of these imports from Asian countries is comprised of goods that require labor-intensive production processes. In 1997 some US$ 4.2 billion (about 70) percent of Japan’s total US$ 5.8 billion textile imports came from Asian countries. China alone contributed about 45 percent of Japan’s total imports of textiles and about 33 percent of textile imports from Asia.[26] Clothing import statistics were similar with China contributing about 60 percent and the entire Asian region contributing about 80 percent of Japan’s clothing imports.[27]

Japanese demand for labor-intensive products has stimulated imports from the Asian region. For example, Japan imports large quantities of furniture from Asian countries. Thailand, other ASEAN countries and China dominate Japan’s wooden furniture imports; Indonesia and the Philippines account for most of Japan’s imports of rattan furniture.[28]

Japanese Corporate Investment in Asia

Japanese corporations, especially the Sogo-Shosya or major trading companies (MTCs), have invested heavily in Asia. These companies not only procure products from overseas but also invest capital to manage contracting factories or shops by sending their employees abroad. According to the World Investment Report 1998, eighteen Japanese transnational corporations (TNCs) are ranked on the list of the largest 100 TNCs. Of the Japanese corporations on the list, the MTCs account for more than half.[29]

The retailing market provides an indicator of the Japanese purchasing power in Asia region. Of the top 35 retailers in Asia, 33 are Japanese. Two Japanese companies are ranked on the global 500 revenue index of general merchandize companies; Daiei Inc. is ranked as 120, and Takashimaya Co., Ltd at 431).[30]

Labor Standards and Japanese Corporate Behavior

A recent survey on Japanese corporate behavior revealed that corporate interest in ethics is not strong. According to one review of Japanese case studies, “only 30 percent of Japanese large corporations have written codes of ethics and more than 70 percent do not have any system for monitoring ethical behavior.” [31] There are plenty of cases in which Japanese corporations have not met adequate labor standards.

·        Corporate Watch, a project of the Transnational Resource and Action Center (TRAC), has reported that the U.S. affiliate (Jefferson, Ohio) of Kobe Steel, a major Japanese steel corporation, does not provide safe working conditions or adequate wages. According to the report, “An overwhelming number of production workers suffer from carpal tunnel syndrome, with many already having surgery on both wrists. Wages in Jefferson are 25-50 percent less than in Cleveland.”[32]

·        Sexual harassment and discrimination against minority groups in Japan are prevalent.

Some corporations, however, are willing to at least establish codes of conduct. For example, the Omron Corporation, a Japanese electronics device company, has ten ethical conduct rules:[33]

1.      Fair and free competition
2.      Active disclosure of information
3.      Preservation of safety and the environment
4.      Respect for human rights
5.      Respect for intellectual property
6.      Observance of international rules
7.      Observance of limitations on international transactions
8.      Sound relations with public administrative authorities
9.      Opposition to antisocial elements
10.  Adherence to this statement in all activities

In 1992, the Japanese Federation of Economic Organizations (also known as JFEO or the “Keidanren”) put forth a set of principles on ethical corporate conduct. Labor standards, however, are not clearly mentioned in the principles.

GOJ Policy on International Labor Standards

Currently, Japan does not have any mechanism for encouraging Japanese companies to ensure that their suppliers respect basic labor standards, and individual corporations have not established programs of their own. Japan’s official stated position is that labor standards should not be linked to trade agreements.

Nonetheless, Japan has indicated its interest in labor standards within the Asia Pacific region. At the Asia Pacific Economic Cooperation (APEC) meeting in Osaka, the GOJ, along with South Korea and the United States, expressed the necessity of supporting labor standards.[34] Moreover, several of Japan’s ODA programs focus on improving labor standards in Asia. For example, in November 1999, the government will host a seminar on labor policy for the Asian countries. The World Bank, the ILO, and the Ministry of Labor of Japan (MOL) are all involved in the seminar.[35]  Japan has also provided technical assistance to Asian countries to help them strengthen their laws and legal enforcement systems. Most recently, the ADB announced a technical assistance program to help China develop a legal and regulatory framework appropriate for a market economy. Japan provided the funding for this initiative.[36]

The GOJ is strongly committed to providing development assistance to developing countries. According to the OECD’s Development Assistance Committee (DAC) report, Japan is currently the largest provider of development assistance. It contributed about 9.6 billion dollars in 1998. The second ranked country, the United States, contributed 6.4 billion dollars.[37]

The GOJ’s strong commitment to development assistance is embodied in its 1992 Official Development Assistance Charter, which states that “full efforts should be made to promote democratization and the introduction of a market-oriented economy and to secure basic human rights and freedoms in the recipient country.”[38] The latest ODA plan focuses on East Asia and calls for the development of a cooperative relationship with the private sector and NGOs.[39]

According to Ministry of Foreign Affairs (MOFA) statistics, China and the ASEAN member countries are the major recipients of the ODA’s financial and technical assistance.[40] Japanese presidents have headed the Asian Development Bank (ADB) for the past ten years.

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