ILO Policy Brief: Keeping a tripartite body on top of Multinational Enterprises

By Isaac Stovell

In 1977, the International Labour Organisation published a declaration on Multinational Enterprises (MNEs) to coordinate international policy for the protection of workers’ rights from possible exploitative activity in an increasingly globalised world.

Almost four decades later, the expectation that MNEs would become major players in shaping international economic outcomes has been proven resoundingly right in the wake of globalisation. Technological advances in communication and transportation and mass-manufacturing have enabled large corporations to become huge ones. Geopolitical convergence to a broadly neoliberal consensus has allowed these corporations to establish themselves as truly international: not only distributing goods and services around the world but fragmenting supply chains and shifting production to wherever resources, including waged workers, are the best value.

MNEs are certainly good for economic wellbeing in some respects: they generated $7.9trillion in value-added international production in 2015 [UNCTAD 2015]. However, as foreseen by the ILO’s declaration, their proliferation has enabled “abuse of concentrations of economic power [and] conflicts with national policy objectives and with the interest of the workers” [ILO 2006]. MNEs’ activity has restructured the global economy massively since 1977, and as often as not in ways counteractive to social justice.

However, despite these deep and wide ongoing changes, the ILO’s declaration on MNEs has only been revisited two times: in 2000 and 2006. Even in this past decade the global economy has changed enormously. The financial crisis in 2008 and the subsequent Great Recession upset the balance of an America-centred world market, as has the high growth rates of emergent economies such as the BRICS nations. China is now a major player in multinational enterprise: in 2014 it saw $116 billion of foreign direct investment outflows [UNCTAD 2015], topping Germany ($112 billion) and Japan ($114 billion), and more than Canada, Singapore and Switzerland combined. Much of this investment is linked to extraction projects in natural resource-rich, less-developed economies- often corrupt nations noncompliant with international policy. Perhaps unsurprisingly, there have been widespread allegations that these projects are often detrimental to local workers’ livelihoods.

In light of issues like this, as further amendments to the Declaration have been regularly proposed but continually postponed, it is encouraging to see the ILO return with effort to bring MNEs’ activities back under up-to-date regulations to ensure the wellbeing and recognition of rights for workers around the world. The ILO’s social-justice grounded mandate, and its influence in global policy guidance, makes it responsible for helping direct the future of MNEs to ensure decent work for their employees. Many facets of globalised labour are simply not included yet: from environmental security, to informal economies, to enforcing minimum wages in complex supply chains, to various forms of employment discrimination. Conducting a review of the Declaration is a no-brainer; even better would be keeping it responsive to the constantly-shifting global economy, maintaining a “living document”, as one delegate phrased it. With the Declaration’s 40th anniversary approaching, it is well overdue an update, something that was finally formally decided at the ILO Governing Body’s 325th meeting last November.

At its 326th meeting, the Governing Body discussed a document outlining proposed options for whether and how such a review might go ahead. The proposal gave an overview of the review’s objectives as decided at the previous session, followed by a list of modalities to be decided concerning the review’s scope (whether just the Declaration’s text should be reviewed or also its interpretation procedure and implementation strategy), process (whether the review should be conducted by the Office, a single meeting of experts nominated by each of the three groups of agents, or a tripartite ad hoc working group comprising 4 worker, 4 employer and 8 government representatives), and timeline for the conduction of the review (2018 or 2017, the earlier date being notably more ambitious but coinciding symbolically with the Declaration’s 40th anniversary) [ILO 2016a].

The tripartite system built into the ILO’s procedures and operations, unique among United Nations bodies, brings together three diverse and often-conflicting sets of collective interests. Workers, employers and governments, as stakeholders in labour markets, may have widely differing perspectives or goals regarding employment policy, but bringing them together to find where their interests best converge makes the ILO’s distinctive model interesting to observe, but also one that tends to generate effective policy. The effectiveness of their negotiation practice relies on a general requirement for consensus, and is aided by the lack (for the most part) of open debate: statements from delegates are prepared in subgroups’ meetings, such as between the employers or the African regional group, keeping the Governing Body’s sessions formal and to the point.

However, the sheer quantity and diversity of workers and employers represented by these spokespeople raises a question of how representative these forums are. The workers’ representatives tend not to be from industry-specific unions but from large congressional bodies such as the International Trade Union Confederation (ITUC); likewise the employers’ representatives tend not to be from particular industries but from bodies like the United States Council for International Business (USCIB) or the China Enterprise Confederation (CEC). All of these bodies are themselves hugely diverse: the ITUC represents 178 million workers in 162 countries through 328 affiliated organisations; the USCIB and CEC, while having more of a geographic focal-point, respectively represent over 300 American multinational corporations, law firms, and business associations, and 545,000 Chinese companies (including the majority of China’s top 500) spanning almost all regions and industrial sectors. I highlight these enormities as a reminder that policymaking on this scale is immensely complex, and not every avenue of detail can feasibly be explored or satisfied. While both the workers’ and employers’ representatives no doubt have large and effective resources dedicated to developing their understanding and perspective on each issue, the range of interests they represent necessitates some simplification here. As such, the delegates are not necessarily the most-informed people about frontline issues in certain sectors’ supply chains and operations (from either a workers’ or employers’ point of view) but engage with such issues in an abstracted way. To what extent can union consortiums like the ITUC properly claim to be seeking the best interests of global workers, the vast majority of whom (particularly those most in need of the ILO’s work) are not unionised? And to what extent can anti-regulation pro-freemarket bodies like the USCIB provide a nuanced policy view on industrial-corporate problems that these bodies themselves simply do not encounter except through research? In answer to both – perhaps well enough to form coherent policy that improves somewhat upon the status quo, but these problems of representation are inarguably in need of address.

The erosion of the tripartite system’s efficacy has been ongoing for decades, according to ILO Director-General Guy Standing, who argues that the appointment of factional members to technocratic positions in the late 1990s politicised internal management, leading to “lower-level appointments based less on professional competence than on contacts and factional allegiances” [2008], which along with the abolition of the Industrial Relations Department proved to exacerbate the failure to stimulating effective dialogue between a healthy representation of employees and employers [Standing 2008].

Despite all these structural elements that may hinder decision-making, the session on MNEs runs remarkably smoothly. The spokesperson for the workers exhorts the Declaration’s essentiality in supporting the ILO’s commitment to social justice, the spokesperson for the employers agrees that the Declaration is a key tool but issues a reminder that any process of review should have its direction agreed upon by all tripartite constituents. Room for diplomatic manoeuvre on a proposal so inarguably reasonable as the review is slim, and so as the governmental representatives began to make their statements, it became clear that nobody was going to object to the proposed review. The political nuances between different levels of agreement are interesting to observe: the USA reminds us of the potential cost of such a review and stresses that any such process would need to make sure it was worthwhile; China expresses solidarity with other countries that, like itself, have experienced heavy outsourcing of MNE activity to make use of their cheap labour supplies in ways not wholly conducive to stable development, and welcome the review with gratitude; Argentina and Cuba hope that the review will enable poverty reduction and reduced risk of exploitation by developing countries integrating with global capitalism. Many echo the need for such a review in light of enormous economic change, just as many emphasise the need to ensure that the review works synergistically in congruence with other global policy (such as the 2030 Sustainable Development Goals). Overall there is widespread strong support for the review, but there was no immediate consensus on which modalities from the proposal would be taken.

Several days later (due to delays in the Governing Body pushing back the timeslot for the closing of the MNEs session) the decisions were announced online [ILO 2016b]: a tripartite ad hoc working group, reviewing the text and interpretation procedure, to be completed by the Declaration’s 40th anniversary. The decision itself is not surprising, but to have witnessed such a large body of people from hugely diverse backgrounds and agendas come to a consensus decision on major policy felt significant. Even if there may be representation management issues in the ILO’s tripartite system, as a policy-generating body, it works.

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