The EU is currently updating the GSP and we’ve put forward many ideas on how to improve it. Below is an edited speech (I’ve added some hyperlinks, cut out the blah blah) I recently gave to a study group of the European Economic and Social Committee outlining those ideas.

“I am from the British TUC, but am also here today deputising for the European Trade Union Confederation (ETUC), and the International Trade Union Confederation (ITUC) which represents trade union organisations in nearly all of the countries receiving trade preferences under GSP.

Trade unions have long supported the granting of unilateral trade preferences to developing countries under the GSP(*), and in particular, additional preference given to “GSP+” countries in exchange for effectively implementing 27 priority human rights and environmental conventions.

Yet we see little evidence that countries are implementing those commitments. A CARIS evaluation of the scheme, came to the same conclusion, in more words:  “GSP+ appears to be effective in promoting the ratifications of the 27 conventions. De jure implementation beyond ratification already faces several constraints. We do not find evidence of any significant positive effects of GSP+ here.” (page 167)

Georgia on our mind: problems with the current GSP system

Let me illustrate this problem with the case of Georgia, a current GSP+ beneficiary.

In 2006, the Government of Georgia passed anti-union labour legislation that was clearly in breach of fundamental ILO conventions, and has been strangling its trade unions ever since. Unions and the ILO have long sought to get Georgia to change, but have been given the diplomatic equivalent of the big finger by the authorities there.

Earlier this year we present a detailed complaint to the European Commission calling on them to commence an investigation into Georgia’s GSP+ status. The Commission told us at the end of August that it “regularly discusses the issue… with the Georgian authorities” and was hopeful of “progress”. And that it is reluctant to launch an investigation because “it only takes recourse to a sanctions-based approach as a last resort.”

For trade unions, the Commission’s answer sums up all that is wrong with the current GSP+ regime.

Firstly we are well beyond the stage of “last resort”. An EU Commission staff report acknowledged in 2008 that Georgia’s revised 2006 Labour Code “falls short” of the ILO Conventions, and concluded that the “…code is to be revised accordingly if Georgia wants to benefit from the GSP+ scheme in 2009.” The code was not revised and Georgia is still benefitting from GSP+.

Secondly, the very process of an investigation can lead to positive change, as was the case with El Salvador, rather than sanctions.  Trade unions are the very last people that want to see actions that cost our members their jobs. The different here is that by starting an investigation the beneficiary country realises that Europe is serious and pressured to act accordingly.

Thirdly, it is impossible for us to judge whether or not the Commission has made any progress with the Georgian authorities. We strongly doubt it. There is very little transparency in the system and a lack of clarity over what the Commission believes “progress” to be. “Progress” needs to be clearly and realistically defined, and made public so both Georgia and the Commission can be held to account.

Fixing the GSP system in 7 easy steps

In light of those concerns, there is much to welcome in the Commission’s proposal for a revised GSP regulation, and even more to welcome in the Preliminary Draft Opinion of this study group. I want to highlight some key areas that could make our welcome even warmer (For those who love gory legal detail, we’ve prepared a much longer submission).

Firstly, we welcome the chance for unions and other civil society actors to now submit evidence. Civil society is uniquely placed to monitor the situation on the ground: it is our members who are being sacked, jailed or even killed for carrying out their legitimate trade union activities. Our evidence can help complement the monitoring work of the treaty reporting bodies such as the International Labour Organisation (ILO),  the most authoritative source to be sure, but often not reporting on key issues for many years, if at all.

Secondly, at the moment the Commission decides when to conduct an investigation.  But we feel that the Commission should be required to launch an investigation where trade unions, as EU social partners, have submitted a complaint making out a prima facie case for action. Additionally, the European Parliament should have this explicit right to trigger an investigation also. This would build in an important check on the power of the Commission – something that its inaction in the case of Georgia shows is needed.

Thirdly, we welcome the long overdue transparency that the new proposal is providing for. The publication of a report every two years, on the progress that countries are making to effectively implement their treaty commitments is very welcome. But there are more places where light should be shone on the workings of the GSP. For example, the Commission should also publish its decisions, with reasons and evidence considered, when granting, suspending or terminating GSP preferences.

Fourthly, the Committee’s draft opinion states at paragraph 4.1 that countries under all arrangements “must have ratified, maintain and adhere to the conventions listed in part A”. Sadly, this is not quite true on our reading of the new regulation. The only obligation on the non-GSP+ beneficiaries is to ensure that they do not commit “serious and systematic violations of the principles laid down in those conventions ((Article 19(1)(a))” among other reasons. So they don’t even have to ratify these conventions, despite many of them, such as Iran and Syria, going backwards on labour rights. At a minimum, such countries should be require to have domestic laws that do not prohibit or seriously restrict the exercise of a fundamental labour right.

Fifthly, while we welcome the much stronger and agile process for conducting investigations under GSP+, including placing the burden of proof on the beneficiary countries, we have one serious concern with the new proposal.  GSP+ beneficiaries will now be accepted onto the arrangement as long as they have not committed a “serious failure” to effectively implement the conventions.

However a “serious failure”, in the context of the International Labour Organisation is only designated where the member governments and worker and employer organisations all agree to do so. This only happens on very rare occasions – usually twice or three times a year – meaning that many objective cases of serious failure will not be designated as such. The new Regulation is therefore setting a dangerously low entry requirement – lower than the current arrangement – and should be dropped.

But we think we understand what the Commission is trying to do: to set a reasonable entry level requirement for countries, and then encourage them to progressively improve their implementation over time. So why not just say so? Why not replace the whole clause with something like: “Beneficiary countries are able demonstrate continuous and reasonable progress towards effectively implementing the conventions.”

Which ties in with my sixth point: we strongly support this group’s call for capacity building for beneficiary countries that request it, and that it “be based on a dialogue which uses the experience of civil society to identify and target real needs”. Any public policy that seeks to influence the behaviour of the good, the bad and the ugly, needs both a carrot and a stick, and the GSP is no different.

Finally, let’s work with other GSP granting countries such as the US, so that our poor Commission colleague here today doesn’t have to tackle some serial labour rights abuser by himself.

Postscript: Since this speech was delivered, the US Government has decided to conduct an official review into Georgia’s GSP status under its own GSP programme. I doubt that the two events are causally linked.

(*) The EU’s GSP contains three arrangements: (i) the general arrangement, applying to any developing countries; (ii) the special incentive arrangement (often called “GSP+”) which grants additional trade preferences to countries effectively implementing international human rights and environment conventions; and (iii) the Least Developed Countries arrangement which grants full market access for “Everything but Arms” (often called “EBA”).

In that time, union leaders have met with most G20 heads of state, as well as with the heads of the IMF, UN, World Bank, OECD, ILO, and the European institutions. We’ve been running across the lurid green carpet of the Press Centre, doing interviews whenever the media are able to look beyond Athens. (Philip Jennings, the General Secretary of Uni Global Union is next to me being interviewed by Le Monde trying to figure out the French for “deficit hawks” so he can insult them).

Beneath the unfolding Greek drama, we’re got some real progress in getting countries to sign up to a Financial Transactions Tax, and commitments to take forward G20 work on employment and social protection, but the spectre of failing to reign in the financial markets remains strong.

There has been definite progress in securing a Financial Transactions Tax. While it appears that the summit will just “acknowledge” that some countries are in favour of this idea, the key point is that more of them are now publicly taking this position. South Africa, Argentina and critically Brazil have now come out publicly in favour – which is the best case scenario that campaigners were predicting and working towards.

The US appears to be relaxing its opposition to an FTT, leaving the UK and Canada more and more isolated. Nearly all the other countries are undecided, wanting more technical detail on how the tax would work, and what the revenue raised would be used for. There is everything to play for in the coming months.

UN Secretary General Ban Ki Moon dropped by to meet with us for the first time ever at a G20 event. While he was characteristically measured, he did speak passionately off script about why he showed up: to help magnify the critical message that labour was pushing, and that much more needed to be done to address the incredibly difficult plight of migrant workers from across the globe. He highlighted the situation in Libya where migrant workers fleeing the conflict should be given the right to return to their jobs and to get any entitlements they were owed.

Random fact: Obama’s motorcade seemed to be as long as the Cannes coastline, but I can’t be sure, the curvature of the Earth was blocking my view. But not as long as the queue to the journalists’ free lunch buffet that I’m about to gatecrash…

I’m also here and my to-do list is also intimidating: carrying the spare pens for global union leaders, writing the occasional blog for this site when the wi-fi allows, and nibbling on croissants by this patch of the French Riviera. Yes, it’s a great job, but someone’s got to do it.

First up today was a meeting of global Robin Hood Tax campaigners in an old Abattoir in Nice. It was a rich discussion (I’m avoiding the temptation to say “meaty”) on how impressively far the campaign has come in juat two years, and what it will take to finally win. We discussed the FTT game plan for Cannes: to get a coalition of willing countries to announce that they’re committed to moving forward on the tax, knowing that the silent or undecided majority of countries would likely follow suit. This is exactly the same approach that France and Germany are taking within Europe with decent results. The Eurozone crisis might derail that plan this week, but there’s always next week, or the week after, or the one after that… There are Robin Hood Tax demos throughout the week. Apparently – and tragically – I missed the chance to take part in yesterday’s rally of nude Robin Hoods! Tomorrow morning nurses from across the globe will be staging a stunt, administering an ‘FTT’ intravenous drip to keep alive an ailing planet. And Bill Nighy and Bill Gates are dropping by to spread some star dust around. EU Commission President Barroso joined us for a session and was bullish about pushing the FTT at the Summit. As he explained, you need to slowly build a coalition to put the tax in place, because waiting for it to be global is the same as saying you don’t want it.

The discussion at the L20 Summit has been truly global and uplifting at times, from nurses leading the Wall Street demos to Egyptian workers demanding their right to join trade unions. Rekson Silaban from the Indonesian unions spoke of their success in getting their government to provide basic medical care for the two-thirds of Indonesians who don’t have any. But the mood is certainly one of deep deep crisis for working people everywhere, which everyone committed to inject into their discussions with world leaders in the coming days. (As a truly perverse backdrop, the L20 is at the Palm Beach casino where the design brief must have been “gimme Brighton pier, but with more kitsch”).

What’s the mood like in Cannes? Walls of police, lost journalists, posters of Sophie Marceau at bus stops, motorcades carrying ridiculously important people, bemused elderly rich folks with leathery tans, and lots of mumbling about George Papandreou having the nerve to ask the Greek public if they want yet more pain. And, yes, croissant nibbling trade union bureaucrats…

It is high influential, but also highly controversial in pressuring governments to scrap any sort of regulation – from employment protection to paying taxes. This year’s report has responded to some union criticisms but is still largely a roadmap for “doing business as usual”.

Unions have heavily criticised the Bank over the years for the report’s employment index which has rewarded countries for slashing employment protection. Last year it praised Belarus for making it easier to sack people. And Rwanda won the “top reformer” prize for allowing business not to consult the workforce about redundancies.

Years of debate and piles of research led to the conclusion that employment protection has little bearing on economic performance. In fact, labour markets in countries with strong employment protection legislation weathered the global financial crisis better than those that didn’t – they acted as automatic stabilisers to keep the economy ticking over.

Unions and the Doing Business people have fought each other to something of a draw: the Bank agreed to drop the ranking this year which is welcome, but it still retains all the grisly detail of the employment protection data in an annex to this year’s report (Check out page 141: Paid annual leave = burden. Retraining redundant workers = burden. Notice period for termination of employment = burden, etc).

Closer to home, this year’s report praises the UK’s effort to cut the regulatory burden on business, motivated by government estimates of “…a particularly heavy burden in employment law, tax administration, and health and safety” (Page 35). This is despite the UK being a top performer, coming in at 7 on a ranking of 183 countries, and despite the positive effects of such regulatory “burdens”. Of course no one wants pointless bureaucracy, but the report doesn’t distinguish between that and regulations for business which might e.g. save lives at work or support extending social protection.

This sort of one-sidedness runs throughout the report and is painful to read. Its “paying taxes indicator” (page 52), rewards countries having the lowest level of taxes and social contributions payable by business.  At a time when public coffers have been emptied propping up the excesses of the finance sector this is a staggeringly thoughtless indicator. And it only pressures governments to shift tax burdens onto workers and consumers or cut services.

So what about an annual “Doing Decent Work” index compiled by the International Labour Organisation to provide a bit of balance? You could never do that – I’ve been told by officials – because that’s “political”.

Launched by the International Trade Union Confederation (ITUC) four years ago, the day aims to spread awareness about “Decent Work”. Instinctively we all know what that means: to have a job that allows you to live in dignity. Yet to deliver that requires governments, employers and trade unions working together to achieve the four bigger objectives of: (1) creating jobs; (2) guaranteeing rights at work; (3) extending social protection and (4) promoting social dialogue. That is what International Labour Organisation (ILO) means by “decent work”. But what do these four objectives mean practically? And why do we need to achieve them more than ever?

We need jobs…

Thanks to the global financial crisis the global dole queue has never been longer than it is today, with 200 million people currently out of work. And this figure doesn’t capture the many vulnerable workers such as migrants and women in the shadows of the global labour market.

News from the G20 labour ministers meeting in Paris last week was sobering: we need to create 21 million jobs each year just to return to pre-crisis levels of unemployment by 2015. At the moment we are going backwards.

From Tunis to Manchester, people across the world have been saying “Enough”. This has been inspiring, yet the risk is that without urgent job creation the optimism of the Arab Spring will soon turn into the depression of a very long global winter.

That’s why unions are urgently calling for investment to create millions of decent and green jobs, funded off wage-led economic growth, and through fair taxation, including a tax on finance – the sector that got us into this mess in the first place.

….with decent standards…

Most people in the globally economy actually have a job, but for at least half of them - 1.5 billion people – it’s a vulnerable or precarious job. And from homeworkers in Delhi to domestic workers in Chelsea and Kensington, it’s women who are painfully overrepresented in these ranks.

This is never more so than in Egypt. A couple of weeks ago, I met with Nawla Darwiche, from the New Woman Foundation in Cairo – Egypt’s key women rights organisation. Research it carried out found that most women garment workers have been getting poverty wages of $30 to $60 a month, and many have been the victim of sexual harassment.

These women were at the forefront of the January revolution and have successfully demanded a rise in the minimum wage to about $120 a month.

But to deliver dignity at work they are absolutely clear: employers and governments need to respect their rights at work, and especially their right to create and speak through their own trade union organisations. That’s why we’re supporting a global petition calling on the Egypt’s interim government to pass a labour law.

…backed up by social protection…

Disturbingly, only about 20 per cent of the world’s working-age population (and their families) have meaningful access to social security – without it someone put out of work through redundancy or injury can quickly be dragged into absolute poverty and take her family with her. That’s why unions are campaigning for a global social protection floor, especially for those outside of the formal labour market, to help them get a leg up in life.

Thankfully, emerging economies such as Mexico and India are starting to heavily invest in social protection. Brazil’s own Bolsa Familia programme has helped them slash their terrible levels of inequality and meet the Millennium Development Goal of halving poverty in half the time. Our very own Department for International Development must play a key role in funding and building a global social protection floor for all.

…and supported by social dialogue.

Economic and social policy will be much better designed if governments are listening to the views of workers and employers – that’s what we mean by social dialogue. But it can mean much more than that.

I was in Tunisia two weeks ago and had the privilege to speak with meet Kamel Jendoubi, the former exile and human rights activist. He had returned to Tunis earlier this year after the fall of the 24-year dictatorship of Ben Ali, to chair Tunisia’s independent electoral commission. For Kamel, unions are about much more than just “terms and conditions”:

Under the dictatorship, the unions were one of the very few places where you could think about and work towards a better world. They kept that hope alive. And when the uprisings happened, they included all of Tunisian society. But I couldn’t think of a single demo that didn’t start from a union office. They were the backbone of all of it. And now, as we go towards elections, the unions are there, scrutinising everything, from the work of my commission, to the registration of voters, and will be there at the polling booths to oversee our transition to democracy.

To be sure, the fund has good features. It will provide sorely needed technical assistance, training and logistical support for developing country trade negotiators. It is quick and flexible, and importantly, is independent from the UK government, avoiding the nasty use of trade assistance to soften up weaker negotiating partners to accept a bad deal.

But the fund stops short at supporting civil society organisations, because – as it’s otherwise very thoughtful feasibility study implies – workers or farmers don’t need a voice because trade bureaucrats with the right training will know what’s best for them (see page 13).

This is flawed. Firstly many governments just don’t represent their citizens – Fiji, Zimbabwe, Sudan and Swaziland come to mind over the last few days.

And take Egypt as an example: President Mubarak’s economic liberalisation over the last decade triggered economic growth, but it was highly concentrated and came at the expense of hundreds of thousands of workers who were dumped on the scrap heap. In response nearly two million workers engaged in some 1,900 strikes or other forms of protest from 2004 to 2008. These were the seeds of Egypt’s revolution.

But secondly, even where governments are democratic, the interests of workers often gets drowned out by stronger business lobbies, stronger negotiating partners, or stronger government priorities.

This is a massive risk for Egypt on its fragile path to democracy that is worth spelling out. Our Foreign Office, among other key players in the international community, have identified “greater market openness” as a priority for Egypt. Yet the EU Sustainability Impact Assessment for a possible trade deal with Egypt came up with the sobering conclusions that unless “appropriate preventative and mitigating measures were put in place”, trade liberalisation could result in:

• a significant short term rise in unemployment, which could continue into the long term if not successfully mitigated; a fall in wage rates associated with increased unemployment;
• a significant loss in government revenues in some countries, with potential for consequent social impacts through reduced expenditure on health, education and social support programmes;
• greater vulnerability of poor households to fluctuations in world market prices for basic foods;
• adverse effects on the status, living standards and health of rural women, associated with accelerated conversion from traditional to commercial agriculture. (from page viii)

That is trade-policy-consultant-speak for an absolute disaster. The actual modelling for Egypt shows, “… a decline in employment of approximately 8% of the total workforce” (page 24) under the liberalisation scenario considered. With a labour market of over 26 million people, that means dumping about two million of them out of work.

Instead, trade liberalisation needs a range of supportive measures to ensure this doesn’t happen. As we’ve just outlined in our submission to the EU on trade policy, this includes proactive industrial policies creating green and decent jobs, training and education, quality public services, social protection and respect for fundamental rights at work. It also needs liberalisation to proceed with the policy space, and at the pace it takes the workforce to fairly adjust.

It’s a point accepted by mainstream experts. As the WTO, OECD, ILO and World Bank concluded recently in a report to the G20:

The benefits of trade generally outweigh the costs associated with the reallocation of labour and capital to more efficient uses. However, if support for open markets is to be sustained, those costs need to be recognised and policies put in place to assist workers and communities to adjust to a more competitive environment.

The problem is, without a stronger voice for workers, that second sentence nearly always gets swept under carpet the during trade negotiations. This is true for workers in the developed world, let along in Egypt, where a nascent independent union movement is still very fragile. So if DFID wants to help the vulnerable, it’s time to help them speak up louder.

Some 3000 employees walked off the job on 27 June, shutting bank branches across the country, after the British management of Standard Chartered First Bank (the Korean subsidiary) sought to impose an unfair performance-based pay system that would pit colleagues against each other, and demote, or give a pay cut, to those failing to hit their targets. It has also refused to lift an effective four-year pay freeze unless the workforce rolls over on this.  

This might sound familiar, especially for those working in Britain’s banks. And that’s exactly where the idea has come from – the mean-spirited parts of the City’s HR manual. 

As the Koreans explained to me, they are worried that this will undermine a workplace culture built on teamwork that has a strong track record in delivering productivity, customer satisfaction, and employee loyalty. It is a model of collaboration that has played a strong role in driving South Korea’s stellar economic growth over the decades.

But this issue is not just about so-called Korean culture and working traditions. It cuts to the heart of the sort of workplaces we want:  collaborative and supportive ones that deliver results, or ones driven by competition and fear?

The Korean union is also worried that this could be the thin end of the wedge – as they explained to me in London this week. Standard Chartered is the first bank to try to introduce such changes in South Korea. Others could be forced to follow.

That is the heart of a complaint filed under the OECD Guidelines for Multinational Enterprises by UNI, the global union federation representing bank workers against Standard Chartered yesterday at both the UK and South Korean National Contact Points – the national complaint bodies set up under the Guidelines. Put simply, UNI alleges that Standard Chartered is trying to impose working standards that are worse than the rest of the industry. 

Employees at the Korean subsidiary are also increasingly “embarrassed” at the legacy of the new management: an over emphasis on short term lending and speculation, harsh loan terms for small and medium enterprises, excessive executive remuneration, and lower customer satisfaction. More things that sound familiar?

Exasperated union leaders from the Korean Finance Industry Union (KFIU) came to the City this week to make their case direct to Peter Sands, the London-based CEO of Standard Chartered Global. He refused to meet with the delegation but did send the head of HR to collect a joint letter from Unite, the TUC and UNI calling on him to urge his Korean subsidiary to sit down at the negotiating table.

Instead, the British CEO of SC First Bank offered a traditional Korean apology earlier this week for the ongoing strikes. It’s time he respected another Korean tradition – that of collaborative working – and worked with the union to build on it, rather than undermine it.

Easily the biggest win during the update is the inclusion of the concept of “due diligence” in the text. Developed by the UN Special Representative on Business and Human Rights, John Ruggie, this concept requires an enterprise to identify and address the negative impacts it’s causing, wherever they occur.

Previously it was unclear whether the Guidelines extended into the vast network of supply and distribution chains that multinationals rely on – with their tens of thousands of suppliers and tens of millions of mostly vulnerable workers. Now they do. So workers can potentially challenge a multinational for using the trickery of outsourcing and agency work to deny them their fundamental rights at work – even if they are not directly employed by that company. As I’ve blogged elsewhere:

Under Ruggie’s proposed due-diligence test, the fact that, say, a luxury clothing brand may not have a Delhi home worker on the payroll is irrelevant. If their sourcing contracts are denying her a living wage or resulting in unsafe working conditions, then they need to act.

Elsewhere the new Guidelines have a new chapter on Human Rights and trade unions lobbied hard to secure language on wages for the first time. Now an enterprise should provide: “the best possible wages…  at least adequate to satisfy the basic needs of the workers and their families”. This is not technically a living wage, but is still a big victory.

Yet it doesn’t matter how good the substantive rights are in the new text, if they’re effectively unenforceable. The Guidelines are still non-binding on companies, but with strong procedures backing up an open and public process, the Guidelines have helped bring some companies into line. This brings us to the main battle ground during the update: improving the largely dysfunctional complaints mechanisms set up under the Guidelines.

Under the Guidelines, each signatory government is required to set up a National Contact Point (NCP) – a government body hearing complaints and generally promoting the Guidelines. But they are given a wide discretion under the treaty as to how these NCPs should function. Unfortunately out of the 40 or so signatory governments, barely a handful have functioning NCPs (the UK NCP is generally regarded as one of the best). Some seem to be little more than an in-tray on the desk of a low ranking, overworked civil servant.

Unions sought to include strong procedural rules for NCPs in the update. And the UK government adopted a progressive approach – there’s a statement you don’t read on touchstone everyday – to this issue, largely seeking to introduce its own good procedural rules into the treaty text. And it achieved some success – particularly on requiring time limits for the processing of complaints, and sensible guidance on what an NCP should do when a complaint filed with it is already the subject of a parallel legal proceeding elsewhere.

Most other union priorities on procedural reforms were included, such as establishing an NCP oversight body, conducting peer reviews and improving transparency, but were watered down with language making them optional.

The biggest disappointment for unions on procedure was the failure to require all NCPs to issue a “determination” on whether or not a company had breached the Guidelines. The threat of a public determination is the single most effective way to force companies to adhere to the Guidelines. It is what helped get Unilever to the negotiating table and sign off on a settlement that everyone could live with. Someone else put this much better: “’Mediation without the credible threat of judicial determination is the sound of one hand clapping”.

Determinations are also essential to send a clear, public and government-endorsed message that cowboy companies abusing human rights are in breach of the Guidelines. This is what the UK NCP has done against Afrimex and Vedanta. The problem here is that these cowboys are unlikely to change their practices unless NCPs have the power to impose sanctions against them – something that the UK, let along the OECD Guidelines, isn’t doing yet. Unions and civil society across the globe will now have to work overtime to pressure all NCPs to start issuing determinations with teeth.

On balance, unions globally through our Trade Union Advisory Committee to the OECD have welcomed the new Guidelines. They are certainly better than the version they are replacing. But they are yet to become the fabled silver bullet to hold companies to account – more like a water pistol that can now squirt a bit further.

Rodrik stumbles across this slightly counterintuitive conclusion in an old article by David Cameron – not our public budget butchering Prime Minister, but a political scientist from Yale. “Yale” Cameron wanted to understand why the public sector had expanded in the 18 industrialised countries he studied – and what explained the variation in the size of the governments between those countries? 

His answer is simple: governments had grown the largest in those economies most exposed to international markets. Larger economies, further away from trading parties, such as the United States, Japan and Australia had government expenditures relative to the economy of about 35 percent. Yet smaller economies, closer to their trading partners, such as Sweden and the Netherlands had public sectors of between 55-60 percent.  

Rodrik put Cameron’s conclusion through an empirical test drive. He expanded the sample size to over 100 countries, used different data sources and different time periods, and controlled variously for country size, geography, demography, income level, and urbanisation among other variables. Yet the correlation of big government and global integration was exactly the same. So what explains the link? Rodrik finally agrees with Cameron’s answer:

People demand compensation against risk when their economies are more exposed to international economic forces; and governments respond by erecting broader safety nets, either through social programs or through public employment (more typical in poor nations). (page 18)

And dare I add that this public sector expansion is not just to ameliorate the impact of openness as Rodrik describes, but also to build the very institutions that help businesses and workers take advantage of it: an active industrial policy investing in skills, financing start-ups and supporting R&D etc to help domestic firms move up global value chains.

So where does this leave our David Cameron, who, on the one hand believes that growth and jobs will come from his government’s “messianic” commitment to “free trade and open markets around the world”, yet on the other hand is butchering the very public sector needed to harness such openness? It complicates an already complicated mess for the government’s trade strategy– but let’s take our complications in order.  

Complication No.1: The UK Government has very little ability to liberalize trade any further. Trade making powers have moved to Brussels and most major trade negotiations are making glacial progress . The other strategy of “trade promotion” seems to boil down to unleashing the charm of Prince Andrew on oversees trade delegation, now that the old approach of gun boats, slavery, opium and the East India company is all a bit 18^th century. Don’t hold your breath on either count.  

Complication No. 2: Every government and their trade promotion poodles are now trying to export their way out of recession. That just doesn’t add up if no-one is increasing their imports. Unless there is an expansion in domestic demand there will be losers, and unless some bright spark in Britain is threatening to create the equivalent of Nokia, Apple and Ikea, by Friday then we’re likely to be those losers. As Richard Exell, my colleague down the hall, has argued with a bit more empirical rigour, “we aren’t going to export our way out of this mess”.

Which is further confirmed by Complication No. 3 – those that are likely to win this battle of exports are those following the pattern of public sector support identified by “Yale” Cameron and confirmed by Rodrik. Yet sadly our David Cameron is taking his axe to exactly the sort of supportive measures (The Future Jobs Fund? Regional Development Agencies?) that can help workers and businesses get back on their feet and take advantage of openness to trade.

So can we stick our David Cameron in Yale and borrow the other one?

The Framework, drafted by UN Special Representative John Ruggie proposes a profoundly simple idea: that businesses should be responsible for their human rights impacts wherever they occur. For the world of work, this means that a company must stop its negative impact on workers, regardless of whether or not they are directly employed by it. To rip off my own words, it can begin to tackle a massive global problem:

…As business operations and their supply chains become more complex, workers are increasingly falling outside of direct and permanent employment relationships that are protected by labor laws into jobs that are more insecure, low paid, and dangerous. They are a key part of the 1.5 billion workers—just more than half of the global labor force—who are now in vulnerable forms of employment, according to this year’s ILO Global Employment Trends report.

Under Ruggie’s proposed due-diligence test, the fact that, say, a luxury clothing brand may not have a Delhi home worker on the payroll is irrelevant. If their sourcing contracts are denying her a living wage or resulting in unsafe working conditions, then they need to act.

Ruggie’s proposal is clear and pragmatic: it’s not asking business to tackle things it isn’t responsible for. And that’s probably why it has been supported by many businesses globally, along with governments and civil society. 

So it’s a shame then that key business lobbies in Paris are kicking and screaming over attempts to include this principle in the Employment and Industrial Relations chapter of the OECD Guidelines for Multinational Enterprises, currently being updated.

The Guidelines are standards of behaviour expected of multinational enterprises operating in or from the territory of the 42 states that have signed up to them. Each state has a “National Contact Point” promoting the Guidelines and considering complaints under them. They are the closest thing that we have to a global system of holding business to account, even though they’re non-binding. In short, this is the best chance we have to turn Ruggie’s carefully crafted words into action.   

The negotiations only have a few more weeks left to run, so its time for governments, civil society, and especially the progressive business community, to speak louder than the business dinosaurs currently blocking progress in Paris.

The Daily Mail has had a great run with its “snouts in the trough” stories about the excessive expenses and pay of CDC’s bosses. Although it’s Richard Brooks at Private Eye, especially in the latest edition, who has been the prime digger of so much CDC dirt – albeit stuck behind a blog-unfriendly subscriber wall. And the Parliamentary International Development Committee is tackling CDC in its current inquiry into DFID. Judging by the evidence in NGO submissions, CDC will be in for a torrid time.

We’ve set lose our own little wolf cub on them – a newly released report titled, “CDC: time to improve its poor effort”. For unions CDC is a sorely missed opportunity to help the poor. Despite having a war chest of public funds, CDC has no actual targets to reduce poverty. Instead, in its 2009 Development Review, it claims that companies it invests in employ some 733,000 people. But have these jobs been created because of CDC’s investment? Using CDC’s rule of thumb, I could fork out for a single share in Tesco and claim to be investing in a company that employs 1.1 million workers worldwide. And are these jobs helping people leave poverty? Were they already well off? Who knows…

And there’s even more to add to the charge sheet: CDC has the gall to defend the use of tax havens in the name of fighting poverty; and faces serious allegations of investing in corrupt companies.

Andrew Mitchell, the DFID Secretary of State, Andrew Mitchell has announced a review of CDC in the wake of this week’s scandals. It’s a long overdue move  – and one that needs to be comprehensive in scope and ambitious in its recommendations. Because the risk is that if DFID doesn’t get this house in order, then the aid bashers at the Daily Mail might succeed in buring it all down:

…In his efforts to cultivate a touchly-feely image, David Cameron promised to spare the DFID from cuts. But with every revelation about how our foreign aid budget is squandered, that pledge becomes ever harder to justify.

Cutting aid would be a disaster. Tens of millions of people, dumped into absolute dollar-a-day poverty by a global economic crisis they did nothing to cause, urgently need our help. And even a small amount of aid spent wisely can make a huge contribution. Workers in Britain agree, passing this motion yesterday on supporting international development at the TUC Congress in Manchester:

…Congress welcomes the commitment of the leading UK political parties to spend the UN target of 0.7 per cent of gross national income on aid and urges the Government to put that commitment into law without delay.

So DFID needs to defend itself against the aid-bashers, by showing that aid is being used wisely. Giving CDC a complete overhaul would be a good start.

It’s not exactly weekend reading, so I’ll pick out one of the more juicy issues (and award a prize to anyone brave/sad enough to read the whole thing): the EU’s new investment powers under the Lisbon treaty.

EU member states currently have about 1200 bilateral investment treaties with other countries, but under Lisbon, Brussels get the power to make new Europe-wide treaties. These little known treaties typically protect foreign investors from expropriation or discriminatory treatment by host states, and have been notoriously one-sided in their favour. Now the EU has the chance to balance out these treaties, by inserting some obligations on investors, and in doing so, close the “governance gaps” that lead to so much business abuse of human rights, particularly in the developing world.

As the (endlessly quoted) UN Special Representative on Business and Human Rights, John Ruggie, puts it:

“The root cause of the business and human rights predicament today lies in the governance gaps created by globalization – between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.”

Such “wrongful acts by companies of all kinds” keep clogging up my inbox.

Europe’s best chance to help meet the fundamental challenge that Ruggie spells out would be to require investors under these new investment treaties to respect fundamental international human rights and environmental norms, through having an enforcement mechanism with teeth. At the moment, we have a small land army of international voluntary guidelines, tools, initiatives, compacts and standards, but nothing with real bite.

But rather than taking this “best chance”, the Commission’s recent communication on the topic looks a lot like business as usual. The only reference to investor obligations is a non-binding one to the non-binding OECD Guidelines on Multinationals in the non-binding preamble – language that might make some of the drafters feel warm, but will have no tangible effect on anyone, anywhere.

Further, the EU will most likely seek to use “Investor-State” arbitration process to resolve disputes under these new treaties. This means that investors can by-pass the entire domestic legal system of host states, to seek to enforce their rights in an international arbitration panel, with notoriously opaque procedures, no right of appeal, decided upon by arbitrators drawn mostly from the ranks of overpaid international investment lawyers.

Positive discrimination by the South African government to combat the legacy of Apartheid? Bolivia’s reclamation of its water supply to ensure the poorest can get access? Both actual disputes would have been ruled illegal by arbitration panels if global public pressure hadn’t forced the investors to back down.

EU member states, MEPs, Commission officials still have a chance to amend this communication and there are many options in front of them. They could scrub out reference to the arbitration panels, and make investors use the courts of host states. If investors can prove that the legal system isn’t fair or doesn’t work – allow them to use the legal system of the home state, but also give those affected by human rights abuses by foreign investors the same rights. Give workers and affect communities workers the same rights to sue in host and home state courts.

If this balanced approach is too much for some in Brussels to stomach, then the new investment rules should at least demand that investors can only step foot inside arbitration hearings in Washington if they have adhered to the OECD Guidelines on Multinational Enterprises.

To summarise the post: this week the OECD is launching its much needed review of the OECD Guidelines for Multinational Enterprises – a treaty on international standards of behaviour expected of multinational enterprises operating in or from the 42 states that have signed up to them. A key change of the review could be ensuring that companies take responsibility for the impacts they have on the supply chains they source from.

Also, the ETI blog page is brand new, and should develop into an interesting read. The organisation brings together companies, unions and NGOs – with their diverse perspectives and roles – to tackle the commonly agreed problem: the terrible working conditions facing many workers in global supply chains. So here’s to some fiery debate…

That a bank levy is even on the cards is a big victory for the tenacious Robin Hood Tax campaign, and a sign of the positive influence of the Liberal Democrats on the coalition. But the big question for these budget slashing times is - will it raise enough?

Online chatter is predicting it will be more than the £1bn that Osborne had proposed while in opposition. But if you put our budgetary black hole, next to the predicted £90bn in reported profits and bonuses for the UK finance sector next year – then George needs to get a bigger calculator, and needs to consider more options than just a levy.

He need look no further than the IPPR’s excellent report on finance sector taxes. It shows that by clamping down on tax avoidance, levying financial institutions, and taxing profits and bonuses or financial transactions, we could raise up to $20bn. That’s the difference between a lot of nurses and teachers being allowing to continue their vital work, or the public services train wreck that’s currently on the cards.

The report adds that – true to its name – a Robin Hood-style tax, unlike the VAT, falls more on the rich than the poor. And it would fall more on high-frequency traders and their destructive, speculative behaviour.

So George faces a big choice tonight:  go down in history as one of Robin’s merry men that saved jobs and the economy, or as the axeman that took us all down swinging.

Under Israeli restrictions only 72 of 4,000 commodities are allowed in, and only then, at a dismal trickle. The export trade is non-existent and concrete and raw materials are banned. The result: construction used to employ a quarter of the Gazan workforce, now it’s less than one percent. Without the means to repair bombed schools, hospitals and houses, Gaza looks like a permanent war zone.

The blockade is also unpredictable and illogical. Coriander is banned but cinnamon is allowed. And big blocks of butter are prohibited because they’ll need cutting up and that requires an “industrial process”. If the evil doers acquire the skills to slice up a large block of Lurpak, innocent Israelis might be next, so the illogic goes.

The impact of all this is predictable. The number of businesses in Gaza fell from 3,900 in June 2005 to just 200 by December 2008. Unemployment has soared to 39%. Although this figure is likely to be an underestimate, it’s still among the highest in the world.

This is the cause of immense suffering. After nearly a year of the blockade, over 70% of Gazans were living below the US$1 per day poverty line, and following the Israeli offensive on Gaza in January 2009, 75% were “food insecure”. Eight in 10 Gazans are now dependent on aid,

The blockade is also driving the very criminality it is purporting to prevent. As our new Foreign Secretary said:

As the once productive private sector has been decimated and ordinary Gazans have lost their jobs and their incomes, it is tunnel entrepreneurs and their Hamas backers who benefit.

The tunnel economy – there are some 400 to 600 tunnels into Gaza – is an important source of revenue for Hamas and for many desperate Gazans it’s the only source of work and essential goods. It’s also a recipe for appalling working conditions, according to the just published annual ILO report on the situation of workers in the occupied Arab territories:

…it is believed that up to 20,000 people are employed in the tunnels and associated economy, many in dangerous conditions, without protection and poorly paid. Child labour in the tunnels is said to be rife.

The very first recommendation in the latest IMF staff report is for the lifting of the blockade of Gaza, which is, “…essential to stem the continuing decline in Gazans’ living standards”.  Under a “pessimistic” scenario, the IMF concludes that GDP will continue to decline in Gaza if there is no progress in the peace process and only a limited easing of restrictions.

Sadly, this IMF “pessimism” sounds like business as usual, unless real pressure is applied to end this medieval siege.

Many of the recommendations – pared down here for the busy blog reader – seem like no brainers for many of us:

• Growth in employment and incomes is critical in driving strong, sustainable and balanced growth.
• G20 countries have pursued a wide range of measures to create and preserve jobs. By ILO maths, this has saved 21 million jobs, but given that we’ve lost 34 million, such measures need to continue and expand.
• Better targeted efforts to generate employment for poor households and vulnerable groups are urgently needed for developing countries.
• Given the rise in vulnerable employment (“…half of the world’s three billion workers are employed in vulnerable forms of employment” according to the recommendations) better social protection systems are critical.
• Improve the quality of jobs through strengthening fundamental rights at work, to reverse the trend “in a number of countries” towards deteriorating or stagnant wages and working conditions and widening income disparities.
• Education, lifelong learning, job training and skills development strategies should be prioritised and linked to growth strategies.

This is all good stuff – but now what? Unlike other G20 commitments and processes, there is little clarity on the who, what and how. Leaders could pick up on them during the next G20 leaders meeting in Toronto at the end of June. But well before then, these recommendations really need to be the heart, lungs and soul of the G20’s “Framework for Strong, Sustainable, and Balanced Growth”, – a peer review process of national measures taken to drive growth and rebalance the global economy, overseen by the IMF.

Yes, the IMF. Worryingly, it’s now arguing for “significant fiscal consolidation” in 2011 – deficit cutting in ordinary speak. With recovery fragile, – and largely jobless – , and labour markets still propped up by government support, following this business-as-usual advice could result in millions more out of work, and in all likelihood tip the world into a second, deeper, recession. That’s why the global union evaluation of the G20 labour ministers’ meeting stresses the need for the International Labour Organisation – the global brains behind these G20 labour ministers’ recommendations - to be in charge of the employment and social protection parts of the G20 Framework.

Given the upcoming general election, our government reps in Washington couldn’t support something like this beyond a couple of weeks. Which political parties want to instead?

Is this just corrupt leaders buying Premier League football clubs and leaving their people destitute? According to the report by the think tank, Global Financial Integrity, only three percent of this total is due to the corruption of government officials, with a further 30-35% coming from crime. That leaves a staggering 60-65% due to, “the proceeds of commercial tax evasion, mainly through trade mispricing”.

As the report outlines:

This massive flow of illicit money out of Africa is facilitated by a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money laundering techniques.

The impact on Africa is immense, draining currency reserves, eroding tax collection to fund vital public services and thwarting poverty alleviation efforts.  “Developing countries,” according to research quoted in the report, can “lose at least $10 through illegal flight capital for every $1 they receive in external assistance”.

Siphoning profits off to some Carribbean hideaway must also seriously undermine attempts by local workers to secure decent wages and working conditions from local subsidiaries of multinationals. And if the international system is failing to reign in such financial trickery, what hope does a local union negotiator in Botswana or Bristol have in understanding the financial health of the multinational she’s bargaining with?

G20 finance ministers meet at the end of this month to review progress in reigning in the worst effects of financial deregulation, including measures to clamp down on global tax evasion. The OECD has also just set up a Task Force on Tax and Development to tackle the issue. Both bodies have a daunting to do list in front of them. One important and early victory would be to require companies to fully and accurately report on all of their financial affairs on a country-by-country basis, greatly cutting out transfer mispricing practices – the key culprit driving capital flight. Such a requirement should be included as part of the upcoming review of the OECD Guidelines on Multinational Enterprises.

At the end of April, the IMF will give an interim report to G20 Finance Ministers on their efforts to build “strong, sustainable and balanced growth” and outline options on how the Banks should help pay for the mess they got us in. In a worrying omen of what their conclusions might be John Lipsky, the second in charge at the IMF, said earlier this week, that to drive growth, “…liberalization of goods and labor markets and the removal of tax distortions… should be pursued vigorously”. As the global trade union movement’s statement of priorities for the meeting makes clear, the world is crying out for millions of green and decent jobs, not the cutting of taxes and slashing of workers’ rights.

Active interventions in labour markets are working. According to the ILO, some 12 to 14 million jobs have been saved through initiatives such as shorter working time, youth job guarantee schemes and decent income protection. As its recent World of Work report shows, countries that have done so, such as Brazil, Australia, Germany and Jordan have weathered the storm, while those with deregulated labour markets and limited social protection schemes haven’t.

The conclusion is that keeping people in work is keeping the economy afloat, but only just. That’s why the UK’s government’s commitment to extend the jobs guarantee scheme for young people – the hardest hit by the crisis – is so important.  

And so is collective bargaining. It enables workers to collectively come up with sensible compromises with management in tough times to keep people in work. For a statistical feast on how good industrial relations drives productivity, morale, and economic recovery check out the TUC’s recently published pamphlet, The Road to Recovery. 

Globally, the decline in the proportion of workers covered by collective bargaining arrangements over the past three decades is a key reason why economic growth has left the majority of people behind. As ordinary workers have lacked bargaining clout, their wages have stagnated and income inequality and the social hardship that comes with it have been rising. In many countries this has driven the dangerous reliance on debt to finance household spending that was responsible for the financial crisis.

The IMF would do well to understand the human cost of deregulated labour markets. In the UK’s white meat sector, weakened employment rights has only led to miserable working conditions for the mainly migrant workers employed there. As the recent EHRC’s inquiry into the sector shows the precarious status of these agency workers has made them vulnerable to bullying and harassment, forced overtime and poverty wages. And how many of the 260 workers interviewed preferred this deregulated and flexible arrangement? You only need one hand to count this one – four of them.

Instead of slashing workers rights and removing “tax distortions”, we need serious public investment to create jobs. The ILO estimates that, despite positive government action, some 34 million jobs have been lost globally since the financial crisis began. An estimated 215 million workers and their families have been pushed into extreme poverty by the financial, food and fuel crises – getting by on less than $1.25 per day. Joblessness is likely to continue well into the future, despite initial signs of recovery. In some countries, as the ILO and the OECD’s forecasts show, unemployment will not reach its peak until well into 2011 at the earliest. Globally, over 300 million new jobs will need to be created over the next five years to return to pre-crisis levels of unemployment.

Who should foot this bill? At Pittsburgh in September last year, the G20 gave the IMF the job of coming up with options on how the finance sector should “make a fair and substantial” contribution to pay for the crisis. It will report back to Finance Ministers at the end of April. Given the scale of the task ahead of us the IMF needs to seriously consider a Robin Hood Tax, or we need to seriously consider getting this fox out of the hen house.

Pre-crisis, some 633 million workers, or 21.2% of the world’s workforce, were struggling to feed their families on less than $1.25 per person per day. Thanks to the global financial crisis our planet is now home to an extreme 215 million workers living in absolute poverty.

The crisis has hit youth the hardest. The unemployment rate globally for those aged between 15 and 24 has jumped up nearly two percent in the last year to 14%. And women still face significant barriers to get decent jobs and wages.

The Millennium Development Goals or MDGs, are global development targets to address issues such as poverty, health, education, gender equality. Set in 2000, the task of reaching the goals by 2015 looks tougher than ever, especially for the world’s workers.

The UK Government’s Department for International Development (DFID) set an ambitious goal last year to cover 50 million people with social protection plans over the next three years. It’s a good start but serious global leadership will be needed during the review of MDG progress this year to gather the resources to fill this global black hole with green and decent jobs, and quality public services. It sounds like the world needs a Robin Hood Tax more than ever.