What is at stake for labour in WTO Hong Kong ministerial in December 2005? Deliberations on WTO-labour relationship have largely been overshadowed by what is known as `social clause` debate ever since the conclusion of Uruguay Round of GATT negotiations. `Social clause` is conceived from a perception that, in trade, lower labour standards increases the competitive advantage of a country. This concern finds its expression in the Havana Charter of 1948, which laid the basis for the GATT, `The members recognise that unfair labour conditions particularly in production for export, create difficulties in international trade and accordingly each members shall take whatever action may be appropriate and feasible to eliminate conditions within the territory.`

Another probable reason for the confinement of the WTO-labour debate within the paradigms of `social clause` was the fact that the most articulate proponents of social clause in WTO were trade unions, particularly those based in the developed countries. For instance, it was ICFTU, the largest international confederation of trade unions, which proposed a concrete clause to be inserted in GATT rules during the Uruguay Round of negotiations in the early 1990s. The ICFTU, in reality, defined the boundaries of the WTO-labour debate. It said, "The contracting parties agree to take steps to ensure the observance of the minimum labour standards specified by an advisory committee to be established by the GATT and the ILO, and including those on freedom of association and the right to collective bargaining, the minimum age for employment, discrimination, equal remuneration and forced labour".

The ICFTU argued strongly that their proposals for a social clause are antiprotectionist, aimed at opening markets and increasing growth and employment. `A worldwide commitment to basic workers` rights will help to spread more fairly the benefits of trade within and between countries,` they argued. Moreover, in their recent articulations, the ICFTU calls for a development perspective in trade negotiations and cautions against arm twisting by industrialised countries that would hamper the development efforts by developing countries and also calls for employment impact assessments of trade negotiations. Nonetheless, its early strong articulation of WTO-labour relationship by and large, constricted other ways in which to look at this linkage.

A third possible reason for the limited canvass of the WTO-labour debate could be that the problematic was largely premised on the perceived threat of large scale employment shift from the developed countries. Generally, Asia was seen as a competitor to the developed world not only in terms of increasing (Asian) trade volumes and GDPs but also in terms of an apparent `employment theft` by the Asian countries. WTO was seen as augmenting the power of new Asia, if controls are not in place. `Social clause` was to precisely serve that purpose.

Trade, Capital Accumulation and Global Division of Labour

As early as in the mid-nineteenth century, Karl Marx has brought out the intimate relationship between global trade, growth of capitalist enterprises, technological development and the ensuing international division of labour. “… it is colonies that created world trade, and it is world trade that is the precondition of large-scale industry….Thanks to the application of machinery and of steam, the division of labour was able to assume such dimensions that large-scale industry … depends entirely on the world market, on international exchange, on an international division of labour”, Karl Marx said in `The Poverty of Philosophy` (1847).

In the twenty-first century, World Trade Organisation is the harbinger and high priest of free world market and unfettered capitalist accumulation. The rules under WTO are intended to throw open the resources of the world and the consumer market for mega corporations by forcing nation states to abdicate their right over resources, knowledge base and the right of control over the production and the distribution of goods and services. The transnational corporations are wielding tremendous power over social, economic and trade policies in today`s world.

It was David Suzuki who pointed out in 1999 that the 200 largest companies in the world employ less than one-third of one per cent of the global workforce, but they control more than a quarter of the world`s wealth. United States of America, France, the United Kingdom, Germany and Japan - the five countries that dominated the world economy at the start of the century – also hosts the headquarters of nearly 90 per cent of the world`s 200 biggest companies now. In 2004, the global value of corporate mergers and acquisitions climbed to 1.95 trillion dollars a 40 per cent jump over the 1.38 trillion dollars in 2003. The combined sales of the world`s 200 largest corporations accounted for 29 per cent of world economic activity in 2004, due to intra-firm trade. (ETC Group, Communiqué 91, Nov/Dec 2005, Oligopoly, Inc. 2005, www.etcgroup.org). The average net profits of the top 500 companies in the United States continue their ascent, charting a recordbreaking 8.2 trillion dollars in revenues and 513.5 billion dollars in profits in 2004 (UNDP 2005). This is the magnitude of concentration and consolidation of the global capital today.

`Market access` is the catch word today, whether it is agricultural or nonagricultural market access, for the mega corporations and their governments. This is achieved by forcing or getting commitments from governments of the world, in particular those of developing and least developed countries, to remove non-tariff barriers, to bind their tariff lines foreclosing the possibilities of increase at any point of time, to continue to reduce the tariff lines progressively within a time frame, to keep the tariffs harmonised across countries and to remove differences in tariffs across products. The ownership and control over research, development and knowledge base over products and process is crucial in this process, which the global capital has achieved through the Trade Related Intellectual Property Rights agreements in WTO. General Agreement on Trade in Services restricts government actions in regards to services and facilitates access to government contracts by transnational corporations in a multitude of areas, including public health, education, child care, elder care, museums, libraries, law, social assistance, energy, water services, environmental protection services, insurance, postal services, transportation, etc.

A lot has been written and public opinion being mobilised against the disastrous impact of the WTO agreements on the subsistence farmers, dismantling of public procurement and public distribution systems, food sovereignty, biodiversity, community knowledge and affordable public health.

The issue how the intrusion of global capital, into the resource base and the market of the developing countries, affect the `working people` has not been adequately addressed.

Trade Locates Developing Countries

Recent UNCTAD studies show that capital accumulation holds a central place in a country`s growth regime; and that there is a positive association between public investment and economic growth. Moreover, the contribution of FDI to capital formation, technical progress and growth depends crucially on the policies adopted by recipient countries vis-à-vis foreign investors. Another factor which influences the impact of capital accumulation on economic growth is the structure of investment. Investment in machinery and equipment has been shown to be key to sustained growth.

Such interventions are possible only if nations retain their ability to provide effective policy interventions at the sectoral levels through differentiated measures of support and protection. As we have observed, commitments to various Uruguay Round agreements such as those relating to tariffs, subsidies, trade related aspects of intellectual property rights (TRIPs), AoA, NAMA and trade-related investment measures (TRIMs) have considerably reduced the freedom and capacity to make such policy interventions.

Until the Uruguay Round and the formation of the WTO, the industrial countries were the active participants in the multilateral trade negotiations mostly because the markets of developing countries were not sufficiently attractive. Things changed since the 1990s, when developing countries started becoming attractive to industrial country exporters as markets. There is increasing realisation that the real action in the WTO over the next few decades would be bargains between industrial and the developing countries, especially, the larger ones. However, the Uruguay Round, because of the Single Undertaking system, brought into the system a large number of smaller developing countries, who have lesser market access negotiating capabilities. Millions of people from a large number of countries are experiencing the impact of integration of their countries to the global trade system.

De-industrialisation and Structural Change

Trade integration imposes structural changes in the economy and industry of developing countries, within the context of incapacitation of the nation states. The UNCTAD study cautions that the pattern of industrialisation and structural change across the developing world has largely been related to the underlying patterns of trade integration. The study shows that in most of the developing countries, the trade integration has affected `capital accumulation`, `policies on investments, including public investment` and the `structure of investment`. According to the study, a rapid and sustained recovery in capital accumulation and growth has proved elusive for most of these reforming countries.

Trade integration imposes a sectoral change in the economy of the developing countries. The forced trade integration risks de-industrialisation in developing countries.

The notion of de-industrialisation is premised on an understanding that industrial employment, having risen rapidly, is now in rapid decline. While productivity gains in agriculture freed labour for industrial development, now, productivity gains in agriculture and industry are freeing labour for nonproductive or service work.

`De-industrialisation` associated with strong productivity growth in manufacturing has been a visible trend in the advanced industrial economies over the past few decades. In the G-7 economies, between 1970 and 2003, the output more than doubled while employment dropped by a quarter (The Economist, 27 September 2003). The decline in the share of the economy accounted for by the industry has to be seen in the context of longterm structural changes. It reflects a process of reallocation of resources to services in developed countries (Europe, the United States, Japan), which has been taking place since the end of the 1950s. The relative share of manufacturing industry in total employment and total value added has decreased, while that of services has increased steadily. The result has been a continuous transfer of jobs from industry to services. Although most industrial sectors have recorded job losses, they have also experienced an increase in both value added and labour productivity. This is the case, notably, in sectors such as chemicals, aeronautical and aerospace industries, telecommunications materials, but also a large number of other industrial sectors (EU 2004).

On the contrary, developing countries experience premature deindustrialization during trade integration as a result of their failure to protect domestic industries from imports of cheaper agricultural and manufactured goods.

What has been called de-industrialisation has in truth been de-labourisation (McQueen, 1982) of the global North and the proletarianisation of the global South. Proletarianisation has become worldwide as a pre-condition for a global reserve army of labour, mainly in developing and least developed countries. Proletarianisation is a social process in which people move from being either an employer, self-employed or unemployed to being employed as wage labour by an employer.

For instance, large-scale dumping of agricultural produce into the country has depressed commodity prices and made marginal and small farming economically unviable. Huge numbers of subsistence farmers are being displaced from their land due to an inability to compete with subsidized products. There are serious concerns that liberalised trade in fisheries will accelerate depletion of fish stocks and will jeopardise the food and livelihood of nearly 40 million people who rely on traditional fishing. Similarly, inappropriate and over-rapid liberalisation of services under GATS could cause displacement of local firms and net job losses for developing countries by the entry or expansion of foreign service providers, especially in retail, education, health, transport and post and telecommunication sectors.

Consider what has happened in two South Asian neighbours: In Pakistan, industrial production declined in the second half of the 1990s, with more than 4,000 units being declared sick. Even as many old units were getting obsolete, new investment to create capacity was not forthcoming. The share of the manufacturing sector in Pakistan`s GDP declined gradually from 18.5 per cent in 1993-94 to 16.8 per cent in 2000-01 and to 17.3 per cent in 2001- 02 (Khaleeq Kiani, HIMAL 2002).

India, home to about 402 million workers in 2001, the employment in manufacturing sector is showing stagnation at 15.8 per cent, which was 15.24 per cent of the working population in 1987-88. In the year 1999-2000, the total contribution to employment by the organised sector was only 8 per cent of which private sector segment`s contribution was hardly 2.5 per cent. At present, the unorganised sector is contributing nearly 59 per cent in GDP, 92 per cent to employment and also substantially to the exports of the country. In the unorganised sector, the employment elasticity was as high as 0.213 in

1999-2000 whereas in the organised sector, it was as low as 0.066, i.e., almost a jobless growth.

De-industrialisation and Division of Labour

There is a relationship between international specialisation and deindustrialisation. The industrial policy of EU talks about the need for repositioning specialisation of European countries in a long term perspective; “The interdependence between the service and the manufacturing sectors has also increased over time, as input-output data show. The aggregate national accounts statistics hide the fact that manufacturing companies have been outsourcing activities regarded as not central to their line of business, which were earlier accounted for as part of manufacturing. Increased demand of services from manufacturing has contributed to the rise in output of business services, which in 2000 accounted for 48.3% of the EU15 GDP.”

Theory of comparative advantage suggests that in most developing countries, industries using low-skilled labour should be expected to attract capital, making those industries more competitive on international markets. As a corollary, developing countries should specialise in low-skilled, labourintensive manufactured goods and import high-skill-intensive goods from advanced countries. The Indian Trade Minister`s claim that India is fast emerging as the “factory of the world” is to be seen in this light. What is understated in the exaltation of India being the manufacturing hub of global production is the fact that these are tightly controlled by transnational corporations along global commodity chains under unfair terms of sourcing, pricing and wages.

The UNCTAD study reminds us that most countries that sought to increase their international competitiveness, but achieved little or no improvement in labour productivity; appear to have had to resort to wage suppression or sharp depreciations. Thus the level of wages fell in most African and Latin American countries. Evidence further suggests that since the mid-1980s rapid trade liberalisation in these regions has also been associated with growing wage inequality between skilled and unskilled labour (UNCTAD, 2001; ILO, 2001). Not many studies have gone into understanding the wage inequality between skilled and unskilled labour in India as a result of trade liberalisation and international specialisation in the production of goods and services.

Wage differentials within and across countries that specialise in and are part of global division of labour are significant because it brings to the forefront the classic conflict between efficiency and distribution in the world trading system. The global trade system might lead to a more efficient allocation of global resources from the perspective of profit maximisation, but have an adverse distributional effect on those who have preferential access to markets today. Various studies have shown that global inequality - between countries and within individual countries - has been growing during the current phase of globalisation (Marc Lee, 2002).

Social Welfare in Peril

Moreover, opening up developing country markets along the lines proposed by developed country WTO members exposes infant industries to overwhelming competition from cheap imports. Competition from cheap imports has forced vast numbers of manufacturing and industrial firms to close as a result of structural adjustment across Africa and Latin America. In such situations, domestic enterprises often find themselves compelled to cut real wages and relax labour standards in an attempt to compete with cheap imports. There are increasing instances where domestic enterprises are forced out of business altogether by external competition. Many millions of workers have lost their jobs and, consequently, their livelihoods as a result of this liberalisation of their domestic markets. (Marc Lee, 2002)

Another area of concern for labour, the revenue loss the developing countries will experience as a result of tariff reduction and the impact it will have already depleting social welfare agenda of the governments. The import surges which have been experienced as a consequence of liberalisation have challenged the trade balance of developing countries. Developing countries rely to a greater extent on customs duties than developed countries for state revenues. Steep tariff cuts are likely to result in a significant overall drop in state revenue; this entails damaging consequences for already fragile government programmes, as fiscal constraints may well require budget cuts across departments such as health, education and other public services. (John Hilary, 2005)

Conclusion

Greater international mobility of capital under the present global trade regime has not lead to equalisation of the benefits throughout the population. While global trade integration takes into account the importance of relative endowments of high-skilled and low-skilled labour in shaping the pattern of a global industrialisation and capital accumulation, it has not lead to a narrowing of the wage gap between unskilled and skilled workers, between countries and within developing countries. Moreover, the current rules of trade integration undermine the freedom and capacity of developing countries to pursue a process of development of their choosing. This calls for broader understanding of WTO-labour linkages beyond unilateral emphasis on universal standards and strategic alliances based on international labour solidarity in the context of global division of labour.