Memorandum submitted by War on Want
1. War on Want welcomes the Government White
Paper on Globalisation. It provides a useful contribution to one
of the greatest debates presently facing the planet. Reducing
globalisation to simplistic notions of "for or against"
is far from helpful. Opposing globalisation is like opposing the
tide. It cannot be stopped but it can be regulated, shaped and
controlled. The debate which is needed is what form that regulation
and control should take.
2. The language of the White Paper represents
a refreshing approach from the Government. The recognition in
the covering press release that "if we go on as we are the
poor will become more marginalised" is a helpful acknowledgement
that the absolute pursuance of free trade at all costs has not
had a positive impact on the poorest people in the world.
3. Unfortunately the detail of the policies
within the White Paper do not reflect this refreshing thinking.
War on Want submitted evidence to the Government as they drafted
the White Paper. Our evidence covers the two areas of globalisation
in which we profess to have expertise, that of International Capital
Flows, and the support of Core Labour Standards. In both of these
areas we were disappointed with the detail of the Globalisation
1. The Globalisation White Paper seeks to
discuss the most effective ways that globalisation can deliver
wealth to the poorest people in the world. War on Want contends
that support for core labour standards is critical to this. War
on Want's overseas partners welcome news that companies such as
Marks and Spencer outsource their production to countries like
Bangladesh. Jobs in export-oriented industries are likely to be
better than no jobs.
2. But globalisation can pit worker against
worker, driving down wages and conditions around the globe to
the lowest possible levels. If workers in Bangladesh are too expensive,
production can easily be moved to China, and then on to Sub-Saharan
Africa, and so on, ensuring that absolute lowest costs are always
Therefore wages will never get above a subsistence
level. Workers will always accept the minimum that they need to
stay alive. This is why globalisation has not delivered the benefits
that it might have promised. Workers are not left with any spare
money either to inject into the local economy, or to send to their
families. The universal implementation of core labour standards
will end this race to the bottom and allow benefits to be distributed
3. But how can core labour standards best
be achieved? The White Paper is disappointingly silent on this
matter. A box on page 29 restates the support of the United Kingdom
Government for the ILO's Declaration on Fundamental Principles
and Rights at Work. It focuses particularly on child labour and
on the efforts being made through the Ethical Trading Initiative
to persuade multinational companies to adopt voluntary codes of
conduct. This initiative, while welcome, does not go far enough.
The voluntary code system is severely limited in terms of it monitoring
and verification process. Often codes do not include reference
to the most important core labour standardthat of freedom
of association. ILO conventions on core labour standards have
been in existence for many years. They have been agreed by most
developing countries but they are not implemented, because the
countries are afraid that to do so will lose a competitive advantage
to other developing countries.
4. In these circumstances the only way forward
is the universal enforcement of core labour standards through
international law. World trade treaties might be the most appropriate
home for enforceable core labour standards, carrying with them
sanctions for non-compliance. Indeed the UK Government and the
EU supported their inclusion in the Seattle talks. The inclusion
of this so-called "social clause" in trade talks is
controversial because of the fears that it could be used for protectionist
purposes by wealthy countries against the poor. In spite of this
good progress was made in Seattle towards a compromise position
involving a joint working group of the ILO and WTO under which
could be developed incentives for compliance with core labour
standards rather than punishments for non-compliance. It is unfortunate
therefore that in the Globalisation White Paper, core labour standards
and world trade talks are not mentioned in the same breath. This
represents a weakening of the Government's position. While recognising
that the fears of the developing world about protectionism have
some justification. War on Want would like the British Government
to play a role in bringing together those who disagree on the
social clause, to facilitate a compromise acceptable to all, which
will strengthen the implementation of core labour standards throughout
Questions for the Secretary of State:
Will the Secretary of State agree
that the attainment of core labour standards will lead to a more
equitable distribution of the benefits of globalisation?
Has the Government now discounted
any possibility of linking core labour standards to world trade
Given that ILO conventions, widely
supported by the international community, are widely violated,
what measures does the Government advocate to ensure core labour
standards are enforced around the world?
Does the Secretary of State acknowledge
that voluntary codes of conduct on labour standards, adopted by
Multinational Corporations, represent only a relatively small
weapon in the armoury, when it comes to improving workers rights
around the world? And furthermore will she acknowledge that there
are inherent dangers that certain elements of core labour standards,
in particular freedom of association, will be left out of such
codes while they are controlled by corporations.
International Capital Flows
5. One specific aspect of globalisation
which has caused poverty is the growth and instability of capital
flows. $2 trillion is now exchanged every day on world currency
markets. This has increased 83 fold in the last 30 years. 95 per
cent of the flows are not related to trade and are speculative.
In 1997-98 high volumes of currency speculation resulted in an
East Asian financial crisis. As a direct result the ILO estimates
that ten million people were thrown out of work and poverty levels
6. The Globalisation White Paper acknowledges
the risks associated with the scale, speed and volatility of global
financial flows. For the first time, the Government states that
it is prepared sometimes to countenance "specific measures
to help discourage excessive short term capital inflows".
But it goes on to state that such measure should only be viewed
as a "temporary means of facilitating the reforms needed
to ensure orderly and sustainable liberalisation. This policy
change, while welcome, only puts the Government into line with
current World Bank thinking.
7. War on Want believes that unilateral
capital controls can be a useful tool in the medium to long term
for developing country governments seeking to build their economies
and encourage long term capital investment, whilst protecting
fledgling industries from the volatility of speculative flows.
In our submission for the White Paper we described how Chile and
Colombia have used such measures to good effect. We hope that
the Government can continue to become more positive about this
valuable option, and support developing countries when they choose
to pursue these policies.
8. The White Paper goes on to describe the
codes which Gordon Brown and his colleagues have come up with
at the Financial Stability Forum to try and ensure less volatility.
These measures (paras 173-181) concentrate on surveillance, transparency
and the resolution of crises when they do occur. They are unlikely
to reduce the levels of currency speculation or prevent crises.
9. War on Want believes that the levels
of currency speculation that we are now seeing are inherently
unstable and present a constant threat to emerging economies and
the poorest people in the world. We favour the introduction of
a currency transaction tax (Tobin Tax). Such a tax, set at a low
level (say 0.25 per cent) would make the majority of speculative
transactions unprofitable and thus reduce volatility in the market.
At the same time they would not interfere with the market's genuine
ability to correct inappropriate exchange rates. The tax would
also generate substantial revenue (we estimate $250 billion pa)
which could be devoted to poverty alleviation.
10. The Currency Transaction Tax is supported
by the Canadian Government and the Finnish Government. The United
Nations is currently undertaking a feasibility study. The single
largest centre for currency transactions is the City of London
so the British Government has a major role to play in building
international support for the tax to be introduced.
Questions for the Secretary of State
Does the Government accept that spiralling
levels of currency trading inevitably create instability and an
environment that brings too many risks for developing countries
seeking to join the global economy?
Looking at Chile or India or China,
does the Government accept that unilateral currency controls imposed
by developing country governments, can provide a very useful form
of protection against the ravages of speculation and allowing
an emerging economy to attract greater long term investment?
Given that London is the location
of more currency exchange than any other country in the world
does the Secretary of State not agree that Britain should play
an active role in building international political support for
the introduction of a small tax on currency transactions?
War on Want