The link between the multilateral trading system and labour standards

The link between the multilateral trading system and labour standards

Outline of the Community (European Union) legislation about The link between the multilateral trading system and labour standards


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Employment and social policy > Employment and social policy: international dimension and enlargement

The link between the multilateral trading system and labour standards

The European Union is exploring the prospect of discussions at the WTO on the link between the multilateral trading system and internationally recognised labour standards, while taking account of the fundamental principle of respecting the comparative advantage of developing countries.

Document or Iniciative

Communication from the Commission to the Council, of 24 July 1996, on the link between the trading system and internationally recognised labour standards [COM(1996) 402 final – Not published in the Official Journal].


The citizens of Europe and the political authorities cannot remain indifferent to infringements of human rights in the context of labour relations, which can take the form of the deprivation of fundamental freedoms (slavery, forced labour, exploitation of children or the prohibition of association and collective bargaining).

The European Union must seek to guarantee respect for fundamental freedoms that can bring about working and living standards corresponding to the level of economic development and the social structures of the countries concerned.

The Commission favours the adoption of a gradual approach based on fundamental human rights that would not undermine the right of developing countries to use their comparative advantage of abundant, cheap labour. The Commission believes that these questions should be broached within the World Trade Organisation (WTO).

The study begun in 1994 by the Organisation for Economic Cooperation and Development (OECD) on “trade, employment and internationally recognised labour standards” focuses on a series of universally recognised core labour standards: freedom of association and collective bargaining, elimination of exploitative forms of child labour, prohibition of forced labour, non-discrimination in employment. The study concludes that the economic effects of these standards are likely to be small and that they will not negatively affect the economic performance or the international competitive position of developing countries.

The International Labour Organisation (ILO) has set up a working group on the social dimension of liberalising international trade. Because of the difficulties encountered, the group agreed to suspend further discussion on whether to create a linkage between international trade and labour standards by introducing a social clause and a penalty mechanism.

At the Copenhagen Social Summit the heads of state and government throughout the world acknowledged that these core labour standards are best reflected by the ILO Conventions on the subject.

In the context of its new GSP (General System of Preferences) arrangements, the Union has introduced two types of autonomous measures:

  • possibility of withdrawing some or all of the preferences granted to countries which countenance slavery or forced labour;
  • “special incentive schemes” granting additional preferences to countries which so request and which comply with the ILO Conventions on freedom of association and the right to collective bargaining and on child labour.

At bilateral level, the cooperation agreements which the Union has concluded with non-Community countries cover economic and social cooperation: programmes of financial and technical assistance as regards education, the participation of women in economic development, etc.

Since 1992 it has also been necessary for every agreement concluded with non-Community countries to contain a clause on human rights. This clause refers to all rights, not only civil and political rights, but also to development, and to economic, social and cultural rights.

At multilateral level, the Commission emphasises the role of:

  • the ILO, which appears to be the most appropriate institution for examining issues relating to the promotion of labour standards;
  • the WTO, which is the natural forum for debating the links between trade and labour standards.

The ILO has mechanisms for monitoring the application of international labour conventions. However, none of its procedures involves the possibility of sanctions; the mechanisms in place have a moral impact (particularly on public opinion) but are not coercive. The promotion of labour standards will entail improving the ILO’s efficiency and upgrading its monitoring systems.

Any discussions within the WTO should have as their point of departure three significant aspects:

  • the convergence of the objectives pursued by the multilateral trade system and the promotion of labour standards;
  • a multilateral approach to respond to the emergence of unilateral trade policies linked to the promotion of labour standards;
  • the impact of the application of universal labour standards on international competitiveness, particularly in the case of developing countries.

The Commission proposes that the Council seeks to establish a working party, at the WTO’s Singapore Ministerial Conference from 9 to 13 December 1996, to investigate the link between the multilateral trading system and core labour standards.


Communication from the Commission to the Council and the European Parliament of 18 September 2002 entitled “Trade and development –” [COM(2002) 513 final – Not published in the Official Journal]

OECD study on international trade and core labour standards (1996, updated in 2000)

The study discusses the interaction between trade liberalisation and the application of core labour standards. It shows that countries that fail to comply with core labour standards do not enjoy a competitive advantage in international trade, do not attract direct foreign investment, and do not perform more effectively on the export front. Conversely, the study shows that more stringent core labour standards can stimulate economic growth and efficiency.

Conclusions of the Council of October 1999 on trade and labour

The Council highlighted the importance of the Singapore declaration and set out the Union’s position on trade and social development, with an eye to the WTO ministerial conference in Seattle in November 1999.

The EU has a duty to do more to help protect core labour standards and thus support the work of the ILO and cooperate with the WTO. The Union is firmly opposed to any approach which is based on sanctions and will oppose any initiative to use workers’ rights for protectionist purposes.

Ministerial declaration of the World Trade Organisation (WTO) in Singapore in 1996

The WTO supports the promotion of internationally recognised core labour standards and believes that economic growth and development fostered by increased trade and further trade liberalisation contribute to the promotion of these standards.

Relations between international trade and working conditions, particularly as regards the issue of sanctions, are a sensitive topic. The declaration therefore points out that the WTO rejects the use of labour standards for protectionist purposes. The comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question.

For further information, please consult the website of the World Trade Organisation.

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