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World Bank takes major step on labour standards

World Bank takes major step on labour standards

Brussels, 13 December 2006 (ITUC OnLine): World Bank President Paul Wolfowitz announced yesterday that the Bank has now taken a decision that all infrastructure projects funded by it in future would have fully to respect the core labour standards of the International Labour Organisation (ILO). Wolfowitz conveyed the decision at a meeting with international trade union officials in Washington DC. Some US$8 billion worth of projects funded each year will come under the new requirements, which are aimed at ensuring workers' rights to trade union organisation and collective bargaining, freedom from discrimination in the workplace and the elimination of child labour and forced labour.

"This is an important step in the right direction, and we are pleased that the World Bank has now accepted our proposal. It reinforces the importance of fundamental workers' rights in the global economy, and shows that the other economic and finance institutions must also meet these standards in full", said ITUC General Secretary Guy Ryder.

The same standard has been applied by the World Bank's private-sector lending arm, the International Finance Corporation (IFC), since May 2006. The union delegation also met with the Executive Vice-President of the IFC, Lars Thunell, to discuss implementation of the labour standards.

During their meeting with International Monetary Fund (IMF) Managing Director Rodrigo de Rato, the union leaders raised serious concerns about the growing global influence of hedge funds and speculative private investment. De Rato responded by setting out the IMF's intention to increase research and expertise concerning the impact of hedge funds and financial speculation on real economic decision-makers, and emphasised the crucial importance of macroeconomic stability in establishing the basis for long-term, low-inflation economic growth.

The union delegation included representatives from 35 countries from all regions of the world, including ITUC affiliates, Global Union Federations and the Trade Union Advisory Committee to the OECD. They took part in three days of meetings with de Rato, Wolfowitz, IMF/World Bank Executive Directors and various other officials, to discuss the impact of the institutions' programmes on decent work and on labour conditions.

The trade union delegation pointed out serious inconsistencies at the World Bank concerning its treatment of Core Labour Standards and other labour issues. These included a World Bank report submitted last month to the government of China in which the Bank advised the government that it should not take seriously the question of "so-called "labour standards"". The union delegation reminded the Bank that wide-scale violation of the right to organize was taking place in China and was one of the root causes of the burgeoning inequality in that country. By advising China, an important Bank client, that it should avoid paying attention to the Core Labour Standards, the Bank was contributing to continued violation of the standards. The delegation also pointed to the negative impacts of Chinese lending overseas, since it is done in the absence of social and environmental standards, and in certain cases even involves forms of indentured labour.

ITUC General Secretary Guy Ryder criticized the World Bank and IMF for their continued use of the Bank's Doing Business publication as the template for its country-level policy advice and conditionality on labour market reform. "Doing Business defines almost all labour regulations - such as hours of work, minimum wages, advance notice of mass dismissals and protection against discriminatory practices - as undue impediments to "doing business"", he emphasised. "We call on the Bank to remove labour regulation from the mandate of the Private-Sector Development department responsible for the publication."

In response, World Bank Wolfowitz agreed that the methodology of the Doing Business publication would be reviewed, particularly with regard to the debatable proposition that firing workers easily was a positive element of business regulation. He undertook to look into the China report, and agreed that any suggestion that China need not respect workers' basic human rights was unacceptable.

Further discussions with the IMF and World Bank concerned the recently-expanded debt cancellation initiative for low-income countries, Bank support for workplace HIV/AIDS programmes and the steps both institutions claim to have taken to reduce economic policy conditions attached to loans and debt relief on questions such as privatization, trade liberalization and public expenditure limits. The union representatives welcomed progress in these areas and called on the institutions to accelerate the reduction of conditionality that, in some cases, had led to the Bank and Fund working at cross-purposes with the UN system and impeding attainment of the Millennium Development Goals, for example when governments are obliged to constrain social expenditures so as to respect IMF-imposed public-spending caps.

This showed the need for the IMF and World Bank to work with the ILO and other UN agencies in policy coherence initiatives, as proposed by the World Commission on the Social Dimension of Globalization, which both institutions have welcomed as have the ILO and other UN agencies. Additionally, the ITUC presented the IMF a paper showing how inappropriate policy prescriptions had driven several developing-country governments, with the support of trade unions in these countries, to avoid further borrowing from the Fund.

Both Wolfowitz and de Rato concurred with trade union condemnation of corruption as an impediment to development, and spoke of the role that trade unions can play in exposing and fighting such corruption.


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