5e Importance of Social and Environmental Clausing for a Sustainable Banana Industry by H Van Beek

8/8/2019 5e Importance of Social and Environmental Clausing for a Sustainable Banana Industry by H Van Beek

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International Banana Conference May 1998 Paper 5

5. The Importance Of Social And EnvironmentalClausing For A Sustainable Banana Industry

By Herman van Beek

1. Introduction

Bananas are the most important tropical fruit in world trade and the fifth most importantcommodity (after cereals, sugar, coffee and cocoa). World exports of banana's amounted to arecord level of 11.4 million tonnes in 1995, with an export value of over US $5 billion. And

banana exports will rise further. FAO projections show banana exports will rise to well over12 million tons in 1999, exceeding world import demand and putting a downward pressureupon world prices (1).The world banana market is an extremely competitive market dominated by only a few large

multinationals. The income of the banana trade is of vital importance to the export incomesof the banana exporting countries and to the incomes of the plantation workers and smallfarmers producing them. The main banana exporting countries are to be found in LatinAmerica. Ecuador, Costa Rica, Colombia, Panama and Guatemala together accounted for 66

percent of world exports in 1995. Outside Latin America only the Phillipines have a similarimportance with 9 percent of world exports in 1995.

The main importing countries are to be found among the rich industrial countries. The USAranks first with almost 29% of world imports in 1995, followed by Germany (10%), Japan(7%), Belgium-Luxemburg (6%) and France and the United Kingdom (both 5%). The EU asa whole accounts for 37% of the world's imports (2).

This structure of the banana trade has much to do with the character of the product and withpolitical factors. The perishable nature of the product and high transportation cost limitaccess to far away markets. Consumer demand is highly seasonal. The political situation in

producer countries is often unstable. All this tends to favor large vertically integratedcompanies like the multinationals which dominate the banana trade. The EU's trade policy inrecent years also favoured big business and was aimed at obtaining a larger world marketshare for the European companies.

The structure of the banana trade leads to a very unequal power relationship between tradersand big companies on the one hand and plantation workers and small farmers in producercountries on the other. These latter depend upon the banana economy for their livelihoodsand well-being. Independent banana farmers and co-operatives are used as a buffer by thelarge companies to dampen the fluctuations of the world market. Purchasing contracts aresuch that the small farmers become extremely vulnerable to world market prices. Workingconditions on the plantations in the producing countries have worsened under the impact ofextreme competition. Companies have been refusing to sign collective labour agreements.They have reduced salaries, increased the length of the working day, fuelled anti-unionfeeling, increased persecution of trade unionists and have abandoned plantations without

paying the appropriate social benefits to workers.(3)

The high productivity of the banana plantations has been reached at the cost of theenvironment. Excessive use of pesticides, overdoses of nutrients and the use of plastics inlarge quantities all contribute to the poisoning of the ecosystem and the creation of a largewaste problem. Needless to say that pesticides also create severe health problems to the

banana workers, who are often unaware of the dangers to their health and to the environment.


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Such are the social and ecological problems associated with the banana trade and production.To begin to solve these problems governments and companies alike will have to be made torespect social and ecological minimum conditions. A variety of strategies will have to befollowed to reach this goal. This paper is about one strategy, the introduction of social andecological clauses in the trade system, in world and regional trade agreements. Central to thisstrategy is the belief that social and an environmental clauses, guaranteeing basic

environmental and labour standards worldwide in the long term, must be included at theinternational level - in the world trade system, in the World Trade Organization (WTO) andin the General Agreement on Tariffs and Trade (GATT). A social and environmental clausein the WTO/GATT and its relevance to the banana sector, will be the subject of chapter 2.

However at this moment it seems unlikely -after the WTO Ministerial Conference inSingapore in December 1996- that such a clause will be included in the WTO/GATT in thevery near future. Given this situation the question arises what would be the most viablecourse in the short and medium term, contributing most to the ultimate goal of a social andenvironmental clause in the WTO. That question will be the subject of chapter 3. It will dealwith experiences with the social and environmental clauses in NAFTA and in the AmericanGeneralized System of Preferences (GSP), the social and environmental clause in the

European GSP and its possible consequences for the Lom treaty and the inclusion of a socialand environmental clause in a new European Banana Regime. In the same chapter attentionwill be paid to the proposed Multilateral Agreement on Investment (MAI), which is now

being negotiated by the Organization for Economic Co-operation and Development (OECD),and the way in which it may affect banana producing countries. Chapter 4 sums it all up.What course to take?

2. Social and Environmental Clauses and The WTO

2.1 Sustainable tradeIntroducing social and environmental clauses in the world trade system are one way ofmaking the banana trade more sustainable.(4) The concept of sustainabiltity has a relativelyyoung history. As 'sustainable development' it received broad acceptance after the publicationof the Brundtland Report in 1987. Social, ecological and economic concerns meet in thisoverarching concept, which holds that the needs of the present should be met withoutendangering the well-being of future generations. Trade, to be sustainable, should beconductive to social and economic development taking due account of social andenvironmental costs and of the preservation of the quality of the environment.

Sustainable development is part of the goals of the World Trade Organization, which wasfounded in 1994 at the end of the Uruguay Round of trade negotiations (see boxGATT/WTO). In the words of its preamble: "Recognizing that their relations in the field of

trade and economic endeavour should be conducted with a view to raising standards ofliving, ensuring full employment and a large and steadily growing volume of real incomeand effective demand, and expanding the production and trade in goods and services, whileallowing for the optimal use of the world's resources in accordance with the object of

sustainable development, seeking both to protect and preserve the environment and enhancethe means for doing so in a manner consistent with their respective needs and concerns atdifferent levels of economic development"

General Agreement on Tariffs and Trade (GATT) and World TradeOrganization

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High import duties characterized world trade immediately after the second world war. Inorder to promote trade the GATT was drawn up in 1948. Liberalized world trade wouldcontribute to prosperity and economic growth, as the preamble to the GATT stated.Successive negotiation rounds led to greatly reduced tariffs.

Non-discimination is the central principle underlying the GATT rules. This principle isembodied in the most-favoured-nation (MFN) treatment and in national treatment. MFNmeans that trade concessions granted for a specific product to a specific country will begranted "immediately and unconditionally to the like product originating in or destined forthe territories of all other contracting parties" (GATT, Article I.1). National treatment meansthat imported products are granted effective equality of treatment as compared with "like

products of national origin" (GATT, Article III.1 and 4).

Both concepts fall back upon the concept of 'like product'. This concept is a core concept ofthe GATT as it underpins the principle of non-discrimination. At the same time however it isthe most important hindrance in the GATT to make trade conditional upon the compliancewith labour or environmental standards. For 'like product' has generally been interpreted asreferring to the product as such, irrespective of the method of production. So-called non-

product-related Processes-and-Production-Methods (PPMs) may not be taken into accountunder present WTO-GATT rules and changing that principle is a trade-political question ofthe first order. The only cut-and-clear exception to this rule is included in GATT, Article XX(e), which allows for trade restrictions relating to the products of prison labour.

The Uruguay Round was the last negotiation round held under the GATT as it had functionedsince 1947. It ended with the foundation of the World Trade Organization (WTO) inMarrakesh on April 14, 1994. The WTO became the responsible organization for all mattersrelating to the GATT and to a number of other trade agreements resulting from the UruguayRound and from the foregoing Tokyo Round. With the WTO also a powerful disputesettlement procedure came into force, which includes the possibility of sanctions. The WTOstarted its work in January 1995. At the end of 1997 the WTO had 132 members. Two

unsolved questions were put on the agenda of the WTO, the proposals for a social clause andthe question of the relationship between trade and environment.

Anyone who concluded however from the wording of the goals of the WTO that it has a clearand broad conception of its task embracing both the relationship between trade andenvironment and between trade and labour standards, would be drawing the wrongconclusion. Both relationships have been the subject of heated debates inside and outside theWTO: should the WTO/GATT include a social and an environmental clause? In other words,should participation in the world trade system be made conditional upon the acceptance andapplication of basic labour and environmental standards?

Though labour standards and environmental standards have a different history and present

different problems in their application, the political debate on their linking trade rules has inboth cases been dominated by three interrelated issues.

First there is the issue of protectionism. This issue has been foremost in stimulatingopposition from developing countries. A social clause or an environmental clause, so theargument runs, would raise the cost of production by raising the costs of labour or ofenvironmental protection, thus endangering the position of developing countries on the worldmarket. Moreover, in the case of the environment, priorities in the South differ from those inthe North and there is a feeling that the North is trying to impose its own priorities byattaching new conditionalities to trade.

Secondly, there is the question of what the nature is of the relationship between development

and social and environmental standards. The economic philosophy underlying much ofconventional economic thinking on trade starts from the premise that free trade, by making

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full use of comparative advantage, will stimulate economic growth, thus creating the basiceconomic conditions upon which a sustainable economy may be built and in whichacceptable labour standards can be realized. From this perspective, linking environmental andlabour standards to trade could actually undermine the goal of development. This viewhowever abstracts from the global disparities in development. It does not take into accountthe negative effects of having to compete at any cost nor the associated problem, especially of

commodity producers, of how to pass on price increases which result from taking intoaccount and internalizing social and environmental costs.

The global disparities in development and therewith in economic and political power are alsoat the bottom of the third issue: national sovereignty. Social and environmental clausesviolate national sovereignty according to their opponents. This is an issue, around whichcountries in the south rally. The question of national sovereignty goes to the heart ofinternational trade rules. For the principle of non-discrimination between countries and

products can be considered as the central principle underlying the rules of the GATT/WTO(see box). Under this principle labour and environmental standards fall within the sovereign

jurisdiction of national states. Differently put the only conditionalities which countries atpresent have to accept to participate in the world trade system, relate to the principles of free

trade and these are harsh enough for most developing countries. The universal nature of thehuman rights embodied in fundamental labour standards and the global nature ofenvironmental concerns provide however strong arguments to introduce social andenvironmental conditionalities into the trade system.

2.2 The social clause

2.2.1 Content and argumentsProposals to link labour rights to trade have a long history and are at the origin of thefoundation of the International Labour Organization (ILO) in 1919. The intertwined

processes of globalization and trade liberalization have given a new impetus to the debate onwhat is generally called 'the social clause'.

A social clause may be defined as a set of regulations of social behaviour which governmentsand firms must observe to obtain certain benefits or not to run into economic sanctions.(5)Since the eighties proposals for linking labour standards and international trade have beenmade by among others the international trade union movement, the European Union and theUnited States. The desirability of core labour standards was high upon the agenda of the firstministerial conference of the WTO in Singapore in December 1996.

Social clauses have been introduced into a number of trade regulations and agreements.Important examples are the European and the American GSP (Generalized System ofPreferences) under which tariff preferences are made possible for products from developing

countries, the so-called side agreements to the North American Free Trade Agreement(NAFTA), and several international commodity agreements (6). The content of these socialclauses however ranges from very general declarations that (fair) labour standards will bemaintained, as is the case in the different commodity agreements, to the more strictly wordedclause based on ILO Conventions in the European GSP.

Though the content of these clauses differs, in recent years consensus has grown that a socialclause should be based upon a limited number of fundamental or core labour standards,which have the status of human rights (see box). The proposal of the InternationalConfederation of Free Trade Unions (ICFTU) from 1994 for a social clause in the GATTcontains all the elements of a social clause along these lines: "The contracting parties agreeto 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

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freedom of association and the right to collective bargaining, the minimum age foremployment, discrimination, equal remuneration and forced labour."(7)

2.2.2 Social clause: core labour standardsProposals for a social clause aregenerally based upon a selection of ILO conventions. Criteria for such a selection are thehuman rights character of a certain labour standard, the measure of acceptance and the

possible impact upon the competitive position of developing countries. Starting from thesecriteria consensus has grown that the following core labour standards should be included in asocial clause: freedom of association and collective bargaining (ILO Conventions 87 and 98),non-discrimination and equal remuneration (ILO Conventions 100 and 111), freedom fromforced and compulsory labour (ILO Conventions 29 and 105) and prohibition of(exploitative) child labour.

The ILO Conventions covering these standards have been broadly ratified, with the exceptionof ILO Convention 138 (minimum age employment), which contains a general prohibition ofchild labour. ILO Convention 138 (minimum age employment) for this reason iscontroversial in this respect. Conversely the elimination of all extreme and exploitative formsof child labour is broadly supported worldwide. The UN Convention on the Rights of theChild, adopted in 1989, obligates governments to protect children "from economicexploitation and from any work that is likely to be hazardous or to interfere with the child'seducation (...)" This convention is the most broadly ratified human rights convention. On the

basis of this general support the ILO is preparing a new ILO Convention on extreme forms ofchild labour to be adopted in 1998/1999.

The other core labour standards are included in the following human rights treaties. Therights to freedom of association and collective bargaining, equal remuneration, abolition ofchild labour and the right to work in just and favourable conditions, are part of the UNCovenant on Economic, Social and Cultural Rights and the UN Covenant on Civil andPolitical Rights contains the right to freedom of association and the prohibition of forcedlabour. Core labour standards rightly figure as fundamental human rights.

These core labour standards are also recognized as inviolable human rights by those who arenot in favour of a direct linking of trade and labour standards by means of a social clause. Forinstance in the Declaration of the World Summit in Copenhagen 1995, signed by 116countries these countries accepted the commitment to "(...)safeguard the basic rights andinterests of workers and to this end, freely promote respect for relevant International LabourOrganization conventions, including those on the prohibition of forced and child labour, the

freedom of association, the right to organize and bargain collectively, and the principle ofnon-discrimination" (Commitment 3(I)). Those basic rights were also included in theProgramme of Action adopted by the countries present at the Summit.

2.2.3 ProtectionismThe danger of disguised protectionism is a central issue in the debate on linking labourstandards to trade. It may be formulated as how to use the small margin between combattingsocial abuse on the one hand and, on the other, respecting comparative cost advantages ofdeveloping countries and hence their position on world markets (8). The core labourstandards mentioned above have been the subject of several studies in this respect. Twostudies done in the eighties concluded that none of these core standards would affect thecompetitive position of countries in the South by raising production costs to a level whichwould effectively impede their export performance (9). In the case of child labour thisconclusion referred to the application of ILO Convention 138. A recent report of the OECDcame -indirectly- to similar conclusions. It states that there is no evidence that low standardsare associated with good trade performance. Instead, if there is an effect, it is conceivable that

the observance of core standards would strengthen the economic performance of all countries(10). At the same time the OECD concluded that there is some evidence that the denial of

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core labour standards has been deliberately used by some governments to improve tradeperformance or to attract investment in export-zones. According to the OECD however, thesegains are likely to prove short-lived. In the long-term the economic costs associated with lowcore-standards are likely to outweigh any short-term gains.

2.2.4 DevelopmentFrom the OECD-report a cautious conclusion may be drawn that applying fundamentallabour standards increases economic efficiency and thereby may help development. A moredrastic conclusion may be drawn from another OECD study. This study identifies productquality, innovative capacity, flexibility, good design and organization as importantcompetitive factors (11). This makes it increasingly difficult to link gains in competitivenessto lower wages. Raising labour standards, not keeping them low, should increasingly be seenas the real source of competitiverness and growth through, among other things, increases inthe quality of labour (12). As the export markets of developing countries largely coincidewith the markets of the industrialized countries, the increasing demands for quality in thesemarkets are at the background of this change in competitive factors. This conclusion mainlyrefers to industrial products. However, similar quality factors are also present in commoditymarkets like the market for bananas.

Higher labour standards then -and not lower standardsare conductive to economicdevelopment. As they are to social development. But many (neo-liberal) economistsnevertheless reject the first conclusion on the basis of the supposedly negative effect ofhigher labour standards on the competitive position of developing countries. In so far as thisis true however, that argument can equally well be used as a decisive argument in favour ofinternational labour standards. For only if workers' fundamental rights are taken out of thecompetitive arena is it possible that countries who respect those rights are not put at acompetitive disadvantage (13).

2.2.5 Big countries, small countriesMany developing countries fear that upholding internationally agreed labour standards may

slip intointerference in their internal affairs. And very often they fear that the WTO will bejust another instrument for the rich OECD-countries to impose their will on the South.Violation of national sovereignty is in many ways the most important objection against asocial clause, especially when seen in the context of the existing inequality in economic and

political power between North and South. The economy of a developing country could Manydeveloping countries fear that upholding internationally agreed labour standards may slideinto be hurt disproportionally when trade sanctions would be imposed as a result of theviolation of labour standards. It follows that forcing a country at the negotiation table tochange its social and labour policies can only be justified in the name of universal rights. Butthe core labour standards which would be included in a social clause, are precisely that, as isshown by the broad ratification of the relevant ILO-conventions and their inclusion in themost important UN Covenants on human rights. And it is also true, as a Dutch minister of

foreign affairs stated at the Vienna World Conference on human rights in 1993: "Onlygovernments sometimes call into question the universality of human rights, not the people,and not the victims of violations." (14)

2.2.6 The social clause: summing up the argumentThough national poverty remains the main cause for low labour standards in developingcountries, higher standards may in themselves be an important condition for competitivenesson world markets and for economic and social development. This conclusion applies to thecore standards like freedom of association and collective bargaining, prohibition of forced(and bonded) labour and (exploitative) child labour and non-discrimination in employment. Itapplies much less to standards which relate directly to wages and working conditions becausethese may directly affect the cost of labour and therewith the position of developing countries

on the world market, instead of merely providing a mechanism to distribute the results oftrade and economic growth in an equitable way.

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The days when labour standards could be set by individual countries in completeindependence of what other countries do are long gone. International mobility of capital andthe growth of large multinational enterprises do severely limit the possibilities ofgovernments for independent action. As the Canadian expert on labour law, Brian Langille,

puts it, the problem is no longer avoiding a potential loss of sovereignty but wether to take an

opportunity to reclaim some measure of it: by deciding about the regulation of world markets(and participating in that decision process) at the level where such decisions belong, theinternational level (15).

However true this may be however, the inequality in economic and political power betweenstates should lead us to restraint. Especially, when enforcement of standards by sanctions isnot excluded. Only standards which are recognized as universal human rights may beenforced in such a way. This strengthens the economic argument to limit internationally setlabour standards to core labour standards.The issue then is primarily one of human dignity and human rights. Finding solutions should

be seen as a shared concern of all. Therefore a social clause should be accompanied by

measures which make clear that realizing these human rights for all, are part of a worldwidecommitment. There should be financial mechanisms to ease the implementation of labourstandards, mechanisms for technical co-operation, tariff preferences, consumer awareness andthe promotion of socially preferrable products (16).

Such a social clause at the level of the WTO would help -by posing social minimumconditions- in finding solutions for the social problems associated with the banana trade.

Nevertheless in the case of the banana trade the above minimum conditions should besupplemented with ILO Convention No. 110 (Social conditions and minimum labour lawsfor plantation workers) and ILO Convention No. 155 (Security and Health at work). Thishowever cannot be realized as part of a general social clause in the WTO. The only feasiblesolution would be if a separate commodity agreement applying to the banana sector would be

realized in which they could be included. Otherwise they can only be realized by promotingfair trade and by promoting corporate codes and collective labour agreements which containthese standards.

2.2.7 The social clause: enforcementProcedures to enforce such a social clause should exclude all possibilities for misuse for

protectionist purposes. The incorporation of a social clause in the WTO is in this respect ofimportance in itself as an instument against unilateral trade restrictions by countries referringto social standards. But in a large organization like the WTO there is a risk that a socialclause might be misused by the big countries. Therefore enforcement should satisfy theconditions of impartiality, step-by-step procedures and practicability (17)

In view of the position and experience of the ILO, monitoring of the labour standardsincluded in a social clause should be done by the ILO. Only when these efforts by the ILOhave no effect, would a breach of the social clause would be referred to the WTO. This wayimpartiality would best be guaranteed.Step-by step-procedures imply that a country which falls short of its obligations is grantedsufficient time to remedy the situation. The ILO would make recommendations to the countryconcerned and if necessary offer technical assistance and make additional resources availableto solve the problem. After an adequate period of time, but not longer than two years, thesituation would again be reviewed. Additional time could then be granted before the matterwould be finally referred to the WTO.

Trade unions and NGOs should have a right to complain. Such an approach enhances thepossibility of gaining insight into the application of labour standards and presents extra

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opportunities to exert pressure at an early stage, when it may still be comparatively easy toresolve the problem. Trade measures are in all respects a matter of last resort. This greatlydiminishes the possibility of misuse of the social clause for protectionist purposes.

2.2.8 The social clause: Singapore and afterIn December 1996, the first Ministerial Conference of the WTO took place in Singapore. Theconference attracted considerable attention, not least because of the controversial issue oflinking trade to labour standards. This debate ended in a compromise. The SingaporeMinisterial Declaration accepted by the conference, included a paragraph on labour standards.The WTO-members there renewed their commitment to the observance of internationallyrecognized labour standards. They declared the ILO to be the competent body to set and dealwith these standards and affirmed their support for the work of the ILO in promoting them.They stated as their belief that economic growth and development fostered by increased tradeand further trade liberalization would contribute to the promotion of labour standards. Labourstandards might in no way be used for protectionist purposes. The WTO and ILO secretariatswould continue their existing collaboration.

At first sight, this statement seems to close the door for a further consideration of the link

between trade and labour standards within the WTO, even though the relationship betweentrade and labour standards is, for the first time, recognized in a general way. Furthermore,although already, by the end of the Uruguay Round in 1995, under pressure from thedeveloped countries, a Committee on Trade and Environment (CTE) was set up to functionwithin the WTO, no such committee has been established on labour standards and trade.

However the Singapore declaration leaves undecided what is to be done should the ILOarrive at a strongly negative opinion on the aplication of fundamental labour standards by aWTO member. In a more general way it leaves open the possibility to formulate somegeneral connection between membership of the WTO and labour rights, for instance bymaking WTO membership conditional upon the recognition of fundamental labour standardsand the role of the ILO in monitoring these standards (18).

More generally still, the relationship of labour standards to trade and trade liberalization willcontinue to be an issue in the WTO due to continuing pressure by leading industrializedcountries, the surfacing of this issue in relation to WTO work on labelling and investmentand continued criticism of the WTO from consumer organizations, trade unions and otherconcerned groups (19).

To prove this continued interest of 'leading industrial countries', President Clinton explicitlyreferred to trade and environmental standards in the State of the Union Address in 1998: " Sowe should seek to advance worker and environmental standards around the world. It shouldbe part of our trade agenda." (20)

The last few years have seen a shifting from 'conventional economic wisdom', critical of theapplication of any labour standard, to seeing core labour rights as 'a good thing',economically as well as socially. In many ways the debate has moved on to the enforcementmechanism. Even though Singapore has shown the difficulties of introducing a social clauseas such in the WTO, the issue will not disappear from the international agenda. The'Singapore declaration' may yet lead to openings in the WTO (21). Labour rights may well beraised again at the next WTO Ministerial Conference in May 1998.

They will almost certainly be on the agenda of the 86th International Labour Conference inJune 1998. The ILO is preparing a proposal for a Declaration on workers' fundamental rights,

based on the consensus the international community has reached regarding the specialsignificance of the fundamental rights contained in the ILO. These include the Conventions

on freedom of association and collective bargaining, the abolition of forced labour, theprohibiton of child labour and on non-discrimination and equal remuneration. This

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Declaration would imply some extension of the present ILO monitoring system to countrieswhich have not ratified the core conventions included in the Declaration (22).

2.3 The environmental clause

2.3.1 Content and argumentsIn comparison with the social clause the issue of linking trade and environment has only arelatively short history. It was as recently as 1979 that the word 'environment' was used forthe first time within the GATT as a possible reason for trade barriers. Some of the mostimportant international environmental agreements, for instance the 1989 Basel Convention,which prohibits the export of waste, the 1989 Montreal Protocol on the reduction of ozone-depleting gases, the 1992 Convention on Biological Diversity, the 1992 FrameworkConvention on Climate Change and the 1994 Tropical Timber Agreement, date only from thelate eighties or the early nineties (23). Today there are about 200 environmental agreements(24). Most of these were concluded after 1970. Of these only a small number include the

possibility of trade measures, 17 in total (25). Instances of these are the Montreal Protocol,the Basel Convention and the 1975 Convention on Trade in Endangered Species (CITES). Itis not by mere accident that these three treaties deal with global environmental problemswhich in principle affect all countries and all people. And it is not accidental that these global

problems are to a large extent the side effects of unprecedented growth of the economies ofindustrialised countries in the latter half of this century.

2.3.2 DevelopmentThere is an important difference between environmental problems in the North and in theSouth. While the problems in the North result from economic growth, those in the Southresult from poverty. This link between economic characteristics and environmental problemsis the rationale for approaching development as sustainable development. But while the Northin principle has the resources to make economic growth sustainable, the South has not. At thesame time the necessity is pressing. For environmental degradation can undermine economicdevelopment, because it erodes environmental resources. And economic growth which causeslarge waste and pollution problems carries a heavy burden for the future.

Like higher labour standards, good environmental standards support development. And justas with labour standards the strong competition on world markets can induce developingcountries to lower their standards instead of promoting higher standards, simply in order toatract urgently needed trade and investment. But there the similarity between labour andenvironmental standards seems to halt. One difference relates to the non-availability in thecase of the environment of broadly accepted standards and of a standard-setting organizationlike the ILO.

Another, fundamental, difference has to do with the nature of core labour standards. Because

of their character of fundamental human rights, applying core labour standards creates theconditions which enable people to influence other labour standards. In this way core labourstandards create a mechanism for the gradual improvement of labour standards. Also, becauseof this, they do not directly and immediately influence costs but create conditions in whichsocial costs can be gradually internalized.

2.3.3 ProtectionismIn the case of environmental standards no such 'mechanism', based on interdependence ofstandards, exists. As there are no broadly accepted standards and target-lines, improvingenvironmental standards has to be done sector by sector and product by product, andgenerally will lead to higher costs. For this reason developing countries in general have not

been very enthusiastic about the environmental concerns of the North. Environmental

standards in their opinion lend themselves too easily to misuse for protectionist purposes.

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The fear of 'green protectionism' has been an important motive for developing countries tooppose linking trade and environmental standards.

2.3.4 The Rio ConferenceThe United Nations Conference on Environment and Development (UNCED), held in Rio deJaneiro in June 1992, seemed to offer a solution for this difference in approach betweendeveloped and developing countries. 'Rio' was a major attempt by the United Nations to putthe environment on the political agenda. The Climate Convention and the Convention onBiological Diversity were both signed during the Rio Conference. Other multilateralenvironmental agreements (MEAs), such as the Basel Convention and the Montreal Protocolwere included in Agenda 21, the vast work program for the 21st century approved during theconference. UNCED made it clear that environment and economic and social developmentcan no longer be regarded as isolated fields. At the same time UNCED underlined thenecessity of a partnership between countries in the North and in the South.

What since has been called the 'Rio Bargain' took into account the different priorities andinterests of the industrialized countries and the developing countries. Trade was part of this'Rio Bargain', which included the opening up of protected markets in the developed

countries, a better functioning of commodity markets, increased flow of official developmentassistance, facilitated technology transfer, action on debt and helping build capacity indeveloping countries to foster sustainable development (26).

Much of this has not been realized and, just as in the case of the social clause, progress wouldbe greatly faciltated if the rich, industrialized North would keep their part of the bargain.Until now liberalization in the conventional economic sense of the word has taken precedenceover sustainable development as envisaged in Agenda 21.

Part of the 'Rio bargain' was an agreement to counter 'green protectionism' by a strongcommitment against using unilateral Trade-Related Environmental Measures (TREMs) and

by a commitment instead to seek international consensus on issues of shared concern. The

legitimacy of different environmental policies and standards in different countries wasrecognized as part of the principle of subsidiarity: Environmental standards, managementobjectives and priorities should reflect the environmental and developmental context towhich they apply (Rio Principle 2). Because resources and environmental conditions mayvary, countries should not use TREMs to discriminate against products from countries withlower standards.

At the same time, Rio opens a vista on a world in which states co-operate to promoteeconomic growth and sustainable development in all countries: Nation states should

promote the internalization of environmental costs and take into account that the pollutershould, in principle, bear the cost of pollution (Rio Principle 16). Environmental measuresadressing transboundary or global environmental problems should, as far as possible, be

based on an international consensus (Rio Principle 12). International standards for theprotection of the environment should be promoted through the gradual development ofuniversally and multilaterally negotiated agreements or instruments (Agenda 21 39.3(d)).Thus, if Rio could be made effective, in combination with an effective social clause,sustainable trade would come a good deal nearer.

2.3.5 'Legitimate' environmental measures'Rio' has, however, by no means been realized since 1992 (27). What has been realized is

protection from the use of unilateral TREMs. The dispute settlement mechanism, introducedwith the WTO, in combination with the customary narrow interpretation of the concept of'like product' in the GATT (see box GATT/WTO above) form an effective barrier againstunilateral TREMs. At the same time of course they also form an effective hindrance against

making trade more sustainable. For under WTO/GATT-rules a country may not restrict orotherwise regulate imports of a product on the grounds that it has been produced with low

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standards, be they low environmental standards or low labour standards. At first sight theGATT seems to offer several possibilities which arouse other expectations. Theenvironmental exceptions bear upon GATT, Article XX (b) and (g) concerning measures"necessary to protect human, animal or plant life or health" and measures "relating to theconservation of exhaustible natural resources."(28) But these provisions have been generallyvery narrowly interpreted. The have come down to meaning that a country may take trade

restrictive measures if a product itself brings environmental or health effects with it, providedthat such import-measures respect the non-discrimination and national-treatment principles ofthe GATT. In short they must apply to foreign and domestic products equally and relate toeffects in the country which imports these products. In no way a country may punish at its

border goods which were produced in a way which degrades the environment in the countryof origin. Similarly, clauses comparable to GATT, Article XX (b) and (g) in the Agreementson Technical Barriers to Trade (TBT) and on Sanitary and Phytosanitary Measures (SPS)(which are both incorporated into the WTO-Agreement) are interpreted in this narrow way.

Realizing sustainable trade while at the same time implementing the Rio commitment tocounter 'green protectionism' would presumably start with efforts in the WTO and ininternational environmental regimes at all levels to distinguish between 'green protectionism'

and 'legitimate' environmental measures (29). This is all the more necessary because thedistinction between 'multilateral' and 'unilateral' is not all that clear as soon as MEAs are inthe picture. In the case of MEAs there is the problem of what is called 'free riders'. Countriesthat remain outside a MEA can reap a sizeable profit. Including trade sanctions in an MEAcan make the MEA more effective in such a case. But how many countries have to sign anMEA before it is 'multilateral'? (30) To deal with questions like these a solution within theWTO/GATT has to be formulated on the conditions under which trade measures relating tonon-product PPMs will be allowed.

2.3.6 The environmental clause: summing up the argumentSustainable development, as we noted above, is part of the goals of the WTO. In practicehowever the trade rules incorporated in the GATT and other treaties which fall within the

scope of the WTO are a hindrance instead of a help in reaching this goal.

Just as, in the case for labour standards, national poverty is at the root of low environmentalstandards, so it is also true that good environmental standards are necessary for development.What is 'good' may differ for different countries and circumstances but harmonization ofPPM standards is a necessary goal in all those instances where the scope of the environmentaldegration is such as to have transboundary and global effects. But also in the case of morelocalized environmental damage there can be strong arguments to harmonize PPMs at leaston a minimum level, i.e. in all those cases where international trade and competition warranta floor to prevent 'a race to the bottom'.

To make environmental standards effective the possibility of trade measures must exist.

These may be negative 'sticks' like trade sanctions, higher tariffs or countervailing duties(31), but also positive 'carrots' like reduced tarifs for products which are produced in anenvironmentally (or socially) sound manner32 or remitting tariffs for products so produced.With the exception of measures taken in the framework of the so-called Generalized Systemof Preferences (GSP)(see below) these types of trade measures are not allowed under the

present GATT/WTO rules.

An environmental clause in the GATT/WTO is necessary then to allow trade measures basedon non-product-related PPMs. This clause cannot consist of a summing up of basic standardslike the social clause but should stipulate the conditions and procedures under which suchtrade measures are allowed. Instead of expanding or adjusting the different relevant articles inthe GATT and other WTO Agreements this clause could be worked out in a new 'Agreement

on Trade and the Environment' (33).

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As with the social clause such an environmental clause would be of importance to theenvironmental problems in the banana sector. However, much more than in the case of thesocial clause, which bears upon specific fundamental labour rights, the significance of suchan environmental clause in the WTO lies in its stimulating character creating favourableconditions for specific agreements and standards. Like in the case of those labour standardswhich are of particular importance in the banana industry (ILO Conventions 110 and 155) the

specific environmental standards required for a sustainable banana production could only bedealt with -if feasible- in a separate commodity agreement for the banana sector.

2.3.7 The environmental clause: Singapore and afterFor the environment the WTO has a separate committee, the Committee on Trade andEnvironment (CTE). Though the CTE has fairly broad terms of reference, including "to makeappropriate recommendations on whether any modifications of the provisions of themultilateral trading system are required" it has in fact pursued a rather narrow technicalagenda. Also the scope of the CTE's work is limited to trade and those trade-related aspectsof environmental policies which may result in significant trade effects for WTO members.The other side of the coin, the environmental effects of trade policies, is not included in theCTE's work.

This is the explicit recognition of the fact that the WTO should not become an environmentalagency. And as many would agree the WTO in isolation is not the right place to addressissues of sustainable development. But precisely because of this, to reach solutions for thecomplicated interrelationships between trade and environment, the WTO will have to interactwith the international organizations which work in the field of environment (for instance theUN Commission on Sustainable Development (CSD), which monitors the implementation ofAgenda 21 and of the treaties signed in Rio, the United Nations Environmental Programme(UNEP) and the United Nations Conference on Trade and Development (UNCTAD)).

The CTE has made use of environmental experts from member-governments but on animportant subject like trade measures in the framework of MEAs the relationship with other

bodies, for instance the secretariats of the MEAs in question, has only been indirect. Progressof the CTE has been very limited. In the report which the CTE has brought out in 1996 onthe first two years of its existence no recommendation of import was included (34). Progresstherefore in the field of Environment and Trade is slow and the Singapore MinisterialDeclaration restricted itself in this field to a general reference to the breadth and complexityof the CTE's work programme.

2.4 Conclusion

The liberalization of world trade has led to strong competition on world markets and has beenaccompanied by growing inequalities between countries and people. The banana trade and

industry have been no exception to this rule. The potential benefits of trade liberalization -promoting growth and development by a better and more efficient allocation of resources -have been undermined on the one hand by the remaining protection of the markets ofdeveloped countries against products from developing countries, and on the other hand by alack of awareness that the new liberalized global market cannot regulate itself to the extentthat it sets itself the basic standards which determine its own functioning. The lack of a link

between trade and labour and environmental standards leads to competition betweencountries not only in products but also in these 'standards'. And while this competition in

principle could be one of finding those - generally higher - labour and environmentalstandards which induce development, this long-term-perspective is in practice overruled bythe short-term need to attract trade and investment, that is by competition based on lowstandards.

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Therefore the rules of world trade should include fundamental labour standards andminimum-environmental standards. A social and an environmental clause should be includedin the WTO/GATT. The social clause should be based on the core labour standards identifiedabove: freedom of association and the right to collective bargaining, prohibition of forcedlabour, prohibiton of child labour, non-discrimination and equal remuneration.Implementation of the social clause should be done in close co-operation between the WTO

and the ILO. The supervison of a social clause in the first instance should be entrusted to theILO. The WTO would only be involved if after an adequate period of time problems wouldnot be resolved and a country would refuse to co-operate. Than as a matter of last resort tradesanctions could be considered.

The environmental clause should be based on an agreement within the WTO/GATT on theconditions and procedures under which trade measures would be allowed which are based onthe environmental effects of the way in which a product is produced (non-product relatedPPMs). The standards themselves and their enforcement would in the first instance beregulated in the context of multilateral environmental agreements (MEAs). MEAs should notonly deal with global environmental problems or with regional transborder problems, but alsowith the minimum standards necessary from the viewpoint of sustainable trade.

Such a social clause and such an environmental clause would be of fundamental importanceto find solutions to the social and environmental problems in the banana sector. However thespecific environmental standards for the banana sector and additional labour standards (ILOconventions on plantation workers and on security and health at work) can only be dealt within a separate commodity agreement for the banana sector. The feasibility of such anagreement falls outside the scope of this paper.

Both the social and environmental clause in the WTO/GATT have been the subject of intensedebate. The ministerial conference in Singapore in 1996 did not solve either question. Theyare still on the agenda.

3. Examples Of Social And Environmental Clauses: PossibleImplications For The Banana Trade

3.1 Introduction

By now some experience has been gained with social and -to a lesser extent- withenvironmental clauses in trade agreements and in regulations outside the GATT/WTO.Environmental clauses, used in a broad sense, fall into two categories. First there are themultilateral environmental agreements which include trade measures, like for instance theMontreal Protocol on ozon-depleting substances or the Basel Convention on hazardous

waste. So far no trade measures have been taken under this type of treaties nor has this typeof accords been challenged under the WTO. Because of this, we will leave this type ofenvironmental clause aside.

Secondly, there are environmental clauses, together with social clauses, included in the sideagreements to the North American Free Trade Agreement (NAFTA) and in the EuropeanGeneralized System of Preferences (GSP). The American GSP also includes a social clauseas does the Carribean Basin Initiative (CBI) which provides additional trade preferences toselected Carribean and Central American countries.

Then there are the social clauses included in a number of commodity agreements. TheTropical Timber Agreement contains an environmental clause.

We will first go into the experience with the social and environmental clauses in the NAFTAside agreements, which have a special character. Then the GSP will be discussed. The GSP

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merits special attention because of its special position in the GATT and because of theimplications the European GSP can have for the Lom Convention and the European BananaRegime.

3.2 North American Free Trade Agreement (NAFTA)The North American Free Trade Agreement (NAFTA) between the United States, Canadaand Mexico, came into force in 1994. Sold on the basis that it would bring a substantialexpansion of US exports to Mexico and would boost Mexico's economic growth, scarcely ayear after NAFTA came into effect, in 1995, Mexico was in the midst of the worst economiccrisis in decades and US exports to Mexico went down. Understandably comments on theexperience with Nafta have been wry. But there are those who take a more optimistic view.Weren't US exports to Mexico far less affected than European or Japanese exports, thanks to

NAFTA? (35) The growth of trade which in fact was realized under NAFTA, is often seen asa direct threat to jobs in the US. This fear as well as concern with environmental and labourconditions in Mexico, was at the background of the inclusion of a social and environmentalclause in NAFTA.

Pressure from the American trade union movement, social movements and environmentalorganizations led to the conclusion of the Labour and Environmental Side Agreements to

NAFTA. The two side agreements, which were signed in August 1993, were critical forgaining approval of NAFTA in the American Congress. Under the terms of these agreements,tariffs can be re-established in the event of violation of labour or environmental standards.

The principle followed however is different from that in the the social and environmentalclauses as outlined above and different from the clauses in the GSP, whihc we discuss below.

No common minimum standards are established under the side agreements. The NAFTA sideagreements make the domestic legislation of each of the NAFTA participating countries thestandard for their own territory.

The labour agreement, whose official title is the North American Agreement on Labor Co-operation (NAALC), only enumerates guiding principles that should inspire domestic law inthe participating countries: freedom of association and collective bargaining, the right tostrike, prohibition of forced labour, labour protection for children and young people,minimum employment standards, i.e. minimum wage and remuneration of overtime,elimination of employment discrimination, equal pay for women and men for equal work inthe same establishment, prevention of occupational injuries and illnesses and protection ofmigrant workers.

The emphasis in the NAALC then is on guaranteeing that each member country applies itsown labour laws in a transparant and reliable way. A Commission for Labor Co-operation has

been established which oversees the implementation of the Agreement. Also, as part of theNAALC, in each country a federal government level office was created, called the NationalAdministrative Office (NAO), at which complaints about non-enforcement of labour lawhave to be addressed.

The NAALC provides only for relatively light financial penalties as a matter of last resort.And these sanctions apply only in case of violations in the area(s) of workplace health andsafety, child labour or minimum wages, not for instance in such a crucial area as the freedomof association and the right to organize. Until 1997 under the NAALC five public reviews ofcomplaints of labour violations had been completed. Four of these centered upon labourrights violations in Mexico. None of the workers in these complaints -more than 200 in total-was reinstated or compensated (36).

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The environmental agreement, the North American Agreement on Environmental Co-operation (NAAEC) rests on the same principles as the NAALC. This agreement, in theory,has more teeth as it includes the possibility of tariff penalties as well as financial penalties.Under the treaty three institutions were established. The Commission on Environmental Co-operation (CEC) promotes joint projects on environmental issues and hears complaints. The

North American Development Bank (NADBANK) was created to design and finance

environmental infrastructure projects. Mexico and the US established the BorderEnvironment Co-operation Commission (BECC) in view of the environmental degradation inthe maquiladora regions. The results have thus far been disappointing. NADBANK forinstance proved to be ineffective, mainly because of the complicated procedures required forthe approval of loans. Of the 10 complaints filed at the CEC during the first three years, not asingle one led to enforcement orders against a NAFTA government.

The significance of the NAFTA side agreements lies in the inclusion in a multilateral treatyof a social and an environmental clause. This in itself is a recognition of the need to linksocial and environmental conditions to trade. The principle on which these agreements are

based -domestic law of the participating countries instead of common minimum standards-together with the weak enforcement mechanism make that the effect of these clauses has been

less than satisfactory.3.3 The American and European Generalized System ofPreferences

Under the Generalized System of Preferences (see box GSP) tariff preferences are grantedunilaterally by the industrialized countries to developing countries. In the GATT the GSPrests on the Enabling Clause, which not only allows for the GSP but also for other

preferential schemes like the American 'Caribbean Basin Initiative (CBI)' (37). Because of theautonomous character of the GSP and related schemes they offer the possibility of theintroduction of social and environmental clauses. Both the US and the European Communityhave made use of this possibility in their GSP schemes.

3.3.1 American GSP and Carribean Basin Initiative (CBI)The US GSP allowsduty-free access for a number of products from developing countries. Since 1984 adeveloping country is not eligible under this arrangement, if it has not taken or is not takingsteps to afford internationally recognised workers' rights to workers in the country, includingany designated zone (i.e. export processing zone) in that country. These rights include theright of association, the right to organize and bargain collectively, a prohibition on any formof forced or compulsory labour, a minimum age for the employment of children andacceptable conditions of work with respect to minimum wages, hours of work andoccupational safety and health. These rights however are not based upon the relevant ILOConventions but upon separate US formulations, the reason being that the US has not ratified(all of) the ILO Conventions involved.

The Generalized System of Preferences (GSP)In 1968 the United NationsConference on Trade and Development (UNCTAD) adopted a resolution on a GeneralizedSystem of Preferences (GSP). The proposed GSP contained rules for the granting of trade

preferences by developed countries to developing countries. These trade preferences would bebased on the recognition that in view of the unequal position of developing countries in worldtrade, nonreciprocal trade preferences by the developed countries were warranted. The GSPwould serve three objectives:

to increase export earnings of developing countries; to promote their industrialization;

to accelerate their rates of economic growth.

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To enable the introduction of the GSP the GATT principles of MFN and non-discriminationwould either have to be adjusted or waived. In 1971 a temporary waiver was granted for a

period of 10 years. The countries of the European Community were the first to make use ofthis waiver by adopting a GSP, followed by other countries. The US adopted a GSP in 1974.There are now 14 GSP schemes in operation offered by 29 preference-giving countries,including the member states of the European Union.

With the so-called Enabling Clause of 1979, negotiated during the Tokyo Round, the GSPbecame part of the GATT itself. However, unlike the intentions of UNCTAD, the GSP didnot become a binding part of the GATT. The GSP kept the character of a unilateral favor,which developed countries could grant to developing countries, but were not obliged to grant.Moreover, preferences would be temporary in the sense that they would be gradually adaptedto the economic development of the countries that received them. This is the principle of'graduation' under which for instance countries like India and Pakistan have lost their trade

preferences on textiles in the European GSP.

A social clause has also been introduced in the Carribean Basin Initiative (CBI). The CBIbecame law in 1983. It provides -under certain conditions- for additional trade preferences toselected Carribean and Central American countries. The social clause in the CBI washarmonized with the workers' rights criteria in the GSP in 1990.

The social clauses in the GSP and the CBI are based on a negative conditionality: preferencesare withdrawn if a country does not comply with the social clause. Part of the supervisonsystem is a complaints procedure which opens up the possibility to individuals as well as toorganizations in the USA to request a public hearing to review the status of labour rightsamong beneficiary countries. Trade unions and human rights organizations have regularlyused this possibility. In the first ten years of the social clause in the GSP 28 out of 34countries against which complaints have been made, have introduced important reforms intheir labour legislation. On the balance the GSP social clause seems to have had positiveeffects on the improvement of labour standards.

3.3.2 European GSPSince 1971, the European Community has conceded preferential tariffs in respect ofindustrial and agricultural products to developing countries. In view of the complexity of theEuropean GSP (resulting from the abundant use of quantitative restrictions in the case ofsensitive products) which made the GSP less effective, the EC decided to revise it.

The new, revised European GSP for industrial products was put into force in 1995 for theperiod 1995-1998. The revised European GSP for agricultural products came into effect July1, 1996 and remains valid until June 30, 1999. The number of agricultural products covered

by the agricultural GSP was much enlarged. At the same time all quantitative restrictions

-quota, ceilings and thresholds- were abolished and replaced by tariffs.

Under the rules of the GSP, products from the least developed countries may be importedfree of duty into the countries of the EC. Tariffs for products from other developing countriesare reduced by preferential margins varying from 15 to 65 percent, depending upon thesensitivity of imports for European agriculture and industry.

Social and environmental clauses were introduced in both revised GSP schemes. They wouldbecome applicable as from 1998, after the European Commission would have worked outproposals for their implementation. Unlike the American GSP, the European GSP works withpositive incentives and unlike the American GSP the social clause is based on ILOConventions. The social clause offers extra preferential margins for products from countries

that request them and which can show that they have adopted and are effectively applying theILO Conventions 87 and 98 on freedom of association and collective bargaining, and

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Convention 138, concerning minimum age for admission to employment. The social clauseextends to all industrial and agricultural products. The environmental clause in the GSP forindustrial products offers additional preferences for tropical wood products to countriescomplying with the criteria of the International Tropical Timber Organization (ITTO); theenvironmental clause in the GSP for agricultural products extends to all agricultural productsfrom countries applying international environmental agricultural standards.

Since 1995, the European GSP also includes a negative clause: preferential tariffs may bewholly or partially withdrawn when countries practice any form of forced labour as definedin the ILO Conventions 29 and 105. This clause entered into force immediately. Under thisclause GSP tariff preferences for Burma have been withdrawn.

On 29 October 1997, the European Commission came up with proposals for theimplementation of the social and environmental incentive arrangements (as the Commissioncalls these clauses). According to these proposals preferential margins for industrial productsfrom countries fulfilling the conditions, will be doubled and preferences for agricultural

products will be increased by two thirds (38). Countries graduating from the GSP would stillbe offered a preferential margin of 25% if they fulfil the conditions.

The proposed monitoring method consists of the provision of detailed information onrelevant legislation, its implementation and results, obtained by the country requestingadditional preferences under the incentive arrangements. The Commission would also reservethe right to visit the country in question and consult any person or organization likely to helpin its research. When considering the request, the Commission may decide not to grantadditional preferences to certain sectors. The requesting country must guarantee that allexporters and producers comply with the standards and that appropriate monitoringarrangements have been introduced. As the Commission admits, the monitoring system willstill rely on confidence in the governments of benificiary countries, as well as on close co-operation with them.

Since the European Commission made its proposals, discussions have been time consumingand difficult. Until now they have not led to consensus. The special incentives still have to beintroduced.

3.4 Implications of the European GSP: Lom and the EU bananaregime

Three different developments coincide, though the time scales differ: the implementation ofthe social and environmental clauses in the European GSP, the revision of the Lom treatyand the introduction of a new European banana regime. The fourth Lom treaty, which has

been in effect since 1990 (and has been revised in 1995) has been concluded for the period1990-2000. Preparations for a new Lom treaty started with the Green Paper of the EuropeanCommission in 1996. October 1997 the European Commission adopted political guidelinesfor the negotiations on a new Lom treaty, which will start in 1998.

The changing international relations, the start of the WTO and the changing European Unionall tend to make this renewal of the Lom treaty more fundamental than earlier renewals. Ofthe many complicated questions which play a role, only two have to be mentioned here:

the future relationship between trade preferences granted under Lom and GSPpreferences;

the future of the banana protocol.

3.4.1 Lome and the GSP: extension of the social clause

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Seventy African, Caribbean and Pacific (ACP) nations have signed the Lom treaty. Underthe Lom treaty they receive preferential acces to the European market. Lom preferences aremuch more favourable than GSP preferences. For most products from Lom countries there isa zero-tariff, no import duties have to be paid. Only for a number of agricultural productsthere are exceptions. For the commodities sugar, rum, banana's, beef and veal, there areseparate protocols.

The Lom preferences are nonreciprocal like the GSP preferences, but because of thecomposition of the group of Lom countries, which is based on historical and politicalgrounds and not on economic grounds, Lom is not covered by the Enabling Clause. Thetrade arrangements of Lom rest on a special GATT-waiver.

The European Commission in its Green Paper and in its recent political guidelines has takenthe position that the trade preferences granted to the ACP countries have lacked effectiveness.Therefore the future relationship between the countries of the EU and the ACP countriesshould be based more on reciprocity than has been the case thus far. In fact the EuropeanCommission in its guidelines of October last, proposes an overall EU-ACP Agreement and aseries of arrangements with regional sub-groups providing for varying degrees of reciprocity

and suitable timetables. In other words the objective is the gradual realization of completereciprocity in the long term, involving equal access of European and ACP countries to eachothers markets. For the least-developed countries (LLDCs) however, the presentarrangements would be maintained and even extended.

The proposed way ahead consists of the conclusion of economic co-operation agreementswith regional subgroups. These agreements should help to increase the competitiveness of theACP economies. They would be combined with regional preferential trade agreements, theidea being that the preferences so agreed would be gradually replaced with free tradearrangements with the countries of the EU. The preferential trade agreements would have to

be compatible with WTO rules and with the Common Agricultural Policy (CAP).

Compatibility with WTO rules will not be easy to attain, for in that case the preferential tradeagreements would have to be in line with the Enabling Clause, which poses on the regionallevel the same problem of selectivity as there is for the present group of ACP countries. So anew Lom treaty probably will have to rest on one or more special waivers, like the one forthe present treaty.

The same probably will be true for the different protocols when they are included in the newtreaty. For these protocols distinguish between ACP countries among each other and betweenACP countries and others. They will either rest on the waiver(s) needed for a new Lomtreaty or have to rest on separate waivers.(39).

With these proposals of the Commission the option of a gradual integration of the ACP

countries in the GSP, which was one of the options in the Green Paper, has been taken off thepolitical agenda. Still, two aspects remain of importance.

LLDCs: The first concerns the extension of the Lom preferences to the least-developedcountries which are not members of the present Lom treaty. The European Commissionin January has made a proposal to harmonise the trade preferences for the LLDCs in theGSP with those in the Lom treaty. A next step would be to have these LLDCs become

parties to a new Lom treaty.

Social clause: There are strong arguments for the inclusion of a GSP-type social clause inthe new Lom treaty. For implementing the social and environmental clause in the GSPand at the same time differentiating among groups of ACP countries in the framework of a

new Lom Convention, implies a danger of trade discrimination between comparablecountries which fall under different trade regimes, GSP or Lom. Also there would be two

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'offices' for ACP countries for (extra) preferences. Harmonization between a new LomConvention and the GSP, implying the inclusion in Lom V of a social and environmentalclause along the lines of the GSP, would be the answer to this problem.

3.4.2 Lome Banana protocol and the EU banana regimeWhat will be the future of the banana protocol? In the event of a new Lom treaty along thelines of the policy guidelines of the European Commission, this may eventually have theconsequence that preferences in their present form would disappear. What form they wouldtake would probably depend on the regional agreements to be concluded in the framework ofLom V. If -in view of the character of the product and its sensitivity- a separate banana

protocol remains it would almost certainly need a waiver.

For a new banana regime the foregoing discussion on the social and environmental clause inthe GSP and the possible inclusion of a similar clause in a new Lom treaty, leads to theconclusion that there are good arguments to introduce a social and environmental clause in anew banana regime, as long as such a clause would be similar to the GSP clause. Thus amore uniform conditionality of access to the European market would be created.

However, the GSP clause in essence deals with additional tariff preferences and not with thecreation of an additional fair trade quota as has been the central idea in the proposals for a fair

banana trade. A purely tariff oriented social and environmental clause in a new bananaregime would have only limited significance, the more so because of the limited conditions ina GSP-type clause. Even so recognition of the principle of a social and environmental clauseis in itself important.

A question of central importance is if a fair trade quota could be realized as part of a socialand environmental clause. To what extent the precedents of a clause in the GSP and possiblythe Lom treaty can serve as precedents for a 'fair trade quota'-clause in the banana regime?Possibly they could, even though the GSP is in essence a sytem for tariff preferences. If not,such a quota regulation probably would have to be part of a special waiver for the banana

protocol.

3.5 Multilateral Agreement on Investment (MAI)

After the successive rounds of trade liberalization of the last decades, the attention ofgovernments and transnational corporations is now shifting towards facilitating foreigninvestment. Investment as an issue is of growing importance in the international politicalarena. In 1995, the same year the WTO started its work, the Ministerial Council of theOrganization for Economic Co-operation and Development (OECD) authorized negotiationsto begin on a Multilateral Agreement on Investment (MAI). Apparently the OECD meant

business and wanted a quick decision, for the original deadline of the MAI was May 1997.

This however proved too ambitious and a new deadline was set for April 1998.

The OECD, which has a forum-function for its 29 member-countries40, has formulatedinvestment rules in the past. The now proposed MAI builds on the 1976 Declaration andDecisions on International Investment and Multinational Enterprises. In fact it contains acomplete revision of the 1976 Declaration implying a far-reaching liberalization ofinternational investment.

At first, negotiations on the MAI attracted little attention, even though they were followdclosely by a number of NGOs, trade unions and national parliaments. Only since 1997 has a

public debate started. Environmental NGOs, especially in the USA, Canada and the UK, havestrongly criticized the MAI, because of the large freedom it gives to multinationals and the

lack of incorporation of the guiding principles of relevant international agreements like theRio Declaration and Agenda 21. Trade unions together with NGOs have criticized the MAI

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for the lack of provisions on the safeguard of labour rights. Developing countries, which areoutside the MAI negotiations, have been strongly suspicious because its terms maysubsequently be imposed upon them in possible future WTO negotiations. For the MAI, as itnow stands, will severely limit the possibilities of governments to set performancerequirements to foreign investors.

What then is the MAI about? In the words of the OECD the MAI will "set high standards forthe treatment and protection of investment, go beyond existing commitments to achieve ahigh standard of liberalisation (...), be legally binding and contain provisions on itsenforcement, apply these commitments to all parties to the MAI at all levels of government(...)."

These objectives must be put in the context of the (very) wide definition of investment in theMAI. In fact investment in the MAI encompasses direct investment and portfolio investment,including banking, insurance and financial and other services.

As in the case of the GATT non-discrimination, embodied in the most-favoured-nationtreatment and in national treatment, is the guiding principle. In the case of investment the

consequences of a consistent application of this principle are even more far-reaching than inthe case of trade. This is because sectors of the economy which would not be affected in anyway by the principles governing international trade for the simple reason that they producefor the domestic market, will have to reckon with the MAI rules. National treatment forinstance implies that even a local government could not favour contracting local businessabove foreign companies. In the banana case the position of companies like Chiquita or Dolewould be greatly strengthened if banana producing countries would accede to the MAI.

Unlike the WTO, where only declared sectors are covered by an agreement (bottom-upapproach), the MAI will extend the principle of National Treatment to all economic sectors,except those that are explicitly excluded. The MAI uses in addition the 'standstill' and'rollback' principles, which have as a consequence that governments, once they have signed

the agreement, will not be able to add non-conforming measures. The only way open will beto further liberalize.

As in the case of the WTO a strong dispute settlement procedure has been worked out. Butdifferently from the WTO, this procedure is not limited to disputes between governments.Investors may also open a dispute under the MAI against a government. Transferred to tradethis would mean that Chiquita would have been able directly to address the European Unionin a dispute on the European banana regime. This further limits the possibilities ofgovernments to go against the will of large multinationals. How many lawyers could thegovernment of Costa Rica bring to the field against the lawyers of Chiquita or Dole?

In many ways the heart of the MAI lies in the limitations set to performance requirements by

national governments. The MAI prohibits governments from requiring investors (amongother things) (41):

to export a minimum or maximum level percentage of goods or services; to achieve a given level or percentage of domestic content; to purchase, use or accord a preference to goods produced or services provided in its

territory, or to purchase goods or services from persons in its territory; to relate investment in any way to the volume or value of exports or to the amount of

foreign inflows associated with investment; to transfer technology, a production process or other proprietary knowledge to a natural or

legal person on its territory;

As can be seen, the present proposals greatly reduce the possibilities of countries whichparticipate in the MAI to put conditions on foreign investors. This is also true in the field of

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labour and environmental standards. The OECD Guidelines for Multinational Enterpriseswhich include rules for the application of labour and environmental standards may or maynot be included in the MAI. But as things stand now they will not be updated and they willkeep their present voluntary character.

The Trade Union Advisory Committee to the OECD (TUAC) has made a number of

proposals to amend the MAI (42), which should be considered as the minimum of guaranteesrequired in the field of labour standards:

a forceful reference in the Preamble of the MAI in which governments affirm their supportfor both core labour standards and the OECD Guidelines for Multinational Enterprises;

the annexing of the full text of the Guidelines in the MAI itself; the establishment of National Contact Points to enforce the Guidelines; this should be a

legally binding element of the Agreement; a wording of the MAI which brings with it the automatic acceptance of the Guidelines by

non-Members of the OECD acceding to the MAI; the inclusion of a binding labour clause as part of the MAI which makes explicit reference

to universal core labour standards and domestic standards; this clause would bind

governments not to attract foreign investment by suppressing domestic labour standards orviolating internationally recognized workers' rights.

Similar requirements are necessary as a minimum in the field of environment. Under pressurefrom environmental groups additional proposals are being worked out by the US, which maylimit the scope of the National Treatment principle.

The MAI probably will affect banana producing countries in two ways:

The first follows from the fact that the MAI will be open to non-OECD-members. In the everwidening competition between countries to attract foreign investment, developing countriesincluding banana producing countries, will be tempted to participate in the MAI after it has

come into effect. At present only the two largest Latin American countries, Argentina andBrazil, have expressed their interest, but once the MAI is there that situation may changedrastically.

The second way in which the MAI will probably affect the banana industry (in the medium orlong term) follows from the fact that the MAI may well stand as a proto WTO-regulation ofinternational investment.

As the MAI concept now stands it would be in the best interest of developing countries andof their possibilities for sustainable development, if the MAI never were to become a reality.But this does not seem a realistic prospect, even though opposition to the MAI is growing.Inclusion of the minimum social and environmental guarantees outlined above may wel be

the maximum possible.

4. Conclusion

Globalization and liberalization have been the catchwords of the eighties and nineties. TheWTO for trade and the proposals for the MAI for investment, are the expression of thegrowing integration of the world economy. They set rules for the world market. But notincluded in these rules are the social and environmental standards that should make trade andinvestment more sustainable. And not included in these rules are the concerns of people allover the world, of farmers, small producers, workers and consumers. Labour andenvironmental standards should become part of world trade and investment agreements.

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In the MAI labour standards should be included by a separate and binding labour clause andby incorporating in the treaty the text of the OECD Guidelines for multinational enterprises.Environmental standards should be included as well. The principle of national treatmentshould be amended in such a way that governments effectively can use performancerequirements for investors to protect the environment (and enforce labour standards).

A social clause in the WTO/GATT should be based upon the core labour standards which areuniversally accepted as human rights: freedom of association and the right to collective

bargaining, prohibition of forced labour, prohibiton of child labour, non-discrimination andequal remuneration. An environmental clause should stipulate the conditions and proceduresunder which trade measures are allowed against products whose production leads toenvironmental degradation.

The social clause should be implemented by the WTO and the ILO together. Monitoring andsupervison of the social clause should be the responsibility of the ILO. The WTO would onlythen be involved if -as a matter of last resort- trade measures and sanctions had to beconsidered.

The first Ministerial Conference of the WTO in Singapore in 1996 has brought recognition ofthe link between labour standards and trade. At the same time it also made clear thedifficulties of having a social clause adopted in the WTO/GATT.

The link between environment and trade had already found recognition before the WTO wasestablished, but here too the lack of results of the WTO Committee on Trade andEnvironment in Singapore, made clear that an environmental clause is also a long term affair.

From the point of view of a sustainable banana trade moreover it is necessary to supplementthe fundamental labour standards of the social clause in the WTO with standards which are ofspecific importance to the banana sector, i.e. the ILO Conventions on plantation workers andon security and health at work. This can only be done in a separate (commodity) agreement.

The same is true for the environmental standards which should govern banana production.

From the point of view of a more sustainable banana trade the present discussions within theEU on the implementation of the social and environmental clause in the European GSP andthe renewal of the Lom convention are of considerable interest. Especially as they co-incidewith the necessity of formulating a new banana regime in 1998.

There are strong arguments for the inclusion of a GSP-type social clause in the new Lomtreaty. For implementing the social and environmental clause in the GSP and at the sametime differentiating among groups of ACP countries in the framework of a new LomConvention, implies a danger of trade discrimination and would create two 'offices' for ACPcountries for (extra) preferences.

A social and environmental clause in the GSP also sets a precedent for a similar social andenvironmental clause in a new banana regime. An issue of central importance remainshowever, the question of whether such a clause besides tariff preferences could also include afair trade quota.

NOTES

1. FAO Commodity Market Review 1996-1997; FAO Press release 97/17, May 7 1997.2. Calculated on the basis of the FAO statistical database.3. Document of the Co-ordinating Body of the Banana workers' Trade Unions of Latin America,1995.4. Other strategies include corporate codes of conduct and fair trade. See following paper.

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5. Definition from: South/North Conference. The Social Clause. In: New alliances for dignity inlabour. Pisa: South/North Conference, 1995.6. For instance the Sixth International Tin Agreement 1982, the 1987 International SugarAgreement, the 1987 International Rubber Agreement and the 1993 International Cocoa Agreement.7. ICFTU. International Workers' Rights and Trade: The Need for a Dialogue. Brussels, 1994.8. Louis Emmerij. Contemporary challenges for labour standards resulting from globalization. In:

Sengenberger, Werner and Duncan Ca

Documents

5e Importance of Social and Environmental Clausing for a Sustainable Banana Industry by H Van Beek