Another Possible Solution: The Trans-Pacific Partnership (TPP)

Frequent readers of our posts may have followed our developments on understanding the Cambodian model and whether it is implementable in other parts of the world. On another front, Mr. Nguyen Van Phu, Managing Editor of the Saigon Economic Times, explains the two schools of thoughts in Vietnam regarding the controversial TPP agreement. In his blog post to the Financial Times on October 10th, 2013, Mr. Phu describes how the TPP is being used by advocates as a way to enforce better labor standards for domestic workers.

Interested parties can access the original blog post from the Financial Times here.

Guest post: TPP is a remedy but of a different kind


Activists in Vietnam fight tenaciously for many things. They’ve advocated land ownership for farmers, equal footing for the state-owned and private sectors and the suspension of a costly bauxite project that is neither financially viable nor environmentally friendly. And yet, they have never raised their voices against the dark sides of free trade agreements as have their peers in other developing countries.

Granted, the Trans-Pacific Partnership (TPP), a comprehensive free trade agreement that Vietnam is negotiating with 11 other countries including the US, will bring Vietnam some obvious benefits. However, these activists also understand very well the negative aspects of joining this “high standard” trade agreement at a time when their country is at the bottom of the global value chain. They know that local farmers will be exposed to new competition with their richer and heavily-subsidised counterparts; that Vietnam will get stuck with low-wage, environmentally costly labour-intensive industries like textiles and garments where local manufacturers can’t move beyond subcontracting jobs; and, most of all, that stricter intellectual property rights will likely translate into more expensive drugs for the Vietnamese people.

Not only have Vietnam’s liberals kept their mouths shut about these issues, they have tried to sell the TPP to the people as something inevitable, a remedy for all economic woes.

The reason is simple: these liberals want to use the requirements imposed by the TPP on its members as leverage on the government to implement much-needed reforms. They hope that once within the TPP framework, Vietnam’s government will have no option but to abide by transparency in policy-making, cease giving preferential treatment to state-owned companies, open government procurement to the private sector and pay more attention to environmental requirements… In short, do those things that their government is supposed to do but does not.

These omissions are seen especially in the case of Vietnamese workers’ well-being. Vietnam is a “socialist” country where workers are supposed to be the leading political and economic force. Ironically, however, it is the “capitalist” US that is putting pressure on Vietnam to protect workers’ interests by setting up independent labour unions. It is exactly such TPP requirements that induce many Vietnamese liberals to give their strong support to joining the trade agreement.

Among the requirements that the US will impose in return for greater access to its market, especially for Vietnamese textiles and footwear, is better treatment of workers. In a stark reality check, US Representative George Miller, a Democrat from California, has written to US Trade Representative Michael Froman questioning whether Vietnam can comply with its TPP commitments because, Miller wrote, there is evidence that export industry workers in Vietnam are “routinely denied basic labor standards.”

Froman’s written reply is also to the point: “By including Vietnam in the TPP negotiations, we have [a] mechanism to improve adherence to labor rights and working conditions in Vietnam that would not exist otherwise.”

The proposed TPP text would apply the International Labour Organization’s principles of freedom of association and the right to collective bargaining, as well as the elimination of all forms of forced labour, child labour and gender discrimination.

People may ask if Vietnamese workers aren’t protected by their government and point to an extensive network of labour unions. The sad fact, however, is that the labour unions are mostly for show. They are used as instrument of state control, and union representatives are more like officials than workers’ representatives. They are normally the ones who prevent workers from going on a strike, rather than organizing it.

A recent scandal involving four public utilities companies in Ho Chi Minh City is so far the strongest evidence of this collusion. The directors of these state-owned companies draw salaries ranging from $100,000 to $130,000 annually in a country where the per capita income is just $1,500. How could they pay themselves such high salaries? They resorted to the very basic trick of “exploiting” their own workers: instead of signing on workers as full-time employees who would enjoy full wages and benefits, they hired them as seasonal workers who were paid as little as $250 to $350 a month.

Arguably, if the workers had an independent labour union, such a scandal would not have happened. If the labour union representatives at these companies did not receive perks from the directors, they would not keep their mouths shut as they did in this case.

Such scandals make people in Vietnam wonder if it is a blessing in disguise that the US seems to be really pushing for better working conditions. Foreign investors, including those from the US, seem to like the way labour unions in Vietnam operate now. The Vietnam Chamber of Commerce and Industry, which represents domestic enterprises, has complained that “Vietnam is not ready for such high requirements on labour standards and implementation, which would increase costs for entrepreneurs, risk workers’ unemployment, and have high implementation costs.”

So whether liberals in Vietnam should regard the TPP as a remedy or just an irony, or even a double irony, remains to be seen.

Addressing Workers’ Condition in the World: A Conversation with Arnold Zack

Boston Global Forum (BGF) had an opportunity to speak with Arnold Zack, an Arbitrator and Mediator of over 5,000 Labor Management Disputes since 1957; former President of the Asian Development Bank Administrative Tribunal; designer of employment dispute resolution systems;; occasional consultant for the governments of the United States (Department of State, Peace Corps, Department of Labor, Department of Commerce), Australia, Cambodia, Greece, Israel, Italy, Philippines, and South Africa, as well as the International Labor Organization, International Monetary Fund, Inter-American Development Bank, and UN Development Program. He has also been a Member of Four Presidential Emergency Boards (chair of two). (Harvard Law School), and currently teaches at the Labor and Worklife Program at Harvard Law School.


BGF: Can you tell me about your background and the works you have been involved with?

Arnold Zack: I am a lawyer, a mediator and arbitrator and I have helped design dispute resolution machinery in countries including South Africa, Bermuda, Ukraine, and many other countries. In 2005, I became interested in what is happening in China. Currently, I am involved with MIT  developing a project in China to train the next cadre of graduates at affiliated business schools to have a sensitivity of work place problems. I am also mostly interested in educating these graduates to be able to design machinery that can help avoid problems like the suicides at Foxconn, and which leads to tens of thousands of strikes in China each year.

Right now, I divide my time between arbitrating for corporations like AT&T and American Airlines and the project in China. I am primarily interested in helping workers  live in better conditions, make more money, and lead better lives. Obviously, there has to be a balance between these issues and the legitimate claims of employers making money and having responsibilities to stockholders. Of course, the question is what a fair balance should be. However, I am less interested in figuring out where this balances lies than in developing machinery and procedure so people can negotiate and talk about those problems. Especially, I would like to enable workers the ability to feel empowered enough to peacefully resolve disputes, so that they do not have to go on strikes, get beaten, thrown into jails and lose their jobs. You have to note that  there is no prescribed level as which there is an economic balance between workers and management. In fact, there are international standards and norms, but, so far, there is no legislation that mandates worldwide employers to abide by these standards.

In any cases, I hope that I can create enough public pressure and stress the self-interests of related parties to realize the benefits of developing  procedures to negotiate their differences. I think the only pragmatic approach to achieve my goal is by focusing on the self-interests and to try to establish fair procedures. We have accomplished this in the US in the union management field through the National Labor Relations Act of 1935. I have been able to accomplish this task within the U.S for individual employment disputes, outside of collective bargaining. The Arbitration Act of 1925 has been used by employers to require a commitment, by new employees that, as an employment condition, they go to arbitration mandated by the employer over any employment disputes and give up their rights to appeal to court for enforcement of statutory rights.  The Supreme Court case of Gilmer vs. Interstate/Johnson Lane in 1991 endorsed such mandatory arbitration. In this case, an employee, who was hired as a stockbroker, got fired at the age of 42 or so. He tried to sue the employer based on the Age Discrimination Act, but failed, as, upon signing the employment agreement, he had given up up his rights to go to court and was forced to go through an arbitration process. I believed this process was not entirely fair and we had to have a fair procedure, so I brought to the table all related parties—the management, the union,  worker groups, the American Civil Liberties Union the American Bar Association, and American Arbitration Association and established a standard procedure of fairness, called “Due Process Protocol.”

I have been trying to replicate this internationally, and I had some success in  developing a similar procedure in South Africa after black workers refused to join unions controlled by white workers when allowed to in 1982.  The black workers organized and white employers realized it was to their benefit to negotiate with them to resolve their disputes. We developed procedures to train mutually acceptable mediators and arbitrators and make them available to disputants to minimize strikes and establish workplace procedures for negotiation. This became the model for the development of the new constitution where the partnership of worker unions, employers and  the academics established a partnership to assure resolution of political conflict. That procedure has worked well until recently when it seems to have fallen apart.

BGF: You mentioned the self-interest of related parties, can you elaborate on this point—how does this relate to your efforts and how can this help address issues including the tragedy in Bangladesh?

 Arnold Zack:  We accept in the US that there will be a level playing fleld in which management and the designated representative of its workers will be able to meet an negotiate the resolution of their disputes over wages hours and working conditions. That is also what happened with the development of the labor law in South Africa. But the problem as it arises in an individual country is different when one focuses on the global economy, where brands and employers seek locations where they can best enhance their profit as they make their products for the global market place. With a competitive market on price, they can best maximize their profit by paying the lowest wages to workers and having them work the longest hours, particularly if the host government turns its head, accepts bribes to avoid enforcement of their national labor laws and keeps workers from organizing into a single voice to express their demands.

The concept of employees having freedom of association and the right to engage in collective bargaining is one which is enshrined not only in the UN  Human Rights Charter, it is also an international norm established by the Conventions of the ILO.  In our global economy, the quest of  employers seeking to produce their products at the lowest possible cost to enhance their profits, has too often led them to South East Asia where workers receive the lowest wages, and have the least protection from their own national governments. What transpired in Bangladesh with its garment factory fires is just the most recent example of the extent of such exploitation despite the availability of international norms trying to establish workplace fairness. As noted earlier the ILO establishes norms, but most nations do not enforce them within their  own laws and too many countries are so corrupt that they disregard the safety as well as the workplace rights of their citizens to pocket a little more money from the contracting factory owners. The world has tended to rely on the brands to monitor these factories, although the evidence increasingly shows they cant or wont do that, turning a blind eye to the corruption and worker exploitation.  There is one example to the contrary, however, Cambodia, where the ILO Itself does the monitoring, and where a separate organization the Arbitration Council provides mutually acceptable arbitrators to resolve disputes over whether there has been conformity to contract and law seeking to achieve compliance with ILO conventions. . The experience there since 2002 has lead to an expansion of the garment factories, a spread of the system to construction and tourist industries, an increase in the number of unionized employees as part of an expanding work force, and all with a notable decrease in strikes and work stoppages.. Unfortunately the Cambodian experiment has not been widely replicated because of the cost involved, but it is a beacon of what can be done with international will, national cooperation and open mindedness by the employers recognizing that they do better, and make more money when their operations are conducted smoothly without strike interruption and with machinery in place to forestall workplace disruption

Going back to our China story, the self-interest of the workers is to have fair working conditions. In the Foxconn case, a worker committed suicide because she was begging for a couple of days off to go see her brother but such leave was not approved. That case was just one of a dozen suicides. Thus, you see how the workers’ self-interest is simply being able to express themselves through a process of negotiation with the management. The United Nations Human Rights Convention gives workers the right to freely associate and to bargain collectively with management on their working conditions, wages, etc., so the workers should really have the right to get to a negotiation table and talk to their employers.IT is only logical that they strike when they are denied that basic human right. On the other hand, the self-interest of brands like Apple, Nike and Honda is to produce their products on time and sell them overseas without interruption in the workplace. Let’s take Apple, for example. Apple does not want their stockholders to say that they mistreat workers and then to decide not to invest in the company. Apple has an impact on Foxconn, but it’s also in the self-interest of the contractors like Foxconn to balance their desire for maximized profits against maintaining Apples confidence and contracts. Since , if Apple pulls out of China, Foxconn would go bankrupt. Besides, it’s also in the self-interest of the Chinese governments that these brands stay in the country to provide work and income for the Chinese citizens.

Thus, what I do now is basically to go around the world and tell these parties that it is in their self-interests to provide fair working  conditions. When I was in Shanghai to speak with the American Chamber of Commerce there, plant managers asked  how we could stop these strikes, and I told them that you could control these strikes by listening to and negotiating with the leaders speaking on behalf of the workers. They responded saying that the law did not require them to do so. In fact, even though China is a collective society, there is no room for workers to select their own unions or union leaders,  The officially recognized unions are those  organized by the ACTFU (All-China Federation of Trade Unions). Thus, the problem arises when workers believe the ACTFU does not represent them. Despite having legal and contractual rights as individuals, workers, when they unite and start demanding improved conditions, higher wages and the like, do not have any established vehicles or laws that  require employers to sit down and talk to them, even though  the ILO (International Labor Organization) Conventions of 87 and 98 state that workers have to rights to organize into unions and the right to bargain collectively with their employers.

Let’s look at an example of what has been happening in China  to gauge the power of these spontaneous strikes of workers organizing collectively. In 2010, when Honda workers went on strike and demanded a 30% increase in their payroll, the managers compromised and gave them 20%. After that, they went back on strike again and got the remaining 10% they demanded. In most parts of the world, workers have peaceful rights to organize themselves and employers have the obligations to start negotiating. Only when this procedure fails do  the employees then go on strike to exercise power to get the employer to change its position. In China and Vietnam however, it actually works backwards, the workers have to go on strike first to demand the employers to come to the table so they can talk to employers. This is the reason why I am collaborating with the business schools in China to install into the existing curricula crucial topics including negotiation, ethical standard of labor conditions and fair procedures. In addition, we’re also successful in getting a local university to establish an independent center to educate workers on topics such as peaceful resolution and the economics of running a business, as an average worker may not understand the economics of overhead, profit margin, wages, and etc.

Besides, it is also understandable why China would be skeptical of some procedures which would give workers the right to elect their own leaders, as the fall of the Soviet Union is often traced to the Solidarity Movement in Gdansk Poland where Lech Walensa led the establishment of a real trade union insisting on the right of workers to negotiate with their employer in that case the government owned ship yards. At the moment, the Chinese government does not allow workers to form their own unions. However, I believe the risk of losing foreign direct investments would outweigh the risk of opening the door for more democratic procedures at the workplace. Also, the government, so far, has not done anything to restrict us from entering the country. I am also trying to convince them that this is a practical method to resolve the problems of wildcat strikes, managers being taken hostage and other examples of frustrated workers seeking to gain a seat at the table to discuss their working conditions with management.  I believe it is also in the self interest of the ACFTU to shift its role from one of monitoring the workplace to a role of representing the workers in peaceful negotiations with their employers.

This is not complex science; it is merely recognition that all the players in the economy have priorities of self interest and achieving “more” as they define that term even if at the expense of other players in their arena.  But when the power is so lopsided that some of the players are excluded, or worse exploited, society owes it to all those involved to assure some measure of equity and fairness. In the world of factory work the world standard has been to permit employees if they so choose to band together as an entity that is more compatible to the power of the employer, and that standard as proclaimed by THE UN Charter and ILO conventions has been to encourage peaceful negotiations between the two parties as a better alternative to exploitation and workplace disruption through strikes. All I have been trying to do in the US and abroad is to encourage the parties to recognize that their self interest is best satisfied by recognizing that the other side likewise has self interests and that negotiations is the most rational means of resolving their conflicts. To the extent that I get people to listen to me, that is a satisfying reward. To the extent that they ask me to help them develop procedures to cope with these problems it is a reward not only for me but for the parties and society as a whole.