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OECD must involve workers in new global rules on investment

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On Tuesday I spoke at a conference held at the OECD in Paris on the costs and benefits of investment protection agreements like Investor-State Dispute Settlement.

In the morning  conference participants had heard something important – the experts gathered by the OECD had, in all their extensive studies, found no evidence that there were benefits of investment protection agreements.

So there appears to be no factual basis for the claims made by governments around the world that ISDS, the Investment Court System or similar investment protection clauses in international agreements are needed.   It’s clearly a political choice to protect the interests of business over those of workers and broader society.

This is an edited version of my speech, partly responding to this finding:

Concerns about globalisation

Across the OECD we are seeing a growth of populism, protectionism and xenophobia, as political movements exploit workers concerns. These concerns are partly linked to the unfair rules governing some forms of globalisation.

Trade unions support a form of globalisation that creates good jobs with decent conditions and fair pay and global protections for rights.

But this isn’t what most workers are experiencing.  OECD research shows income inequalities are at their highest level since the 1980s (with inequality in the UK particularly high) while real wages are falling.

When we look at investment agreements we see global rules that give great rights and protections to international investors while workers have no binding tools to enforce rights.  While the EU and Korea signed a free trade agreement in 2011 which contained a commitment to honour workers’ rights, there has been no attempt by the EU to penalise South Korea when they have repeatedly repressed trade unions, and thrown scores of union leaders in jail.

Investment agreements not only represent an unequal arrangement but have been used repeatedly to undermine workers’ rights and the public services on which we all depend. They’ve been used in the past to overturn minimum wage laws, nationalisation of water supplies and health services and there are many other examples.

And we’ve seen that where investment protection agreements are present we’ve seen governments are less likely to pass policies that will invite litigation even if these protect workers or the public good. For example, following Australia being sued by Philip Morris in an ISDS case for introducing plain packaging laws, for example, the New Zealand government decided to drop plans for similar laws.

The OECD should engage with trade unions – through the Trade Union Advisory Committee known as TUAC –  to gather evidence about these social costs of investment protection agreements. Understanding these costs is critical to understand concerns about globalisation.

No evidence for benefits of ISDS

While there are clear social costs of international investment agreements, it seems there has been no evidence presented to the OECD that investment protection agreements are needed.

International investors should take out private insurance if they want to guard against risk. Concerns we hear about the rule of law in some countries, meanwhile, can only be addressed by investing in development efforts to improve domestic legal systems. Indeed, countries have committed to such actions in the UN Sustainable Development Goals which include a goal to create Peace, Justice and Strong Institutions (Goal 16).

Addressing concerns

Global rules must provide workers with powers to claim their rights and oblige international investors to respect international labour standards.

This should involve commitments by countries to make the OECD guidelines on business and human rights binding, so there are material consequences (such as restrictions on export licenses) for international investors who fail to carry checks on labour standards in their operations, and serious penalties where abuses are found.

Countries should also strengthen and better resource their OECD National Contact Points – the offices in each OECD member state that investigate when there are reports of abuse of workers’ rights in company supply chains.

Governments must put binding commitments to uphold labour standards in trade agreements with sanctions as the final penalty when labour standards are not respected.  The TUC will be working with ETUC to call for this in CETA in the upcoming review of the agreement’s labour chapter that the EU trade Commissioner has announced.

Finally, crucially, trade unions must be involved in processes to enforce labour standards in international trade and investment agreements.

The fact that working people have largely been excluded from the process of shaping globalisation has resulted in the unequal distribution of its benefits.  This exclusion has lead to the creation of systems that entrench unequal power relations and damage workers rights, like ISDS or the Investment Court System (which largely contains the same threats).

The engagement of the OECD, governments and employers  with trade unions and other stakeholders on ways to improve global investment rules is welcome.  This engagement must intensify to develop new systems and rules to ensure globalisation benefits the many not the few.

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