Fair Wages and Standards Spur Growth : Workers’ rights shouldn’t be abandoned in GATT.

<i> Richard Rothstein is a research associate of the Economic Policy Institute and the author of "The Global Hiring Hall" in the spring issue of the American Prospect</i>

In Morocco on Friday, the General Agreement on Tariffs and Trade Uruguay Round will conclude when representatives of 121 nations initiate a new World Trade Organization. The deal almost fell through last week--not because of last winter’s high-profile issues like European restrictions on American films or subsidies for French farmers, but because of new demands by the Clinton Administration for negotiations on “international worker rights.”

President Clinton’s insistence that developing nations enforce minimum-wage laws, abolish child labor and permit union organization goes beyond traditional concerns that low-wage imports destroy low-wage jobs at home. Rather, Clinton argues that American high-wage jobs won’t expand without higher wages abroad: If Third World workers earn too little, they can’t purchase what we make, annihilating purported benefits of free trade.

Barely reported in the United States, this initiative has caused a furor in Europe and the Third World. European Union trade minister Sir Leon Brittan denounced its “protectionism.” Two weeks ago, developing nations rejected the U.S. demands, threatening the entire GATT deal.

Leading the resistance was India, whose GATT ambassador claimed that restrictions on labor exploitation could undo seven years of progress. But India comes to the debate with a record that illustrates why Clinton is on the right track.


India’s largest export industry is now handwoven carpets, manufactured by 300,000 children between 6 and 15, often mortgaged by their parents to employers. India was not always a carpet exporter. Its industry developed after 1970, when the shah of Iran prohibited child labor in his own country, causing carpet manufacture to migrate to Asia, where children could still be exploited.

In India, carpets are made mostly in Uttar Pradesh, which adopted a “Child Labour Abolition and Regulation Act” in 1986. Yet not one employer has since been prosecuted for child labor abuses. In neighboring Pakistan, which shares in the carpet boom, about half of the children working in carpet factories die from malnutrition and disease before age 12, according to the International Labor Organization. One reason parents never redeem their children’s mortgages is accumulating debts to employers for amphetamines that enable children to work long into the night. Such is the development path that India decries Clinton’s attempt to destroy.

Another opponent of labor standards has been Malaysia, which also comes to these debates without clean hands. At the behest of U.S. and Japanese electronics manufacturers, it prohibited electronics-workers’ unions. And with no minimum-wage law, Malaysia grew in the 1980s to be the world’s largest semiconductor exporter. Texas Instruments, Intel and National Semiconductor paid Malaysian girls 45 cents an hour for unskilled work. The Malaysian American Electronics Industry Society said member firms would move if unions were authorized. It’s too bad that Malaysia doesn’t welcome the Clinton initiative to protect it from such blackmail.

U.S. Trade Representative Mickey Kantor last week responded to critics who argue that sweatshops and child labor are part of development and that only economic growth unhindered by regulation can eventually raise standards. Kantor noted that U.S. wages began to increase and child labor was abolished not as the evolutionary consequence of development, but after decades of bitter political conflict. From 1917 to 1938, the Supreme Court repeatedly struck down minimum-wage and child-labor laws. Only after popular agitation and the appointment by Franklin Roosevelt of sympathetic justices were we able to prohibit child labor in factories and establish minimum-wage rules.


While Kantor was speaking in Washington, a compromise was worked out, allowing the Morocco meeting to proceed. It was agreed that labor-standards discussion will come later. If Clinton and Kantor are able to follow up, we may escape from our worldwide downward wage spiral in which nations (not only Iran, India and Malaysia, but also the United States) have to compete for investment with promises of ever lower wages and worker protections.

As Clinton pointed out in Brussels in January, “If we’re going to open our borders and trade more and invest more with developing nations, we want to know that their working people will receive some of the benefits . . . Otherwise, they won’t have increasing incomes, and they won’t be able to buy our products and services.”

Labor standards are not protectionist. They’re an essential ingredient of worldwide economic growth.