GB.274/MNE/1/2 - Governing Body

ILO is a specialized agency of the United Nations

GB.274/MNE/1/2 274th Session Geneva, March 1999

Committee on Multinational Enterprises	MNE

FIRST ITEM ON THE AGENDA

Follow-up on and promotion of the
Tripartite Declaration of Principles
concerning Multinational Enterprises
and Social Policy

(b) Promotional activities, technical advisory services,
completed studies and current research by the Office

I. Promotional activities and technical advisory services

1. Following a national seminar on labour regulations for foreign investment law, held in Hanoi in January 1990, the Government of Viet Nam took measures to implement the recommendations of that meeting, and at successive sessions of the International Labour Conference there were discussions with the Office on follow-up that would involve the tripartite partners at both the national and provincial levels.

2. In this context the Ministry of Labour, Invalids and Social Affairs of Viet Nam (MOLISA) requested a translation of the ILO's Tripartite Declaration into Vietnamese and technical assistance that would enable the social partners to dialogue thereon. The translation was completed.

3. Following a preparatory mission early in 1998, an ILO/Viet Nam tripartite round table on labour and social issues in FDI and MNE activities was held in Hanoi from 7 to 9 April 1998. It was financed by the ILO and organized in cooperation with MOLISA, the Viet Nam Chamber of Commerce and Industry (VCCI) and the Viet Nam General Confederation of Labour (VGCL).

4. Over 60 participants took part, comprising equal numbers of government, employer and worker representatives from various provinces of the country. The round table discussed six issue papers prepared by the ILO, MOLISA, VCCI, VGCL, the Ministry of Planning and Investment (MPI) and a representative of a major foreign corporation on behalf of external investors in the country. The national papers provided overviews on FDI/MNE operations in Viet Nam in the context and reality of the legal framework and social policy of the country. The principal document which served as a basis for the various presentations and the ensuing discussions at the round table was the ILO's Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.

5. Throughout the three-day session, participants explored the best ways of settling urgent and specific labour and social problems, which, if unresolved, would create obstacles to the continued operations and expansion of existing enterprises, pose threats to potential investment, and cast doubts on the country's desire and ability to harness its energy, exploit its comparative advantage and attain its economic and social objectives.

6. Some of the issues on which participants called for action include the following:

(a) Employers and investors:

the need to further strengthen the activities of national employers' organizations to bring into full play their role in enhancing the country's economic and social advancement;
while there is no doubt that Viet Nam needs FDI, and that there is intense competition in this regard worldwide, it was important that those MNEs and investors who choose to operate in the country:

are aware of and fully respect the country's laws, rules, policies, regulations, customs, tradition and culture, and pay due regard to their obligations to uphold the dignity of workers in their employment;
provide adequate safety and health safeguards, and pay wages, benefits and salaries as stipulated by law and/or collective agreements;
not interfere in any way, direct or indirect, when workers exercise their right to form and join associations of their own choosing;
in line with the principles of the Tripartite Declaration, introduce sound industrial relations practices, including mechanisms for joint examination of issues, thereby contributing to prevention of labour disputes;
work together in the common interest of all employers by joining a national employers' organization.

(b) The trade union organization and its members:

to remain aware of the fact that strikes are instruments of last resort, and that even then, any work disruption, no matter of whatever duration, is not the best means of solving a problem, and that in addition, it is costly to the enterprise, its employees and the State;
to comply with the obligation to fully respect the relevant law, rules and regulations in force, as well as provisions of collective agreements;
to accept that FDI is essential for the country's economic and social development, and that a truly meaningful partnership with management is a sine qua non if the development priorities and goals of the country are to be attained and the future of economic and social progress put on a firm foundation and that workers have, individually as well as collectively, a role that is pivotal.

(c) The Government was urged to ensure, inter alia:

the preparation and widespread dissemination of extracts from the relevant and most important labour laws, rules and regulations, as well as concise and clear explanatory notes thereon, to FDI-financed ventures and home countries of actual, as well as potential, investors;
a constant dialogue with foreign investors, aimed at ensuring proper understanding and implementation of labour legislation.

(d) The ILO was requested:

to provide assistance, including a study of the labour and social impact of FDI-MNE activities;
to provide assistance and training programmes for the Vietnamese trade union leaders and the employers' organization in the country;
to organize and finance a similar round table in Ho Chi Minh City and the neighbouring provinces on the subject of the Tripartite Declaration, FDI and its MNE activities.

7. As follow-up on the round table and in response to its request for a similar round table, steps have been taken to organize a tripartite meeting for Ho Chi Minh City, Dong Nai and Binh Duong provinces. In the course of a preparatory visit in January 1999, extensive discussions were held with the Ministry of Labour, Invalids and Social Affairs of Viet Nam and the authorities in the three provinces, industrial and export processing zone authorities, trade unions, employers' representatives and foreign investors encountered through enterprise and factory visits.

8. In the course of the reporting period, discussions aimed at a better understanding of the MNE/FDI-related concerns of the trade union movement were also held with the ICFTU in Brussels (March 1998).

9. These discussions followed extensive consultations held by the ICFTU with the International Trade Secretariats (ITSs) on activities concerning MNEs, and also covered ongoing work in the ILO on the Declaration and codes, and in the ICFTU on the latter. Since it is being reported that rapid globalization, driven by MNEs, is accentuating labour and social problems, the discussions included ways on how the ILO and ICFTU could work more closely in minimizing conflict. The ICFTU underscored the direct relevance to the international trade union movement of the ILO's work in this area and called on the Office to play a more active and catalytic role in stimulating tripartite dialogue and negotiations on codes of conduct and their conclusion.

10. Discussions also took place with the Secretary-General of the European Round Table of Industrialists (ERT) to acquaint ERT senior staff with ILO concerns and activities in the labour and social fields concerning FDI/MNE activities, and in view of the ERT's constituency and its global influence, to exchange views on possible cooperation between the two organizations. Contacts with organizations like the ERT provide added opportunities for the ILO to extend its reach, deliver its message direct, promote its image and enhance its role.

11. The Office was represented at a Conference/Workshop on "Social Aspects of Trade Liberalization: Focus on Social Labelling" (San Francisco, 8-10 May 1998). The objective of the meeting was to consider, through an in-depth discussion of the advantages, difficulties and limitations of labelling efforts, codes of conduct, international standards, etc., the best means of contributing to the improvement of workers' rights. This meeting was held under the auspices of the Ford Foundation, which is funding a two-year project, based at the Graduate Institute of International Studies, Geneva, on international organizations and social aspects of trade liberalization. The work programme consists of a series of seminars and studies which will examine the work of the ILO, WTO, EU and OECD "in relation to the link between trade and labour issues".

12. The topics addressed included, for example: the Rugmark programme; social clauses in private agreements: problems of globalization; citizens' groups' use of international standards; codes for MNEs: the ILO's Tripartite Declaration; and international standards and social labelling.

13. Attendance at the Conference/Workshop in San Francisco provided an opportunity for meetings with Business for Social Responsibility (BSR) and GAP. BSR has a membership of some 1,200 US companies and associations (including AT&T, Time Warner, Coke, Ford, Levi Strauss and Reebok) and under its human rights and business programme offers assistance in the development of codes of conduct. GAP is also one of the major investors cooperating with NGOs and labour groups in having introduced a code of conduct for its affiliates and subcontractors, and closely monitors its implementation.

14. Contacts and working relations with such groups, organizations and institutions are useful for the Office "not only to pursue research on the content, scope and effectiveness of such codes, but also explore possible partnership with enterprises that have adopted, or wish to adopt, such codes of conduct, particularly multinational enterprises".⁽¹⁾

15. In July 1998 the Office responded to an invitation from Human Rights Watch to familiarize its staff and its Advisory Committee with the substance and objectives of the Tripartite Declaration.

16. A large number of participants from HRW staff as well as associates at its headquarters in New York -- and via video conferencing, its Washington offices -- were briefed on the history and substance of the Tripartite Declaration, ILO activities relating to promotional and technical advisory services, the regular surveys on the effect given to the Declaration and the interpretation procedure.

17. During the discussions that followed, many questions were asked concerning the effectiveness and extent of tripartite participation in the quadrennial surveys; why the Tripartite Declaration was still only voluntary; whether any attempts had been made to transform it into a binding text; what relations or arrangements the ILO had with WTO, UN, World Bank, UNDP, UNIDO, ICC and UNICEF; and how effectively/closely it was working with NGOs active in workers' and human rights issues.

18. In the course of the mission other contacts were also made, including the International Toy Manufacturers' Association (ITMA), the Council on Economic Priorities (CEP), the Inter-faith Center on Corporate Responsibility (ICCR), the National Labor Committee (NLC), Philips Van Heusen Corporation (PVH), Colgate-Palmolive, and the Union of Needle Traders, Industrial and Textile Employees (UNITE).

19. The main thrust of the various contacts was to promote the Tripartite Declaration, as well as to gather information. All the NGOs visited have been using the Tripartite Declaration in their work. In addition, MULTI's work programme for 1998-99 on codes of conduct featured in the discussions. In this context, CEP has carried out an analysis of a number of codes and given the ILO access to some of this information. It was thus of particular interest to compare and learn from their experience and methodology.

20. At the invitation of the International Restructuring Education Network Europe (IRENE) and the Centre for Research on Multinational Corporations (acronym SOMO in Dutch), the Office participated at the Expert Meeting of the SOMO-IRENE Research Project on the Multilateral Agreement on Investment (MAI), the liberalization of foreign direct investment (FDI) and the effects on labour standards, held in Amsterdam on 25 September 1998.

21. Some 30 international delegates attended the meeting, and ILO participation was sought in connection with experience of follow-up on and implementation of the Tripartite Declaration. This provided an opportunity to discuss in detail the ILO Tripartite Declaration and Office activities, as well as the Declaration of Fundamental Principles and Rights at Work and its Follow-up and the ILO's work on international labour standards.

22. The Institute of Social and Ethical Accountability (UK), the Ethic Practitioners of Canada, and Vancouver City Savings Credit Union sponsored the first North American Conference on Social and Ethical Auditing, Accounting and Reporting (SEAAR), held in Vancouver, Canada, from 18 to 23 October 1998. At the invitation of the organizers, the Office participated in the meeting to share with participants its experience of follow-up on and implementation of the Tripartite Declaration.

23. This meeting was the third of its kind, others having been held in the United Kingdom and the Netherlands, and was called to discuss how effective social auditing and reporting systems can contribute to the higher achievement of objectives concerning operational and governance issues in business.

24. The invitation of the ILO reflects, inter alia, growing interest in voluntary instruments, the search for which has drawn many to take more interest in and benefit from the ILO's experience. The conference conducted its work through a combination of plenary presentations and workshops that were respectively addressed and led by presenters with backgrounds in corporate boardrooms and offices, non-profit organizations and institutions, and public services. There were opportunities to discuss ways in which businesses have approached SEAAR and what results may have been achieved, and this was complemented by subsequent discussions on techniques, tools, lessons and experience by "internal and external practitioners" of SEAAR. The main objective of the conference was to raise standards of corporate responsibility and accountability.

25. Some 200 participants attended the conference regularly. Many others came to listen to particular presentations and participate in the ensuing discussions. The meetings, both plenary and workshop, were designed in such a way that advocates of social and ethical auditing, accounting and reporting were present to answer questions on objectives and practitioners led the workshops on methods. Except for a number of MNEs, the business world -- responsible for implementing and practising the standards -- was rather poorly represented.

26. The Tripartite Declaration and its follow-up mechanism were presented at a number of the workshops and in the course of individual and other group discussions. In addition, the constant reference to ILO instruments by many of the speakers also provided opportunities to speak thereon.

27. While there were at least some "representatives of business" (including Levi Strauss, IKEA, Shell, IBM, with each of which the ILO representative discussed the Tripartite Declaration), there was no attendance by any trade union movement -- national, regional or international -- or any governmental organization.

28. As the matters discussed at the conference have not yet been fully addressed in the ILO, during the meeting it was made clear that the ILO's presence was in no way to be taken as an endorsement of what was being discussed or agreed, nor should this disclaimer be interpreted as a rejection of what was taking place.

29. In view of the important developments in international economic relations recently, and as these might well call for changes in international instruments dealing with investment and related issues, the OECD convened a meeting to launch a new review of its Guidelines for Multinational Enterprises, adopted 22 years ago, and to make an assessment of their modus operandi from the point of view of governments, business, labour unions and non-governmental organizations so as to ensure their effectiveness and their continued relevance and responsiveness to the major concerns of member States.

30. Major reviews had already been held in 1979, 1982, 1984 and 1991, but there have been very few amendments indeed to the original substance of the Guidelines, as member States consider that the effectiveness of the instrument depends, in large part, on the stability of the text.

31. The ILO was invited to the Conference on the OECD Guidelines for Multinational Enterprises, held from 16-18 November 1998 in Budapest, Hungary, where it gave a presentation on the Tripartite Declaration and related ILO activities.

32. In opening the conference, the representative of the Government of Hungary acknowledged that MNEs had played an important role in his country's economic development and modernization, and had brought in modern technologies, improved standards and skills, and also created stable jobs and new opportunities. "Governments", he stated, "had the responsibility not only to protect and promote investment, but also to pursue coherent domestic policies that would alleviate concerns about globalization and the role of MNEs in it". He spoke of the need for new approaches and instruments to keep globalization on track, and at the same time to increase the number of people who feel its benefits. He underlined that a new partnership was necessary where MNEs and governments, together with civil society, worked hand in hand to find appropriate policy solutions to the challenges of globalization. He called for the conference to contribute to maintaining the Guidelines as an internationally agreed yardstick that responds to the aspirations of governments and the social partners, including business, labour and NGOs.

33. Following some brief remarks by the OECD secretariat and by representatives of governments, business (BIAC) and unions (TUAC), the conference proceeded to a broad assessment of the Guidelines and other codes of conduct in current circumstances.

34. As the issue of corporate codes of conduct has received considerable attention over the last few years, and in the absence of internationally accepted standards of reference due to the unfortunate lack of success in the UN-sponsored negotiations on a draft code of conduct, it has been argued that the OECD Guidelines were originally developed to fulfil this function. It was hence envisaged that the conference would also consider ways to increase the influence of the Guidelines as an internationally accepted yardstick for corporate behaviour and discuss ways of making their implementation more effective. An OECD Task Force was established in 1998 to develop Draft Guidelines on Corporate Governance,⁽²⁾ and its recommendations are due to be adopted by the OECD Council at Ministerial Level in May 1999.

35. In endorsing the current review of the Guidelines, OECD member States identified two main areas where revisions might be called for: environment, and employment and industrial relations -- but without prejudice to other areas being discussed if required. A conference document had suggested that participants address a number of questions, such as:

do participants consider that the Guidelines for Multinational Enterprises have had a positive effect on corporate conduct?
what have been their most visible effects?
is there agreement that the Guidelines can contribute to favourable economic relations between MNEs and governments?
what are the most important elements of the Guidelines to consider during the current review, and how should they be addressed: text, legal status, procedures, profile and dissemination?
in addition to the provisions already identified (employment and labour relations, the environment and competition policy), do any others need particular attention?
what specific issues need to be addressed, and why?
is there any major omission from the current text?
how can awareness of the Guidelines be improved?
is the role played by the Committee on International Investment and Multinational Entreprises (CIME) sufficiently effective as a forum for policy discussion?
if not, how can it be improved?
is the role of the national contact points sufficiently developed?
would the development of common terms of reference be helpful in this respect?
should NGOs be given a more explicit role in the implementation procedures of the Guidelines, taking account of the existing roles of BIAC and TUAC?
are additional efforts needed to strengthen cooperation on the Guidelines with non-Members?

These questions were also submitted to the Committee on International Investment and Multinational Entreprises (CIME) for discussion at its meeting on 23 November 1998.

36. A number of presentations were made concerning environment and sustainable development (by WWF International); labour (ILO and Danone, a multinational enterprise); competition and corporate governance (OECD); and bribery and corruption (Transparency International).

37. The Subcommittee may wish to note in particular the following statement by the representative of the Government of France:

The fundamental labour rights proclaimed by the World Summit for Social Development held in Copenhagen and solemnly reaffirmed in the Declaration on Fundamental Principles and Rights at Work adopted last June by the ILO are of four types: the right of association and collective bargaining; the right of non-discrimination; prohibition of all forms of forced or compulsory labour; and the abolition of child labour.

Only the first two categories are included in the Guidelines. The other two types of fundamental rights should therefore also be included --

prohibition of all forms of forced or compulsory labour;
abolition of child labour.

In view of their importance, these fundamental principles should be made into mandatory standards, not just recommendations.

As explained in the recent OECD study entitled Trade, Employment and Labour Standards, such an amendment would be "a clear signal of the importance which the governments attach to respect for all fundamental rights".

38. Over 115 participants took part in the conference. Of these, the large majority represented member States, but some 20 were registered as BIAC delegates, and 12 were part of the TUAC team. NGO representatives were also visible. ILO participation in this conference was useful, as the text of the Tripartite Declaration was in part inspired by the OECD Guidelines, and what transpired in Budapest could well serve as a lesson to the ILO. Both the Tripartite Declaration and the Declaration on Fundamental Principles and Rights at Work were among the package of conference material distributed. There were repeated references to the fact that the OECD Guidelines were in themselves generally sound -- what needed to be done was to improve their effectiveness and their application and use by all concerned, and that this also included not only MNEs but their subcontractors, affiliates, subsidiaries, branches and associates.

39. Discussions were also held in Singapore in January 1999 with the Secretary-General and staff of the ICFTU-Asia Pacific Regional Organization, on promotional activities foreseen in the Asian region and possible collaboration in a number of areas, and on wider trade union participation in the forthcoming Seventh Survey on the effect given to the Tripartite Declaration.

40. In cooperation with the Trade Union Council for Multinational Enterprises (TCM), an ILO-TCM Symposium on Multinational Enterprises and the Tripartite Declaration, which brought together some 60 trade union leaders, was held in Tokyo in February 1999. This meeting also provided opportunities for discussions with officials of the Ministry of Labour, Nikkeiren (the Japan Federation of Employers' Associations), the Japan Institute of Labour (JIL), and the Japan Overseas Employers' Association (Nichijaikyo).

41. The Subcommittee was informed⁽³⁾ of discussions on the Tripartite Declaration with members of Parliament of Argentina, who were active players in the MERCOSUR group of parliamentarians, and that as a result, the Tripartite Declaration and relevant descriptive material had been distributed to all 64 members of this group.⁽⁴⁾

42. The Office has since been notified that a resolution, which sought to have the Tripartite Declaration become "the minimum standard to be followed in all matters relating to the regulation of multinational enterprises and as far as possible applicable to national enterprises, for the purpose of drafting the final text of the Social Charter which will be applicable throughout the MERCOSUR member States", was adopted by the MERCOSUR group of parliamentarians and that a follow-up mechanism has been established "with a view to developing surveys and agreements promoting the application of these standards, a permanent legislator and a deputy legislator will be appointed by each of the parliaments of the member States". A series of studies on the labour and social effects of MNE activities in MERCOSUR countries is under way and this will be the basis for a series of meetings planned in the subregion at a later stage.

43. The ILO's Programme on Multinational Enterprises and Social Policy, including the Tripartite Declaration and promotional activities (descriptive texts, etc.) is now available in English on the ILO's public Internet site. French and Spanish versions will be ready in the near future.

II. Completed studies and current research in areas
covered by the Tripartite Declaration

44. Since the last report to the Subcommittee on this topic the following working papers have been published in the languages indicated:

WP. 80: Export processing zones in Bangladesh: Economic impact and social issues.
WP. 82: Les entreprises multinationales dans l'industrie du textile-habillement en Tunisie: l'impact économique et social.

45. Final drafts of the following working papers have been completed and are awaiting publication:

Japanese multinationals in Australia: Employment policies and industrial relations, 1990-97.
European works councils in multinational enterprises: Background, working and experiences.
The impact of multinational enterprises on employment, training and development in Namibia and Zimbabwe: A preliminary assessment.
Labour practices in enterprises providing offshore data services in Jamaica and Barbados.

46. The following working papers in Spanish have been commissioned, and work is well under way:

Impacto social y laboral de la presencia de EMNs e IEDs en Argentina.
Impacto social y laboral de EMNs e IEDs en Paraguay (estudio de caso).
Impacto social y laboral de la presencia de EMNs e IEDs en Uruguay.
Los efectos sociales y laborales de la privatización del sector de correos y telecomunicaciones en Argentina.

Geneva, 28 January 1999.

1. GB.271/5, para. 12.

2. http://www.oecd.org/daf/governance/guidelines.htm

3. GB.271/MNE/1, para. 13.

4. GB.271/MNE/1, para. 19.

Updated by VC. Approved by RH. Last update: 26 January 2000.