The Welfare State, Globalization,

and International Law

Springe r-Verlag
Berlin Heidelberg
GmbH
Eyal Benvenisti
Georg Nolte
Editors

The Welfare State,

Globalization,
and International Law
With Contrihutions by
D. Barak-Erez, U. Becker, E. 8envenisti, T. Dagan.
M. Hirsch, S. Krebber, A. Junker, S. Lagodinsky,
T. Marauhn, W. Meng, G. Mundlak, G. Nolte,
A. Nussberger, S. Oeter, A. Reich, Z. Rosenhek,
P. Zumbansen

, Springer
Prof. Eyal 8 envenisti
Faculty of Law
Tel Aviv University
Ramat Aviv Tel Aviv 69978
Israel
ebenve@post.tau.ac.il

Prof. Dr. Georg Nolte

Inst itute of International Law
University of G6ttingen
Platz der G6ttinger Sieben 5
37073 G6ttingen
Germany
g.nolte@jur.uni-goettingen.de

ISBN 978-3-540-0 11 03-3 ISBN 978-3-642-17008-9 (eBook)

DOI 10.1007/978-3-642-17008-9

Cataloging-in-Publication Data applied for

A catalog record for thi. book i. available from the Library of Congre, s.
Bibliographic information publi.hed by Die Deutsche Bibliothek
Die Deutsche Bibliothek Iim this publialtion in the Deutsehe Nationalbibliografie; detailed bibliographk
data is available in the Internet at <http://dnb.ddb.de>.

This work is subject to copyright. AII rights are reserved, whether the whole Or part of the material is
concerned, specifically the rights of translation, reprinting, reuse of iIlu.trations, recitation, broadcast-
ing, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this pub-
lication or parIS thereQf is permitted only under the provisions of the German Copyright Law of Septem-
bec 9,1%5, in its cur rent ve~ion, and permission for use must always be obtained from Springer-Verlag.
Violations are liable for prose.:ulion under the German Copyright Law.

C Springer-Verlag Berlin Heidelberg 2004

Originally published by Springer-Verlag Berlin Heidelberg New York in 2004

The use of general descriptive names, registered names, trademarks, etc. in this publicat ion does not
imply. even in the ab.ence of a specific statement, that .uch names are exempt from the relevant protec-
tive laws and regulations and there(ore (ree for general use .
Cover-Design: I'.rich Kirchner, Heidelberg
SPIN 10923894 64/3130IDK -5 4 3 2 ] 0 - Primed on acid-free paper
Contents

Introduction: Challenges to the Welfare State in an

Era of Globalization VII
Eyal Benvenisti and Georg Nolte
1 The Challenge of Migration to the Welfare State 1
Ulrich Becker
lA Comment 33
Angelika Nussberger
2 The Costs of International Tax Cooperation 49
Tsilly Dagan
3 Globalization, Domestic Politics and the Restructuring of
the Welfare State: The Unemployment Insurance Program
in Israel 79
Zeev Rosenhek
4 The Israeli Welfare State: Growing Expectations and
Diminishing Returns 103
Daphne Barak-Erez
5 Quod Omnes Tangit: Globalization, Welfare Regimes
and Entitlements 135
Peer Zumbansen
6 The Search for Core Labor Standards in Liberalized
Trade 175
Sebastian Krebber
7 The Transformative Weakness of Core Labor Rights in
Changing Welfare Regimes 231
Guy Mundlak
7A Comment 271
Abbo Junker
8 Social Rights Beyond the Traditional Welfare State:
International Instruments and the Concept of Individual
Entitlements 275
Thilo Marauhn
9 The Role of Non-Governmental Organizations in the
International Labor Organization 321
Georg Nolte and Sergey Lagodinsky
VI Contents

10 Welfare and Democracy on a Global Level:

The WTO as a Case Study 343
Eyal Benvenisti
lOA Comment 361
Stefan Geter
11 International Labor Standards and International Trade
Law 371
WemerMeng
ItA Comment 395
Arie Reich
12 Enhancing the Role ofNGOs in the Global Arena:
Towards a New Regime on International Labor
Standards 411
Moshe Hirsch
Appendices 439
Introduction: Challenges to the Welfare State in
an Era of Globalization

Eyal Benvenisti and Georg Nolte

Globalization - "a process of closer international co-operation resulting in

increasing trade, free movement of capital, and free movement of per-
sons."' - creates new challenges to the welfare state idea. This book aims
at assessing these challenges. The book is not informed by an anti-glo-
balization sentiment and does not wish to portray globalization as an in-
curable threat to the survival of the welfare state. As a matter of fact, evi-
dence, some of which is presented in the contributions in this book,
suggests that welfare states have been rather resilient to dissolution as do-
mestic political and social forces have impeded its disintegration," Accept-
ing globalization as a process that should lead to increased global stan-
dards of living, security, and political freedoms, this book seeks to identify
the modalities through which welfare-oriented policies may henceforth be
formulated and implemented.
In all likelihood, human society needs more globalization, not less.'
Developing societies in particular can benefit from more openness to
world markets. Fairly reliable reports indicate that extreme poverty in
developing countries has declined, albeit slowly, during the 1990s.4 The
story of globalization is therefore not necessarily one of increasing pover-
ty, on the contrary.
But at the same time, the story of globalization is a story of new chal-
lenges to the welfare state. In the developing world, globalization is asso-

I Ulrich Becker, on Chapter 1, at p. 20. See as well Alan Greenspan, Globaliza-

tion, Speech at the Institute for International Economics' First Annual Stav-
ros S. Niarchos Lecture (24 October, 2001) (available at: http://www.iie.com/
publications/papers/greenspanlOOl.htm, last visited 27 March, 2003) (Global-
ization is "the increasing interaction of the world's peoples through their na-
tional economic systems").
2 See Chapters 3 (Rosenhek), 4 (Barak-Erez), and 5 (Zumbansen).
3 Greenspan, supra note 1.
4 The World Bank, Poverty Trends and Voices of the Poor, 5 (4th Ed., May 2001)
(available at: http://www.worldbank.org/poverty/data/trends/, last visited
27 March, 2003); L. Alan Winters "Trade and Poverty: Is There a Connec-
tion?" (available at: http://www.wto.org/english/news_e/presOO_e/pov3_e.pdf,
last visited 27 March, 2003).
6 Id.
VIII Eyal Benvenisti and Georg Nolte

ciated with increases in inequalities in a number of countries with a large

number of poor people, in particular in China, India, Bangladesh , and Ni-
geria. " Economic inequalities result also in educational gaps, as the poorest
parts of the population in many developing countries tend not to have ac-
cess to schooling.' But what is even more telling is the transformation in
the way of life of the numerous workers who, as a consequence of the new
employment opportunities, traded their traditional livelihoods for mass
production centers. Having forsaken their communal supportive institu-
tions in close-knit rural environments, they find no substitutes that could
provide alternative protections against the consequences of unemployment,
disability, infirmity, or old age. Upward mobility for many of the poor in
developing countries is possible, but the grave threat is illness, loss of em-
ployment, poor crops, and desertion (of women). Then "there is usually
nothing to prevent them from falling into the abyss. And when they do fall,
there is often nobody waiting to catch them at the bottom or to lend a hand
as they attempt to start over."8 Corruption, lack of access to justice, and
political powerlessness is experienced by people who have had to give up
their traditional, family-based, social institutions. Growing income dispari-
ties, loss of traditional social institutions, the breakup of traditional values
and authority, especially as women leave their traditional role in search for
jobs, breed anti-globalization forces, among them religious fundamental-
ism.?
The developed welfare state experiences different challenges. There are
changing and intensifying demands for welfare policies, as growing life
expectancy , growing unemployment, and labor migration increase the
number of those seeking institutional support. At the same time, the supply
of such support must confront global tax competition'? responsible for
shrinking national budgets that spell a reduction in benefit levels, tighten-
ing of eligibility criteria, more frequent use of means-tests, and privatiza-
tion of certain social services provision. I I
The contributions included in this book explore different aspects of
these contemporary challenges to the welfare state. There are two main fo-
cal points to these contributions. The first several contributions assess the

? Id., at 37.
8 id., at 46.
9 Anthony Giddens, The Director's Lectures -- Runaway World: The Reith Lec-
tures revisited Lecture I: 10 November 1999 (available at: http://www.lse.
ac.uk/Giddens/reith_99/week l/w eekl.htm, last visited 27 March, 2003).
10 See Chapter 2 (Dagan), Reuven S. Avi-Yonah, Globalization , Tax Competition,
and the Fiscal Crisis of the Welfare State, 113 Harv. L. Rev. 1573 (2000).
II See Chapters 3 (Rosenhek), 4 (Barak-Erez), and 5 (Zumbansen).
 Introduction IX

influence of global competition on traditional welfare state institutions. Ul-

rich Becker examines the challenge of migration to the welfare state.
Daphne Barak-Erez and Ze'ev Rosenhek use Israel as a case study. Barak-
Erez surveys the growing expectations and diminishing capabilities of the
Israeli welfare state, while Rosenhek takes a closer look on the unem-
ployment insurance program in Israel. Peer Zumbansen puts these two case
studies in the wider context of parallel developments in other western
countries and their reflection by critical theory. Tsilly Dagan examines the
problem of double taxation and the efforts to eliminate it, efforts that often
result in the allocation of taxes by the rich capital exporting states and
which reduce the revenues available for developing governments that
could have financed welfare policies.
The other focal point is on global efforts that seek to complement exist-
ing, and even more importantly, to substitute non-existing national welfare
institutions with international ones. Sebastian Krebber and Guy Mundlak
address the potential role of international labor law in defining core labor
rights. Thilo Marauhn analyzes the possible contribution of international
human rights law and practice for the reconception of the welfare state on
the basis of legally enforceable individual entitlements. Emerging new
venues for global policy-making with respect to international labor and
other welfare rights are explored by Georg Nolte and Sergey Lagodinsky,
who examine the decision-making processes within the International La-
bour Organization (ILO), and Eyal Benvenisti, who does the same with re-
spect to the World Trade Organization (WTO). Finally, two contributors
assess the potential modalities for implementing core labor and other so-
cial rights. Werner Meng examines whether trade institutions under the
WTO could be called upon to perform such tasks, while Moshe Hirsch
studies Non-Governmental Organizations (NGOs) as informal enforce-
ment agencies of international labor standards.
Ulrich Becker deals with the challenges migration, a phenomenon that is
part of the globalization process, presents to the welfare state. He analyzes
potential reactions of the receiving countries to migration as far as the wel-
fare state is concerned. In an environment of reduced barriers to movement
of labor and capital, states are measured not only according to their levels
of taxation, but also according to the demands and promises of their re-
spective systems of social security. A well functioning social system may
attract people, but at the same time deter foreign investments. In general,
Becker would expect that higher barriers to migration to be associated with
states that have higher levels of social benefits and more comprehensive
social protection. Such states would have greater concerns with possible
negative effects of migration and therefore would be expected to adopt
more restrictive immigration policies. At the same time, however, there
X Eyal Benvenisti and Georg Nolte

could be an interest in attracting migrant workers as part of an effort to

adapt existing systems to contemporary challenges such as population de-
cline and population ageing.
As Becker points out, for historical reasons, most of the social insurance
schemes in developed states are based on salaries, namely contributions
paid by employers or employees in relation to work. Employment is the
key factor for eligibility regarding social security benefits. Therefore mi-
grants - including undocumented ones - are expected to contribute as well
even if they will in practice not try to claim for any benefits. Contributions
to these schemes effect labor costs, and therefore have to be paid out of
every wage earned from employment within the territory in order to avoid
unfair competition.
For different reasons, both legal (based on a duty to admit certain
groups of foreigners) and practical (the inability to insulate borders),
Becker predicts that magnet states are less likely to adopt a policy of
closed borders but instead to set up migration programs. A foremost con-
cern of the state would be to avoid illegal migration that competes with
contributing labor. Another concern is to distinguish between two types of
migrants. Migration caused by differences in wages is supposed to lead to
overall economic advantages, whereas migration only caused by differ-
ences in social benefits will lead to overall economic disadvantages. States
are expected to form their migration policies accordingly.
Finally, Becker examines the three possible venues for policy-making
concerning migration: unilateral, bilateral and global. In his view, there
might be good reasons to make an appeal to the states, claiming for mutual
respect and just sharing of global resources. However, it is hard to see how
moral arguments can help to overcome the weakness of social rights at the
international level. The formulation of migration policies is still to a large
extent a matter for unilateral decision-making .
The focus on the same three venues for policy-making - the unilateral,
bilateral, and international- is also the subject of Tsilly Dagan's contribu-
tion. Dagan explores the challenge of double taxation. The problem of
double taxation arises when a taxpayer residing in one country invests in
another. "Double taxation" occurs when both the country of residence
(home country) and the host country tax a taxpayer. Double taxation is
considered one of the most acute problems of international taxation affect-
ing home countries as well as host countries. It curtails cross border invest-
ments and severely limits the economic benefits such investments generate
for both host and residence countries. As Dagan demonstrates, however,
policies designed to eliminate double taxation carry significant distribu-
tional consequences as the home countries tend to be the northern rich,
 Introduction XI

whereas host countries tend to be those in much need for greater national
budgets .
Dagan examines bilateral tax treaties. These are widely regarded as the
mechanism for preventing double taxation. Policy makers assume that tax
treaties benefit everyone involved. By eliminating double taxation, these
treaties facilitate the free movement of capital, goods, and services and
help achieve allocational efficiencies. Although countries are required to
forgo potential tax revenues, tax treaties are perceived to be well worth the
effort because they allegedly provide significant benefits for all. However,
Dagan's analysis demonstrates quite surprisingly that such bilateral agree-
ments allow the rich home states, instead of the poorer hosts, to collect the
investors ' taxes. They create a regressive redistribution of wealth, benefit-
ing developed countries at the expense of the developing ones, affecting
the welfare capabilities of the respective countries. At the same time, uni-
lateral measures to prevent double taxation have different distributional ef-
fects, and are more likely to direct the tax to the coffers of the developing
host states.
The final part in Dagan's contribution is a critical assessment of sugges-
tions to explore global mechanisms to eliminate double taxation. A multi-
lateral tax agreement is viewed as more equitable because it shifts taxes
back from less mobile labor to more mobile capital and because it allows
countries joining such an agreement to finance their welfare states, making
(local) redistribution something that countries can afford. Yet, Dagan ar-
gues, a closer analysis demonstrates that this is not necessarily the case. A
multilateral agreement has its disadvantages as well. While it may indeed
preserve some countries' ability to maintain their welfare state, it would, at
the same time, limit the ability of other countries to choose their "proper"
level of welfare state. Harmonization might also generate some efficiency
losses, and might distribute resources in a disturbing way. The move from
current tax competition to a multilaterally negotiated stage may shift pow-
ers to countries that have preferential negotiation positions.
Ze'ev Rosenhek and Daphne Barak-Erez address the complex interac-
tion between external and internal forces in fashioning or refashioning the
contemporary welfare state. Indeed, as Rosenhek points out, it seems that
globalization and increased international competition are putting growing
pressures on the welfare state, but if these pressures act upon the dynamics
of welfare policy, it is because they are politically processed by specific
actors, both domestic and international. The restructuring of the welfare
state, even if it is a response to constraints related to globalization, is first
and foremost a political process in which domestic actors, such as the
state, workers' and employers' organizations, and political parties, are in-
XII Eyal Benvenisti and Georg Nolte

volved. Hence, the specific mode of welfare state restructuring is not over-
determined by the constraints emanating from globalization.
The crucial importance of these domestic variables is demonstrated by
the diverse ways in which particular welfare states react to globalization ,
and by the persistence of significant differences between them. Political
and institutional factors working at the domestic level have conferred un-
equal degrees of strength and resilience to different welfare states. A gen-
eral conclusion of the reviewed literature is that the retrenchment of the
welfare state must be empirically assessed rather than being presumed on
the basis of the dominant neo-liberal rhetoric. Within this context, political
and institutional factors that can contribute to the resilience of the welfare
state deserve special empirical attention. Moreover, also the assumed link
between globalization and the restructuring of the welfare state has to be
evaluated through the study of concrete cases.
These general conclusions inform Rosenhek's empirical examination of
the dynamics of the unemployment insurance program in Israel over the
last two decades. In general, the trend in this regard has been toward a less
generous program with tighter rules of eligibility, which would enhance
the disciplining effects of market forces over labor. Yet, a detailed exami-
nation indicates that the changes in the unemployment insurance program
have been less radical than what might be expected given the strong rhe-
torical attacks on it advanced by powerful political actors. Over the last
two decades several plans to drastically reduce the coverage and benefit
levels of the unemployment insurance were effectively blocked, or at least
moderated, by opposition based on considerations of electoral politics. The
human factor also proved extremely effective in blocking the lowering of
welfare standards. Reports from several sources indicate that the tighter
eligibility rules, especially those that determine "job refusals", were not
fully enforced by clerks in the employment exchanges. These clerks were
reluctant to register unemployed persons as having refused a job offer,
since they knew that such registering would cause their loss of entitlement
to unemployment benefits. In small towns, the rates of registered refusals
were lower than the national average, suggesting that in those cases per-
sonal acquaintance between the clerks and the unemployed persons played
a role in the partial enforcement of the tighter eligibility rules. These find-
ings reinforce the insight that discretion enjoyed by low-level bureaucrats
over the allocation of benefits and sanctions to their clients transform them
in effective policy-makers who develop autonomous interests that can dif-
fer from, and even contradict those of the agencies in which they work. Ul-
timately, Rosenhek concludes, those domestic political and bureaucratic
constraints effectively neutralized external pressures to reduce unemploy-
ment insurance benefits.
 Introduction XIII

Daphne Barak-Erez highlights a different type of domestic pressure that

mitigates external pressures, namely continuing and even rising public
support in Israel for the welfare state ideology and growing expectations
from state institutions to provide care for the infirm, disabled, and the eld-
erly. With the aid of legislators seeking short-term popularity, these public
demands were translated into a "blooming of welfare oriented and social
rights oriented statutes," that have significantly raised the levels of social
and welfare rights beyond the "first generation" of social legislation in Is-
rael during the 1950s. These statutes, described by Barak-Erez, required
significant state spending and hence were incongruent with the interest of
the government and private sector in a leaner national budget capable of
competing globally.
As Barak-Erez demonstrates, the conflict between the public and its rep-
resentatives in the legislature and the recalcitrant government and the pri-
vate sector was ultimately resolved by governmental resistance to the im-
plementation of the new statute-based standards through the application of
silent bureaucratic measures intended to defeat social legislation without
much public awareness. Barak-Erez explores several techniques that were
applied by government agencies in this regard. She also argues that courts
seized with controversies concerning the application of social statutes by
and large accepted the government's position by applying minimalist inter-
pretations of the relevant legislation. In addition, legislative amendments
aimed ostensibly at revising details concerning the entitlements (such as
contribution fees or dates of application) as a matter of fact reduced stan-
dards considerably.
Peer Zumbansen interprets the findings of Rosenhek and Barak-Eretz as
expressions of a general trend in western societies that is not inextricably
linked to globalization. He focuses on reconceptions of the role of the ad-
ministration away from a politically obedient unilateral and homogeneous
implementation instrument and towards becoming an actor that is increas-
ingly heterogeneous as society is becoming less manageable through gen-
eral rules and unilateral measures. The structural trend from the industrial
age to an information and service society goes together with an individu-
alization of administrative methods, in particular by an increased use of
contractual forms of rule-implementation, and which contain the potential
of an enhancement of the role of the individual/citizen as a holder of enti-
tlements. These trends can contribute to explain why welfare administra-
tions at times pursue a different path than the political system, but also
why restrictions of welfare functions may also be implemented in some-
what collusive ways. Zumbansen does caution, however, against overesti-
mating the described structural trends which have not led to the abolish-
ment of the powerful intermediate forces between the state and the
XN Eyal Benvenisti and Georg Nolte

individual, such as trade unions or the idea of the rule of law, and whose
origins and spirit should be kept alive even if this can only result in an
ironical relationship.
Sebastian Krebber and Guy Mundlak address the role of labor law and
workers' rights in the context of globalization . While their approaches are
clearly distinct, they arrive at similar conclusions. Proceeding from a his-
torical perspective, Krebber consciously adopts a positivist legal approach
in order to verify whether the four Core Labor Rights, as they have been
proclaimed by the ILO in 1998, are indeed the recognized and appropriate
minimum of labor law protection at the universal level. Mundlak, on the
other hand, proceeds from a critical analysis of general assumptions about
globalization and its effects on the welfare state and labor law, then under-
takes a purpose-oriented critique of the Core Labor Rights approach and
finally suggests an alternative "developmental" approach.
Krebber reminds us that labor standards have been an issue in interna-
tionallaw for more than one hundred years and that developed states avant
la lettre have put minimum standards on the international agenda not least
because they perceived worker's rights as also being a question of (unfair)
comparative advantage. This skeptical point of departure leads Krebber to
undertake a rigorous examination of whether the Core Labor Standards of
1998 are indeed universally recognized as the most important labor stan-
dards. In this he successively adopts three different perspectives . The first
is that of a delocalized, somewhat western oriented labor lawyer. Taking
into account the historical development of labor law, the values which un-
derlie the conflict of laws legislation and the self-declared importance of
the subject matter, he finds that labor law traditionally recognizes three of
the four Core Labor Rights as fundamental (prohibition of forced labor,
prohibition of child labor, and freedom of association), but that labor law
usually places occupational safety above the fourth Core Labor Right, non-
discrimination. The second perspective, however, appears to correct the
picture: The international and national efforts to define core labor stan-
dards, such as the catalogues of the ILO, OECD, and the Council of Eu-
rope, disclose the same four Core Labor Rights. Only those acts which are
applied between or by developed states (US Trade Act, NAFTA Labor
Side Agreement, and the European Directive on the Posting of Workers in
the Framework of Providing Services) include occupational safety among
the Core Labor Rights.
In the following, Krebber submits this second perspective to a critical
examination, that of existing international and national fundamental (and
other) rights instruments and legislation. At first sight, this third perspec-
tive indeed seems to confirm the second, international perspective since in-
ternational human rights instruments generally confirm, and therefore ex-
 Introduction XV

plain, the choice of the Four Core Labor Rights with their emphasis on
discrimination and their lack of reference to occupational safety. Notable
exceptions include the ICESCR, CEDAW, the European Social Charter,
and the American Convention on Human Rights. When Krebber turns to
the state of ratification of the pertinent ILO Conventions relating to occu-
pational safety and to the state of the recognition of occupational safety by
many constitutions and labor legislation, including many developing coun-
tries, a different picture emerges. This result leads Krebber to assert that
occupational safety is sufficiently recognized internationally to be included
as another, and last, Core Labor Right.
Krebber's meticulous research and analysis draw attention to the some-
times neglected fact that international recognition is not limited to express-
ing collective declarations, but that it may also be expressed by way of
specific treaties, unilaterally and by way of domestic legislation. His con-
clusion leads Krebber to suggest that more emphasis should be placed on
holding countries to account for what they have already agreed to (in this
respect he favours the approach of the NAFTA Labor Side Agreement)
and that more effort should go into identifying existing standards (which
are frequently embodied in ILO Conventions) rather than engaging in a
fruitless and reductionist political exchange. This should not exclude, ac-
cording to Krebber, the pursuit of the human rights approach in order to
overcome the simplifications which inhere in the charge of protectionism
against Core Labor Standards.
Mundlak approaches the ILO Core Labor Rights of 1998 from the gen-
eral political context in which they were developed and from their purpose.
According to Mundlak, the context of the ILO Declaration is a widespread
view of the effects of globalization and the reaction by the ILO to the
failed attempt to link labor standards with the world trade regime. He ar-
gues that the general assumption that "globalization" puts "the welfare
state" under pressure and provokes a "race to the bottom" is a simplifica-
tion which has, so far, not been empirically verified. He rather finds it like-
ly that the pressures which are generated by an increasingly liberalized
world economy put certain groups and welfare functions under pressure
while others remain perfectly feasible.
Thus, for Mundlak the question is not, as it is sometimes demanded,
whether the welfare function should be dismantled or reduced, but rather
how these functions should be reconceived and refined. He reminds us that
the typical forms of welfare regulation and the regulation of the labor mar-
ket have always been two sides of the same coin, which included that the
welfare state pursued the goal of nurturing and developing a concept of so-
cial citizenship. According to Mundlak this concept of social citizenship
should be reassessed in the light of the displacements which go together
XVI Eyal Benvenisti and Georg Nolte

with the process of globalization. In this context, he suggests to distinguish

between an "inward looking" and an "outward looking" function of the na-
tional welfare state. Since the political and the economical communities no
longer coincide (as capital has the possibility of "exit" and labor's "voice"
resonates less), the national welfare state must not only seek to protect it-
self against international pressures by engaging in compensatory regula-
tory regimes on the international level but that it must also take into ac-
count the interests of those displaced members of the labor market which
are not members of the national community in the narrow sense.
On the basis of this assessment of the situation, Mundlak proceeds to an
analysis whether the Core Labor Rights approach of the ILO strikes the
right balance between "scope" (extent of substantial protection) and "le-
gitimacy" (acceptability by developing countries and from a moral point of
view). He argues that these Core Labor Rights clearly do not serve the
purpose of protecting a minimum level of labor rights in developed states
where these rights are sufficiently secured despite the pressures of global-
ization (inward looking function). They also do not help to secure competi-
tive "fairness" for developed states against unduly low standards by devel-
oping states, since they do not significantly raise the costs for these states
(indirect inward looking function). Finally, he argues that these standards
cannot convincingly be justified by the goal to secure minimal protection
of workers against "the worst kinds of employment practices" since they
incoherently protect, for example, against possibly acceptable forms of
child labor but not against unacceptable health hazards.
Mundlak does not stop at asserting a more convincing (and, as Krebber
has demonstrated, a legally justifiable) set of standards which deserve to
be protected but traces the alleged inconsistencies to the specific structure
of the four ILO Core Labor Rights. These rights have in common that they
are negative rights, prohibitions on state action, and thus classical political
and human rights. Such rights, according to Mundlak, can only cure the
symptoms of the root causes from which the issue of core labor rights de-
rives. These root causes, poverty and certain structural conditions of soci-
ety, must be addressed by positive obligations, just as classical labor law
and labor rights have developed from a concept of rights and social citi-
zenship which went beyond that of mere negative rights. In order to be co-
herent in their quest for higher labor standards in developing states, devel-
oped states would have to accept the obligation to pay for at least some of
the cost for the fulfillment of positive obligations, in particular for those
which relate to child labor and health hazards. He suggests an alternative
developmental agenda which would seek to induce a "race to the top" by
employing international law to "compensate for the regulatory deficit as
well as the effects of displacement on the welfare state". His admittedly
 Introduction XVII

sketchy final proposals include, first, the demand to structure Core Labor
Rights in terms of development and not in terms of negative rights, and,
second, the goal "to diffuse obligations beyond the state, to small commu-
nities, employers, and a multitude of social organizations", and, third, that
"responsibility and costs should be diffused to different agents, including
states (developed and developing) and private employers".
Thilo Marauhn challenges the traditional understanding that the welfare
state expresses itself by way of statutory arrangements and entitlements,
but not by way of individual constitutional rights. He points to various in-
ternational instruments, in particular human rights instruments, which at
the time of their drafting were not intended to contain individual entitle-
ments but merely to create state obligations. He shows, however, that the
competent international supervisory bodies have interpreted some of these
instruments, and increasingly so since 1990, as containing a significant
number of justiciable and enforceable rights. This is true, in particular, for
the Committee that is charged with the supervision of the International
Covenant on Economic, Social and Cultural Rights. While the same is not
true for the European Social Charter, it should be noted that the enforce-
ment machinery under the Charter has recently been improved by the in-
troduction of a collective complaints procedure. The supervisory mecha-
nisms of the International Labour Organization as such do not support an
interpretation of ILO Conventions as containing individual entitlements
(except in the area of freedom of association), many of the ILO Conven-
tions include provisions that can be directly applied by domestic courts.
Finally, the International Covenant on Civil and Political Rights and the
European Convention on Human Rights contain individual entitlements
that, by interpretive practice of their respective supervisory organs, have
been held to include some social rights. This is true, in particular, for the
right to equality, the right to a fair trial, the protection of family life, and
the prohibition of inhuman and degrading treatment.
Marauhn's survey of the international treaty law demonstrates that
States are prepared to accept the idea that social rights can be considered
as individual entitlements under international law. This seems to have to
do with a renaissance of the recognition that social rights are inextricably
linked to civil and political rights, since social rights provide the necessary
basis for the actual realization of civil and political rights while civil and
political rights are indispensable for the realization of economic and social
rights. A difference between both groups of rights must remain to take into
account the different economic and social conditions of each state. These
differences seem to be best accommodated if economic and social rights
are given a primarily procedural meaning. This would imply that the indi-
vidual can force the state to adopt measures but cannot claim a particular
XVIII Eyal Benvenisti and Georg Nolte

outcome. Marauhn' s approach, which makes social rights enforceable and

justiciable, is based on the idea that the individual is a member of civil so-
ciety and must be considered as equally responsible in respect of social
rights as in respect of civil and political rights. In this sense, social rights
are individual entitlements which leave a wide margin of appreciation but
which form the necessary individual counterpart of economic globaliza-
tion.
Nolte and Lagodinsky address an issue of representativeness with re-
spect to the international welfare function by looking at the role which
non-governmental organisations play in the context of the International La-
bour Organisation. They proceed from the theoretical assumption as well
as from the experience in other fields according to which NGOs generally
playa useful but necessarily limited role in international relations. While
NGOs raise awareness and build public pressure for certain (and often
worthy) causes, their role cannot go very much beyond that of domestic
producers of public opinion due to their mostly restricted and homogenous
membership, their uncertain existence and accountability, and their un-
equal geographical origin. Contrary to almost all other intergovernmental
international organisations, however, the International Labour Organiza-
tion has traditionally integrated parts of international civil society, repre-
sentatives of employers and trade unions, into their structure with full vot-
ing rights. Although this tripartite structure may sometimes make the adop-
tion of politically acceptable standards more difficult, it has the obvious
advantage of putting the process of standard-setting on a broader base and
making it more conscious of possible difficulties at the implementation
stage. Since, however, the exceptional tripartite ILO structure is itself a re-
flection of the specific domestic power structures in the labour field, it
cannot easily serve as a general representational model in other areas of in-
ternational relations.
As Nolte and Lagodinsky show, the ILO experience, however, is useful
as a test for the general functions of non-governmental organizations on
the international level. The ILO rules concerning the participation of
NGOs (other than the employers and trade unions) in the work of the or-
ganization are not very different from those of other international organi-
zations and they largely follow the ECOSOC rules. In practice, NGOs
even seem to take a lesser interest in ILO deliberations on standards setting
than, for example, in activities within the framework of the WTO. This is
due to the fact that the individual ILO conventions must be ratified by each
state and that the main challenge is to secure a high number of ratifica-
tions. It is indeed the area of implementation of ILO standards where
NGOs are most active and where their participation is most welcome. The
most important areas are pressuring states to ratify conventions and to
 Introduction XIX

comply with their standards as well as participating in projects which con-

cern labour standards. Efforts by NGOs to go beyond this role have not
met with success: It is well-known that NGO pressure has not succeeeded
in establishing the trade-labour link, and even a proposal by the ILO Secre-
tary-General to create a voluntary labeling system for labour standards in
which NGOs would have had played a major role has been rejected by the
ILO constitutents. These and other cases seem to express a general reluc-
tance on the part of the ILO constituents, including the representatives of
employers and trade unions, to accord NGOs greater influcence.
This restrictive attitude on the part of the ILO constituents raises the
question of whether it is justified in view of the already enhanced repre-
sentativity of the ILO structure. Nolte and Lagodinsky identify three
groups which do not seem to be appropriately represented: the unem-
ployed, migrant workers, and indigenous peoples. While the interests of
the indigenous peoples have been taken up by various states and groups
which have succeeded in changing ILO policy in important respects, the
interests of the unemployed and those of migrant workers seem to be un-
derrepresented. While it may be true that this lack of representation is itself
a reflection of a lack of political representation or clout on the domestic
level, it seems to be equally clear that the political weakness of these
groups is to a significant extent due to international (legal and factual) con-
ditions as well as monopolistic practices of the better represented groups of
the employers and trade unions. It is here where international civil society,
as represented by NGOs, has the important task to compensate for a lack
of representation. According to Nolte and Lagodinsky, such a lack of rep-
resentation should not, however, be compensated by transforming the tri-
partite structure of the ILO into a structure of four or even more players
(with the inclusion of NGOs). Instead, the compensation can be achieved
by enhancing the rights of participation by NGOs through the creation of
an advisory body in which NGOs would have an official forum in addition
to their individual consultative role. The main function ofNGOs, however,
remains that of forming international public opinion in favour of the under-
represented.
Benvenisti examines the norm-creating processes at the WTO, a central
international institution that is shaping global policies affecting the welfare
state. Being an international, or rather intergovernmental, organization, the
WTO is a forum in which only governments have a voice. Identifying such
government-controlled institutions as potentially under-representing all
sectors of civil society, Benvenisti explores the potential mechanisms
within the WTO that could provide ample voice to the general public. This
effort is motivated by the view that the future of the welfare state - both in
developed and developing societies - hinges on the question whether in-
xx Eyal Benvenisti and Georg Nolte

ternational decision-making procedures would aim at leveling the political

playing field and ensure effective opportunities for public participation.
Opening up the channels of communication at the WTO's and other in-
ternational institutions is a challenge fraught with difficulties. There is a
concern that "anti-trade" "pro-human rights" or other "anti-government"
interests will clog up the system with excessive noise. The role ofNGOs -
a term that could include established, serious and respectable organizations
but also unaccountable ones whose funding and motivation are unclear - is
of particular worry. Benvenisti examines these concerns and argues that
they need not preclude wider representation. Ultimately , however, he notes
that the current standoff at the WTO is not a result of technical or legal dif-
ficulties concerning institutional authority to receive or impart information .
It is a result of a lack of wide-spread commitment of the WTO members to
democracy and to welfare standards. Opening the WTO processes for the
larger groups within democratic countries is viewed as threat not only by
the smaller groups of investors and employers but also by the representa-
tives of the developing countries who wish to maintain their low levels of
welfare that constitute their relative edge. Democratic participation thus
becomes one of the items on the agenda of the North-South conflict, and
hence this issue is liable to be negotiated away. The potential toll on wel-
fare-enhancing opportunities is thus significant
The main focus of Werner Meng's contribution is the position of the
World Trade Organization in the context of setting up and maintaining
global core labor rights. Meng examines several key questions concerning
the role of the WTO in the context of international trade in goods: Is it
lawful under WTO law to enact sanctions against states that violate core
labor standards? Who is deciding about the contents of these standards?
Who decides about the appropriateness as well as the lawfulness of sanc-
tions? Would it be lawful under WTO law to enact sanctions against "so-
cial dumping"?
Meng makes a crucial distinction between the perfectly legal right of
states to use lower wages and other work conditions as legitimate com-
parative advantage of developing economies, and on the other hand in-
fringements of Core Labor Rights that have gained recognition as basic hu-
man rights. He asserts that there is both an ethical as well as an eco-
economic interest to sanction violations of such rights. It has to be seen,
whether WTO law in its basic thrust to reduce trade barriers and to channel
trade sanctions still allows for sanctions for human rights violations and
unfair exploration of advantages reaped by unlawful conduct. This is of vi-
tal interest for proving to the people that are skeptical to trade liberaliza-
tion that this development is not blind to the basic values of humanity and
only geared towards economic profit. The developing countries on one
 Introduction )[KI

side are afraid of the use of the efficient enforcement instruments of the
WTO in labor disputes. The history of the GATT and now WTO mecha-
nisms countervailing price dumping and state subsidies shows that these
remedies against unfair trade practices may be abused for protectionist
purposes. In the WTO, with its effective adjudication, the danger of abuses
and particularly of a lack of sanctions for such abuses is certainly reduced
and legally more disciplined, but the main problem is to agree in the first
place which activities or omissions are violations of internationally binding
labor standards and which behavior could be deemed unfair.
On the basis of his analysis of the present WTO law, Meng argues that it
is possible to use trade sanctions as countermeasures against human rights
violation and possibly also against violations of other conventionally a-
greed labor standards. As he explains, WTO members that would enact
economic sanctions on the basis of general public international law would
still have to have their case scrutinized by the DSU institutions. This con-
siderably lowers the danger of outright protectionism in the guise of hu-
man rights protection. However, it confers to the panels and the Appellate
Body the duty to decide about the scope and content of the "Core Labor
Rights" and other human rights that are sometimes not very clear or even
disputed, like in the case of child labor.
Hirsch examines a range of NGO-sponsored possibilities for enforcing
international labor rights in developing countries. He first reviews a variety
of existing initiatives in this regard. These initiatives include corporate
codes (labor standards adopted by employers), social labeling of products
(information supplied by NGOs concerning the production process), and
socially responsible investments ("ethical investment funds" committed to
investment in firms whose practices satisfy certain social or environmental
criteria).
Labor-oriented NGOs are responsible for the facilitation of these non-
governmental initiatives. Hirsch examines the expanding role of these
NGOs in recent years and assesses their potential promise. He notes that
most NGOs active in the domain of labor rights are based in developed
states. Most of the resources employed by these organizations are mobi-
lized from the population or governments of industrial states, a fact that
nurtures suspicion in developing communities, mistrust that undermines
the effectiveness ofNGOs operations in those regions.
Having on the one hand described the potentially crucial role of NGOs
in advancing labor standards in developing countries, and on the other
hand the prevalence of popular mistrust in their intentions, Hirsch sets out
to propose rules for the self-management of the NGOs themselves. He
suggests that NGO undertake to abide by a uniform code of conduct. Such
a uniform code would have to be negotiated among NGOs under the aus-
XXII Eyal Benvenisti and Georg Nolte

pices of an intergovernmental body, preferably the ILO. In his view, the

exigencies of a comprehensive approach, the need to apply a coherent sys-
tem of labor standards, to coordinate between various NGOs and IGOs,
and to supervise NGOs operations, call for a universal IGO (preferably the
ILO) to be assigned with the prime responsibility to establish and imple-
ment such a universal code of conduct.
The contributions included in this book demonstrate the need for further
refinement and strengthening of existing international norms and institu-
tions in the effort to maintain and promote labor rights and the welfare
state. It is hoped that the book furthers the understanding of these needs
and the means to address them.
This book is an outcome of a research project jointly managed by the
Institute of International Law at the University of Goettingen and the Mi-
nerva Center of Human Rights at the Hebrew University of Jerusalem. Our
first meeting, in June 2000 in Jerusalem, was devoted to the study of glob-
alization and the challenges it presented to national welfare systems. Dur-
ing this meeting the participants defined their respective areas of research.
In our second meeting, in February 2001 in Goettingen, the group dis-
cussed draft papers presented by the participants. Our final meeting, in a
form of a conference held in May 2001 in Jerusalem, was an opportunity
to present our research before an audience of experts in the various rele-
vant areas. We thank all the invited guests whose contributions helped to
refine our understandings of the issues involved. In particular, we would
like to thank Arie Amon, Hisham Awartani, Rolf Birk, Riad al Khouri,
Eibe Riedel, Gerhard Wegner, Joseph RR Weiler, and Lucie White, for
sharing with us their views on globalization and helping us to define our
research agenda.
We are grateful for the Hebrew University of Jerusalem Faculty of Law
and the Konard Adenauer Foundation for their generous support for the
project.
We wish to thank Francine K. Hazan and Miriam Lappin-Benchetrit of
the Minerva Center and Christiane Becker of the Institute of International
Law for their efficient and careful administration of this project. Thanks
are due to Susanne Kruse and to Felice Kahan-Siskin for their untiring,
sensitive, and accurate editing work.
1 The Challenge of Migration to the Welfare State

Ulrich Becker

Contents
1.1 Introduction: Three underlying assumptions 2
1.2 The welfare state: Redistribution and its legitimacy .4
1.2.1 Concepts and institutions of the welfare state 4
1.2.2 Different forms of redistribution 8
1.2.3 Consequences for the legitimacy of redistribution 12
1.3 Challenges: Reactions to the impacts ofmigration 16
1.3.1 Which kind of reaction? 16
1.3.2 Which aims of reaction? 19
1.3.3 Which level of reaction? 21
Bibliography 26

The relevance of potential effects of globalization on the welfare state in

general or, more particularly, on social policy is broadly discussed. The
most prominent among the many questions that arise is whether globaliza-
tion is the cause of the crises of welfare states.' This paper deals specifi-
cally with the challenge that migration presents to the welfare state. My
considerations are not based on the fact that there is a significant migra-
tion, nor on the assertion that migration will inevitably create challenges to
the welfare state. Moreover, I will not even try to define globalization.
Firstly, I will rely on the assumption of a certain link that exists between
globalization and migration on the one hand and between migration and
the welfare state on the other hand (infra, under I.) . It is not difficult to
provide a basis for these assumptions. Secondly, I will explore which ef-
fects migration may theoretically have on different welfare state institu-
tions (infra, under II.). Taking into account the broad formulation of my

, Cf. Fligstein, "Is Globalization the Cause of the Crisis of Welfare States?" EUI
Working Papers SPS (1998) no. 5; Martin, "What does Globalization Have to
Do With the Erosion of Welfare States?" ZeS Arbeitspapiere (1997) no. 1; re-
garding the German welfare state, see Heinze and Strunck, in Leibfried and
Wagschal (eds.), Der deutsche Sozialstaat (2000), pp. 490 et seq.
2 Ulrich Becker

topic, this can only be done rather generally by referring to the different
basic structures of social security systems and to the different living condi-
tions of migrants. In this context, redistribution and the granting of indi-
vidual rights to benefits must be our focus. They are most relevant to the
legitimacy of a welfare state on the one hand, and to the position of mi-
grants on the other. This should allow us to deal not only with some as-
pects of the human rights debate but also with utilitarian arguments for
special welfare regimes for migrants and to point out the different interests
involved. With this picture as a basis, the third and last step describes po-
tential reactions to migration as far as the welfare state is concerned (infra,
under IlL). Three questions are asked which I will only partially answer.
First of all, what reactions can be expected from the receiving countries?;
secondly, which aims should be considered in their reaction to migration,
both from the welfare state perspective as well as from the migrants' per-
spective?; thirdly, at what level can different reactions of a legal nature be
realized?

1.1 Introduction: Three underlying assumptions

1. Globalization, despite its varied meanings and definitions, can basically

be described as a process of closer international cooperation resulting in
increasing trade, free movement of capital, and free movement of per-
sons.
The notion of globalization is, in particular, more often used to describe
a substantial growth of world trade and financial markets, and it could be
argued that a major challenge to the welfare state lies in the very differing
extent to which capital on the one hand and labor forces on the other are
able to move across national borders. This argument could possibly par-
tially explain the political helplessness of states facing international com-
petition or the necessity of a neo-liberal restructuring of social security
systems. I do not intend to deal with these controversial conclusions, since
my paper aims to examine the impact of migration and therefore must be
based on the assumption that migration occurs and will continue in the fu-
ture.
2. Free choice of residence leads to competition between different models
or concepts of the welfare state. Functioning systems of social security
may, on the one hand, attract persons and capital and thus be seen as a
 1 The Challenge of Migration to the Welfare State 3

pull factor; on the other hand, the costs of social security clearly serve as
a push factor for the capital.'
As globalization results in a more intensive flow of information, the
concepts of the welfare state become commensurable. They no longer sim-
ply exist, but can be questioned. This does not, however, imply one par-
ticular answer to this question. One conviction may be that the advantages
of social security prevail over the disadvantages,' whereas another may
consider it abundantly clear that free movement of capital and workers
must lead to a liberal approach to social security.' A third might ask the
question of whether at least a considerable part of the problem could be
avoided by regulating, or rather restricting, the migrant's access to the do-
mestic territory.
3. The possible influence of migration on the welfare state depends on dif-
ferent factors. One factor is the conceptualization of the welfare state in
general and, more specifically, the concrete architecture of the institu-
tions through which social policy is implemented. The other factor is, of
course, the intensity and direction of population movement. If migration
were to significantly impact welfare state institutions, it would flow
from the less developed to the more developed countries.
The last part of my third assumption can be understood as an approval
of the welfare magnet thesis,' but is presented as a simple statement. Why
people really move from one place to another is difficult to say, and at-
tempting to answer the question requires an in-depth examination, It has
been stated that "the fundamental cause of international migration is a gap
in living standards between one country and another"," This does not, how-
ever, mean that this gap would be the only reason for migration or that it
would necessarily lead to migration of noticeable dimensions. Globaliza-
tion is not the only factor that seems to cause the movement of workers
due to its influence on the social and economic situation in less developed
states. As many studies on international migration show, the change of so-

2 A point that might be of special importance due to the increasing predominance

of multinational enterprises.
3 Cf. Haslinger, in Aufderheide and Dabrowski (eds.), lnternationaler Wettbe-
werb - nationale Sozialpolitik? (2000), pp. 185 et seq.
4 See, for example, Berthold, Der Sozialstaat im Zeitalter der Globalisierung
(1997).
S Cf. Peterson and Rom, Welfare Magnets (1990), pp. 26 et seq.; the reasons for
international migration can be seen in Castles and Miller, The Age ofMigration
(1998), pp. 19 et seq.
6 Stalker, Workers without Frontiers (2000), p. 93.
4 Ulrich Becker

cial patterns and the instability of political systems are also considerably
influential factors on the decision to emigrate.

1.2 The welfare state: Redistribution and its legitimacy

1.2.1 Concepts and institutions of the welfare state

Social benefits as characteristics of the welfare state

Examining the consequences of migration for the welfare state would, first
of all, require a definition of the term "welfare state". I do not, however,
wish to broach this line of analysis, since concepts of welfare vary broadly.
There are some general circumscriptions: "The welfare state is the institu-
tional outcome of the assumption by a society of legal and therefore formal
and explicit responsibility for the well-being of all of its members."? In ad-
dition, we can list different matters that are commonly considered part of a
welfare regime. These comprise not only social benefits but also housing
and education." While most people would agree with the latter, it remains
questionable as to whether the provision of infrastructure, the building of
streets and railroads, or the supply of water and electricity are also specifi-
cally part of a welfare state. For the purpose of this paper, I will concen-
trate on the main areas of social policy, and, furthermore, only those areas
characterized by state interventions that are generally granted in the form
of benefits, either as benefits in kind or as cash benefits. Thus, I will ex-
clude from the following considerations not only labor law but also the
legislation on protection at work.?
Social benefits are offered in different forms by most developed coun-
tries. They can be categorized with regard to situations for which the grant-
ing of benefits is deemed necessary or appropriate, as well as regarding the
characteristics of the respective benefits. to Taking into account the existing

7 Girvetz , Welfare State, International Encyclopedia of the Social Sciences,

vol. 16 (1972), p. 512.
8 See Titmuss , in Essays on the Welfare State (1963), p. 42: "All collective inter-
ventions to meet certain needs of the individual and/or to serve the wider inter-
ests of society may now be broadly grouped into three major categories of wel-
fare: social welfare, fiscal welfare, and occupational welfare."
9 For the broader concept of social policy enshrined in the EC-Treaty , see
Art. 136 of this Treaty.
to Zacher, in Furst (ed.), Festschriftfiir Zeidler (1987), pp. 571 et seq.
 1 The Challenge of Migration to the Welfare State 5

international provisions in this field of law, a very rough distinction can be

drawn between social aid or social assistance on the one hand and social
security on the other. Social security in this sense consists of: medical care,
sickness and maternity benefits, industrial injuries and disability benefits,
old-age pensions, unemployment benefits, and family benefits."
The two categories differ in that social aid is, in principle, a means-
tested benefit paid because a person has no other funds at his disposal, and
his existence as a human being would be endangered without the payment.
"Existence" does not only refer to basic needs but also, to some extent, to
social participation in a given society. Social security, in contrast, is aimed
at compensating for losses in income due to the realization of special social
risks such as sickness or disability or, more generally, emerging from a
specific social situation, such as maternity or old age.

Common principles
Social aid and social security can be organized in different ways, not only
in terms of the system's institutional architecture but also in the methods
with which benefits are financed. We will return to these aspects later. The
systems can also vary in the extent of benefits and thus in the concrete
function they are designed for. 12 A differentiation between types of social
security schemes described as Bismarckian and Beveridgeian is mainly
based on these differences. Furthermore, a closer look at existing models
can reveal a more complex picture. Esping Andersen, to cite a well-known
typology of different welfare regimes, has identified three categories:
Firstly, the liberal regimes which are characterized by means-tested bene-
fits and a modest universal transfer; secondly, the corporatist regimes in
which the preservation of status differentials are predominant; and thirdly,
the social-democratic regimes which promote an equality of the highest
standards. 13
It is unnecessary to go into details and enter the debate on categorization
and the factors used or held as useful for this purpose. Sure enough, there
are links between the type of welfare regimes existing within a state and
the state's reaction to immigration. One could theoretically assume that the
higher the level of social benefits and the more comprehensive the social

II See ILO: C 157 Maintenance of Social Security Rights Convention (1982);

C 118 Equality of Treatment (Social Security) Convention (1962); C 102 So-
cial Security (Minimum Standards) Conventions (1952).
12 For a distinction between "institutional" and "residualist" models, see Harris,
Social Security Law in Context (2000), pp. 6 et seq.
13 Esping-Andersen, The Three Worlds of Welfare Capitalism (1990).
6 Ulrich Becker

protection, the greater the fear of the negative effects of migration and the
more restrictive the immigration policy. However, this hypothesis seems
too general for the following considerations and may more suitably de-
scribe the different interests of states and their attitude towards migration. 14
The potential effects of migration depend on the outlook of every concrete
social benefits system. As this paper aims to describe these effects rather
than the different approaches to social policy, an analysis of how to appro-
priately compare different welfare states is not helpful.
We will instead concentrate on the two basic features of welfare regimes
which can be affected by, or are of a special value to, migrants. They are
very general and could therefore appear obvious and self-evident.
Nevertheless, their relevance should be emphasized.
The first observation is that a welfare state is based on redistributive in-
terventions. Every social benefit must be paid from the population's in-
come and is not distributed according to the individual share of payments
but according to the individual situation and the specific need of support. IS
Usually, the percentage of gross domestic product spent for social pur-
poses is an indicator of the dimension of a welfare state, but in order to
understand the process of redistribution, it is valuable to look more closely
at the organization of this process, especially with regard to the population
groups involved.
A second point of interest concerns the granting of individual rights to
social benefits. The character of a welfare state can often be grasped by the
description of the individual's position within the state. From an overall
perspective, welfare states may be distinguished by whether or not they
grant extensive social rights. As to the rights themselves, another distinc-
tion can be drawn between individual rights to certain benefits, circum-
scribed in detail by legal provisions, and rights to benefits defined by ad-
ministrative authorities for each individual case. It could be argued that
discretion and means-testing present difficulties to the concept of social
rights because detailed examination of financial means leads to stigmatiza-
tion and thus to social exclusion. 16

14 See below, II. 3.

IS See also Snower, in Hauser (ed.), Die Zukunfl des Sozialstaats (2000), p.49 :
"To enable the welfare state to thrive and meet society's undisputed need for
economic security, I believe the above redistributive mechanism needs to be
abandoned. Governments must, where possible, stop redistributing money,
goods, and services, and start redistributing economic incentives ."
16 Twine, Citizenship and Social Rights (1994), pp. 95 et seq.; see for a distinc-
tion between "social rights" and "labour market participation" p. 110.
 1 The Challenge of Migration to the Welfare State 7

From a legal perspective, the specific character of an individual right to

social benefits is more important. It does not protect against violations by
any state measure and is not aimed at delimiting a sphere of individual
freedom, but its goal is participation in society. This can be described as
the distinction between negative and positive freedom' ? and the idea of so-
cial citizenship as presented by Marshall, gives reasons why individuals
are included. Citizenship is defined as "a status bestowed on those who are
full members of a community. All who possess the status are equal with
respect to rights and duties with which the status is endowed?", and social
rights are "the whole range from the right to a modicum of economic wel-
fare and security to the right to share to the full in the social heritage and to
live the life of a civilized being according to the standards prevailing in so-
ciety" .19 This analysis is based on experience with a specific welfare state
in a specific historic situation. It does not help in defining citizenship and
thus does not clarify the legal status of immigrants; besides, the notion of
rights as rights to a "decent living" is not focused on legally binding
rights.20
Technically seen, a social right in the sense of the right of an individ-
ual" would mean that a person is entitled to a benefit, be it accommodation
or a disability pension. It would empower the individual to claim it,22 and
this would require the existence of a person bound by that right and re-
sponsible for granting the benefit. As for social rights, the state must pay
for them. In other words, a social right sets up a legal relation between the
individual and the state, and imposes on the state the obligation to fulfill
this right. The state is the mediator within the process of redistribution; it
takes the necessary means on the one hand, and it distributes them by ful-
filling social rights on the other. Certainly, the state may undertake redis-
tributional interventions in other ways, without a legally binding obliga-
tion towards individuals, as long as this is judged legitimate according to
the general constitutional order. The individual entitled to social rights
clearly becomes part of the process of redistribution.

17 See Jellinek, System der subjektiven 6.fJentlichen Rechte (1905), pp. 94 et seq.
18 Marshall, Citizenship and Social Class (1973), p. 84.
19 Marshall, ibid., p. 72.
20 See Faist, Social Citizenship/or Whom? (1995), pp. 15 et seq.
21 For a detailed and complex analysis, see Alexy, Theorie der Grundrechte
(1986), pp. 454 et seq.
22 For this general criterion, see Buhler, Die subjektiven offentlichen Rechte und
ihr Schutz in der deutschen Verwaltungsrechtsprechung (1914), p. 224 .
8 Ulrich Becker

1.2.2 Different forms of redistribution

We must provide a bit more detail ofhow redistribution is organized. A vi-

tal distinction must be made concerning the welfare state's finances - not
so much the types of government expenditures but the ways in which the
necessary resources for redistribution are collected. A line must be drawn
between tax-funded systems on the one hand and contributions-based sys-
tems on the other, between direct and indirect financial transfers. This dis-
tinction also leads to some general remarks on the inclusion of migrants.

Different methods of financing

To formulate a general principle: social benefits systems available to the
whole population must be financed through taxation. The less rules of eli-
gibility are used and the less preconditions arc made within a certain sys-
tem, the more the benefits emanating from this system must be paid from
the general budget. This is, first of all, true for social assistance serving as
a safety net, which will only fulfill its tasks when available to everyone
under the sole condition that a person does not dispose of the necessary
means for living.
Quite the same can be said about national health systems. Where they
exist, they offer benefits in kind in the form of universal medical care, im-
plying that the benefits are available for everyone living in the country.
National health systems are consequentially financed by general tax reve-
nues which provide the main source of revenue, but do not, however, have
to be the only one. In the UK, for example, national-insurance contribu-
tions also form a small part of the funds.
Social benefits can be provided in situations that usually require special
support on the provision that public interest exists in the individual' s enter-
ing the specific situation. Family benefits, such as child allowance, or
child-raising benefits, are the most prominent and important example. On
the assumption that everyone raising children should be eligible for bene-
fits, these will be financed through taxation." For historical reasons, how-
ever, they are sometimes paid by contributions,» which leaves at the same
time more room for social assistance.
Social insurance schemes are, in contrast, generally financed by insur-
ance contributions. As a general principle, though, this does not exclude
some financial support from the general budget to the benefit of insurance
systems. It can nevertheless be stated that a person has to pay before he or

23 For a systematic approach, see Zacher, (supra n. 10), p. 586.

24 e.g. in France .
 1 The Challenge of Migration to the Welfare State 9

she may get insurance benefits; often a minimum number of contributions

is required. This does not mean that benefits are the equivalent of contribu-
tions. Social insurance schemes are not only characterized by compulsory
membership but also by the fact that contributions must be paid according
to the individual income, not according to the individual risk. In this re-
spect, they can be distinguished from private insurance as a mechanism for
pooling risks. The result is redistribution, not only seen from the perspec-
tive of the insured over his lifetime, in a vertical sense, but also as taking
place horizontally, between people paying different contributions, despite
receiving the same benefits. This is especially true for social insurance
schemes offering benefits in kind, and to a lesser extent for those schemes
where the benefit amount is calculated on the individual contribution re-
cord, e.g. old-age pension schemes.
For historical reasons, most social insurance schemes in developed
states are based upon contributions paid from earnings of the employed
(and sometimes the self-employed as well). Thus, they are strictly linked to
the labor market. This would not necessarily have to be so because of the
financing of the schemes, but is mainly due to the corporatist arrangement
of the organization, notwithstanding some considerable differences be-
tween the traditions in western European countries. In Germany, for exam-
ple, only a few self-employed are included in the social insurance schemes,
whereas in France, the case is quite the opposite." However, social insur-
ance is based on employment, and, as a general rule, only employed per-
sons are eligible for social insurance benefits. A few social insurance
schemes have developed differently over the last years, and are designed to
protect everyone; they are not financed through wage-related but through
pro-capita contributions."
That form of redistribution, however, mainly occurs between employed
persons." Aside from the fact that in some countries, as in Italy for exam-
ple, the picture is much more complex because there are different insur-
ance systems for different types of employees, it is evident that only work-
ers, and to a lesser degree the self employed, have to pay for social
insurance benefits. Even within this group, the community of the insured,
redistribution is often cut down by another mechanism. Upper earning lim-
its sometimes keep out people earning high wages, as they are designed as
limits to the compulsory insurance, yet in tum restrict the amount of con-

25 For a rough overview, see Becker, Staat und autonome Trager im Sozialleis-
tungsrecht (1996), pp. 131 et seq. and pp. 232 et seq.
26 As the health insurance schemes in the Netherlands and in Switzerland.
27 As far as employers are obliged to pay social insurance contributions, these
form, economically seen, part of the wages.
10 Ulrich Becker

tributions which must be paid for the insurance. Thus, social insurance sys-
tems tend to differentiate by cutting out smaller communities of redistribu-
tion from the society, and, as a further point, do not redistribute income
from the rich to the poor. As the underlying criteria do not always seem
indisputable, this leads to questions concerning social justice or equality.

Inclusion of migrants
From a technical point of view, migrants are included in social benefits
systems because these systems do not take the citizenship of the people in-
volved into account.
As has been established, social security aims at protecting workers and,
to a lesser extent, the self-employed. Hence, employment is the key factor
for eligibility regarding social security benefits. As long as employment is
the cornerstone upon which social insurance schemes are established, the
inclusion of migrants is part of the inherent logic of their structure. Contri-
butions to these schemes effect labor costs, and therefore must be paid
from every wage earned by employment within the territory" in order to
avoid unfair competition.
One aspect is especially relevant for the inclusion of illegal migrants. In
many systems, e.g. the German health insurance and industrial injuries in-
surance schemes, entitlement to benefits does not depend on the payment
of contributions in a technical sense, meaning that the failure to pay social
insurance contributions, notwithstanding its violation of the applicable
law, does not exclude the granting of benefits such as health care or dis-
ability pensions. Thus, at least in theory, undocumented foreign (and do-
mestic) workers are eligible for social insurance benefits even if, for dif-
ferent reasons, they will not try to claim these benefits."
Social benefits which are not embedded in labor relations, especially so-
cial assistance and most family benefits, are paid to everyone in the coun-
try as long as they meet the conditions in the relevant legal provisions .
Taking residency as a central requirement for entitlement reflects their
function, which is to meet basic needs.
However, this is not to say that citizenship would not matter at alL Enti-
tlement to social assistance and other benefits for foreigners or people
from abroad can be restricted, according to their legal status. Persons with

28 Leaving aside the problem of posting.

29 For a similar case, see Mundlak, "Power-breaking or Power-entrenching Law?
The Regulation of Palestinian Workers in Israel" (2000) 20 Comparative Labor
Law & Policy Journal, 595 et seq.
 1 The ChalIenge of Migration to the Welfare State II

a limited permit to enter or remain in a country will often not be eligible

for benefits or only receive reduced payments ."
The fact that entitlement to social benefits does not depend on citizen-
ship, but is based on territoriality, is due to different factors. First of all,
the concrete functions of social security and social aid are to protect per-
sons exposed to certain risks and enable them to social participation, de-
pendent on their living standards or basic needs .
The question remains as to why citizenship does not seem to playa de-
cisive role, at least as far as welfare distribution through social assistance
and social insurance is concerned. Even though my short considerations
only reflect legal regimes and, because of this formal approach, are some-
what superficial," I shall try to explain this observation.
With the growth of nation-states in Europe and the concept of absolute
territorial sovereignty, the state becomes responsible for every person liv-
ing within its territory. " Although citizenship is the formal bond between a
state and the constituent individual, the concept of territorial sovereignty
leads, in principle, to a comprehensive responsibility," which is no longer
only based on preoccupation for social order but on the recognition of hu-
man dignity . General social responsibility might be assessed as a rather
weak legal concept." Still, if it is not directly taken as an argument for es-
tablishing a right to accession, but is restricted to the treatment within a
territory, the link to basic human rights as guaranteed in the domestic legal
order can explain an individual right to subsistence. This is far enough

30 See, for example, § J20 Bundessozialhilfegesetz; for the rules in the UK, see
Harris, Social Security Law in Context (2000), pp. 197 et seq.
31 For a description of a "migration regime", taking into account the institutional
structures, see Rosenhek, "Migration Regimes, Intra-State Conflicts, and the
Politics of Exclusion and Inclusion: Migrant Workers in the Israeli Welfare
State" (2000) 47 Social Problems, 52 et seq.
32 See Preuliisches Allgemeines Landrecht of 1794, Part II, Title 19, § 1: "Dem
Staate kommt es zu, fur die Ernahrung und Verpflegung derjenigen Burger zu
sorgen, die sich ihren Unterhalt nicht selbst verschaffen, und denselben auch
von andem Privatpersonen, welche nach besondem Gesetzen dazu verpflichtet
sind, nicht erhalten konnen. ... §4. Fremde Bettler sollen in das Land nicht ge-
lassen, oder darin geduldet, und wenn sie sich gleichwohl einschleichen, sofort
uber die Grenze zuruckgeschafft werden."
33 I will not deal with the concept of citizenship in general, nor with the remaining
responsibility of the state of citizenship for their citizens living abroad accord-
ing to intemationallaw.
34 See Graser, Dezentrale Wohlfahrtsstaatlichkeit im fOderalen Binnenmarkt?
(2001), pp. 47 et seq.
12 Ulrich Becker

from participation in social relations and from social inclusion, yet is a ba-
sis for the untouchable core of rights.
A second argument, much more far-reaching practically, yet much less
strong in its legally binding effect, stems from the existence of social secu-
rity systems. Once created, they must be applied according to their own
rules, reflecting their own structure. There are economic reasons not to ex-
empt any person from the schemes, and equal application is, as a matter of
fact, crucial for the acceptance of the schemes, and thus for their general
legitimacy as well. From a legal point of view, this is a question of equity
and the principle of non-discrimination, which is also a part of the domes-
tic law. This does not, however, exclude every differentiation between citi-
zens and foreigners, as it might be possible to justify respective measures.
In practice, the effect on the principle of non-discrimination somewhat de-
pends on the other question of whether it is also applicable to discrimina-
tory measures having a direct or indirect character.

1.2.3 Consequences for the legitimacy of redistribution

General questions of legitimacy

It is a question of politica l philosophy whether, and how far, a state should
or may pursue welfare policy through redistributional interventions. When
redistribution takes place at all, which can be seen as a starting point refer-
ring to welfare states, libertarian concepts" might be used in a strict sense
to criticize the existing regime, but will not playa major role in explaining
it. If we then ask why a person should contribute to redistribution , an ex-
planation might be found in either utilitarian" or normative approaches, for
example, in a search for social justice. "
The different approaches might answer the question "equality of what",
and can assess the level and the institutions of a specific welfare state. "

35 Nozick, Anarchy, State and Utopia (1974), p. 297: "No state more extensive
then the minimal state can be justifie d."
36 For a distinction between utilitarianism and a social-welfare assessment, see
Sen, Inequality Reexamined (1995), pp. 93 et seq.
37 See Rawls, A Theory ofJustice (1999), p. 53: "The second principle applies, in
the first approximation , to the distribution of income and wealth and to the de-
sign of organizations that make use of differences in authority and responsibi l-
ity, or chains of command . While the distribution of wealth and income need
not be equal, it must be to everyone's advantage, and at the same time, posi-
tions of authority and offices of command must be accessible to all."
38 See Barr, The Economics ofthe Welfare State (1998), pp. 68 et seq.
 1 The Challenge of Migration to the Welfare State 13

Their contribution to answering the question "equality of whom" is more

difficult to see. While a liberal theory would not rely on a specific element
that holds society together," communitarian theories explain a mutual ob-
ligation to solidarity based on ethical and cultural factors, or they take a
position more open to cultural diversity, based on political rights." Re-
spective approaches would, because of the underlying prerequisites, tend
to exclude migrants from solidarity and from redistribution, or at least con-
struct a relatively high barrier against migrants becoming part of the "re-
distributional community". The outcome does not only challenge the con-
cepts of an open society, but can hardly be brought into accordance with
the existing social benefits systems. There is the remaining possibility of
distinguishing different spheres of justice" and distributing goods or utili-
ties according to criteria inherent in the respective sphere. Still, this plural-
istic model can explain why social rights are not dependent on political
participation? and lets the society discuss and define the rules by which
distribution will have to take place . Regarding social assistance and social
security, this returns us to responsibility, the core of human rights and the
principle of equity, including potential differentiation with regard to the
legal status of migrants, their residency, and whether they have formally
become part of the redistributional community by paying taxes or contri-
butions.

39 But is, as far as the distribution of basic goods is concerned, based on a con-
tract, see Rawls (supra n. 37), p. 4: "A society is a cooperative venture for mu-
tual advantage." Therefore, the community of redistribution is the community
of contractual co-operation, which would not explain the inclusion of outsiders,
see Kersting (ed.), Politische Philosophie des Sozialstaates (2000), p. 32, who
argues against the "egalitarian" concept of distributive justice and for a concept
of solidarity, pp. 50 et seq.
40 For an overview, see Volkmann, Solidaritdt - Programm und Prinzip der Ver-
fassung (1998), pp. 32 et seq.
4\ Walzer, Spheres ofJustice (1983), concerning the "sphere of security and wel-
fare" (p. 65): "Membership is important because of what the members of a po-
litical community owe to one another and no one else, or to no one else in the
same degree. And the first thing they owe is the communal provision of secu-
rity and welfare" (p. 64). Redistribution is justified by "the social contract ... an
agreement to redistribute the resources of the members in accordance with
some shared understandings of their needs, subject to ongoing political deter-
mination in detail" (p. 82). Even without defining membership in particular,
this leads to a strong link between democratic and social participation.
42 Migration can be seen as a factor intensifying the separation of social citizen-
ship from political citizenship, Eder, in Bommes and Halfmann (eds.), Migra-
tion in nationalen Wohlfahrtsstaaten (1998), p. 68.
14 Ulrich Becker

Potential effects of migration

From a utilitarian perspective, migration would not pose a problem to the
welfare state if, and as long as, the inclusion of migrants were to maximize
the total welfare. This depends on a wide range of different factors, which
make reaching generally accepted conclusions very difficult."
In March 2000, the Population Division of the Department of Economic
and Social Affairs at the United Nations Secretariat published a study on
replacement migration, designed to answer the question of whether it could
provide a solution for declining and aging populations." A major finding
was that the number of migrants needed to offset declines in the working-
age population is significantly larger than the number needed to offset total
population decline, and that maintaining potential support ratios at current
levels through replacement migration alone seems inaccessible, because of
the extraordinarily high number of migrants necessary. Thus, immigration
can clearly not serve as a magic remedy against the demographic drops
jeopardizing social security systems. More must be done to adapt these
systems to population decline and population aging.
Nevertheless, immigration could help limit negative effects of the pre-
sent demographic development in developed countries. In Germany, it is
argued that the amount of contributions migrants pay to health insurance
and old-age pension schemes will, because of their age structure, be higher
than the amount of benefits migrants will claim from these schemes: In
contrast, the balance of transfers would be negative with regard to the in-
clusion of migrants in unemployment insurance schemes, while the overall
balance for all social insurance schemes would remain positive." The
question as to whether migrants perform mainly skilled or unskilled labor
should however also play an important role, taking into account that the
amount of contributions to be paid to social insurance schemes is calcu-
lated on a wage-related basis. As a result, the effects of migration must be
considered relatively small."

43 See, for example, Jacobs, "Migration und Sozialstaat" (1997) Sozialer Fort-
schritt , pp. 260 et seq.; it is even difficult to assess the impact of migration
which took part in the past, see Hatton and Williamson, in Giersch (ed.), Eco-
nomic Aspects ofInternationals Migration (1994), pp. 27 et seq.
44 ESNPIWP.160, www.un.org/esa/population/unpop.htm.
45 Seifert, Geschlossene Grenzen - offene Gesellschafl? (2000), pp. 186 et seq.;
Borsch-Supan, in Siebert (ed.), Migration: A Challenge for Europe (1994),
pp. 119 et seq.
46 See Felderer, in Giersch (ed.), Economic Aspects of International Migration
(1994), pp. 197 et seq.
 1 The Challenge of Migration to the Welfare State 15

As far as the balance of social benefits systems financed by taxes is con-

cerned, one crucial aspect is the place of residence." Supposing migrants
only worked for a limited time in the receiving country and their families
stayed in their home country, the receiving country would not have to
spend much on social assistance or family allowances. However, aside
from the fact that this would not help the overaging of the population, at-
tempting to exclude migrants from participation in society is also hard to
implement, even though it might be preferred by the home country so as to
prevent a brain drain." Aside from practical problems, there are also moral
and legal arguments against this approach. Hence, an assessment of immi-
gration would also have to consider potential costs of integration and the
effects on labor markets."
Regarding normative considerations, attention is not focused on the cal-
culation of advantages and disadvantages following migration but on the
question ofjust redistribution and equality.
The economic outcome of migration might be directly linked to the re-
distributional process. One possible argument: If migration leads to lower
redistribution, then more migration would have the "unintended conse-
quence of a greater inequality of the income distribution among the native-
born"." This would not be a strong argument in a normative discourse for
two reasons: the model it is based on relies on different assumptions which
may fit certain scenarios of migration, but not others. Moreover and more

47 Despite the vague concept of this term, Bilsborrow, Hugo, Oberai and Zlotnik,
International Migration Statistics (1997), pp. 18 et seq.
48 This is a lesson to be learnt from the approach in Germany during the 1960s
and 1970s ("Gastarbeiter").
49 See a rather sceptical assessment in Poschner, Die EJJekte der Migration aufdie
soziale Sicherung (1996); Michael and Hatzipanayotou, "Welfare Effects of
Migration in Societies with Indirect Taxes, Income Transfers and Public Good
Provision", CES i/o Working Paper (2000) no. 347; for a positive assessment,
see Simon, in Giersch (ed.), Economic Aspects of International Migration
(1994), pp. 231, 233, who observes "a lack of displacement effect upon em-
ployment, that the tax-and-transfer mechanism that produces a net positive
flow from immigrants " dominates all other quantifiable effects, and the sup-
posed trade-like effect in fact produces no benefits to consumers of the re-
ceiving country."
50 Based on the assumption that one has to expect lower redistribution "when mi-
grants do not participate in the political process ..., or when the median voter is
an unskilled native-born individual", see Razin/Sadka, "Interactions between
International Migration and the Welfare State", CES i/o Working Paper (2000)
no. 337, p. 22.
16 Ulrich Becker

importantly, it only considers the native-born position while ignoring the

migrant position.
The crucial question remains whether, or to what extent, the inclusion of
migrants should depend on their position in society. Whereas citizenship
means membership in the society and therefore potential membership in
the redistributional community without the need of further justification for
the granting of social rights (as far as these rights are generally held to be
just), it could be asked why foreigners should become members of the host
society as well. As far as the basic right to subsistence is concerned, the
answer lies in the mere fact of residency, taking into account the territorial
responsibility of a state. As a result, illegal migrants must be entitled to ba-
sic rights, with the possibility of drawing certain conclusions if the stay in
the receiving country is brought to a close. As to other rights, the inclusion
of migrants is obligatory once they are admitted into society. Migrants do
not have to pay a membership fee. As long as the states are free to decide
whether or not they issue residence permits (and, thus, may decide based
on utilitarian considerations), they must accept the consequences of their
decisions. Nevertheless, certain exceptions may be acceptable, especially
adjustments to the conditions of living abroad or the duration of the stay,
as these factors are relevant to the functions of social benefits and belong-
ing to the redistributional community.5I

1.3 Challenges: Reactions to the impacts of migration

1.3.1 Which kind of reaction?

Barriers to the free movement of persons

As a general principle, there is no right of entry into a foreign state in in-
ternational law. In other words, states decide whether they open their fron-
tiers and admit foreigners. This general principle is refined by various ex-
emptions, but is nevertheless the existing legal principle of international
public law. States tend to build barriers against foreigners for different rea-
sons. Protection of identity is a possible reason. "Protection of identity is
accomplished rather by keeping people out"52and is perhaps characteristic
of western law tradition. This quite broadly shared expectation explains

51 See below, III.2.a).

52 Glenn, Legal Traditions ofthe World (2000), p. 150.
 1 The Challenge of Migration to the Welfare State 17

why the European Union is metaphorically called, "Fortress Europe"."

Cultural aspects aside, developed countries will certainly try to limit and
control the accession of foreigners so as to avoid disadvantages arising
from migration, considering the potential cost of integration." For different
reasons, this will most probably not lead to a policy of closed borders but
to the setting up of migration programs.
It could be argued that the closure of borders as well as the discretion of
developed states to decide on the accession of foreigners would violate the
rights of people to participate in the world-wide process of development,
especially considering the fact that developed states presently consume
most of the world's finite resources in terms of energy, natural resources,
etc. This kind of "spaceship ethics", or the argument of economic interde-
pendence between developed and non-developed countries in general,
could be used to claim a universal right of free movement." Primarily, this
discourse occurs on a moral level." In the human rights debate of today,
there is no legally binding state obligation to admit every foreigner, and it
is not to be assumed that this right will be accepted in the near future. The
main reason is that the right to free movement, although protecting a nega-
tive freedom, 57 must be accompanied by more-or-Iess intensive integrative
measures of the receiving country that place it near the category of rights
protecting positive freedom. Nevertheless, the effectiveness of a restrictive
policy towards migrants might be limited for other reasons.
Firstly, under some circumstances, a rejection of foreigners might not
only be illegitimate but illegal. As far as a right to asylum or non-refoule-

53 For the Migration Policy in the ED, see Convey and Kupiszewski, in Rees et al.
(eds.), Population Migration in the European Union (1996), pp. 311 et seq.
54 See above, II.3.b), and Enzensberger, Die grofJe Wanderung, p. 57: "Ein weite-
res strukturelles Hindemis fur die Einwanderung, dessen Machtigkeit unter-
schatzt wird, ist der Wohlfahrtsstaat ... Wo aber nicht nur individuelle, sondem
auch kollektive Besitzstande als heilig gelten, ist die Neigung, die Solidaritat
auf Landfremde auszudehnen , gering." For a critical economic assessment, see
Ritzen and van Dalen, in Zimmermann (ed.), Migration and Econom ic Devel-
opment (1992), pp. 231 et seq.; advocating planned immigration policies, Cas-
tles and Miller, The Age ofMigration (supra n. 5), pp. 285 et seq.
55 See Tugendhat, in Gosepath and Lohmann (eds.), Philosoph ie der Menschen-
rechte (1999), p. 60.
56 Also arguing for a just policy of membership in a State, Rieger, Einwanderung
und Gerechtigkeit (1998).
57 See above, II.l.b)bb).
18 Ulrich Becker

men! is recognized," this is the case for persons suffering from prosecution
for specific reasons in their home country . Moreover, citizens (and their
family members) from different countries may enjoy the right to free
movement, granted by bilateral or multilateral treaties of international law.
An even more fundamental basis to the free movement of persons can be
developed by creating regional (or transnational) communities. Europeani-
zation, whatever meaning is added to European citizenship, through its
free movement provisions, resulted in the overcoming of the states' territo-
rial boundaries. 59
Secondly, the attempt to close the borders is not likely to be perfectly
efficient, especially when there is a substantial migratory pressure. As the
example of cross-border migration between the U.S. and Mexico illus-
trates, migration between two countries sharing a common border with
sharp differences in wages can hardly be controlled, and flows ofundocu-
mented migrants will depend on the economic and political situations in
both neighboring countries as well as on the exchange of information and
individual factors ."

Restructuring of social policy / welfare state institutions

It is rather unlikely that migration will be the decisive incentive for the re-
structuring of the welfare state. Certainly, in western European states, one
can presently observe a general tendency towards renovating social secu-
rity systems, due first and foremost to an endogenous factor, demographic
developments." Whether this means a new orientation in social policy is
still open for debate. Reducing public interventions and thus creating a
more balanced public -private-mix in social security" are strategies proba-
bly influenced by the perception of rising competition, shifts in labor mar-
kets, and a possible need for more flexibility.s' Nevertheless, there remains

58 See in detail Goodwin-Gill, The Refugee in International Law (1996); Grahl-

Madsen, Territorial Asylum (1980); Plender, International Migration Law
(1988); for the Geneva Convention on the Status of Refugees also Davy, Asyl
und internationales Fliichtlingsrecht (1996).
59 See Weiler, The Constitution ofEurope (1999), p. 342.
60 See Stalker (supra n. 6), pp. 21 et seq.
61 See above, II.3.b)aa)(l).
62 Cf. Doring (ed.), Sozialstaat in der Globalisierung (1999), pp. 192 et seq.
63 See Kaufmann, Herausforderungen des Sozialstaats (1997), pp. 69 et seq.:
demographic, economic, international, and cultural challenges to the welfare
state.
 1 The Challenge of Migration to the Welfare State 19

room for political choices." Overall, potential effects of migration, as far

as they should be noticeable at all, will only playa minor role in the proc-
ess of adaptation or reorientation of social benefits systems as a whole ."
Besides, if the observation was true that "there is a general recognition of
the need to redirect social expenditure away from (some) relatively well-
off elderly people towards supporting poorer families with children and
currently excluded people to become established in the labor market","
then the present restructuring of the welfare state would at the same time
have to be in favor of the migrants already living in Western European
countries.
If, however, migration leads to considerable challenges to the welfare
state, the reactions will in the first place consist of adjustments to specific
problems perceived as resulting from migration. Thus, we must pay atten-
tion to the question of which aims of reaction are to be pursued.

1.3.2 Which aims of reaction?

Prevention of "unfair" competition

Whether states are not able or not allowed to control migration, or whether
they are willing to open their frontiers to migration, they will try to take
measures to maintain their welfare policy . Their first aim will be to protect
the existing social benefits systems from "unfair" competition. Two main
aspects playa role: Firstly, illegal migration, and secondly, migration mo-
tivated by a higher level of social welfare in the receiving country.
From the point of view of welfare states, illegal or undocumented
migration poses serious problems. Illegal migrants do not pay for social
benefits, they do not become members of the redistributional community;
thus their inclusion in social benefits systems is neither justified by admit-
tance nor by the circumstance that they have paid contributions or taxes.
As welfare states remain responsible, however, for the granting of basic
64 See also references in footnote 1. For the interaction between domestic policy
and the processof European integration in this respect, see Martin (supra n. 1),
pp. 44 et seq.
65 For the discussion on how to adapt to the consequences of globalization, see
Offe, in Michalski et al. (eds.), Societal Cohesion and the Globalising Econ-
omy (1997), p. 98 et seq. (basic income as an economic citizenship) on the one
hand and Krupp and Weeber, Globalisierung und Sozialversi cherung, Deut-
sche Rentenversicherung (1998), pp. 738 et seq., on the other.
66 Michalski, Millerand Stevens, in Michalski et al. (eds.), Societal Cohesion and
the Globalising Economy (1997), p. 14.
20 Ulrich Becker

fare states remain responsible, however, for the granting of basic social
rights," they must seek either to expel illegal migrants or legalize their
status."
As far as the second point is concerned, the motivation for migration;
the underlying argument distinguishes between "productivity driven"
migration on the one hand and "social benefits driven" migration on the
other. Migration caused by differences in wages should lead to overall
economic advantages, whereas migration caused only by differences in so-
cial benefits will lead to overall economic disadvantages.s? Leaving aside
the double problem of distribution of the expected welfare gains," states
should therefore try to exclude social benefits driven migration. Econo-
mists propose the solution of so-called delayed integration. migrant work-
ers remain affiliated to the social insurance systems of the sending country
during a transition period." This model would not violate the migrants'
right to benefits according to the amount of contributions they have paid,
but lead to lower labor costs for employing foreign workers during the
transition period. Moreover, the delayed integration model mainly takes
into account contributory systems and seems not to question whether con-
siderable disadvantages must be expected as a result of divergent levels of
social security (or whether this divergence serves as a pull factor causing
migration). The model could be used more effectively if non-contributory
benefits, such as social assistance and family benefits, were granted ac-
cording to the legal regimes applicable in the states of origin. This is, with
regard to the function of the respective benefits, a favorable approach as
long as the migrants and their families still reside in the territory of this
state," but would conflict with the principle of equality if the persons ask-
ing for benefits live in the receiving country. The sole justification is the
assumption that without the proposed restriction, free movement would not

67 See above, II.3.b)bb)(2).

68 For potential reactions, see also Vogel, in Eichenhofer (ed.), Migration und Il-
legalitdt (1999), pp. 83 et seq.
69 Richter and Wiegard, "Umverteilungsbedingte Wanderungen bedrang en den
Wohlfahrtsstaat und senken das Sozialprodukt" , Frankfurter Allgemeine Zei-
tung, 8.5.2001 , p. 21.
70 Distribution between the winners and losers of migration within the receiving
country on the one hand and between the host country and the sending country
on the other.
71 BMF, **Fre iziigigkeit und soziale Sicherheit in Europa (2000), pp.79 et seq.
72 See Becker, in Schulte and Barwig (eds.), Freiziigigkeit und Soziale Sicherung
(1999), pp. 226 et seq.
 1 The Challenge of Migration to the Welfare State 21

be granted," or in other words, the temporarily applicable inequality is the

price to be paid for accession.

Protection of migrants' social rights

Migrants are not only interested in equal treatment and the enjoyment of
the same social rights as the citizens of the receiving country. In many
situations, their entitlement to social rights also means the necessity of
overcoming the territorial boundaries of states: when pensions have to be
paid abroad, when family members live in the country of origin, or when
events occurring abroad have to be taken into account as preconditions for
the granting of benefits.
One additional point: if it were true that a major challenge to the welfare
states lies in the erosion of solidarity resulting from a process of individu-
alization," the inclusion of migrants and the protection of their social
rights might have a stabilizing effect: at least under the condition that it is
considered legitimate in the sense of accepting the belonging of migrants
to the redistributional community, it helps, by broadening the personal ba-
sis of social benefits systems, in order to uphold solidarity.

1.3.3 Which level of reaction?

National level
The inclusion of migrants could be interpreted as following from a grow-
ing accountability for human rights, thus placing the emphasis on interna-
tional regimes as well as being based on the domestic legal regimes." At
least in most Western European states and in the U.S., the latter is likely to
have greater impact, not at least due to the enforcement procedures through
which social rights can be realized in practice and which are still domi-
nated by national laws. In any case, it can be observed that the rights

73 For this argument, see Sinn et al. (eds.), EU-Erweiterung und Arbeitskraftemi-
gration: Wege zu einer schrittweisen Annaherung der Arbeitsmarkte (2000).
74 Ortmann, "Der Sozialstaat in der Globalisierungsfalle" (1997) Zeitschrifl fUr
Sozialreform, 596.
75 See Rosenhek, "Migration Regimes, Intra-State Conflicts, and the Politics of
Exclusion and Inclusion: Migrant Workers in the Israeli Welfare State" (2000)
47 Social Problems, 52, with further references. See also Iliopoulos-Strangas,
"Conclusions comparatives", in Iliopoulos-Strangas, La protection des droits
sociaux fondamentaux dans les Etats membres de I'Union europeenne, p. 966
et seq.
22 Ulrich Becker

granted to migrants constrain the capacity of states to control immigra-

tion," though this does not in itself exclude a possible rollback in order to
regain more room for national immigration policy measures.
As has been mentioned, there are two central basic rights ensuring social
protection of migrants. The first is the non-discrimination rule or the prin-
ciple of equal treatment, the second the right to property. The latter is rele-
vant for the portability of social rights as far as these rights are based on
the payment of contributions, but might not be part of every national con-
stitution, especially as a rule protecting rights enclosed in public law pro-
visions. Nevertheless , a certain level of legal protection will follow from
legitimate expectations, from the European Convention of Human Rights
or, for political reasons, from the institutional framework.77
Both for the situation within the receiving country and for the deterrito-
rialization of social benefits, the cornerstone of the migrants' legal position
is the principle of equal treatment. It does not exclude differentiation, yet
requires justification of differentiation. Within this context, some general
rules can be formulated:
1. Unequal treatment may not be justified based on the existence of a bor-
der or issues of citizenship;
2. It can be justified as a consequence of the specific function of a social
benefit.
Whether an exemption of the first rule can be made on the grounds of
reservation of reciprocity is still disputable. Since the right to a social
benefit is protected by the basic right to property, the question must be re-
jected." In other cases, a positive answer would seem doubtful, taking into
account the different roles of receiving and sending countries regarding co-
operation in the field of international migration.

Bilateral agreements
My last remark addresses the position and interests of the sending states.
They will try to protect their citizens living abroad by imposing the obliga-
tion of equal treatment on a receiving state, even if their responsibility in

76 Hollifield, in Schulte and Thranhardt, International Migration and Liberal

Democracies, Yearbook Migration (1999), p. 38.
77 See Harnisch, Der Schutz individueller Rechte bei Rentenreformen - Deutsch-
land und Groflbritannien im Vergleich (2001).
78 For German constitutional law, see BverfGE 51, 1 et seq.; dissenting opinions
E 51, 1,31 , and 37.
 1 The Challenge of Migration to the Welfare State 23

this regard is only of secondary importance compared to the responsibility

of the receiving country." They may also try to avoid a brain drain by in-
cluding a portability clause for social benefits in recruitment agreements.
Historically seen, bilateral agreements have played a considerable role
in protecting the social rights of migrants; the domestic courts could deal
with the matter based on the agreements and judges could apply the equal-
ity criterion."
Nowadays, the negotiating of bilateral agreements is likely to lose im-
portance as an instrument of international cooperation and as an instrument
which can constrain the exercise of state power over foreigners at the same
time. If states were to compete for labor forces," the sending states could
find themselves in a weak position. This has to be expected when, for eco-
nomic or political reasons, the already existing push factors for migration
or the individual initiative to emigrate overweigh the potential pull factor,
which consists of the expectation of legal certainty emanating from a bilat-
eral agreement. Globalization seems to reinforce this shift by facilitating
communication and transportation, and also by possibly imposing certain
restrictions on social policy in developing countries.

Multilateral level
At a multilateral level, common principles laid down in regional or global
treaties can serve as a basis for generally accepted individual rights, thus
limiting the power of the states to exclude migrants from entitlement to
these rights ." Leaving aside the question of whether multilateral agree-

79 See Graser, (supra n. 34), pp. 70 et seq.

80 Bohning, ILO Asia-Pacific Regional Symposium for Trade Union Organiza-
tions on Migrant Workers, Protection, International Norms and ILO Migrant
Workers Standards (1999), 1.
81 Jordan, in Jordan, Leibfried and Rieder (eds.), "Wohlfahrtsstaat und Globalis-
ierung" Zes-Arbeitspapier (1995) no. 15, p. 18: Nation states successfully "re-
strain internal competition to compete more successfully with other states",
82 See also Bohning, The Role and Functions of International Organizations in
the Field of Migrant Workers (1999), I: "Some intergovernmental organiza-
tions, the ILO among them, also enjoy the privilege of giving birth to and nur-
turing international minimum standards. This is due to the inability of any gov-
ernment, except in a hegemonic system that it controls, of setting standards to
be adhered to by other governments. Where there is an identified need for es-
tablishing international norms in a non-hegemonic system, a large number of
States have to agree on procedures and substance for such norms to become a
reality. Where levels of treatment are specified, these norms cannot be more
than minimum standards ... It would constitute no more than a declaration of
24 Ulrich Becker

ments were the outcome of a discourse open to every party involved and
reflected the different interests in an equal manner, their practical impact
depends on the number of states involved and the area covered: The more
cohesion between the treaty parties, the more effective a multilateral sys-
tem will be. Universal standards, however, have to be set up on a global
level, notwithstanding the manifold problems to be faced in order to make
a universal system work.83
A second point concerns not only the quality of rights, i.e. standard set-
ting or rules," soft-law or hard-law, but their dimension, in other words,
whether they are designed to protect negative or positive freedom." The
legal protection of property, and even the principle of equal treatment,
seem to guarantee a core of individual rights. International law can be in-
terpreted as claiming that a state may not withhold rights to social benefits
based on the payment of contributions even when this is aimed at ensuring
reciprocity. " The legal character of the UN Covenant on Economic, Social
and Cultural Rights, and the particular institutional structure of the ILO,87
already underline the peculiarities of social rights in an international per-
spective.
According to some, the time has come to introduce a global welfare pol-
icy, to create global social security systems that are open to everyone. 88
Arguments have been advanced favoring more redistribution between
states, giving more power to supranational bodies in the field of social pol-

moral value if the rules agreed upon would not enter into force at the national
level and if their application at that level could not be supervised internation-
ally. This being a very sensitive issue, only a few international organizations
have been endowed with supervisory mechanisms."
83 For the Human Rights Treaty System, see: Evatt, in Bayefsky (ed.), The UN
Human Rights Treaty System in the 21"1 Century (2000), pp. 287 et seq.
84 See Simma and Zockler, in v. Maydell and NuBberger (eds.), Social Protection
by Way ofInternat ional Law (1996), pp. 71 et seq.
85 See above, II. 1. b) bb) (2).
86 Kokott, in Hailbronner (ed.), Die allgemeinen Regeln des volkerrechtlichen
Fremdenrechts (2000), p. 50, referring to the ECHR, but also to general public
international law (as being in statu nascendi).
87 For possible further developments, see NuBberger, in v. Maydell and NuBber-
ger (eds.), Social Protection by Way of International Law (1996), pp. 237 et
seq.
88 See Butterwegge, in Butterwegge and Hentges (eds.), Zuwanderung im Zeichen
der Globalisierung (2000), pp. 280 et seq.
 1 The Challenge of Migration to the Welfare State 25

icy." There might be good reasons to appeal to the states, claiming mutual
respect and just sharing of global resources. However, it is hard to see how
moral arguments can help overcome the weakness of social rights at the in-
ternational level. The other side of entitlement to benefits is the obligation
to pay for them and social benefits mean that the wealthier population has
to pay for the weaker population. We are, however, still more than one
step away from a global legal order that would impose an obligation on the
states to become members of a worldwide redistributional community."
Moreover, ultimately, individuals pay for redistribution, so we might have
to look for a link between the international community and the individual
in order to legitimize redistribution.

89 Deacon, Global Social Policy (1997), p. 213: "To ensure global citizens (and
not their governments) benefit, there should be no global social redistribution
without the empowerment of citizens before a global court of social rights."
90 For a more optimistic view, but without clear suggestions for a solution, see
Meyer, in Aufderheide and Dabrowski (eds.), Internationaler Wettbewerb -
nationale Sozialpolitik? (2000), pp. 287 et seq.
26 Ulrich Becker

Bibliography

Robert Alexy, Theorie der Grundrechte (Frankfurt a. M., 1986).

Nicholas Barr, The Economics ofthe Welfare State (3rd edn., Oxford, 1998).
Ulrich Becker, Staat und autonome Trager im Sozialleistungsrecht (Baden-Baden,
1996).
Ulrich Becker, "Die Koordinierung von Familienleistungen, Praktische und recht-
liche Fragen der Anwendung der va 1408171" in Bernd Schulte and Klaus
Barwig (eds.), Freiziigigkeit und Soziale Sicherung (Baden-Baden, 1999),
pp. 191 et seq.
Norbert Berthold, Der Sozialstaat im Zeitalter der Globalisierung (Tiibingen,
1997).
R. E. Bilsborrow, Graeme Hugo, A. S Oberai and Hania Zlotnik, International
Migration Statistics (Geneva, 1997).
W. R. Bohning, The Role and Functions of International Organizations in the
Field ofMigrant Workers (1999).
[http://www.ilo.orgipubliclenglishlregionlasro/mdtmanilalspeeches/miworker.
htm].
W. R. Bohning, ILO Asia-Pacific Regional Symposium for Trade Union Organi-
zations on Migrant Workers, Protection, International Norms and ILO Mi-
grant Workers Standards (1999).
[http://www .ilo.orgipubliclenglishlregionlasro/mdtmanilalspeeches/mistanda.
htm];
Axel H. Borsch-Supan, "Migration, Social Security Systems, and Public Finance",
in Horst Siebert (ed.), Migration: A Challenge for Europe (Tiibingen, 1994),
pp. 119 et seq.
Ottmar Biihler, Die subjektiven offentlichen Rechte und ihr Schutz in der deut-
schen Verwaltungsrechtsprechung (Berlin, 1914).
Bundesministerium der Finanzen, "Freizugigkeit und soziale Sicherheit in Euro-
pa", Gutachten erstattet vom Wissenschaft1ichen Beirat beim Bundesministe-
rium der Finanzen, in BMF (ed.) Schriftenreihe des Bundesministeriums der
Finanzen (2000) Heft 69.
Christoph Butterwegge, "Zuwanderung und Wohlfahrtsstaat im Zeichen der Glo-
balisierung" in Christoph Butterwegge and Gudrun Hentges (eds.), Zuwande-
rung im Zeichen der Globalisierung (Opladen, 2000), pp. 258 et seq.
Stephen Castles and MarkJ. Miller, The Age of Migration (2nd edn., New York,
1998).
 1 The Challenge of Migration to the Welfare State 27

Andrew Convey and Marek Kupiszewski, "Migration and Policy in the European
Union" in Rees et al. (eds.), Population Migration in the European Union
(Chichester, 1996), pp. 311 et seq.
U1rike Davy, Asyl und internationales Fliichtlingsrecht (Wien, 1996).
Bob Deacon, Global Social Policy, International Organizations and the Future of
Welfare (London, 1997).
Diether Doring, "Zur Konzeption von Reformen" in Diether Doring (ed.), Sozial-
staat in der Globalisierung (Frankfurt a. M. , 1999), pp. 192 et seq.
Klaus Eder, "Warum ist Migration ein soziales Problem?" in Michael Bommes
and Jost Halfmann (eds.), Migration in nationalen Wohlfahrtsstaaten (Osna-
bruck, 1998), pp. 63 et seq.
Hans Magnus Enzensberger, Die grofie Wanderung (Frankfurt a.M., 1992).
Gosta Esping-Andersen, The Three Worlds of Welfare Capitalism (Cambridge,
1990).
Elizabeth Evatt, "The Future of the Human Rights Treaty System: Forging Rec-
ommendations" in Anne F. Bayefsky (ed.), The UN Human Rights Treaty
System in the ir Century (The Hague, 2000), pp. 287 et seq.
Thomas Faist, Social Citizenship for Whom? (Aldershot, 1995).
Bernhard Feldere, "Can Immigration Policy Help to Stabilize Social Security Sys-
tems?" in Herbert Giersch (ed.), Economic Asp ects of Internationals Migra-
tion (Berlin, 1994), pp. 197 et seq.
Neil Fligstein, "Is Globalization the Cause of the Crisis of Welfare States?" EUI
Working Papers SPS (1998) no. 5.
Harry K. Girvetz. Welfare State, Internat ional Encyclopedia of the Social Sci-
ences (vol. 16, New York, 1968 (reprint 1972), pp. 512 et seq.
H. Patrick Glenn, Legal Traditions ofthe World (Oxford, 2000).
Guy Goodwin-Gill, The Refugee in International Law (2nd edn., Oxford, 1996).
Atle Grahl-Madsen, Territorial Asylum (Stockholm, 1980).
Alexander Graser, Dezentrale Wohlfahrtsstaatlichkeit im foderalen Binnenmarkt?
(Berlin, 2001).
Ann-Christine Harnisch, Der Schutz individueller Rechte bei Rentenreformen -
Deutschland und Groflbritannien im Vergleich, Schriften zum deutschen und
europaischen Sozialrecht no. 3 (Baden-Baden, 2001).
Neville Harris, Social Security Law in Context (Oxford, 2000).
28 Ulrich Becker

Franz Haslinger, "Der Sozialstaat als Standortfaktor?" in Detlef Aufderheide and

Martin Dabrowski (eds .), Internationaler Wettbewerb - nationale Sozialpoli-
tik? (Berlin, 2000), pp. 185 et seq.
Timothy 1. Hatton and Jeffrey G. Williamson, "International Migration and World
Development: A Historical Perspective", in Herbert Giersch (ed.), Economic
Aspects ofInternationals Migration (Berlin, 1994), pp. 3 et seq.
RolfG. Heinze and Christoph Strunck, "Ein politisches Projekt unter okonomi-
schem Druck: Warum die Globalisierung den deutschen Sozialstaat betrifft
und warum nicht" in Stephan Leibfried and Uwe Wagschal (eds .), Der deut-
sche Sozialstaat (Frankfurt a. M., 2000), pp. 490 et seq.
James F. Hollifield, "The Politics ofInternational Migration: How Can We 'Bring
the State Back in'?" in Axel Schulte and Dietrich Thranhardt (eds.), Interna-
tional Migration and Liberal Democracies, Yearbook Migration 1999/2000
(Munster 1999), pp. 21 et seq.
Julia Iliopoulos-Strangas, La protection des droits sociaux fondamentaux dans les
Etats membres de l'Union europeenne, Athenes, Bruxelles, Baden-Baden
2000 .
Herbert Jacobs, "Migration und Sozialstaat, Entwicklungstendenzen des Sozial-
staats unter dem EinfluB wirtschaftlicher Globalisierung und weltweiter Wan-
derungsstrome" (1997) Sozialer Fortschritt, 256 et seq.
Georg Jellinek, System der subjektiven offentlichen Rechte (2 nd edn.; Tubingen,
1905, reprint 1964) .
Bill Jordan, "Globalisation and Welfare States" in Bill Jordan, Stephan Leibfried
and Elmar Rieder, Wohlfahrtsstaat und Globalisierung, ZeS-Arbeitspapier
(1995), no. 15, pp. 13 et seq.
Franz-Xaver Kaufmann, Herausforderungen des Sozialstaats (Frankfurt a. M.,
1997) .
Wolfgang Kersting, "Probleme der politischen Philosophie des Sozialstaats" in
Wolfgang Kersting (ed.) , Politische Philosophie des Sozialstaats (Weilerwist,
2000) , pp . 17 et seq .
Juliane Kokott, "Die Staatsangehorigkeit als Unterscheidungsmerkmal fur soziale
Rechte von Auslandern" in Kay Hailbronner (ed.), Die allgeme inen Regeln
des volkerrechtltchen Fremdenrechts (Heidelberg, 2000) , pp. 23 et seq.
Hans-Jurgen Krupp and Joachim Weeber, "Globalisierung und Sozialversiche-
rung" (1998) Deutsche Rentenversicherung, 723 et seq.
T. H. Marshall, Citizenship and Social Class (Garden City, N.Y., 1950, reprint
1973) .
Andrew Martin, "What does Glob alization Have to Do With the Erosion of Wel-
fare States ? Sorting Out the Issues", ZeS Arbeitspapie re (1997) no. 1.
 1 The Challenge of Migration to the Welfare State 29

Eric Christian Meyer, "Perspektiven einer internationalen Sozialordnung aus ord-

nungsethischer Sicht" in Detlef Aufderheide and Martin Dabrowski (eds.), In-
ternationaler Wettbewerb - nationale Sozialpolitik? (Berlin, 2000), pp. 287 et
seq.
Michael S. Michael and Panos Hatzipanayotou, "Welfare Effects of Migration in
Societies with Indirect Taxes , Income Transfers and Public Good Provision",
CES ifo Working Paper (2000), no. 347.
Wolfgang Michalski, Riel Miller and Barrie Stevens , "Economic Flexibility and
Societal Cohesion in the Twenty-first Century" in Wolfgang Michalski et al.
(eds.), Societal Cohesion and the Globalising Economy (Paris, 1997), pp. 7 et
seq.
Guy Mundlak, "Power-breaking or Power-entrenching Law? The Regulation of
Palestinian Workers in Israel" (2000) 20 Comparative Labor Law & Policy
Journal, 569 et seq.
Robert Nozick, Anarchy, State and Utopia (Oxford and Cambridge, 1974).
Angelika NuBberger, "Is the International Labour Organization in a State of Tran-
sition?" in Bernd v. Maydell and Angelika NuBberger (eds.), Social Protec -
tion by Way ofInternational Law (Berlin, 1996), pp . 211 et seq.
Claus Offe , "Towards a New Equilibrium of Citizens' Rights and Economic Re-
sources?" in Wolfgang Michalski et al. (eds.), Societal Cohesion and the
Globalising Economy (Paris, 1997), pp. 81 et seq.
Friedrich Ortmann, "Der Sozialstaat in der Globalisierungsfalle" (1997) Zeit-
schrift fir Sozialreform, 585 et seq.
Paul E. Peterson and Mark C. Rom., Welfare Magnets, A New Case for a National
Standard (Washington D. c.1990).
Richard Plender, International Migration Law (2nd edn., Dordrecht, 1988).
Hans Poschner, Die Effekte der Migration auf die soziale Sicherung (Weiden,
1996).
John Rawls , A Theory ofJustice (Oxford, rev edn 1999).
Assaf Razin and Efraim Sadka, "Interactions between International Migration and
the Welfare State", CES ifo Working Paper (2000), no. 337.
Wolfram Richter and Wolfgang Wiegard, "Umverteilungsbedingte Wanderungen
bedrangen den Wohlfahrtsstaat und senken das Sozialprodukt", Franlifurter
Allgemeine Zeitung, 8 May 2001, p. 21.
Gunter Rieger, Einwanderung und Gerechtigkeit (Opladen, 1998).
30 Ulrich Becker

JozefM. Ritzen, Hendrik P. van Dalen, "The Economic Consequences of Selec-

tive Immigration Policies" in Klaus F. Zimmermann (ed.), Migration and
Economic Development (Berlin, 1992), pp. 231 et seq.
Zeev Rosenhek, "Migration Regimes , Intra-State Conflicts , and the Politics of Ex-
clusion and Inclusion: Migrant Workers in the Israeli Welfare State" (2000)
47 Social Problems , 49 et seq.
Richard M. Titmuss, "The Social Division of Welfare", in Essays on the Welfare
State (2nd edn., London, 1963), pp. 34 et seq.
Wolfgang Seifert, Geschlossene Grenzen - ofJene Gesellschafl? (Frankfurt a.M.,
2000) .
Amartya Sen, Inequality Reexamined (New York , 1995).
Bruno Simma and Markus Zockler, "Social Protection by International Law: Law-
Making by Universal Organizations" in Bernd v. Maydell and Angelika
NuBberger (eds .), Social Protection by Way oj International Law (Berlin,
1996), pp. 69 et seq .
Julian L. Simon, "On the Economic Consequences of Immigration: Lessons for
Immigration Policies" in Herbert Giersch (ed.), Economic Aspects ojInterna-
tionals Migration (Berlin, 1994), pp. 227 et seq.
Hans-Werner Sinn et al., El.I-Erweiterung und Arbeitskrdftemigration: Wege zu
einer schrittweisen Anndherung der Arbeitsmdrkte, Studie im Auftrag des
Bundesministeriums fur Arbeit und Sozialordnung (Munchen, 2000) .
Dennis 1. Snower, "Evolution of the Welfare State" in Richard Hauser (ed.), Die
Zukunfl des Sozialstaats (Berlin, 2000), pp. 35 et seq.
Peter Stalker, Workers without Frontiers, The Impact oJGlobalization on Interna-
tional Migration (Geneva, 2000).
Ernst Tugendhat, "Die Kontroverse urn die Menschenrechte", in Stefan Gosepath
and Georg Lohmann (eds .), Philosophie der Menschenrechte (2nd edn., Got-
tingen, 1999), pp. 48 et seq.
Fred Twine, Citizenship and Social Rights, The Interdependence ojSelfand Soci-
ety (London, 1994).
Dita Vogel , "Illegale Zuwanderung nach Deutschland und soziales Sicherungssys-
tern" in Eberhard Eichenhofer (ed.), Migration und Illegalitdt (Osnabruck,
1999), pp . 73 et seq.
Uwe Volkmann, Solidaritdt - Programm und Prinzip der Verfassung (Tubingen,
1998) .
Michael Walzer, Spheres ojJustice (Oxford, 1983).
Joseph H. H. Weiler, The Constitution oJEurope (Cambridge, 1999).
 1 The Challenge of Migration to the Welfare State 31

Hans F. Zacher, "Grundtypen des Sozialrechts" in Walter Furst (ed.), Festschrift

fiir Zeidler (Berlin, 1987), pp. 572 et seq.
1A The Challenge of Migration to the Welfare
State

Comment on the Paper Presented by Ulrich Becker

by Angelika Nussberger

Contents
IAI Introductory Remarks 33
IA2 Categorization of migrants 34
IA.2.1 Migrant workers 35
IA.2.2 Refugees 36
IA2.3 Ethnic migrants 36
IA2A Illegal migrants 37
IA.2.5 Temporary migrants 37
IA 3 The development of the mechanism of inclusion and
exclusion - a historical perspective 38
IAA The functioning of the mechanism of inclusion and
exclusion in the age of globalization .40
IA5 Regulations on the intemationallevel 42
IA6 Challenges to the legitimacy of the welfare state 46

1A.1 Introductory Remarks

In his analysis of the challenges of migration to the welfare state in an era

of globalization, Ulrich Becker focuses on three basic questions:
Is there a link between globalization and migration?
How are migrants included in the redistributional mechanisms of the
welfare state?
Does migration provoke adaptations of the historically developed model
of the welfare state?
The main thesis of Ulrich Becker's paper is that the inclusion of mi-
grants is part of the inherent logic of the structure of both national social
security and social assistance systems. Thus, if migration is no longer con-
34 Angelika Nussberger

trollable or at least only controllable up to a certain point, states have to

prevent the unfair exploitation of the welfare state by illegal migration as
well as by social benefits driven migration. The rights of the productivity-
driven migrants must also be safeguarded . Regulations on the national lev-
el as well as bilateral and multilateral treaties are necessary to respond to
these new challenges.
The present comment highlights the exceptions to the mechanism of in-
clusion which illustrate the vulnerable points of the historically developed
welfare systems. In analyzing the challenge of migration, it must be taken
into account that the inclusion of migrants is only possible if complemen-
ted by restrictive immigration rules excluding potential net-receivers . The
dilemmas of this model become evident when confronted with illegal mi-
gration : the territorially defined welfare state cannot but offer paradoxical
solutions to this problem.
It is necessary to differentiate between various categories of migrants as
they pose different problems to the welfare state: (I) Migration is not to be
seen as a new challenge but as an intrinsic problem of the territorially re-
stricted welfare state. Welfare states protect themselves against exploita-
tion in two ways: barring access to those who might upset the balance of
the system, and integrating those who can contribute adequately. (II) The
exceptions to these rules illustrate that in the age of globalization this ap-
proach no longer functions smoothly. (III) Reactions to the new challenges
are a patchwork of different regulations. Ifnew regulations are deemed ne-
cessary on the multilateral level, the existing rules should be taken into ac-
count. (IV) New developments in the jurisprudence of the European Court
of Human Rights show that the traditional system of territorially restricted
welfare states cannot but give paradoxical answers to basic questions of
social justice.

1A.2 Categorization of migrants

Ulrich Becker's analysis of the potential effects of migration focuses pre-

dominantly on the group of migrant workers. Considering the phenomenon
of migration generally, it might be worthwhile to shed light on the interests
and distinctive features of other groups of migrants as well.
 lA Comment on UlrichBecker 35

1A.2.1 Migrant workers

In international law, "migrant worker" is defined in different ways. The

European Convention on the Legal Status of Migrant Workers 19771 de-
fines a migrant worker as:
... a national of a Contracting Party who has been authorised by anotherCon-
tracting Party to reside in its territory in orderto take up paid employment. (Art. 1
para. 1)
According to the International Convention on the Protection of the
Rights of all Migrant Workers and Their Families 1990:2
The term 'migrant worker' refers to a person who is to be engaged, is
engaged, or has been engaged in a remunerated activity in a State of which
he or she is not a nationaL (Art. 2 para. I)
The differences between these definitions are quite evident: in the first
definition, authorization is stressed; in the second definition, this aspect is
not explicitly included, but the dimension of time is broader: migrant
workers are not only those who actually work in another country but also
those who will work there or have worked there.
These differences are important when discussing the consequences of
migration to welfare states: is there an ongoing responsibility for the well-
being of those people who have returned to their home countries? Or is the
challenge of migration restricted to the time that the migrant workers are
actually present in the territory of another State?
The inclusion of migrant workers in redistributional welfare schemes
can have positive economic short-term and long-term effects,' as long as
the professional qualifications of the migrant workers correspond with the
demands of the labor market. The chances of a positive balance of trans-
fers in the welfare system for this form of "productivity-driven migration"
are enhanced if the admission of the migrant workers is linked to a con-
crete check of their opportunities on the labor market.
The inclusion of the family members of migrant workers can have dif-
ferent effects in the short-term and long-term perspective. The payment of
family benefits and integration costs can be regarded as an investment,
which in the long-term may help limit negative effects of the demographic
problem.

I European Convention on the Legal Status of Migrant Workers (1977) ETS

No. 093.
2 GA Res. 45/158 (1990), not yet entered in force.
3 Cf. Ulrich Becker's analysis of the inclusion of migrant workers in redistribu-
tionalsystems from a utilitarian perspective.
36 Ange lika Nussberger

1A.2.2 Refugees

Refugees are those outside their country of nationality due to a well-found-

ed fear of being persecuted for reasons of race, religion, nationality, mem-
bership in a particular social group or political opinion.'
The redistributional effects of the inclusion of refugees in the welfare
systems cannot be analyzed from a utilitarian perspective because admit-
ting and integrating refugees is both a moral duty and a duty based on con-
stitutional and international law. In discussing the challenge of migration
to the welfare state in general, one cannot ignore the burden on social as-
sistance systems.
Globalization may aggravate the problem for welfare states as informa-
tion about benefits is spread very quickly and can influence the direction
of the stream of the refugees. In this context, a "race to the bottom", a re-
duction of benefits to a mere subsistence level, is possible. Although ac-
cording to the Geneva Convention, refugees staying lawfully within the
territory of a country shall be accorded the same treatment as nationals
with respect to public relief and assistance,' this does not apply to those
not yet legally accepted as "refugees". If states try to limit the benefits giv-
en to this category of asylum-seekers in order to secure the economic bal-
ance of their welfare systems,' this can harm the concept of the welfare
state as an all-embracing system. Although everyone living together in one
territory is included, some are included "more than others" .

1A.2.3 Ethnic migrants

If members of an ethnic minority leave their state of origin and emigrate to

the state where the minority is the majority, they are migrants as well. An
example would be the migration of Jews to Israel as well as the migration
of the so-called "Volksdeutschen" from Eastern Europe to Germany. Eth-
nic migration is also a typical consequence of the dismembering of states;
recent examples are the Soviet Union and Yugoslavia. According to the
political and economic situation in the receiving country, the inclusion and
exclusion of migrants in social protection systems can be very different;
there are no common standards in this context. In contrast with migrant
workers, ethnic migrants are likely to take their children with them and re-
main permanently in the receiving country. Thus, the question of exporting

4 Cf. Art. I of the Convention relating to the Status of Refugees of 28 July 1951.
5 Cf. Art. 23 of the Geneva Convention.
6 e.g. Germany: Law on assistance for asylum -seekers (Asylbewerberleistungs-
gesetz).
 1A Comment on Ulrich Becker 37

long-term as well as family benefits is less urgent than the question of

maintenance and resumption of social security rights by the accumulated
periods completed in the country of origin.

1A.2.4 Illegal migrants

People barred access to another country who migrate without permission

are "illegal migrants". As a rule they are excluded from all social benefits ;
if they work on the black market, they can be included in certain social se-
curity systems, e.g., if the only precondition for being insured is the fact of
doing dependent work, even without a valid employment contract.' In ad-
dition, they can claim emergency aid and thus challenge the social assis-
tance systems. The most important problem, however, is that illegal migra-
tion may cause distortion on the labor market and thus endanger em-
ployment-based welfare systems.

1A.2.5 Temporary migrants

The categorization of the different types of migrants can also be based on

the duration of the stay: permanent migrants must be distinguished from
temporary migrants; for e.g., seasonal workers, students, tourists, and post-
ed workers. If posted workers are integrated into the labor market but re-
main insured in their home countries, they can upset the balance of the la-
bor market of the receiving country : if social security costs are lower in the
sending country, they can offer work at lower prices.
As a rule, students and tourists cause less problems to the welfare state
if they remain insured in their home-countries or only require integration
in social protection systems in case of illness.!
Globalization did not create these forms of migration. But the increased
number of migration movements - temporary and permanent - has added
to the problems of the welfare states based on stable working relations.
Although, generally, different legal regulations apply to migrant work-
ers and their family members, to refugees, to illegal migrants, and to tem-
porary migrants, these categories are not impermeable. Migrant workers
can become needy, lose their residence permit, and thus become illegal.

? An example would be the German workers compensation system.

8 For the EU a recent decision of the European Court of Justice (C 184-99) has
modified the legal situation of students: they have to be granted social assis-
tance on the same basis as nationals. But for being admitted as a student an ade-
quate funding can still be required.
38 Angelika Nussberger

Refugees can take on work and be integrated in the redistributional com-

munity. The status of illegal migrants can be legalized; temporary migrants
may want to stay.

1A.3 The development of the mechanism of inclusion and

exclusion - a historical perspective

The essence of the "welfare state"? as it has been developed since the end
of the 19th century is the redistribution of wealth to guarantee "freedom of
want" , to secure a decent standard of living for all. The society as the sub-
strate of the welfare state encompasses those living in a territorially de-
fined nation-state. Flows of migration - immigration and emigration -
change the composition of the society. The effects of migration on the re-
distributional system of the welfare state depend on many factors, above
all, the relation between immigration and emigration and the balance be-
tween net-payers and net-receivers who come and go. This balance can be
seen from the immediate, short-term perspective and from the long-term
perspective.
Migration challenges the welfare state when the balance of the redistri-
butiona1 mechanism is upset. It can potentially undermine this system in
different ways: If migrants are included, but appear only on the side of the
net-receivers, financing becomes insecure and the idea of fairness is
threatened. But if migrants are excluded, the welfare state system is also
threatened.
Non-participation in the financing of the costly social security system of
a welfare state confers unjustified economic and competitive advantages
on the labor market; the functioning of the labor market is the precondition
for financing the welfare state. Thus, if neither inclusion nor exclusion can
adequately protect the welfare state, migrants are barred access; they are
kept out. These are the two pillars on which the welfare states ' answer to
migration relies.
Migration is not a new challenge to the welfare states that have devel-
oped despite "international challenges". The 19th century was marked by
controversial discussion about the possibility of introducing labor and so-
cial security regulations that would be beneficial to workers. These regula-
tions were expected to endanger the competitiveness of the respective na-

9 "Welfare State" is defined here in the same way as in the paper of Ulrich Beck-
er concentrating only on those areas of social policy where the State directly in-
tervenes granting benefits when specific risks have been realised.
 lA Comment on Ulrich Becker 39

tiona I market economy.'? Furthermore, migration was expected to destroy

the national standards achieved for the workers. liOn the one hand, it was
feared that migrant workers might accept work under less favourable con-
ditions and thus compete unfairly. On the other hand, it did not seem ac-
ceptable to let foreign workers benefit from state subsidies to social bene-
fits that they had not contributed to on an equal basis. Thus, although the
decisive criterion for welfare benefits eligibility in the different systems
was employment or residence, there are very differentiated answers in the
first social security laws as to the inclusion or exclusion of migrants.
In workers' compensation systems, migrant workers were usually in-
cluded, but the payment of benefits abroad was not always guaranteed. In
health insurance systems, migrant workers were generally also included on
an equal footing with the nationals of the respective countries; their posi-
tion could be limited with regard to state subsidies to benefits. However,
pension legislation was different. Whereas migrant workers were usually
excluded from tax-financed and savings systems, they were regularly in-
cluded in insurance systems. Still they were discriminated against. For ex-
ample , pensions could be reduced if the beneficiaries returned to their
home countries; state subsidies and the employers' contributions could be
deducted. 12
Social assistance systems, which were primarily on a regional basis, de-
veloped in the beginning of the zo" century and did not usually differenti-
ate between citizens and foreigners regarding emergency aid. When there
was a permanent lack of means of subsistence, needy foreigners were usu-
ally repatriated if transport to the border was possible. These were the pre-
dominant solutions, not only in national law and practice but also in bilat-
eral treaties. 13
Basically, the challenge that migration posed to the early welfare states
was solved by immigration regulations. The special welfare law rules were
only a subsidiary means to stabilize the balance of the redistributional sys-
tems . Thus, although the criterion of citizenship was not a necessary condi-
tion for participation in redistributive welfare schemes, from the very be-

10 Cf. the so-called "Warenkonkurrenzargument"; Wilhelm Hafner, Motive der

internationalen Sozialpolitik. Untersuchungen fiber ihre Entwicklung, Berlin,
Leipzig 1922, pp. 3 f(
II Cf. the so-called "Wandererkonkurrenzargument"; Wilhelm Hafner, Motive der
internationalen Sozialpolitik. Untersuchungen fiber ihre Entwicklung, Berlin,
Leipzig 1922, pp. 56 ff.
12 Cf. the comparative studies of Ernest Mahaim, Droit international ouvrier, Paris
1913,p.100etseq.
13 Cf. the overview given by Cyrille Van Ovcrbcrgh, L'assistance aux etrangers,
La solution internationale. Bruxelles, Dewit 1912.
40 Angelika Nussberger

ginning differentiated solutions as to the inclusion or exclusion of migrants

were elaborated. The welfare state based on the concept of territorial sov-
ereignty assumed responsibility for every person living within its territory,
but in different ways.

1A.4 The functioning of the mechanism of inclusion and

exclusion in the age of globalization

At the outset, the picture has not changed much. The welfare state's an-
swer to migration remains twofold: Migrants deemed to be net-receivers
are denied entry into welfare states on the basis of restrictive immigration
rules; if they become needy, they are repatriated. Those admitted to the ter-
ritory of a welfare system are included in the redistributional system.
However, this simple scheme is changing. On the one hand, there are
noticeable exceptions to the general rule of solely attaching the receipt of
benefits to workplace and residence. On the other hand, the concept of the
welfare state controlling the influx of migrants is undermined.
To start with the last point first: there are a lot of new constraints to
even opening the borders for potential net-receivers. The borders cannot be
closed to refugees and ethnic migrants due to political and humanitarian
reasons. In the age of globalization, it is primarily economic reasons that
can induce states to abandon restrictive immigration rules. Open borders
are essential for a globalized market. As the example of the European Un-
ion shows, the exchange of goods is linked to the free movement of peo-
ple. Open markets are incompatible with closed borders.. If the EU wants
to integrate Eastern European countries, a strong migration pressure is to
be expected as these countries are much poorer than former accession can-
didates. Because free movement of persons is significant to the very idea
of European integration, even a potentially large-scale influx of migrants
must be accepted.
As immigration rules are the lever regulating the pressure of migration
on welfare states, the logical consequence of the modification of these
rules is the modification of the inclusion scheme.
Thus, the actual discussions show that new approaches are being con-
sidered. One prominent example is the model of delayed integration pro-
posed by the EU member states to avoid negative social consequences of
the enlargement of the EU to the East."

14 Cf. Ulrich Becker, EU-Erweiterung und differenzierte Integration. Zu beitritts-

bedingten Ubergangsregelungen am Beispiel der Arbeitnehmerfreiziigigkeit,
Baden-Baden 1999; cf. the contributions in Hans-Werner Sinn (ed.), EU-
 lA Comment on Ulrich Becker 41

The exclusion of migrants from social security and social assistance sys-
tems is not only a planned reaction to future developments. A survey of
different national systems shows that state-financed or state-subsidised
payments in the case of long-term unemployment, old age, disability, and
child-raising allowance is often made dependent on nationality. 15 In several
systems the export of benefits is not guaranteed to foreigners, whereas
there are no restrictions for nationals. "Residence" can be defined restric-
tively, so that foreigners are excluded, at least for a certain period of time,"
Regulations reducing or suspending long-term benefits for both foreign-
ers and nationals when they live abroad can be indirectly discriminatory,
as foreigners are much more likely to be affected by such rules. The same
is true for regulations reducing or denying childcare benefits for children
living abroad.
If benefits are not granted to foreigners by the law but depend on eco-
nomic or political considerations, then foreigners arc in a disadvantaged
position as well. The same is true if a constitutional guarantee is lacking
for social rights of foreigners whereas it is granted to nationals.
Differentiation in these cases is based on the assumption that a different
treatment of foreigners and citizens can be justified if there is no synallag-
ma between contribution and benefits.
The exceptions to the model of inclusion are criticized as being dis-
criminatory." However, they do not invalidate the general rule of the in-
clusion of migrants in the social security and social assistance systems of
the receiving country. The relation between rule and exception can change
when migrants (i.e. migrant workers) and employers collude in order to

Erweiterung und Arbeitskraftemigration. Wege zu einer schrittweisen Annahe-

rung der Arbeitsmarkte, Munchen 2001.
15 Cf. e.g. the social assistance benefits in case of old age in France (the regulation
has been changed recently) and Italy; the special benefits in case of long-term
unemployment in Austria (the regulation has been changed due to the Gay-
gusuz Decision of the European Court of Human Rights); the child-raising al-
lowance paid in some of the German Bundeslander.
16 Cf. the survey of Bernd von Maydell, General Report, in: Bernd von Maydell,
Bernd Schulte (eds.), Treatment of Third-Country Nationals in the EU and EEA
Member States in Terms of Social Security Law, Leuven 1995, pp. 325-342.
17 Cf. the critical comments of the various control bodies on the implementation
of social rights on the international level (Committee ofIndependent Experts on
the Application of Conventions and Recommendations, controlling the imple-
mentation of the conventions of the ILO, Committee of Social Rights control-
ling the implementation of the European Social Charta, Committee of Social
and Economic Rights controlling the implementation of the International Cove-
nant on Economic , Social and Cultural Rights) .
42 Angelika Nussberger

gain competitive advantages. The scheme is old: when a firm located in

one country temporarily sends workers to another country, the workers
remain insured in the social security system of the country in which the
firm is established. This concept is revived in a new context in the era of
globalization: it provides the basis for employing workers from low-
income countries in highly developed welfare states without including
them in the respective national redistributional mechanism. The interna-
tionalized structures of firms and the new flexible patterns of employment
offer a large playing-field for finding legal constructions meant to reduce
the social protection of seconded workers. These phenomena can become
so widespread that exclusion becomes the rule and inclusion the exception,
a development that distorts the labor market and the idea of the universal-
ity of the welfare state."

1A.5 Regulations on the international level

Ulrich Becker discerns three levels of possible reactions to these problems :

the national, the bilateral and the multilateral. This approach is rooted far
back in the discussions on the development of welfare regimes in the
19th century. Already then, passing laws on a national basis was considered
insufficient. International agreements were deemed necessary to further a
real solution. Thus, bilateral treaties were concluded to regulate immigra-
tion'? and to secure the inclusion of migrants in the social security sys-
terns." On the multilateral level, convention No . 19 of the IL021 is an early
example of a regulation to the problem: the contracting parties" agreed to
pay pensions to victims of work accidents independent of the residence of
the beneficiary.

is Cf. the preamble to the Recommendation No. R (91) 3 of the Committee of

Ministers of the Council of Europe: "Noting that the secondment of workers is
an expanding practice, particularly on account of the development of large eco-
nomic areas and the intensification of international economic relations ..."
19 Cf. the American-Chinese treaty from 1886 and the English-Chinese treaties
from 1886 and 1904; cf. Wilhelm Hafner, Motive der internationalen Sozialpo-
litik. Untersuchungen tiber ihre Entwicklung, Berlin, Leipzig 1922, pp. 3 et seq.
20 Cf. the French-Italian treaty of 1904; cf. Paul Pic, La Convention franco-

italienne du travail du 15 avril 1904 et le droit international, Revue generale de

Droit international public, Paris Tome XI, 1904, pp. 515-531 .
21 Equality of Treatment (Accident Compensation) Convention 1925, Internatio-
nal Labour Organisation, International Labour Conventions and Recommen-
dations 1919-1991, Volume I, Geneva 1992, pp. 63 et seq.
22 As of September 2001 119 States have ratified the convention.
 1A Comment on Ulrich Becker 43

Since then, many international regulations have been elaborated to de-

fine common standards as to the inclusion of migrants in social protection
systems on the regional and the universal level. 23 Different sets of norms
can be discerned: the human rights instruments including a "right to social
security" and a "right to social assistance" or a "right to a decent standard
of living" granted to everybody> on the one side, and the specific conven-
tions concerning social protection based on a differentiated concept as to
the inclusion of foreigners on the other side." In addition, there are specific
regulations concerning the situation of migrant workers as such."
These international regulations are not unequivocal in detail, although
equal treatment and inclusion in social security and social assistance sys-
tems can be regarded as the general rule."
The wording of the human rights treaties is open to interpretation, as the
right to social security and the right to a decent standard of living, to social

23 Jan Niessen, Immigrants and Migrant Workers , in Asbjorn Eide, Catarina

Krause , Allan Rosas (eds .), Economic, Social and Cultural Rights, Dordrecht,
Boston, London, 1995, pp. 323-340, Richard B. Lillich , The Human Rights of
Aliens in Contemporary International Law, Manchester University Press 1984 .
24 The most important guarantees are included in Arts. 9, 11 International Cove-
nant on Economic, Social and Cultural Rights and in Arts. 12, 13 European So-
cial Charta.
25 Cf. the general regulations: Convention No. 48 (Maintenance of Migrants' Pen-
sion Rights Convention 1935), Convention No. 118 (Equality of Treatment
(Social Security) Convention 1962) and Convention No. 157 (Maintenance of
Social Security Rights Convention 1982); cf. also the specific regulations:
Art. 3 Convention No.2 (Unemployment Convention 1919), Art. 2 Convention
No.3 (Maternity Protection Convention 1919), Art. 21 Convention No . 35 (Old
Age Insurance Convention 1933), Art. 13 Convention No. 37 (Invalidity Insur-
ance Convention 1933), Part XII Convention No. 102 (Social Security (Mini-
mum Standards) Convention 1952), Art. 6 No.1 b Convention No. 97 (Migra-
tion for Employment Convention, Revised 1949), Art. 27 Convention No. 121
(Employment Injury Convention 1964) and Art . 32 Convention No. 130 (Medi-
cal Care and Sickness Benefits Convention 1969).
26 Cf. the International Convention on the Protection of the Rights of all Migrant
Workers and Their Families (1990) and the European Convention on the Legal
Status of Migrant Workers (1977).
27 Cf. the resolution of the General Assembly of the United Nations (13.12.1985)
" Declaration on the Human Rights of Individuals Who are not Nationals of the
Country in which They Live" guaranteeing certain qualified rights to health
protection, medical care, social security, social services , education, rest and lei-
sure , "...provided that [the persons] fulfil the requirements under the relevant
regulations for participation and that undue strain is not placed on the resources
of the State (Art. 8 para. 1 (c))."
44 Angelika Nussberger

and medical assistance is guaranteed to everyone, but nationality is not in-

cluded among the criteria considered discriminatory." If nationality is re-
garded as "other status" in the sense of the discrimination clauses, it is still
uncl ear to what extent differentiat ion based on nationality is justified espe-
cially in the controversial cases: the export of long-t erm benefits and the
granting of publicly funded short-term benefits.
The total exclusion of foreigners is clearly deemed a violation of inter-
national law . Th e reservation of Kuwait to Art. 9 ICESCR has been inter-
preted as contrary to the object and purpose of the ICESCR29:
The Government of Kuwait declares that while Kuwaiti legislation safeguards
the rights of all Kuwaiti and non-Kuwaiti workers, social security provisions apply
only to Kuwaitis.
It is doubtful whether every differentiation between nationals and for-
eigners can be considered discriminatory. This approach is for examp le
followed by the Committee on Economic Social and Cultural Rights that
controls the implementation of the International Covenant on Economic,
Social and Cultural Rights. In its "General Comment" No . 14 of 2000, th e
ambit of the ' right to health' enshrined in Art. 12 of the Covenant is ex-
plained:
" ...states are under the obligation to respect the right to health, inter alia, re-
fraining from denying or limiting equal access for all persons, including prisoners
or detainees, minorities, asylum seekers and illegal immigrants, to preventive,
curative, and palliative health services."30
This view can be bas ed on the wording "everybody has a right to .. ." as
there are no special regulations for foreign ers.

28 Cf. the respective clauses in the Covenants, e.g. Art . 2 para. 2 of the Interna-
tional Covenant on Economic, Social and Cultural Rights: "The States Parties
to the present Covenant undertake to guarantee that the rights enunciated in the
present Covenant will be exercised without discrimination of any kind as to
race, colour, sex, language, religion, political or other opinion, national or so-
cial origin, property, birth or other status."
29 Cf. the answer to the reservation of Kuwait by Finland, Germany, Italy, the
Netherlands, Norway and Sweden; cf. e.g. the wording of the comment of the
Federal Republic of Germany: "...[The German government] particularly feels
that the declaration regarding article 9 as a result of which the many foreigners
working on Kuwaiti territory would, in principle, be totally excluded from so-
cial security protection, cannot be based on article 2 (3) of the Covenant."
30 General Comment No. 14 of the Committee on Social and Cultural Rights "The
right to the highest attainable standard of health" (4.7.200. E/C.1 21 200014,
§ 34).
 1A Comment on Ulrich Becker 45

However, this comment is in sharp contrast to the regulation in the In-

ternational Convention on the Protection of Migrant Workers and Mem-
bers of their Families, according to which illegal migrant workers are only
granted a right to health care on a very restricted basis: They receive medi-
cal care if it is urgently required for the preservation of life or the avoid-
ance of irreparable harm to health on the basis of equality of treatment
with nationals of the state concerned (Art. 28).
On the regional level, the duties of states in the field of social protection
are stated explicitly. According to Art. 12 of the European Social Charter,
the contracting parties are obliged "to undertake steps by the conclusion of
appropriate bilateral and multilateral agreements ... in order to ensure equal
treatment with their own nationals of the nationals of other contracting par-
ties (and) the granting, maintenance and resumption of social security
rights " Equal treatment is also demanded for those without adequate re-
sources (Art . 13). Although these obligations are formulated as progressive
state-obligations, the Committee on Social Rights responsible for the con-
trol of the implementation of the treaty interprets them as directly applica-
ble, and forbids not only direct but also indirect discrimination.
More important for the development of international standards is the ju-
risprudence of the European Court of Human Rights. Although the right to
social security and social assistance as well as the right to health do not
figure among the rights protected in the European Convention on Human
Rights, pension rights are considered "property" in the sense of Art. 1 of
the First Additional Protocol. Therefore, violations can be controlled by
the European Court of Human Rights. In the famous Gaygusuz case, the
Court decided that benefits granted in unemployment cases, even if they
are not financed or not exclusively financed by contributions, cannot be
denied to foreigners." The argument that a state has a "special responsibil-
ity for its own nationals" was not accepted as an "objective and reasonable
justification" for a differentiation based on nationality. Neither was the
lack of a bilateral treaty, and, as a consequence, the lack of reciprocal obli-
gations regarded as relevant. The Court thus defines the concept of inclu-
sion broadly .
In contrast with the human rights approach, the specific multilateral
treaties on social protection provide for various possibilities of excluding
foreigners from redistributional welfare systems. In the majority of the
ILO conventions, benefits granted from public funds can be withheld. Re-
ciprocity is regarded as essential even for inclusion in contributory social

31 Case of Gaygusuz v. Austria, (1996) Reports 1996-IV, No. 14, pars. 45, 50.
46 Angelika Nussberger

security schemes." Multilateral conventions on social assistance are rare.

According to the European Convention on Social and Medical Assis-
tance," nationals of a contracting party who are without sufficient re-
sources, are equally entitled with the nationals of the other contracting
party to social and medical assistance. This system not only favors inclu-
sion but stands on two pillars as well: although the possibility of repatria-
tion of people in need of assistance is restricted, it still exists.
Although the underlying idea of these regulations is the inclusion of for-
eigners in social protection schemes, the exceptions show that a common
international standard is an illusion. If new standards are elaborated, har-
monizing the different approaches and not just adding new rules to the ex-
isting patchwork is of utmost importance.
It remains questionable if international legal regulations have any im-
pact on reality. At the very least, international standards serve as a neces-
sary corrective for the national rules. National political communities usu-
ally follow the utilitarian approach and consider what is advantageous for
them. Foreigners cannot vote and take part in the decision-making. There-
fore the position of migrants is very insecure and can at any time be
changed by national reform legislation. Thus, it is helpful if the interna-
tional community defines clear standards that serve as a point of reference
for the elaboration of national rules.

1A.6 Challenges to the legitimacy of the welfare state

Migration challenges the welfare state on different levels: it not only de-
mands practical decisions but also provokes questions as to the legitimacy
of the whole system. The redistributional mechanism only functions within
a defined territory. Immigration law accepts migrant workers, refugees,
and ethnic migrants under certain conditions, but usually refuses all those
who do not fall into one of these categories: the old, the disabled, the sick,
the unemployed, those who cannot make a living in their home country,
i.e. people at risk whom the welfare state protects against. These people
might want to migrate - no medical facility to cure their disease exists in

32 Cf. as an example Art . 68 of Convention No. 102 of the ILO accepting excep-
tions to the rule of inclusion in respect to benefits payable wholly or mainly out
of public funds and in respect of transitional schemes and making equal treat-
ment in respect to contributory social security schemes dependent on bilateral
or multilateral agreements providing for reciprocity.
33 European Convention on Social and Medical Assistance (11.12.1953), ETS
No. 014; 16 Member States (2001).
 lA Comment on Ulrich Becker 47

their home country, or they do not have the means to survive in their home
country. As the detrimental effects of complete exclusion of individuals in
need cannot be ignored in the age of mass media, the limits of a territori-
ally restricted process of redistribution become evident. Ulrich Becker
writes "We are still more than one step away from a global legal order that
would impose on the states an obligation to become members of a world-
wide redistributional community." That is certainly true. But there are still
signs that the challenge of migration is no longer only taken up on the ba-
sis of the traditional scheme of exclusion! inclusion defined by the welfare
state. A very controversial development of the jurisprudence of the Euro-
pean Court of Human Rights might illustrate a new approach that still
sticks to the aspect of territorial responsibility but enlarges it at the same
time.
In the case of D. v. United Kingdom," a drug dealer entering the United
Kingdom was arrested at the border and imprisoned for several years. It
was discovered there that he was HIV-positive. At the end of his prison
sentence, the authorities wanted to repatriate him to his home country, St.
Kitts. He appealed this decision at the European Court of Human Rights
arguing that due to his health condition it would be inhuman to return him
to his home country where he would be deprived of the most basic health
facilities. The Court found a violation of Article 3 of the European Con-
vention on Human Rights (prohibition of torture and inhuman treatment).
Clearly, the same person would not have been accorded any rights to
support if he had not committed a crime and had tried to illegally enter a
well-functioning welfare state." Thus in theory, those waiting at the border
and asking for a visa are chased away, whereas those who enter illegally
are integrated - at least up to a certain point - in the redistributional sys-
tem of the welfare state. This is a paradoxical result, a solution contrary to
a basic sense of social justice. The Court has tried to mitigate the conse-
quences, to point out that the decision must not be interpreted as an initia-
tion for illegal migration.>

34 D. v. United Kingdom (1997), Reports 1997-III, No. 37.

35 Cf. the critical comment of Kay Hailbronner, Die Relevanz des Volkerrechts
fur das deutsche Auslanderrecht, in Kay Hailbronner (ed.), Die allgemeinen
Regeln des volkerrechtlichen Fremdenrechts. Bilanz und Ausblick an der Jahr-
tausendwende, Heidelberg 2000, pp. 1-10 .
36 "Against this background the Court emphasises that aliens who have served
their prison sentences and are subject to expulsion cannot in principle claim any
entitlement to remain in the territory of a Contracting State in order to continue
to benefit from medical, social or other forms of assistance provided by the ex-
pelling State during their stay in prison. However, in the very exceptional cir-
cumstances of this case and given the compelling humanitarian considerations
48 Angelika Nussberger

The arguments of the Court are convincing: repatriation would amount

to "inhuman treatment" ." Although the decision is paradoxical, it is in line
with the concept of a welfare state built on restrictive immigration rules,
but assuming responsibility for those physically present. However, it
shows that the model of the territorially restricted welfare state cannot of-
fer adequate solutions to controversial social problems in the age of global-
ization, when borders are, as a rule, open for goods, opening up for mi-
grant workers and remaining closed for people in need.

at stake, it must be concluded that the implementation of the decision to remove

the applicant would be a violation of Article 3. (Case ofD. v. the United King-
dom, para. 54).
37 Cf. the wording of the decision: "The Court also notes in this respect that the
respondent State has assumed responsibility for treating the applicant's condi-
tion since August 1994. He has become reliant on the medical and palliative
care which he is at present receiving and is no doubt psychologically prepared
for death in an environment which is both familiar and compassionate. Al-
though it cannot be said that the conditions which would confront him in the re-
ceiving country are themselves a breach of the standards of Article 3, his re-
moval would expose him to a real risk of dying under most distressing circum-
stances and would thus amount to inhuman treatment." (Case of D. v. Great
Britain, para. 53).
2 The Costs of International Tax Cooperation *

Tsilly Dagan

Contents
2.1 Introduction 50
2.2 Unilateral Tax Measures and Neutrality 51
2.2.1 Preventing Double Taxation 52
2.2.2 Global Neutrality 53
2.2.3 Global Neutrality and Local Interests 56
2.2.4 Partial Neutralities and the Mechanisms that Promote
Them 56
2.2.5 Mechanisms and the Interests They Support 58
2.3 Bilateral Treaties for the Prevention of Double Taxation 60
2.3.1 A World Without Tax Treaties 62
2.3.2 Unilateral vs. Bilateral Solutions 66
2.4 Multilateral Tax Agreements - Protecting the Welfare State 69
2.4.1 Tax Competition and Efficiency 70
2.4.2 Undesirable Distributional Effects of Tax Competition 73
2.4.4 Undesirable Distributional Effects of a Multilateral
Agreement 74
2.5 Conclusion 76

• tdagan@umich.edu. Assistant Professor, Bar Han University Law School, Vis-

iting Assistant Professor, University of Michigan Law School; LL.B., 1988,
Tel Aviv University; LL.M. (in Taxation), 1993, New York University; J.S.D.,
1999, Tel Aviv University. The author would like to thank Reuven Avi Yonah,
Eyal Benvenisti, Michael Heller, Assaf Likhovsty, Julie Roin, Max Steams,
Omri Yadlin and participants at The Welfare State in an Era of Globalization
conference, Jerusalem and Goettingen for their comments, as well as Shlomit
Agmon and Roy Moss for excellent research assistance.
50 Tsilly Dagan

2.1 Introduction

In the international tax arena we often find ideas and initiatives that sound
indisputable. After all, how can one object to initiatives to "promote neu-
trality" , to "reduce double taxation", or to "protect the welfare state". One
of the reasons that make these ideas so attractive is the theme of coopera-
tion that underlies all these initiatives: neutral policies are perceived as co-
operative policies towards global efficiency; (cooperative) treaties are per-
ceived as the ultimate mechanism for preventing double taxation; and the
welfare state, we are told, can only be saved through (cooperative) multi-
lateral efforts. A closer look at these initiatives, however, reveals that even
such noble causes often bring about completely different (and sometimes
undesirable) results. While acknowledging the potential benefits of
internation cooperation for some, this article highlights the (sometimes
hidden) costs of such cooperation for others.
Exposing the potential winners and losers from cooperative strategies is
the main goal of this Article. Such winners and losers exist in all three dif-
ferent levels on which international taxation evolves: the unilateral, the bi-
lateral and the multilateral.
On the unilateral level, each country designs its international tax policy,
using measures to tax its own residents investing abroad as well as foreign
investors, often attempting to "alleviate double taxation". My main argu-
ment here is that domestic interest groups tend to win or lose from adopt-
ing an (elusive) cooperative strategy as the unilateral mechanism of their
countries.
On the bilateral level, pairs of countries negotiate treaties "for the pre-
vention of double taxation". Here I argue that developing countries tend
systematically to lose tax revenue when they enter into the (more coopera-
tive and thus seemingly benign) bilateral treaty regime without gaining any
more investments .
Finally, on the multilateral level, there have been efforts to establish
multilateral cooperation towards harmonization of international tax rules to
fight tax competition, thus protecting the welfare state. I argue that this
emerging multilateral regime, promoted as an all-benefiting cooperative
strategy, also creates potential losers both among and within nations.
The following sections offer a closer look at each of these levels. They
illustrate the seemingly noble intentions, the less than ideal results, and the
interests being served on each level. Section I discusses the aspired
neutrality in the unilateral level; section II considers the goal of preventing
double taxation on the bilateral level; finally, section III examines the ar-
 2 The Costsof International Tax Cooperation 51

guments for multilateral agreement and against tax competition . A brief

conclusion follows.

2.2 Unilateral Tax Measures and Neutrality

Conventional wisdom recommends that in designing their international tax

systems, countries should promote neutrality . A globally neutral system, so
the argument goes, better allocates resources according to market prefer-
ences, thus promoting efficiency that eventually benefits all parties involv-
ed. A closer look reveals, however, that neutrality is only an attractive ter-
minology that masks specific domestic interests.
In this section, I consider the way in which a residence country should
deal with the problem of double taxation. The typical case of double taxa-
tion arises when a taxpayer residing in one country (the home) invests in
another (the host). When both the home and the host countries impose
taxes, the taxpayer pays "double taxation". Double taxation is considered
one of the most acute problems of international taxation affecting home
countries as well as host countries. It curtails cross-border investments and
severely limits the economic benefits such investments generate for both
host and residence countries. Therefore, countries designing their interna-
tional tax rules try to avoid it by using various kinds of unilateral mecha-
nisms for the alleviation of double taxation. The most common mecha-
nisms are an exemption for income produced abroad, a credit granted for
foreign taxes paid by a country's residents abroad, and a deduction for
such foreign taxes.
Conventional wisdom points to the concept of neutrality as a decisive
goal for designing international tax policies, namely, choosing among
these alternative mechanisms . The best mechanism would best promote
neutrality. I But since global neutrality can only be achieved through inter-
national cooperation, no single country can unilaterally achieve global
neutrality . Individual countries are thus advised to promote partial neutral-

I See, e.g., Joint Committee on Taxation, 106th Congress, Overview ofPresent-

Law Rules and Econom ic Issues in International Taxation 3 (Committee Print,
1999); Joint Committee on Taxation, lOrd Congress, Factors Affecting the In-
ternational Competitiveness of the United States 236 (Committee Print, 1991);
DavidF. Bradford and U.S. Treasury Department Tax Policy Staff, Blueprints
for Basic Tax Reform (2nd edn, Arlington, VA, 1984), pp. 89-90.
52 Tsilly Dagan

ity stirring a heated debate among supporters of different kinds of partial

neutrality. 2
Viewed this way, these partial neutrality policies are merely offsprings
of the plausible idea of global neutrality, a kind of "second best" option:
since no country can achieve global neutrality, it should at least do its
share by promoting partial neutrality. Implied in this argument is the intui-
tion that if all countries cooperated in adopting a neutral policy, a globally
neutral (and thus more efficient) system would evolve. A different angle,
however, reveals that different types of partial neutrality achieve different
economic results, thus supporting the interests of different domestic
groups.

2.2.1 Preventing Double Taxation

International tax, like almost any tax, brings with it an inevitable ineffi-
ciency cost - the cost of placing a wedge between supply and demand for
capital, thus preventing some pre-tax efficient transactions from taking
place.' But even greater inefficiency results if the tax not only places a
wedge between supply and demand but also distorts taxpayers' economic
decisions.
Double taxation increases the efficiency costs associated with the tax
wedge, since a larger tax means a larger wedge.' It also distorts taxpayers'
economic decisions: if a taxpayer pays only one layer of taxation while in-
vesting in her home country - but pays two layers of taxation (one at home
and one in the host country) while investing abroad - then she will have an
incentive to invest at home or to move her home to the place of investment
even if absent double taxation she would prefer to reside in the first coun-
try and invest in the other. Economic theory assumes that the taxpayer's
initial election (her "neutral" election) is, generally speaking, the more ef-
ficient one. Thus, the fact that double taxation may shift taxpayers' in-
vestment and residency decisions carries with it an additional efficiency
cost.

2 For a recent review of the economic literature bearing on this debate, see u.s.
Treasury Department, The Deferral ofIncome Earned Through u.s. Controlled
Foreign Corporations : A Policy Study (Dec. 2000), pp. 25-42.
3 For a discussion of the "tax wedge" and welfare effects of a capital income tax,
see A. Lans Bovenberg, Krister Andersson , Kenji Aramaki and Sheetal K.
Chand, 'Tax Incentives and International Capital Flows: The Case of the Unit-
ed States and Japan' in Assaf Razin and Joel Slemrod (eds.), Taxation in the
Global Economy (University of Chicago Press, Chicago, IL, 1990), pp. 291-2.
4 Bovenberg , 'Tax Incentives,' supra note 3, pp. 288-94.
 2 The Costs of International Tax Cooperation 53

It is widely agreed that the efficiency costs associated with double taxa-
tion should be eliminated. It is also widely agreed that it is worthwhile for
countries to eliminate double taxation unilaterally, even without coopera-
tion from other countries. The only debated issue concerns the best
mechanism to eliminate double taxation unilaterally. A country may con-
sider three basic candidates as unilateral mechanisms for the prevention of
double taxation: a deduction, a credit, and an exemption.' Under a deduc-
tion mechanism, a taxpayer can deduct foreign tax from her income. The
credit mechanism allows foreign taxes to be credited against a taxpayer's
home-tax liability. An exemption exempts from home country taxes any
income produced abroad. But how should a country decide whether to
provide its taxpayers with a credit, a deduction, or exempt them alto-
gether? In answering this question, experts tum to neutrality.'

2.2.2 Global Neutrality

A neutral tax system eliminates the efficiency costs associated with the
distortion of taxpayers' preferences. A globally neutral system would pre-
vail if taxes would not interfere with taxpayers' decisions as to where to
invest, where to reside, and where to incorporate. Taxpayer's preferences
will not be distorted if they are subject to the same combined rates of taxa-
tion no matter where they reside or where they decide to invest. A per-
fectly neutral system requires all countries to impose a single rate of taxa-
tion (above the cost of useful services they provide) and use the same
mechanism for the alleviation of double taxation.'
Global neutrality could only be achieved through international coopera-
tion. No single country can unilaterally (without the cooperation of fellow
countries) create a globally neutral system. Does this mean that each coun-
try should pursue a policy that enhances (global) neutrality? Since national
(rather than global) actors make decisions in today's international tax
game, national interests (not international ideals) seem more likely to

5 Richard E. Caves, Multinational Enterprises and Economic Analysis (2nd edn,

Cambridge University Press, 1996), pp. 191-2.
6 E.g., sources cited in note 1.
7 If countries impose different rates of taxation, then presumably taxpayers will
have an incentive to reside and invest in the countries that impose lower rates.
If some countries provided a credit but others only a deduction, then again tax-
payers will prefer residing in the country that allows a credit. The tax-induced
incentive to invest or reside in a specific country constitutes a distortion com-
pared to the pre-tax preferences.
54 Tsilly Dagan

guide them. 8 Thus, for a single country to promote global neutrality, two
separate questions should be answered positively: first, whether global
neutrality, once achieved, will indeed serve the best interests of such a
country. Second, whether cooperation toward such global neutrality is at-
tainable and sustainable. It may be argued that if single countries adopt a
neutrality enhancing policy, then, with time, international cooperation may
evolve thus promoting global welfare. Therefore, it may be argued, a co-
operative strategy on the part of each country may serve such country's in-
terests in the long run.? I am doubtful:
For one, it is not at all clear that the achievement of a globally neutral
level of taxation would result in the most efficient allocation of global re-
sources. Indeed, competition between countries may achieve more efficient
results. As detailed in section III below, competition between countries for
investments as well as for residents may entail efficiency gains.
But even if we insist on global neutrality as the optimal goal, the likeli-
hood of achieving it and sustaining it seems trivial. Consider first the hur-
dle of attaining coordination. In order to achieve global neutrality, all
countries should adhere to a single rate of taxation beyond the costs of
public goods provided and a single mechanism for alleviating double taxa-
tion. Since countries' decisions regarding tax rates are deeply rooted in the
divergent characteristics and beliefs (and sometime simply the means) of
their citizenry and leadership!", attaining coordination in the first place ap-

8 See Tsilly Dagan, 'National Interests in the International Tax Game' (1998)
18 Virginia Tax Review 363; Michael 1. Graetz, 'Taxing International Income:
Independent Principles, Outdated Concepts and Unsatisfactory Policies' (2001)
54 Tax Law Review 26 1,278. (Arguing that this is not only the way things are,
but also the way things should be) .
9 Examples of evolutionary cooperation are often based on the possibility of pun-
ishment that may create an incentive for other players to cooperate provided
that a player's losses from punishment are larger than her defection gains. One
famous example of such punishing strategy in an infinite repeated prisoner's
dilemma game is the "tit for tat" strategy in which each player starts the game
by cooperating but moves to defection in response to another's defection. The
next round will start, again, with cooperation. In experiments made by Robert
Axelrod, this strategy was found to be highly efficient in the long run . See
Robert M. Axelrod, The Evolution of Cooperation (Basic Books, NY, 1984),
pp.27-54.
10 The various interest groups affected within each country by its tax rates and
policies complicate the picture even further. Generally the greater the number
of players the lower the chances for cooperation to evolve, unless interest
groups in different countries cooperate in promoting a certain policy. For an
analysis of the influence of interest groups on international conflicts see Eyal
 2 The Costs ofInternational Tax Cooperation 55

pears problematic. I I Second, even if countries were able to agree on a level

ofunifonn tax (beyond the costs of public goods), it is highly unlikely that
they would be able to apply such an agreement, because determining the
value of public goods provided by each country is bound to be highly con-
troversial. Third, even if such coordination could be achieved, it is hard to
see how it could be sustained. Even if overall world welfare would in-
crease if countries promoted neutrality, any given country could derive
even greater economic benefits by defecting from such coordination. De-
fection can take place either by imposing less tax than cooperatively
agreed upon in order to attract residents and investors (as in the tax havens
case), by providing more public goods without raising the tax rates, or by
providing specific economic benefits.'? Another option exists for those
countries large enough to affect global prices of capital and attractive
enough to keep its residents (if any such countries even exist). By not alle-
viating double taxation themselves, they may be able to pressure other
(host) countries to reduce their taxes instead. Preventing defection requires
sophisticated valuation technique and sensitive monitoring mechanisms as
well as willingness on the part of all participants to submit to and observe
the set sanction for defection. Even if countries were able to measure the
public benefits provided, the price of monitoring defection may be very
high since it requires on-line inspection of the tax laws, and public expen-
diture programs of all nations as well as any concessions made either on an
individual basis or simply by not enforcing existing norms.
The bottom line is that even if international cooperation towards neutral-
ity is desirable, its attainment and sustainability hurdles make it practically
elusive. This conclusion undermines the claim that single countries should
unilaterally cooperate to promote global neutrality. It makes sense for a
country to promote global neutrality only if it promotes its national inter-
ests. Without a strong reason to believe that global cooperation will
evolve, or that once evolved, it will necessarily serve the interests of indi-
vidual countries, there is no special reason for any given country to sup-
port partial neutrality, unless it so happens that providing a credit, a deduc-
tion, or an exemption promotes its national interest.

Benvenisti, 'Exit and Voice in the Age of Globalization' (1999) 98 Michigan

Law Review 167. A thorough analysis of their influence on the tax treaty re-
gime is beyond the scope of this Article.
II See Dagan, 'National Interests', supra note 8, p. 379; Julie Roin, ' Competition
and Evasion: Another Perspective on International Tax Competition' (2001)
89 Georgetown Law Journal 543 at 557-61 .
12 Charles I. Kingson, 'The Coherence of International Taxation' (1981) 81 Co-
lumbia Law Review 1151.
56 Tsilly Dagan

2.2.3 Global Neutrality and Local Interests

Despite these challenges, neutrality recommendations abound in policy

debates concerning unilateral mechanisms for the alleviation of double
taxation. Since no coordination exists as to any kind of global neutrality,
the conventional wisdom supports whatever partial neutrality the country
can achieve. Absent an official international standard, it is recommended
that countries select mechanisms that promote at least some kind of neu-
trality. The literature discusses three types of neutrality: Capital Import
Neutrality, Capital Export Neutrality, and National Neutrality . Each of
these partial neutrality concepts can be achieved by a specific mechanism
for the alleviation of double taxation. An exemption promotes CIN, a
credit promotes CEN, and a deduction - NN. Such partial neutrality rec-
ommendations sound as merely closely related branches of neutrality; a
kind of "second best" alternative options - sharing the objective, favoring-
all fame of global neutrality. A closer analysis reveals, however, the inter-
ests hiding behind the "neutral" terminology.
Each of these mechanisms provides a different incentive for outbound
investments (and for expatriating) provided that host countries tax foreign
investments. An exemption provides the highest incentive for outbound
investment; a credit provides a moderate incentive for outbound invest-
ments; a deduction provides the lowest incentive for outbound investment.
Thus, each of these partial neutralities basically takes a stance regarding
the optimal level of incentive for resident investments abroad. The debate
among the different kinds of partial neutralities is in fact a debate among
different levels of outbound investments promoted by the specific mecha-
nisms "for the alleviation of double taxation".
Section D discusses in further detail the connection between each con-
cept of partial neutrality and the corresponding mechanism. Section E de-
scribes the connection between the mechanisms or rather the level of out-
bound investment they promote and the interests they serve.

2.2.4 Partial Neutralities and the Mechanisms that Promote

Them

Capital Export Neutrality tries to prevent tax consideration from distorting

investors' decisions regarding where to invest. CEN obtains when the total
tax imposed by the country of residence and the host country combined
equals the tax imposed on domestic investments in the country of resi-
dence. CEN supports the claim that (global) welfare will increase if tax
considerations do not interfere with investment decisions, because absent
 2 The Costs of International Tax Cooperation 57

tax considerations investments will flow to the country of their most effi-
cient use. In order to prevent tax considerations from distorting decisions
on where to invest, CEN seeks to ensure identical after-tax profits for iden-
tical pretax rates-of-return, wherever produced. The credit mechanism
achieves this goal. Under a credit mechanism the home country allows its
resident investing abroad to credit the foreign taxes she paid against home
country taxes. Thus, under a perfect credit mechanism, the taxpayer will
always be subject to her home country taxes, and only to her home country
taxes, wherever she invests." A credit mechanism promotes CEN because
the taxpayer will pay the same total amount of taxes no matter where she
decides to invest.
Capital Import Neutrality focuses on the impact of tax on imported
capital. CIN aims to ensure that the total tax imposed on investment re-
turns in a given country is the same irrespective of the residence of the in-
vestor. Under CIN, income from all businesses operating in anyone local-
ity would be subject to uniform taxation. The nationality of investors in a
particular locality would not affect the tax rate. Universal CIN would ob-
tain if, for example, all countries exempted their residents investing abroad
(and each host country would treat local and foreign investors alike). A
single home country that employs CIN by exempting foreign source in-
come promotes CIN and enables its investors - when investing abroad - to
compete on equal footing with investors from other countries.
National Neutrality focuses on national rather than global prosperity as
its target. Indeed, NN does not pretend to be a proxy for global neutrality.
National neutrality supporters believe in encouraging investors to invest
abroad only if both the investor and the government benefit from such in-
vestment. Therefore, NN obtains when the tax revenues of the country of
residence as well as the after tax returns of its residents are equal, whether
the income arises at home or abroad. A deduction promotes NN because
under a deduction a taxpayer will choose to invest abroad only if her after-
foreign-tax-return abroad is higher than her pre-local-tax-return in her
home country.

13 Most of the countries that grant a credit, however, limit the amount of foreign
taxes credited to the amount of domestic taxes imposed on the foreign income.
58 Tsilly Dagan

2.2.5 Mechanisms and the Interests They Support

Each of these three mechanisms provides a different incentive for out-

bound investment (and for expatriation"). For given home country and
host county tax rates (and assuming host taxes are lower than home taxes),
an exemption provides the highest incentive for outbound investment, a
credit provides a lower level of incentive, and a deduction provides the
lowest level of incentive for outbound investment. 15 Thus, the neutrality
debate easily translates into a debate regarding the level of incentive for
outbound investment.
The level of outbound investment has many social, political, and econo-
mic ramifications. It therefore involves many interests. Thus, for example,
a higher level of outbound investment may affect wages, unemployment,
and the quality ofjobs ; 16 it may affect the division of income between capi-

14 As the discussion in Chapter III below notes, the incentive to change one's
residency has to do not only with the double tax prevention mechanism, but al-
so with the level of tax in the residence country. Obviously, non-tax considera-
tions are probably of greater consideration regarding residency. This paper,
however, focuses on tax and expenditure considerations assuming other things
being equal.
15 If, for example, a host imposes 30% tax and the home country 40% tax on in-
come produced by the home's resident in the host country, then under an ex-
emption the taxpayer will be subject only to the hosts 30% taxes, under a cred-
it, he will be subject to the home 40% taxes (paying 30% to the host and an-
other 10 to his home country - 40% minus the 30% credit) and under a deduc-
tion will be subject to 30% taxes in the host plus another 28% (40%*70) in the
home country.
16 Given labor's relative immobility and assuming that investment abroad comes
at the expense of investment at home, investment abroad lowers the productiv-
ity of labor at home and thereby lowers wages. See Peggy B. Musgrave, United
States Taxation ofForeign Investment Income: Issues and Arguments (Harvard
Law School, Cambridge, MA, 1969, pp. 14-15 . Economists generally believe
that investment abroad has no significant effect on overall unemployment lev-
els, but that it can affect the type and quality of jobs (U.S. firms, for example,
tend to export low quality jobs) and can lower wages. See Jane Gravelle, 'For-
eign Tax Provisions of the American Jobs Act of 1996,' (1996) 72 Tax
Notes 1165, 1166. See also Joint Committee on Taxation, Staff Description
(JCS-15-9l) of HR . 2889, 'American Jobs and Manufacturing Act of 1991,'
Relating to Current U.S. Taxation ofCertain Operations of Controlled Foreign
Corporations, and Related issues (scheduled for Oct. 3, 1991 hearing by House
Ways and Means Committee. Released Oct. 2, 1991, reprinted in Daily Tax
Reporter (BNA), Oct. 3, 1991, pp. L-48 to L-49). ("There are unfortunately
few economic studies addressing this issue. One [...] paper examines the effect
 2 The Costs ofIntemational Tax Cooperation 59

tal and labor." The way a country treats outbound investment may affect
its attractiveness for headquarters , which often provide high paying profes-
sional jobs and technological spillovers associated with research and de-
velopment centers." By affecting the level of US investments in foreign
markets (and possibly driving US investors out of domestic markets), it
may affect US dominance in those markets. The level of outbound invest-
ment may even affect issues such as foreign policy," national security or
national sovereignty."
Naturally, many of the local interests will have a preference for one
mechanism or another. Thus, for example, in the United States, in the de-
bate between CEN and CIN, labor unions traditionally supported CEN
while capital owners strongly supported CIN.2\ Simply put, partial neutral-

of outbound investment on domestic employment and finds some evidence that

increases in overseas activities by U.S. multinational corporations reduce their
domestic employment. [. .. ] The authors attribute it largely to the allocation of
more labor-intensive activities abroad and more skill and capital-intensive ac-
tivities to the United States . Therefore, although multinational corporations
may have fewer domestic employees as a result of their overseas production
they also provide greater compensation per domestic employee as a result of
their overseas production.") .
17 If exporting capital does not increase domestic savings, it may reduce the pro-
ductivity of local labor, thereby lowering wages; at the same time it improves
the position of local capital by reducing the amount of capital invested within
the country. See, e.g., C. Fred Bergsten, Thomas Horst and Theodore H. Mor-
an, American Multinationals and American Interests (The Brookings Institu-
tion , Washington, D.C., 1978), p. 177; Gravelle, 'Foreign Tax Provisions,' su-
pra not e 16, p. 1166; Joint Committee on Taxation, 'Factors,' supra note 16,
p.234.
18 See, e.g., Gary Clyde Hufbauer, u.s. Taxation ofInternational Income: Blue-
print for Reform (Institute for International Economics, 1992), p. 92.
19 To the extent that FDI increases the possession of technology, it may affect
diplomatic or military relations. See Ibid, pp . 92-3.
20 Concern regarding foreign domination of a country is often recognized on the
international level. Domination of the country's strong points, such as its land,
defense industry, and natural resources, has a negative effect on psychological
and practical levels. See, e.g., Henry 1. Steiner, Detlev F. Vagts, and Harold
Hongju Koh, Transnational Legal Problems: Materials and Text (4th edn,
Foundation Press, NY, 1994), p. 51.
21 See Bergsten, et al, American Multinationals, p. 177, noting that "[i]n the early
1970s, the AFL-CIO lobbied hard, but unsuccessfully, to get Congress to
eliminate both deferral and the foreign tax credit [.. .] The unions hoped that
this double taxation would limit American firms ' willingness to invest abroad
and enhance the unions' bargaining strength in wage negotiations".). See also
60 Tsilly Dagan

ity concepts have a lot more to do with promoting interests of domestic

groups than with enhancing global welfare through neutrality.
In sum, policy debates concerning the optimal policy on the unilateral
level highlight neutrality - presumably as a cooperative step towards effi-
ciency - as a central goal for individual countries to promote. In reality,
however, individual countries do not and cannot achieve neutrality , and
cooperation towards such neutrality remains far from being reached. The
theories of partial global neutrality derive their validity from the concept of
total global neutrality . It therefore makes sense to promote partial neutral-
ity only if it promotes global neutrality. But if total global neutrality can-
not realistically be achieved, then theories of partial neutrality have no par-
ticular validity. Neutrality is thus fancy terminology for certain domestic
interests that are affected by levels of outbound investments. Thus, what is
usually framed, as a neutrality debate is, in reality, a battle of interests. Al-
though the neutrality debate seems to focus on ways to enlarge the global
welfare pie - we are in fact dealing with an internal distribution of re-
sources.

2.3 Bilateral Treaties for the Prevention of Double

Taxation

Tax treaties are often viewed as the mechanism for preventing double taxa-
tion. Policy makers assume that tax treaties benefit everyone involved. By
cooperatively eliminating double taxation, these treaties facilitate the free
movement of capital, goods, and services and help achieve allocational ef-
ficiencies. Although countries are required to forgo potential tax revenues,
tax treaties are perceived to be well worth the effort because they allegedly
provide significant benefits for all.22

Dagan, 'National Interests' , supra note 8, p. 386, infra note 57 and accompany-
ing text.
22 See, e.g., American Law Institute, Federal Income Tax Project, International
Aspects of United States Income Taxation II, Proposals on United States In-
come Tax Treaties 2 (1992), in which the reporters state that "[t]he loss (or po-
tential loss) of revenue which this entails is accepted as the price of obtaining
the perceived benefit to the participating countries [... ]"; Committee on Fiscal
Affairs, Organization for Economic Cooperation and Development, Model Tax
Convention on Income and on Capital, at 1-1 (1997), declaring that eliminating
the "harmful effects" of double taxation is the main purpose of the OECD
Model Tax Convention.
 2 The Costs of International Tax Cooperation 61

Treaties, however, often just replicate the mechanism that countries use
unilaterally to alleviate double taxation." This is not just a surprising con-
tingent fact. Rather, an analysis of the interaction between the unilateral
policies of different types of countries demonstrates that treaties are not
likely to offer any significantly greater degree of double taxation preven-
tion than the mere interaction of unilateral policies. Thus, on the double
taxation prevention front, treaties cannot be preferred to unilateral mecha-
nisms of double taxation prevention. In fact, treaties reach results that are
very similar to the results reached by unilateral mechanisms. Even the
techniques employed by such treaties - most often a credit or an exemp-
tion - are similar to the unilateral mechanisms. One striking difference,
however, distinguishes the unilateral solution from the treaty mechanism:
while the most common unilateral solutions tend either to eliminate all
taxes (exemption) or allow host countries to collect tax revenues (credit),
tax treaties usually allocate the revenues more to the benefit of home coun-

For some notable exceptions, see Elizabeth A. Owens , 'United States Income
Tax Treaties: Their Role in Relieving Double Taxation' (1963) 17 Rutgers Law
Review, pp. 428, 430, arguing that "U.S. income tax treaties playa very mar-
ginal role in relieving double taxation [... ] [since] the U.S. has unilaterally
provided for the avoidance of double taxation for its own citizens, corpora-
tions, and residents through the foreign tax credit provisions of the Internal
Revenue Code"; Joseph Isenbergh, International Taxation: U.S. Taxation of
Foreign Persons and Foreign Income (2nd edn, Little, Brown, Boston, MA,
1996), p. 55:2, noting that " income tax treaties can easily be taken as measures
designed to confer tax relief on certain individuals or enterprises. In fact that is
rarely their function. Tax treaties are principally concerned with the appor-
tionment of tax revenues between the treasuries of the treaty countries . . . .";
Julie A. Roin, 'Rethinking Tax Treaties in a Strategic World with Disparate
Tax Systems ' (1995) 81 Virginia Law Review 1753, 1763, stating that
"[t]hough some of these [treaty-based] source tax reductions are intended to
benefit investors through the elimination of 'excessive taxation,' many are in-
tended to effect a roughly neutral exchange of tax revenues between the source
and residence countries."; Pierre Gravelle , 'Tax Treaties: Concepts, Objectives
and Types' (1988) 42 Bulletin for International Fiscal Documentation, p. 523,
stating that "[wjhile the elimination of double taxation is an objective which is
usually stated in its title, in reality a treaty is more correctly described as an in-
strument which refines and improves existing provisions in the domestic legis-
lation which are designed to accomplish that end [...]".
23 See Commission ofthe European Community's Report of the Committee ofIn-
dependent Experts on Company Taxation 267 (1992) . See also Owens, 'Re-
thinking', supra note 22, p. 1767, arguing similarly that the use of unilateral
measures for avoiding double taxation has "blunted U.S. taxpayers' incentives
to use treaty provisions".
62 Tsilly Dagan

tries. This revenue disparity is probably insignificant between two devel-

oped countries. But in treaties between developing and developed coun-
tries (usually host and residence countries, respectively), preserving the
credit mechanism while reallocating tax revenues means a regressive redis-
tribution of wealth, benefiting developed countries at the expense of the
developing ones.
The next sections develop this analysis in further detail. Subsection A
concentrates on the interaction of unilateral policies and envisions what a
world without tax treaties might look like. Subsection B compares such a
world to the existing one under tax treaties.

2.3.1 A World Without Tax Treaties

Imagine a world in which, for some reason, tax treaties were not an option.
The conventional rhetoric of tax treaties implies that absent tax treaties,
double taxation would prevail. The truth, however, is that individual coun-
tries have an incentive to prevent double taxation unilaterally, even absent
tax treaties. The reason is that host and home countries benefit from cross-
border investments. Because excessive taxes limit such benefits, both
countries have an incentive for unilateral action.
Host countries have an incentive to lower tax rates in order to attract as
much investment as possible", Home countries have an incentive to reduce
double taxation unilaterally in order to enable investors to use their re-
sources more efficiently. We have seen in Section I that the specific
mechanism of preventing double taxation in each country would be deter-
mined according to its preference as to the level of desired cross-border in-
vestment. It would also be influenced by the country's predictions as to
various host countries' reactions .
In a world without tax treaties, the interaction between the policies of
host and home countries would yield a stable equilibrium. Elsewhere," I
provide a detailed game-theoretical analysis of the possible preferences
and equilibria. For the purposes of my current argument, it is enough to
highlight my conclusions briefly :

24 See, e.g., Mark Gersovitz, 'The Effects of Domestic Taxes on Foreign Private
Investment' in David Newbury and Nichol as Stern (eds.), The Theory of Taxa-
tion for Developing Countries (Oxford University Press, The International
Bank for Reconstruction and Development, Washington, D.C., 1987), pp. 615-
616.
25 Tsilly Dagan, 'The Tax Treaties Myth' (2000) 32 New York University Journal
ofInternational Law and Politics, p. 939.
 2 The Costs ofInternational Tax Cooperation 63

Generally speaking, a host country's interest is to reduce to the greatest

extent possible the total level of taxation on foreign investors investing in
their country. The lower the total tax burden on foreign investors, the more
foreign investments will be made in the host country. More foreign in-
vestment means better use of the local factors of production (mainly labor
and land). Sure, lower taxes also mean lower governmental revenues, but
economic theory teaches us that the local gains from foreign investments
are larger than the potential losses from lowering taxes." Thus, the stan-
dard recommendation for a small open economy is not to tax foreign inves-
tors" .
One important exception arises when the home country levies taxes.
These, of course, are taxes that the host country cannot unilaterally reduce .
Therefore , where home countries tax their residents investing abroad, the
optimal policy for the host country depends on the mechanism the home
country employs for alleviating double taxation": if the home country pro-

26 Gersovitz, 'Effects', supra note 616.

27 For a formal explanation see Gersovitz, 'Effects' , 616. The basic intuition be-
hind Gersovitz analysis is that a small open economy seeking to attract foreign
investment must compete with investment opportunities offered by other coun-
tries. See also Joel Slemrod, 'Tax Principles in an International Economy' in
Michael J. Boskin and Charles E. McLure Jr. (eds.), World Tax Reform: Case
Studies of Developed and Developing Countries (1990) pp. 11, 13: "Capital
imports should occur along as their contribution to the domestic economy, the
marginal product of capital, exceeds the cost to the economy. A small country
must compete with investment opportunities elsewhere, so it must offer the for-
eign investor the going after tax rate of return. This level of capital imports will
be achieved if such imports are completely exempt from taxation by the
importing nations, because in this case foreign investors will, in their own
interest, invest until the domestic marginal product equals their opportunity
cost, the after tax world rate of return. Any attempt to tax capital imports will
cause the country to forgo domestic investment whose contribution to national
income exceeds the cost to the nation." As Gersovitz emphasizes, the host
country should also not subsidize the foreign investment in any way. The result
is that foreign investors should pay taxes equal to the benefits conferred on
them by the host country.
28 One may wonder as to the ability of host countries to discriminate among in-
vestors according to their country of residence (something that would be neces-
sary in order to optimize the host country taxes as described below). But host
countries were known to design mechanisms that tax only residents of coun-
tries that provide a credit. The most notorious mechanism perhaps is "soak-up
taxes" which imposes host country taxes only in face of such credit (for a pos-
sible reaction of the country of residence, see e.g. Treas. Reg. § 1.901-
2(a)(3)(ii) of the IRC. See also RR 87-39, 1987-1 CB 180). Countries some-
64 Tsilly Dagan

vides a credit for foreign taxes paid by its residents, the optimal policy for
the host would be to collect taxes equal to the home country's taxes." This
way, the total level of taxation would not be affected by the tax imposed
by the host country. The host, however, would be able to collect taxes."
If, on the other hand, the home country exempts foreign income pro-
duced by its taxpayers or allows only a deduction for foreign taxes, the op-
timal policy for the host country would be to exempt foreign investors.
Under an exemption mechanism in the home country, an exemption by the
host would mean total elimination of any tax burden and thus the maxi -
mum amount of foreign investment and benefits." Under a deduction at the
home country, an exemption at the host would mean at least a reduction of
the total tax burden, which is the best the host can do under these circum-
stances."
Residence countries' policies will depend on the level of incentive they
wish to provide their residents investing abroad. As detailed in section I
above, the more outbound investment that a residence country is interested
in and the more tax revenues per investment it is willing to sacrifice for
that purpose, the more "generous" double taxation prevention mechanism
it will provide to its residents. A residence country interested in encourag-
ing more investment abroad will provide an exemption, a country prefer-
ring less outbound investment will grant a credit, and the lowest incentive
for outbound investment will be achieved through a deduction.
The interaction of the unilateral policies of host and residence countries
has interesting results. No matter what the residence country's preference,
the interaction between the unilateral policies of residence and host coun-

times simply allow an individualized exemptionthat is granted upon a specific

request by the taxpayer. Such request (and such exemption) are usually in place
only when the exemption actually benefits the foreign investor - by reducing
its overall tax liability.
29 Ibid, p.649. In fact, an even better policy for the host would, as Gersovitz
shows, be to tax and pay the tax revenues back to the investors as a subsidy.
For our purposes, I will assume that residence countries can effectively fight
this option by mechanisms like the "specific economic benefit" exceptions. See
e.g., Treas. Reg. § 1.901-2(a)(2)(ii)(B) (1983).
30 Assume, for example that the home country imposes 30% taxes and grants a
credit for foreign taxes. Ifthe host country does not collect any taxes - the tax-
payer will pay the host 0 and the home 30%. A 30% tax imposed by the host
under these circumstances would mean that the taxpayer pays the same 30% to
the host but pays nothing to his home country (the 30% he pays the host are
credited against the 30% he owes the home country).
31 Gersovitz, 'Effects' , sup ra note 24, pp. 617-618.
32 Ibid, p. 619.
 2 The Costs ofIntemational Tax Cooperation 65

tries yields an equilibrium devoid of double taxation. These equilibria are

stable because none of the countries has an incentive to change its policy
given the other country's policy.
To be more precise: in case the home country prefers the higher tax
revenues (but lower outbound investment) offered by a deduction mecha-
nism, the interaction of its policy with the host country's policy results in
an equilibrium of a deduction allowed by the home country and no taxes
levied in the host country. Under this equilibrium, double taxation is pre-
vented and the residence country gets to collect all tax revenues.
If, on the other hand, the home country is interested in encouraging
more outbound investment even at the price of tax revenues, thus granting
a credit for taxes paid by its residents to the host country, another stable
equilibrium emerges - credit at the home country and full taxation in the
host country - achieving the same moderate level of cross-border invest-
ment and devoid of double taxation. However, under this assumption, the
host country collects the tax revenues.
The third scenario occurs when the home country is interested in en-
couraging the maximum possible level of outbound investment and ex-
empts all foreign income. Again, equilibrium is reached when the host
country does not tax foreign investment and the residence country allows
an exemption. In this case, neither country collects any taxes on cross-
border investments.
Thus, whatever assumption we adopt as to the optimal policy for a resi-
dence country, the result in terms of double taxation is the same: when
countries operate unilaterally to best promote their national interests with
regard to outbound investments and tax revenues, a stable equilibrium
emerges under which double taxation is prevented.
This hypothesis is not merely theoretical. An examination of the exist-
ing international tax rules of host countries indicates - contrary to conven-
tional wisdom - that treaties are not necessary for alleviating the burden of
double taxation on cross-border investments. The reason for this is that
most countries apply unilateral mechanisms to prevent double taxation in
addition to whatever tax treaties they sign. Most of the major developed
countries (which are usually residence countries for investors) alleviate
double taxation by granting a credit for foreign taxes paid by residents" or
by altogether exempting income produced abroad." Only a handful of

33 As mentioned above, Greece, Iceland, Italy, Japan, New Zealand, Spain, Tur-
key, the U.K., and the U.S. all grant a credit for foreign business income. See
"Report on Company Taxation" , supra note 23, p. 267.
34 Austria, Belgium, France, Finland, Luxembourg, the Netherlands, and Switzer-
land all exempt foreign business income unilaterally. See ibid.
66 Tsilly Dagan

home countries grant their residents only a deduction" for their foreign
taxes . The majority of these home countries have included in their tax trea-
ties the same (or roughly the same) mechanism as the one they were al-
ready using unilaterally."
Moreover, some empirical work recently found "insignificant or even
negative, effects of these treaties on FDI (foreign direct investment, T.D.)
activity . . ,". This is consistent with the hypothesis that tax treaties are in-
tended to reduce tax evasion rather than promote new investment. 37
Thus, even without tax treaties, double taxation is not the dreaded beast
it is often made out to be; unilateral measures are already effectively pre-
venting double taxation. If double taxation is being prevented even without
tax treaties , what is the role of tax treaties?

2.3.2 Unilateral vs. Bilateral Solutions

There are important similarities, but no less significant differences, be-

tween the equilibrium achieved by tax treaties and the alternative unilateral
equilibria described above. As I have already mentioned, most countries
include in their treaties the same mechanisms they have allowed unilater-
ally. But the equilibria reached under treaties still differ from the equilibria
that result from the interaction of unilateral policies. The main difference is
in the way in which tax revenues are distributed.
Treaties often limit the ability of host countries to collect taxes. Some-
times the jurisdiction to tax is granted exclusively to the home country ." In

35 Only Ireland, Portugal, and Switzerland allow only a deduction for non-busi-
ness income. Switzerland exempts foreign business income. Ibid.
36 See ibid. Belgium, Greece, Spain, France, Luxembourg, the Netherlands, Unit-
ed Kingdom, Austria, Japan, and the United States all treat dividend and inter-
est income in the same way, whether it has been produced in a treaty country or
in a non-treaty country. See ibid; Denmark, Germany, Italy, Canada, and Swe-
den all treat interest income in the same manner and grant a credit for dividend
income. Only Ireland, Portugal, and Switzerland adhere to the traditional story
and provide a deduction when a treaty does not exist and a credit when a treaty
is signed. As for business income produced by a foreign permanent establish-
ment, most of the reported countries allow their residents to credit their foreign
taxes unilaterally, while some exempt it altogether.
37 Bruce A. Blonigen and Ronald B. Davies, 'The Effects of Bilateral Tax Trea-
ties on U.S. FDI Activity,' University of Oregon (2000).
38 E.g. business income when no Permanent Establishment exists, income from
personal services. See Philip Baker, Double Taxation Conventions and Interna -
tional Tax Law (Sweet and Maxwell, London, 1994), p. 18: "If, on the other
 2 The Costs ofIntemational Tax Cooperation 67

other cases, treaties limit the level of home country taxes on certain kinds
of income, especially passive income." When a treaty adopts a credit
mechanism, limiting the tax rates on passive income means that the treaty
reduces the host country's share in the tax revenues. Such a reduction in
host country taxation does not translate into a larger volume of foreign in-
vestment but rather amounts to no more than a revenue shift." Therefore,
under the credit mechanism the country of residence collects taxes that the
host country has foregone. 4 I
Thus, although treaty-based credits and unilateral credits achieve ap-
proximately the same total reduction in taxes, they allocate tax revenues
between the contracting states differently. Essentially, in reducing host
countries' taxation, such tax treaties allow home countries to take a larger
bite of the tax-revenue pie.
Surely, tax treaties have other important advantages for both parties,
such as: improved compatibility between the tax rules of the signatory
countries, reinforcing investor certainty, and potential cooperation in tax
enforcement among nations." These advantages are significant and can
partially explain why nations sign tax treaties. Not one of these benefits,
however, is as heroic a purpose as the prevention of double taxation. Sim-
ply put, the function of preventing double taxation attributed to tax treaties
is highly overrated.
Instead of preventing double taxation, treaties have much more to do
with the allocation of taxes between home and host countries as well as
with the other, more technical advantages. Instead of reducing the total

hand, no permanent establishment exists, the host will usually cede taxing ju -
risdiction to the residence country. Income from personal services, to take an-
other example, is typically taxed by the host country without limitation except
in special cases specified in the treaty, such as situations involving , inter alia,
students and trainees, and diplomatic staff."
39 Baker, ibid: "Passive income, which usually consists of income from interest or
dividend payments , is ordinarily taxed by the country in which the payment
originates , the "source" country, but the rate of taxation by the source country
is limited."
40 Except in cases where tax sparing is granted. Tax sparing allows investors to
credit taxes that were not in fact collected by the host country.
41 See, e.g., Roin, 'Rethinking Tax Treaties' , sup ra note 22, p. 1765, noting that
"[r]eductions below a 'reasonable' level of tax, by contrast, have generally
been perceived as benefiting a foreign taxpayer's country of residence rather
than the taxpayer when that residence country, like the U.S., uses a tax credit
system to ameliorate duplicative taxation ."
42 Blonigen and Davies, 'Effects' , supra note 37, pp. 5-6.
68 Tsilly Dagan

level of taxation, treaties reduce the host country's tax revenues while in-
creasing the residence's tax revenues.
This may be a deal worth making in a "symmetrical treaty" - where
each country is both a host and a residence country , and its profits as a
residence country can compensate for the losses it incurs as a host country.
However, in asymmetrical treaties, countries that are predominantly host
countries - which is the case for most developing countries - tend to lose
revenues by entering into a treaty without increasing the incentive for
cross-country investments. Although conventional rhetoric praises treaties
as benefiting both countries involved by preventing double taxation, as far
as developing countries are concerned, this explanation is incorrect. Thus,
the question remains: if signing a treaty is such a bad deal for host coun-
tries, why do (some) still get into it? One explanation may be that host
countries do not, for some reason (lack of information, officials with self-
serving interests, etc), act rationally on this matter. Another explanation
may be that some developing countries simply value other advantages trea-
ties offer. The administrative simplicity, taxpayer certainty, and interna-
tionallegitimacy the treaty regime provides may prove more important for
developing countries than for developed countries. In other words, unlike
the benefits that accrue to developed countries, the main benefit for devel-
oping countries is increased legitimacy on the international level and, at
times, a more robust foreign policy. However, developing countries -
unlike developed ones (that receive symmetrical benefits) - pay a price in
tax revenues for signing treaties.
Thus, treaties whose main claim is to benefit all signatory countries by
reducing overall rates of taxation and facilitating cross-border investment
do not reduce double taxation any better than would the unilateral interac-
tion of policies. Not only do tax treaties not achieve their stated goal, they
do achieve another covert outcome - redistribution of tax revenues from
developing to developed countries.
To conclude, the tax treaties' claim to fame is "preventing double taxa-
tion". However, interaction of unilateral policies would probably yield the
same prevention of double taxation with more tax revenues ending up in
the hands of the governments of developing countries. In the current, bilat-
eral treaty regime, developing countries, unlike developed countries
(which receive symmetrical benefits), make a sacrifice in the guise of tax
revenues in order to become members of the "treaty club".
 2 The Costs ofInternational Tax Cooperation 69

2.4 Multilateral Tax Agreements - Protecting the Welfare

State

Countries in the international arena compete for residents, for investments,

and for tax revenues. Host countries are trying to attract investments by
lowering their tax rates on foreign residents; residence countries pursue
foreign individuals as well as multinational enterprises by offering them
attractive taxing and spending deals. The result, so it is often claimed, is a
"race to the bottom" in which residence as well as host countries keep re-
ducing their tax rates, undermining their ability to sustain the welfare
state."
Policymakers and scholars in the international tax field are highly both-
ered by this phenomenon, often offering a cooperative multilateral solution
- "coordination" or "harmonization" - that will enforce multilateral stan-
dards of taxation", Harmonization", it is often argued, will prevent "harm-
ful tax competition" and enable countries to collect enough taxes to sustain
(or restore) the welfare state. Such a multilateral tax agreement is justified,
according to its supporters, for efficiency as well as for equity reasons. 46
A multilateral tax agreement is viewed as more efficient than a regime
of tax competition because it generates neutrality. If all countries are tax-
ing residents and investors similarly, then investment decisions as well as

43 For a detailed analysis of the phenomenon of tax competition, see Reuven

S. Avi-Yonah, 'Globalization, Tax Competition, and the Fiscal Crisis of the
Welfare State ' (2000) 113 Harvard Law Review, p. 1575-1603.
44 Calls for international cooperation on tax matters vary significantly. Starting
from complete harmonization of international tax rules on to negative harmo-
nization - where countries are expected not to pursue "harmful" techniques. In
this paper I focus on complete harmonization in order to tackle the normative
question of whether or not it is desirable.
45 Complete harmonization can, basically, be thought of as two separate concepts:
harmonizing nominal tax rates (e.g., all countries impose, say 30% income
taxes) or harmonizing distributive tax rates, that is: taxes above the payment for
benefits provided by the government (say, all countries impose benefit taxes
plus 5%). Equating nominal rates makes no sense where countries vary in the
services they provide . I will therefore refer to the second. It is extremely hard
to apply such harmonization since countries are bound to disagree on the valua-
tion of benefits conferred by fellow countries . My goal here, however is to ar-
gue that even if it were feasible, such harmonization is not necessarily desir-
able.
46 For a detailed description of these arguments and a convincing critique , see
Julie Roin, 'Competition and Evasion: Another Perspective on International
Tax Competition' (2001) 89 Georgetown Law Journal, pp. 543, 549-86.
70 Tsilly Dagan

residency decisions are "neutrally" made, ignoring tax considerations."

Harmonization further promotes efficiency, so it is claimed, because it pro-
tects countries from racing their taxes to a sub-optimal level. 48 Absent
harmonization, countries are unable to tax mobile factors and thus are un-
able to finance public goods they find necessary.
A multilateral tax agreement is viewed as more equitable because it
shifts taxes back from less mobile labor to more mobile capital'? and be-
cause it allows countries joining such an agreement to finance their welfare
states, making (local) redistribution something that countries can afford. 50
All this sounds like an indisputable good. But again, a closer analysis
demonstrates that this is not necessarily the case. A multilateral agreement
has its disadvantages as well. While it may indeed preserve some coun-
tries' ability to maintain their welfare state, it would, at the same time,
limit the ability of other countries to choose their "proper" level of welfare
state. Harmonization might also generate some efficiency losses and might
distribute resources in a disturbing way . The move from current tax com-
petition to a multilaterally negotiated stage may shift powers to countries
that have preferential negotiation positions.

2.4.1 Tax Competition and Efficiency

Tax competition, at least in theory, drives tax rates down. Assuming per-
fect competition - tax rates will race to the bottom - until no taxes (other
than taxes that merely pay for the benefit of governmental services) are
paid." Collecting benefit taxes (rather than not collecting any taxes) is re-
quired on efficiency grounds, because provision of public goods and ser-
vices without having their consumers pay for them entails a subsidy,
which, like a positive tax, creates deadweight loss.
A world without taxes (other than benefit taxes) is more efficient? than
a world with an extra layer of taxes intended to redistribute income, even if
these taxes are imposed in a perfectly neutral fashion. The reason is that
while neutral taxes indeed eliminate the inefficiency costs associated with

47 See Avi-Yonah, ' Fiscal Crisis', supra note 43, pp. 1604-11.
48 Roin , 'Another Perspective' , supra note 46, p. 552, citing proponents of the
claim.
49 See Avi-Yonah, 'Fiscal Crisis', supra note 43, pp. 1616-25.
50 Ibid, pp. 1631-48.
51 Efficiency here refers only to maximization of worldwide available resources .
To include distributive goals in the meaning here will only obscure the analy-
sis.
52 See Roin, 'Another Perspective' , supra note 46 pp. 549-54.
 2 The Costs ofInternational Tax Cooperation 71

the misallocation of resources, zero taxes (other than benefit taxes) do even
better from the point of view of economic efficiency. They do not only
eliminate such misallocation of resources but also eliminate the tax wedge,
and with it the deadweight costs associated with almost any tax.
Supporters of harmonization argue that the race to the bottom will be
destructive, driving tax rates "too low;" they treat the efficiency gains of
tax competition as negligible.
There are, to be sure, a few reasons to be suspicious with regard to the
desirability of tax competition.53 The more serious reason is that spillovers
impair the efficiency of competition; the other reason is the fear that with
no harmonization, strategic behavior will make countries pursue strategies
that harm them. 54 Both are discussed below:
Spillovers arise when those who benefit from the pubic goods offered
by a specific country are not paying for these benefits. This can occur ei-
ther be cause the beneficiaries avoid taxes imposed by the country provid-
ing the benefits (e.g. by moving their capital to tax havens) - which is an
enforcement problem - or because of the nature of the public goods of-
fered that are not limited in use to those who actually pay the taxes (e.g.
investments in human capital that later on leaves the country, hence the
famous "brain drain" problem). The enforcement problem will not neces-
sarily be solved by harmonizing tax rates but rather by cooperation among
governments on enforcement matters. 55 Such cooperation mayor may not
take place under either tax competition or harmonization. As for the other
spillover effect - having foreign countries and foreign residents benefit
from public goods provided by other countries - this too will not be re-
solved by harmonizing the tax systems of countries. A country would still
have a disincentive to invest in public goods that would spill over to other
countries, even if its tax rates are higher. The strategic consideration envi-
sions a situation under which countries that would otherwise prefer higher
taxes are forced to lower their tax rates only because of the strategic

53 Roin also notes the problem of governmental agents' inability to set the "right
price" for the public goods they offer (owing to challenges such as the moneta-
rization of non-monetary costs and benefits, optimism, and agency costs), but
convincingly explains why these concerns do not outweigh the benefits of tax
competition. See ibid, pp. 563-8.
54 For an explanation of why the floor of a race to the bottom would be marginal
cost of public services rather than zero, see Roin, 'Another Perspective' , sup ra
note 46, pp. 555-7.
55 Ibid , pp. 594-603 .
72 Tsilly Dagan

game's downward pressures." This consideration, however, is usually

based on the assumption that the tax levels preferred by countries absent
competition is normatively desirable. Although harmonization would cer-
tainly allow governments to collect more tax revenues, this is not necessar-
ily a normatively desirable outcome. Curtailing tax competition has the
same effects as a cartel - creating inefficiency losses due to lack of compe-
tition. Governments who harmonize their tax rates might act less effi-
ciently, since they will have no incentive to limit "governmental waste" .
As Daniel Shaviro puts it: " .. .just as businesses need not please customers
as assiduously if they can form cartels to limit supply, so governments use
tax harmonization to loosen their competitive constraints. Once exit from
the reach of their harmonized rules has become impossible, only internal
political dynamics can limit their power to coerce and expropriate as they
choose."57
Julie Roin recently made a convincing argument explaining the benefits
of tax competition in setting the optimal level of public goods: Roin claims
that not every departure from noncompetitive tax levels is unduly 10w. 58
She shows that tax competition leads to "a diversity of governmental and
tax regimes" thus promoting locational efficiencies." When governments

56 See Avi-Yonah, 'Fiscal Crisis' , supra note 43 p. 1583 ("The current situation
resembles a multiple-player assurance ("stag hunt") game: all developed coun-
tries would benefit if all re-introduced the withholding tax on interest because
they would gain revenue without the risk that the capital would be shifted to
another developed country. However, no country is willing to attempt to spark
cooperation by imposing a withholding tax unilaterally; thus, they all "defect"
(that is, refrain from imposing the tax) to the detriment of all.").
57 Daniel Shaviro, 'Some Observations Concerning Multijurisdictional Tax Com-
petition' in Daniel C. Esty and Damien Geradin (eds.), Regulatory Competition
and Economic Integration: Comparative Perspectives (Oxford University
Press, NY, 2001), p. 60.
58 Roin, 'Another Perspective' , supra note 46 p. 553.
59 Ibid, p. 561, stating that "[i'[n sum, advocates of tax harmonization overstate
their case by implicitly assuming the fungibility of governments and jurisdic-
tions. Countries are not like bushels of corn, indistinguishable from one an-
other. Instead, they vary along many different dimensions, some of which are
quite important to investors. As a result, instead of leading to a pure "race to
the bottom", "tax competition has and is likely to continue to result in market
segmentation, as investors and countries look for good partners. Just as we be-
lieve that society benefits from the availability of Chevy Cavaliers, Camrys,
Lexuses, and Porches, so too can it benefit from the diversity of governmental
and tax regimes encouraged by tax competition - benefits that would be lost
 2 The Costs ofIntemational Tax Cooperation 73

compete for residents and investors, they offer packages of services for
certain amounts of taxes. Faced with competition by other countries, dif-
ferent countries offer different services for different taxes based on the
services that may prove attractive for the residents and investors they wish
to attract. Since different countries have different needs and preferences,
competition has the benefit of drawing investment to the location that val-
ues it most. Roin convincingly concludes that "tax competition is not a
negative sum game, either from the perspective of participating countries
or global welfare as a whole, when viewed from a strictly economic per-
spective... ."60
The bottom line is that tax competition is beneficial in important senses
such as reducing the tax wedge, creating a diversity of governmental and
tax regimes, and racing "governmental waste" to the bottom. While there
are, as we have seen, costs associated with tax competition - the most seri-
ous of which is the inability of governments to collect taxes for public
goods that entail spillovers - there is no reason to celebrate the costs and
downplay the benefits."
In any case, as cumbersome as the costs of tax competition may be, we
must ask ourselves whether harmonization is the right way to deal with the
problem. This is especially true in today's world, where the only way to a-
chieve harmonization is a shift from tax competition to multilateral nego-
tiations.

2.4.2 Undesirable Distributional Effects of Tax Competition

The distributive case against tax competition is straightforward. Tax com-

petition limits the ability of countries to redistribute income. Under tax
competition, countries try to attract (and keep) investors and residents. In
order to do so, they have to offer, among other things, attractive packages
of taxing and spending. This means, on the one hand, lowering the taxes
on these mobile factors to the lowest possible level and, on the other hand,
offering them the public goods and services they will find most attractive.
Driving down tax rates on the mobile factors of production moves the tax
burden to the less mobile (most importantly low skilled labor)." On the

under a strict form of harmonization. At least in an ideal world, then, tax com-
petition can create locational efficiencies."
60 Ibid, p. 568 .
61 Ibid.
62 Avi-Yonah, ' Fiscal Crisis', supra note 43 p. 1624, stating that "[... ) a shift in
the tax burden from capital to labor tends to render the tax system more regres-
74 Tsilly Dagan

expenditures side, investors as well as high-income mobile residents will

be interested in services that the government can supply more efficiently
than the free market (such as infrastructure, security, rule of law, etc), but
they will presumably be less interested in governmental functions aimed at
helping the weaker segments of society (such as welfare, public health,
perhaps education, etc.)." Thus, tax competition is indeed likely to push
countries towards limiting the redistributive functions of taxes and limit
their taxes to benefit taxes, thus hurting the social welfare net within the
country. The painful result is that tax competition indeed curtails the abil-
ity of countries to redistribute income among their residents.

2.4.4 Undesirable Distributional Effects of a Multilateral

Agreement

Surprisingly, however, curtailing tax competition may also have some very
disturbing distributive effects.
First, harmonization might force countries that may not be interested in
higher tax rates to increase their tax rates in order to be able to adhere to
the international standard. This may not raise a distribution problem unless
such countries have more pressing needs than establishing a social welfare
net.
Second, in the absence of a global government, the terms of such multi-
lateral agreement will be set by multilateral negotiations. The main prob-
lem in a multilateral accord is the shift from competition to negotiation.
This shift is not insignificant. In multilateral negotiations, countries are no
longer relatively small players guided by the invisible hand of the market,
but rather, their relative negotiation power is influenced by many other
factors (including their respective cultural, diplomatic, and army powers).
Imagine, for example, the relative power of the US in such negotiations
vis-a-vis its power in the market place. In a multilateral bargaining proc-
ess, developed countries are not only likely to have greater individual
powers vis-a-vis developing countries, but will also probably have more
power as a group over developing countries for two reasons: because of

sive. Such a tax system is also less capable of redistributing resources from the
rich to the poor."
63 Some differences may arise between features that are attractive to prospective
residents (clean environment, public parks, etc.) and future investors (that
might find lower environmental standards attractive), but they are not part of
my interest in this paper. The point in this paper is that the redistributive func-
tions of taxes are not the ones preferred by potential residents as well as inves-
tors.
 2 The Costs ofIntemational Tax Cooperation 75

their relatively superior position in the international community, and be-

cause the resource they compete for (residents) is a lot less mobile than
capital sought for by developing countries." This preferred bargaining
power may be used by such countries in order to obtain a larger share of
the collectively imposed tax revenues. If residence countries as a group
have superior bargaining power, they might be able to raise capital prices
by collectively levying a residence-based tax (and not granting a credit),
much like a cartel of capital suppliers. The taxes collected may indeed help
developed countries redistribute wealth within their countries, but the host
countries will end up effectively paying for the redistributive function of
home countries' taxes. If developing countries will indeed end up paying
the price of redistribution in developed countries, the combined redistribu-
tion effect may not be exactly what we were hoping for.
Moreover, even if developed home countries are superior neither in their
cooperative abilities nor in their bargaining power, a multilateral tax agree-
ment might still have disturbing distributional effects on a global level due
to another difference between host and residence countries, namely, the
different local groups that gain and lose due to cross-border investments
and the tax thereof.
A tax limits cross-border investments, thus creating a welfare loss that
affects groups within each country differently. While in capital-exporting
(residence) countries, governments will, due to the multilateral agreement,
be better able to collect taxes from capital owners (and thus be able to re-
distribute wealth), the case in capital-importing (host) countries is differ-
ent. In capital-importing countries, local factors of production (most im-
portantly labor) are the ones that benefit most from foreign investments."
Local capital owners in developing countries actually lose from a higher
supply of capital from foreign investments. A tax imposed on cross-border
investments (and the tax wedge it creates) reduces the level of foreign in-
vestment. By doing so, it prevents larger gains from getting into the hands
of the host's local factors of production (read: labor). Instead, such tax al-
lows the government of the host country to collect tax revenues that are
lower than the gains that labor could have collected from more foreign in-

64 Thus, developed-residence countries are much less vulnerable to defection by

fellow residence countries. That is, the risk of one developed country lowering
its tax rate in order to attract residents is lower than the risk of a developing
country lowering its tax rates in order to lure investors.
65 Bo Sodersten and Geoffrey Reed, International Econom ics (3rd edn, St. Mar-
tin's Press, NY, 1980), pp. 463-4.
76 Tsilly Dagan

vestments (at least this is the case if residence and host countries are shar-
ing the tax revenues). 66
The most problematic aspect of this outcome is that labor in particular is
exactly the group in need of redistribution . Even if the government uses all
of the tax revenues it collects for redistribution purposes, thus paying them
back to labor, labor as a group loses, because it would have gained more
had the government not levied a tax in the first place. The only way in
which developing countries can gain is when developed countries give up
(at least part of) their tax revenues. This way (assuming the dead-weight
loss from imposing the tax is smaller than the revenues collected by devel-
oping countries), redistribution from developed to developing countries
will prevail.
But even if developed countries give up potential tax revenues in order
to facilitate internation redistribution, there is still the risk that the host
government will not be very efficient in redistributing these revenues to
the people who need them most, and that it would use those funds to bene-
fit other groups and not necessarily the needy.
Again, we can see that the noble cause - helping countries finance their
welfare state - is not necessarily all good in the international tax arena.
Curtailing tax competition may prove inefficient when examined more
closely from an international angle. The inefficiency losses created by the
imposition of taxes as well as the losses created by not having govern-
ments compete with each other reduce the global welfare pie. Moreover, a
multilateral agreement may force some countries into standards that they
cannot afford. And finally - probably most disturbing - such an agreement
might mean financing developed countries' welfare states out of the pock-
ets of developing countries or (even worse) their weakest residents.

2.5 Conclusion

Some of the prevailing arguments in international taxation sound indisput-

able. At least with respect to the arguments discussed in this paper, how-
ever, such first impressions prove dubious. A Pareto rhetoric masks the
fact that behind these seemingly noble ideals lie interests of specific
groups and countries .

66 This complies with the view of governments as rent-seekers , seeking first and
foremost to maximize their revenues. For the classic statement of this view, see
Geoffrey Brennan and James M. Buchanan, The Power to Tax: Analytical
Foundations ofa Fiscal Constitution (Cambridge University Press, 1980), 1-33.
 2 The Costs of International Tax Cooperation 77

The underlying theme of these prevailing arguments is the often-praised

value of cooperation in the international tax game. Cooperation is used in
support of the conventional wisdom on all three levels at which interna-
tional tax evolves . On the unilateral level, countries are encouraged to fol-
low "neutral" policies as a cooperative strategy towards global neutrality;
on the bilateral level, countries are encouraged to cooperate in order to
eliminate double taxation; on the multilateral level they are encouraged to
cooperate in order to harmonize their taxes in an effort to save the welfare
state.
But cooperation is not necessarily desirable. It is far from clear that mul-
tilateral cooperation can evolve and that, if it can evolve, it can be sus-
tained. It is also not clear that multilateral cooperation would be norma-
tively desirable even if it could evolve. Nevertheless, cooperative
strategies sound indisputable. Thus they serve as useful rhetorical tools
that support a certain contingent policy choice but obscure other, poten-
tially important, considerations and alternatives.
Most importantly, supporters of cooperation in international tax down-
play the heterogeneity of the international community. In international tax,
every policy chosen potentially affects different people, groups, and na-
tions in different ways. Identifying the winners and losers of cooperative
policies is thus necessary in order to evaluate such polices . Cooperation
cannot be and is not the ultimate goal in international tax policy.
3 Globalization, Domestic Politics and the
Restructuring of the Welfare State:
The Unemployment Insurance Program in Israel*

Zeev Rosenhek
Department of Sociology and Anthropology
The Hebrew University of Jerusalem

Contents
3.1 Introduction 79
3.2 The "crisis" of the welfare state and globalization 80
3.3 The unemployment insurance program in Israel 86
3.4 Changes in the unemployment insurance program: politics
and institutions 91
3.5 Conclusions 99

3.1 Introduction

The aim of this article is to document and examine the changes in the un-
employment insurance program in Israel over the last two decades, at-
tempting to elucidate whether, and if so how, they are related to globaliza-
tion. Given the strong connection between the mode of operation and de-
gree of comprehensiveness of unemployment insurance, and the extent to
which labor is protected by the welfare state from absolute exposure to
market forces, this social security program has significant and direct ef-
fects on the functioning of the labor market. However, it is often claimed
that a major consequence of the globalization of production and capital
markets is that, in order to maintain the international competitiveness of
their economies, states are required to make labor markets more flexible
through the diminution of the decommodificatory effects of their social se-

• The research was supported by a grant from the Israel Foundations Trustees.
80 Zeev Rosenhek

curity system. This connection might make unemployment insurance pro-

grams particularly vulnerable to globalization.
This presumed link between globalization, patterns of regulation of the
labor market, and unemployment insurance makes this last social security
program especially appropriate for an empirical examination of the claims
about globalization effects on the welfare state. If globalization is an om-
nipotent and deterministic force undermining the welfare state, this effect
might be especially salient in the case of the unemployment insurance pro-
gram. The main purpose of this study is to assess empirically whether the
unemployment insurance program in Israel has been radically contracted
and its decommodificatory effects significantly reduced in comparison
with the "pre-globalization" past.
The article is organized as follows: At the outset, I critically review the
version of the globalization thesis that sees a deterministic causal relation
between globalization and the so-called crisis of the welfare state. Then I
introduce an alternative approach that proposes to study the interplay be-
tween global pressures and domestic political and institutional variables as
a basic factor shaping the restructuring of the welfare state. This last ap-
proach serves as the analytical framework for an examination of the case
study. The empirical analysis consists of a description and examination of
the dynamics of the unemployment insurance program in Israel, focusing
on the changes in its mode of operation and their effects on the extent to
which it protects the unemployed population from absolute exposure to
market forces. The findings suggest that the unemployment insurance pro-
gram, while being under significant political pressures, has been relatively
resistant to neo-liberal attacks attempting to reduce its decommodificatory
effects. I will analyze the political and institutional obstacles to the radical
retrenchment of the program. The operation of these domestic factors
shows that the link between globalization and the restructuring of the wel-
fare state is far more complex than it is claimed to be by some in public,
and at times in academic discourses as well. Even if globalization exerts
pressures upon the welfare state, the specific degree and mode of restruc-
turing of the welfare state are ultimately specified by the operation of po-
litical and institutional forces at the domestic level.

3.2 The "crisis" of the welfare state and globalization

During the last decade, it has became commonplace in academic and pub-
lic discourses to link the presumed crisis of the welfare state to economic
globalization. In its strongest form, this globalization thesis asserts that due
 3 Globalization, Domestic Politics and Restructuring the Welfare State 81

to the expanded operation of global markets, it is ultimately impossible to

maintain the relatively generous post-war welfare state. One version of this
thesis, which is characterized by economistic-functionalist thinking, claims
that the welfare state is essentially incompatible with global economy. This
simplistic approach is often articulated, especially by certain political ac-
tors, using a seemingly neutral rhetoric of efficiency, I which claims that
the welfare state is a major factor causing the loss of international competi-
tiveness of advanced capitalist economies in both production and financial
markets. Moreover, it postulates an automatic process of functional adapta-
tion of domestic structures to the irresistible requirements of global econ-
omy, which include flexible labor markets, low labor costs, low taxation,
and state reduction. These functional requirements, the argument states,
impose a deep retrenchment of the welfare state, both as a regulative and
as a redistributive mechanism. Therefore, the common logic of the global
economy and its imperatives results in a deterministic process of conver-
gence among advanced capitalist countries towards a neo-liberal model of
deregulation and reduced welfare states.'
The main significance of this deterministic argument is probably its po-
litical deployment by actors pursuing and justifying nco-liberal agendas of
welfare state shrinking and other related socioeconomic policies.' For in-
stance, reduction in welfare expenditures and policies of deregulation are
often ideologically framed as the only appropriate and rational response to
globalization.' Through this kind of articulation, the politics of the welfare
state is depoliticized and transformed into a "technical" issue of adaptation
to changing conditions which must be resolved through "rational" means
determined by professional expertise.
A far more elaborated version of the globalization thesis, while still pre-
supposing a drastic retrenchment of the welfare state and a process of con-
vergence along neo-liberal patterns, emphasizes the political processes that

I See David Rapkin and Jonathan Strand, "Competitiveness: Useful Concept, Po-
litical Slogan, or Dangerous Obsession?", in David Rapkin and William Avery
(eds.), National Competitiveness in a Global Economy (Lynne Rienner Publish-
ers, Boulder, 1995), pp. 1-20.
2 For example, Susan Strange, "The Future of Global Capitalism; or Will Diver-
gence Persist Forever?", in Colin Crouch and Wolfang Streeck (cds.), Political
Economy of Modern Capitalism - Mapping Convergence and Diversity (Sage
Publications, London, 1997), pp. 182-191.
3 Ramesh Mishra, Globalization and the Welfare State (Edward Elgar, Chelten-
ham, 1999).
4 Neil Fligstein , "Is Globalization the Cause of the Crises of Welfare States?"
EUI Working Papers, SPS No. 98/5, European University Institute (1998).
82 Zeev Rosenhek

produce these outcomes.' Indeed, it seems that globalization and increased

international competition are putting growing pressures on the welfare
state, but if these pressures act upon the dynamics of welfare policy, it is
because they are politically processed by specific actors.' According to this
view, the linking mechanism between globalization and the crisis of the
welfare state is not a process of functional adaptation but a fundamental
shift in the balance of power between political actors at the domestic level.
The main claim is that globalization has altered the balance of power be-
tween capital and labor, undermining the political conditions, such as neo-
corporatist institutional arrangements, upon which the welfare state was
based.' Globalization has modified the labor market structure and class
configuration of advanced capitalist societies, producing a deep segmenta-
tion of the labor market and polarization of the workforce into full-time
employed and skilled core workers, and part-time and irregularly em-
ployed unskilled workers. This new configuration weakens the organized
working class and reduces the middle-class support of the welfare state,
causing the collapse of the cross-class coalitions that served as the political
base of the welfare state."
Another way that globalization affects the politics of the welfare state is
through erosion of the states' institutional capabilities to regulate market
processes and hence to design and implement autonomous socioeconomic
policy, a result of the growing vulnerability of state policies to global mar-
ket forces." It has been claimed that in the context of global markets, gov-

5 For example, John O'Connor, "Bringing the International Economy Back In:
Welfare System Change in Sweden, Britain and the U.S., 1975-1985" (1988)
18 International Journal ofSociology and Social Policy 50-102.
6 Alfred Pfaller and Ian Gough, "The Competitiveness ofIndustrialised Welfare
States: a Cross-country Survey", in Alfred Pfaller, Ian Gough, and Goran Ther-
born (eds.), Can the Welfare State Compete? - A Comparative Study of Five
Advanced Capitalist Countries (Macmillan, London, 1991), pp. 15-43; Alfred
Pfaller, Ian Gough , and Goran Therborn, "Welfare Statism and International
Competition: the Lessons of the Case Studies", in Pfaller, Gough and Therborn
(eds.), Can the Welfare State Compete?, pp. 271-297.
? For example, Bob Jessop, "The Welfare State in the Transition from Fordism to
Post-Fordism", in Bob Jessop, Hans Kastendiek, Klaus Nielsen , and ave Perd-
esen (eds.), The Politics of Flexibility - Restructuring State and Industry in
Britain , Germany and Scandinavia (Edward Elgar, Aldershot, 1991), pp. 82-
105.
8 Christopher Pierson, Beyond the Welfare State ? The New Political Economy of
Welfare (Polity Press, Cambridge, 1998), p. 61.
9 Philip Cerny, "International Finance and the Erosion of Capitalist Divergence",
in Colin Crouch and Wolfang Streeck (eds.), Political Economy of Modern
 3 Globalization, Domestic Politics and Restructuring the Welfare State 83

ernments must respond not only to their constituencies' preferences but

also, and probably first and foremost, to the structural power of interna-
tional capital. This version of the globalization thesis also predicts a proc-
ess of convergence among advanced capitalist countries towards a reduced
welfare state. Yet, its focus on political actors and processes, some of them
playing at the domestic level, opens the path for a more flexible and nu-
anced understanding of the link between globalization and the dynamics of
the welfare state.
Taking this last approach as my point of departure, I would like to raise
two main criticisms of the globalization thesis. The first one refers to the
diagnosis of the globalization thesis on the welfare state. The radical re-
trenchment of the welfare state is frequently presumed rather than empiri-
cally assessed. It seems that both those celebrating and those mourning the
withering away of the welfare state often base their claims more on the
neo-liberal rhetoric of political actors than on factual policy and institu-
tional changes. Many recent studies have shown, however, that the chan-
ges experienced by the welfare state, whether caused by globalization or
by other factors, do not imply its dismantling. As demonstrated by Paul
Pierson, for instance, welfare states have been highly resistant to dissolu-
tion, and important political and institutional obstacles, such as considera-
tions of electoral politics and institutional stickiness, have impeded its rad-
ical reduction. 10 Within this context it is important to stress that, contrary to
presumed "common knowledge", public support for state provided social
security has remained relatively strong in most countries, making the dis-
solution of the welfare state a politically difficult task. I I
The second criticism refers to the causal relation that is assumed to exist
between the restructuring of the welfare state and globalization. As stres-
sed by Fligstein, there is no conclusive empirical evidence for the claim

Capitalism - Mapping Convergence and Diversity (Sage Publications , London,

1997), pp. 173-18l.
10 Paul Pierson, Dismantling the Welfare State? - Reagan, Thatcher, and the Poli-
tics ofRetrenchment (Cambridge University Press, Cambridge , 1995). See also
Geoffrey Garrett and Peter Lange, "Political Responses to Interdependence:
What's 'Left' for the Left?" (1991) 45 International Organization 539-564;
John Stephens, Evelyne Huber and Leonard Ray, "The Welfare State in Hard
Times", in Herbert Kitschelt , Peter Lange, Peter Marks and John Stephens
(eds.), Continuity and Change in Contemporary Capitalism (Cambridge Uni-
versity Press, Cambridge, 1999), pp. 162-193 .
II Paul Pierson, "Irresistible Forces, Immovable Objects: Post-Industrial Welfare
States Confront Permanent Austerity" (1998) 5 Journal ojEuropean Public Po-
licy 539-560.
84 Zeev Rosenhek

that globalization is the cause of the welfare state crisis.'? Undoubtedly,

there are links between global and domestic developments, but they are far
more complex than the simplistic unidirectional relation proposed by the
strongest versions of the globalization thesis." The quantitative expansion
and the qualitative strengthening of global markets have probably some-
what reduced the range of policy options available to national govern-
ments, causing significant constraints on the welfare state, which are mani-
fest in growing pressure to reduce state expenditure, labor costs, and labor
market rigidities. Still, numerous studies demonstrate that states have not
loosened their governing capabilities concerning socioeconomic policy. L4
Moreover, the effects of globalization upon the welfare state, like its ef-
fects on other aspects of advanced capitalist social formations, should be
understood in terms of a complex interplay between global and domestic
forces and processes. is The restructuring of the welfare state, even if it is a
response to constraints related to globalization, is first and foremost a poli-
tical process in which domestic actors, such as the state, workers' and em-
ployers' organizations, and political parties, are involved. Hence, the spe-
cific mode of welfare state restructuring is not over-determined by the
constraints emanating from globalization. L6 There are two main sets of do-
mestic variables that, interacting with globalization, shape the changes ex-
perienced by particular welfare states. The first set is composed of political
variables and includes the power balance between various political actors,
patterns of coalition building between them, claimsmaking by specific

L2 Fligstein, "Is Globalization the Cause of the Crisis of Welfare States?"

L3 Alexander Hicks, Social Democracy and Welfare Capitalism - A Century ofIn-
come Security Politics (Cornell University Press, Ithaca, 1999); Mishra, Glob-
alization and the Welfare State; Christopher Pierson, Beyond the Welfare
State? ; Paul Pierson, "Irresistible Forces" .
14 For example, Vincent Cable, "The Diminished Nation-State : A Study in the

Loss of Economic Power" (1995) 124 Daedalus 23-53; John Campbell and
Ove Pedersen, "The Rise ofNeoliberalism and Institutional Analysis", in John
Campbell and Ove Pedersen (eds.), The Rise ofNeoliberalism and Institutional
Analysis (Princeton University Press, Princeton, 2001), pp. 1-23; Linda Weiss,
The Myth ofthe Powerless State (Polity Press, Cambridge, 1998).
is See Sean 0 Riain, "States and Markets in an Era of Globalization" (2000)
26 Annual Review ofSociology 187-213; Martin Rhodes, "A New Social Con-
tract? Globalization and West European Welfare States", EUI Working papers ,
RSC No. 96/43, European University Institute (1996).
16 Gosta Esping-Andersen, Social Foundations ofPostindustrial Economies (Ox-

ford University Press, 1999); Stephens, Huber and Ray, "The Welfare State in
Hard Times" .
 3 Globalization, Domestic Politics and Restructuring the Welfare State 85

constituencies, and considerations of electoral politics.' ?The second set re-

fers to institutional variables, including linkage mechanisms between state
and civil society actors, modes of welfare state organization and function-
ing, and other kinds of institutional legacies." In short, domestic politics
and institutional patterns still matter for the dynamics of the welfare state.
Obviously, these two sets of variables are strongly interrelated. On the one
hand, the emergence of specific institutional patterns is in itself the result
of political processes. On the other hand, once established, institutional
patterns playa key role in the shaping of political processes by affecting,
for instance, the varying opportunity structures of different political actors
to put issues on the public agenda and to advance their interests.
The crucial importance of these domestic variables is demonstrated by
the diverse ways in which particular welfare states react to globalization
and by the persistence of significant differences between them. Political
and institutional factors working at the domestic level have conferred un-
equal degrees of strength and resilience on different welfare states. Hence,
contrary to the claim of the strong version of the globalization thesis, due
to the intervention of domestic variables, the impacts of globalization have
not resulted in a universal trend toward convergence around neo-liberalism
and radically reduced welfare states. 19
A general conclusion of the reviewed literature is that the retrenchment
of the welfare state must be empirically assessed rather than presumed on
the basis of the dominant neo-liberal rhetoric. Within this context, political
and institutional factors that can contribute to the resilience of the welfare
state deserve special empirical attention. Moreover, the assumed link be-
tween globalization and the restructuring of the welfare state must also be
evaluated through the study of concrete cases. These are the goals of the
following empirical examination of the dynamics of the unemployment in-
surance program in Israel over the last two decades.

17 Paul Pierson, Dismantling the Welfare State?

18 Herbert Kitschelt, Peter Lange, Gary Marks and John Stephens, "Convergence
and Divergence in Advanced Capitalist Democracies", in Kitschelt, Lange,
Marks and Stephens (eds.), Continuity and Change, pp. 427-460; Rhodes, "A
New Social Contract?"; Stephens, Huber and Ray, "The Welfare State in Hard
Times".
19 Ramesh Mishra, The Welfare State in Capitalist Society - Policies of Re-
trenchment and Maintenance in Europe, North America and Australia (Har-
vester-Wheatsheaf, New York, 1990); Stephens, Huber and Ray, "The Welfare
State in Hard Times".
86 Zeev Rosenhek

3.3 The unemployment insurance program in Israel

Due to the specific political conditions under which the Israeli welfare
state emerged and developed, especially its strong connection with the pro-
cess of Zionist statemaking within a colonial context," the unemployment
insurance program in Israel was established relatively late for a self-de-
fined modem and extensive welfare state. Its establishment in 1973 was
part and parcel of the process of notable expansion and institutionalization
experienced by the Israeli welfare state during the seventies." A basic
component of the process of expansion was the institutional strengthening
of the National Insurance Institute (N.LL) and its organizational ideology-
a strong preference for statutory and compulsory programs of social secu-
rity based on the principles of insurance and universal coverage. More-
over, the decision to finally establish an unemployment insurance program
was a remarkable departure from the traditional opposition of the Zionist
Labor movement - both the Labor party and the central workers' organiza-
tion (Histadrut) - to unemployment insurance. " It is important to note that
the program was established during a period of full employment. Under
these conditions, and with rising consumption levels and inflationary pres-
sures, the Treasury supported the establishment of the program and envi -
sioned it as a tool to reduce the public 's spending power through fiscal ab-
sorption,>
The general context within which the program was set shifted dramati-
cally during the eighties, both with respect to the institutional and political
dynamics of the Israeli welfare state and the specific conditions in the la-
bor market. After the quite brief "golden age" of the seventies, the welfare
state in Israel in the last two decades experienced changes that , as in other
countries, are often characterized in both academic and public discourses
as indicating a severe crisis: reduction in benefit levels , tightening of eligi-
bility criteria, cuts in budgets allocated to social services, more frequent

20 See Zeev Rosenhek , "Policy Paradigms and the Dynamics of the Welfare State:
The Israeli Welfare State and the Zionist Colonial Project" (1998) 18 Interna-
tional Journal ofSociology and Social Policy 157-202.
21 Abraham Doron and Ralph Kramer, The Welfare State in Israel - the Evolution
ofSocial Security Policy and Practice (Westview Press, Boulder, 1991).
22 John Gal, "Unemployment Insurance, Trade Unions and the Strange Case of
the Israeli Labour Movement" (1997) 42 International Review ofSocial History
357-396.
23 John Gal, "The Development of Unemployment Insurance in Israel" (1994)
3 Social Security 117-136 (Special English edition).
 3 Globalization, Domestic Politics and Restructuring the Welfare State 87

use of means-tests, and privatization of certain social service provisions."

This shift was related to the general restructuring of Israeli political econo-
my, initiated by the 1985 Emergency Stabilization Plan to halt hyperinfla-
tion in the Israeli economy.
The main traits of the restructuring, which became especially evident
during the nineties, have been liberalization of capital and other markets,
privatization of state-and Histadrut-owned enterprises, deregulation of the
labor market, a growing openness to the "global" economy, and a signifi-
cant decline in state expenditure. 25 Yet, as demonstrated by Michael Sha-
lev, the liberalization ofIsrael's political economy is more partial and mar-
ked by contradictory trends than what might be inferred from the neo-
liberal rhetoric of most political actors.> The contradictions and complexi-
ties of the process are clearly manifest in the mixed patterns of continuity
and change experienced by the welfare state. In general, the concrete
changes in welfare policy are far less dramatic than the alarmist claims
mourning the dissolution of the Israeli welfare state." Yet, it is clear that
the general political context concerning social policy has changed, and ide-
ological trends that see the welfare state as an impediment to economic ef-
ficiency and growth have gained notable salience in the political arena.
This development is related to shifts in the Israeli class structure, par-
ticularly the strengthening of a new middle class which is far less depend-
ent on the state than formerly, more attached to the global economy, and
more exposed to the influence of neo-liberal ideological models that postu-
late privatization, deregulation, and a reduced welfare state. Furthermore,
an important component of the restructuring of the Israeli political econ-
omy has been the institutional strengthening of the Bank of Israel and the
Treasury, and their endorsement of a restrictive fiscal and monetary policy
which attempts to reduce, or at least contain the growth in the expenditure

24 See Abraham Doron, "The Transformation of Israeli Social Security Policy: the
Influence of Ideological Change" (1991) 30 Bitachon Soziali 15-26 (in He-
brew); Abraham Doron, In Defense of Universality - A Challenge to Israel's
Social Policies (The Magnes Press, Jerusalem, 1995) (in Hebrew); Abraham
Doron, "Workfare - A Threat to the Safety Net in the Israeli Social Security
System" (2000) 57 Bitachon Soziali 37-58 (in Hebrew); John Gal, "Commodi-
fication and Privatization of the Welfare State - Implications for Israel" (1994)
15 Chevra V'revacha 7-24 (in Hebrew).
25 Michael Shalev, "Liberalization and the Transformation of the Political Econ-
omy", in Gershon Shafrr and Yoav Peled (eds.), The New Israel- Peacemaking
and Liberalization (Westview Press, Boulder, 2000), pp. 129-159.
26 Ibid.
27 Zeev Rosenhek, " Social Policy and State-Building: The Dynamics of the Israeli
Welfare State" (forthcoming) Journal ofSocietal and Social Policy.
88 Zeev Rosenhek

on social security and social services. These trends have had important
consequences for welfare state politics. By enlarging the opportunity struc-
ture of those political actors that pursue the reduction of the welfare state
and a significant decrease of its decommodificatory effects, the changes in
the class structure and in the balance of power within the state apparatus
have made the welfare state more politically vulnerable than in the past.
In the mid-eighties, important changes began to occur in labor market
conditions, which are at least partially related to the general restructuring
of the Israeli political economy. As we can see in figure no.1, the period of
full employment ended in the mid-eighties, in the aftermath of the imple-
mentation of the Emergency Stabilization Program. An additional jump in
unemployment rates occurred in the late-eighties, as a consequence of the
persistent recession in Israeli economy. In successive years, unemploy-
ment rates increased even more, due to the massive immigration from the
former Soviet Union. Under conditions of high unemployment, the eco-
nomic costs of unemployment insurance obviously increased (see figure
no. 1), and this became a central issue in the politics of the welfare state.
Moreover, within the context of a nearly hegemonic neo-liberal rhetoric of
liberalization, state reduction, and labor market deregulation, the unem-
ployment insurance program was singled out as a preferred target for at-
tacks by welfare state detractors."

28 Gal, "The Development of Unemployment Insurance" ,

 3 Globalization, Domestic Politics and Restructuring the Welfare State 89

12 O.R

0 .7
'0 +-- -- - - - - - - - - -----;--'--- - ' -- - - - +- - -1

.- 0 .6

.-
..
0. 5

+- ----.;'-- "-=----+ -+ 0.4

~ --.... -.' .'

0 .3

0 .2

- 0 .1

1980 19 K1 19f12 19 K3 19 R4 198 5 19 RfI 19 R7 19 f1l\ 191\9 19 90 19 91 19 92 19 9 3 19 94 19 9 5 1996 19 9 1 199fl 1999

I --.---U n cm pl oym cn t rat e - B en efil s/G DP I

Fig. 3.1. Unemployment rates and unemployment benefits as percentage of GDP;
Source: Bank of Israel, Bank of Israel Report, 1999 (Bank of Israel, Jerusalem,
2000) (in Hebrew).
The Bank of Israel and the Treasury played a central role in the process.
They claimed that unemployment insurance was a major cause of the in-
crease in unemployment levels, since its generous rules permit the unem-
ployed to refuse work offers and provide an alternative source of income.
Thus , the program reduces work incentive and produces rigidities in the
labor market. As early as 1981, the Bank of Israel claimed that additional
increases in the level of unemployment benefits should be avoided to pre-
vent the "negative consequences of unemployment insurance.'?" In succ es-
sive years, as unemployment levels increased and the issue became more
salient on the public agenda, the criticism of the central bank on the unem-
ployment insurance program intensified." The 1992 Bank ofIsrael Annual
Report states : "Among the main reasons [for the increas e of unemploy-
ment levels] it is possible to mention the development of unemployment

29 Bank ofIsrael, Bank ofIsrael Report, 1981 (Bank ofIsrael, Jerusalem, 1982)
(in Hebrew), p. 69.
30 For example, Bank ofIsrael, Bank ofIsrael Repo rt, 1986 (Bank ofIsrael, Jeru-
salem, 1987) (in Hebrew), p. 79; Bank of Israel, Bank of Israel Report, 1989
(Bank ofIsrael, Jerusalem, 1990) (in Hebrew), p. 143, 145.
90 Zeev Rosenhek

insurance, that reduces the pressure on workers to come back to the labor
market ... "31
The Treasury's professional apparatus also actively participated in the
assault on unemployment insurance. For instance, in a document titled "A
Program for Increasing Growth", presented to the government in 1997, one
proposal on the agenda was "supervising more closely those entitled to re-
ceive unemployment benefits." 32 Similarly, a document prepared by the
Budget Department of the Treasury suggestively titled "From Ensuring In-
come to Ensuring Employment" emphasizes the "negative" consequences
of unemployment insurance concerning the incentives to participate in the
labor market. Particularly significantly, the document also notes the "nega-
tive" effects of the program upon wage levels in the labor market, and
hence on labor costs. The argument advanced is that by providing an alter-
native source of income for unemployed persons, unemployment insurance
reduces the possibilities of using unemployment to restrain wage levels."
This makes clear that the considerations of the Treasury go well beyond
the narrow concern with the budgetary costs of unemployment benefits.
Rather, the focus here is on the political economy of labor market regula-
tion; specifically on the general repercussions of the decommodificatory
effects of the program on the labor market.
These classical neo-liberal criticisms were also adopted and advanced in
the public arena by many politicians from both the Labor and the Likud
parties. For example, Ora Namir, Minister of Labor and Social Affairs dur-
ing the Labor government between 1992 and 1996, was one of the most
vocal politicians expressing a critical position on unemployment insurance.
In 1993 she declared: "We can't force a person to work, but unemploy-
ment benefits were created for people who were desperate to work and
couldn't find a job, not for people who want to take advantage of some-
thing they shouldn't when we have tens of thousands of jobs. [...] Take
20,000 young men, under 35, and tell them: ' You take a job or you don't
receive unemployment benefits.' That's my plan."> In a similar vein, Meir
Sheetrit, a leading Likud politician, who would be Minister of Finance dur-
ing the last year of Netanyahu's government, declared: "The system is so
generous that it encourages 'parasitism"'. The solution he proposed was to

31 Bank of Israel, Bank ofIsrael Report, i992 (Bank of Israel, Jerusalem , 1993)
(in Hebrew), p. 149.
32 The Jerusalem Post, 8 August 1997.
33 Merav Shaviv, From Ensuring income to Ensuring Employment, Budget De-
partment, Ministry of Finance (1999) (in Hebrew).
34 The Jerusalem Post, 4 June 1993.
 3 Globalization, Domestic Politics and Restructuring the Welfare State 91

create "incentives to work" by lowering unemployment benefits." In a re-

cent attempt to further weaken the political status of the unemployment in-
surance program, Minister of Labor and Social Affairs Shlomo Benizri,
from the Shas party, claimed that fifty percent of those applying for unem-
ployment benefits were imposters that are in fact employed," Given this
political climate, the fundamental questions are: to what extent did the
shift in the political context and the attacks on unemployment insurance in-
deed cause radical changes in the program's mode of operation, and what
were the consequences of the changes that were implemented?

3.4 Changes in the unemployment insurance program:

politics and institutions

In this section, I examine the changes in the unemployment insurance pro-

gram in five major areas: distribution of funding between employers, em-
ployees and the state; qualification period; rules determining loss of enti-
tlement to benefits; maximum period of benefit payment; and benefit lev-
els. These rules and the changes in them determine the decommodificatory
effects of the program. In other words, they determine the extent to which
the insurance program protects unemployed persons from absolute expo-
sure to market forces by providing an alternative source of income.
As previously noted, when the unemployment levels began to increase
in the early eighties, state agencies started to discuss options for changing
the unemployment insurance in order to reduce the "disincentives to work"
that it caused." In successive years this trend intensified. For instance, a
main topic on the agenda of the Cabinet Committee on Unemployment es-
tablished in 1992 was the tightening of eligibility criteria for unemploy-
ment benefits." Indeed, over the last two decades there were numerous
changes in the set of rules determining the mode of operation of the unem-
ployment insurance program . In fact, this social security program experi-
enced the greatest number of statutory changes."
In general, the trend has been toward a less generous program with
tighter rules of eligibility, which would enhance the disciplining effects of
market forces over labor. Most changes in the program's mode of opera-

35 The Jerusalem Post, 25 July 1997.

36 Ha 'aretz , 22 August 2001.
37 For example, Report No.1 ofthe Interm inisterial Committee on Pockets of Un-
employment, Ministry of Labor and Social Affairs (1984) (in Hebrew).
38 The Jerusalem Post , 22 October 1992.
39 Gal, "The Development of Unemployment Insurance".
92 Zeev Rosenhek

tion were legislated in the framework of an "omnibus law" called "The Ar-
rangements in the State's Economy Law", which is approved annually by
the Knesset together with the Budget Law.40 This omnibus law, which in-
cludes substantive changes in numerous laws, is a mechanism employed
by the government to bypass the normal legislative debate and procedures,
thus neutralizing potential parliamentary opposition to its socioeconomic
policy. This procedure has significantly reduced the political opportunity
structure of the opponents to the government's policy in the parliament.
Yet, a detailed examination indicates that the changes in the unemploy-
ment insurance program have been less radical than might be expected
given the strong rhetorical attacks advanced by powerful political actors.
In the last two decades, several plans to drastically reduce the coverage
and the benefit levels of the unemployment insurance were effectively
blocked, or at least moderated, by opposition due to electoral politics. For
instance, an economic plan presented in 1990 by the Minister of Finance
and unanimously approved by the Cabinet which included quite drastic re-
strictions of eligibility rules and a significant reduction of benefit levels,
was rejected by the Knesset.41 In a similar vein, in 1998, the Minister of
Finance proposed cutting unemployment benefits as a means of reducing
unemployment. Prime Minister Netanyahu found the proposal ''unaccept-
able", since it might cause a coalition crisis and possibly damage his elec-
toral prospects." Of course, these cases do not refute the claims concerning
the basic political weakness of the welfare state in general and of unem-
ployment insurance in particular in the last two decades. Nevertheless,
they show that even under these conditions, electoral politics still play a
role in restructuring the welfare state, providing political resources to the
opponents of its radical retrenchment.
It is far from clear that the changes enacted have attained the declared
goals of significantly reducing the level of benefits and especially the pro-
portion of unemployed persons entitled to them, thus strengthening the ex-
posure of both workers and unemployed persons to market forces. Regard-
ing the distribution of the program's funding, there was a clear trend of
decrease in the employers' contributions to the unemployment insurance:
from 0.6 percent of the payroll in 1979 to a lowest point of 0.04 percent
since 1991 up to now (see table no. 1). This change is part ofa broad pol-
icy reducing employers' contribution rates to the social security system
implemented in the eighties and the nineties. The declared policy goals

40 Ami Frankel, Unemployment Benefits in Israel: Changes in Legislation , I985-

2000, (Adva, Tel Aviv, 2001) (in Hebrew).
41 The Jerusalem Post, 14 September 1990,28 December 1990.
42 The Jerusalem Post, 6 August 1998.
 3 Globalization, Domestic Politics and Restructuring the Welfare State 93

were to "reduce the cost of labor in the economy as a means of keeping

prices stable (thus curbing inflation) and increasing the profitability of
production (thus improving the ability ofthe Israeli economy to compete in
international markets) (emphasis Z.R.)."43 It is important to note that the
explicit mention of international competitiveness as the reason for the re-
duction of employers' contributions does not necessarily mean that global-
ization is the cause for the policy change. Possibly, this is a case of ideolo-
gical deployment of globalization to justify a policy driven by other fac-
tors, such as the employers' basic interest in reducing labor costs, which
does not per se derive from globalization .

Table 3.1. Contributions to the unemployment insurance program (as percentage

of wages)

.............................................. E.~P~gY.~~~ ~.~p~gy.~~.~ T.~~~~ .

1979 0.6 0.3 0.9
1980 0.4 0.2 0.6
1982 0.2 0.1 0.3
1987 0.1 0.15 0.25
1990 0.07 0.15 0.22
1991 0.04
....................•.•.•.••.•.•..•.•.•.....•.........•...•......................•...•.•.....•.•.•.•.•.•.••..•.•.•.•.•
, ,
0.15 0.19 .
Source: National Insurance Institute, Annual Survey (National Insurance Institute,
Jerusalem, various years) (in Hebrew).
The reduction in employers' contributions was compensated by the
Treasury's special reimbursements to the N.LL Hence, the policy did not
imply a reduction in the financial resources available to the program, but
rather a shift of the burden from the employers to general state revenues .
Nevertheless, this change might have important consequences for the so-
cial security system, as it reduced the N.LL's independent sources of reve-
nues, making it more dependent on the state budget and hence more vul-
nerable to political attacks and resultant cutbacks.
A major criterion determining access to the program is the required quali-
fication period for entitlement to benefits. The qualification period deter-
mined by the law was 180 days of employment within the last 360 days, or
270 days within the last 540 days. Two populations enjoyed special privi-
leges: Discharged soldiers are exempt from the qualification period for the
first year after completing military service, and the qualification period for
"new immigrants" in the first two years after their immigration was half
the qualification period for the general population. It is worthwhile to note
that in Israel, the term "new immigrant" is a legal category referring to im-

43 National Insurance Institute, Summary of Developments and Trends in Social

Security , 1987 (National Insurance Institute, Jerusalem, 1988), p. 37.
94 Zeev Rosenhek

migrants settling in the country under the Law of Return, and it is not ap-
plicable to non-Jewish labor migrants, who are absolutely excluded from
the unemployment insurance program as well as from most other social se-
curity schemes." The special status of discharged soldiers and new immi-
grants is explained by the strong link between the Israeli welfare state and
the process of state-and-nation building, whose basic components include
the centrality of the military and the incorporation of Jewish immigrants.
Over the last two decades, some changes in the qualification period
were aimed at reducing the number of unemployed persons entitled to ben-
efits. In 1993, the privilege enjoyed by "new immigrants" was abolished.
An additional change which took effect the same year and which might
have far more significant effects on unemployed persons' chances of ac-
cessing benefits, was the limitation of the qualification period to one un-
employment period within the year. Hence, an unemployed person claim-
ing unemployment benefits a second time would require a new qualifica-
tion period for entitlement to the benefits.
The second set of criteria determining access to benefits contains the
rules that define cases in which the claimant loses his or her entitlements.
The original law stipulated that if an unemployed person refuses an offer
of "suitable work" made by the Employment Service, he or she will not be
entitled to the benefits for 30 days following the refusal. "Suitable work"
was defined as work similar to the work that the claimant was employed in
during the last three years, or work that suits his or her training, level of
education, and physical fitness. Moreover, remuneration for the work
should be at least equal to the unemployment benefits the claimant was en-
titled to, and the workplace should be at a maximum distance of 40 km
from his or her place of residence.
During the nineties, several important changes occurred in the definition
of suitable work which were directed at tightening the eligibility criteria.
In 1991, the maximum distance between the work offered and the resi-
dence of the claimant was increased to 60 km. Moreover, for unemployed
persons under 35 years of age, after the first 60 days of unemployment,
work was considered suitable even if it was not similar to the claimant's
previous occupation. In 1994, the rules were tightened further, and claim-
ants up to the age of 35 were also obliged to accept work whose remunera-
tion was lower than the unemployment benefits. In addition, sanctions for
refusal were more stringent. In 1991 , the period in which an unemployed
person refusing work is not entitled to benefits increased from 30 to 90

44 See Zeev Rosenhek, "Migration Regimes, Intra-State Conflicts and the Politics
of Exclusion and Inclusion: Migrant Workers in the Israeli Welfare State"
(2000) 47 Social Problems 49-67 .
 3 Globalization, Domestic Politics and Restructuring the Welfare State 95

days following the refusal. Finally, since 1998, if an unemployed person

refuses "suitable work", 30 days are deducted from the maximum unem-
ployment period during which he or she is entitled to benefits.
An additional rule that affects how much the unemployment insurance
program protects unemployed persons from absolute dependence on the
market is the maximum period of entitlement to benefits. In 1980, the
maximum period was 175 days for an unemployed person at least 45 years
of age, or if the person was younger and had three dependent persons. In
other cases, the maximum period was 138 days. In 1994, the maximum pe-
riod of payment to discharged soldiers was reduced to 70 days. In 2000,
the maximum period for unemployed persons less than 35 years of age and
with less than three dependents was shortened to 100 days.
Given all these changes in the programs' rules over the last two decades,
a pronounced trend of reduction in the take-up rates of unemployment
benefits could be expected. Figure no. 2 illustrates that this did not occur.
On the contrary, the trend is towards a significant increase in the percent-
age of unemployed persons receiving unemployment benefits. This trend is
a result of the changing character of unemployment since the mid-eighties:
not only is there a significant increment in unemployment levels but there
is also an increase in long-term unemployment, which indicates that the
frictional unemployment of the seventies and early eighties was trans-
formed into structural unemployment. Hence the longer periods of unem-
ployment were a major factor contributing to the rise in take-up rates. Still,
the tightening of eligibility rules was far from successful in attaining the
intended reduction of take-up rates.
96 Zeev Rosenhek

fiO

50

40

----- - <.: ~
31)

20

\1)

19 KO 19 KI 19K 2 III ID 1(,11'4 191'5 I l,lKfl 19 K7 19KK IlJlW 1990 199 1 ! l}l} 2 IlIY 3 191,14 199 5 199 6 199 7 199 K 1999

Fig. 3.2. Beneficiaries as percentage of unemployed (monthly average) ;

Source: Esther Toledano, Recipients of Unemployment Benefits in 1999 (Jerusa-
lem, National Insurance Institute, 2000) (in Hebrew).

A major factor explaining this policy failure are the institutional con-
straints that made implementing the stricter eligibility rules difficult, even
when the law was changed. Several sources report that the tighter eligibil-
ity rules, especially those that determine "job refusals", were not fully en-
forced by clerks in the employment exchanges." The 1992 State Comptrol-
ler's Annual Report remarks that the clerks were reluctant to register the
unemployed as having refused a job offer, since they knew that this would
cause loss of entitlement to unemployment benefits. The report concludes
that the number of registered job refusals was lower than the actual num-
ber of unemployed persons refusing job offers. Moreover, the report indi-
cates that in small towns, the registered refusals were lower than the na-
tional average, suggesting that in those cases, the personal acquaintance
between the clerks and the unemployed persons played a role in the partial

45 For example, Binyamin Feferman, "Issues on the Development of Unemploy-

ment over the Last Decade", in Batia Harari and Ephraim Tamri (eds.), The La-
bor Market in Israel (The Ministry of Economy and Planning, Jerusalem,
1993), pp. 53-78 at p. 76 (in Hebrew); The Jerusalem Post, 13 August 1991,
21 October 1992, 11 May 1993.
 3 Globalization, Domestic Politics and Restructuring the Welfare State 97

enforcement of the tighter eligibility rules." In effect, Table no. 2 shows

that the proportion of unemployed persons registered in the employment
exchanges as having refused job offers remained extremely low over the
years, despite the changes in the program's rules.

Table 3.2. Unemployed persons registered in the employment exchanges and job
refusals (monthly average)
Unemployed Job refusals Percentage
persons regis-
tered
...........................................................................................................................................................................
1989 79,600 2,500 3.1
1990 91,600 2,300 2.5
1991 129,000 2,600 2.0
1992 142,400 2,400 1.7
1993 124,700 4,900 3.9
1994 105,600 4,100 3.9
1995 106,400 4,500 4.2
1996 114,600 4,000 3.5
1997 143,000 3,900 2.7
1998 156,200 5,700 3.6
!..?.~.2.
" .•.•.•.•.w .• !.?~.?.?..~.~
wm.•.•.•.•.•.•.•.•.•.•••.•.•.•.•.•.•.•.•. ~.;.~.2.2 # ~
•••••••••• ••. •• 2
•• : •• # ••• •• •• ••••• ••• •• •• • " •• " ••• • • ••

Source: 1989-92 in Binyamin Feferman, "Issues on the Development of Unem-

ployment over the Last Decade" in Batia Harari and Ephraim Tamri (eds.), The
Labor Market in Israel (The Ministry of Economy and Planning, Jerusalem,
1993), pp. 53-78 at p. 69 (in Hebrew); 1993-99 in Internal Reports of the Em-
ployment Service.
While from a formalistic point of view, the partial enforcement of the
tighter eligibility rules could be interpreted as cases of inappropriate appli-
cation of rules, misconduct, and even corruption, from a political-institu-
tional perspective, this has far wider significance. As Lipsky explains,
street-level bureaucrats are not merely passive policy implementers." The
institutionalized practices that they employed in their contacts with citizens
have far-reaching political and policy consequences . In fact, the relatively
high levels of discretion enjoyed by low-level bureaucrats over the alloca-
tion of benefits and sanctions to their clients transform them into effective
policy-makers. Moreover, due to their specific institutional position within
the state apparatus, which consists of unmediated and daily interactions

46 State Comptroller, Year Report No. 43, 1992 (State Comptroller, Jerusalem,
1993), p. 487 (in Hebrew).
47 Michael Lipsky, Street-Level Bureaucracy (Russell Sage Foundation, New
York, 1980).
98 Zeev Rosenhek

with claimants to benefits, they develop autonomous interests that can dif-
fer from, and even contradict those of the agencies in which they work. In
our case, the fact that the clerks in the employment exchanges have to con-
front the claimants' reactions to their decisions (registration of the claim-
ant as refusing a job offer and the resultant loss of benefits) probably ex-
plains their reluctance to apply this sanction. Due to their autonomous in-
terests, they function, on the micro-level, as an institutional obstacle to the
state's attempts to reduce the decommodificatory effects of the unemploy-
ment insurance program.
Statutory changes also occurred in the rules calculating the level of ben-
efits. While in the case of eligibility, there was a clear trend towards tight-
ening, in this case the changes were contradictory; some changes caused
an increase in the average level of benefits, and some changes attempted at
reducing the average level (see figure no. 3). The first change occurred in
1983 and affected the benefit levels of discharged soldiers. It was decided
that the benefit would be equivalent to 80% of the minimum wage instead
of 40% of the average wage. Important additional changes were put into
effect in 1995: the wage used to calculate the benefit would not be lower
than the minimum wage, even if the previous wage of the unemployed per-
son was below this level. Furthermore, included in the calculation of the
benefit level were wage components previously not taken into account.
These changes were a major factor causing the significant increase in the
real value of the average unemployment benefit seen in the graph. In 1999,
the level of benefits was limited: in the first 125 days of unemployment,
benefits would not exceed the average wage level, and on successive days
of unemployment, benefits would not exceed 2/3 of that level. According
to official statements, this change attempted to reduce the expenditure on
unemployment benefits and to encourage unemployed persons to return to
the labor market. Yet, it is doubtful that this limitation in benefit levels
would attain the declared goals, since over the years, less than 3% of the
benefit recipients were entitled to allowances higher than the average
wage."

48 National Insurance Institute, Summary of Developments and Trends in Social

Security, 1999 (National Insurance Institute, Jerusalem, 2000), p. 38.
 3 Globalization, Domestic Politics and Restructuring the Welfare State 99

60

--->:
50

40

30
---- <;:
~

20

10

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Fig. 3.3. Average unemployment benefit as percentage of average wage;

Source: National Insurance Institute, Annual Survey (Jerusalem, National Insur-
ance Institute, various years) (in Hebrew).
To conclude, in the last two decades, the unemployment insurance pro-
gram experienced statutory changes that made it even less comprehensive
than before. At the aggregative level, however, these changes were not
very effective in achieving the goal of reducing the program's decommodi-
ficatory effects. The explanation that I suggest for this lack of efficiency is
not "technical", but rather a political-institutional account of the program
reform. While the neo-liberal critique of unemployment insurance gained
significant public prominence and political power, political and institution-
al factors operating at the domestic level have so far impeded the radical
retrenchment of the program.

3.5 Conclusions

In the last two decades, neo-liberal attacks on the welfare state in general
and unemployment insurance in particular have reached an almost hege-
monic status in the Israeli political arena. These attacks are often articu-
lated in the "objective" idiom of efficiency, competitiveness, flexibility of
the labor market and economic necessity dictated by globalization. Within
100 Zeev Rosenhek

this same ideological framing, the opponents to the neo-liberal agenda are
frequently stigmatized as "irresponsible populists" . If there is a clear link
between globalization and changes in the current condition of the welfare
state, it mainly consists of the political deployment of globalization as a
justificatory device for specific socioeconomic policies. This deployment
is instrumental in providing legitimacy for specific policies by framing
them as determined by the inexorable functional requirements of the global
economy.
Given this background, it is not surprising that the unemployment insur-
ance program experienced an enormous number of changes, most attempt-
ing to reduce the degree to which it protects labor from absolute exposure
to market forces. The findings of this study suggest, however, that despite
the numerous changes, the goals of radical retrenchment of the unemploy-
ment insurance program and significant diminution of its decommodifica-
tory effects have not yet been achieved. It is important to note that this
does not mean that the unemployment insurance program in Israel is par-
ticularly comprehensive and generous. On the contrary, compared with
European welfare states, unemployment insurance in Israel is, like most
other programs of social security, characterized by rather strict rules of eli-
gibility, low benefit levels, and short periods of benefit payment." My
claim is that these characteristics were not caused by globalization but by
the specific origins and dynamics of the Israeli welfare state." In fact, the
unemployment insurance program in Israel has been characterized by these
traits since its very introduction in the early seventies.
Moreover, even if the growing openness of Israeli economy to global
markets is exerting pressure on the welfare state and has weakened it po-
litically, there are also domestic political and institutional factors working
in the opposite direction. This study of the politics of the reforms of the
unemployment insurance program indicates that two main factors appear
to have impeded its severe retrenchment. The first factor refers directly to
the macro-politics of the welfare state restructuring. On several occasions
in the 1990s, plans were presented to reduce unemployment levels that in-
cluded severe tightening of eligibility rules and notable decreases of bene-
fit levels of unemployment insurance. If accepted, these drastic proposals

49 See DaliaGordon and EstherToledano, The Unemployment Insuran ce Law: An

International Comparison. 1997 (NationalInsurance Institute, Jerusalem, 1998)
(in Hebrew); Esther Toledano, Unemployment Insurance : An International
Comparison (National Insurance Institute, Jerusalem, 1988) (in Hebrew).
so See Zeev Rosenhek, "Social Policy and State-Building"; Michael Shalev, La-
bour and the Political Economy in Israel (Oxford University Press, Oxford,
1992).
 3 Globalization, Domestic Politics and Restructuring the Welfare State 101

might have effected a significant reduction in how much the program pro-
tects unemployed persons from absolute exposure to market forces. Yet,
they were rejected by the government or by the Knesset, or at least the
proposals were significantly moderated in response to the objections
raised. Similarly to other welfare states,' I considerations of electoral poli-
tics played a significant role as an obstacle to radical retrenchment.
The second factor belongs to the micro-politics of welfare policy re-
form. The informal institutionalized practices employed by low-level bu-
reaucrats with considerable discretionary power are very often not less
significant for the program's mode of operation than statutory changes. In
our case, the autonomous actions of these "street-level" bureaucrats have
functioned as an additional obstacle to radical retrenchment. The effects of
domestic factors suggest that even if globalization exerts pressures on the
welfare state, the manner in which these pressures are politically processed
by specific actors and the balance of power between them is what matters.
In other words, the specific mode and extent of the restructuring of particu-
lar welfare states are ultimately determined by political processes at the na-
tion-state level.

51 See Paul Pierson, Dismantling the Welfare State ?

4 The Israeli Welfare State: Growing Expectations
and Diminishing Returns

Daphne Barak-Erez*

Contents
4.1 Introduction: Incentives to Curtail the Welfare State 103
4.2 The Inner Tension: Increased Expectations from the
Welfare State 106
4.3 The Result: Promising Primary Legislation and Strategies
to Avoid Related Costs 107
4.3.1 The New Wave of Social Rights Legislation in Israel 107
4.3.2 Techniques for Lowering the Costs of Welfare and
Social Services 110
4.3.3 Techniques for Externalizing the Costs of Welfare and
Social Services 124
4.3.4 The Limited Effectiveness of Judicial Review 126
4.4 The Welfare Scene in a Political Context.. 128
4.5 Concluding Thoughts 132

4.1 Introduction: Incentives to Curtail the Welfare State

The welfare state model, which was developed in Western democracies

during the twentieth century,' is in trouble. Discussions of the so-called

* Associate Professor, Faculty of Law, Tel-Aviv University . I am thankful to Lu-

cie White, Dan Schnitt, Guy Mundlak, and Aeyal Gross for their comments . I
would also like to thank Adi Aron for her research assistance and Batya Stein
for the editing.
1 Despite the obvious differences between various models of the welfare state, all
share the aspiration to guarantee decent universal standards in various aspects
of economic and social life. For a review of the development of the British
model of the welfare state before and after the Beveridge Report, see: Neville
Harris Social Security Law in Context (Oxford, 2000), pp. 69-117 (Chapters 3-
4). For a review of the development of the German model of the welfar e state,
see: Eve Rosenhaft "The Historical Development of German Social Policy" So-
104 Daplme Barak-Erez

"crisis" of the welfare state are widespread.' Ideological opposition to the

welfare state always enjoyed considerable support in right wing political
circles. Over the years, however, this criticism has intensified, as the wel-
fare state is proving rather expensive and thus an alleged burden on nation-
al economies,' particularly in an era of globalization when these economies
must compete to attract investors and retain high profile workers.' Criti-
cism has also been forthcoming from other directions, emphasizing, for in-
stance, the bureaucratic nature of the welfare state, which, at times, un-
dermines its ability to achieve its own professed goals. Ross Cranston has
described this problem as the "paradox of social welfare bureaucracies",
stating "that although they might be ostensibly devoted to the wider public
interest and the interest of intended beneficiaries, frequently they appear to
neglect these interests in what they do.">
These critiques resonate in the Israeli scene as well. Soon after the State
of Israel was established, it enacted a succession of social laws," including

cial Policy in Germany (Jochen Clasen and Richard Freeman ed., Hertford-
shire, 1994), p. 21. For the development of welfare and welfar e reforms in the
United States, see: Joel F. Handler '''Constructing the Political Spectacle ': In-
terpretation of Entitlements, Legalization, and Obligations in Social Welfare
History" 56 Brooklyn L.Rev. p. 899 (1990). See also : The Development of Wel-
fare States in Europe and America (Peter Flora and Arnold J. Heidenheimer
ed., New Brunswick-London, 1981); Abraham Doron The Welfare State in a
Changing Society (Jerusalem, 1985), pp. 1-41 (Hebrew).
2 For discussions of the welfare crisis, see: Peter Koslowski "Restructuring the
Welfare State: Introduction", Restructuring the Welfare State: Theory and Re-
form of Social Policy (Peter Koslowski and Andreas Follesdal ed., Berlin ,
1997), p. 1; Yosef Katan "The Welfare State - Continuity , Change or Dissolu-
tion" 42 Social Security, p. 17 (1994) (Hebrew) ; Joel F. Handler " American
Regulatory Policy: Have We Found the "Third Way"?" 48 Kan. L. Rev. p. 765
(2000).
3 The economic and demographic reality that was the background for building
the welfare state has changed dramatically, with the aging of the population,
immigration, rising cost of health care, and so forth. The power of the public
so-called "moral" criticism of welfare without duties unquestionably owes
much to the objective rise of welfare costs.
4 See: Reuven Avi-Yonah "Globalization, Tax Competition, and the Fiscal Crisis
of the Welfare State" 113 Harv.L.Rev. p. 1573 (2000); Ramesh Mishra Globali-
zation and the Welfare State (1999).
5 Ross Cranston Legal Foundations ofthe Welfare State (London , 1985), p. 232.
See also: D. J. Galligan "Rights, Discretion and Procedures" Law, Rights and
the Welfare State (1986) , p. 128.
6 For the history of the groundwork preceding the social security system in Israel,
based on the Knev Report that served as the equivalent of the famous Beve-
 4 The Israeli Welfare State 105

the establishment of a national insurance (social security) system," the in-

troduction of free and mandatory education," the recognition of core labor
law standards, limiting working hours," and granting statutory entitlements
to vacations," paid sick leave, I I paid maternity leave,'? and more." Yet,
even this legacy failed to immunize the Israeli welfare state against the
present crisis, and critical views of the welfare state model formulated in
other countries have influenced local views. 14 The highly centralized econ-
omy that prevailed in the past also evoked among economic players a
strong desire "to be left alone", on the assumption that economic success
goes hand in hand with decreased regulation and reduced taxation, which
inherently imply less welfare." The aim of this paper is to conduct an in-
depth study of the complex changes presently affecting the Israeli welfare
state.

ridge Report in England, see: Abraham Doron "50 Years Since the Publication
of the Program for Social Insurance in Israel - The Report of the Knev Com-
mittee" 8 Labor, Society and Law p. 43 (2001) (Hebrew).
7 The original law - National Insurance Law, 1953 (Hok ha-Bituah ha-Leumi,
1953) - was updated several times. The present version is the National Insur-
ance (Integrated Version) Law, 1995 (Hok ha-Bituah ha-Leumi [Nosah Meshu-
lav], 1995).
8 Compulsory Education Law, 1949 (Hok Limud Hovah, 1949).
9 Work and Leisure Law, 1951 (Hok Shaot Avodah u-Menuhah, 1951).
10 Annual Leave Law, 1951 (Hok Hufshah Shnatit, 1951).
II Sick Leave Law, 1976 (Hok Dmei Mahalah, 1976).
12 Women at Work Law, 1954 (Hok Avodat Nashim, 1954), as augmented by the
entitlement to "motherhood insurance", according to the National Security Law
(currently, Chapter C in National Insurance Law [Integrated Version], 1995).
13 This legislation is perceived as reflecting the ideology of the then hegemonic
Labor party regime, which dominated all Israeli governments as well as the Is-
raeli parliament (the Knesset) until 1977. At the same time, it was part of an
ideology of nation-building. See: Zeev Sternhal Nation-Building or a New So-
ciety ? The Zion ist Labor Movement (1904-1940) and the Origins of Israel
(1995); Zeev Rosenhek "Social Policy and State Building: the Dynamics of the
Israeli Welfare State" (unpublished manuscript).
14 See: Abraham Doron In Defense of Universality - A Challenge to Israel's So-
cial Policies (Jerusalem, 1995), p. 33-46 (Chapter 2) (Hebrew).
IS See also: Rosenhek, supra note 13 (stressing the efforts of the Ministry of Fi-
nance to reduce the increased costs of social security and social services); Shlo-
mo Swirski "Fiscal Policy and the Ideological Drive to Downsize the State in
Israel" 59 Social Security p. 19 (2001).
106 Daphne Barak-Erez

4.2 The Inner Tension: Increased Expectations from the

Welfare State

In light of the current pessimistic views of the welfare state, and the pres-
sures to adapt the economy to international competition, one could expect
legislation designed to ensure welfare and social rights to shrink. In Israel,
however, this rule does not seem to apply, and there are a relatively large
number of new laws granting citizens or residents additional social and
welfare rights." This new legislation denotes the significant support that
the welfare state still enjoys within the Israeli polity." In other words, sup-
port for the welfare state ideology is increasing rather than decreasing
among the public, in contrast to the views of high profile economists, in-
dustrialists, and government officials, who strive to present favorable eco-
nomic results." People seem to feel entitled to social services. This sense
of entitlement has also begun to apply to new, previously non-existent,
standards of medical care and educational services, such as the prevalent
expectation that public health services should include new life-saving
drugs, regardless of the cost. The "revolution in expectations" resulting
from the reality of the welfare state described by Lawrence Friedman de-
scribes'? was indeed extremely successful in IsraeL These expectations still
flourish despite the changing economic reality: "first, a general expectation
that the state will guarantee total justice, and second [.. .] a general expec-
tation that the state will protect us from catastrophe."20 An inner tension is
visible in Israel between a sense of entitlement to a decent standard of liv-
ing, the main aspiration of the welfare state, and an ambition to take part in
the global economy, which urges the curtailment of expensive welfare ar-
rangements .2'

16 See Chapter C (1) below.

17 Some of these laws reflected the lobbying efforts of particular groups. Many,
however, cannot be characterized in these terms and reflect public support for
the welfare state, as evident in the description of these laws in the next chapter.
18 Indeed, in other countries as well, researchers point to gaps between "ordinary"
public opinion towards the welfare state, and the more critical views of profes-
sionals and politicians. See: Doron, supra note 1, at pp. 32-34; Katan, supra
note 2, at pp. 21-25.
19 Lawrence M. Friedman "Legal Culture and the Welfare State" Dilemmas of
Law in the Welfare State (Gunther Teubner ed., Berlin, 1985), pp. 13,23.
20 Friedmann, ibid.
21 Abraham Doron, the leading authority on the Israeli welfare state, also points to
this contradiction in the 1980s and 1990s. See: Abraham Doron "Welfare Pol-
icy in Israel - The Developments during the Eighties and Nineties" Public Pol-
icy in Israel (David Nachmias and Gila Menachem ed., 1999), pp. 437, 442-
 4 The Israeli Welfare State 107

4.3 The Result: Promising Primary Legislation and

Strategies to Avoid Related Costs

4.3.1 The New Wave of Social Rights Legislation in Israel

A series of new statutes that have significantly raised levels of social and
welfare rights beyond the "first generation" of social legislation in Israel
during the fifties attests to the growing expectations from the welfare state.
The blooming of welfare-oriented and social rights-oriented statutes in Is-
rael, which combined to form a "second generation" of welfare legislation ,
can be traced back to the late 1980s. In this context, the following laws de-
serve note :
i. The Nursing Amendment to the National Insurance Law enacted in
198622 - a law establishing eligibility for home nursing, providing pri-
mary care at home for incapacitated elderly people.
ii. Special Education Law, 198823 - a law providing equal educational
opportunities for children with disabilities that affect their normal devel-
opment and impair their learning aptitude (ranging from severe levels of
mental retardation up to learning disabilities). The law ensures that, be-
tween the ages of three and twenty-one, these children will have a right
to free education, including special needs such as speech therapy , phys-
iotherapy, psychological evaluation, etc.
iii. Senior Citizens Law, 198924 - a law granting privileges and discounts
to citizens reaching retirement age. According to this law, senior citi-
zens are entitled to discounts in television fees, public transportation,
and more.

444 (Hebrew). Doron views this as the result of conflicting pressures between,
on the one hand, the dominant trend seeking to narrow government involve-
ment and, on the other hand, the activity of social-oriented lobbying, together
with the support the welfare state still enjoys among some political segments.
22 This entitlement originates in the National Insurance Law (Amendment
No. 61), 1986. The relevant provisions now form Chapter 10 of the National In-
surance Law [Integrated Version], 1995. For more details, see: Dan Schnitt
"The Long-Term Care Insurance Law" 30 Social Security, p.65 (1987) (He-
brew); Mimi Ajzenstadt and Zeev Rosenhek "Privatization and New Modes of
State Intervention: The Long-Term Care Programme in Israel" 29 Jnl.Soc.Pol.,
p. 247 (2000).
23 Special Education Law, 1988 (Hok Hinukh Meyuhad, 1988).
24 Senior Citizens Law, 1989 (Hok ha-Ezrahim ha-Vatikkim, 1989).
108 Daphne Barak-Erez

iv . Extended School Day and Educational Enrichment Law, 1997 25 - a

law expanding the time children spend at school beyond the standard
practice, usually confined to five or six hours a day. The purpose of this
law was to enable parents to take full-time jobs and to broaden chil-
dren's opportunities for educational enrichment, even if their parents
cannot afford to pay for them. This law was preceded by an earlier Ex-
tended School-Day, 1990,26 which was abolished when the new law was
enacted.
v. State Health Insurance Law, 199427 - this law, "the jewel in the
crown" of present day Israeli welfare legislation, ensures universal
health coverage. The entitlement created by the new law applies to all
aspects of health care and is not limited to primary care. The law created
a new health tax to finance this expensive entitlement, reaching up to
five percent of individual salaries, but allows exemptions for the unem-
ployed.> Consequently, the mechanism created by the law is also subsi-
dized by tax payments from other sources.
vi. Equal Rights for People With Disabilities Law, 199829 - a law recog-
nizing the right of the disabled population to equal opportunities. The
implementation of the equal opportunity principle requires actual invest-
ments, such as, for instance, investment in building in order to secure
easy access to buildings.
vii. Public Housing (Purchase Rights) Law, 1998 30 - a law granting pub-
lic housing tenants the right to buy their apartments at subsidized prices,
which takes into consideration the length of their prior period of resi-
dence.
viii. Rights ofTenants in Public Housing Law, 19983 1 - a law recogniz-
ing the right of tenants leasing public housing to reasonable mainte-
nance of their apartments, and the right of their immediate family to
continue the lease in the event of death or hospitalization.

25 Extended School-Day and Educational Enrichment Law, 1997 (Hok Yom

Hinukh Arokh ve-Limudei Haasharah, 1997).
26 Extended School-Day Law, 1990 (Hok Yom Hinukh Aroch, 1990).
27 State Health Insurance Law, 1994 (Hok Bituah Bri'ut Mamlakhti, 1994).
28 Section 2(c)(3) of the Law.
29 Equal Rights for People with Disabilities Law, 1998 (Hok Shiviyon Zekhuyot
le-Anashim im Mugbalut, 1998).
30 Public Housing (Purchase Rights), Law 1998 (Hok ha-Diyur ha-Tsibburi [Zek-
huyot Rekhishah] 1998).
31 Rights of Tenants in Public Housing Law, 1998 (Hok Zekhuyot ha-Dayar ha-
Tsibburi, 1998).
 4 The Israeli Welfare State 109

Other new laws have been enacted recently," providing for the right of
children "at risk" to free daycare," the significant increase of allowances
paid to large families," the right of sick children to education at times of
hospitalization and prolonged illnesses," the amended right of the mentally
retarded to housing within the community whenever possible," and more."
Not all these laws share the same characteristics or a similar ideology.
Some represent an attempt to expand universal social services, such as the
laws on special education and health insurance, which until then had not
been guaranteed by law. Others are specifically intended for needy sectors
of the population, such as public housing tenants. Some might even be
characterized as sectorial legislation, such as the privileges granted to sen-
ior citizens. Despite these and other differences, the emerging picture,
when considered in a broader perspective, is one of a cluster of laws de-
signed to raise living standards and, therefore, promote the welfare state
project in Israel.
This massive body of social legislation is in glaring conflict with the as-
pirations of the powers in charge of economic development (the govern-
ment in general and the higher echelons of the Ministry of Finance in par-
ticular). Consequently, the latter have persistently resisted the newly en-
acted welfare legislation by attempting to circumvent it. The implemen-
tation of this legislation is thus often compromised through the application
of bureaucratic measures -intended to lower accompanying costs . These
measures curtail the effectiveness of social laws without altering their
grandiose declarations. Jerry Mashaw claims that broad declarative provi-
sions have the advantage of enabling adjustments of legislation to chang-
ing views in government." In the context of Israeli social legislation, how-

32 The political dynamics leading to this legislation, originating in private bills, is

discussed in Section D below.
33 Children at Risk Law (The Right to Daycare) , 2000 (Hok Peotot be-Sikkun
[ha-Zekhut le-Ma 'on Yom], 2000) .
34 National Insurance Law (Amendment No. 41) (Large Families Subsidy) , 2000
(Hok ha-Bituah ha-Leumi [Tikkun Mispar 41] [Siyua le-Mishpahot Berukhot
Yeladim] ,2000).
35 Free Education for Sick Children Law, 2001 (Hok Hinukh Hinam le-Yeladim
Holim , 200 I).
36 Welfare Law (Caring for the Retarded) (Amendment No.4), 2001 (Hok ha-
Sa'ad [Tipul bi-M 'fagrim] [Tikkun Mispar 41],2001).
37 For example : Daycare Rehabilitation Law, 2000 (Hok Meonot Yom Shikumi -
yim, 2000) ; Assisting Victims of the Chemobyl Disaster Law, 2001 (Hok ha-
Mesaiym le-Nitrul Ason Chemobyl, 2001) .
38 See: Jerry L. Mashaw Greed, Chaos, & Governance - Using Public Choice to
Improv e Public Law (1997) , pp. 131-157.
110 Daphne Barak-Erez

ever, the provisions of welfare laws are in fact systematically adapted in

the direction of curtailment, in conspicuous contradiction to the legislator's
message.

4.3.2 Techniques for Lowering the Costs of Welfare and Social

Services

General: The Dynamics of Welfare Bureaucracies

As noted in the introduction, welfare bureaucracies do not necessarily en-
courage the fulfillment of welfare entitlements." This phenomenon will be
explored in detail below, pointing out the methods used for taking the wind
out of the sails of the seemingly progressive Israeli legislation on welfare
and social services.
The relative disadvantages of the two extreme models of welfare legisla-
tion - the one that awards broad discretion to public welfare officers and
the one based on stringent and explicit rules - must be stressed in this con-
text." The discretionary model grants the bureaucracy a large measure of
discretion in determining the actual level of welfare, weakening certainty
as well as the sense of entitlement." On the other hand, legislation setting
highly definitive conditions may burden, and even deter, needy welfare ap-

39 See the text to supra note 5.

40 The alternative adoption of these two models is discussed by Matthew Diller
"The Revolution in Welfare Administration: Rules, Discretion, and Entrepre-
neurial Government" 75 NY.U.L.Rev. p. 1121 (2000). A classic article in this
field is Richard M. Titmuss "Welfare ' Rights', Law and Discretion" 42 The Po-
litical Quarterly p. 113 (1971).
41 Discretionary legislation may also result in differential treatment in similar cir-
cumstances. In a discretionary system, the attitudes of welfare personnel play a
crucial role and could result in substantial variations when handling comparable
cases. Consequently, a problem of uniformity emerges, not ju st in the same
welfare office but also within the overall welfare system of the country. As ear-
Iy as 1971, Jerry Mashaw studied five welfare departments in Virginia and dis-
covered that "welfare in the rural departments [... J is essentially a different
program from that in the urban department, [... Jalthough all these juri sdictions
are contiguous and none is beyond a thirty minute drive from another." See:
Jerry L. Mashaw "Welfare Reform to Local Administration of Aid to Families
with Depend ent Children in Virginia" 57 Va.L.Rev. pp. 818, 821 (1971). See
also: Joel F. Handler "Discretion in Social Welfare: The Uneasy Position in the
Rule of Law" 92 Yale L. J. p. 1270 (1983). Overall, dependence on government
discretion is understood to be a threat to human liberty. See: Charles Reich,
"The New Property" 73 Yale L. J. p. 733 (1964).
 4 The Israeli Welfare State III

plieants. Modem welfare legislation includes myriad funds, benefits, and

pensions. With so many mandatory rules and stipulations, applicants can
hardly find their way through the legal labyrinth.?
Besides the complex rules and conditions that applicants must meet, the
attitude of welfare officials is often described as discouraging and alienat-
ing. Welfare authorities may enforce informal practices that deter potential
applicants from requesting public benefits. Michael Lipsky coined the term
"bureaucratic disentitlement"? for these practices. These may include, in-
ter alia, unnecessary demands for hard-to-obtain proofs of eligibility as
prerequisites for filing applications, a demand for the applicant's presence
during the entire process, lack of information, and more." The result is that
benefits are withheld from eligible recipients, and their actual receipt is de-
layed until the applicant's eligibility is officially confirmed.
Another problem relates to the passivity of the bureaucratic procedure.
The welfare system operates in a way that helps only those aware of their
rights, as opposed to those entitled to them. Social welfare bureaucracies
are generally not obligated to locate eligible claimants or assist them in
pursuing their application. The premise is that citizens are aware of their
rights but, as noted, this is usually not the case. In fact, many claimants
need legal advice and even representation. This help, however, is often not
available."
The bureaucratic problem is exacerbated due to the social stigma at-
tached to welfare claimants, at least concerning some entitlements. "Bene -
fit programs can stigmatize, sending a message that recipients are failures
who are a drain on society. Conversely, programs can confer benefits in a
dignified manner suggesting that recipients are worthy of respect .':" This
social stigma affects not only the tendency to refrain from applying but

42 In the words of Ross Cranston: "People have difficulty learning about, and then
negotiating, the labyrinth of rules governing the many social welfare benefits
and services." Cranston, supra note 5, p. 165.
43 Michael Lipsky "Bureaucratic Disentitlement in Social Welfare Programs"
58 Soc.Serv.Rev. p. 3 (1984) .
44 See also: Gary L. Blasi "Litigation Strategies for Addressing Bureaucratic Dis-
entitlement" 16 N Y.U Rev.L.& Soc.Change p. 591 (1987-88); Susan D. Ben-
nett , '''No Relief But Upon the Terms of Coming Into the House' - Controlled
Spaces, Invisible Disentitlements, and Homelessness in an Urban Shelter Sys-
tem" 104 Yale L. J p. 2157 (1995); David 1. Kennedy "Due Process in a Privat-
ized Welfare System" 64 Brooklyn L. Rev. pp. 231,241-250 (1998) .
45 Sheri M. Danz "A Nonpublic Forum or a Brutal Bureaucracy? Advocates'
Claims of Access to Welfare Center Waiting Rooms" 75 N Y.U L.Rev.
pp . 1004, 1007-1008 (2000).
46 Diller, supra note 40, p. 1134.
112 Daphne Barak-Erez

also generates ungenerous attitudes towards social welfare applicants with-

in the government and its officials."

The Israeli Bureaucracy in Action

I have so far pointed out the power of welfare bureaucracies and their im-
pact on welfare rights de facto. The recognition of this impact is the start-
ing point for my discussion. I build upon it in order to claim that, in Israel,
the power of the bureaucracy is used to limit the effect of the generous
welfare legislation. Government agencies use several techniques to curtail
the achievements of welfare legislation. These techniques are mainly bu-
reaucratic measures employed by state officials under official guidance, or
at least with silent government approval. Occasionally, the courts abet this
process by applying minimalist interpretations of the relevant legislation.
These measures are also accompanied by legislative amendments enacted
in the Knesset resulting from political compromise, on the pretext of revis-
ing details of the entitlements (such as contribution fees or dates of appli-
cation) rather than issues of principle. Officially, these amendments are
parliamentary rather than bureaucratic actions, but in fact they usually ori-
ginate in the government, prompted by officials of the Ministry of Finance.
It is important to view these techniques in a broader context:
i. Lowering standards through bureaucratic measures. Entitlements se-
cured by welfare and social legislation are often defined so that the stan-
dard of service can be lowered without changing the law. For instance,
whereas the Special Education Law secures the right of every child to
study in a normal class whenever possible (with additional professional
help)," in practice, many children with disabilities are denied this right
and required to study in special separate classes. This way, ordinary
schools do not have to accommodate children with special needs, or
supply them with individual help. The right to integration within the
regular school system is thus contingent on the parents' ability to fight
bureaucracy," often requiring them to prove the justice of their case by
adding expert (and costly) evaluations of the children. so A well-known

47 Cranston, supra note 5, pp. 220-221 .

48 Section 7(b) to the Special Education Law, 1988.
49 For example, see HCJ 2599/00 Yated v. Ministry ofEducation (to be published ,
14 August 02) concerning the right of children suffering from Down Syndrome
to study in a normal class.
so In general, petitions questioning decisions of the boards referring children to
institutions of special education are difficult to prove. See, for instance, HCJ
85/716 Ben-Baruch v. Municipality 0/ Ashkelon 40(1) P.D. 344 (petition dis-
 4 The Israeli Welfare State 113

Supreme Court precedent deals with a disabled child with normalleam-

ing abilities, who could not attend his neighborhood school because the
school building lacked reasonable access to the toilets ." This case is
probably only the tip of the iceberg in this context.v
In the regular educational system, a gradual decrease in school hours
and school services can be noted. In principle, nothing has changed re-
garding the state obligation to provide free education. In fact, however,
changes occurred in school curricula, mainly manifest in the minimiza-
tion of enrichment classes, such as art lessons. The more affluent parents
pay the school for these additional classes .53 In other cases, well-to-do
parents seek to establish "special" schools with specific educational foci
(arts schools, nature and environment schools, democratic schools etc.),
which are expected to offer more enrichment classes and are also subsi-
dized by the parents. 54 Another prominent change is the growing number
of pupils in every class, making classes of 35-40 pupils the standard.55
The health system assures people of the right to expensive treatments,
but they are often forced to wait, mainly for surgery, a fact that partially
offsets the effectiveness of their rights. In addition, patients are often
denied choice of the hospital in which they undergo treatment, although
public hospitals should all be equally available. This reality prompts the
more affluent patients to avoid, at least partially, regular public health
services, enabling the national health system to save some money."

missed). The authorities generally tend to compromise in disputes with petition-

ers who have gone that far, without establishing a precedent. See: HCJ 93/4746
Hilah Asso ciation for Education v. Minister of Education (unpublished); HCJ
95/6259 Almi v. Board of Special Edu cation Law (unpublished); HCJ 94/1090
Kashizda v. Board ofSpecial Education Law (unpublished).
51 HCJ 93/7081 Botser v. Maccabim-Reut Municipality 50(1) P.D. 19.
52 Bizchut, The Israel Human Rights Center for the Disabled, Comments on the
Combined Initial and Second Reports ofthe State ofIsrael Concerning the Im-
plementation of the UN Convention on Economic, Social, and Cultural Rights
(November 1998), p. 10.
53 See: Oma Kazin "Buying Knowledge" Ha 'aretz, 29 August 2000.
54 See: Rali Saar "10% Have Already Transferred From State to Private Educa-
tion" Ha 'aretz, 25 February 2001.
55 Rali Saar "The Overcrowding of Classes will Increase Due to The Curtailment
in Education" Ha'aretz, 15 June 2001.
56 See: Chaim Shadmi "Increase in the Number of Applicants to Private Medical
Services" Ha 'aretz, 1 April 2001. People with "good connections" within the
bureaucracy may still obtain exactly what they want through the mechanisms of
the national health insurance law, but many others will be made to understand
that they are requesting special privileges rather than the fulfillment of their en-
titlements.
114 Daphne Barak-Erez

ii. Under-budgeting of social services. The annual budget laws often

provide less funds than are realistically needed to support social services
guaranteed by legislation. To a great extent, this is why there are not
enough positions for social workers and psychologists in welfare ser-
vices. Sometimes, budgets earmarked for a particular purpose (such as
placing children from dysfunctional families in foster homes) are com-
pletely depleted before the end of the fiscal year. Underbudgeting is de-
signed to lower the standard of welfare (as fewer services can be ex-
panded because of the decreasing number of social workers).
When welfare laws are passed, the entitlements guaranteed by the
new legislation are sometimes financed at the expense of previous ones.
For example, when children at risk are entitled to daycare," this may be
financed by reducing the number of social workers employed by the
welfare authorities. In other cases, the state budget cannot accommodate
laws expected to increase the demand for social services, although these
laws are not strictly defined as welfare statutes. For instance, the Law
for Prevention of Violence in the Family, 1991,58 meant to protect vic-
tims of family violence by judicial preventative order, contributed to the
growing demand for state assistance to these victims. New budgets,
however, failed to follow.
Often, insufficient budgets cause direct damage to the quality of wel-
fare services.t? which may be prevented if personnel at social services
are willing to work for low salaries and without due compensation for
extra hours.w
A relatively recent instance of recourse to the under-budgeting tech-
nique was the original proposal for the 2000 budget law, which did not
provide a budget for the new position of the Commissioner for Com-
plaints against Discrimination of People with Disabilities, as set out in
the new 1998 Law.6 1 It was also reported that the Ministry of Justice
withholds the payments to lawyers hired to provide services to defen-
dants via the Public Defender's office, since the budget for this purpose

57 Supra note 33.

58 Hok Limniat Alimut Ba-Mishpaha, 1991.
59 For instance, the number of social workers in charge of children at risk is far
below what is necessary. According to recent publications, 500 social workers
are in charge of 32,000 children at risk. See: Ruthi Sinai "500 Social Workers
for 32,000 Children" Ha 'aretz 21 August 2001.
60 See also Section C (3) below .

61 This lacuna was amended due to a petition submitted to the Supreme Court by a

human rights organization - Bizchut , The Israel Human Rights Center for the
Disabled.
 4 The Israeli Welfare State 115

was exhausted before the end of the fiscal year." In addition, the manag-
ing director of the Ministry of Justice ordered the office of the Public
Defender to refrain from hiring private lawyers to represent defendants,
disregarding their statutory entitlement to legal representation."
iii. Postponing the application of new entitlements. Another prevalent-
technique in implementing social legislation in Israel is postponing
implementation "for budgetary reasons." This is achieved by legislating
an amendment to the law postponing its application, or even by in-
cluding a provision to this effect in the original statute . This technique
allows supporters of the new welfare statute to claim victory, albeit hol-
low. Let me point out some examples of the use of this strategy. The law
ensuring more school hours includes a provision stating it will be ap-
plied gradually." To date, over ten years after the enactment of the first
law to implement this entitlement, it has hardly been applied." Although
priority was given to areas with deprived population, implementation is
far from satisfactory, and Arab education can serve as a prime exam-
ple. 66 Other laws which were postponed as part of the political
agreement enabling parliamentary approval of the budget for 2001 are:
Public Housing Law (Purchase Rights), 1998,67 Children at Risk (The
Right to Daycare), 2000,68 and the Free Education for Sick Children
62 Assaf Bergerfruend "The Ministry of Justice Withholds Payments of Fees to
Public Defenders" Ha 'aretz; 14 January 2001.
63 Letter of Dan Yakir, legal adviser of the Association for Civil Rights in Israel,
to the Minister of Justice, 6 June 2001.
64 Section 4(a) to the Extended School-Day and Educational Enrichment Law,
1997.
65 According to data included in a relatively recent decision of the Supreme Court,
only 2% of state kindergartens in Israel have an extended day program. See:
HCJ 99/8437 Chain of Habad Kindergartens in the Holy Land v. Minister of
Education 54(3) P.O. 69, 93.
66 Two petitions centering on the alleged discrimination of the Arab population in
the gradual implementation of the original Extended School-Day Law, 1990,
were argued before the Supreme Court, but dismissed. See: HCJ 90/3491
Agabria v. Minister of Education and Culture, 45(1) P.O. 221; HCJ 91/3954
Agabria v. Minister ofEducation and Culture, 45(5) P.O. 472.
67 Section 23 of the Regulation of the State Economy Law 2001 (Legislative A-
mendments for Achieving the Goals of the Budget and the Economic Policy for
the Fiscal Year 2001) (Hok ha-Hesderim be-Meshek ha-Medinah (Tikkunei
Hakikah le-Hasagat Yeadei ha-Taktziv ve-ha-Mediniyut ha-Kalkalit li-Shnat
ha-Ksafim 2001), 2001). This law had already been postponed previously,
through Section 37 of the Regulation of the State Economy Law (Achieving
Goals for the Year 1999), 1998 (Hok ha-Hesderim be-Meshek ha-Medinah
(Tikkunei Hakikah le-Hasagat Yeadim 1999), 1998. A petition to the Supreme
116 Daphne Barak-Erez

2000,68 and the Free Education for Sick Children Law, 2001. 69 Recently,
the Constitution, Law, and Justice Committee of the Knesset proposed a
bill including a standard rule, whereby a new law with budgetary impli-
cations will only be enforceable in the year after its enactment."
An informal way of postponing new entitlements is delaying their im-
plementation bureaucratically, without a formal postponing amendment.
This was done, for example, concerning the provision mandating acces-
sibility of public transport to people with disabilities." The regulations
for implementing this provision were not enacted, while steps were
taken to purchase new buses inadequately adapted for the wheelchair-
bound . The new regulations were only enacted following a petition to
the Supreme Court."
iv. Nominal standards. Some of the welfare legislation standards are so
low that their social significance becomes almost negligible. For in-
stance, welfare payments for people with a 100% disability are equiva-
lent to US$ 400 per month," a sum that cannot provide for minimal liv-
ing standards in Israel. Moreover, even this relatively modest entitle-
ment is granted according to very stringent criteria; severely handi-

Court to apply the law was rejected, based on section 37. See: HCJ 99/403 Ran
Cohen v. Minister of Construction and Housing (unpublished) . This petition
was submitted by Knesset Member Ran Cohen, who led the legislation process
of the initial law.
68 Section 31 to the Regulation of State Economy Law 2001 (Legislative Amend-
ments for Achieving the Goals of the Budget and the Economic Policy for the
Fiscal Year 2001).
69 Section 18 to the Regulation of State Economy Law 2001 (Legislative Amend-
ments for Achieving the Goals of the Budget for the Fiscal Year 2001)
(Amendment, Revocation and Suspension of Legislation Originating in Private
Bills) 2001 (Hok ha-Hesderim be-Meshek ha-Medinah [Tikkunei Hakikah le-
Hasagat Yeadei ha-Taktziv Ii-Shnat] 2001) (Tikkun, Bitul ve-Hatlaya shel
Hakikah she-Mekorah be-Hatsaot Hok Pratiyot), 2001).
70 Basic Law: The State Economy (Amendment No.6) (Approval by the Budget
Control Committee) Bill (Hatsa'at Hok Yesod: Meshek ha-M'dina (Tikkun
Mispar Shesh) (Ishur ha-Vaadah le-Bikoret Taktsivit) .
7 1 Section 19 in Equal Rights for People with Disabilities Law, 1998.

72 HCJ 00/3989 Bizchut, The Legal Center for Human Rights ofPeople with Dis-
abilities v. the Minister of Transport (unpublished).
73 According to Section 202(b) of National Insurance Law [Integrated Version] ,

1995, the maximum allowance under this provision is defined as 25% of the
average salary in Israel.
 4 The Israeli Welfare State 117

capped applicants may be awarded only part of it (for instance 50%).74

Another example relates to the standard established in the schedule of
the State Health Insurance Law, 1994. In a recent case, the labor court
(which is authorized to resolve disputes in many welfare entitlement
cases) rejected a petition submitted by individuals with multiple sclero-
sis, who requested additional physiotherapy beyond their allotted twelve
treatments per year. 75 Child benefits for the first three children are also
nominal and unrelated to economic and social reality. Payment for each
of the first two children is about US$ 40 a month, and payment for the
third child, which is double, is also far from generous." Threats of can-
cellation or taxation on the payments for the first two children are often
voiced when budget cuts are discussed.
v. Avoiding the updating of standards . Statutory standards for welfare
services that were reasonable at the time they were set, gradually lost
their effectiveness due to the reluctance to amend and update them. A
prime example of this technique of resisting the spirit of the original
statute can be found in the implementation of the State Health Insurance
Law, 1994. This law was enacted with a schedule describing all the ser-
vices included in its coverage, which reflected the medical standards of
the time. Proposals to add new drugs and surgical techniques since de-
veloped were encountered by objections based on budgetary considera-
tions. People often tum to the courts demanding a specific drug or treat-
ment not included in the schedule. The labor court recently rejected
another petition submitted by individuals with multiple sclerosis, who
demanded the supply of a drug not sanctioned by the schedule as stan-
dard treatment for their illness." This specific litigation ended in a com-
promise, when the decision of the labor court became a matter for fur-
ther litigation in the Supreme Court." The case represents a more ex-

74 For example, deaf children are entitled to a full allowance only until the age of
eight, according to the National Insurance Regulations (Living, Assistance in
Studies and Arrangements for the Handicapped Child), 1998 (Takkanot ha-
Bituah ha-Leumi [Dmei Mechiyah, Ezra be-Limudim ve-Sidurim le-Yeled
Nekhe), 1998]. This rule was recently the subject of a new petition to the High
Court ofJustice. See: HCJ 0l/137 Harpaz v. the Minister ofLabor and Welfare
(petition pending).
75 L.A.9717-5 Medzini v. Kelalit Health Fund and the State of Israel, 33
P.D.A. 193.
76 Section 68 of the National Insurance Law [Integrated Version], 1995.
77 L.A. 9717-4 Kelalit Health Fund v. Carmel 33 P.D.A. 415.
78 HCJ 99/501 Carmel v. The State Labour Court (unpublished). In this case, Ke-
lalit Health Fund was willing to declare in court that it would not stop supply of
118 Daphne Barak-Erez

tensive problem, bearing on the general concern of updating the sched-

ule."
vi. Additional payments for so-calledfree services. Supplementary pay-
ments are increasingly demanded for presumably free education and
health services. Parents are asked to pay all expenses not strictly con-
nected to teaching (textbooks, school trips, etc.). These payments are
deemed legal according to the Mandatory Education Law, which provid-
ed for the possibility of education-related payments.w Patients are or-
dered to pay "contributory fees" for almost every service (doctor's ap-
pointments, medication, etc.).S\ Findings indicate that the public directly
finances 36% of the medication costs covered by the State Health Insur-
ance Law, 1994.82 Recently, the principle of contributory fees was also
introduced into the relatively new Rights of Tenants in Public Housing

the requested medication to the petitioners without a minimum six-month no-

tice, to enable them to apply for judicial remedy.
79 A widely publicized issue was the battle over the supply of Herceptin to women

with breast cancer, since this drug was not included in the original plan of the
State Health Insurance Law, 1994. See: R.A. 99/186 Kelalit Health Fund v.
Grundstein (unpublished). In this case, the labor court was willing to grant the
plaintiff an interim injunction ordering that the drug, although not included in
the plan, be supplied because of the immediate danger to the plaintiffs life.
In another case pending in the labor court, which deals with the entitlement
to genetic tests vital in cancer treatment, the main claim of the applicant is that
the general provision of the State Health Insurance Law, 1994, providing for
treatment "of reasonable quality and in accordance to medical discretion" (sec-
tion 3(d)) involves a dynamic principle, necessarily implying the steady updat-
ing of standards, even without expressly amending the plan. See: I.A.98/70065
Lazar-Haramati v. Kelalit Health Services (petition pending) .
so Section 6(d) of the Mandatory Education Law allows for the collection of pay-
ments. In addition, Section 6(e) allows requests for payments for additional
classes, with the parents' consent.
S\ Section 8 of the State Health Insurance law, 1994.
S2 Chaim Shadmi "The Public Finances 36% of the Drugs in the Health Basket"
Ha 'aretz, 12 January 200 I; idem "Research : The Burden of Financing Health
Shifts to the Insured" Ha 'aretz; 1 November 2001.
 4 The Israeli Welfare State 119

Law, 1998,83 and into the Public Defender Law, 1995,84 which was cur-
tailed through regulations requiring contributory fees from defendants."
Although basic services are still free, the gradual decline in the qual-
ity of services through the application of these techniques makes satis-
factory service contingent on extra payments . Residents of more affluent
areas pay for additional classes and extended school days ("gray educa-
tion")." "Supplementary health insurance" is also advised to be pur-
chased. This voluntary insurance is not a private, elitist insurance policy
solely available to the affluent, but a standard option offered by the pub-
lic health funds that supply services according to the Health Insurance
Law. Barring proper updating of the treatment standards provided by
law, this supplementary insurance has become a way of securing a rea-
sonable level of treatment for the middle and upper classes." Further-
more, a so-called "private" health service offers the option of paying for
medical care (mainly surgery) in public hospitals, bypassing the waiting
list, and allowing a choice of physicians,"
vii. Excluding politically weak groups. Entitlements secured by Israeli
welfare legislation are not equally available to all segments of society,
thus placing a disproportional burden on populations wielding less polit-
ical power. A major example is the continued disadvantage of the Arab

83 Section 23 of Regulation of State Economy Law 2001 (Legislation Amend-

ments for Achieving the Goals of the Budget and the Economic Policy for the
Fiscal Year 2001). According to this amendment, necessary repairs in public
housing will be contingent on contributory payments .
84 Hok ha-Sanegoria ha-Tsibburit, 1995.
85 Public Defender Regulations , 2000 (Mandatory Payments Required from Peo-
ple Entitled to Representation) (Takkanot ha-Sanegoria ha-Tsibburit (Hovat
Tashlum shel Zakayim le-Yitsug), 2000). A decision issued by a Magistrate
Court recently ruled that these regulations are unconstitutional. See: C.C.
(Ramia) 00/2698 The State ofIsrael v, Katabi (unpublished) .
86 See supra note 53. See also: Swirski, supra note 15, pp. 39-43 .

87 For example, see: L.A. 00/1091 Shitrit v, Meuhedet Health Fund 35 P.D.A. 5.
The appellant required a medical treatment that was not covered by the Na-
tional Health Insurance Law but only by the "supplementary insurance" pro-
vided by his health fund and requiring additional payment. In this case, the
court based its decision on a promise made to the appellant that the "special
cases committee", which has discretion to approve treatments not covered by
the law, would consider his case.
88 For more details on the various forms of privatization of the health system in
Israel, see: Dani Filk "The Neo-Liberal Project and Privatization Processes in
the Health System" Distributive Justice in Israel (Menachem Mautner ed.,
2000) pp. 375, 380-382 (Hebrew).
120 Daphne Barak-Erez

population vis-a-vis the various welfare and social services, which are
usually implemented through bureaucratic means rather than through
explicit legislation," At present, the distinctions between budgets allo-
cated to Jews and Arabs are not rooted in any legal provision; rather,
they reflect the sympathies and priorities of the officials working in a
reality of limited budgets. One instance at the heart of several legal pro-
ceedings is the educational system in the Arab sector. There is patent
discrimination of this system that becomes even more conspicuous in
the context of relatively expensive services such as special education.
The options for special education in the Arab sector of the state educa-
tion system are very limited." As already indicated, the implementation
of the long school-day regime was slower in the Arab sector than in
other comparable socioeconomic groups, which headed priority lists."
Moreover, the Arab educational system was not originally included in
several programs for the advancement of school children from disadvan-
taged populations." Similar concerns have been voiced regarding the
availability of mother-and-baby state clinics in the Arab sector." Evi-
dence is also available concerning differences between Jewish and Arab

89 On the origins of the exclusion, or at least partial exclusion, of the Arab popula-
tion in the context of welfare, see : Zeev Rosenhek "The Exclusionary Logic of
the Welfare State" 14(2) International Sociology p. 195 (1999) (centering on
the example of the child allowance scheme) ; Zeev Rosenhek and Michael Sha-
lev "The Contradictions of Palestinian Citizenship in Israel- Inclusion and Ex-
clusion in the Israeli Welfare State" Citizenship and the State in the Middle
East (N. Butenschan and Others ed., Syracuse, 2000), p. 288 (discussing both
the child allowance issue and housing policy).
90 See : RC.J. 0111079 Houri v. Ministry ofEducation (petition pending). This pe-
tition points to the inadequate implementation of the Special Education Law,
1988, in Arab cities and villages. It appears that many Arab children suffering
from mental or emotional disabilities, who are officially eligible for special ed-
ucation, attend the regular education system because the Ministry of Education
has not yet found appropriate educational settings for them.
91 See supra note 66.
92 HeJ 97/2814 The Supreme Committee for the Surveillance ofArab Education
in Israel v. The Ministry ofEducation, Culture and Sport 54(3) P.D. 233.
93 For example, see : HCJ 01/1472 Farah v. the Municipality ofJerusalem (unpub-
lished). The petition focused on the lack of proper services of this kind in East
Jerusalem. At this stage, the authorities were willing to declare in court that
three new clinics would be built during the year, voiding the need for continu-
ing the current petition.
 4 The Israeli Welfare State 121

localities in expenditures for families and individuals receiving social

services."
Another example of the inclination to grant fewer entitlements to
groups unable to mobilize political clout is the annual quota set for enti-
tlements to paramedical treatments, such as speech therapy and physio-
therapy. The State Health Insurance Law, 1994, does not provide a guid-
ing rule in this regard," and patients are assigned to treatments up to the
"ceiling" that was prevalent (as a result of a bureaucratic decision-
making within the health funds) when the law was first enacted, and not
necessarily according to medical needs." In this context, it is important
to remember that entitlement to these treatments is usually relevant to
permanently disabled patients who are therefore unable to work. These
patients are often excluded from the community of working and func-
tioning citizens. In contrast, costly treatments for cancer patients are
provided relatively generously," not to mention the highly expensive
fertility treatments covered by the law." In addition, when the health
funds failed to provide new cancer drugs to patients, it was relatively
easy to organize a political coalition to fight this decision, in contrast to
the "brick wall" encountered when pleading for the well-being of chil-
dren unable to express their needs.
viii. Strict interpretation ofentitlements. The authorities tend to interpret
entitlements minimalistically. Below are some representative examples .
In a case dealing with regulations providing for entitlements to a secured
income allowance for claimants obligated to stay home to provide "con-
stant care" to an ailing relative," the authorities and the court dismissed
the claim of a woman who could not hold a job because both her mother
and son were ill and needed this care.'?' She claimed to be entitled to the

94 Yosef Katan and Dan Shnit "Provision of Personal Social Services in Israel -
Issues of Distributive Justice and Territorial Inequality" (presented at the "So-
cial Rights" Conference, Minerva Center for Human Rights, Tel-Aviv Univer-
sity, May 2001) .
95 See: sections 20 (regarding developmental problems in children) and 22 (in

general) of the Second Schedule of the State Health Insurance Law, 1994.
96 See also supra note 77.
97 See section 26 of the Second Schedule of the State Health Insurance Law,
1994.
98 See section 6(d) of the Second Schedule of the State Health Insurance Law,
1994.
99 Section 3(a)(3) to the Securing Income Regulations , 1982 (Takkanot Havtahat

Hakhnasah) , 1982).
100 L.A. 1990104-39 National Insuranc e Institute v. Menachem 21 P.D.A. 490 .
122 Daphne Barak-Erez

allowance, even though separately, neither her son nor her mother
needed "constant care." The Court adhered to the administrative posi-
tion and interpreted the provisions to mean that the allowance could
only be granted for a single sick relative requiring constant care. The
claimant, a divorcee, had no choice but to stay home and tend both her
ailing mother and son, deprived of the right to an income allowance be-
cause neither relative was "sick enough" in his or her own right. In an-
other case, a mother's request for a maternity grant was denied because
she gave birth at home and not in a hospital, as stipulated by law.'?' An-
other applicant was denied a maternity grant due to a former debt she
owed the National Insurance Institute at the time of giving birth. Her
claim was denied even after the debt was paid.'?' An unemployed wom-
an who took an accounting course was refused the unemployment al-
lowance routinely allocated to unemployed participants undergoing
"professional training" because she had not been referred to this course
by the employment bureau, even though the course was initiated by the
Ministry of Labor and Welfare.'?' In another case, the plaintiff was
originally declared a "work objector" and refused unemployment allow-
ance because he informed a potential employer that he had back prob-
lems.'?'
Many examples concern the narrow interpretation and application of
the senior citizens' entitlement to home nursing aid,105 which proved a
much larger burden on the welfare budget than originally estimated. Ac-
cording to one precedent, this entitlement can only be applied in the
form of payment to a professional caretaker, a stranger rather than a
family member.!" More significantly, the entitlement was also very nar-
rowly interpreted regarding an assessment of the applicants' need for
aid. In order to "prove eligibility" for the entitlement, one must be "en-

101 L.A. 1988/0-191 Ladvin v. National Insuranc e Institute 21 P.D.A. 5.

102 L.A. 1994/0-267 Deutch v. National Insurance Institute 28 P.D.A. 503.
103 L.A. 1990/04- 237 Biton v. National Insuran ce Institut e 22 P.D.A. 530.

104 This decision was revoked by the regional labor court. See: LA. (Jerusalem)

00/1913 Goliger v. Employment Service (unpublished) .

105 In addition to constricting conditions expressly set in the law. According to sec-

tion 227 to the National Insurance Law [Integrated Version] , 1995, the entitle-
ment does not apply to applicants who reside in nursing homes. In the case of
L.A. 1994/05-275 National Insurance Institute v. Vioneta 27 P.D.A. 409, the
court sanctioned the decision not to implement this entitlement for residents in
private nursing homes, which are not state-subsidized. When ruling against this
petition, the court argued that the nursing allowance had been intended to help
the sick/elderly to continue functioning within the community.
106 L.A. 1990/0-138 National Insuranc e Institute v. Shayvis 22 P.D.A. 152.
 4 The Israeli Welfare State 123

tirely dependent on assistance" while performing "everyday activi-

ties."!"? The currently applied evaluation method is based on criteria that
grant "points" according to the patient's performance of several key ac-
tivities such as walking, dressing, washing, and eating. In practice, these
criteria are so rigidly applied that even an extremely limited independent
behavior overrules entitlement. Abiding by these criteria, the court ruled
against a petitioner who was not completely dependent on others in per-
forming these activities. L08 This rigid application occurred in another re-
ported case: a 78 year-old woman was denied this entitlement because
of her ability to walk in her home "independently" - with a walker or by
leaning on furniture and eat "independently" - after being served the
dishes (she could not cook herself). In addition, the court lacked evi-
dence that she could endanger herself. L09 Similar inflexibility prevails
concerning entitlements to allowances for disabled children. I 10
ix. Waiting Periods . Many entitlements are contingent on waiting peri-
ods, which limit and sometimes eliminate the significance of the entitle-
ment. A prime example is the disabled child allowance, LLL which was
contingent upon a minimum six-month dependence period.tv Contro-
versy arose in the case of a child who had undergone surgery and was
confined to a wheelchair for a six-month period. The parents claimed to
have met the condition set by the regulations for the allowance. Yet,
both the authorities and the court denied their claim, on the grounds that
the allowance is paid from the seventh month of disability onwards, and
not retroactively.!" Many other entitlements have similar stipulations. I 14
Moreover, payments for many entitlements are only disbursed from the
application date and not from the occurrence of the handicapping event,
even if the latter dates further back. I IS

L07 Section 224(a) National Insurance Law [Integrated Version], 1995.

L08 L.A. 1989/05-120 National Insuran ce Institute v. Tishler 21 P.D.A. 22.
L09 N.LA. 99/2 Vingord v. National Insurance Institute 34 P.D.A. 551.

L10 L.A. 1989/0-179 National Insurance Institute v. Peretz 22 P.D.A. 61.

III Current regulations in this regard are National Insurance Regulations (Living,
Assistance in Studies and Arrangements for the Handicapped Child), 1998 dis-
cussed in supra note 74. The example discussed in the text concerns the 1980
regulations (under the same name).
LL2 The new regulations reduced the waiting-period to 90 days.

LL3 L.A. 1989/0-213 National Insuran ce Institute v. Ben Or 21 P.D.A. 227.

LL4 For example, the nursing entitlement of elderly people is contingent on a twelve

month (!) eligibility period, according to Section 226 National Insurance Law
[Integrated version], 1995.
us See: L.A. 95/0-198 Na 'im v. National Insuranc e Institute 30 P.D.A. 9; N.LA.
97/246 Muskal v. National Insurance Institute 35 P.D.A. 348.
124 Daphne Barak-Ercz

4.3.3 Techniques for Externalizing the Costs of Welfare and

Social Services

An alternative way to circumvent welfare expense is to save costs not by

curtailing entitlements but by refraining from paying full value for services
provided by welfare personnel (who earn very low salaries), or by private
institutions legally mandated to supply some services (which are not al-
ways fully reimbursed for invested funds). This "survival technique" has
become characteristic of social services in Israel.
i. Externalizing costs by lowering standards of remuneration and work.
Salaries for social service personnel in Israel are low. This description
applies to the education system (teachers), the welfare system (social
workers and psychologists), and the health system (doctors and nurses).
These services, therefore, suffer from the damaging repercussions of re-
curring strikes seeking to raise salaries . Strikes, however, have been in-
effective, proving only marginally successful in raising salaries and hav-
ing little impact on the strikers' quality of life or social status. Although
some professionals add to their income (doctors in private practice and
teachers with private tutoring), this does not hold true for the majority.
Moreover, these additional endeavors sometimes lower the standard of
service provided by the public system (e.g. doctors and teachers who
hurry to leave work to go to their private jobs). Significantly, most
members of the work force in these public service areas are women,
who are more willing to compromise due to their discrimination by pri-
vate employers and their preference for relatively convenient work
schedules.
ii. Externalization to care workers. Another class of workers crucial to
the survival of the Israeli welfare system consists of care providers em-
ployed by private individuals disabled by sickness and old age. Welfare
legislation (mainly the National Insurance Law mentioned earlier) helps
to finance these nursing services. Standards of state subsidy enabling
this necessary help, however, assume very low salaries and therefore
exploitation of these workers , at the lowest echelons of the work force.
In addition, the policy on work permits for foreign workers is especially
lenient regarding nursing aid, perhaps as a response to widespread frus-
tration with the State Health Insurance Law, 1994, which failed to ad-
dress the nursing needs of the elderly. If inexpens ive care providers are
available, the problem appears less acute (at least for the more affluent) .
Although most of the rights secured by the labor legislation concerning
minimal wage and extra-hours also apply to foreign workers, these ar-
rangements are hardly ever enforced in this context. A recent example
 4 The Israeli Welfare State 125

illustrating the reliance on inexpensive imported labor is a new prece-

dent in tort damages awarded to plaintiffs who, due to severe disabili-
ties, became dependent on help. The Supreme Court held that these
damages should be quantified with the assumption that a foreign worker
(whose salary is significantly lower than that of a local counterpart)
would supply nursing aid.!" Another aspect of the low employment
costs of foreign workers is that their health insurance only grants partial
coverage. I 17
iii. Externalization to other institutions or suppliers. Extemalization of
costs also occurs in official refusals to refund institutions supplying ser-
vices according to statutory duties, and which are therefore entitled to be
fully reimbursed. This occurred in the case of Jerusalem Theater v. the
Minister ofLabor and Welfare. I 18 The Ministry refused to reimburse the
petitioner for discounts granted to elderly patrons according to the pro-
visions of the Senior Citizens Law, 1989, which mandates a list of insti-
tutions to ensure discounts to senior citizens. The Jerusalem Theater was
not on the list, but used to buy and sell tickets for productions by other
theaters included in it. In these cases, the petitioner granted elderly pa-
trons the discount on tickets stipulated by law. A request for a refund
from the authorities was refused on the grounds that the original theaters
producing the shows should provide compensation. The High Court of
Justice ruled against the petitioner, although aware of the complicated
and burdensome process of obtaining refunds from the original theaters.
In practical terms, the discounts provided by law to senior citizens were
thrust in this case upon the Jerusalem Theater.
More significant from the perspective of Israel's economy is the case
of Maccabi Health Services v. the Minister of Finance. I 19 This petition

116 c.A. 99/450 Axelrad v. Zur-Shamir, Insurance Company Ltd. 54(4) P.D. 450.
For the status of foreign workers in Israel, see: Zeev Rosenhek "Migration Re-
gimes, Intra-State Conflicts, and the Politics of Exclusion and Inclusion: Mi-
grants Workers in the Israeli Welfare State" 47 Social Problems p. 49 (2000).
117 The provisions of the State Health Insurance Law do not apply to them, and
they only enjoy the more limited entitlements accorded by the Foreign Workers
Law (Prohibition on Unlawful Employment and Securing Fair Conditions),
1991 (Hok Ovdim Zarim [Issur Haasakah she-lo ka-Din ve-Havtahat Tna'im
Hognim), 1991). See also: H.C.J. 0116433 Filora v. Minister ofHealth (petition
pending).
118 HC] 98/8150 The Jerusalem Theater v. The Minister of Work and Welfare

54(4) P.D. 433.

119 HC] 98/2344 Maccabi Health Services v. The Minister ofFinance 54(5) P.D.
729.
126 Daphne Barak-Erez

concerned the refusal of the Ministry of Finance to update its payments

to the health funds, which supply services according to the State Health
Insurance Law 1994. The health funds' argument rested on the increased
costs of their standard services due to medical developments since the
original enactment of the law, the aging of the Israeli population, and
other factors . The court ruled in favor of the health funds, ordering the
authorities to reconsider, but without mandating any specific decision.
Another way to externalize the costs of social laws is to make the em-
ployers, rather than the state, responsible for the expense of entitlements
given to salaried workers. This is the model adopted by the new laws
granting workers the entitlement to paid sick leaves even in the case of a
sick relative - a child,'> a parent, 121 or a spouse.v' including a pregnant
spouse . 123

4.3.4 The Limited Effectiveness of Judicial Review

At this stage of the discussion , it is important to assess the impact of judi-

cial review on the bureaucratic implementation of welfare legislation. Do
the courts accept this cumbersome application? Can judicial remedies im-
prove the implementation of welfare and social laws? Overall, my answer
is not encouraging. When disentitlement originates in the welfare statute
itself, namely, when the law expressly provides for low standards or con-
stricts the entitlement by setting stringent conditions, prospects for judicial
review are dim. Such a review could rely, if at all, on the concept of a con-
stitutionally protected level of social rights that the statute fails to meet,
and would require a uniquely activist judicial approach . When the argu-
ment addresses issues concerning the implementation of the legislation, ju-
dicial review is possible, but in practice, the judiciary can hardly be ex-
pected to have too much influence . The judge is indeed better placed than
the bureaucrat to value the law-protected rights and is not expected to use
efficiency as the sole criterion when ruling on the application of welfare

120 Sickness Payment Law (Leave Due to a Child's Illness), 1993 (Hok Dmei Ma-
halah [Headrut be-shel Mahalat Yeled], 1993).
121 Sickness Payment Law (Leave Due to a Parent's Illness), 1993 (Hok Dmei Ma-
halah [He' adrut be-shel Mahalat Horeh], 1993).
122 Sickness Payment Law (Leave Due to a Spouse's Illness), 1998 (Hok Dmei
Mahalahl [Headrut be-shel Mahalat Ben Zug], 1999).
123 Sickness Payment Law (Leave Due to a Spouse's Pregnancy or Childbirth),
2000 (Hok Dmei Mahalah [Headrut Ekev Herayon ve-Leidah shel Bat Zug],
2000).
 4 The Israeli Welfare State 127

legislation. Yet, barriers still exist at a deeper level. In standard welfare

cases, applicants lack relevant information that might facilitate litigation.
They also lack the financial resources for successful litigation to reach the
Supreme Court. More often than not, applicants are also dependent on the
goodwill of welfare officials and might therefore think twice before enter-
ing into legal confrontation with them. 124 Above all, applicants are not "re-
peat players" and are thus less prepared for legal battle than the welfare au-
thorities.'> Throughout this paper, I have pointed to the many judicial
decisions reflecting a tendency of the Israeli labor courts to endorse mini-
malist interpretations of entitlements. 126
And yet, despite the difficulties of welfare cases on the way to court,
there are documented legal victories. What characterizes Israeli precedents
in the realm of welfare and other social services? First, successful petition-
ers tend to be affluent. A prominent example is the renowned case of Bot-
ser v. The Macabim-Reut Local Municipality.F' involving a municipality
that failed to build a school accommodating the needs of children using
wheelchairs . The municipality did not assume responsibility for providing
the necessary conditions for disabled pupils until forced to do so by a Su-
preme Court decision. Macabim-Reut, however, is a suburb with one of the
most affluent populations, on average, in the country. Can we expect a
poor family to engage in this path-breaking battle? Another legal victory
for a national insurance applicant, won in Halamish v. National Insurance
Instituter" addressed the entitlement to old-age allowances (social security
payments) of former residents who no longer reside in Israel but have paid
their dues for many years. 129 This case, originating in a petition brought by
a well-to-do former Israeli who migrated to the United States, is once
again not a representative welfare dispute.

124 Joel F. Handler "Continuing Relationships and the Administrative Process: So-
cial Welfare" WisLRev. pp. 687,690 (1985).
125 Using the terminology suggested by Marc Galanter "Why the 'Haves' Come

Out Ahead : Speculations on the Limits of Legal Change" 9 L. & Soc.Rev. p. 95

(1974).
126 See supra notes 75, 77, 99-110 and accompanying texts.
127 Supra note 51.

128 HCJ 99/890 Halamish v. National Insurance Institute 54(4) P.D. 423.

129 According to the rule set by the law, the entitlement at the time of payment is

limited to residents. The law, however, acknowledges the possibility of recog-

nizing exceptions that may mitigate this harsh rule. Before the matter was
brought to court, administrative officials had refrained from setting regulations
covering these exceptions. The result of the proceedings was a court order to
consider the enactment of new regulations on this matter.
128 Daphne Barak-Erez

From the perspective of the welfare bureaucracies, it still pays to wait

for court rulings. In many cases, applicants get tired of waiting and do not
exhaust all the legal options. 130 If they do go to court, they may still lose. If
they win, the authorities are usually not penalized for refusing to accept the
applicants ' demand before their recourse to legal means. In the case of the
discriminatory exclusion of the Arab sector from programs assisting chil-
dren from disadvantaged populations,'!' the Ministry of Education accept-
ed the petitioners' argument and there was no need for a ruling. If so, why
were legal proceedings necessary in this case? More crucially, what incen-
tive do the authorities have to refrain from illegal policies at an earlier
stage?
Even when courts rule for the petitioners, decisions might still be con-
strued as limited to the circumstances for the case at hand. The court itself
tends to limit the scope of its decisions, and thus even hard-fought prece-
dents may not help future claimants who may need to start everything
afresh. In Sofer v. The Ministry ofLabor and Welfarec? the petitioner ar-
gued that a provision postponing payment of a disability allowance , due to
an appeal pending on the original decision to award the allowance.t -' was
unreasonable and void. The court accepted this argument but refrained
from overruling similar arrangements which postpone allowances upon ap-
peal of the original decisions to grant them, leaving the issue for future
litigation. 134 In many cases, the petitioner is also unable to argue his case in
the context of a systemic problem in the realm of welfare. A legal victory
then will typically not be applied in other contexts, despite the similarities.

4.4 The Welfare Scene in a Political Context

The present situation has many disadvantages . First, the most sensitive to
the curtailment of rights are the most vulnerable and neediest - low-in-

130 In the context of unemployment allowances, findings show that only few of the
thousands of unemployed individuals classified as "work objectors" appeal to
the labor court each month. See : Ruthi Sinai "The Labor Court Accepted the
Appeal of an Unemployed Individual Contesting his Definition as 'Work Ob-
jector'" Ha'aretz , 12 January 2001.
[ 3[ See supra note 92.

[32 HCJ 98/5580 Sofer v. The Minister ofLabor and Welfare 54(4) P.D. 319.

133 Section 27(a) National Insurance Regulations (Determining the Level of Handi-

cap for People Injured at Work) (Takkanot ha-Bituah ha-Leumi [Keviat Dargat
Nekhut le-Nifgaei Avodah], 1956) .
134 Sofer, supra note 132, p. 326 .
 4 The Israeli Welfare State 129

come citizens lacking skills to cope with cumbersome bureaucratic mecha-

nisms . If employed, they are the ones most likely to suffer from the prac-
tice of long waiting hours in the corridors of the National Insurance offices
or in the hallways of public hospitals, in order to meet the relevant official.
Their appointment will usually be scheduled for an indefinite morning
hour. Because of their difficulties in earning a living, they will not consider
a private afternoon appointment for a doctor. Second, the present reality
sows further distrust as to the accomplishments of the welfare state. Dis-
trust originates from the recognition that the level of some entitlements is
below a reasonable minimum. For instance, children from needy homes
cannot participate in extracurricular activities, such as the annual field trip,
if their parents cannot afford to pay. Distrust also stems from the growing
gap between the exaggerated promises of legislation and its actual imple-
mentation.
Distrust in the state welfare system leads to the gradual development of
parallel, seemingly private welfare alternatives, mainly in religious com-
munities, both Jewish and Muslim. The independent educational system of
the Shas religious party offers its pupils inexpensive transportation to
school, lunch, and an extended school day, which is usually not available
in the state public education system. The Islamic movement is also gradu-
ally developing an alternative system of education and welfare support.
Admittedly, voluntary activities are considered positive signs in a civic so-
ciety . They should not, however, serve as substitutes for reasonable state
provided activities. Moreover, the so-called private services provided by
Shas rely heavily on state subsidies. The result seems to be that the state,
rather than providing for the general public through ordinary welfare chan-
nels, allocates taxpayers' money on a sectorial basis to selected groups.
Sectorial parties have good reason to support and strengthen this pattern,
which both benefits their constituencies and enhances their popularity.
Another problematic development is the increasing number of citizens
opting out of state supplied services due to their unsatisfactory nature - es-
pecially by buying private medical services, "gray education" and enroll-
ing in "special" schools. This trend illustrates that affluent groups tend to
despair of public services. To some extent, these groups have stopped
struggling to improve the quality of these services, exposing the whole sys-
tem to deterioration (without the political support of influential constituen-
cies). '> This sets in motion a vicious cycle, in line with the well-known
truism that "services for the poor become poor services".

135 Compare: Clayton P. Gillette "Opting Out of Public Provision" 73 Denver

L.Rev. p. 1185 (1996).
130 Daphne Barak-Erez

What the Israeli welfare state truly needs is a sense of direction. Israel
must decide what it can offer its population as a whole and what it can of-
fer its needy population. As a result, some entitlements may be defined
more rigidly than they are today, but the final definition should be fully re-
spected. In other words, the focus of this article is not the level of welfare
and social services currently offered by the Israeli welfare state but rather
the systemic gap between the statutory promises and their application.
Unfortunately, prospects for this change in the near future are exceed-
ingly slim. Social issues are marginal to the political debate in Israel,
which is dominated by the life-and-death questions of the Israeli-Arab con-
flict. When forced to choose, most voters prefer to focus on these ques-
tions, even at the cost of their social worldview and possibly their immedi-
ate welfare interests. Due to the political split in matters of security and the
peace process,'> all governments rely on fragile parliamentary support and
are deterred from promoting new initiatives, thus making any significant
reform in the social or political realms practically impossible. For leaders
in the two major parties, reforms threatening the political gains of powerful
interest groups represent a daunting endeavor.!? since any reform seeking
to establish a more coherent welfare policy would necessarily curtail some
rights in order to secure others. Leading political figures do not consider
the Ministry of Labor and Welfare an attractive office, and incumbents are
usually not expected to take political initiatives. In fact, the Ministers of
Labor and Welfare in the period relevant to our discussion considered this
appointment a political compromise. Having accepted the nomination,
however, and as leaders of sectorial parties (usually Shas), they were more
interested in pursuing the particularistic goals of their constituencies by,
for instance, supporting religious hostels for children at risk.
Due to changes in the electoral system, the effects of the political split
on the inability to initiate and lead reforms intensified in the last few years.

136 In Israeli political jargon, this split is known as one between "left" and "right".
This terminology, however, does not attest to differences on social issues. So-
called left-leaning politicians do not necessarily support social views, nor do
right-leaning politicians necessarily hold economic views associated with the
political right in Western parlance.
137 Note in this context the inability of the Barak government to carry a legislative

initiative intended to bring about a major tax reform. See: Amendment to the
Tax Law Bill, 2000 (Hatsaat Hok le-Tikkun Dinei ha-Missim, 2000), based on
a report submitted by a committee appointed by the Minister of Finance and
chaired by Prof. Ben-Basat.
 4 The Israeli Welfare State 131

Since the adoption of direct and separate elections for prime minister.! " Is-
raeli voters began to split their vote, voting for a sectorial party in parlia-
ment and for a candidate for prime minister affiliated with a different par-
ty. This led to a parliament splintered into even more small parties, which
cannot guarantee effective support to the prime minister, and compete with
each other in the area of popular legislation intended to gain new welfare
rights or improve existing ones.' > Some of the laws enacted during these
years are justified, while others are not as sound. They include the impor-
tant new law concerning day-care arrangements for children at high risk, 140
as well as the controversial new amendment increasing children allow-
ances to large families (starting from the fifth child), 141 which the ultra-
orthodox parties strongly supported.w These new laws, initiated by indi-
vidual Knesset members (and not by the government), are not isolated ex-

138 According to the Basic Law: The Government, enacted in 1992, which abol-
ished the original parliamentary regime as set in the Basic Law: The Govern-
ment, from 1968.
139 Shachar Han "Israel is Probably the Only Democracy Without Limits on Private

Budgetary Legislation" Ha 'aretz, 17 December 2000.

140 See supra note 33.The lack of appropriate aid for children at risk in early stages

of development was acknowledged by the court in HCJ 95/1554 Gilat Support-

ers Association v. The Minister ofEdu cation , Culture and Sports 50(3) P.D. 2.
This petition was dismissed, however, because it argued for continued state
support for a private project in this area, while the Ministry of Education stated
it was planning new initiatives to accomplish the same goal. The court ruled
that the Ministry of Education's decision was reasonable.
141 See supra note 34.

142 In practice, this amendment was supported by a strange coalition that also in-

cluded the Arab parties, which recognized the (unintended) advantages of this
law to their voters. For a critique of the privileged position of large families in
the Israeli system of children's allowances (even before the new amendment),
see: Yoram Margalioth "Child Support Allowances" Berenson Book, Vol. 2
(2000), p. 733 (Hebrew); Yoram Margalioth "Child Support Allowances Dis-
tort the Tax System: Analysis and Proposal" 47 The Economic Quarterly p. 252
(2000) (Hebrew).
According to available statistics, almost 60% of the children considered
"poor" by the Institute for National Insurance do not benefit from the new
amendment, as, according to the terms of the law, their families are not large
enough. See: Shachar Han "The Large Families Law Does Not Help the Major-
ity of the Poor" Ha 'aretz, 20 June 2001.
132 Daphne Barak-Erez

amples. Social bills privately initiated by Knesset members.!" as well as

new bills that they submitted to the Knesset, continue to accumulate.!"

4.5 Concluding Thoughts

The Israeli welfare and social service systems send an ambivalent message
to their recipients. Officially, all social rights are secured by statutes, ifnot
more.!" In practice, however, implementation may require the entitled to
follow a long, arduous, and not always promising path. The parallel devel-
opment in two opposing directions, preserving and broadening welfare
statutes while narrowing their significance and impact, cannot coexist for
long.
Globalization is liable to make adherence to welfare ideals increasingly
difficult. Therefore, it is essential that the money invested in welfare be

143 See supra notes 33-37.

144 For example: State Health Insurance Law (Amendment No. 12) (Rights of
Non-Resident Children) Bill, 2000 (Hatsaat Hok Bituah Beriut Mamlachti
[Tikkun Mispar 12] [Zekhuyot Yeladim she-Enam Toshavim] 2000); Equal
Rights for People with Disabilities Law (Amendment) (Accessibility, Housing
in the Community and Personal Assistance, Sport, Leisure, Culture, Education
and Studies, the Legal System, Special Needs and Information) Bill, 2000
(Hatsaat Hok Shivyon Zekhuyot le-Anashim im Mugbalut [Tikkun] [Negishut,
Diyur ba-Kehilah ve-Siyu 'a Ishi, Tarbut, Pnai ve-Sport, Hinukh ve-Haskalah,
ha-Maarekhet ha-Mishpatit, Tsrakhim Meyuhadim ve-Meyda] 2000); State
Health Insurance (Amendment No. 14) (Health Services for Pupils) Bill, 2001
(Hatsa 'at Hok Bituah Beriut Mamlakhti [Tikkun Mispar 14] [Sherutei Beriut
la-Talmid] 2001); National Insurance Law (Amendment No. 44) (Study Schol-
arship for Bar-Mitzvah Youth) Bill, 2001 (Hatsaat Hok ha-Bituah Haleumi
[Tikkun Mispar 44[ (Ma'anak Limudim le-Yeled she-Higi'a le-Mitzvot] 2001).
A new initiative to limit the enactment of social laws with considerable budget-
ary consequences is the amendment to Basic Law: The State Economy mandat-
ing every law with budgetary consequences to be passed with the support of at
least 50 Knesset members (out of 120). See: Basic Law: The State Economy
(Legislative Bills with Budgetary Consequences) (Temporary Provision) 2002
(Hatsa'at Hok Yesod: Meshek ha-M'dina [Hatsa'ot Hok ve-Histayguyot She-
bevitsu'an Krucha Alut Taktsivit] ]Hora'at Sha'a) 2002).
145 The constitutional status of social rights (as opposed to their ordinary protection

by legislation) is still imprecise, since proposals to enact a Basic Law in this re-
gard have so far failed to mobilize sufficient political support. For a discussion
of the effect of the Basic Laws in the realm of human rights, see: Aeyal Gross
"The Politics of Rights in Israeli Constitutional Law" 2 Israel Studies p. 80
(1998) .
 4 The Israeli Welfare State 133

used to convey clear preferences. Due to the political deadlock in Israel,

the prospects for change in this area are, at best, unclear. Strong criticism
of the electoral system introduced only a few years ago!" resulted in sig-
nificant constitutional change. A new version of the Basic Law: the Gov-
ernment!'? was enacted, renewing the traditional parliamentary regime bas-
ed on a single vote. It remains to be seen whether this change will diminish
the power of sectorial parties and enable new social initiatives based on a
broader view of the developments currently affecting the welfare state.
This constitutional reform will not guarantee change, however, as long as
Israeli political life is dominated by security problems perceived by the
public as more vital.

146 See supra note 138.

147 Basic Law: The Government, enacted in March 2001.
5 Quod Omnes Tangit: Globalization, Welfare Regimes
and Entitlements'

Peer Zumbansen"

Contents
5.1 Introduction 136
5.2 The Citizen ofthe Welfare State 138
5.2.1 The Stakes of Welfare Politics 140
5.2.2 A Sociological Perspective 141
5.2.3 What Makes A Citizen? 142
5.2.4 Legislative Lawmaking and Administrative Discretion 144
5.2.5 The Changing Face of Public Administration 147
5.2.6 Learning from Private Law 149
5.2.7 Limits to Contractualization 152

• Comments to the papers by Daphne Barak-Erez (II-III) and Zeev Rosenh ek

(IV), presented at the Intern ational Conference, "The Welfare State in an Era of
Globalization", The Hebrew University, Mount Scopus , Jerusalem, June 18-19,
2001: http ://www.humrts .mscc.huji. ac.il. My thanks go to Eyal Benvenisti and
Georg Nolte for the kind invitation and to Miriam Aziz, Florian Hoffmann,
Guy Mundlak, Gerry Neuman, Georg Nolte, and Sung-Kee Kim for very help-
ful comments. For the meaning of "quod omnes tangit" in Justinian's Code
5.59.5.2, [" ..., omnibus tractari et approbari debet" - what touches upon eve-
ryone, must be heard and approved by everyone] , see, e.g., G. Post, "A Roman
Theory of Consent;" A. Gouron, ' Aux origines medievales de la maxime Quod
Omnes Tangit,' 277 (describing that this "modest line" was, inde ed, applied to
manifold contexts in canon law as well as political theory); N . Luhmann,
"Quod Omnes Tangit", 883 f. This contribution builds on previous work , see
Peer Zumbansen, Ordnungsmuster im modernen Wohlfahrtsstaat. Lernerfah-
rungen zwischen Staat, Gesellschaft und Vertrag; idem, "Die vergangene Zu-
kunft des Volkerrechts"; idem, " Spiegelungen von Staat und Gesellschaft:
Governance-Erfahrungen in der Globalisierungsdebatte"; a more elaborated
discussion of the issues touched upon in the present article can be found in my
"The Province of Government: Towards A Private Law Understanding of Pub-
lic Governance" (LL.M . Thesis , Harvard Law School 1998, unpublished
manuscript, on file with author and Harvard Law School Library: orig . title :
"The Private Ordering Paradigm and the Missing Basis of Contract Law").
•• Lecturer, University of Frankfurt, Institute of Economic Law; Jean Monnet
Fellow, European University Institute, Florence, Italy 2001-2002.
136 Peer Zumbansen

5.2.8 From the Rule of Law to the Welfare State and Back 153
5.3 Remembering the Choices Made in the Past.. 154
5.3.1 The Welfare State's Futile Struggle Against
Unemployment 154
5.3.2 Remembering 161
5.3.3 In the Presence ofIrony 161
Bibliography 163

5.1 Introduction

While the dispute over the past or the future of the welfare state' has tradi-
tionally set off about the proper definition of what characterizes the wel-
fare state,' today's attention is aimed at gaining a clearer focus on the rea-
sons for its status as a severely endangered species . Paradoxically, the
alleged reason of all worry - globalization - remains at best a vaguely de-
fined phenomenon in continuing need of further analysis and exploration.'

, See, for an excellent overview of recent work , Pierson, "Investigating the Wel-
fare State at Century's End", 1,5 (defending the argument that , against the cur-
rent interpretation, welfare states are not merely "protective reactions" against
capitalism but, instead, an integral part of it); cf. RiegerlLeibfried, Grundlagen
der Globalisierung; Berthold, Der Sozialstaat im Zeitalter der Globalisierung;
cf Habermas, "Die Krise des Wohlfahrtsstaates und die Erschopfung
utopischer Energien".
2 See, e.g., the Fourteenth Amendment to the US Constitution (http://www.uni-
wuerzburg.de/law/grOOOOO_.html#A022-l; see Art. 20 par. 1 and Art. 28 pa-
ra. 1 German Basic Law (Grundgesetz) , available at: http: //www.uni-
wuerzburg.de/law/gmOOOOO_.html. See for a historical analysis: Stolleis , "Die
Entstehung des Interventionsstaates und das offentliche Recht", 129 ff.
3 See, e.g., Fligstein, Is Globalization the Cause of the Crises of the Welfare
State?; HeldlMcGrew (eds.), The Global Transformations Reader; Sassen, Los-
ing Control?; Sassen, Globalization and its Discontents; BoyerlDrache (eds .),
States against Markets. The Limits of Globalization; Brunkhorst/Kettner (eds.),
Globalisierung und Demokratie; Voigt (Hrsg.), Globalisierung des Rechts;
BuschIPliimper (eds.), Nationaler Staat und Intemationale Wirtschaft; Soskice,
"Globalisierung und institutionelle Divergenz: die USA und Deutschland im
Vergleich", 201 ff.; Habermas, "Der europaische N ationalstaat unter dem
Druck der Globalisierung", 425 ff.; Habermas, "Die postnationale Konstellati-
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 137

While the different dimensions of the welfare state under pressure are only
beginning to be grasped, we are witnessing a substantial widening of the
research spectrum.' Analyses of the highs and lows of the welfare state
were traditionally more-or-Iess connected with right and left politics that
debated over the legitimate reach of state regulation of societal welfare
("non-market regulation of the market");' the European and global agendas
replace these frames of reference. Complicating policy choices further,
welfare politics have become an issue of international regulatory competi-
tion." Recent work persuasively insists on the various comparative institu-
tional advantages connected to particular systems of "embedded capital-
ism" which are responsible for different - more-or-Iess successful -
models of welfare regimes.' In particular, the value of the "varieties of
capitalism" research lies in its redirecting our attention to the different in-
stitutional settings of welfare systems and understanding them as vital
elements of capitalist market regimes." From this perspective, globalization
might not be the only and eminent cause for the crisis of the welfare state;
instead, the causal relationship appears to be much more complicated. We
are forced to analyze developments related to changes in international

on und die Zukunft der Demokratie", 91 ff.; Bonoli et aI., European Welfare
Futures, 51 ff., 52: "It is, however, globalization as ideology that excites most
passion."
4 See the recent contributions in Leibfried/Wagschal (eds.), Der deutsche Sozial-
staat. Bilanzen - Reformen - Perspektiven; Berger, Der Umbau des Sozialstaa-
tes. Ansichten von Parteien und Wohlfahrtsverbanden zur Modemisierung des
Staates; Kaufmann, Herausforderungen des Sozialstaates 14- 20; Badura, "Der
Sozialstaat."
5 For an account of the shift in the first half of the 19th century from "litigation"
to "regulation" in the United States, see Glaser/Shlcifer, "The Rise of the Reg-
ulatory State", 5, 11, referring to the inability of courts to adequately address
the harm resulting from the "new economy" arising in the second half of the
19th century!
6 See Scharpf, "Negative and Postitive Integration in the Political Economy of
European Welfare States", 158-9; Handler, "Questions About Social Europe by
an American Observer" , 440: "The politics of social welfare are very different
than the politics of capital; therefore, one should not assume that the institu-
tional structures and political mobilization that secured Economic Europe are
sufficient for Social Europe."
7 Manow, Comparative Institutional Advantages of Welfare State Regimes, 146,
155; cf. HalVSoskice, Introduction to Varieties of Capitalism.
8 Pierson, "Coping with Permanent Austerity. Welfare State Restructuring in Af-
fluent Democracies" , 410; Rieger/Leibfried, Perspektiven des Wohl-
fahrtsstaates, 15-18,272-277.
138 Peer Zumbansen

trade as well as to economy and work on the nation-state level in its inter-
play with overarching and border-crossing developments. This observation
increasingly informs literature on the welfare state? and, in particular, the
papers by Daphne Barak-Erez and Zeev Rosenhek that I shall focus on in
my comments. Both authors provide a concrete analysis of the workings of
welfare law in the complex machinery of administrative practice and also
testify to a continuing pursuit of strong beliefs and convictions regarding
the value and societal importance, if not symbolic'? relevance, of a prevail-
ing welfare regime in times of crisis. II

5.2 The Citizen of the Welfare State

The questions raised by Barak-Erez regarding the quality of welfare enti-

tlements and the relationship between the welfare state and its citizens as
recipients of these benefits invite a closer inspection of the roles of both
rule of law and citizenship vis-a-vis the welfare state. While the welfare
state itself is sometimes understood as merely being an aliud to an alleg-
edly pure, formalist model of the state, supposedly incarnated in the rule of
law, the notion of the rule of law itself must be clarified." The central fo-

9 See Pierson (ed.), The New Politics of the Welfare State; Rieger/Leibfried, Per-
spektiven des Wohlfahrtsstaates; Welti, " Wandel der Arbeit und Reform von
Sozialstaat und Sozialrecht", 69 ff.; Handler, "Questions about Social Europe
from an American Observer", 438: "In the meantime, the foundations of the
welfare State-sa society of steady, well-paying jobs--are rapidly being dis-
placed by major changes in both economic structures (low-paying, intermittent
jobs, a large more-or-less permanently un- or under-employed group) and
demographics (a declining proportion of workers as compared to retirees, an
increasing proportion of mothers in the paid labor force, the rise of single par-
ent families, the increase in immigration).".
10 Diller, "The Revolution in Welfare Administration", 1143.
II See , for the Israeli case, also Hirschl, "Israel's Constitutional Revolution: The
Legal Interpretation of Entrenched Civil Liberties in an Emerging Neo-Liberal
Economic Order", 427 ff.
12 See Fallon, '''The Rule of Law' as a Concept in Constitutional Discourse" , 1:
"The Rule of Law is a historic ideal, and appeals to the Rule of Law remain
rhetorically powerful. Yet the precise meaning of the Rule of Law is perhaps
less clear than ever before .". See already Jones, "The Rule of Law and the
Welfare State" , 143: "How, if at all, can the values associated with the rule of
law be achieved in today's welfare State?" and 143, Note 1: "[ ... ] the general
attributes of the rule of law itself [...] will be discussed here only to the extent
necessary to set the stage for realistic discussion of the impact of welfare State
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 139

cus of our present invocation of the rule of law can undoubtedly be seen in
the procedural elements that are regularly attributed to the very ideal of the
rule of law. Barak-Erez convincingly takes this perspective, which, admit-
tedly, lies at the heart of a primarily legal critique of the present crisis in
the welfare state. The question then becomes whether or not the welfare
state is compatible with the procedural, in fact, litigative associations with
the rule of law."
I propose to look more closely at how we have learned to describe,
model and conceptualize the "state" with regard to the wide-reaching spec-
trum of challenges in a heterogenic society, a decreasing trust in public
governance due to implementation obstacles and the failure of state agen-
cies to take adequate account of contextual demands and shifting interests.
With this look at the genesis and the failures of "regulatory law", we might
be able to better identify the historical institutional framework as well as
the challenges and attacks formulated against this set of references. De-
scriptions of the state as an "interventionist state"," a "welfare state", a
"regulatory state", or, to take a recent example, an "environmental state","
must be seen as attempts to manipulate what has always been the unde-
fined "other" in relation to the ideal model of the state which has held
sway since the nineteenth century under the construction "rule of law". 16

developments on the rule of law ideal.", See, for different perspectives this and
that side of the Atlantic, e.g.: Charny, "The Employee Welfare State in Transi-
tion" , 1640; Jones , "The Rule of Law and the Welfare State", 144 (describing
the contrast between State power and the rule of law in the American under-
standing); see also Alesina et aI., "Why Doesn't The US Have A European-
Style Welfare State? " (ascribing the weakness of the American welfare State to
racial heterogeneity and the general public's reluctance to support the poor
which happens to be primarily colored); see also Karst, "The Coming Crisis of
Work in Constitutional Perspective", 528: "The distribution of poverty in
American soci ety is not random. It falls most heavily on members of some ra-
cial and ethnic minorities, on women, on the young , and on people with limited
educational opportunities." (citations omitted) .
13 See again Jones, "The Rule of Law and the Welfare State,' 145-6 (critically
discussing the proposal put forward by Friedrich Hayek and others , that the
welfare state is the end of the rule of law; see Hayek, "The Road to Serfdom"
(1944) cited by Jones at 146.
14 For a critique of the conflicting values at play in governmental intervention, see
e.g. Adler, 'The Meanings of Permanence", 23-30.
15 See Steinberg, Der okologische Verfassungsstaat.
16 See Stolleis, "Die Entstehung des Interventionsstaates und das offentliche
Recht", 129 ff.; Gunther, "Der Wandel der Staatsaufgaben und die Krise des
regulativen Rechts", 51 ff.
140 Peer Zumbansen

This rule of law, understood as a merely formal amalgam of rules and pro-
cedures, has served and still serves as the model by which the regularity,
eventually also the domestication and curtailment of public power, was le-
gitimized and institutionalized. In contrast, the welfare state is often por-
trayed as being a mere political program or a matter of choice whether or
not to move beyond the allegedly formal framework of the rule of law. I
identify this alleged tension between a formal view on the state as in the
rule of law and a more political, normative perspective as is the common
association with the welfare state to be the real concern of Barak-Erez' pa-
per. Only a short-circuiting and fusing of the rights-and-rules approach of
the rule of law with the political model of the welfare state can allow us to
mobilize a notion of citizenship as a counterweight to administrative dis-
cretion. In discussing Barak-Erez' description of contemporary administra-
tive practice, particular attention will be given to more general changes in
administrative governance against the background of increasingly privat-
ized welfare distribution and the discussion about a more recipient-
oriented view of contractual public governance." This will allow us to
place her analysis in the wider context of public sector reform and the ef-
fects on public and private law interaction in the welfare state.

5.2.1 The Stakes of Welfare Politics

Barak-Erez paints a gloomy picture of the Israeli welfare state. She sees it
situated between ambivalent legislative attempts to guarantee a good stan-
dard of general prosperity and equality on the one hand, and a political cli-
mate hostile to grand maneuvers in welfare politics, mainly resulting from
the country's unending foreign policy struggle over its borders, territories,
and identity, on the other. While a surprising number of recent legislative
activity related to different areas of welfare politics can be noted, the effect
is often diminished by extremely limiting interpretations given to the
written law by both administrative agencies and courts. This recent welfare
legislation "in the shadow of globalization" may be adequately explained

17 See hereto Kennedy, "Due Process in a Privatized Welfare System" , 232: "Af-
ter fighting so hard for greater authority over the welfare system, States seem
strangely eager to pass the prize to private corporations .". Salamon, "The New
Governance and the Tools of Public Action: An Introduction", 1612: "Where
earlier government activity was largely restricted to the direct delivery of goods
or services by government bureaucrats, it now embraces a dizzying array of
loans, loan guarantees, grants, contracts, social regulation, economic regula-
tion, insurance, tax expenditures, vouchers, and much more."
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 141

plained by welfare supporting motives that have been developed and fol-
lowed in Israel since the founding of the state. In contrast, the present ero-
sion of entitlements by restrictive norm application within administrative
discretion severely encroaches on the status of social protection attained so
faL I8 This status is, as Barak-Erez argues, still trumpeted as an expression
of the government's political will to maintain a strong welfare state. The
prospects that heavily national-security oriented political attention in Israel
will soon be replaced by more inward-directed processes of political delib-
eration seem quite bleak. 19

5.2.2 A Sociological Perspective

A possible approach, and one also partially espoused by Barak-Erez, in

analyzing the crisis of the welfare state focuses on the reality dimension of
public services distribution and how it unfolds in people's lives. The wel-
fare state is interpreted with a general skepticism vis-a-vis bureaucracy and
juridification." The analysis focuses thus on the democratic governance
dimensions of the welfare bureaucracy from the claimant's or recipient's
perspective. The older bureaucracy critique of the Eigthies has primarily
viewed the welfare state as a unilaterally functioning distributing molloch
of public funding. The normative justification for insurance, providence,
and prevention with the idea of a solidarity community as developed at the
times of the first insurance schemes seems almost ideological when con-
fronted with the hard reality of inaccessible public agents and frequently
arbitrary distributions . Recently, the analysis has been focusing on the sov-

18 See Kennedy, "Due Process in a Privatized Welfare System", 238: "Profes -

sional social workers ran the welfare bureaucracy and brought a generally com-
passionate and flexible approach to their work. On this model, the individual
social worker was free of bureaucratic constraints to act in the best interests of
the client. While professionals could abuse their discretion, welfare recipients
at least encountered a measure of humanity in their dealings with the system."
(Describing the situation in the nineteen-sixties) [citation omitted].
19 See hereto also Hirschl, "Israel's Constitutional Revolution : The Legal Inter-
pretation of Entrenched Civil Liberties in an Emerging Neo-Liberal Economic
Order", 440-6 (arguing that adjudication by Israeli High Courts - Supreme and
Labor - promoted a negative-freedom oriented understanding of welfare laws,
thus restricting the range of individual and institutional welfare entitlements,
with ill effects in particular for Arab-Israeli citizens).
20 See Handler, "Constructing the Political Spectacle", 902; Pitschas, "Soziale Si-
cherung durch fortschreitende Verrechtlichung ?", 150 ff.; see also Simon, "The
Invention and Reinvention of Welfare Rights", 22.
142 Peer Zumbansen

ereignty of the recipient, the system's user - the citizen ultimately turning
to his or her welfare state. Sociologists and social philosophers have
shown that welfare regimes tend to produce both enabling and disabling
effects on welfare recipients, and it is unclear how this surviving dynamic
of the modem, complex welfare bureaucracy can be changed. The inclu-
sion of the recipient in the welfare regime by dependence on public assis-
tance eventually replaces former daily-life strategies with a whole new set
of priorities, concerns, and aims. Like a hospital patient who puts on her
nightgown the moment the bed is assigned early in the day, the set of ref-
erences drastically changes for the person confronted with a non-
transparent system of welfare whose services, she must think, she receives
by way of charity rather than of entitlement."

5.2.3 What Makes A Citizen?

Amidst the varied picture of the welfare state is the concrete, laborsome,
truly unspectacular and Sisyphean dimension of welfare state law, prac-
ticed far from the legal ventures that make headlines and fortunes. As de-
scribed by Barak-Erez, beyond the complex and emotionally loaded politi-
cal debate about the welfare state, its costs, challenges, and chances, there
lies another realm of inquiry into the machinery and workings of this sys-
tem. This complex field of administrative practice reacts nervously to the
poking and drilling of legal analysis, while otherwise hiding behind both a
densely woven texture of norms, statutes, and political declarations, and a
jurisprudence that, classically, has not been the most attractive legal field
for lawyers to roam in. Lawyers concerned with social welfare law, em-
ployment law, restitution law, or other law related to what is regarded to be
mere marginalities to our political economy have seldom stood in the spot-
light, nor have they been able to count on much sympathy from their col-
leagues who spend their day drafting corporate contracts. Thus, in consid-
erable distance from more popular fields of law, the social lawyer must,
again and again, dig through rapidly changing norms and decrees" that -
as Barak-Erez has so sharply illuminated - can only be adequately mobi-
lized or attacked if there is constantly updated knowledge of how they are

21 See Luhmann, "Politische Theone im Wohlfahrtsstaat" 22,25 (1981) , describ-

ing the phenomenon of inclusion through an overwhelmingly paternalistic wel-
fare regime; cf Pitschas, "Soziale Sicherung durch fortschreitende Verrecht-
lichung ?" 150 f.
22 See Schmidt/Weiss, "Job Creation Policies in Germany".
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 143

interpreted by the administrative bodies and the courts." Otto Kahn-

Freund's observation that, "A week is a long time in employment law" de-
scribes accurately the field of welfare law we are now considering. The
constant information problem, the serious lack of information about con-
crete entitlements and rights," aggravates the welfare recipient's position
even further: while claiming welfare provisions already touches at deep-
rooted issues of self-respect," both the legislative exclusion of societal
segments from entitlements" and the "patriarchal welfare state's" tendency
to further already existing structures of social exclusion of women from
active participation in political deliberation" split society and alienate
many from their alleged role as citizens.

23 See, e.g., Forbath, "Constitutional Welfare Rights", 1855-8 (describing the

creation of a special welfare lawyers taskforce during the early Nixon admini-
stration). "Young LSO attorneys frequently compared themselves with older
counterparts at the ACLU and NAACP Legal Defense Fund. Unlike the latter,
LSO lawyers meant to combine litigation with mobilization. Thus, they em-
braced the craft of test-case litigation, which the Legal Defense Fund had per-
fected, but Legal Services lawyers strove to be more attentive to the most deep-
ly felt grievances of welfare recipients themselves. So they set about exploring
with grassroots leaders which legal challenges held out the most promise for
mobilizing the rank and file." !d., at 1856.
24 See Barak-Erez, "The Israeli Welfare State" (II, III, in this volume); see also
Diller, "The Revolution in Welfare Administration", 1151 (discussing the re-
cipients' lack of information with regard to applicable and extendable time lim-
its).
25 Donald Moon, "The Moral Basis of the Democratic Welfare State", 32 ff.
26 See Barak-Erez, "The Israeli Welfare State" (in this volume), with regard to
Arabs under Israeli welfare politics; with regard to welfare benefits the locus
classicus is Ch. Reich, "The New Property;" but see Simon, "The Invention
and Reinvention of Welfare Rights", 2 ff.
27 See, e.g., Pateman, "The Patriarchal Welfare State", 235 (describing women as
"social exiles"); Habermas, "Paradigms of Law", 775-6; "Law, Women, Work,
Welfare, and the Preservation of Patriarchy", 1281: "Despite substantial formal
support for the legal ideal that women be afforded equal access to traditionally
male occupations, the welfare system discriminates against poor women in al-
locating jobs. Such discrimination is seen as justified by the need to preserve
the stability of the traditional family. Thus, the welfare system operates to pre-
serve and reinforce patriarchy by assuming that women should be dependent on
men: when, and only when, male economic support is withdrawn favors men in
the allocation of scarce jobs ; by placing a formal work requirement on poor
women the system declares that childcare is not legitimate work.".
144 Peer Zumbansen

5.2.4 Legisla tive Lawmaking and Administrative Discretion

Notably , but not only" in the field of social protection," legislators embark
on drafting framework laws that grant wide discretion to administrative
agencies." Thus, the law's scope is often only provided by its actual appli-
cation through the administrative agency or judicial interpretation. While
this latter development seems characteristic of contemporary , reflexive
forms of lawmaking" in a dense public-private mix under ubiquitous
"conditions of uncertainty" ," its appropriateness in areas of individual en-
titlements for basic substantial and existential support is disputable."
Discretionary lawmaking aggravates the already high level of uncertainty
among welfare recipients with regard to their rights>, while, paradoxically,

28 See Treutner, Kooperativer Rechtsstaat, 36 ff. (describing extensive forms of

public-private interaction in the fields of environmental protection, infrastruc-
ture planning, fmancing of cultural institutions etc.).
29 See, e.g., Diller, "The Revolution in Welfare Administration", 1127 (tying the
turn to discretion to a general introduction of private management techniques
into public administration) ; see already Handler, "Discretion in the Welfare
State" , 1272: "Discretion, in its lawful, positive sense [...], implies, at the
minimum, a discussion , a dialogue , a bargain of some sorts, a minimal sharing
of power. But how are the poor, the really dependent poor, to participate in
these decisions? "
30 See Fallon, '''The Rule of Law' as a Concept in Constitutional Discourse" , 3-4:
"Politically, twentieth-century legislatures have vastly expanded the sweep of
governmental regulation , and they have frequently relied on administrative
agencies with vague mandates and a mixture of enforcement, rulemaking , and
adjudicative powers to implement regulatory policies." [citations omitted] ; but
see Rubin, "Discretion and Its Discontents" (arguing to substitute the allegedl y
empty notion of discretion by "supervision" in order to describe more accurate-
ly contemporary administrative practice).
31 See Teubner , Reflexives Recht, 13 ff.
32 See Ladeur, The Theory of Autopoiesis as an Approach to a Better Understand -
ing of Postmodern Law, 40-1; Treutner, Kooperativer Rechtsstaat (arguing that
beyond the administrative State's financial distress there lies a whole realm of
societal structural changes, "individualization", "risks" and "implementation
problems oflaw" that call for a closer public-private interaction) .
33 Diller, "The Revolution in Welfare Administration," 1127: "Freeing oneself
from welfare is presented as analogous to quitting smoking."
34 Id., 1134-48 (describing the rise of the "social work model" after the New
Deal, placing high emphasis on agency discretion, its succession by the "legal
bureaucratic model", introducing fixed rules and formal requirements and, fi-
nally, in the 1990s, the renaissance of wide agency discretion, fueled by legis-
lation aiming at driving recipients out of welfare).
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 145

it can sometimes allow for a closer communication and cooperation be-

tween the agent and the recipient, often revealing, however, the agent's
views with regard to poverty, self-sufficiency, and self-made misery." The
often vague and general formulae in welfare legislation, which grant wide
discretion to welfare bureaucrats, the legislative tendency to underbudget
certain areas or to shift budgetary positions in often quite non-transparent
ways from one area to another, significantly distance the welfare state and
its supposed beneficiaries." Barak-Erez rightly underlines the negative ef-
fects of these dilemmata of lawmaking, in particular with regard to the
weakening of the social services recipient's bargaining position towards
the social bureaucracy. This scheme of administrative lawmaking seems to
suggest an altogether negative view on the further weakening of the al-
ready highlighted fragile character of the law of the welfare state." Stand-
ing somewhat outside the clearly demarcated sphere of the body of the rule
of law, welfare law, often the first to bleed in governmental rebudgeting
and, above all, seen as discretionary and subject to constant political
changes, can hardly attain a firm stability. In this respect, the welfare state,
in its bureaucratic reality dimension, is particularly sensitive to politics of-

35 Placing large discretion with welfare agents, the legislative aim is to convey a
new "message" of welfare, driving recipients away from long-term subsistence
to short-term support leading to new employment. Id. at 1166-7. See, id.,
at 1129:
"By increasing the authority and discretion of ground-level administra-
tors, reformers have re-envisioned the role of agency personnel as motivators,
guides, and overseers of recipients, constantly promoting the message of self-
sufficiency.". See Schmidt/Weiss, "Job Creation Policies in Germany" (de-
scribing fifteen-hour thresholds of weekly employment hours beyond which the
formerly unemployed is considered "employed").
36 There is overwhelming literature in this field; see, e.g., Handler, "Discretion in
Social Welfare: The Uneasy Position of the Rule of Law", 1272 ff. (describing
the stigmatization and marginalization of poor people considered "deviant");
Handler, "Constructing the Political Spectacle: Interpretation of Entitlements,
Legalization, and Obligations in Social Welfare History" (discussing the rise
and fall of recipient-oriented "entitlements" to increasing "legalization" and en-
suing intransparencies of welfare procedures); Schoen, "Working Welfare Re-
cipients: A Comparison of the Family Support Act and the Personal Responsi-
bility and Work Opportunity Reconciliation Act" (arguing that recent US-
American welfare politics ["PRWORA"; "TANF"] shifts the welfare State's
focus on education and training to improve the recipients' long-term perspec-
tives to time-limited and curtailed measures of promoting often ill-defined em-
ployment).
37 See Frankenberg, "Why care?", 1375.
146 Peer Zumbansen

ten increasing the already existing climate of volatility by which it is sur-

rounded."
However there is another, more positive perspective on changes in con-
temporary lawmaking and administrative law, even if the role that "new
public governance" forms can play in the field of social welfare may be
problematic with regard to the weak bargaining position of the welfare re-
cipient." Increasing administrative discretion and the tum to "contractual"
forms of governance" suggest both the regulatory state's retreat from a
long assumed role of a social engineer" as well as its experimenting with
new and possibly more adequate institutional designs for public govern-
ance.? From the perspective of new governance challenges to the adminis-
trative state, the observation is, indeed, that the state, when extending dis-
cretionary power of administrative bodies and providing space for

38 This explains the recurrence of "due process" claims against the welfare State:
see, above all, Reich's seminal article on the "New Property" and the Supreme
Court's ruling in Goldberg v. Kelly (397 U.S: 254 [1970)) ; see hereto Handler,
"Constructing the Legal Spectacle", 899 ff.; Diller, "The Revolution in Welfare
Administration", 1139.
39 See Treutner, Kooperativer Rechtsstaat, 93.
40 See, e.g., Freeman, "The Contracting State", 155; Salamon, "The New Goveru-
ance and the Tools of Public Action", 1619-1920 (describing the increas ed
complexity of public governance with regard to mastering the new tools in rela-
tionship with various private actors) ; Zumbansen , Vertragsregimes im 'Dritten
Sektor' ; Diller, "The Revolution in Welfare Administration", 1127: "This com-
bination of discretion and control is an outgrowth of a broad movement toward
the use of private sector management techniques in public administration. In
essence, this movement seeks to refashion instruments of government to
resemble entrepreneurial organizations that strive to achieve results and cus-
tomer satisfaction, rather than to improve the performance of particular admin-
istrative tasks."
41 See Schulze-Fielitz, "Staatsaufgabenentwicklung und Verfassung", 11 ff.
42 See Freeman, "The Contracting State", 157; Freeman, "Collaborative Govern-
ance in the Administrative State"; Dorf/Sabel , "A Constitution of Democratic
Experimentalism", 268 (arguing for a shift in perceiving of administrative ac-
tion which should enhance information pooling among the different actors of
civil society interacting with the agency); see also Schuppert, "Zur notwendi-
gen N eubestimmung der Staatsaufsicht im verantwortungsteilenden Verwal-
tungsstaat", 299 ff.; Kippes, Bargaining. Informales Verwaltungshandeln und
Kooperation zwischen Verwaltungen, Burgem und Unternehmen; Zumbansen,
The Province of Government (drawing extensively on U.S. legal realist cri-
tique , relational contract theory and German postwar private law theory).
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 147

administrative rulemaking and so-called "informal administrative action?",

might not actually be in retreat, but instead that its modes of functioning
are undergoing radical changes." Obviously, what comes to mind are con-
cerns with underlying principles such as the separation-of-powers doctrine
or the regularity-as-legality principle of administrative action that is central
to the rule of law." In order to evaluate this two-dimensional development,
which consists of an apparent loosening of formal requirements as well as
an adaptation of the state's functioning to a pluralistic, fragmented, indeed
heterarchic social reality," we need to pinpoint our analytical frame of ref-
erences and our normative associations .

5.2.5 The Changing Face of Public Administration

Some work done by French, American, and German administrative law

scholars" invites us to take a less parliament-oriented perspective on pub-
lic governance. Instead, it suggests adopting a more agency-oriented ap-
proach for both an adequate picture of public administration and even de-
mocratic theory. From a classical focus on the parliament as the primary

43 See Freeman, "The Contracting State", 159-160, describing the alien nature of
a "governance by contract" concept in comparison with traditional, hierarchical
understandings of administrative law and public governance; for the German
example, see, e.g., Krebs, "Vertrage und Absprachen zwischen der Verwaltung
und Privaten", 248 ff.
44 See Di Fabio, "Verwaltung und Verwaltungsrecht zwischen gesellschaftlicher
Selbstregulierung und staatlicher Steuerung", 235 ff.; Hoffmann-Riem, "Ten-
denzen in der Verwaltungsrechtsentwicklung", 433 ff.; Mollers, Reform des
Verwaltungsrechts; Calliess/Mahlmann, "Der Staat der Zukunft".
45 See Ackerman, "The New Separation of Powers", 709: "Separationism and the
Rule of Law"; see also Lawson, "Delegation and Original Meaning" .
46 See, e.g., Ladeur, The Theory of Autopoiesis as an Approach to a Better Un-
derstanding of Postmodern Law, 21 ff.
47 See, e.g., Chevallier/Lochak , Science Administrative; Debasch, Science Ad-
ministrative; for the American example, see the landmark work by Landis, The
Administrative Process; for the reception of Landis in American administrative
law, see Horwitz, The Transformation of American Law: The Crisis of Legal
Orthodoxy, 213-217; see also Stewart, "The Reformation of American Admin-
istrative Law"; Lepsius, Verwaltungsrecht unter dem Common Law; Schup-
pert, Verwaltungswissenschaft; Hoffmann-Riem, "Entwicklungstendenzen";
for the German interwar period, see Stolleis, Geschichte des offentlichen
Rechts in Deutschland, vol. 3, 211-234 (describing the surfacing of new fields
"on the fringes" of administrative law and the naissance of contractual forms of
public governance and the extension of executive discretion).
148 Peer Zumbansen

lawmaker in a democratic polity seems to follow an almost automatic

skepticism towards administrative action and lawmaking." However, in
light of a growing awareness of informational gaps and implementation
difficulties of regulatory law, administrative agencies can play a much
more positive role in their close interaction with private actors. There is a
lot to learn today from public lawyers, as they are innovative, fast-moving,
and quite well-organized in conceptualizing, probing, and experimenting
with new forms of public governance." There already is a big body of pub-
lic law work related to the conceptualization of "social regulation or steer-
ing" (soziale Regulierung/Steuerung), where detailed regulatory elements
and environmental, technical, and procedural issues are carefully as-
sessed." The applicable standards of this form of public-private or hybrid
regulation are developed within a complex scheme of state-industry coop-
eration and "partnership". This, in itself, certainly raises substantial ques-
tions of legitimacy, but they go well beyond what has so far been dis-
cussed under the formula of capture:" The state has been depending and
continues to depend on widespread and dispersed private knowledge, and
the forms of cooperation between regulatory agency and civil society are
entirely escaping a black-and-white dichotomy of public/private. Public
administration, thus, is changing fundamentally. At the same time, across
Europe, we can hear sighs of resignation and frustration by public officials,
including social welfare bureaucrats and numerous other employees in
administrative bodies, who shudder at the thought of a managerial revolu-
tion of the administrative state.52 Looking helplessly at their habitual coffee
cup, they can only hope that the wave of controlling, quality management,

48 See Maus, "Entwicklung und Funktionswandel" , 53-4; but see Rubin, "Discre-
tion and Its Discontents", 1303-4 (arguing that the nature of the modern State is
to be an administrative State).
49 See Stewart, "The Discontents of Legalism"; see, e.g., the insightful contribu-
tions to Hoffmann-RiemlSchmidt-ABmann (eds.), Reform des allgemeinen
Verwaltungsrechts and Hoffmann-Riem, "Offentliches Recht und Privatrecht
als wechselseitige Auffangordnungen"; cf Zumbansen, The Province of
Government.
50 See, e.g., the contributions in Hoffmann-Riem/Schmidt-Afimann (eds.), Inno-
vation und Flexibilitat des Verwaltungshandelns; Salamon, "The New Govern-
ance and the Tools of Public Action", 1611 ff.
51 See hereto Freeman, "The Private Role in Public Governance", 546: "The time
has come, however, for the discipline of administrative law to grapple with pri-
vate power."
52 See, e.g., Konig, "Markt und Wettbewerb als Staats- und Verwaltungsprinzi-
pien" ; 239 ff.
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 149

and "new governance", including corporate accounting standards and con-

sumer orientation, will pass them by unharmed.
If we look at the opening of public administration to civil society (and
consumerism) in the context of a distant and alienated system of parlia-
mentary deliberation, the consensual and cooperative administrative action
appears, if not an alternative, then at least a supplementation to be reck-
oned with. The critique mounted against a parliament convening and
agreeing in closed meetings - "committees" - and often enacting laws that
are even incomprehensible to many members of the voting assembly, has
always been accompanied by a deep skepticism against parliamentary rule
as such.53

5.2.6 Learning from Private Law

Nevertheless, in some areas the change of public administrations towards a

more responsive system of public-private interaction is already far ad-
vanced." What experts in public governance have recently started to ex-
periment with may be a promising avenue to follow. Public administration
theorists and practitioners have been increasingly looking to private law
for regulatory patterns. One of the promising instruments found is so-
called "relational contracting", which is concerned with long-term contrac-
tual agreements between parties that go beyond a momentary exchange of
goods or services against money. 55 Parties to a relational contract perceive
of it as a space, a process in and by which amendments and alterations can
be renegotiated and amended. The main characteristic of a relational con-

53 See Schmitt, Die geistesgeschichtliche Lage des heutigen Parlamentarismus;

for a critique, see, e.g., Mouffe, "Carl Schmitt and the Paradox of Liberal De-
mocracy", 38 ff.; Kennedy, "Carl Schmitt und die Frankfurter Schule" .
"Deutsche Liberalismuskritik im 20. Jahrhundert", 380 ff.; Zumbansen, "Carl
Schmitt und die Suche nach politischer Einheit", 63 ff.
54 See, e.g., Frankenberg, "Shifting Boundaries: The Private, The Public, and the
Welfare State", 72 ff.; Whitfield, Public Services of Corporate Welfare, 141
(describing the UK Labour Party "Third Way Welfare State");
G.F. Schuppert, "Staat, Markt, Dritter Sektor - oder noch mehr?", 47 ff.;
Schuppert, "Die offentliche Verwaltung im Kooperationsspektrum staatlicher
und privater Aufgabenerfullung", 415 ff.
55 See, Macneil, The New Social Contract; Macneil, "Contracts: Adjustment of
Long-Term Economic Relations under Classical, NeoClassical, and Relational
Contract Law", 854 ff.; Oechsler, "Wille und Vertrauen im privaten Aus -
tauschvertrag", 91 ff.
150 Peer Zumbansen

tract is its cooperative nature and process orientation." The socio-

normative basis for relational contracting, however, is not found in com-
munitarian aspirations of bridging value conflicts through recourse to
common cultural, ethnic, or religious background and heritage, but is often
found in the informal contracting practices that exist in business communi-
ties.57After seminal studies conducted by contract lawyers and legal soci-
ologists starting in the 1960s,58 administrative scientists began to consider
this form of governance for their own purposes. 59 What becomes obvious is
that the problem lies less in the administrative tum to contractual govern-
ance as such than in connected issues of contractual design and entitle-
ment. In a persisting gray zone of third-sector actors contracting with the
state over market shares in welfare distribution , the (bargaining) position
of the final recipient is largely obscure." While this can be attributed to the
agencies ' focus on cost avoidance and a relatively weak system of contrac -
tual oversight with regard to the "ultimate consumer", " there is a strong
public-private perspective guiding even private law interpretations of pri-
vate contracts for a public good or concern."

56 See Deakin/Lane/Wilkinson , "Contract Law, Trust Relations, and Incentives

for Co-operation", 105 ff.; cf Brownsword, "Contract Law, Co-operation, and
Good Faith: The Movement from Static to Dynamic Market Individualism" ,
255 ff. It is, however, this focus on long-term adjustments within a continuing
contractual relationship that common law courts find difficult to accept, given
their original bias with regard to "discrete" contracting, see Macneil, The New
Social Contract, 72-77; Chamy, "The Employee Welfare State in Transition" ,
1633 note 109, 1634: "Conceptions of 'contract' are ill-suited to sorting out the
legal consequences of breach of long-term implicit commitments. [.. .] Rather,
the cases deal with a set of insurance issues that, as courts often candidly ac-
knowledge (and hope), will be resolved by political intervention rather than by
a series of future contractual arrangements."
57 See Macaulay, "Non-contractual Relations in Business: A Preliminary Study",
55 ff.; Macneil, "Relational Contract: What we do and what we do not know",
483 ff.
58 See Macaulay 1965 and Macneil 1980, supra notes 58 and 60.
59 See Stewart, "The Discontents of Legalism", 655 ff.; for a recent overview and
analysis, see Freeman, "The Contracting State", 157 ff.
60 Freeman, "The Contracting State", 178 (finding scarce instants of case law
where recipients are considered as "third party beneficiaries").
61 !d., at 179.
62 See, recently, the ruling of Germany's Federal Court of Justice of26 June 2001
[Reg. No. X ZR 231/99], denying plaintiff a third party beneficiary claim for a
contract between the Federal Banking Supervision Agency and a Private Con-
sultant assessing plaintiffs banking qualifications, holding that while the con-
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 151

With regard to the noted difficulties of legislative lawmaking and ad-

ministrative action on the one hand and the growing tendency to introduce
contractual governance into administrative practice on the other, two as-
pects have become determinative. First, it is quite clear that there is seldom
a one-to-one application of a legislative norm as it stands by the adminis-
trative agent. The concrete application takes place, as Professor Rakoff re-
cently remarked, in a variety of situations that "is so vast that the process
of application will inherently go beyond formal characterization, and in-
stead will require judgments of policy.?" Second, the rise in contracting-
out of public services as well as the cooperation between administrative
agencies and private parties does not automatically solve fundamental
questions regarding entitlements and procedural rights of welfare recipi-
ents in their confrontation with welfare bureaucrats! While in continental
legal orders one related aspect is that of assigning the contractual relation-
ships to either public or private law and its corresponding branches of the
judiciary, the described problems with regard to the recipient's standing
and bargaining position in a contractualized administrative state are more
pressing. Based on this experience in public governance, we need to assess
the increasing importance of contracting within the administrative state.
There is a need for intensified exchange between public and private law-
yers with regard to the specific learning experiences in the respective
fields. While the notion of the "consumer" is relatively new to the field of
administrative law, tendencies to create competitive markets, even in the
field of welfare distribution, are ubiquitous and the extensive private law
experience should be considered here. The never-ending dispute among
private lawyers over the intrinsic value of the notion of the consumer" is a
rich source of arguments for the science of the contractual administrative
state to draw upon. While prominent case law regarding issues of unequal

tract directly affected plaintiffs rights towards the Agency, the contract ex-
clusively served public purposes in safeguarding a functioning banking system.
See hereto Kannowski, Federal Court of Justice and Expert Liability Towards
Third Parties; KannowskilZumbansen, "Gerneinwohl und Privatinteresse - Ex-
pertenhaftung am Scheideweg", 3102.
63 Todd, Rakoff, "The Choice between Formal and Informal Modes of Adminis-
trative Regulation", 161.
64 See, e.g. , Medicus, Abschied von der Privatautonomie im Schuldrecht?; Reich,
"Das Phantom "Verbraucherrecht' - Erosion oder Evolution des Privatrechts?"
609 ff.; for a brillant account and analysis, see Damm, "Privatautonomie und
Verbraucherschutz", 129 ff.
152 Peer Zumbansen

bargaining power" has stirred scholars' imagination considerably early,"

we are only at the beginning of a fruitful exchange between contract law-
yers and administrative lawyers.

5.2.7 Limits to Contractualization

A caveat, however, is called for regarding tendencies of overinterpreting

the consensual character of new administrative action based on the primary
focus on business or infrastructure building cooperation between agencies
and corporate actors." The efficiency drive has entered public administra-
tion" but is often restricted to areas in which private actors already have a
strong enough hand with which to effectively knock on the doors of ad-
ministrators. Most importantly, corporate actors often offer a deal to the
public agency when the financing of an infrastructure project is concerned
or the communal effort of modernizing institutions in form of public-
private partnerships is a venue. Clearly, this dimension of cooperation be-
tween administration agencies and the citizen is not the reality Barak-Erez
depicts. The bargaining position of welfare recipients can hardly be com-
pared with that of a private financier, a bank, or a corporation offering its
cooperation to the state, and this is only the tip of the iceberg of a struc-
tural problem. In addition, the introduction of contractual governance into
administrative reform in the field of social welfare is still far from effi-
ciently providing for workable relationships between agencies and private
actors. The main reason herefore seems to be historical. As witnessed, for
example, in the German welfare system, the "market for social services"
has since its inception been populated by large corporate actors that func-
tion as intermediaries between the welfare bureaucracy and the recipient.
While recent German legislation has attempted to introduce competition
into this cartellized market, mainly by radically overhauling the fmancing
mechanism and by introducing an extensive scheme of contractual govern-
ance into the web of welfare bureaucracy, service providers, and recipi-

65 Decisions of the Federal Court of Justice ("Bundesverfassungsgericht"),

BverfGE 81, 242; BVerfGE 89, 214.
66 See the study by Neumann, Freiheitsgefahrdung im kooperativen Sozialstaat.
67 See, e.g., Bauer, "Verwaltungsrechtliche und verwaltungswissenschaftliche
Aspekte der Gestaltung von Kooperationsvertragen bei Public Private Part-
nership", 89 ff.
68 See the brillant monograph by Eidenmuller, Effizienz als Rechtsprinzip; Bie-
back, "Effizienzanforderungen an das sozialstaatliche Leistungsrecht", 127 ff.;
Zavelberg, "Lean Management - ein methodischer Ansatz fur mehr Effizienz
und Effektivitat in der offentlichen Verwaltung?" 1040 ff.
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 153

ents, it is still too early to judge the actual spin-off for all actors involved."
The established actors are still very strong and leave room for small pro-
viders possibly only at the cost of reducing the welfare level. Conse-
quently, the introduction of competition into this field, its development
towards a "competitive market for social services", might be shortsighted
to the degree that it risks sacrificing the level of welfare services for the
reduction of overall costs. Notable, however, is the degree to which medi-
ating schemes have been instituted within the nexus of service providers
and welfare agencies in the form of arbitration institutions (Schiedsstel-
leni." The actual welfare recipient, however, is not present and so the
model remains far from a truly self-regulatory, private law regime with its
central focus on private autonomy and freedom of contract.
The current crisis of the American "employee welfare state", which rests
on company-based welfare and pension provisions, can be read as a paral-
lel experience with regard to dangers arising from contracting risks with-
out a more comprehensive, collective risk allocation and spreading, and an
efficient disentanglement of firm-oriented entitlements once the firm falls
into crisis."

5.2.8 From the Rule of Law to the Welfare State and Back

This leads us back to the basic critique raised by Barak-Erez as to the weak
position of the welfare recipient when dealing with administrative agen-
cies. Amidst the various openings that we have described with respect to a
formerly exclusively hierarchical bureaucracy, we must still note that the
focus in all the public administration reform has not been on the individ-

69 Zumbansen, Ordnungsmuster im modemen Wohlfahrtsstaat, 149 ff.; Zumban-

sen, Vertragsregimes im ,Dritten Sektor' (discussing the history of social wel-
fare providers and recent German legislative attempts to open this cartellized
market to competition); see Treutner, Kooperativer Rechtsstaat, 93, for an ear-
lier account.
70 Zumbansen, supra note 69, 170-173; see, in particular, the Decision by the
Federal Administrative Court (Bundesverwaltungsgericht), of 1 December
1998, reg. No.5 C 17/97, published in: BVerwGE 108, 47 and NVwZ-RR
1999,446.
71 Chamy, "The Employee Welfare State in Transition", 1611-1620, 1629:
" .. .the fundamental risk-spreading deficiency of the current employee welfare
scheme - i.e. its dependence on the prosperity of a particular firm or industry."
The developments connected to Enron, Global Crossing and Worldcom, espe-
cially the critique of the 401(k) pension schemes, give a particular tragic tum to
the earlier assessments, see, e.g., The Economist, 17 August 2002, 11.
154 Peer Zumbansen

ual. The focus on an autonomous, self-determining citizen as contracting

party does not only reiterate the same ideological assumptions prevalent in
liberal market and classical private law theory but also appears to fully
lose sight of the original reason for which much of the administrative re-
form began - the citizen . Against this background, we must take Barak-
Erez' plea for a stronger citizenship concept of the welfare state seriously .

5.3 Remembering the Choices Made in the Past

The dilemmatic imagery of the welfare state which is conveyed by Barak-

Erez' paper corresponds with Rosenhek's plea to withstand the commonly
held thesis of trade liberalization and economic debordering allegedly
causing the inevitable decline in national welfare protection. Rosenhek's
critique of the thesis that globalization marks the end of welfare states
points to the unfoundedness of this overtly simplistic causality claim and
calls for an engaged analysis of the developments within national polities
and their different ways of responding to their transnational environment.
It is clear to both Rosenhek and Barak-Erez that the relationship between
the crisis of the welfare state on the one hand and globalization on the
other deserves much closer inspection.

5.3.1 The Welfare State's Futile Struggle Against

Unemployment

Rosenhek questions the connection between the development of the Israeli

unemployment program and globalization. He rightly refutes the dominant
simplistic claim of being either for or against globalization - as if that was
a serious alternative at all! His account of the sharp discrepancy between a
legislative curtailing of unemployment benefits on the one hand and the
counteractive discretionary use of the "street level bureaucrat" on the
other" strongly invites us to reflect on what underlies these phenomena.
A welfare state's strugg le against unemployment, or, stated positively,
for high employment, is deeply woven into the dense texture of the institu-

72 See also Diller, "The Revolution in Welfare Administration", 1130: "It is diffi-
cult to conceive of an area in which the distance between grand policy deci-
sions and ground -level implementation is as vast as in the welfare system."
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 155

tiona I, political and legal settings of the national labor market." That this
labor market is changing under the influence of national programs with re-
gard to family policy, vocational training policy, work conditions, inflation
rates, and the specific state of the economy is rather obvious. This has di-
rect impact on the definitions of work and, correlatively, of employment
and unemployment. Another obvious influence can be observed with re-
gard to the prominent actors that are active here. We see the state, public
(and, increasingly, private") employment offices, employers and employ-
ees and we see, in many countries, unions, however different their particu-
lar role and influence might be." And in countries with a strong union
heritage, this tripartite bargaining system between state, unions, and em-
ployers now eventually appears to be too rigid to adapt to a changing
world of production and commercial exchange . We see rapidly evolving
realities of what it means to be a worker, or rather "what work is"."
The inquiry into the connections between employment law and
globalization thus deals with two variables, the first being a field of law
whose intricacies we only lightly touched upon and the second being a
globalization discourse in and by itself that has, as Rosenhek pointed out,
almost become the denominational term to describe an inevitability, a
quasi-natural force. He rightly argues that curtailments of the system are
brought about by the political will of those who exercise power within
national political regimes." This takes place, at the same time, in close

73 See, for the German context, the report given in 2000 at the German Jurists
Convention [Deutscher Juristentag] by G.Kleinhenz; see the analysis of recent
programs by Schmidt/Weiss, "Job Creation Policies in Germany" , 145 ff.
74 Schmidt/Weiss , "Job Creation Policies in Germany", (describing the quantita-
tive rise of private employment placing agencies after the break-up of the Ger-
man Employment Office's monopoly by the European Court of Justice in 1991
- the success of these private actors has so far been meager).
75 See Charny, "The Employee Welfare State in Transition", 1625-6 (describing
the ambiguous bargaining position of American unions in firm and even plant
specific renegotiation of contract terms with regard to welfare provisions); see,
for the German case, Schmidt/Weiss, Labour Law and Industrial Relations in
Germany, paras. 347-376.
76 See, e.g., Charny, "The Employee Welfare State in Transition"; Karst, "The
Coming Crisis of Work in Constitutional Perspective"; Handler, "Questions
About Social Europe by an American Observer", 447: "The nature of employ-
ment is shifting from full-time work for a single employer to various forms of
part-time, temporary, contract, or contingent work.". For the German context,
see Schmidt/Weiss, Labour Law and Industrial Relations in Germany, 99-112
(describing the law of fixed-term contracts and temporary work).
156 Peer Zumbansen

litical regimes." This takes place, at the same time, in close relationship
with a radical overhaul of state functions and governance modes. The bit-
ter fight over entitlements to welfare benefits enters into new battles where
the combatant is no longer just "administrative discretion" but, increas-
ingly, privatization and the outsourcing of public services."

Welfare Administration: Implementation and Policy

And yet, in light of the considerably reduced and real effects that recent
legislative efforts have had towards an entrenchment of welfare benefits, it
is not easy to predict whether or not a radical turning away from the core
elements of the welfare state regime is occurring irreversibly. But, as Piore
and Sabel wrote in their seminal book in 1984: "The times are troubled in-
deed when the good news is almost indistinguishable from the bad."?"
Their starting point was both an observation and an intuition: they sug-
gested an analysis of the instruments and principled choices made in the
past with regard to the governance of the political economy, because in
just waiting for periodical economic upturns, we might or might not ex-
perience a slight momentary improvement, but we would soon have to see
that our analytical categories fail to fully account for the structural reasons
of both downturns and upturns.
Rosenhek's focus on how welfare legislation works on the agency level
raises again the deep ambiguity of contemporary welfare administration
with its increasing reliance on contractual and cooperative forms of gov-
ernance. In this respect, Matthew Diller, a close observer of the American
welfare state, has remarked:
"First, clients are never referred to as having a 'right' to anything. Although
clients may be provided with assistance in various ways, there is nothing to indi-
cate that a client can demand anything . Instead, the client is expected to partici-
pate in a 'partnership' with a caseworker who has immense power and whose

77 This very much corresponds with the U.S. legislation of the late 1990's, send-
ing out a new welfare message to welfare recipients, one of self-sufficiency,
not of rights, one of responsibility, not of entitlements. See, e.g., Diller, "The
Revolution in Welfare Administration", 1166-1171.
78 Diller, "The Revolution in Welfare Administration" , 1182-3: "In essence, gov-
ernment cedes tremendous power over how a program will be administered,
with the belief that competition and performance incentives will spur the con-
tractor to produce the desired outcomes . Privatization becomes an attractive al-
ternative when ends are viewed as more important than means and where the
ends sought can be specified in advance and measured." (citations omitted).
79 Sabel/Piore , The Second Industrial Divide, 3.
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 157

main objective is to get her off the benefit rolls. Clearly, the caseworker holds all
the cards in this partnership . A client who makes demands of the agency or pos-
sesses a sense of entitlement, runs the risk of being judged a bad 'partner. '''80
The undeniable trend to private ordering as a form of "public" govern-
ance prompts us to seriously reassess our understanding of legitimacy and
legalized governmental action. The central question appears to be whether
or not we can apply our learned perceptions of democratic governance to
this welfare state reality in light of an ongoing multiplication of images of
the state and public governance. Our ways of understanding industrial pro-
duction, labor politics, state intervention and, finally, the welfare state - ei-
ther addressed in state-directed insurance regimes, indirect aid through
consumer protection legislature, or a court-driven constitutional control of
market contracting with the aim of impeding "structural imparity?" - build
on model assumptions about "the state" and "the society" that are not en-
tirely convincing. It has long become apparent that we need to take into
account the various interrelations between the public and the private
sphere in order to adequately describe and to normatively mobilize soci-
ety's democratic potential, in all of society's differentiations, contexts, and
spheres. However, the influence of our institutional experience is still
strong. And so we face this institutional welfare state jungle inside of
which many feel helpless and frustrated; some aspects we have learned to
demonize as alienated bureaucracy and other aspects we hold dear as we
may remember the long and hard struggles to get there. This framework
occupies our mind and must intrude when we try to see things from an en-
tirely different perspective. We tend to identify the attacks on the welfare
state based on this particular experience of it.

The Conundrum of Cause and Effect

Let us briefly recollect these effects as pointed out by Rosenhek:
1. There is undoubtedly an erosion of the middle-class support basis for
the welfare state due to the segmentation of employees into a full-time,
skilled workforce in contrast to an unskilled, part time one. Even if it
were true, as some authors suggest, that - quantitatively - full-time em-
ployment has not diminished in toto but that the impression of a higher

80 Diller, "The Revolution in Welfare Administration", 1169.

81 See, e.g., Decision of the Federal Constitutional Court (FCC) of 16 October
1993, printed in: 89 BVerfGE 214; see the ensuing "marital contract cases",
decided by the FCC in February and March 2001, hereto see Zumbansen, Pub-
lic Values, Private Contracts.
158 Peer Zumbansen

ratio of part-time employment is due to married women moving into

these positions, this would not disqualify the general assessment of a
structural loss of long-term employment due to technical innovation and
radical changes in industrial and post-industrial production.
2. Next, we are faced with the loss of a basis for an identity of interests,
which was a central presupposition of a labor market populated by
equally strong and organized bargaining parties and which now seri-
ously erodes the grounds for collective action.
3. Finally, the states' respective impact on domestic welfare politics is not
driven by a primary concern with their own constituency but by the al-
leged needs of "international capital". This observation is, indeed, at the
outset of a critical assessment of the function of domestic antagonistic
political discourse that Rosenhek has pointed to. Ensuing is a need to
explore the particular arguments deployed by those wishing to dismantle
the welfare state.
Rosenhek asks whether these changes can be attributed to the phenome-
non of globalization and persuasively describes the fallacy consisting in a
simple acceptance of what he calls "neo-liberal rhetoric" to describe the al-
leged effects of globalization on the welfare state. Indeed, we ought to halt
for a minute and try to spell out this idea a little. Would it really be con-
vincing to state that the structural changes that have occurred due to transi-
tions from the reigning mass production industry types to service industry
models and to flexible specialization market regimes are mere reactions to
the change from national markets to international or global ones? Is it ac-
tually the case that the gradual but decisive switch from a society of indi-
viduals to a society oforganizations and onwards to a society ofnetworks'?
are mere reflexes on denationalized, globalized market constraints?

Market and State from a Denationalized Perspective

Analysis of the "information" or "knowledge" society" has illuminated the
emergence of more societal actors than we have been focusing on in our

82 See generally Ladeur, Negative Freiheitsrechte und gesellschaftlichc Selbstor-

ganisation.
83 See, e.g. Ladeur, Negative Freiheitsrechte und gesellschaftliche Selbstorganisa-
tion; Ladeur, The Theory of Autopoiesis as an Approach to a Better Under-
standing ofPostmodem Law, esp. 21 et seq.; Neef, The Knowledge Economy
2-3 (describing the extreme increase in high-skill employment, eventually re-
placing blue-collar positions in virtually every production sector and the ensu-
ing practice of "electronic corporate globalization" allowing firms to outsource
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 159

political theory for a long time. The embrace of pluralism, e.g. in postwar
Germany, as a sociologically informed answer to the bankruptcy of the
democratic attempts of the Weimar Republic in the Third Reich centered
on individuals, on democratic procedures, but most importantly on the
public sphere." The public sphere was, under the auspices of a social and
political theory of pluralism, the place for the exchange of ideas, for the re-
inforcement of values, and for society's struggle with cohesion and con-
flict. The economic theory that had already begun to gain momentum at an
earlier stage also inside legal discourse purported to replace Marxist ideas
of state and society through an ordo-liberal understanding of the market.
The beauty of the idea of a private law society (Privatrechtsgesellschaft)
resided in the communion of political self-determination in a democratic
rule of law with a market that was understood as being populated by bour-
geois-citoyens. The focus of, say, Franz Bohm in Germany" or Roscoe
Pound in the USA 86 on private power shed light on the structural corrup-
tion inherent in a model that placed a political state above a non-political
society and attempted to justify this hierarchical relationship by norma-
tively upgrading the market as not being so non-political after all. The bot-
tom line of this state-market dualism, however, was that the market activi-
ties were understood as natural, good, and efficient and that the state's role
mainly consisted in providing an adequate framework. In 1932, the theo-
retically highly ambivalent lawyer Carl Schmitt consoled the worried
minds of German industry with the conception allegedly held by the Na-
tional Socialists of a strong State and a healthy Economy.87
Today, we must ask ourselves whether the New Economy has really dis-
carded all these assumptions. Critics in the 1960s and 1970s have shown
that the individualist assumptions about the state and the market, which
were also still prevalent under the sign of postwar pluralism, fail to
account for the structural power rifts between groups and individual actors
in society and that a liberal, individualist perspective risked remaining

IT jobs to poorly paid experts in India that get the work done overnight at a
fraction of domestic labor costs); Charny, "The Employee Welfare State in
Transition", 1621.
84 See Koselleck, Kritik und Krise; Fraenkel, "Der Pluralismus als Strukturele-
ment der freiheitlich-rechtsstaatlichen Demokratie",; Habermas, The Structural
Transformation of the Public Sphere; for the American case, see Stewart, "The
Reformation of American Administrative Law"; Shapiro, "Administrative Law
Unbounded: Reflections on Government and Governance", 369, 372 (2001).
85 Bohm, "Das Problem der privaten Macht".
86 Pound, "The New Feudal System".
87 Schmitt, "Gesunde Wirtschaft im starken Staat".
160 Peer Zumbansen

blind to contextual differentiations and the emergence of new societal ac-

tors. These new but partially also older actors such as corporations, unions,
business conglomerates, and other associations eventually moved into the
gray zone between state and market and it became a great challenge in le-
gal and social theory to assess their political, legal, and social quality."
Whether actors in this corporatist field, or "third sector", are "public" or
"private" can only seemingly be answered with regard to their political
quality." At the same time, this was always done with reference to their
association with either state or society, with either the public (political) or
private (market) sphere." These mixed, hybrid beings inhabiting this zone
between state and society escape this analytical framework. Corporatism
and the more recent assessments of neo-corporatism, subsidiarity, third
sector, and civil society have gradually effaced and blurred the boundaries
central to the conceptual perspective as such." Consequently, whether we
describe these phenomena from a state-perspective or from a society point
of view, whether we see privatization of welfare as a promise or a curse,
we now naturally seem to build on this experience with the demystification
of the state as the omnipotent political, central actor and the shrinking of
the public-private divide. We are informed and influenced by a strong
heritage whose connected semantics and learning experiences will con-
tinue to shape our perceptions and arguments for quite a while. Both heri-
tage and path-dependencies are not only a burden, but with respect to the
historical and contemporary struggles for political and social rights we
should be aware of the normative dimension of this particular experience.
And we ought to ask how to realize this experience both in its historical
dimension and in its fragile normative aspiration.

88 See, e.g., Grimm, "Verbande und Verfassung", 241; Bockenforde, "Die politi-
sche Funktion wirtschaftlich-sozialer Verbande und Interessentrager in der so-
zialstaatlichen Demokratie", 223; Mayntz, "Interessenverbande und Gemein-
wohl", II.
89 See Charny, "The Employee Welfare State in Transition", 1640 (recognizing a
specific understanding in the U.S. of the particular, centralist public welfare
provision scheme, which is allegedly owed to a "greater sophistication of the
European political tradition", i.e. to a intricate mix of strong leftist politics and
non-governmental societal actors that engage with the State in close consensus
seeking bargaining).
90 See, e.g., Kaldor, "Public or Private Enterprise"; Castells, The Rise of the Net-
work Society, 155-6; Charny, "The Employee Welfare State in Transition",
1603 (describing the "unique pattern" of wide-ranging, firm-based welfare pro-
visions in the United States and their endangerment due to changes in market
structures).
91 See Schmitter, "Still the century of corporatism?"
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 161

5.3.2 Remembering

What we might do in order to be able to spell out our political aspirations

against the neoliberal, supposedly apolitical and matter-of-fact globaliza-
tion semantics that Rosenhek so sharply identifies, is to remember the
background against which we politically have been learning, hoping , aspir-
ing, for better or for worse. Remembering does not have to be directed
exclusively at chronology and the historiographical reconstruction of the
past but should instead embrace specific experiences, outspoken and un-
spoken hopes, aspirations, and shared utopia and what has become of
them." We can then begin to assess under which particular conditions we
have developed our understanding of institutions, public and private
ordering, individual bargaining and collective action. Welfare regimes are
deeply embedded in specific historical and institutional settings that have
come under pressure from the inside and the outside. In order to develop
the democratic potential in and around these settings, we need to search for
modes of democratic re-entries into the different levels of welfare state
regimes . We ought to take the memory of the rule-of-law, which was al-
ready prevalent in Barak-Erez' inquiry into welfare state citizenship, and
use it to reformulate the welfare state perspectives that we have learned to
adopt. We then might be able to reconcile the formal and the substantive
understandings of the state and see the inherent interdependency of politi-
cal and social rights ."

5.3.3 In the Presence of Irony

Discussing the medieval formula of "quod omnes tangit", Niklas Luhmann

writes in his comments on Between Facts and Norms that "Habermas natu-
rally knows that a discourse with all involved is not possible in any legal
process . He therefore does not demand that one should postpone the deci-
sion until the last person affected has been born, grown up, and heard. " 94
Habermas finds a "solution" by referring to a situation of rational dis-
course in which all potentially affected persons "could" agree on certain
norms that would, in tum, be considered valid." Luhmann pinpoints the
virtuality of this discourse, which he sees reflected in the word "could" and

92 See Yerushalmi, Zakhor.

93 See Habermas, Between Facts and Norms, ch. III; Habermas, "Paradigms of
Law" .
94 Luhmann, "Quod Omnes Tangit", 890-1.
95 !d., at 891.
162 Peer Zumbansen

by which he finds that Habermas "hides" the problem of not being able to
lay down the conditions under which this rational discourse "could" be
possible. Luhmanns thus observes: "The master and the invisible hand will
not be replaced. But who determines, and how does he do so, what could
defme rational agreement? How does this decisive operation, on which
everything in the post-metaphysical age depends, become juridified?"96He
remains unsatisfied - to say the least - with Habermas' ensuing transfer of
the pressing legitimacy problem into the legal process. He finds Habermas'
"escape" into the law merely "astonishing" because for Luhmann to try to
answer the claim to legitimacy - which Luhmann coins with the "quod
omnes tangit" formula - by drawing a distinction between legality and le-
gitimacy in which the latter can be no more than a legal fiction does not
make the paradox - that the conditions for legitimacy remain in the con-
junctive ("could") - go away. Habermas' repeated concession that "free
and equal access of all to processes which are so structured that they can
represent a reasonable experience - whether this be agreement or under-
standing based on compromise (freedom and equality; once more)" - is
greeted by Luhmann 's observation of total absence of "any trace of irony,
and thus any distance from the project." 97
It is this admittedly intriguing plea for irony that "could" inform the de-
bate on the welfare state, but it doesn't most of the time." It seems to be
for the same reasons that Luhmann finds it absent in Habermas' democ-
ratic theory. While, against the background of competing validity claims
within a highly fragmented society, there are indeed good reasons to adapt
ironical approaches to comprehensive legitimacy claims, the very tum to
irony vis-a-vis one's own convictions proves much more difficult. Socio-
logical observation inevitably leads us to the insight that most of our nor-
mative aspirations regarding a "good life", a "free society", or a "just law"
are futile and that we had better adopt a more ironical view, and we end up
asking : "And then what?" Even irony can only provide a heartbreaking an-
swer to this question, a question as inevitable as the paradox of legitimacy
and legality.

96 Id.
97 Id., at 896.
98 But see Willke, Ironie des Staates; see also Whitfield, Public Services of Cor-
porateWelfare.
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 163

Bibliography

Ackerman, Bruce, "The New Separation of Powers", in: 113 Harv. L. Rev. 633
(2000) .

Adler, Libby S., "The Meanings of Permanence: A Critical Analysis of the Adop-
tion and Safe Families Act of 1997", in: 38 Harvard Journal on Legislation 1-
36 (2001).
Alesina, Alberto/Glaeser, Edward/Sacerdotte, Bruce, " Why Doesn't The US Have
A European-Style Welfare State?" HIER [Harvard Institute of Economic Re-
search] Discussion PaperNr. 1933, Cambridge, MA, November 2001.
Badura, Peter, "Der Sozialstaat", in: Die offentliche Verwaltung 1989,491-499.
Bauer, Hartmut, "Verwaltungsrechtliche und verwaltungswissenschaftliche As-
pekte der Gestaltung von Kooperationsvertragen bei Public Private Partners-
hip" , in: Die offentliche Verwaltung (DGV) 1998, 89-97.
Berger, Rainer, Der Umbau des Sozialstaates. Ansichten von Parteien und Wohl-
fahrtsverbanden zur Modernisierung des Staates (Opladen. Westdeutscher
Verlag 1999).
Berthold, Norbert, Der Sozialstaat im Zeitalter der Globalisierung (Tubingen:
Mohr 1997).
Bieback, Karl-Jurgen, "Effizienzanforderungen an das sozialstaatliche Leistungs-
recht", in: Wolfgang Hoffinann-Riem/Eberhard Schmidt-ABmann (eds.), Ef-
fizienz als Herausforderung an das Verwaltungsrecht (Baden-Baden: Nomos
1998), 127-173.
Bockenforde, Ernst-Wolfgang, "Die politische Funktion wirtschaftlich-sozialer
Verbande und Interessentrager in der sozialstaatlichen Demokratie", in: Wil-
helm HennislPeter Graf Kielmannsegg/ Ulrich Matz (eds.), Regicrbarkeit.
Studien zu ihrer Problematisierung, vol. 1, (Stuttgart 1977), 223-254.
Bohm, Franz, "Das Problem der privaten Macht" (1928), in: Franz Bohm, Reden
und Schriften (Karlsruhe: C.F. MOller 1960),25-45 .
Bonoli, Giuliano/George , Vic/Taylor -Gooby , Peter, European Welfare Futures .
Towards A Theory of Retrenchment (Cambridge : Polity Press 2000) .
Boyer, Robert/Drache, Daniel (eds.), States against Markets . The Limits of Glob-
alization (London: Routledge 1996).
Brownsword, Roger, "Contract Law, Co-operation, and Good Faith : The Move-
ment from Static to Dynamic Market Individualism", in: Deakin , Simoni Mi-
chie, Jonathan (eds.), Contracts, Co-operation, and Competition (Oxford /
New York: Oxford University Press 1997), 255-284.
164 Peer Zumbansen

Busch, Andreas/Plumper, Thomas (eds.), Nationaler Staat und Internationale

Wirtschaft (Baden-Baden: Nomos 1999).
Calliess, Gralf-Peter/Mahlmann, Matthias , " Der Staat der Zukunft. Eine Einlei-
tung" , in: Calliess, Gralf-Peter/Mahlmann, Matthias (eds .), Der Staat der Zu-
kunft (Vortrage der 9. Tagung des Jungen Forum Rechtsphilosophie in der
IVR, 27.-29. April 2001 an der FU-Berlin), ARSP Beiheft 83 (Stuttgart: Stei-
ner 2002 ).
Calliess, Gralf-Peter, Prozedurales Recht (Baden-Baden: Nomos 1999).
Castells, Manuel, The Rise of the Network Society (Vol. I of "The Information
Age") (Cambridge, MA/Oxford: Blackwell 1996).
Charny, David, "The Employee Welfare State in Transition", in: 74 Texas Law
Review 1601-1643 (1996).
Chevallier, Jacques/Lochak, Daniele, Science Administrative (Paris : LGDJ 1978).
Damm, Reinhard, "Privatautonomie und Verbraucherschutz. Legalstruktur und
Realstruktur von Autonomiekonzepten", in: Versicherungsrecht 1999, 129-
141.
Deakin, Simon/Lane, Christel/Wilkinson, Frank , " Contract Law, Trust Relations,
and Incentives for Co-operation: A Comparative Study" , in: Deakin,
SimonlMichie, Jonathan (Hrsg.), Contracts, Co-operation, and Competition,
Oxford, New York 1997,105-139.
Debasch, Charles, Science Administrative: Administration Publique (Paris: Dalloz
1976).
Di Fabio , Udo, "The Present and Future Meaning of the State and the Role of the
Federal Constitutional Court", Interview, in: 2 German Law Journal No.9
(I June 200 I), available at: http://www.gennanlawjournal.com.
Di Fabio, Udo , "Verwaltung und Verwaltungsrecht zwischen gesellschaftlicher
Selbstregulierung und staatlicher Steuerung", in: Veroffentlichungen der Ver-
einigung der Deutschen Staatsrechtslehrer [VVDStRL] 56 (1996) (Ber-
IinlNew York: Walter de Gruyter 1997), 235-282.
Diller, Matthew, "The Revolution in Welfare Administration: Rules , Discretion
and Entrepreneurial Government", in: 75 New York University Law Review
1121-1220 (2000).
Dorf, Michael C.lSabel, Charles F., A Constitution of Democratic Experimental-
ism, in: 98 Columbia L. Rev. 267 (1998).
Eidenmuller, Horst, Effizienz als Rechtsprinzip (Tubingen: Mohr 1996).
Ewald , Francois, "A Concept of Social Law", in: Gunther Teubner (ed.) , Dilem-
mas of Law in the Welfare State (BerlinlNew York: Walter de Gruyter 1986),
40-75.
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 165

Ewald, Francois, L'Etat providence (Paris : Grasset 1986).

Fallon, Richard H. Jr., '''The Rule of Law' as a Concept in Constitutional Dis-
course", in: 97 Columbia Law Review 1-56 (1997) .
Fligstein, Neil, Is Globalization the Cause of the Crises of the Welfare State? , EUI
Working Paper SPS 98/5, European University Institute, Florence 1998.
Forbath, William E., "Constitutional Welfare Rights: A History, Critique and Re-
construction" , in: 69 Fordham L. Rev. 1821 (2001) .
Fraenkel, Ernst, "Der Pluralismus als Strukturelement der freiheitlich-rechts-
staatlichen Demokratie", Lecture given at the 45th Convention of German
Lawyers [Deutscher Juristentag), Miinchen 1964, B 1-29.
Frankenberg, Giinter,"Why Care? The Trouble With Social Rights" , 17 Cardozo
L. Rev. 1365-1390 (1996).
Frankenberg, Giinter, "Shifting Boundaries: The Private, The Public, and the Wel-
fare State", in: Michael B. Katz/Christoph Sachl3e (eds.), The Mixed Econ-
omy of Social Welfare 72-94 (Baden-Baden: Nomos 1996).
Freeman, Jody, "The Contracting State", 28 Florida State University Law Review
(Fla. St. D. L. Rev.) 155 (2000) .
Freeman, Jody , "The Private Role in Public Governance", 75 New York Univer-
sity Law Review (N.Y.D.L. Rev.) 543 (2000).
Freeman, Jody, "Collaborative Governance in the Administrative State" , 43 Uni-
versity of California at Los Angeles Law Review (UCLA L. Rev.) 1 (1997) .
Glaser, Edward L. /Shleifer, Andrei, "The Rise of the Regulatory State", Harvard
Institute of Economic Research [HIER) Discussion Paper Number 1934, Har-
vard University, Cambridge, November 2001, available at:
http://www.ssrn.com.
Gouron, Andre, "Aux origines medievales de la maxime Quod Omnes Tangit", in:
Histoire du droit social. Melanges en hommage it Jean Imbert (Paris: Presses
Universitaires de France 1989),277-286.
Grimm, Dieter, "Verbande und Verfassung", in : Dieter Grimm , Die Zukunft der
Verfassung (Frankfurt: Suhrkamp 1991),241-265.
Giinther, Klaus, "Der Wandel der Staatsaufgaben und die Krise des regulativen
Rechts", in: Dieter Grimm (Hrsg .), Wachsende Staatsaufgaben - sinkcnde
Steuerungsfahigkeit des Rcchts, Baden-Baden 1990,51-68.
Habermas, Jiirgen, "Der europaische Nationalstaat unter dem Druck der Globali-
sierung", in: Blatter fur deutsche und internationale Politik 1999,425-436.
166 Peer Zumbansen

Habcrmas , Jurgen, "Die postnationale Konstellation und die Zukunft der Demo-
kratie" , in: J.Habermas, Die postnationale Konstellation 91-169 (Frankfurt:
Suhrkamp 1998).
Habermas , Jurgen , "Paradigms of Law" , in: 17 Cardozo Law Review (Cardozo L.
Rev.) 771-784 (1996).
Habermas, Jurgen, The Structural Transformation of the Public Sphere (Cam-
bridge: Polity Press 1989).
Habermas, Jurgen, "Die Krise des Wohlfahrtsstaates und die Erschopfung utopi-
scher Energien", in: Habermas, Die neue Unubersichtlichkeit 141 (Frankfurt:
Suhrkamp 1985).
Habermas, Jurgen, Between Facts and Norms [Transl. W. Rehg] (M.LT. Press
1996).
Handler, Joel F., "Questions about Social Europe from an American Observer",
in: 18 Wisconsin International Law Journal [Wis. Int'l. L.l] 437-476 (2000).
Handler, Joel F., "Constructing the Political Spectacle: Interpretation of Entitle-
ments, Legalization, and Obligations in Social Welfare History", in:
56 Brooklyn Law Review 899-973 (1990).
Handler, Joel, F., "Discretion in Social Welfare : The Uneasy Position of the Rule
of Law", 92 Yale Law Jouma11270-1286 (1983).
Hall, Peter A.lSoskice, David, Varieties of Capitalism. The Institutional Founda-
tions of Comparative Advantages (Oxford: O.UP. 2001).
Held, DavidlMcGrew, Anthony G. (eds.), The Global Transformations Reader.
An Introduction to the Globalization Debate, (Malden, MA: Polity Press
2000) .
Hirschl, Ran, "Israel's Constitutional Revolution: The Legal Interpretation of En-
trenched Civil Liberties in an Emerging Neo-Liberal Economic Order", in:
American Journal of Comparative Law [Am. 1 CompoL.] 427-452 (1998).
Hoffmann-Riem, Wolfgang , "Tendenzen in der Verwaltungsrechtsentwicklung",
in: Die offentliche Verwaltung 1997,433-442.
Hoffmann-Riem, Wolfgang , "Offentliches Recht und Privatrecht als wechse1sei-
tige Auffangordnungen - Systematisierung und Entwicklungsperspektiven ",
in: Wolfgang Hoffmann-RiernlEberhard Schmidt-ABmann (Hrsg.), Offent-
liches Recht und Privatrecht als wechselseitige Auffangordnungen (Baden-
Baden: Nomos 1996),261-336.
Hoffmann-Riem, WolfgangiSchmidt-ABmann, Eberhard (Hrsg.), Innovation und
Flexibilitat des Verwaltungshandelns (Baden-Baden: Nomos 1994).
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 167

Hoffmann-Riem, Wolfgang/Schmidt-ABmann, Eberhard/Schuppert, Gunnar Folke

(Hrsg.), Reform des Allgemeinen Verwaltungsrechts (Baden-Baden: Nomos
1993).
Horwitz, Morton, The Transformation of American Law 1870-1960: The Crisis
of Legal Orthodoxy (New York/Oxford: Oxford U. Press 1992).
Jones, Harry W., "The Rule of Law and the Welfare State", in: 58 Columbia Law
Review 143-156 (1958).
Kaldor, Nicholas, "Public or Private Enterprise - The Issues to be Considered",
in: William 1. Baumol (ed .), Public and Private Enterprise in a Mixed Econ-
omy (LondoniBasingstoke 1980), 1-12.
Kannowski, Bernd, "Federal Court of Justice and Expert Liability Towards Third
Parties: Public Safeguard and Private Interest " , in: 2 German Law Journal
No. 13, 1 August 2001 (available at:
http://www.germanlawjournal.comlpast_issues.php?id=71 ).
Kannowski, Bernd/Zumbansen, Peer, "Gemeinwohl und Privatinteresse - Exper-
tenhaftung am Scheideweg?" in : Neue Juristische Wochenschrift (NJW)
2001,3102-3103 .
Karst, Kenneth, "The Coming Crisis of Work in Constitutional Perspective", in:
82 Cornell Law Review 523-571 (1997).
Kaufmann, Franz-Xaver, Herausforderungen des Sozialstaates (Frankfurt: Suhr-
kamp 1997) .
Kennedy, David 1., "Due Process in a Privatized Welfare System ", 64 Brooklyn
Law Review 231-306 (1998) .
Kennedy, Ellen, "Carl Schmitt und die 'Frankfurter Schule'. Deutsche Liberalis-
muskritik im 20. Jahrhundert ", in : 12 Geschichte und Gesellschaft 1986,
380-419.
Kippes, Stephan, Bargaining. Informales Verwaltungshandeln und Kooperation
zwischen Verwaltungen, Biirgern und Unternehmen (Koln u.a.: Heymann
1993) .
Kleinhenz, Gerhard, "Welche arbeits- und erganzenden sozialrechtlichen Rege-
lungen empfehlen sich zur Bekampfung der Arbeitslosgkeit?" Report given in
2000 at the 63rd German Jurists Convention [63. Deutscher Juristentag] (Mu-
nich: C. H. Beck 2000).
Konig, Klaus, "Markt und Wettbewerb als Staats- und Verwaltungsprinzipien ",
in: Deutsches Verwaltungsblatt 1997, 239-248.
Koselleck, Reinhart, Kritik und Krise . Eine Studie zur Pathogenese der burgerli-
chen Welt (Frankfurt: Suhrkamp 1973), first ed. Freiburg: Alber 1959.
168 Peer Zumbansen

Kreb s, Walter, "Vertrage und Absprachen zwischen der Verwaltung und Priva-
ten", in: Veroffentlichungen der Vereinigung deutscher Staatsrechtslehrer
(VVDStRL) 52 (1992) (Berlin/New York: Walter de Gruyter 1993),248-284.
Ladeur, Karl-Heinz, Negative Freiheitsrechte und gesellschaftliche Selbstorgani-
sation (Tubingen: Mohr 2000).
Ladeur, Karl-Heinz, The Theory of Autopoiesis as an Approach to a Better Un-
derstanding of Postmodern Law . From the Hierarchy of Norms to the Heter-
archy of Changing Patterns of Legal Inter-relationships, EUI Working Paper
Law No . 99/3 (European University Institute, Florence 1999).
Landis , James M., The Admin istrative Process (New Haven, CT: Yale University
Press 1938) .
Law, Sylvia A., "Women, Work, Welfare , and the Preservation of Patriarchy ", in :
131 University of Pennsylvania Law Review 1249-1339 (1983) [131 U.
Penn. L. Rev. 1249-1339 (1983)] .
Lawson, Gary, "Delegation and Original Meaning", in: 88 Virginia L. Rev. 327
(2002) .
Leibfried, Stephan/Wagschal, Uwe (eds.), Der deutsche Sozialstaat. Bilanzen -
Reformen - Perspektiven (FrankfurtlNew York: Campus 2000) .
Leibfried, Stephan/Pierson, Paul, "Semisovereign Welfare States: Social Policy in
a Multi-tiered Europe", in: Leibfried/Pierson (eds.), European Social Policy.
Between Fragmentation and Integration (Washington: Brookings 1995), 43-
77.
Lepsius, Oliver, Verwaltungsrecht unter dem Common Law: amerikanische Ent-
wicklungen bis zum New Deal (Tubingen: Mohr 1997).
Luhmann, Niklas, "Quod Omnes Tangit: Remarks on Jiirgen Habermas' Legal
Theory " , in: 17 Cardozo L. Rev. 883-899 (1996).
Luhmann, Niklas, Politische Theorie im Wohlfahrtsstaat (Mtmchen/Wien: Olzog
1981).
Macaulay, Stewart, "Non-contractual Relations in Business : A Preliminary Stud-
y", 28 American Sociological Review 55 (1963).
Macneil, Ian, "Relational Contract: What we do and what we do not know", 1985,
in : Wisconsin Law Review 483-525.
Macneil, Ian, "Contracts: Adjustment of Long-Term Economic Relations under
Classical, NeoClassical, and Relational Contract Law", in: 72 Northwestern.
U. Law Rev. 72 (1978) ,854-905.
Macneil, Ian, The New Social Contract. An Inquiry into Modem Contractual Re-
lations (New Haven: Yale University Press 1980).
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 169

Manow, Philip, "Comparative Institutional Advantages of Welfare State Regimes

and New Coalitions in Welfare State Reforms ", in: Pierson (ed.), The New
Politics ofthe Welfare State (Oxford: Oxford U. Press 2001),146-164.
Maus , Ingeborg, "Entwicklung und Funktionswandel der Theorie des burgerli-
chen Rechtsstaates ", in: Maus, Rechtstheorie und Politische Theorie im In-
dustriekapitalismus (Mimchen: Fink 1986), 11-82.
Mayntz, Renate, "Interessenverbande und Gemeinwohl ", in: Renate Mayntz
(ed.), Verbande zwischen Mitgliederinteressen und Gemeinwohl (Gutersloh:
Bertelsmann 1992), 11-35.
Medicus , Dieter, Abschied von der Privatautonomie im Schuldrecht? (Koln:
Heymanns 1996).
Mollers, Christoph, Reform des Verwaltungsrechts - Moglichkeiten und Grenzen
eines wissenschaftlichen Diskurses in Deutschland, EUI Working Paper Law
No . 2001110, European University Institute, Florence 2001.
Mouffe, Chantal, "Carl Schmitt and the Paradox of Liberal Democracy ", in:
Mouffe, Chantal (ed.), The Challenge of Carl Schmitt (LondonlNew York:
Verso 1999),38-53.
Neef, Dale, The Knowledge Economy (Woburn, MA: Butterworth Heinemann
1998).
Neumann, Volker, Freiheitsgefahrdung im kooperativen Sozialstaat (Koln u.a.:
Heymanns 1992).
Nolte, Georg, "Kosovo und Konstitutionalisierung: Zur humanitaren Intervention
der NATO-Staaten ", in: 59 Zeitschrift fur auslandisches Offentliches Recht
und Volkerrecht 941-960 (1999) .
Oechsler, Jtirgen, "Wille und Vertrauen im privaten Austauschvertrag. Die Re-
zeption der Theorie des Relational Contract im deutschen Vertragsrecht in
rechtsvergleichenderKritik ", in: RabelsZ 60 (1996), 91-124.
Pierson, Paul, "Investigating the Welfare State at Century's End", in: The New
Politics of the Welfare State (Pierson, Paul ed.), 1-14 (2001).
Pierson, Paul (ed.), The New Politics of the Welfare State (Oxford : Oxford U.
Press 2001) .
Pierson, Paul, " Coping with Permanent Austerity . Welfare State Restructuring in
Affluent Democracies ", in: Pierson (ed.), The New Politics of the Welfare
State (Oxford : Oxford U. Press 2001) , 410-456.
Pitschas, Rainer, "Soziale Sicherung durch fortschreitende Verrechtlichung?" in:
Rudiger Voigt (Hrsg.), Verrechtlichung, (Konigstein : Athenaum 1980), 150-
169.
170 Peer Zumbansen

Post, Gaines , "A Roman Legal Theory of Consent, Quod Omnes Tangit, in Me-
dieval Representation ", 1950 Wisconsin Law Review 66.
Pound, Roscoe , "The Rule of Law and the Modem Welfare State", in:
7 Vanderbilt Law Review 1 (1953).
Pound, Roscoe, "The New Feudal System ", in: 35 Commercial Law Journal 397-
403 (1930).
Todd, Rakoff, "The Choice between Formal and Informal Modes of Administra-
tive Regulation", 52 Admin. L. Rev. 159 (2000).
Reich, Charles S. "The New Property ", in: 73 Yale L. Journal 733-787 (1964).
Reich, Norbert , "Das Phantom. 'Verbraucherrecht' - Erosion oder Evolution des
Privatrechts?" in: Juristenzeitung 1997, 609-610.
Rieger, ElmarlLeibfried, Stephan, Grundlagen der Globalisierung . Perspektiven
des Wohlfahrtsstaates (Frankfurt: Suhrkamp 2001).
Rubin, Edward , "Discretion and Its Discontents", in: 72 Chi-Kent L. Rev. 1299
(1997).
Sabel, Charles F.lPiore, Michael S., The Second Industrial Divide (New York :
Basic Books 1984).
Salamon, Lester M., "The New Governance and the Tools of Public Action: An
Introduction ", in: 28 Fordham Urban Law Journal 1611-1674 (2001).
Sassen, Saskia, Losing Control? Sovereignty in an Age of Globalization (New
York: Columbia U. Press 1996).
Sassen, Saskia, Globalization and its Discontents . Essays on the new mobility of
people and money (New York: New Press 1998).
Scharpf, Fritz, "Negative and Postitive Integration in the Political Economy of
European Welfare States ", in: Martin Rhodes and Yves Meny (cds.), The Fu-
ture of European Welfare 155-177 (London: Macmillan 1998).
Schmidt, MarienelWeiss, Manfredi, "Tob Creation Policies in Germany: The
Role of Labour Law, Social Security Law, and Industrial Relations ", in: Mar-
co Biagi (ed.), Job Creation and Labour Law (The Hague: Kluwer 2000),
145-168.
Schmidt, Marlene/W eiss, Manfredi, Labour Law and Industrial Relations in Ger-
many. Third Edition . (The Hague : Kluwer 2000).
Schmitt, Carl, "Gesunde Wirtschaft im starken Staat " , Hauptvortrag vor der Mit-
gliederversammlung des Vereins zur Wahrung der gemeinsamen wirtschaft-
lichen Interessen in Rheinland und Westfalen am 23. November 1932, Dus-
seldorf 1932, 13-32.
 5 Quod Omnes Tangit: Globalization , Welfare Regimes and Entitlements 171

Schmitt, Carl, Die geistesgeschichtliche Lage des heutigen Parlamentarismus

(1926), 7. ed. (Berlin : Dunker & Humblot 1993).
Schmitter, Philippe C. "Still the century of corporatism?" in: 36 Review of Poli-
tics 85-131 (1974).
Schoen, Lindsay Mara, "Working Welfare Recipients: A Comparison of the Fam-
ily Support Act and the Personal Responsibility and Work Opportunity Rec-
onciliation Act", in: 24 Fordham Urban Law Journal 635-662 (1997).
Schulze-Fielitz, Helmut, "Staatsaufgabenentwicklung und Verfassung", in: Dieter
Grimm (Hrsg.), Wachsende Staatsaufgaben - sinkende Steuerungsfahigkeit
des Rechts (Baden-Baden : Nomos 1990), 11-47.
Schuppert, Gunnar Folke, Verwaltungswissenschaft (Baden-Baden: Nomos
2001) .
Schuppert, Gunnar Folke, "Zur notwendigen Neubestimmung der Staatsaufsicht
im verantwortungsteilenden Verwaltungsstaat ", in: Schuppert, (Hrsg.), Jen-
seits von Privatisierung und "schlankem" Staat (Baden-Baden: Nomos 1999),
299-329.
Schuppert, Gunnar Folke, "Die offentliche Verwaltung im Kooperationsspektrum
staatlicher und privater Aufgabenerfullung: Zum Denken in Verantwortungs-
strukturen", in: 31 Die Verwaltung 415-447 (1998).
Schuppert, Gunnar Folke, "Staat, Markt, Dritter Sektor - oder noch mehr?" in:
Thomas Ellwein/Joachim Jens HesselRenate Mayntz/Fritz W. Scharpf
(Hrsg.), Jahrbuch zur Staats- und Verwaltungswissenschaft, Band 1, 47-87
(Baden-Baden: Nomos 1987).
Shaffer, Gregory, "WTO Blue-Green Blues: The Impact of U.S. Domestic Politics
on Trade-Labor, Trade-Environment Linkages for the WTO Future",
24 Fordham International Law Journal 608-651 (2000).
Shapiro, Martin, "Administrative Law Unbounded: Reflections on Government
and Governance", in: 8 Ind. 1. Global Leg. Studies 369 (2001).
Simon, William H., "The Invention and Reinvention of Welfare Rights", in:
44 Maryland Law Review 1-37 (1985).
Soskice, David, "Globalisierung und institutionelle Divergenz: die USA und
Deutschland im Vergleich", in: 25 Geschichte und Gesellschaft 201-225
(1999).
Steinberg, Rudolf, Der okologische Verfassungsstaat (Frankfurt : Suhrkamp
1998).
Stewart, Richard B., "The Discontents of Legalism : Interest Group Relations in
Administrative Regulation ", in: 1985 Wisconsin Law Review 655 (1985).
172 Peer Zumb ansen

Stewart, Richard B., "The Reformation of American Administrative Law", in:

88 Harvard Law Review 1667-1813 (1975).
Stolleis, Michael, "Die Entstehung des Interventionsstaates und das offentliche
Recht ", in: Zeitschrift fur neuere Rechtsgeschichte (ZNR) 1989,129-147.
Stolleis, Michael, Geschichte des offcntlichen Rechts in Deutschland, vol. 3
(Mimchen: C. H. Beck 1998).
Teubner, Gunther, Reflexives Recht, in: ARSP 1982, 13-59.
Treutner, Erhard, Kooperativer Rechtsstaat. Das Beispiel Sozialverwaltung (Ba-
den-Baden: Nomos 1998).
Voigt, Rudiger (Hrsg .), Globalisierung des Rechts (Baden-Baden: Nomos
1999/2000).
Welti, Felix , "Wandel der Arbeit und Reform von Sozialstaat und Sozialrecht", in:
Sozialer Fortschritt 2001,69-79.
Whitfield, Dexter, Public Services of Corporate Welfare. Rethinking the Nation
State in the Global Economy (London: Pluto 2001) .
Willke, Helmut, Ironie des Staates. Grundlinien einer Staatstheorie polyzentri-
scher Gesellschaft (Frankfurt: Suhrkamp 1992).
Yerushalmi, Yosef Hayim, Zakhor. Jewish History and Jewish Memory (Seattle
and London: Washington U. Press 1982).
Zavelberg, Heinz Gunter, "Lean Management - ein methodischer Ansatz fur mehr
Effizienz und Effektivitat in der offentlichen Verwaltung?" , in : Die offentli-
che Verwaltung 1994, 1040-1042.
Zumbansen, Peer , Vertragsregimes im ,Dritten Sektor', in: Hein Kotz et al. (eds .),
2 Non-Profit Yearbook (2003),jorthcoming.
Zumbansen, Peer, Public Values, Private Contracts and the Colliding Worlds of
Family and Market, in: 11 Feminist Legal Studies 73-87 (2003).
Zumbansen, Peer, The Province of Government: Towards a Private Law Under-
standing of Public Governance, LL.M . Thesis Harvard Law School 1998,
forthcoming 2003.
Zumbansen, Peer, "Spiegelungen von Staat und Gesellschaft: Governance-Erfah-
rungen in der Globalisierungsdebatte", in: Globalisierung als Problem der
Steuerungsfahigkeit des Rechts und der Gerechtigkeit (Michael Anderheiden,
Stefan Huster, Stephan Kirste eds.), ARSP Beiheft No. 79, Stuttgart 2001 ,
13-40.
Zumbansen, Peer, "Die vergangene Zukunft des Volkerrechts ", in : 34 Kritische
Justiz (KJ) 46-68 (2001).
 5 Quod Omnes Tangit: Globalization, Welfare Regimes and Entitlements 173

Zumbansen, Peer, Ordnungsmuster im modemen Wohlfahrtsstaat. Lemerfahrun-

gen zwischen Staat, Gesellschaft und Vertrag (Baden-Baden: Nomos 2000).
Zumbansen, Peer, "Carl Schmitt und die Suche nach politischer Einheit ", in:
30 Kritische Justiz (KJ), 63-79 (1997).
6 The Search for Core Labor Standards in
Liberalized Trade*

Sebastian Krebber

Contents
6.1 Introduction 176
6.1.2 Factual Background of the Dispute on Minimum Labor
Standards 176
6.1.3 Outline of the Analysis 180
6.2 Core Labor Standards from a Labor Law Perspective 181
6.2.1 Importance of the Subject Matter Protected by Provisions
of Labor Law 181
6.2.2 Evaluation in Private International Law 182
6.2.3 Historical Ranking 183
6.2.4 Conclusion 186
6.3 Existing Definitions of Core Labor Standards 187
6.3.1 Regulations and Proposals in the Context of the
Liberalization of Trade 187
6.3.2 European Union 191
6.3.3 Organization of the American States 193
6.3.4 Regulations in the Context of Trade and Investment
Agreements 194
6.3.5 Unilateral Regulations 195
6.3.6 Voluntary Commitments 197
6.3.7 Synopsis 199
6.4 Possible Grounds for Core Labor Standards 200
6.4.1 General Public International Law 200
6.4.2 State Consensus on Labor Standards 216
6.5 Conclusions 224
6.5.1 Core Labor Rights 224
6.5.2 Existence and Acceptance of Labor Standards 228
6.5.3 Human Rights Perspective vs. Labor Law Perspective 229

I dedicate these lines to my academic teacher, Prof. Dr. Dres. he Rolf Birk, in
honor of his 65th birthday.
176 Sebastian Krebber

6.1 Introduction

In recent times, there has been much disagreement over whether participa-
tion in liberalized world trade presupposes adherence to certain labor stan-
dards. The following paper concentrates upon one aspect of the complex
discussion of these standards and identifies the labor law provisions that,
irrespective of possible mechanisms for their enforcement in international
trade relations, should be regarded as minimum labor standards.

6.1.2 Factual Background of the Dispute on Minimum Labor

Standards

The contemporary discussion of minimum labor standards can be better

understood in light of the factual background. Two aspects in particular
have shaped the controversy .

Wages, Ancillary Wage Costs and Labor Standards

At the heart of the debate about minimum labor standards in the liberalized
world trade order is the developed countries ' fear that open borders will
flood their markets with low-cost products and services from developing
countries I which will harm their competing industries and employees,
and/or compel their companies to shift production to countries with lower
labor standards.'
Thus, the dispute is really about prices. The dispute about the recogni-
tion of minimum labor standards is not primarily between countries with
different levels of employee protection but between countries with differ-
ent wage levels. This explains how the US - other than France' - can act as

I Cf. already Gerhard Schnorr, Das Arbeitsrecht als Gegenstand internationaler

Rechtsetzung (Munich, 1960), p. 240. For a more recent survey, cf. Raj Bhala,
" Clarifying the Trade-Labor Link", (1998) 37 Columbia Journal of Transna-
tional Law, pp. 11, at 17 et seq.
In an unpublished study, however, the DECD questions this conclusion, see
Guy de Jonquieres, "Low labour standards 'no advantage ''', Financial Times,
27 June 2000, p.4. Generally questioning the industrialized countries' fears,
Harald Grossmann and Georg Koopmann, "Social Standards in International
Trade" in: Harald Sander and Andreas Inotai (eds.), World Trade After the
Uruguay Round (London, 1996), pp. 115, 123 et seq.
Cf. Frederick M. Abbott, Introductory Remarks for the Meeting of the Section
on International Law of the American Association of Law Schools, (1996)
17 Comparative Labor Law Journal, pp. 338, 343.
 6 The Search for Core Labor Standards in Liberalized Trade 177

one of the two principal supporters of minimum labor standards. If the dis-
pute were truly about the level of employee protection, then, it can be ar-
gued, the US could be among those asked by some European countries to
improve their standards.'
Though prices are undoubtedly influenced by labor law provisions, they
are mainly and directly determined by wages and ancillary wage costs.' A
direct connection between minimum labor standards and wage level only
exists with regard to forced labor and prison work, child labors and equal
pay. Therefore, minimum labor standards can only partially neutralize the
threat to enterprises and employment in developed countries by cheaper
products from low wage countries and do not offer the short-term protec-
tion that many in the developed countries are hoping for.' A mechanism to
eliminate the imminent threat could only consist of adopting minimum

4 Although this issue cannot be examined in detail here, it should be briefly not-
ed that the level of protection of US-American labor law is distinctly lower
than that of the Member States of the European Union and numerous other de-
veloped and less-developed countries. The following two points may serve as
examples: no paid maternity leave, and, apart from a few exceptions, no gene-
ral regime of protection from unfair dismissal.
5 Paul Brenton, Henry Scott and Peter Sinclair, International Trade; A European
Text (Oxford New York 1997, p. 21; cf. the remark by Abbott, "Introductory
Remarks", pp. 338, at p. 345, regarding the motives of US-American labor un-
ions; in this context see also Benjamin Rozwood and Andrew R. Walker, "Side
Agreements, Sidesteps, and Sideshows: Protecting Labor From Free Trade in
North America", (1993) 34 Harvard International Law Journal, pp. 333, 338;
see also the examples given by Schnorr, Arbeitsrecht, pp. 239 et seq . Yet, this
point is not always emphasized adequately; frequently, without further differ-
entiation, it only refers to the working costs which would result from social
minimum standards, cf. e.g. Lars P. Feld, "Sozialstandards und die Welthandel-
sordnung" (1996) 51 Aussenwirtschaft, 51, 53. For a historic outlook on the
significance of wages as a factor influencing costs, cf. Arthur Nikisch, Arbeits-
recht (3 vols., vol. 3., 3 rd edn., Tubingen, 1961), § 2 II 1, p. 15. In the begin-
ning of national and international labor legislation, however, it was not so
much wages but every single newly intended labor protection provision that
was discussed as a cost factor, cf. Ernest Mahaim, "The Historical and Social
Importance ofInternational Labor Legislation" in: James T. Shotwell (ed.), The
Origins of the International Labor Organization (2 vols., New York, NY,
1934) vol. 1, pp. 3, 14.
6 This connection however is denied by Dirk Meyer, "Social Standards and the
New World Trading Order" (1998) 21 (6) World Competition , pp. 33, 40.
7 See also Wilhelm Adamy, "International Trade and Social Standards" (1994),
Intereconomics, 269, 275; Matthias ReuB, Menschenrechte durch Handels-
sanktionen (Baden-Baden 1999), pp. 148 et seq.
178 Sebastian Krebber

wages at the level of the wages in the developed countries, in the develop-
ing countries or in duties impos ed by the industrialized states." The latter
solution is incompatible with the concept of free trade , the first is an unre-
alistic demand. Thus , a discussion which was primarily about prices be-
came a controversy about minimum labor standards. Adherence to certain
minimum standards in employment protection is expected to adjust at least
the leve l of wages in the long run.?

Competitive Advantages vs. Fairness

The leitmotiv of the liberalization of international trade is that all countries
should profit from free tra de between them. 10 This concept is based on the
conviction that free international trade leads to an efficient distribution and
utilization of reso urces as we ll as an efficient international distribution of
labor, and that, as a resu lt, each participating country has competitive ad-
vantages." At least theoretically, the consequence of all of the participating
states taking advantage of their respective competitive advantages is that
the trade exchange between them shou ld be at least som ewhat balanced.
The comparative advantages of developed countries are manifold, those of
deve loping states always encompass low wages and low ancillary wage
costs . Often they may even be reduced to these factors.
The abolition of tariffs and non-tariff barriers in a free world trade order
also presupposes that the participants abide by certain rules. Consequently,
free trade is - desp ite the general commitment to the principle that the par-
ticipants should take advantage of their respectiv e comparative advantages
- also genuinely characterized by a notion of fairness . The freedom to
benefit from comparative advantages requires honoring certain rules . Not
all comparative advantages can be taken advantage of, only those attained
under certain circumstances.

8 For a closer survey of the latter and a general outlook on the existing means to
neutralize competitive advantages in this context, cf. Grossmann and Koop-
mann, Social Standards, pp. 115 et seq.
9 The example given by Frank Brassel and Michael Windfuhr, Welthandel und

Menschenrechte, Bonn 1995, p. 81, illustrates that the direct effects are only
modest.
10 Cf. only Kenneth W. Dam, The GATT - Law and International Economi c Or-

ganization (Chicago, III., 1970), p. 6.

II For an extensive outline, cf. John H. Jackson, The World Trading System: Law
and Policy of International Economic Relations (2nd edn, Cambridge Mass.,
1997), pp. 15 et seq.; Brenton, Scott and Sinclair, International Trade, p. 16 et
seq.
 6 The Search for Core Labor Standards in Liberalized Trade 179

There is a large and longstanding consensus that (within the limits of the
GATT provisions) dumping and subsidies are in principle unfair practices
in international trade, although their admissibility at the national level may
be seen differently." The renouncement of subsidies and dumping is the
price for abolishing tariffs and non-tariff barriers; consequently, the sanc-
tion for violation of this prohibition consists in the right to impose coun-
tervailing duties.
Yet, besides dumping and subsidies, numerous other factors influence
the product price and therewith its potential on another national market.
The legal conditions under which enterprises operate and produce (e.g.
protection of intellectual property, regulation of research and development,
taxes, environment law) are significant, too. The duties formerly imposed
at the national borders used to cover these advantages as well. Hence the
question arises whether the shift from a system of border control through
duties to the non-border control of the GATT system should be extended
to these factors. But while dumping and subsidies inevitably bear the im-
plication of unfairness, there is no consensus as to whether different stan-
dards regarding these legal factors represent a distortion of fair competition
or whether they are competitive advantages whose exploitation free trade
promotes." Each new round of negotiations to the further liberalization of
international trade must face the dilemma of reconciling the wish for ex-
pansion of the harmonization of such rules and the principle of compara-
tive advantages. At a political level, the argument is generally between the
developed and the developing countries: the latter accuse the former of at-
tempting to deprive them of the few competitive advantages they have.
Labor standards!' are a typical example of this conflict." Even the mis-
leading term, "social dumping?" can only linguistically classify these
standards as a kind of dumping - in substance they cannot be compared."

12 Jackson, World Trading System, pp. 247, 251, 274, 279.

13 Cf. Bhala, Trade-Labor Link, 19,22.
14 Not only English-speaking authors concentrate on social standards. In sub-
stance, however, the debate concerns labor law provisions, not social legisla-
tion, which is why the term, "core labor standards" is favored in this paper.
15 See also Schnorr, Arbeitsrecht, p. 242.
16 With regard to the term, "social dumping" in the present context cf. Hans-
Volkhard Lempp, Die Vereinbarkeit einseitiger Mafinahmen der Vereinigten
Staaten gegen das sogenannte Sozialdumping mit dem "GATT 1994 " und dem
Vollcergewohnheitsrecht (Diss. Wurzburg, 1995), pp. 6 et seq.
17 OECD (ed.), Trade, Employment and Labour Standards - A Study of Core
Workers' Rights and International Trade (Paris, 1996), p. 170 et seq.; note,
however, the example of Spain in the 1930s, which included in its definition of
dumping lower prices caused by non-observance of international regulations in
180 Sebastian Krebber

Certain developed states promot e keeping certain labor law provisions as

prerequisite for participation in the liberalized world trade; the developing
countries thoroughly and unanimously reject them as a protectionist meas-
ure. " In addition, minimum labor standards cannot be easily reconciled
with the notion that free trade will lead to an efficient international divi-
sion of labor. 19
As developing countries reject the concept of minimum labor standards,
a broad basis for these standards must be explored. Any unilateral defini-
tion offered by the developed countries - however sound it may appear -
will inevitably fail. However, a generally or commonly accepted basis can
refute the allegation of protectionism and simultaneously increase the legal
and political power of the argument in favor of these standards . Therefore,
the discussion has shifted from a search for general minimum labor stan-
dards to a search for so-called core labor rights. Without anticipating the
outcome of this analysis, it should be noted at this stage already that there
exists a wide consensus regarding both the possible basis for such core la-
bor rights standards and the identification of the various core rights.

6.1.3 Outline of the Analysis

The first step is the attempt to determine the priorities of core labor stan-
dards from a labor law perspective (B), the next step is comparing the re-
sults with the existing legally binding regulations and the definitions of
core labor standards proposed in the course of the present controversy (C).
Subsequently, the possible legal basis for core labor standards will be ex-
amined (D). The analysis will end with an identification of core labor
rights, a proposal for content specification, and a highlighting of some col-
lateral results important for the controversy over the trade labor link. (E)

respect of social matters, see Steve Charnovitz, "The Influence of International

Labour Standards on the World Trading Regime", (1987) 126 International
Labour Review 565, 573; also Grossmann and Koopmann , Social Standards ,
p. 116 and Fn. 1,129.
18 However, it is unclear, whether the observance of core labor standards will
have an adverse effect upon the economic capacity of a state, cf. the extensive
survey by OECD (ed.), Trade, Employm ent and Labour Standards , pp.77-
148.
19 Cf. e.g. Dam, The GATT, p. 6.
 6 The Search for Core Labor Standards in Liberalized Trade 181

6.2 Core Labor Standards from a Labor Law Perspective

The discussion of core labor standards with regard to the liberalization of

world trade is in essence a discussion about employment protection. Be-
fore exploring international feasibility, one should be aware of possible
priorities from the labor law perspective. Thus the first step is the question
of whether, from a labor law perspective, one can identify a ranking of dif-
ferent rules of employment protection.
This question, although most sensible, is difficult to answer. Substantia-
tion can only be partial, for usually there is no need for this analysis within
one legal system. The hierarchies between different levels of rules - for in-
stance between individual and collective labor law - do not prioritize as to
the substance of the rules but merely represent rules of conflict as to the
rank of these provisions when applicable to the same fact pattern (Rang-
kollisionsrecht). They cannot therefore serve as a means of identifying
rank from the perspective of employment protection values. Furthermore,
it is unclear which priorities of one legal system correspond with the pri-
orities of other legal systems.
In order to reach substantiated conclusions and avoid allegations or
speculations, one must determine which objects protected by labor law
rules are usually highly valued. There are several criteria to determine this:
constitutional basis, ordre public, historical priority, an ethical perspective.
With this approach, however, the perspective of labor law is partially
abandoned, because the criteria listed above do not stem from labor law.
The attempt to examine the controversy on core labor standards in interna-
tional trade from a labor law perspective leads close to the type of reason-
ing which also characterizes the search for core labor standards at an inter-
national level.

6.2.1 Importance of the Subject Matter Protected by Provisions

of Labor Law

If one assesses labor law provisions by the object they protect, in accor-
dance with the common ethical conviction, highest priority must be given
to the protection of life and health. Occupational safety is particularly im-
portant in the various areas of labor law.
Within the legal provisions protecting health and safety at the work-
place, one can further differentiate between the degree of danger the em-
ployee is exposed to without corresponding protection (imminent or long-
term hazard, probability of damage), the kind of danger (serious dangers
for life and health or dangers only taken into account in countries with a
182 Sebastian Krebber

particularly strong consciousness for health matters, such as requirements

for display screen equipm ent, daylight requirements in an office etc.), and
finally between general employee protection and the protection of groups
of employees meriting special protection (pregnant women, juveniles or
children).
It is hard to classify provisions of individual labor law according to the
value of their respective subject matter of legal protection. At first glance ,
protection from unjust dismissal would appear to be a high priority, as a
counterbalance to the employee's economic dependence upon the em-
ployer, something that constitutes a crucial interest of labor law. At the
same time, protection from unfair dismissal reflects the difficulty in ar-
ranging an undisputed ranking. The emphasis of protection from unfair
dismissal is a very European characteristic" and cannot be transferred un-
reservedly to other countries , who may conclude that a rigid general pro-
tection from unfair dismissal will prevent employers from hiring new em-
ployees , and thus the best protection from unemployment is low-level or
no protection from unfair dismissal. Similar questions and uncertainties ex-
ist in the other areas of individual labor law.
In collective labor law, the results of ranking are less restricted. The
freedom to form and join trade unions and the right to collective bargain-
ing are generally considered of material significance, which is also re-
flected by the constitutional protection they often enjoy, either expressly or
implicitly, as part of the general right of assembly. In relation to trade un-
ions and collective bargaining, the right to strike is of principal importance
as well. Yet, there is already no consensus about the right for employers to
lock-out. The various obstacles at the European level to agree on the estab-
lishment and exact form of a system of worker participation at the plant,
enterprise, or managerial level" illustrate that, in this respect, the uncer-
tainties are even larger than those regarding the main subject matters of in-
dividuallabor law.

6.2.2 Evaluation in Private International Law

Private international law may require an evaluation of labor law provisions

in light of the public policy exception. This, however, is a national per-

20 From the German point of view, see e.g. Nikisch, Arbeitsrecht , § 5 I 2, p. 31.
21 With regard to the various suggestions cf. only Roger Blanpain, "Represen-
tation of Employees at Plant and Enterprise Level" in Bob A. Hepple (ed.) In-
ternational Encyclopedia of Comparative Law (17 vols., Tiibingen, 1994),
vol. XV, Labour Law, Chapter 13, nos.013-112 et seq.
 6 The Search for Core Labor Standards in Liberalized Trade 183

spective: each legal system decides under which circumstances its public
policy is violated by the application of foreign law. This process has been
harmonized at the European level on the basis of the Rome Convention on
the Law applicable to Contractual Obligations ." Beyond the scope of this
instrument, however, common rules for the application of public policy
have not been agreed-upon. The protection from unfair dismissal can serve
as an example in this respect as well. The application of a foreign law that
does not protect from unfair dismissal would infringe on Article 16 Rome
Convention. In the US, the result would not be the same.
Even at the European level, difficulties arise in the process of evaluating
labor law provisions. This is best reflected by Article 6 of the Rome Con-
vention, which submits the choice of law for an employment relationship
to a control; the concept of the Rome Convention is that the law applicable
in the absence of a choice of law sets a minimum standard of employment
protection that cannot be undermined by the chosen law. In every case
with a choice of law, the court must compare the chosen law and the law
applicable in the absence of such a choice to ascertain which law is more
favorable to the employee. In the few reported decisions and in academic
writings, the comparison of the same sets of rules - unsurprisingly - does
not lead to the same result, but differs from country to country . In Ger-
many, for instance, it is widely recognized that protection from unfair dis-
missal by protecting the existence of the employment relationship is more
favorable than protection based upon compensation. Yet, in Austria the
opposite view appears to prevail. 23 Equally, a German lawyer specializing
in labor law will hardly be convinced by the undifferentiated statement of
the Cour d'Appel de Metz that the French law on protection from unfair
dismissal is "nettement plus favorable que la loi allemande"."

6.2.3 Historical Ranking

Finally, some conclusions may be drawn from the historical evolution of

labor law after the beginning of the Industrial Revolution . Although the
hazards of history may argue against such an attempt, the wide range of
available material reveals certain evolutionary streams in the historical de-

22 OJ No. C027, 26 January 1998, pp. 34-46.

23 Robert Rebhan, Kundigungs- und Entlassungsschutz im Internationalen Pri-
vatrecht - Anmerkung zu OGH v. 29.3.1995, 90b A 12/95, (1996) Oster-
reichisches Recht der Wirtschoft, pp. 68, 70.
24 Cour d'Appel de Metz du 15.10.1997 (Societe Scheurich GmbH & Co KG /
Deschamps), Revue de la jurisprudence sociale 1998, no. 1429,865.
184 Sebastian Krebber

velopment of labor law. Assuming that the questions first addressed are of
particular significance, these patterns can be seen as an argument in favor
of or against the significance of the respective areas of labor law. The his-
torical perspective would in fact seem to be the criterion most genuine to
labor law.
Occupational safety was important early on,> frequently also repre-
senting the beginning of labor legislation." Significantly, the early devel-
opment of occupational safety legislation was not limited to industrialized
countries." Occupational safety legislation also appears - although with a

25 For the basic principles of occupational safety legislation, cf. Stephan Bauer,
"Arbeiterschutzgesetzgebung" in: Ludwig Elster, Adolf Weber and Friedrich
Wieser (eds.), Handworterbuch der Staatswissenschaften (9 vols., 4 thedn., Je-
na, 1923), vol. 1, pp.402 et seq.; Georges Scelle, "L'organisation interna -
tionale du Travail et le B.LT" (Paris, 1930), pp. 18 et seq.; also Rudolf Macha-
cek, "Die Internationale Arbeitsorganisation" in Oswin Martinek (ed.), Arbeit,
Recht und Gesellschaft. Festschrift fur Walter Schwarz (Wien, 1991), pp. 753-
754; Hermann Pechan, "Arbeiterschutz (I) Geschichte" in Erwin v. Beckerath,
Hermann Bente, Carl Brinkmann, Erich Gutenberg, Gottfried Haberler, Horst
Jecht, Walter Adolf Johr, Friedrich Lutge, Andreas Predohl, Reinhard Schae-
der, Walter Schmidt-Rimpler, Werner Weber and Leopold v. Wiese (eds.),
Handworterbuch der Sozialwissenschaften (13 vols., Stuttgart, 1956), vol. 1,
p. 245; for Germany, cf. the extensive survey by Bauer, ibid., pp. 434 et seq.;
Pechan, ibid., p. 247; also Nikisch, Arbeitsrecht, § 2 II 2, p. 16, § 5 I 1, p. 30;
Alfred Hueck and Hans Carl Nipperdey, Lehrbuch des Arbeitsrechts (2 vols.,
7th edn., Berlin, 1963), vol. 1, § 3 III, pp. 9 et seq .
26 Bauer, Arbeiterschutzgesetzgebung, p.402; Ernest Mahaim, "L'Organisation
permanente de travail", (1924) 4, III Recueil des Cours, pp.65, 70; Waclaw
Szubert, "Safety and Health at Work" in Bob A. Hepple (ed.), International
Encyclopedia of Comparative Law (17 vols., Tubingen, 1983), vol. XV, chap-
ter 7, nos . 7-1, 7-3 et seq .
27 For England, cf. Bauer, Arbeiterschutzgesetzgebung, pp. 403, 405 et seq .; for
France ibid. pp.475 et seq.; Switzerland, pp.490 et seq. ; Austria, pp. 506 et
seq., Finland, pp. 534 et seq.; Denmark, Sweden, Norway, pp. 536 et seq.; Ne-
therlands , pp. 551 et seq.; Belgium, pp. 562 et seq.; Portugal, pp. 568 et seq .;
Hungary, pp. 570 et seq.; Luxembourg, pp.575 et seq.; Bulgaria, pp. 576 et
seq. ; Italia, pp. 578 et seq .; Spain, pp. 586 et seq .; Romania, pp. 590; Greece,
pp.597 et seq .; Poland, pp.600 et seq.; Czechoslovakia, pp.602 et seq.; Li-
thuania, pp.607; Estonia, pp.607 et seq.; USA, pp.608 et seq .; Canada,
pp. 634 et seq.; Australia and New Zealand, pp. 642 et seq .; Japan, pp. 684 et
seq . For the development in Germany cf. the extensive survey by Karl Heinrich
Kaufhold, "Die Diskussion urn die Neugestaltung des Arbeitsrechts im Deut-
schen Reich 1890 und die Novelle zur Reichsgewerbeordnung" (1991) Zeit-
schrift fiir Arbeitsrecht, pp. 277, 288 et seq.
 6 The Search for Core Labor Standards in Liberalized Trade 185

certain delay - in numerous countries which today are considered to be

developing or newly industrializing countries, in some case as very lim-
ited, basic and singular rules, but in other cases also with a relatively high
level of protection." Early occupational safety legislation focuses upon
protection from particular health hazards, but concentrates above all on the
protection of certain groups of employees, 29 particularly children," because
children (and women) were cheap labor" and it was therefore very popular
to employ them." Once the former methods of fixing wages and working
conditions disappeared," freedom of association," collective bargaining"
and the freedom to strike" became another early issue addressed by labor
law.

28 For an overview on the following countries cf. Bauer, Arbeiterschutzgesetz-

gebung: Mexiko, pp. 637 et seq .; Central- and Southamerica (Argentina, Pa-
nama, Uruguay, Costa Rica, Ecuador, Brazil, Peru, Venezuela, Nicaragua,
Guatemala, Salvador, Honduras, Chile, Cuba), pp. 638 et seq.; South Africa,
pp . 672 et seq ., Egypt, pp. 676; Guadeloupe, Martinique and Guyana, p. 642;
for the Engl ish colonies in Africa, cf. p. 676; for the German colonies in Afri-
ca, cf. p. 677; for the French colonies in Africa, cf. pp. 677 et seq., for the Por-
tuguese colonies in Africa, cf. p. 679; India, pp. 681 et seq . Many former colo-
nies have at least partially adopted the law of the respective colonial power.
29 Cf. the references in Fn. 27. Furthermore, cf. Pechan, Arbeiterschutz; p. 245.
30 The protection of children represents the start of occupational safety legislati-
on, cf. Stephan Bauer, Arbeiterschutz und Viilkergemeinschaft (Bern, 1918),
p. 79; Mahaim, "Organisation de travail", p. 70. For Germany, cf. Karl Hein-
rich Kaufhold, "150 Jahre Arbeitsschutz in Deutschland: Das preuBische Regu-
lativ von 1839 und die weitere Entwicklung" (1989) Arbeit und Recht 225 et
seq.; Franz-Josef Duwell , "150 Jahre gesetzliches Verbot der Kinderarbeit in
Deutschland", (1989) Arbeit und Recht 233 et seq . For England and Germany,
cf. Markus Reimann, "Der Kinderarbeitsschutz in England und Deutschland bis
zur Ersten Internationalen Arbeiterschutzkonferenz 1890" in Martin Gutzeit
and Markus Reimann (eds .), Liber discipolorum Wiese. Dankschrift Gunther
Wiese (Weinheim 1996), pp . 141 et seq .
31 Cf. Etwa Duwell, Kinderarbeit, pp. 233 et seq .
32 For the reasons cf. Kaufhold, 150 Jahre Arbeitsschutz, 226.
33 Folke Schmidt and Alan C. Neal , "Collective Agreements and Collective Bar-
gaining" in: Bob A. Hepple (ed.), International Encyclopedia of Comparative
Law (17 vols. , Tubingen, 1984), vol. XV , Labour Law, chapter 12, no. 12-6.
34 Cf. only Scelle, L 'organisation internationale du Travail , p. 19; F. Schmidt
and Neal, Collective Agreements, no.° 12-7.
35 Schmidt and Neal, Collective Agreements, nos .012-66 et seq., 12-99 et seq ., 12-
138 et seq ., 12-179 et seq., 12-217 et seq.
36 Schmidt and Neal, "Collective Agreements", no.012-18 et seq.
186 Sebastian Krebber

On the other hand, the protection from discrimination on the grounds of

gender or race did not become the object of labor law legislation until very
recent times." Consequently, anti-discrimination laws are not - without
evaluating or discrediting them - part of traditional labor law.

6.2.4 Conclusion

The following conclusions can be drawn from the labor law perspective:
occupational safety, including the protection of children, the freedom to
form and to join trade unions, the right to collective bargaining and the
right to strike are "in", anti-discrimination provisions are "out".

37 Cf. the overview by Roger Blanpain, "Equality of Treatment in Employment"

in: Bob A. Hepple, International Encyclopedia of Comparative Law (17 vols.,
Tubingen, 1990), vol. XV, Labor Law, chapter 10. no. 10-4 et seq., from which
some of the following have been taken : Australia: Racial Discrimination Act
of 11 June 1975 (no. 52 of 1975); Aboriginal and Torrens Strait Islanders Act
(Queensland Discriminatory Laws of 19 June 1975 (no. 75 of 1975); Human
Rights Commission Act of 14. April 1981 (no. 24 of 1981); Sex Discrimination
Act of 21 March 1984 (no. 4 of 1984); Belgium: Loi tendant a reprimer cer-
tains actes inspires par le racisme ou la xenophobic - Wet tot bestraffmg van
bepaalde door racisme of xenophobie ingegeven daden v. 1981; Brazil: De-
creto-Lei no. 5452 consolidacao das leis do trabalho ; Decreto-Lei no. 5473
regula 0 provimento de cargos e da outras providencias; France: Loi relative a
la lutte contre le racisme v. 1972; Loi modifiant et completant le code du travail
en ce qui conceme les regles particulieres au travail des femmes ainsi que
l'Article 298 du code de la securite sociale et les Articles 187-1 et 416 du code
penal v. 1975; Loi portant modification du code du travail et du code penal en
ce qui conceme I'egalite professionnelle entre les femmes et les hommes v.
1983; India: Protection of Equal Rights Act 1955; Equal Remuneration Act
1976; Ireland: Anti-Discrimination (Pay) Act 1974, der Employment Equality
Act 1977; ltalia: (Parita di trattamento tra uomini e donne in materia di lavoro)
of 9 Dec. 1977; Japan: Law on equal employment opportunity for women
workers - law respecting the improvement of the welfare of women workers
including the guarantee of equal opportunity and conditions for men and
women in the field of employment v. 1972; New Zealand: Human Rights Act
1993; Netherlands: Wet gelijk loon voor mannen en vrouwen v. 1975; Wet
gelijke behandeling van mannen en vrouwen v. 1980; Sweden: Lag on jam-
stalldhet mellan kvinnor och man i arbetslivet v. 1979; South Africa: Employ-
ment Equity Act 1998; USA: Title VII Civil Rights Act 1964 United Kingdom:
Equal Pay Act 1970; Sex Discrimination Act 1975.
 6 The Search for Core Labor Standards in Liberalized Trade 187

6.3 Existing Definitions of Core Labor Standards

6.3.1 Regulations and Proposals in the Context of the

Liberalization of Trade

World Trade
Havana Charter and GATT. The Havana Charter of 1948, which failed
in 1950 because of US opposition to the results of the negotiations," was
not confined to the liberalization of world trade. The Havana Charter and
the International Trade Organization (ITO), which it would have estab-
lished, were supposed to be pillars of the Bretton Woods System. Thus, the
Havana Charter did not only include the GATT, but aimed at shaping an
international trade system. Although explicitly addressing the trade-labor
link, the Charter did not stipulate a catalogue of core labor standards that
every Member State would have to respect. Article 7 of the Havana Char-
ter merely provided that "(ITO) Members recognise that measures relating
to employment must take fully into account the rights of workers under in-
ter-governmental declarations and agreements .....(and) all countries have a
common interest in the achievement and maintenance of fair labour stan-
dards related to productivity, and thus in the improvement of wages and
working conditions as productivity may permit. The Members recognise
that unfair labour conditions, particularly in production for export, create
difficulties in international trade, and accordingly each Member shall take
whatever actions may be appropriate and feasible to eliminate such condi-
tions within its territory."
The GATT limits itself in Article XX lit 3) to provide for a general ex-
ception "relating to the products of prison labour"."
Proposals for the Definition of Core Labor Rights for the Liberalized
World Trade in the Framework of the WTO. There are numerous pro-

38 Dam, The GATT, p. 12; Jackson, World Trading System, p. 38.

39 Attempts in literature to construe Article XX lit. a) so as to include a general
reservation in favor of human rights are not considered in this paper, cf. e.g.
Ernst-Ulrich Petersmann, "From "Negative" to "Positive" Integration in the
WTO: Time For "Mainstreaming Human Rights" Into WTO Law?", (2000)
37 CMLRev, pp. 1363, at p. 1380.
188 Sebastian Krebber

posals of definitions of core labor rights. The IL()4°identifies the following

areas of labor law:
(a) freedom of association and the effective recognition of the right to
collective bargaining;
(b) elimination of all forms of forced or compulsory labour;
(c) effective abolition of child labour; and
(d) elimination of discrimination" in employment and occupation.
The catalogue of the OECD42 only differs in some, yet not insignificant
details and in wording:
(a) freedom of association and collective bargaining, i.e. the right of
workers to form organizations of their own choice and to freely negoti-
ate their working conditions with their employers;
(b) elimination of exploitative forms of child labour, such as bonded la-
bour and labour that put the health and safety of children at serious risk;
(c) prohibition of forced labour, in the form of slavery or compulsory
labour;
(d) non-discrimination in employment, i.e. the right to equal respect and
treatment for all workers.
The parliamentary Assembly of the Council of Europe recommended
the following rights? as basic labor standards:
(a) freedom of association;
(b) the right to collective bargaining;
(c) the prohibition of slavery and forced labour;
(d) equality of remuneration;
(e) non-discrimination;

40 ILO Declaration on Fundamental Principles and Rights at Work, 86 th Session,

Geneva, June 1998, http://www.ilo.org/public/english/standards/declldeclara-
tion/text/index.htm.
41 The relation between the listed rights and the conventions which have been
identified as fundamental by the ILO (below, p. 214) shows that, in this con-
text, only gender discrimination is intended, and not racial discrimination.
42 OEeD (ed.), Trade Employment and Labour Standards, p. 26.
43 Recommendation 1308 on the World Trade Organization and Social Rights,
7 November 1996 .
 6 The Search for Core Labor Standards in Liberalized Trade 189

(f) (an unspecified") minimum age for work.

There are a number of resolutions and reports of the European Parlia-
ment addressing the issue of social standards in a free trade order. The
most comprehensive list of core labor rights appears in the Report on the
communication from the Commission to the Council on the trading system
and internationally recognized labor standards", and includes:
(a) freedom of association;
(b) freedom to engage in collective bargaining;
(c) working hours;
(d) the minimum age for employment;
(e) industrial safety and inspection of working conditions;
(f) the introduction of a code of good conduct for European multina-
tional undertakings.

Regulations in the Context of Regional Free Trade Zones

The most comprehensive provisions regarding labor rights in the context
of regional free trade are to be found in the NAFTA Labor Side Agree-
ment." However, the NAFTA Labor Side Agreement does not identify
uniform core labor rights, it merely refers to the enforcement of certain
provisions of the parties to the agreement." In the case of persistent failure
to enforce its own laws, the NAFTA Labor Side Agreement provides a
several step dispute resolution process. Only if the dispute is about the
non-enforcement of specific subject matters will it be considered by arbi-

44 Recommendation 1308 specifies that all mentioned rights are guaranteed by the
Convention for the Protection of Human Rights and Fundamental Freedoms
and the European Social Charter. Article 7 of the European Social Charter es-
tablishes the minimum age of 15 years. It would seem sensible to apply this
minimum age to the provisions of the recommendation.
45 Report on the communication from the Commission to the Council on the trad-
ing system and internationally recognised labour standards, 11 November
1998, Document A4-0423/98, http://www2.europarl.eu.int/omk/OM-Europarl?
L=DE&PROG=REPORT&PUBREF=-//EP//TEXT+REPORT+A4-1998-0423-
+0+DOC+SGML+VO//DE&LEVEL =3&SAME LEVEL=1
46 North American Agreement on Labor Cooperation. Supplemental Agreement
to the NAFTA, Washington. Ottawa, Mexico City, 14 September 1993, (1993)
32 fLM, p. 1499, http://socrates.berkeley.edu:3333//. trade/.NAFTN.sideLab.
html.
47 Cf. the list included in Annex 1 of the Agreement.
190 Sebastian Krebber

tral panels, that may impose sanctions. Thus, without expressly stating pri-
orities between the different aspects of labor law mentioned in the agree-
ment, the structure of the dispute resolution process indirectly sets up a hi-
erarchy oflabor standards."
The subject matters that can be considered by arbitral panels are ac-
cording to Article 29 (1) so-called technical labor standards with regard to:
(a) occupational safety and health;
(b) child labor;
(c) minimum wage.
The treaty of Asuncion," which laid the foundation for Mercosur, does
not address the trade-labor link at all. In Article 4, it only refers to subsi-
dies, dumping and "other unfair practice". The Ouro Preto protocol" estab-
lishes a socioeconomic consultation forum to consider questions of labor
law." The debate about core labor rights did not have any influence 52 on
the Central American Common Market," the Caribbean Community" and

48 Thomas Schoenbaum, "Remarks at the Meeting of the Section on International

Law of the American Association of Law Schools", (1996) 17 Comparative
Labor Law Journal 347, 349. For further information on the mechanism of dis-
pute resolution and the institutions involved therein, cf. the extensive survey by
Jorge F. Perez-Lopez, The Promotion of International Labor Standards and
NAFTA: Retrospect and Prospects, (1995) 10 Connecticut Journal of Interna-
tional Law, pp. 427, 453 et seq.; also Katherine Van Wezel Stone, "Labor and
the Global Economy: Four Approaches to Transnational Labor Regulation",
(1995) 16 Michigan Journal of International Law, pp. 1008 et seq.; Lance
Compa, "The Multilateral Agreement on Investment and International Labor
Rights", (1998) 31 Cornell International Law Journal, pp. 683, 704 et seq.;
OECD (ed.), Trade, Employment and Labour Standards, pp. 180 et seq.
49 Treaty Establishing a Common Market between the Argentine Republic, the
Federative Republic of Brazil, the Republic of Paraguay and the Eastern Re-
public of Uruguay, Asuncion, 26 March 1991, (1991) 30 ILM, p. 1042.
50 17 December 1994, (1995) 34 ILM, p. 1244.
51 Cf. Compa, Multilateral Agreement, p. 694; Perez-Lopez, The Promotion ofIn-
ternational Labor Standards , p. 468, also with regard to the so far unsuccessful
attempts to draft a Social Charter for Mercosur.
52 Cf. Perez-Lopez , The Promotion of International Labor Standards, pp. 462 et
seq.
53 The Central American Common Market is in existence since 1960; its member
States are: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and even-
tually Panama, cf. Perez-Lopez, The Promotion of International Labor Stan-
dards, pp. 462 et seq.
 6 The Search for Core Labor Standards in Liberalized Trade 191

the Andean Pact. 55 The agreements underlying the ASEAN Free Trade
Zone also do not address labor law issues. 56
It is still unclear, whether the Free Trade Agreement of the Americas,
which the elected Heads of State and Government undertook to negotiate
until 2005, will stipulate core labor rights. The Declaration of Principles"
adopted at the 1994 Summit of the Americas is nebulous in this respect. A
so-called plan of action requires the parties "to further secure the obser-
vance and promotion of workers rights, as defined by appropriate interna-
tional convention"." It is reported that, besides the United States and Can-
ada, the participants oppose an interrelation of free trade and core labor
rights. 59 However, a new plan of action adopted at the Quebec meeting ear-
lier this year calls for respecting the ILO's Declaration on Fundamental
Rights and Principles at Work, the adoption and implementation of legisla-
tion and policies "that provide for the effective application of core labor
standards as recognized by the ILO" and the consideration of implement-
ing fundamental ILO Conventions." These commitments are also men-
tioned in the Declaration of Quebec City."

6.3.2 European Union

The European Union, characterized by particularly close ties between its

Member States, may have extensively addressed the distortion of competi-
tion through different standards of employment protection via a harmoni-
zation of the Member State's labor laws," but the EEC Treaty itself does
not contain a definition of core labor standards. The original version of Ar-

54 For information on the Member States, the historical development and the ob-
jectives, cf. Perez-Lopez, The Promotion of International Labor Standards,
p.464.
55 With regard to the Member States, the historical development and the objec-
tives, cf. Perez-Lopez, The Promotion of International Labor Standards ,
pp. 462 et seq.
56 Abbott, Introductory Remarks, 344.
57 http://www.ftaa-aica.orglministerials /miami_e.asp.
58 As quoted by Perez-Lopez, The Promotion of International Labor Standards,
p.472.
59 Abbott, Introductory Remarks , , p. 344.
60 http://www .summit-americas .orgiDocuments%20for%20Quebec%20City%20
SummitiQuebec/plan-e .pdf, at p. 25.
6\ http://www .summit-amercas.orgiDocuments%20for%20Quebec%20City%20
SummitiQuebecl Declaration%20ot%20Quebec%20City%20(final).htm.
62 Cf. already Schnorr, Arbeitsrecht, pp. 246 et seq.
192 Sebastian Krebber

ticle 117 EEC Treaty stipulated in general terms the objective of improv-
ing the living and working conditions within the EEe.
The only labor right included in the original version of the EEC Treaty
was Article 119 EEC asking for equal pay for women and men. The former
Article 119 EEC Treaty is of interest in this context as its inclusion in the
treaty was motivated by considerations of a distortion of cornpetition r" it
was included in the Treaty at the request of France, who believed that it
had already achieved equal pay for women and men and feared possible
unfair competitive advantages of other Member States who allowed differ-
ences in remuneration.
It is also interesting to note that the first legislative power granted to the
EC in the context of labor law concerned health and safety at work (the
former Article 118a EEC Treaty) .
The present version of the EEC Treaty has not changed much in this re-
gard. Article 137 EEC is the primary legislative power of the EEC regard-
ing labor law. The subject matters of labor law contained in Article 137
EEC Treaty, however, do not represent a catalogue of core labor rights but
only a compromise about the distribution of powers between the ED and
the Member States. This is clearly reflected by the general exclusion in Ar-
ticle 137 (6)64 of the power of the Community for matters related to the
freedom of association and the right to strike. The prohibition of gender
discrimination as set forth in Article 141 EEC Treaty and Article 13 EEC
Treaty will be examined later.65
The so-called Directive on the Posting of Workers in the Framework of
Providing Services," however, deals with the very core of the trade labor
link. The freedom to provide services guaranteed in Article 49 EEC Treaty
allows providers of services from one Member State to offer their services
in another ED Member State, and allows them to bring their employees
with the working conditions of their Member State of origin. A provider of
services from a Member State with low wages and a low level of employ-
ment protection can therefore offer his services in a Member State with

63 Cf. Opinion of Advocate General Dutheillet de Lamothe delivered on 29 April

1971. Gabrielle Defrenne v Belgian State. Reference for a preliminary ruling:
Conseil d'Etat - Belgium. Equal pay. Case 80-70, European Court Reports
1971 p. 445; Christine Langenfeld, Die Gleichb ehandlung von Mann und Frau
im Europiiischen Gemeinschaflsrecht (Baden-Baden, 1990), pp. 30 et seq.
64 Art. 137 (5) in the Nice version of the EEC treaty.
65 Below, pp. 205, 206.
66 Directive 96/71JEC of the European Parliament and of the Council of 16 De-
cember 1996 concerning the posting of workers in the framework of the provi-
sion of services , OJ 1997 No. L 18, 21 January 1997, pp. 1-6 .
 6 The Search for Core Labor Standards in Liberalized Trade 193

higher labor standards at lower prices than the competing enterprises of

that Member State. The Directive attempts to neutralize this comparative
advantage by requiring the Member States to apply specified labor law
provisions to employees that only perform their work in the territory of
that Member State on a temporary basis. These so-called core labor law
provisions cover:
a) maximum work periods and minimum rest periods;
b) minimum paid annual holidays;
c) minimum rates of pay, including overtime rates, but not supplemen-
tary occupational retirement pension schemes;
d) conditions ofhiring-out workers;
e) health, safety and hygiene at work;
f) protective measures regarding the terms and conditions of employ-
ment of pregnant women or women who have recently given birth, chil-
dren and young people;
g) equality of treatment between men and women and other provisions
on non-discrim ination.

6.3.3 Organization of the American States

Articles 35 et seq. of the Charter of the Organization of the American

States extensively address the economic relations between the Member
States and also consider aspects of the liberalization of trade (Articles 39,
40, 42). The Charter does, however, not stipulate a list of core labor stan-
dards. Nevertheless, Article 46 states that the Member States recognize the
necessity of harmonizing the labor and social welfare legislation of the de-
veloping countries in order to ensure equal employee protection and
therewith facilitate the process of Latin American integration. Because of
the reference to Latin American regional integration, however, it is unclear
whether this article aims at a harmonization that will also guarantee certain
minimum labor standards in relation to the more developed North Ameri-
can Member States of the OAS. Furthermore, Article 40 of the Charter,
which stipulates that the more developed States shall not, when granting
concessions to the less developed States, ask for "reciprocal concessions"
which cannot be reconciled with their economic development as well as fi-
nancial and commercial needs, contains a principle which might be raised
against the adoption of core labor standards.
194 Sebastian Krebber

6.3.4 Regulations in the Context of Trade and Investment

Agreements

A number of the so-called commodity agreements include clauses concern-

ing labor standards. As far as can be seen, they do not designate a cata-
logue of binding core labor rights . Furthermore, they usually avoid estab-
lishing actual obligations of the Member States. The following wordings of
the International Rubber Agreement and the International Tin Agreement
are typical in this respect:" "Members declare that they will endeavour to
maintain labour standards designed to improve the levels of living of la-
bour"68or the Member States "will seek to ensure fair labour standards" ."
The draft of a Multilateral Agreement in Investment," which has been
prepared by the OECD/' does not include a catalogue of labor standards
either." Instead, the preamble refers to a commitment to observe certain in-
ternationally accepted core labor rights and to the OECD "Guidelines for
multinational enterprises" ." A clause states that lowering standards of em-
ployee protection in order to attract foreign investment is inappropriate ."

67 The wording of other commodity agreements is equally questionable and non-

committal, see Kullmann, Fair Labour Standards , p.529 (sugar agreement),
pp. 530 et seq . (cacoa). Justifying the clauses, but with weak arguments, Philip
Alston, "Commodity Agreements - As Though People Don't Matter", (1981)
151. WTL., pp.455, 457 et seq.; for a more critical view cf. Gijsbert van
Liemt, "Minimum labour standards and international trade: Would a social
clause work?" (1989) 128 International Labour Review, pp.433, 439; l-M.
Servais, "The social clause in trade agreements: Wishful thinking or an instru-
ment of social progress?" (1989) 128 International Labour Review, pp.423,
426; differentiating, Paul Waer, "Social Clauses in International Trade", (1996)
30 J WT , pp. 25,28.
68 Cfthe Article 54 of the International Natural Rubber Agreement as cited by Ul-
rich Kullmann, ""Fair Labour Standards" in International Commodity A-
greements" , (1980) 14 J W TL., p. 527.
th
69 Cf. Article 42 of the 5 International Tin Agreement as cited by Kullmann,
"Fair Labour Standards", p. 527.
70 Cf. http://www.oecd.org//daf/investment/fdi/mai/mairap95.htm.

7 1 With regard to the background cf. James Salzman, "Labor Rights, Globaliza-

tion and Institutions: The Role and Influence of the Organization for Economic
Cooperation and Development", (2000) 21 Michigan Journal ofInternational
Law , pp. 769, 810 et seq.
72 Cf. http://www.oecd.org//publications/pol_brieflI997/9702]OL.HTM# 12; a

critical view is adopted by Compa, "Multilateral Agreement", pp. 687 et seq.

73 Below, Fn. 96.

74 Cf. http://www.oecd .org//publications/pol_brief/1997/9702_POL.HTM#12 ;

Compa, "Multilateral Agreements" , p. 686.

 6 The Search for Core Labor Standards in Liberalized Trade 195

The trade labor link is thus addressed very unsubstantially which is be-
lieved to be one reason why negotiations for drafting this agreement are at
a standstill. 75

6.3.5 Unilateral Regulations

For obvious reasons, unilateral regulations are not a strong basis for inter-
nationally accepted core labor rights." However, they illustrate as well
which areas of labor law are considered to be particularly important.

Provisions in the Context of Granting Tariff Preferences or

Giving the Right to Impose Duties in Retaliation of Unfair Trade
Practices
EEC Regulation 1154/9877 grants certain tariff preferences concerning pro-
ducts from countries that satisfy the requirements of ILO convention
no. 87 on Freedom of Association and the Right to Organise of 9 July
194878, Convention no. 98 on the Right to Organise and Collective Bar-
gaining of 1 July 194979 and no. 138, Minimum Age Convention, of
26 June 197380•

75 Salzman, "Labor Rights", pp. 817 et seq. provides an extensive survey.

76 As is correctly pointed out for cases of extraterritorial application of a statute
by Van Wezel Stone, "Labor and the Global Economy", p. 1026.
77 Council Regulation (EC) No. 1154/98 of 25 May 1998 applying the special in-
centive arrangements concerning labour rights and environmental protection
provided for in Articles 7 and 8 of Regulations (EC) No. 3281/94 and (EC)
No. 1256/96 applying multiannual schemes of generalised tariff preferences in
respect of certain industrial and agricultural products originating in developing
countries , OJ 1998 No . Ll60, 4 June 1998, pp. 1-10V.
78 ILO Convention C 087, Convention concerning Freedom of Association and
Protection of the Right to Organize, San Francisco, 9 July 1948, in force 4 July
1950, all ILO conventions to be found at: http://ilolex.ilo .ch:1567/english/ con-
vdisp2 .htm.
79 ILO Convention C 098, Convention concerning the Application of the Princi-
ples of the Right to Organize and to Bargain Collectively, Geneva, 1 July 1949,
in force 18 July 1951; all ILO conventions to be found at: http://ilolex.
ilo.ch:1567/english/convdisp2.htm.
80 ILO Convention C 138, Convention concerning Minimum Age for Admission
to Employment, Geneva, 26 June 1973, in force 19 June 1976; all ILO conven-
tions to be found at: http://ilolex.ilo.ch:1567/english/convdisp2 .htm.
196 Sebastian Krebber

The corresponding statute in the US is section 502(a)(4) of the Trade

Act of 1974 which defines internationally recognized worker rights as:"
- the right of association;
- the right to organize and bargain collectively;
- a prohibition on the use of any form of forced or compulsory labor;
- a minimum age for the employment of children;
- acceptable work conditions regarding minimum wages, hours of work,
and occupational safety and health.
Other US statutes (e.g. the Caribbean Basin Economic Recovery Expan-
sion Act of 1990, the Andean Trade Preference Act of 1991, section 301
Trade Act 1974 and section 307 Tariff Act 1930) refer to this catalogue or
stipulate corresponding rights."

Extraterritorial Application of National Labor Law

A State may under certain conditions - which will not be discussed in fur-
ther detail here - apply its national law to fact patterns taking place in for-
eign countries. Even if the preconditions of public international law for ex-
traterritorial application are not met, there is in principle no internal au-
thority to hinder the State from ordering an extraterritorial application of
its own statutes." Extraterritorial application is a common feature in the

81 On section 502(a)(4) of the Trade Act of 1974, see Ian Charles Bailon, "The
Implications of Making the Denial of Internationally Recognized Worker
Rights Actionable Under Section 301 ofthe Trade Act 1974 ", (1987) 28 Virgi-
nia Journal ofInternational Law, pp. 73, 78 et seq.
82 Cf. e.g. the Caribbean Basin Economic Recovery Expansion Act of 1990, the
Andean Trade Preference Act of 1991, section 301 of the Trade Act 1974 and
section 307 ofthe Tariff Act 1930. With regard to these and further statutes, cf.
Jorge F. Perez-Lopez, " Conditioning Trade on Foreign Labor Law: The
U.S. Approach", (1987-88) 9 Comparative Labor Law Journal, pp. 253, 259 et
seq.; see also Jorge F. Perez-Lopez, Promoting International Labor Standards ,
pp .434 et seq.; Compa, " Multilateral Agreements" , p. 693; Bhala, "Trade-
Labor Link", 40 et seq.; Theresa A. Amato, "Labor Rights Conditionality:
United States Trade Legislation and the International Trade Order", (1990)
65 New York University Law Review, pp. 79 et seq.; Bailon, "Implications",
pp. 75 et seq.; Lempp, Sozialdumping, pp. 45, 47, 48, 50.
83 Since Head Money Cases, 122 U.S., pp. 580, 598 et seq. (1884); Whitney v.
Robertson, 124 U.S., pp. 190, 194 (1888) US-American Courts are supposed to
respect a statute's demand of extraterritorial application even where this is a-
 6 The Search for Core Labor Standards in Liberalized Trade 197

context of trade embargoes, but is also a possible approach in this con-

text," even though such provisions might violate the GATT regulations.
Factual examples are rare, however, as only the Anglo-American coun-
tries share a tradition of determining the territorial reach of a statute and
even they show a trend towards limiting the application of their labor law
statutes to internal cases." Several US federal statutes contain occasional
exceptions to this, yet in that context, the statutes' scope of application is
restricted to US-American employers and US-American employees."

6.3.6 Voluntary Commitments

Multinational corporations may consider voluntary commitments for their

branches in developing countries to comply with certain labor standards. 87
The observance of core labor rights may also be imposed on suppliers." In

gainst public international law; see also Restatement (Third) Foreign Relations
Law ofthe United States, §§ 115 (1), 403 comment g (1987) .
84 For a more recent view from the general human rights perspective cf. Kirsten
Schmalenbach, "Multinationale Unternehmen und Menschenrechte", (2001)
39 Archiv des Vtikerrechts, pp. 57, 71 et seq.
85 Cf. the UK statutes: Section 6, 10 Sex Discrimination Act 1975; section 4,8,9
Race Relations Act 1976; section 3(1), (3) Transfer of Undertaking Regulations
1981; section 4(6) Disability Discrimination Act 1995; section 196 Employ-
ment Rights Act 1996. Irische Gesetze: section 2(3) Unfair Dismissals Act
1977; section 25 Redundancy Payments Act 1967.
86 Cf. 42 U.S.c. §§ 2000e(f), 2000e-l(b) (Title VII des Civil Rights Act 1964);
42 U .S.C. §§ 12111(4), 12112(e) (Americans with Disabilities Act); 29 U.S .c.
§ 623(h) (Age Discrimination in Employment Act) . They are therefore unsuit-
able as a model in this context, Matthew Finkin, "International Governance and
Domestic Convergence in Labor Law as Seen from the American Midwest",
(2001) 76 Indiana Law Journal , pp. 143,147.
87 With regard to the motives of voluntary commitments, cf. Robert 1. Liubicic,
" Corporate Codes of Conduct and Product Labeling Schemes: The Limits and
Possibilities of Promoting International Labor Rights Through Private Initia-
tives", (1998) 20 Law and Policy in International Business, pp. 111, 114 et
seq .
88 Cf. e.g. the "Business Partner Terms of Engagement" of Levi Strauss & Co, the
"Human Rights Production Standards" of Reebok, the "A Shared Commitment:
Requirements for Suppliers, Contractors, Business Partners" of Phillips-Van
Heusen, which are all cited by Diane F. Orentlicher and Timothy A. Gelatt,
"Public Law , Private Actors: The Impact of Human Rights on Business Inves-
tors in China", (1993 /1994) 14 Northwestern Journal ofInternational Law and
Business, pp. 66, 125 et seq .; see also Lance A. Compa and Tashia Hinchliffe-
198 Sebastian Krebber

addition, there are "labeling initiatives".89 In practice, there are both initia-
tives of individual companies and several Codes of Conduct. It is impossi-
ble to present an overview of the individual initiatives of transnational cor-
porations" to observe certain labor standards. Some of the examined
initiatives are restricted to prohibitions of forced and prison labor, most are
more comprehensive. The American Rating Agency Council on Economic
Priorities, following the model of ISO quality standards , has developed in-
ternational social minimum standards ."
The draft? of a United Nations Code of Conduct on Transnational Cor-
porations merely stipulates a comprehensive prohibition of discrimination
and an unspecified duty to respect the human rights in the host country
(no. 13).93 The Tripartite Declaration of Principles Concerning Multina-
tional Enterprises and Social Policy," which has been adopted by the ILO
in 1977, stipulates principles regarding non-discrimination, the freedom of
association, the freedom to collective bargaining, adequate wages and
healthy and safe working conditions ." The "Guidelines for multinational
enterprises" of the OECD96 go further :" besides addressing questions of
freedom of association and collective bargaining they encourage corpora-

Darricarrere, "Enforcing International Labor Rights Through Corporate Codes

of Conduct", (1995) 33 Columbia Journal of Transnational Law, pp. 663,
675 et seq.
89 Examples are provided by Brassel and Windfuhr, Welthandel, pp. 87 et seq.
90 Further initiatives, which are not mentioned in Fn. 88, are addressed by Liubi-
cic, "Codes of Conduct and Product Labeling", pp. 122 et seq.; Compa and
Hinchliffe-Darricarrere, "Corporate Codes of Conduct", pp. 672 et seq.
91 Cf. Liubicic, "Codes of Conduct and Product Labeling", pp. 126 et seq.; see
also Frankfurter Allgemeine Zeitung, 27.12.1999, at p. 15.
92 With regard to the historical development, cf. Wolfgang Sprote, "Negotiations

on a United Nations Code of Conduct on Transnational Corporations", (1990)

33 German Yearbook ofInternational Law, pp. 331,332 et seq.
93 See also Carsten Thomas Ebenroth, Code of Conduct - Ansdtze zur vertragli-
chen Gestaltung internationaler Investitionen (Konstanz, 1987), p. 123;
Schmalenbach, "Multinationale Unternehmen", p. 67.
94 ILM 1987, pp. 422 et seq.; cf. OECD (ed.), Trade, Employment and Labour
Standards , pp. 190 et seq.
95 Cf. Ebenroth, "Code of Conduct", pp . 370 et seq.
96 OECD Doc . OECD/GD /97 /40 , 1997; also http ://www.oecd .orgl/daflinvestment
I guidelines/mnetext.htm.
97 The attention which the OECD devotes to problems of labor law in this context

is equally emphasized by Bernhard Grossfeld and Ulrich Hubner, "Erklarung

und Leitsatze der OECD fur multinationale Unternehmen", (1978) Zeitschrift
fir Unternehmens- und Gesellschaftsrecht , pp. 156, 169.
 6 The Search for Core Labor Standards in Liberalized Trade 199

tions to participate in the abolition of child labor and forced labor." The
recommendations are also concerned with occupational safety and mini-
mum employee participation. The former EEC Code of Conduct for busi-
nesses active in South Africa concentrated on issues of racial discrimina-
tion and the improvement of the situation of black workers in South
Africa ."

6.3.7 Synopsis

The catalogues of ILO, OECD and the Parliamentary Assembly of the

Council of Europe disclose the common core of the numerous attempts to
identify internationally accepted labor standards: freedom of association,
collective bargaining, prohibition of forced labor and slavery, prohibition
of child labor and non-discrimination provisions with respect to race and
gender. Only the European Parliament, the US Trade Act, the NAFTA La-
bor Side Agreement, the European Directive on the Posting of Workers in
the Framework of Providing Services as well as some voluntary commit-
ments also include health and safety at work.
If one contrasts this finding with the results of the labor law perspective,
the scant attention given to health and safety at work is as surprising as the
general inclusion of anti-discrimination provisions.
The origin of the discussion of labor standards, i.e. diverging wage lev-
els and diverging ancillary wages costs, is only addressed by the NAFTA
Labor Side Agreement and even more extensively in the Directive on the
Posting of Workers in the Framework of Providing Services, two instru-
ments adopted in the context of close regional relations between a limited

98 Cf. section IV of the Guidelines, Employment and Industrial Relations; on sec-

tion IV, see OECD (ed.), Trade, Employment and Labour Standards, pp. 193 et
seq.; Salzman, "Labor Rights", pp. 788 et seq.
99 Adopted by the Foreign Ministers of the Community in 1977, revised in 1985,
cf. Ebenroth, "Code of Conduct", p.40. With regard to the Code, see only
Anne Akeroyd, Franz Ansprenger, Reinhard Hermie and Christopher R. Hill
(eds.), European Business and South Africa: An Appraisal of the EC Code of
Conduct (Munich, 1981); Alison Wiebalck, The European Economic Commu-
nity Code of Conduct for Companies with Interests in South Africa (Regens-
burg, 1992). The demands of the German trade Union Industriegewerkschaft
Metall for minimal standards labor relations and standards about labor conflicts
in South African subsidiaries of German corporations went in the same direc-
tion. Those demands are listed in Ursula Kiausch, "Forderungskatalog der IG
Metall an bundesdeutsche Untemehmen mit Tochtergesellschaften in Siidafri-
ka", (1988) 6 Arbeitsrecht im Betrieb, pp. 133, 136.
200 Sebastian Krebber

number of States. Yet, due to their direct link to wage levels, the prohibi-
tion of forced and prison labor, child labor and equal pay also relate to the
heart of the controversy about minimum labor standards.
Most of the catalogues are non-legally binding proposals. The absence
of legally binding labor standards, however, does not express a lack of in-
ternational recognition of certain areas of labor law protection, but reflects
the decision in principle against a link between world trade liberalization
and labor standards. The US Trade Act of 1974 and the EEC Regulation
1154/98 are both legally binding and have been adopted in the context of
world trade, but they are unilateral instruments and are not based upon in-
ternational consensus. Apart from Article:XX lit. e) of the GATT, once
again, only the NAFTA Labor Side Agreement and the Directive on the
Posting of Workers in the Framework of Providing Services are interna-
tionally binding legally.

6.4 Possible Grounds for Core Labor Standards

6.4.1 General Public International Law

Labor Standards as Human Rights

Introductory remarks. This research did not only concentrate on provi-

sions directly affecting labor rights, but also looked at human rights which
are not specifically related and limited to an employment context, but
which may nonetheless affect labor law cases, namely the prohibition of
discrimination and general rights related to health and safety. In the latter
case, however, there is some uncertainty, because it is often unclear
whether under the regime of the respective human rights conventions,
these rights include the duty of the State to actively protect them from in-
fringements by others than the State itself (Schutzpflichten) or whether
they have some immediate or indirect effect against third parties (Dritt-
wirkung). On the other hand, numerous human rights conventions explic-
itly include an obligation of the Member States to guarantee the human
rights stipulated in the respective instrument.!" Even when an obligation

100 See e.g. Article 2 (1) of the International Covenant on Civil and Political
Rights and the International Covenant on Economic, Social and Cultural
Rights; Article 2 of the Convention on the Elimination of All Forms of Dis-
crimination Against Women, of the International Convention on the Elimina-
 6 The Search for Core Labor Standards in Liberalized Trade 201

does not exist, the corresponding guarantees reflect a general system of

values.
The human rights provisions affecting labor rights vary as to their legal
effect: subjective right of the individual, mere State obligation, or even
only a programmatic character without any legally binding effect; 101 diver-
gences also exist with regard to the defmition of the scope of these rights
and their limitations. Yet these differences may be neglected at the stage of
the identification of labor law rights in human rights instruments. Differ-
ences with regard to the preconditions and the limitations of a right do not
challenge its existence. Moreover, any obligation to respect certain labor
standards in a free world trade order would be imposed on States, so that
the issue of whether the respective instruments grants subjective rights to
individuals is insignificant. Finally, many pertinent rights are guaranteed
by more than one convention; therefore, if one convention does not have
any legally binding effect, this is often compensated by another convention
that does.
In addition, regarding some of the rights in question, one may at least
think about whether they have become part of the ius cogens.!'" One

tion of All Forms of Racial Discrim ination and the Convention on the Rights of
the Child) ; Part I of the European Social Charter.
101 Cf. only Jorg Paul Muller, Soziale Grundrechte in der Verfassung? , (2nd edn,

Basel, 1981), pp. 282 et seq .

102 With regard to the term of ius cogens cf. in particular Lauri Hannikainen, Per-

emptory Norms (jus cogens) in International Law (Helsinki, 1988), pp . 1 et

seq., 208 et seq.; Stefan Kadelbach, Zwingendes Vtilkerrecht (Berlin 1992),
pp. 130 et seq.; cf. in particular Hannik ainen, ibid., p. 453 (child labor as a part
of the slavery prohibition), pp . 467 et seq. (prohibition of discrimination in
general), pp. 471 et seq. (discrimination on the ground of race) , pp. 476 et seq.
(discrimination on the ground of sex); Kadelbach, ibid., pp.74, 277 et seq.
(race discrimination), pp. 305 et seq. (equality in general) . The ILO is of the
opinion that the rights set fourth in the declaration of 1998 (above, p. 188) are
binding for all ILO Member States, whether they have ratified a certain con-
vention or not. The general ius cogens character of social, cultural and eco-
nomic rights is unsettled, cf. Alfred Verdross and Bruno Simma, Universelles
Volkerrecht: Theorie und Praxis (3 rd edn., Berlin, 1984), p. 77; but see Kadel-
bach , ibid ., p. 305. According to a recent publication of Schmalenbach, "Multi-
nationale Untemehmen", p. 62, the prohibition of child labor, forced labor and
discrimination on the ground of race are, besides other rights , which are not of
interest in this context, accepted even if not embodied in human rights conven-
tions. On certain forms of child labor, cf. Janelle M. Diller and David A. Levy,
" Child Labor, Trade and Investment: Toward the Harmonization of Interna-
tional Law", (1997) 91 American Journal ofInternational Law, pp. 663, 664 et
202 Sebastian Krebber

should note that the search for core labor standards in international trade is
located on the borderline between legally binding rules of public interna-
tionallaw and political and ethical argument. Those rights that may be part
of the ius cogens are also the strongest in the political arena, because they
are part of an international consensus of values. The more questionable the
binding character of a certain right as part of the ius cogens is, the weaker
it is as a political argument. Both the legal and the political persuasive
force stem from a consensus of values, based primarily on declarations and
commitments of States, while the actual State practice is only of secondary
importance.
In international conventions which, like the European Social Charter or
the Charter of Fundamental Rights of the European Union, extensively ad-
dress issues of labor law and therefore also comprise details, it can be
questioned whether all the stipulated rights represent human rights. This
question, however, is not relevant to this paper and is not included.
Provisions prohibiting torture are also not included in this outline, as
their link to labor law is too far-fetched. The prohibition of slavery is gen-
erally recognized in public international law, and so provisions on this sub-
ject are also not dealt with. Note, however, that supplying children and ju-
veniles to exploit them for work is included in the slavery prohibition'<.
Because of the existing GATT provisions, prison labor and compulsory la-
bor are also not included!".
General Public International Law.!"
a) Universal Declaration of Human Rights of 10 December 1948/06 The
main provisions relating to labor law are Articles 23 and 24. According to
Article 23 no. 1, every person has a right "to just and favourable condi-
tions of work". Article 23 no. 2 stipulates a right "to equal pay for equal
work", Article 23 no. 3 guarantees the right of everyone who works "to
just and favourable remuneration". Article 23 no. 4 grants the right "to
form and join trade unions" for the protection of workers' interests. Arti-
cle 24 concerns the right to "reasonable limitation of working hours and

seq. For a critical view regarding the ius cogens character of human rights in
general, cf. Frederic Sudre, Droit international et europeen des droits de
I'homme (Paris, 1989), pp. 54 et seq.
103 Cf. Article 1 lit d) of the Supplementary Convention on the Abolition of Slav-
ery, the Slave Trade, and Institutions and Practices Similar to Slavery,
http://www.bri .ca/uninfo/treaties/3 O.shtml.
104 Sudre, Droits de l'homme, pp. 141 et seq.

105 For the status of ratification of the most important human rights convention,
see http://www.unhchr.ch/pdflreport.pdf.
rd
106 GAOR 3 Sess., Resolutions part 1, p. 71.
 6 The Search for Core Labor Standards in Liberalized Trade 203

periodic holidays with pay". Besides, Article 3 includes a "right to security

of person". The prohibition of discrimination contained in Article 2 only
refers to the rights and freedoms of the Universal Declaration of Human
Rights and does therefore not represent a general prohibition of discrimi-
nation in the realm oflabor law.
b) International Covenant on Civil and Political Rights of 19 December
1966./07 Article 2 (1) relates to discrimination. It does not establish a gene-
ral prohibition of discrimination, but only one regarding the rights guaran-
teed by the covenant. Article 3, which addresses the "equal right of men
and women", takes a similar approach . Discrimination is also addressed in
Article 26. Article 22 guarantees "the right to freedom of association with
others". Article 9 mentions a right to "security of person". This article
regulates at length the right to personal freedom, but it seems doubtful if it
includes the protection from health hazards .
c) International Covenant on Economic, Social and Cultural Rights of
19 December 1966. 108 The International Covenant on Economic, Social
and Cultural Rights is of particular importance for labor law, but according
to the conventional view its binding force is substantially weaker than that
of the Covenant on Civil and Political Rights.!'" In the same wording as
Article 3 of the Covenant on Civil and Political Rights, Article 3 refers to
the "equal right of men and women", and once again does not establish a
general prohibition of discrimination but only one in relation to "the rights
set forth in the present Covenant". Article 2 (2), corresponding to Arti-
cle 2 (1) of the Covenant on Civil and Political Rights, addresses similar
issues and also mentions race discrimination. Article 6 refers to a "right to
work" . According to Article 7, the Member States recognize the right for
everyone to fair and favorable working conditions. This right includes in
particular: adequate pay, equal treatment of men and women with regard to
working conditions and remuneration, safe and healthy working condi-
tions, and "rest, leisure and reasonable limitation of working hours and pe-
riodic holidays with pay as well as remuneration for public holidays". Ar-
ticle 8 provides for a "right of everyone to form trade unions and join the
trade unions of his choice", Article 10 no. 2 guarantees paid maternity

107999 UNTS 171.

108 993 UNTS 3.
109 Cf. only Peter A. Kohler, Sozialpoliti sche und sozialrechtliche Aktivitdten in

den Vereinten Nationen (Baden-Baden, 1987), pp. 955 et seq.; see also Bruna
Simma and Sabine Bennigsen, "Wirtschaftliche, soziale und kulturelle Rechte
im Volkerrecht" in Jurgen F. Bauer and RolfO . Belke (eds.), Festschrift fur
Ernst Steindorff(Berlin 1990), pp. 1477, 1490.
204 Sebastian Krebber

leave, and Article 10 no. 3 imposes limits upon the employment of chil-
dren and juveniles. Article 12 contains the Member States' acknowledge-
ment of the "right of everyone to the enjoyment of the highest attainable
standard of physical and mental health", which, according to Article 12 (2)
lit. b) includes measures for the "improvement of all aspects of environ-
mental and industrial hygiene".
d) Convention on the Elimination of All Forms of Discrimination
Against Women of 18 December 1979.110 The title of this convention al-
ready indicates its broad scope of application that is not limited to labor
law. Article 11 of the pact extensively addresses the elimination of "dis-
crimination against women in the field of employment". The catalogue is
comprehensive and according to Article 11 (1) establishes a duty to guar-
antee the following rights: the right to work, the right to the same em-
ployment opportunities, including the application of the same criteria for
selection in matters of employment, the right to free choice of profession
and employment, the right to promotion, job security and the right to re-
ceive vocational training, the right to equal remuneration for work of equal
value as well as equality of treatment in the evaluation of the quality of
work, the right to social security, particularly in cases of retirement, unem-
ployment, sickness, invalidity and old age and the right to protection of
health and to safety in working conditions. Article 11 (2) aims at the pre-
vention of discrimination against women on the ground of marriage or ma-
ternity (protection from dismissal, paid maternity leave, encouragement of
"the provision of the necessary supporting social services to enable parents
to combine family obligations with work responsibilities and participation
in public life, in particular through promoting the establishment and devel-
opment of a network of child-care facilities", protection from harmful ac-
tivities during pregnancy).
e) International Convention on the Elimination of All Forms of Racial
Discrimination:"! Like the previous convention, the Convention on the
Elimination of All Form of Racial Discrimination has a wide scope of ap-
plication and therefore also relates to labor law issues. Article 5 lit. e) (i)
stipulates the rights "to work, to free choice of employment, to just and fa-
vorable conditions of work, to protection against unemployment, to equal
pay for equal work and the right to just and favorable remuneration". Arti-
cle 5 lit e) (ii) guarantees the "right to form and join trade unions", (v) re-
fers to the "right to education and training".

110 1299 UNTS 13.

1117 March 1966, 660 UNTS 195.
 6 The Search for Core Labor Standards in Liberalized Trade 205

J) Convention on the Rights of the Child of20 November 1989.111 Due to

its nature, the Convention on the Rights of the Child concentrates even less
on the area of labor law than the Conventions on the Elimination of Dis-
crimination against Women and of Racial Discrimination, but it does con-
tain some pertinent provisions. Article 32 of the convention establishes the
child's right "to be protected from economic exploitation and from
performing any work that is likely to be hazardous or to interfere with the
child's education, or to be harmful to the child's health or physical, mental,
spiritual, moral or social development". According to Article 1 of the con-
vention "a child means every human being below the age of eighteen years
unless under the law applicable to the child, majority is attained earlier".
Article 32 needs to be seen in connection with the second and third sen-
tence of Article 10 no. 3 of the Covenant on Economic, Social and Cultural
Rights. The second sentence of Article 32 (2) requires the contracting
States to provide for "a minimum age or minimum ages for admission to
employment"(a) and for "appropriate regulation of the hours and condi-
tions of employment"(b). Article 15 mentions the general "right of the
child to freedom of association and to freedom of peaceful assembly". It is
doubtful to what extent this includes the freedom to form and join trade
unions. As long as the child can be legally employed in this occupation, it
would seem sensible to include the freedom to form and join trade unions
under this provision.
Regional Public International Law.
a) Organization for Security and Co-operation in Europe (OSCE). Even
before the Conference on Security and Co-operation in Europe became the
organization of the same name'!', the participating States concluded a con-
vention at the Copenhagen meeting of the CSCE in order to "strengthen
respect for, and enjoyment of, human rights and fundamental freedoms, to
develop human contacts and to resolve issues of a related humanitarian
character", which deal with labor law questions as well'!', No. 9.3 ad-
dresses the "right of association". No. 26 requires the participating States
to encourage and support "free and independent labor unions" within the
scope of this provision. Without further specifications, no. 13 mentions the
"recognition of the rights of the child".
b) European Union.
EEe Treaty. As Article 141 EEC Treaty illustrates, the principle of equal
pay included in former Article 119 was developed into a general prohibi-

112 GAOR 44t h Sess., Resolutions, p. 166.

113 EuGRZ 1995, p. 329 .

114 EuGRZ 1990, pp. 239 et seq.

206 Sebastian Krebber

tion of gender-based discrimination in the area of social policy. 115 More-

over, there are several directives regarding equal treatment of men and
women.!" Article 13 EEC Treaty deals with discrimination in general.
Two directives adopted under this provision also apply to labor law is-
sues'".
The Social Charter ofFundamental Rights. The Social Charter of Funda-
mental Rights is a legally non-binding declaration of the heads of State and
government of the EC Member States, by which they intended to solemnly
emphasize'" the regard for the social dimension of the Community in the
course of the realization of the internal market. Thus, this document is fac-
tually linked to the liberalization of trade. Yet, the Social Charter is more
than a catalogue of social human rights; it contains a plan of action for the
Community's social policy as illustrated by nos . 7-9, which aim at the im-
provement of living and working conditions. The Social Charter mentions
the following social rights: the right to fair remuneration, a right to social
security, the right to freedom of association and to collective bargaining,
improvement of worker's participation, equal treatment of male and female

115 Cf. Sebastian Krebber in Christian Calliess and Matthias Ruffert (eds.)
EUVIEGV (Neuwied, 1999), Article 141 no.075; see also RolfBirk in Reinhard
Richardi (ed.), Miinchener Handbuch zum Arbeitsrecht (2 vols., 2nd edn., Mu-
nich, 2000). § 19, vol. 1, no.08 et seq .
116 Council Directive 75/l171EEC of 10 February 1975 on the approximation of

the laws of the Member States relating to the application of the principle of
equal pay for men and women, OJ 1975 No. L45, 19 February 1975, pp. 19-
20; Council Directive 76/2071EEC of 9 February 1976 on the implementation
of the principle of equal treatment for men and women as regards access to
employment, vocational training and promotion, and working conditions, OJ
No. L39, 14 February 1976, pp. 40-42; Council Directive 79/7IEEC of 19 De-
cember 1978 on the progressive implementation of the principle of equal treat-
ment for men and women in matters of social security, OJ 1979 No. L6,
10 January 1979, pp. 24-25 ; Council Directive 86/3781EEC of24 July 1986 on
the implementation of the principle of equal treatment for men and women in
occupational social security schemes, OJ 1986 No. L225, 12 August 1986,
pp. 40-42; Council Directive 97/80/EC of 15 December 1997 on the burden of
proof in cases of discrimination based on sex, OJ 1998 No. Ll4, 10 January
1998, pp. 6-8.
117 Council Directive 2000/431EC of 29 June 2000 implementing the principle of

equal treatment between persons irrespective of racial or ethnic origin, OJ 2000

No. Ll80, 10 July 2000, pp.22-26; Council Directive 2000/781EC of
27 November 2000 establishing a general framework for equal treatment in
employment and occupation, OJ 2000 No. L303, 2 December 2000, pp. 16-22.
th
118 Cf. the 13 consideration of the charter.
 6 The Search for Core Labor Standardsin Liberalized Trade 207

workers, protection of health and safety at work, protection of children and

juveniles.
The Charter of Fundamental Rights of the European Union. The Charter
of Fundamental Rights of the European Union" 9 is also, at this point in
time, not legally binding. It is subdivided into chapters on dignity, free-
doms, equality, solidarity, citizens' rights and justice and concludes with
general provisions. Fundamental rights relevant to labor law are primarily
included in the chapter on solidarity. The charter guarantees: a right to
physical and mental integrity (Article 3), the freedom of assembly and as-
sociation (Article 12), the freedom to chose an occupation and right to en-
gage in work (Article 15), general non-discrimination (Article 21), equality
between men and women (Article 23), a workers' right to information and
consultation within the undertaking (Article 27), the right of collective
bargaining and action (Article 28), protection in the event of unjustified
dismissal (Article 30), fair and just working conditions (Article 31), prohi-
bition of child labor and protection of young people at work (Article 32),
the right to protection from dismissal connected with maternity and the
right to paid maternity leave and to parental leave following the birth or
adoption of a child (Article 32 (2)) .
Statement of the European Parliament on Fundamental Rights and Free-
doms. The statement of the European Parliament on Fundamental Rights
and Freedoms of 1989 addresses the following relevant issues: a prohibi-
tion of discrimination on the grounds of sex or race (Article 3 (2)), free-
dom of association (Article 11), an unspecified right to just working condi-
tions (Article 13), the right to collective bargaining, the right to collective
action and information and consultation rights for workers (Article 14).
c) Council of Europe The European Convention for the Protection of Hu-
man Rights and Fundamental Freedoms of 4 November 1950 120 mentions
the following rights: Article 4, prohibition of slavery, forced or compul-
sory labor; Article 11 (1), right to freedom of peaceful assembly and to
freedom of association with others and Article 14, prohibition of discrimi-
nation regarding the rights set forth in the convention.
The European Social Charter of 18 October 1961 naturally includes an
important number of rights that are relevant: the right to just conditions of
work established by Article 2, which requires the signatory States to pro-
vide: reasonable daily and weekly working hours (no. 1), public holidays

119 OJ 2000 No. C364, 18 December 2000, pp. 1-22.

120 European Convention for the Protection of Human Rights and Fundamental
Freedoms, StraBbourg, 4 November 1950, 213 UNTS 221 .
208 Sebastian Krebber

with pay (no. 2), a minimum of two weeks annual holiday with pay (no. 3),
additional paid holidays or reduced working hours for workers engaged in
dangerous or unhealthy occupations as prescribed (no. 4) and a weekly rest
period (no. 5). The provision of Article 2 no. 1 is important in our context,
establishing a duty to progressively reduce the working week "to the ex-
tent that the increase of productivity and other relevant factors permit". Ar-
ticle 3 stipulates the right to safe and healthy working conditions, Article 4
stipulates a right to fair remuneration, which also includes the right of men
and women workers to equal pay for work of equal value (no. 3) and the
right of all workers to a reasonable period of notice for termination of em-
ployment (no. 4). Article 5 ensures the right to organize, Article 6 the right
to bargain collectively. Article 7 deals with the right of children and young
persons to protection. The "rights of the employed women to protection",
as stipulated in Article 8 include maternity protection, protection from
dismissal on grounds of maternity leave and restrictions regarding the em-
ployment of women at night work and underground mining. The Addi-
tional Protocol to the European Social Charter of 1988 grants a right to
equal treatment in matters of employment and occupation without dis-
crimination on the grounds of sex (Article 1), the workers' right to infor-
mation and consultation (Article 2) and certain rights to participation in the
determination and improvement of the working conditions and working
environment (Article 3).
d) African Charter on Human and Peoples' Rights of 26 June 1981
(Banjul Charter). This charter, which is also referred to as the Banjul
Charter, t21 refers to a general freedom of association in Article 10. The
freedom to form and join trade unions is not explicitly mentioned, but the
wording of Article 10 appears wide enough to cover it. Article 15 provides
for a right to work under equitable and satisfactory working conditions and
to receive equal pay for equal work. The general prohibition of discrimina-
tion contained in Article 2 also implies a prohibition of discrimination on
the grounds of race or sex. Article 16 no. 1 establishes the right of every
individual to enjoy the best attainable standard of physical and mental
health. Article 18 no. 3, finally, mentions the duty of the State to ensure

121 In force since 21 October 1986, EuGRZ 1990, p. 348; ILM 1982, 58. With re-
gard to the special status of the social human rights in the Banjul Charter, cf.
E. Obinna Okere, "The Protection of Human Rights in Africa and the African
Charter on Human and Peoples' Rights: A Comparative Analysis with the Eu-
ropean and American Systems", (1984) 6 Human Rights Quarterly, pp. 141,
145, 147. Yet Okere also adopts a critical view as to the practical enforceability
of these rights in Africa (p. 147). But see Simma and Bennigsen, Rechte im
Volkerrecht, p. 1484.
 6 The Search for Core Labor Standards in Liberalized Trade 209

the protection of the rights of the woman and the child as stipulated in in-
ternational declarations and conventions.
e) Arab Charter on Human Rights of 15 September 1994. Article 2 of the
Arab Charter on Human Rights' > contains a prohibition of discrimination
inter alia on grounds of race and sex regarding the rights and freedoms
recognized in the charter. In addition to the general right to freedom of
peaceful assembly and association of Article 28, Article 29 of the charter
guarantees the right to form trade unions and the right to strike. Article 30
refers to the right to work, Article 32 guarantees equality of opportunity in
regard to work, which includes the right to equal remuneration for work of
equal value. According to Article 38 (2), the State undertakes to provide
outstanding care and special protection for the family, mothers and chil-
dren. Article 39 establishes the right of juveniles "to be afforded the most
ample opportunities for physical and mental development". However,
these two provisions do not expressly refer to the field of employment. Fi-
nally, Article 5 guarantees a right to life, but because it is connected with
the right to liberty and security of person, it is unclear how much protec-
tion this provision offers from health hazards.
j) American Convention on Human Rights of 22 November 1969. Arti-
cle 16 of the American Convention on Human Rights!" guarantees the
"freedom of association (..) for labor (...) purposes". Article 19, which re-
lates to the rights of the child, does not expressly take account of labor law
issues, and merely refers in broad terms to "the measures of protection" of
the minor child "required by his condition as a minor by his family, society
and the State".
According to Article 26, the contracting States to the Convention on
Human Rights undertake to achieve the realization of the cultural standards
set forth in the Charter of the Organization of the American States. The
significant provisions in this respect are Article 34 and in particular Arti-
cle 45 of the Charter. Article 34 lit. g) mentions "fair wages, employment
opportunities, and acceptable working conditions for all". Article 45 pre-
sents a number of so-called "principles and mechanisms"; the following
are of interest in this context: "Work is a right and a social duty, it gives
dignity to the one who performs it, and it should be performed under con-
ditions, including a system of fair wages, that ensure life, health, and a de-
cent standard ofliving for the worker and his family, both during his work-

122 Arab Charter on Human Rights. Cairo, 15 September 1994, (1997) 18 Human
Rights Law Journal , pp. 151 et seq.
123 American Convention on Human Rights, Jan Jose, 22 November 1969, ILM

1970, p. 99.
210 Sebastian Krebber

ing years and in his old age, or when any circumstance deprives him of the
possibility of working" (lit. b); the right of workers to "associate them-
selves freely" (lit. c) and the "recognition of the importance (...) of organi-
zations such as labor unions" (lit. g).
The Additional Protocol to the American Convention on Human Rights
in the Area of Economic, Social and Cultural Rights'> ("Protocol of San
Salvador") contains further rights relevant for this examination. Article 6
introduces the right to work, which includes the opportunity to secure the
means for living a dignified and decent existence. Article 7 specifies the
scope of this right as covering inter alia the right to equal wages for equal
work (lit. a), protection in cases of unjustified dismissal (lit. d), "safety and
hygiene at work" (lit. e), certain restrictions, yet no general prohibition of
the employment of children and juveniles (lit. f), a "reasonable limitation
of working hours, both daily and weekly" (lit. g) and paid vacations as
well as remuneration for national holidays (lit. h). Article 8 of the protocol
concerns the Trade Union Rights. Furthermore, Article 3 of the protocol
provides for an "obligation of nondiscrimination", inter alia regarding sex
and race, in relation to the rights set forth in the protocol.
g) Human Rights Declaration by the ASEAN Inter-Parliamentary Or-
ganization. The Human Rights Declaration by the ASEAN Inter-Parlia-
mentary Organization.t> which was adopted by this contact group of the
parliaments of the ASEAN States!" at their General Assembly in 1993, is
particularly brief with regard to rights of interest for the examined issue. A
"right to freedom of association" is guaranteed in general terms by Arti-
cle 13, yet, the right to form trade unions is not explicitly mentioned. At
several points, the declaration refers to the general equality of all human
beings (Article 2, 11); it does not, however, contain a prohibition of dis-
crimination. The spirit of the ASEAN Inter-Parliamentary Organization is
well reflected by Article 5, which states, that "the universal promotion and
protection of human rights should take place in the context of international
cooperation, based on respect for national sovereignty, territorial integrity
and non-interference in the internal affairs of states, and human rights

124 Additional Protocol to the American Convention on Human Rights in the Area
of Economic, Social and Cultural Rights, San Salvador, 17 November 1988,
ILM 1989, p. 161.
125 Cf. http://www.rwgmechanism.com/aipo.html. There is no regional human

rights convention in Asia, cf. Michaela Wittinger, Die drei regionalen Men-
schenrechtssysteme, (1999) Jura, 405 in Fn. 4.
126 Cf. http://www.aipo.org.
 6 The Search for Core Labor Standards in Liberalized Trade 211

should not be used as a conditionality for economic cooperation and de-

velopment assistance".
Conclusion. The overview of the possible bases of core labor standards in
international human rights instruments explains the choice of the rights in-
cluded in many of the catalogues of core labor rights mentioned earlier:
The search for core labor standards in a liberalized world trade does not
proceed from a labor law perspective but from a human rights approach. 127
This can be shown most clearly by the absence of regulations concern-
ing safety at work. Health and safety at work are only mentioned in a few
international human rights conventions (International Covenant on
Economic, Social and Cultural Rights of 19 December 1966, Convention
on the Elimination of All Forms of Discrimination Against Women, the
Social Charter of Fundamental Rights, the European Social Charter, the
American Convention on Human Rights of 22 November 1969). This ab-
sence cannot be compensated by general provisions about the protection of
life and health, as those are even more rare. Moreover, the human rights
perspective explains the overwhelming emphasis placed on gender and ra-
cial discrimination. They are both firmly rooted in international human
rights conventions and, at the general public international law level, both
are also dealt with extensively in a special Convention. In both areas, the
human rights approach does not conform with the labor law perspective.
International conventions offer a sufficiently strong basis for the right to
freedom of association and collective bargaining as well as the prohibition
of child labor. In those areas, the labor law and the human rights approach
correspond with each other.
In examining the regional human rights instruments, the most striking
result is the poor record for Asia, while the African, Arab and - not sur-
prisingly - the American region have developed far-reaching guarantees.

Public International Law in the Field of Labor Law

Universal Public International Law: The International Labor Organi-
zation. ILO conventions are the primary source of international labor law
provisions. They are at the same time particularly appropriate and inappro-
priate for our discussion. They are particularly helpful because they di-
rectly establish labor standards and thus impose specific obligations upon
the States. Even then, however, the ILO is often criticized for its insuffi-

127 See also OECD (ed.), Trade , Employment and Labor Standards, pp. 26 et seq.;
Brian A. Langille, "Eight Ways to think about International Labour Standards",
(1997) 31 lW.T., pp. 32,34 et seq.
212 Sebastian Krebber

dent control mechanisms. 128 The inappropriateness of the ILO conventions

is due to the fact that a State that has decided not to ratify a certain ILO
convention can claim not to be bound by that convention, either directly or
indirectly, by means of the liberalized world trade system.
a) The Long Tradition of a Trade-Labor Link in the ILO. The origin of
public international law in the field of labor law stems from the desire to
introduce certain international core labor standards that would prevent dis-
tortions of competition between the individual States.!" The fear of possi-
ble distortions of competition has contributed significantly to the convoca-
tion of the International Conference for Labor Protection in Berlin in
1890130 and is clearly referred to in the preamble ofthe ILO Constitution.'>'
The discussion of a trade-labor link is therefore not new.!" but merely has
reemerged with particular force in recent times.
There are, however, some substantial differences between the original
and the present debate. At the outset, the development at the international

128 Cf. only Finkin, "International Governance", p. 146.

129 Cf. Bauer, Arbeiterschutzgesetzgebung, p. 686, with numerous further referen-
ces. According to Bauer, this thought represents the oldest motive for the intro-
duction of international workers protection. See also Mahaim, "International
Labor Legislation", pp.4 et seq., 13 et seq.; Schnorr, Arbeitsrecht, pp. 240 et
seq.; Genevieve Besse, "Mondialisation des echanges et droits fondamentaux
de l'homme au travail: quel progres possible aujourd'hui?" (1994) Droit so-
cial84l .
130 Bauer, Arbeiterschutzgesetzgebung, pp. 687 et seq.; see also Gisbert Brink-

mann, "Der Anfang des internationalen Arbeitsrechts: Die Berliner Intematio-

nale Arbeiterschutzkonferenz von 1890 als Vorlaufer der Internationalen Ar-
beitsorganisation" in Bundesministerium fur Arbeit und Sozialordnung/Bun-
desvereinigung der Deutschen Arbeitgeberverbande/Deutscher Gewerkschafts-
bund (eds.), Weltfriede durch soziale Gerechtigkeit: 75 Jahre Internationale
Arbeitsorganisation (Baden-Baden, 1994), p. 14.
131 Section 3 of the Preamble reads: "Whereas also the failure of any nation to a-
dopt humane conditions of labour is an obstacle in the way of other nations
which desire to improve the conditions in their own countries"; cf. Scelle,
"L'organisation internationale du Travail", pp.35 et seq.; Schnorr, Arbeits-
recht, p. 241. The drafts to the preamble already contained the same wording ,
as cited by James T. Shotwell (ed.), The Origins ofthe International Labor Or-
ganization (2 vols., New York, NY, 1934) vol. 1, pp. 374 et seq. ; on the far-
reaching British draft, cf. Wilhelm Adamy, "Sozialklauseln im international en
Handel", (1994) Soziale Sicherheit, pp. 260,264.
132 OECD (ed.), Trade, Employment and Labour Standards, p. 21.
 6 The Search for Core Labor Standards in Liberalized Trade 213

level concentrated on occupational health and safety. 133 When weighing the
significance of this fact, one must take into account that occupational
health and safety was also the first issue of labor law legislation in individ-
ual countries.'> This is also true for issues related to collective bargaining,
which were quickly addressed at the individual State level and then also
became the object of ILO activities.' > Therefore, both inevitably turned
out to be areas of labor law in which diverging levels of protection ren-
dered distortions of competition possible. In contrast, the present contro-

133 Cf. Scelle, "L'organisation internationale du Travail", pp. 20 et seq.; Mahaim,

"Organisation de travail" , pp. 69 et seq., 205 et seq.; Mahaim, "International
Labor Legislation", 8. With regard to the meetings of the Berlin conference of
1890 and their consequences, cf. Max R. Kern, "Zur Wirkungsgeschichte der
Arbeiterschutzkonferenz im internationalen Bereich", (1991) Zeitschrift fiir Ar-
beitsrecht, pp. 323, 324 et seq., 332 et seq., 336 et seq., 342 et seq.; with regard
to the resolutions of this conference, see also Brinkmann, "Die Berliner Inter-
nationale Arbeiterschutzkonferenz", pp. 13, 19 et seq. The resolutions of the
first international "KongreB fur Arbeiterschutz 1897" in Zurich included inter
alia: prohibition of Sunday work and work on public holidays; prohibition of
child labor under the age of 15; introduction of an eight-hour day for juveniles
between 15 and 18 years of age; eight-hour day and limitation of weekly work-
ing hours to 44 for women; the aim of an eight-hour day for male workers as
well; prohibition to work for women in child bed before and after birth; general
prohibition of night work for women; prohibition of overtime work for chil-
dren, juveniles and women; prevention of the emission of noxious substances
into the breathing air in dangerous enterprises according to the state of techno 1-
ogy; reduction of maximum daily working hours corresponding to the degree
of danger a worker is exposed to in his working environment; introduction of
periodic medical examinations ; prohibition of performing underground or dan-
gerous work for children, juveniles and women, cf. Bauer, Arbeiterschutzge-
setzgebung, p. 689. The "diplomatische Konferenz fur Arbeiterschutz" in Bern
ended in 1906 with the adoption of an International Agreement on the prohibi-
tion of night work for women (Internationales Ubereinkommens betreffend das
Verbot der Nachtarbeit der in der Industrie beschaftigten Frauen) and the Inter-
national Agreement of the prohibition of the use of white Phosphor in the
match industry (Internationales Ubereinkommen betreffend das Verbot der
Verwendung weiBen (gelben) Phosphors in der Zundholzindustrie. Both can be
found in Bauer, Arbeiterschutzgesetzgebung, pp. 692 et seq. See also Mahaim,
ibid., pp. 9 et seq. regarding these conventions, and pp. 694 et seq. regarding
their further development. With regard to the beginning of ILO activities, cf.
Scelle, pp. 198 et seq., 240 et seq., 257 et seq., 276 et seq.
134 Above, p. 184.

135 Scelle, "L'organisation internationale du Travail", pp. 295 et seq.

214 Sebastian Krebber

versy occurs on a background of much more comprehensive national sys-

tems of employee protection, where a choice has to be made.
b) The Fundamental ILO Conventions. It is impossible to give a complete
overview of the numerous ILO conventions. The ILO itself has identified a
core of labor standards' > embodied in four pairs of two conventions each,
which it deems fundamental Conventions:
- no. 87: Freedom of Association and Protection of the Right to Organ-
ise of 1948137;
- no. 98: Right to Organise and Collective Bargaining of 1949138;
- no. 29: Forced Labor of 1930139;
- no. 105: Abolition of Forced Labor'<;
- no. 111: Discrimination (Employment and Occupation) of 1958141;
- no. 100: Equal Remuneration of 1951'42;
- no. 138: Minimum Age of 1973 143;
- no. 182: Worst Forms of Child Labor of 1999144 .

136Above, p. 214.
137Above Fn. 78.
138 Above Fn. 79.
139 ILO Convention C 029, Convention concerning Forced or Compulsory Labour,
Geneva, 28 June 1930, in force 1 May 1932; all ILO conventions to be found
at: http://ilolex.ilo.ch:1567/englishlconvdisp2 .htm.
140 ILO Convention C 105, Convention concerning the Abolition of Forced La-
bour, Geneva, 25 June 1957, in force 17 January 1959; all ILO conventions to
be found at: http://ilolex.ilo.ch:1567/englishlconvdisp2.htm.
141 ILO Convention C Ill, Convention concerning Discrimination in Respect of
Employment and Occupation, Geneva, 25 June 1958, in force 15 June 1960; all
ILO conventions to be found at: http://ilolex.ilo.ch:1567/englishlconv
disp2.htm.
142 ILO Convention ClOD, Convention concerning Equal Remuneration for Men
and Women Workers for Work of Equal Value, Geneva, 29 June 1951,in force
23 Mai 1953; all ILO conventions to be found at: http://ilolex.ilo.ch:1567/ eng-
lishlconvdisp2 .htm.
143 Above Fn. 80.
144 ILO Convention C 182, Convention concerning the Prohibition and Immediate
Action for the Elimination of the Worst Forms of Child Labour, Geneva,
17 June 1999, in force 19 November 2000; all ILO conventions to be found at:
http://ilolex.ilo.ch :1567/englishlconvdisp2.htm.
 6 The Search for Core Labor Standards in Liberalized Trade 215

It is doubtful, whether this choice of fundamental conventions is

convincing. The identification of fundamental conventions is closely
related to the ILO Declaration on Fundamental Principles and Rights at
Work,145 which has been elaborated in the course of the debate about core
labor standards for international trade . Herein, the ILO concentrates on
what is feasible and adopts, as shown in the preceding observations, a
human rights perspective'" so as to argue that the rights articulated in the
declaration will also be binding on those States that have not ratified the
underlying conventions. Yet, considering the described historical
background and the general work of the ILO since its inception, the focus
on human rights considerations is not characteristic of the ILO activities,
which are wide and encompass the entire area of labor law. 147In particular,
industrial safety represents a broad area of ILO activities!" and is, in this
respect, also referred to in the Tripartite Declaration of Principles
Concerning Multinational Enterprises and Social Policy.!" The first ILO
convention established a general limitation of working hours. 150 At present,
78 out of 183 ILO conventions relate to issues of health and safety at
work. 151 However, in this respect, the ILO has focused mainly on the
limitation of working hours and on the protection of specific groups of
workers (women and children) . Moreover, some professions, such as
seamen, are more naturally the subject of ILO conventions. A framework
of basic general occupational safety is provided by conventions C 148
(Working Environment - Air Pollution, Noise and Vibration, 1977 152),
C 155 (Occupational Safety and Health, 1981 153) and C 161 (Occupational

145 Above Fn. 40.

146 Wilhelm Adamy, "Globalisierung und internationale Sozialpolitik", (1997)
Jahrbu ch Arbeit und Technik, pp. 263, 267. See also Lempp, "Sozialdumping",
p.33 .
147 Cf. in particular points II and III of the Declaration of Philadelphia of 1944.
148 Wilhelm Adamy, "Stellenwert der IAO-Normen fiir Arbeitsschutz und frauen-
spezifische Antidiskriminierungspolitik" in Bundesministerium fur Arbeit und
SozialordnunglBundesvereinigung der Deutschen Arbeitgeberverbande / Deut-
scher Gewerkschaftsbund (eds.), Weltfriede durch soziale Gerechtigkeit (Ba-
den-Baden, 1994),p. 182.
149 Nos . 36 et seq. of the Declaration.
150 ILO Convention COOl, Convention Limiting the Hours of Work in Industrial
Undertakings to Eight in the Day and Forty-eight in the Week, Washington,
28 November 1919, in force 13 June, 1921; all ILO conventions to be found at:
http://ilolex.ilo.ch:1567/english/convdisp2.htm.
151 See Appendix 1.
152 Convention concerning the Protection of Workers against Occupational Haz-
ards in the Working Environment Due to Air Pollution, Noise and Vibration,
216 Sebastian Krebber

and Health, 1981153) and C 161 (Occupational Health Services, 1985 154 ) .
Considering the activities of the ILO, standards relating to a reasonable
limitation of working hours and health and safety at work also constitute
fundamental labor standards. 155
Regional Instruments. Apart from European labor law, which has been
discussed earlier, regional public international law in the field of labor law
is a rare feature. The Arab Labor Organization, established by the League
of Arab States in 1970, is the only other regional organization specializing
in labor law. 156 It has so far enacted 16 conventions; two conventions relate
to the issue of occupational safety . 157 Convention no. 5 concerns the rights
of female workers and, inter alia, sets up a prohibition of discrimination. 158

6.4.2 State Consensus on Labor Standards

A consensus of individual States can be the result of a legal obligation to

adopt certain labor standards. This obligation may be the result of the rati-
fication of ILO conventions or of other international conventions (of the
Arab Labor Organization , for instance).

Ratification of ILO Conventions

The status of ratifications of the conventions that the ILO refers to as fun-
damental, in particular among developing and newly industrializing coun-

Geneva, 20 June 1977, in force 11 July 1979; all ILO conventions to be found
at: http://ilolex.ilo .ch:1567/englishlconvdisp2.htm.
153 Convention concerning Occupational Safety and Health and the Working Envi-

ronment, Geneva, 22 June 1981, in force 11 August 1983; all ILO conventions
to be found at: http://ilolex.ilo.ch:1567/englishlconvdisp2.htm.
154 Convention concerning Occupational Health Services, Geneva, 25 June 1985,

in force 17 February 1988); C 155 (Convention concerning Occupational Safe-

ty and Health and the Working Environment, Geneva, 22 June 1981, in force
11 August 1983; all ILO conventions to be found at: http://ilolex.ilo.ch:1567/
englishlconvdisp2.htm.
155 Aiming at the same direction , Reufi, Menschenrechte, pp. 25, 27.

156 For the background and history of this organization , cf. Abdellah Boudahrain,

"The Arab Labour Organisation" in Roger Blanpain (ed.), International En-

cyclopaedia for Labour and Industrial Relations (2 vols., The Hague, 1995)
vol.l ,p.12.
157 Conventions nos. 7 and 13, cf. Boudahrain, The Arab Labor Organisation,

p. 59; for a brief outline of their content , cf. ibid., p. 61.

158 Boudahrain, The Arab Labor Organisation , p. 64.
 6 The Search for Core Labor Standards in Liberalized Trade 217

tries, is not as bad as one might have feared.!" Only the prohibition of
child labor is characterized by a relatively low status of ratifications that
cannot be fully explained by the recent nature of one of the two conven-
tions.':" Among the remaining conventions, however, at least one of the re-
spective pai r most often has been ratified. Besides, due to the fact that
some ILO conventions overlap in substance, it is possible that in case of
the non-ratification of one convention, its content is partially covered by
that of other conventions that have been ratified by the respective State!" .
Still, there are some exceptions to this in particular regarding conventions
no . 87 and 98, especially among the remaining communist' ? and Arab
States. The status of ratifications of the conventions relating to occupa-
tional safety, on the other hand, appears rather modest in comparison: only
41 out of the 175 ILO Member States have ratified convention no . 148,163
no. 155 has only been ratified by 36,164 no. 161 only by 20 Member
States!". The conventions of the Arab Labor Organization show a similarly
modest status of ratifications.166

Factual Consensus
A factual consensus, i.e. a consensus irrespective of whether a State was
under an international obligation to adopt certain labor laws, also is of in-
terest. A purely factual consensus may not have any legal impact, but is re-
levant insofar as it would not be very convincing to reject certain standards

159 Cf. http://ilolex.ilo.ch:1567/public/english/docs/declworld.htm; see also the

correct conclusion of Adamy, "Sozialklauseln", 262; more hesitant, however,
Adamy, "Globalisierung", 267; cf. Christian Hess, "Wie lassen sich Sozial-
standards besser durchsetzen", (1997) 11 Arbeitgeber 373.
160 The following countries have ratified neither of the two conventions (State of
Ratifications March 2001): Afghanistan, Angola, Armenia, Australia, Baha-
mas, Bahrain, Benin, Cambodia, Cape Verde, Comoros, Cote d'Ivoire, Czech
Republic, Djibouti, Estonia, Fiji, Gabon, Gambia, Grenada, Guinea, Guinea-
Bissau, Haiti, Iran, Jamaica, Kazakhstan, Laos, Latvia, Lebanon, Lesotho, Li-
beria, Mauritania, Mozambique, Myanmar, New Zealand, Oman, Pakistan,
Peru, Saint Vincent, Sao Tome & Principe, Saudi Arabia, Sierra Leone, Singa-
pore, Solomon Islands, Somalia, Sudan, Surinam, Swaziland, Syrian Arab Re-
public, Trinidad and Tobago, Turkmenistan, Uganda, Uzbekistan.
161See also Hess, "Sozialstandards", 375 (with examples).
162 China, North Korea.
163 28 of these are non-industrialized countries.
164 25 of these are non- industrialized countries.
165 Approximately 16 ofthese are non-industrialized countries.
166 Cf. Boudahrain, "The Arab Labour Organisation", p. 59.
218 Sebastian Krebber

at an international level, while these very standards are part of one's na-
tional law, even if they exist only on the books. This paper can only give
some first impressions and does not claim to provide a comprehensive
overview of the relevant developing countries.
Constitutional Level. Freedom of association is referred to in the constitu-
tions of Ethiopia,"? Angola.!" Argentina,"? Azerbaidjan,'?? Brazil, "! Eri-
trea.! " Fiji,173 India, '?' Indonesia,' ?' Iraq,176 Iran, 177 Cambodia.! " Congo
( B razzav ill e) ,179 Kuwait,180 Lebanon,181 Madagascar,182 Malawi ,183 Malay-
sia,l84 Morocco.!" Mauritania, I 86 Mongolia,"? Namibia.!" Nepal, 189
Oman,1 90 Paraguay,'?' Rwanda, 192 Singapore,' ?' South Korea, '?' Syria,'?'
Taiwan,'?' Thailand,'?" Tunisia.!" Yemen"? and Zambia.w

167Article 42 .
168Article 33.
169 Article 14bis (2).
170 Article 59 (2).
171 Article 5 (0) XVII , Article 8.
172 Article 19 (6).

173Article 33 (1).
174 Article 19 (1) lit. c).
175Article 28.
176Article 26 .
177 Article 26 .
178 Article 36 (5), (6).
179Article 25.
180 Article 43.
181 Article 13.
182 Article 10, 14,31.
183 Article 31 (2), 32.
184 Article 10 (1) 1 lit. c.
185 Article 9 lit. c) .
186Article 10 (1) 1).
187Article 16 (10) .
188Article 21 (1) 1 lit. e).
189Article 12 lit. c).
190Article 33.
191Article 42 , 96.
192 Article 19,31.
193Article 14.
194 Article 33.
195 Article 48 et seq.
196 Article 14.
197Article 45 .
 6 The Search for Core Labor Standards in Liberalized Trade 219

Prohibitions against discrimination were established by the constitutions

of Ethiopia.?" Angola.v' Argentina,203 Azerbaidjan>' Brazil.v' China.?"
Eritrea,207 Fiji ,208 India"209 Iraq 210 in Cambodia,21 1 Congo (Brazzaville),212
Madagascar.!" Malawi.s" Mongolia.s" Namibia.s's Nepal,"? Oman,218 Para-
guay.?" South Korea,220 Singapore.?" Thailand.t> Iran223 and Yemen.>'
The rights of the child are recognized by the constitutions of Ethiopia.t"
Brazil 226 India 227 Cambodia 228 Congo (Brazzaville) 229 Kuwait 230 Ma-
'" "

198Article 8.
199 Article 39 .
200 Article 21, 24.
201 Article 25 (general; race and sex), Article 35 (8) (employment, sex only).
202 Article 18 (sex and race).
203 Article 14bis (1) (equal pay for equal work) .
204 Article 25 (race and sex), Article 35 (6) (equal pay for equal work).
205 Article 5 (0) I (general; sex), Article 7 (0) XXX (employment, sex and race).
206 Article 48 (sex).
207 Article 14 (2) (race and sex) .
208 Article 38 (race and sex) .
209 Article 15 (general; race and sex) , Article 16 (employment by the State; race
and sex).
210 Article 19 (sex).
211 Article 36 (2) (equal pay for equal work), Article 45 (1) (general; sex) .
212 Article 10 (1) (general; sex and race), Article 10 (2) (general; sex), Article 31
(2) (employment; sex and race), Article 31 (1), first sentence (equal pay for e-
qual work).
213 Article 28 (race and sex) .
214 Article 20 (race and sex) , Article 24 (2) lit. b) (sex) , Article 31 (3) (race and
sex) .
215 Article 14 (2).
216 Article 10 (2) (race and sex) .
21 7 Article 11.
21 8Article 17.
219 Article 48 (sex) , Article 88 (race and sex ; in the field oflabor law) .
220 Article 32 (4).
221 Article 12 (2) (racial discrimination).
222 Article 30 (race and sex).
223 Article 19 (racial discrimination); Article 21 , which regulates the rights of wo-
men, does not contain a prohibition against discrimination.
224 Article 27 (race and sex).
225 Article 36 (1) 1 lit. d) .
226 Article 7 (0) XXXIII.
227 Article 24.
228Article 48 .
220 Sebastian Krebber

lawi.>' Namibia.s? Nepal.>' Paraguay.>' South Korea.>' Taiwan.?" and

Zambia." ?
Prohibitions of slavery and forced labor are included in the constitutions
of Ethiopia.?" Argentina. i" Azerbaijan.>" Eritrea,"! Fiji,242 India,243 Congo
( Brazzav ille),244 Kuwait,245 Malawi ,246 Malaysia,247 Mongolia ,248 Namibia ,249
Nepal.r" Paraguay,"! Rwanda.>' Singapore>" and Zambia .v'
Other provisions relevant in the context of labor law are included in the
constitutions of Ethiopia.i" Angola.?" Argentina,"? Azerbaijan.i" Brazil.?"

229Article 43 et seq.
230 Article 10.
231 Article 24 (4).
232 Article 15 (2) - (4).
233Article 20 (2).
234 Article 54, 90.
235 Article 32 (5).
236 Article 153 (2).
237Article 11 lit. c).
238Article 18 (2) and (3).
239 Article 15.
240 Article 35 (3).
241Article 16 (3).
242Article 24.
243Article 23.
244 Article 31 (3).
245 Article 42.
246 Article 27.
247Article 6.
248 Article 16 (4), second sentence.
249Article 9.
250 Article 20 (1).
251 Article 10.
252 Article 17.
253Article 10.
254 Article 14.
255 Article 35 (5) (maternity protection, maternity leave with pay) , Article 42 (1)
lit b) (right to strike), Article 42 (2) (inter alia : reasonable limitation of working
hours, rest, vacation and national holidays with pay) .
256 Article 34 (right to strike), Article 46 (1) (right and duty to work) , Article
46 (2) (fair remuneration, rest , vacation).
257 Article 14bis (1) (reasonable limitation of working hours, paid vacation, em-
ployee participation in management, protection from unjustified dismissal), Ar-
ticle 14bis (2) (right to strike) .
 6 The Search for Core Labor Standards in Liberalized Trade 221

China 260 Fiii 26\ Cambodia 262 Congo (Brazzaville) 263 Kuwait 264 India 265
, ~ " '"
Indonesia.w Iraq,267 Iran,268 Libya.s" Madagascar.i" Mauritania.?" Mo-
rocco.i" Nepal.i" Paraguay.s" South Korea.?" Syria.?" Taiwan.?"

258 Article 35 (right to work, which includes inter alia the right to collective bar-
gaining, Article 35 (4), Article 36 (right to strike), Article 37 (right to rest pe-
riods, reasonable limitation of working hours, right to vacation).
259 Article 7 (0) includes nearly all of the complete catalogue of labor rights and
inter alia: protection from unjustified dismissal, period of notice for dismissals ,
minimum wages, wage protection, 13th monthly salary, additional salary for
work at night, overtime and dangerous work, reasonable limitation of working
hours, paid vacation, maternity protection, paternal leave, right to collective
bargaining; besides Article 9 (right to strike), Article 10 et seq . (employee par-
ticipation in management) .
260 Article 42 (right and duty to work), Article 43 (reasonable limitation of work-
ing hours, vacation).
26\ Article 33 (2) (right to collective bargaining) .
262 Article 37 (right to strike) .
263 (Article 33 (reasonable limitation of working hours, vacation and national ho-
lidays with pay).
264 Article 41 (right to work) .
265 Article 41 (right to work), Article 42 (maternity protection), Article 43 (fair
remuneration), Article 43A (employee participation in management).
266 Article 27 (2) (right to work) .
267Article 32 (right, honor and duty to work) .
268 Article 21 no. 2 (general maternity protection as a fundamental aim); Article 28
(right to work) .
269 Article 4 (right, honor and duty to work).
270 Article 27 (right to work), Article 29 (right to fair remuneration) , Article 32
(employee participation in management) , Article 33 (right to strike) .
271Article 14 (right to strike).
272 Article 14 (right to strike).

273 Article 26 (6) (fundamental aim of State policy regarding labor law, right to
work, consultation of employees in the course of decision taking).
274 Article 86 (right to work); Article 87 (full employment as a fundamental aim of
State policy); Article 89 (maternity protection); Article 91 (reasonable limita-
tion of working hours, vacation); Article 92 (remuneration) ; Article 94 (protec-
tion from unjustified dismissal by paying compensation for dismissal); Arti-
cle 97 (right to collective bargaining); Article 98 (right to strike and lockout) ;
Article 99 (State supervision of the observance of labor law and of the law re-
lating to occupational safety).
275Article 32 (1) (right to work) .
276 Article 36 (Relates to work and includes a right to work, a State guarantee to-
wards the individual of a right to earn a decent living and a duty of the State to
fix working) .
222 Sebastian Krebber

Only a few of the constitutions examined refer to occupational safety.

The constitution of Malawi requires the State to ensure safe and healthy
working conditions (Article 13 lit. d) ii). Article 32 (1) grants a right to
"safe labour practices" to every individual. Article 35 (6) of the constitu-
tion of Azerbaijan stipulates a right to work under safe and healthy work-
ing conditions. A right to a healthy and safe working environment is also
guaranteed by Article 42 (2) of the Ethiopian constitution. In its Article 42,
the Indian constitution requires the State to ensure just and human working
conditions. A similar provision can be found in Article 33 (3) of the const-
itution of Fiji, which grants every individual the right to "proper working
conditions". Article 7 (0) XXII of the Brazilian constitution establishes the
right to a reduction of risk through health, hygiene and safety regulations.
In Article 46 (2) of its constitution, Angola guarantees the right to health
and safety at work.
Non Constitutional Provlsions.r" As a sufficient basis for the remaining
fundamental issues of labor law have already been shown, occupational
safety regulations are of foremost interest in the present context.
The list of countries relevant for this examination which have adopted
legislation relating to occupational safety"? shows that this fundamental is-

277 Article 15 (right to work).

278 The ILO database NATLEX provides an overview as to which States have
adopted national legislation regarding certain areas of labor law, see
http://natlex.ilo.org. A detailed examination of the substance of these statutes
or regulations cannot be accomplished in this context. Occasionally, the con-
tents cannot be determined, as the information contained in the database is too
scarce, because the database contains only insufficient or contradictory infor-
mation. This is the case with regard to Egypt, Angola, Burkina Faso, Costa
Rica, Gabon, Guatemala, Guyana, Honduras, Iran, Iraq, Kolumbien, Cuba, Le-
banon, Morocco, Mexico, Namibia, Pakistan, Paraguay, Poland, Russian Fed-
eration, Singapore, Slovenia, Uganda, Hungary, Uruguay, Viet Nam, Zimbab-
we.
279 Brazil; Bulgaria; Burkina Faso; Burundi; Cote d'Ivoire ; China; Costa Rica,

Dominican Republic; Estonia; Fiji; Gabon; Guatemala; Guyana, Honduras; In-

donesia; Iran; Iraq; Jordan; Cameroon; Kazakhstan; Kenya; Kyrgyzstan; Co-
lombia; Congo, Brazzaville; Congo, Democratic Republic; Korea; Cuba; Lat-
via; Lebanon; Lithuania; Madagascar; Malawi; Malaysia; Morocco; Mauritius;
Mexico; Namibia; Nicaragua; Niger; Nigeria; Pakistan; Papua New Guinea;
Paraguay; Peru; Poland; Romania, Russian Federation, Saint Lucia; Senegal;
Seychelles; Singapore; Slovenia; Solomon Islands; South Africa; Sri Lanka;
Syrian Arab Republic; Taiwan; Tanzania; Thailand; Togo; Trinidad and To-
bago; Tunisia; Turkey; Uganda; Ukraine; Hungary; Uruguay; Venezuela; Viet
Nam; Belarus; Yemen; Zimbabwe.
 6 The Search for Core Labor Standards in Liberalized Trade 223

sue of labor law is addressed in national provisions more frequently than it

would seem from the trade-labor link debate and the status of ratifications
of the respective ILO conventions. In many cases, these provisions repre-
sent general regulations concerning health and safety at work,280 in some
cases, only individual issues are dealt with.?"

280 See Annex II.

281 In the following, not all provisions of a certain State are listed. Cote d'Ivoire:
Decret no. 96-206 du 7 mars 1996 relatif au comite d'hygiene, de securite et
des conditions de travail, Journal officiel. 1996-05-09. No. 19, pp.442-444;
Indonesia: Guideline and Procedure for Occupational Safety Inspection of In-
stallations, Instruments and Techniques Used in Natural Oil and Gas Exploi-
tation and Geothermal Resource Exploitation (Decision ofthe Director General
of Natural Oil and Gas No. 84.K/38/DJW1998), Business News. 1999-10-29.
No.6, pp. 3A-5A; Congo Brazzaville: Arrete no. 6054/ MTERFPPS/ DGT du
3 juillet 1985 instituant Ie comite technique consultatif d'hygiene, de securite
du travail et de prevention des risques professionnels; Democratic Republic of
Congo: Arrete departemental no. 69/CAB/DEP.MIN/73 du 15 novembre 1973
sur les comites de securite et d'hygiene dans les entreprises minieres et leurs
dependances, Photocopie du Code du travail-Mesures d'application, pp. 75-81;
Lithuania: Decree No. 504 of 12 April 1995 on compulsory hygienic courses
and courses for first medical assistance to workers. (Text No. 235), Vedomosti.
1995-06-09. No. 16, pp. 46-50, Decree No. 1277 of 27 October 1998 on
evaluation of hygiene in workplaces (Text No. 390), Vedomosti. 1998-12-10.
No. 34, pp. 11-15; Nicaragua : Norma ministerial sobre las disposiciones basi-
cas de higiene y seguridad del trabajo aplicables a los equipos e instalaciones
electricas- riesgos electricos-tsexta norma especifica con arreglo al articulo ter-
cero de la resolucion ministerial del 26 de julio de 2000), La Gaceta (Publicada
en dos fasciculos sucesivos), 2000-06-19. nums. 1151117, pags. 3174-3177
(115)/3231-3237 (117); Niger: Decret no.96-408/PRN/MFPT/E du
4 novembre 1996 portant modalites de creation, d'organisation et de foncti-
onnement de Comites de sante et de securite au travail; Romania: Ordonnance
n099 du 29 juin 2000 sur les mesures qui peuvent etre appliquees dans les pe-
riodes avec des temperatures extremes pour la protection des travailleurs, Mo-
nitorul Oficial, 2000-07-04, Nr. 304, pp. 1-2; Syrian Arab Republic: Arrete
No. 25 du 12 juillet 1987 du ministere de la Sante sur les conditions techniques
et hygieniques qui doivent regner a l'mterieur des fabriques de medicaments,
Recueil des lois et de la legislation financiere. 1987-09-09, no. 35, pp. 53-62;
Thailand: Notification of Ministry of Labour and Social Welfare re: The Com-
mittee for Safety, Occupational Health, and Surrounding Condition in Work
Performance, Royal Thai Government Gazette, 1995-09-00. Vol. 49. No. 17,
pp.339-346; Tunisia: Loi no. 90-77 du 7 aofrt 1990 portant creation de
l'Institut de la sante et de la securite du travail, Journal officiel, 1990-08-10,
Nr. 52, p. 1033; Turkey: Decree No. 6/11974, respecting the application of the
regulations concerning the establishment of industrial safety and health com-
224 Sebastian Krebber

Conclusion
Due to the ratification of the respective ILO conventions or to existing
constitutional or national legal provisions, there is a relatively broad state
consensus regarding the areas of labor law which are commonly recog-
nized as central issues in the discussion on core labor standards. This ap-
plies equally to health and safety at work.

6.5 Conclusions

6.5.1 Core Labor Rights

Identification of Core Labor Rights

If one looks at the possible legal basis of core labor rights, it becomes clear
that the ILO's list of core labor rights represents the common denominator.
The human rights perspective leads to the inclusion of provisions of non-
discrimination. However, international human rights conventions do not
provide for a sufficient basis for the inclusion of occupational safety legis-
lation, even if general provisions on the duty of the State to safeguard the
health of its citizens are taken into account.
Nevertheless, there is seemingly enough support to include occupational
safety in the catalogue of the core labor law rights. "? The historical devel-

mittees in undertakings, Resmi Gazette, 1969-07-14; Yemen: Order of the

Council of Ministers (No. 13 of 1998) concerning the composition of the
Committee for Occupational Health and Safety.
282 See also Lance Compa, "Labor Rights and Labor Standards in International
Trade", (1993) 25 Law and Policy in International Business, pp. 165, 169,
175 et seq.: Grossmann and Koopmann, "Social Standards", p. 117; Steve
Chamovitz, "The World Trade Organization and Social Issues", (1994)
28 l .W .T., 17, 31, does not mention occupational safety in general, but at least
a prohibition of toxic substances; in his earlier publication, the reference to oc-
cupational safety is more general, see Steve Chamovitz, "Minimum labour
standards", p. 437; Marc Maindrault, "Les aspects commerciaux des droits so-
ciaux et des droits de I'homme au travail", (1994) Droit social, pp. 850, 852;
according to OECD (ed.), Trade and Labour Standards: A Review of the Issues
(Paris, 1995), p. 13, the core right is limited to the information of the employ-
ees about risks (the study edited by the OECD was written by Fields); regard-
ing this as a first step, that shoud later be followed by the inclusion of occupa-
tional safety, Karen Vossler Champion, "Who Pays for Free Trade? The
Dilemma of Free Trade and International Labor Standards", (1996) 22 North
 6 The Search for Core Labor Standards in Liberalized Trade 225

opment at both the national and international level which reflects the par-
ticular significance of occupational safety and the relatively broad state
consensus provide a satisfactory basis for this thesis. However, the follow-
ing might be the most convincing argument: if the controversy about the
observance of core labor standards adopts a human rights perspectives"
and thus evolves into a discussion about values and ethics, the protection
of health and life is of extraordinary importance.s" This value, though it
may not have been explicitly included in the relevant international conven-
tions, distinctly exceeds that of the core rights recognized by the ILO . To
impose international trade sanctions for the differences in payor promo-
tion of male and female workers while accepting at the same time serious
injuries to health resulting from inadequate employment safety regulations,
would not be convincing. The least convincing argument against the inclu-
sion of occupational safety is, that since the freedom of association and the
freedom of collective bargaining are guaranteed by the ILO 's core rights ,
collective bargaining agreements will take care of issues of occupational
safety. Legislation was needed in all industrialized countries and even in
those with a longstanding tradition of free collective bargaining. It would
be a miracle, if it were different in developing countries, which often do
not have such a tradition.
The core labor rights therefore consist of: the right to freedom of asso-
ciation and to collective bargaining, the prohibition of forced labor, the
prohibition of child labor, the prohibition of discrimination on the grounds
of race or sex, occupational safety.
The expansion of core labor rights to other areas of labor law appears to
be out of the question at the present time, as it would be politically unrea-
sonable to bring in new demands in an already controversial discussion. It
should be mentioned, though, that a factual consensus exists for other areas
of labor law as well ; this consensus might serve as a basis for considera-
tions on expanding the catalogue in the future.

Carolina Journal of International Law and Commercial Regulation, pp. 181 ,

220. Opposing the inclusion of the ILO conventions on working time, occupa-
tional safety and safety standards ReuB, Menschenrechte, p. 125.
283 The close relation between the human rights perspective and the issue of occu-

pational safety at the working place is also noticed by Orentlicher and Gelati,
Public Law, Private Actors, p. Ill.
284 In this context, see also ReuB, Menschenrechte, p. 27.
226 Sebastian Krebber

The Substance of the Core Labor Rights

So far, the actual substance of the core labor rights has been set aside. Still,
the exact substance of these rights is just as important as their identifica-
tion. A quick look at the respective bases of the core labor rights is suffi-
cient to understand that in this respect, a consensus' » cannot be found un-
less one takes a level of abstraction at which the respective rights totally
lose any material profile.
All core labor rights are dealt with in ILO conventions. The ILO's very
purpose is to define international core standards. Since the specification of
the substantial requirements of the core labor rights is not directly a ques-
tion of the legally binding character or the enforceability of instruments of
international law, it is suggested that the material scope of the minimum
standards of the core rights be defined by the respective ILO conven-
tions.?" It is also suggested not to limit oneself to the so called fundamen-
tal conventions and the three conventions relating to a general scheme of
occupational safety; rather all ILO Conventions should be included, unless
they have been repealed or unless specific conventions collide with other
core rights, as may be the case with certain provisions meant to protect fe-

285 With regard to freedom of association, cf. the overview by Bernd Sproedt, Ko-
alitionsfreiheit und Streikrecht in den universellen und europdischen Kollektiv-
abkommen (Diss. Heidelberg 1972); Heinz E. Kitz, "Die Koalitionsfreiheit der
Arbeitnehmer nach der Europaischen Menschenrechtskonvention und der Eu-
ropaischen Sozialcharta" in Max-Planck-Institut fur auslandisches offentliches
Recht und Volkerrecht" (ed.), Die Koalitionsfreiheit des Arbeitnehmers
(2 vols., Berlin, 1980), vol. 2, pp. 1073 et seq.; Geraldo von Potobsky, "The
Freedom of the Worker to Organise According to the Principles and Standards
of the International Labour Organisation" in Max-Planck-Institut fur auslandi-
sches offentliches Recht und Volkerrecht (ed.), Die Koalitionsfreiheit des Ar-
beitnehmers (2 vols. Berlin 1980), vol. 2, pp. 1119 et seq.; Ulrich Beyerlin,
"Die Koalitionsfreiheit der Arbeitnehmer in den Menschenrechtsinstrumenten
der Vereinten Nationen" in Max-Planck-Institut fur auslandisches offentliches
Recht und Volkerrecht (ed.), Die Koalitionsfreiheit des Arbeitnehmers (2 vols.,
Berlin 1980), vol. 2, pp. 1153 et seq.; cf. auch Sudre, Droits de l'homme,
pp. 168 et seq.; see also the table on the limitations of the freedom of associa-
tion in OECD (ed.), Trade, Employment and Labour Standards, pp. 57 et seq. ;
id. at pp. 62 et seq. for an overview of the limitations of the right to strike, and
at pp. 66 et seq. an overview regarding the protection of trade union members
and the rights related to the freedom to bargain collectively.
286 See also OECD (ed.), Trade, Employment and Labor Standards, pp. 28 et seq.
 6 The Search for Core Labor Standards in Liberalized Trade 227

male workers (prohibition of night work, for example) on the one hand and
the principle of equality of male and female workers on the other hand.?"
The limits to the binding character of ILO Conventions is only relevant
when core labor standards are enforced, which is not considered here. The
ILO is of the opinion that the core rights included in its list are binding
even for Member States that have not ratified the underlying conventions,
simply on the grounds of their ILO membership.?" In this context we will
not look into whether this opinion is convincing. In practice, the status of
ratifications of the relevant conventions is high,289 so that this problem is
only pertinent with regard to the three ILO Conventions on the basic re-
gime of occupational safety.
It should be noted, however, that the recourse to ILO conventions for
specification of the substance of core labor rights is a provisional solution
and gives rise to several questions, which can only be briefly addressed.
Other than the mentioned collision of the rights granted by different
conventions, it is doubtful to what extent the relevant conventions, that
have not been drafted in the context of the liberalized world trade, are
suitable for the establishment of a trade-labor link at all.290 They might
actually go too far,29I not far enough or in the wrong direction for the

287 This question, however, will not be dealt with further here. Cf. only the judg-
ment of the ECJ in Case C-345/89, Stoeckel (1991) ECR 1-4047; report for the
Hearing at 1-4052 et seq. as well as the opinion of Mr Advocate General Te-
sauro delivered on 24 January 1991 Ziff.3 et seq., 11; Rs. C-158/91, 2.8.1993,
Slg. 1993, 1-4287, Rn.3 et seq., 10 et seq. (Levy); Rs. C-13/93, 3.2.1994,
Slg. 1994,1-371, Rn. 14 et seq. (Minne) .
288 See at http ://www.ilo.org/publicienglishistandards/decVdeclarationitext/index.
htm; see also OECD (ed.), Trade, Employment and Labour Standards , p. 28;
very generous also Daubler, "Sozialstandards im intemationalen Wirtschafts-
recht' in Friedrich Graf von Westphalen und Otto Sandrock (eds.), Lebendiges
Recht: von den Sumerern bis zur Gegenwart, Festschrift fur Reinhold Trinker
(Heidelberg, 1995), pp. 475-491 at pp. 484 et seq.
289 Above, Fn. 159. With regard to possible reasons for non-ratification, cf. OECD
(ed.), Trade, Employment and Labour Standards, pp. 34 et seq.
290 Dietrich Willers , "Sozialklauseln in intemationalen Handelsvertragen" in Bun-
desministerium fur Arbeit und Sozialordnung/Bundesvereinigung der Deut-
schen Arbeitgeberverbande/Deutscher Gewerkschaftsbund (eds.), Weltfriede
durch soziale Gerechtigkeit: 75 Jahre Internationale Arbeitsorganisation (Ba-
den-Baden, 1994), p. 173, Fn. 24, expresses doubts wether the ILO conven-
tions provide a suitable basis for core labor rights in the context of the liberali-
zation of world trade ; the opposition by ReuB, Menschenrechte, p. 125, to in-
clude the ILO conventions on working time and occupational safety also is
based upon the contents of these conventions, while ReuB agrees in principle
upon the human rights character of these issues (cf. Fn. 283).
228 Sebastian Krebber

too far,291 not far enough or in the wrong direction for the purposes of in-
ternational trade. Under Article 2 of convention no. 182 on the abolition of
the worst forms of child labor,"? for instance, a child is a person of under
18 years of age. ?" which might be considered too high a minimum age for
the purpose of a general definition.r" Besides, there is a reason why many
industrialized countries have not ratified certain ILO conventions, although
in principle, they agree to the necessity of the recommended protection.
Furthermore, to some extent, the ILO must face the critique that the inter-
pretation of the conventions by its control organs is too far-reaching.?"
Similar concerns exist in relation to the abovementioned human rights
conventions.
If the trade-labor link is recognized in the future, therefore, the specifi-
cation of the contents of the core labor rights will become a prominent is-
sue. The defects of the ILO conventions and the alternatives (special regu-
lations for the context of free world trade, specification by the WTO) will
have to be discussed and will become the object of a new controversy.

6.5.2 Existence and Acceptance of Labor Standards

The flat and unequivocal rejection of core labor standards by the develop-
ing countries is difficult to reconcile with the status of ratifications of most
of the relevant ILO conventions and to some extent with the legal situation
in the respective states as well. An important collateral result of the re-
search, which is significant in order to understand the controversy about
core labor standards at large , is that the present discussion which mainly
focuses on whether core labor standards should be adopted, faces the real-
ity in which the issue rather should be one of observance and enforcement
of existing standards. For instance, in the controversy about core labor
standards, particular emphasis is placed on child labor; however, only a
few countries have not yet adopted some set of rules as to the employment
of children.?" Two prominent examples: India, which is often mentioned in

291 Hess, Sozialstandards, pp. 373 et seq.

292 Above, Fn. 144.
293 As in Article 1 of the Convention on the Rights of the Child, cf. above Fn. 112.
294 David M Smolin, "Conflict and Ideology in the International Campaign
Against Child Labour", (1999) 16 Hofstra Labor & Employment Law Journal,
pp. 383, 395.
295 Hess, Sozialstandards, pp. 373 et seq., gives examples .
296 Cf. Susanne Hoffmann and Hans Joachim MaaBen, "Der Kampf gegen die
Kinderarbeit - Eine entwicklungspolitische Aufgabe der Internationalen Ar-
beitsorganisation" in Bundesministerium fur Arbeit und Sozialordnung / Bun-
 6 The Search for Core Labor Standards in Liberalized Trade 229

this context, prohibits the employment of children in the carpet-weaving

industry (section 3 and schedule B (2) Child-Labour Prohibition and Regu-
lation Act 1986); Nepal prohibits employment of children that have not
completed 14 years of age (Child Labour (Prohibition and Regulation) Act,
2000).
It hence seems appropriate to consider a partial refocus in the debate on
respecting minimum standards in international trade, both politically and
legally. The approach of the NAFTA Labor Side Agreement, which re-
quires that the contracting States observe their respective national stan-
dards.?" might, after all, be a good model, although it often has been criti-
cized for not defining the labor rights that must be observed.?" At the
political level, the developing countries would probably perceive a duty to
enforce their own laws less as an intrusion by the industrialized countries.
Moreover, this method allows for development within a national system.
Furthermore, it does not appear very sensible to introduce new rules at the
legal level, when the existing ones are not respected.

6.5.3 Human Rights Perspective vs. Labor Law Perspective

Any assessment of the human rights perspective in the search for core la-
bor standards needs to differentiate. The extent that protectionist goals may
have been relevant in the call for core labor standards at the political level
is unclear.?" The foregoing observations, however, illustrate that the
charge of protectionism simplifies a diversified controversy. The human
rights perspective made progress in this controversy possible, because it
weakened the argument of protectionism: Social human rights cannot be
evaded, no matter what the state of development of a specific country.v"
and competitive advantages resulting from the violation of human rights

desvereinigung der Deutschen Arbeitgeberverbande/Deutscher Gewerkschafts-

bund (eds.), Weltfriede durch soziale Gerechtigkeit: 75 Jahr e Internationale
Arbeitsorganisation (Baden-Baden, 1994), p. 231 .
297 Above, p . 189 .

298 Cf. Van Wezel Stone, Labor and the Global Economy, pp. 1024 et seq.; Finkin,

International Governance, p . 148; for a positiv view, cf. Compa, Multilateral

Agreements, p . 711 ; Rozwood and Walker. Side Agreements, Sidesteps, and
Sideshows, p . 342 .
299 Cf. only Gus Edgren, "Fair Labour Standards and Trade Liberalisation" , (1979)

118 International Labour Review, pp. 523, 523 et seq .

300 See also Adamy, Sozialklauseln , p . 262 ; see also Feld, Sozialstandards, p . 63 .
230 Sebastian Krebber

do not deserve protection in a system of free world trade. >' At the same
time, observance of these core labor rights obliges the industrialized coun-
tries to accept the lower prices of products and services from less devel-
oped countries.P'
The human rights perspective also prevails in the individual voluntary
commitments of multinational corporation. This is not surprising, because
the allegation of human rights violations is an effective way to exercise
pressure on such corporations, while at the same time they can use their
promotion of human rights actively for marketing purposes.
On the other hand, the human rights perspective tends to neglect labor
law considerations, which may result in distortions regarding the impor-
tance of the different subject matters. Another negative aspect of this per-
spective becomes evident in those countries that, like the Asian States,
thoroughly reject any interference in human rights affairs. There an ap-
proach based on a labor law perspective might be more successful. It is
also emphasized that the focus on social rights might neglect other human
rights that are of equal or even higher value .t'"

301 See also Harald GroBmann and Georg Koopmann, "Minimum Social Standards
for International Trade? " (1994) Intereconomics, pp. 277,281.
302 Adamy, Sozialklauseln, p. 262.

303 Cf. Brassel and Windfuhr, Welthandel, p. 83.

7 The Transformative Weakness of Core Labor
Rights in Changing Welfare Regimes

Guy Mundlak

Contents
7.1 Introduction 231
7.2 Regulating Labor in the Welfare State and the Effects of
Globalization 234
7.2.1 The Welfare State and Labor-Market Regulation 234
7.2.2 The Effects of Globalization on Welfare State/Labor
Markets 236
7.3 Remedying the Regulatory Deficit.. 243
7.3.1 The International Response 243
7.3.2 The Scope-Legitimacy Tradeoff and the Emergence
ofCLRs 247
7.4 The Transformative Weakness of CLRs 253
7.4.1 Justifying the CLRs 254
7.4.2 Explaining the Canon of CLRs 257
7.4.3 A Developmental Alternative 262
7.4.4 Concluding Remarks 268

7.1 Introduction

The post-World War II evolution of the welfare state was intractably link-
ed to the regulation of the labor market. Despite significant differences
among welfare regimes, I to some extent all models linked various func-
tions of the welfare state to labor markets, thus involving employers in the
responsibility of sustaining a general level of welfare for the working
population. While some models prescribed a limited residual role to the

I Gosta Esping Andersen, The Three Worlds of Welfare Capitalism (Princeton

NJ, Princeton University Press, 1990).
232 Guy Mundlak

state regarding the non-working population, other models increased uni-

versal state provisions, retracting the need to negotiate these benefits as
part of the employment contract.' Consequently, one variable that is used
to distinguish among welfare regimes is the division of responsibility for
welfare among employers and the state.
The globalization of markets, starting in the mid-1970s, has dramati-
cally affected national labor markets, and hence also the balance between
welfare provisions and labor market regulation, in two complementary
ways. First, globalization has led to the displacement of labor as industry
and services have started to relocate worldwide. Furthermore, globaliza-
tion has affected the wages and benefits of the employed. This is not to say
that globalization has been equally difficult for all workers. On the con-
trary. Some workers have benefited from this process, in both the develop-
ing and the developed countries, while others have paid a personal price in
the process of displacement. Globalization, in itself, did not suppress labor
conditions or increase aggregate unemployment but rather led to a polari-
zation of employment opportunities and labor standards, both nationally
and globally. Second, globalization has undermined the power of the na-
tion-state to regulate labor markets. The two traditional instruments used
for regulation, statutory regulation and collective bargaining, rely on com-
prehensive coverage of labor standards on all employers and employees.
When globalization provides employers with the power of exit to stan-
dards-free venues, the capacity of the state or of the bargaining partners to
regulate diminishes.
As globalization imposed new pressures on the welfare state, efforts
were made to renew the regulation of labor markets at the international
level. These efforts included global standards, as promulgated by the ILO,
regional standards, most notably in the European Union, and to a lesser ex-
tent in other regions such as North America, and voluntary trade codes in
various industries or multinational enterprises. A heated debate also mark-
ed the effort to establish global free trade, concerning the desirability of in-
tegrating labor standards into free trade pacts. Common to all these mecha-
nisms is the effort to replicate the regulation of labor markets at the
national level and to establish international standards that will compensate
for the diminished regulatory capacity of the state. However, in the proc-
ess, it became clear that global solutions cannot be sustained at the same
level of detail as at the national level. Given the highly unequal back-
ground conditions across countries and the absence of political cohesion

2 Walter Korpi and Joakim Palme, "The Paradox of Redistribution and Strategies
of Equalities : Welfare State Institutions, Inequality and Poverty in the Western
Countries" (1998) 63 American Journal ofSociology 661-687.
 7 The Transfonnative Weakness of CoreLaborRights 233

that characterizes state level politics, international labor standards are

viewed as too intrusive and insensitive to the conditions of the affected
states. Thus, a tradeoff was realized between the depth and scope of inter-
national regulation and its acceptance by the states as well as by employ-
ers.
Over the last decade, a list of core labor rights (hereon : CLRs), which
are distinguished from labor standards, was constructed to address the al-
leged tradeoff between scope and legitimacy of international regulation . It
is assumed that the limited political legitimacy that exists for international
standardization should not be wasted on a comprehensive and controver-
sial regulatory project but should focus instead on the protection of a lim-
ited set of standards for which an international consensus can be achieved.'
Although the scope of CLRs is defined differently in the various contexts,
a common list of rights is emerging as the dominant form. Yet when criti-
cally observing the evolving distinction between CLRs and other labor
standards, the distinctions are not self-explanatory . This article seeks to
question the emerging consensus on the distinction between CLRs and la-
bor standards and to demonstrate that the distinction draws on a human
rights discourse characteristic of civil and political rights at the national
level. However, it fails to integrate the jurisprudence historically associ-
ated with social and economic rights. Consequently, the outcome of these
distinctions is incompatible with the objectives attributed to international
labor standards . It provides protection (assuming, en arguendo, it is com-
plied with and enforced) against some abuses of labor but has little signifi-
cance in the performance of functions relegated to the welfare state. Con-
sequently, the destabilizing effects of globalization on labor markets, and
hence on the functioning of the welfare state, cannot be remedied by the
promotion of CLRs.
Section I examines the effects of globalization on the labor market and
on the welfare state, and describes the diverse global responses to them.
Section 2 observes the development of the CLRs labor standards distinc-
tion in the last few years. Section 3 then highlights the inadequacy and in-
coherence of the emerging canon of CLRs, pointing at the mismatch be-
tween the objectives of international labor regulation and the reliance on a
civil rights discourse to advance them. The analysis suggests the need to

3 A related, yet separate reason for distinguishing CLRs from other labor stan-
dards is that a minimal set of rights, unlike comprehensive regulation, will not
have negative effects on efficiency. This assumption requires a separate empiri-
cal analysis. The focus of this article, however, is on the problem oflegitimacy,
and the alleged tradeoff between efficiency and distribution is integrated only
to the extentit reflects on the problem of legitimacy.
234 Guy Mundlak

emphasize an alternative perception of developmental rights that can aid in

constructing a new sense of global social citizenship. It is argued that this
dimension of citizenship which was developed in the context of the wel-
fare state is useful and necessary for rethinking welfare arrangements in an
era of globalization.

7.2 Regulating Labor in the Welfare State and the Effects

of Globalization

7.2.1 The Welfare State and Labor-Market Regulation

The welfare state in its current form evolved relatively recently, and ma-
tured only after World War II. The exact contours of the "welfare state"
are difficult to identify. The welfare state assumes a liberal democracy
(broadly speaking), which upholds a free markets regime and endorses the
responsibility of the state to its citizens and (to a lesser extent) to its non-
citizen residents. To that extent, the state regulates economic activity as a
means of social engineering, aspiring to ensure high levels of employment
and provide social services including social security, health, education and
housing. These activities are aimed at ensuring that individuals will not
only depend on market outcomes. Individual and social welfare are pro-
moted by the fusion of regulatory and market policies. The result of any
particular combination of the two should be benchmarked according to the
welfare state's objective of promoting social citizenship, which extends
beyond the liberal ideal of political citizenship.
The generalizations of the welfare state conceal the extensive variations
that can be found among different welfare regimes. Esping Andersen's ty-
pology of the welfare state distinguishes between three prototypes of wel-
fare regimes on the basis of the extent of decommodification they seek to
achieve.' Decommodification describes the disassociation of individuals'
welfare from their ability to obtain income by means of employment in the
free market. The reliance of the welfare state on the labor market is most
visible in its liberal prototype, where the welfare state's role is residual to
an individual's functioning in the labor market and the level of decom-
modification is low. In these regimes, one of the primary reasons for labor
market regulation is to relieve the welfare system of its residual role. The
residual welfare states apply different levels of labor market regulation that
aim to ensure that all workers receive some work-related benefits. Other

4 Gosta Esping Andersen, The Three Worlds of Welfare Capitalism, above at

note 1.
 7 The Transformative Weakness of Core Labor Rights 235

dimensions of social welfare are left to markets-based individual negotia-

tions. By contrast, in the social democratic regimes, welfare entitlements
are considered a more important vehicle for the expansion of social citi-
zenship; they are universal, unrelated to one's position in the labor market,
and prove a greater level of decommodification. Consequently, regulation
of labor markets fulfills different purposes, namely the guarantee of full
employment and negotiated policymaking, themselves derivatives of social
citizenship. The conservative regimes display the most complex relation-
ship between the welfare state and the regulation of the labor market. In
these regimes, the welfare state delegates some of its functions to the labor
market, therefore making entitlements contingent on one's status in the la-
bor market. In this sense, the conservative model is distinct from the social
democratic model. However, the smaller share of welfare provisions ad-
ministrated by the state is complemented by a greater level of labor-market
regulation, which is premised on collective and autonomous negotiations
over benefits that apply to all the employees covered by these agreements.
The scope and nature of labor-market regulation therefore renders this
model to be also qualitatively different from the residual model with its
emphasis on individual entitlements and bargaining . Entitlements are not
universal, nor residual. In sum, labor-market policy is a strong determinant
for various welfare entitlements.
Despite the persistent disciplinary divide in legal analysis between wel-
fare regulation and labor market regulation, the two components are in fact
two sides of the same coin. A guarantee of full employment, an assurance
that one can live adequately on earned income, insurance against unfore-
seen life events, such as unemployment or injuries, and - most generally -
promoting social citizenship tied to adequate resources, economic and oth-
ers, can be achieved through regulatory means that center on both the labor
market and on the functioning of the state and civil society. Some of these
regulatory measures are exclusive. Thus, for example, the residual role of
the state when labor markets no longer succeed in responding to individual
needs, requires, almost by definition, welfare measures. Other tasks can be
obtained by either welfare or labor market regulation, and thus there is a
substitution effect between the two measures.' Regulatory efforts, whether
centered on welfare or on labor market regulation, should be seen as part
of a broad regulatory system, in which all the components inter-relate and

5 For example, pensions can be guaranteed through centralized (welfare) meas-

ures as is the preferred model in the social democratic regime, or by occupa-
tional based pensions as is the case in the corporatist regimes. Of course, the
fact that these two arrangements may substitute one another does not imply that
the aggregate or the distributive consequences are one and the same.
236 Guy Mundlak

intertwine to provide a set of norms and practices that promote the task of
enhancing social citizenship. Welfare and labor market regulation are
therefore one body of law rather than separate components.'

7.2.2 The Effects of Globalization on Welfare State/Labor

Markets

Since the oil shocks of 1973, discussion of globalization and its effects on
the nation-state has increased. What started as a trickle became a flood of
academic, political and popular debates. Yet, the more we think about glo-
balization, the less obvious it really is.? For our purpose, it is sufficient to
assume a core understanding of globalization, which highlights the in-
creased rate of movement of production factors across national borders,
and their disassociation from national systems. This movement does not
affect labor and capital to the same extent, because capital is more mobile
than labor. While the regulatory instruments of the post-WWII paradigm
of the welfare state relied on stable, nationally-situated production factors,
the increased movement attributed to globalization put into question the
feasibility of these instruments. This is of little concern, because regulatory
measures are just means and not an end in themselves. Although processes
of globalization question the feasibility of these means, the preliminary
question must address the effects of globalization on the ends of the wel-
fare state, namely the enhancement of social citizenship.
Globalization is associated with change and displacement. This is al-
most a tautological statement when defining globalization on the basis of
increased movement. Displacement, however, is often presented not as a
descriptive statement but rather as an intrinsically negative situation. Ac-
cording to this view, displacement undermines social citizenship. This
view must be qualified for two reasons, one which deals with the empirical
support (or lack of) for the adverse effects of displacement, and the second
which is concerned with values.

6 Gosta Esping Andersen and Marino Regini, Why Deregulate Labour Markets ?
(Oxford , Oxford University Press, 2000).
7 Harry Arthurs , for example, notes that "[g]lobalization is an integrated system
of business arrangements that seeks to move large volumes of goods, services,
information and capital across international borders with low friction and high
velocity ." But what may seem to be an easy and straightforward definition soon
transforms into a broader view of "globalization as ideology" - "globalization -
at least in its current incarnation - is a political system known as neo-liberal-
ism." Harry Arthurs , "Reinventing Labor Law for the Global Economy" (2001)
22 Berkeley Journal ofEmployment and Labor Law 271-294.
 7 The Transformative Weakness of Core Labor Rights 237

First, displacement is not identical with job loss. The data on the effects
of globalization on jobs is disputed. Some studies claim that globalization
plays only a minor explanatory role with regard to the level of unemploy-
ment. These studies emphasize technological change as the driving force
behind current changes in the labor market. 8 Other studies found globaliza-
tion affects the demand for labor and has led to a higher rate of unem-
ployment, but not to a change in relative wages." This finding, however, is
not readily supported by an international comparison, because it is not
clear that countries with higher unemployment are more exposed to trade
compared to countries with lower unemployment. 10 Studies that found sup-
port for effects of trade on labor market conditions, emphasized that the
outcome of trade is a greater degree of inequality among high-skilled and
low-skilled workers." This occurs because the possible relocation of low-
skilled labor-intensive firms across the border raises the supply of low
skilled workers. At the same time, industrial change in developed countries
increases the demand for high-skilled workers. Hence a growing wage dis-
parity between workers with different degrees of human capital has oc-
curred.'? Similarly, the ILO has noted that "as the demand for higher skill-
ed workers increases at the top, ill-paid, transient jobs are multiplying at
the bottom."?
The effects of trade on inequality at the state level have clear implica-
tions for the reconsideration of welfare state institutions. For the liberal
welfare state, increasing inequality increases the potential number of de-
pendents, therefore overloading the residual role of the welfare state. It can
no longer be assumed that employed individuals do not require the aid of
the residual welfare state, as the liberal welfare regime is confronting a

8 Drusilla K. Brown, International Trade and Core Labour Standards : A Survey

0/ the Recent Literature (Paris , OECD Labour Market and Social Policy Occa-
sional Papers No . 43, 2000) pars . 11-20.
9 Richard B. Freeman and Lawrence F. Katz (eds.), Differences and Changes in
Wage Structure (Chicago, Chicago University Press, 1996) 1-22.
10 Steven 1. Davis, John C. Haltiwanger and Scott Schuh, Job Creation and De-
struction (Cambridge, MA, MIT Press, 1996) 48-49, 174-176.
II Cf. Lester Thurow, The Future ofCapitalism (NY , W. Morrow and Co., 1996),
chapter 4.
12 Drusilla K. Brown, International Trade and Core Labour Rights (OECD 2000) ,
above note 8, pars. 45-63 .
13 ILO Report of the Director General, Decent Work (International Labor Confer-
ence , 87 th Session 1999; http ://www.ilo.org/public/english/standards/relm/ilc/
ilc87 /rep- i.htm, last visited December 2002) 21-22.
238 Guy Mundlak

growing class of "working poor"." For the social democratic state, grow-
ing inequality suggests a more difficult task for solidaristic and universal
arrangements, as the revenues to support the programs are reduced and the
needs grow greater. Even if globalization merely intensifies volatility in
the labor market, the outcomes may imply a stronger demand for short-
term relief aid such as unemployment funds." This greater pressure has in-
deed imposed a financial pressure on unemployment funds in many wel-
fare states."
The second drawback of the objection to globalization as an intrinsically
negative factor is concerned with moral and distributive issues. Much of
the literature on globalization and displacement draws on a western per-
spective and tends to lack the necessary empathy for job creation in other
countries, itself a result of globalization." The strong thrust of insiders-
outsiders analysis that underlies much of the literature on labor markets
and the welfare state" explains why the question posed for debate is rarely
how many jobs have been lost or created world-wide and how they were
distributed. Instead, trade unions, politicians and academics often ask how
many jobs have been lost or created in their own country. The insiders'
perspective of globalization can only be justified if it is assumed a-priori
that losses in one venue are always worse than gains in another. This as-

14 On the rise of the "working poor" class and its implications for [the] welfare re-
form, see for example in the United States: Rebecca Blank, It Takes A Nation :
A New Agenda f or Fighting Poverty (Princeton NJ, Princeton University Press,
1997); Joel Handler and Yeheskel Hasenfe1d, We the Poor People: Work, Pov-
erty and Welfare (New Haven CT, Yale University Press, 1997). The problem
in Europe is less severe, as inequality is lower and workplace-related benefits
are higher. Thus the European malaise continues to take the form of living
wage and benefits at work, and a higher rate of unemployment, and thus the re-
liance of the unemployed on welfare. Joel Handler, "Social Citizenship and
Workfare in the U.S. and Western Europe: From Status to Contract" (2002),
working paper presented in the Law & Society Association Annual Meeting
2002.
15 Henry Farber, The Chang ing Face ofJob Loss in the United States, 1981-1995
(Cambridge MA, NBER Working Paper 5596, 1996).
16 Jochen Clasen, "Motives, Means and Opportunities: Reforming Unemployment
Compensation in the 1990s" in Maurizio Ferrera and Martin Rhodes (eds.), Re-
casting European Welfare States (London, Frank Cass, 1999) 89-112.
17 Brian Langille, "Labour Law is not a Commodity" (1998) 19 Industrial Law
Journal (South Africa) 1002-1016.
18 For a review of the literature on the insiders-outsiders problem, see: Assar
Lindbeck and Dennis J. Snower, "Insiders versus Outsiders" (2001) 15 Journal
ofEconomic Perspectives 165-188.
 7 The Transformative Weakness of Core LaborRights 239

sumption can only be justified by strong nationalist sentiment but is more

difficult to uphold in ethical terms.
The objection that globalization is intrinsically bad should therefore be
rephrased in a more nuanced manner. Globalization is not intrinsically bad,
but some of its effects must be relegated to remedial action by the welfare
state. Minimally, the state must assume its residual role and aid the indi-
vidual in the transition phase from one job to another. A more ambitious
role for the welfare state requires a proactive labor market approach that
aids individuals in the process of displacement and seeks to enhance job
creation.'? Both tasks indicate that globalization and displacement raise the
need for the welfare state's regulatory capacity.
Bearing in mind both empirical and value-oriented reservations, it can
be concluded that globalization does not threaten the welfare state per-se
but does render the functioning of the welfare state more difficult. In other
words, globalization should not be conceptualized as a leading determinant
to unemployment and inequality but as a phenomenon that inhibits the use
of traditional regulatory means that were developed to ease the outcomes
of changing labor market conditions. Given that social citizenship requires
some degree of welfare and labor market regulation, the growing discrep-
ancy between the domestic political sphere and the global socio-economic
spheres renders regulation difficult to implement. More generally, the no-
tion of citizenship requires a preliminary definition, and an ongoing stabil-
ity, of communal borders. Given that state borders, and therefore the out-
reach of the regulating sovereign, are relatively stable, but socioeconomic
borders are dynamic and no longer overlap the political borders, advancing
social citizenship by state-based political means may be inherently incon-
sistent.
When conceptualizing globalization in this manner, the difficulty in
providing welfare and regulating the labor market may seem to be differ-
ent, but they are symptoms of the same fundamental problem. As to the
former, a greater degree of socioeconomic mobility questions the assump-
tion of both territorial- and citizenship-based criteria for benefits. As indi-
viduals move across borders, benefits administered only to those who re-
side within the boundaries of the state may exclude individuals who were
part of the social community in the past but have migrated out of the po-
litical community. The flip side of this problem is that a worldwide mass
of migrant workers is potentially excluded from social welfare provisions
because the workers are not deemed to be sufficiently "insiders" of the po-
litical community (i.e. the welfare state). These problems indicate the need

19 Guy Standing, Global Labour Flexibility: Seeking Distributive Justice (Lon-

don, Macmillan, 1999).
240 Guy Mundlak

to rethink the meaning of citizenship in a more fluid international regime

with an increase in the movement of labor. This problem will be bracketed
hereon, as it merits attention in a separate essay.
The other problem associated with the growing cleavage between the
political and the social communities, which is at the center of this study, is
that effective labor market regulation requires a comprehensive coverage
of the labor market." Regulation of labor markets can aid in achieving
both aggregate efficiency and a more just distribution that resonates with
the objectives of social citizenship. 2 1 As noted, it is also an important
means for the decommodification of citizenship sought by the welfare
state. Comprehensive effects can be achieved by the state's monopolistic
power (statutory mandates) or through social-consensus negotiated by the
social partners (collective agreements and social pacts)." Yet, if state-
based measures for decommodification require comprehensive coverage,
globalization threatens reliance on these measures in several complemen-
tary ways.
Globalization, designating the mobility of capital, indicates that em-
ployers can easily relocate outside the reach of the regulatory regime. This
does not require the actual movement of capital to these regimes, and
therefore the extent of the problem cannot be captured by observing the
number of firms actually relocating. The mere threat of movement is suffi-
cient to impact the political regime, deterring further legislation and en-
couraging the rollback of workplace-related benefits and social protection .
The threat that capital relocates is unmatched by a similar threat of labor.
While capital is courted to cross borders and provide work to local com-
munities, the movement of workers across borders is more often perceived
as a threat. Consequently, capital relies on "exit", while social-citizenship
relies on "voice"." For capital, political communities become fungible and
negotiable. For workers, and - more generally - for "social citizens", a
community is non-fungible. While in the past, the social community was

20 Melvin Reder and Lloyd Ulman, "Unionism and Unification" in Lloyd Ulman,
Barry Eichengreen and William Dickens (eds.), Labor and an Integrated Eu-
rope (Washington DC, Brookings Institute, 1993) 13-44.
21 Andersen and Regini, Why Deregulate Labour Markets? (2000), note 6 above.
22 This assumption underlies neo-corporatist arrangements. Michael Wallerstein ,
Miriam Golden and Peter Lange, "Unions, Employers' Associations and Wage-
Setting Institutions in Northern and Central Europe" (1997), 1950-1992 50 In-
dustrial and Labor Relations Review, 379-401 ; Wolfgang Streeck, "Neo-
voluntarism : A New European Social Policy Regime?" (1995) I European Law
Journal 31-59.
23 Albert Hirschman , Exit, Voice and Loyalty (Cambridge MA, Harvard Univer-
sity Press, 1970).
 7 The Transformative Weakness of Core Labor Rights 241

identical with the state, at present it seems that the state-based community
can no longer facilitate the same sense of socioeconomic cohesion and
consensus. The growing imbalance between those who are drawing on
codes of exit and those who rely on codes of voice suggests that currently,
social negotiations are based on distorted communications or none at all."
The imbalance between codes of exit and codes of voice may also lead
to derogatory arrangements that withdraw obligations from employers in
some sectors of the economy, particularly in the high-tech industry, which
benefits the economy more than traditional industry. Partial derogations
undermine comprehensive regulation, allow a greater degree of market ef-
fects into regulation, and decrease the level of decommodification. A simi-
lar effect takes place in the process of collective bargaining, whether at the
enterprise or at the broader sector and state levels. This is one of the rea-
sons offered to explain the decline of trade unions' power in most western
countries."
Finally, the shift of economic activity in disregard to national bounda-
ries distorts existing regulatory mechanisms that are intended to remedy
problems of collective action. While movement of capital can distort solu-
tions to the problem of collective action at the state-level, it also creates
new collective-action problems at the international level. Potentially, these
could lead to "social dumping?" and consequently to a "race to the bot-
tom"." Admittedly, the evidence on this phenomenon has been rather ten-

24 Guy Mundlak, "Labor Law in a Fungible Community" in Joanne Conaghan,

Michael Fischl and Karl Klare, Labour Law in an Era of Globalization (Ox-
ford, Oxford University Press, 200 1).
25 Kate Bronfrenbrenner, "The Effect of Plant Closings and the Threat of Plant
Closings on Worker Rights to Organize", Supplement to Plant Closings and
Workers Rights: A Report to the Council of Ministers by the Secretariat of the
Commission for Labor Cooperation", (Dallas, TX, Beman Press, 1997); Robert
Kyloh, Mastering the Challenge of Globalization: Towards a Trade Union
Agenda (Geneva, ILO, 1998).
26 Harald Grossmann and Georg Koopmann, "Social Standards in International
Trade: A New Protectionist Wave?" in Harald Sandar and Andras Inotai (eds.)
World Trade After the Uruguay Round (London, Routledge, 1996) 115, 116.
The authors define social dumping as "costs that are for their part depressed be-
low a "natural" level by means of social oppression, facilitating unfair pricing
strategies against foreign competitors.
27 The "race to the bottom" is the process in which countries compete by lowering
standards, even beyond efficiency, because of a prisoner' s dilemma. See,
Katherine Van Wezel Stone, "Labor in the Global Economy: Four Approaches
to Transnational Labor Regulation" (1995) 16 Michigan Journal ofInternation-
al Law 987; Thomas 1. Palley, The Economic Case fo r International Labor
242 Guy Mundlak

tative and highly controversial ." The hesitant empirical findings are ex-
plained by the pressure of voters and political groups on government to re-
sist capital's pressure to deregulate. At the same time, the problem of col-
lective action and coordination remains, and the need for solutions must
address the need to promote a "race to the top" ."
In addition to the threat, or actual movement of capital, the findings on
the growing inequality and the higher degree of labor market volatility
render the regulatory project even more difficult. This is especially true in
the corporatist regimes where collective bargaining is centralized. Peak
bargaining is not always suitable to coordinate the wages of a highly polar-
ized workforce. A growing inequality is therefore both a cause of collec-
tive bargaining's decline and its outcome. Similarly, the greater volatility
in labor market conditions renders regulatory provisions that traditionally
emphasized stability and long-term employment relationships more diffi-
cult to sustain." Finally, increased labor market inequality, rooted in the
weakness of traditional instruments that govern the labor market, also bur-
dens other regulatory fronts , such as anti-discrimination law, which is
strongly linked with labor market inequalities."
The growing disparity between political and social citizenship, and
hence between state-based regulatory means and social objectives, is aug-
mented by the need to reconsider the community in which social citizen-
ship nests. Citizenship is not only determined by a pre-existing community
but also determines new communities. In the past, social citizenship was
assumed to be merely an additional dimension of citizenship within pre-
determined state borders. Yet as global markets emerge and employers,
consumers, and workers no longer reside within the confines of anyone
stat e-based community, the assumption of pre-determined communities

Standards: Theory and Some Evidence (Washington DC, AFL-CIO Economic

Policy Papers E036, 1999).
28 T.N. Srinivasan, "International Trade and Labor Standards From an Economic
Perspective" in Pitou Van Dijck and Gerrit Faber (eds), Challenges in the New
World of Trade Organization (Amsterdam, Kluwer, 1998) 219-243 ; Charles
Oman, Policy Competition For Foreign Direct Investment: A Study ofCompeti-
tion Among Governments to Attract FDI (Paris, OECD, 2000).
29 Bob Hepple, "A Race to the Top? International Investment Guidelinesand Cor-
porate Codes of Conduct" (1999) 20 Comp arative Labor Law and Policy Jour-
na1347 .
30 KatherineVan Wezel Stone, "The New Psychological Contract: Implications of
the Changing Workplace for Labor and Employment Law" (2000) 48 UCLA
Law Review 519.
31 Francine Blau, "The Gender Wage Gap" in Inga Persson et. al. (eds.), Women's
Work and Wages (London, Routledge ,1998).
 7 The Transformative Weakness of Core Labor Rights 243

holds little moral significance. If employers and consumers of workers in

one state reside in another, there is no a-priori moral justification to ex-
clude them from the community in which social citizenship nests. As noted
earlier, the welfare state has always assumed that the state and private
agents would divide the responsibility of upholding social needs. The prin-
ciple of solidarity, which required the provision of a comprehensive safety
net and decommodification of individual welfare, cannot justify confining
social citizenship to predetermined state-based communities. Yet translat-
ing cross- national social obligations into law renders the state-based po-
litical structures wholly unsuitable to the task.
The accumulation of these factors threaten the assumption that the wel-
fare state can rely on labor market regulation, as well as other types of so-
cial regulation to advance the objective of ensuring social citizenship.
While displacement and inequality may be a result of a host of factors, in-
cluding both technology and globalization, globalization in itself renders
traditional regulatory responses to such problems inadequate. Social citi-
zenship at the state level requires comprehensive regulation that the state
can no longer provide at the same level of effectiveness. Remedying this
problem requires inward-oriented measures (i.e., facilitating the regulatory
power of the state). At the same time, responding to the needs of social
citizenship may require abandoning the state-level altogether and develop-
ing regulatory provisions that construct meta-state communities. This task
requires outward-oriented measures (i.e., reaching out of the political
boundaries of any one state).

7.3 Remedying the Regulatory Deficit

7.3.1 The International Response

As the process of globalization increased the importance of the transna-

tional as the venue for economic activity and decreased the capacity of the
state to regulate its labor markets, various measures were developed which
share in common the effort to replicate state-based regulatory measures at
the transnational level. These include transnational regulation by means of
international covenants and conventions, regional regulations based on the
participating states' consent to regional standardization, unilateral applica-
tion of one state's legislation ex-territorially, and codes of conduct and
codes of trade developed by multinational companies, industries and
NGOs. The transnational regulatory alternatives that are evolving differ
from one another and can be distinguished on the basis of several parame-
ters:
244 Guy Mundlak

(a) Are the international standards aimed at states or at employers? For

example, the ILO conventions place the responsibility of fulfilling the
conventions on the state. By contrast, voluntary trade codes are aimed
explicitly at employers and not at the state. The two options are not nec-
essarily dichotomous, because the state may be required, as part of its
own obligations, to impose rules that bind employers.
(b) Are the authors ofregulation state-centered or transnational actors ?
ILO standards, and the possibility of incorporating a social clause into
the WTO's regulatory instruments, represent models that are based on
regulation by transnational actors. By contrast, the side agreements to
NAFTA were negotiated by three states. In the interim, treaties and di-
rectives at the ED level originate at a transnational level, but they are
based on coordination between a small group of states. The difference
between state and transnational actors is therefore one of degree , as
transnational agencies evolve by state participation.
(c) Are the authoring agents "political " or "business"? Generally, both
state-level and international instruments are authored by political agen-
cies that are to some extent politically accountable to constituents.
These constituents can be individuals (citizens of the state) or the states
themselves. By contrast, trade codes are often devised by industry,
which is not politically accountable. In the absence of political account-
ability , an economic incentive is assumed. This need not rule out all in-
dustry-based instruments because of an alleged profit-seeking motive.
Self-regulation can enhance solutions to coordination problems in the
industry. Indirect accountability to interests other than short-term profit
maximization can also be traced to the producers' interest in catering to
consumers' taste in purchasing products manufactured while maintain-
ing decent labor standards. At the same time, self-regulation that is not
based on democratic accountability should be held suspect, unless dem-
onstrated otherwise. v The distinction between the nature of the author-
ing agents , like the other distinctions proposed, should be placed on a
continuum. Thus, for example, NGOs are neither politically account-
able, nor motivated by economic concerns . Their "third way" nature is
considered appropriate for the development of international instruments,

32 Robert J. Liubicic, "Corporate Codes of Conduct and Product Labeling

Schemes: The Limits and Possibilities of Promoting International Labor Rights
Through Private Initiatives" (1998) 30 Law and Policy in International Busi-
ness 111.
 7 The Transformative Weakness of Core Labor Rights 245

and it has been suggested that they can be integrated as monitoring a-

gents in the self-regulation by business."
(d) Are the regulatory instruments "hard law" or "soft law"? Hard law
involves effective sanctions (as is the case with European regulation),
while "soft law" does not involve enforceable rights and sanctions
against violations (as is the case with some voluntary codes of conduct
and numerous recommendations). Again, the difference between hard
and soft law is one of degree . Trade codes are generally voluntary, while
multilateral treaties are binding and enforceable. EU directives are situ-
ated in the middle of the continuum and merely provide for harmoniza-
tion, but they are still binding to an extent. NAFTA's side agreements
are also binding, but their de-facto enforceability is cumbersome and
constrained, placing them somewhat closer to the voluntary end of the
continuum rather than to the binding end. Finally, the ILO instruments
are generally binding but absent any sanctions against countries that do
not comply with the conventions they ratify; the ILO's power derives
from persuasion, diffusion of information and other "soft-law" methods.
(e) How are the international instruments related to domestic law?
Some instruments develop standards that are detached from state-level
regulations, while others seek to ensure compliance with domestic stan-
dards in each and every state affected . Thus, for example, EU directives
seek to establish European standards that require states to harmonize
their domestic standards upwards (but not downwards) towards the re-
gional standard. By contrast, although NAFTA's side agreements cover
a broad range of issues, they merely require each member-state to en-
sure the application of its own laws. Thus, if one country's regulatory
provisions are weak (or almost non-existent), NAFTA's side agreements
do not lift the domestic standards upwards.
Observing the various parameters, it is clear that the numerous forms of
international instruments that are currently being developed are premised
on different modes of coordination. These may be merely viewed as dif-
ferent strategies addressing the effects of globalization. However, a closer
look indicates that they also seek to address the two different challenges
identified in the previous section. First, there is the belief that transnational
regulation can remedy the regulatory deficit at the state level and therefore

33 Charles Sabel, Dara O'Rourke and Archon Fung, Ratcheting Labor Standards:
Regulation/or Continuous Improvement in the Global Workplace (World Bank
Social Protection Unit Discussion Paper SP 0011, 2001).
246 Guy Mundlak

substitute it, at least to an extent." Second, transnational regulation of la-

bor markets is aimed at replicating state-level objectives associated with
decommodification and social citizenship, only at the international leveL
The second objective thus seeks to establish the global village or - less
ambitiously - the region or the industry as one in which social citizenship,
even more than political citizenship, nests in a newly defined community.
The two objectives can therefore be distinguished by reference to their tar-
get community. While the first objective seeks to enhance social citizen-
ship at the state level, the second objective seeks to establish social citizen-
ship in a broader community. Similarly, the two objectives can be distin-
guished on the basis of their relationship to state-level regulation. The first
objective seeks to complement, maybe even replace, the weakening capac-
ity of the regulatory state, while the second objective addresses problems
that are not confined to the boundaries of any single state and must there-
fore be resolved at the meta-national leveL
The two objectives of the new international regulation require distin-
guishing between instruments that are "inward-looking" (hereon: IL),
seeking to correct the effects of displacement at the state level, and those
that are "outward-looking" (hereon: OL), seeking to redress inequality and
the absence of social cohesion, solidarity, and communal responsibility a-
mong individuals who are part of the same social and economic system but
who do not reside in the same political community.
Some of the new international instruments seek to address both objec-
tives simultaneously. For example, EU instruments seek to halt the "race to
the bottom" and labor's deteriorating political clOUt. 35 They are therefore
mostly an inward-looking measure. Their aim is to establish minimum
standards, and to harmonize existing standards, in developed states. Their
outward-looking objective is related to the establishment of a European
Union which seeks to provide more than quid-pro-quo arrangements. The
more ambitious objective is to construct a new European identity, and to
facilitate a cross-national commitment, inter alia in the social dimension of
the community, alongside the preservation of state-based identities and
communities. Unlike the construction of a global community, the Euro-

34 See for example Christopher R. Coxson, "The 1998 Declaration on Fundamen-

tal Principles and Rights at Work: Promoting Labor Law Reforms Through the
ILO as an Alternative to Imposing Coercive Trade Sanctions" (1999) Dickinson
Journal ofInternational Law 469. Coxson argues that the ILO CLRs are likely
[to] pressure all states towards a higher degree of compliance, including the
US.
35 Stone, Labor in the Global Economy (1995), above note 27.
 7 The Transformative Weakness of Core LaborRights 247

pean Union seems more feasible, because of the relative manageability of

its economic and political imbalance.
Similarly, most examples of voluntary codes of conduct, whether pri-
vately regulated or publicly (or semi-publicly by NGOs) monitored, seek
to redress global inequality, and therefore their major objective is outward-
looking. This is not to say that such forms of regulation, if effective, do not
have an inward-looking effect. Hampering the profit-making motive of
firms seeking to establish sweatshops in those countries with low or weak-
ly enforced labor standards affects the cost-benefit calculation of firms
considering relocation and could thus potentially reduce the displacement
caused by the movement of traditional industry. This in tum reduces the
gap between codes of exit and codes of voice that render state-based social
regulation difficult.
The distinction between IL and OL objectives is important. With regard
to the well-developed welfare states, OL objectives only have an indirect
effect on the domestic regulatory deficit. For these countries, IL instru-
ments are required, and these instruments are expected to aid in sustaining
the state's regulatory capacity. By contrast, with regard to countries whose
welfare provisions and labor market regulation are not well-developed, OL
objectives must be viewed as the method of extending regulation to states
where it never existed. The two regulatory projects are interrelated but dif-
ferent.

7.3.2 The Scope-Legitimacy Tradeoff and the Emergence of

CLRs

The various instruments that were developed at the supra-national level

have all encountered various difficulties. Some have not materialized (e.g.
the WTO "social clause"), and others have been used with varying degrees
of intensity. Problems of standard setting, compliance and enforcement,
and, more generally, legitimacy, have been serious obstacles to the devel-
opment of these instruments. In the process of exploring the limits of glo-
bal responses to the domestic regulatory deficit, the tradeoff between the
scope of the regulatory project and its need for legitimacy by those af-
fected has become evident. The more ambitious the regulatory project, the
less legitimacy it enjoys. The problem of legitimacy may arise from the
various objections attributed to international regulation: issues of sover-
eignty, fear of protectionism, or objection to economic colonialization of
the developing states. Moreover, it is argued that poor countries cannot se-
riously accept upon themselves obligations that exceed their economic sit-
248 Guy Mundlak

nation." The state's economic constraints limit its capacity to comply with
a broad list of standards or rights. The problem, however, extends the pub-
lic-sphere limitation into the private sphere. Raising standards that are too
high and insensitive to the domestic economic situation at a given point of
time can lead to growing unemployment. A few core rights are assumed to
be better than many employment-related rights that are irrelevant to a
growing number of unemployed people.
As a way of mediating the scope-legitimacy tradeoff, a number of rights
have been designated as CLRsY In general, CLRs refer to norms that are
universally applied, regardless of the level of development or technology
of the country or of the employer. The rhetoric of human rights applied in
these situations indicates that the choice of CLRs is not based on empirical
assumptions that some rights are more efficient than others. The term sug-
gests that the overall pool of labor standards and benefits includes two dis-
tinguishable sets of standards. One set is that of human rights. For the
same reason that freedom of speech is a human right, regardless of its effi-
ciency, some labor standards must be recognized to be over and above
their contribution to economic efficiency. The other set is that of "regular"
labor standards, the desirability of which can be relegated to a utilitarian
calculus and economic assessment.
In the process of differentiating CLRs from labor standards, it is possi-
ble to conceive two alternative means of defining CLRs. The first would
assume that CLRs, which designate inalienable human rights, can be iden-
tified regardless of variations in their recognition and application in vari-
ous countries. This approach resembles either a natural law approach to
human rights or alternatively a liberal process of identifying rights behind
the veil of ignorance. 38 Thus, for example, the right to be free from slavery

36 Raj Bhala, "Clarifying the Trade-Labor Link" (1998) 37 Columbia Journal of

Transnational Law II , 33-34.
37 For an overview of the CLRs' emergence, see Virginia Leary, "Workers'
Rights and International Trade: The Social Clause" in Jagdish Bhagwati and
Robert Hudec (eds.), Fair Trade and Harmonization: Prerequisites to Free
Trade? (Volume 2, Cambridge MA, MIT Press, 1996) 177; Drusilla K. Brown
et aI., "International Labor Standards and Trade : A Theoretical Analysis" in
Fair Trade and Harmonization: Prerequisites to Free Trade? (Volume 1, Cam-
bridge MA, MIT Press, 1996) 227.
38 While the emergence of CLRs is described here as a new phenomenon which is
associated with the new international response to the problems posed by global-
ization, it is of course rooted in prior conceptions of labor-related rights as hu-
man rights. Most notably , the right to work and fair labor conditions is well es-
tablished in the International Covenant on Economic, Social and Cultural
Rights. The new appearance of these rights, however, may redeem the rights in
 7 The Transfonnative Weakness of Core Labor Rights 249

should be recognized as a human right, independent of whether it is identi-

fied in multilateral pacts between states or in voluntary trade codes drafted
by industry. The right is prior to any conception of the good and therefore
merely needs to be surfaced and acknowledged. An alternative conception
of rights, grounded in communitarian perceptions, holds rights to be a
product of a communal deliberative process. It is expected that such an ap-
proach should display a greater variation among the different instruments.
Table 1, which is presented in the appendix, summarizes the choice of
CLRs in some of the key instruments that have developed, or are being ne-
gotiated, at the international level.
Observing Table 1, it appears that there actually is an integration of the
two conceptions. On the one hand, the ILO's fundamental core labor rights
appear, for the most part, to be the customary canon for all instruments. At
the same time, other instruments expand the list of CLRs; the expansion is
occasionally referred to as "core plus". The emerging canon of acceptance
necessitates two separate questions:
1. Why do various instruments that were designed by different agents and
for different objectives all accept the same canon of CLRs? This may be
a result of a moral consensus and clarity regarding the core of labor
standards that is identified with human rights. Alternatively, it may dis-
playa simple adherence to the newly formed status quo. I will discuss
this problem hereon.
2. Is the evolving canon of CLRs coherent, and can it serve the objectives
of the new international instruments? This will be the topic of the fol-
lowing section.
The success of the ILO Declaration on Fundamental Principles and
Rights at Work (1998) has been demonstrated by the fact that all 175 ILO
members have expressed their commitment to respect the basic standards
of the Declaration. Yet only 120 of the members have ratified at least 7 out
of the 8 ILO conventions supporting these standards."
The ILO's adoption of the CLRs followed a host of political maneuvers
by international organizations, most notably the 1996 Singapore Ministe-
rial Meeting of the WTO, calling the ILO to take the lead in the protection
of labor standards (instead of integrating these issues into trade agree-

the Covenant that have remained for the most part, without interpretation, unen-
forced, and generally a statement of good will rather than a clear trajectory for
action. It is noteworthy that even today, the Committee on Economic, Social
and Cultural Rights has not established a clear interpretation of these rights.
39 Ratifications of conventions are listed at http://www.ilo.org (last visited and
number of ratifications updated, December 2002).
250 Guy Mundlak

ments). The selection of rights in the 1998 conference of the ILO was in
line with a culminating tradition that evolved during the few years prior to
the ILO decision, including the Copenhagen World Summit for social de-
velopment (1995), the OECD Report (1996), and the WTO Singapore
meeting (1996).40 The ILO's decision on CLRs should therefore be viewed
as a codification of prior agreements and understandings. As the represen-
tatives of Canada to the Committee in the ILO Committee on the Declara-
tion of Principles noted: "There seems to be a general agreement as to the
fundamental rights and principles: 'fundamental' meant that those princi-
ples must be upheld by all ILO members as universal, not relative; abso-
lute, not conditional; and for now and not the future.'?" Similarly, in the
words of the ILO Director-General: "the list of rights no longer seems
open to dispute." Others have echoed this view, holding the current selec-
tion of CLRs to be "basic and sound" .42
The ILO's decision to focus on the 4 CLRs has not replaced its broader
agenda. The CLRs are one of four strategic objectives prescribed by the
ILO in its 87 th session (ILO, Decent Work 1999). Aside from promoting
the fundamental principles, the ILO defined its other objectives: employ-
ment, social protection and social dialogue. The importance of the CLRs to
the ILO agenda was explained in its "Decent Work" report," holding that
CLRs enable "people to claim freely a fair share of the wealth they have
helped to generate, and to seek more and better work. The guarantee of
those rights is therefore also a guarantee of a permanent process of trans-
lating economic growth into social equity and employment at all stages of
the development path."
Although the topics that construct the CLRs seem to be generally ac-
cepted, there is still a degree of divergence as to the form and substance of
standardization for each one. An important point of controversy centers on
absolute guarantees vis-a-vis flexible and domestically adjustable stan-
dards. Thus, for example, with regard to child labor: The ILO's fundamen-
tal principles include a reference to Convention 138, which deals with
minimum age for admission to employment. The OECD Secretariat, al-

40 See Table 1 in the Appendix .

4 1 ILO, "Report of the Committee on the Declaration of Principles", Section 47.

The Report was presented in: The International Labour Conference,

86th Session (1998) (http://www.ilo.org/public/english/standards/relm/ilc/ilc86/
com-decl.htm, last visited December 2002).
42 For a description and analysis of the ILO's adoption of the 1998 Declaration,
see: Brian Langille, "The ILO and the New Economy" (1999) 15 The Interna-
tional Journal ofComparative Labour Law and Industrial Relations 229-258.
43 ILO, Decent Work (1999), above note 13.
 7 The Transformative Weakness of Core Labor Rights 251

though accepting the prohibition of child labor as belonging to the CLRs,

refused to accept convention 138, arguing that the convention prohibits
some child labor that is consistent with the observance of human rights .
The OECD held that the convention aims at the wrong target, and that the
prohibition should address exploitation of children rather than work by
children . The OECD study did not include a distinction between good
work and bad exploitation but relied on UNICEF's characterization of ex-
ploitation as "children who work too young, too long hours, for too little
pay, in hazardous conditions under slave-like arrangements"." A similar
reference has also been made to the UN Convention on the Rights of the
Child (UNCRC), which emphasizes the prohibition of exploitation. This
approach moves away from establishing minimum age requirements in fa-
vor of a presumption that employment at a young age is a violation of hu-
man rights. However, the proponents of the ILO approach argue that it is
precisely the nature of children's work that deems it an inherent violation
of human rights." A child's consent to work is intrinsically flawed and
thus presumed involuntary. A flexible approach that requires assessing
whether or not a child is adequately compensated is in tension with the hu-
man rights approach because the assessment subordinates child's labor to
market pricing. In other words, if market wages are very low, then child's
wages are likely to be low as well. If many children are working, market
wages will be even lower, but a market-sensitive approach may not deem
this to be a human-rights problem. The OECD Secretariat was well aware
of these problems and therefore accepted the establishment of minimum
wages, although it deferred to the states on deciding the appropriate age.
On the other hand, the ILO conceded the need to distinguish between dif-
ferent types of child labor, leading to the incorporation of a recent conven-
tion on the worst forms of child labor into the list of conventions compos-
ing the CLRs.46
The controversy is not merely between the ILO (pro-absolute rules) v.
OECD (pro-adjustable standards), and should be viewed as an example of
a broader debate. Within the ILO, there were many objections to the abso-
lute framing of rights. Government representatives from many countries
insisted on expressing the relativity, conditionality and progressive charac-
ter of even the most fundamental rights. The terminology - whether
"rights " or "principles" - illustrates the same tension, whereby those who

44 OEeD, Trade, Employment and Labour Standards (paris, OECD, 1996) 14.
45 Cf Steve Charnovitz, "Trade, Employment and Labour Standards: The OECD
Study and Recent Developments in the Trade and Labor Standards Debate"
(1997) 11 Temple International and Comparative Law Journal 131-163 .
46 ILO Convention 182 on the Worst Forms of Child Labour (1999).
252 Guy Mundlak

preferred an absolutist view sought to designate them as rights, and those

preferring the flexible adaptation approach sought to designate them as
principles. Complementing this cleavage was the debate on the scope of
fundamental rights/principals. While some argued the list was overinclu-
sive, others claimed it was underinclusive. The representatives from Paki-
stan, for example, demanded the inclusion in the declaration of many other
principles or issues: employment and job creation, the alleviation of pov-
erty, and more.
In sum, the emerging canon of CLRs, as codified in the ILO 1998 deci-
sion, seems to support the notion of an exploration and identification proc-
ess of inalienable labor-related human rights, whose list is not contingent
on any particular community or choice of instrument. This can be viewed
in the piecemeal fashion of reaching the current list. The debate between
the OECD and the ILO on child labor can be viewed as demonstrating a
dispute on the particular method of defining the right, but not on the right
itself. It is therefore agreed upon that child labor presents a problem asso-
ciated with human rights, and the controversy is confined to the exact con-
tours of this linkage.
By contrast, the broader list of rights, the "core-plus", tends to be more
sensitive to the nature of the community and the type of instrument. For
example, instruments developed by states in the process of constructing a
region are more likely to provide a more extensive list of rights compared
to those adopted by the weaker and nebulous global community. Thus, Eu-
ropean standardization processes have mostly avoided the limited agenda
of the four CLRsY Only in Europe can we find a particular reference to
rights that support the freedom of association and can render it effective,
such as the right to consultation and to information. "Soft law" instruments
provide a more comprehensive list of rights compared to "hard law" in-
struments." Industry or firm-specific codes display a greater disparity in
their lists of rights, which can be accounted for by the differences among
the regulated industries. Voluntary codes in textiles, clothing, and footwear
tend to concentrate on the CLRs, most notably on the prohibition of forced
labor and child labor. However, there are codes in the chemical and trans-
port sectors that cover health and safety issues as well. At the same time,
the difference between political and commercial interests account for the

47 Compare the instruments developed by the European union to those of the in-
ternational agents (IOL, WTO, OECD and World Bank). See Table 1 in the
Appendix .
48 Compare the ILO definition, as well as the US GSP ("hard law"), to the Copen-
hagen Summit's recommendations and to voluntary codes of conduct ("soft
law") . See Table 1 in the Appendix .
 7 The Transformative Weakness of Core Labor Rights 253

fact that only 15% of the codes address the freedom of association, and
very few of them refer to collective bargaining."
To summarize, the myriad of international instruments are distinguished
from one another in several respects. Despite the variation, they tend to
display a shared acceptance of those CLRs deemed inalienable human
rights. At the same time, variations are reflected in the list of rights that ex-
ceed the CLRs and extend into the realm of "core-plus". The "core-plus"
rights are not debated in the same manner as the CLRs. They are not nec-
essarily attributed to a theory of inalienable rights and are best understood
as a portrayal of a community's deliberative process of prioritizing some
standards over others, based on the community's conjunctural needs and
the authoring agents' interests.
In the following section, I will argue that both the canon of CLRs, and
to an extent also the "core-plus" rights fail at providing a coherent state-
ment on labor rights as human rights. Moreover, the list of CLRs is espe-
cially vulnerable, as it promotes neither the IL nor the OL objectives which
justify the international regulation of labor. Consequently, the current list
of CLRs risks fails in two respects. First, it fails at the moral task of allevi-
ating the proper standards to the level of human rights. Second, the current
list fails at the instrumental task of achieving the legitimacy necessary for
redressing the weakening state-based capacity to regulate, and the growing
need to construct new communities that can reconstruct a sense of social
citizenship.

7.4 The Transformative Weakness of CLRs

Although the evolving canon of CLRs points at what are undoubtedly im-
portant rights, the narrow scope seems questionable, in regard to the rights
included and the many rights excluded. If the CLRs are merely a pragmatic
political compromise which addresses the scope-legitimacy tradeoff, then
they do not merit an analysis, other than a description of the political

49 ILO Governing Body 273rd session, Overview of Global Developments and Of-
fice Activities Concerning Codes of Conduct, Social Labeling and Other Pri-
vate Sector Initiatives Addressing Labour Issues (lLO G.23/WP/SDL/l, 1998);
OECD Working Party of the Trade Committee, Codes of Corporate Conduct
(Paris, OECD TDITC/WP(98) 74, 1999); For a recent critique of voluntary
codes of conduct see: Harry Arthurs, "Private Ordering and Workers' Rights in
the Global Economy: Corporate Codes of Conduct as a Regime of Labour Mar-
ket Regulation" in Joanne Conaghan, Michael Fischl and Karl Klare (eds), La-
bour Law in an Era ofGlobalization (Oxford, Oxford University Press, 2001).
254 Guy Mundlak

forces which constructed the list.50 In light of the following critique of the
selected CLRs, perhaps that is all that is needed. However, if the process
of selecting CLRs that are to be distinguished from merely local or re-
gionallabor standards is in reality a search for defining a morally coherent
list of human rights, then the current canon of rights is questionable. Given
the highly instrumental nature of the current debates, and that most of the
debate is not framed in a rhetoric of natural law or any other political the-
ory for that matter, the framing of some labor rights as human rights is as-
sumedly used as a means of increasing legitimacy and prioritizing some
rights over others in the complex international terrain.

7.4.1 Justifying the CLRs

The welfare state's emphasis on its commitment to uphold social citizen-

ship as a human right in itself sought to ensure each citizen (or resident),
inter alia, the right to work, dignity, and adequate income. Globalization's
displacing effect evoked a recognition that the welfare state no longer has
the same regulatory power which could be used to sustain social citizen-
ship. At the same time, the emergence of communities that extend the bor-
ders of the state, be they regional or global communities, requires that so-
cial citizenship be respected, protected, and fulfilled." not only by the
state-community but also by other relevant communities. The first objec-
tive has been designated as the IL function of CLRs, and the latter has
been designated as the OL objective. On the basis of the distinction be-
tween IL and OL objectives, three competing claims to justify the list of
CLRs can be posed.

50 Aside from some rhetoric which appears in the international instruments them-
selves, there is no commentator who seriously argues that the CLRs reflect any-
thing beyond a political compromise. The notion that the current canon of
rights aims to define a coherent distinction between rights and standards there-
fore seems somewhat theoretical. See for example Bhala, Clarifying the Trade-
Labor Link (1998), above note 36, who argues that the merit of the CLRs is that
they can gain international consensus.
51 These are the three levels of obligations posed by social rights, as detailed in
The Limburg Principles on the Implementation of the International Covenant
on Economic, Social and Cultural Rights, U.N. Doc. E/CNAI 1987/17. Also
published in 9 Human Rights Quarterly 122 (1997). The Maastricht Guidelines
on Violations of Economic, Social and Cultural Rights, (1997) 15 Netherlands.
Quarterly on Human Rights 244.
 7 The Transformative Weakness of Core Labor Rights 255

Claim 1 (IL): CLRs seek to establish some labor standards as human rights in
developed welfare states that can no longer rely on their own regulatory power to
ensure social citizenship.
The IL objective is latent in the discourse on CLRs, and for the most
part indirect. The problems associated with the construction and enforce-
ment of the international regulatory instruments are usually addressed as
problems of low standards and lack of compliance in developing countries.
Consequently, the international instruments, and the canon of CLRs,
tend to refute the IL objective. This can be observed in a twofold manner.
First, some developed countries refuse to accept the international cove-
nants that define the CLRs, the United States being the most striking ex-
ample." Second, developed countries may view these rights as prescribing
minimum standards that are irrelevant to developed welfare states. Lance
Compa for example notes that the OECD's proposal for Multilateral
Agreement on Investment (MAl) does not affect situations in which out-
side investment exerts pressure on states within the United States to pass
"right to work" laws that make collective bargaining extremely difficult to
initiate.53
Because the CLRs seek to pose a minimum threshold, they lack any
mechanism that can encourage progressive realization of social rights and
social citizenship. The alleged irrelevance of CLRs to developed states dis-
tances away the problems associated with the declining regulatory power
of the welfare state and suggests that the resolution of these problems lies
with developing states and run-away employers. The difficulty of enforc-
ing these rights takes the pressure off the developed welfare states, which
can present the weakening regulatory power as an unfortunate byproduct
in a global regime where basic rights are not enforced (elsewhere) and
competition is unfair.
Claim 2 (Ol.-instrumental-to-Il.} : CLRs seek to construct some labor standards
as human rights in order to ensure developed welfare regimes against unfair com-
petition.

52 The United States ratified only two of the eight ILO covenants that compose
the CLRs (one dealing with forced labor and the other on the worst forms of
child labor). See: ILO website for updated ratification information
(http://www.ilo .org); OECD, International Trade and Core Labor Standards
(Paris, OECD, 2000) 25.
53 Lance Compa, "The Multilateral Agreement on Investment and International
Labor rights: A Failed Connection", (1998) 31 Cornell International Law Jour-
na1683; Coxson, The 1998 ILO Declaration, above note 34, 485-496.
256 Guy Mundlak

As a result of distancing the problems of the developed welfare states,

by reliance on a human rights rhetoric, CLRs remain mostly rights that ad-
dress OL problems. This seems to be the dominant view of CLRs. 54
It is usually observed that developing countries refuse to adopt interna-
tional standards, fearing the loss of their comparative advantage in the glo-
bal labor market. Associated with this problem are employers situated in
developing countries that do not comply with the international standards
and that are usually not coerced by the states in which they operate to in-
crease compliance. To the extent that globalization brings about displace-
ment, weakens negotiated and regulatory standards within the developed
welfare states, and leads to growing inequality, the international instru-
ments merely seek to remedy these problems by making the option of relo-
cating to developing countries less attractive. The objective is to avoid
"unfair competition", but not to construct a "fair economy" in the devel-
oped welfare state.
To the extent that this objective is instrumental to the preservation of the
developed welfare states, then, as argued, it is not really an OL objective
but merely an instrumental approach to IL objectives. International instru-
ments may therefore seek to inhibit the forces of globalization rather than
remedy the regulatory deficit that globalization brings about. This argu-
ment supports the developing states' claim that the CLRs preserve a regu-
latory imbalance in which regulation initiated by developed states only
targets the developing states. Thus there is an inherent imbalance in the
CLRs and the effort to devise a narrow list of rights does not eliminate the
mismatch between responsibility (mainly on developing states) and bene-
fits (gained mostly by developed states). Consequently, this imbalance
sheds doubts on the effort to devise a narrow list of CLRs as a means of
addressing the problem of legitimacy.
Claim 3 (OL): CLRs seeks to address the absence ofrights in developing coun-
tries that do not provide sufficient welfare entitlements and protection of social
citizenship .
If CLRs cannot be justified as means to address IL problems of devel-
oped welfare regimes (claim 1, ibid), and cannot advance the need for le-
gitimacy as the instrumental objective suggests (claim 2, ibid), then their
main justification should be proposed as a purely OL objective: securing
the rights of each and every worker in the global (or regional) community.
Occasionally, this argument will be made as a way of masking the instru-
mental objective. Other times it may be sincere. Indeed, the CLRs seek to
prevent what seems to be unjustified practices that present gross infringe-

54 Cf. Bhala, Clarifying the Trade-Labor Link (1998), above note 36.
 7 The Transformative Weaknessof Core Labor Rights 257

ment of individual rights. No argument whatsoever can be made to justify

slavery. The evolving international community cannot sustain such prac-
tices that undermine the most fundamental values of the community. Of
the three claims, this claim makes most sense in explaining the reductionist
discourse of CLRs . It presents a pragmatic and strategic understanding of
the limits of international regulatory instruments and seeks to eliminate on-
ly the worst kind of employment practices. Once achieved, it will be pos-
sible to advance forward and redefine the targets.

7.4.2 Explaining the Canon of CLRs

Bearing in mind the three possible claims that can justify the carving of
CLRs from the broad list of labor standards, one must then scrutinize the
list of CLRs and assess the rights it enumerates and those it omits. Is there
an ethical standard that can justify the inclusion of the four rights in the
CLRs and the exclusion of others? Some components are almost trivial.
Forced labor is an undisputed violation of human rights. 55 Other compo-
nents, however, pose many doubts . For example, it is unclear why prohibi-
tion on child labor, prescribed as a strict rule, 56 should always be seen as
the "worst kind of employment practice". At the same time, the absence of
commitment to occupational health and safety is striking. When seeking to
identify the "worst kind of employment practices" that do not resonate
with a community's commitment to uphold social citizenship, it is possible
to illustrate two situations: (a) a twelve-year-old child whose parents are

55 There are, however, some disputes at the marginsof the right against forced la-
bor, such as whether the right prevents from coercing prisoners to work and re-
pay society for the harm that they've committed, or whether the right prohibits
compulsory draft to military service. See Bhala, Clarifying the Trade-Labor
Link (1998), above note 36, pp. 37-38; Adelle Blackett, "Whither Social
Clause? Human Rights, Trade Theory and Treaty Interpretation" (1999)
31 Columbia Human Rights Law Review 1, 17-19. I leave these issues aside as
I think that while they raise interesting questions, they are of marginal impor-
tance in the overall debate. I assume every right has a clear core and a vague
penumbra. The core of the right against forced labor is relatively clear. Each
and every right will suffer from the problem of drafting its exact scope, and this
problem should not be held against the project of distinguishing CLRs from la-
bor standards. For an extensive analysis of forced labor, see: ILO Report, The
Elimination of All Forms of Forced or Compulsory Labor (2001,
http://www.ilo.orgipublic/english/standards/decl/publ/reports/index.htm. last
visited December 2002) .
56 As noted, this was the ILO's traditional position, unlike that of the OECD. See
above at note 44 and accompanying text.
258 Guy Mundlak

poor, and who dropped out of school, is employed eight hours a day in
light industry and receives minimum wage; (b) a twenty-one-year old is
employed fourteen hours a day in intensive menial work, exposed to dan-
gerous substances, and receives half the prevailing market wage. Compar-
ing the two "bundles" of poor employment practices is difficult, and it is
not a-priori clear that (a) is worse than (b). Similar difficulties could be il-
lustrated by comparing the freedom of association, which appears in the
CLRs , with the mere right to work, which does not. Thus, a working per-
son who is denied the freedom of association is considered to be at a disad-
vantage compared with the unemployed who can associate, but - given his
employment status - may not have anyone to associate with. More gener-
ally, the narrow list of CLRs raises serious questions as to its coherence,
given the absence of the right to strike, occupational health and safety, pro-
tection of migrant workers, minimum wage or living wage, social insur-
ance, and aid to unemployed workers." Is there any ethical principle that
underlies the choice of CLRs and which can explain its contents?
The current list of CLRs is based on two simple premises. First, the
CLRs guarantee negative rights ("don't dO"),58 and second, they are rule-
based and not results-oriented (i.e. not defined in terms of desirable out-
comes but rather centered on prohibited actions)." These features are char-
acteristic of the liberal implementation of civil rights . They give directions
regarding what should not be done, with the belief that if these actions are
prevented, the market will "play fair". These two principles can aid in
making sense of the current list of CLRs, but at the same time can also aid
in identifying its weakness.
To demonstrate the problem in the two underlying premises , it is useful
to reassess the debate on child labor. Child labor is a function of various
factors: low return on schooling, unavailable schooling options , extreme

57 Compare: Compa, The Multilateral Agreement on Investment (1998), above

note 53.
58 On the distinction between negative and positive rights, see: Sir Issiah Berlin,
"Two Concepts of Liberty" in Four Essays on Liberty (Oxford, Oxford Univer-
sity Press, 1969) 118.
59 The distinction between rule-based and results-based rights is closely related to

the Limburg principles ' term "progressive realization" (above note 51). Ac-
knowledging that once rights (whether civil or social rights) have a positive
component, it is necessary to standardize them not only on the basis ofprohibi-
tions (rules) but also on the basis of outcomes. For an implementation of this
distinction, see for example: U.N. GAOR, Report ofthe Seminar on Appropri-
ate Indicators to Measure Achievements in the Progressive Realization ofEco-
nomic, Social and Cultural Rights (UN GAOR, 48th Sess., U.N. Doc.
NCONF.157!PC/73 , 1993).
 7 The Transformative Weakness of Core Labor Rights 259

poverty that requires families to forgo long-term benefits from their child's
schooling in favor of short-term gains, and selfish behavior of families." A
mere prohibition on child labor is mostly successful in targeting the last
problem, but does little to remedy the first three problems. The struggle to
abolish child labor ignores the social reality of many families who depend
on child labor and do not have access to effective education to raise the
child's and the family's income in the foreseeable future. It also does little
to ensure an efficient market return on schooling. The framing of the pro-
hibition of child labor as a negative right therefore seeks to abolish the
symptom of deeply structured social and economic problems in various
states. However, merely addressing the symptoms does not provide a cure
and may even augment the problems. Moreover, focusing on the prohibi-
tion of child labor constructs the fundamental problem as that of selfish
families rather than as a problem of institutional deficiencies. As such, it
turns attention away from the responsibility of the state, employers, and
the international community to the conditions explaining many instances
of child labor.
The flip side of the child labor example is the absence of occupational
health and safety from the list of CLRs. This omission is curious, because
health and safety matters are derived from civil rights such as the right to
bodily integrity and life." However, the narrow preoccupation with limit-
ing the list of CLRs to negative rights accounts for this failure. Occupa-
tional health and safety is only meaningful if conceived as a positive right
that requires action on behalf of both the state and employers. Moreover,
occupational injuries are never eliminated. They are part and parcel of ev-
ery social system in which work takes place." A rule-based approach that
requires eliminating occupational injuries is therefore not feasible in both
developed and developing states. Instead, a CLR dealing with occupational
health and safety must be phrased in terms of results - reducing injuries
and improving preventive measures. Again, this framing of rights is not
part of the current CLRs agenda and at most appears in the core-plus list.

60 Brown , International Trade and Core Labour Standards (2000) , above note 8,
pars. 145-164.
6\ Jeremy Waldron , "Liberal Rights : Two Sides of the Coin", in Liberal Rights :
Collected Papers 1981-1991 (Cambridge, Cambridge University Press, 1993),
12-13 . Note that some have explained the omission of occupational health and
safety as a result of the technical nature of health and safety regulations. Black-
ett, Whither Social Clauser, above note 55.
62 Nicholas Ashford and Charles Caldart, Technology, Law and the Working En-
vironment (Washington DC, Island Press, reviseded ., 1996) 229-258; Kip Vis-
cusi, Risk By Choice: Regulatory Health and Safety in the Workplace (Cam-
bridge , Harvard University Press, 1983).
260 Guy Mundlak

Its appearance is more often a measure of harmonization among similarly

situated states (European Union) or in very well-defined sectors where the
problems are known and similar across the firms worldwide (e.g. transpor-
tation of hazardous materials and industrial work).
Prohibition of discrimination as a negative right suffers from the flaws
attributed to both the prohibition of child labor and the absence of protec-
tion against occupational injuries. On the one hand, it confronts domestic
values, be they religious or cultural. Like the prohibition of child labor,
there is nothing wrong with pushing the level of protection to women and
other discriminated groups upwards. v The problem is that the negative
right does not account for the consequences of intervening in deep social
and economic structures. First, if gender equality is seriously pursued, the
result would be an expansion of the low-skilled labor market, and hence
the further suppression of the low-skilled workers' wages in the developed
countries . Thus, the fact that CLRs are rule-based rather than result-orient-
ed may lead to compliance, but with adverse outcomes. Second, the ex-
perience of battling discriminatory practices in states with a long tradition
of cultural, religious and institutional bias indicates that the negative decla-
ration that discrimination is prohibited, although important in itself, is
unlikely to affect embedded discriminatory structures in both markets and
politics. Even if firms do not directly discriminate between men and wom-
en, no radical changes in employment practices is likely to take place. For
example, women 's discrimination in the labor market is a function of indi-
rect discrimination based on the division of labor within families, slow
promotion, low levels of schooling, and - most notably - general inequal-
ity in society." Unless the causal factors that lead to discrimination are
remedied, discriminatory patterns are not likely to change. None of these
factors, and most notably general inequality in society, will be affected by
a mere prohibition on discrimination . It is possible to hypothesize that im-
posing a negative prohibition on discrimination serves as tokenism that ad-
dresses the moral issue but does not seek to induce true change.
The emphasis on negative/rule-based rights also accounts for the ab-
sence of other potential rights that may be deemed an important compo-
nent of social citizenship. Fair working conditions, including a minimum
wage calculated on the basis of domestic conditions (or even with a com-
bination of sectoral prevailing wages), and promise of rest (limitation of
working hours and annual vacation), are deemed to exceed the negative

63 It should therefore be made clear that I am by no means accepting the simplistic

relativ ist argument that protecting certain disadvantaged groups is a "western
morality" and that diffusing human rights is a colonializing project.
64 Blau, The Gender Wage Gap (1998), above note 31.
 7 The Transformative Weakness of Core Labor Rights 261

right and impose an obligation on the legislature to act in the affirmative

by guaranteeing rights, and on employers to act affirmatively and pay for
these rights. Rights to social insurance and aid to the unemployed are simi-
larly considered to exceed the negative rights of CLRs. Thus, while it is
acceptable to determine an age under which CLRs will state "do not em-
ploy" , it is not acceptable to determine a certain number of rest-days for
which employers are told "you must pay"." Nor is there any guarantee of
pension that can relieve the aged from working.
The examples regarding child labor, anti-discrimination, occupational
health and safety, and fair working conditions suggest that reducing the la-
bor rights agenda to a short list of CLRs is flawed in its negative
rights/rule-based framing of CLRs. This argument need not be surprising.
The liberal construct of civil rights has never been exceptionally useful for
workers, even before the expansion of globalization. In fact, it has been
observed that there is a tradition of cleavage between the pursuit of civil
rights and labor rights." Civil rights were viewed by some as the rights of
those who "have" but not the rights of those who "have not"." At the min-
imum, civil rights were deemed irrelevant to labor rights. A more extreme
view held them to be precarious for the development of workers' rights,
especially when including market rights, such as the right to property and
the freedom of contract. It is therefore odd that the current agenda at the
international level is framed by a discourse that was rejected by the advo-
cates of workers' rights at the national venue.
Structuring the CLRs on the basis of the negative /rule-based rights
paradigm also accounts for why it cannot really achieve any of the possible

6S The comparison naturally highlights the weakness of the distinction between

negative and positive rights altogether. The right to fair labor standards could
be phrased as a negative right as well ("do not pay below a given level"). The
difference between the framing of the right as negative or positive is merely
that of determining the bench mark. See : Dennis Davis, Patrick Macklem and
Guy Mundlak, " Social Rights, Social Citizenship and Transformative Constitu-
tionalism", in Joanne Conaghan, Michael Fischl and Karl Klare (eds.) Labour
Law in an Era ofGlobalization (Oxford, Oxford University Press, 2001) .
66 On the limitations of civil rights as progressive socio-economic instruments,
see Virginia Leary, "The Paradox of Workers' Rights as Human Rights", in
Lance Compa and Stephen Diamond (eds.) Human Rights, Labor Rights and
International Trade (Philadelphia, University of Pennsylvania Press, 1996) 22-
47.
67 On the distinction, see Frank Michelman, "Possession vs. Distribution in the
Constitutional Idea of Property" (1987) 72 Iowa Law Review 1319; William
Forbath, "Caste, Class and Equal Citizenship" (1999) 98 Michigan Law Re-
view 1.
262 Guy Mundlak

claims to justify the CLRs agenda. As to the IL claim, CLRs have little di-
rect impact on domestic problems of developed states in which there are
developed institutions of the welfare state. To address these problems, the
institutions of the welfare state and the regulation of the labor market must
be reconsidered. This is first and foremost a domestic agenda that can only
be extended beyond the state level if there are closely knit relationships
among similar states, the European Union being the only example that can
be currently considered. The negative/rule-based approach could potential-
ly aid in addressing the second "instrumental" claim, but fails in its quest
for obtaining legitimacy for a reduced agenda. The CLRs provide a set of
prohibitions that mostly impose limitations on employers in the developing
states and on the developing states themselves. Although it is tempting to
think that the reduction of CLRs to negative rights could aid in their accep-
tance, this thought is misconceived. It assumes, correctly, that if the inter-
national community will impose positive obligations on developing states,
these will be unobtainable because of the states' economic situation. Yet as
long as the imbalance between the regulating states (developed) and the
targeted states (developing) is maintained, and the objective is defined as
preventing displacement in developed states, even the negative agenda is
not likely to obtain the necessary legitimacy. What is required, as will be
demonstrated shortly, is that CLRs be defined in terms of positive obliga-
tions, but raise these obligations on the regulating (developing) states. In
other words, if the beneficiaries of the second claim are the developed wel-
fare states, then these states should also be held responsible to sponsor a
more ambitious positive/result-oriented agenda of CLRs. Finally, the OL
claim cannot be satisfied by the current structure of CLRs. Mere nega-
tive/rule based rights are unlikely to aid individuals or communities in de-
veloping countries. Except for the freedom from forced labor, other nega-
tive/rule-based rights will not advance any notion of social citizenship in
markets and societies that do not provide the appropriate social and eco-
nomic infrastructure, including fair labor standards to working people,
education alternatives to children, unions that workers and the unemployed
can associate with, and employment opportunities for women and minori-
ties. In sum, the legitimacy that was sought by reducing the international
agenda to CLRs has therefore encountered its limits.

7.4.3 A Developmental Alternative

What is the alternative to the emerging discourse? Drawing on the analogy

to rights at the national level, it seems that more consideration must be
given to the rephrasing of the international agenda in terms of social rights,
 7 The Transformative Weakness of Core Labor Rights 263

which can be characterized as rights that (a) combine both negative and
positive dimensions, and (b) are result-oriented, rather than rule-based. "
The alternative agenda accepts the possibility of distinguishing CLRs from
labor standards. It may also merge with components of the current canon.
The list of selected rights is only part of the problem. The deeper problem
is with the negative/rule-based framing of rights which is inadequate for
achieving any of the three possible claims posed at the beginning of this
section.
The alternative agenda, which I designate as "developmental", seeks to
induce a "race to the top", as distinguished from the empirically shaky
"race to the bottom"." Hepple describes the "race to the top" as a way of
using international instruments to push developing countries and devel-
oped welfare states forward , and compensate for the regulatory deficit as
well as the effects of displacement on the welfare state. This objective
aims to affect both the IL and the OL perspectives outlined earlier. Hepple
further notes that the current agenda of CLRs does not seriously promote a
race to the top but seems more like "legitimizing sustainable capitalism
...market imperialism... or social imperialism"."
A developmental agenda for defining CLRs must address a number of
concerns that are currently neglected.
First, it must be structured in terms of development rather than in
terms of prohibition.
The child labor policy is the most striking example. In order to
change the families' cost-benefit calculation, the mere prohibition on
child labor must be replaced with developmental measures . At the state
level, this could be done by subsidizing schooling beyond the mere of-
fering of free schooling for all. Thus, for example, Mexico is paying
families who send their children to work, thus tweaking their costlbene-
fit calculation. To the extent states do not have the necessary funds to
pursue such investments in human capital, the international response
must seek to aid financially rather than suffice with prohibition. Another
response is to impose on firms that relocate to developing countries and

68 I am characterizing socialrights by the positive/outcome-based nexus, although

I generally reject the distinction which assumes that civil rights are negative/
rule-based and social rights are positive/outcome-based. All human rights (po-
litical, civil, social, economic, and cultural) integrate the two dimensions. See:
Davis, Macklem and Mundlak, Social Rights (2001), above note 65. The argu-
ment here therefore reflects what I believe was a historical fallacy, but one
which has been too well accepted in scholarly analysis.
69 Hepple, The Race to the Top (1998), above note 29.
70 Hepple, Id., idemp. 360.
264 Guy Mundlak

countries and employ children to sponsor educational programs, thus

changing the balance between state and employers. Common to all pro-
grams is the shift from negative rights to positive obligations.
An additional dimension of a developmental agenda is to defme
rights broadly and require a "progressive realization" of these rights."
Minimum wage and fair working conditions may therefore be part of the
CLRs. Their substance, however, will vary from one state to another,
and also from time to time. Similarly, aid to the unemployed and social
insurance programs can be integrated into the CLRs, but will have to
vary from one case to the next. The "progressive realization" approach
requires not only stating CLRs in positive terms but also defining the
fulfillment of the right in terms of outcomes. Compliance with the duty
of promoting equality in the workplace, increasing occupational safety,
and schooling alternatives to children can be monitored by observing the
outcomes of various strategies taken by states and employers.
The "progressive realization" approach is not an adoption of a relativ-
istic perception of human rights. The rights remain fundamental and in-
alienable. However, even a universal and objective approach to human
rights need not suffice with advocating only the bare minimum. The im-
portance of a fluid definition for CLRs is that these rights also require
the developed states to take action domestically rather than suffice with
prohibitions aimed at other countries. The disadvantage of the "progres-
sive realization" approach is that it blurs the distinction between the
"absolute core" and other standards. If negative/rule-based rights were
useful in obtaining legitimacy for the absolute minimum, the choice be-
tween a minimal list of priorities and broader objectives would have
been difficult. However, as argued, the prevailing effort to define the
"core" does not seem coherent and fails on its own terms (obtaining le-
gitimacy) .
Second, a developmental agenda must seek to diffuse obligations be-
yond the state, to small communities, employers, and a multitude of so-
cialorganizations.
It is important to acknowledge that, while globalization requires seek-
ing venues of regulation other than the state, the small community is just
as much an alternative venue as the global community. The regulatory
deficit pervading the welfare state is not remedied by global responses
where the sense of community is rather weak. Although regional com-
munities such as the European Union succeed in building up more regu-

71 Maastr icht Guidelines on Social, Economic and Cultural Rights (1997), above
note 51.
 7 The Transformative Weakness of Core LaborRights 265

latory power than other international communities, the ED is currently

the exception rather than the rule. The CLRs were intended to remedy
the absence of legitimacy to international responses, given the weak
sense of community and interests of cross-national solidarity. However,
as demonstrated (especially with regard to the second claim, ibid), a wa-
tered-down regulatory agenda of human rights does not necessarily suc-
ceed in building a sense of community. On the contrary, the current
CLRs merely trumpet the disparity among the developed and develop-
ing states. Taking the ILO as an example, the institution seems to con-
front both a legitimacy problem by the states, but also a problem of un-
represented interests that cannot influence the debate on CLRs. The
tripartite structure of representation, although most developed in
comparison to other international bodies, does not provide for voices of
the unemployed or of workers whose interests are different from those
of the trade unions representing them. 72
A developmental strategy should therefore seek to draw upon small
geographical and identity-based communities. As noted by Harry Ar-
thurs, "[t]he failure to produce a substitute for the state at the transna-
tional level may refocus attention on local struggles, on indigenous, im-
plicit and informal lawmaking, on movements which have not become
juridified but which actually draw their substance and strength from
grass roots."?'
Some proposals have emphasized the need to integrate international
regulation with monitoring by NGOS.74 However, the need to redefine
the CLRS requires a more far-reaching rethinking of emphasis. Impos-
ing an agenda of developmental CLRs, which are positive/outcome-
based, must seek to address basic social problems that cannot be dealt
with at the macro-state level. If child labor is a symptom of low returns
on schooling, if gender discrimination is a symptom of women's role in
the family, and if occupational injuries are a result of local ecological
hazards that can only be remedied by means of collective action, then
prohibitive statements are unlikely to make the necessary difference.
Concerns for human rights at developing states, just as the problem of
displacement in developed states, must seek to bring together various

72 Sean Cooney, "Testing Times for the ILO: Institutional Reform for the New In-
ternational Political Economy", (1999) 20 Comparative Labor Law and Policy
Journal 365, 370-374; Langille, The ILO and the New Economy (1999), above
note 42.
73 Harry Arthurs, "Labor Law Without a State" (1996) 46 University of Toronto
Law Journal 1, 45.
74 Sabel et al., Ratch eting Labor Standards , above note 33.
266 Guy Mundlak

communities (geographical communities and identity-based communi-

ties, such as women 's organization, trade unions, NGOs that deal with
education, health and welfare). Only through such coordinated action
can the problems themselves , rather than the symptoms, be addressed."
Rethinking the venue of response to the regulatory deficit from the
global to the small community implies that the changing developed wel-
fare states must seek internal solutions rather than distance the problems
and blame globalization for displacement. Generally, this suggests that
too many objectives have been placed on the new international response
and that relying on CLRs to assure fair trade and to correct for the ef-
fects of globalization may be the wrong path to pursue. Local responses,
however, need not be detached from the global response . Take for ex-
ample the European Union Guidelines on Employment which require
states to devise action plans that pursue the Union's objectives as de-
fined and redefined from time-to-time." The implementation of these
transnational guidelines does not replace small local experiments that
address unemployment, partially caused by the effects of globalization.
Taking Germany as an example, most responses to the European Guide-
lines have been devised by the tripartite "Alliance for Jobs, Training and
Competitiveness", and its solutions have been tried out at the sectoral
level as well as in geographical-based communities. " Thus, internation-
al coordination and regulation can complement and promote domestic
responses in the welfare state. More generally, globalization should be
conceived as an opportunity to promote regulatory innovations that do
not overlap with the artificial boundaries of the state. Admittedly, the
examples of such international-domestic complementarity are not abun-
dant, but they can potentially avoid the incoherent outcomes of the cur-
rent reductionist canon of CLRS and address the problems of different
communities situated in different socio-economic positions.

75 This argument is based on two different, yet - for the present purpose - com-
plementary conceptions of democracy and political theory: radical democracy,
as presented by Chantal Mouffe , The Return of the Political (London, Verso,
1993) and Aristotelian social democracy, as discussed by Martha Nussbaum,
"Aristotelian Social Democracy" in B. Douglass , G. Mara and H. Richardson
(eds.) , Liberalism and the Good (NY, Routledge, 1990) 203-252.
76 The Councils of the Europe an Union, Council Resolution on the 1999 Employ-
ment Guidelines (http://europa.eu.int/commlemployment_social/empl&esf/
empI99/guide_en.htm, last visited December 2002).
77 EIRO, Federal Government Gives Financial Support for Pilot Projects on Sub-
sidizing Low Wages, (http://www.eiro.eurofound.ie at DE0005260f, last visited
December 2002).
 7 The Transformative Weakness of Core Labor Rights 267

Third, responsibility and costs should be diffused to different agents,

including states (developed and developing) and private employers.
The welfare state has been described at the opening section of this ar-
ticle as a web of institutions that accept the functioning of markets, yet
seek to partially decommodify social citizenship by means of regulating
the labor market and placing obligations on both the state and employ-
ers. The current agenda of CLRs holds either states or employers re-
sponsible to respect a minimal threshold, but their obligations are
framed only as respecting the negative rights of employees and are not
sufficiently interdependent. Consequently, the image of the international
welfare regime corresponds at the most to the weakest welfare regime
identified at the state level - the residual, neoliberal model. The more
demanding models, based on employers' obligations (the corporatist
model) and state obligations (the social democratic model) are excluded
from the international response.
A developmental strategy requires upholding positive rights. The ob
jections of developing states to a developmental extension of the CLRs
is a result of the assumption that obligations are solely imposed on the
developing states. However, the second claim proposed earlier indicates
that international instruments seek to advance labor rights in developing
states in order to remedy the destabilizing effects of globalization on de-
veloped states. This is the essence of the asymmetry that undermines the
expected legitimacy of the CLRs' project. One side gains, and the other
side is expected to pay. Similarly, employers relocating to developing
states where labor costs are lower and the welfare state infrastructure is
undeveloped seek to gain from these states' situation. Employers are
therefore not concerned about developing a social pact. Unlike the em-
ployers at the heyday of developed welfare regimes, who were viewed
as part of a pact that places responsibility on labor, capital and the state,
the "runaway" employers ' presence in developing countries is contin-
gent on sustaining the poorly regulated system.
A developmental strategy which seeks to advance social citizenship
as a human right requires placing obligations on all states governed by
the international instruments as well as on employers that benefit from
cross-borders movement. For example, child labor, even if unharmful,
must be taxed for the explicit purpose of increasing schooling opportun-
ities. Employers and states that do not achieve targets of reducing dis-
crimination can be taxed to fund anti-discrimination programs, and to
improve employment opportunities for disadvantaged groups. States that
benefit from increased labor protections in other countries, given that
observance of human rights ensures a fairer trade, should take part in as-
sisting employment creation in the countries affected. Thus, the replica-
268 Guy Mundlak

tion of regulatory measures that were an integral part of the developed

welfare state in the past, to the international level, must also replicate
the social pact between the social partners that sustained the welfare
state's arrangements. The welfare state that transcends the minimal re-
sidual model emphasizes comprehensive solidarity, whereby rights and
obligations are placed on all those affected. The current agenda of CLRs
imposes benefits on some and obligations on others. Unless this is
changed, the CLRs are not likely to gain the necessary legitimacy, nor
advance any feasible objective that can be attributed to them.

7.4.4 Concluding Remarks

Admittedly, these three issues do not provide a clear blueprint for an alter-
native strategy. Looking at the characteristics described earlier, a develop-
mental strategy cannot be limited to anyone single instrument. It must in-
tegrate "hard law" with "soft law", business and political agents, national
and international regulations. The deconstruction offered here provides
only a critical message. The reductionist discourse of CLRs is incoherent
on its own terms. It is not likely to achieve either IL or OL objectives. It
claims that the fundamental reason for the CLRs' inadequacy is their em-
phasis on negative/rule-based rights. Framing the alternative in terms of
positive/outcome-based rights can aid in searching a developmental rather
than a prohibitive international strategy. Although I do not pretend to pro-
vide grand solutions, it is noteworthy that developmental alternatives can
be observed in some international instruments, most notably the Copenha-
gen Summit's program for action. The program is not "hard law" but nev-
ertheless seeks to gravitate an international order based on development
rather than on prohibitions and negative rights. To the extent that the CLRs
seek to achieve an international consensus, it is important to rethink
whether their theoretical incoherency does not indicate a strategic fallacy.
It may be argued that constructing the minimal CLRs is the most that
can currently be gained. Political limitations will not enable a more com-
prehensive welfarist approach. That may be true, although this claim does
not justify a more positive view of CLRs. The argument presented here
suggests that the negative/ rule-based framing of the CLRs inevitably
brings about the outcome of protectionism. It does not matter whether or
not this is intentional. The conventional protectionist argument holds that
states do not seriously want to engage in competition. The proposed cri-
tique, emphasizing the absence of a developmental agenda, suggests yet
another dimension of protectionism. If fulfilling social obligations raised
the returns on investment in human capital for workers in developing
 7 The Transformative Weakness of Core Labor Rights 269

countries, globalization might increase competition for professional work-

ers and not only for low-skilled workers (e.g. Indian software engineers).
This may in tum jeopardize the security enjoyed by high skilled workers in
developed states. Thus, avoiding developmental CLRs disregards the need
of workers in developing states to upgrade their human capital and com-
petitive skills in global markets. As a result, protectionism is not only an
argument about the interests of the developed states which affected the
drafting of the international instruments, but also the interests of the high-
waged and high-skilled workers who may experience the weakening of
their market power if human capital in the developing countries is up-
graded.
Advancing labor rights at the international level can aid in creating a
new sense of community and in battling protectionist inclinations. How-
ever, the mere agreement on a watered-down list of CLRs does not really
aid in the creation of an international community. Only an alternative strat-
egy that draws on positive/outcomes-based obligations may resurrect the
social pacts of the welfare state as we knew them. Without taking such a
step, the remedies for the negative effects of globalization are best sought
elsewhere.
7 A Comment on Guy Mundlak - "The
Transformative Weakness of the Global Core
Labor Rights in Changing Welfare Regimes"

Abbo Junker

The discussion of core labor rights has inspired the thinking of lawyers
throughout the world. As Guy Mundlak points out (see Mundlak, supra,
Table 1), the International Labor Organization, as well as the OECD, ac-
knowledges core labor rights in four areas of labor law:
- suppression of compulsory or forced labor;
- elimination of child labor;
- freedom of association; and
- non-discriminatory practices in employment relationships.
In addition, the paper identifies a second canon of labor rights, referred
to as "core plus", that includes the freedom of movement of employees,
fair treatment of foreign workers, occupational health and security issues,
and minimum conditions of work and wages.
While it is plausible that recent developments show an ongoing process
of identification of alienable labor rights, it is questionable whether a gen-
erally accepted "core plus" canon exists. Only occupational safety and
health issues seem to be on the same level as the four internationally ac-
cepted core labor rights: From a human rights perspective, the protection
of health and safety is of utmost importance. To impose sanctions for dis-
criminatory practices in employment while at the same time accepting the
hazards of inadequate health and safety regulations would be less than con-
vincing (see Sebastian Krebber, .. . [sub Ell]). But the freedom of move-
ment of workers must remain a subject of national legislation and regula-
tion (exceptions are, of course, the rules of specific supranational institu-
tions like the European Community). Apart from supranational bodies like
the European Community, it is hard to conceive that the free flow of work-
ers across national borders is a core or core plus labor right. The notion of
fair treatment of foreign workers is too vague to be of any significance,
and minimum conditions of work and wages would have to be defined.
Given the overall nature of the four core areas of fundamental labor
rights named earlier, it is difficult to accept that these rights seek to estab-
lish labor standards in developed welfare states, such that these states can
272 Abbo Junker

no longer rely on their own regulatory power to insure social citizenship in

the process of globalization (see Guy Mundlak, supra, [3 claim 1]). The
Federal Republic of Germany, for example, is surely a developed welfare
state. If its regulatory power is undermined by the process of globalization ,
prohibitions against child labor and forced labor are of no great help for
the ordinary German "social citizen". Mundlak rightly points out the irrele-
vance of core labor rights to developed states, "distances away from the
problems associated with the declining regulatory power of the welfare
state".
The second assertion is that core labor rights seek to construct some la-
bor standards as human rights in order to ensure that developed welfare
states do not suffer from unfair competition. This, too, is questionable,
since it is not clear whether the competition argument is the main focus of
the prohibition against forced labor and child labor. Maybe it is more than
"human rights rhetoric" that sustains the ban on child labor and forced la-
bor, as well as the promotion of non-discriminatory practices and freedom
of association. One might well argue that it is not the aim of human rights
to eliminate economic differences between developing states and devel-
oped states but that this is a mere side effect.
The third claim is that core labor rights seek to address the absence of
rights in developing countries that do not have a developed concept of wel-
fare entitlements . This argument is not easy to understand. The underlying
premise , however, that core labor standards secure the rights of each and
every worker in the global community and seek to eliminate the worst
kinds of employment practices, seems to be the right approach.
The alternatives developed in part [3.c] of Mundlak's paper are equally
convincing. First, the agenda for defining core labor standards should be
structured in terms of development rather than prohibition . It is sound pol-
icy to substitute the mere prohibition of child labor with, instead, devel-
opmental measures that will change families' cost-benefit calculation. The
inherent problem with such an approach is, of course, that someone will
have to pay for it. A little less convincing is the proposal to impose sanc-
tions on firms that employ children in developing countries, which may
take the form of a duty to sponsor educational programs. If the kind of
child labor in question is prohibited, it is doubtful whether one should al-
low the employer to compensate by sponsoring educational programs.
Questions are also raised by the proposal to make the minimum wage rule
a part of the core labor rights: Such a minimum wage standard could very
well change the competitive position of developing countries for the
worse. The second proposed alternative is that a developmental agenda
must seek to diffuse obligations beyond the state to small communities,
employers, and a multitude of social organizations. The question, of
 7A Comment on Guy Mundlak 273

course, remains who should be responsible for piercing the national veil. A
grassroots approach may be the answer (see Mundlak, supra, text accom-
panying note 66) but probably does not constitute the far-reaching ap-
proach needed. The German Tripartite Alliance for Jobs, Training and
Competitiveness, the so-called Round Table, might not be the prime ex-
ample of such an approach because it does not exactly deal with the prob-
lems of developing countries but with an unemployment dilemma on a ve-
ry high level of economic development. In sum, however, the very inspir-
ing and thoughtful paper by Guy Mundlak may be right in its conclusion,
that the remedies for the negative effects of globalization have to be ap-
proached with broad alternative strategies and are not to be found primar-
ily through the promotion of core labor rights.
8 Social Rights Beyond the Traditional Welfare
State: International Instruments and the Concept
of Individual Entitlements

Thilo Marauhn

Contents
8.1 Introduction 275
8.2 Social Rights as a Matter of Public International Law 278
8.3 International Instruments Explicitly Granting Social Rights 285
8.3.1 The International Covenant on Economic, Social and
Cultural Rights 285
8.3.2 The European Social Charter 291
8.3.3 Social Rights within the International Labor
Organization (ILO) 296
8.4 Implicit Guarantees of Social Rights 304
8.4.1 Social rights derived from the UN Covenant on Civil
and Political Rights 304
8.4.2 Social Rights Derived from the European Convention
on Human Rights 308
8.4.3 Social Rights within the Framework of the Inter-
American Human Rights System? 312
8.5 State Obligations or Individual Entitlements? 315

8.1 Introduction

The traditional welfare state, in its rudimentary form as part of a liberal,

more-or-less pure market economy, or construed as a pillar ofa social mar-
ket economy, or in any other, more elaborate regulatory framework, is a
collective undertaking. The purpose of the traditional welfare state is to
eradicate individual poverty in order to improve the economic and social
life of society as a whole. From a constitutional perspective , the establish-
ment of a welfare state is a political decision within the prerogative of the
276 Thilo Marauhn

legislature . Thus, the traditional welfare state is policy-based, not rights-

based. While statutory provisions may establish individual entitlements,
few of these entitlements have been attributed to the constitutional sphere.
Another characteristic element of the traditional welfare state has been its
focus on the nation-state. The traditional welfare state is designed to ad-
dress poverty and social imbalances within a more-or-less closed economic
and political environment: national economy and national welfare within
the nation-state.
One can no longer discuss welfare options within such a closed envi-
ronment. Without assessing the degree of recent changes in the nation-state
as the primary subject of public international law, I we must take note of
both the changing nature of sovereignty- and the growing interdependence
of national economies,' the creation of a global economic environment.
Against this background, I argue to consider the option of developing the
traditional welfare state beyond its collective and national constraints. The
basis can be a reconstruction of social rights, not as a kind of collective
safety net but as individual entitlements which can be taken from public
international law instruments; by nature, these instruments are part of an
international environment and are limited to the state as the focal point of
welfare options. If welfare does not rest primarily upon the decisions of a
particular political entity, i.e, the nation-state, but is more closely related to
the individual and the individual's limited group, it may be possible to

I There are numerous articles on the subject; see for instance O. Schachter, "The
Decline of the Nation-State and its Implications for International Law", Colum-
bia Journal of Transnational Law, 36 (1997), 7-23; J. Habermas, "Beyond the
nation-state? On some consequences of economic globalization", in:
E.O. Eriksen/lE. Fossum (eds.), Democracy in the European Union - Integra-
tion through Deliberation? (2000), 29-41.
2 There is an ongoing debate on the concept of sovereignty and the changes re-
sulting from recent developments in international relations and in public inter-
national law. The following references may serve as an introduction into the
debate: G. Sorensen, "Sovereignty: change and continuity in a fundamental in-
stitution", Political Studies, 47 (1999),590-604; S.H. Hashmi (ed.), State Sov-
ereignty: Change and Persistence in International Relations (1997); A.F.
Perez, "Review essay: who killed sovereignty? or: changing norms concerning
sovereignty in international law", Wisconsin International Law Journal, 14
(1996),463-490.
3 For an interesting debate of the impact of economic interdependence on the de-
velopment of the law cf. J.H. Jackson, "Regulating international economic be-
haviour: the WTO and the challenge of constructing institutions to manage
global interdependence", in: U. Immenga (ed.), Festschrift fiir Ernst-Joachim
Mestmd cker (1996), 611-623 .
 8 Social Rights Beyondthe Traditional Welfare State 277

achieve the necessary flexibility to open traditional perspectives and adapt

welfare (state) options to a global, political, and economic environment.
These issues will not be addressed from a purely theoretical perspective
but rather from a practical one - examining the interpretation of interna-
tional instruments guaranteeing social rights and considering the practice
of states parties and supervisory (international) organs vis-a-vis these in-
struments. This paper will show that the nature of social rights has some-
what changed, that international instruments for the protection of social
rights have increasingly been interpreted parallel with instruments dealing
with civil and political rights .
This approach does not mean that the individual is necessarily better
cared for. Social rights as individual entitlements move beyond caring in-
stitutions but are based upon individual freedom and individual responsi-
bility. This interrelationship between freedom and responsibility' can only
be developed if the traditional concept of social citizenship' no longer re-
mains within the sphere of the nation-state: we have to introduce concepts
of local, national, regional, and international citizenship in order to adapt
welfare options to the existing multi-level system of local, national, re-
gional and international political entities.'

4 This is not a new concept. It is noteworthy that Art. 1 of the UN Declarationon

Social Progress and Development of 1969 (UN GA Res. 2542 [XXIV)) in-
cludes the following provision: "All peoples and all human beings, without dis-
tinction as to race, colour, sex, language, religion, nationality, ethnic origin,
family or social status, or political or other conviction, shall have the right to
live in dignity and freedom and to enjoy the fruits of social progress and
should, on their part, contribute to it" (italics by the author).
5 The concept of social citizenship was developed to a large extent by T.R. Mar-
shall, Citizenship and Social Class - and other Essays (1950) . Perceptionshave
changed to some extent; cf. M. Bulmer/A.M. Rees (eds.), Citizenship Today:
The Contemporary Relevance ofT.If. Marshall (1996). To a certain extent, ad-
aptations have been attempted to meet the needs of modem societies; see e.g.
R. Dworkin, A Matter ofPrinciple (1985) , at 211; J. Kenner, "Citizenship and
fundamental rights: reshaping the European social model", in: id. (ed.), Trends
in European Social Policy (1995),3-84. Reference may also be made to R.A.
Dahl, Dilemmas ofPluralist Democracy. Autonomy vs. Control (1982) as well
as U.K. Preul3, Verfassungstheoretische Uberlegungen zur normativen Begrun-
dung des Wohlfahrtsstaates, in: C. Sachlie/H,T. Engelhardt (eds.), Sicherheit
und Freihe it. Zur Ethik des Wohlfahrtsstaates (1990), 106-132.
6 There have been numerous attempts to cope with such a multi-level system
from the perspective of public international law by constitutionalizing such de-
velopments; cf. recently C. Walter, "Constitutionalizing (Inter)national Gov-
ernance - Possibilities and Limits to the Development of an International Con-
stitutional Law", German Yearbook ofInternational Law (200 I), 170-201. See
278 Thilo Marauhn

De facto, the establishment and maintenance of a welfare state system

are contingent on adequate fmancial resources. The acquisition of funds
and their availability in a given society or group depends on a variety of
factors, including the existence of natural resources, the potential of tech-
nological and other forms of know-how, the composition and structure of
society, participation in economic transactions, and others. Consequently,
social politics is closely interrelated with public and private economic ac-
tivities. De jure, social politics stricto sensu is primarily a matter of nation-
al law. Nevertheless, the policy options at the national level depend on in-
ternational factors, including international law, in particular international
economic law. However, another area of public international law deals
with core components of the welfare state: human rights in general and so-
cial rights in particular. Insofar as the implementation of internationally
guaranteed social rights has an impact on welfare (state) options at the lo-
cal and national level and insofar as it entails costs, the concept and the
structure of pertinent agreements must be analysed as to their ability to
meet the consequences of economic globalization.
Below, we will discuss whether and to what extent global and regional
human rights instruments explicitly stating or implicitly granting social
rights establish individual entitlements, whether the concept of individual
entitlements has changed (perhaps to some extent as a consequence of the
breakdown of the ideology based capitalist - communist dichotomy), and
how much of a tendency and need exists to bring international social rights
in line with international civil and political rights. Social rights will be ex-
amined as a matter of public international law in general. More specifical-
ly, we will distinguish between instruments explicitly granting social rights
and the interpretation of civil and political rights as a basis for individual
social entitlements. In conclusion, we will discuss and suggest that human
rights are a means of developing civil society and of bridging the gap be-
tween the national welfare state and global economy.

8.2 Social Rights as a Matter of Public International Law

Post-1945 legal doctrine and state practice have primarily followed a func-
tional or instrumental approach to social rights. Social rights have been
considered subsidiary but supportive , if not necessary, for the implementa-

also lA. Frowein , "Konstitutionalisierung des Volkerrechts", in: Volkerrecht

und Internationales Privatre cht in einem sich globalisierenden internationalen
System: Auswirkungen der Entstaatlichung transnationaler Rechtsbeziehungen,
Berichte der Deutschen Gesellschaft fur Volkerrecht 39 (2000), 427-447.
 8 Social Rights Beyond the Traditional Welfare State 279

tion of civil and political rights. For illustration, we may consider the par-
allel adoption of the two covenants in 1966 and the concept of indivisible
human rights that has continuously been supported by state practice and
discussed in literature. At the outset, after the adoption of the Universal
Declaration of Human Rights, the U.N. Human Rights Commission began
to draft a single pact, a single treaty for the protection of human rights.
However, in 1952, the United Nations General Assembly decided? that the
Commission should draft two separate instruments taking into considera-
tion the distinct characteristics of the rights included therein." This should
also open up the possibility of developing separate mechanisms for imple-
mentation and enforcement. The decision of 1952, the separation of civil
and political rights on the one hand, and social, economic, and cultural
rights on the other hand, did not mean that the concept of indivisible hu-
man rights was abandoned . Both covenants may be considered as two
sides of a coin: civil liberties are meaningless without economic, social,
and cultural rights and these latter rights will not protect human dignity in
the absence of civil liberties. Such indivisibility has continuously been
stressed in pertinent declarations and resolutions: the 1968 Proclamation of
Teheran," the 1977 Resolution on Alternative Approaches and Ways and
Means within the United Nations System for Improving the Effective En-
joyment of Human Rights and Fundamental Freedoms," and General As-
sembly Resolution 37/200 of 1982 on the Further Promotion and Protec-
tion of Human Rights and Fundamental Freedoms, II reaffirm the interre-

7 UN GA Res. 543 (VI).

8 For such a distinction cf. M. Bossuyt, "La distinction juridiquc entre les droits
civils politiques et les droits economiques, sociaux et culturels", Revue des
Droits de l'Homme 8 (1975), 783-820.
9 The Proclamation was adopted and proclaimed by the International Conference
on Human Rights at Teheran on 13 May 1968 (document available on the web-
site of the UN High Commissioner for Human Rights, at: http://www.unhchr.
chlhtmVmenu3lblb_tehern. htm). Para. 13 of the Proclamation reads as follows:
"Since human rights and fundamental freedoms are indivisible, the full realiza-
tion of civil and political rights without the enjoyment of economic, social and
cultural rights is impossible. The achievement of lasting progress in the imple-
mentation of human rights is dependent upon sound and effective national and
international policies of economic and social development." .
10 UN GA Res. 32/130. The preamble states, inter alia, the following: "Profound-
ly convinced that all human rights and fundamental freedoms are interrelated
and indivisible, ... ".
II UN GA Res. 37/200. Para. 1 "Affirms that a primary aim of international co-
operation in the field of human rights is a life of freedom and dignity for each
human being, that all human rights and fundamental freedoms are indivisible
280 Thilo Marauhn

lationship of both categories of rights. The Vienna Declaration and Pro-

gramme of Action, as adopted by the World Conference on Human Rights
on 25 June 1993,12 confirming the concept of indivisibility" after the
breakdown of the Eastern Bloc, demonstrates that this was not just an ide-
ology-based and power-related compromise.
The Universal Declaration of Human Rights of 194814 unites civil and
political rights as well as social, economic and cultural rights in a single
document without establishing any priorities. In particular, Articles 1 and
2, including universality, and Articles 29 and 30 with their limitation
clauses apply to civil and political as well as social, economic, and cultural
rights alike. While the status and legal effect of the Declaration is a matter
of dispute, there is, however, some support for considering parts of the
Declaration as customary international law.'> This, however, does not ap-
ply to the social rights included in Articles 22 to 28 of the Declaration .
As of today, there are a broad variety of international instruments deal-
ing with social rights, either explicitly or implicitly. The most prominent
instrument granting social rights is the International Covenant on Econo-
mic, Social and Cultural Rights." However, this is by no means the only
universal instrument addressing the issue of social rights. First, there are
various instruments dealing with employment and freedom of association .
Many have been adopted by the International Labor Organization." To

and interrelated and that the promotion and protection of one category of rights
should never exempt or excuse States from the promotion and protection of the
other; . .. ".
12 UN Doc. AlCONF.157/23.
13 Ibid., para. 5: "All human rights are universal, indivisible and interdependent
and interrelated. The international community must treat human rights globally
in a fair and equal manner, on the same footing, and with the same emphasis.
While the significance of national and regional particularities and various his-
torical , cultural and religious backgrounds must be borne in mind, it is the duty
of States, regardless of their political, economic and cultural systems, to pro-
mote and protect all human rights and fundamental freedoms ."
14 UN GA Res . 217 (III).
15 E. Riedel, in: B. Simma (ed.), The Charter of the United Nations. A Commen-
nd
tary (2 ed. 2002), Article 55(c) , marginal notes 30-33. For a recent debate on
the Universal Declaration, see D. Matas, "The Universal Declaration of Human
Rights: Fifty Years Later", McGill Law Journal 46 (2000) , 203-215;
D. O'Sullivan, "Is the Declaration of Human Rights Universal?" International
Journal ofHuman Rights 4 (2000), 25-53 .
16 993 UNTS 3.
17 The International Labour Organization has contributed in various ways to the
concept and development of social rights ; cf. L.B. Sohn, "The contribution of
the International Labour Organization to the development of the concept of
 8 Social Rights Beyond the Traditional Welfare State 281

name but a few, we may refer to the Employment Policy Convention

(No. 122) of 1964,18 Convention (No. 154) concerning the Promotion of
Collective Bargaining,'? Convention (No. 168) concerning Employment
Promotion and Protection against Unemployment of 1988,20 and Conven-
tion (No. 169) concerning Indigenous and Tribal Peoples in Independent
Countries of 1989.21 As far as freedom of association is concerned, refer-
ence may be made to the Freedom of Association and Protection of the
Right to Organize Convention (No. 87) of 1948,22 as well as Convention
(No. 98) concerning the Application of the Principles of the Right to Or-
ganize and to Bargain Collectively of 1949,23 the Convention (No. 135)
concerning Protection and Facilities to be Afforded to Workers' Represen-
tatives in the Undertaking of 1971,24 and Convention (No. 151) concern-
ing Protection of the Right to Organize and Procedures for Determining
Conditions of Employment in the Public Service of 1978.25 Apart from
conventions dealing specifically with workers' rights, there are several
conventions with a particular focus on vulnerable groups, such as children
and women. Reference may be made to the Convention on the Elimination
of all Forms of Discrimination against Women of 197926 and to the Op-

economic, social and cultural rights", in: R.-J. Dupuy (ed.), Melanges en
l'honneur de Nicolas Valticos (1999),595-606.
18 Text adopted on 9 July 1964 by the General Conference of the International

Labour Organisation, entry into force 15 July 1966.

19 Text adopted on 19 June 1981 by the General Conference of the International

Labour Organisation, entry into force 11 August 1983.

20 Text adopted on 21 June 1988 by the General Conference of the International
Labour Organisation, entry into force 17 October 1991.
21 Text adopted on 27 June 1989 by the General Conference of the International
Labour Organisation, entry into force 5 September 1991.
22 Text adopted on 9 July 1948 by the General Conference of the International
Labour Organisation, entry into force 4 July 1950.
23 Text adopted on 1 July 1949 by the General Conference of the International
Labour Organisation, entry into force 18 July 1951.
24 Text adopted on 23 June 1971 by the General Conference of the International
Labour Organisation, entry into force 30 June 1973.
25 Text adopted on 27 June 1978 by the General Conference of the International
Labour Organisation, entry into force 25 February 1981.
26 Text adopted by UN GA Res. 34/180 on 18 December 1979, entry into force
3 September 1981. Art. 1 reads: "For the purposes of the present Convention,
the term, "discrimination against women" shall mean any distinction, exclusion
or restriction made on the basis of sex which has the effect or purpose of im-
pairing or nullifying the recognition, enjoyment or exercise by women , irre-
spective of their marital status, on a basis of equality of men and women, of
human rights and fundamental freedoms in the political , economic , social, cul-
282 Thilo Marauhn

tional Protocol of 1999 27, which establishes an individual and collective

complaints procedure." Social rights are further included in the Conven-
tion on the Rights of the Child of 1989. 29 It is noteworthy that the Optional
Protocol to this Convention which prohibits the sale of children, child
prostitution, and child pornography entered into force in January 2002, less
than two years after its adoption in May 2000. 30 Other than these conven-
tions which are examples of legally binding instruments at the universal
level, there are numerous declarations dealing with specific social rights.
One of the first pertinent resolutions of the UN General Assembly included
the Declaration on Social Progress and Development." This was later sup-

tural, civil or any other field." According to Art. 3 of the Convention, "States
Parties shall take in all fields, in particular in the political , social, economic and
cultural fields, all appropriate measures, including legislation , to ensure the full
development and advancement of women, for the purpose of guaranteeing them
the exercise and enjoyment of human rights and fundamental freedoms on a ba-
sis of equality with men." Furthermore, Art. 11, para. 1, lit. e, of the Conven-
tion specifically guarantees the right to social security, Art. 11, para . 2, lit. b,
includes the obligation of States Parties to introduce maternity leave, and
Art . 11, para. 2, lit. c, requires States Parties "to encourage the provision of the
necessary supporting social services to enable parents to combine family obli-
gations with work responsibilities and participation in public life" .
27 Text adopted by UN GA Res. A/54/4 on 6 October 1999, entry into force
22 December 2000.
28 Art. 2 of the Optional Protocol stipulates that "(c)ommunications may be sub-
mitted by or on behalf of individuals or groups of individuals, under the juris-
diction of a State Party, claiming to be victims of a violation of any of the rights
set forth in the Convention by that State Party."
29 Text adopted by UN GA Res. 44/25 on 20 November 1989, entry into force
2 September 1990. Art . 4 of the Convention provides : "States Parties shall un-
dertake all appropriate legislative , administrative, and other measures for the
implementation of the rights recognized in the present Convention. With regard
to economic , social and cultural rights , States Parties shall undertake such mea-
sures to the maximum extent of their available resources and, where needed ,
within the framework of international co-operation." Detailed social rights are
included , in particular, in Arts. 23-36 of the Convention.
30 Text adopted by UN GA Res. 54/263 on 25 May 2000, entry into force 18
January 2002.
31 UN GA Res. 2542 (XXIV) of 11 December 1969. The Declaration, inter alia,
includes the obligation to assist and protect families (Art. 4), the right to work
and the free choice of employment (Art. 6), the goal to ensure the right of eve-
ryone to form trade unions and workers ' associations and to bargain collective-
ly (Art. 10, lit. a), the goal to guarantee the right to proper nutrition (Art. 10,
lit. b), the aim to achieve progress in numerous areas of social policy (health,
education, housing) , and further goals with respect to economic and social de-
 8 Social Rights Beyond the Traditional Welfare State 283

plemented by the Universal Declaration on the Eradication of Hunger and

Malnutrition," the Declaration on the Rights of Disabled Persons," and the
1986 Declaration on the Right to Development." The picture would be ra-
ther incomplete if existing regional instruments were not taken into ac-
count. In this regard, we will discuss in detail the European Social Char-
ter" as well as the Protocol of San Salvador of 1988 to the American Con-
vention on Human Rights.>

velopment (Arts . 11-13). As far as the means and methods for implementation
are concerned, it is noteworthy that Art . 18, lit. a, of the Declaration envisages
the "adoption of appropriate legislative, administrative and other measures en-
suring to everyone not only political and civil rights, but also the full realiza-
tion ofeconomic, social and cultural rights without any discrimination" (italics
by the author).
32 Declaration adopted on 16 November 1974 by the World Food Conference and
endorsed by UN GA Res. 3348 (XXIX) of 17 December 1974. Paragraph 1 of
the Declaration states: "Every man, woman and child has the inalienable right
to be free from hunger and malnutrition in order to develop fully and maintain
their physical and mental faculties" (italics by the author).
33 Declaration proclaimed by UN GA Res . 3447 (XXX) of 9 December 1975.
Paragraphs 6-11 include a number of specific social rights. Reference may be
made in particular to para. 10, which states: "Disabled persons shall be protect-
ed against all exploitation, all regulations and all treatment of a discriminatory,
abusive or degrading nature."
34 Declaration adopted by UN GA Res. 41/128 of 4 December 1986. The right to
development is defined as follows: "The right to development is an inalienable
human right by virtue of which every human person and all peoples are entitled
to participate in, contribute to, and enjoy economic, social , cultural and political
development, in which all human rights and fundamental freedoms can be fully
realized" (Art. 1, para. I). More important, however, is Art. 2, para. 1, which
makes it clear that it is the human being which the right to development is con-
cerned with, not particular states , societies or other entities: "The human person
is the central subject of development and should be the active participant and
beneficiary of the right to development." As to the variety of views on the right
to development cf. N.J . Udombana, "The Third World and the right to develop-
ment: agenda for the next millennium", Human Rights Quarterly 22 (2000),
753-787, and J.D. Bunn, "The right to development: implications for interna-
tional economic law" , American University International Law Review 15
(2000),1425-1467.
35 The original Charter was opened for signature on 18 October 1961 (ETS
No. 035) and entered into force on 26 February 1965. Three Protocols were
added to the Charter in 1988 (ETS No . 128 of 5 May 1988, entry into force on
4 September 1992), 1991 (ETS No . 142 of21 October 1991, amend ing the So-
cial Charter, not yet in force) and 1995 (ETS No . 158 of9 November 1995, en-
try into force on 1 July 1998) . In 1996, a revised Social Charter was opened for
284 Thilo Marauhn

Apart from instruments explicitly guaranteeing social rights, it is impor-

tant to take into consideration other human rights instruments which focus
on civil and political rights. Many of these instruments have been inter-
preted to include elements of social rights. In this context, we must con-
sider the International Covenant on Civil and Political Rights" as well as
the European Convention on Human Rights", and, to a more limited ex-
tent, the American Convention on Human Rights'? together with the
American Declaration of the Rights and Duties of Man.40 These instru-
ments have all been interpreted to include certain social guarantees. Par-
ticular focus has been on provisions guaranteeing the right to equality (Ar-
ticle 26 of the International Covenant on Civil and Political Rights) as well
as on the Prohibition of Inhuman and Degrading Treatment (Article 3 of
the European Convention on Human Rights). Reference to these implicitly
granted social rights is particularly important because of the enforcement
mechanisms under pertinent agreements. Irrespective of any further devel-
opments regarding enforcement mechanisms under instruments explicitly
granting social rights, the enforcement mechanisms for civil and political
rights are to a certain extent more effective and more court-like.
The question that arises with each international agreement guaranteeing
social rights is whether and how far these include individual entitlements.
We must distinguish between the individual's position in public interna-
tionallaw (i.e. the extent of an individual's legal personality in public in-
ternational law and the individual's entitlement to enforce his or her rights
at the international level) and the effect of a particular treaty obligation in
domestic law (Le. the individual's right to bring claims before national
courts).

signature (ETS No. 163 of 3 May 1996). It entered into force on 1 July 1999
and at the time of writing there were 12 ratifications.
36 Additional Protocol to the American Convention on Human Rights in the Area
of Economic, Social and Cultural Rights (Protocol of San Salvador) (GAS TS
No. 69), opened for signature on 17 November 1988, entry into force on
16 November 1999. At the time of writing there were 12 ratifications (see the
relevant page on http://www.oas.org/).
37 999 UNTS 171.
38 ETS No. 005, opened for signature on 4 November 1950, entry into force
3 September 1953.
39 GAS TS No. 36, opened for signature on 22 November 1996, entry into force
18 July 1978; 1144 UNTS 123.
40 GAS Res. XXX, adopted by the Ninth International Conference of American
States, Bogota, Colombia (1948), reprinted in: Basic Documents Pertaining to
Human Rights in the Inter-American System, GENSer.L.VIII.82 doc.6 rev.I
at 17 (1992).
 8 Social Rights Beyond the Traditional Welfare State 285

Regarding the effect of treaties in domestic law, we must distinguish be-

tween the question of whether or not a treaty is part of the law of the land
and the individual's entitlement based on such a treaty. The general issue
of direct applicability must be addressed." Many intricate problems are re-
lated to the doctrine of direct effect. Although this is not exclusively a mat-
ter of public international law but also of a country's constitutional rules,"
the starting point, nevertheless, remains the text of the treaty." Interpreta-
tion of treaty provisions may lead to the following outcomes: direct effect
is prescribed by public international law, direct effect is excluded by pub-
lic international law, or direct effect is left to the domestic law.

8.3 International Instruments Explicitly Granting Social

Rights

8.3.1 The International Covenant on Economic, Social and

Cultural Rights

The rights guaranteed by the Covenant, Articles 6-15, include the right to
work, conditions of work, collective labor rights, social security rights, the
protection of families, mothers and children, the right to a decent standard
of living, the right to health, the right to education, and the right to partici-
pate in cultural life and in achieving scientific progress. These guarantees

41 Starting from the relationship between international law and municipal law, the
application of international law in municipal law (see K.J. Partsch, "Interna-
tional Law and Municipal Law" [1987] , in: R. Bernhardt [ed.], Encyclop edia of
Public International Law, Vol. 11[1995],1183 at 1190-1192) is of particular
importance if provisions are designed to be applied directly and are regarded as
"self-executing" (see A. Bleckmann, "Self-Executing Treaty Provisions"
[1984] , in: R. Bernhardt [ed.], Encyclopedia of Public International Law,
Vol. IV [2000] , 374-377). - For a case study on the direct applicability of hu-
man rights instruments, see R.E. Vinues a, "Direct applicability of human rights
conventions within the internal legal order: the situation in Argentina", in:
B. Conforti (ed.), Enforcing International Human Rights in Domestic Courts
(1997), 149-173.
42 See G. Buchs , Die unmittelbare Anwendbarkeit volkerrechtlicher Vertragsbe-
stimmungen. Am Beispiel der Rechtsprechung der Gerichte Deutschlands, Os-
terreichs, der Schweiz und der Vereinigten Staaten von Amerika (1993) , at 29
and 45.
43 P. Kunig , "Volkerrecht und staatliches Recht" , in: W. GrafVitzthum (ed.), Vol-
kerrecht (2nd ed. 2001), 87 at 108-109, marginal notes 41-42.
286 Thilo Marauhn

are phrased as universal individual rights. However, they differ in specific-

ity.
The first question addressed is: what is the status of the individual under
the International Covenant on Economic, Social and Cultural Rights? We
must first acknowledge that, according to doctrine, the Covenant - al-
though primarily phrased in rights-based terminology - does not grant in-
dividual entitlements." In contrast to Art. 2, para. 1, of the International
Covenant on Civil and Political Rights, which stipulates that each State
Party "undertakes to respect and to ensure to all individuals within its ter-
ritory and subject to its jurisdiction the rights recognized in the present
Covenant", Art. 2, para. 1, of the Covenant on Economic, Social and Cul-
tural Rights only includes the obligation of each State Party to "take steps
[...], to the maximum of its available resources, with a view to achieving
progressively the full realization of the rights recognized in the present
Covenant by all appropriate means, including particularly the adoption of
legislative measures"." Whether or not the International Covenant on Eco-
nomic, Social and Cultural Rights only includes obligations imposed upon
States Parties without granting the individual entitlements is a question
which must be reconsidered in light of recent developments in enforce-
ment, in particular in light of proposals for a new Optional Protocol to the
Covenant." To this end , it is necessary to briefly look at the enforcement

44 Cf. M. Craven, "The International Covenant on Economic, Social and Cultural

Rights", in: R. Hanski, An Introduction to the International Prot ection of Hu-
man Rights (2nd ed. 1999), 101 at 107-111. For an analysis of the nature of the
obligations undertaken by the States Parties to the International Covenant on
Economic, Social and Cultural Rights, see P. Alston/G. Quinn, "The nature and
scope of States parties' obligations under the International Covenant on Econo-
mic, Social and Cultural Rights", Human Rights Quarterly 9 (1987), 156-229,
and M. Craven, "The domestic application of the International Covenant on
Economic, Social and Cultural Rights", Netherlands International Law Review,
XL (1993), 367-404 .
45 Italics by the author.
46 UN Doc. E!CNA/l997/l05. See, in particular, E. de Wet, "Recent develop-
ments concerning the draft protocol to the International Covenant on Economic,
Social and Cultural Rights", South African Journal on Human Rights 13
(1997),541-548, and NJCM Commentaryon the Draft Optional Protocol to the
International Convention on Economic, Social and Cultural Rights, Nederlands
Juristen Comite voor de Mensenrechten. Bulletin 23 (1998), 237-244 . Refer-
ence may also be made to the earlier publication by M. Craven, "Towards an
unofficial petition procedure: A review of the role of the UN Committee on
Economic, Social and Cultural Rights", in: K. Drzewicki/ C. Krause! A. Rosas
(eds.), Social Rights as Human Rights: A Europ ean Challenge (1994),91-113 .
Closely related are the so-called Maastricht guidelines on violations of eco-
 8 Social Rights Beyond the Traditional Welfare State 287

procedures under the Covenant. The Covenant, however, only prescribes a

reporting procedure, without any details as to how these reports are to be
examined . In 1985, the UN Economic and Social Council adopted a new
procedural arrangement , installing an expert committee consisting of 18
members." The Committee on Economic, Social and Cultural Rights took
office in 1997 and contributed to the development of the reporting proce-
dure into a more effective enforcement and supervisory mechanism." The
Committee followed a step-by-step approach. The most important steps in-
clude, firstly, the new guidelines for reporting which were adopted in
199149 (with a focus on particularly vulnerable groups, with a set of ques-
tions put to the government before the oral part of the procedure, etc.), se-
condly, the Committee proposal to identify and name those states parties
which do not comply with their reporting obligations," and thirdly, the
adoption of general comments on treaty provisions to further clarify the
content and scope of the rights included in the Covenant.
In 1990, the Committee decided to pursue the project of an Optional
Protocol." The World Conference on Human Rights supported the idea of
strengthening the position of individuals and groups under the Covenant. 52
However, even if the Protocol was adopted and put into effect, the Com-
mittee's powers would remain limited. The 1996 draft includes the follow-
ing proposal for an individual complaints procedure: "A State Party to the
Covenant that becomes a Party to the present Protocol recognizes the com-

nomic, social and cultural rights, adopted by leading experts in the field; see
V. Dankwa/ C. Flinterman/S . Leckie, "Commentary to the Maastricht guide-
lines on violations of economic, social and cultural rights" , Human Rights
Quarterly 20 (1998), 705-730.
47 UN Doc. E/RES/1985/l7; see P. Alston, "The Committee on Economic, Social
and Cultural Rights", in: id. (ed.), The United Nations and Human Rights
(1992), 473-508, and B. Simma, "Die internationale Kontrolle des VN-Paktes
tiber wirtschaftliche, soziale und kulturelle Rechte: neue Entwicklungen", in:
U. Beyerlin et al (eds.), Recht zwischen Umbruch und Bewahrung. FS Rudolf
Bernhardt (1995),579-593.
48 B. Simma, "The examination of state reports : International Covenant on Econo-
mic, Social and Cultural Rights", in: E. Klein, The monitoring system ofhuman
rights treaty obligations (1998), 31-48.
49 UN Doc. E/l99l/23 , Annex IV; UN Doc. E/C.12/199l/1 (Revised general
guidelines regarding the form and contents of reports to be submitted by states
parties under articles 16 and 17 of the International Covenant on Economic,
Social and Cultural Rights).
50 Cf. UN Doc. E/199l/23 , 1 and E/1992/23, 1.
51 Committee on Economic, Social and Cultural Rights, Report on the Fifth Ses-
sion, UN Doc. E/l99l/23 , at 72.
52 UN Doc. NCONF.157/23 , para. 75.
288 Thilo Marauhn

petence of the Committee to receive and examine communications from

any individuals or groups subject to its jurisdiction in accordance with the
provisions of this Protocol."> It may thus be argued that - in contrast to
the Covenant itself - the Optional Protocol would establish individual enti-
tlements at the level of public international law, since the individual him-
self or herself would be in a position to claim respect for his or her rights
within an international procedural arrangement.
As far as the Covenant's provisions and their relevance to the individ-
ual's position are concerned, most commentators adopt a very general ap-
proach without any attempt at differentiation. Most commentators, refer-
ring to Art . 2, para. 1, of the Covenant, simply state that the provisions of
the Covenant are not self-executing.54 This paper does not follow this ap-
proach but looks more closely at Art. 2 and at the various provisions of the
Covenant which may be relevant in this context. Thus, it is necessary to
take into account General Comments No.3 (1990)55 and No.9 (1998) 56
adopted by the Committee. The Committee explains that the Covenant is
not limited to aspirational obligations. Drawing upon the International Law
Commission, a distinction should be drawn between obligations of conduct
and obligations of result. In particular, the Committee considers Art. 2,
para. 2, of the Covenant, which prohibits discrimination, as directly appli-
cable. Also, regarding the obligation included in para. 1 "to take meas-
ures", the Committee argues that this is directly applicable. As the Com-
mittee argues in General Comment No.3: "Thus, while the full realization
of the relevant rights may be achieved progressively, steps towards that
goal must be taken within a reasonably short time after the Covenant's en-
try into force for the States concerned."57 The Committee then suggests
that several rights included in the Covenant can be considered to be justi-
tiable and directly effective - "in accordance with the national legal sys-
tem". These include equality of men and women (Art. 3), equal pay
(Art. 7, lit. a), freedom of association, to form unions and the right to strike

53 UN Doc. E/CN.4/l997 /105, Annex, para. 21.

54 For positions adopted by German scholars, see D. Murswiek, "Grundrechte als
Teilhaberechte, soziale Grundrechte", in: 1. Isensee/P. Kirchhof (eds.), Hand-
buch des Staatsrechts der Bundesrepublik Deutschland, Vol. V: Allgemeine
Grundrechtslehren (1992), § 112, marginal note 43; K. Hailbronner, "Der Staat
und der Einze1ne als Volkerrechtssubjekt", in: W. GrafVitzthum (ed.), Volker-
recht, 161 at 237, marginal note 249.
55 General Comment No.3, The nature of States parties obligations (Art. 2,
para. 1), 14 December 1990, UN Doc. E/1991123 , Annex III.
56 General Comment No.9, The domestic application of the Covenant, 3 Decem-
ber 1998, UN Doc. E/C.l2 /1998/24.
57 General Comment No.3 (note 55), para. 2.
 8 Social Rights Beyond the Traditional Welfare State 289

(Art. 8), prohibition of discrimination of children and youths (Art. 10,

para. 3), free provision of schooling (Art. 13, para. 28), parental rights
(Art. 13, para. 3), the right to establish private schools (Art. 13, para. 4),
and Art. 15, para. 3, granting freedom of arts and science. The Committee
underlines that "any suggestion that the provisions indicated are inherently
non-self-executing would seem to be difficult to sustain". " On the other
hand, the Committee stresses the neutrality of the Convention in terms of
economic policy as long as indivisibility remains intact.
It is against this background that General Comment No.9 deserves
closer analysis. This Comment deals with the internal application of the
Covenant's provisions. The Committee argues that, although the Covenant
- in contrast to the International Covenant on Civil and Political Rights -
does not include an obligation to ensure that any person claiming an effec-
tive remedy at the national level shall have his right thereto determined by
competent traditional, administrative or legislative authorities, or by any
other competent authority provided for by the legal system of the State,
and to develop the possibilities of traditional remedy (Art. 2, para. 3, lit. b,
International Covenant on Civil and Political Rights), nevertheless, the
general denial of any individual recourse at the national level would not
meet the requirements of Art. 2, para. 1 of the International Covenant on
Economic, Social and Cultural Rights . Justiciability at the national level
may be important when considering the appropriateness of the means
adopted by the parties according to Art. 2, para. 1: "Where the means used
to give effect to the covenant on economic, social and cultural rights differ
significantly from those used in relation to other human rights treaties,
there should be a compelling justification for this.'?" This does not mean
that the recourse must be traditional. However, as the Committee rightly
points out, a "rigid classification of economic, social and cultural rights
which puts them, by definition, beyond the reach of the courts would thus
be arbitrary and incompatible with the principle that the two sets of human
rights are indivisible and interdependent't.w The Committee eventually
concludes that States should avoid any a priori determination that the
rights granted by the Covenant are not within the reach of national courts.
The Committee takes the view that most of the Covenant's provisions are
no less clear and precise than those of other international human rights in-
struments."

58 General Comment No.3 (note 55), para. 5; italics by the author.

59 General Comment No .9 (note 56), para. 7.
60 General Comment No .9 (note 56), para. 10, italics by the author.
61 Referring to the rights included in the International Covenant on Economic, So-
cial and Cultural Rights, the Committee argues that "(i)n fact, many of them are
290 Thilo Marauhn

To summarize, the Committee obviously takes the view that several of

the Covenant's provisions can be considered directly applicable. The Com-
mittee builds upon the notion of applicability. In contrast to the European
Social Charter, the Committee can point to the fact that the Covenant does
not include a general reservation as to its applicability, neither explicitly
nor implicitly. Thus, direct applicability is not excluded by the treaty itself.
Any argument reducing the applicability of the provisions of the Covenant
on the basis of Art. 2, para. 1, of the Covenant is not convincing if it does
not take into account the differences between Part III of the European So-
cial Charter and the provisions of the Covenant. Although Art. 2, para. 1 of
the Covenant envisages a step-by-step approach, the progressive realiza-
tion of the rights recognized in the Covenant, and thus obviously assumes
that the Covenant includes goals to be implemented, this does not exclude
effective measures to be adopted by States Parties when assuming treaty
obligations. The Covenant, on the basis of Art. 2, para. 1, acknowledges
that States Parties find themselves in different economic and social situa-
tions. This implies that they cannot take the same measures. However,
States can also not escape their obligation to take measures. They must
take the measures that they can afford. It is inadmissible to simply await
changes in social and economic circumstances without doing anything. If
there is only one effective means within the meaning of Art. 2, para. 1, of
the Covenant, this has to be adopted, irrespective of whether this is a mea-
sure to be taken by the legislature, the executive or the judiciary. Refer-
ence to measures of the legislature is only an example given by Art. 2,
para. 1. The consequence of such an interpretation of Art. 2, para. 1, is that
it is necessary to assess the applicability of individual provisions of the
Covenant. Whether or not this provision is directly applicable and thus
self-executing very much depends upon the wording, the content and its
purpose. In other words, this is a matter of interpretation. Those provi-
sions, which the Committee has identified, can clearly form the basis of ju-
dicial decisions at the national level.
This means that the Covenant does not only include obligations imposed
upon the States Parties'< but that - on the basis of a differentiated interpre-

stated in terms which are at least as clear and specific as those in other human
rights treaties, the provisions of which are regularly deemed by courts to be
self-executing" (General Comment No.9 [note 56], para. 11).
62 E. Schwelb, Some Aspects of the International Covenants on Human Rights of
December 1966, in: A. Eide/A. Schou (eds.), International Protection of Hu-
man Rights. Proceedings of the Seventh Nobel Symposium, Oslo, Septem-
ber 25-27, 1967 (1968), 103 at 107-109; see also O. Schachter, "The Obliga-
tion to Implement the Covenant in Domestic Law", in: L. Henkin (ed.), The In-
 8 Social Rights Beyond the Traditional Welfare State 291

tation-' of Art . 2, para. 1 - Arts. 6-15 can be directly applicable at the na-
tional level. The executive does not enjoy unlimited discretion. Generally
speaking, the indicated provisions of the Covenant are capable of forming
the basis of individual entitlements because the most important remaining
criterion of such individual entitlements is the existence of an individual
interest. Such interest is always at hand in the case ofhuman rights ."

8.3.2 The European Social Charter

The second Part of the European Social Charter, as adopted in 1961, in-
cludes a list of rights to be granted under the Charter. For analytical pur-
poses, three groups of rights can be distinguished : rights related to profes-
sional relations, rights generally dealing with social matters, and rights
designed to protect particularly vulnerable groups. While the catalogue in-
cluded in the Charter is impressive, the obligations assumed by States Par-
ties are rather limited. States Parties must only undertake to be bound by
(at least) 10 Articles (out of 19) or 45 numbered paragraphs (out of 72) of
Part II of the Charter; however, each Party must accept at least five out of
seven Articles regarded as particularly significant. 65 These are the right to
work, the right to organize, the right to bargain collectively, the right to so-

ternat ional Bill of Rights . The Covenant on Civil and Politi cal Rights (1981) ,
311 at 322-324. Underlining the binding character of the Covenant's obliga-
tions, see G.H.J. van Hoof, "The Legal Nature of Economic, Social and Cultu-
ral Rights: a Rebuttal of Some Traditional Views", in: P. Alston/K. Tomasevski
(eds.) , The Rights to Food (1984),97 at 101. - The view taken by E.W . Vier-
dag, "The Legal Nature of the Rights Granted by the International Convention
on Economic, Social and Cultural Rights", Netherlands Yearbook on Interna-
tional Law IX (1978),69 at 105, arguing that "the rights granted by the Interna-
tional Covenant on Economic, Social and Cultural Rights are of such a nature
as to be legally negligible" is not convincing. It fails to take note of the differ-
ent wording of the various provisions of the Covenant.
63 On the need of such a differentiated interpretation, see B. Simma/S . Bennigsen,
"Wirtschaftliche, soziale und kulturelle Rechte im Volkerrecht. Der Internatio-
nale Pakt von 1966 und sein Kontrollverfahren" , in : J.F . Baur et al (eds.), Fest-
schrift fur Ernst SteindorfJzum 70. Geburtstag am 13. Mdrz 1990 (1990), 1477
at 1487-1488.
64 This has been rightly argued by M. Scherf, Die Umsetzung des internationalen
Paktes iiber wirtschaftliche, soziale und kulturelle Rechte vom 19. Dezember
1966 in die Rechtsordnung der Bundesrepublik Deutschland (1990), at 55.
65 On this approach, see L. Wildhaber, "Soziale Grundrechte", in : P. Wipfe1der/
L. Wildhaber (eds .), Geddchtnisschrift fiir Max Imboden (1972), 371 at 377-
378 .
292 Thilo Marauhn

cial security, the right to social and medical assistance, the right to the so-
cial, legal and economic protection of the family, and the right to protec-
tion and assistance for migrant workers and their families . All States Par-
ties have used this a fa carte approach.
From the 1980s onwards, States Parties have adopted several steps to
further develop the Charter. It may be helpful to distinguish between
amendments in scope and changes designed to improve the enforcement
machinery. As to substantive changes, the 1988 Protocol" is aimed at ex-
tending the protection of the social and economic rights guaranteed by the
Charter. It adds four particularly important rights: the right of workers to
equal opportunities and equal treatment in matters of employment and oc-
cupation without discrimination on the ground of sex, the right for workers
to be informed and consulted within the undertaking, the right for worke rs
to take part in the determination and improvement of working conditions
and the working environment in the undertaking, and the right for elderly
persons to social protection. Similarly, the revised Charter" extends the
material scope of protection. Building upon the rights included in the origi-
nal Charter and in the 1988 Protocol, it adds the following new rights:
right to protection against poverty and social exclusion, right to housing,
right to protection in cases of termination of employment, right to protec-
tion against sexual harassment in the workplace and other forms of har-
assment, rights of workers with family responsibilities to equal opportuni-
ties and equal treatment, and rights of workers' representatives in under-
takings. Other rights are reinforced (such as the principle of non-discrimi-
nation), and there is an improvement in the protection of particularly vul-
nerable groups (inter alia, gender equality in all fields covered by the
Charter).
Before turning to procedural developments in respect of the Social
Charter, its relationship to the European Convention on Human Rights de-
serves closer attention. From the outset, the Charter was considered to

66 Additional Protocolof 5 May 1988, ETS No. 128 (note 35). For a discussion of
the 1988 Protocol, see L. Betten, "The Protocol to the European SocialCharter:
More rights, better impact?" Netherlands Quarterly ofHuman Rights 6 (1988),
9-18.
67 ETS No. 163 (note 35). On the Charter revision, see DJ. Harris, "The rights
protected under the European Social Charter", in: D. Gomien et al (eds.), Law
and Practice ofthe European Convention on Human Rights and the European
Social Charter (1996),379 at 406-407; id., "The Council of Europe (II): The
European Social Charter", in: R. Hanski/M. Suksi (eds.), An Introduction to the
International Protection ofHuman Rights . A Textbook (1997) ,243 at 252-253 ;
A. Hendriks, "RevisedEuropeanSocialCharter", Netherlands Quarterly ofHu-
man Rights 14 (1996), 341-342 (introduction to the revised Charter).
 8 Social Rights Beyond the Traditional Welfare State 293

complement the European Convention on Human Rights. Human rights

protection in Europe is based on both international instruments." Civil and
political rights on the one hand and economic and social rights on the other
hand are often considered an "indivisible set of principles on which the
democracies of Europe are founded"." Sometimes the European Social
Charter is perceived as "equivalent of the European Convention on human
rights in the field of the protection of economic and social rights"." How-
ever, both human rights instruments are not on equal footing. It has been
rightly argued that the European Social Charter can only be considered as
the unequal sister of the European Convention on Human Rights." The
main reason for this argument is that the supervisory mechanisms designed
to enforce the Social Charter are relatively weak compared to the enforce-
ment machinery established under the European Convention on Human
Rights. Although there have been several changes in this regard, it cannot
yet be argued that the European Social Charter establishes social rights as
individual entitlements. While so far, the Charter has not had a major im-
pact on economic and social life in Europe," it may be argued that this will
change due to more effective reporting procedures and the introduction of
a collective complaints procedure.
In assessing the position of the individual under the European Social
Charter, it is necessary to take a closer look at the supervisory mechanisms
established under the Charter. Part IV of the Charter (Arts. 21-29) estab-
lishes a reporting procedure, originally with a Committee of Experts
(Art. 25) set up to examine the reports (Art. 24) submitted by the States
Parties according to Arts . 21-23. The conclusions of the Committee of Ex-
perts were to be presented to a sub-committee of the Governmental Social
Committee of the Council of Europe (Art. 27, para. 1) and to the Assembly
(Art. 28). According to Art. 29 of the original Charter, it is then up to the
Committee of Ministers to issue recommendations. These recommenda-
tions are, however, not binding. A weakness of the original system is that
the powers of the Committee of Experts and the sub-committee of the

68 T. Ohlinger, "Die Europaische Sozialcharta" , in: M. Bowak et al (eds.), Fort-

schritt im Bewusstsein der Grund- und Menschenrechte. Festschrift fur Felix
Ermacora (1988),213 at 214.
69 R. Brillat, "A New Protocol to the European Social Charter Providing for Col-

lective Complaints", European Human Rights Law Review 1996, 52 at 52.

70 A. Zimmermann, Council of Europe: Protocol Amending the European Social
Charter Providing for a System of Collective Complaints - Introductory Note,
International Legal Materials XXXIV (1995), 1453 at 1453.
7 1 R. Nowak, Das Problem der sozialen Grundrechte (1972), at 10.
n Cf. C. Tomuschat, "The Right to Work", in: A. Rosas/J. Helgesen (eds.), Hu-
man Rights in a Changing East-West Perspective (1990), 174 at 178.
294 Thilo Marauhn

Governmental Social Committee overlap ." Both were competent to assess

the reports submitted by the States Parties and both have often arrived at
contradicting conclusions. This led to negotiations on a Protocol amending
the European Social Charter." While there have been 18 ratifications so
far, Denmark, Germany, Hungary, Luxembourg, Turkey, and the United
Kingdom have not yet ratified the Protocol, thus preventing its going into
effect." Under the Protocol, the then re-named Committee of Independent
Experts would continue to "assess from a legal standpoint the compliance
of national law and practice with the obligations arising from the charter
for the contracting parties concerned" (Art. 2 [= revised Art. 24], para. 2).
In contrast, the Governmental Committee would no longer have powers of
interpretation but "shall prepare the decisions of the committee of min-
isters [...] in the light of the reports of the committee of independent ex-
perts and of the contracting parties" (Art. 4 [= revised Art. 27], para. 3).
However, the Protocol does not envisage any changes as to the position of
the individual. The amendments only concern the role of the Expert Com-
mittee and pay tribute to the recognition that a "monitoring system that de-
pends entirely upon national reports is unavoidably deficient without in
any way questioning the good faith of governments when presenting their
reports, it is inevitable that they will see the position from a particular
point of view"."
A major change occurred in 1995 with the adoption of a new protocol to
the European Social Charter providing for a collective complaints proce-
dure." The Protocol allows social partners and non-governmental organi-
zations to submit collective complaints alleging unsatisfactory application
of the Charter. The complaint, addressed to the Secretary General (Art. 5),
will be examined by the Committee of Independent Experts (Arts. 7
and 8). Should the Committee find that the Charter has not been applied in
a satisfactory manner, the Committee of Ministers may adopt, by a major-
ity of two-thirds of those voting, a recommendation addressed to the Party
concerned (Art. 9, para. 1). While introduction of the collective complaints
procedure improves the effective enforcement of the social rights guaran-

73 D.l Harris , "A Fresh Impetus for the European Social Charter" , International
and Comparative Law Quarterly 41 (1992) , 659 at 662-663 .
74 ETS No. 142 (note 35). M. Mohr, "The Turin Protocol of 22 October 1991: A
Major Contribution to Revitalizing the European Social Charter", European
Journal ofInternational Law 3 (1992) , 363-370.
75 According to its Art. 8, the Protocol will only enter into force once it has been
ratified by all Parties to the (original) Charter.
76 Harris (note 73), at 76.
77 ETS No. 158 (note 35).
 8 Social Rights Beyond the Traditional Welfare State 295

teed by the Charter, it has, nevertheless, been argued that adoption of the
Protocol is a decision against an individual complaints procedure." Fur-
thermore, it is noteworthy that the Protocol does not go far beyond what is
well-established under the ILO collective complaints procedure. In so far
as the right to submit complaints extends not only to international organi-
zations of employers and trade unions but also to international non-govern-
mental organizations which have consultative status with the Council of
Europe, and to representative national non-governmental organizations,
subject to a pertinent declaration of the State Party concerned, the Protocol
purports a new dimension. However, complaints have to explain "in what
respect a State Party has not ensured the satisfactory application of this
provision" (Art. 4). This seems to exclude individual complaints even if
brought by a non-governmental organization or some other collective ac-
tor. As Frederic Sudre states: "La reclamation a pour objet une situation
generale et doit necessairement porter sur l'inobservation, ou la mauvaise
observation, dans le droit ou la pratique d'un Etat partie d'une ou plusieurs
dispositions de la Charte. " 79 The Protocol thus does not establish individual
but rather collective entitlements.
This analysis finds further support in the opening paragraph of Part III
38 of the Charter, which seems to exclude any direct effect." In other
words, the rights guaranteed do not seem to be self-executing." Does this
apply to the Charter in general or is it possible to develop a more dif-
ferentiated approach, in particular regarding Art. 6, para. 4, and Art. 18,
para. 4 of the Charter, in which the Contracting Parties "recognise ... the
right of workers and employers to collective action in cases of conflicts of
interest, including the right to strike, subject to obligations that might arise
out of collective agreements previously entered into"?" Similarly, under
Art . 18, para. 4, of the Charter, the Contracting Parties undertake to "rec-
ognise [...] the right of their nationals to leave the country to engage in a
gainful occupation in the territories of the other Contracting Parties"."

78 F. Sudre, Le protocol additionnel it la charte sociale europeenne prevoyant un

systeme de reclamations collectives, Revue generale de droit international pu-
blic 1996, 715 at 719-721.
79 Ibid., at 725; see also Brillat (note 69), at 60.
80 The opening paragraph of Part III reads as follows : " It is understood that the
Charter contains legal obligations of an international character, the application
of which is submitted solely to the supervision provided for in Part IV thereof."
81 See W. Strasser, "European Social Charter" , in: R. Bernhardt (ed.),
Encyclopedia of Public International Law, Vol. II (1995), 291 at 292;
cf. D.l Harris, The European Social Charter (1984), at 290.
82 Italics by the author.
83 Italics by the author.
296 Thilo Marauhn

There is some argument that "the final decision as to whether a Charter

provision can be relied upon by an individual in a national court must be
one for the national court concerned applying national law"." Such deci-
sions at the national level are rather rare. While the Federal Constitutional
Court in Germany has always sought to avoid determining whether or not
the provisions of the Charter are directly applicable," the Hoge Raad of the
Netherlands in a case concerning Art. 6, para. 4, of the European Social
Charter, ruled that the right to strike guaranteed therein is directly applica-
ble in the Netherlands."
Although one cannot argue that the European Social Charter includes
individual entitlements, it may, nevertheless, be argued that there is a need
for a differentiated interpretation of the European Social Charter in light of
these developments. While there are obvious differences in terminology
and national implementation between the International Covenant on Eco-
nomic, Social and Cultural Rights and the European Social Charter, both
instruments have nevertheless recently sought to strengthen the position of
the individual. Both include certain provisions that may be considered as
directly applicable (social) rights, thus coming close to individual entitle-
ments in the proper sense.

8.3.3 Social Rights within the International Labor Organization

(ILO)

When discussing social rights in the context of the 1966 UN Covenant and
the European Social Charter, it is often overlooked that social rights have
also been codified within the framework of the International Labor Organi-
zation. One may add that the ILO was one of the first organizations to es-
tablish an institutionalized supervisory mechanism. While it is true that to-
day, these supervisory mechanisms - at least if compared with the mecha-

84 Harris (note 67), at 434; see also A. Bleckmann, Interpretation et application en

droit interne de 1a Charte sociale europeenne, notamment du droit de greve,
Cahiers de droit europeen (1967), 388 at 409: "Ce n'est done plus le monopole
de I'execution et du controle international, mais le monopole du legislateur in-
terne qui excluerait ainsi l'application directe de la Charte." Cf. D. Kahn-
Freund, "The European Social Charter", in: F.G. Jacobs (ed.), European Law
and the Individual (1976), 181 at 184-186 , and the examples given by H.
Wiebringhaus, "La Charte socia1e europeenne vingt ans apres 1aconclusion du
traite", Anuaire Francais de droit international 28 (1982), 934 at 945-946.
85 BVerfGE 58, 233 at 254; 74, 358 at 370; 88,103 at 112.
86 Hoge Raad, 30 mei 1986, nr , 12698, in: Neder1andse Jurisprudentie 1986, nr.
688.
 8 Social Rights Beyond the Traditional Welfare State 297

nisms established under the European Convention on Human Rights and

under the International Covenant on Civil and Political Rights - can no
longer be considered particularly effective, it is worthwhile to consider to
what extent the existing ILO supervisory mechanisms and the obligation to
implement the ILO Conventions at the national level" contribute to the es-
tablishment of individual entitlements. It is noteworthy that it has recently
been argued that the International Labor Organization, in toto, carries "the
most highly developed intergovernmental system for the protection of hu-
man rights"."
While the Constitution" of the International Labor Organization itself,
apart from the principle of non-discrimination (which is included in Sec-
tion II, lit. a, of the Declaration of Philadelphia," annexed to the Constitu-
tion) primarily includes organizational and procedural provisions, substan-
tive obligations of member states are based upon international agreements
negotiated and adopted within the framework of ILO. The form and con-
tent of these agreements differ greatly. Thus, the wording of some conven-
tions suggests individual entitlements while others include obligations of a
rnore-or-less objective character which are only addressed to States Par-
ties. This is particularly so if Conventions only include an obligation to

87 See, in particular, Art . 9, para. 5, of the ILO Constitution: "In the case of a
Convention [. .. ] (b) each of the Members undertakes that it will, within the pe-
riod of one year at most from the closing of the session of the Conference, or if
it is impossible owing to exceptional circumstances to do so within the period
of one year, then at the earliest practicable moment and in no case later than 18
months from the closing of the session of the Conference, bring the Convention
before the authority or authorities within whose competence the matter lies, for
the enactment of legislation or other action; [. .. ] (e) if the Member does not ob-
tain the consent of the authority or authorities within whose competence the
matter lies, no further obligation shall rest upon the Member except that it shall
report to the Director-General of the International Labour Office, at appropriate
intervals as requested by the Governing Body, the position of its law and prac-
tice in regard to the matters dealt with in the Convention, showing the extent to
which effect has been given, or is proposed to be given, to any of the provisions
of the Convention by legislation, administrative action , collective agreement or
otherwise and stating the difficulties which prevent or delay the ratification of
such Convention."
88 V.A. Leary, " Lessons from the Experience of the International Labour Organi-
sation", in: P. Alston (ed.), The United Nations and Human Rights. A Critical
Appraisal (1992),580 at 580 .
89 Text adopted by the Peace Conference in April of 1919; available on the ILO
website under http://www.ilo.orglpublic/english!about/iloconst.htm.
90 Text adopted on 10 May 1944; available on the ILO website under
http://www.ilo.orglpublic/english!ahout/iloconst.htm#annex.
298 Thilo Marauhn

adopt legislative measures or to support the further development of par-

ticular institutions. As far as content goes, the International Labor Organi-
zation has primarily addressed freedom of association, freedom of occupa-
tion, and the already mentioned principle of non-discrimination . Reference
may also be made to rights for adequate pay and the attempts to abolish
child labor.
In human rights matters, the International Labor Organization has con-
sistently followed an integrated approach and has avoided contrasting civil
and political rights on one hand and economic and social rights on the
other. This extends far beyond the principles of indivisibility and interde-
pendence reflected in the International Covenant and the European Social
Charter because from its inception, the International Labor Organization
has avoided the dichotomy of civil and political rights versus economic
and social rights. Thus, it may be argued that the difference between the
two categories of human rights has been largely irrelevant in the practice
of the ILO. As Virginia Leary argues: "The ILO has avoided the dichot-
omy by adopting a broad conception of human rights and establishing es-
sentially the same supervisory system for all rights within the area con-
cerned, including economic and social rights. " 91 The concept of social
justice as reflected in the preamble of the ILO Constitution'? and the con-
stant reference to the interrelationship between social progress and the pro-
tection of civil and political rights in the ILO's practice reflect a broad
human rights perspective . Section II of the Declaration of Philadelphia af-
firms that "all human beings, irrespective of race, creed or sex, have the
right to pursue both their material well-being and their spiritual develop-
ment in conditions of freedom and dignity, of economic security and equal
opportunity ". This holistic approach is reflected in the various Conven-
tions adopted within the framework of the International Labor Organiza-
tion. This may be best illustrated by the right of freedom of association
that can be qualified as both a civil and political right and an economic and
social right." Freedom of association is referred to in the ILO Constitu-

91 Leary (note 88), at 581.

92 The introductory paragraph of the Preamble reads: "Whereas universal and last-
ing peace can be established only if it is based upon social justice; .. .".
93 Reference may also be made to Art. 8 of the International Covenant on Civil
and Political Rights as well to Art. 22 of the International Covenant on Eco-
nomic , Social and Cultural Rights . For a discussion within the context of the
European Convention on Human Rights cf. T. Marauhn, "Die wirtschaftliche
Vereinigungsfreiheit zwischen menschenrechtlicher Gewahrleistung und privat-
rechtlicher Ausgestaltung. Zur Bedeutung von Art . II EMRK fur das kollektive
Arbeitsrecht und das Gesellschaftsrecht", Rabels Zeitschrift fiir ausldndisches
und internationales Privatr echt 63 (1999) ,537-560.
 8 Social Rights Beyond the Traditional Welfare State 299

tion," is reflected and confirmed in the Declaration of Philadelphia" and

has subsequently been further developed in ILO Conventions No. 87 and
98.96 The International Labor Conference has always stressed this interrela-
tionship between civil and political rights and the protection of the unions'
activities. Thus, an excerpt of a resolution adopted in 1970 reads: "[ ...] the
rights conferred upon workers' and employers' organizations must be
based on respect for those civil liberties which have been enunciated, in
particular, in the universal declaration of human rights and in the Interna-
tional Covenant on Civil and Political Rights and that the absence of these
civil liberties removes all meaning from the concept of Trade Union
Rights.'?" Another demonstration of the integrated approach followed by
the ILO is the fact that all Conventions adopted within its framework, irre-
spective of whether primarily addressing civil and political rights or whe-
ther dealing with economic and social rights, are subject to the same en-
forcement mechanisms.
In order to assess the legal position of the individual under ILO Conven-
tions, the existing supervisory mechanisms must be evaluated." Four dif-
ferent mechanisms can be identified:
The first mechanism, the more-or-less classical reporting procedure, has
been fairly effective." Each member state of the International Labor Or-
ganization is obliged, in respect of all conventions ratified, to periodi-
cally'v' report about measures taken regarding the implementation of these

94 "And whereas conditions of labour exist involving such injustice, hardship and
privation to large numbers of people as to produce unrest so great that the peace
and harmony of the world are imperilled; and an improvement of those condi-
tions is urgently required; as, for example, by ... recognition of the principle of
freedom of association; .. ." (Preamble, para. 2).
95 "The Conference reaffirms the fundamental principles on which the Organiza-
tion is based and, in particular, that [...) (b) freedom of expression and of asso-
ciation are essential to sustained progress; [...)" (Section I).
96 Freedom of Association and Protection of the Right to Organize Convention
(No. 87) of 1948 (note 22); Convention (No. 98) concerning the Application of
the Principles of the Right to Organize and to Bargain Collectively of 1949
(note 23).
97 Quote taken from Leary (note 88), at 591-592.

98 For a discussion on the reform of the supervisory system, see ILO Governing
Body, The strengthening of the ILO's standards supervisory system, ILO Doc.
GB.264/6.
99 This has been argued, inter alia, by J.P. MOller, Soziale Grundrechte in der
Verfassung (2 nd ed. 1981), at 297 .
100 On modifications as to periodicity, see L. Swepston, "Supervision ofILO stan-
dards", The International Journal of Comparative Labour Law and Industrial
Relations 13 (1997), 327 at 334 .
300 Thilo Marauhn

conventions (Art. 22). Reports are then assessed by a Committee of Ex-

perts on the Application of Conventions and Recommendations and subse-
quently at the annual meeting of the International Labor Conference
(Art. 23). The Conference may adopt recommendations. In contrast with
other reporting procedures, it is noteworthy that the ILO procedure is
treaty-based and that the assessment criteria are fairly precise. Also, it has
proven to be effective that the social partners participate in the reporting
procedure.
A second mechanism for supervision is the "Article 24 Representation
Procedure" . This allows any national or international workers' or employ-
ers' organization to make a so-called representation claiming that a given
member state has failed to apply an ILO Convention it has ratified. 101 Rep-
resentations are submitted to the International Labor Office, which ac-
knowledges receipt, informs the government concerned, and brings the
matter before the governing body. The governing body, having determined
the receivability of the representation, establishes a three-member commit-
tee to examine the matter. The government concerned is invited "to make
such statement on the subject as it may think fit" (Art. 24). According to
Art. 25 of the Constitution, if no statement is received from the govern-
ment concerned within a reasonable time or if the statement is not consid-
ered satisfactory by the governing body, "the latter shall have the right to
publish the representation and the statement, if any, made in reply to it".
This procedure has not been very effective for a long time. However, it is
noteworthy that recently there have been increased representations accord-
ing to Art. 24. 102
A third supervisory mechanism is provided in Art. 26 of the Constitu-
tion, which is a complaints procedure related to the non-observance of any
ratified convention. The complaints procedure can be initiated by another
ratifying member state.!" an ILO delegate or the governing body itself.
The governing body decides whether to appoint a commission of inquiry
that will investigate the complaint and set procedures as required by the
case. The findings are sent to the government concerned, including recom-
mendations and a time frame for their implementation. The report is usu-

101 There are detailed rules of procedure laid down in Standing Orders on Repre-
sentations according to Arts. 24 and 25 of the Constitution; text available at:
http://www.ilo.org/public/english/standards/norm!enforced/reprsnt!art24.htm .
102 Swepston (note 99), at 338.

103 "Any of the Members shall have the right to file a complaint with the Interna-

tional Labour Office if it is not satisfied that any other Member is securing the
effective observance of any Convention which both have ratified in accordance
with the foregoing articles" (Art. 26, para. 1, of the ILO Constitution).
 8 Social Rights Beyondthe Traditional Welfare State 301

ally published and transmitted to the governing body . Should the case
arise, the government(s) concerned may refer the complaint to the Interna-
tional Court of Justice for final decision. Again, in recent years, this proce-
dure has hardly been applied.
The situation is quite different vis-a-vis the fourth mechanism, the wide-
ly used Special Supervisory Mechanism concerning Freedom of Associa-
tion. Following consultations with the United Nations Economic and So-
cial Council based on a 1949 resolution adopted by ECOSOC, the ILO
Governing Body, in 1950, decided to establish a Fact-Finding and Con-
ciliation Commission on Freedom of Association. This Commission is en-
titled to receive allegations regarding infringements of trade union and
employers' rights to freedom of association, irrespective of whether the
country involved ratified the relevant ILO Conventions on freedom of as-
sociation.'?' The idea of establishing this commission began to evolve
when the International Labor Conference was discussing the adoption of
Conventions No . 87 and 98. The need for such special machinery arose in
light of the fear that some member states might not ratify the two Conven-
tions and thus escape any supervisory mechanism regarding freedom of as-
sociation (which - at least in principle - is protected by the ILO Constitu-
tion) . Hence, a mechanism was sought to fill the gap between the general
principle of freedom of association and the implementation of this princi-
ple. The Fact-Finding and Conciliation Commission on Freedom of Asso-
ciation examines complaints of infringement of trade union rights referred
by the International Labor Organization's governing body in respect of any
member state, irrespective of whether or not it is party to the Conventions
on freedom of association. The Commission may even examine complaints
of violations of freedom of association against non-member states of the
ILO if the UN forwards these complaints and as long as the state con-
cerned consents.
The Commission must be distinguished from the Committee on Free -
dom of Association, which is a completely different body. It was estab -
lished as a tripartite Committee of the Governing Body in 1951. The Com-
mittee examines complaints from governments, workers' and employers'
organizations which claim that Member States are not respecting basic
principles of freedom of association. Since the procedure is based on con-
stitutional principles, the complaints may be examined regardless of whe-
ther the country concerned has ratified the ILO 's pertinent Conventions.

104 The Commission was set up on the basis of Art . to, para. 1, of the ILO Consti-
tution: "The functions of the International Labour Office shall include [...] the
conduct of such special investigations as may be ordered by the Conferenceor
the GoverningBody."
302 Thilo Marauhn

The procedure - in contrast to the 1995 Protocol to the European Social

Charter - can also be initiated when the applicant organization claims vio-
lation of its own rights. This procedure is considered the ILO ' s most effec-
tive supervisory mechanism aside from the reporting mechanism.
These supervisory mechanisms do not significantly improve the status
of the individual as a subject of public international law . However, the so-
cial partners can achieve a quasi-subject status since they can use the com-
plaints procedure to enforce and implement their own rights.
The analysis would be incomplete without some remarks on the problem
of direct applicability. Without going into detail, it may be taken as a start-
ing point that - in accordance with the practice of the ILO Expert Commit-
tee - provisions of ILO Conventions imposing obligations on the legisla-
ture are not directly applicable. t'" Reference may be made to Art. 6 of the
1983 Vocational Rehabilitation and Employment (Disabled Persons) Con-
vention (No. 159) which states: "Each Member shall, by laws or regula-
tions or by any other method consistent with national conditions and prac-
tice, take such steps as may be necessary to give effect to Articles 2, 3, 4,
and 5 of this Convention." It may be argued that reference to laws and reg-
ulations at least excludes direct effect. Similarly, Art. 4 of the Convention
(No. 120) concerning Hygiene in Commerce and Offices of 1964 is not di-
rectly applicable. According to this provision, each member, having rati-
fied this Convention, undertakes that it will "(a) maintain in force laws or
regulations which ensure the application of the General Principles set forth
in Part II; and (b) ensure that such effect as may be possible and desirable
under national conditions is given to the provisions of the Hygiene (Com-
merce and Offices) Recommendation, 1964 , or to equivalent provisions".
However, it is not only the imposition of legislative measures that prevents
direct effect regarding pertinent provisions. The same applies to the obliga-
tion to establish certain administrative or executive bodies or to obligate
these bodies to adopt particular measures. Reference may be made to
Art. 10 ofILO Convention No . 96 concerning Fee-Charging Employment
Agencies (Revised 1949), which stipulates that such fee-charging employ-
ment agencies "shall be subject to the supervision of the competent author-
ity". This requires that certain organizational and administrative measures
are taken before the provision can be applied. Thus, this particular provi-
sion is not directly effective.
In contrast, there are other provisions, which through their wording are
directly applicable. Reference may be made to Art. 3 of the Maternity Pro-

105 V.A. Leary, International Labour Conventions and national law. The effective-
ness of the automatic incorporation of treaties in national legal systems (1982),
at 96 et seq.
 8 Social Rights Beyond the Traditional Welfare State 303

tection Convention of 1919 (No. 003)106, which prohibits a woman to work

during the six weeks following her confinement. A more complicated case
is Art. 1 of ILO Convention No . 87 concerning Freedom of Association
and Protection of the Right to Organise. According to this provision,
"(e)ach Member of the International Labour Organisation for which this
Convention is in force undertakes to give effect to the following provi-
sions". The phrase "undertakes to give effect to" seems to negate the self-
executing character of the other provisions of the Convention. In contrast,
the Dutch government considers Art. 3, which grants workers' and em-
ployers' organizations the right to draw up their constitutions and rules, to
elect their representatives in full freedom, to organize their administration
and activities and to formulate their programmes, as directly effective. The
Swiss government has taken the view that Art. 4 is directly effective. This
provision stipulates that workers' and employers' organizations shall not
be liable to be dissolved or suspended by administrative authority. Further-
more, the Italian government took the view that Art . 2, which grants work-
ers and employers "the right to establish and, subject only to the rules of
the organization concerned, to join organizations of their own choosing
without previous authorization", is directly applicable.!" This illustrates
that - as demonstrated with regard to Art. 2, para. 1, of the International
Covenant on Economic, Social and Cultural Rights - a general obligation
imposed upon States Parties "to adopt measures" does not exclude as such
and per se the direct applicability of subsequent treaty provisions. The ex-
amples also demonstrate that achieving unanimity will be rather difficult
regarding the direct effect of a fairly large number of provisions, in par-
ticular if States Parties to a particular Convention are obligated to "under-
take" certain obligations. It may be argued that eventually, the various con-
stitutional frameworks and the various legal traditions will gain effect and
will lead to certain discrepancies as far as the practice of States Parties is
concerned.
Building upon the above analysis, the consequences as to individual en-
titlements must be assessed. At the international level, there is only limited
evidence that individuals themselves have particularly strong legal posi -
tions . Rather, workers' and employers' associations enjoy a quasi -status as
legal persons under public international law. Regarding implementation at
the national level, the direct applicability of numerous provisions of ILO
Conventions may be taken as proof that an increasing number of economic

106 Revised by Conventions Nos. 103 and 183.

107 These examples have been taken from Leary (note 105), at 108-109.
304 Thilo Marauhn

and social rights have "developed into enforceable rights, i.e. rights which
can be invoked in court" . 108

8.4 Implicit Guarantees of Social Rights

8.4.1 Social rights derived from the UN Covenant on Civil and

Political Rights

While, generally speaking, the International Covenant on Civil and Politi-

cal Rights does not guarantee social rights, social rights in numerous cases
developed out of civil and political rights by way of interpretation. Most of
these cases were based on Art. 26 of the Covenant, which enshrines the
principle of equality: "All persons are equal before the law and are entitled
without any discrimination to the equal protection of the law. In this re-
spect, the law shall prohibit any discrimination and guarantee to all per-
sons equal and effective protection against discrimination on any ground
such as race, colour, sex, language, religion, political or other opinion, na-
tional or social origin, property, birth or other status." Without a doubt,
equality, along with liberty, can be considered the most important principle
inspiring the concept of human rights. 109 In contrast to Art. 14 of the Euro-
pean Convention on Human Rights, which has no independent existence
and cannot be invoked on its own,'!? Art. 26 of the Covenant grants an in-
dependent right to equality, whereas Art. 2, para. I, of the Covenant is an
accessory prohibition of discrimination. Thus, for the purpose of Art. 26 of
the Covenant, there is no need to demonstrate that the matters at issue fall
within the ambit of one of the other rights included in the Covenant. Simi-
lar to Art. 26 of the Covenant, Art. 7 of the Universal Declaration on Hu-
man Rights and Art. 24 of the American Convention on Human Rights in-
clude independent guarantees regarding equal treatment. Art. 26 includes a

108L. Betten, International Labour Law. Selected issues (1993), at 386.

109 M. Nowak., U.N. Covenant on Civil and Political Rights. CCPR Commentary
(1993), at 458.
110 ECHR, Rasmussen v. Denmark (1984), ser. A no. 87, para. 29: "Article 14
complements the other substantive provisions of the Convention and the Proto-
cols. It has no independent existence since it has effect solely in relation to "the
enjoyment of the rights and freedoms" safeguarded by those provisions . Al-
though the application of Article 14 does not necessarily presuppose a breach
of those provisions - and to this extent it has an autonomous meaning - there
can be no room for its application unless the facts at issue fall within the ambit
of one or more of the latter."
 8 Social Rights Beyond the Traditional Welfare State 305

right to substantive equality, thus giving rise to numerous controversies not

just with regard to its historical background but also its application by the
Committee and interpretation in the corresponding literature. III These con-
troversies are particularly important in the context of interpreting Art. 26
with regard to rights not guaranteed by the Covenant on Civil and Political
Rights but by the Covenant on Economic, Social and Cultural Rights.
Several cases before the Human Rights Committee gave rise to disputes
concerning equal treatment in employment and social security issues.
These cases first arose in the late 1980s and were based on individual
communications against the Netherlands. The Committee emphasized the
meaning of substantive equality in social law and thus contributed to the
development of what may be termed "social rights by interpretation". This
implicit recognition of social rights based on the right to equality provoked
reactions that were either enthusiastic or over-critical.':" In the Nether-
lands, there was even a discussion on whether or not to add a reservation to
the Covenant regarding Art. 26. 113
Against this background of controversy, it is necessary to take a closer
look at the decisions involving social law and the right to equality as in-
cluded in Art. 26 of the Covenant. The first two cases, Broeksv: and
Zwaan-de Vries ,115 are concerned with gender-specific distinctions in the
Dutch Unemployment Benefits Act. According to the provisions of the
Unemployment Benefits Act, women could only receive support if they
could prove that they were responsible for the family income. No such
proof was required of married men. The Committee, in finding a violation
of Art. 26, took as a starting point that the right to equality "prohibits dis-
crimination in law or in practice in any field regulated and protected by
public authorities". Difference was only legitimate if "based on reasonable
and objective criteria". This was not the case with distinctions in unem-

I IIFor an account of pertinent controversies, in particular with regard to the diffe-

rences between Art . 2, para . 1, and Art. 26 of the Covenant, see T. Opsahl ,
"Equality in Human Rights Law, with particular reference to Article 26 of the
International Covenant on Civil and Political Rights" , in: M. Nowak et al
(eds.), Progress in the Spirit of Human Rights. Festschrift Felix Ermacora
(1988) , 51 at 59 et seq. with further references.
112 See Nowak (note 109), at 461 (marginal note 7).
113 Ibid., at 461 (marginal note 7, with further references in footnote 12).

114 Broeks vs. The Netherlands, Communication No. 172/1984 , Annual Report

1987, 137.
115 F.H. Zwaan-de Vries vs. The Netherlands, Communication No. 182/1984, An-

nual Report 1987, 160 (= Human Rights Law Journal 1988, 256).
306 Thilo Marauhn

ployment. In the case of Paugert" that was raised against Austria, the
Committee found a similar violation. The Austrian Pension Act at the time
granted full pension benefits to widowers only if they had no other source
of income whereas widows were not subject to such limitations. In con-
trast, the Committee in the case of Vos!'? accepted that gender-specific dis-
tinctions in other Dutch social security laws were based on "reasonable
and objective criteria" . The distinction at issue was that a disabled woman,
having lost her former husband, was no longer entitled to a disability al-
lowance (being only entitled to a widow's pension) while a man, whose
former wife died, kept his entitlement to a disability allowance. Irrespec-
tive of the reasoning in each case, it is noteworthy that social matters have
become an issue under the Covenant on Civil and Political Rights, based
on Art. 26 which grants a right to substantive equality. While it may thus
be argued that the Covenant includes social rights by interpretation, the ef-
fect of this jurisprudence in practical terms should not be overestimated.
While it can be argued that these cases do not really establish social
rights stricto sensu, this is different in other cases concerning either affir-
mative or so-called horizontal effects under Art. 26 of the Covenant. The
case of Stalla Costa, 118 which attacks a 1985 Uruguayan law giving prefer-
ence of access to public service to those civil servants dismissed for politi-
cal reasons during the period of military dictatorship, demonstrates that the
Committee is obviously prepared to consider affirmative action as a le-
gitimate means of establishing de facto equality. As for the horizontal ef-
fect of Art. 26, the right to equality - in general - does not obligate private
parties to respect protection against discrimination. However, the jurispru-
dence of the Committee demonstrates that such horizontal effects may,
nevertheless, arise under particular circumstances. Earlier, the argument
was made that in the quasi-public sphere, every form of discrimination
among private persons was admissible.!' ? This argument was criticized'>

116 Dietmar Pauger vs. Austria, Communication No. 415/1990 , Annual Report
1992, 333 (= Human Rights Law Journal 1993, 18).
117 Hendrika S. Vos vs. The Netherlands, Communication No. 218/1986 , Annual

Report 1989, 232 (= Human Rights Law Journal 1990, 150).

118 Ruben Stalla Costa vs . Uruguay, Communication No . 198/1985, Annual Report

1987, 170 (= Human Rights Law Journal 1988, 261) .

119 C. Tomuschat, "Equality and Non-Discrimination under the International Cove-
nant on Civil and Political Rights", in: Festschrift Hans-Jilrgen Schlochauer
(1981),691 at 711.
120 B.G. Ramcharan, "Equality and Non-Discrimination", in: L. Henkin (ed .), The

International Bill of Rights - The Covenant on Civil and Politi cal Rights
(1981), 246 at 266 et seq .; see also Nowak (note 109), at 478 (marginal
note 31).
 8 Social Rights Beyond the Traditional Welfare State 307

and eventually, it may be argued, was implicitly rejected by the Committee

in two cases that, for other reasons, were declared inadmissible.!" In one
case, the Committee commented that Art. 26 "should be interpreted to cov-
er not only entitlements which individuals entertain vis-a-vis the State but
also obligations assumed by them pursuant to law".'>
The Committee's approach can be further underlined by reference to the
pertinent General Comments. Para. 2 of General Comment No.4 states:
"Firstly, article 3, as articles 2 (1) and 26 in so far as those articles primar-
ily deal with the prevention of discrimination on a number of grounds,
among which sex is one, requires not only measures of protection but also
affirmative action designed to ensure the positive enjoyment of rights. This
cannot be done simply by enacting Iaws."! > Para. 3 continues by stipulat-
ing that "the positive obligation undertaken by States parties [... ] may it-
self have an inevitable impact on legislation or administrative measures
specifically designed to regulate matters other than those dealt with in the
Covenant but which may adversely affect rights recognized in the Cove-
nant".
Since the International Covenant on Civil and Political Rights clearly
includes rights stricto sensu, i.e. individual entitlements, and since it has
been demonstrated that the Covenant, based on Art. 26, provides for indi-
vidual rights regarding social laws at the national level, it may be argued
that the Covenant grants social rights as individual entitlements, albeit to a
limited extent and depending on the scope of social legislation in domestic
law. This may further be illustrated by reference to General Comment
No. 18. 124 The Committee, in para. 10, points out "that the principle of
equality sometimes requires States parties to take affirmative action in or-
der to diminish or eliminate conditions which cause or help to perpetuate
discrimination prohibited by the Covenant. For example, in a State where
the general conditions of a certain part of the population prevent or impair
their enjoyment of human rights, the State should take specific action to
correct those conditions. Such action may involve granting for a time to
the part of the population concerned certain preferential treatment in speci-
fic matters as compared with the rest of the population." This supports the
conclusion that the principle of non-discrimination and the right to equality

121 F.G.G. vs. The Netherlands (Dismissed Sailors), Communication No . 209/-

1986, Annual Report 1987, 180; B.d.B. et al vs. The Netherlands, Communica-
tion No . 273/1989, Annual Report 1989,286.
122 B.d.B. et al vs. The Netherlands, Communication No. 273/1989 , Annual Report
1989,286 at para . 6.5.
123 General Comment No .4: Equality between the sexes (Art . 3), 30 July 1981.
124 General Comment No. 18: Non-discrimination, 10 November 1989.
308 Thilo Marauhn

under certain circumstances include social rights . In so far as social rights

are thus based on the right to equality, they must be treated like all other
civil and political rights , i.e., as directly enforceable individual entitle-
ments .

8.4.2 Social Rights Derived from the European Convention on

Human Rights

The European Convention on Human Rights primarily, but not exclusive-

ly, guarantees civil and political rights. Apart from the fact that it is hardly
possible to draw a clear-cut distinction between the two categories of
rights,'> at least two provisions included in the Convention and its Addi-
tional Protocols may be considered social rights : freedom of association
according to Art. 11 of the Convention and the right to education guaran-
teed by Art . 2 of Protocol No .1 . Moving one step further, it has recently
been argued that Protocol No.1 includes, in addition to the right to educa-
tion, another right of a complex nature, i.e., the right to the peaceful en-
joyment of one 's possessions. This has been described as meaning that the
two guarantees "may be regarded as economic or cultural, but also as civil
rights".' > Taking into account the dynamic interpretation given to numer-
ous freedoms by the Convention organs, it may be argued that many of the
rights have a dual character as civil rights and as social rights alike. There-
fore, it may be stated that "the European Convention itself has potential for
the protection of some economic and social rights". 127 This interpretation is
also in line with the title of the European Convention which, in contrast
with the two UN Covenants, does not explicitly refer to either category of
rights but to human rights in general. 128
The European Court on Human Rights has made it clear that there is no
watertight separation between the two categories of economic and social
rights on the one hand and the civil and political guarantees included in the
European Convention on Human Rights on the other hand. The Court re-

125 I.A. Frowein, "Wirtschaftliche und soziale Rechte in der Rechtsprechung der
StraBburger Organe" , in: S. Vassilouni (ed.), Aspects of the Protection ofIndi-
vidual and Social Rights (1995) , 203 at 203.
126 P. Strurma, "Poverty and International Instruments on Economic and Social

Rights", in: R. Hofmann et al (eds .), Armut und Verfassung (1998),47 at 51.
127 Ibid. , at 52.
128 R. Ryssdal, "Botschaft des Prasidenten des Europaischen Gerichtshofs fur
Menschenrechte an das Kolloquium tiber 'D ie Durchsetzung wirtschaftlicher
und soziale Grundrechte' (Salzburg April 1991)", in: Schriften des Osterreichi-
schen Instituts fir Menschenrechte , Vol. 3, at 2.
 8 Social Rights Beyond the Traditional Welfare State 309

jected the idea that the Convention does not touch upon the social sphere.
In its decision in the Airey case, the Court argued: "Whilst the Convention
sets forth what are essentially civil and political rights, many of them have
implications of a social and economic nature. The Court therefore consid-
ers, like the Commission, that the mere fact that an interpretation of the
Convention may extend into the sphere of social and economic rights
should not be a decisive factor against such an interpretation; there is no
water-tight division separating that sphere from the field covered by the
Convention."129 In this case, Ms. Airey, pursuing an action for judicial sep-
aration from her husband, had complained that the high costs involved in
obtaining the necessary legal representation before the High Court in Ire-
land amounted to a denial of access under Art. 6, para. 1, of the Conven-
tion.
The Airey case may be taken as a starting point of a series of decisions
by the European Court on Human Rights that build social rights on the tra-
ditional civil and political rights included in the Convention .'> While the
Convention organs did not develop a comprehensive approach or a fully-
fledged theory of social rights, their pragmatic approach forms the basis of
a broad approach towards the issue of social and economic rights under the
Convention. The Commission and the Court have used various human
rights included in the Convention, inter alia, Art. 11, guaranteeing free-
dom of association, 131 the right to a fair trial, as embodied in Art . 6, para. 1,
of the Convention,' > and even Art. 1 of Protoco I No . 1.133 In the cases con-
cerning Art. 6, para. 1, the question was whether or not welfare laws in-
clude "civil rights and obligations" within the meaning of the right to a fair
trial. Regarding Art. 1 of Protocol No.1, guaranteeing the peaceful enjoy-
ment of one's possessions, the problem was whether certain unemploy-
ment benefits were protected as "possessions". The Court argued that enti-
tlements arising out of social security arrangements may answer the same
purpose as traditional property rights as long as the individual has contrib-
uted something to these entitlements. The Court primarily focused on the

129 ECHR, Airey v. Ireland (1979) , ser. A No . 32, para. 26.

130 For an account of the jurisprudence, see C. Droge/T. Marauhn, "Soziale Grund-
rechte in der Europaischen Grundrechtscharta - aus der Perspektive der
EMRK", in: Bundesministerium fiir Arbeit und Sozialordnung et al (eds.), Sozi-
ale Grundrechte in der Europaischen Union (2000/2001) , 77 at 85-92.
131 Marauhn (note 93), at 541-545.
132 Cases dealing with the application of Art. 6, para . 1, to welfare provisions in

domestic law, inter alia, were prominent; ECHR , Feldbrugge v. The Nether-
lands (1986), ser. A no. 99, and Deumeland v. Deutschland (1986), ser. A
no. 100.
133 ECHR , Gaygusuz v. Austria (1996), Reports 1996-IV no. 14, para . 41.
310 Thilo Marauhn

fact that unemployment benefits were only paid after the individual had
contributed to the financial basis of such claims. Nevertheless, the decision
met with harsh criticism.'> Art. 2 of Additional Protocol No.1 has a dual
nature since it may be considered both a social and a civil right.'> The
Strasbourg organs have interpreted this provision as a right of access to ex-
isting educational institutions, but not, as a right to establishing new educa-
tional institutions.'> Also, the Commission and the Court underlined that
whenever the State offers certain options for education, there must be
equal access and at the same time internal pluralism within such institu-
tions.!"
Two other provisions of the Convention may be referred to: the right to
family life as incorporated in Art. 8 and the prohibition of inhuman or de-
grading treatment within Art. 3. The Court has consistently emphasized

134 K. Hai1bronner, "Die sozialrechtliche Gleichbehandlung von Drittstaatsangeho-

rigen - ein menschenrechtliches Postulat?" Juristenzeitung 1997, 397 at 398.
But see H. Verschueren , "EC Social Security Coordination Excluding Third
Country Nationals: Still in Line with Fundamental Rights after the Gaygusuz
Judgment?" Common Market Law Review 34 (1997), 991-1017.
135 J. Delbriick, "The Right to Education as an International Human Right", Ger-

man Yearbook ofInternational Law 1992, 92 at 101 et seq.

136 ECHR, Belgian Linguistics Case (1968), ser. A no. 8, para. 9. The Court noted

the negative formulation of the provision, but confirmed that the Article does
guarantee a right of access to educational institutions. The Court rejected the
idea that such a right would require the Contracting Parties to establish at their
own expense, or to subsidise, any particular type or level of institution : "Thus,
persons subject to the jurisdiction of a Contracting State cannot draw from Ar-
ticle 2 of the Protocol the right to obtain from the public authorities the creation
of a particular kind of educational establishment; nevertheless, a State which
had set up such an establishment could not, inlaying down entrance require-
ments, take discriminatory measures within the meaning of Article 14." On the
limited scope of Art. 2 of Protocol No.1, see L. Wildhaber, "Right to Educa-
tion and Parental Rights", in: id., Wechselspiel zwischen innen und aussen:
Schweizer Landesrecht, Rechtsvergleichung, Volkerrecht (1996), 391 at 411 et
seq. and A. Bradley, "Scope for Review. The Convention Rights to Education
and the Human Rights Act 1998", European Human Rights Law Review 1999,
395 at 397.
137 ECHR, Kjeldsen, Busk Madsen and Pedersen v. Denmark (1976), ser. A no.

23, para. 53: "[ ... ] the State, in fulfilling the functions assumed by it in regard
to education and teaching, must take care that information or knowledge in-
cluded in the curriculum is conveyed in an objective, critical and pluralistic
manner. The State is forbidden to pursue an aim of indoctrination that might be
considered as not respecting parents' religious and philosophical convictions ."
 8 Social Rights Beyond the Traditional Welfare State 311

that Art . 8 extends beyond negative obligations. w Protecting family life

entails the State's social responsibility regarding all family-related regula-
tory measures!". Within the context of Art . 8 as well as within the juris-
prudence on Art. 3 of the Convention, the procedural aspects were of pri-
mary importance. The development of the jurisprudence can be exempli-
fied by referring to two cases. The first case concerned a young family
(with small children) whose electric supply was cut off in winter for failure
to pay the bill . The social security office was not prepared to support the
family in proceedings against the energy supplier. The Commission con-
sidered the application manifestly ill-founded and declared it inadmissible
without taking a closer look at either Art. 8 or at Art. 3. 140 This decision
was harshly criticized in the literature 141 and in September 1999, the Com-
mission seems to have given up its restrictive approach. In the case under
consideration, the children were gravely neglected by their parents, and
were living in hunger and unhygienic circumstances. The authori ties knew
the facts but were passive, assuming that it would be best for the children
to stay with their parents. The Commission considered the authorities' pas-
sivity to be inhuman and degrading under Art . 3 and argued that the au-
thorities had a positive obligation to protect the children's physical and
moral integrity. 142
Drawing conclusions from the above analysis, the Convention undoubt-
edly includes individual entitlements. Assessing the relevance of the wel-
fare context of certain cases dealt with by the Convention organs, it is true
that the Convention itself is not an instrument of welfare law.!" However,
in a case-by-case basis, the Convention organs have underlined that States
Parties, in guaranteeing and protecting civil and political rights, are ob-
liged to take the social sphere into account. A limited but conclusive ten-
dency now exists of deriving social rights stricto sensu from the European

138 ECHR, Johnston v. United Kingdom (1986), ser. A no. 112, para. 55; ECHR,
Keegan v. Ireland (1994), ser. A no. 290, para. 49.
139 Frowein (note 125), at 208-209.

140 European Commission on Human Rights, Van Volsem v. Belgium, Application

no. 14641/89, decision of9 May 1990; Revue universelle des droits de l'homme
1990,384.
141 F. Sudre, La premiere decision "quart-monde" de la Commission europeenne

des droits de 1'homme : Une "bavure" dans une jurisprudence dynamique, Re-
vue universelle des droits de l'homme 1990, 349-353 ; A. Cassese, "Can the
Notion of Inhuman and Degrading Treatment be Applied to Socio-Economic
Conditions?", European Journal ofInternational Law 1991, 141-145.
142 European Commission on Human Rights, Z and others v. United Kingdom, Ap-

plication no. 29392/95, decision of 10 September 1999.

143 Frowein (note 125), at 360.
312 Thi10 Marauhn

Convention on Human Rights. This has not led to a weakening of the en-
forcement mechanisms established under the Convention, but rather the
opposite. The jurisprudence of the Strasbourg organs can be taken as proof
that social rights have been accepted as a justitiable and enforceable nor-
mative category, in other words : social rights can be construed as individ-
ual entitlements.

8.4.3 Social Rights within the Framework of the Inter-American

Human Rights System?

The American Convention on Human Rights!" does not include explicitly

stated social rights. It was negotiated with the European Convention on
Human Rights in mind and, when it was drafted, there was no intention of
including individual guarantees for social issues. Apart from the possibility
of interpreting certain civil and political rights as social guarantees similar
to the Strasbourg organs, reference may be made to Art. 26 of the Ameri-
can Convention. This provision reads: "The States Parties undertake to
adopt measures, both internally and through international cooperation, es-
pecially those of an economic and technical nature, with a view to achiev-
ing progressively, by legislation or other appropriate means, the full reali-
zation of the rights implicit in the economic, social, educational, scientific,
and cultural standards set forth in the Charter of the Organization of Amer-
ican States as amended by the Protocol of Buenos Aires ." While States
Parties to the Convention according to Art. 42 are under obligation to sub-
mit reports and studies "to the Executive Committees of the Inter-
American Economic and Social Council and the Inter-American Council
for Education, Science, and Culture, in their respective fields, so that the
Commission may watch over the promotion of the rights implicit in the
economic, social, educational, scientific, and cultural standards set forth in
the Charter", the individual complaints procedure established under Art. 45
of the Convention only applies to "a human right set forth in this Conven-
tion" (Art. 45, para. I). It is not possible to directly raise a complaint con-
cerning social issues under the American Convention unless the American
Declaration of the Rights and Duties of Man can be utilized. This Declara-
tion includes numerous social rights in Arts. VII, XI-XVI, and XXII.145

144 OAS TS No . 36, 1144 UNTS 123.

145 These include the right to protection for mothers and children, the rights to edu-
cation, to the benefits of culture, to work and to fair remuneration, to leisure
time and to the use thereof, the right to social security and freedom of associa-
tion.
 8 Social Rights Beyond the Traditional Welfare State 313

Originally, the Declaration was designed as a non-binding instrument.

However, it gained "some normative force"!" based on the institutional ar-
rangements for the protection of human rights under the OAS-Charter and
in light of relevant state practice . The Inter-American Court on Human
Rights in an advisory opinion acknowledged that the Declaration can be
used in order to interpret the OAS Charter.!" This does not, however, clar-
ify the relationship between the Declaration and the Convention. Conse-
quently, it is rather difficult to rely on Art. 45 of the Convention or on any
other related supervisory mechanism to enforce the implementation of so-
cial rights in this context. This gap can only be overcome by arguing that
the Declaration and the Convention are mutually supportive and comple-
mentary. As Thomas Buergenthal has argued : "It is difficult to escape the
conclusion that the American Declaration is designed to serve as a major
normative source in the interpretation and application of the Convention
and that, as such, it may be resorted to fill the normative lacunae of that
instrument."!" This assessment can be based on two findings: first, there is
a certain jurisprudence of the Inter-American Commission on Human
Rights regarding social rights , and, second, the Commission seems to have
built upon the advisory opinion of the Court regarding the status of the
American Declaration. As to the first argument, it is noteworthy that eco-
nomic and social rights have been applied for the protection of indigenous
peoples.!" As far as the status of the Declaration, the Commission origi-
nally argued that the Convention "does not include economic, social and
cultural rights" and hence the right to work was not protected under the In-
ter-American System of Human Rights.!" However, the Commission has

146 M. Craven, "The Protection of Economic, Social and Cultural Rights under the
Inter-American System of Human Rights", in: DJ. Harris/S. Livingstone (eds.),
The Inter-American System ofHuman Rights (1998), 289 at 292 .
147 Advisory Opinion OC-IO/89 of 14 July 1989, ser. A no. 10 (Interpretation of

the American Declaration of the Rights and Duties of Man within the frame-
work of Art. 64 of the American Convention).
148 T. Buergenthal, "The American Human Rights Declaration: Random Reflec-

tions" , in: K. Hailbronner et al (eds .), Staat und Vdikerrechtsordnung. Fest-

schrift fiir Karl Doehring (1989), 133 at 138.
149 For references, see Craven (note 146), at 295-296. Craven argues: "Perhaps the

most significant claims relating to economic, social and cultural rights that have
been considered under the Declaration by way of individual petitions have been
those involving the persecution and mistreatment of minorities and indigenous
populations." See also R. Grote, "The Status and Rights of Indigenous Peoples
in Latin America", ZeitschriJtfiir ausldndisches offentliches Recht und Volker-
recht 59 (1999), 497 at 524-525.
150 Cases 9718 and 9777 (Argentina), IACHR Annual Report 1987/8, 31, para. 6.
314 Thilo Marauhn

recently accepted communications referring to the rights granted in the

Declaration . It has even argued that "ratification of the Convention by
Member States at least complemented, augmented or perfected the interna-
tional protection of human rights in the inter-American system, but did not
create them ex novo, nor did it extinguish the previous or subsequent vali-
dity of the American Declaration."!"
In light of the limited protection of economic, social and cultural rights
under the American Convention on Human Rights, an Additional Protocol
to the Convention in respect of economic, social and cultural rights was
adopted on November 17, 1988. 152 (Protocol of San Salvador). This Proto-
col is drafted along the lines of the International Covenant on Economic,
Social and Cultural Rights but includes certain provisions extending be-
yond the scope of the UN Covenant: the right to a healthy environment
(Art. 15), the rights of the child (Art. 16), the protection of the elderly
(Art. 17) and the protection of the disabled (Art. 18). It is deplorable, how-
ever, that the Protocol does not include a supervisory mechanism for the
benefit of the individual. Thus it is rather difficult to argue that the Proto-
col guarantees individual entitlements. Rather, Art. 19 of the Protocol sug-
gests that it only includes state obligations since this provision only estab-
lishes a reporting procedure. The sole reference to the individual is includ-
ed in Art. 19, paras. 5 and 6, and concerns freedom of association as well
as the right to education. Art. 19, para. 5, of the Protocol states: "Any in-
stance in which the rights established in paragraph a) of Article 8 and in
Article 13 are violated by action directly attributable to a State Party to this
Protocol may give rise, through participation of the Inter-American Com-
mission on Human Rights and, when applicable, of the Inter-American
Court of Human Rights, to application of the system of individual petitions
governed by Article 44 through 51 and 61 through 69 of the American
Convention on Human Rights." The Commission is entitled under Art. 19,
para. 6, to "formulate such observations and recommendations as it deems
pertinent concerning the status of the economic, social and cultural rights
established in the present Protocol in all or some of the States Parties,
which it may include in its Annual Report to the General Assembly or in a
special report, whichever it considers more appropriate provides for a re-
porting procedure without any specific consequences to the benefit of the
individual" .
Summarizing the social dimension of the Inter-American Human Rights
system, it may be argued that hardly any individual entitlements are in-

151 Report No.74/90 Res. 22/88, Case 9850 (Argentina), Annual Report IACHR
1990-1, para. 6.
152 GAS TS No. 69.
 8 Social Rights Beyond the Traditional Welfare State 315

eluded therein. Although recent developments within the jurisprudence of

the Inter-American Commission on Human Rights suggest that there are
possibilities to raise social issues included in the American Declaration be-
fore the Commission and notwithstanding the adoption and coming into ef-
fect of the Additional Protocol of San Salvador, the individual has only
limited possibilities of enforcing social rights vis-a-vis the states parties to
the pertinent agreements. In contrast with the developments within the In-
ternational Covenant on Civil and Political Rights and within the European
Convention on Human Rights, the Inter-American System has not yet
adopted a comprehensive social rights approach.

8.5 State Obligations or Individual Entitlements?

It cannot be disputed that on the regional and universal level, there are now
numerous instruments guaranteeing social rights. These instruments dem-
onstrate that a certain degree of protection exists in social and economic
issues. Most of these instruments have a human rights background. Taking
into account the history of social rights and their protection after 1945, it
must, however, be conceded that individual entitlements are not necessar-
ily based on such international instruments. In several cases it has been ar-
gued correctly that these instruments, at least when drafted, were not de-
signed to grant individual entitlements but to simply impose state obliga-
tions.
The situation has, however, changed somewhat. Whereas the breakdown
of the East-West divide after 1989 may have seemed to many to lead to a
decline of social rights, the contrary has been true. The respective supervi-
sory bodies interpret those international instruments explicitly stating and
protecting social rights as largely justitiable and enforceable. This is,
above all, true for the International Committee which supervises the Inter-
national Covenant on Economic, Social and Cultural Rights. As explained
above, the committee identified two approaches to increase the effective-
ness of social rights guaranteed under the Covenant: firstly, the Committee
is more accessible internationally, not so much on its own will but because
the state parties to the Covenant empowered the committee. The imple-
mentation of social rights by States Parties is more closely scrutinized -
even though the additional protocol providing for an individual communi-
cations procedure has not yet been adopted. The second approach is per-
haps even more important as it strengthens the individual's position. Ad-
dressing the issue of national implementation, the Committee has made it
quite clear that the Covenant provisions are not exclusively state obliga-
316 Thilo Marauhn

tions but that several provisions can be applied directly in national courts.
This necessitates a differentiated approach to the doctrine of direct applica-
bility and to the concept of self-executing norms. The Covenant's various
provisions must be interpreted on their own merits. Consequently, the
Covenant includes individual entitlements to a certain extent.
While this argument cannot be advanced regarding the European Social
Charter, it is noteworthy nevertheless that the introduction of a collective
complaints procedure has substantially improved the enforcement machin-
ery under the Charter. An impressive list of complaints has been addressed
so far.!" This notwithstanding, the collective complaints procedure cannot
be taken as an argument to construe or interprete the obligations included
in the Social Charter as individual entitlements. The notion of collective
entitlements can only be introduced vis-a-vis those actors entitled to sub-
mit a complaint under the new procedure. Also, the European Social Char-
ter, in following a menu approach, is less suitable for direct application
than the International Covenant. There are, however, examples in domestic
jurisprudence of some Charter provisions considered to be directly appli-
cable.
While very early in the development of international human rights pro-
tection, the International Labor Organization developed institutionalized
supervisory mechanisms; today these are considered fairly weak instru-
ments arguing in favor of individual entitlements. It can only be argued re-
garding freedom of association that there are rights stricto sensu at the in-
ternational level. Concerning justitiability and direct applicability, it has
been demonstrated that numerous conventions include provisions that can
be relied on in domestic courts. Thus, various social rights within the
framework of the International Labor Organization can be viewed as indi-
vidual entitlements.
Finally, reference must be made to the International Covenant on Civil
and Political Rights and the European Convention on Human Rights. Un-
doubtedly, both instruments include individual entitlements regarding civil
and political rights. Both instruments provide a meaningful enforcement
machinery at the international level. Also, most of the provisions easily
qualify as directly applicable. The only major problem is whether it can be
argued that these instruments include social rights. Both the international
Human Rights Committee and the Strasbourg organs have broadly inter-
preted various civil and political rights, such as the right to equality, the
right to a fair trial, the protection of family life, and the prohibition of in-
human and degrading treatment. The interpretations include social rights to

153 See http://www.humamights.coe.int/cseweb/GB/GB3/GB30_list.htm.

 8 Social Rights Beyond the Traditional Welfare State 317

a certain extent. These social rights can be considered individual entitle-

ments within the proper sense of the term.
This does not, however, mean that at the individual level, there is a com-
prehensive catalogue of social rights, but that states are prepared to accept
social rights as individual entitlements under international law. This does
not promise more than can be kept. Rather one must look more closely at
how to meaningfully construe social rights. It has been shown that social
rights are inextricably linked to civil and political rights.
Indivisibility is not just ideological but is the continuous approach that
both international organizations and states follow to the two categories of
human rights. Given this indivisibility of civil and political rights on the
one hand and economic and social rights on the other hand, it is easy to
follow a functional approach to constructing and interpreting social rights.
Social rights provide the necessary basis for the actual realization of civil
and political rights while civil and political rights are indispensable for the
realization of economic and social rights.'>' Without a meaningful social
and economic basis, no individual can actually enjoy civil and political
rights. Universal instruments do not provide the same degree of welfare in
all societies, and therefore the problem of a differentiated meaning of so-
cial rights in different countries must be addressed. To this end, the differ-
ence between civil and political rights on the one hand and economic and
social rights on the other hand must be acknowledged. This difference,
which takes into account each State Party's economic and social situation
on the protection of social rights, can best be accommodated if economic
and social rights are given a primarily procedural meaning. A state cannot
escape its obligation to adopt effective measures regarding social rights;
however, an assessment of effectiveness must consider the specific State's
economic situation. The individual can insist that the government adopt
measures, but cannot claim a particular outcome. Parallel with the distinc-

154 An interesting perspective on this interrelationship may be taken from an article

by Amartya Sen: "Political rights can have a major role in providing incentives
and information towards the solution of economic privation. But the connec-
tions between rights and needs are not merely instrumental, they are also cons-
titutive. For our conceptualization of economic needs depends on open public
debates and discussions, and the guaranteeing of those debates and those dis-
cussions requires an insistence on political rights... . Political rights, including
freedom of express ion and discussion, are not only pivotal in inducing political
responses to economic needs, they are also central to the conceptualization of
economic needs themselves" (A. Sen, "Freedoms and Needs", The New Repub-
lic [January 10 and 17, 1994], 31 at 32; reprinted in: R.I. Steiner/P . Alston
[eds.], International Human Rights in Context. Law, Politics, Morals
[20d ed. 2000], at 269-271).
318 Thi10 Marauhn

tion between obligations of result and obligations of conduct, social rights

can be considered rights of conduct, and not rights of result.
This approach to social rights makes them enforceable and justitiable
and is based on the idea that the individual is - at least in social and eco-
nomic terms - not just a neutron, but a member of civil society. Thus, the
individual must be considered equally responsible for social rights and for
civil and political rights. Social rights can now be viewed as individual en-
titlements, leaving a wide margin of appreciation to the addressees of such
rights. These social rights are the necessary individual counterpart of eco-
nomic globalization. If liberalism and its potential of achieving economic
and social welfare based on responsible citizens is meaningful, then a
framework must be established in which individuals can assume this re-
sponsibility. Social rights can no longer be simply viewed as policy goals
or state obligations beyond the power of supervisory bodies. Rather, they
must be seen as placing responsibility with individuals, empowering them
to require that public authorities address certain social issues. Arguably,
this is a weak interpretation of social rights. However, it corresponds with
the interrelationship between rights and responsibilities. 155 Social rights do
not establish a safety net for public welfare. Rather, they rely on the indi-
vidual to take up his or her case. As Philip Alston has rightly observed:
"Individuals must be empowered to participate in decisions relating to the
steps to be taken towards meeting those rights and be given the opportu-

155 For an interesting approach, see D. Beetham, "What Future for Economic and
Social Rights?" Political Studies 43 (1995), 41-60. Beetham argues that it is
important to adopt a rights-based approach to social rights for a number of rea-
sons. He also illustrates - from a political science perspective - how this may
actually work: "The ... response is to insist that human rights most urgently
need asserting and defending, both theoretically and practically, where they are
most denied. Indeed the language of rights only makes sense at all in a context
where basic requirements are vulnerable to standard threats ... The human
rights agenda has therefore necessarily an aspirational or promotional dimen-
sion; but it is not mere rhetoric. The purpose of the two covenants and their
monitoring apparatus is to cajole state signatories into undertaking the neces-
sary domestic policy and legislation to ensure their citizens the protection of
their rights in practice. This promotional aspect of the human rights agenda is
not only addressed to those whose responsibility it is to secure the rights in
question. It also serves as a legitimization for the deprived in their struggles to
realize their rights on their own behalf, by providing a set of internationally val-
idated standards to which they can appeal."
 8 Social Rights Beyond the Traditional Welfare State 319

nity to contribute to monitoring and evaluation processes ."156 A modem

understanding of social rights as individual entitlements can facilitate this
contribution.

156 P. Alston, "International Governance in the Nonnative Areas", in: UNDP,

Background Papers : Human Development Report 1999, at 18, reprinted in:
Steiner/Alston (note 154),317 at 318.
9 The Role of Non-Governmental Organizations in
the International Labor Organization

Georg Nolte and Sergey Lagodinsky'

Contents
9.1 The Issue of Representativeness on the International Level... .. 322
9.2 The Role ofNGOs in the International System 324
9.3 Purposes and Structures of the ILO 326
9.4 The Role ofNGOs within the ILO 329
9.4.1 The Legal Framework for NGO Participation in the
ILO 329
9.4.2 NGOs and the Policy of the Office 331
9.4.3 NGOs versus Workers ' and Employers' Organizations 333
9.4.4 The Practical Participation ofNGOs 334
9.5 Is there a Need for Broader Participation? 335
9.5.1 Indigenous Peoples 336
9.5.2 The Unemployed 337
9.5.3 Migrant Workers 338
9.6 Concluding Remarks 338

The International Labor Organization (ILO) is the main international insti-

tution for developing, promoting and implementing social standards . Is this
organization institutionally adapted to modem conditions? This question
arises in light of the general discussion on representation deficits in inter-
national relations (I). Many observers have identified NGOs as actors who
could compensate such perceived deficits (II). Given the purpose and the
activities of the ILO (III), it appears worthwhile to review the present role
of NGOs within the ILO structures (IV). This analysis is aimed at assess-

• Georg Nolte is Professor of Law, Institute of International Law, University of

Goettingen; Sergey Lagodinsky was research assistant at the Institute of Inter-
national Law, University of Goettingen, and is currently John-McCloy Fellow
at the John F. Kennedy School of Government, Cambridge, USA. The authors
would like to thank Julie Harris for her thorough editing work. Errors and mis-
conceptions are ours.
322 Georg Nolte and Sergey Lagodinsky

ing possible representation deficits of the organization (V) so that further

conclusions may be drawn (VI).

9.1 The Issue of Representativeness on the International

Level

One of the most heavily discussed questions of modem international law is

whether international decision-making procedu res are sufficiently repre-
sentative. It is true that democratic deficits have, in a sense, always been
one of the characteristics of international law and international relations .
Still, some modem developm ents make the question of representativeness
particularly acute today :
First, there is a new intensity of international regulation. ' States grant in-
ternational regimes and supranational entities the power to decide on mat-
ters directly affecting the lives of their inhabitants . The competences of the
European Union are an extreme, but certainly not an exclusive example of
such a shift of powers.' Whether it concerns patent protection ,' food safe-
ty,> or the criminal liability of individuals.s the decision-making between
states or by international organizations often overlaps with the compe-
tences exercised within states. A second reason for the growing importance
of the question of representative ness is the level of international interde-
pendence that has become visible in the course of the general process of
globalization.' In this process, states have become more and more depend-
ent upon international norms and developments which somewhat devalue

2 Anthony McGrew, "Dernokratie ohne Grenzen? Globali sierung und die demok-
ratische Theorie und Politik" in Ulrich Beck (ed.), Politik der Globalisierung
(Suhrkamp, Frankfurt am Main, 1998), pp. 374-422, p. 382; Thom as M.
Franck, " Legitimacy and the Democratic Entitl ement" in Gregory H. Fox/Brad
R. Roth (eds.) Democratic Governance and International Law (Cambridge
University Press, Cambridge, 2000) , pp. 25-47, p. 31; see also Katherine Van
Wezel Stone, "Labor and the Glob al Economy: Four Appro ache s to Tran s-
national Labor Regul ations" (1995) 16 Michigan Journal of International La w
(MJIL), pp. 987-1028,p. 989.
3 From the German perspective see the Maastricht Treaty 1992 Constitutionality
Case BVerfGE 89, 155; [98] ILR 197.
4 Part II § 5 Art. 33 TRIPS Agreement.
s The WTO Agreement on the Application of Sanitary and Phytosanitary Meas-
ures .
6 Art 25 ICC-Statute.
7 Commission on Global Gove rnance Our Global Neighborhood (Oxford Uni-
versity Press, Oxford, 1995), p. 43; see also McGrew, supra note 2, p. 382.
 9 The Role of Non-Governmental Organizations 323

the more immediately legitimated national decisions. Discussing the grow-

ing competences of the European Union, the German Constitutional Court
has held that it is "crucial that the development of the democratic founda-
tions of the Union keeps pace with integration [...]"8
There is indeed no immediate chain of democratic legitimation from in-
dividuals to most international organizations, nor is there a chain of ac-
countability from the organizations to the individuals. As Falk and Strauss
have put it: "At present, the sole primary constituencies to which most in-
ternational organizations must respond are states, not citizens", whereas
the influence of the citizens on the foreign policy of their governments is
mostly "too attenuated ... to satisfy the conditions of a truly representative
democracy ."? One can doubt, however, whether citizens have ever directly
influenced international relations. It cannot be denied that states have al-
ways had to take into account the interests of financial, economic, or other
lobbies. It would not be appropriate, after all, to demand a more direct de-
mocracy on the international plane than already exists on the national lev-
el. All the same, such considerations cannot render superfluous the ques-
tion of how fair international decision-making is in light of present trends
towards greater dependency on intrusive international and supranational
rules. Even if the democratic legitimacy of states' policies could be as-
sumed, it would nevertheless have to be taken into account that the self-
contained dynamics of international institutions often allow them to take
action without previously consulting member states. The internal policies
and practices of international institutions, like those of the World Bank, are
often influenced by factors other than inter-state."
Whether or not doubts concerning the representativeness of international
decision-making are justified on a theoretical level, public opinion seems
to perceive democratic deficits. National governments and international
organizations are concerned about forms of popular resistance to the pre-
sent international system that may call into question the effective imple-
mentation of transnational regimes. I I Discussions about the possible prac-

8 [98] ILR 197, p. 224; BVerfGE 89 155 (186) .

9 Richard Falk, Andrew Strauss , "On the Creation of a Global Peoples Assembly:
Legitimacy and the Power of Popular Sovereignty" (2000) 36 Stanford Journal
ofInternational Law, pp. 212.
10 Benedict Kingsbury, "Operational Policies of International Institutions as Part
of the Law-Making Process: The World Bank and Indigenous People", in
Guy S. Goodwin-Gill, Stefan Talmon (eds.), The Reality ofInternational Law.
Essays in Honour ofIan Brownlie (Clarendon Press, Oxford, 1999), pp . 323-
342, p. 342 .
\I FalklStrauss, supra note 9, p. 213.
324 Georg Nolte and Sergey Lagodinsky

tical effects of a perceived lack of legitimacy of international institutions

have not only taken place on a general level' 2 but also within the ILO.13

9.2 The Role of NGOs in the International System

Generally speaking, there are two main aspects to the discussion on legiti-
macy of international decision-making. The first aspect is the question of
participation during the process of decision-making, and the second aspect
is general accountability, especially with the issue of transparency. Some
speak in terms of representation and process." A solution offered to in-
crease the degree of representation and accountability in the international
decision-making process is a broader participation of non-governmental
bodies. Indeed, NGOs often prove to be more flexible, forthcoming and re-
sponsive as opposed to governmental members of the international sys-
tern." One of their most useful features is working relations with commu-
nity groups." The voluntary, local and issue specific character of NGOs
makes them a useful link between the sub-national community and nation-
al and international communities and institutions. 17
It is well-known that the participatory role of NGOs has proven a valu-
able "democratic" contribution to several international legal developments:
NGOs played an important role during the ICC negotiations. Their partici-
pation in both the Preparatory Committee and the Rome Conference sig-
nificantly contributed to the success of the ICC negotiations. Their active
lobbying and occasional media pressure promoted such issues as the pro-
tection of children and gender-based crimes," as well as the prosecutor's

12 Commission on Global Governance, Our Global Neighborhood.

13 See below IV.
14 M.C.W. Pinto, "Democratization ofInternational Relations and its Implications
for Development and Application of International Law", in Najeeb Al-Nauimi,
Richard Meese (eds.), International Legal Issues Arising under the United Na-
tions Decade of International Law (Kluwer Law International, The Hague,
1995),pp. 1249-1299,p. 1287.
15 Edwin M. Smith, Thomas G. Weiss, "UN Task-Sharing Towards or Away from
Global Governance?" in Thomas G. Weiss (ed.), Beyond UN Subcontracting
(Macmillan Press Ltd, Houndmills, 1998), pp. 227-258, p. 252.
16 SmithlWeiss, ibid., p. 251.
17 John King Gamble, Charlotte Ku, "International Law - New Actors and New
Technologies : Central Stage for NGO's?" (2000) 31 Law and Policy in Interna-
tional Business , pp. 221-262, p. 238.
18 Mahnoush H. Arsanjani, "The Rome Statute of the International Criminal
Court", (1999) 93 AJIL, pp. 22-43 , p. 34.
 9 The Role ofNon-Govemmental Organizations 325

independence, and led to their progressive resolution." Another success

story concerns the negotiations that led to the 1997 Ottawa Convention on
Land Mines. Due to the prominent presence of NGOs which were led by
an umbrella NGO confederation, the International Campaign to Ban Land-
mines, those groups were able to substantially and directly influence the
treaty-making process." Still another example ofNGO participation is the
participation of NGOs in the Preparatory Committees for the 1992 Rio
Conference from 1990 to 1992.2 1 Hence, a broader involvement ofNGOs
could be important to improve the degree of representation.
Viewed from a more rigorous democratic perspective, however, the in-
ternational role of NGOs remains questionable. NGOs can only increase
legitimacy insofar as they possess legitimacy themselves.P It is often un-
clear whom NGOs represent-' or whether their own corporate structures
fulfil any democratic requirements. The German Division of Greenpeace
has only 38 voting members but 500,000 donors.> Other problems are the
disproportionate representation ofNGOs from the Northern Hemisphere,"
as well as the risk of exercising undue influence by providing inaccurate
information - as in the case of the Shell oil rig.> The problem of account-
ability and transparency of non-governmental players is widely recog-
nized," alongside the danger of NGOs being instrumental in serving the
national interests of particular states." Finally, NGO participation can neg-
atively affect the efficiency of international procedures. The Preparatory
Committee of the 1992 Rio Conference was faced with more than one
thousand NGOs wishing to contribute to its work, causing significant or-
ganizational problems." It has also been asserted that negotiations for the

19 Arsanjani, ibid., p. 23.

20 Gamble/Ku, supra note 17, p. 251.
21 Sonja Riedinger, Die Rolle nichtstaatlicher Organisationen bei der Entwick-
lung und Durchsetzung internationalen Umweltrechts (Duncker und Humblot,
Berlin, 2001), pp. 188 and p. 195.
22 Riedinger, ibid., p. 299.
23 Jens Martens, "Dabeisein ist noch nicht alles. Die NGO's in den Vereinten Na-
tionen: Akteure, Kritiker, Nutzniesser" (1993) 41 Vereinte Nationen pp. 168-
l7l,p.170.
24 Riedinger, supra note 21, p. 283.
25 Martens, supra note 23, p. 171.
26 Zemanek, "The Legal Foundations of the International System", 266 RdC
(1997-IV), pp. 9-335, p. 42.
27 SmithlWeiss, supra note 15, p. 253.
28 Lester M. Salamon, "The Rise of the Nonprofit Sector", (1994) 73/4 Foreign
Affairs, pp. 109-122 , p. 119.
29 Riedinger, supra note 21, p. 188.
326 Georg Nolte and Sergey Lagodinsky

UN Convention of the Law of Sea were protracted due to the increased

participation ofNGOs.30
These objections , however, cannot lead to outright rejection of the
NGOs' role. NGOs cannot compensate for the perceived lack ofparticipa-
tory legitimacy of international organizations: financially (donors' inter-
ests), ideologically, and geographically (northern hemisphere), NGOs are
representatives of comparatively homogeneous social groups - as opposed
to democratic states which are legitimated by their whole heterogeneous
citizenry. NGOs do not even claim to perform the role of legitimate repre-
sentatives. No NGO would seriously demand the same right to vote that
the states have. As Peter J. Spiro has put it, "The NGOs want to get in the
room, but they never ask for a seat at the table."" The legitimate strength
of the NGOs is therefore not representational in a general sense. Just as po-
litical parties, the media, human rights groups, lobbies, churches, or trade
unions are essential to bringing about public trust in the political process at
the national level, so the NGOs must also perform an analogous role at the
international level. The formal role ofNGOs in the international decision-
making process is therefore, not as much participatory , as one of securing
the accountability of international institutions.
In this context, the two main terms are accountability and transparency.
These terms' relationship to one another may not always be sharply de-
fined; both, however, contain the notion that international organizations
support an open information policy. This entails providing access to inde-
pendent actors for observation and monitoring the organizations' proceed-
ings and activities.

9.3 Purposes and Structures of the ILO

The International Labor Organization came into being as a result of the

Peace Conference in Paris in 1919. 32 According to its preamble, the organ-
ization pursues three major objectives: social justice, international peace
consolidation and promotion of just competition between national econo-
mies. These general aims were redefined by the so-called Declaration of
Philadelphia that was adopted by the International Labor Conference in

30 Gamble/Ku, supra note 17, p. 248.

31 Peter J. Spiro, "Transparency, Accountability and Private Actors", 1996 ASIL
Proceedings, pp. 178-192, p. 192.
32 Victor-Yves Ghebali, The International Labour Organization. The Case Study
on the Evolution of U.N Specialized Agencies (Martinus Nijhoff Publishers,
Dodrecht, 1989), p. 6.
 9 The Role of Non-Governmental Organizations 327

1944. The declaration restated the original ILO objectives by proclaiming

a number of specific principles, such as recognition of the freedom of as-
sociation and expression, condemnation of poverty as a danger to property
everywhere, and the statement that all human beings, irrespective of race,
creed, or sex, have the right to enjoy freedom and dignity, economic secu-
rity, and equal opportunities. A main achievement of the Declaration was
to place the individual at the center ofILO activities." The Declaration has
remained the major instrument defining the main principles of the Organi-
zation.
One of the main features of the ILO institutions is their tripartite compo-
sition. The main ILO bodies include not only delegates of national govern-
ments but also representatives of the workers and the employers. Whereas
governmental votes amount to 50 percent of the general votes, the workers
and the employers receive one fourth of the entire vote each. The main
"legislative" organ of the Organization is the International Labor Confer-
ence.> Each state delegation includes two governmental representatives,
one workers' representative, and one employers' representative. The Gov-
erning Body is the main executive Organ of the ILO that guides the work
of the Organization between conferences. It consists of 28 government
members , 14 workers and 14 employers" and it meets three times a year.
Ten of the government seats are held by the major industrial states." The
International Labor Office is the permanent secretariat of the Organization
that is headed by the Director-General."
It is not the mere possibility of decision-making on the international
level that raises the question of representativeness but the scope and nature
of certain rules. Two aspects appear to be important in respect to the ILO.
First, do ILO activities directly affect the individuals in their rights and du-
ties? This can be doubted in light of the fact that most ILO conventions
and recommendations do not even address non-state actors. Out of more
than 181 conventions and 188 recommendations, only the 1977 ILO Tri-
partite Declaration directly addresses the employers' and workers' organi-

33 Karin Oellers-Frahm, "Multiplication of International Courts and Tribunals

and Conflicting Jurisdiction - Problems and Possible Solutions", Max Planck
Yearbook of United Nations Law 2001, pp. 67-104; Rudiger Wolfrum, "Coor-
dination among Multilateral Agreements through Treaty Provisions", in: Inter-
national Governance for Environment and Sustainable Development (Peter-
Tobias Stoll Hg.), Berlin 2002, pp. 9-16; Ghebal i, The International Labour
Organization, ibid., p. 61.
34 Art 3 sect. 1 ILO Constitution.
35 Art 7 sect. 1 ILO Constitution.
36 Art 7 sect. 2 ILO Constitution.
37 Art 8 ILO Constitution.
328 Georg Nolte and Sergey Lagodinsky

zations, and this Declaration has no binding effect." The question of who
is bound by legal instruments, however, is not of primary importance.
Many ILO conventions provide for actions to be taken by private entities,
and often the States are under an obligation to ensure that action be taken
by workers and employers." In addition, decisions of the International La-
bor Organization often influence states irrespectively of their specific con-
sent. The main "legislative" body of the Organization, the International
Labor Conference, is empowered to adopt conventions by a two-thirds ma-
jority of its votes," but it is only the consent of each particular state that
makes the instruments binding through its ratification. Still, decisions of
the Organization are relevant for all member states irrespective of their
consent. Even if a state refuses to ratify a convention, it is obligated to re-
port the state of its laws and practices to the Director-General with regard
to the matters covered by the convention." Similarly, the follow-up reports
to the ILO Declaration on Fundamental Principles deal with the state of af-
fairs in states that have not ratified the ILO core conventions.v Such re-
porting systems significantly contribute to the fact that the ILO standards
influence domestic legislation of many states irrespectively of their norma-
tive status. 43
The second - and related - aspect is the question of growing interdepen-
dence between various international norms involving the ILO standards.
According to a study of the International Labor Office, which reviewed
about 215 codes of conduct in the private sector, approximately one-third

38 Bob Hepple, "The Importance of Law, Guidelines and Codes of Conduct in

Monitoring Corporate Behavior", in Roger Blanplain (ed.), Multinational En-
terprises and the Social Challenges ofthe XXIst Century (KluwerLaw Interna-
tional, The Hague, 2000), pp. 3-8, p. 5.
39 Janelle M. Diller, "Social Conduct in Transnational Enterprise Operations: the
Role of the International Labour Organization", in Blanplain (ed.), Multination-
al Enterprises and the Social Challenges of the XXIst Century, pp. 17-28,
p. 18.
40 Art 19 ILO Constitution.
41 Art 19.5e ILO Constitution.
42 Kari Tapiola, "The ILO Declaration on Fundamental Principles and Rights at
Work and its Follow-up", in Blanplain (ed.) Multinational Enterprises and the
Social Challenges ofthe XX/st Century, pp. 9-16, p. 13.
43 Eibe H. Riedel, Theorie der Menschenrechtsstandards (Duncker und Humblot,
Berlin, 1986), p. 63.
 9 The Role of Non-Governmental Organizations 329

of the codes refer to international labor standards including those promul-

gated by the ILO.44 The 1998 Declaration on Fundamental Rights and Prin
ciples at Work, the cornerstone of the present ILO policy, is an example
of how an ILO instrument can influence different spheres of national and
international politics. In his address to the World Economic Forum in
Davos on January 31, 1999, UN Secretary-General Kofi Annan called this
instrument a "definition of universal values" which are important for inter-
national economic cooperation. The policies of various institutions like the
World Bank are often clearly influenced by developments within the Inter-
national Labor Organization." Hence, the regulatory role, policy and deci-
sions of the International Labor Organization, clearly extend beyond its
formal legal status.

9.4 The Role of NGOs within the ILO

The practical importance of the ILO's decisions raises the question as to

what extent the organization satisfies modem demands for democratic rep-
resentativeness. This depends in part on the role played by NGOs within
the ILO.

9.4.1 The Legal Framework for NGO Participation in the ILO

The statutes of the ILO allows for a rather marginal role for NGOs . Arti-
cle 12 of the ILO Constitution provides for the possibility of making suit-
able arrangements for consultation with NGOs, based upon what the ILO
deems desirable. The Standing Orders of both the Labor Conference" and
the Governing Bodies" lay down specific conditions that NGOs must sat-
isfy in order to apply for participation in the conferences or sessions of the

44 No 52 of the Overview of Global Developments and Office Activities Concern-

ing Codes ofConduct, Social Labelling and other Private Sector Initiatives Ad-
dressing Labour Issues, ILO Doc. GB.273/WP/SDL/1.
45 See e.g. the revision of the World Bank 1982 Policy to Produce Operation Di-
rective 4,20 in 1991, Kingsbury, supra note 10, p. 341.
46 Art 2 para . 3 (j), para . 4 Standing Orders of International Labour Conference,
available at: http://www.ilo.org/public/english/standords/relm/ilc/ilc-so.htm.
47 Art 7 Standing Orders of the Governing Bodies, available at: http://www.ilo .
org/public/english/standards/relm/refs /so.htm.
330 Georg Nolte and Sergey Lagodinsky

ILO Governing Bodies." Besides other formal requirements (like being of

an international nature or having a special interest in participation), the in-
terested NGOs are expected to file their applications at least one month
prior to the conference." NGOs can also apply to the ILO's Special List to
receive ILO periodicals and announcement of major meetings. An NGO
that wishes to attend the Conference has to send, inter alia, copies of its
statutes, a copy of its latest report and detailed and verified information
about its financing sources." In many cases, however, organizations are
exempt from submitting these documents (e.g. if they have attended previ-
ous conferences or if they are already on the ILO's Special List). The ap-
plication procedure is perhaps more bureaucratic than in some other inter-
national institutions (e.g. ECOSOC).51 Nonetheless, application conditions
hardly amount to requirements that could not be met by most NGOs. Ac-
cording to the Standing Orders of the Governing Bodies, the Chairman and
the Vice-Chairman must agree in order to allow NGOs to make or circu-
late statements about matters on the agenda.52 Ifno such agreement can be
achieved, the Governing Bodies themselves must decide whether or not
statements will be allowed. This decision, however, must be made without
further discussion. NGO participation in administrative or financial matters
is not permitted. The statutory provisions contain no guaranteed right for
NGOs to participate and discuss. Rather, they constitute a legal basis for a
discretional decision on this matter within the ILO structures.» It is there-
fore up to the official ILO delegates representing the state governments ,
the workers ' and the employers' organizations to grant NGOs the possibil-
ity of participating in the sessions.

48 Summarized in "Representation of International Non-governmental Organiza-

tions at the International Labour Conference", Information Note, available at:
http://ilo .orgipublic/englishistandards/reVilc/note.htm.
49 Art 2 para. 4 Standing Orders of International Labour Conference.
50 "Representation of International Non-governmental Organizations at the Inter-
national Labour Conference", Information Note .
51 Virginia A. Leary, "Human Rights at the ILO : Reflections on Making the ILO
More 'User Friendly," in Antonio A. Cancado Trindade (ed.) , The Modern
World ofHuman Rights. Essays in Honour ofThomas Buergenthal (IIDH , San
Jose, 1996), pp. 375-396, note 14, p. 387.
52 Art 7 para. 1 Standing Orders of the Governing Bodies.
53 Art 7 para 1 of the Standing Orders of the Governing Bodies reads: "The]...]
organizations may be invited [...] The Chairman may [... J permit."
 9 The Role of Non-Governmental Organizations 331

9.4.2 NGOs and the Policy of the Office

Since NGO collaboration depends upon the discretion of the governments

as well as the workers" and employers' organizations, their view on the
role of NGOs is the decisive factor that determines the extent of their par-
ticipation. From the perspective of these core players, and the International
Labor Office, the main role ofNGOs lies in the field area of assistance and
monitoring of the implementation of ILO standards. The activities of IPEC
(The ILO Project against Child Labor) exemplify such collaboration. Ac-
cording to the ILO, IPEC is successfully promoted by NGOs such as
AIDEC in Peru, Habitat in Guatemala, The Venkatarangaiah Foundation in
India as well as the Global March worldwide. These organizations do not
only serve as "implementing agencies", they also actively push for further
ratification of the relevant ILO Convention (Convention No. 182).54 It is
probably due to the NGOs' important role in the implementation area that
the attitude of the International Labor Office towards civil society has
changed in the past few years.
Due to the globalized economy, ILO officials search for other mecha-
nisms to promote more active engagement of civil society. While until
1996 the main objective of the ILO was focused on the linkage of social
and labor standards to the GATT provisions and mechanisms," the WTO
Singapore Ministerial Meeting in December 1996 excluded the ILO and
labor standards from the WTO agenda, stating that the "ILO is the compe-
tent body to set and deal with the standards" ." This position has been reaf-
firmed in the Ministerial Declaration of Doha in November 2001.51 The
governments' decision provoked an identity crisis in the ILO that led it to
seek a new role in the international system." As dramatic as it was, this
crisis provided an opportunity for the ILO to find and define a new organ-
izational identity. In 1997, the ILO Director-General attempted to define a
new role for the organization. In his report to the International Labor Con-

54 "How IPEC works with NGOs", available at: http://www.ilo .org/public/eng-

lish/standards/ipec/ngos/index.htm.
55 Virginia A. Leary, "Workers' Rights and International Trade: Social Clause
(GATT, ILO, NAFTA, U.S. Laws", in Jagdish Bhagwati, Robert E. Hudec
(eds.), Fair Trade and Harmonization : Prerequisites for Free Trade? (Massa-
chusetts Institute of Technology, 1996), pp. 177-230, pp. 192 et seq.
56 Singapore Ministerial Declaration (13 December 1996) WT/MIN(96)/DEC.
57 Ministerial Declaration (14 November 2001) WT/MIN(Ol)/DEC/l.
58 Brian A. Langille, "The ILO and the New Economy: Recent Developments"
(1999), 15 International Journal of Comparative Labour Law and Industrial
Relations, pp. 229-257, p. 231 et seq.
332 Georg Nolte and Sergey Lagodinsky

ference, "The ILO standard setting and globalization"," he made a signifi-

cant attempt to tum the attention of the ILO towards non-governmental
players outside the ILO structures and their working strategies . Giving up
on the idea of linking the WTO and ILO standards, the Director-General
proposed a linkage between ILO activities and the strategies used by seg-
ments of civil society. He suggested a system of voluntary labeling by the
member countries according to the degree of their labor standards and
characterized this approach as part of a "mobilization of non-governmental
actors" who were expected to play an important role in this program. The
Director-General pointed out that "social progress is no longer only a mat-
ter for States; it is increasingly becoming a matter for other actors [...J".
Nonetheless, the International Labor Office 's attempt to promote new
ways of cooperation with civil society was "shot down immediately"."
This incident illustrates well the limits of direct cooperation between inter-
national secretariats and civil society.
Despite this failure, the International Labor Office's efforts to increase
the NGO's role continued. In his Report to the 87th Session ofthe Interna-
tional Labor Conference in 1999, the Director-General emphasized that
"[c]loser links with the civil society, if well defined, can be a source of
great strength for the ILO and its constituents"." However, due to the re-
sistance of the core ILO players to accept the growing role of the NGOs,
the Office limits their role primarily to implementing activities. This was
confirmed in Director-General Juan Somavia 's speech to the Millennium
Non-Governmental Organization Assembly in New York in May 2000.
Mr. Somavia highly praised the specific monitoring role of the civil soci-
ety. He underlined the "watchful role of so many independent eyes and
ears", of organizations "monitoring, reporting, critiquing, witnessing the
truth and speaking from facts". The NGO's monitoring role will become
even stronger as the Global Compact Project of the UN (in which the ILO
also takes part) grants NGOs the right and the opportunity to verify and
supervise on a case-by-case basis the annual reports of the companies in-
volved in the project." The Director-General underlined his own efforts to

59 Michel Hansenne, "The ILO, standard setting and globalization", Report of the
Director-General to the 85th Session of the International Labour Conference
1997, available at: http://www .ilo.org/public/english!standards/relm/il/ilc85/dg-
rep.htm.
60 Langille, supra note 58, p. 244.
61 Juan Somavia, "Decent Work" , Report ofthe Director-General to the sr' Ses-
sion ofthe International Labour Conferen ce, 1999, available at: hrtp:llwww.ilo.
org/pub licl english! standards/relm/ilc/ilc87/rep-i.htm.
62 Unpublished information obtained from the ILO Geneva office.
 9 The Role of Non-Governmental Organizations 333

strengthen the role of civil society within the ILO framework. However, he
never mentioned the possibility of granting NGOs an enhanced part in the
process of standard-setting, the definition of rights, or the monitoring of
the decision-making procedures in the ILO. The fact that the NGOs are
viewed as outsiders in this major field of ILO activities was also made
clear when the General-Director mentioned some "legitimate concerns " by
civil society with regard to the revision of the Maternity Convention.
Mr. Somavia urged the NGOs to place their concerns before the national
governments, workers' and employers' organizations . This was a clear sig-
nal of institutional impotence of the NGOs on the international level. De-
spite this reservation regarding standard-setting, an overall analysis of the
ILO's attitude towards NGOs suggests that the ILO official policy on
NGOs can be qualified as reserved but friendly cooperation.

9.4.3 NGOs versus Workers' and Employers' Organizations

The reserved approach of the International Labor Office officials to the

topic of "civil society" can be explained by the skepticism harbored by the
ILO representatives of the workers ' and employers' organizations as well
as some governmental delegations. Many ILO delegates fear the increasing
influence of NGOs and thus often stress the exclusive character of their
own legitimacy within the ILO tripartite system. In their discussion of the
ILO Global Report in the 88th Session of the International Labor Confer-
ence, some of the employers' delegates and even the employers' spokes-
man openly criticized the trend to increase the influence of the NGOs in
the IL063 and to grant them a role they "obviously do not have in law",«
During the session of the Resolutions Committee at the same conference,
both employers' and workers' Vice-Chairpersons insisted that the draft of
the Resolution concerning HIVIAIDS and the world ofwork should not ex-
plicitly urge the governments and workers' and employers ' organizations
to cooperate with "civil society" in their efforts to fight discrimination in
the work place.s' The workers' representative stated that the employers'
and workers ' organizations had to focus on the workplace, and not the

63 Potter (USA) (Employers' spokesperson) "Provisional Record 11", 88th Session

ofthe International Labour Conference, p. 11.
64 Funes De Rioja (Argentina) "Provisional Record 11" 88th Session ofthe Inter-
national Labour Conference, p. 14.
65 "Provisional Record 19" Report of the Resolutions Committee, ILC88-PR19-
257-en.doc, paras. 125 and 127.
334 Georg Nolte and Sergey Lagodinsky

NGOS.66 Because of strong resistance to the term "civil society" in para-

graph l(a) of the Resolution, it was finally substituted by the more neutral
term "other concerned groups". The Assembly ultimately adopted this ver-
sion of the text.

9.4.4 The Practical Participation of NGOs

The rather "soft legal status" of the NGOs within the ILO structures and
the main ILO players' skeptical attitude towards them, raise the question
of whether NGOs are able to make efficient use of the legal possibilities
mentioned above . In 1996, Virginia Leary criticized the impermeability of
the ILO to human rights organizations." This conclusion, however, does
not seem to be justified anymore : The Governing Body, for example, au-
thorized the Director-General to invite 52 organizations of civil society to
the 88th (2000) Session of the International Labor Conference, 28 of
which were workers' organizations, 2 employers' organizations, and 22
other NGOs (Amnesty International, American Association of Jurists,
Terre des Hommes etc.)." These organizations not only participated in the
sessions of the ILO organs, they also had the opportunity to present their
views and make statements. According to a report of the International La-
bor Office, the representatives of the International Federation of Social
Workers, the International Council of Nurses, the International Women
Count Network, as well as the NGO Working Group on Women's Em-
ployment and Economic Development made valuable remarks during the
general discussion of the Committee on Maternity Protection regarding the
revision of the important Conventions on Maternity." The same is true in
respect to the discussion on the proposed Convention concerning the Pro-
hibition and Immediate Action for the Elimination of the Worst Forms of
Child Labour. In the course of the debate, speakers for the NGOs from the
Americas, as well as the speakers on behalf of the African-, Asian- and Eu-
ropean-based NGOs, and the representative of the Global March contrib -

66 "Provisional Record 19" Report of the Resolutions Committee. ILC88-PRI9-

257-en.doc, para. 127.
67 Leary, sup ra note 51, p. 377.
68 Record of decisions concerning requests from non-governmental international
organizations wishing to be represented at the 88th Session ofthe International
Labour Conference, GB.277/inf.3.
69 "Report ofthe Committee on Maternity Protection" 87th Session ofthe Labour
Conference, 1999, nos. 42-45, available at: http://www.ilo.org/public/englishl
standards/relml ilc/ilc87/com-mat.htm.
 9 The Role ofNon-Govemmental Organizations 335

uted to the general discussion ." In a follow-up session to the Declaration at

the 88th Session of the International Labor Conference, ad hoc arrange-
ments were made for the discussion of the Global Report, an annual report
on the state of affairs in one of the four core rights areas. The discussion of
the Global Report began with statements of the spokesperson for the non-
governmental or regional groups ." These examples demonstrate that de-
spite the rather rudimentary legal provisions and the reserved attitude of a
number of ILO delegates, NGOs are in fact permitted to contribute to the
work of the ILO organs.

9.515 there a Need for Broader Participation?

The demand for creating an enhanced legal framework for collaboration

with NGOs must overcome the skepticism of the workers' and employers'
representatives who fear intrusions into their exclusive domain (see the
HIV/AIDS Resolution debate above). Still, the question remains of wheth-
er broader participation by NGOs can increase the degree of transparency
of the Organization towards civil society in general. Taking into considera-
tion the special tripartite nature of the ILO, one might argue that the exist-
ing participation of the workers ' and employers' organizations already
meets the demands for sufficient representation within the ILO, more so
than in most other international governmental organizations .
The unique tripartite structure of the ILO can be perceived as an early
attempt to minimize possible democratic deficits of ILO decisions . This
form of organization aimed to involve all the main elements of production
directly concerned with regulating labor matters." Ever since, the ILO has
been viewed as a good example of an organization that properly represents
the individual's interests, as opposed to international organizations, which
are mainly concerned with representing the interests of the aggregate
state."
It is doubtful, however, whether the issues discussed within the ILO
concern only the interests of one or all of the three main groups - the state

70 "Report of the Committee on Child Labour (Corr.)" 87th Session ofthe Interna-
tional Labour Conference, 1999, nos. 56-60 available at: http ://www.ilo.org/
pub liclenglish/standards/relm/ilc/ilc87/com-chil,htm.
71 GB.276/LILS /1.
72 N. Valticos/G. von Potobsky, International Labour Law, (2 nd Edn., Kluwer Law
and Taxation Publishers, Deventer, 1995), p. 35.
73 N.D. White, The Law of International Organizations (Manchester University
Press, Manchester and New York, 1996), p. 71.
336 Georg Nolte and Sergey Lagodinsky

governments, the workers or the employers. Today, two main reasons raise
the question of the representativeness of the tripartite system, one reason is
quantitative and one is qualitative. The quantitative reason is the decline in
membership in union and employer organizations in developed countries."
In 199 5, only 164 million of the world's estimated 1.3 billion workforce
belonged to trade unions, with a membership rate in more than half of the
ILO member countries falling to less than 20 percent of the workers." The
employers' organizations are struggling with similar membership prob-
lems. The qualitative deficit of the present tripartite system lies in the fact
that some of the disputed issues are dealt with without substantive and suf-
ficient representation of the relevant groups . This is true in particular for
indigenous peoples, " as well as unemployed and migrant workers.

9.5.1 Indigenous Peoples

Since its first Convention on the Rights ofIndigenous Workers of 1936,77

the International Labor Organization became involved in this subject mat-
ter and consequently produced a number of relevant instruments." Since
1957, the ILO widened the regulatory scope of its Conventions significant-
ly, covering a broad range of subjects in respect of indigenous, tribal and
semi-tribal populations." Not until 1986, however, did the ILO relinquish
its policy of integration of the indigenous peoples and adopt a Convention
that recognized the "aspiration of these peoples to exercise control over
their own institutions, ways of life and economic development and to
maintain and develop their identities". 80 This change of approach only took
place after massive pressure by civil groups and indigenous representatives
from outside the organization." Indeed, the indigenous representatives
were granted an active role in the process of adopting this convention: the
so-called "Meeting of Experts" which was established in 1986 to revise

74 Lee Swepston, "International Labour Organization (ILO): Standards and Hu-

man Rights", in Yael Danieli, Elsa Stamatopoulou, Clarence 1. Dias (eds.), The
Universal Declaration of Human Rights: Fifty Years and Beyond (Baywood,
Amityville, 1999), pp. 37-44, p. 41.
75 International Labour Office. The ILQ. What it is. What it does, p. 33.
76 Leary, supra note 51, p. 388 .
77 Th e Recruitment of the Indigenous Workers Convention (No. 50).
78 Conventions of 1939 (Nos. 64 and 65), Convention of 1947 (No 86), Conven-

tion of 1955 (No 104), Recommendation of 1939 (No 58) .

79 Convention of 1957 (No 107).
80 Preamble, Indigenous and Tribal Peoples Convention of 1989 (No . 169).
81 Valticos/v. Potobsky, supra note 72, no. 547, p. 243 .
 9 The Role of Non-Governmental Organizations 337

Convention No. 107 included, inter alia, the World Council ofIndigenous
Peoples, a loose confederation of indigenous groups. Later, special ar-
rangements were made to allow representatives of indigenous peoples lim-
ited participation on the revision of the Labor Conference.» However, as
the actual beneficiaries of the Convention, indigenous peoples were not
empowered to file complaints on the failure of a state to meet the require-
ments of the Convention. This right belongs solely to the main ILO con-
stituencies. Under such circumstances, the indigenous peoples must rely on
the main constituencies or the Governing Body to file complaints on their
behalf. Some authors suggest that out of demographic or political reasons,
the Trade Unions are likely surrogates for indigenous peoples." This pro-
position is based on past experience," but it may not necessarily be true for
the future.

9.5.2 The Unemployed

Similar to the interests of indigenous peoples, the interests of the unem-

ployed also lack sufficient representation by any of the three main ILO
constituencies. Since its establishment in 1919, the ILO has developed a
series of instruments to secure a minimal social standard" and access to
the labor market.86 The Employment Policy Convention and Recommenda-
tion" are considered to be among the fundamental instruments of the
ILO.88Still, the aim of the ILO to "prevent unemployment" should not be
confused with the aim to protect the unemployed. Similar to the situation
at the national level, it is doubtful whether the workers' representatives
perform the role of honest agents for the unemployed . Their main interest
is securing better social standards for their members. Once the interests of
unemployed workers collide with those who have regular employment, it
is not hard to imagine whose side the workers' representatives will take. In
the case of such conflicts, the system of the ILO favors the interests of em-
ployed workers over the unemployed.

82 S. James Anaya, Indigenous Peoples in International Law (Oxford University

Press, New York and Oxford , 1996), p. 47.
83 Anay a, ibid., p. 162.

84 Anaya, supra note 82, p. 177, footnote 75.

85 Valticos/v. Potobsky, supra note 72, nos. 452 et seq., p. 195.
86 1919 ILO Unemployment Convention (No.2), 1948 Employment Service Con-
vention (No. 88).
87 Convention of 1964 (No. 122), Recommendation No . 122.
88 Lammy Betten, International Labour Law. Selected Issues, (Kluwer Law and

Taxation Publishers, Deventer, 1993), p. 332.

338 Georg Nolte and Sergey Lagodinsky

Another possibility is that the governments should be interested in uni-

versal protection for the unemployed in order to minimize competitive dis-
advantages for their own economies. However, this perspective only re-
flects the attitude of the governments of such states that already have a
strong social security system. States that enjoy the competitive advantage
of a low level of social security tend to oppose increased protection of the
interests of the unemployed population on the international level.

9.5.3 Migrant Workers

The question is not any easier with respect to the interests of migrant
workers. They can hardly count on the support of the workers' representa-
tives from their host-countries who will tend to protect their national fel-
low-colleagues. Still, the protection of migrant workers has always been
considered to be one of the main functions of the ILO.89 Originally, the
governments' representatives were interested in strengthening the legal
status of their nationals as part of their diplomatic protection. This is why a
number of Conventions that deal in particular with the social security of
foreign workers are based on the principle of reciprocity. Today, however,
it is no longer realistic to assume that home states can sufficiently repre-
sent the interests of migrant workers. States are increasingly indifferent to
the needs of their emigrants. Operating under the watchful eyes of public
opinion at home, governments do not tend to overemphasize the issue of
protecting the emigrant minority.

9.6 Concluding Remarks

Writing in 1996, Virginia Leary has criticized the lack of NGO participa-
tion in the work of the ILO.90 She suggested that two factors were respon-
sible for this situation: First, NGOs are not very interested in participating
in the ILO proceedings, which, from their point of view, deal with techni-
cal matters of labor law." Second, the impermeable ILO-structures do not
allow active participation."

89 See the preamble of the ILO Constitution; Valticos/v, Potobsky, sup ra note 72,
no. 579, p. 246.
90 Leary, supra note 51, p. 386.
91 Leary, supra note 51, p. 377.
92 Leary, supra note 51, p. 377.
 9 The Role of Non-Governmental Organizations 339

Today it seems that this analysis remains only partly true: participation
ofNGOs in the proceedings of the ILO organs, although highly formalized
and limited, is possible and does indeed take place. NGOs are admitted to
attend the sessions . Under certain conditions they are permitted to make or
to circulate statements, at least during the proceedings of the Governing
Bodies or various committees . Because the sessions of the main ILO or-
gans are not closed, unlike those within the WTO, the problem of docu-
ment disclosure does not arise as a serious issue. The rather open informa-
tion public policy of the ILO, through its very informative, though poorly
structured database," provides a satisfactory degree of transparency. The
transparency of the organization is, of course, also strengthened by the fact
that employers' and workers' organizations, as part of civil society, are of-
ficial ILO constituencies.
The arrangements for cooperation between the ILO and the NGOs,
though differing from those of other organizations in some details, do not
differ from them conceptually: they grant the NGOs passive participating
rights which are limited to attending sessions and making statements there.
Even the relatively NGO-friendly system of the ECOSOC is based on the
same principles of cooperation with NGOS.94 It would therefore be unfair
to characterize the ILO as a particularly user-unfriendly agency. The ILO
only reflects a general trend of limited and passive participation ofNGOs.
This raises the question of whether the NGOs themselves utilize the in-
stitutional opportunities offered them by the ILO-structures. Virginia Lea-
ry has already pointed out that NGOs have developed only a limited inter-
est in the ILO.95 In this respect, her observations are still true today. One
reason for this lack of interest may be that the former focus of ILO activi-
ties was on achieving a linkage between social and trade standards . The
main problem was not establishing new standards but linking the already
existing standards with the trade rules and enforcement mechanisms . The
working paper on "The Social Dimensions of Liberalization of World
Trade", which was presented by the International Labor Office to the Gov-
erning Body, had proposed that such linkage should take place by way of
an extensive interpretation of the GATT, especially Article XXIII, which
lays down the remedies for failures to meet obligations under the GATT
agreement." This idea implied that the WTO legal system, and not the ILO
standards, needed to be changed. The WTO presented itself as the forum to
achieve such an understanding. Hence the main activities area of the

93 www.ilo.org.
94 Stoecker, NGO's und die UNO, Frankfurt 2000 , p 230 .
95 Leary, supra note 51, p. 387.
96 Leary, supra note 55, p. 194.
340 Georg Nolte and Sergey Lagodinsky

NGOs shifted towards the WTO institutions and to national governments

to push for a broader construction of the WTO/GATT provisions." Even
though the linkage of standards is no longer the main objective of the ILO,
the focus on the WTO continues to dominate NGO activities .
Some observers and players project "good guy-bad guy" images onto
the international institutional system . While the WTO is widely viewed as
a reincarnation of the evils of globalization, the ILO image is the opposite.
In the eyes of much of the NGO community, ILO stands for and not
against labor rights and social standards . Such a perception is understand-
able in the face of the main principles and the tripartite system of the ILO.
From this perspective, an organization which sets social standards is per-
ceived as an ally and not as an antagonist for NGOs. At the same time, the
WTO, with its neo-liberal approach, remains the main institution that
seems to endanger the present level of social security and is therefore the
main focus of monitoring and attention by NGOs.
The passive NGO role within the ILO may stem from the fact that in or-
der to be universally accepted, today's labor standards do not aim at any
level going beyond the lowest common denominator." This minimalist ap-
proach encompasses only those core labor rights" included in the newly
established ILO Declaration on Fundamental Principles and Rights at
Work. All other rights are extremely controversial and therefore possess
only persuasive authority. 100 This common denominator is already codified,
which means that other standards will be difficult to implement. Hence, it
is not surprising that the NGOs with their limited capacities are not inter-
ested in investing much effort for what promises to be a modest outcome.
Apart from these general reasons for the NGOs ' relative lack of interest
in the work of the ILO, the most important obstacle to improved coopera-
tion with NGOs appears to be the ILO constituencies' distrust towards the
NGOs. In his report, "Decent Work", even the Director-General has ad-
dressed the "drawbacks" of the NGOs: "Their action may be sporadic ,

97 For a historic overview see Elissa Alben "GATT and the Fair Wage: A Histori-
cal Perspective on the Labor-Trade Link" (200 I) 101 Columbia Law Review,
pp. 14 10- 1447.
98 Leary, supra note 55, pp. 218 et seq.
99 Leary, supra note 55, p. 219 .
100 Langille, supra note 58, p. 233; Frederick Abbott, Introductory Remarks for

"International Trade and Social Welfare: The New Agenda" Transcript of

Jan . 7, 1995 Meeting of the Section on International Law of the American As-
sociation of Law Schools (1996) 17 Comparative Labor Law Journal pp. 338-
372, p. 343.
 9 The Role of Non-Governmental Organizations 341

their representation uncertain, their life-span and their funding unstable."!"

The practical concerns of delegates who fear that too much time would be
spent as a consequence of broader NGO participation are also an important
factor.!" The image problems and the workers' and employers' fear of los-
ing their dominant positions in the labor market make a more comprehen-
sive formal NGO representation rather unlikely.
Despite these obstacles, the role of NGOs as safeguards of the interests
lacking representation within the main ILO constituencies remains their
most essential future challenge. As pointed out above, the interests of the
unemployed, the migrant workers and the indigenous peoples - the most
important of the poorly represented groups - will have to be articulated by
NGOs. When assessing the possible representation deficits of these three
groups, one has to bear in mind that the interests of the unemployed are
usually not very well-represented at the national level either. The represen-
tation of indigenous peoples is a special case to which the general political
system is rather responsive. The issue of migrant workers is more difficult.
Migrant workers who are lawfully employed in certain states enjoy the
same rights as the local workforce. Other states do not grant equal protec-
tion . Up to a certain point, this raises a problem of bargaining strength (ei-
ther of the home state(s) or of the migrant worker community), but beyond
this point, serious human rights issues arise. This applies particularly with
respect to illegal immigrants. NGOs should, it seems, be active in this area
within the ILO.
The final question is whether any reforms within the ILO are needed to
increase the influence of the NGOs, which would promote better transpar-
ency. It appears that the endowment of a greater number ofNGOs with the
right to vote is not only illusory but would also lead to more discrimina-
tion. The tripartite nature of the ILO has its inherent value. The influence
of civil society is better channeled by the establishment of a separate con-
sultative body that would unite the NGOs' representatives and strengthen
the status of the NGOs working within the ILO. A catalogue of guaranteed
participatory rights included in the ILO constitution would also be helpful.
The implementation of these suggestions, however, presupposes constitu-
tional amendments.w'

101 Juan Somavia, "Decent Work", Report ofthe Director-General to the 87th Ses-
sion of the International Labour Conference, 1999,available at: http://www.ilo.
org/public/englishl standards/relm/ilc/ilc87/rep-i.htm.
102 Leary, sup ra note 51, p. 393.

103 See Art 36 ILO Constitution.

10 Welfare and Democracy on a Global Level: The
WTO as a Case Study

Eyal Benvenisti'

Contents
10.1 Introduction 343
10.2 The Right to Democratic Participation in the
Supranational Context 346
10.2.1 Supranational Institutions and the Democratic
Imperative 348
10.2.2 Open Communication Channels as Essential
Components of Democracy 349
10.2.3 The Democratic Imperative of Supranational
Institutions 351
10.3 Open Channels of Communication in the WTO 352
10.3.1 The Prescriptive-Interpretive Process 353
10.3.2 The Dispute-Settlement Process 355
lOA Concluding Observations : Welfare and Democracy
Disputed 358

10.1 Introduction

One aspect of globalization is the shift of the venue of policy-making from

the national to the regional and the international arenas. Willingly or
grudgingly, national legislatures agree to share policy-making and moni-
toring powers with regional or international institutions. This has resulted
in a process of "legalization of world politics", 2 as outcomes at the supra-
national level are shaped less by the informal and opaque bargaining

* Professor of International Law, Tel Aviv University, Faculty of Law. I thank

Orit Dubrovsky for excellent research assistance.
2 See the special issue of 54 International Organization, Summer 2000.
344 Eyal Benvenisti

among governments that characterized inter-governmental dealings so far,

but increasingly more by structured decision-making processes at the su-
pranational prescriptive, monitoring and dispute-resolution levels. US laws
aimed at protecting endangered species,' Canadian laws aimed at protect-
ing Canadian air quality,' or French laws restricting trade in products con-
taining asbestos fibers' are being challenged, reviewed, and sometimes re-
jected as violations of supranational norms by international or regional
institutions such as the World Trade Organization (WTO) or the North
American Free Trade Agreement (NAFTA).
Welfare-related policy-making and enforcement has for many years
been an important area for national political branches. Because the welfare
state hinges on norms and institutions that intervene in domestic markets to
ensure labor rights and provide a safety net to citizens, the waning power
of national decision-makers to shape those norms and institutions may
threaten the sustainability of welfare policies. The risk is that unilateral
welfare-enhancing measures that would impose limits on unhindered trade
would be found illegal under supranational norms, as constituting anti-
trade measures . This risk meets domestic societies in transition both in de-
veloped and developing countries, transitions that require the adjustments
of existing welfare policies or setting up of new ones.'
The national-supranational power-sharing phenomenon also holds, how-
ever, a promise to governments seeking improvements to existing welfare
standards. Such governments may try to work through the relevant supra-
national institutions to impose their standards, such as better labor stan-
dards or more inclusive social rights, on other states, including less wel-
fare-oriented or less developed competitors. In other words, they use su-
pranational institutions as new venues for welfare-related policy-making.
There are two main stumbling blocks to this route. First, there are gov-
ernments who do not wish to adopt high welfare standards. Some devel-
oped states are less keen on high welfare standards for their citizens. For

3 See the Shrimp-Turtles dispute, infra, note 37.

4 See the litigation under NAFTA concerning Canada's law banning a fuel addi-
tive manufactured by a US firm: Ethyl Corp. v. Canada, Jurisdiction, Award
(NAFTA Ch. 11 Arb. Trib., June 24, 1999), reprinted in 38 ILM 708 (1999);
see Alan C. Swan, Case Report: Ethyl Corporation v. Canada, 94 AJIL 159
(2000). Subsequently, Canada rescinded the law and paid compensation. Other
fmns have used the NAFTA procedure to sue the US and Mexico. See Chris
Tollefson, "Games Without Frontiers: Investor Claims and Citizen Submissions
Under the NAFTA Regime" 27 Yale 1. In1'l L. 141 (2002).
5 European Communities - Measures Affecting Asbestos and Asbestos-Contain-
ing Products AB-2000-11, WT/DS135/AB/R 12 March 2001, infra, note 40.
6 See the Introduction to this book.
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 345

developing economies, high labor standards and social safety nets imply
higher labor costs that limit their relative advantage vis-a-vis developed
economies,
The second problem involves the waning power of the individual voters
as a direct result of the delegation of domestic powers to supranational in-
stitutions. Welfare considerations are usually the concern of the larger and
politically weak groups within society, namely the employees, the rela-
tively poor, the uneducated, or unhealthy citizens. The delegation of politi-
cal power to supranational institutions is more likely to affect adversely
those larger and looser groups of voters, those who are less likely to form
narrow interest groups and carry their demands beyond their country's
borders, where organization costs are sometimes exorbitantly high. The
smaller, usually more politically effective groups of employers and inves-
tors, who have lesser, if any, interest in maintaining welfare standards,
who can pose a credible threat of exit, are those likely to increase their rel-
ative political power the further away from the voter the decision-making
is made.'
The first stumbling block requires inter-governmental negotiations. As it
happens, there is room for such negotiation. Developed countries can trade
higher welfare standards for the elimination of tariffs and quotas imposed
by developed states on agriculture and textile products, and for the reduc-
tion of the length and scope of patent protection. The recent WTO Ministe-
rial Declaration, adopted at the WTO Ministerial Conference in Doha on
14 November 2001, S attests to an acknowledgement of a possible give-
and-take, and presents a commitment to explore this possibility."

? Eyal Benvenisti, "Exit and Voice in the Age of Globalization" 98 MICH. L.

REv. 167 (1999), based on Mancour Olson, The Logic of Collective Action
(1965). See also the contributions of Rosenhek and Barak-Erez in this volume.
S See WTO Doc. WT/MIN(OI)/DEC/I , of 20 November 2001 rep. in: http://
www.wto.org/english/thewto_e/minist_e/minOI_e/mindecl_e.htm.
9 See, e.g., the Ministerial Declaration, Work Programme, with respect to agri-
cultural products (Article 13: " .. .we commit ourselves to comprehensive nego-
tiations aimed at: substantial improvements in market access; reductions of,
with a view to phasing out, all forms of export subsidies; and substantial reduc-
tions in trade-distorting domestic support. We agree that special and differential
treatment for developing countries shall be an integral part of all elements of
the negotiations and shall be embodied in the Schedules of Concessions and
Commitments and as appropriate in the rules and disciplines to be negotiated,
so as to be operationally effective and to enable developing countries to effec-
tively take account of their development needs, including food security and ru-
ral development. . ."); and the Declaration on the TRIPS Agreement and Public
Health (WT/MIN(01)/DEC/2 20 November 2001), concerning intellectual pro-
346 Eyal Benvenisti

These negotiations, however, will be orchestrated by governments. Arti-

cles 48 and 49 of the WTO Work Programme ensure that the negotiations
would be open to governments only. It is here that the second stumbling
block, concerning the dilution of the general voters' power and hence the
pro-welfare voices, comes into play.
The aim of this chapter is to examine these internationalized decision-
making processes in which only governments have voice, in an effort to
assess potential mechanisms to ensure ample voice to the general public.
This effort is motivated by the view that the future of the welfare state -
both in developed and developing societies - hinges on the question of
whether supranational decision-making procedures would aim at leveling
the political playing field and ensure effective opportunities for public par-
ticipation .
This chapter is devoted to an examination of the challenge of democ-
ratic participation in supranational institutions in general (Part II), and in
the WTO in particular (Part III). Part IV concludes with an analysis of the
prospects for maintaining welfare standards through supranational institu-
tions.

10.2 The Right to Democratic Participation in the

Supranational Context

"Democratization" in this context clearly cannot mean holding general

elections among the citizens of all the countries participating in the supra-
national body." "Democratization" in a legal environment composed of
sovereign states that wish to retain effective national legislatures should
mean something more nuanced but hopefully no less meaningful than the
right to vote directly for representatives to the supranational institution.
Participatory rights can still center on the national democratic processes.
But such participatory rights must be augmented by measures that would
ensure the ability to form opinions based on sufficient information, as well
as to ensure the ability to provide input for decision-makers at the suprana-
tionallevel.

perty ("4. We agree that the TRIPS Agreement does not and should not prevent
Members from taking measures to protect public health. [... J we affirm that the
Agreement can and should be interpreted and implemented in a manner suppor-
tive of WTO Members ' right to protect public health and, in particular, to pro-
mote access to medicines for all."), and Article 6(c) of this Declaration.
10 Cf. David Held, Democracy and the Global Order (1995).
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 347

History shows that the right to democratic participation is not easily

won. Enfranchisement within states has always meant the dilution of the
decision-making power of those holding power who obviously had to be
convinced to share the power and dilute their own influence. Often this
conviction was achieved using force and not only reason. Now history
seems to repeat itself in the global context. Governments who have enjoy-
ed almost complete freedom from accountability provided by the opaque
shield of the supranational institution resist the demands of individuals and
groups to more transparency and voice . They fear the supranational body
would become dysfunctional. They are also concerned with the change of
policy such an opening might entail. The more "legalized" and hence more
transparent trade negotiations under the WTO system, for example, call,
according to Judith Goldstein and Lisa L. Martin, to "a cautionary note" .11
Caution is advised to pro-trade forces, because the legalization of trade
means more openness, and more openness yields more knowledge about
the distributional implications of trade agreements. Such knowledge, Gold-
stein and Martin caution, "enhances the mobilization of anti-trade forces
relative to the already well-organized pro-trade groups. ':" Hence, "legali-
zation could undermine liberalization.?!' Barred from entry into the locus
of decision-making process, "pro-environment", "pro-welfare", and other
groups (all dubbed "anti-trade" by participating governments and some
scholars) take to the streets and resort to violence. Increasingly foot-
dragging, some governments and institutions yield ground by allowing
more transparency. The fact that some governments are more attuned to
such pressures than others complicates this delicate balancing of interests
even further.
In the global context, we speak about "voice without a vote", or more
accurately, "voice without a direct vote". This is because the decision-
making structure does not allow for direct representation of voters. From
the perspective of voters, we do not speak of direct democracy, or even of
indirect democracy, but of a doubly-indirect democracy: voters vote in na-
tional elections, and then their representatives appoint and direct their rep-
resentatives to the supranational forum . Should supranational institutions
offer to the general public - citizens of the states' parties to the institutions
- the opportunity to take part in shaping the institutions' policies? If so,
how could they take part? Can they have a meaningful opportunity of exer-

II Judith Goldstein and Lisa L. Martin, "Legalization, Trade Liberalization, and

Domestic Politics: A Cautionary Note" (2000) 54 International Organiza-
tion 603.
12 Id at 607.
13 Id., id.
348 Eyal Benvenisti

cising their democratic right to shape the decisions affecting their lives
without the right to vote in supranational institutions?

10.2.1 Supranational Institutions and the Democratic

Imperative

Why should supranational institutions provide the constituencies of the

member states with the opportunity to influence their policies? There are
two responses to this question: one instrumental and one normative.
The instrumental response highlights the quality of policies that are in-
formed by input of the general public . Similar to the case of national bu-
reaucratic systems," open deliberations among the decision-makers at the
supranational institution reduce the slack that otherwise enables officials to
cater to the demands of narrow, often short-term, interests.15 Open delibera-
tions level the playing field where conflicting considerations compete and
need to be balanced. This is especially the case in decisions related to the
welfare state idea: a more transparent decision-making process is better able
to check the influence of the narrow interest groups and care for the interests
of the larger constituencies, including the employed and unemployed sectors
of society. Moreover, independent information yields better-informed deci-
sions that also take into consideration facts and assessments that the narrow
interest groups did not wish to present to the decision-makers. Finally, appar-
ently because of the legitimacy assigned to such policies, the relevant actors
are more likely to honor them. As the literature on the emergence of coopera-
tion in the management of common-pool resources suggests, institutions that
provide for equal voice are more likely to resolve the collective-action prob-
lems that they face. 16
Beyond the instrumental benefits that accrue from an inclusive decision-
making process, there is a normative argument: parties to supranational in-
stitutions are required to respect and ensure the individual right of their

14 McNollGast, "Administrative Procedures as Instruments of Political Control"

3 J. Law Econ. & Org. 243 (1987).
15 Eyal Benvenisti, "Exit and Voice in the Age of Globalization" 98 Mich. L. Rev.
167 (1999). For a similar claim with respect to NGO participation in the World
Trade Organization procedures see Daniel C. Esty, "Non-Governmental Or-
ganizations at the World Trade Organization: Cooperation, Competition, or Ex-
clusion" 1 J OF INT 'L EeON. L. 123 (1998), id., "Linkages and Governance:
NGOs at the World Trade Organization" 19 U PA. J INT'L Bco n . L. 709
(1998). For the opposite view see, e.g., John O. McGinnis and Mark L. Movse-
sian, "The World Trade Constitution" 114 Harv. L. Rev. 511 (2000).
16 See Elinor Ostrom, Governing the Commons (1990), Chapter 6.
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 349

citizens to democratic decision-making, namely the right to participate in

decisions affecting their lives. This right suggests that individuals must en-
joy opportunities that influence such decisions at the appropriate level,
whether this is a national, sub-national, or supranational level. Many state
parties to supranational institutions, whose domestic legal order is democ-
ratic, are subject to this duty by their domestic legal order. I ? Even without
suggesting that such a duty is also a duty under the international law on
human rights that every state and institution should respect," this norma-
tive consideration implies that at least some state parties have no authority
under their domestic law to revoke their citizens' right of democratic par-
ticipation. Hence, supranational institutions of which democratic states are
parties must ensure opportunities for individuals to get involved in the de-
cision-making process.

10.2.2 Open Communication Channels as Essential

Components of Democracy

The democratic process is based on votes, but not only on votes. Voting is
a precondition for a functioning democracy, but for democracy to function,
voting must be complemented with other safeguards that can supply infor-
mation to voters about their choices and ensure accountability of elected
representatives to them.!? We do know that voting itself is a poor way of
shaping political outcomes even in the national context. As suggested by
Rokkan, "votes count in the choice of governing personnel, but other re-
sources decide the actual policies pursued by authorities."20 Public choice
scholarship supports this observation, emphasizing the role of small inter-
est groups in shaping national policies, based on the anti-intuitive observa-
tion that smaller groups obtain more political power than larger groups ."
We can therefore, following Anthony Down's observations," view the
challenge of democracy as the challenge of reducing information asymme-
tries: accurate and sufficient information will hold the representative ac-
countable and will provide voters with an effective opportunity to shape
policies.

I? See, for example, the discussion in the German Constitutional Court, infra
note 22.
18 See Article 25 of the International Covenant on Civil and Political Rights.
19 Anthony Downs, An Economic Theory ofDemocracy (1957).

20 S. Rokkan, "Norway, Numerical Democracy and Corporate Pluralism", in Po-

litical Opposition in Western Democracies, 70, 106 (ROBERT DAHL ED., 1966).
2 1 Mancur Olson, The Log ic ofCollective Action (1965).

22 Supra note 18.

350 Eyal Benvenisti

To reduce information asymmetries, democracy must also take into ac-

count the failure of representatives to obtain information from the voters
about their preferences. Indeed, information asymmetries result from fail-
ures on both channels of communication lines between voters and their re-
presentatives. Hence, a functioning democracy must provide mechanisms
not only for supplying information to the voters but also for allowing vot-
ers' preference to reach representatives, government officials and bureau-
crats.
We therefore speak of open channels of communications between the
voters and their representatives . One channel of communication concerns
the voters' voice, namely the opportunity of domestic constituencies to
voice their wishes and concerns to their representatives . The other channel
concerns the flow of information from the representatives or their dele-
gates to the public .
Essentially the same institutions that maintain open channels of com-
munication between voters, representatives and bureaucrats at the national
sphere can be reproduced in the supranational one. In the national sphere
there are three types of agents that supply information to voters. First,
there are the national legislatures, especially opposition members of the
national legislatures . Second, there are interest groups, domestic and inter-
national, that inform the general public or their relevant constituencies
about their representatives' performance . Third, there are the media and
other actors whose business is the provision of information. The same
agents inform officials about voters' preferences. Usually, cooperation be-
tween opposition legislators, interest groups, and the media is beneficial
for all, as legislators depend on information collected by the interest
groups and the media, while interest groups seek political support and the
media seek information from the other two.
To gain and impart information, these agents make use of several de-
vices. There are devices that ensure the flow of information to the public,
such as the duty to provide information, or the duty to offer reasons for de-
cisions. There are also devices that provide the public with the opportunity
to impart information, such as the right to be heard before making deci-
sions at the administrative level, or the ability to challenge policies through
adjudication. In principle, these three agents can operate in the suprana-
tional sphere, provided similar devices are adopted at the supranational
level.
This analysis suggests that voters may be able to shape decisions affect-
ing their life despite the fact that those decisions are taken at the suprana-
tional level. While direct elections are not a must, open channels of com-
munications are. This conclusion conforms to the response of the German
Constitutional Court that approved Germany's ratification of the Maas-
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 351

tricht Treaty." In an integrated European Union, reasoned the Court, the

demand for democracy will be satisfied if the union will provide an "ongo-
ing free interaction of social forces, interests, and ideas, in the course of
which political objectives are also clarified and modified, and as a result of
which public opinion moulds political policy ."> To preserve democracy, in
the Court 's view, "it is essential that both the decision-making process
amongst those institutions which implement sovereign power and the polit-
ical objectives in each case should be clear and comprehensible to all, and
also that the enfranchised citizen should be able to use its own language in
communicating with the sovereign power to which it is subject.">

10.2.3 The Democratic Imperative of Supranational Institutions

This Part outlines a case for introducing mechanisms that ensure open
channels of communications in supranational institutions between the dif-
ferent constituencies and their representatives. It argues that instrumental
and normative considerations require such open channels, namely that
these are necessary elements in a functioning supranational institution. At
the same time, this Part argues that such open channels are also sufficient
from the perspective of democracy. The question that remains is what
mechanisms are available at the level of the supranational institution to en-
sure open channels of communications.
Debates in recent years concerning institutional design do not revolve as
much around the recognition of these participatory rights. There is wide
agreement that participatory rights are necessary, especially in the context
of environmental institutions ." Rather, the heated debate focuses on the

23 Federal Constitutional Court Decision concerning the Maastricht Treaty, ofOc-

tober 12, 1993 (trans. in 33 I.L.M. 388 (1994», p. 420.
24 ibid.
25 ibid.
26 The preamble to the Convention on Access to Information , Public Participation
in Decision-Making and Access to Justice in Environmental Matters adopted in
Aarhus, Denmark on June 25, 1998 by member states of the Economic Com-
mission for Europe and other European states, emphasizes these points : "Rec-
ognizing that, in the field of the environment , improved access to information
and public participation in decision-making enhance the quality and the imple-
mentation of decisions , contribute to public awareness of environmental issues,
give the public the opportunity to express its concerns and enable public au-
thorities to take due account of such concerns, aiming thereby to further the ac-
countability of and transparency in decision-making and to strengthen public
support for decisions on the environment, ... " (The text appears in:
http://www .un.orgiDepts/Treaty/collection/notpubV27-l3eng.htm).
352 Eyal Benvenisti

ways and means of facilitating public participation without clogging the

system with debilitating noise. Neither side has an interest in impeding the
flow of information, but some governments and a few scholars express
concern that anti-cooperation groups seek to abuse the participatory rights
to bring institutions to a standstill. Hence the debate concentrates on the
"how" question: how to ensure transparency and facilitate communications
without congesting the decision-making processes within the institutions.
In this context, particular emphasis is given to the question of participa-
tion of non-governmental organizations (NGOs). Such groups, who often
serve as loudspeakers or tribunes that convey citizens' concerns, seek to
influence decisions in the supranational sphere. 27 They often serve as in-
termediaries between officials and the general public , but at the same time,
their voluntary character raises concerns about their own accountability
and commitment to transmit messages to and fro without distortion. "
Some of them may seek protectionism in the disguise of caring for the
plight of the poor workers who toil in sweatshops across the developing
world. Clearly, the latter have yet to enjoy the impartial representation of
international governmental and non-governmental organizations.
Responding to the "how" question requires attention to the specific
character and goals of each institution . Mechanisms should be tailored to
the different demands. The following Part examines the "how" question in
the context of the WTO.

10.3 Open Channels of Communication in the WTO

In the WTO context, a body that both prescribes trade norms and monitors
states' compliance with its norms, we must look for the existence of our
two channels of communication in both the prescriptive sphere and the di-
spute settlement sphere. The prescriptive process , which includes both in-
terpretation of existing provisions and decisions to amend provisions, in-
volves the General Council and the Ministerial Conferences. The dispute
settlement process involves a Panel and may also include review by the
Appellate Body, and is governed by the Dispute Settlement Body. This
Part recounts the efforts to open up channels of communications in the
WTO context , and the resistance to such efforts.

27 Steve Charnovitz, "Two Centurie s of Participation: NGOs and International

Governance" (1997) 18 MICH. J. INT'L. L. 183.
28 See, e.g., McGinnis and Movsesian, supra note 14, pp. 570-71.
 10 Welfare and Democracy on a Global Level : The WTO as a Case Study 353

10.3.1 The Prescriptive-Interpretive Process

This norm-setting process involves all member states. The sheer number of
states -140 at the time of writing - and their differing agendas, leads states
to resort to informal, behind-the-scene negotiations and consultations.
Such "informal consultations within the WTO - and even outside - playa
vital role in bringing a vastly diverse membership round to an agree-
ment. "29 This informal prescriptive process remains opaque to civil society.
Indeed, NGOs representing diverse interests can sometimes use this opac-
ity to present their views and gather information," but this influence re-
mains a matter of discretion for states who find it opportune to support
some NGOs on a certain matter under discussion.
Since the creation of the WTO, there has been growing NGO demand
for more transparency in decision-making. The plenary sessions of the
Ministerial Conferences were open to observers since the first Conference
held in Singapore in 1996. 3 1 In July 1996 the General Council adopted
Guidelines for Arrangements on Relations with Non-Governmental Organ-
izations. " The guidelines recall Article V: 2 of the Marrakesh Agreement
establishing the WTO, which provided that "the General Council may
make appropriate arrangements for consultation and cooperation with non-
governmental organizations concerned with matters related to those of the
WTO." The Council members "recognize the role NGOs can play to in-
crease the awareness of the public in respect of WTO activities" (Arti-
cle 2). They further acknowledge that NGOs are "a valuable resource that
can contribute to the accuracy and richness of the public debate" (Arti-
cle 4). The Members therefore agree "to improve transparency and develop
communication with NGOs" (Article 2). For this purpose, the guidelines
call upon members to "ensure more information about WTO activities in
particular by making available documents which would be derestricted
more promptly than in the past." The WTO Secretariat is requested to pro-
vide on-line computer access to such documents. (Article 3). The Secre-

29 From the WTO official website : http://www.wto.org/englishlthewto_e/whatis-

_e/tif, e/org I_e .htm.
30 See Jeffrey L. Dunoff, The Misguided Debate over NGO Participation at the
WTO (1998) 1. OF INT'L ECON. LAW 433. For a recent appraisal of the debate
see Eric Stein, International Integration and Democracy: No Love at First
Sight, 95 AnL 489, pp. 504-09 (2001).
31 The number ofNGOs attending the plenary sessions has grown from 108 at the
Singapore Ministerial Conference in 1996 to 686 at the Seattle Ministerial Con-
ference in 1999 (see WTO: External Transparency, Communication from Hong
Kong, China, 31 October 2000, WT/GC/W/418).
32 WORLD TRADE Doc No. WT/L/162.
354 Eyal Benvenisti

tariat is instructed further to "playa more active role in its direct contacts
with NGOs ... through various means such as, inter alia, the organization
on an ad hoc basis of symposia on specific WTO-related issues, informal
arrangements to receive the information NGOs may wish to make avail-
able for consultation by interested delegations and the continuation of past
practice of responding to requests for general information and briefings
about the WTO." (Article 4).
At the same time, however, the guidelines reflect the concern many
governments have with increased voice to NGOs. Article 6 emphasizes
"the special character of the WTO, which is both a legally binding inter-
governmental treaty of rights and obligations among its Members and a fo-
rum for negotiations", and points out the "broadly held view that it would
not be possible for NGOs to be directly involved in the work of the WTO
or its meetings." The intergovernmental character of the WTO implies, ac-
cording to the guidelines, that the appropriate level for NGOs' direct par-
ticipation is the national level: "Closer consultation and cooperation with
NGOs can also be met constructively through appropriate processes at the
national level where lies primary responsibility for taking into account the
different elements of public interest which are brought to bear on trade
policy-making ."
In other words, these guidelines recognize the need to ensure transpar-
ency in the decision-making process, or what is called in the WTO jargon
"external transparency", as distinct from "internal transparency", which re-
lates to openness among members. In the years since 1996 impressive ef-
forts have been made, particularly by the Secretariat, to provide accessible
information including documents to the general public by posting it on the
WTO website. A few "Northern" members have come up with suggestions
for improved transparency. Canada, Norway, and the United States sug-
gested, inter alia, that General Council and other committee meetings be
open to observers, including Trade Policy Review meetings, where mem-
bers' policies are reviewed for conformity with WTO rules." Other sug-
gestions included the establishment of fora to enable open dialogue be-
tween WTO bodies and NGOs, the inclusion of advice of legislators from
member states and of experts in specialized areas, and the creation of ad-

33 See General Council Informal Consultations on External Transparency, Octo-

ber 2000. Submission from the United States, 10 October 2000, WT/GC/w1
413; WTO External Transparency, Informal Paper by Canada, 17 October
2000, WT/GC/w/415; External Transparency, Communication from Norway,
2 November 2000, WT/GC/W /419.
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 355

hoc advisory boards to provide non-binding NGO advice on a variety of

issues."
Such ''Northern'' suggestions are not very well-received by the develop-
ing "Southern" countries. The latter are less constrained domestically by
democratic considerations. They apparently also realize that they stand to
lose from a more active role for NGOs that represent the interests of the
relatively well-off societies seeking to maintain high levels of welfare and
environmental protection. The effort of the developing members is to re-
strict public participation to the passive role of receiving information from
WTO bodies rather than communicating it to the WTO. Note the position
of Hong Kong, China on this matter, elaborating on the distinction be-
tween external transparency and direct participation:
8. In our view, enhancing "external transparency" of the WTO means keeping
the public informed and educated of the WTO's work, enriching their understand-
ing and awareness of the Organization and the multilateral trading system, and
thereby improving the ability of the public to reflect views to their governments.
On the other hand, "participation" in the WTO by non-Members implies a right to
take part in the decision-making process of WTO, a right to make representations
of interest in the formal WTO setting and in the process prejudice the outcome of
discussions.
9. While we are prepared to consider those proposals aiming at improving
transparency, we are not convinced of the desirability of adopting proposals which
seek to make provisions for direct participation of the civil society in the Organi-
zation in this exercise. Such proposals go against the inter-governmental nature of
the WTO, risk politicising the operations of the Organization due to sectoral and
electoral interests, and undermine the rights and obligations of individual WTO
Members."
A similar North-South tension exists in the context of the dispute settle-
ment mechanisms, to which we now tum.

10.3.2 The Dispute-Settlement Process

In contrast to most other international adjudication procedures, the WTO

procedures maintain secrecy. Litigation before the Panels and the Appel-
late Body are closed to WTO members that are not parties to the litigation
and to the general public. Calls for transparency focus therefore on making
all parties' submissions available to the public and on enabling the general
public to observe the proceedings using various tools, including webcast-

34 See in particular the Canadian paper, sup ra note 32.

35 See Communication from Hong Kong, China, supra note 30.
356 Eyal Benvenisti

ing.> Moreover, suggestions for enbling the flow of communication from

the public to the adjudicators concentrate on the possibility of submitting
amicus briefs to the panel and the appellate bodies.
Here again one can trace a north-south tension, northern members
strongly supporting open and accessible proceedings to the dismay of
southern states. The United States is the most ardent supporter of transpar-
ency and communication in the dispute settlement process." Apparently, it
is the State that has to gain the most from such openness. In fact, it was the
first and so far the only state that presented NGO briefs as integral part of
its brief while defending its environment-friendly unilateral restrictions on
trade against the complaint of India, Malaysia, Pakistan and Thailand."
The Appellate Body has shown at least initial inclination to consider
amicus briefs.'? In 1998, it decided it had authority to accept NGO briefs in
the Shrimp/Turtles dispute which one litigant - the United States - incor-
porated into its briefs." In a more recent case, the Asbestos case, the Ap-
pellate Body went even further. In the midst of hearings, it invited "any
person" to file applications for leave to file briefs concerning the dispute at
hand." The invitation, setting highly rigorous conditions for eligibility to
file briefs, was posted on the WTO website on 8 November 2000.
In its recently published decision, the Appellate Body describes the un-
folding events and decisions subsequent to the issuance of this invitation
(footnotes omitted):
53. The Appellate Body received 13 written submissions from non-govern-
mental organizations relating to this appeal that were not submitted in accordance
with the Additional Procedure. Several of these were received while we were con-
sidering the possible adoption of an additional procedure. After the adoption of the
Additional Procedure, each of these 13 submissions was returned to its sender,

36 See the US submission, supra note 32.

37 See its proposals in the submission, id.
38 The complaint criticized the US prohibition on the importation of certain
shrimp and shrimp products caught in methods considered by the US to ad-
versely affect the population of sea turtles: United States - Import Prohibition
of Certain Shrimp and Shrimp Products: Report of the WTO Appellate Body,
WT/DS58/ABIR (1998).
39 For a detailed analysis of the Panels' and Appellate Body's authority to consult
amicus briefs see Petros C. Mavroidis, Amicus Curiae Briefs Before The WTO:
Much Ado About Nothing, Jean Monnet Paper No. 2101 (available at
http ://www .jeanmonnetprogram.org/ papers/papersO l .html).
40 See supra note 37.
41 European Communities - Measures Affecting Asbestos and Asbestos-
Containing Products, Communication from the Appellate Body 8 Novem-
ber 2000, WT/DS135 /9.
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 357

along with a letter informing the sender of the procedure adopted by the Division
hearing this appeal and a copy of the Additional Procedure. Only one of the se as-
sociations, the Korea Asbestos Association, subsequently submitted a request for
leave in accordance with the Additional Procedure.
54. By letter dated 15 November 2000 , Canada and the European Communities
jointly requested that they be provided with copies of all applications filed pursu-
ant to the Additional Procedure, and of the decision taken by the Appellate Body
in respect of each such application. All such documents were subsequently pro-
vided to the parties and third parties in this dispute.
55. Pursuant to the Additional Procedure, the Appellate Body received 17 ap-
plications requesting leave to file a written brief in this appeal. Six of these 17 ap-
plications were received after the deadline specified in paragraph 2 of the Addi-
tional Procedure and, for this reason, leave to file a written brief was denied to
these six applicants. Each such applicant was sent a copy of our decision denying
its application for leave because the application was not filed in a timely manner.
56. The Appellate Body received 11 applications for leave to file a written brief
in this appeal within the time limits specified in paragraph 2 of the Additional
Procedure. We carefully reviewed and considered each of these applications in ac-
cordance with the Additional Procedure and, in each case, decided to deny leave
to file a written brief. Each applicant was sent a copy of our decision denying its
application for leave for failure to comply sufficiently with all the requirements set
forth in paragraph 3 of the Additional Procedure.
57. We received a written brief from the Foundation for International Environ-
mental Law and Development, on its behalf and on behalf of Ban Asbestos (Inter-
national and Virtual) Network, Greenpeace International, International Ban Asbes-
tos Secretariat, and World Wide Fund for Nature, International, dated 6 February
200 1. As we had already deni ed, in accordance with the Additional Procedure, an
application from these organizations for leave to file a written brief in this appeal,
we did not accept this brief. 42
What the Appellate Body does not recount is that its invitation sparked
angry protests by a number of member states that questioned its authority
to do so. A few members - reportedly Pakistan and Egypt, supported by
India and Malaysia? - immediately reacted by requesting the Chair of the
General Council to convene a special meeting to discuss this issue. In the
meeting, which took place on 22 November 2000, several members ex-
pressed criticism, arguing that the Appellate Body exceeded its authority."

42 European Communities - Measures Affecting Asbestos and Asbestos-

Containing Products, AB -2000 -11, WTIDS 1351ABIR, 12 March 200 1.
43 BRIDGES Weekly Trade News Digest - Vol. 4 No . 44, 21 November 2000 .
44 See e.g. Statement by Uruguay at the General Council on 22 November 2000 ,
WT/GC /38 .
358 Eyal Benvenisti

The Appellate Body's ultimately unexplained decision to deny the requests

to file briefs may very well reflect the furious reactions to its invitation.
It is interesting to compare the WTO developments with a parallel de-
velopment in the context of NAFT A. A NAFTA tribunal decided on
16 January 2001 that it had authority to consider an amicus brief submitted
by the International Institute for Sustainable Development (IISD), a Can-
ada-based NGO, in a dispute between a Canadian producer of a gasoline
additive and the United States that had banned its use. In support of its re-
quest to submit a brief, IISD argued that only amicus briefs will present
environmental concerns, and that the tribunal should take these concerns
into consideration.v In this case, no angry protests were recorded.

10.4 Concluding Observations: Welfare and Democracy

Disputed

Opening up the channels of communication at the WTO 's and other inter-
national institutions' prescriptive and enforcement spheres is not free of
difficulties. There is a concern that "anti-trade" "pro-human rights" or
other "anti-government" interests will clog up the system with excessive
noise. The role of NGOs - a term that could include established, serious
and respectable organizations, but also unaccountable ones whose funding
and motivation are unclear - is of particular worry. These concerns must
be addressed, and can be addressed through accreditation or other proc-
esses adopted by domestic systems and other international institutions."

45 http://www.iisd.orgitrade/investmentJ egime/htm.
46 See for example Hirsch, (Chapter 12 in this volume) on the working relations
between ECOSOC and NGOs. The World Bank's practice that so far has yield-
ed very good results: The World Bank Operational Manual "Good Practices In-
volving Nongovernmental Organizations in Bank-Supported Activities"
GP 14.70 February 2000 (available at http://wblnOOI8.worldbank.orgiInstitutio-
nallManuals/OpManual.nsfltocl/), at Article 15: "Establishing Relevant Selec-
tion Criteria. NGO partners should be selected according to the specific skills
and expertise required for the task at hand as it relates to the development goals
being pursued . The following are some of the qualities that should be consid-
ered in selecting individual NGO partners (depending on the nature and pur-
pose of a particular task):
(a) credibility: acceptability to both stakeholders and government;
(b) competence: relevant skills and experience, proven track record;
(c) local knowledge;
(d) representation: community ties, accountability to members / beneficiaries,
gender sensitivity;
 10 Welfare and Democracy on a Global Level: The WTO as a Case Study 359

There is no reason to assume that supranational institutions are more prone

to capture by NGOs than domestic institutions. If national courts have ma-
naged to cope with the amicus briefs challenge and made the best out of it,
there is no reason to believe that supranational tribunals will fail to ac-
commodate them properly.
A particularly troubling aspect of current debates and negotiations is the
lack of voice of the majorities in the developing world. Their governments
resist transparency and enhanced labor standards invoking those majori-
ties' interest in access to jobs. Demand for low paying jobs is indeed prev-
alent among those innumerable workers who have no alternative but to
spend their lives in sweatshops. But this second-best preference is no more
credible and acceptable than the similar one raised by capital owners in the
dark days of the Industrial Revolution. It is certainly less costly for govern-
ments (both developed and developing) to sell this argument rather than
invest in schools, health and welfare institutions. A genuine voice of the
world's poor will certainly dispute that argument and call for redistribution
of the economic gains of globalization among the developed and the de-
veloping countries. As part of the democratization of this debate, it is nec-
essary to invest institutional efforts to enhance the capacities of existing
and new southern NGOs and provide a genuine and effective voice for the
poor." The UNDP and the World Bank are among the institutions that
have begun this process of southern empowerment." It is hoped that more
attention and resources will be devoted to this task.

(e) governance: sound internal manag ement, transparency, financial account-

ability, efficiency;
(f) legal status; and
(g) institutional capacity: sufficient scale of operations, facilities , and equip-
ment."
47 On the insufficient resources of southern NGOs see Gregory C. Shaffer, "The
World Trade Organization Under Challenge : Democracy and the Law and Poli-
tics of the WTO's Treatment of Trade and Environment Matters" 25 Harv.
Envtl. L. Rev. 1, 28-30 (2001). Care should be given to prevent northern inter-
ests from cloning themselves as local, southern, branches of themselves (see the
concern ofa southern NGO activist in this regard, in Shaffer, id., at note 240.
48 The World Bank in particular has been quite successful in strengthening the ca-
pacities of southern NGOs: see World Bank , "Capacity Building of Southern
NGOs - The Experience of the World Bank" (available at: http://wblnOOI8.
worldbank.org/essd/essd.nsfl) ; World Bank , "The World Bank and Chinese
NGOs " (available at: http://www.worldbank.org.cn/EnglishlPartnershipINGO
Overview1.shtml) (reporting that according to official Chinese statistics, the
number of Chinese NGOs reached 165,600 by the end of 1998). For a general
discussion of this issue see Olena P. Maslyukivska, "Role of Nongovernmental
360 Eyal Benvenisti

The current standoff at the WTO is not a result of technical or legal dif-
ficulties concerning institutional authority to receive or impart information.
It is a result of a lack of widespread commitment of the WTO members to
democracy and to welfare standards. Opening the WTO processes for the
larger groups within democratic countries is viewed as a threat not only by
the smaller groups of investors and employers but also by the representa-
tives of the developing countries who wish to maintain the low levels of
welfare that constitute their relative edge. Democratic participation thus
becomes one of the items on the agenda of the North-South conflict, and
hence liable to be negotiated away. The potential toll on welfare-enhancing
opportunities is thus significant.

Organizations in Development Cooperation Research Paper", UNDPlYale Col-

laborative Programme, 1999 Research Clinic, New Haven 1999 (available at:
http://www.undp.org/ppp/library/files/ maslyuO l.html); Michael Edwards,
David Hulme and Tina Wallace, "NGOs in a Global Future: Marrying Local
Delivery to Worldwide Leverage" (Conference Background Paper, Birming-
ham 1999) (available at: http://www.gdrc.org/ngo).
10A Comment on: Globalization, Welfare, and the
Democratization of the WTO

Stefan Oeter

Globalization and the welfare state are often perceived as irreconcilable

opposites. For many people, saving the welfare state is nearly identical
with resisting the forces of globalization, by constructing legislative barri-
ers against free trade and a deepening international division of labor. The
call for "democratization of the WTO" serves as one of the playing fields
of critical discourse dealing with the evolving international economic or-
der. If one tries to be modest as a critic, if one tries to avoid the radical
type of "frontal attack" calling for abolition of the WTO, one centers upon
the "democratic deficit" of the "global economic order" which is institu-
tionalized in the WTO. This does not mean that it is unjustified to discuss a
"deficit" of democratic participation, a deficit in voice as well as in ac-
countability. I totally agree here with the remarks of Eyal Benvenisti. The
traditional concept of indirect democracy in international relations, of an
indirect voice of people through national legislatures and governments and
of an indirect accountability through governments and parliamentary con-
trol, has by and large proven to be a "grand illusion". ' The U.S. Senate
perhaps might serve that function to a certain degree, in the most common
type of parliamentary system according to the Westminster model, how-
ever, parliamentary majorities have no interest whatsoever in controlling
their governments. Even more, in the traditional world of international di-
plomacy there was a clear rationale for this practice of non-control. In a
"power-oriented system", traditionally conceptualized by realist theoreti-
cians as an "international anarchy" driven by power games," the Hobbesian
jungle of interstate relations was structurally resistant to any serious par-
liamentary control. Even the development of a more "rule-oriented sys-
tem" during the last decades' has not significantly changed this perception .
Admittedly, myriads of single-issue "international regimes" have subjected

I Cf Markus Krajewski, "Democratic Legitimacy and Constitutional Perspec-

tives ofWTO Law"(2001) 35 No.1 Journal of World Trade 167-186 at 175-
177.
2 See only Hedley Bull, The Anarchical Society (London 1977).
3 See also the discourse (mainly in international relations) that constructs the de-
scribed development as a process of "legalization of world politics" - cf the
special issue of 54 International Organization , Summer 2000, dedicated to this
topic.
362 Stefan Oeter

states to a network of more-or-less clearly formulated rules. And formally,

national parliaments have a decisive veto power in such a system of rule-
making by international treaties, since they are heard before a state be-
comes subject to a specific rule. But the real power of parliaments is quite
small in that area. The formal participation in practice has proven to be
largely void,' although constitutional theoreticians still tend to perceive it
as the "ideal type" of democratic participation in international relations. It
proves to be an empty shell because parliamentarians are not usually really
interested in international treaties, and habitually tend to back the govern-
ment that has negotiated the treaty and could only reject the whole treaty if
they would vote against it - an improbable decision in a situation in which
the government will usually have good arguments to prove that a better
treaty is not possible. Nevertheless, constitutionalists show a good deal of
nostalgia for the traditional illusion that the inherited device of formal par-
ticipation secures popular voice and democratic accountability.'
One might find here one reason why the WTO has become the prime
object of hate of defenders of traditional ideas of national sovereignty, but
at the same time also ofNGO-related militants of "civil society". Although
there is a fundamental difference in the visions of each circle concerning
the just organization of state and society, they both converge in their an-
tipathy towards globalization and the WTO. Why? The institutional mech-
anism of the WTO is a frontal attack against the illusion described above
of democratic participation in international relations.s The product of seven
years of Uruguay Round negotiations was too complex to be evaluated and
discussed seriously in traditional procedures of parliamentary participation
in treaty-making. One can easily argue that national parliamentarians did
not know what they were voting for when they ratified the WTO Agree-
ment. And even more, the WTO package with all its series of specific
agreements left so many decisive questions open to future diplomatic ne-
gotiations and judicial decision-making that it cannot arguably be perceiv-
ed as a clearly defined set of rules. Well, parliaments can still consent to

4 See in detail Markus Krajewski, Verfassungsperspektiven und Legitimation des

Rechts der Welthandelsorganisation (WTO) (Berlin 200 1), pp. 223-225 .
5 An example of this tendency can be seen in the essay of the German Constitu-
tional Court Judge Udo Di Fabio, Der Verfassungsstaat in der Weltgesellschaft
(Tiibingen 2001) , pp. 100-117; as concerns the various normative models of
democracy argued in the debate on "governance beyond the nation-state" cf.
Jiirgen Habermas, "Drei normative Modelle der Demokratie", in Jiirgen Haber-
mas, Die Einbeziehung des Anderen (Frankfurt 1996), pp. 277-292, and Mi-
chael Ziirn, "Governance Beyond the Nation-State" (2000) 6 European Journal
ofInternational Relations 186-188.
6 See Krajewski , Verfassungsperspektiven, pp. 227-230.
 lOA Comment on Eyal Benvenisti 363

such a package of open-ended rules and principles, but one can no longer
claim to know the concrete contours of the meaning of these rules in the
future. Admittedly, there are many other international treaties that take ref-
uge in vague and open-phrased formula compromise provisions; but usu-
ally, interpretation and further development of these provisions remain up
to the member states.
Here the WTO system has caused a decisive change. In practice, the last
word in giving concrete contours to the open-ended provisions of the
agreements has been shifted from states, which means national executives,
to the quasi-judicial organs of the WTO dispute settlement system. Such
transformation has been called a step from a "rule-based" to a "principle-
based" system." It is not clearly defined rules but inherently vague princi-
ples that dominate the legal framework. Responsibility for clarifying the
scope and interplay of the principles is on a network of quasi-autonomous
judicial bodies that develop a normative system which is not a series of po-
litical compromises but normatively reasoned judicial decisions, if not to
say "precedents". The development of the system thus becomes decoupled
from the political will of the member states and follows its own systemic
logic as a legal system.8
If seen from the perspective of traditional democratic voice and ac-
countability, this development seems to break with all concepts of democ-
ratic government. The world seems to be ruled by a class of international
bureaucrats and lawyers. Are there any alternatives? Is there really a way
back to the sovereign "nation state", in the sense of stemming the tide of
globalization and preserving the traditional set-up of a welfare state by
constructing a protective wall of interventionist legislation? One might
doubt that. Our wealth is the product of a liberal economy profiting from
the efficiency gains of an integrated world market. A policy of protection-
ism and autarchy would cost enormous loss of wealth, at least for the con-
sumer. Perhaps we might manipulate the rules of the game, opt out of cer-
tain segments of the international division of labor in fields where free
trade would be a detriment to our national industries, like the states of the
North did in textile manufacturing and agriculture in the last decades.
Powerful states might thus shift the transformation costs to the weak and
the poor. This is not a principled alternative to free trade and a liberal glo-

7 See only Ernst-Ulrich Petersmann, "The Transformation of the World Trading

System through the 1994 Agreement Establishing the WTO" (1995) 6 Euro-
pean Journal ofInternational Law 161-222.
8 See Ernst-Ulrich Petersmann, "From the Hobbesian International Law of Coex-
istence to Modem Integration Law: The WTO Dispute Settlement System"
(1998) 1 Journal ofInternational Economic Law 175-198.
364 Stefan Oeter

bal economy, an answer to the question of fairness in the distribution of

wealth, but a power-based strategic deformation of free trade in the interest
of the beati possidentes.
The other extreme, a transfer of inherited nation state models of democ-
ratic governance to the international level, is even less viable." How does
one organize an authentic system of popular voice institutionalized in par-
liamentary elections and a corresponding democratic accountability of po-
litical decision-making to an elected parliamentary body at the WTO level
in a structure where a majority of the world's population is already ex-
cluded from democratic participation nationally? Any institutional set-up
of parliamentary control would inevitably become a mockery of sorts, a
disguised power game not of popular representatives but of self-sufficient
"classe politique" elites, dominated by twilight "cleptocracies" from the
South.!?
The call for "democratization" of the WTO remains. What could this
term really mean? Eyal Benvenisti has demonstrated the inherent difficul-
ties of any effort in that direction. The first issue is - and has to be - the
demand for more transparency. Without heightened transparency, any fur-
ther move towards "democratization" is condemned to failure. Interna-
tional negotiations are inevitably characterized by a high degree of opacity,
and to a lesser degree this is also true for decision-making procedures in-
side international organizations. Political responsibility for the results of
such compromise-type dealings is by defmition much less transparent than
decision-making in a majoritarian parliamentary system of the Westmin-
ster model." One should not exaggerate these differences, since the results
of political negotiations in coalition-government systems tend to become
quite opaque too. The theoretical difference, however, is indisputable. This
is even more so if the system is as complex as the WTO system, with a se-
ries of agendas proceeding in different fora at the same time. The issues
are often highly technical, only comprehensible to specialists; it is difficult

9 See only Fritz W. Scharpf, "Legitimationsprobleme der Globalisierung", in

Carl Bohrer and Gottrich Wewer (eds.), Regieren im 21. Jahrhundert (Opladen
1993), p. 165, and Krajewski, Verfassungsperspekiiven, pp. 246-250. See also
the paradigmatic work of David Held, Democracy and the Global Order (Cam-
bridge 1995).
'0 I have developed that argument in more detail in an essay published under the
title "Intemationale Organisation oder Weltfoderation? Die organisierte Staa-
tengemeinschaft und das Verlangen nach einer "Verfassung der Freiheit", in
Hauke Brunkhorst and Matthias Kettner (eds.), Globalisierung und Demokra-
tie: Wirtschaft, Recht und Medien (Frankfurt 2000), pp. 208-239.
II See Fritz W. Scharpf, Governing in Europe: Effe ctive and Democratic? (Cam-
bridge 2000), Chapter 1.
 lOA Comment on Eyal Benvenisti 365

for anybody to intellectually follow all the events. Even states with a
small-sized representation in Geneva have difficulty knowing exactly what
is going on in the various segments of the WTO. Admittedly, there are ad-
ditional difficulties. The structure of negotiations that hitherto was com-
mon practice, in particular the practice of back-stage "green room" nego-
tiations, might reflect the common standard of traditional negotiations in a
"power-based system", but undoubtedly cannot count as a model of trans-
parency." WTO procedural routines will have to change here, although it
is not imaginable that efficient negotiations can be organized in a system
based solely on plenary meetings of more than 140 member states. Some
kind of restricted, committee-type negotiation group will always bear the
burden of formulating the decisive traits of a compromise solution, and
such exclusive "in-door" negotiations are by their nature averse to full
transparency. A system of more equilibrated representation of different in-
terests and groups of member states in these "core" negotiation fora, how-
ever, will have to be designed to overcome the widespread discontent ex-
isting in developing states. 13
It remains open to doubt whether the whole system might become so
transparent that the general public - and NGOs are still a part (and a repre-
sentative) of the general public - could be informed of each detail of the
negotiations. Even national-political systems have their "black box" insti-
tutions to draft decisive deals on delicate issues that have not proven to be
open to ordinary majority decision. NGOs play an important role as ob-
server, "loudspeaker", informant, and sometimes watchdog for the public.
This role will grow in importance. The more the public in WTO member
states is aware of the important issues dealt with in the various bodies and
fora of the WTO, the more it will need the NGOs for gaining information
and keeping a critical eye on its governments' dealings with the other ac-
tors on the scene. The distrust typically voiced by NGOs towards state ac-
tors may bear traits of paranoia, but nonetheless, there may be reasons for
a certain degree of distrust. Although governments and their bureaucracies
are at least as legitimate representatives of their people as NGOs are voices
of "civil society", social science research has consistently demonstrated
how distorted "national interest" governmental constructions may be."
There is no guarantee that the usual problems of collective action will be
easily overcome. Well-organized interest groups still manage to hijack

12 See Krajewski, Verfassungsperspektiven, pp. 80-88.

13 See also Markus Krajewski, From 'Green Room' to 'Glass Room' - Participa-
tion ofDeveloping Countries and Internal transparency in the WTO Decision-
Making Process, A Trade Watch Paper (Bonn 2000).
14 See the examples given by Krajewski, Verfassungsperspektiven, pp. 108-115.
366 Stefan Oeter

governments in defining the national interest to the detriment of less-

organized interests of larger, but more heterogeneous collectivities. 15 Thus,
highly organized industry interests still tend to override consumer inter-
ests, environmental interests, and the "welfare state" interests of the lower
classes. This may not necessarily occur, but it still happens too often ; thus
the need for counterbalancing forces, like the public-interest oriented
NGOS.16
Although it is true, as Eyal Benvenisti stressed, that more transparency
might be to the detriment of liberalization, as "more openness yields more
knowledge about the distributional implications of trade agreements",
there is no serious political argument against the call for more transparen-
cy. Undoubtedly, heightened knowledge about the distributional implic a-
tions of trade agreements "enhances the mobilization of anti-trade forces" .
The already well-organized pro-trade groups are not accustomed to going
to the public; they are used to directly voicing their arguments to the
government, thus directly influencing the decision-making that has an
effect on them. This creates an asymmetry in public discourse, an asymme-
try strengthened by most people's aversion to risk. The losses of liberaliza-
tion are secure; the potential gains may be much greater, but are not as eas-
ily attributable to individuals as the losses are. Thus, the losers of the
distributional implications of trade agreements are much easier to organize
than the potential winners, if they are not specifically organized business
interests. In the long run, it is not sound political strategy to push people
into a system of institutionalized liberalization of international trade - such
as the WTO - while disguising the potential distributional implications of
such international legal arrangements. The backlash will inevitably come
at some point; it is a positive step that the discussion on distributional
implications that was not seriously held in 1994 is now being held with the
broad participation of a diverse public .
One should, however, avoid falling into illusions again . The spectrum of
NGOs is not a true mirror of "civil society", even less than traditional gov-
ernments are a mirror of "nations". There is an inherent asymmetry in the

15 As to the background of this problem, see Mancur Olson, The Logic of Collec-
tive Action (Cambridge, MA, 1965).
16 See in particularRichard G. Shell,"Trade Legalism and International Relations
Theory - An Analysis of the World Trade Organization" (1995) 44 Duke Law
JournaI829-927 ; id., "The Trade Stakeholders Model and Participation by
Nonstate Parties in the World Trade Organization" (1996) 17 University of
Pennsylvania Journal ofInternational Economic Law 359-381.
 lOA Comment on Eyal Benvenisti 367

representation of interests. 17 NGOs are usually single-issue organizations

centered upon a limited range of collective interests, not a representative
expression of all interests and concerns of "civil society". They play an im-
portant role as an informational counterbalance to organized business in-
terests and state bureaucracy, but they are as much one-sided organizations
as traditional industrial lobbies are. It would be a fatal mistake to perceive
them as a genuine voice of "civil society". 18 They are a part of "civil soci-
ety", but not more.
Any attempt at direct participation of NGOs in political decision-
making does not solve problems of legitimacy but creates new problems of
democratic accountability." Eyal Benvenisti has aptly reviewed the vari-
ous efforts to organize forms of participation at WTO negotiations and di-
spute settlement. These efforts to integrate NGOs into the structure of de-
cision-making have caused several states to voice strong protests. Often
the rationale of such protests is easily discernible, since the states con-
cerned are afraid of public scrutiny. But besides such partial interests, there
are sound arguments that should caution against too much participation of
NGOs in policy formulation. NGOs are not democratically accountable
themselves, but they are private interest groups of rather different organi-
zation and background. To consult them to enrich the informational basis
of decision-making is more than justified. To treat them as representative
organizations of public interest, like the organs of democratic states,
would, however, go too far. They are part and parcel of the world of organ-
ized interests, with all the inherent problems of collective action. If I limit
my remarks to the NGOs struggling for the preservation of the "welfare
state" and high social standards, I must reiterate that social science has
pointed to the phenomenon that organized labor, i.e. trade unions and re-
lated organizations, on the national level, does not represent the poorest,

17 See Marie Manson, The Roles ofNon-Governmental Organizations (NGOs) in

International Regime Cooperation - A Casestudy of the Regime of the World
Trade Organization (Stockholm 1997).
18 See Philip M. Nichols, "Extension of Standing in World Trade Organization
Disputes of Non-Governmental Parties" (1996) 17 University of Pennsylvania
Journal of International Economic Law 295-329; Peter Wahl, "NGO-Multis,
McGrecnpeace und die Netzwerk-Guerilla - Zu einigen Trends in der intema-
tionalen Zivilgesellschaft", in Benno Engels and Klaus Liebig (eds.), Die Zu-
kunft des Welthandelssystems - Reformvorschlage deutsch er und internation-
aler Nichtregierungsorganisationen (Hamburg 1999), pp. 10-26; Peter 1. Spiro,
"New Global Potentates : Non-Governmental Organizations and the 'Unregulat-
ed Marketplace" (1996) 18 Cardozo Law Review 957-969.
19 See only Krajewski , Verfassungspersp ekiiven; pp. 250-255 with further refer-
ences.
368 Stefan Geter

but represents pressure groups of the well-settled workers of core indus-

tries. The laborers in marginal enterprises, and even more the jobless, are
scarcely cared for by organized labor. The same phenomenon exists on the
international level. NGOs struggling under the banner of the preservation
of the "welfare state" are not representatives of the world's really poor, but
are pressure groups serving the interests of the beati possidentes of the
Northern hemisphere welfare state, owners of qualified, highly paid jobs.
These people and their organizations have an evident interest in excluding
competitors offering lower costs from the markets, an interest that con-
verges with their employers' interests. If they succeed in their attempts at
protectionism, they create a type of cartel, an arrangement that effectively
restricts competition. The low wages and social standards, the developing
countries' major edge, are seen as unfair competition that should be ex-
cluded from free trade. If one follows this line of reasoning and requires
wages comparable to the wages in industrialized societies be paid and
comparable social standards be granted, states and societies with a lower
productivity can never develop export industries and integrate into the glo-
bal economy. Admittedly, the elites of Third World states who raise these
arguments care little about the interests of the poor. But this does not nec-
essarily mean that their arguments are invalid.
This may sound like the traditional argument of a "hard core" free-trade
liberal. In a sense it is. My argument runs against falling victim to the si-
rens ofNGO-advocated protectionism. National governments have the task
of preserving their own social systems against turmoil and crisis. At the
same time they are responsible for developing some solidarity with the
world's have-nots . Classical development aid that should be taken for
granted after decades of heated discussion is not an adequate response to
the quest for solidarity. The only sound response is to give the poor a
chance to earn a decent living. This is impossible if we continue to shut
them out of the advantages of free trade as soon as free trade hurts the tra-
ditional industries that have lost their competitive edge - textile manufac-
ture, electronic consumer goods, etc. It is true, opening our markets pro-
duces victims for us too - dying industries, declining regions, jobless
masses. Our welfare state provides an opportunity to take care of the vic-
tims. The poor elsewhere are not given this care.
By and large, the "race to the bottom" in the field of social standards is
more myth than real threat. High social standards have obvious costs, but
they also produce gains and advantages for the industry. High-tech indus-
tries dependent upon a reliable infrastructure and a qualified workforce va-
lue the positive trade-offs of refined welfare state systems. This is not to
say that every detail of inherited welfare state arrangements deserves a de-
fence. On the contrary. But the concept as such is not in crisis.
 lOA Comment on Eyal Benvenisti 369

This leads back to the call for democratization of the WTO. The WTO ,
at least in my judgment, strikes a fair balance between the interests of the
industrialized states, as the beati possidentes of the global economic order,
and the interests of the have-nots of the Third World. A decisive part of
this balance is free trade in labor-intensive industries in which developing
countries may have a competitive edge. Unpacking the package would
mean depriving the Third World countries of the benefits of the WTO . Our
collective interest as industrialized societies might desire this strategy, but
we should not try to sell it under the guise of democratizing the WTO.
Democratization of the system means giving the countless poor a better re-
presentation in running the organization, and not enhancing the participa-
tion possibilities of organized pressure groups from the North in a system
in which their governments are already dominant. Thus, the NGOs' more
direct participation is not a solution to the democratic deficit of the WTO .
A convincing therapy to the diagnosis of "democratic deficit" has still not
been presented. Perhaps the quest for more democracy in the WTO system
is a wrong answer to a wrong question.
11 International Labor Standards and
International Trade Law

Werner Meng

Contents
ILl Fears and concerns about "cheap labor" 371
11.2 Interdependence between trade and labor. 374
11.3 "Social clauses" in WTO Law against unfair labor
practices? 378
11.4 Trade sanctions against violations of labor rights under
WTO law 384
11.5 Possible Conflicts 392
11.6 Conclusion 393

11.1 Fears and concerns about "cheap labor"

Globalization of the economy, particularly the liberalization of the flows of

goods, services, and capitals over state borders, raises as many fears and
doubts as it raises hopes. Violent protests and even riots, beleaguered con-
ference venues, alternative conferences sponsored by non-governmental
organizations, and intensive attempts to influence public opinion by those
groups of "civil society" that blame globalization for many economic
problems in the less developed as well as in the developed world are the
visible signs of a significant change of attitude towards the mechanisms of
international trade and capital movements.
Labor is a popular topic, not only in the public discourse, but also
among lawyers.' Cheap labor from developing states is seen as a threat to

I There is ample literature on the legal questions of the relation between trade
and labor, see only Raj Bhala, "Clarifying the Trade Labor Link", (1998)
36 Columbia Journal of Transnational Law 11-55; Steve Chamovitz, "Trade,
Employment and Labor Standards: The OECD Study And Recent Develop-
ments in the Trade and Labor Standards Debate", (1997) 11 Temple Interna-
tional and Comparative Law Journal 131-161 ; Wolfgang Daubler, Sozialstan-
dards im internationalen Wirtschafisrecht, (1995) 475-492; Robert Howse and
Michael J. Trebilcock , "The Fair Trade-Free Trade Debate : Trade , Labor, and
372 Weruer Meng

high standards in labor and social welfare conditions in countries whose

costly standards have developed in the last centuries.' The workers and
their trade unions are afraid of a race to the bottom triggered by the inex-
pensive competition from abroad. Cheap labor, they surmise, means
cheaper products requiring a decrease in labor costs in their countries as
well. They demand that governments either set up a virtual "dam" at the
border to prevent unfair "social dumping'? from abroad, using countervail-
ing duties or other trade barriers to neutralize the impact of cheap labor
from abroad, or that they exert international pressure on states with cheap
labor to at least raise their standards to the necessary minimum, so as to
largely offset the harmful competition.
However, the perceived threat to ongoing high standards at home is only
one concern. Another main concern is the commitment to labor standards
improvements. Individuals and organizations care about the labor stan-
dards in foreign countries, warn of human rights violations in the field of
labor law and call for the guarantee of "core labor rights" for all people.'
They value trade law and frequently request trade sanctions against states
violating these rights (in "odious products" - rugs knotted by children or
goods produced in forced labor camps), or request a comprehensive sanc-
tion scheme (particularly economic sanctions), so as to coerce the target

the Environment", (1996) 16 Int'l Rev. ofLaw and Economics 61-79; Virginia
Leary, "The WTO and the Social Clause: Post-Singapore", (1997) 8 European
Journal of International Law 118-122; Eddy Lee, "Mondialisation et normes
du travail: un tour d'horizon", (1997) 136.2 Revue Internationale du travail;
Christopher McCrudden and Anne Davies, "A Perspective in Trade and Labor
Rights", (2000) 3 Journal ofInternational Economic Law 43-62; Chantell Tay-
lor, "NAFTA, GATT, and the current free trade system: a dangerous double
standard for workers' rights", (2000) 28 Denver Journal ofInternational Law
and Policy 401-435; Ann Trebilcock, "Social dimensions of international trade
liberalization", in Paul Demaret (ed.) Regionalism and multilateralism after the
Uruguay Round (1997), pp. 511-518; Paul lI.M. de Waart, "Minimum labour
standards in international trade from a legal perspective", in Pitou van Dijck
(ed.) Challenges to the new World Trade Organization (1996), pp. 245-264;
Friedl Weiss, "Internationally recognized labour standards and trade", in Friedl
Weiss (ed.) International economic law with a human face (1998), pp. 79-107.
2 Jose M. Salazar-Xirinachs, "The trade-labor nexus: developing countries' per-
spective s", (2000) 3 Journal ofInternational Economic Law 377-386.
3 The notion of dumping in international trade law relates to "unfair" behavior, a
violation of the rules ofthe "level playing field" agreed upon. Apart from exist-
ing legal commitments, the statement of fairness is predominantly subjective,
which is the major problem of the notion of fairness in international trade law.
4 Yasmin Moorman , "Integration of ILO core rights labor standards into the
WTO", (2001) 39 Columbia Journal ofTransnational Law 555-583 .
 11 International Labor Standards and International Trade Law 373

state to end the alleged violations.

Many institutions deal with the respective demands of interested persons
or organizations: the International Monetary Fund and the World Bank de-
tennine the conditions for loans, the International Labor Organization is
the main guardian of labor standards on the international levelS, and states
grant trade preferences depending on conditions that may also take into ac-
count labor law standards.
However, the focus of this article is the position of the World Trade Or-
ganization in this area. The events in Seattle at the end of 1999, in Davos
2000, and in Genova 2001 have highlighted the criticism of the WTO's
role in the field of labor conditions. The WTO has dealt with these issues,
but its members have been unable to reach a consensus. WTO law is clear-
ly a major factor in these labor issues. The WTO is a cornerstone of econo-
mic globalization, because its law is binding on member states and it is
subject to a compulsory dispute settlement procedure. The law limits the
sovereign freedom of its members to erect barriers to foreign trade and to
enact trade sanctions against other member states.
There are two main aspects of the relation between labor law questions
and WTO law," WTO law is pertinent to trade sanctions in general. If trade
sanctions are applied to counteract violations of labor rights either on a hu-
man rights level or enshrined in international conventions, this automati-
cally brings labor law and WTO law together. On the other hand, there is
ample discussion about whether the WTO needs in the future an interface
to labor, a "social clause" against "social dumping"? or an agreement on
minimum labor standards as integral part of WTO obligations. Both ques-
tions are not intrinsically related to each other: a decision against a social
clause or labor rules cannot keep the WTO out of labor law discussions,
because trade sanctions against, for example, countries allowing child la-
bor, that are discussed from time to time, inevitably raise questions as to
their compatibility with existing WTO.
There is little indication that the problems of trade and labor have been
thoroughly dealt with in shaping the legal order of the GATT and - later -

5 Steve Charnovitz, "The International Labour Organization in its second cen-

tury", in Max Planck Yearbook of United Nations Law (2000), pp. 147-184.
6 The following thoughts do not comprehensively cover all facets of WTO law;
they are primarily concerned with WTO law as it pertains to the trade in goods
as regulated in the GATT . The variations whieh are probably caused by struc-
tural differences of GATS and GATT would be an interesting subject for an-
other study.
7 L. Cuyvers and B. Kerremans, The International Social Issue: Social Dumping
and Social Competition in the Global Economy (1998).
374 Werner Meng

of the WTO. Whereas the Havana Charter" as precursor of the GATT con-
tained a provision concerning labor that stipulated co-operation with the
ILO and vaguely refers to "unfair labor conditions" and their results that
may be eliminated by each member for its territory,? the GATT, because of
its well-known history," was an unfinished torso that only mentioned
prison labor in Art. XX (e) as a method of producing goods that does not
enjoy the privileges of GATT law. Apart from this, there is no mention in
the GATT of either labor standards in particular or human rights in gen-
eral. Finally, in contrast to price dumping, the GATT to this day does not
apprehend "labor dumping" . Consequently, the questions about counter-
measures have to be answered by applying general rules of WTO law and
other public international law, while the questions about "social clauses"
concern the development of this law in the future.

11.2 Interdependence between trade and labor

Labor is one factor in the production of goods and services. Trade enlarges
the markets in which the combined results of human labor and capital can
be sold. International trade creates more sales opportunities across state
borders and thus guarantees income for workers and a profitable return for
investors. These opportunities, however, also increase the risk of competi-
tion. Competition within one country is not only often safeguarded by le-

8 Final Act of the United Nations Conference on Trade and Employment: Havana
Charter for an International Trade Organization (1947) .
9 Article 7:
"1. The Members recognize that measures relating to employment must take
fully into account the rights of workers under inter-governmental declarations,
conventions and agreements. They recognize that all countries have a common
interest in the achievement and maintenance of fair labour standards related to
productivity, and thus in the improvement of wages and working conditions as
productivity may permit. The Members recognize that unfair labour conditions,
particularly in production for export, create difficulties in international trade ,
and, accordingly, each Member shall take whatever action may be appropriate
and feasible to eliminate such conditions within its territory.
2. Members which are also members of the International Labour Organisation
shall co-operate with that organization in giving effect to this undertaking.
3. In all matters relating to labour standards that may be referred to the Organi-
zation in accordance with the provisions of Articles 94 or 95, it shall consult
and co-operate with the International Labour Organisation."
10 See e.g. lH. Jackson, The World Trading System. Law and Policy of Interna-
tional Economic Relations (2. ed., 1997) 31-78.
 11 International Labor Standards and International Trade Law 375

gal rules securing, for example, its fairness, but also by certain distribution
patterns that have developed within these societies: wage agreements, a net
of welfare benefits provided by these states, negotiations between workers
and employers.
These conditions change when competition extends beyond state bor-
ders. Fairness may be defined differently in different states, social rules
differ and are valued differently in different states. However, wages, bene-
fits, and fair competition rules are cost factors: higher wages and social
benefits can only be financed by higher returns of sales, rules of fair com-
petition may increase the basic production costs of goods and services.
Trade liberalization across borders often results in competition between
products that are produced under different conditions as far as these costs
are concerned. This is the starting point for the fear of a "race to the bot-
tom" : are goods and services that are produced with lower labor costs
more competitive? Will the drive to lower prices in order to preserve com-
petitiveness necessitate lowering costs, especially labor costs, and will this
development eventually weaken the social net? This problem is exacer-
bated by the fear that the liberalization of the flow of investment capital
will lead to disinvestment in countries with high standards of labor and so-
ciallaw protection, and to a flight of the capital to countries with cheap la-
bor.
Of course, to equate between cheap labor and market success or attrac-
tiveness to foreign capital is far too simple. A country may have other as-
sets to offset its higher labor costs: infrastructure, commodities, cultural at-
tractions, social and political stability. Furthermore, production efficiency
is not only defined by the relation between wages and output but also by
the productivity. Productivity may vary from country to country (and even
from region to region within a country), depending on technological de-
velopment and, very significantly, the skills of the work force.
The OEeD emphasizes these more subtle parameters of economic suc-
cess and argues that higher labor standards are a factor of economic suc-
cess and not an economic failure." Undoubtedly, under certain circum-
stances, lower labor costs may lead to economic success and to the
attraction of foreign capital. Success in competition may also create losses
for other competitors. These two sides of the same coin are a necessary

II GECD, Trade, Employment and Labour Standards: A Study of Core Workers'

Rights and International Trade (1996). Critical see Steve Charnovitz, "Trade,
Employment and Labor Standards: The GECD Study And Recent Develop-
ments in the Trade and Labor Standards Debate, (1997) 11 Temple Interna-
tional and Comparative Law Journal, 131-161. See also GEeD, International
trade and core labour standards (Paris, 2000).
376 Werner Meng

corollary of free competition and are certainly also a factor in the eco-
nomic success of market economies.
The flexibility of economic actors (reorientation of investors, managers,
and also workers) commended upon and required by economic theory is,
however, a theoretical concept with different implications in actuality.
Workers may be limited by skills, knowledge, age, family, and particularly
by the job supply in a period when technological development reduces
their opportunities for finding new employment if they are too old or can-
not be retrained.
The loss of a job may well be a personal tragedy for the worker and his
family, or at least a considerable hardship requiring mitigation by the so-
cial system. These systems, however, depend on the national economy's
success because only money can facilitate a smooth transition to another
employment or social payments to workers who can no longer find work.
Thus, unsurprisingly, workers are suspicious of the consequences of in-
creased competitive confrontation with "cheap labor" because they fear a
possible loss of comfort and security. Since states do not have much op-
portunity to influence foreign competitive parameters, their governments
are lobbied for protectionist measures that would reduce the level of liber-
alization. The flagship of this liberalization is the World Trade Organiza-
tion. In addition, the International Monetary Fund and the World Bank
press for an increased liberalization of the economies of debtor states with
their concept of conditionality and are also the focus of widespread re-
sentment and anger.
It may be true that people's simplistic perceptions, combined with their
being deliberately exploited by those interested in reducing trade liberali-
zation, at least partially explain the riots accompanying almost every meet-
ing of international bodies involved with trade liberalization. However,
one should remember that labor is not only a cost factor of production but
that it is also a key aspect of human dignity and that many people's subjec-
tive reality includes fears of imminent unemployment. Analyzing and eval-
uating the validity or faultiness of these fears is of utmost necessity . It is
primarily the task of economists. However, a few economic aspects should
be mentioned here.
The starting point is the concept of "comparative advantage" as focused
on by David Ricardo,'? and based on the different factor endowment of the
national economies. If national economies concentrate on using their re-
sources for the production of the goods that they can produce relatively
cheaper than other states, the international as well as the national econo-

12 David Ricardo , On the Principles of Political Economy and Taxation (Lon-

don 1817), reprint London 1933.
 11 International Labor Standards and International Trade Law 377

mies are better off. The cost of labor is an important factor of this advan-
tage. Some countries have an advantage over others in terms of labor costs,
but they might be lacking technology or labor skill. Cheap labor is there-
fore an important advantage for such countries.
Theoretically, the mechanism is clear: if labor is cheaper somewhere
else, labor-intensive production should move there. The workers will be
forced to adapt to the new circumstances. They will lose their jobs and
look for other work that requires more than just labor that is cheaper
somewhere else. The economic concepts in this situation are well-known :
flexibility, constant reorientation in a situation of changing comparative
advantages, social aid and help for professional re-qualification, as op-
posed to trying to erect a costly and inefficient dam against foreign compe-
tition. In other words: helping the losers of international competition by re-
distribution of preserved or even increased wealth (in order to pay the
transaction costs) and enabling them to adapt to the new requirements of
the markets is preferable to collectively losing ground by imposing trade
restrictions.
However, such circumstances fasten protectionist demands, because ad-
aptation and flexibility require the willingness to pay transaction costs in
money and effort, and - compared to that - protection seems to be the eas-
ier solution. This is the realm of WTO law, which is designed to discour-
age the national temptation to protectionism by combining the natural in-
terest of states to reap the mutual advantages with the necessary enforce-
ment of rules based on the threat of the loss of advantages by counter-
measures. The strict observance of WTO law - greatly encouraged by the
new dispute settlement and enforcement mechanism designed in the Dis-
pute Settlement Understanding of the Uruguay Round (DSU) - is one of
the principal means of guaranteeing the functioning of the concept of com-
parative advantage.
Both the WTO and the ILO have declared their commitment to the con-
cept of comparative advantage, especially with regard to labor conditions.
The developed countries sent a clear signal to the developing countries,
which feared that a protectionist wave might be triggered if cheap labor
was included in the agenda of the WTO. Therefore, the 1996 Ministerial
Meeting of the WTO in Singapore declared: "We reject the use of labour
standards for protectionist purposes, and agree that the comparative advan-
tage of countries, particularly low-wage developing countries must in no
way be put into question.?" This was reaffirmed by the Doha Declara-
tion.!'. And the ILO in No.5 of its 1998 declaration on core labor rights

13 http://www .wto.org/english/thewto_e/minist_e/min96_e/wtodec_e.htm.no. 4.
14 http://www .wto.org/english/thewto_e/minist_e/minOl_e/mindecte.htm.no. 8.
378 Wemer Meng

echoed: "... labor standards should not be used for protectionist trade pur-
poses, and that nothing in this Declaration and its follow-up shall be in-
voked or otherwise used for such purposes; in addition, the comparative
advantage of any country should in no way be called into question by this
Declaration and its follow-up."
This clear confirmation of comparative advantage as a principal driving
force of international trade relations is not in conflict with a possible use of
trade sanctions as countermeasures for violation of human rights or of
treaty rights as well of customary law rights of other states. Comparative
advantage relates to factor endowment. The breach of international obliga-
tions is not a realization of comparative advantage, although it might lower
production costs, but an unlawful behavior that has to be removed. Wheth-
er it is wise or reasonable for a state to react to such violation in confor-
mity with the rules of public international law by trade sanctions may be
questioned, but it is per se" no protectionism.
Therefore, one should consider the questions of trade and labor in a two-
pronged approach: first the consequences of violations of labor standards,
human rights and other standards binding under public international law in
WTO law, and second the feasibility of new law harmonizing labor stan-
dards, or at least setting a minimum standard or "fair labor conditions".
The legal considerations in both areas are quite different from each other.

11.3 "Social clauses" in WTO Law against unfair labor

practices?

The inseparable link between trade and labor, the basic antagonism be-
tween preservation of individual labor rights and "unfair" competition by
"cheap labor" have influenced the political discussion within the GATT
and the WTO. They have also fueled a sometimes-violent debate about the
WTO itself. Is this institution a job-killer in developed countries? Is it
blind to human rights violations, such as child labor or forced labor? Does
it, in general, prevent states from sanctioning violations of public interna-
tional law by economic sanctions? On the other hand, given the consider-
able and efficient, mandatory and institutionalized dispute settlement and
sanctioning system of the WTO, it is natural to try and use these mecha-
nisms to brand odious practices of states and to use trade sanctions as an
answer with the express approval of an international organization with
quasi-global membership.

IS If it is not abused .
 11 International Labor Standards and International Trade Law 379

As mentioned before, at present WTO law does not contain any appro-
priate instrument for dealing with purported unfair "social dumping". The
only similar situation of unfair behavior regulated by WTO law is price
dumping, " but this is such a particular and disputed trade instrument that
its scope cannot be extended by analogy. In certain cases, it might be pos-
sible to use the safeguard clause of Art. XIX GATT if "as a result of un-
foreseen developments and of the effect of the obligations incurred by a
contracting party under this Agreement, including tariff concessions, any
product is being imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or threaten seri-
ous injury to domestic producers in that territory of like or directly com-
petitive products." But this is an exceptional tool for exceptional situa-
tions.
Consequently, "social clauses" would have to be added to WTO Law.
But the crucial question is whether the WTO is the appropriate structure to
deal with the purported "unfairness of cheap labor". It is argued that the
trade specialists in the WTO institutions are not sufficiently knowledge-
able in labor law. Traditionally, this knowledge would be gathered in the
International Labor Organization," which since 1919 has initiated more
than 170 conventions and recommendations on the protection of labor
standards. The General Conference of this organization has a particular tri-
partite structure that is composed of representatives of the state govern-
ments, workers and employers.
Indeed, an admirable concentration of knowledge and experience from
the 175 member states has accumulated within the ILO institutions. How-
ever, compared with the WTO, there are relative disadvantages as to the
scope, adjudication, and enforcement of labor law obligations within this
organization. ILO recommendations are not legally binding. The conven-
tional labor standards are only binding on those member states that have
signed and ratified them. The number of ratifications varies from conven-
tion to convention. For example, in spring 2002, Conventions 138 and 182
on the abolition of child labor were ratified by less than two thirds of the
member states. Furthermore, there is no mandatory dispute settlement sys-
tem available, although there are procedures for the complaints of states
and workers' or employers' organizations. The settlement of disputes,
however, relies on the classical instruments of public international law,
particularly the International Court of Justice, requiring express submis-
sion to its jurisdiction as provided for in Art. 36 of the statute of this court.

16 J. Viner, Dumping : a Problem in International Trade (1991).

17 Cf. Werner Meng , Art. 57 UN Charter, no. 52-59, in Bruno Simma (ed.) The
Charter ofthe United Nations . A Commentary (2nd ed. 2002) .
380 Werner Meng

Consequently, considerable differences exist between the ILO and WTO

as to the adjudication and enforcement of legal disputes. The attitude of
states with regard to the attribution of labor law questions, either exclu-
sively to the ILO or also to the WTO, is therefore determined by their re-
spective political interests. On the one hand, there are states, particularly
the USA and, with more nuances, the EU, which might prefer to address
this subject within the framework of the WTO, so as to include difficult
questions in package deals that benefit all parties, an approach proven to
be successful in the intellectual property area with the achievement of the
TRIPS Agreement. This objective of more efficiently regulating minimum
standards within the WTO law than in the ILO, due to the particular dis-
pute settlement and enforcement mechanism of the WTO, was vigorously
rejected by most developing countries in the WTO , who feared a creeping
loss of their most important comparative advantages. Furthermore, as his-
tory has shown, particularly in the field of anti-dumping and anti-subsidy
law, legalized defense mechanisms may easily be turned into instruments
of hidden protectionism.
Thus labor never became an issue, not in the context of the Uruguay
Round Agreements nor during the ongoing negotiations since 1995. In
Singapore 1996, American attempts to introduce the subject in negotia-
tions were rejected and the remaining declaration weakly reflected the ini-
tial goal:"
"4. We renew our commitment to the observance of internationally recognized
core labour standards. The International Labour Organization (ILO) is the compe-
tent body to set and deal with these standards, and we affirm our support for its
work in promoting them. We believe that economic growth and development fos-
tered by increased trade and further trade liberalization contribute to the promo-
tion of these standards. We reject the use of labour standards for protectionistpur-
poses, and agree that the comparative advantage of countries, particularly low-
wage developing countries, must in no way be put into question. In this regard, we
note that the WTO and ILO Secretariats will continue their existing collabora-
tion."
The ILO Declaration on core labor rights of 1998 19 was a reaction to this
WTO statement. It stated four "core labor rights" and used cautious lan-
guage against the possibility of using sanctions against their violation:
"2. Declares that all Members, even if they have not ratified the Conventions in
question, have an obligation arising from the very fact of membership in the Or-

18 SingaporeMinisterialDeclarationWTIMIN(96)/DEC 18 December 1996.

19 International Labor Conference, 86th Session, Geneva 1998. Cf. C.R. Coxson,
"The 1998 ILO Declaration on Fundamental Principles and Rights at Work",
17 Dickinson Journal ofInternational Law (1999) 469-504.
 11 International Labor Standards and International Trade Law 381

ganization, to respect, to promote and to realize, in good faith and in accordance

with the Constitution, the principles concerning the fundamental rights which are
the subject of those Conventions, namely:
(a) freedom of association and the effective recognition of the right to collec-
tive bargaining;
(b) the elimination of all forms of forced or compulsory labour;
(c) the effective abolition of child labour; and
(d) the elimination of discrimination in respect of employment and occupation .

5. Stresses that labour standards should not be used for protectionist trade pur-
poses, and that nothing in this Declaration and its follow-up shall be invoked or
otherwise used for such purposes; in addition, the comparative advantage of any
country should in no way be called into question by this Declaration and its fol-
low-up."
Apart from this declaration, which the ILO - Working Party on the So-
cial Dimension of Globalization, installed as a nucleus for the ILO's con-
tinuing activities in the "Trade and Labor" field, the organization has so far
been unable to achieve other tangible results. Particularly, the problem of
the admissibility of trade sanctions to enforce core labor rights divided the
member states and still does." Referring the subject to the ILO was con-
sidered to be a move to win time rather than an effort to effectively deal
with "Trade and Labor". This is the main reason why the question of
whether to introduce the subject in a new round of trade negotiations in the
WTO was not dropped by some, mostly developed, states. The subject not
only divided developing and developed states" but also divided actors
within member states. In the USA, the Democrats always wanted the sub-
ject on the agenda of a new trade round," while the Republicans were vig-
orously opposed to this position." The American Labor Unions were in fa-
vor, while the employers were opposed." In principle, the EU favored
inclusion of the subject but proposed a Joint ILO/WTO Standing Working
Forum without an official institutional position in the WTO.25
In Seattle, at the end of 1999, President Clinton tried to reintroduce the

20 Source: BRIDGES Weekly Trade News Digest vol. 2 (1998), no. 5.

21 Some developed parties, however, changed their positions for tactical reasons
when they saw the unconditional opposition of developing states to any inclu-
sion of the subject in a new WTO round.
22 They exerted pressure by linking this question to the granting of a new "fast
track authority" for the president.
23 Source: BRIDGES Weekly Trade News Digest vol. 3 (1999), no. 3.
24 Source: BRIDGES Weekly Trade News Digest vol. 3 (1999), no. 44.
25 Source : BRIDGES Weekly Trade News Digest vol. 3 (1999), no. 44.
382 Werner Meng

subject to the WTO agenda by threatening unilateral sanctions. This was

one of the reasons for the complete breakdown of the Seattle conference
and demonstrated the explosiveness of the dispute on "Trade and Labor"
questions. In the preparatory talks for the Doha Ministerial Conference
2001 , the most important developing countries, particularly India and Pak-
istan, reiterated their flat refusal to include the subject on the agenda. The
"G-15" as well as the "G-77" made unequivocal declarations. They were
supported by the Director General of the WTO, the Secretary General of
the United Nations, as well as the International Chamber of Commerce."
Since the USA and the EU wanted Doha to be a success, it was not surpris-
ing that the statement on the subject was short and laconic: "
"8. We reaffirm our declaration made at the Singapore Ministerial Conference
regarding internationally recognized core labour standards. We take note of work
under way in the International Labour Organization (ILO) on the social dimension
of globalization."
Afterwards, in March 2002, the ILO created the World Commission on
the Social Dimension of Globalization," comprising 21 distinguished per-
sonalities, among them two state heads as co-chairmen (the Presidents of
Finland and Tanzania). Time will tell whether this commission will resolve
the questions arising from the relationship between trade and labor . It
seems thus far that the same problems that paralyzed the dialogue on these
subjects in the WTO are also preventing any agreement within the ILO.
The crucial question does not seem to be whether the organization is ap-
propriate but rather finding the appropriate solution, taking into account
the fundamental differences between the interests of developing and de-
veloped states.
On the one hand, the developing countries are afraid of the use of the ef-
ficient enforcement instruments of the WTO in labor disputes. The history
of the GATT and now WTO mechanisms countervailing price dumping
and state subsidies shows that these mechanisms against unfair trade prac-
tices may be abused for protectionist purposes. In the WTO, with its effec-
tive adjudication, the danger of abuses, and particularly a lack of sanctions
for such abuses is certainly reduced, but the main problem is agreeing in
the first place as to which activities or omissions are violations of interna-
tionally binding labor standards and which behavior can be deemed unfair.
Thus, in statements postulating "no trade sanctions in disputes concern-
ing labor standards" the focus is not on the sanctions but on the cases in

26 Source : BRIDGES Weekly Trade News Digest vol. 3 (1999), no. 27.
27 Doha- Declaration (WT/MIN(OI)/DEC/I of November 14, 200l.
28 GB.283IWP/SDG/3.
 11 International Labor Standards and International Trade Law 383

which such sanctions are to be used. There is not sufficient consensus on

what is acceptable, what is odious, or what is unfair in labor law. With
some qualifications, the WTO has removed the subject from its agenda for
at least the next four years. The members "reject the use of labour stan-
dards for protectionist purposes"; it is unclear whether this means that
trade sanctions are prohibited even when they are countermeasures against
the violation of binding labor standards. The members "agree that the com-
parative advantage of countries, particularly low-wage developing coun-
tries, must in no way be put into question", however, it is unclear whether
cheap labor is always the result of a comparative advantage.
Therefore, although it may be stated that currently "Trade and Labor" is
a "non-issue in the WTO" ,29this is only true for the negotiations about new
law. There may not be a "social clause" in WTO law,> but the questions
remain : Are there remedies for "unfair labor practices" if they amount to a
breach of obligations under existing international obligations? Is it possible
under the present law to use trade sanctions as countermeasures against
human rights violations and possibly against violations of other conven-
tionally agreed-upon labor standards? Even without a "social clause" , the
WTO will not be able to ignore these labor law questions . For example, a
state enacts trade sanctions against another state, banning the import of
rugs or footballs produced by 6-10 year-old children. The export state may
demand that a panel be instituted according to the rules of the DSU and
this panel as well as probably the Appellate Body would deal with the
question of whether these sanctions are justified and thus lawful under
WTO law. The prohibition of child labor could serve as a justification for
the ban. At this point, a WTO organ could not refer the matter entirely to
the ILO. The case would have to be decided in the WTO that is, according
to Art. 23 DSU, the exclusive forum for deciding on possible violations of

29 It is mentioned to some extent on the websites of the WTO, but ostensibly un-
der the heading "not on the agenda". They insist that the Singapore declaration
cannot be interpreted another [any other] way and that "for the time being"
there are no committees or working parties dealing with the issue.
30 It should be added that there are social clauses in regional agreements, such as
NAFTA and Mercosur, and in bilateral agreements such as the US - Jordanian
or the Canadian - Costa Rican free trade agreements. The problem of enabling
the building of dams against "unfair cheap labor" is also playing a considerable
role in the negotiations for free trade agreement for the Americas (FTAA).
There are also practices to combine preferential treatment of states with safe-
guards against cheap labor. These treaty regimes are all marked by the predom-
inance of the USA[,] which is often successful in pressing for such clauses. The
structure of interests in the WTO is different, so that both the US and the EU
could not succeed in putting trade and labor on the Doha agenda.
384 Werner Meng

the rules of non-discrimination and the prohibition of non-tariff barriers in

international trade law. Here the problem arises how these matters are to
be evaluated under substantive WTO law.

11.4 Trade sanctions against violations of labor rights

under WTO law

Human beings are not pale shadows in economic theory. Their work is part
of their personal freedom, an expression of their active participation in so-
ciallife. Human rights are binding on states that accepted them by treaty or
customary law; they are a common and not disposable standard of the legal
orders of these states. The same is true for other contractual labor stan-
dards that states have mutually accepted as common treaty law.
There are different levels of labor rights or standards. It is questionable
whether this difference in legal "dignity" may influence their treatment un-
der WTO law, while under general public international law, there is no
doubt that all violations of obligations might be answered by sanctions if
the specific requirements of the right to countermeasures are fulfilled."
Human rights in the labor field were already mentioned in 1946 in the
Universal Declaration of Human Rights. They are, although with different
degrees of strictness, proclaimed by the UN International Covenant on
Economic and Social Rights of 1966, as well as in regional human rights
treaties." These rights are protected in many national constitutions and are
also mentioned in the new Charter of Fundamental Rights> of the Euro-
pean Union. The exact scope of human rights protection in the labor law
field is controversial. They may contain true individual rights or merely
state obligations to progressively reach a goal, as reflected in Art. 2,
para. 1 of the ICESCR : "Each State Party to the present Covenant under-
takes to take steps, individually and with international assistance and co-
operation, especially economic and technical, to the maximum of its avail-
able resources, with a view to achieving progressively the full realization
of the rights recognized in the present Covenant by all appropriate means,
including particularly the adoption of legislative measures."

31 See the "Draft articles on Responsibility of States for Internationally Wrongful

Acts" of the ILC (2001) http://www.un.org/law/ilc/texts/StateJesponsibility/
responsibilityfra.htm.
32 These treaty obligations are - of course - only binding on those states that have
signed and duly ratified the treaty.
33 Available at:
http://europa .eu.int/comm/justice_home/unit/charter/index_eu. html.
 11 International Labor Standards and International Trade Law 385

Many of the state duties in conventions on social human rights are sub-
ject to such "available resources" condition, although not all of them."
However, they stipulate at least true obligations for the states to endeavor
to reach the projected level of protection, as the Commission of the UN
Covenant on Economic and Social Rights ably stated in its well-known
"General Comment 3" on Art. 2, para 1 ICESCR.35 The UN Charter itself
commits all its members to guarantee and safeguard human rights."
The ILO declaration, unanimously proclaimed in the International Labor
Conference 1998, states that four core labor rights are an obligation of all
ILO member states' ? "arising from the very fact of membership in the Or-
ganization", particularly minimum wages, maximum working hours, a
minimum health and safety standard, and a general right to work. This
catalogue comprises labor rights that are not dependent on the "available
resources" of the national economies as stated by the UN Covenant." All
members have accepted this interpretation of the ILO Convention" and are
bound by these rights. In general, human labor rights as well as the "core
labor rights" are international treaty or customary law obligations of all
members.
The same holds true of the considerable body of labor rights stipulated
by the now 184 ILO conventions." The issue here is not the evaluation of
the status of particular labor standards existing or evolving in the commu-
nity of states. It suffices to state that there are labor rights which are widely
accepted, such as the right to form labor unions, while other human rights
are accepted as a core but disputed as to their scope, such as the prohibi-

34 For instance, the basic right to form trade unions (Art. 8, para. 1) does not draw
on resources of a state, while the right to work under Art . 6, para. I apparently
does.
35 The nature of States parties obligations (Art. 2, para. 1): . 14/12/90. [?] CESCR
General Comment (http://www.unhchr.ch/tbs/doc.nsf/(Symbol)/94bdbaf59b43
a424cI2563ed0052b664?Opendocument).
36 See the preamble that reaffirms "faith in fundamental human rights, in the dig-
nity and worth of the human person, in the equal rights of men and women".
Art. 55 of the UN Charter states expressly the duty of the members to promote
"universal respect for, and observance of, human rights and fundamental free-
doms for all without distinction as to race, sex, language, or religion".
37 Whereas the ILO still has more member states than the WTO (175 in 2002), all
the WTO members (144 in 2002) are also ILO members.
38 Art . 2, para. 1 ICESCR.
39 Especially the Preamble to the Convention and the Statement of the objectives
and purposes of the ILO contained in the Philadelphia Declaration.
40 See Charnovitz, note 5; Lee, note 1.
386 Werner Meng

tion of child labor." However, the question generally arises with respect to
all labor standards binding states under public international law whether
their violation might be answered by countermeasures, and particularly by
trade sanctions.
But do not the WTO members themselves renounce on using trade tools
for preserving labor law in solemnly stating in Singapore and also in Doha
that labor rights' disputes should not be resolved by trade sanctions? So far
it appears that these are merely political statements and without legal con-
sequences. Furthermore, since the preservation of comparative advantages
is expressly mentioned in the same statements, it appears as if they were
only meant to cover cases of mere purported unfairness (social dumping)
without unlawful behavior. Therefore, it is submitted that trade sanctions
for labor law violations have not been expressly excluded by the WTO
members in their declaration.
The use of general public international law concerning countermeasures
has been excluded by Art. 23 DSU if the dispute concerns the violation of
WTO law itself. Insofar, the DSU procedure is lex specialis in relation to
general rules . In the IL042 or under human rights conventions there are no
such exclusive enforcement regimes, so that recourse to general public in-
ternational law rules is open from this side of the problem. Consequently,
it is necessary to evaluate whether WTO law itself permits or prohibits
such sanctions as countermeasures.
WTO law is applicable if states want to impose economic sanctions to
prohibit or burden the importation of goods that they believe are produced
under conditions violating human rights. Since it will always only be one
or a few WTO member states allegedly acting unfairly or unlawfully, the
question is: could products from these countries be singled out and treated
less favorably than domestic products or like products from other coun-
tries? However, Art. I GATT, the most favored nation clause, states that
products from one country have to be treated the same as "like products"
from a country which has been granted most favored access to the market.

41 Important factors in the discussion about the scope of these rights are different
cultural traditions and different stages of development. It might - however - be
doubtful how these socially motivated limits relate to the personal, globally
equal and immutable dignity of the human being.
42 Cf. the procedural rules in Art . 26 to 34 of the ILO Constitution concerning a
preliminary activity of the Commissions ofInquiry and the possible referral IC]
without mandating the submission of all ILO members to the jurisdiction of this
court. The procedures mentioned there are neither exclusive nor prevailing gen-
eral public international law concerning state responsibility. There are also no
special exclusionary rules concerning enforcement in the International Human
Rights instruments.
 11 International Labor Standards and International Trade Law 387

This non-discrimination principle concerns the treatment of all imported

goods in relation to each other. It is complemented by the principle of na-
tional treatment, Art. III GATT, which prohibits discrimination between
national products and like products that are foreign. Furthermore, Art. XI
GATT, in principle, prohibits the use of non-tariff barriers against goods
from abroad. Import prohibitions or restrictions would be such barriers.
The question whether goods produced under circumstances that consti-
tute a violation of human rights, core labor standards, or other labor law
obligations are "like products" in the sense of Arts. I and III GATT is open
again after the Appellate Body of the WTO decided in the "asbestos
case"43 that likeness is not confined to the product's physical characteris-
tics, as was consistently held in a long series of GATT and WTO deci-
sions, the "Shrimp/Turtle" case-' being the most recent example. However,
trade sanctions would in principle also violate the prohibition of non-tariff
barriers under Art. XI GATT, where the "like products" test generally is
not applicable." Embargos or comparable sanctions are, in principle, a vio-
lation of Art . XI, no matter why they are being applied, if there is no justi-
fication. For the field oflabor law, such justification could be found best in
the general catalogue of exceptions for public purposes in Art. XX GATI.
Art . XX (g) contains a clause on "prison labor", stipulating that products
made in prisons do not enjoy free access to markets of member states.
Member states are therefore free to prohibit the importation of such goods
or to apply any lesser measures. It is doubtful whether this rule can be ex-
tended by way of analogy. When the GATT was drawn up, people knew
that there are other forms of "odious labor", but as there was no consensus
about them, only "prison labor" is mentioned.
Art. XX (b)46is another possible provision for addressing labor law vio-
lations in the GATT context regarding rules protecting workers' health. It
may be doubtful whether this gives states the right to protect the health of
workers in foreign countries by banning the import of products violating
rules safeguarding health. However, one could also argue that opening a
market for such goods actively contributes to prolonging the human rights
violations of the workers, thus constituting an unlawful action in itself.
Healthy conditions of production methods are not mentioned in the core
labor rights declaration of the ILO, but they can be derived as a human

43 European Communities - Measures Affecting Asbestos and Asbestos-Contain-

ing Products, WT/DS/135 /AB .
44 United States - Import Prohibition of Certain Shrimps and Shrimp Products,
WT/DS/58 /AB .
45 Only with respect to agricultural goods, cf. Art. XI.2 .c GATT.
46 "[... ]measures necessary to protect human, animal or plant life or health."
388 Werner Meng

right from other instruments. Art. 23, para. I of the Universal Declaration
of Human Rights mentions the right to "just and favourable working con-
ditions of work", and Art. 7, para I (b) of the "International Covenant on
Economic and Social Rights" proclaims that this must include "safe and
healthy working conditions".
A further viable method for introducing a general protection of human
rights at home and abroad into WTO law seems to be the clause contained
in Art. XX (a) GATT whereby states have a right to protect "public mor-
als"." In the beginning of GATT, it is most likely that this term did not re-
fer to internationally protected human rights. However, the history of the
introduction of concepts of environmental protection into GATT law
shows that this field of law is developing gradually, and its interpretation
must take into account the dynamic development of certain legal concepts.
It is no longer doubted that human rights are part of the ethical foundation
of states that, under public international law, must be guaranteed and pro-
tected.
Since ethic is "a set of moral principles or values"48 and therefore the
word "morals" is a synonym of "ethic"," the clause concerning the protec-
tion of "public morals'>" is one possible starting point for a comprehensive
human rights protection under WTO law", This illustrates that WTO law
is not blind to human rights and it would bring WTO law in conformity
with the duty to promote human rights under Articles 55 and 56 of the UN
Charter. However, it is disputed whether these Charter provisions really
contain a strict obligation, requiring particular action or abstention, or only
a rather amorphous duty to further human rights. But as far as human
rights are agreed upon by WTO member states by treaty or customary law,
their preservation might be part of national and even international "public
morals". In contrast, however , this exception does not refer to isolated
moral convictions in one or some states. Otherwise it would be an arbitrary

47 Robert Howse and Michael J. Trebilcock, "The Fair Trade-Free Trade Debate:
Trade, Labor, and the Environment, " (1996) 16 Int'l Rev. ofLaw and Econom-
ics, 61-79.
48 According to the Merriam-Webster Collegiate Dictionary.
49 According to the Merriam-Webster Collegiate Dictionary.
50 C.T. Feddersen, "Focusing on Substantive Law in International Economic
Relations: the Public Morals of GATT's Article XX (a) and 'Conventional'
Rules ofInterpretation", 7 Minnesota Journal ofGlobal Trade (1998), 75-122;
S. Charnovitz, "The Moral Exception in Trade Policy", 38 Virginia Journal of
International Law (1998),689-744.
51 A similar case makes L.M. Jarvis, "Women's Rights and the Public Morals Ex-

ception of GATT Article 20", 22 Michigan Jl. of International Law (2002),

219-238.
 11 International Labor Standards and International Trade Law 389

justification for violating WTO law. It therefore has to be restricted to

moral values common to all WTO members. So it might cover cases of
violation of universal human rights or quasi-universal core labor rights ac-
cording to the ILO statement as part of an "international public order". It
shall not be applied to the violation of particular obligations of labor law
that are not recognized by the WTO member states as a whole.
Another possible justification would be to apply the general principle of
public international law which states that violations of an obligation may
be answered by a proportional countermeasure," no matter whether it con-
cerns human rights or other obligations, or whether these obligations are
universally accepted or only treaty law between two states. But can general
public international law really justify violations of WTO law? As the Ap-
pellate Body stated in the Gasoline Case, the GATT is not to be read in
clinical isolation from public international law." Thus it would seem that
WTO law is not an entirely "self contained regime". However, it should be
borne in mind , that Art. 3.2 draws a clear limit for extensive interpretation:
"Recommendations and rulings of the DSB cannot add to or diminish the
rights and obligations provided in the covered agreements." This has to be
read together with the other sentence in the same paragraph, according to
which the DSU procedure serves "to clarify the existing provisions of
those agreements in accordance with customary rules of interpretation of
public international law".
This could be read as limiting the DSU institutions to the use of the cus-
tomary interpretation rules of public international law when applying
WTO law. However, this would lead to the completely unsatisfactory re-
sult that panels and the Appellate Body would have to disregard other
norms of public international law that influence the applicability of WTO
law. Under these conditions, the final result could not reflect the complete
state of the law." The assumption that general rules of public international
law like those on state responsibility and the justification of countermea-
sures are not at all applicable in WTO law since this law generally super-
sedes and thus excludes the application of all general norms of public in-
ternationallaw, would be tantamount to saying that the enforcement struc-
ture of public international law was dramatically changed in 1947 or in

52 Cf. the ILC Draft, supra note 31.

53 United States - Standards for Reformulated and Conventional Gasoline
(WT/DS2/AB/R).
54 The result of a DSU procedure would not be to state what the Public Inter-
national Law is but rather what the rules of WTO law say with a reservation
that this might be further influenced by other norms of public international law
that the panel or the Appellate Body is not allowed to apply.
390 Werner Meng

1994, because trade sanctions could consequently only be possible in the

few topical cases enumerated in Art. XX.
Given the importance of economic sanctions in public international law
and of countermeasures in general for the enforcement of international le-
gal obligations, this would mean that WTO law had substantially curtailed
the possibility for countermeasures, since economic sanctions are often the
most efficient available countermeasures, notwithstanding the fact that
their effects are not always positive. 55
Furthermore, if the possibility of trade sanctions were completely abol-
ished in labor law cases, the efficiency of labor rights would be jeopard-
ized. Also, it must be borne in mind that violations of labor standards
agreed upon by the states is an unfair use of unlawful behavior for com-
petitive purposes. It would be difficult to understand why states that suffer
from such behavior should nevertheless be bound by their trade obligations
without being able to sanction the other states' labor rights violation.
Since such an interpretation of the DSU is not reasonable, it is prefer-
able to interpret Art. 3.2 DSU referring to Art. 31 of the Vienna Conven-
tion on the Law of treaties in a broad way. The Vienna Convention is to a
large extent a codification of customary public international rules on inter-
pretation." It allows for taking into consideration while referring to the
context of the norm "any relevant rules of international law applicable in
the relations between the parties". Here is the key for the consideration of
the comprehensive legal relationship between the contracting partners. The
law of general state responsibility may also be applied" in order to assess
whether the obligations under WTO law may have be correctly suspended
during trade sanctions. This does not "add to or diminish the rights and ob-
ligations provided for in the covered agreements", because these rights and
obligations are always defined by the rules of general public international
law applicable to them.
In sum, this means that trade sanctions, which would contravene Art. I,
III, or XI (and possibly also Art. II) GATT, may be justified even beyond
the reasons enumerated in Art. XX and XXI GATT - that might suffice if

55 D. Barnhizer, Effective Strategies for Protecting Human Rights: Economic

Sanctions , Use of National Courts and International Fora and Coercive Power
(2001); G.c. Hufbauer, J.1. Schott and K.A. Elliott, Economic Sanctions Re-
considered : History and Current Policy (1985); S.S. Gibson, "International
economic sanctions", 13 Emory International Law Review (1999), 161-245.
56 United States - Standards for Reformulated and Conventional Gasoline
(WTIDS2/AB/R) .
57 Like the Appellate Body did in the United States - Transitional Safeguard Mea-
sure On Combed Cotton Yam from Pakistan (WT/DSI92/AB/R) .
 11 International Labor Standards and International Trade Law 391

obligations concerning internationally recognized" public morals are

breached - if they are countermeasures to violations of international law in
accordance with the general rules of state responsibility. This does not dis-
regard the importance of the enumeration in Art. XX but assumes that this
enumeration is not exhaustive and not contingent on the unlawfulness of
state actions. It is a catalogue of reasons for self-protection, and not of
countermeasures against unlawful acts. This result is also consistent with
the obligation in Art. 55 and 56 of the UN Charter, for otherwise it would
be impossible to enforce human rights obligations effectively in situations
below the threshold of chapter VII of the Charter. The only exception to
the power of WTO members to adopt unilateral trade sanctions are situa-
tions in which such sanctions would be countermeasures against violations
of WTO law itself, for here the exclusiveness of the dispute settlement
process as stated in Art . 23, para. I DSU is a special rule superseding gen-
eral international law.
One could argue that opening the door to general countermeasures puts
WTO law on a slippery slope. But it is submitted that the situation is not as
dangerous as it might seem, because the obligatory dispute settlement pro-
cedure under the DSU submits the cases of trade sanctions automatically to
the panel and appellate body jurisdiction if the state targeted by the sanc-
tions applies to commence a procedure according to the DSU. Trade sanc-
tions are no longer a unilateral state prerogative. They must be justified -
under WTO law as well as under general public international law - and
will be evaluated by independent adjudicative bodies.
Such an application of trade countermeasures against violations of in-
ternational labor law obligations is not only not harmful to WTO law but
even favorable. International trade usually increases the chances that states
with labor intensive productions will expand. If little children or forced
prison labor are used in the manufacturing of products, the resulting eco-
nomic success might entice others and increase human rights violations. 59
Based on this assumption, world trade would be directly responsible for
prolonging and even worsening the ill fate of forced laborers. The same
holds true for other labor rights that are considered to be human rights or
have been agreed upon by states in one of the numerous labor law conven-
tions held within the institutions of the International Labor Organization.

58 I.e. at least by all WTO member states.

59 However, one should also be cautious to state such causalities as self-under-
standing wisdom, for an incentive might be that economic success entails tech-
nological development that might relieve the old odious methods of production .
These statements have to be taken as a basis for legal reasoning, not as econo-
mic truisms.
392 Werner Meng

There are two aspects to violations of these conventions: they violate

individual rights or even human dignity and should be eradicated, as can
be derived from Articles 55 and 56 of the Charter of the United Nations,
and they allow for lower production costs than in states observing these
rights and obligations, thus creating an advantage in international competi-
tion that is more than unfair, namely unlawful. There is therefore an ethical
and an economic interest in sanctioning violations of such rights. So WTO
law with its basic thrust of reducing trade barriers and channeling trade
sanctions is nevertheless sensitive to human rights violations and unfair
exploitation of advantages caused by unlawful conduct, allowing for trade
sanctions in these areas. It is of utmost significance to prove to trade liber-
alization skeptics that WTO law is not blind to the basic values of human-
ity and is not only geared towards maximizing economic profit.

11.5 Possible Conflicts

WTO members may enact economic sanctions if the conditions of general

public international law are met, albeit under the scrutiny of the DSU insti-
tutions . This considerably lowers the danger of outright protectionism in
the guise of human rights protection . However, it confers on the panels and
the Appellate Body the duty to decide the scope and content of the "core
labor rights" and other human rights that are sometimes not very clear or
even disputed, as in the case of child labor." Furthermore, conflicts may
arise between the interpretation of the DSU bodies and possible diverging
opinions of other international bodies, be it the organs of the ILO or other
international organizations or courts and other quasi-judicial bodies in the
international human rights field.
These problems are already well-known in the field of environmental
law. However , at present they can only be mitigated, but not completely
eliminated. The states themselves and the dispute settlement organs must
be aware of these problems, and the latter should defer to legal findings of
organs specialized in human rights protection and in the formulation and
delimitation of core labor rights. However, if there is no case law available
yet, they will have to decide on their own. It would be preferable that the
DSU organs refer such cases to the specialized fora whose findings should
be binding or at least prejudicial to the WTO institutions. But this would
need a power of these organs to do so, and the development of efficient
complementary settlement institutions in the other competent organiza-

60 Janelle M. Diller and David A. Levy, Child Labor, Trade and Investment: to-
wards the Harmonization ofInternational Law (1997).
 11 International Labor Standards and International Trade Law 393

tions. As long as this is not resolved in a satisfactory manner, the DSU or-
gans will have to decide on labor law violations if they are at the basis of
justification of the trade sanction at stake.

11.6 Conclusion

The previous considerations have shown that violations of labor rights of

any state under public international law might be answered even among
WTO member states by trade sanctions if they are in conformity with the
requirements of general public international law and, as far as it is applica-
ble, with those of the "chapeau" of Article XX GATT.6\ These limits can
be controlled by the dispute settlement organs of the WTO in a procedure
according to the DSU if the target state requires so.
On the other hand, it is also clear that under the present WTO law it is
impossible to justify sanctions or countervailing measures against "social
dumping" based on purported "unfairness" without being unlawful. Con-
cepts of a "level playing field" based on an amorphous concept of "fair-
ness" seem foreign to the basic ideas of the WTO order, and it can only be
explained historically that they still exist in the area of "price dumping"
under Art . VI GATT and the Antidumping Agreement of the Uruguay
Round." Without a general consensus of WTO members, this exceptional
remnant of an earlier international trade law cannot - and should not - be
extended to social conditions.
Is there any need for creating an instrument against cheap labor and "so-
cial dumping"? Cheap labor is not automatically "social dumping". Wages,
social security standards, vacation days, and working hours are a result of
historical developments, of the level of economic development, of tradition
and, therefore, of relations within a society that go far beyond mere labor
relations . Differences in these parameters cannot be assessed as being un-
fair trade advantages, since these differences in development have been
and still are natural for all national economies and comparative advantage
is a positive driving force in increasing the international welfare by liberal
trade. As long as there is no common understanding on what should be

]the requirement that such measures are not applied in a manner which
6 1 " [ .. .

would constitute a means of arbitrary or unjustifiable discrimination between

countries where the same conditions prevail, or a disguised restriction on interna-
tional trade."
62 Agreement on Implementation of Article VI of the General Agreement on Tar-
iffs and Trade . Cf. Raj Krishna and World Bank., Antidumping in Law and
Practice (Washington, DC, 1997).
394 Werner Meng

considered as unfair, it is hardly conceivable that all WTO members would

agree on such a "social clause". There is no possibility that a certain de-
gree of harmonization would be acceptable in the foreseeable future (and it
might also be doubtful under economic aspects whether such a leveling
would be favorable).
In exceptional cases, states may invoke Art. XIX GATT for temporarily
defending themselves against excessive consequences of competitive dy-
namics ("a result of unforeseen developments and of the effect of the obli-
gations incurred by a contracting party under this Agreement"). But no
state may countervail the basic effects of price competition based on labor
conditions under WTO law; they can only be remedied by national social
policy. International efforts to create a social net for losers of the
globalization in developed countries will most probably not be realistic
still for a long time to come. There is no indication at this point that the
assertive blockade of the majority of developing countries might be lifted
heffhe only feasible way will be that more and more labor standards that
can be agreed upon on a universal level are elaborated by the ILO as treaty
law. A second necessity seems to be the development of a co-operation of
WTO and the ILO by procedural rules in order to develop a dependable
case law on the violation of labor standards and the appropriate legal reac-
tions thereon.
What if the ILO also were to set up a mandatory dispute settlement sys-
tem in labor rights cases? In that case, the members of both organizations
would face the problem of keeping both systems coherent in order to avoid
possibly conflicting decisions in the same case. The problem already exists
in the relation between the Law of the Sea Tribunal in Hamburg and the
DSU institution in Geneva. There is no solution to this problem at this
point. It is a typical feature of public international law that lacks a central
judicial body. However, states will have to cope with the problem and de-
velop specific conflict rules if they want to avoid a fragmentation of public
international law. The general doctrine of classical public international law
is not very helpful in coping with such recent problems in a sound manner
avoiding counterproductive conflicts. The international legislator 's input is
required.
11A Core Labor Standards and the WTO: Beware
of Unilateralism! - A Response to Werner Meng

Arie Reich'

Contents
IIA.I Introduction: Between Diversity, Relativism and
Universalism 395
II .A.2 Promotion of Core Labor Standards through GATT
Article XX(a): Some Legal Obstacles 397
11.A.3 Normative Analysis: The Harmful Effects of
Unilateral Trade Sanctions .401
11.AA Alternative Approaches .406

11A.1 Introduction: Between Diversity, Relativism and

Universalism

This wonderful conference is taking place on Mount Scopus, an ancient

hill with a beautiful view of the city of Jerusalem - hence its name. This
city, a holy city to no less than three central religions of the world, serves
as a meeting place for a myriad of different religious sects, cultures, na-
tionalities, convictions, and political parties and groups, and symbolizes,
perhaps more than any other place in the world, both the virtue and the
vice of human diversity. Cultural, religious, and economic diversity is an
integral part of our world, indeed of human existence, and is one of the
sources of the world's continuous and healthy development, both economi-
cally and culturally. In the past, modem Western society saw the "melting
pot" as the ideal and as one of the means that would bring peace and pros-
perity both within the nation-state and between nations. In the post-modem
era, however, realization of the virtue of diversity has emerged and the

, Senior Lecturer, Faculty of Law, Bar Han University. Director of the Center for
Commercial Law .
396 Arie Reich

model of multiculturalism has replaced the melting pot. I This realization,

however, must not lead us to a destructive type of relativism, in which
every act or position can be defended, and no act or practice - no matter
how atrocious or malicious - can be denounced. Certainly there must be
basic values and "core" human rights that have universal application and
are respected by all.
Against this background, I agree fully with Professor Meng's important
distinction, in his paper on "International Labor Standards and Interna-
tional Trade Law", between so-called "core labor standards", which have a
universal human rights aspect, and other labor standards - as important as
they may be. Labor standards, in relation to issues such as wages, social
security, vacations and working hours are, as Prof. Meng so rightly points
out, a result of history, the level of economic development, tradition, and
relations within a society that go far beyond mere labor relations. They re-
flect the relative factor endowment of a national economy; one cannot
even dream of artificially imposing worldwide uniformity on such stan-
dards. Therefore, the talk about "social dumping'? in this context and the
need to countervail products manufactured under labor conditions lower
than those of the importing country, in order to "level the playing field"
and ensure "fair trade", often reflects either deep ignorance and misunder-
standing, or thinly disguised protectionism. This same logic, normally used
to justify restrictions or countervailing duties on cheap imports from poor
to rich countries, could just as well be used to justify restrictions on im-
ports from rich to poor countries. One could easily sustain an argument on
similar foundations, in which these restrictions are required to countervail
the developed economies' unfair advantage in fields such as scientific de-
velopment and ownership of intellectual property - a gap that it will be dif-
ficult for the developing countries to ever bridge. I often hear arguments
for allowing countervailing duties against "social dumping" from US stu-
dents who are convinced that "the American way" is the way, and that eve-
ryone else should just adapt accordingly. When I explain that if their sug-
gestion is adopted by the GATT, Israel will be able to countervail US
products imported into Israel; considering that US labor standards mater-

I See e.g. Multiculturali sm: Examining the Politics ofRecognition (c. Taylor et
al., eds.) (Princeton University Press, Princeton, 1994); Will Kymlicka, Liber-
alism, Community and Culture (Clarendon Press, Oxford, 1989) (for a liberal-
philosophical defence of multiculturalism).
2 The term "social dumping" refers to the "export of products that owe their com-
petitiveness to low labor standards". Steve Chamowitz, "The Influence of Inter-
national Labour Standards on the World Trading Regime", 126 Int'! Lab.
Rev. 565, 566 (1987).
 IIA Comment on Werner Meng 397

nity leave for mothers and many other social security guarantees are lower
than in Israel, they are at first very surprised and then usually change their
minds.
Lower wages and lower labor standards are therefore part of the com-
parative advantage of developing countries, enabling them to participate in
the global economy. By blocking their exports, the rich countries will only
bring about the closure of their plants and impede their economic devel-
opment - causing them to sink back into under-development and poverty.
This will certainly not improve their living conditions . On the contrary, al-
lowing the free flow of imports will contribute to their continued economic
development and rising standard of living. Experience has shown this strat-
egy to be much more effective for raising labor standards in developing
countries .
However, some types of employers ' behavior cannot be justified by any
economic development argument, or by any cultural difference. Violations
of human rights such as unlawful child labor, forced labor, or prohibition
of collective bargaining are not part of a country's comparative advantage
and should not be justified under international law, nor under international
trade law. This is indisputable. Hence the distinction between human rights
in the labor field - such as those included in the 1988 Declaration of the
International Labor Organization (ILO)3- and other labor rights. The ques-
tion is how to go about achieving wider acceptance and respect for core la-
bor rights, and whether or not unilateral trade sanctions are the answer.

11.A.2 Promotion of Core Labor Standards through GATT

Article XX(a): Some Legal Obstacles

In this regard, I wish to caution in relation to Professor Meng's suggestion

in the last part of his paper.' He suggests that human rights protection
could be introduced into WTO law through Article XX(a) GATT,S where-
by states have a right to deviate from the Agreement if it is necessary to
protect "public morals". He argues that "morals" is a synonym for "ethics"
and that the protection of "public morals" could therefore be understood to

3 ILO Declaration on Fundamental Principles and Rights at Work, 1998, ILO

Document CIT/1998/PR20A (available through the ILO website http://www.
ilo.org).
4 Werner Meng, "International Labor Standards and International Trade Law: A
Race to the Bottom?", Chapter 11 of this volume.
S General Agreement of Tariffs and Trade, openedfor signature on October 30,
1947,55 UN.T.S. 194; T.I.A.S. No. 1700 [hereinafter GATT], Article XX(a).
398 Arie Reich

encompass the protection of human rights, at least those protected by the

Universal Declaration of Human Rights" or other widely accepted interna-
tional treaties. It would therefore follow, according to this logic, that any
WTO member could unilaterally decide to impose trade sanctions on an-
other WTO member if, in the opinion of the former, there are human rights
violations, or if products are produced under conditions not commensurate
with core labor standards. The act of the Member State imposing sanctions
could be brought to the scrutiny of a WTO panel and later to the Appellate
Body, who would have to decide "on the scope and content of the core la-
bor rights". This proposition, which is not entirely new in the literature," is
quite problematic, both legally and politically , and I would like to briefly
explain why.
First, there are some legal obstacles: Since Article XX is a limited and
conditional exception from obligations under other provisions of the
GATT, the practice of GATT/WTO panels has been to interpret Arti-
cle XX narrowly." They also place the burden on the party invoking Arti-
cle XX to justify its invocation and refrain from examining Article XX ex-
ceptions unless invoked." The member invoking Article XX(a) would also
have to convince a panel that it has met the requirements of the chapeau,
namely that the measures adopted do not constitute "a means of arbitrary
or unjustifiable discrimination between countries where the same condi-
tions prevail"." In other words, it would have to show that the trade re-

6 Universal Declaration of Human Rights, (U.N. Doc. All80 (1948) .

7 See e.g. Gate Hansson, Social Clauses and International Trade (Croom Helm!
St. Martin's Press, LondonlNew York, 1983), 175-76; J.M. Servais, "The So-
cial Clause in Trade Agreements : Wishful Thinking or an Instrument of Social
Progress?", 128 Int'l Lab. Rev. 423 (1989); Daniel S. Ehrenberg , "The Labor
Link: Applying the International Trading System to Enforce Violations of
Forced and Child Labor", 20 Yale J. Int'l L. 361 (1995); and Steve Charnowitz,
"The Moral Exception in Trade Policy", 38 Va. J. Int'l L 689 (1998).
8 See e.g. the Tuna I decision, infra note 12, para. 5.22; and William J. Davey,
"The WTO/GATT World Trading System: An Overview", in Handbook of
GATT Dispute Settlement 7 (Pierre Pescatore et al. eds.), (Kluwer, Deventer,
1991-1998) at 63; and Jan Klabbers , "Jurisprudence in International Trade
Law: Article XX of GATT", 26 J. World Trade 63,88-89 (1992).
9 Tuna I, ibid.
10 GATT, sup ra note 5, Article XX. The chapeau of Article XX provides: "Sub-
ject to the requirement that such measures are not applied in a manner which
would constitute a means of arbitrary or unjustifiable discrimination between
countries where the same conditions prevail, or a disguised restriction on inter-
national trade, nothing in this Agreement shall be construed to prevent the
adoption or enforcement by any contracting party of measures :" This opening
sentence is then followed by a list of various circumstances considered to serve
 llA Comment on Werner Meng 399

striction has been imposed against all the countries, and not just some of
the countries, in which core labor standards are not respected. Of course,
this is not an insurmountable obstacle. The Member State choosing this
path of action would have to investigate the labor situation of its trading
partners and, based on the findings, adopt uniform trade measures that
would satisfy the requirement of non-discrimination.
Second, it would have to meet the "least trade restricting measure" test
developed by GATT and WTO panels and the Appellate Body through
several decisions. I I In particular, a panel may require the imposing state, as
in the Tuna-Dolphin Case," to exhaust the multilateral venue before using
unilateral trade restrictions." This would mean trying to negotiate an a-

as excuses for the imposition of otherwise prohibited measures . The first of

which is paragraph (a): "[measures] necessary to protect public morals" .
II In United States - Section 337 ofthe TariffAct of 1930, GATT BISD 36S/345,
at 394, ruled that "a contracting party cannot justify a measure inconsistent with
another GATT provision as "necessary" in terms of Article XX( d) if an alterna-
tive measure which it could reasonably be expected to employ and which is not
inconsistent with other GATT provisions is available to it. By the same token ,
in cases where a measure consistent with other GATT provisions is not reason-
ably available , a contracting party is bound to use, among the measures reason-
ably available to it, that which entails the least degree of inconsistency with
other GATT provisions." (Emphasis added). It should be noted, that like para-
graph (d), discussed in this case, paragraph (a) of Article XX also uses the term
"necessary" . This ruling has been followed in many subsequent cases , includ-
ing the Tuna/Dolphin cases, infra. The WTO Appellate Body also showed a
clear preference for multilateral cooperative mechanisms over unilateral action
in its more recent Shrimp Report : United States - Import Prohibition ofCertain
Shrimp and Shrimp Products, 38 I.L.M . 118 (1999) , at 170.
12 United States - Restrictions on Imports of Tuna, Sept. 3, 1991, GATT BISD
39S/155 (hereinafter "Tuna I"), para . 5.28 of the report . The panel ruling was
not formally adopted by the GATT Council, by mutual agreement of the USA
and Mexico . Mexico's consent not to enforce the decision in its favor was mo-
tivated by its wish not to jeopardize the then ongoing NAFTA negotiations with
the US. The US did, however, heed the panel's call for a multilateral solution to
the problem, and in October 1995 the Declaration of Panama was reached be-
tween the US and 11 other nations setting an internationally accepted set of
principles to protect dolphins from tuna fishermen. See R. Bhala, International
Trade Law: Theory and Practice (2 nd ed.) (Lexis Publishing , New York, 2000),
1602.
13 There , the GATT Panel considered that the US unilateral measures did not meet
the requirement of necessity set out in the chapeau of Article XX : "The United
States had not demonstrated to the Panel - as required by a party invoking an
Article XX exception - that it had exhausted all options reason ably available to
it to pursue its dolphin protection objectives through measures consistent with
400 Arie Reich

greement with the country allegedly violating the core labor standards, in
order to bring an end to the violation. If that does not help, a multilateral
action against it, for instance within the ILO or the Security Council (as
suggested by Professor Meng), would have to be considered. If it has not
exhausted these alternatives, the trade restriction may be deemed, accord-
ing to WTO jurisprudence, not to be "necessary", as required by Arti-
cle XX(a).
Third, this situation will again raise the question of extra-territoriality in
relation to the various policy objectives specified in Article XX. In the first
Tuna-Dolphin case, it was held that Article XX(b) could only be under-
stood to relate to protection of humans, animals, or plants inside the terri-
tory of the imposing state.':' While this interpretation prompted wide criti-
cism by many commentators" and was later rejected by the second Tuna-
Dolphin panel," it has not yet been ruled upon by the Appellate Body,
which left it open in the Shrimps-Turtle case.I? In our case, it is a much
more problematic issue. Can the "public moral" exception of Article XX,
which was probably formulated in order to allow a country to restrict im-
portation of "immoral" products, such as pornography, into its territory, 18
(in other words a provision protecting a country's right to administer its
own domestic policies), be understood to allow country A to impose trade
restrictions on country B in order to try to force B to change some of its
domestic practices which A believes are immoral (in other words a provi-
sion allowing a country to interfere in another country's domestic poli-

the General Agreement, in particular through the negotiation of international

cooperative arrangements.. ." .
14 Tuna I, supra note 12, para. 5.26.
15 See, for instance, MJ. Trebilcock & R. Howse, The Regulation ofInternational
Trade (Routledge, London et al., 1995),347-350.
16 United States - Restriction on Imports of Tuna, reprinted in 33 J.L.M 839
(1994) .
17 United States - Import Prohibition of Certain Shrimps and Shrimp Products ,
WT/DS58/ABIR (issued 12 October 1998, Adopted 6 November 1998).
18 See R. Bhala & K. Kennedy, World Trade Law (Lexis Law Publishing, Char-
lottesville , Va., 1998), 146. Interestingly, there has been no litigation or other
GATT practice under Article XX(a) that can shed light on its scope. Most
countries, however, have provisions that authorize their custom authorities to
seize obscene materials . See for instance 19 U.S.c. § 1305(a). It therefore
makes sense that the drafters of the provision would seek to permit such excep-
tions to the Article XI prohibition on import prohibitions. Bhala & Kennedy,
ibid., ascribe the fact that the Article XX(a) public morals exception has never
been invoked by a WTO Member, to wise self-restraint on the part of WTO
Members, who understand the potentially broad sweep of this exception.
 IIA Comment on Werner Meng 401

cies)? That is indeed quite a daring and far-reaching reading of the provi-
sion.

11.A.3 Normative Analysis: The Harmful Effects of

Unilateral Trade Sanctions

The suggestion to interpret Article XX(a) so as to permit the use ofunilat-

eral trade sanctions against countries in which core labor standards are vio-
lated raises some serious normative questions. Do we really think that uni-
lateral trade restrictions by one country against another is the way to go in
order to try and raise labor standards worldwide? Can we be sure that the
imposing country isn't motivated by protectionist sentiments? If we allow
this type of measure, aren't we opening up a loophole of gigantic measures
that will imperil the entire multilateral trading system?
One must keep in mind that, while the adjudicative system of the WTO
is more developed than those found in most other areas of international
law, it is still not nearly as developed as most domestic legal systems.
WTO panels do not have the authority to order any binding interlocutory
measures, nor are their final decisions more than declarations about the ob-
ligations of Member States. Proceedings before the panels are usually quite
lengthy, always preceded by diplomatic consultations," and often followed
by an appeal to the Appellate Body." Thus, a unilateral measure imposed
by a Member State against imports from another Member State is bound to
stay in place for at least a year or two before a binding ruling against it can
be obtained from the WTO Dispute Settlement Body." Then, it can take up

19 See Article XXII of the GATT, supra note 5; and Article 4 of the Understand -
ing on Rules and Procedures Governing the Settlement of Disputes, Annex 2 of
the Marrakesh Agreement Establishing the World Trade Organization, re-
printed in The Results of the Uruguay Round of Multilateral Trade Negotia-
tions: The Legal Texts (Geneva: GATT, 1994).
20 Ibid. , Article 17.
21 A request for the establishment of a panel may be submitted if consultations fail
to resolve the dispute within 60 days after the request for consultation (ibid.,
Article 4.7). The panel proceedings will usually take an additional nine months,
or twelve months if the decision is appealed (ibid., Article 20). If we add the
time it takes for a Member State (especially a developing state) to decide
whether to initiate proceedings and to prepare them, we usually reach a total pe-
riod of close to two years from the time the import measure is imposed against
it, until the date it can obtain a binding decision from the DSB.
402 Arie Reich

to 15 months until the ruling is implemented." A unilateral import measure

can therefore cause serious harm to the exports of developing countries in
terms of the trade losses suffered, even if in the end it is found to be unjus-
tified . Under existing WTO law, the aggrieved Member is not entitled to
compensation for this harm." If a Member State has an interest in protect-
ing its domestic industry in certain sectors against inexpensive imports
from developing countries, it may therefore have an actual incentive to im-
pose a unilateral measure by invoking the Article XX(a) exception. If
Member States have not yet availed themselves of this option, it is proba-
bly because such unilateral invocations based on domestic labor policies of
other Member States have until now been considered unacceptable. If they
become an acceptable norm within the WTO system, this may very well
lead to an outbreak of unilateral measures and counter-measures. This, in
tum, may eventually cause the collapse of the multilateral trade regime.
Another concern provoked by Professor Meng's suggestion is that it
creates the danger of politicization of the WTO and its dispute settlement
system. The multilateral trading system has until now managed to stay a-
way from political controversies that are not trade-related . The WTO is
one of the very few international organizations where countries with wide-
ly differing political agendas, including countries involved in conflicts, are
able to put their differences aside and sit down together to "talk business"
in order to improve the welfare of their citizens. In the last WTO Ministe-

22 Although Article 21.1 of the DSU, supra note 19, provides that "prompt com-
pliance with recommendations or rulings of the DSB is essential etc.", it also
recognizes that when immediate compliance is "impracticable", "the Member
concerned shall have a reasonable period of time in which to do so" (Arti-
cle 21.3). A reasonable period of time can be the period of time proposed by the
Member with the approval of the DSB, generally not to exceed 15 months from
the time of the establishment of the panel. In some cases, however, when the
question of implementation goes to arbitration, it can take up to 15 months
from the date of the adoption of the report (ibid) . This happened, for instance,
in the case of Japan - Taxes on Alcoholic Beverages, WT/DS8/15 (1997); and
in European Communities - Regime for the Importation, Sale and Distribution
ofBananas, WT/DS27/15 (1998).
23 See, for instance, the Uruguay Round note by the GATT Secretariat on "Com-
pensation in the context of GATT Dispute Settlement Rules and Procedures" ,
MTN.GNGING13/W/13/32 of 14 July 1989; the GATT Panel Report: EEC Re-
strictions on Imports of Dessert Apples from Chile, Report of the Panel adopted
on 22 June 1989, in BISD 36 S/93, 134-135; and the discussion in Ernst-Ulrich
Petersmann, "The Dispute Settlement System of the World Trade Organization
and the Evolution of the GATT Dispute Settlement System Since 1948",
31 Com. Mkt. L. Rev. 1157, at 1177-1182 (1994).
 11A Comment on Werner Meng 403

rial in Doha, for instance, Israel and several Arab countries found them-
selves cooperating on several fronts in order to further positions common
to their mutual economic interests." For a WTO Member State to invoke
Article XX(a) in the manner suggested, it must in effect "accuse" other
Member States, against whom the unilateral measures are targeted, of
grave breaches of basic human rights within its domestic labor market.
This is bound to stir up heated political controversies, with accusations and
counter-accusations, all of which must then be litigated and decided upon
by three trade diplomats or trade-lawyers appointed for the respective
WTO panel. Today the United States will impose trade sanctions on Afri-
can countries for not doing more to prevent child labor, and tomorrow the
Africans will retaliate, accusing the Americans of practicing discrimination
against Afro-Americans in the work force. Then we may have unilateral
trade sanctions against Hungary for allegedly discriminating against ethnic
Rumanians and vice versa, and Arab countries imposing trade sanctions
against Israel for allegedly discriminating against Palestinian workers . And
how about European trade sanctions against Saudi-Arabia and other Is-
lamic countries for discriminating against women in the labor market (if
not eliminating them entirely)? Who can adjudicate such cases? Do we
really want WTO panels to enter such minefields? Should trade diplomats
and trade lawyers be passing such contentious judgements against sover-
eign governments of numerous WTO Member States? Is it for them to de-
cide on behalf of the international community which labor standards are
"core" standards and universal human rights, and which are not?
I personally believe that these are questions that we would like to see
negotiated on a multilateral level until agreement is reached, and not
fought out in the wild boxing arena of aggressive unilateralism, where only
the strong and powerful can prevail. It is perhaps relatively easy for the US
to impose trade sanctions on a small developing country in Africa for not
living up to some labor standards. But who could have imposed trade sanc-
tions against the US when it practiced segregation and discrimination
against its black citizens back in the Fifties and the Sixties? And who will
dare to do so today against China? By suggesting the use of Article XX(a)
as the solution to the problem of violations of core labor standards, we are
in effect suggesting an inherently discriminatory instrument that can be
used by the strong against the weak, but not by the weak against the strong.
It is therefore not surprising that the suggestions to add a "social clause" to
the GATT - the major proponent of which have been the US and some

24 Based on reports in Israeli newspapers from the Ministerial. For instance the re-
port of Sapir Peretz in Globes, 11.11.01.
404 Arie Reich

Member States of the European Community - have been met by staunch

and consistent opposition by all of the developing countries.
It is also quite clear that unilateral trade sanctions, taken under any of
the relevant exceptions of Article XX, are hardly the optimal policy instru-
ment for raising labor standards in developing countries. A balanced ap-
proach needs to look at this problem within the broader perspective of im-
balances in the world trade structure, such as the unfavorable terms of
trade to developing countries, their difficulty to access markets, and the ex-
isting conditions of poverty. These problems cannot only be resolved by
unilateral trade sanctions and other types of intimidation. As Van Liemt
has argued:
"Why is the question of labour standards brought up in isolation from the
broader issues of imbalances in the world trade structure - including the issue of
greater market access through accelerated restructuring of developed country eco-
nomies, and that of raw material prices, many of which are at a low level and con-
tinue to fluctuate wildly ... why [should] the social clause ... be linked only to
trade: would action not be more effective if it was also linked to public capital
flows (such as official lending and aid flows) and strategic relations such as de-
fence treaties?"25
This instrument is also limited to the manufacturing sector producing for
exports to developed countries - which usually covers only a small frac-
tion of most countries' labor markets. In fact, it is questionable whether
this sector is the most in need of improvement. Edgren has noted that "the
most blatant cases of exploitation and deprivation are not generally found
in the manufacturing industries which produce for export. The worst of-
fences are usually found in plantations and mines, construction industry
and small service firms working entirely for the domestic market,"> It is
also an instrument that, at least in the short run, harms the very individuals
that it was meant to protect - the poor workers in the developing countries
- whose products will be barred from some of their export markets, and
who consequently may find themselves jobless. It is also likely to harm the
less-wealthy consumers in these markets, who are now forced to purchase
other more expensive alternatives. Of course, these two last arguments are
open for debate : it is possible that in some cases, the trade sanctions will
cause the targeted employers to raise labor standards without losing their
export markets because of increased costs. In such cases, the trade sane-

25 Gijsbert van Liemt, "Minimum Labour Standards and International Trade:

Would a Social Clause Work?" 128 Int'I Labour Rev. 433, at 435 and 447
(1989).
26 G. Edgren, "Fair Labour Standards and Trade Liberalization" 118 Int'l Labour
Rev. 523, at 525 (1979) .
 llA Comment on Werner Meng 405

tions have achieved good results and are justified. But the likely effect of
trade sanctions is something that needs to be researched carefully and can-
not be taken for granted. The fact is that the poor workers themselves or
their representatives are not consulted in the process, and some of the evi-
dence indicates that the sanctions cause more harm than good."
Finally, one should consider the question of institutional competence.
Which is the optimal institutional framework for deciding labor standards?
Is it the WTO or the ILO? There can be no question that the ILO has much
more expertise and legitimacy in dealing with labor standards and deciding
not only about their contents, but also about their enforcement. Beside its
expertise, the ILO's institutional tripartite structure, where not only gov-
ernments, but also employers and employees are amply represented, is
much more suitable to deciding labor standards than the WTO, which is a
purely inter-governmental organization. In all countries, labor law usually
consists of three layers: legislation (i.e. acts of the legislator), collective a-
greements (i.e. agreements between groups of employers and groups of
employees, such as labor unions), and private agreements (i.e. acts agreed
upon between individual employers and employees). Why, in the interna-
tional arena, would we have governments (i.e. the executive branch of the
government, not even the legislator) decide about certain labor standards
and their enforcement, without the involvement of the other players? In
view of that, it is fully understandable why the WTO Ministerial in Singa-
pore, and later in Doha, recognized the ILO as the competent body to set
and deal with core labor standards, and not the WTO.28 It would also be

27 Thus, for instance, when, between July and October 1994, thousands of chil-
dren were fired from their jobs in the garment sector in Bangladesh as a result
of feared US trade sanctions, the dismissed children did not merely retire to go
to school. The evidence reflects that these children found new jobs, working for
underground subcontractors under worse conditions than before, or even work-
ing as beggars or prostitutes. See United States Department of Labor, Bureau of
International Labor Affairs, The Apparel Industry and Codes ofConduct: A So-
lution to the International Child Labor Problem ? 7 (1996), available at:
http://www.dol.gov/doVilab/public/library/reports/iclp/appareVapparel.pdf.
28 The first WTO Ministerial meeting was held in Singapore in December 1996.
In relation to core labor standards, the Ministers declared as follows: "We re-
new our commitment to the observance of internationally recognized core la-
bour standards. The International Labour Organization (ILO) is the competent
body to set and deal with these standards, and we affirm our support for its
work in promoting them." (The declaration can be found on the WTO website:
http://www.wto.orglenglishlthewto_e/minist_e/min96_e/wtodec_e.htm. In the
last WTO Ministerial, held in Doha in November 2001, the Ministers reaf-
frrmed their declaration made in Singapore regarding internationally recognized
406 Arie Reich

better if the ILO and its members could come to an agreement on whether
trade sanctions should be used to enforce certain core labor standards, and
if so - which.

11.A.4 Alternative Approaches

As our above discussion has shown, there are two major problems with the
suggestion to use Article XX(a) in relation to core labor standards: (1) the
unilateral nature of such an approach, and (2) its confrontational and
potentially politicized nature. The first problem is connected with the fact
that we permit countries to unilaterally impose barriers to trade on the ba-
sis of their own assessment, thereby opening the door to potential abusive
use by strong developed countries of trade barriers out of protectionist mo-
tives. The second problem stems from the fact that in order to invoke the
Article XX(a) exception, a WTO Member must in fact accuse another
Member of violating basic human rights standards, then deny to such a
Member trade benefits that it is otherwise entitled to enjoy under the
Agreement, and finally be willing to litigate the whole conflict through the
WTO's dispute settlement procedures. One should therefore look for alter-
native ways to ensure respect for core labor standards in developing coun-
tries, ways that avert these two problems.
One possible approach would be to establish a non-political interna-
tional mechanism that would promote the respect of core labor standards,
mainly through cooperation with the government of the country where the
alleged violations occur. Instead of working against the developing coun-
try, we should try to work together with it, assisting in eradicating human
rights violations in its labor market. Only as a last resort, in the absence of
sincere cooperation, should one turn to trade sanctions. Such sanctions,
however, must be examined and approved ex ante by this non-partial and
professional body. By entrusting the important task of promoting humane
labor conditions to a multilateral body, we ensure that actions are not taken
out of protectionist motives and prevent allegations to the contrary by the
targeted country. Such a mechanism is more likely to enjoy the interna-
tional legitimacy required in order to take measure with the sensitive issue
of domestic labor policies of sovereign states. One could envisage a mech-
anism based on cooperation between the ILO and the WTO, utilizing the
respective expertise and advantages of both multilateral organizations. One

core labor standards and took note of work underway in the ILO on the social
dimension of globalization. (See WTO Document: WTIMIN(Ol)/DEC/W/l ;
paragraph 8 of the preamble to the declaration).
 llA Comment on Werner Meng 407

mechanism, that has been suggested in the literature," includes an objec-

tive and fair determination procedure, based on an impartial panel of inter-
national trade and labor experts who decide whether a state has exhibited a
consistent pattern of gross and reliably confirmed violations of core labor
standards in producing export goods. The mechanism would then enter the
remedial phase, which would determine the measures necessary to elimi-
nate those violations and set a timetable for compliance. It would rely on
technical cooperation programs with the developing country, certification
programs, and economic sanctions to achieve its objectives, although the
most extreme remedy - trade sanctions - would only be used when a state
failed to respond to less severe pressure." The remedial phase should also
include consultations with the workers in the affected developing country
before decisions are reached on which measures to take to improve their
situation ."
In order to mandate the use of such a mechanism, an amendment of
GATT Article XX would not necessarily be required. Once it exists in one
form or another, its use could be mandated through adaptation of the exist-
ing jurisprudence of WTO panels and the Appellate Body under Arti-
cle XX, namely the "least trade restricting measure" doctrine, discussed
above." Hence, a WTO Member State could not invoke the Article XX(a)
exception, unless it has tried to solve the problem though the cooperative
international mechanism. If it has not exhausted this alternative, its trade
restriction would not be deemed "necessary", as required by Article XX(a).
Another possible approach, which could be coupled with the first one, is
a system of positive incentives, instead of punitive sanctions, in order to
encourage states and employers to take measures against violations of core
labor standards within their jurisdiction. A system of carrots, instead of
sticks, would not deny WTO Member States the trade benefits that they are
entitled to under the agreements - and which they often have "paid for" by
reciprocal concessions. Instead, it would condition the granting of addi-
tional trade concessions and other economic benefits, such as financial aid,
upon a positive record in the field of core labor standards within the coun-
try's entire labor market - not just in the export manufacturing sector. The
additional trade concessions could involve the lowering of certain tariffs in

29 Ehrenberg, supra note 7, at 403-414.

30 Ibid. , at 416.
31 On the importance of entering into a dialogue with the developing country
workers, see Claire Moore Dickerson, "Transnational Codes of Conduct
Through Dialogue: Leveling the Playing Field for Developing-Country Work-
ers", 53 Fla. 1. Rev. 611 (2001).
32 Supra note 11 and accompanying text.
408 Arie Reich

relation to the regular Most Favoured Nation (MFN) rate, on products of

interest to the exporting country. Such a scheme would be permitted under
the GAIT, despite the deviation from the MFN non-discrimination rule,
based on the GAIT rules on special and preferential treatment of develop-
ing countries." In special cases in which these rules are not applicable , a
particular waiver could be granted under GATT Article XXV:5. Preferen-
tial treatment could also be tied to other trade benefits, such as general ex-
emptions from anti-dumping duties or countervailing measures, special
concessions regarding trade in services or in agricultural products, and
preferential status in government procurement - all conditioned upon re-
spect for core labor standards. The denial of such benefits, in response to
established violations of core labor standards in the exporting state, would
not constitute a violation of any GATT obligation by the importing state,
since any such benefit would be a voluntary non-reciprocal concession by
the granting state. The use of such schemes would therefore be much less
confrontational than unilateral trade sanctions, which most likely will be
countered by legal challenges before the WTO dispute settlement tribunals.
Instead of using a scheme based on measures that reduce the welfare of
both the targeted and the imposing state (increased trade barriers), the sug-
gested schemes would be based on welfare-enhancing measures for both
parties (lowered trade barriers)." The same type of strategy should be used
in connection with other types of economic benefits that developed states
bestow upon less developed states, such as financial aid, technical assis-
tance, promotion of investments and technology transfers.
Some countries have already, unilaterally, adopted similar schemes as
part of their domestic legislation. In the US, for instance, a number of trade
and aid programs are conditioned on the granting of "internationally rec-
ognized worker rights". " In particular the right to enjoy benefits of the

33 See e.g. the Tokyo Round Decision of November 18, 1979 on Differential and
More Favourable Treatment, Reciprocity and Fuller Participation of Develop-
ing Countries (commonly referred to as the "Enabling Clause") , BISD,
26th Supp. 203 (1979).
34 Of course , the withdrawal of the special benefits in response to alleged viola-
tions of core labor standards would reduce welfare , at least in the short run.
However, this is the exceptional situation. In the normal course of the scheme ,
it would generate more trade and increased welfare for both countries, com-
pared to the situation in its absence.
3S For an overview of such programs, see Virginia A. Leary, "Worker' s Rights
and International Trade: The Social Clause (GATT, ILO, NAFTA, U.S.
Laws)", in Fair Trade and Harmonization: Prerequisite for Free Trade?
(J. Bhagwati & R. Hudec, eds) (MIT Press, Cambridge, Mass., 1996), 177,
at 2 10.
 11A Comment on Werner Meng 409

Generalized System of Preferences (GSP) may not be granted to a devel-

oping country that "has not taken or is not taking steps to afford interna-
tionally recognized worker rights to workers in the country"." Similar
conditions have been incorporated into the European Union's GSP regula-
tions," as well as in their preferential trade agreements." Such schemes
ought to be adopted by more countries and implemented more widely, in
order to enhance their effectiveness. This should be promoted through
multilateral instruments and international cooperation and not only as spo-
radic unilateral initiatives. In particular, measures should be taken to avert
the sometimes-justified criticism that the implementation of these schemes
has been politically motivated and ignored the substance of international
law." The main problem seems to be that determinations on whether "ade-
quate steps" have been taken, and regarding which country should be de-
nied GSP status because of inadequate steps, are taken by national, and of-
ten political, organs. If such incentive schemes are to enjoy international
legitimacy, they need to be based on determinations made by international
impartial bodies and based on internationally recognized standards.

36 19 U.S.c. § 2462.
3? See EC Council Regulation 1256/96 of 20 June 1996 and EC Regulation
3281/94 of 19 December 1992. Under these regulations, additional trade bene-
fits may be granted, upon request, to countries that effectively apply the stan-
dards laid down in ILO Conventions 87 and 98 on freedom of association and
the right to collective bargaining and those of Convention 138 on Child Labour.
The regulations also allow for the withdrawal of benefits, in whole or in part,
where beneficiary countries practice any form of slavery or forced labor.
38 For instance, the 2000 Cotunou Agreement between the EC and 77 ACP States
includes a special provision, which confirms the parties' commitment to core
labour standards (Article 50), thereby making it a potential condition for the
preferential treatment granted under the agreement See Commission of the EC,
Promoting Core Labour Standards and Improving Social Governance in the
Context ofGlobalization, A Communication from the Commission to the Coun-
cil, Parliament and Economic and Social Committee, COM (2001) 416 final,
p.12.
39 See Philip Alston, "Labor Rights Provisions in US Trade Law; "Aggressive
Uni1atera1ism?"", 15 Human Rights Quarterly 1 (1993); Lawyers Committee
for Human Rights, Protection 0/ Workers Rights: A Report on Legal Mecha-
nisms to Protect Worker Rights 10, 15 (Human Rights and US Foreign Policy
Project, Oct. 10, 1991), quoted in Leary, supra note 35.
12 Enhancing the Role of NGOs in the Global
Arena: Towards a New Regime on International
Labor Standards

Moshe Hirsch I

Contents
12.1 Introduction 412
12.2 The Evolution ofInternational Labor Standards .413
12.3 Private-Sector Initiatives: Corporate Codes .415
12.4 Semi-Public Initiatives: NGOs' Programs .418
12.4.1 Social-Labeling Programs .419
12.4.2 Ethical Funds 421
12.5 The Expanding Role ofNGOs in the International Arena :
Trends and Causes 422
12.5.1 The increasing involvement ofNGOs in
intergovernmental organizations work 423
12.5.2 NGOs' participation in ECOSOC work .424
12.5.3 The Comparative Advantages and Weaknesses
ofNGOs 427
12.6 Empowering NGOs : Towards a New Model of Coord ina-
tion between Governmental and Non-Governmental Bodies. 431
12.6.1 Expanding the Role ofNGOs .432
12.6.2 Equipping NGOs with Special Rights and Functional
Immunities 433
12.6.3 Subjecting NGOs to an International Code of
Conduct 434
12.6.4 The Overall Responsibility of an Intergovernmental
Organization 436
12.7 Concluding Remarks .437

I Arnold Brecht Chair in European Law, Faculty of Law and Department of In-
ternational Relations, Hebrew University of Jerusalem. The article was prepar-
ed with financial assistance from the Minerva Center for Human Rights, the
Hebrew University, and I wish to express my gratitude for this generous sup-
port. Thanks are also due to Ms Irina Livshin of the HU Faculty of Law who
skillfully assisted me in the research work.
412 Moshe Hirsch

12.1 Introduction

Non-state actors have been very active in the sphere of labor standards
protection in the recent decade. At times, when the states' efforts failed to
attain significant results, transnational corporations (TNCs), non-govern-
mental organizations (NGOs), and trade unions have dominated the inter-
national scene. Indeed, the increasing influence of non-governmental bod-
ies (as well as the weakening of sovereign states) is one of the salient
features of the globalization process.' This paper explores the prospects
and perils of this trend and attempts to appraise the contribution of non-
governmental entities to the promotion of labor rights. In light of the con-
clusions drawn from the discussion, we will be able to suggest some means
for the advancement of international labor rights protection.
The subject of labor standards protection generates harsh disputes in the
international community, and particularly between developing and devel-
oped states. The governments of developing states often see the whole sub-
ject as a poorly disguised tool of trade protectionism. They resist such
standards because they feel that increased labor costs would erode the
competitive advantage they enjoy in the production of labor intensive
goods.' The proposal to integrate labor standards into the work of the
World Trade Organization (WTO), and allow to trade sanctions in this
context, aroused fierce opposition among numerous developing states, and
constituted one of the principal reasons for the failure of the 1999 WTO
Ministerial Conference in Seattle.' The 2001 Doha Ministerial Declaration

2 See, e.g., David Held, Anthony McGrew, David Goldblatt, and Jonathan Perra-
ton, Global Transformations: Politics, Economics and Culture (Polity Press,
Cambridge, 1999), pp. 8-9; "Human Development Report" (1999) United Na-
tions Development Programme, http://www .undp.orglhdro /Chapterl.pdf, April
2000, pp. 31-32, 35-36; Thomas D. Lairson and David Sidmore, International
Political Economy (2nd edn, Harcourt Brace College Publishers, Forth Worth,
Philadelphia, 1997), pp. 109-110; Peter Willets, "Transnational Actors and In-
ternational Organizations in Global Politics", in John Baylis and Steve Smith,
(eds.), The Globalization Of World Politics (Oxford University Press, Oxford ,
1997), pp. 287-309; Jan Aart Scholte, "The Globalization of World Politics", in
John Baylis and Steve Smith, (eds.), The Globalization Of World Politics (Ox-
ford University Press, Oxford, 1997), pp. 13-30, p. 21.
3 See, e.g., Global Trade Negotiations : Labor, http://www .cid.harvard.
edu/cidtrade l issues/labor.html, May 2000; Christopher McCrudden and Anne
Davies, "A Perspective on Trade and Labor Rights" (2000) 3 Journal ofInter-
national Economic Law 43-62, 46-47.
4 See, e.g., "New Trade Round Postponed", Bridges Daily WTO Update, 8 De-
cember 1999, BRIDGES Weekly Trade News Digest, www.ictsd.org, pp. 1-2 ;
 12 Enhancing the Role ofNGOs in the Global Arena 413

(that launched a new round of global trade negotiations) does not include a
commitment to the link between trade and labor standards in future WTO
agreements.' As to the effectiveness of trade sanctions, experts of interna-
tional economics expressed serious doubts as to whether such measures are
likely to improve labor rights in developing states."
In light of the lack of consensus for concerted intergovernmental action
in this field, and the growing public concern regarding very low labor stan-
dards, non-governmental bodies sought to fill the vacuum left by govern-
ments. Consequently, private corporate codes and various NGO programs
mushroomed in this domain, particularly since the mid-1980s. The consid-
erable role played by non-state actors allows scholars a rare opportunity to
analyze the contribution ofNGOs and private corporations to the global ef-
fort to advance labor standards, and draw conclusions regarding their fu-
ture role in this sphere as well as in other international domains. This arti-
cle will appraise the role of non-governmental actors in this sphere, an-
alyze their comparative advantages and weaknesses, and suggest some
better means for coordination between governmental and non-govern-
mental bodies. The principal conclusions of this article call for broadening
the role of NGOs in the domain of labor standards, enhancing their legal
status (by endowing them with special rights and immunities), and requir-
ing them to comply with an international code of conduct (including liabil-
ity rules).

12.2 The Evolution of International Labor Standards

Hepple identifies four stages in the evolution of post-Second World War

international labor law:?

Bridges Weekly Trade News Digest 3(47),8 December 1999, BRIDGES Week-
ly Trade News Digest, www.ictsd.org, pp. 2-3.
5 Keith E. Maskus, "Should Core Labor Standards Be Imposed Through Interna-
tional Trade Policy?" (1997) 1817 Policy Research Working Paper, The World
Bank Development Research Group, http:// www.worldbank.org!researchl
trade!wpI817.html, August 1997,22,65-67.
6 Bob Hepple, "A Race to the Top? International Investment Guidelines and
Corporate Codes of Conduct" (1999) 20 Comparative Labor & Policy Review
347-363 ,353-356.
7 On the ILO unique structure, see in detail George Tsogas, Labor Regulation in
a Global Economy (M.E. Sharp, London, 2001) p.49 et seq.; Claire Moore
Dickerson, "Transnational Codes of Conducts Through Dialogue: Leveling the
Playing Field for Developing-Country Workers" (200 I) 53 Florida Law Review
611,656-657.
414 Moshe Hirsch

1. First Stage - from 1944 until late 1960s: The work of the International
Labor Organization (ILO) was dominated by international instruments
that were addressed to the governments of the member states . The par-
ticipation of other actors in this sphere (trade unions and employers)
was attained through the tripartite structure of the ILO.8
2. Second Stage - from the late 1960s until the early 1980s: The acceler-
ated expansion of the activities of TNCs in developing states led some
international organizations to try to somewhat discipline the activities of
TNCs in this sphere. The main instruments were adopted by the OBCD,
UN, and the ILO. These documents were formulated as voluntary guide-
lines and they are widely perceived as having failed."
3.Third Stage - from the mid-1980s to the late1990s: This period was
characterized by a shift to deregulatory policies. Private corporate codes
(mainly adopted by TNCs) proliferated vastly'? and NGOs significantly
expanded their activities during this period.
4. Fourth Stage - since the late 1990s: International organizations and
governments currently endeavor to reassert public control over private
initiatives. The central instrument is the 1998 Declaration on Fundamen-

8 Christopher McCrudden, "Human Rights Codes for Transnational Corpora-

tions: What Can the Sullivan and MacBride Principles Tell us?" (1999) 19 Ox-
ford Journal of Legal Studies 167, 168; Tsogas, Labor Regulation, above,
pp. 61-62; Hepple, "A Race to the Top?" above, 353-354.
On the OECD Declaration on International Investment and Multinational En-
terprises, 21 June 1976, htip://wwwl.oecd.orgldaf/investmentlguidelines/-
declaratl.htm, July 2001; see also Sebastian Krebber, "The Search for Core
Labor Standards in Liberalized Trade", Paper presented to The Welfare State in
an Era of Globalization International Conference, Jerusalem, June 2001, The
Minerva Center for Human Rights, htip:/lhelp.mscc.huji.ac.iVlaw/Modaotflaw/-
minerva/globalization/internet.htm, October 2001.
9 On the reasons that motivated private firms to adopt corporate codes, see
OECD, International Trade and Core Labor Rights (OECD Publications, Paris,
2000), pp. 72-73; Hepple, "A Race to the Top?" above, 355; Tsogas, Labor
Regulation, above, pp. 10-12 .
10 ILO Declaration on Fundamental Principles and Rights at Work, Geneva,
18 June 1998, International Labour Organization, hrtp://www.ilo.orglpublic/
english/standards/relmlilc/ ilc86/com-dtxt.htm, January 2000. On the 1998
Declaration, see also Tsogas, Labor Regulation, above, pp. 54-55; OECD, In-
ternational Trade and Core Labor Rights, above, pp. 17-21; Justine Nolan and
Michael Posner, "International Standards to Promote Labor Rights: The Role of
the United States Government" (2000) Columbia Business Law Review 529,
532-533.
 12 Enhancing the Role ofNGOs in the Global Arena 415

tal Principles on Rights at Work." Several attempts to integrate labor

rights into the WTO regime failed. 12
The vacuum left by governments and intergovernmental organizations
(IGOs) in the sphere of global labor standards, and the growing pressure to
improve working conditions in developing states (mainly within the public
in North America and Europe), enabled the establishment of a myriad of
initiatives by non-governmental bodies. These initiatives vary, inter alia,
with regard to the extent of governmental involvement in each program as
well as to the scope of their geographical application (local, national, re-
gional, global arrangements). This article focuses on NGOs' programs and
private corporate codes.

12.3 Private-Sector Initiatives: Corporate Codes

The number of corporate codes has rapidly proliferated since the early
1990s and particularly in recent years. 13 Most of the largest firms in the US
and UK have adopted such codes." Still, research into this field is in its
formative stage. The common features of most codes are that they are vol-
untarily written (though in response to public pressure)" and that they in-

II ILO Declaration on Fundamental Principles and Rights at Work, Geneva,

18 June 1998, International Labour Organization, http://www.ilo.orglpublic/
english/standards/relm/ilc/ ilc86/com-dtxt.htm, January 2000. On the 1998 De-
claration, see also Tsogas, Labor Regulation, above, pp. 54-55; OECD, Inter-
national Trade and Core Labor Rights, above, pp. 17-21; Justine Nolan and
Michael Posner, "International Standards to Promote Labor Rights: The Role of
the United States Government" (2000) Columbia Business Law Review 529,
532-533 .
12 On the attempts to set basic labor standards within the WTO treaties, see
McCrudden and Davies, "A Perspective on Trade and Labor Rights", above,
43-62.
13 See on the earlier (and influential) codes, and particularly on the Sullivan and
MacBride Principles, McCrudden, "Human Rights Codes for Transnational
Corporations", above, 172 et seq.
14 OECD, International Trade and Core Labor Rights, above, p. 73; see also
Tsogas, Labor Regulation, above, pp. 62-63.
15 Corporate officers are often responsive to public pressure because they fear that
negative publicity will lead to a loss of market share and, ultimately, profits. On
the impetus of corporate codes in this sphere, see Robert J. Liubicic, "Corporate
Codes of Conduct and Product Labeling Schemes: The Limits and Possibilities
of Promoting International Labor Rights Through Private Initiatives" (1998)
30 Law and Policy in International Business 111, 114-117; Su-Ping Lu, "Cor-
416 Moshe Hirsch

elude certain labor standards. Most of these codes are issued by individual
firms. Only some codes are formulated by business organizations and even
fewer involve NOOs or trade unions. 16
Recent surveys of the labor content of corporate codes reveal an ex-
tremely diversified picture." The main components of the codes include
prohibitions on forced or indentured labor of children, prohibitions on ra-
cial or ethnic discrimination, prohibitions on certain classes! sorts of pun-
ishment (e.g., physical punishment), and provisions on pay as well as
hours of work. 18 The ILO' s international standards were expressly referred
to in 20%-33% of the codes (the OEeD and the ILO surveys, respective-
Iy).!? The freedom of association and the right to collective bargaining are
particularly controversial in this context. It is noteworthy that many corpo-
rations in industrialized states do not recognize trade unions in their head-
quarter bases." Thus, it should not surprise us that only 15% of the codes
addressed freedom of association." Many codes acknowledge the right to
join trade unions but do not mention collective bargaining." Some codes
even aimed at the elimination oftrade unions."
The main criticism of private codes is directed against inadequate moni-
toring and implementation mechanisms. The content of the codes is well-

porate Codes of Conduct and the FTC: Advancing Human Rights through De-
ceptive Advertising Law" (2000) 38 Columbia Journal of Transnational Law
603,613 .
16 Hepple, "A Race to the Top?", above, 357; see also Gary Gereffi, Ronei Gar-
cia-Johnson and Erika Sasser, "The NGO - Industrial Complex" (July/August
2001) Foreign Policy 56, 57.
17 OECD, International Trade and Core Labor Rights, above, p. 73; Liubicic,
"Codes of Conduct and Labeling Schemes", above, 122-131 .
18 See in detail, Tsogas, Labor Regulation , above, pp. 63, 66-72; see also - Ger-
effi, Garcia-Johnson and Sasser, "The NGO - Industrial Complex", above, 58.
19 Hepple, "A Race to the Top?" above, 358; see also Adelle Blackett, "Sympo-
sium: Globalization, Accountability, and The Future of Administrative Law:
Global Governance, Legal Pluralism and the Decentered State: A Labor Law
Critique of Codes of Corporate Conduct" (2001) 8 Indiana Journal of Global
Legal Studies 401, 410-411.
20 Tsogas, Labor Regulation , above, p. 66.
21 Hepple, "A Race to the Top?" above, 357-358, see also Blackett, "A Labor
Law Critique of Codes of Corporate Conduct", above, 410-411 ; Virginia Hau-
fler, A Public Role for the Private Sector: Industry Self-Regulation in a Global
Economy (Carnegie Endowment for International Peace, Washington DC,
2000), pp. 73, 77.
22 Tsogas, Labor Regulation, above, p. 66; Haufler, A Public Role for the Private
Sector, above, p. 73.
23 Hepple, "A Race to the Top?" above, 357-358.
 12 Enhancing the Role ofNGOs in the Global Arena 417

known to the media in developed states, but sometimes unknown to the

workers in developing states. A significant number of the codes do not
provide for any significant monitoring procedures at all, and almost all
codes that deal with this issue provide only for internal, rather than exter-
nal monitoring." Monitoring by the firm's officials is naturally susceptible
to conflicts of interest. Credible codes require external monitoring. Such
monitoring is far more credible than internal mechanisms, from the per-
spective of both the consumers and the workers." In addition, most corpo-
rate codes do not elaborate any sanction to be taken against those who vio-
late the standards included in the codes."
As concluded by Liubicic on this issue:
"In short, internal monitoring may allow MNCs to use private initiatives as
toothless public relations tools to obscure what may be vast differences between
corporate image and corporate actions."27
These fundamental flaws of corporate codes indicate that it is not rea-
sonable to expect private corporations alone to be entrusted with the task
of promoting international labor standards."

24 Hepple, "A Race to the Top?", above, 359. See also Haufler, A Public Rolefor
the Private Sector, above, pp. 73-75 ; Liubicic, "Codes of Conduct and Label-
ing Schemes", above, 138; Lu, "Corporate Codes of Conduct and the FTC",
above, 615; Tsogas, Labor Regulation, above, p. 84; Janet Hilowitz, "Social
Labeling to Combat Child Labor: Some Considerations" (1997) 136 Interna-
tional Labor Review 215, 220-221; Gereffi, Garcia-Johnson and Sasser, "The
NGO - Industrial Complex", above, 57. As stated by the US Department of
Labor in that regard: "The most important developments today do not lie so
much in adopting the codes, which are already widespread, but in the ways
companies are devising to implement these codes. Some companies have adop-
ted codes before fully developing methods to implement them" - as cited in
Tsogas, Labor Regulation, above, p. 80.
25 See in detail on this issue, Liubicic, "Codes of Conduct and Labeling
Schemes", above, 38-139.
26 On the lack of enforcement as a weakness of corporate codes, see Lu, "Corpo-
rate Codes of Conduct and the FTC", above, 614-616 .
27 Liubicic, "Codes of Conduct and Labeling Schemes", above, 137-138 .
28 Dickerson shows in length how the structure ofTNCs as well as the geographi-
cal scope of their operations encourage indifference to workers' labor stan-
dards; Claire Moore Dickerson, "Transnational Codes of Conducts Through
Dialogue: Leveling the Playing Field for Developing-Country Workers" (2001)
53 Florida Law Review 611,617-625.
418 Moshe Hirsch

12.4 Semi-Public Initiatives: NGOs' Programs

NGOs29 have dramatically expanded their activities in the international

arena since the 1970s, and they have established themselves as regular
players in several international domains, particularly in the spheres of hu-
man rights and environmental protection." NGOs demonstrated an impres-
sive capacity to mobilize domestic support for transnational problems, and

29 Non-Governmental Organizations are defined in the Encyclopedia of Public In-

ternational Law as "private organizations .. . not established by a government or
by intergovernmental agreement , which are capable of playing a role in interna-
tional affairs by virtue of their activities" ; Hermann H.K. Rechenberg in Rudolf
Bernhardt (ed.), Encyclopedia of Public International Law (4 Vols., Elsevier,
Amsterdam, 1997), vol. III, p. 612. Art . 1 of The 1986 Convention on the Rec-
ognition of the Legal Personality of International Non-Governmental Organiza-
tions defines NGOs as "associations, foundations and other private institu-
tions..." ; Strasbourg, 24 April 1986, ETS 124, Council of Europe Publishing ,
http ://book.coe.int/conv/en/etsI124-en.htm. See also on the definition ofNGOs,
Henry G. Schermers and Niels M. Blokker, International Institutional Law,
(3 rd edn, Martinus Nijhoff Publishers, Dordrecht, 1995), p. 32; Steve Charno-
vitz, "Two Centuries of Participation: NGOs and International Governance "
(1997) 18 Michigan Journal ofInternational Law 183,185-186; Dianne Otto,
"Nongovernmental Organizations in the United Nations System: The Emerging
Role of International Civil Society" (1996) 18 Human Rights Quarterly 107,
112-112; Thomas G. Weiss and Leon Gordenker, "Pluralizing Global Govern-
ance: Analytical Approaches and Dimensions", in Thomas G. Weiss and Leon
Gordenker (eds.), NGOs, the UN, and Global Governance, (Lynne Rienner,
Boulder, 1996), pp. 17-50, p. 18.
30 On the role of NGOs in the sphere of international environmental protection,
see Ken Conca, "Greeting The UN: Environmental Organizations and The UN"
in Thomas G. Weiss and Leon Gordenker (eds.), NGOs, the UN, and Global
Governance , (Lynne Rienner, Boulder, 1996), pp.83-102; David Hunter,
James Salzman and Durwood Zaelke, International Environmental Law and
Policy (Foundation Press, New York, 1998), pp. 422-433 . On the role ofNGOs
in the sphere of international human rights protection see Claude E. Welch, Jr.,
"Introduction" in Claude E. Welch, Jr. (ed.), NGOs and Human Rights: Prom-
ise and Performance (University of Pennsylvania Press, Philadelphia, 2001)
pp. 1-24; Felice D. Gaer, "Reality Check: Human Rights NGOs Confront Gov-
ernments, the UN" in Thomas G. Weiss and Leon Gordenker (eds.), NGOs, the
UN, and Global Governance, (Boulder : Lynne Rienner, 1996), pp. 51-66; Mi-
chael H. Posner and Candy Wittome, "The Status of Human Rights NGOs"
(1994) 25 Columbia Human Rights Law Review 269.
 12 Enhancing the Role ofNGOs in the Global Arena 419

their size and flexible structure often give them a "comparative advantage"
over public actors in the international system."
The operations ofNGOs in the field oflabor standards have also signifi-
cantly increased in the recent decades, particularly in North America and
Western Europe. NGOs regularly focus their efforts to exert pressure upon
governments to adopt policies that promote their aims. Unlike this well-
known pattern, one of the unique features of the NGOs' work in the sphere
of labor rights is that their main operations are designed to directly influ-
ence other non-governmental actors in this domain; mainly TNCS.32 View-
ing national governments as unable or unwilling to constrain TNCs' opera-
tions, "the multinationals" became the prime target of NGOs' operations
(particularly those that employ workers or import inputs from developing
states)." In order to improve labor standards, NGOs seek to influence the
consumers' choice against firms that are susceptible to breaching basic la-
bor standards. This goal is principally implemented through two patterns
of operations: social-labeling programs and ethical funds.

12.4.1 Social-Labeling Programs

The common features of social labeling programs are the use of an actual
label on the product or retail establishment, monitoring of the labor stan-
dards of the workers who produce the products, and sometimes putting a
levy on the product which is paid by the retailer or importer." Product-
labeling schemes are designed to provide information regarding the pro-
duction process to consumers, assuming that they are willing to pay extra
for products manufactured through equitable working conditions (and for

31 See, e.g., Held, McGrew, Goldblatt and Perrraton, Global Transformations,

above, pp. 67, 387,413 . For a detailed discussion ofNGOs' comparative ad-
vantages, see Section V (3).
32 On the important role of TNCs in the field of human rights, see Lu, "Corporate
Codes of Conduct and the FTC" , above, 605-607. On the application of human
rights obligations to TNCs, see Peter T. Muchlinski, "Human Rights and Multi-
nationals" (2001) 77 International Affairs 31, 35 et seq.
33 See, with regard to oil TNCs , Marina Ottaway, "Reluctant Missionaries" (July/
August 2001) Foreign Policy 44, 45-61; and in the sphere of agricultural subsi-
dies, see Bridges Weekly Trade News Digest, 5(32), 25 September 2001,
BRIDGES Weekly Trade News Digest, www.newsbulletin.orglbulletins/get-
bulletin.cfm?bulletin_ID=14&issue_ID=2056&browse=1&SID=, see also Me-
Crudden, "Human Rights Codes for Transnational Corporations", above, 171-
172.
34 See, OECD , International Trade and Core Labor Rights, above , p. 76 ; Gereffi ,
Garcia-Johnson and Sasser, "The NGO - Industrial Complex", above, 57.
420 Moshe Hirsch

the additional information)." Indeed, recent polls conducted in Western

countries show that a significant portion of consumers are ready to pay
higher prices for products produced through "fair" working processes."
Social-labeling programs may be particularly efficient in spheres that
are characterized by high level competition between several producers
(e.g., coffee, chocolate, soft drinks, and textile). In such competitive do-
mains, it is sufficient to persuade 10%-20% of the consumers to change
their purchasing patterns, in order to generate significant change in the
market, and consequently, exert significant pressure upon producers. It
should be emphasized, however, that social-labeling programs are expect-
ed to be effective with regard to firms that sell consumer goods ("end-use
goods"), and particularly products sold to middle and high-income custom-
ers." Such a method is not likely to succeed with a finn that deals with ex-
traction of natural resources (such as copper and cobalt mining) , 38
manufacturers of intermediate products, or providers of intermediate
services. "
Social-labeling methods have been applied to various products, such as
hand-knotted carpets, coffee, chocolate, textile products and footwear." As
with corporate codes, social-labeling programs often provide for a wide
variety of labor standards," and not all of them include the ILO principles.

35 See, Maskus, " Should Core Labor Standards Be Imposed Through International
Trade Policy?" above, 21; Hilowitz, "Social Labeling to Combat Child Labor",
above, 216-218; Liubicic, "Codes of Conduct and Labeling Schemes", above,
117-119.
36 See, e.g., the public-opinion data regarding US consumers' attitudes towards
the importance of labor conditions in the textile industry : 75.3% of the persons
interviewed were ready to pay a higher price (20% difference) for products cer-
tified that they are not made in sweatshops. Gereffi, Garcia-Johnson and Sasser,
"The NGO -Industrial Complex" , above, 59.
37 Hilowitz, " Social Labeling to Combat Child Labor", above, 229; Liubicic,
"Codes of Conduct and Labeling Schemes", above, 115-116.
38 See, e.g., Ottaway, "Reluctant Missionaries", above, 47-48; Gereffi, Garcia-
Johnson and Sasser, "The NGO -Industrial Complex", above, 64.
39 E.g., typing services that are rendered in third-world countries as one of the in-
termediate services designed to produce a book in a developed state.
40 See, e.g., OECD, International Trade and Core Labor Rights, above, pp. 75-
78; Gereffi, Garcia-Johnson and Sasser, "The NGO - Industrial Complex",
above, 57. On social labeling programs in other fields, Janelle Diller, "A Social
Conscience in the Global Marketplace? Labor Dimensions of Codes of Con-
duct, Social Labeling and Investor Initiatives" (1999) 138 International Labor
Review 99; Hilowitz, "Social Labeling to Combat Child Labor" , above.
41 See, e.g., OECD, International Trade and Core Labor Rights , above, p.87;
Liubicic, "Codes of Conduct and Labeling Schemes" , above, 123-131; Jane C.
 12 Enhancing the Role ofNGOs in the Global Arena 421

Thus, for instance, requirements applied by TransFair US to Starbucks?

are different from those applied by Care and Fair to carpet producers."
This incoherence undermines the ability of consumers to purchase prod-
ucts from firms that follow adequate labor standards." Generally, monitor-
ing procedures in these programs seem to be better than those found in cor-
porate codes, but, still, there is significant difference between internal and
external oversight mechanisms."

12.4.2 Ethical Funds

Socially responsible investments (SRI) are implemented through "ethical

funds" that are committed to investment in firms whose practices satisfy
certain social or environmental criteria . Regularly, such funds ' managers
employ the "double bottom line approach" for purchasing firms or shares:
potential investment opportunities are initially screened financially; invest-
ments that survive the financial screening are then subject to one or several
social screens (in accordance with the investor's social preferences)."
Social investors include individuals but also businesses, universities,
hospitals, foundations, pension funds, religious institutions and other non-
profit organizations. The sums invested in such funds are increasing, and
more than two trillion dollars were invested in such funds in the US in

Finding a Private Right of Action for International Laborers Against MNCs for
Labor Rights Violations" (2000) 19 Wisconsin International Law Journal 41,
52-57.
42 See, Kevin Tarman, "Principled Distributed Regulation by Negotiation and
Agreement: Transnational Action Networks, the Fair Trade Movement, and the
Starbucks Agreement to Sell Fairly Trade Coffee", Paper submitted to the In-
ternational Study Association Annual Convention, Chicago, February 24,2001.
See also http://www.transfairusa/org/products/coffee/criteria.html.
43 OECD, International Trade and Core Labor Rights, above, p. 177.
44 Liubicic, "Codes of Conduct and Labeling Schemes", above, 131-132 .
45 See, e.g., Hilowitz, "Social Labeling to Combat Child Labor", above, 230-232;
Liubicic, "Codes of Conduct and Labeling Schemes", above, 131-138 . On sig-
nificant doubts regarding the reliability of eco-labels, see Melinda Fulmer,
"Eco -Labels on Food Called Into Question", Los Angeles Times, 26 August
2001, p. C-1.
46 Lewis D. Solomon and Karen C. Coe, "Social Investments by Nonprofit Corpo-
rations and Charitable Trusts: A Legal and Business Primer for Foundation
Managers and Other Nonprofit Fiduciaries" (1997) 66 University of Missouri,
Kansas City Law Review 213,244; OECD, International Trade and Core La-
bor Rights, above, p. 78.
422 Mo she Hirsch

1997,47 The principal concern of ethical funds is tobacco (96%), and the
subject of labor rights is addressed in 38% of such funds." Social funds
tend also to exclude investments in alcohol, defense, nuclear energy, and
oil industries."
While social investments appear to be gaining ground in developed
states, their limitations should not be overlooked. The differences between
the criteria utilized by different ethical funds tend to weaken their capacity
to send a clear message to enterprises. In addition, such funds do not usu-
ally own enough shares in a single firm to significantly influence their de-
cision-making by threatening share prices. Still, socially responsible funds
may exert significant pressure upon companies when they operate in con-
junction with other social strategies. 50
Overall, the capability ofNGOs to promote labor standards is dependent
upon the degree of public interest in a particular area (often subject to fluc-
tuations), and the extent to which firms are vulnerable to public pressure.
As to the first factor, ethical consumption (through social-labeling pro-
grams) has been increased in developed states in the recent decade, and the
same trend is noticeable with regard to ethical investment. These develop-
ments increase the pressure on some firms to improve their labor standards
record. Still, as discussed above, NGOs' operations in this field suffer
from major limitations. Among their weaknesses is the lack of coherence
among the labor standards included in various programs, and some limita-
tions result from the particular products and investments that may be tar-
geted by these organizations.

12.5 The Expanding Role of NGOs in the International

Arena: Trends and Causes

NGOs gained growing influence in international affairs in the recent dec-

ades and their role in the sphere of labor standards is noticeable. As dis-
cussed above, however, NGOs active in this area also suffer from major
limitations.

47 OECD, International Trade and Core Labor Rights, above, p. 79; see also
Danny Hakim, "On Wall St., More Investors Push Social Goal s", The New
York Times, 11 February 2001. On ethical funds , see also http ://www. social-
funds .com , December 200 1.
48 OECD, International Trade and Core Labor Rights , above , p. 79.
49 Solomon and Coe , " Social Investments", above, 235.
50 Diller, "A Social Conscience in the Global Marketplace?" abov e, 121-122.
 12 Enhancing the Role ofNGOs in the Global Arena 423

Thus, NGOs' capacity to promote labor standards on a meaningful scale

- without significant governmental or intergovernmental involvement - is
doubtful. This statement does not belittle the significant achievements of
NGOs in the campaign to promote international labor standards . NGOs
possess some significant "comparative advantages" over governmental
bodies, and as discussed below, these special capacities may constitute val-
uable assets in the future international regime to promote labor rights.
Thus, our conclusion here is that the desirable international regime in this
area should involve substantial involvement of both governmental and
non-governmental organizations.
Before elaborating our proposed regime for better coordination between
NGOs and IGOs, it is necessary to briefly discuss the trend of increasing
involvement of NGOs in IGOs' work and analyze their comparative ad-
vantages and weaknesses in the international arena.

12.5.1 The increasing involvement of NGOs in

intergovernmental organizations work

NGOs are expanding their participation in the international system and sta-
tistical data reveals considerable growth of NGOs in comparison with in-
tergovernmental organization (IGOs).51 NGOs' active role is particularly
felt in the spheres of human rights and environmental protection, but re-
cently also in the domain of international economic law.v The increasing
role ofNGOs in world affairs is perceived by some experts as a manifesta-
tion of a broader paradigmatic shift towards a gradual building of interna-
tional civil society (as opposed to states-centric system)."

51 See, e.g., Klaus Hufner: "Non-Governmental Organizations", in Rudiger Wolf-

rum and Christiane Philipp, (eds.), United Nations : Law, Policies and Practice
(2 Volumes, C. H. Beck/Martin Nijhof Publishers, Munchen et aI, 1995),
Vol. II, pp. 927, 928; A. LeRoy Benneth, International Organizations : Princi-
ples and Issues (5th ed., Upper SadIe River, Prentice-Hall International, 1991),
p.256; Charnovitz, "NGOs and International Governance", above, 184; Re-
chenberg, Encyclopedia ofPublic International Law, above, p. 614.
52 See, e.g., on the role of NGOs in the WTO Ministerial Meeting in Seattle
(1999), Mark Ritchie, "Beyond Seattle", WTOWatch, http://www.wtowatch.
orgllibrary/admin/uploa dedfileslBeyond_Seattle.htm.
53 See, e.g., Christine Chinkin, "Human Rights and the Politics of Representation:
Is there a Role for International Law", in Michael Byers (ed.), The Role ofIn-
ternational Law in Politics (Oxford University Press, Oxford, 2000), pp. 131,
134.
424 Moshe Hirsch

The participation of NGOs in IGOs' work already began in the late-

eighteenth century (targeting slave trade and later, promoting working
solidarity) and considerably expanded in recent decades." Their capacity
to lodge mass demonstrations during world conferences and to influence
the resulting resolutions took a prominent form in the 1999 WTO Ministe-
rial Meeting in Seattle as well as in other well -known global conferences."
NGOs play an increasingly active role not only in the streets outside in-
tergovernmental conferences but also as a regular actor within the IGOs'
deliberations. They often participate in members of states' delegations and
the phenomenon of NGOs' conferences that take place parallel to IGO
conferences has increased tremendously in recent years. The 1992 UN
Conference on Environment and Trade (UNCED) represented a major step
forward for NGOs by opening a formal accreditation process." NGOs in-
creasingly take an active part in IGOs' policy shaping as well as in imple-
mentation operations. Their role in policy planning is regularly realized
through their gaining consultative status in IGOs' decisions-making proc-
ess, and their role in the implementation process is frequently fulfilled
through oversight work (verifying compliance with international norms by
states and TNCs)Y

12.5.2 NGOs' participation in ECOSOC work

The exemplary case of institutionalized consultative relationships between

IGOs and NGOs is presented in the ECOSOC special regime, which also
serves as a model for some other IGOs .58 During World War II, dozens of

54 For a detailed historical evolution ofNGOs' involvement in IGOs' work since

the late-eighteenth century, see Chamovitz, "Two Centuries of Participation:
NGOs and International Governance", above, 189-268; Klaus Hufner: "Non-
Governmental Organizations", in Rudiger Wolfrum and Christiane Philipp,
(eds.), United Nations, above, pp. 928-931 ; Weiss and Gordenker, "Pluralizing
Global Governance", pp. 21-25.
55 See, Klaus Hufner: "Non-Governmental Organizations", in Rudiger Wolfrum
and Christiane Philipp, (eds.), United Nations, above, pp. 932-935; Weiss and
Gordenker, "Pluralizing Global Governance", pp. 23, 27.
56 About 1500 NGOs were recognized in this process; Otto, "Non-Governmental
Organizations in the United Nations System", above, 118-119.
57 See also on the involvement of NGOs in intergovernmental organizations'
work, Benneth, International Organizations: Principles and Issues, above,
pp.257-263 .
58 See, e.g., the rules developed by UNESCO and FAO that follow the ECOSOC
division into three categories ofNGOs, Klaus Hufner: "Non-Governmental Or-
 12 Enhancing the Role ofNGOs in the Global Arena 425

NGOs participated in the negotiations leading to the establishment of the

United Nations. This involvement led, inter alia, to the formulation of Ar-
ticle 71 of the UN Charter:
"The Economic and Social Council may make suitable arrangements for
consultations with non-governmental organizations which are concerned
with matters within its competence. Such arrangements may be made with
international organizations and, where appropriate, with national organiza-
tions after consultation with the Member of the United Nations con-
cemed.?"
While the representatives of all organizations may be invited to attend
public meetings of the General Assembly,« the consultative status" entails
certain further rights (and obligations) for NGOs. Over the years, the
ECOSOC has developed in a series of resolutions a differentiated regime
that established three categories ofNGOs, each with different set of rights
and obligations." Under this regime, the NGOs are classified in accor-
dance with the link between their objectives and the issues dealt with by
the ECOSOC.
In 1993, ECOSOC initiated a general review of arrangements for con-
sultation with NGOS.63 This led to Resolution 1996/31 that updates the
previous framework (established in 1968) and elaborates the current rights
and privileges of NGOs within the ECOSOC framework.s- In accordance

ganizations", in Rudiger Wolfrum and Christiane Philipp, (eds.), United Na-

tions, above, pp. 931-932.
59 On the legislative history of Article 71, see Rainer Lagoni in Bruno Simma
(ed.), The Charter of the United Nations : A Commentary (Oxford University
Press , Oxford, 1994), p. 912.
60 Schermers and Blokker, International Institutional Law, above, p. 131.
6 1 On the process of application for consultative status in ECOSOC , see UN

Guidelines: Association between the United Nations and Non-Governmental

Organizations, United Nations : DESA NGO Section, http://www .un.org/esa/
coordinationingo/pdfYguidelines.pdf, pp. 5-7.
62 On the ECOSOC's Resolutions regarding the participation ofNGOs, see Otto,
"Non-Governmental Organizations in the United Nations System", above, 118-
119; Schermers and Blokker, International Institutional Law, above, p. 131;
Klaus Hufner: "Non-Governmental Organizations", in Rudiger Wolfrum and
Christiane Philipp, (eds.), United Nations, above, pp.929-932 ; Charnovitz,
"Two Centuries of Participation: NGOs and International Governance", above,
pp. 267-268.
63 ECOSOC Res. 1993/80, 30 July 1993, IGC Internet, http://www.igc.apc.org /
habitatlngo-rev/1993-214 .html, November 2001.
64 ECOSOC Res. 1996/31 on Consultative Relationship Between the United Na-

tions and Non-Governmental Organizations, 25 July 1996, UN Documentation

Centre, at http://www .un.org/documents/ecosoc/res/1996/eres1996-31.htm.De-
426 Moshe Hirsch

with this resolution, there are three types of status: General, Special and
Roster.
General Category: The NGOs in this category are concerned with most of
the activities of ECOSOC and its subsidiary bodies, and are closely in-
volved with the economic and social life of the peoples and areas they rep-
resent. 65 Such NGOs may send representatives to the UN, attend meeting
of ECOSOC of and its subsidiaries, make oral statements at ECOSOC
meetings, and circulate statements. These NGOs are also required to sub-
mit quadrennial reports." The reports are examined by the Committee on
Non-Governmental Organizations that may then recommend to ECOSOC
any reclassification in the status of the organization concerned." In addi-
tion, under the organization's internal guidelines, these NGOs may also
consult with officers from the Secretariat on matters of interest to the
NGOs. They are also allowed to make oral statements based on recom-
mendations by a Committee, submit brief written statements, designate
representatives to sit at meetings of ECOSOC and its subsidiaries, and
place items on the agendas ofECOSOC and its subsidiaries."
Special Category: NGOs in this category are concerned with only a few
of the fields of activity covered by ECOSOC. 69 These NGOs may send rep-
resentatives to the UN, attend meetings of ECOSOC and its subsidiaries,
speak at ECOSOC meetings, and circulate statements. Such NGOs are also
required to submit quadrennial reports." Under the UN internal guidelines,
these NGOs may also consult with officers from the Secretariat on matters
of interest to the NGO, make oral statement based on recommendations by

cember 1999. On the former ECOSOC Resolutions regarding cooperation with

NGOs, see Klaus Hufner : "Non-Governmental Organizations", in Rudiger
Wolfrum and Christiane Philipp , (eds.), United Nations , above, pp. 929-931;
Charnovitz, "Two Centuries of Participation: NGOs and International Govern-
ance" , above, pp. 253-254.
65 Art. 22 of Res. 1996/31.
66 See Part II of UN Guidelines: Association between the United Nations and
Non-Governmental Organizations, above , p. 4; Arts. 28-42 of Res. 1996/31.
67 Art . 61 (b) ofRes.l996/31, see also Schermers and Blokker, International Insti-
tutional Law, above , p. 131. On the process of reclassification, see also Art. B
(Part III) of UN Guidelines: Association between the United Nat ions and Non-
Governmental Organizations, above, p. 10.
68 Art. A (Part III) of the UN Guidelines: Association between the United Nations
and Non-Governmental Organizations, above, p. 5.
69 Arts. 23, 29-32, 35-39, 42 of Res. 1996/31.
70 Art 61 (c) of Res. 1966/31.
 12 Enhancing the Role ofNGOs in the Global Arena 427

the Committee, submit brief written statements, and designate representa-

tives to sit at meetings ofECOSOC and its subsidiaries."
Roster Category: NGOs belonging to this category have a specific tech -
nical focus and are permitted to attend meetings of ECOSOC and its sub-
sidiaries, but are not allowed to circulate statements and speak at meetings.
These NGOs are not required to submit quadrennial reports." Under the
UN internal guidelines, these NGOs may also consult with officers from
the Secretariat on matters of interest to the NGO and designate representa-
tives to attend meetings in the NGOs field of competence."
Currently, 123 NGOs are included in the General Category, 1082 are in-
cluded in the Special category, and 886 organizations are included in the
Roster."
Other IGOs have also developed sets of rules to formalize their relations
with NGOs, and among the most prominent are those established by the
IL075 and the Council of Europe." The role of NGOs in the ECOSOC
model is largely restricted to a consultative one. Some other IGOs went
beyond this model and integrated NGOs into the organizations' regular
monitoring work.

12.5.3 The Comparative Advantages and Weaknesses of NGOs

NGOs have succeeded in considerably increasing their influence in trans-

national affairs as a result of their comparative advantages over national
governmental bodies and intergovernmental institutions. NGOs are gener-
ally smaller and more flexible than governmental bodies . Their size and
flexible decision-making structure enables them to rapidly react to transna-
tional challenges. NGOs are also regularly focused on a narrow set of
aims, and they are less constrained by the need to make painful compro-
mises to balance between competing policy goals.

71 Art . A (Part III) of the UN Guidelines: Association between the United Nations
and Non-Governmental Organizations, above, p. 5.
72 Art. 24 and 61 (c) of Res. 1996/31.
73 Art. A (Part III) of the UN Guidelines: Association between the United Nations
and Non-Governmental Organizations, above, p. 5.
74 See, http://www.un.org/esa/coordination/ngo.November200 1.By1993. under
these arrangements, nearly 1000 NGOs had been granted formal consultative
status with ECOSOC. Otto, "Non-Governmental Organizations in the United
Nations System", above, 109.
75 See, Schermers and Blokker, International Institutional Law, above , p. 171;
Blackett, "A Labor Law Critique of Codes of Corporate Conduct", above, 401.
76 Schermers and Blokker, International Institutional Law, above, p. 131-132.
428 Moshe Hirsch

Their wide geographical scope of operations and relative flexibility as-

sist NGOs in collecting and disseminating information throughout the
world within a short time, often assisted by modem channels of interna-
tional communication. This capacity enables NGOs to fulfill an important
"intelligence function'? " within international regimes. Some IGOs success-
fully employ such NGOs "information services" to complement their own
internal institutionalized monitoring system. " Rational choice analysis
demonstrates that increased information regarding states' behavior is cru-
cial for enhancing the prospect of compliance with international norms. "
These fundamental advantages, and particularly information capacity
and flexibility, enable NGOs to mobilize public support for transnational
causes, and through this important medium, to exert considerable pressure
on governments and firms to promote certain social values.
Following the above discussion of the comparative advantages of
NGOs, it is important to analyze their limitations as well. Understanding
the weaknesses of NGOs will enable us to suggest some legal means to
address these problems in the future international labor standards regime.
The number ofNGOs is vast, a fact that practically prevents the integration
of all NGOs into IGOs' work in most domains . A possible solution may
take the form of allocation of several positions for NGOs in a relevant
IGO, thus leaving the first to decide their internal allocation." An alterna-
tive way of addressing this problem is to entrust the relevant IGO to set out
screening rules to select the desirable NGOs in accordance with the par-
ticular features of the relevant regime." A more difficult problem arises

77 Charnovitz, "Two Centuries of Participation: NGOs and International Govern-

ance" , above, 271-272. On other functions ofNGOs in the international arena,
see Charnovitz , above, 272-275; Weiss and Gordenker , "Pluralizing Global
Governance", above, pp. 37-38.
78 See, e.g., Schermers and Blokker, International Institutional Law , above,
pp. 872, 874; Gaer, "Human Rights NGOs Confront Governments , the UN",
above, pp. 55-56.
79 The operation of effective retaliatory measures (that are of major importance to
the issue of compliance) is dependent upon reliable information . In addition, in
some cases (characterized as "Assurances" situations) information may well
lead the parties to comply with agreed rules, even without the threat of sanc-
tions. See, Moshe Hirsch, "Game Theory, International Law, and Environmen-
tal Cooperation in the Middle East" (1999) 27 Denver Journal ofInternational
Law and Policy 75, pp. 116-117.
80 See, e.g., Charnovitz, "Two Centuries of Participation: NGOs and International
Governance", above, 276.
81 This method is adopted by numerous IGOs, see, e.g., regarding the ECOSOC
rules in Section V (2).
 12 Enhancing the Role ofNGOs in the Global Arena 429

from the diversity of norms applied by various NGOs in a particular field.

This undesirable feature is prominent in the domain of labor rights, and
different NGOs habitually employ manifold labor standards in their social-
labeling and investment programs.v The application of significantly inco-
herent labor standards to workers in different places and industries (in ac-
cordance with the geographical reach of each NG0)83 is clearly undesir-
able.
Most NGOs active in the domain of labor rights (as well as in many
other spheres) are based in developed states." Most of the resources em-
ployed by these organizations are mobilized from the population or gov-
ernments of industrial states. The fact that a significant part of these
NGOs' operations aims to generate changes in developing states generates
stark imbalance. Thus, it should not surprise anyone that some developing
states and some prominent scholars argue that these NGOs are just "ideo-
logical copycats" of the traditional civil rights organizations in the West,
and that their intent is to spread certain basic Western values throughout
the world." The resulting mistrustful relations between some developing
states and NGOs significantly undermine the effectiveness of NGOs' op-
erations in the territories of these states.
As NGOs continue to increase their influence in world affairs, they are
increasingly confronted with questions regarding their accountability. In-
deed, accountability has become the "Achilles heel" ofNGOs.86 The prob-
lem of subjection to international accountability rules has barely been ad-
dressed in international instruments, and this deficiency undermines

82 See in Sections IV (1) and IV (2).

83 Occasionally, the norms applied to a particular corporation or category of pro-
ducers reflect the result of the negotiations between the relevant NGOs and
producers. See, e.g., on the negotiations between TransFair US and Starbucks,
Tarman, "Principled Distributed Regulation by Negotiation and Agreement",
above.
84 See, e.g., Rechenberg, Encyclopedia of Public International Law, above,
p.618.
85 Makau Wa Mutua, "Politics and Human Rights: An Essential Symbiosis" , in
Michael Byers (ed.), The Role ofInternational Law in Politics (Oxford Univer-
sity Press, Oxford, 2000), pp. 149, 155-159. See also in Charnovitz , "Two Cen-
turies of Participation: NGOs and International Governance", above, pp. 276-
7; Chinkin, Human Rights and the Politics ofRepresentation, above, p. 144.
86 Martha L. Schweitz, ''NGO Network Codes of Conduct: Accountability, Prin-
ciples, and Voice" , Paper presented to the International Studies Association
Annual Convention, Chicago, 7 February 2001. See also Peter J. Spiro, "New
Global Potentates : Nongovernmental Organizations and the "Unregulated Mar-
ketplace" (1996) 18 Cardozo Law Review 957,962.
430 Moshe Hirsch

NGOs' legitimacy. " The subject matter of accountability (in the larger
sense) relates to the applicability of some substantive and procedural rules
to the structure and operations of NGOs. Such rules include, for instance,
provisions pertaining to NGOs' financial independence, stipulations
against conflict of interests between NGOs and the subjects of their inves-
tigation, supervisory mechanisms to rectify errors and provide appropriate
remedies for losses caused to third parties as a result of inadequate NGOs'
operations." Some buds of NGOs ' code of conduct exist at present, and
some NGO networks have already adopted some codes that include differ-
ent rules of conduct. 89 Such self-regulation and incoherent codes, however,
are certainly neither desirable nor sufficient to address the problems of ac-
countability and legitimacy.
An often-cited objection to NGOs ' involvement in international regimes
relates to the subject of representativeness. NGOs' leaders are not always
elected by their membership," and where they are duly elected, a question
that frequently arises is what portion of the general population supports
their aims and operations. Sometimes, NGOs' constituencies consist of on-
ly a handful of people." Some arguments regarding the "democracy defi-
cit" within NGOs have also been voiced with regard to the decision-
making process. Some scholars argue that NGOs' decision-making proc-
esses are not always transparent and are occasionally concealed."
As noted above, one of NGOs' comparative advantages is concentration
of activities in a particular narrow sphere. This advantage sometimes leads
to disadvantageous results because a "success" in one domain may gener-
ate greater negative impacts in a related domain . The well-known example
in that respect is child labor. NGOs' activities may increase pressure upon
TNCs not to employ children in developing states. Consequently, there is a
significant risk that the displaced children may be forced into activities that
are less desirable than working in the formal labor sector, and exposed to
worse forms of exploitation."

87 Schweitz, "NGO Network Codes of Conduct", above, 8.

88 See on this subject in detail, in Section VI (3).
89 See, Schweitz, "NGO Network Codes of Conduct", above.
90 See, e.g., Spiro, "New Global Potentates", above, 963.
91 See, e.g., Chinkin, Human Rights and the Politics of Representation, above,
p.143 .
92 Chinkin, Human Rights and the Politics ofRepresentation, above, pp. 143-144;
see also Spiro, "New Global Potentates", above, 963.
93 That was the case, for instance, following the cessation of the use of child labor
in the garment industry in Bangladesh, see Dickerson, "Transnational Codes of
Conducts Through Dialogue" , above, 613. On the risk that child workers may
be driven into harsher forms of exploitation, see also Maskus, "Should Core
 12 Enhancing the Role ofNGOs in the Global Arena 431

Finally, NGOs' operations are often not effective since they are hin-
dered by various restrictions imposed by states that seek to curtail their in-
fluence. These limitations take various forms, inter alia , restrictions on
gaining permission to operate as a legal entity, various prohibitions on
raising funds from abroad, limitation of their ability to collect and dissemi-
nate information, and exclusion from participating in IGOs' deliberations.
In some cases, NGOs are subject to intimidation and physical attacks spon-
sored by state governments." Some legal mechanisms that address these
weaknesses ofNGOs will be elaborated in the next section.

12.6 Empowering NGOs: Towards a New Model of

Coordination between Governmental and Non-
Governmental Bodies

The above discussion underlined the importance ofNGOs' participation in

international regimes and their unique comparative advantages as well as
weaknesses in comparison to governmental bodies. NGOs' operations
aimed to promote labor standards already bear impressive results, and
some of them could hardly have been achieved by governmental bodies
alone. NGOs' active in this area skillfully employed their "intelligence ca-
pacity" and flexibility in order to mobilize public support and exert pres-
sure upon private firms and governments to improve their labor rights re-
cord. These NGOs' significant achievements, however, should not lead us
to underestimate their limitations in the international arena.
As elaborated above, NGOs often suffer from the lack of a comprehen-
sive approach, the application of incoherent sets of labor standards in a va-
riety of programs, and various states' restrictions that inhibit their opera-
tions. In addition, NGOs are frequently regarded by developing states as
preachers of Western values, and the fact that they are not subject to ade-

Labor Standards Be Imposed Through International Trade Policy?", above, 7;

Diller, "A Social Conscience in the Global Marketplace?", above, 120; Liubi-
cic, " Codes of Conduct and Labeling Schemes", above, 148-149; Barry
Bearak, "Lives Held Cheap in Bangladesh Sweatshops", New York Times,
15 Apri12001.
94 For a detailed account of various restrictions imposed by some states on NGOs
in the sphere of human rights, see Posner and Wittorne, "The Status of Human
Rights NGOs" , above, 272-28 1. On the exclusion ofNGOs from international
negotiations, see Chinkin, Human Rights and the Politics of Representation,
above,pp.140-141.
432 Moshe Hirsch

quate international accountability rules undermines their legitimacy to-

wards numerous states and the public .
In light of the essential contribution of NGOs to the promotion of labor
standards and their weaknesses, the ambitious challenge posed to scholars
and policymakers is to devise an appropriate legal regime that better inte-
grates NGOs into the global effort to advance labor rights, alongside with
adequate norms to address their weaknesses. These considerations lead us
to suggest that an effective international regime to promote labor standards
would be developed along the following principles:
1. NGOs should play an enhanced role in the future regime to promote in-
ternational labor standards, particularly with regard to monitoring com-
pliance with the agreed global standards.
2. The international legal status of NGOs should be strengthened and they
should be equipped with adequate legal rights as well as functional im-
munities.
3. NGOs that are willing and able to participate in the future regime (and
to enjoy the additional rights and immunities), should be subjected to an
agreed-upon international code of conduct that would include account-
ability and supervisory rules. "
4. The exigencies of a comprehensive approach and application of coher-
ent labor standards suggest that the overall responsibility for establish-
ing and operating the future regime should be assigned to an intergov-
ernmental body (preferably to the ILO).

12.6.1 Expanding the Role of NGOs

The discussion in Section V (3) shows that NGOs have essential capacities
and that the expansion of their role is likely to increase the effectiveness of
the future labor standards regime. Consequently, the activities of NGOs
should be broadened with regard to shaping general policy and specific la-
bor standards," and particularly with regard to monitoring comp liance.
The consultative role of NGOs within IGOs should be further expanded
through negotiations with their representatives. Generally, it is not desir-
able that the role and legal status ofNGOs within a certain international re-

95 As elaborated below, the proposed regime will not prejudice the existing rights
of any NGOs that are not interested in gaining the special rights and immunities
offered to NGOs under the suggested regime .
96 As discussed below, the prime responsibility for shaping policies and standards
in this sphere should be assigned to an IGO (preferably the ILO).
 12 Enhancing the Role ofNGOs in the Global Arena 433

gime will be unilaterally determined by the relevant IGO. Furthermore, the

participation of NGOs in the processes of policy shaping should be en-
sured by the internal law of the relevant IGOs (e.g., ILO, the World Health
Organization).
The remarkable capacity of NGOs to collect and disseminate informa-
tion regarding labor standards in working places is a valuable asset in the
campaign to improve labor rights. As discussed above, 97 gaining increased
information regarding the conduct of states is crucial for compliance with
international norms . The problem of monitoring is further exacerbated in
the area of labor standards, inter alia, since private firms (TNCs and local
firms) are very active in this sphere and because the production processes
leading to a consumer good are often scattered in various parts of the
globe." Consequently, NGOs should be recruited to monitor compliance
with international labor standards and their expanded "intelligence role"
should constitute an essential component in any effective regime in the
sphere of labor standards."
In addition, it is desirable that other information-commercial mechanis-
ms, such as labeling schemes and ethical funds be expanded and assisted
by governmental and intergovernmental funds.'?" Innovative mechanisms
like "sustainable firms indexes" that take into account both financial and
social criteria of firms'?' should be encouraged and further developed.

12.6.2 Equipping NGOs with Special Rights and Functional

Immunities

The various restrictions imposed by some governments on NGOs' activi-

ties."? and the need to expand their monitoring activities in the sphere of
labor standards, call for endowing NGOs with certain rights and immuni-
ties. Such enhanced legal protection should be accorded to NGOs that are
willing to be bound by certain rules of conduct (see below). The special
rights granted to such NGOs may include recognition of their legal status

97 See the discussion in Section V (3).

98 Liubicic, "Codes of Conduct and Labeling Schemes", above, 137-138.
99 As elaborated below, NGOs ' intelligence operations should also be protected
by adequate immunities .
100 As elaborated below, these programs, should be operated along certain rules to

minimize the risk of unjustified losses to third parties; see in Section VI (3).
101 See about such indexes, " Sustainable Firm Indexes for Europe," Bridges Week-

ly Trade News Digest, 5(37A), 30 October 2001, BRIDGES Weekly Trade

News Digest, www.ictsd .org, p. 10.
102 See on the restrictions imposed by some states on NGOs in Section V (3).
434 Moshe Hirsch

within the local legal system' s' as well as permission to receive funds from
various sources (from both within and outside of the state) . NGOs' over-
sight role will be enhanced by according them several freedoms , such as
freedom of access to working premises, to interview workers, to receive
complaints from workers and labor unions, freedom of expression and
communication. In some cases, the freedom of NGOs to receive govern-
mental information regarding workers' rights should also be recognized.
NGOs that promote labor standards should be protected by functional im-
munities from national legal procedures. Finally, adequate rules that pro-
hibit physical attacks or threats to NGOs' personnel are fundamental for
sustaining and broadening their operations worldwide.
The possibility to set out a differential system of rights and immunities
for NGOs should be taken into account. In accordance with this technique,
NGOs involved in the sphere of labor standards will be divided into sev-
eral categories. NGOs in each category will be entitled to different sets of
rights and immunities, and bound by different sets of obligations (see fur-
ther below) .'?' Generally, it is desirable that the scope of rights and immu-
nities granted to NGOs in each category correlate with the extent of
obligations included in each category.

12.6.3 Subjecting NGOs to an International Code of Conduct

Parallel to the enhancement of legal protection accorded to NGOs, it is es-

sential that these organizations undertake to conduct their operations in ac-
cordance with an agreed-upon international code of conduct. Some codes
of conduct have already been adopted by some NGOs networks, but their
provisions are diversified and often very vague .!" It is clear that this type
of self-regulation and incoherent sets of rules of conduct are not desirable.
Thus, it is desirable to elaborate a uniform code of conduct for NGOs op-
erating in the sphere of labor rights through negotiations among represen-
tatives of involved parties (NGOs, private corporations, labor unions, the
ILO and other involved intergovernmental organizations). Naturally, the
rules that are already included in both existing NGOs ' codes and IGOs' in-
ternal documents (such as in ECOSOC Resolutions)!" will constitute the
substantive infrastructure for such negotiations. Still, it is clear that the ex-

103 See, e.g., Art. 2 of the European Convention on The Recognition of the Legal
Personality of International Non-Governmental Organisations, above .
104 See in detail about the three categories of NGOs in the ECOSOC system in
Section V (2).
105 Schweitz, "NGO Network Codes of Conduct," above .

106 See in Section V (2).

 12 Enhancing the Role ofNGOs in the Global Arena 435

isting rules in these documents are not sufficient and they should be sig-
nificantly augmented by additional and meaningful rules .
The future uniform code of conduct for NGOs should lay some basic
rules regarding NGOs' organizational structure, decision-making proce-
dures, operational rules, and accountability and supervisory rules. Rules
pertaining to NGOs' organizational structure should ensure the independ-
ence of the organizations towards the involved actors in a particular setting
(states, private firms, and workers organizations). Generally, conflicts of
interests should be avoided as much as possible, and when it is strictly in-
evitable, disclosure of relevant information is essential. These principles
call for the elaboration of adequate duties regarding the financial inde-
pendence and disclosure of financial records of NGOS.107 In addition, it is
desirable to set out rules that ensure the democratic and transparent deci-
sion-making processes, and the exclusion of profit-oriented NGOS.108
As to operational rules, it is desirable that the uniform code include ade-
quate provisions regarding fair and unbiased operations (e.g., with regard
to oversight activities) and apply the structural rules above regarding con-
flict of interests to NGOs' operations as well .
Recent literature in international law and international relations under-
scores the importance of legitimacy as a factor that intensifies or weakens
compliance with international norms. !" Legitimacy derives, inter alia,
from participation of the representatives of a particular sector in the body
that shapes the relevant norms . Thus, enhancing compliance with interna-
tional labor standards in developing states necessitates a significant par-
ticipation of representatives of local communities in all levels of decision-
making and implementation. When the participation of local representa-
tives is practically impossible, the default rules should be drawn from a

107 Such rules are designed to avoid doubts regarding the dependence of the organ-
ization towards one of the involved states or private firms. See, e.g., the dispute
that arose in 1967 between Western and Soviet states regarding the independ-
ence of some NGOs that were regarded as "agents of communism" or those that
were suspected to financed by the CIA. This dispute led to the establishmentof
duty for all NGOs affiliated with the ECOSOC to declare all financial re-
sources. Klaus Hufner: "Non-Governmental Organizations", in Rudiger Wolf-
rum and Christiane Philipp, (eds.), United Nations, above, p. 930.
108 This does not mean to exclude NGOs who make profits that are used for
financingtheir non-profit activities.
109 See, Thomas M. Franck, The Power of Legitimacy Among Nations (Oxford
University Press, Oxford, 1999), p. 3; Beth A. Simmons, "Compliance with In-
ternational Agreements" (1998) 1 Annual Review of Political Science 75, 87-
89.
436 Moshe Hirsch

multilateral instrument that has gained the acceptance of both developing

and developed states.
Supervisory procedures and mechanisms should also be included in the
uniform code. NGOs that are ready to subject themselves to adequate ac-
countability rules and enable potential injured persons to apply to fair su-
pervisory procedures are likely to increase public confidence towards these
organizations . Such actions are also expected to foster the legitimacy of
NGOs towards governmental and private firms, and, consequently, enable
them to further broaden their roles in the international arena. Thus, the
code should bind NGOs to establish in their internal documents adequate
supervisory procedures to process complaints lodged by third parties that
are adversely affected by their operations. Such procedures would be de-
signed to correct mistakes and provide adequate remedy to parties that
have been harmed by the NGOs' inadequate activities. 110

12.6.4 The Overall Responsibility of an Intergovernmental

Organization

While it is suggested to significantly enhance the role and legal status of

NGOs in the future regime on labor standards, it is highly desirable to en-
trust an intergovernmental body with the overall responsibility to establish
and operate this regime. The exigencies of a comprehensive approach, ap-
plication of a coherent system of labor standards, I I I coordination between
various NGOs and IGOs, and external supervisory mechanism for NGOs'
operations, indicate that a universal IGO (preferably the ILO) should be
assigned the prime responsibility of implementing these tasks.
IGO should be assigned the prime responsibility of convening and di-
recting the relevant parties to formulate a comprehensive instrument in-
cluding minimum labor standards in various spheres. Following the estab-
lishment of such an instrument, all parties that are active in this sphere
(including NGOs) will be bound to apply, as a minimum, these labor stan-

110 On the recourse to external supervisory mechanisms (to allow "appeals" a-

gainst the decisions ofNGOs' internal supervisory bodies), see further below.
III The labor standards applied by IGOs and NGOs should not necessarily be the
same for all regions in the world. Due to the correlation between labor stan-
dards and level of economic development, and the considerable gap regarding
the content and implementation of labor standards in developing and developed
states, there is a need to develop different labor standards for developed and
developing states. In principle, differential obligations should be set out for an
intermediate period.
 12 Enhancing the Role ofNGOs in the Global Arena 437

dards in their various programs. In absence of standards in a particular

sphere, the default rules will be provisions of the 1998 ILO Declaration.
IGO should also coordinate between the various operations of states and
NGOs in a particular geographical region or substantive sphere of labor
standards. It is desirable that representatives ofNGOs participate in the de-
liberations leading to decisions regarding such coordination. This coordi-
nation work should strive to avoid a concentration or overlapping of vari-
ous parties' operations in a particular region or sphere, and allocate
different realms to the different parties.
Finally, it is desirable that IGO have the prime responsibility of estab-
lishing and operating an adequate mechanism to settle disputes among the
various parties involved in the campaign to promote labor standards. This
supervisory mechanism should be established and operated together with
NGOs' representatives and issue binding decisions towards the involved
NGOs in appropriate cases. This body should also deal with appeals
against the decisions ofNGOs' internal supervisory mechanisms.

12.7 Concluding Remarks

Non-state actors have dramatically increased their activities in the sphere

of labor standards protection in the recent two decades. The lack of con-
certed intergovernmental action in this field, and the growing public con-
cern regarding very low labor standards, enabled non-governmental bodies
to fill the vacuum left by governments. Consequently, private corporate
codes and various NGOs' programs mushroomed in this domain, particu-
larly since the mid-1980s. The considerable role played by non-state actors
during this period provides scholars with a rare opportunity to appraise the
contribution of these bodies in this sphere, analyze their comparative ad-
vantages and weaknesses in the international arena, and draw some con-
clusions regarding their future role in this domain as well as other transna-
tional fields.
The analysis in the previous sections reveals that NGOs possess signifi-
cant comparative advantages over governmental actors (prominently their
flexibility and capacity to collect and disseminate information within a
short period). Equipped with these (and other) capacities, NGOs managed
to mobilize domestic support and exerted significant pressure upon private
corporations and governments to improve international labor standards.
These significant achievements indicate that that NGOs should play an es-
sential role in the future international regime to promote international labor
rights. Still, the above discussion also reveals that NGOs suffer from cer-
438 Moshe Hirsch

tain major limitations, mainly their narrow approach, application of inco-

herent labor standards, and lack of adequate accountability rules. Thus, the
capacity of NGOs to promote labor standards on a meaningful scale -
without significant governmental or intergovernmental involvement - is
doubtful.
These considerations led us to the conclusion that the desirable interna-
tional labor standards regime should involve substantial involvement of
both governmental and non-governmental organizations. Consequently, we
suggest to significantly expand the role as well as the legal protection ac-
corded to NGOs active in this sphere. The enhancement ofNGOs' role in
this domain should be accompanied by the establishment of an internation-
al code of conduct that would apply to NGOs. It is desirable that this code
would include accountability and supervisory rules to protect the rights of
third parties. The overall responsibility to establish and operate the future
regime should be assigned to an intergovernmental body (preferably, the
ILO). This proposed regime, it is submitted, is likely to better coordinate
between governmental and non-governmental bodies and enhance the ef-
fectiveness of international labor standards on the global level.
Appendices

I Appendix to Chapter 6.4

Conventions Relating to Issues of Health and Safety at work'

ILO Conventions C 183 (Convention concerning the revision of the Ma-
ternity Protection Convention (Revised), 1952, Geneva, 15 June 2000);
C 182 (Convention concerning the Prohibition and Immediate Action for
the Elimination of the Worst Forms of Child Labour, Geneva, 17 June
1999, in force 19 November 2000); C 180 (Convention concerning Sea-
farers' Hours of Work and the Manning of Ships, Geneva, 22 October
1996); C 176 (Convention concerning Safety and Health in Mines, Gene-
va, 22 June 1995, in force 5 June 1998); C 174 (Convention concerning the
Prevention of Major Industrial Accidents, Geneva, 22 June 1993, in force
3 January 1997); C 171 (Convention concerning Night Work, Geneva,
26 June 1990, in force 4 January 1995); C 170 (Convention concerning
Safety in the use of Chemicals at Work, Geneva, 25 June 1990, in force
4November 1993); C 167 (Convention concerning Safety and Health in
Construction, Geneva, 20 June 1988, in force 11 January 1991); C 164
(Convention concerning Health Protection and Medical Care for Seafarers,
Geneva 8 October 1987, in force 11 January 1991); C 162 (Convention
concerning Safety in the Use of Asbestos, Geneva 24 June 1986, in force
16 June 1989); C 161 (Convention concerning Occupational Health Ser-
vices, Geneva, 25 June 1985, in force 17 February 1988); C 161 (Conven-
tion concerning Occupational Health Services, Geneva, 25 June 1985, in
force 17 February 1988); C 155 (Convention concerning Occupational
Safety and Health and the Working Environment, Geneva, 22 June 1981,
in force 11 August 1983); C 153 (Convention concerning Hours of Work
and Rest Periods in Road Transport, Geneva, 27 June 1979, in force
10 February 1983); C 152 (Convention concerning Occupational Safety
and Health in Dock Work, Geneva, 25 June 1979, in force 5 December
1981); C 148 (Convention concerning the Protection of Workers against
Occupational Hazards in the Working Environment Due to Air Pollution,
Noise and Vibration, Geneva, 20 June 1977, in force 11 July 1979); C 147
(Convention concerning Minimum Standards in Merchant Ships, Geneva,
29 October 1976, in force 28 November 1981); C 146 (Convention con-
cerning Annual Leave with Pay for Seafarers, Geneva, 29 October 1976, in

I Cf. Chapter 6.4 in this volume, Sebastian Krebber, "The Search for Core Labor
Standards in Liberalized Trade", footnote 152.
440 I Appendix to Chapter 6.4

force 13 June 1979); C 139 (Convention concerning Prevention and Con-

trol of Occupational Hazards caused by Carcinogenic Substances and
Agents, Geneva, 24 June 1974, in force 10 June 1976); C 138 (Convention
concerning Minimum Age for Admission to Employment, Geneva,
26 June 1973, in force 19 June 1976); C 136 (Convention concerning Pro-
tection against Hazards of Poisoning Arising from Benzene, Geneva,
23 June 1971, in force 27 July 1973); C 134 (Convention concerning the
Prevention of Occupational Accidents to Seafarers , Geneva, 30 October
1970, in force 17 February 1973); C 132 (Convention concerning Annual
Holidays with Pay (Revised), 1970, Geneva, 24 June 1970, in force
30 June 1973); C 127 (Convention concerning the Maximum Permissible
Weight to Be Carried by One Worker, Geneva 28 June 1967, in force
10 March 1970); C 124 (Convention concerning Medical Examination of
Young Persons for Fitness for Employment Underground in Mines, Ge-
neva, 23 June 1965, in force 13 December 1967); C 123 (Convention con-
cerning the Minimum Age for Admission to Employment Underground in
Mines, Geneva, 22 June 1965, in force 10 November 1967); C 120 (Con-
vention concerning Hygiene in Commerce and Offices, Geneva, 8 July
1964, in force 29 March 1966); C 119 (Convention concerning the Guard-
ing of Machinery, Geneva, 25 June 1963, in force 21 April 1965); C 115
(Convention concerning the Protection of Workers against Ionising Radia-
tions, Geneva, 22 June 1960, in force 17 June 1962); C 113 (Convention
concerning the Medical Examination of Fishermen, Geneva, 19 June 1959,
in force 7 November 1961); ClIO (Convention concerning Conditions of
Employment of Plantation Workers, Genev a, 24 June 1958, in force
22 January 1960); C 109 (Convention concerning Wages , Hours of Work
on Board Ship and Manning (Revised 1958), Geneva, 14 May 1958);
C 106 (Convention concerning Weekly Rest in Commerce and Offices,
Geneva, 26 June 1957, in force 4 March 1959); C 103 (Convention con-
cerning Maternity Protection (Revised 1952), Geneva, 28 June 1952, in
force 7 September 1955); C 101 (Convention concerning Holidays with
Pay in Agriculture, Geneva, 26 June 1952, in force 24 July 1954); C 93
(Convention concerning Wages, Hours of Work on Board Ship and Man-
ning (Revised 1949), Geneva, 18 June 1949); C 091 (Convention concern-
ing Vacation Holidays with Pay for Seafarers (Revised 1949), Geneva,
18 June 1949, in force 14 September 1967); C 090 (Convention concern-
ing the Night Work of Young Persons Employed in Industry (Revised
1948), San Francisco, 10 July 1948, in force 12 June 1951); C 089 (Con-
vention concerning Night Work of Women Employed in Industry (Revised
1948), San Francisco, 9 July 1948, in force 27 February 1951); C 079
(Convention concerning the Restriction of Night Work of Children and
Young Persons in Non-Industrial Occupations, Montreal, 9 October 1946,
 I Appendix to Chapter 6.4 441

in force 29 December 1950); C 078 (Convention concerning Medical Ex-

amination of Children and Young Persons for Fitness for Employment in
Non-Industrial Occupations. Montreal, 9 October 1946, in force
29 December 1950); C 077 (Convention concerning Medical Examination
for Fitness for Employment in Industry of Children and Young Persons,
Montreal, 9 October 1946, in force 29 December 1950); C 076 (Conven-
tion concerning Wages, Hours of Work on Board Ship and Manning, Seat-
tle, 29 June 1946); C 073 (Convention concerning the Medical Examina-
tion of Seafarers, Seattle, 29 June 1949, in force 17 August 1955); C 072
(Convention concerning Vacation Holidays with Pay for Seafarers, Seattle,
28 June 1946); C 067 (Convention concerning the Regulation of Hours of
Work and Rest Periods in Road Transport, Geneva, 28 June 1939, in force
18 March 1955); C 062 (Convention concerning Safety Provisions in the
Building Industry, Geneva, 23 June 1937, in force 4 July 1942); C 061
(Convention concerning the Reduction of Hours of Work in the Textile In-
dustry, Geneva, 22 June 1937); C 060 (Convention concerning the Age for
Admission of Children to Non-Industrial Employment, Geneva, 22 June
1937, in force 29 December 1950); C 059 (Convention Fixing the Mini-
mum Age for Admission of Children to Industrial Employment (Revised
1937), Geneva, 22 June 1937, in force 21 February 1941); C 058 (Conven-
tion Fixing the Minimum Age for the Admission of Children to Employ-
ment at Sea, Geneva, 24 October 1936, in force 11 April 1939); C 057
(Convention concerning Hours of Work on Board Ship and Manning, Ge-
neva, 24 October 1936); C 052 (Convention concerning Annual Holidays
with Pay, Geneva, 24 June 1936, in force 22 September 1939); C 051
(Convention concerning the Reduction of Hours of Work on Public Works,
Geneva, 23 June 1936); C 049 (Convention concerning the Reduction of
Hours of Work in Glass-Bottle Works, Geneva, 25 June 1935, in force
10 June 1938); C 046 (Convention Limiting Hours of Work in Coal Mines
(Revised 1935), Geneva, 21 June 1935); C 045 (Convention concerning
the Employment of Women on Underground Work in Mines of all Kinds,
Geneva, 21 June 1935, in force 30 May 1937); C 043 (Convention for the
Regulation of Hours of Work in Automatic Sheet-Glass Works, Geneva,
21 June 1934, in force 13 January 1938); C 041 (Convention concerning
Employment of Women during the Night (Revised 1934), Geneva, 19 June
1934, in force 22 November 1936); C 033 (Convention concerning the
Age for Admission of Children to Non-Industrial Employment, Geneva,
30 April 1932, in force 6 June 1935); C 032 (Convention concerning the
Protection against Accidents of Workers Employed in Loading or Unload-
ing Ships (Revised), 1932, Geneva, 27 April 1932, in force 30 October
1934); C 031 (Convention Limiting Hours of Work in Coal Mines, Ge-
neva, 18 June 1931; C 030 (Convention concerning the Regulation of
442 I Appendix to Chapter 6.4

Hours of Work in Commerce and Offices, Geneva, 28 June 1930, in force

29 August 1933); C 028 (Convention concerning the Protection against
Accidents of Workers Employed in Loading or Unloading Ships, Geneva,
21 June 1929, in force 1 April 1932); C 020 (Convention concerning Night
Work in Bakeries, Geneva, 8 June 1925, in force 26 May 1928); C 016
(Convention concerning the Compulsory Medical Examination of Children
and Young Persons Employed at Sea, Geneva, 11 November 1921, in
force 20 November 1922); C 015 (Convention Fixing the Minimum Age
for the Admission of Young Persons to Employment as Trimmers or Stok-
ers, Geneva, 11 November 1921, in force 20 November 1922); C 014
(Convention concerning the Application of the Weekly Rest in Industrial
Undertakings, Geneva, 17 November 1921, in force 19 June 1923); C 013
(Convention concerning the Use of White Lead in Painting, Geneva,
19November 1921, in force 31 August 1923); COlO (Convention con-
cerning the Age for Admission of Children to Employment in Agriculture,
Geneva, 16 November 1921, in force 31 August 1923); C 007 (Convention
Fixing the Minimum Age for Admission of Children to Employment at
Sea, Genoa, 9 July 1920, in force 27 September 1921); C 006 (Convention
concerning the Night Work of Young Persons Employed in Industry,
Washington, 28 November 1919, in force 13 June 1921); C 004 (Conven-
tion concerning Employment of Women during the Night, Washington,
29 November 1919, in force 13 June 1921); C 003 (Convention concerning
the Employment of Women before and after Childbirth, Washington,
29 November 1919, in force 13 June 1921); COOl (Convention Limiting
the Hours of Work in Industrial Undertakings to Eight in the Day and
Forty-eight in the Week, Washington, 28 November 1919, in force
13 June, 1921; all ILO conventions to be found at: http://ilolex.ilo.ch :
1567/english/convdisp2.htm.
 II Appendix to Chapter 6.4.2 443

II Appendix to Chapter 6.4.2

General Regulations Concerning Health and Safety at Wor/(!

Cf. e.g. Algeria: Loi no. 88-07 de 26 janvier 1988 relative a l'hygiene, a
la securite et a la medecine du travail, Journal officiel. 1988-01-27. no. 4,
pp. 84-89; Argentina : Decreto num. 1741/96 de 11 de junio, sobre estable-
cimientos industriales; Barbados: Factories Act (Ch.347), The Laws of
Barbados, Chapter 347 (L.R.O. 1987), pp.9-108; Bolivia: Decreto ley
num. 16998 de 2 de agosto de 1979, ley general de higiene, seguridad ocu-
pacional y bienestar, Ley general del trabajo. Serrano Tomeo, Cocha-
bamba. Bolivia. 1993-07-25, pp.183-289; Bulgaria: Act of 16 December
1997 on Occupational Safety and Health, D'rzhaven Vestnik. 1997-12-23 .
No. 124, pp. 10-19; Burundi: Decret du 8 janvier 1952 relatif a la securite
et a la salubrite au travail, Recueil de la Legislation du Travail du Burundi,
Programme des Nations Unies pour le Developpement, Burundi, 1983-08-
00, p. 1; China: Code of Safety and Health in Factories; Estonia: Act of
16 June 1999 on occupational hygiene and safety (Text No. 616), Pravov-
ye Akty. 1999-09-30. No. 49, pp. 1843-1866; Dominican Republic: Regla-
mento sobre higiene y seguridad industrial von 1966; Fiji: Health and
Safety at Work Act, 1996 (No.4 of 1996), Gazette, Acts, pp. 19-62; Cam-
eroon: Arrete no. 23 du 27 mai 1969 fixant les mesures generales d' hy-
giene et de securite sur les lieux de travail, Journal officiel, 1969-06-01;
Kazakhstan: Government Decree No. 878 of 9 June 2000 to approve the
National Plan of action on hygiene of the environment (Text No. 305), Ak-
tiler Zhinagy. 2000-07-25. No. 26, pp. 99-140; Kenya: The Factories Act
(Chapter 514) (No. 38 of 1950) [consolidated through 1972], Laws of
Kenya. Government Printer, Nairobi, Kenya, 1972, Chapter 514 - 1972
rev. ed.; Kyrgyzstan : Law No. 765-XII of 27 February 1992 on Labour
Protection (Safety and Health) (Text No. 152), Vedomosti Verkhovnogo
Sovieta Respubliki Kyrgyzstan. 1992-04-00. No. 4/1 (1004), pp. 134-150;
Latvia: Act of 4 May 1993 on Labour Protection; Madagascar : Loi no. 94-
027 du 17 novembre 1994 portant Code d'hygiene, de securite et de l'envi-
ronnement du travail, Journal officiel, partie 1. 1995-12-04, no. 2337,
pp. 3670-3672; Malawi: Occupational Safety, Health and Welfare Act,
1997 (No. 21 of 1997), Government Gazette, 1997-08-29. No. 21, pp. 1-
58; Malaysia: Occupational Safety and Health Act 1994 (No. 514); Mauri-
tius: Occupational Safety, Health and Welfare Act 1988. No. 34, Govern-
ment Gazette, Legal Supplement. 1988-12-03, No. 76, pp. 133-215 ; Mol-

I Cf. Chapter 6.4.2 in this volume, Sebastian Krebber, "The Search for Core La-
bor Standards in Liberalized Trade", footnote 281.
444 II Appendix to Chapter 6.4.2

davia: Law No. 625-XII of 2 July 1991 on Labour Protection (Safety and
Health); Nigeria: Factories Act (No. 16 of 1987), Laws of the Federation
ofNigeria. 1990. Vol. 8, Chapter 126; Papua New Guinea: Industrial Safe-
ty, Health and Welfare Act (Chapter 175); Peru: Ley num.26842, Ley
General de Salud, El Peruano. 1997-07-20. Nr. 6232, pp. 151245-151252;
Solomon Islands: Safety at Work Act 1982 (No.3 of 1982); Saint Lucia:
Employees (Occupational Health and Safety) Act 1985. No. 10; Sey-
chelles: Occupational Safety and Health (Workplace health, safety and
welfare) Regulations, 1997; Slovakia: Occupational Safety and Health Pro-
tection at Work Act (No. 330); Sri Lanka: Factories Ordinance. Chap-
ter 144, Legislative Enactments ofthe Democratic Socialist Republic of Sri
Lanka, Government of Sri Lanka. 1980, pp. 51-110; South Africa: Occu-
pational Health and Safety Act, 1993 (No. 85 of 1993), Government Ga-
zette of the Republic of South Africa. 1993-07-02. Vol. 337. No. 14918,
pp. 1-53 ; South Korea: Industrial Safety and Health Act (No. 4220 of
1990), Labor Laws ofKorea 1998, Ministry of Labor, Korea, pp. 183-257;
Taiwan: Occupational Safety Act as amended to 17 May 1991, Labour
Laws and Regulations ofthe Republic ofChina, Council of Labour Affairs
of the Executive Yuan, Taiwan, 1993, pp. 152-185; Ukraine: Act on La-
bour Protection (safety and health) of 14 October 1992, Vedomosti Verk-
hovnogo Soveta Ukrainy, 1992-12-08, Nr. 49, pp. 1475-1493 ; Venezuela:
Ley organica de prevencion, condiciones y medio ambiente de trabajo, Ga-
ceta Oficia1, 1986-07-18, N.3850, extraordinario, pp. 1-7 ; Belorus: Act
No. 363 of 10 January 2000 on industrial security of dangerous production
sites (Text No. 41), Vedomosti Verkhovnogo Soveta, 2000-02-15. No.5,
pp. 130-153 .
 Appendix- Table 1: Core labor rights- a comparative survey of selected international instrum ents

CORE LABOR RIGHT S "CORE PLUS"

Instrument Forced labor Child labor Freed om of Equality and Freedom of Treatment of Health and Social fund Others
association and anti- movement foreigu workers safety
ancillarv rights' discrimina tion
UN" 0
World Summit for Social Development: The Copenha gen Declaration and Programme for Action, Commitm ent 3( 1), 16- 17

!LOw 0 0 0 0
!LO !LO !LO !LO The se rights appear in conventions that are not part of the CLRS .
Conventions Conventions Conventions Conventions
29, 105 138, 182 87 98 100, 111
WTO "
"Commitment to the observance of internati onally recognized core standards; the !LO is the compe tent body to set and deal with these issues"

OECD· 0 0 0 0
genera l'

OECD 0 0 0 0 0 Trainin g;
guideli nes for
--
>
"0
MNC s " Upholding domestic "0
standards genera lly;
8->;; '
NAFT A- 0 0 0 0 0 0 Minimum wages
NAALC'" Enforcement Enforcement
s
priority priorit y Enforcement priorit y
9
US GSP"" 0 0 0 Minimum conditions
of work and wages i....
-.)

EU Charter of 0 0 0 0 0 Right against

Fund amen tal unjus tifi ed di smissal
Rights (2000 )" Fair and right work ing ......
conditions VI
.---
 .j:>,
.j:>,
0\

EU directives' 0 0 0 0 0" .....

~
World Bank'" 0 0 0 0 Social funds are
not part of a
human rights ~
agenda
8-...
:><
Fair Labor 0 0 0 0 0 Min. wage or industry
Ass ociation wage (the higher of the 0-
(apparel . two);
industryj'" Hours of work &
overtime;
compensation; ....
f
Freedom from -J
harassment or abuse
SA-8000'" 0 0 0 0 0 Compensation;
Working Hours;
Discipline
Apparel 0 0 0 0 0 Prevention of
Industry harassment or abuse;
Partnership Wages and benefits;
Code of Hours of work
Conduct - overtime
(US)" compensation.

Ethical Tradi ng 0 0 0 0 0 Living wage;

Initiative Working hours;
(UK)''' Regular employment;
Discipline
UNl- 0 0 0 0 0 Minimumwage and
Telefonica working day according
~Jreement to national legislation.

The Gap' ''''' 0 0 0 0 0 Wages;

Hours of work;
Prohibition on certa in
disciplinary practice s;
Housins conditions
Reebok'" 0' 0' 0' 0' 0' Social funds are Working hours
not recognized +overtime
as human rights compensation;
issues, but as Fair wages.
human resource
policy

, "Ancillary right s" include variou s rights that are derived from the freedom of association and are intended to ensure its effectiveness, such as the right to collective
bargainin g, the right to consultation and disclosure, and the right to strike. It should be noted that the freedom of association in itself, without recognition of ancillary rights,
may render the use of association ineffective and even precarious.
u United Nations, World Summit fo r Socia l Development : The Copenhagen Declara tion and Programme for Ac tion, Commitment 3(1), 16-17 (1995) and Programme of

Action Chapter 3, section 54. Interestingly, the Copenhagen Declaration is probably the broadest and most far-reaching internati onal statement of relevance to our topic. It
covers numerous problem s, with particul ar attention to the effects of globalization, and lists an extensive list of action programmes . Nevertheless, even in this document there
are traces of CLRs, as codified later by the ILO (1998). Section 54(b) of the Programme of Action call for "Safeguarding and promoting respect for basic workers' rights,
including the prohibition offorced labour and child labour, freedom of association and the right to organize and bargain collectively, equal remun eration for men and women
for work of equal value, and non-discrimination in employment .. .".
in Internati onal Labour Organization (ILO), Declara tion on Fundamental Principles and Rights at Work (1998); for the declaration and its follow-up, see:
http ://www.ilo .org/publi c/english /standards/decl/inde x.htm (last visited Dec. 2002). The Convention s are listed in http://www.ilo.org/ilol ex/engli sh/index.htm .
rv World Trade Organi zation (WTO), Singapore Ministerial Declaration (adopted December 13, 1996) Section 4, WTIMIN(96)/DEC

, OECD, Trade, Employment and Labor Standards: A Study ofCore Rights and International Trade (Paris, OECD , 1996)
vr OECD, OECD Guidelines for Mu ltinational Enterprises (Paris, OECD , 2000) Section IV.
......
......
......
vu The North American Agreement on Labor Cooperation Between the Government ofthe United States ofAmerica, The Government of Canada and the Government ofthe

United Mex ican States (NAALC) (September 13,1993); (http ://mvw .naalc.org/engli sh/infocentreINAALC.htmlast visited December 2002). Regardin g, the three issues in
which it is noted that there are enforcement priorities, there is a special dispute resolution process that is not extended to other issues ~
' no For a survey of generalized system of preferences (OSP) used by various countries, including the United States, see: www.unctad.org (last visited December 2002). The [
United States' OSP is codified in 19 U.S.c. 2701-706 . For the European Union's OSP legislation , see: Council Regulation (EC) No. 1256/96 (June 1996); Council Regulation :;<"
(EC) No. 328 1/94 (December 1994). 0-
ox Charter ofFundamental Righ ts fo r the European Union (Proclaimed in Nice, Dec. 7 2000)
x For the complete list of European Directives regardin g labour, see: http://europa .eu.inVcomm/employment social/soc-dial/labour/ind exen.htm (last visited December
2002). The European Directives are included in this table mostly for a comparative perspective, but they are detached from the general distinction between CLRs and labour
standards. On the one hand they do not regulate directly most issues that belong to the CLRs and on the other hand they regulate issues that extend well beyond the sphere of
minimum standards. Th e coverage of the directives includes issues such as the establishment of works councils and labour-mana gement consultation, the regulation of fixed- - .)

term work. part-time work, organization of work-time (which extends beyond the regnlation of overtim e payment) and the free movement of workers. It should be noted that
f
.j::o.
.j::o.
-.)
 ,l::o
the Directives are not the exclusive instrument for European governance of the labour market. Moreover, the concept of CLRs and the ILO's list of CLRs has been integrated ,l::o
00
into the policy makin g of the union. Cf. Commission of the European Commun ities, Promoting Core Labour Standards and Improving Social Governance in the Context of
Globalisation (communication to the Council, European Parliam ent and the Economic and Social Committee, COM (2001) 4 1618.7.2001).
xi Th e European Social Fund, established by the Treaty of Rome. The fund is not part of the system of the EU's directives, but it is part of the EU law, and it is added for its
,....
,....
,....
promin ent position in the promotion of employment rights in the European Union. See: hltp:l/europa.eu.intlcommlemployment social/esf2000/ (last visited December 2002).
xu World Bank , Workers in an Integrating World (Washington DC, World Bank, 1995) 78.
xiii Fair Labor Assoc iation Code of Conduct, !!.up.;!by}\1y.Ji!!xJ1!J?9.L.9.rg/.i!.\!!.£Q.g~!.i.!!g'5.J\1m.\ (last visited December 2002).
~
"V Social Accountability International, Social Accountability Standad 8000 second version, !!.!W!I.}~}\1\,,£~p.i!.i!,Q.rgLS.!i!.!!.C!i!!g%f.Q.~.!!gJ.j~!.\,gQf (last visited December 2002). 8-,..
xv United States, Department of Labor, Apparel Industry Partnersh ip Code of Conduct, !.\ttP)l.wm\"gQ.LgQyL!1.N?l.m,gi.w.!~p.Q.n~{.(£)p.I.i!P.P.i!r~!a.9.,!.\!.m (last visited December :><
2002) .
xvr Ethi cal Tr ading Initiative, Th e Base Code (!.\!!.P..l!.,~},}\'" .!h(f.~!lmg~,Q.r,gf.P.lJ!?!.p.\!J?!i£i!.( i.Q!!.~&.i!~'f.9.g.~{~!!I.i.!!g.'~.,~h!m.\, last visited December 2002).
0-
xvn Code of conduct signed between Union Network International (UNI) and Telefonica (March 12, 2001) on the basis of the Protocol signed by the parties in Apri l 20, 2000.
n
Documents can be obtained from UNl's website: !Jnp.;(!m~.lJJ.lj.QJ.l:n'l~Y.Qr~~.Q.r,gf.\!J.li.~i!~f.j.!!_g.,p.l!J!m.\!!.\ini!.!i.QJ.li!.\~l~!.,.f.(.m.(£.w.!.~!~.«l!!.(£.~Jl!m (last visited December 2002). For I
other codes of conduct that were negotiated between international trade unions and multinational enterpri ses, see: Q
!Jl!p.;!h\1~y,.~j!Q.&lJr9..fg.\!J.lg.J,!.f.QQ.!N5.I.f.~i!!.\!!,f.);;v.Q.!.Q.5..V}f.,!Jlm! (last visited December 2002). -..l
xvm Gap Inc., Code of Vendor Conduct, b.uP';jl.mm.g~p.(!l£SQm!.~9f.(i!.Lr.'.~p.I.~g.\!r£i.!!g/.Y'J.l9.QL£Qg,_P'Q.gy',~h!m (last visited December 2002)
xix Reebok Intern ation al Ltd. hnp ://www.reebok.comlReeboklUSlHumanRi ghts/business/ (last visited December 2002).