362

Discussion #1

As described here, Free Trade Agreements with 20 Countries, the United States has free trade agreements in force with multiple countries. Compare and contrast two of the agreements.

Discussion #2

Most unions have opposed free trade agreements, such as NAFTA. On the other hand, most employer lobbying groups have supported such agreements. Create an argument for one side or the other.

Please use at least three references from class resources to support your argument.

Writing a Thesis and Making an Argument

References 1.

http://usa.usembassy.de/etexts/oecon/chap9.htm

https://ustr.gov/about-us/benefits-trade

https://www.eeoc.gov/laws/guidance/employee-rights-when-working-multinational-employers

Codes of Conduct for Multinational

Corporations: An Overview

James K. Jackson

Specialist in International Trade and Finance

References number 2.

Module 4: Labor Relations in a Global Environment

Topics

Unions, the Global Economy, and Free Trade

Labor Relations and Multinational Corporations

The Labor Relations Environment in Foreign Countries

1. Unions, the Global Economy, and Free Trade

Today international trade and global economic activity are enormous. In recent years, the focus has shifted from the national economy to a more global perspective. Many developing nations are experiencing newfound prosperity, and U.S. firms are rapidly expanding their overseas markets. However, the net benefits of globalization have been uneven. Many American jobs have been lost. Among the hardest hit have been industries with a strong union presence—steel, automobiles, textiles, and consumer electronics. An estimated 17 million American workers have been displaced since the early 1980s. About one-third of these jobs were in manufacturing.

The AFL-CIO has begun to recognize that unions must broaden their perspective. They can no longer concern themselves exclusively with U.S.-based corporations and the domestic economy. If unions are to survive and prosper, they must incorporate a more global perspective. Speaking at a gathering of worldwide trade unions in 2001, AFL-CIO President John Sweeney stated:

[t]he global economy that corporations have forged can only be tamed by the international solidarity of working families everywhere…[w]e must commit to pressuring our governments to champion the cause of building enforceable workers’ rights into the rules of the global market. (Sweeney, 2006)

Sweeney and other union leaders acknowledge the benefits of expanding global trade. They also point out that these new economic realities come with some costs. To fuel their growing economies, countries are sometimes forced to compete among themselves to attract investment capital. This competition does not always translate into higher wages or an enhanced standard of living. In fact, in some instances, competition for new plants and new investment may actually drive down wages. Organized labor also believes that expanding global competition can erode workers’ rights, threatening important job protections.

Pros and Cons of the Global Economy

The pros and cons of the expanding global economy are hotly debated. Some economists agree with the concerns expressed by the AFL-CIO. Unquestionably, global enterprises and keen competition for investment capital have taken on added importance in recent years. As countries scramble for limited capital and investments in new plants and equipment, the effect may be downward pressure on both wages and environmental standards.

Protections for workers (wage-and-hour laws, safety statutes, fair-employment laws, and job security) may follow the same downward path. Other experts sharply disagree. They argue that employers are less concerned with maintaining low wage levels and more concerned with identifying a productive workforce and a good infrastructure to support their business. For example, high-technology companies need to maintain close ties with universities as a ready source of intellectual capital. Finally, supporters of globalization point out that many MNCs have actually raised the labor standards and improved employee working conditions in countries where they have opened production facilities.

Free Trade Agreements

Another dramatic change has been the recent proliferation of free trade agreements. Increasingly nations are forming pacts to reduce trade barriers and encourage the free movement of goods and services across their national borders. Perhaps the best-known regional trade agreement is the North American Free Trade Agreement (NAFTA). The net effects of this and similar agreements are hotly debated. Consumers have clearly benefited because of lower prices and increased selection, and U.S. exports to Canada and Mexico have increased substantially since the 1993 enactment of NAFTA. However, over the same period, the United States has experienced a substantial decrease in manufacturing jobs.

Thus, the overall effects have been uneven. Looking at free trade on a global rather than a regional basis, it is clear that virtually any product can be manufactured more cheaply in China than it can in higher-wage countries of North America and western Europe. Enhanced trade with China has generated a selection of reasonably priced consumer goods for the American market. However, the migration of manufacturing capacity to Asia poses a direct threat to American jobs, both union and nonunion.

Organized labor has taken a strong stand against the expansion of free trade pacts. Indeed, the AFL-CIO has launched protests at several trade conferences aimed at reducing trade and tariff barriers. Union concerns extend beyond the mere loss of jobs. Unions also see free trade agreements as responsible for an overall deterioration in worker rights. Fundamental worker rights were addressed in one of the supplemental agreements to NAFTA, the so-called North American Agreement on Labor Cooperation (NAALC). Through the NAALC, Canada, Mexico, and the United States adopted a statement of principles. These include a shared commitment to enforce 11 basic worker rights, including protection for the right to strike, prohibitions against child labor, and appropriate compensation for occupational injuries.

Like NAFTA itself, NAALC has yielded mixed results. The agreement fails to provide specific remedies where a worker’s rights have been violated. In addition, there are no simple mechanisms to sanction governments that do not adhere to the letter or spirit of the agreement. The procedures to address infractions are cumbersome. However, labor and human rights groups have used NAALC as a basis to convene conferences and studies on worker rights and have raised public awareness of the problem. When claims of abuses have surfaced, NAALC members have sought to avoid public airing of the accusations, which has resulted in the informal resolution of many worker complaints.

2. Labor Relations and Multinational Corporations

In addition to contending with the overall expansion in world trade and the growth in free trade agreements, unions must also contend with the growth of multinational corporations (MNCs). Corporations that produce and market goods across national borders and maintain a presence in several countries are not new. Many large U.S. corporations sought to tap foreign markets as early as the 1950s. In addition, the notion of moving a portion of manufacturing operations abroad is hardly a new concept. Nevertheless, some of these enterprises have grown enormous in size and impressive in their influence. Some authors have pointed out that the annual revenues of Wal-Mart stores, which operate in a multitude of countries, are about same as the gross national product of Austria. Other examples of very large MNCs are Exxon Mobil, an integrated producer and marketer of energy products, and General Motors, which manufactures cars and trucks in locations as diverse as Brazil and Australia.

American unions have not kept pace with the explosive growth of these behemoth enterprises. For example, when Japanese or European auto manufacturers opened U.S. assembly plants, unions used the same organizing tactics traditionally used with U.S.-based manufacturers. They also appealed to the workers’ sense of patriotism and directed negative publicity toward these offshore companies.

The companies responded with a blend of traditional American tactics as well as approaches from their home countries. For example, Japanese firms do not hesitate to hire labor lawyers and consultants to help them remain union free. In addition, they have emphasized trust between managers and employees, restricted executive “perks,” and encouraged work teams. This positive approach to human resources management combined with traditional American tactics has created additional challenges for unions. Union efforts to organize these foreign manufacturers operating on U.S. soil have been no more successful than when unions try to organize domestic corporations. In both arenas, they are winning around 50 percent of all secret-ballot elections conducted by the NLRB.

MNCs present additional challenges for unions. Strikes may be less effective. The purpose of a strike is to place economic pressure on the enterprise. The union does so by denying the employer its labor source in hopes of choking off production. The notion is to starve the enterprise of its revenue source until it succumbs to the union’s demands. But an MNC can often divert production to an alternative overseas location or obtain goods from one of its outlying manufacturing facilities. In fact, unions perceive that MNCs are actually on the offensive against organized labor, insisting upon cuts in employee benefits or demanding more favorable work rules. Some of these companies simply say to the union, “if you don’t give us the concessions we want, we will move our facilities overseas or send a portion of our work to an alternative facility.”

Bargaining in a transnational setting also requires unions to overcome a number of obstacles. For example, labor relations laws and collective bargaining structures vary from country to country. Indeed, trade unions themselves often have difficulty collaborating across national borders. Local union leaders are reluctant to share authority with foreign counterparts. In addition, American unions are often uncomfortable with the socialist or communist political affiliations of overseas unions. Finally, MNCs have generally resisted any sort of centralized or transnational bargaining. Most experts agree that this attitude will change only if unions can surmount some of the other issues just mentioned.

3. The Labor Relations Environment in Foreign Countries

As with residents of other countries, those of us in the United States tend to view other countries in terms of our own culture, practices, and patterns of living. However, our system of labor relations is unique. No other country has a system that operates in quite the same manner. The major features of a nation’s labor relations system can be evaluated by examining three key dimensions: (1) union density, (2) recognition procedures, and (3) bargaining structures.

Union Density

Union membership is in sharp decline in the United States. With the exception of unions representing public employees (state, county, municipal, federal, and so forth), major U.S. unions have been losing members for more than 20 years. Recent data from the Bureau of Labor Statistics show that only about 12 percent of American workers belong to unions. In contrast, several northern European countries boast unionization rates exceeding 80 percent. That is nearly seven times greater than membership in the United States. Even in neighboring Canada and Mexico, more than 20 percent of active workers belong to unions, a rate nearly double the U.S. rate. Membership is on the rise in both countries (Holley, 2005, p. 682; Baltimore Sun, 2007, p. 6E).

Recognition Procedures

Under U.S. labor laws, employers may insist upon a secret-ballot election as a precondition to recognizing and dealing with a labor organization. In addition, employers are permitted to conduct sophisticated campaigns to convince employees to vote “no union.” This is not the case in many other countries. Employers are generally more accepting of unions in Canada, for example, and are less likely to engage in antiunion tactics.

Card checks are a widely accepted means to gain union recognition in Canada. This method denies employers the opportunity to conduct protracted antiunion campaigns. Canadian labor laws themselves are more restrictive concerning permissible antiunion campaign tactics. Mexico permits the closed shop, a practice that is illegal in most U.S. industries. This system requires than an individual join a union before he or she is hired. Mexican unions may also insist upon the termination of an individual who refuses to maintain union membership and pay required dues.

Bargaining Structures

The relationship between an employer and a union in the United States is based on the concept of exclusivity—the basic notion that if the employer must deal with a union, it need only deal with a single union as the representative of a given group of employees. In Great Britain, exclusivity is not the prevailing model. Most bargaining does not take place at the company level. Agreements are forged between large multiemployer associations and union umbrella organizations. A manufacturing company might have ongoing relationships with as many as six or seven different unions. In sharp contrast to the United States, there are no national labor laws compelling negotiations or the resolution of employee grievances. Although deeply entrenched in the national culture, Great Britain’s collective bargaining system is purely voluntary in nature.

Germany has 16 major national unions. However, the most important collective bargaining agreements are not negotiated at the national or plant level. Instead regional agreements are the most important. Companies and unions within a specific geographic area of the country reach agreements applicable to all employees within the region. Also typical of the European model, the government is a much more active and visible participant in the labor relations process. Senior government officials will often intercede directly in collective bargaining and may play a vital role in brokering a final agreement.

In both Europe and Latin America, labor unions and political parties are intimately intertwined. Union members depend upon sympathetic politicians to support laws protecting employee rights and enhancing benefits. In turn, politicians look to the unions for political and financial support. Nowhere are unions more visible than in Great Britain. There, organized labor has its own highly influential political party, the Labour Party. Recently, the British government has been led by prime ministers from the Labour Party, and the government has enacted legislation making it easier for unions to organize new groups of employees.

Try This Try This 4.1: International Labor Relations Terms

Module 4 Self-Assessment Questions – Please go to My Tools > Self Assessments > to complete this self assessment.

References

Holley, W. H., Jr. (2005). The labor relations process (8th ed.). Mason, OH: Southwestern.

Sweeney, John. (September 9, 2006). Labor unions and globalization. [Online]. University of Iowa Center for International Finance and Development. Available: www.uiowa.edu/ifdebook/issues/globalization/reading table/labor.shtml

Union membership declines. (2007, January 26). The Baltimore Sun, p. 6E.