Why does trade matter for labour?
Dr Ben Richardson, University of Warwick
In 2015 customers of the Stafford branch of Asda were in for a surprise. Popping in for their shop one August lunchtime, they encountered two dairy cows and dozens of irate farmers. The farmers were clearing the shelves of milk in protest against the low retail price, which they said was forcing them out of business. The supermarkets’ position was that dairy products are globally tradable commodities and that the price of milk in the UK market was really being driven by the price of cheese, yoghurt and butter on the world market. In other words, they were simply paying farmers the going rate. Despite disagreement over the causes, what could not be denied was that hundreds of dairy farmers were leaving the industry every year – and, in fact, they still are.
One thing this food fight demonstrates is that the effects of trade on labour are not straightforward. At a general level there is consensus that the exchange of goods and services across national borders will have consequences for the kinds of work that people do. Indeed, the theory of ‘comparative advantage’ – the intellectual cornerstone of free trade – starts from the premise that trade is a means to maximise the division of labour, reallocating people to where they are relatively most productive. Yet to get into specifics, such as how many jobs are lost or created by international trade, is much more complex. One reason is because trade, and the rules which enable it, can affect labour in multiple ways.
Trade rules establish terms of competition
Trade agreements provide the legal framework within which trade takes place. They influence the terms of competition between producers in different countries (not forgetting that in some parts of the world agri-food trade in the informal economy is substantial). Agreements that liberalise trade via lower tariffs or increased import quotas will enhance the price competitiveness of exporters over domestic producers. Some firms see this as a threat, others as an opportunity. These ‘defensive’ and ‘offensive’ interests can in turn lead to sectoral politics. For example, in trade negotiations between the EU and South America, European sugar producers opposed the deal as it would likely lower sugar prices, whereas European manufacturers of sweetened foods and drinks supported it for exactly the same reason. Depending in part on which workers they represent, trade unions may ally with one industry group over another. In this case, the European Federation of Food, Agriculture and Tourism Trade Unions went with the sugar producers.
Trade agreements also address ‘behind the border’ policy areas such as product standards. These can affect labour too. The debate over chlorinated chicken imports from the US has been framed as a consumer issue, but unions representing workers in the UK food processing industry primarily see it as a threat to jobs. Their argument is that such imports would undermine the competitiveness of UK meat processors as these have to maintain more costly standards of factory hygiene than processors based in the US. Trade rules would thus change the terms of competition via the cost of production. What this would mean for workers is an open question. There are potential job losses to consider, but also a worsening of jobs that might remain. Exposure to international competition via trade – whether this is real or constructed – can be used by employers to put downward pressure on wages and working conditions. The Low Pay Commission considers this an important reason why agriculture and food processing are among the UK’s lowest paying industries.
Another key policy area that trade rules address are farm subsidies. Trade agreements, such as the World Trade Organization’s Agreement on Agriculture, attempt to establish a level playing field of permissible subsidies so that one country’s farmers do not gain an unfair advantage. However, attempts to distinguish ‘trade distorting’ from ‘non-trade distorting’ subsidies have been contentious. Countries in the Global South continue to criticise the EU and US for protecting their farmers through subsidies, like cheap inputs and credit, that effectively lower the cost of production. Due to the larger numbers of people making a livelihood from agriculture in the Global South, the displacement of domestic production can be detrimental, as seen in the EU’s export of milk powder to West Africa undermining the fresh milk sold by herders.
Trade rules govern labour standards
Trade agreements can also contain provisions on labour standards. These are meant to ensure that countries follow a minimum set of rules around workers’ rights, typically derived from the International Labour Organization. While labour standards are largely absent from the World Trade Organization rulebook, meaning that there are few obligations on members to uphold workers’ rights, they have been more common in bilateral and unilateral arrangements. In fact, since 2015 there have been more free trade agreements with labour provisions than without. The EU has been particularly proactive in forging a ‘trade-labour linkage’ yet because of problems in the design and implementation of these provisions there has been limited impact on the ground. One pervasive challenge is translating legal commitments made by states into actual rights experienced by workers. The UK is no exception to this, of course. One of the oldest labour standards is to provide freedom from forced labour yet there remain hundreds of potential victims of modern slavery in UK restaurants and farms. Using trade agreements to raise statutory rights for workers and ensure they are effectively applied remains very much a work in progress.
Another recent feature of trade agreements are provisions on digital trade. These are designed to promote forms of ‘e-commerce’ such as online sales, and are especially concerned with the rules on data governance for companies trading or investing abroad. In a more indirect way than labour standards provisions – though perhaps ultimately a more impactful one – these can also affect how people experience work. One prominent criticism is that ‘tech giants’ have created platforms and employment regimes that have intensified work. By allowing them to more easily transfer data on workers across national borders and restrict public scrutiny of how that data is used, trade agreements could limit the ability of labour to resist intrusive surveillance and monitoring. In respect to the UK food sector, we might think here of the worrying working conditions reported by couriers for Deliveroo (now part-owned by Amazon) and which in the wake of increased food deliveries as a result of COVID restrictions, announced its intention to double the number of its riders to more than 50,000.
Trade rules can be agreed by companies too
It is not just rules agreed by states that determine the relationship between trade and labour. ‘Non-state governance’ and ‘private regulation’ are concepts that refer to the ability of companies and/or charities to develop regulations that exist alongside international agreements. The Fairtrade cocoa label, for example, indicates that in that particular supply-chain farmers have been paid a market premium and workers have been treated decently. As membership of these organisations is voluntary, though, companies can shop around for the rules which best suit them. A recent example is the decision by Nestlé to switch its certified cocoa for KitKats from Fairtrade to Rainforest Alliance. This has been criticised for significantly reducing the premium paid to farming cooperatives in Côte d’Ivoire.
Most of the private regulation governing agri-food trade is not visible to consumers. Take Tesco as an example. It contracts from thousands of suppliers worldwide. Those based in countries at high risk of human rights violations are audited against the labour standards of the Ethical Trading Initiative but the results of those audits are not displayed to consumers on the shop floor. There is a good reason for this. By its own admission, in 2018/19 “critical non-conformances” with the basic labour standards were identified at 63 per cent of these suppliers with the most common reason being excessive working hours. Tesco collaborate with the suppliers to try and remedy these problems and claim that the vast majority are resolved. However, academic research has shown that whilst buyers continue to demand low cost products and labour law remains lax, violations of labour standards tend to recur, often being shifted to outsourced or ‘indirect’ suppliers.
In its human rights report, Tesco also notes its engagement with the UK Gangmasters and Labour Abuse Authority (GLAA). This was set up in 2005 after the manslaughter of 21 Chinese people sent to pick cockles in Morecambe Bay by an illegal gangmaster. Focused on agriculture, horticulture, shellfish gathering and their associated processing industries, the GLAA has in the last ten years helped to convict 75 gangmasters operating without a licence. This points towards the importance of joining up state and non-state governance to more effectively regulate employers. It is also a useful reminder that labour abuse is a global problem and not one confined to ‘developing countries’. By embedding these two principles into international trade policy, there is the possibility to create better forms of global labour governance, though whether this outweighs the economic dislocation caused by trade itself is a bigger question to be posed.