In defense of transnational domestic labor regulation.

AuthorDoorey, David J.

ABSTRACT

Transnational domestic labor regulation (TDLR) is unilateral regulation introduced by a government to influence labor practices in foreign jurisdictions. TDLR has the potential to empower foreign workers and influence the balance of power in foreign industrial relations systems in ways that might lead to improved labor conditions. Particularly interesting is the potential for TDLR to harness or steer private labor regulation--the many non-state sources of labor practice governance already active in shaping labor conditions within global supply chains. However, whether governments should try to influence foreign labor practices at all is a controversial question. This Article explores the arguments both for and against a unilateral legislative strategy that aims to improve working conditions in foreign countries. While the Article ultimately supports this strategy, it concludes that the design of the model must have as its principal objective the empowerment of the foreign workers themselves. TDLR that is poorly designed or loses sight of this objective can produce harmful results that leave the workers even worse off.

TABLE OF CONTENTS I. FOREIGN LABOR PRACTICES AND THE DOMESTIC POLITICAL AGENDA WITHIN DEVELOPED STATES II. ARGUMENTS AGAINST A TRANSNATIONAL DOMESTIC LABOR REGULATION (TDLR) PROJECT AND PRIVATE LABOR REGULATION (PLR) A. TDLR Undermines Foreign Government National Sovereignty and Comparative Advantage B. PLR May Seek to Produce Norms that Conflict with Social Norms in the Foreign States C. Reliance by PLR Campaigns and Initiatives on Market Forces is Inappropriate and Ineffective D. PLR Legitimizes the Substitution of Private or "Self" Regulation for State Regulation E. PLR Shifts Responsibility for Defining Appropriate Standards from States to Unaccountable Private Actors F. The Costs of TDLR Would Outweigh Any Potential Benefits III. ARGUMENTS IN SUPPORT OF TRANSNATIONAL DOMESTIC LABOR REGULATION A. The Sovereign State and Labor Practice Governance B. PLR and TDLR Might Bolster Government Sovereignty by Improving Compliance with National Labor Laws C. The Modest Impact of PLR Initiatives and Campaigns on Labor Practices and Foreign Inward Investment D. PLR Encourages Greater Deliberation and Discourse About Abusive Supply Chain Labor Practices E. PLR May Influence Internal Management Systems of Multinational Corporations in Useful Ways F. PLR May Encourage Industry Collaboration Towards Finding Sustainable Solutions to Reputation-Damaging Labor Practice Abuses IV. THE NEED TO ENCOURAGE PARTICIPATION OF LOCAL ACTORS V. CONCLUSION Governments of advanced economic nations have been wrestling with an intriguing question: to what extent should they seek to use their influence to improve labor practices in economically developing countries? Should the U.S. government expend financial and political resources to improve working conditions in Chinese or Indian factories? These are controversial questions.

On one side of the debate is the argument that determining acceptable employment practices within a particular jurisdiction is best left to its governing political leaders and the local industrial relations actors, including employers, employees, and, where they exist, unions. On the other side is the argument that while multinational corporations (MNCs) have reaped huge financial rewards from globalization and the proliferation of the global sourcing model over the past quarter century, they have often done so by exploiting poor working conditions in countries where independent unions are nonexistent or outlawed altogether and where national governments are either unable or unwilling to enforce decent labor standards to protect workers.

In fact, Western governments have sought to influence working conditions in developing countries through a variety of methods, including support for direct trade--labor linkages in regional and supranational trade agreements and "soft law" measures intended to reward decent labor practices and punish offensive ones. (1) Some governments have also enacted unilateral legislation intended to influence labor practices in foreign jurisdictions. (2) This Article focuses on unilateral legislation and, more specifically, on the debates that surround this form of regulation.

Legislation enacted in one country that is intended to influence labor practices in other countries can be labeled "transnational domestic labor regulation" (TDLR). (3) It is "transnational" in the broad sense envisioned by Philip Jessup, who defined transnational law to include "all law which regulates actions and events that transcend national frontiers. Both public and private international law are included, as are other rules which do not wholly fit into such standard categories." (4) State-based laws that create incentives for foreign governments to improve labor laws or for foreign producers to improve labor practices are included. For example, Generalized Systems of Preferences grant import preferences based on compliance with specified labor standards. (5) A law that denies the importation of a product made under working conditions that violate a standard--such as the standard not to use child or prison labor--would also qualify as TDLR, since the objective of the law is to encourage foreign suppliers to cease the offending practice. (6)

However, this Article is mostly interested in regulation that is designed to influence or steer the behavior of MNCs and the many factory owners they engage around the world to produce their goods. (7) This type of TDLR offers interesting potential in an era in which capital is global and governance of business behavior is divided into complex arenas of government and private forms of regulation. It draws on the lessons of so-called "de-centered" or "reflexive" legal theory, which is often labeled "New Governance" in North America. (8) The idea, in very general terms, is that some social and economic problems are more effectively addressed through indirect legal signals that guide, steer, or encourage changes in behavior by influencing the practical conditions under which behavioral norms emerge. (9) A de-centered legal orientation encourages lawmakers to think about what sorts of legal signals might create the perception for employers or MNCs that improving labor practices is in their economic interest.

Viewing concerns about abusive labor practices within global supply chains through the lens of de-centered regulation opens up possibilities for the use of regulation to harness and agitate those forces that, in practice, already influence normative labor conditions. Labor practices within modern global supply chains are today determined not only by national labor laws and prevailing market conditions, but also by pressures, rules, risks, and opportunities whose origins lie in the efforts of non-state activists interested in improving labor practices. These activists employ a number of tactics: they utilize investigations, monitoring, and campaigns, or the threat of them, by nongovernmental organizations (NGOs), unions, academics, and journalists; they encourage multi-stakeholder and industry-led initiatives seeking to eliminate sweatshops; student activists pressure their educational institutions to adopt "no sweat" policies; and consumers and activist investors avoid companies that condone abusive labor practices.

The rules and norms that developed from the interactions of these groups with employers and MNCs have been variously described as "outsourced," "non-governmental," (10) or "private labor regulation" (PLR) (11)--the term this Article employs. If PLR in fact influences labor practices, as many authors have claimed, then this creates opportunities for TDLR that have been underexplored in legal literature. For instance, if MNCs are more likely to insist that their suppliers comply with local labor laws because failing to do so will lead to negative publicity in an NGO campaign, then a law empowering the NGOs may create greater pressure on MNCs to monitor their suppliers' labor practices. In other words, TDLR could be used to harness PLR to raise the probability of improved labor conditions in supplier factories.

A law might require MNCs to disclose information about their global supply chains and thereby increase the risk in permitting abusive labor conditions in their supplier factories to go unchecked. (12) States can use regulation to inject risk into supply chain management systems with the expectation that the companies' risk management responses will ultimately improve the environment under which labor practice norms emerge. A law requiring every supplier to be identified with a name and address, for example, could alter the power dynamic between the MNC, its suppliers, and the many private activists engaged in monitoring and reporting on supply chain labor practices. Such a law would make it easier and cheaper for the activists to monitor a company's activities, thereby increasing the risk that abusive labor conditions will be exposed. (13) This change in relative power could indirectly encourage the MNC or the contractor to take steps to reduce the possibility of exposure as a labor rights violator, which in turn could have a positive effect on labor practices.

Whether or not a law that seeks to indirectly influence supply chain labor practices would be effective in practice is an interesting, and as yet, largely untested hypothesis. However, there is another question that needs to be addressed first: whether a regulatory TDLR project that seeks to harness the power of PLR, with the aim of improving foreign labor practices, is good policy. Ultimately, this Article's objective is to defend the use of TDLR as a means of improving labor practices in foreign jurisdictions. However, the Article also recommends that the form and design of any such regulation must take account of some legitimate warnings and lessons described by...

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