Presentation to World Bank Conference on Private Sector Development and Core Labor Standards

By Yannick ETIENNE

Batay Ouvriye

May 2007

Section 1 – Labor Rights in Haiti

            Labor rights in Haiti exist on paper but not in reality.  ILO conventions 87 and 98 (1948 and 1949) are ratified by the government but there is no protection for trade union organizing and collective bargaining.  The other two conventions (135 and 151[1]) dealing with representation have not been ratified.  Union busting is done with impunity.  There are weak structures to enforce labor rights.  Although the law gives clear time frames to act on labor conflicts, the process drags on for many months, effectively discouraging workers from pursuing complaints.  After a case is dragged through the courts, actual penalties for labor right violations are minimal.  As an additional mechanism, with the support of the ILO, a national Tripartite Commission was set up to hear labor disputes in the late 1990s.  We have been working on one case of labor conflict submitted to the Tripartite Commission last November. The commission has not met in five months claiming they have no space to meet. Given this situation, the private sector operates in a de facto environment of non-compliance and impunity.  There are no inspections, no real regulation, and collective bargaining is rare. 

            The government is now taking steps to open the Haitian economy to more foreign investment.  This goal recently received a boost with the passage of a bilateral trade preference regime by the US congress called H.O.P.E.  The bill will allow for the duty-free importation of textile and automotive parts that have been assembled in Haiti .  More free trade zones and industrial parks are planned to create the space to take advantage of these so-called trade preferences.  An increase in exports and liberalized trade in Haiti in this environment of impunity could very well accelerate the race to the bottom.  For these reasons, and within the limits of this economic model, linking core labor standards to World Bank loans is important for helping to implement labor standards. But serious challenges also exist. Today, I will talk about a case in which we have been most closely involved: the CODEVI free trade zone on the border of Haiti and the Dominican Republic . Then, I will give our assessment of the policy measure tested in that case – the conditioning of an IFC loan on core labor standards. Finally, I will present our suggestions for the way forward.

Section 2 – CODEVI Case Background

In 2003, the World Bank’s International Financial Corporation (IFC) offered a $20 million loan package to the largest Dominican textile firm, Grupo M, to upgrade the group’s facilities in the DR and to finance construction of the CODEVI free trade zone on the border between the DR and Haiti . The loan projected the creation of 1500 jobs in the initial phase and the possibility of more investment to generate 20,000 direct jobs once the entire site was developed.  The project violently displaced 172 farmers or more, affecting a total of 792 people according to the compensation plan that later became another condition of the loan.

Dominican unions and their international allies were the first to raise concerns to the IFC about Grupo M’s violations of freedom of association in the Dominican Republic .  The unions alleged that Grupo M had violently busted union efforts in several of their Dominican plants. Labor solidarity groups with offices in Washington , DC – including the Worker Rights Consortium, the AFL-CIO’s Solidarity Center , and the ICFTU -- put direct pressure on the head of the IFC after the loan officer brushed them off.  This eventually resulted in an independent investigation of the Dominican union’s claims by a consultant selected and paid for by the IFC.  The investigation produced the ALGI report.  This report supported most of the Dominican union’s claims. As a result, the IFC rewrote the loan proposal.  The new loan proposal made the loan conditional on the company following a remediation plan in the Dominican Republic and a social plan for displaced farmers in Haiti .  As part of the remediation plan, the IFC conditioned the loan on respect of freedom of association and collective bargaining and made a public statement to this effect in early 2004.

During 2004, the CODEVI free trade zone continued to navigate troubled waters.  The two factories at CODEVI operated with an entirely Dominican management and a Haitian workforce.  It is not surprising that conflicts were common, given the historical tensions between Dominicans and Haitians and the form of exploitation in the garment industry. Workers began to organize a union at the border zone with the support of the BATAY OUVRIYE movement.  In February 2004, the union submitted its paperwork for recognition to the Haitian Ministry of Labor and to the company around the same time that the Haitian government was falling apart and a rebel militia had taken over most of Ouanaminthe.   The Dominican military began to have an active presence in the trade zone, quickly transforming the union campaign into a struggle over national sovereignty. A few days after the union papers were filed, one of the main leaders was severely beaten and fired. Workers stopped the factory in protest. The following day, as union leaders were mobilizing to maintain the strike outside the factory gates early in the morning, members of the local armed rebel group showed up and handcuffed and beat the union leaders. Grupo M fired thirty-three of them that day claiming that they had tried to impose the strike with violence. The IFC’s review of security camera footage of the area showed no evidence of this claim.

Pressure from various US- and European-based labor rights groups and unions together with the IFC and Levi’s led to the eventual reinstatement of the fired workers and the apparent demilitarization of the border zone although members of the military were still present in plain clothes.  A team of three monitors – two Dominicans and one Colombian based in Ouanaminthe – maintained a permanent presence in the factory for five weeks after the reinstatement, holding weekly conference calls with Levi’s, the company, the IFC, and US-based labor rights groups – but not with the union or with our organization, Batay Ouvriye .  While the situation appeared to stabilize for a few weeks, workers staged a one hour stoppage on June 4^th to protest the company’s canceling of a meeting to begin to negotiate some of their grievances. As a result, the Dominican military was employed to remove union leaders by force. In protest, leaders called for a strike the following week. A temporary solution was mediated and workers agreed to return to work but found themselves locked out for one day. On June 8, Grupo M sent out a public letter announcing the closure of the trade zone and three days later, half the workers of the Levi’s plant were fired (350 workers) while the Hanes Corporation announced it would discontinue orders. 

Numerous meetings between different international and national groups followed in what had become a conflict that was receiving international attention. The IFC was reluctant to cancel the loan but was motivated to act because it had publicly conditioned the loan on the respect of freedom of association which was so clearly violated by Grupo M.  Eventually, after much campaigning both by the union and support from international groups, the company agreed to collective bargaining. The bargaining process continued throughout 2005, leading to a collective bargaining contract in December of that year, the only such contract that exists in any of the 17 Grupo M facilities.  In the Dominican Republic , the same union that initiated the complaint against Grupo M has continued to face overt union busting – including physical intimidation, the formation of company unions and attempts to pressure and bribe union leaders.  Because of the company’s anti-union activity, the Dominican union has not been able to obtain a collective bargaining contract. Also, the social compliance plan has not yet been fully implemented in Ouanaminthe. Landowners were poorly compensated for their lands and are waiting for the state to fulfill its promises. And small farmers and sharecroppers are also waiting for the implementation of the social compensation plan after more than 3 years of Codevi existence.

             

Section 3 – Evaluation: Positives and Negatives

We understand the context that we are living in. From our perspective, to link core labor standards with private sector loans is a short term policy measure within a dominant relationship of power.  We do not see this as a long term solution to the problem of social injustice and rampant inequality particularly in a country like Haiti . Here we offer our perspective on the positives and negatives of the CODEVI experience, as well as some lessons to be learned for the future. We do this within the confines of the present debate but do not see this linkage as a sustainable solution to the problem of social and economic inequality.

The conditioning of the IFC loan was an instrument that we were able to use in order for the IFC to pressure Grupo M to respect freedom of association. We put pressure on the company working through the WRC, the Solidarity Center , the ICFTU, and other solidarity groups, who in turn put pressure on Levi’s and the IFC.  These solidarity organizations knew Grupo M’s track record, its history of unionbusting in the Dominican Republic and knew that they could not sit back and let the company be awarded a loan while violating basic labor rights.  These violations were also independently confirmed by the IFC-funded ALGI report. Levi’s threatened to pull orders while the IFC threatened to recall the loan if the company did not comply with labor standards.  As result of the ALGI investigation, the IFC put together a remediation plan with Grupo M – including respect for freedom of association and reinstatement of the first group of fired workers. The IFC also had a presence on the ground at this critical point in the process.  The loan officer was present when this first group of fired workers was reinstated. 

In addition to pressuring the IFC and the brands, the labor solidarity groups also tried to pressure the Haitian government but the political instability during that period meant this was not effective. 

            After the reinstatement of the first group of fired workers, Grupo M continued to violate workers’ rights. While management tried to handle the situation to a certain extent, it seemed as if their bad habit of not being able to deal with unions was hard to get rid of. The company has an autocratic structure, under the firm control of one family. The company continues to react aggressively and even violently to union challenges to its power.   

At various points, the union and our movement were excluded from conversation with the IFC.  For example, when the monitors were in the trade zone for five weeks, they had weekly conference calls with the company, the IFC, labor solidarity groups in Washington, and Levi’s.  We were excluded from these weekly conference calls, limiting the communication with the local union and social movements in Haiti .  The World Bank seemed to approve Grupo M’s position of excluding our union federation from the process. The result was a lack of information for workers and numerous examples of miscommunication that created conflicts that could have been avoided. The IFC did not contact the union directly and the World Bank continued to obtain its information through management. We strongly believe that implementation of labor conditionality of loans in the case of a labor conflict depends on getting information from both sides.   

            In general, we believe that labor conditionality would have been a more effective instrument if workers and management at all levels would have been informed of the whole project. At various occasions, the company [and the IFC?] held meetings in the community with hand picked people linked to the government at the time. These people did not represent local community stakeholders. Also, middle managers and supervisors were still in the mode of business as usual and did not know that this project was conditioned on labor rights. Perhaps a few of them would have acted differently if they had known.

            Still, the conditionality of the loan does reinforce compliance with labor standards and creates a small space that wasn’t there before for workers to organize.  It also permits the union to build its membership because the union is able to get results by using this instrument, especially in the case of Haiti where national legislation is not reinforced and does not yield results for workers. 

            For unions to be successful, they need to use combined strategies and cannot rely on this mechanism alone. Most importantly, the union must be strong and representative. Without that, the link to core labor standards and loans is ineffective.

            It is important to discuss how the collective bargaining agreement has been implemented and the violations that continue to exist at CODEVI. The company continues to periodically fire workers, especially those that have worked at the plant for more than three years.  It seems this is an effort to limit workers with experience because they would better be able to defend their right. Firing experienced workers also demonstrates that the company does not have an interest in their long-term livelihoods but just wants to take advantage of a few short years of youthful production.  Although the workers have a contract and the union is pushing hard to support workers, management continues to put barriers in place that block any substantial change in industrial relations in the plants.  All this creates much frustration in the workforce.  Workers often feel that only direct actions like stopping the line can get their voices heard.  But this places their jobs in jeopardy.  The situation is always on the brink of deteriorating.

A year and a half since the signing of the agreement, the clauses of the collective agreement relating to social benefits have still not been implemented. Also, some of the social clauses that were put into place – for example, giving baskets of basic goods to pregnant women – have since been stopped. 

            The wage clause negotiated as part of the CBA has been interpreted differently by management and the union.  At stake is the difference between a base wage of 900 gourds – the union’s interpretation – or 583 gourds – which is management’s position.  The IFC was informed about this problem and met with the union executive committee this year in March. This was the only meeting the loan officer has had with the union.  The loan officer said he understood the problem and promised to get back to us but as yet, we have not heard anything.

The situation at CODEVI remains volatile because management continues to make arbitrary changes in production, violating the contract, and will not consider the union’s interpretation of the wage clause. Just last week, management attempted to impose a change in the system of pay. Workers felt that their only recourse was to carry out a labor stoppage.  They stopped the factory for an entire day.  What could have been a negotiated change to the system of payment instead was imposed with no consideration for the workers’ position and came very close to provoking a major conflict. 

            It must be said that the link to core labor standards still not address the question of workers’ needs and social justice. Today, CODEVI workers make between US$13.80 and $22 a week in a town where one pound of beans costs US$0.80. Workers who need medical attention must cross over to the Dominican Republic – and pay Dominican prices – for basic care.  Ouanaminthe, a town of more than 60,000, lacks most basic services like garbage collection, water and electricity.  These are difficult conditions for workers to stay healthy. There is no food subsidy from management and prices are high. As well, workers do not learn transferable skills in the factory. After several years of doing the same operation, and no longer able to keep up the pace, workers are left jobless and skill-less and will be back in the informal sector where they started. They are not able to access skilled jobs.

            Finally, after this experience, we are left with this question: What is the level of the World Bank’s commitment to core labor standards? Once these standards are adopted, what is its commitment to make sure standards are implemented? How does the IFC support what it is advocating on paper? This commitment has to be present concretely on the ground at the level of management, workers, and the community. In Third World countries, the communities involved must be taken into account when such projects are implemented. Their economies are not developed and there are consequences for the community of building factories that the communities themselves are unable to address: for example, housing, waste management, water, and environmental contamination.  The World Bank needs to engage not only with the union but also with the community where the project will be implemented.

We are skeptical of the international financial institutions’ ability to support communities under these circumstances because the economic model is being imposed from the outside, using the country’s workforce as a leverage to attract foreign investors. This is not a model that the World Bank seems willing to question and we continue to doubt the benefits that such a model will bring to Haiti .

Section 4 –  Suggestions and thoughts on the Future

            I will conclude with some suggestions and concerns about the future. As I mentioned, part of the anti-union stance of the company, we believe, is linked to its corporate culture, so to speak.  Dealing with the authoritarian power within the company should be a priority. In addition to supporting the independent organization of representative unions, educating middle management and supervisors on the terms of the project and on freedom of association could also be beneficial.

            We also think that the IFC should produce public reports on how the linkage to labor conditionality has worked, whether it has been effective, and what can be done to improve the reality of respect of labor rights on the ground in the companies they finance. Also, the IFC should make information on potential and current loan recipients’ track records in labor and the environment available to the public.

Other ILO conventions should be included when considering companies and loans: for example, conventions and  on gender and non-discrimination.

Finally, many questions remain with respect to this policy tool.  For example, what will happen to respect for core labor standards when the relationship between the donor and the recipient ends?  We would hope that the union would be strong enough to deal with the company and that the company will have adopted a more reasonable stance to industrial relations.  But the potential that the financing relationship ends and the company returns to business as usual, having received the benefits of the loan, does exist. In the case of the CODEVI trade zone, we would like to be hopeful but the company’s periodic firing of experienced workers and the high turnover that results makes it difficult to build a strong union. We are moved again to emphasize that linking loans to core labor standards, while valuable, is a short-term measure.  Any medium or long term gain will depend on strong unions, effective public institutions, and changing the attitudes of investors who see Third World workers solely as the means to lower their costs of production while falsely talking about integration and globalization.