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Journal of International Business Policy

, Volume 2, Issue 3, pp 211–216 | Cite as

Applying the GVC framework to policy: The ILO experience

  • Arianna RossiEmail author
COMMENTARY

Abstract

Understanding global value chains (GVC), their power dynamics, and their opportunities and challenges for developing countries is a key policy priority for development. The analytical framework developed by Gary Gereffi has increasingly been embedded in policy-making at the multilateral level. This article homes in on the relevance of the GVC framework for policies and interventions of the International Labour Organization, the United Nations’ agency for labour rights and decent work. By reviewing the introduction of the GVC framework at the ILO in the past quarter of a century, I highlight how it has supported the ILO in understanding labour governance dynamics in the wake of globalisation, and in particular the rise of private compliance initiatives led by GVC lead firms. I also show how the ILO is using the GVC framework to map the most vulnerable segments of the production chain from a workers’ right perspective, and to develop targeted interventions to achieve decent work in GVCs.

Keywords

global value chains globalisation working conditions labour standards 

Gary Gereffi’s (2019) reflection on the global value chain framework and how it has impacted the policy discourse at the international level is more timely than ever, given the current climate of trade wars and general skepticism of multilateralism. It is particularly opportune for the International Labour Organization (ILO), which turns one century old this year. The ILO indeed predates the United Nations, tracing its creation in 1919 to the Treaty of Versailles on the heels of the First World War and the Industrial Revolution. The ILO is built on the premise that universal and lasting peace can only be achieved if it is based on social justice. The motives for the ILO’s creation were to improve working conditions for the average worker; to avoid the potential that widespread discontent among workers could erupt into large-scale demonstrations of unrest; and to establish universal labour standards providing guidance to national governments for adoption in national laws, in order to avoid that any country which introduces social reform could find itself at an economic disadvantage relative to other countries (Posthuma & Rossi, 2017). The “imperative of social justice” has been recently highlighted anew in the ILO’s Centenary Declaration for the Future of Work (2019). These founding principles continue to be relevant especially in a globalised world, where the need of tackling the risk of unfair competition based upon lower labour standards is more present than ever (Rodgers et al., 2009).

As Gereffi points out in his editorial, the ILO was destined to be an early adopter of global value chain (GVC)1 analysis due to its intrinsic interest in understanding the changing dynamics among its tripartite constituents – governments, employers’ and workers’ organisations – as a result of globalisation.

Similarly as for other international organisations, global value chain analysis emerged as a useful analytical tool to understand new dynamics brought about by globalisation. In the case of the ILO, applying the GVC analytical framework to its mandate meant initially focusing on outcomes and consequences on employment policies as a result of globalisation, and after 1999, on decent work outcomes, that is, work taking place under conditions of freedom, equity, security and human dignity, in which rights are protected and adequate remuneration and social coverage is provided (ILO, 1999).

I explore how the GVC framework has helped the ILO to come to terms with two challenges: first, understanding labour governance dynamics in the globalisation era, and their implications for the ILO itself and its constituents; and secondly, mapping vulnerable workers in global production chains and devising strategies to ensure decent work for all.

GVC Analysis to Understand Labour Governance

The GVC framework has been particularly useful, and controversial, for the ILO to grapple with the question of labour governance and responsibility across borders. The analytical insights into governance dynamics in global value chains, especially in labour intensive buyer-driven chains described by Gereffi (1994), stylised the “lead firms” wielding power over their suppliers across borders. While Gereffi and subsequent GVC scholars focused on GVC governance in terms of lead firms as setting production parameters in their chains (Gereffi et al., 2005), the framework provided an equally useful entry point in analysing the rising phenomenon of emerging private sector regulation of labour across borders. Since the early 1990s, exploitative labour conditions in lead firms’ suppliers in developing countries have come under scrutiny (for example, Hale & Wills, 2005; Locke, 2013; Oxfam International, 2004). As a result, lead firms have increasingly taken action through corporate social responsibility (CSR) initiatives, establishing codes of conduct and investing millions of dollars in third-party monitoring of working conditions in their outsourced production sites. This effectively translated into the emergence of new regulatory actors beyond the state – global brands implementing CSR initiatives in their supply chains as a way of independently regulating labour issues. Ironically, especially in labour intensive industries, it is primarily due to low labour costs, minimal labour protection and weak enforcement that outsourcing of production started to become a competitive strategy.

The emergence of GVCs and the related private governance of labour and compliance at the supplier level posed a significant challenge to the ILO, due to a number of issues. First, this phenomenon challenged the traditional construct that nation-states regulate the labour market and enforce labour legislation. They potentially weaken state regulation (Seidman, 2009), as well as create parallel regulatory systems (Posthuma, 2010). Codes of conduct often do not make reference to the ILO core labour standards2 nor to key national legislation on wages and working hours. Second, even recognising the weak capacity of developing countries’ labour administrations to enforce labour legislation, private compliance initiatives have significant and well-documented limitations in promoting decent work: they are unilaterally developed and implemented by lead firms, undermining worker organisations and trade unions from taking a lead role in the process to negotiate for improvements in working conditions. Also, the audit process through which codes of conduct are monitored in factories, whether carried out internally by the buyer or by a third-party auditor, is often flawed. Problems range from basic inaccuracy and lack of attention to detail, to the failure to consult workers, cultural differences and translation problems, and corruption (Barrientos & Smith, 2007; Hughes et al., 2008; Jenkins et al., 2002; Mamic, 2003).

From this point of view, GVC analysis provided an insightful entry point to understand power dynamics among actors producing across borders and the motivation behind these cross-border movements of goods and services. Lead firms’ ease in moving production across borders made national regulatory frameworks and union structures less effective. As such, these production structures pose a challenge to the traditional role of the ILO’s tripartite constituents. This was recognised in the work of the World Commission on the Fair Dimension of Globalization, an independent body that brought together experts from the ILO’s tripartite constituents as well as world-renowned academics. The World Commission report “A fair globalization” (WCSDG, 2004) put emphasis on the need for shared responsibility of labour governance in global supply chains, and provided recommendations for all key actors, including the ILO itself. The report drew significantly on the global value chain framework. It called for “Stronger action […] to ensure respect for core labour standards in Export Processing Zones (EPZs) and, more generally, in global production systems. All relevant international institutions should assume their part in promoting these standards and ensure that no aspect of their policies and programmes impedes implementation of these rights.” (WCSDG, 2004: XIII). Similarly, in his report to the International Labour Conference (ILO 2004), the Director-General stated that “Global production systems are an essential sphere of action if decent work is to be made a global goal. A more systematic and coordinated effort is required to take full advantage of the enormous potential, both technological and economic, which these new systems of production can deliver for people. Through the engagement of its tripartite constituency, the ILO is well placed to develop policies and approaches to ensure that this potential is realised, and that it delivers decent work.”

The outcomes of the World Commission were echoed in the ILO’s engagement with the growing academic community looking at social upgrading in GVCs. As Gereffi recalls in his editorial, the ILO commissioned him to deliver three Social Policy Lectures in 2005 – the last of which made reference to a ‘global governance deficit’ (Gereffi & Mayer, 2006), highlighting that there is no national or international actor that alone has the regulatory capacity to ensure fair outcomes as a result of globalisation. This provided an important analytical hook to define the challenges that the ILO and its constituents had been experiencing since the rise of private governance of GVCs.

More recently, the GVC framework took centre stage in the ILO policy debate exploring decent work in global supply chains and the related global governance challenges. Since the mid-2000s, the complex interplay between the different interest groups that the ILO represents explains why it took several years to have decent work in global supply chains rise to the top of the list of its policy priorities. Within the ILO, the Workers’ group and several governments had long been interested in holding a discussion on decent work in global supply chains at the annual International Labour Conference (ILC). On the other hand, the Employers’ group argued that GVCs did not intrinsically pose a new challenge to decent work, but rather that compliance with labour standards in GVCs continued to be a capacity challenge in terms of public governance. There were years of debates in the ILO’s tripartite executive body, the Governing Body, on whether and when to include decent work in global supply chains as an item for discussion for the ILC. However, the Rana Plaza disaster in Bangladesh, which claimed more than a thousand workers’ lives and drew international attention to poor working conditions and safety standards in global supply chains, galvanised public opinion and led to the ILC requesting the ILO to hold a discussion on decent work in global supply chains in 2016. The Governing Body’s expected outcomes of the discussion were to “[…] clarify and reaffirm the ILO’s mandate and identify ways for the ILO to increase policy coherence and support its constituents in addressing opportunities and challenges in the promotion of decent work in global supply chains” (ILO, 2013).

In the run-up to the ILC 2016, workers’ organisations such as the International Trade Union Confederation (ITUC) called for a new ILO standard regulating decent work in global supply chains as a desired outcome of the discussion (ITUC, 2016). The Employers’ group reiterated instead its position that “[t]he cross-border flow of goods and services does not pose a unique challenge to decent work.” (IOE, 2016). In the end, the conclusions of the ILC 2016 called for a meeting of experts to “[…] Consider what guidance, programmes, measures, initiatives or standards are needed to promote decent work and/or facilitate reducing decent work deficits in global supply chains” (ILO, 2016a, b; emphasis added). This resolution highlighted the need for the ILO to consider whether its current standards are ‘fit for purpose’ in a GVC world, therefore speaking to the need for the ILO to play a key role in supranational governance of labour in GVCs (Posthuma & Rossi, 2017). Such a meeting of experts is scheduled for early 2020, potentially opening up a new process to regulate global governance deficits.

GVC Mapping to Design Decent Work Interventions at the Workplace

A second, practical application of the GVC framework to the work of the ILO has been to use it to map global value chains and identify the most vulnerable groups of workers. This, in turn, has led to ILO experimentation with harnessing GVC incentives to promote decent work. I will provide an example of this approach by looking at the Better Work programme, a partnership of the ILO with the International Finance Corporation.

From an operational standpoint, the ILO started experimenting with using global value chain analysis as a practical mapping tool for its direct country-level interventions since 2001. With the establishment of Better Factories Cambodia, the ILO took a novel role in directly monitoring compliance with international and national labour standards in apparel factories in Cambodia, something that Polaski (2006: 922) identifies as a “[…] a critical element of continued relevance for the ILO, as global production chains increasingly elude the control of national labor ministries and labor inspectorates.” In this context, the ILO operations through Better Factories Cambodia address the global governance challenges that I described at the policy level above.

Building on the success of Better Factories Cambodia in improving compliance with labour standards and in supporting the expansion of the industry in a highly competitive global market (Berik & van der Meulen Rodgers, 2010), the Better Work Programme was founded in 2007 with the objective of improving working conditions and promoting competitiveness in global supply chains. Now covering more than 2 million workers across eight countries, Better Work has achieved a considerable impact on working conditions, worker wellbeing and business competitiveness (Rossi, 2015; Brown et al., 2016; Kotikula et al., 2015), as well as playing a significant role in influencing national policy (Amengual & Chirot, 2016)

These cases speak very much to the “partnership interpretation” that Gereffi proposes in his editorial: Better Work is an example of viewing “development as a partnership between public and private actors, bringing together governments, lead firms, local suppliers, worker organisations and global policy actors to ensure economic and social upgrading in GVCs”.

Where Next?

The ILO Centenary Declaration stresses the need for the organisation and its constituents to advance a “human-centred approach” helping to ensure opportunities and protection of all workers and promoting inclusive growth, full and productive employment and decent work (ILO, 2019). More broadly, the present and the future compel the ILO to grapple with ever-changing patterns of sourcing, production, investment and trade, and the rise of new technologies. All areas of current and future research in GVCs identified by Gereffi in his editorial are highly relevant to the future of work agenda of the ILO, and confirm that the GVC framework, together with emerging IB literature (such as Maggioni et al., 2019), continues to be a critical instrument to understand governance, power dynamics and value capture in a complex and globalised world of work.

Notes

  1. 1

    There is some sensitivity related to the term “global value chains” in the ILO. While other international organisations have aligned themselves to the usage of the term “global value chains” since the early 2000s, the ILO has struggled to find consensus to use this widely agreed terminology, due to the word “value” potentially being misconstrued to mean both economic value and social values. Early ILO research work on GVCs used the global production network and global value chain terminology (Palpacuer & Parisotto, 2003), whereas the World Commission on the Social Dimension of Globalization used the term “global production systems”. Finally, the ILO settled on the use of the business-friendly term “global supply chains” starting from the mid-2000s, defined as “[…] the cross-border organisation of the activities required to produce goods or services and bring them to consumers through inputs and various phases of development, production and delivery.” (ILO, 2016a, b).

     
  2. 2

    The ILO Core Conventions stipulate the elimination of forced and compulsory labour (n. 29 and n. 105), the elimination of discrimination (n. 100 and n. 111), the abolition of child labour (n. 138 and n. 182) and the right to freedom of association and collective bargaining (n. 87 and n. 98). These standards should be upheld by all Member States of the ILO regardless of their ratification status. This is relevant given that prominent MNE host countries such as the United States have not ratified all Core Conventions.

     

Notes

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Copyright information

© Academy of International Business 2019

Authors and Affiliations

  1. 1.International Labour OrganizationGenevaSwitzerland

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