Good afternoon. It is my pleasure to be here with our distinguished panelists, Minister of Commerce Mr. Axel Addy, my colleague from the U.S. Department of Labor, Trade Policy and Negotiations Division Chief Dr. Anne Zollner, and the Addis Ababa ILO Country Office Director for Ethiopia and Somalia Mr. George Okutho.
You may be wondering why a Deputy Assistant Secretary from the State Department’s Bureau of Democracy, Human Rights, and Labor is addressing a forum on Trade and Economic Cooperation. The answer lies in the Africa Growth and Opportunity Act itself. When Congress passed AGOA in 2000, it was with the recognition that growth is not enough if it does not also create opportunity for millions of people to rise out of poverty. Economic growth, in other words, must be broad-based and inclusive. It must benefit a nation’s entire population by raising everyone’s standard of living and quality of life. Growth that increases wealth only for a privileged few does not address a country’s economic and development challenges and can, in fact, make these challenges worse by increasing income inequality.
The principles and protections that foster democracy and respect for human rights in Africa and around the world also promote inclusive growth and opportunity. Growth and opportunity thrive in liberalized economies that keep corruption in check, consistently apply clear rules and regulations, respect the freedoms of expression and association, allow for the free flow of information, and uphold the rule of law. Foreign investors must carefully calculate the level of risk they are willing to bear when investing in foreign markets. Corruption, shifting rules and regulations, restrictions on access to information, limitations on core freedoms, and weak legal systems also hurt African entrepreneurs. They harm even the most modest businesses, such as market vendors looking for more effective ways to get their goods to local or foreign markets and young urban entrepreneurs looking to set up their first company. So, while we are here today to discuss trade and economic cooperation, it is important to remember that the cornerstones of inclusive growth and opportunity are the same cornerstones that underpin democratic progress, respect for human rights, and the rule of law.
This brings me to the issue on which I want to focus today– respect for fundamental labor rights, something which is an essential and powerful tool in promoting inclusive growth and the rule of law. In a paper it prepared regarding the post-2015 UN Development Goals the International Labor Organization (ILO) noted that, “a shift to inclusive and sustainable development will not be possible if millions of people are denied the opportunity to earn their living in conditions of equity and dignity.” There is empirical data to support this position, and it’s importance is recognized even by the multilateral development banks. The World Bank’s World Development Report for 2013, for example, stresses that increased earnings, not increased employment, is the largest contributor to poverty reduction. In other words, just creating jobs is not sufficient if they are not decent jobs. Labor rights are essential for attaining the conditions of equity and dignity that define decent work. Workers whose rights are not effectively protected by law, who cannot organize, and who do not have access to social protections that enable them to change jobs without fear of falling back into poverty cannot bargain for a greater share of national income. This means they also cannot become the kind of consumers who can cycle their income back into the local economy. As a result, protection of labor rights and respect for the rule of law are part of the structural transformation economies must go through to achieve inclusive growth, not just luxuries that only developed countries can afford.
The global economic crisis, the Arab Spring, and other events around the world have produced a growing consensus on the need for the international economic policy community to focus more proactively on inclusive economic growth. We now see this reflected in the G-20 process, the post-2015 UN Development Goals, and the policies of the multilateral development banks. In Africa, even countries that have experienced strong growth over the past decade have not stemmed the growth of income inequality. This occurs for several reasons in Africa, including long-standing labor market imbalances, high levels of labor market informality, and long-term underemployment and unemployment.
While there are welcome signs of increasing industrial employment in many African countries, in most cases, these industries in which these jobs appear embrace low-wage models, capitalizing on inexpensive labor and light regulation. These industries argue that they are contributing to development by providing jobs, but again job creation alone does not automatically lead to inclusive growth. Recent research on 15 of the world’s leading apparel-exporting countries found that between 2001 and 2011, wages for garment workers in the majority of these countries fell in real terms. Such low-wage industries also discourage innovation and investment to improve productivity, and can even lead to increased income inequality.
It is up to the governments of Sub-Saharan Africa to put a floor on the race to the bottom by setting acceptable minimum standards for wages and working conditions, and empowering workers to advocate for their own interests. Some African countries, such as Ghana, are already moving in this direction. Following its weak economic performance in the 1980s, Ghana adopted stabilization and structural adjustment policies in line with International Monetary Fund (IMF) requirements, which involved economic liberalization, privatization and State reform.
Since then, like many African countries, Ghana has exhibited strong economic performance recording GDP growth of nearly 15 percent in 2011, 8 percent in 2012, and is projected to grow by 8 percent in 2013. But Ghana’s growth, driven by the Ghana Decent Work Programme (GDWP), has also had an impact at local and national levels alike by fostering social dialogue, strengthening local business and promoting the extension of social protection for workers in the informal economy, all while placing significant emphasis on economic sectors with a high share of working women. A 2011 ILO case study found that Ghana’s GDWP helped poverty rates in Ghana’s central region decrease from 48 percent to 20 per cent between 1999 and 2006.” This is just one example of how African nations can translate increased national level growth into greater income equality and reduced poverty rates.
The ILO’s “Global Wage Report” published earlier this year made a number of recommendations for achieving equitable growth. These include: improving wage-setting institutions and the bargaining position of workers, better financial regulation to channel resources into productive and sustainable development, adoption of taxation systems that tax capital more heavily than labor, bringing workers from the informal sector into the formal economy, providing education and training to improve labor productivity, and implementing social protection schemes that will discourage excessive saving. It is not an exhaustive list, but it consists of proven, achievable policies that offer African workers the opportunity to work more, earn more, consume more and contribute to vibrant, growing economies in which every segment of society benefits.
In passing AGOA in 2000, it was the intention of the U.S. Congress to help Africa break free of the cycle of poverty. Since then, we have seen great progress in terms of economic growth and even job creation, but the challenge remains to ensure that that the growth is inclusive and the jobs are decent ones that offer opportunity to those who remain in poverty.
I look forward to the remainder of our discussion here today.