Labor Relations

Module 4: Labor Relations in a Global

Environment

Topics

1. Unions, the Global Economy, and Free Trade 2. Labor Relations and Multinational Corporations 3. The Labor Relations Environment in Foreign Countries

1. Unions, the Global Economy, and Free Trade

Today international trade and global economic activity are enormous. In recent years, the focus

has shifted from the national economy to a more global perspective. Many developing nations

are experiencing newfound prosperity, and U.S. firms are rapidly expanding their overseas

markets. However, the net benefits of globalization have been uneven. Many American jobs have

been lost. Among the hardest hit have been industries with a strong union presence—steel,

automobiles, textiles, and consumer electronics. An estimated 17 million American workers have

been displaced since the early 1980s. About one-third of these jobs were in manufacturing.

The AFL-CIO has begun to recognize that unions must broaden their perspective. They can no

longer concern themselves exclusively with U.S.-based corporations and the domestic economy.

If unions are to survive and prosper, they must incorporate a more global perspective. Speaking

at a gathering of worldwide trade unions in 2001, AFL-CIO President John Sweeney stated:

[t]he global economy that corporations have forged can only be tamed by the international

solidarity of working families everywhere…[w]e must commit to pressuring our governments to

champion the cause of building enforceable workers' rights into the rules of the global market.

(Sweeney, 2006)

Sweeney and other union leaders acknowledge the benefits of expanding global trade. They also

point out that these new economic realities come with some costs. To fuel their growing

economies, countries are sometimes forced to compete among themselves to attract investment

capital. This competition does not always translate into higher wages or an enhanced standard of

living. In fact, in some instances, competition for new plants and new investment may actually

drive down wages. Organized labor also believes that expanding global competition can erode

workers' rights, threatening important job protections.

Pros and Cons of the Global Economy

The pros and cons of the expanding global economy are hotly debated. Some economists agree

with the concerns expressed by the AFL-CIO. Unquestionably, global enterprises and keen

competition for investment capital have taken on added importance in recent years. As countries

scramble for limited capital and investments in new plants and equipment, the effect may be

downward pressure on both wages and environmental standards.

Protections for workers (wage-and-hour laws, safety statutes, fair-employment laws, and job

security) may follow the same downward path. Other experts sharply disagree. They argue that

employers are less concerned with maintaining low wage levels and more concerned with

identifying a productive workforce and a good infrastructure to support their business. For

example, high-technology companies need to maintain close ties with universities as a ready

source of intellectual capital. Finally, supporters of globalization point out that many MNCs have

actually raised the labor standards and improved employee working conditions in countries

where they have opened production facilities.

Free Trade Agreements

Another dramatic change has been the recent proliferation of free trade agreements.

Increasingly nations are forming pacts to reduce trade barriers and encourage the free movement

of goods and services across their national borders. Perhaps the best-known regional trade

agreement is the North American Free Trade Agreement (NAFTA). The net effects of this and

similar agreements are hotly debated. Consumers have clearly benefited because of lower prices

and increased selection, and U.S. exports to Canada and Mexico have increased substantially

since the 1993 enactment of NAFTA. However, over the same period, the United States has

experienced a substantial decrease in manufacturing jobs.

Thus, the overall effects have been uneven. Looking at free trade on a global rather than a

regional basis, it is clear that virtually any product can be manufactured more cheaply in China

than it can in higher-wage countries of North America and western Europe. Enhanced trade with

China has generated a selection of reasonably priced consumer goods for the American market.

However, the migration of manufacturing capacity to Asia poses a direct threat to American jobs,

both union and nonunion.

Organized labor has taken a strong stand against the expansion of free trade pacts. Indeed, the

AFL-CIO has launched protests at several trade conferences aimed at reducing trade and tariff

barriers. Union concerns extend beyond the mere loss of jobs. Unions also see free trade

agreements as responsible for an overall deterioration in worker rights. Fundamental worker

rights were addressed in one of the supplemental agreements to NAFTA, the so-called North

American Agreement on Labor Cooperation (NAALC). Through the NAALC, Canada, Mexico,

and the United States adopted a statement of principles. These include a shared commitment to

enforce 11 basic worker rights, including protection for the right to strike, prohibitions against

child labor, and appropriate compensation for occupational injuries.

Like NAFTA itself, NAALC has yielded mixed results. The agreement fails to provide specific

remedies where a worker's rights have been violated. In addition, there are no simple

mechanisms to sanction governments that do not adhere to the letter or spirit of the agreement.

The procedures to address infractions are cumbersome. However, labor and human rights groups

have used NAALC as a basis to convene conferences and studies on worker rights and have

raised public awareness of the problem. When claims of abuses have surfaced, NAALC

members have sought to avoid public airing of the accusations, which has resulted in the

informal resolution of many worker complaints.

2. Labor Relations and Multinational Corporations

In addition to contending with the overall expansion in world trade and the growth in free trade

agreements, unions must also contend with the growth of multinational corporations (MNCs).

Corporations that produce and market goods across national borders and maintain a presence in

several countries are not new. Many large U.S. corporations sought to tap foreign markets as

early as the 1950s. In addition, the notion of moving a portion of manufacturing operations

abroad is hardly a new concept. Nevertheless, some of these enterprises have grown enormous in

size and impressive in their influence. Some authors have pointed out that the annual revenues of

Wal-Mart stores, which operate in a multitude of countries, are about same as the gross national

product of Austria. Other examples of very large MNCs are Exxon Mobil, an integrated producer

and marketer of energy products, and General Motors, which manufactures cars and trucks in

locations as diverse as Brazil and Australia.

American unions have not kept pace with the explosive growth of these behemoth enterprises.

For example, when Japanese or European auto manufacturers opened U.S. assembly plants,

unions used the same organizing tactics traditionally used with U.S.-based manufacturers. They

also appealed to the workers' sense of patriotism and directed negative publicity toward these

offshore companies.

The companies responded with a blend of traditional American tactics as well as approaches

from their home countries. For example, Japanese firms do not hesitate to hire labor lawyers and

consultants to help them remain union free. In addition, they have emphasized trust between

managers and employees, restricted executive "perks," and encouraged work teams. This positive

approach to human resources management combined with traditional American tactics has

created additional challenges for unions. Union efforts to organize these foreign manufacturers

operating on U.S. soil have been no more successful than when unions try to organize domestic

corporations. In both arenas, they are winning around 50 percent of all secret-ballot elections

conducted by the NLRB.

MNCs present additional challenges for unions. Strikes may be less effective. The purpose of a

strike is to place economic pressure on the enterprise. The union does so by denying the

employer its labor source in hopes of choking off production. The notion is to starve the

enterprise of its revenue source until it succumbs to the union's demands. But an MNC can often

divert production to an alternative overseas location or obtain goods from one of its outlying

manufacturing facilities. In fact, unions perceive that MNCs are actually on the offensive against

organized labor, insisting upon cuts in employee benefits or demanding more favorable work

rules. Some of these companies simply say to the union, "if you don't give us the concessions we

want, we will move our facilities overseas or send a portion of our work to an alternative

facility."

Bargaining in a transnational setting also requires unions to overcome a number of obstacles. For

example, labor relations laws and collective bargaining structures vary from country to country.

Indeed, trade unions themselves often have difficulty collaborating across national borders.

Local union leaders are reluctant to share authority with foreign counterparts. In addition,

American unions are often uncomfortable with the socialist or communist political affiliations of

overseas unions. Finally, MNCs have generally resisted any sort of centralized or transnational

bargaining. Most experts agree that this attitude will change only if unions can surmount some of

the other issues just mentioned.

3. The Labor Relations Environment in Foreign Countries

As with residents of other countries, those of us in the United States tend to view other countries

in terms of our own culture, practices, and patterns of living. However, our system of labor

relations is unique. No other country has a system that operates in quite the same manner. The

major features of a nation's labor relations system can be evaluated by examining three key

dimensions: (1) union density, (2) recognition procedures, and (3) bargaining structures.

Union Density

Union membership is in sharp decline in the United States. With the exception of unions

representing public employees (state, county, municipal, federal, and so forth), major U.S.

unions have been losing members for more than 20 years. Recent data from the Bureau of Labor

Statistics show that only about 12 percent of American workers belong to unions. In contrast,

several northern European countries boast unionization rates exceeding 80 percent. That is nearly

seven times greater than membership in the United States. Even in neighboring Canada and

Mexico, more than 20 percent of active workers belong to unions, a rate nearly double the U.S.

rate. Membership is on the rise in both countries (Holley, 2005, p. 682; Baltimore Sun, 2007, p.

6E).

Recognition Procedures

Under U.S. labor laws, employers may insist upon a secret-ballot election as a precondition to

recognizing and dealing with a labor organization. In addition, employers are permitted to

conduct sophisticated campaigns to convince employees to vote "no union." This is not the case

in many other countries. Employers are generally more accepting of unions in Canada, for

example, and are less likely to engage in antiunion tactics.

Card checks are a widely accepted means to gain union recognition in Canada. This method

denies employers the opportunity to conduct protracted antiunion campaigns. Canadian labor

laws themselves are more restrictive concerning permissible antiunion campaign tactics. Mexico

permits the closed shop, a practice that is illegal in most U.S. industries. This system requires

than an individual join a union before he or she is hired. Mexican unions may also insist upon the

termination of an individual who refuses to maintain union membership and pay required dues.

Bargaining Structures

The relationship between an employer and a union in the United States is based on the concept of

exclusivity—the basic notion that if the employer must deal with a union, it need only deal with

a single union as the representative of a given group of employees. In Great Britain, exclusivity

is not the prevailing model. Most bargaining does not take place at the company level.

Agreements are forged between large multiemployer associations and union umbrella

organizations. A manufacturing company might have ongoing relationships with as many as six

or seven different unions. In sharp contrast to the United States, there are no national labor laws

compelling negotiations or the resolution of employee grievances. Although deeply entrenched

in the national culture, Great Britain's collective bargaining system is purely voluntary in nature.

Germany has 16 major national unions. However, the most important collective bargaining

agreements are not negotiated at the national or plant level. Instead regional agreements are the

most important. Companies and unions within a specific geographic area of the country reach

agreements applicable to all employees within the region. Also typical of the European model,

the government is a much more active and visible participant in the labor relations process.

Senior government officials will often intercede directly in collective bargaining and may play a

vital role in brokering a final agreement.

In both Europe and Latin America, labor unions and political parties are intimately intertwined.

Union members depend upon sympathetic politicians to support laws protecting employee rights

and enhancing benefits. In turn, politicians look to the unions for political and financial support.

Nowhere are unions more visible than in Great Britain. There, organized labor has its own highly

influential political party, the Labour Party. Recently, the British government has been led by

prime ministers from the Labour Party, and the government has enacted legislation making it

easier for unions to organize new groups of employees.

Module 4 Self-Assessment Questions

Please go to My Tools > Self Assessments > to complete this self assessment.

References

Holley, W. H., Jr. (2005). The labor relations process (8th ed.). Mason, OH: Southwestern.

Sweeney, John. (September 9, 2006). Labor unions and globalization. [Online]. University of

Iowa Center for International Finance and Development. Available:

www.uiowa.edu/ifdebook/issues/globalization/reading table/labor.shtml

Union membership declines. (2007, January 26). The Baltimore Sun, p. 6E.