Gonzalez-Garibay Montserrat, Adriaensen Johan  , Kerremans Bart
Paper prepared for the workshop - "International Political Economy and Cross-Border Effects" In
London, 28 April 2011
Note: This paper draws on the research done for the IIEB-working paper “Middle-Income developing countries and the trade-labour linkage: adaptation or inertia?”
Abstract
Since the end of the Uruguay round, debates at the WTO have often resulted in a clash between the developed and the developing countries. This paper problematises the monolithic view of the developing countries’ positions by observing that, even though middle income developing countries (MIDCs) are – from an economic perspective- situated in between the developed and developing countries, they often align with the less developed countries even if it is not in their own interest.
The paper further inquires into the factors that are responsible for this observation. To do so, we focus on the positions taken by Mexico and South-Africa in the debates on the inclusion of labour standards in the WTO trading regime. Our research, drawing on institutionalist insights, points at domestic institutional hindrances and international socialization as crucial factors to explain the stickiness of the policy positions taken in the WTO.
Introduction
During the period that followed the Uruguay Round (1986-1994), the WTO came to be characterized as an organization in which developing countries confronted their developed counterparts regarding several issues. For instance, the events leading up to the breakdown of the negotiations at the Cancun
Ministerial have been interpreted as a result of an increasing developed-developing countries polarization (Narlikar and Tussie, 2004).
 Corresponding author

This view partially stems from one of the most visible items of contention at the WTO during the
1990s: the rejection to link trade to the Core Labour Standards in any form (sanctions to enforce compliance, a working group on the issue, etc) has been regarded as a victory of the developing over the developed world (Narlikar, 2003). In that view, the developed and developing countries have grown to represent two monolithic blocks situated at the two ends of the policy spectrum.
Drawing from recent insights obtained in studies on international economics, this paper questions the adequacy of such a dichotomous view of the world economy. Countries that are situated in between these categories, so-called middle income developing countries or MIDCs, have specific interests of their own. Even though the political and economic interests of those MIDCs have historically leaned towards the group of developing countries, at present they may equally plausibly lean towards the developed countries’ position. Even though, up until now, the MIDCs have almost always chosen sides with the developing countries, the question arises whether this might still be the case in the changing political and economic configuration that emerged at the turn of the new Millennium. China’s increased international presence spurred by its accession to the WTO and the phasing out of the Multi-Fiber
Agreement (MFA) have reshaped much of the global political economy. Addressing this question requires a qualitative, explorative research design This paper provides such a study through a case study of the policies of two such countries, Mexico and South Africa, regarding the inclusion of core labour standards in the WTO. In this particular case, these MIDCs, who in the current context are arguably the largest beneficiaries of such an inclusion, were amongst the most vehement opponents in the debates during the 1990s. They rejected the developed countries’ proposals to establish a working group on trade and labour standards because they thought it to be a covert form of protectionism. In this paper we inquire into the factors that have impeded these MIDC’s to protect their interest by joining the developed countries.
This paper is structured as follows: in the first section we argue why MIDCs often have a distinct interest in the international economy and why we would expect –on the basis of that interest- MIDCs to be in favour of the trade-labour linkage. In the second section we shed some light on the reasons that constrain a policy-maker in pursuing such interest by reviewing the literature on the idea of a punctuated equilibrium. Building on those insights the third section explores the potential interest change of Mexico and South-Africa as a consequence of the changed economic constellation.

1. Setting up the puzzle
Analysts 1 often regard the developing country opposition against the trade-labour linkage as a logical outcome of their relative economic position. If labour standards were to be coupled to trade, their comparative advantage vis-à-vis the industrialised countries in terms of cheap labour would be dissolved in favour of disguised protectionism from the industrialised nations. However, when taking a quick glance at some basic data, that opposition is far from evident in the case of the MIDCs. For instance, whereas Mexico’s and South Africa’s monthly wages lag far behind the United States’ and the European
Union’s, they clearly outperform India and China. Similar comparisons can be made on a whole range of variables such as GNI, labour productivity or the sectoral composition of the economy.
2 While persuasive in its conceptual clarity, a dichotomous view on the global economy therefore shrouds the plurality and gradualism we observe in reality. The question is then to which extent the MIDCs interests are aligned with those of the wealthier countries rather than with those of other developing countries.
To assess this question we first look at the economic literature on the effects of globalization on MIDCs.
In a second step we discuss how this affects the position we expect them to take on the inclusion of labour standards in the WTO. In a final step we briefly sketch how the debate unfolded and raise the question as to why there is a discrepancy between the interests of a country and the policy position taken in the international arena.
1.1 MIDCs in the global economy
Applying a simple Heckscher-Ohlin framework already exemplifies the particular position of MIDCs in the global economy. While the middle-income countries are facing difficulties when competing with the more capital abundant countries for high-end products, at the same time they are facing fierce competition on labor-intensive products from low wage competitors in poor countries.
Recent models in international economics have not only confirmed this intermediate position, they also showed that –as a result- MIDCs often have a specific interest of their own, independently from developing countries. Due to increasing international fragmentation of the production process,
Markusen and Venables (2007) show, for example, that countries with more extreme labour/capital ratios benefit from liberalization whereas those in the middle tend to lose out. Markusen (2010), by constructing more refined models, found that under certain conditions welfare effects for MIDCs can
1 See for instance Brian Burgoon, ‘The Rise and Stall of Labor Linkage in Globalization Politics’, International Politics, Vol. 41,
No. 2 (2004), pp. 196-220; Eddy Lee, ‘Globalization and Labour Standards: a Review of Issues’, International Labour Review
Vol. 136, No. 2(1997), pp. 173-189.
2 ILO, LABORSTA, (ILO, 2008), at http://laborsta.ilo.org/; IBRD, World Development Indicators (IBRD, 2006).

still be positive, but even under these conditions, the welfare effects are more favorable for countries with more extreme capital-labor ratio’s.
In empirical research, this debate figured more prominently due to the manifestation of China as a trading power 3 . Venables (2009), when looking at the evolution of the global income distribution argued: “… globalization tends to benefit the extremes and squeeze the middle … What happens to middle-income countries during this process? They do not have an extreme comparative advantage to exploit and at the same time are faced with changing terms of trade, largely as a result of increased supply from Asia.”
Aided by its accession to the WTO and the phasing out of the Multi-Fiber Agreement, the Chinese juggernaut has gained momentum over the last years, and as a consequence it has been the primary object for studies analyzing the effect of south-south competition. So it has been argued by Eva Paus
(2009) that the increasing presence of China in the international economy has exacerbated this so-called middle-income trap for Latin American countries. Most studies distinguish between the direct as well as indirect competition encountered by these middle-income countries. The former corresponds to the traditional economic pressures associated with increased imports while the latter focuses on the crowding out of exports in third markets. The damaging effects of Chinese imports have been studied at the micro-level for Chile where –in contrast to developed economies- no product upgrading could be found (Alvarez and Claro, 2009). In the case of South-Africa, Morris and Einhorn (2008) found similar results for the apparel industry but pointed at indications of a more successful upgrading and restructuring of the sector.
The loss in export market share has attracted more attention, however, as it is something more specific to south-south competition. With an overt focus on export-led development, many developing countries resorted to the establishment of export processing zones. Not only does this increase reliance on third markets it also leads to a fierce competition among low-wage countries.
This coincides with the argument presented by Chan and Ross (2003) who suggested that the exodus of labour-intensive industries from the developed towards the developing countries gradually shifts the balance from North-South competition towards South-South competition. In the case of Mexico some of the ‘Maquiladoras’ were able to hold their ground, others –particularly those in textiles and clothing- experienced a drastic reduction in employment (Sargent and Matthews, 2009). The fierce competition present in this industry can be attributed partly to the phasing out of the multi-fiber agreement. But pressures are not strictly limited to this sector. In a recent study by Gallagher et al.(2008) the authors found that out of the 15 most important export products of Mexico, 14 were directly threatened by
3 While we follow the literature in focusing on China, the dynamics we describe can be applied to the low wage countries in general.

Chinese exports. Jenkins et al. (2008) expand this argument to include more Latin-American countries where they found –amongst others- that also Brazil suffered from indirect competition of China.
Iacovane, and Winters (2010) affirmed these effects at the micro-level.
Besides competition in export markets, rising imports from developing countries in other developing countries may threaten economic development by displacing domestic production. This is mainly the case for South Africa, where Chinese imports are perceived as a threat to the national textile industry 4 and where, according to WTO statistics, import of apparel grew by 500 per cent from 2002 to 2006.
5
Kaplinsky and Morris (2008) showed in addition that Chinese exports stalled manufacturing export from
Sub Sahara Africa, and South-Africa in particular, to developed countries.
We take caution in noting that several authors have depicted a more optimistic story of China’s influence on Latin America (see e.g. Lederman, Olarreaga and Perry, 2006) by drawing attention to the opportunities China’s growth represent for other developing economies. However, what is relevant from a political perspective are rather the costs than the benefits, especially when these costs are distributed unevenly both among different countries as well as in the different sectors concerned. Both export concerns and import pressures are likely to trigger demand for protection from the affected production sectors. Labour standards, we will argue, can provide that protection.
1.2 Labour standards as a tool of protection
The use of trade sanctions to enforce labour standards has long been regarded as a way to protect a country’s level of social development without imperilling its international trade position (Engerman,
2003). By assuming a negative impact of labour standards on trade competitiveness, linkage advocates argue that sanctions counter the risk that countries competitively lower their standards in order to preserve their relative trade position (the so-called ‘race to the bottom’). Even though the empirical evidence of the true relationship between labour standards and trade is scarce and inconclusive (see e.g.
Kuruvilla, 1996; Rodrik, 1996; Büsse, 2002; Kucera & Sarna, 2006) , the 1919 Constitution of the
International Labour Organization (ILO) enshrined the argument in its preamble: ‘(…) the failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries (…)’.
Consequently, labour standards have been used several times, by both developing and industrialised countries, as an instrument of trade policy (Chamovitz, 1987). As such, they enjoy one advantage over
4 Lydia Polgreen & Howard W. French, ‘China is in Africa Both Benefactor and Competitor’, The New York Times, August 20
2007.
5 WTO, WTO Statistics Database (WTO, 2008), at http://stat.wto.org/Home/WSDBHome.aspx?Language. Data converted to current dollars using the US Department of Labour’s Consumer Price Index.

tariffs and NTBs: their ability to influence the competitive position of countries in third markets. While tariffs and NTBs are able to deter imports, they are not suitable to protect the competitive position of a country in its export markets. Labour standards, on the other hand, are able to do that by directly affecting the cost of labour in competitor countries. Therefore it represents one of the sole instruments that a policy-maker can wield to cope with indirect competition.
If labour standards are regarded as protectionist instruments, middle-income developing countries might plead for its incorporation in the multilateral trade regime to protect their own industries. Such a plea would only be credible, however, under the assumption that they have a better compliance record than the nations whose labour standards they attempt to influence. For most MIDCs this seems to be the case. The following table shows the ratification status of the ILO Core Labour Standards Conventions
(CLS) by Mexico, South Africa and China. In the table, one can see that South Africa has the best record in terms of the ratification of Conventions, whereas China’s ratifications only cover two of the four CLS.
Mexico, with two unratified Conventions belonging to different CLS, can be situated in the middle.
Discriminatio
LS FACB Forced labour n Child labour
Convention number
China
Mexico
87
1950
98 29
1934
105
1959
100
1990
1952
111
2006
1961
138
1999
2000
182
2002
South
Africa 1996 1996 1997 1997 2000 1997 2000 2000
Ratification is, however, not to be equated with actual compliance.
6 Several violations have been identified by institutions that review labour standards systematically.
7 In the case of China, these concern especially the implementation of the free association and collective bargaining (FACB) rights and the prohibition of forced labour. The political control of the Chinese Communist Party over the formation and organisation of unions, the non-existence of strikes in legal documents, the imprisonment
6 The most striking example thereof are the United States, whose ratification record is comparable to the Chinese one.
Moreover Busse provided evidence that ratification is not a good predictor of actual labor standards.
..
7 The analysis comprised all ILO Global Reports that have been published (2000-2007), the US Department of State’s reports from 1999 to 2007, and the three last ICFTU reports on compliance with CLS (for China, the year of publication was 2006, for South Africa 2003 and for Mexico 2002).

of protesting workers and the government’s Re-Education Through Labour (RETL) program, in which minor offenders are forced to execute certain tasks without remuneration, have been repeatedly criticised.
By contrast, besides sporadic references to rural child labour and racial discrimination, South Africa’s implementation of labour rights is praised by the ILO 2000 Global Report as an example of ‘positive synergies between national political will and ILO’s technical expertise’, and no systematic CLS-related violations are registered.
Mexico is again situated somewhere in the middle. Even though its score in the FACB index elaborated by the OECD is the same as South Africa, 8 some violations of labour standards are often cited. Reports refer often to the lack of actual protection of FACB rights is often cited, as well as the administrative difficulties to register independent unions, anti-union discrimination, blacklisting of workers, the lack of secret ballot in union elections and the use of collective bargaining contracts negotiated by management and trade unions unrelated to the workers.
In sum, in terms of labour standards, Mexico, and South Africa perform better than China. By demanding a trade-labour linkage in international trade agreements they could avoid or minimise the eventually resulting comparative disadvantages. As a result, they could not only protect their domestic market but also their export interests, something that cannot be accomplished by traditional protectionist instruments. However, given the fact that South Africa experiences Chinese competition mainly in the context of its domestic market, where protection can be achieved by other means (tariffs,
NTBs), whereas Mexico experiences the Chinese competition especially in the US market, it is reasonable, from an economic point of view, to expect a stronger demand for linkage from Mexico than from South Africa.
1.3 The debate on the trade-labour linkage
Even though the trade-labour standards debate had long been present in the multilateral setting, the issue was most intensively discussed since the 1990s in two multilateral fora, the World Trade
Organization (WTO) and the International Labour Organization (ILO). At the WTO, the debate took place mainly during the Ministerial Conferences of Singapore (1996), Geneva (1998) and Seattle (1999), after several proposals had been introduced by the US, often with the support of the Scandinavian countries and some member states of the European Union. The main feature of the discussion was the polarisation between developing countries, under the lead of India, and the industrialised nations, under the lead of the United States (Burgoon, 2004).
8 OECD, Trade, Employment and Labour Standards.

Whereas the developed countries’ positions diverged, with the EU member states and the
Scandinavian countries emphasising the human rights value of labour standards, and the US approaching labour standards in terms of the preservation of American trade competitiveness, the developing countries’ reactions, including those of South Africa and Mexico, were in appearance homogeneous.
They mostly underscored the protectionist nature of labour standards, both individually and collectively.
Groups such as the G-77, the G-15 and the Non-Aligned Countries stated their opposition, and the issue has been called by Narlikar (2003) the largest and only victory of the informal group of developing countries.
This seeming polarisation was replicated during the discussions in the tripartite framework of the
ILO’s International Labour Conference both in 1994, when the idea of the introduction of a social clause was launched as a means to enhance the organisation’s role in the post-Cold War framework, 9 and in
1998, when the Declaration of Fundamental Principles and Rights at Work was negotiated.
10 This time the employers’ groups from the industrialised and developing countries supported the developing country representatives in their demands for the rejection of a linkage within the ILO. The workers’ group homogeneously backed the industrialised countries in their plea for a strong Declaration.
When assessing both countries the question can be posed why, in the face of competitive pressures, particularly from China, both in their domestic and export markets, Mexico and South-Africa
(vehemently) opposed the trade-labour linkage. Economically, this would have been justified.
2. Punctuating the Equilibrium
How can the absence of policy adaptation to the intermediate position in the international economic system be explained? The model of punctuated equilibrium provides the answer. The model of punctuated equilibrium starts from the observation that a high level of policy stability exists in most countries. At the same time, it is stressed that such stability tends to co-exist with infrequent and relatively rare moments of sudden change. Why is this so and what does this tell us about the objects of our study?
The first part of the answer is provided by the stability of institutions, the bias in favor of the status quo and the resulting path dependencies that this creates. The notion of stability is inherent in the notion of institutions as these have been defined as “(…) problem-solving devices that actors use to induce stability, contain opportunism, and realize gains from cooperation or trade” (Schneiberg, 2005: 99).
9 ILO, Defending Values, Promoting Change. Social Justice in a Global Economy: an ILO Agenda (ILO, 1994).
10 ILO, Report of the Committee on the Declaration of Principles (ILO, 1998).

There is of course, a potential contradiction in this definition as the stability-enhancing effect of institutions may sometimes undermine their problem-solving capacity. Institutions, by their stabilityenhancing effect, lock-in practices and solutions that reflect both, the problems they originally tried to deal with, and the interests that prevailed at the time that solutions for these problems were looked for.
In political economic terms, one could claim therefore, that most ongoing policies reflect more the distribution of interests of the past than those of today. A high level of political pressure is necessary to break through these existing practices, that is, to punctuate the existing equilibrium. There are different ways to explain this. Pressures can come from the domestic economy or from the international level. In the remainder of this paper we will focus on domestic drivers for such a change. The reason for doing so, lies in the leading role MIDCs play in the international arena. Both in the WTO as well as in other fora, Mexico, Brazil or South-Africa often represent the developing countries. As a result, a departure from the status quo is unlikely to originate from pressures at the international level.
When looking at the domestic level, there are basically two explanations for policy stability. The main distinction here is the one between society-centered explanations and state-centered ones. Societycentered explanations focus on the impact of the combination of lobbying and countervailing lobbying on the ability of mobilized societal interests to change the status quo (Schuler et al., 2002: 663). The idea is relatively straightforward. To the extent that lobbying efforts to change an existing policy are countered by lobbying efforts to maintain the status quo, the result is lobbying gridlock, which in itself leads to the continuation of the existing situation, and thus, the status quo. Such an explanation stresses the role that societal mobilization plays in policy-making, either in the sense of triggering change or in the sense of discouraging or blocking change. It also stresses that a continuation of the status quo is not tantamount to lobbying inactivity. It often implies even the opposite. Rather than a shortage, there is an abundance of such activities, but this on the different sides of an issue, with mutually neutralizing effects as a consequence.
The most difficult question to answer is how lobbying efforts can lead to change. In such cases, changes would have to be generated by lobbying in favor of change and this under the condition that it would not trigger either countervailing lobbying or sufficient countervailing lobbying. For this to happen, two conditions need to be fulfilled. First, the distribution of mobilization needs to be changed significantly in comparison with the distribution that existed at the time of (and resulted in) the policies that represent the status quo today. Long term trends often account for this, such as changes in the demography of a country, or changes in the production structure of an economy, or a related change in the position of the national economy in the international trading system (Baumgartner et al., 2009: 20). Second, lobbyists for change must provide a compelling story about the rationalities for change. Such stories are necessary

to make a compelling case, both vis-à-vis public opinion overall, and vis-à-vis the policy-makers.
Notions such as framing and reframing enter the picture here.
Making a compelling case vis-à-vis policy-makers is necessary as policy-makers suffers from a shortage of time in dealing with policy issues. Many issues compete for political attention, but only a minority will succeed in getting on the political agenda. Because of this, selective attention exists (Jones and
Baumgartner, 2005: 126). Issues thus need to survive the winnowing process that comes with selective attention, and as such, mobilizers on these issues need to be able to outperform the mobilizers on all other issues. The resulting level of mobilization increases the probability therefore that, whenever policy-makers act on the surviving issues, they will do so drastically. The reason for the latter is related to framing and its impact on the kind of information that policy-makers take into account as a consequence of it. Framing points at the process through which one dimension with regard to a policy is magnified in comparison with the other dimensions (Payne, 2001: 39; Baumgartner et al., 2009: 167).
Framing often happens as part of the struggle for political attention (Michalowitz, 2007: 135; Princen and Kerremans, 2008: 1138), and is therefore, essential strategic (Princen and Rhinard, 2006: 1129).
The frames represent the different dimensions that societal mobilizers try to magnify. The winner – the one that succeeds to produce the frame to which policy-makers are receptive – will not only increase its chances to get a policy change (in case the framing was meant to produce such a change), but also the probability that the policy-makers will act with a disproportionate attention to the information that is related to that frame, this at the expense of attention for the other dimensions that may be relevant to the case. Their reaction will follow the logic of a so-called “alarmed discovery”. The result is – as Jones and Baumgartner (2005: 128-129; 133) have stressed – overreaction, and thus, radical policy change. In most cases however, in the struggle among frames, each frame cancels out the effect or visibility of the others, and as such, the policy-makers’ reaction is inaction. The outcome is the status quo.
State-centered explanations focus on the level of insulation that policy-makers may enjoy and the impact that this has on their ability to resist societal pressures. The literature on international political economy abounds with research that analyzes the effect of different kinds of institutional characteristics on such insulation. Several authors have pointed at these characteristics ranging from the kind of electoral system
(cf. Rogowski, 1997; Nielson, 2003; Gawande, et al., 2009), the related size of the constituencies (cf.
Lohmann and O’Halloran, 1994; Ehrlich, 2009), the presence of an independently elected executive (cf.
Gilligan, 1997; Karol, 2000; Ladewig, 2006; Kono, 2010), the number of access points (Ehrlich, 2007), veto points (Henisz and Mansfield, 2006) and the related question of the dispersal of policy-making power (Kennedy, 2007), the level of party discipline (cf. McGillivray, 1997; Grossman and Helpman,
2004; Hankla, 2006), and the extent to which the government parties are linked to a stable electoral base (cf. Hankla, 2006).

In a context of high insulation levels, a more fundamental question emerges: what drives policy-makers’ behavior? Their behavior will be driven in the first place by their own preferences, and by the convictions they entertain about the best ways to realize those preferences. Uncertainty has an important effect here. Higher levels of uncertainty, particularly with respect to the consequences of policy decisions, lead more readily to non-decisions, that is, to the preservation of the status quo. This effect will be further enhanced to the extent that a coherent policy paradigm is present that helps policymakers in understanding current policies and in linking these with expected outcomes (Hall, 1993:
291). In such cases, the uncertainty that new policies may bring will especially be unattractive.
Secondly, as policy-makers that are active in government institutions, they may be exposed to international pressures as well, that is, pressures from their foreign counterparts. In principal, taking other government’s preferences into account may be costly. At a minimum, it undermines the autonomy that policy-makers enjoy. But pressures from such counterparts may leave no choice, and may thus lead to change.
Even if state-centered explanations focus on the insulation of policy-makers, such insulation is never absolute. Policy-makers have to take into account the preferences of constituencies that are decisive for the maintenance of their power, or whose absence of opposition to that power is a precondition for office keeping. This is not just the case in fully democratic societies, but also in autocracies, where the military, specific tribes, or specific economic interests may be decisive in this respect.
The fact that complete insulation doesn’t exist, may be an important element in the understanding of punctuated equilibrium, or rather, in the punctuation of that equilibrium. The preservation of the equilibrium depends then on the stability of the policy-makers’ preferences on the one hand, and the absence of any substantial international pressure for change on the other hand. Punctuation takes place either because exogenous events lead to preference changes among the policy-makers, because international pressures for change become compelling, or because the amount of constituency mobilization for change becomes so overwhelming that the absence of change would threaten the office keeping perspectives of the policy-makers. In the absence of these factors, the status quo is the most probable outcome.
On the basis of the above analysis we can argue that some of the conditions for this punctuation to occur have been met. Interest groups have become vocal (see infra) as a result of an exogenous shock. The shock here being the evolution of a country who competes on the basis of low wages, to a country who faces competition from low wage countries. In the following section we will therefore assess the impediments that obstructed such change to take place.

3. Empirical analysis
In order to answer the question whether MIDCs confronted with competition from low income developing countries are likely to change their position towards the trade-labor linkage, two case countries, Mexico and South Africa, are selected. We selected these countries for three reasons. In the first place, because they have experienced both indirect and direct competition from low income developing countries. Furthermore the fact that those losses have been concentrated in one sector – textiles – increases the chances of mobilization for protection.
A second criterion for case selection is the countries’ labor standard compliance, which is related to the probability that protection adopts the form of a trade-labor linkage. Contrary to some of the other
MIDCs, both Mexico and South Africa display a better record of labor standards compliance than China, which has been accused of the use of forced labor and the curtailment of trade union rights. Mexico and
South Africa’s advantage is both formal, in terms of ratification of the essential ILO’s Conventions, and in terms of implementation (ICFTU 2002, 2003). This provides the countries with some legitimacy to label Chinese competitiveness as based on violations of labor standards. Evidence for both criterions have already been highlighted in section 1.1 and 1.2.
A third criterion is related to the countries’ position in the international context. Both of them belong to the group of most active countries within the WTO and enjoy considerable influence among the developing member states. They have a chance to change international rules, or shift the balance between the proponents and opponents of the trade-labour linkage in the international debates.
As raised above, we expect changes to manifest themselves through pressures exerted by civil society (be it labour or business). In the following, we will discuss the (lack of) access of different interest groups as well as the present ideology. We round up each case by a more detailed analysis of how such a change was hampered.
A) Institutional Acces
Mexican trade activities are embedded in a complex institutional and political constellation, with business, labour and government playing a certain role. First, policy-making is largely concentrated in the Executive Power. Pursuant Article 131 of the Mexican Constitution, the External Trade Act outlines the Mexican trade policy. Article 5, sub IX of the law assigns to the Secretaría de Economía (SE) the responsibility to negotiate trade agreements, and the right to involve the productive sectors in consultations, if so desired by the SE itself. Such consultations did not take place between 2000 and
2006, however (Bouzas 2006).

Second, business is constituted by a complex structure. In general terms, Mexican business is constituted by several, often overlapping, organizations. With two national chambers representing industry
(CANACINTRA and CONCAMIN), two private sector umbrella organizations (CCE, COPARMEX), and a multitude of organizations at the sector level, such as textile and clothing confederations (see below), the representation of business is quite fragmented. Moreover, in the wake of the NAFTAnegotiations, an additional group was founded in the pre-NAFTA period to protect the interests of small enterprises (ANIT).
Concerning trade policy, business participation seems less fragmented. The Foreign Trade Business
Organizations Coordinating Council (COECE) formed in the NAFTA context and representing 114 sectors and 16 business associations, including the ones mentioned above, links government and business. During the NAFTA negotiations, it had an important role in the provision of information to the Mexican government, and its adaptability to the distinct dynamics of trade negotiations has allowed it to preserve its influential role after NAFTA (Ortiz Mena LN 2001). The main criticism raised against
COECE, is it lack of inclusion of small and medium sized enterprises (Ortiz Mena, 2005).
Third, contrary to business, the role of Mexican labor in trade policy decision-making is marginal, with only 15,3 per cent of employees being unionized in 2006 (Salas 2008). This is not only a matter of institutional access; labor’s passivity is strongly related to the post-revolutionary corporatist structure, maintained in place between 1946 and 2000 by the Revolutionary Institutional Party (PRI). Organized labor constituted in this system one of the four pillars on which the PRI’s power rested (Meyer 1976).
The Mexican Workers’ Confederation (CTM) emerged as the dominant labor organization. It adopted patronage tactics by which social peace and electoral support from the bases were rewarded with wage increases, administrative positions and Congressional seats (Klesner 1997). Decision-making in the trade unions was delegated to the national leaders, who bargained within the governing coalition led by the
President. The legal system, which allowed for closed shop representation, strengthened the CTM further (de la Garza Toledo 1998).
In 1997, several unions separated from the umbrella organization that had previously accommodated the
CTM-related trade unions, and founded the Unión Nacional de Trabajadores (UNT) together with some smaller federations. However, it was the CTM who formally remained the privileged partner of the regime. In spite of the CTM’s monopoly of government-labor relations and the UNT’s modest membership and mobilization capabilities, the UNT and its subsidiary, the Frente Auténtico del Trabajo
(FAT), have contributed to break the CTM’s monopoly in the labor movement, and to lay bridges between labor and civil society organizations (Natal and González 2002).
The FAT has established close links to the left-wing Partido de la Revolución Democrática (PRD), and to several Canadian and American NGOs opposing NAFTA (de la Garza Toledo 2006). It joined the

radical Mexican Network Against Free Trade, a platform grouping several Mexican NGOs against free trade during the nineties (Ortiz Mena LN 2001). The platform is mentioned as the only civil society organization directly attempting to exercise an influence on Mexican trade policy. However, its strength seems to have waned after NAFTA (Natal and González 2002).
We can conclude that policy-making is centralized and that policy-makers are relatively insulated from societal pressures. Moreover, as the consequences of Chinese competition are felt mostly in SME’s
(Iacovane et al. 2010), the exclusion of SMEs from COECE, increases said insulation. In the theoretical section, we argued that insulation increases the importance of ideology of policy-makers to induce a deviation from the status quo. We will asses this in the following section.
B) Status granted to different interests and government ideology
Mexican trade policy making is embedded in a pro-liberalization ideology, product of a shift brought about since the administration of Carlos Salinas (1988-94) (Pastor and Wise 1999). The Mexican development strategy was based, until the 1980s, on Import Substitution Industrialization (ISI), in which domestic industry was heavily protected. This model was maintained until the early 1980s, when liberalization was gradually introduced. From 1982 on, as part of the new pragmatic, neoliberal approach, the government elite approached the business community to obtain broad support for economic reforms (Poitras and Robinson 1994: 14-18). The reforms diminished the political power of the trade union movement, which was further weakened by the changes in the electoral landscape and the gradual political reforms during the 1990s. Interministerial consultations often take place (Jordana and Ramió 2002) and references have been made, often in the context of NAFTA negotiations, to the role of business as a privileged partner of the Mexican authorities (Poitras and Robinson 1994; Ortiz
Mena LN 2001; Schneider 2002).
After the regime change in 2000, Mexican trade policy continued to be rooted in the administration’s support for trade liberalization. Vicente Fox’s government further prolonged the status quo, and no permanent venues for inter-confederation dialogue were opened.
11 In this sense, Mexican corporatism proved to be state corporatism, rather than party corporatism (de la Garza Toledo 2006). Much of the changes have been ascribed to the ideological profile of the Mexican US-educated political elite who, according to Babb (2001), had been influenced by the trend towards “Americanization” of the economic profession pervasive in Latin America since the 1980s. This trend is on its turn related to the policy
11 The only exception was the establishment of a ‘Mesa Central de Decisión’ that would elaborate a project to reform the labour legislation. The UNT soon abandoned the dialogue and formulated an own proposal together with the left-wing
Partido de la Revolución Democrática (PRD) (de la Garza Toledo 2006).

move towards the Washington Consensus, which motivated trade liberalization in several Latin
American countries. Two conclusions can be drawn on the basis of this.
First of all, given the preference of the Mexican government for free trade, and acknowledging that the dominant frame in which the trade-labour linkage featured in international debates is one of protectionism, we can conclude that the conditions are not prone to change. Secondly the status given to different interest groups by the executive is largely skewed in favor of business, further marginalizing any potential role labour unions can play.
C) How the debate unfolded
Since 2000, the Mexican written media repeatedly reported on the decay in the maquiladora industry.
This was perceived as a consequence of the lack of flexibility in the Mexican labor market, the American economy’s deceleration, the Mexican peso’s overvaluation, and the loss of competitiveness with respect to economies where lower wages prevailed with a special focus on China, and often on its labor conditions (Bello 2000; El Universal 2001; González 2002; AEE 2002, Cota Meza 2002, 2003; Velasco
2003). In April 2003, the Mexican Economy Secretary, Fernando Canales, portrayed Mexican respect for human rights as a comparative advantage vis-à-vis undemocratic China (Morales 2003). However, the
Home Secretariat (Secretaría de Gobernación) promptly issued a statement in which Canales’ assertion was typified as a personal opinion (Aponte 2004). The Foreign Secretariat (Secretaría de Relaciones
Exteriores) advocated a China-Mexico bilateral agenda constituted by opportunities, as opposed to threats. Furthermore, in December 2003 Luis Ernesto Derbez, the Foreign Secretary, issued an opinion article in which he attempted to rebuke the arguments about Chinese low labor standards as a source of competitiveness by comparing them with the similar arguments concerning Mexico that had dominated the American political scene previous to the ratification of the North American Free Trade Agreement
(NAFTA) (Derbez Bautista 2003). Nevertheless, these statements were followed by a diplomatic incident in 2004 in which President Fox underlined the lack of trade union democracy in China (Gómez
Quintero 2004). There was, however, no official position issued on the linkage issue. The government behavior therefore reflects the general ideology which views labour standards as a protectionist tool that runs against their loyalty towards a free trade agenda. The occasional dissonant note could be interpreted as an electoral move because in the meantime, domestic societal pressure from textile business groups to curb Chinese exports in view of the MFA’s end grew. Lobbying activities were coordinated by an alliance between the National Textile Industry’s Chamber and the National Apparel Industry Chamber
(Pedrero 2004). At the domestic level, the textile lobbying conducted several lobbying activities to avoid direct Chinese competition. In the first place, they exerted direct pressure on the SE, so that it would negotiate an extension of the MFA’s phasing out and put in place safeguard mechanisms

(NOTIMEX 2004a). Secondly, lobbying took place at the Mexican labor ministry so that Chinese labor standards would be assessed bilaterally and at the ILO (NOTIMEX 2004b). The third target was the
Senate, where Chinese imports were discussed 2006 and 2007. Both the Labor and Economy Secretaries were asked to pursue Chinese compliance with previously acquired labor and commercial commitments, and new tariffs on Chinese products were demanded (Senado de la República 2006, 2007a, 2007b). The plea at the Senate, which followed the submission of a request for protection by the national industrial lobby (CANACINTRA), was less related to party cleavages than to regional issues, since the senators demanding protection against Chinese shoe and textile imports were those in whose constituency (the state of Guanajuato) those industries are an important source of employment.
Furthermore, conferences were held by the textile chamber at universities and business organizations.
During a number of these conferences, the lack of respect for labor standards was indicated as a source of comparative advantage, and it was argued that action should be taken at the level of the ILO so that compliance would be ensured (CANAINTEX 2007).
Contrary to business activities, trade union and NGO actions were scarce. The FAT, which advocates the inclusion of a social clause in trade agreements (Domínguez A. 2006), issued a position in the context of the WTO’s Cancún Ministerial Conference (FAT 2003). The position was, however, more embedded in the trade union’s general strategy than meant as a reaction to the surge in Chinese competitiveness. In the same vein, sporadic references to linkage also appeared in documents from the
PRD’s think tank (Calderón Salazar and Villegas Soto 2006).
In the context of the lobbying campaign by the textile industry (Martínez 2007; Morales 2007), the
Mexican labor ministry and its Chinese counterpart signed a Memorandum of understanding in March
2005, regarding labor issues such as employment promotion, labor inspection, safety and social dialogue, which foresaw cooperation activities (El Universal 2005). Even though the agreement was signed in the context of the debate on the Chinese competitiveness, it did not address trade issues. In
June 2008, an Agreement was signed between the Mexican and the Chinese government, where complementary transition measures were foreseen for certain categories of textile products (Secretaría de Economía 2008). There were, nevertheless, no references to a direct linkage between labor standards and trade.
From the above we distill two findings. First of all, mobilization took place but was insufficient to be translated in a demand for the trade-labour linkage. Secondly, even though business was able to secure the memorandum of understanding on labor issues and some transition measures regarding trade in textiles, no permanent measures were adopted in the field of trade and no compulsory measures were

adopted in the field of labor. Insulation from societal pressures and the government ideology led to the maintenance of the status quo.
A puzzle arises, however, and that is: Why did industry mobilize whereas labor unions have mostly remained silent? In part, this can be explained by the low unionization levels and lack of influence. One of the factors that determine mobilization is the chance by which a successful outcome can be expected.
In the case for labour, not much mobilization will take place as the odds for successfully altering policy in this case was probably relatively low.
A) Institutional access
Three main features characterize the South African institutional context. First, dialogue regarding trade policy decision-making is institutionalized along clear lines. Second, the role of labour in that institutional setting has declined in favor of business. Third, as opposed to Mexico, labor is considerably active in that policy making process and in general.
The input of labor, business and civil society to the trade policy making is streamlined through the
National Economic and Development and Labor Council (NEDLAC), a social dialogue body formed after the apartheid and whose composition and functions were established in the NEDLAC Act of 1994.
It incorporates representatives from labor, business, the department of Labor, Trade and Industry,
Treasury and the community. They are appointed by the Minister of Labor after nomination by the relevant organizations. It gathers four times a year, and organizes an Annual Summit. It has four chambers, among which a Trade and Industry one, which shares with the other chambers the tasks of concluding agreements, considering changes to social and economic policy (which includes trade) before they are discussed in Parliament, and promoting coordinated policies, among other (South African
Government 1994; Bezuidenhout 2000). The Department of Trade and Industry is in charge of policy formulation and coordination, although initiatives can come from other agencies such as Finance,
Agriculture, National Health and Mineral and Energy Affairs, and from the South African Reserve Bank and the Industrial Development Corporation (WTO 1998).
In spite of its seemingly strong role, there have been some criticisms on NEDLAC’s true potential. Since
1996 macroeconomic policy has been said not to be negotiated within its chambers due to the government’s post-GEAR position. Van Wyk (2009) claims that NEDLAC’s role waned further from
2004 on as a consequence of a pact between business and the ruling party, the African National Congress
(ANC). Besides, NEDLAC’s lack of organizational capacity and expertise to engage in trade negotiations

has also been pointed out (Bezuidenhout 2000: 20-1), in spite of the fact that some of its labor and business members have been part of the South African delegations to the WTO Ministerial Conferences at least in two occasions: Seattle (1999) and Hong Kong (2005) (NEDLAC 2000, 2007). Nevertheless, several accomplishments of the different chambers, such as Trade and Industry’s input to international trade negotiations with the European Union at the end of the nineties, are mentioned by Houston,
Liebenberg and Dichaba (2001).
In spite of the fact that NEDLAC’s formal structure and functioning have not varied, the different constituents’ actual roles seem to have been subjected to an evolution in the post-apartheid period. In the first place, business has evolved from fragmentation to unity. Until 2003, business had been divided along racial lines. Business South Africa (BSA) represented white businesses’ interests before NEDLAC, whereas the National African Federation of Chambers of Commerce and Industry (NAFCOC), originally a member of BSA, had mainly a black membership with ties to the ANC. Fragmentation created difficulties to find a single position within business, and to enforce any reached agreements on the membership (Houston et al. 2001). The lack of consensus is exemplified by labor reforms discussions, which often ended with an ANC-labor-NAFCOC front against BSA (Edigheji 2003). However, as the
Black business elite grew as a product of the ANC’s Black Economic Empowerment strategy, the two organizations were drawn closer, what led to their fusion into Business Unity South Africa (BUSA) in
2003 and the establishment of closer ties with the ANC (van Wyk 2009).
Contrary to business, the political clout of labor in the post-apartheid period seems to have declined.
The Congress of South African Trade Unions (COSATU), founded in 1985 as a fusion of different nonracial unions and the largest trade union confederation in South Africa, was one of the most prominent actors in the struggle against apartheid. From the beginning they were linked to the ANC, and in the early 1990s the links were formalized and political decisions were left to the ANC. COSATU remained, however, an important source of pressure on the regime. Since 1990, it was integrated into several corporatist agreements with the state and business, and became a member of the institution that preceded NEDLAC, the National Manpower Commission. A “Tripartite Alliance” was formed between
COSATU, the ANC and the South African Communist Party. After the fall of the apartheid, several
COSATU members were elected to Parliament as part of the ANC fraction (Maree 1993, 1998; Wood
2002; Buhlungu 2005).
After the formation of a Government of National Unity under Nelson Mandela, organizational and strategy problems emerged in the midst of COSATU, given the fact that the contestation tactics used so

far needed to be changed in a parliamentary regime where the ANC enjoyed the majority (Maree 1998).
Furthermore, programmatic differences regarding the neoliberal reforms have constituted a source of conflict since the Mandela government (Southall and Wood 1999; Brown, Vukani and Musgrave 2006), and some authors argue that the alliance’s role has been marginalized during the last decade, although the union remains close to the ANC regime (Buhlungu 2005: 711-12). The abandonment of the RDP
(Maree 1998: 30) to promote the GEAR was seen as a sign of COSATU’s weakening.
Even though it has experienced a fall of its membership and a lack of leadership during the last years,
COSATU remains the largest trade union umbrella organization in South Africa, followed by the
National Council of Trade Unions and the Federation of Unions of South Africa, along which it represents labor in NEDLAC. Although it cannot be said that it enjoys an actual monopoly of the union membership, it can be regarded as the most representative labor organization, with nearly two million members out of the 2.992.000 unionized workers in 2003 (NALEDI 2004; Statistics South Africa 2004) and an extensively developed organizational structure with sector federations and a think tank, the
National Labor and Economic Development Institute (NALEDI).
In short, even though the formal institutional setting of trade policy decision-making in South Africa has remained stable throughout the post-apartheid period, the real power relations within that formal structure have considerably changed, and the period of the Chinese rise coincides largely with the decay of labor’s role within NEDLAC.
B) Status granted to different interests and government ideology
The demise of labor within South Africa’s institutional setting coincided with a shift in the government’s ideology, featuring a neo-liberal ideology that has predisposed the ANC against COSATU’s anticapitalist discourse.
The ideological position of South Africa’s post-apartheid political elite on trade has been the subject of much discussion due to its shift from a left-wing ‘growth through redistribution’ strategy to a neoliberal
‘redistribution through growth’ view (Peet 2002: 55). The ANC, is historically rooted in an antiapartheid alliance with the largest trade union of the country, COSATU and the South African
Communist Party. The ANC’s position on economic policy, based on vague anti-capitalist arguments during the apartheid, was gradually formalised after 1990 (Williams and Taylor 2000). In its 1994
Reconstruction and Development Programme (RDP), the ANC advocated for a fundamental restructuring of the economy, job creation and the integration of South Africa into the world economy through export and the attraction of investors who would respect labor standards (Peet 2002: 70). Even though the RDP contained several neoliberal elements, it was seen as a compromise between different

ideologies. This was, however, not the case of the 1999 Growth, Employment and Redistribution
Programme (GEAR), from which references to “left-wing” components, including respect for labor standards, disappear, and which is seen by some commentators as the indicator of the liberal economic ideology that has characterized the ANC ever since (Williams and Taylor 2000; Peet 2002).
C) How the debate unfolded
South Africa has been regarded by some authors as the only developing country that showed some openness during the linkage discussions in several fora, starting with the 1995 UN World Summit for
Social Development, where Mandela argued that “basic rights, including a social clause in international agreements, are desirable” (ANC 1995). Even though the South African WTO statements condemned protectionism, they did so in a less direct way than Mexico. At the Singapore Ministerial Conference,
Alexander Erwin, Minister of Trade and Industry, underlined the inadequacy of the WTO as a forum for the discussion of labor standards, but defended a strengthened coordination among the different multilateral organizations (WTO 1996b). At the Doha Ministerial, he emphasized again the need of cooperation, and defended the compatibility of trade with labor standards (WTO 2001).
At the regional level, support for labor issues was clearer. Without advocating linkage, the 1994 Policy
Framework embraced the call for a South African Social Charter establishing minimum standards across the region as a way of “leveling up rights and conditions of workers”. This has been contextualized by a member of the international trade union movement as motivated by competitiveness concerns regarding
EPZs in neighboring countries (ANC 1994).
That softer position shows a strong contrast with the official position issued by the South African government in June 2001: “We endorse the principle of core labor standards as enshrined in the ILO conventions. Like others, we reject the use of labor standards for protectionist purposes” (Department of Trade and Industry 2001).
The statements largely mirror the internal debate that took place on the issue during the nineties, and of which the results have been described as a success of the South African labor movement (Gostner and
Joffe 1998). COSATU defended the incorporation of a social clause involving sanctions to the EU-South
Africa Trade, Development and Cooperation Agreement, and the Trade Protocol of the South African
Development Community (COSATU 1999a, 1999b), what has been interpreted as related to the heightened competition from neighboring countries (Alden and La Pere 2009). Furthermore, it advocated the elimination of EPZs in the neighboring countries. However, it expressed some fear of possible protectionist uses of labor standards by the G-7 (COSATU 2000).

COSATU’s main realizations with regard to the linkage during the nineties were two. At the Trade and
Industry Chamber of NEDLAC, which served as a forum for discussion on the social clause between
1995 and 1996, COSATU won the support of business for a tripartite Framework Agreement on the
Social Clause (NEDLAC 1996) which, without mentioning sanctions, concluded that South Africa would seek the incorporation of labor chapters to its bilateral trade deals. The document further embedded the social clause in the “history of the struggle for human rights in South Africa’.
12 It envisioned a “creative and multifaceted strategy” to deal with the opposition against the social clause by other developing countries. Also within NEDLAC, COSATU, under influence of its textile affiliate (see below) promoted the launching of the “Proudly South African” label, a certificate of compliance with certain labor and environmental standards, in 2001 (NEDLAC 2002). According to a South African DTI officer (personal communication, 5 July 2008), the campaign was a way of countering the economic competition by products from neighboring countries with low labor and environmental standards, such as Namibia and
Zimbabwe, where EPZs had been established throughout the nineties (Jauch 2002).
Labor standards issues arose again after 2001 in the context of job losses related to import competition from Chinese garments, which were regarded as originating from the lower labor costs arising from the violation of labor standards. Action was mainly undertaken by COSATU’s textile affiliate, the South
African Clothing and Textile Workers’ Union (SACTWU). In 2003 SACTWU, backed by COSATU, invoked the procedure contained in Section 77 of the Labor Relations Act, which empowers NEDLAC to mediate in case a protest action is announced by a trade union (NEDLAC 2004). The reasons of the protest, aimed at retailers and their bank and asset managers were, among others, the job losses caused by foreign sourcing, and ‘the practice of many retailers in shifting their sourcing to low wage areas, and exploiting workers in the informal sector, is against the socio-economic interests of workers’ (COSATU
SACTWU and CEPPAWAWU 2003). As a consequence of the procedure a “Buy Local Agreement” was signed by SACTWU and some of the largest clothing retailers, which committed themselves to increase their domestic sources and to “support decent work and fair labor practices in the terms of their procurement policies” (NEDLAC 2003a). The agreement was embedded in the “Proudly South African” initiative (NEDLAC 2003b). None of the other trade unions expressed any preference on the subject.
Action continued in 2005. At the regional level, the African branch of the International Textile,
Garment and Leather Workers Federation argued for countering the “race to the bottom” and for
12 During the 1990s and as a consequence of the victory against apartheid, South Africa strongly identified itself as an advocate of human rights. They became one of the axes of Mandela’s foreign policy, and became of less importance after Mbeki came to power.

marketing of the region as an “ethical source of goods” (ITGLWF-Africa Region 2005). Furthermore, an agreement was reached in 2006 to reduce Chinese imports until December 2008 (Mohapeloa and
Mahlangu 2006). In that same year, COSATU defended once more the incorporation of a social clause to the WTO, but consensus within NEDLAC was not reached (NEDLAC 2006).
From the debate portrayed above it can be concluded that any potential change of the South African policy with regard to trade and labor standards as a consequence of a changed economic position was blocked by two features of the discussion. First, the gradual changes in the informal institutional setting, that have led to a diminished role for labor and a waning importance of NEDLAC as a policy-making forum, coupled to the government’s turn towards a neoliberal evolution, have made the government more receptive to business. Second, the fact that the ANC still constitutes a dissident voice on the tradelabor linkage may also explain the government’s reluctance towards linkage. Even though it might be argued that the post-apartheid period was characterized by a seemingly easy alliance between the ANC and COSATU, the fact that period during which Chinese competition grew coincided with the consolidation of the South African government’s neoliberal orientation invalidates such a claim.
Conclusion
Through an analysis of the Mexican and South African trade-labour linkage policies the paper comes to three main conclusions. First, all the two case countries constantly display a strong resistance towards change in spite of changing economic conditions that would justify a shift towards a pro-linkage policy.
Second, that resistance stems from two interrelated factors: domestic insulation and government ideology. On the one hand, the existence of a domestic institutional buffer isolating decision makers from potential lobbying by groups affected by economic changes avoids the deviation from previous policy paths. On the other hand, that isolation itself heightens the decision-makers’ sensitivity towards influences from the international level. In the case of linkage, the previous socialization and identification of the case countries with the broader developing countries’ group, where linkage opposition became institutionalized throughout the years, increased the potential cost of changing a policy path.
The Mexican case showed how, despite real economic consequences for the apparel manufacturers that led to pro-linkage lobbying during the 2000s, the Mexican position regarding linkage did not change because institutional barriers hindered the transmission of mobilized interests to change the preference of policy-makers. Similarly, South Africa’s gradual change from a pro-linkage to a defensive stance on the trade-labour linkage was the product of both a system that gradually marginalized the labour movement and an intense socialization with other developing countries.

Our paper contributes to the existing literature in three ways. First of all, we question the monolithic view that pervades the literature on MIDCs by looking at the underlying policy processes. Secondly we make an empirical contribution to the theory on path dependencies. And finally we present new and original material on the formation of policy positions in the discussion on the trade-labour linkage.
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