COVID-19 and supply chain relationships: inclusive governance reform or break-up ahead?

This article is part of the series Governance, in crisis.

By Janelle M. Diller
Senior Research Associate, Global Governance Centre,
Graduate Institute of International and Development Studies

Synopsis: The threats to human and worker rights accompanying the global coronavirus pandemic reinforce the need to prioritize inclusive sector-wide dialogue and action among governments, business, workers and civil society in global value chains, aided by international standards and organizations.

Keywords: global value chains, transnational governance, labour, worker rights, multi-stakeholder initiatives, human rights, private authority, COVID-19

COVID-19 has blatantly exposed the fragility of relationships across global value chains (GVCs) among governments and private actors.  Despite the UN’s call “to mobilize a coordinated global response . . . with all relevant actors” (UNGA Res. 74/270), lockdowns and work stoppages unilaterally imposed by governments have seriously disrupted the supply of labour and sourcing inputs that keep GVCs going.  After years of reducing costs and minimizing inventories, many GVCs lack the resilience and relational assets to absorb the shocks of such disruptions and decline in consumer demand.

GVC workers, enterprises, and communities in a wide range of global industry sectors face severe threats to livelihood and well-being. In the second quarter of 2020, an 93 per cent of the world’s workers faced required or recommended workplace closures, contributing to a 14 percent decrease in global working hours equivalent to 400 million full-time jobs.  As of last month, nearly 70 percent of employment across manufacturing sectors was to be at risk from the lack of key imported inputs, totaling 255 million workers.  In the garment sector, as brands and retailers cancelled contracts, some suppliers allegedly failed to pay back wages due.

“… widespread deprivation across GVCs is a telling indicator of the weakness of transnational governance…”

Existing governance systems remain inadequate to manage the shocks. A reported that 55 per cent of the world’s people have no social protection against loss of income or health.  Now, although some 200 countries have introduced or increased benefits or subsidies, extreme poverty is expected to rise by 20 per cent this year. Protection deficits also face GVC workers returning to work, or still on the job in essential industries where adequate hygiene measures including personal protective equipment (PPE) are lacking. In many countries, the pandemic also serves as a pretext for rights abuses, with miners forcibly confined to the worksite, union members among the first to be fired, and seafarers unable to go ashore for crew changes due to crisis-related border and travel restrictions.

Such widespread deprivation across GVCs is a telling indicator of the weakness of transnational governance, which remains largely disconnected from national and global governance orders.

This governance gap is not new.  In a recent piece, I argue from case-based evidence that GVCs have greater capacity to advance human rights when public and private GVC actors from national, transnational and global governance orders participate in inclusive dialogue on rights concerns and take decisions using relevant international standards as a baseline.

By means of four case studies, I compare drivers, processes, and rights outcomes across multi-stakeholder initiatives of varying degrees of participation by governments, international organizations (IOs), and representatives of transnational and local business, unions and other collective private interests. The results suggest that the more inclusive the process of consensual decision-making, the greater the societal perception of legitimacy and rate of voluntary compliance with the agreed approaches to remediation or prevention of rights abuses. The role of the State in such transnational inclusive governance (TIG) appears pivotal. In the Rana Plaza Arrangement to compensate the injuries and deaths of 3,000 GVC factory workers, the State played an essential role by sharing regulatory authority and decision-making power with an inclusive set of representatives of business, workers, and civil society organizations (CSOs). It also aligned national and international standards and governance, drawing on the ILO’s expertise. As shown by the (MLC), when States cooperate as International Organization (IO) Members in TIG processes, the opportunities to respect and enforce transnationally-agreed worker rights and responsible conduct across a global industry exponentially increases.

To be inclusive, TIG requires equal opportunity for all those concerned to participate in dialogue and decision making for a common purpose aligned with international standards. If concerned actors are marginalized, the legitimacy needed for voluntary compliance suffers, and key actors may resist or opt-out.  In developing ISO 45001 on occupational health and safety management systems, industry leaders sidelined governmental and union objections on key issues, which led to deviations from international standards and opt-out by some governments and the ILO.  In the Bangladesh Accord for Fire and Building Safety, transnational business and global union federations with national affiliates led an impressive inspection effort, but exclusion of local government and business from decision-making provoked resistance that changed the effort indelibly.

“In crisis, social dialogue mechanisms already in place have delivered solutions at country and transnational levels…”

Do such preliminary TIG lessons offer guidance to the diverse governance initiatives and actors seeking to revitalize GVC relationships and restore rights? The public and private sector interests acting at national, transnational, and international levels appear largely uncoordinated.  Yet, at as evidenced by a recent OECD forum , a number of common priorities for GVCs emerge: social protection for all, wages and health safeguards for workers, and incentives for GVC businesses to act responsibly with each other and with workers.  International financial institutions and relevant IOs lead efforts with governments to build sustainably-financed social protection systems. Governments and investors innovate policies that link responsible business conduct with bail-outs and financial loans. Policymakers, financial sectors, and CSOs all seize the opportunity — some to avert cross-border dependence by re-localization of GVCs and others to reform GVC purchasing practices. Unions and advocates call for remediation of rights abuses. Expert groups conduct monitoring and reporting, and issue guidance for GVC recovery with resilience.

Amidst the flurry, more attention should be paid to inclusive dialogue among GVC actors with different interests that can help build trust and find solutions if all commit to using international standards. In crisis, social dialogue mechanisms already in place have delivered solutions at country and transnational levels: at country level, tripartite and bipartite compromises in which employers retain jobs, workers accept shorter working hours, and governments cover wages and business bail-outs; and at transnational levels, bipartite commitments through framework agreements between global union federations (GUFs) and multinational enterprises to provide workers’ social protection and health care needs, minimum standards for return-to-work, and guidelines to safeguard workers’ health across their global operations.

To reform GVC sectors world-wide, inclusive dialogue and decision-making requires the engagement of a critical mass of the sector’s governments and industry, as in the MLC. By this metric, progress in sector-wide responses is underway but insufficient.  In the maritime sector, so far 13 maritime states, working with the international shipowners’ and seafarers’ associations and the International Maritime Organization (IMO), have committed to national exemption measures to permit seafarers trapped on board to come ashore for much-needed crew changes. In the global garment industry, an ILO-convened biparitite working group of brands and employers’ and workers’ organizations have agreed to implement a to help the sector’s businesses and workers and to build social protection floors, yet their decision-making excludes governments (two observers permitted) and CSOs.  In the food and agricultural sector, the Directors General of three IOs and a group of global enterprise CEOs, scientists and CSOs  both advocated open global trade for food supply flows,  although in separate calls. In the tourism sector, G-20 tourism ministers released a statement of intention to collaborate more with IOs and industry stakeholders to improve the sector’s resilience, with results pending.

It is high time to prioritize inclusive sector-wide dialogue and decision-making among GVC governments, business, workers and civil society, aided by IOs and international standards aligned to principles of recovery and resilience in crisis.  After all, “we’re all in this together”.

Janelle M. Diller’s latest publication is entitled “The Role of the State in the Exercise of Transnational Public and Private Authority over Labour Standards” which appears in a special issue of the International Organizations Law Review. 

Image by Julius Silver from Pixabay