KARACHI: Conditioned to spoon feeding, state patronage, a green house environment, generous bank loans and the facility of quick write-offs in case of default, a sellers market that is highly protected
, a virtual hostile attitude of the government towards labour for the last 50 years and an unlimited profit margin, Pakistani business has remained oblivious to social needs and environmental requirements. It is now struggling hard to adjust to the demands of trade globalization that demands certain social and environmental standards.
This late wake-up call to respond to social compliance and environmental standards has not come from the WTO as it is generally believed, but it has originated from the big buyers of Pakistani products in Europe and the US.
As far back as 1995, the year when the WTO was formed, the presidency of the European Council was held by France. In a memorandum, the EU declared that it had a "duty to act to improve the living and working conditions of workers throughout the world". The Council of EU ministers supported a linkage between labour and trade and by a large majority they agreed to end forced labour, child labour and pledged to introduce the right of trade unions and the right to form collective bargain.
Powerful pressure groups in the US and Europe demanded from their governments that production and services sourced out to developing or under-developed countries for cheap labour should not lead to environmental deterioration, exploitation and bad working conditions and use of forced or child labour. "Social compliance is now an integral part of the business strategy of the big buyers in the US and Europe," a local textile dealer said.
Till this day, there is no formal WTO agreement on social and environmental compliance. Issues linked to this have been discussed in the WTO at various ministerial meetings. But is has not led to any formal WTO agreements on the social compliance issue. However, environmental concerns have been brought into the domain of the WTO through the Trade and Environment Committee (TEC), which is now examining the relationship between trade and environmental issues. The TEC has a very limited involvement in such issues. It ensures that environmental policies do not act as obstacles to trade, and that trade rules do not stand in the way of adequate domestic environmental protection. The WTO recognizes the International Labour Organization (ILO) as the only appropriate forum for international negotiations on labour issues and prefers to stay aloof.
In the absence of WTO agreements on social and environmental standards, the issue is driven mainly by the giant sales departments and big buyers of Pakistani products in the US and Europe. These buyers ask their trade partners to observe the standards fixed by international organizations like the International Standard Organization (ISO) and Social Accountability International (SAI).
The Pakistan government prepared a report on child labour in 1996, which is expected to be updated either in 2005 or 2006. The Population Census of 1998 and the Labour Force Survey of 1999-00 counted 2.5 million working children in Pakistan.
A recent study of the Asian Development Bank found the level of general awareness 'low' and compliance with social and environmental standards 'patchy' among Pakistan's export firms. The study on "Social and Environmental Compliance issues" in September 2004 attributes to two reasons for this low level awareness. One is the lack of capacity on the part of the government to enforce such social and environmental standards as there are too few laboratories in Pakistan. Secondly, all the buyers of Pakistani products in the US and Europe are not making such demands. Only a few buyers are asking their partners in Pakistan to comply. Nonetheless, richer markets are becoming concerned not only with the end product which they are purchasing but also with the production processes that are used to make the product.
The ADB report mentions the Sialkot Chamber of Commerce and Industry for taking a lead in complying with international demands on child labour in someof the manufacturing sectors. Quite a few leading Pakistaniexporters are at the head of the compliance initiative.
The report identifies five main manufacturing sectors in Pakistan where, potentially, increasing implementation of social and environmental standards could have an adverse effect on Pakistan's exports. These are textiles, leather, sports goods, surgical goods and carpets.
The report reveals that more than 600 companies in India secured ISO-14001 certification as against 21 in Pakistan, 13 in Sri Lanka and only three in Bangladesh in the year 2002. With 10,620 ISO-14001 certifications Japan tops the list and it is one of the big buyers of Pakistani goods. Other big importers of Pakistani goods are the US, where 2,620 companies have ISO-14001 certification, China (2,803), Germany (3,700), Sweden (3,720), the UAE (92) and Saudi Arab, five. It means that the companies having ISO-14001 certificates in these countries will demand the same environmental standards in Pakistan.
The Islamabad-based Sustainable Development Policy Institute (SDPI) carried out a series of studies on environmental standards and implications on Pakistan's exports. Almost all these studies established the fact that the benefits of the operation of an environmental friendly technology outweigh the cost.
Exporters in Pakistan like the government felt the pressure from Western countries in the 1990s decade of nineties purely for political reasons. These pressures became strong after the 1998 nuclear explosions. But no sooner the military government took a U-turn in policies after the 9/11, buyers in the US and Europe also took a U-turn. These buyers are soft on Pakistan, but how long they would remain so is a question that is not being answered by many Pakistani exporters. Europe and the US absorb as much as 56 per cent of Pakistan's total exports. It means $7.5 to $8 billion worth of exports out of $13.7 billion expected in 2004-05.
