Page 197 - DMGT548_GLOBAL_HRM

Global HRM

Notes 2. The need for trade union solidarity to prevent workers in one region from accepting pay
cuts to attract investment at the expense of workers in another region

Did u know? “Social dumping” is a term used to describe a temporary or transitory
movement of labour, whereby employers use workers from one country or area in another
country or area where the cost of labour is usually more expensive, thus saving money
and potentially increasing profit. There is a controversy around whether Social Dumping
takes advantage of an EU directive on internal markets.
North American Free Trade Agreement (NAFTA): NAFTA is an agreement which involves the
formation of a free trade zone between the United States, Canada and Mexico. The Canada–
United States Free Trade Agreement went into effect on January 1989, and a draft accord to create
NAFTA, which brought Mexico into the trading bloc, was announced in August 1992. The NAFTA
agreement was signed by the governments of the United States, Mexico, and Canada in December
1992, coming into force in January 1994.
NAFTA differs from the Single European Market in that it is a free trade zone and not a common
market. NAFTA deals only with the flow of goods, services, and investments among the three
trading partners. It does not address labour mobility or other common policies of the SEM. It has
introduced new institutions to process complaints, violations of labour laws, and committed
each of the three nations to introduce a set of 11 labour rights principles.
There are significant HR implications in NAFTA that must be considered by HR managers in
North American firms. While NAFTA does not include workplace laws and their enforcement,
the country with the least restrictive workplace laws will have a competitive advantage.

Organised labour in the United States and Canada responded to the passage of NAFTA with
substantial opposition, based on fear of job losses due to the transfer of production to Mexico to
take advantage of lower wage rates and tax enforcement of social and labour legislation. In the
case of NAFTA, jobs are able to cross borders, but workers are not. There has been – a general
lack of coordination between the labour organisations of the NAFTA countries.

Example: In telecommunications, trucking, and electrical industries, NAFTA has
stimulated some strategic cross-border collaboration among individual trade unions and their
allies.

The EU and NAFTA provide examples of regional integration, which present many issues for
international industrial relations. As regional integration, and interregional integration, develops
in other parts of the world, issues will continue to emerge for international industrial relations.
Self Assessment

State whether the following statements are true or false:
13. Trade union leaders consider the growth of multinationals as a threat to the bargaining
power of labour.
14. There is no significant implication of the regional integration agreements on industrial
relations internationally.

15. NAFTA is an agreement which involves the formation of a free trade zone between the
United States, Canada, and Brazil.

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