©Reuters. FILE PHOTO: A man works at a mechanical factory in Hanoi, Vietnam, May 30, 2018. REUTERS/Kham/File Photo
By Francesco Guarascio
HANOI (Reuters) – Communist-ruled Vietnam is expected to ratify the United Nations Convention on the Free Formation of Trade Unions this year, U.N. officials and diplomats said, in a move intended to reduce the risks of trade disputes but which will likely leave some foreign companies uncomfortable.
The long-delayed measure would represent a major formal step in a tightly controlled one-party nation where the only existing national union operates within the Communist Party structure, although it is unclear how and when the convention, once ratified , will actually be applied. .
The Southeast Asian manufacturing hub, which is home to factories of international companies including Samsung Electronics (KS:), Intel (NASDAQ:), Foxconn and Canon, depends heavily on trade, which last year exceeded 160% of $415 billion national economy. .
UN standards on workers’ rights need to be applied to avoid disputes over “social dumping,” which refers to the practice of countries unfairly competing with others on labor costs, under multibillion-dollar trade deals with the European Union and Pacific partners. .
“We are confident that Vietnam will commit to ratifying Convention 87 as soon as possible,” Ingrid Christensen, Vietnam head of the International Labor Organization, the U.N. agency responsible for workers’ rights, told Reuters.
Convention 87 on “freedom of association and protection of the right to organize” was adopted in 1948 and is one of the fundamental texts protecting workers’ rights worldwide.
In a December meeting with foreign experts, Vietnam’s Labor Ministry officials said ratification of the convention was expected in October 2024, according to a Hanoi-based diplomat. Other diplomats have confirmed their intention to ratify it this year.
Vietnam’s prime minister’s office, the Ministry of Labor and the Vietnam General Confederation of Labor, the country’s only national union, did not respond to requests for comment.
After a decade of talks, Parliament was expected to ratify the convention last year, just before the January deadline agreed with Canada expired. By missing the deadline, Ottawa theoretically has further argument to seek sanctions under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Canada, whose trade with Vietnam is worth more than $10 billion, is reviewing a complaint about whether Vietnamese labor laws comply with CPTPP obligations on workers’ rights, a Canadian government spokesperson said.
The EU, which had bilateral trade with Hanoi of almost $65 billion in 2022, views the ratification of Convention 87 and changes to relevant laws as “crucial” to respect existing agreements, the EU ambassador said in Vietnam Julien Guerrier.
SOME UNHAPPY COMPANIES?
However, “if ratification led to more real power for unions, some companies might be unhappy,” said Nguyen Hung, a supply chain specialist at RMIT University Vietnam, warning that this could impact foreign investment, including that of Samsung, the largest investor. in the country.
Freedom of establishment would “result in a disorderly proliferation of trade unions” and deterioration of industrial relations, according to notes seen by Reuters for a 2016 speech by Samsung’s former deputy head in Vietnam, Bang Hyun Woo. The notes stated that Bang’s views did not reflect those of Samsung.
Samsung declined to comment on Vietnam’s possible ratification and whether that would change its investment plans.
Vietnam will also increase the minimum wage in the business sector by 6% in July, following other increases in the past. Levies on large multinationals will also increase from this year under a new global tax deal.
Vivie Wei, who runs investment consultancy Dezan Shira & Associates in Vietnam, said she had seen no significant impact on foreign investor interest from strengthening union rights or wage increases.
Vietnam is “not positioned as the cheapest option” but has still managed to attract investment even after recent wage increases, he said.