Leveraging the clout of purchasing power and the rule of law

In somewhat exaggerated terms, tendering workwear for municipal service staff in the small town of Gramatneusiedl could improve working conditions in the sweat shops of the outsourced garment industry in Bangladesh. The lever producing this effect goes by the name of Socially Responsible Public Procurement (SRPP). In 2014, the EU issued a directive on public tenders – from the level of the Union down to the local level – which gives more leeway for the consideration of social and ecological standards in public procurement. In a project jointly funded by the Austrian Science Fund FWF and the German Research Foundation (DFG), Cornelia Staritz and Kristoffer Marslev from the University of Vienna, Gale Raj-Reichert from Bard College Berlin, as well as Leonhard Plank and John Watt from the Vienna University of Technology are exploring what aspects need to be taken into account in order to use public procurement to improve labour governance – i.e. the configuration and regulation of labour relations – in global production networks.

The development economist Cornelia Staritz describes the objectives of the research as follows: “There is ample research on voluntary, private and company-specific instruments to influence labour standards in global production networks. They have been found to be difficult to enforce, and they have not resulted in systematic improvements. We are investigating instruments that regulate market access and provide opportunities for the public sector to demand better labour governance, for example in the global garment and electronics industries.”

Outsourcing of production and responsibility

The media regularly reports on cases of gross disregard of environmental and social standards, including low wages, high labour intensity, excessive working hours and safety hazards: the collapse of the Rana Plaza building in Bangladesh, or the deaths of Foxconn employees in China, are two examples that again brought these issues to the fore in public debates. At the University of Vienna’s Department of Development Studies, Cornelia Staritz is conducting research on international trade, global production networks and development strategies of countries of the Global South. Her focus is on the unequal relations between states and lead firms in countries of the Global North, such as those of the EU, and the USA, and states and firms in Africa, Asia and Latin America and their workers, in global production networks. The European Union can influence the well-being of workers and the environment by the way it regulates access to a market of almost 450 million people. While the coronavirus pandemic presented great obstacles for conducting research, it also brought to the fore issues of public procurement, supply security, environmental criteria, social standards and responsibility in the EU.

To know how

A 2014 revision of the EU directive on public procurement increased the possibilities of including environmental and social standards in the tendering process. The interdisciplinary project team developed a conceptual framework in order to find out what the chances are for the application of such standards and what their effects would be. This framework understands states as a hybrid of “buyer and regulator”. It is illustrated with examples from procurement practice in Sweden and Germany and shows how states can advocate for SRPP in global production networks. “Our framework helps to understand what opportunities for influence there are if the political will is there,” Staritz notes.

The concept should prove useful for application in research, policy and practice. Public authorities, procurement agencies, NGOs or buyers is shown what opportunities, but also what obstacles, can arise in the process. As Cornelia Staritz explains: “As an instrument that brings into play the purchasing power of government agencies in the EU, i.e. the volume of public procurement, SRPP is well positioned to demand social and ecological standards for market access.”

Harness all four power factors

While the value of EU-wide public procurement is estimated to amount to 14 to 19 percent of the EU's GDP, it is divided between levels and organisations, from EU authorities to national hospitals, from universities to local authorities, from ministries to municipal departments. In order to be able to use this purchasing power, stakeholders must also take into account other power factors related to the role of the EU as a regulator. Four power factors along the entire procurement process determine whether and in what way SRPP can be used: legislative power (national legislation on public procurement), institutional power (competence in international tendering and control of criteria in other countries), judicial power (court rulings as points of reference for procurement practice), and discursive power (re-framing of concepts such as strategic public procurement).

Cornelia Staritz considers that Austria did not make full use of the existing leeway given by the EU directive in its transposition of rules into national legislation. Federalism is very pronounced in Austria, which can reduce buyer power, but the Federal Procurement Agency supports procurement practices at various levels. Up to now, it has however contributed very little to support the integration of social standards in the context of global production networks. The researchers also examined a second instrument for labour governance through control of market access. Bilateral free trade agreements (most recently, for example, between the EU and Vietnam) can be linked to conditions even prior to ratification, such as the implementation of the Core Conventions of the International Labour Organisation ILO.

Personal details

Cornelia Staritz is a tenure-track professor of development economics in the Department of Development Studies at the University of Vienna. She is also a senior research associate at the Austrian Foundation for Development Research (ÖFSE) and a research associate at Policy Research on International Services and Manufacturing (PRISM), based at the Department of Economics, University of Cape Town. She holds a PhD in Economics from the New School for Social Research in New York and the Vienna University of Economics and Business. Funded by the Austrian Science Fund FWF with EUR 161,000, the German-Austrian research project “Labour governance in global production networks” is set to run until June 2022.

Publications & Contributions

Raj-Reichert G., Staritz C., Plank L.: Conceptualizing the Regulator-Buyer State in the European Union for the Exercise of Socially Responsible Public Procurement in Global Production Networks, in: Journal of Common Market Studies 2022

Marslev K., Staritz C.: Towards a stronger EU approach on the trade-labor nexus? The EU-Vietnam Free Trade Agreement, domestic labor reforms and social struggles in Vietnam, Working Paper, Department of Development Studies, University of Vienna 2021 (PDF)

Marslev K., Staritz C., Raj-Reichert G.: Worker power, state-labour relations and worker identities: Re-conceptualising social upgrading in global value chains, Working Paper, Department of Development Studies, University of Vienna 2021 (PDF)