It was May Day when a leaked copy of the Retail Council of Canada's master plan to eliminate sweatshops came through my fax machine. London was rioting, two million people were protesting in Japan, and workers were smashing rice bowls in Hong Kong. As I read this feather-light document, designed, it proudly states, to assure "customers that the goods they buy are not produced under exploitative, inhumane or illegal working conditions," all I could do was laugh. Unlike tougher codes in Europe, and even the one just adopted by the University of Toronto, it said nothing about transparency, independent monitoring, or a living wage.

The retailers of Canada, it seems, are going to stop the sweatshop epidemic with nothing but bad blood and good intentions.

In June, 1998, Minister of Foreign Affairs Lloyd Axworthy was presented with a petition signed by 30,000 Canadians. It demanded that he convene a task force, much as the Clinton administration had done in the United States, to address the rise of sweatshop abuses in Canada and overseas.

Representing a coalition of labour, human rights and church groups was the Ethical Trading Action Group (ETAG). Speaking for 8,500 Canadian retailers, including foreign-owned multinationals such as Wal-Mart, was the Retail Council of Canada. Trying to get the two sides to agree to something was former Liberal MP and University of Waterloo historian John English.

After almost a year of meetings, the process collapsed and, in March, the Retail Council announced it would go it alone with its own code (the one that came through my fax machine). According to Sharon Maloney, vice-president of government relations for the council, it will be released, possibly with some minor changes in "nuance," next month.

Not interested in waiting around, ETAG will issue an official statement slamming the code today. Speaking for the coalition, Bob Jeffcott called it "10 years behind the times."

The sticking point that led to this mess, according to John English, was "collective bargaining." The Retail Council, though it agreed to include a clause about the "lawful rights of free association" for workers, refused to include any wording guaranteeing the right to form unions, to bargain collectively, or to be protected from employer retaliation. ETAG maintains that any code has to treat such rights "as a starting point."

According to Ms. Maloney, the Retail Council's only goal was to get its members and their contractors to abide by the laws of the countries in which they do business. But, she says, countries like China restrict independent unions and "we should not recommend what our members cannot achieve."

The breakdown points to a fundamental impasse in the debate about how to end international sweatshop labour. Conservative economists like to claim that sweatshops are a natural part of economic progress: These jobs formed the foundation of industrialization in the West, and then, just as leaves fall from the trees in autumn, we evolved beyond them. According to this happy tale, the same thing will happen in the developing world, with the help of a few weak codes of conduct.

This is nonsense. It wasn't capitalism's natural evolution that eliminated sweatshops in the 1920s and '30s, it was labour unions. There was a reason Monday's global May Day protests targeted international retailers and manufacturers. It is these industries' insistence on low wages and minimal regulations that is driving the debasement of standards around the world, and they are not about to raise labour standards on their own.

In the Philippines, where police blasted workers with water cannons on Monday after they stormed the presidential palace, there used to be a strong, well-organized labour movement. That changed when the government embraced a development model based on so-called free-trade zones—gated industrial parks where organizing can get you fired and labour laws are routinely violated. Did the government of the Philippines build these legalized lawless states because they felt like abusing their young citizens? No, they did it because they had every reason to believe that low wages, lax laws and union busting were the incentives foreign capital required to set up shop in their country. Unions were a clear liability.

Many of the free-trade zone factories in the Philippines are owned by companies from South Korea, site of another May Day riot on Monday. In a now familiar story, these companies left their home country after Korean workers organized unions and won higher wages. The factory owners claimed they had no choice but to leave, since the companies supplying them with contracts—major retailers like Wal-Mart—were not interested in sticking around while South Korea used sweatshops as a stepping stone to better jobs. They already had their eye on countries where workers are better controlled by the state: Indonesia, say, or China. The South Korean economy was devastated.

And that is the real insult of the Retail Council's code. Many of the same companies who made sacrificing workers the entry pass into the global economy are now claiming that they can't mention unions in their code of conduct. Why? Because they don't want to interfere with the sovereign decisions of foreign countries. It's a little late for that.

This article first appeared in the Globe and Mail.