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April 2001
Volume 13, No. 2(B)

 CANADA/MEXICO/UNITED STATES

TRADING AWAY RIGHTS
The Unfulfilled Promise of NAFTA's Labor Side Agreement

ACKNOWLEDGMENTS

TERMS AND ACRONYMS

NAALC OBJECTIVES AND OBLIGATIONS 

NAALC LABOR RIGHTS PRINCIPLES 

I. SUMMARY 

II. FINDINGS AND RECOMMENDATIONS  III. LABOR RIGHTS AND TRADE  IV. THE NAFTA LABOR SIDE ACCORD V. NAALC CASE SUMMARIES  VI. THE RESULTS OF NAFTA LABOR RIGHTS CASES  APPENDIX I: U.S.-MEXICO MINISTERIAL AGREEMENTS 

ACKNOWLEDGMENTS

Joel Solomon, research director for the Americas Division of Human Rights Watch (currently on leave from the organization), wrote this report. Joanne Mariner and Josť Miguel Vivanco, the division's deputy director and executive director, edited it. Human Rights Watch Program Director Malcolm Smart and Senior Legal Advisor James Ross also edited the report.

Human Rights Watch is grateful for the continuing support of the General Service Foundation. The foundation's generous support allowed us to undertake this report as part of a project on labor rights and trade. The author would also like to thank Lance Compa, labor rights consultant to Human Rights Watch, and Carol Pier, researcher with the Americas Division, for their comments.

TERMS AND ACRONYMS

Arbitral Panel An arbitral panel is set up to resolve disagreements about the enforcement of certain labor law subject areas by one of the parties: labor protections for children and young persons; minimum employment standards, including minimum wage; and prevention of occupational injuries and illnesses. If the government against which the complaint was lodged fails to implement the action plan devised by the panel, fines backed by trade sanctions can result. Such a panel can only be established if the state parties do not reach agreement based on the recommendations of an Evaluation Committee of Experts.
Commission for Labor Cooperation (CLC) The CLC is the international entity responsible for administering the NAALC, made up of a Council of Ministers and a Secretariat.
Council of Ministers Composed of the labor ministers of the NAALC signatory countries, the council is the governing body of the NAALC, responsible for overseeing the implementation and interpretation of the agreement and directing the work of the Secretariat. The Council plays a central role in cases that involve an Evaluation Committee of Experts or requests for arbitration or sanctions.
Evaluation Committee of Experts (ECE) An ECE consists of a panel of independent experts convened to study, draw conclusions about, and make recommendations on a pattern of practice related to enforcement of labor laws in the following issue areas: prohibition of forced labor; compensation in cases of occupational injuries and illnesses; protection of migrant labor; elimination of employment discrimination; equal pay for men and women; labor protections for children and young persons; minimum employment standards, including minimum wage; and prevention of occupational injuries and illnesses. An ECE can be convoked by any of the parties to the NAALC if a labor matter related to one of these labor principles has not been resolved through ministerial consultations. An ECE's report will lead to consultations by the state parties; if consultations do not lead to consensual resolution, an arbitral panel may be set up, but only to address issues related to the latter three issue areas mentioned above.
Free Trade Area of the Americas (FTAA) A free trade area currently being negotiated for the Western Hemisphere that is scheduled to begin in 2005.
Ministerial Agreement An agreement between labor ministries to adopt activities to address problems related to a signatory's fulfillment of NAALC obligations. This term has been developed through practice; it is not an official term created by the NAALC.
Ministerial Consultations Discussions between two or more labor ministries to determine how to address issues related to compliance with NAALC obligations. In practice, consultations have always taken place at the request of an NAO, but ministries can also initiate consultations on their own.
National Administrative Office (NAO) Each of the state parties established an NAO, an office within the labor department of a NAALC signatory country that is responsible for the development or receipt of complaints about alleged violations of the NAALC, and the review of such complaints. The NAOs also promote cooperative activities between signatories and exchange information on labor law and adjudication.
North American Agreement on Labor Cooperation (NAALC) The labor side agreement of the North American Free Trade Agreement.
North American Free Trade Agreement (NAFTA) NAFTA is the agreement that created the free trade area between Canada, Mexico, and the United States that came into force in January 1994.
Pattern of Practice of Non-enforcement In order for an Evaluation Committee of Experts to be formed, the country complained of must have engaged in a "pattern of practice" of non-enforcement of the labor principle at issue. This means a "course of action or inaction beginning after the date of entry into force of the Agreement, and does not include a single instance or case."
Persistent Pattern of Non-enforcement In order for an arbitral panel to be convened, the country complained of must have engaged in a "persistent pattern" of non-enforcement of the labor principles at issue. This refers to a "sustained or recurring pattern of practice."
Secretariat The Secretariat assists and supports the Council of Ministers, preparing reports and studies on issues of relevance and, with the NAOs, organizing cooperative activities between the parties.
Sanctions Sanctions may be applied against a government that fails to implement the action plan of an arbitral panel. The financial penalty cannot exceed .007 percent of the total trade in goods between the parties. If that government fails to pay the penalty, the complaining government can suspend NAFTA benefits in an amount no greater than that sufficient to collect the monetary penalty. (Canada has ensured that it will not be the subject of trade sanctions, by guaranteeing payment of fines through enforcement in its courts.)
Trade-related In order for an Evaluation Committee of Experts to be formed, the non-enforcement of the labor principles at issue must have taken place in a matter that is "trade-related." This means that the matter must relate to "a situation involving workplaces, firms, companies or sectors that produce goods or provide services traded between the territories of the Parties; or that compete, in the territory of the Party whose labor law was the subject of ministerial consultations. . . , with goods or services produced or provided by persons of another Party."

NAALC OBJECTIVES AND OBLIGATIONS

Article 1: The objectives of this Agreement are to improve working conditions and living standards in each Party's territory; promote, to the maximum extent possible, the [NAALC Labor Principles]; encourage publication and exchange of information. . . to enhance mutually beneficial understanding of the laws and institutions governing labor in each Party's territory; promote compliance with, and effective enforcement by each Party of, its labor law; and, foster transparency in the administration of labor law. (Partial list)

Article 2: Affirming full respect for each Party's constitution, and recognizing the right of each Party to establish its own domestic labor standards, and to adopt or modify accordingly its labor laws and regulations, each Party shall ensure that its labor laws and regulations provide for high labor standards, consistent with high quality and productivity workplaces, and shall continue to strive to improve those standards in that light.

Article 3(1)(a-g): Each Party shall promote compliance with and effectively enforce its labor law through appropriate government action, subject to Article 42 [which prohibits one party from enforcing labor law in the territory of another], such as: appointing and training inspectors; monitoring compliance and investigating suspected violations, including through on-site inspections; seeking assurances of voluntary compliance; requiring record keeping and reporting; encouraging the establishment of worker-management committees to address labor regulation of the workplace; providing or encouraging mediation, conciliation and arbitration services; or initiating, in a timely manner, proceedings to seek appropriate sanctions or remedies for violations of its labor law.

Article 4(1): Each Party shall ensure that persons with a legally recognized interest under its law in a particular matter have appropriate access to administrative, quasi-judicial, judicial or labor tribunals for enforcement of the Party's labor law.

Article 5(1)(a and d) and 5(4): Each Party shall ensure that its administrative, quasi-judicial, judicial and labor tribunal proceedings for the enforcement of its labor law are fair, equitable and transparent and, to this end, each Party shall provide that: such proceedings comply with due process of law; and such proceedings are not unnecessarily complicated and do not entail unreasonable charges or time limits or unwarranted delays. Each Party shall ensure that tribunals that conduct or review such proceedings are impartial and independent and do not have any substantial interest in the outcome of the matter.

Article 6: Each Party shall ensure that its laws, regulations, procedures and administrative rulings of general application respecting any matter covered by this Agreement are promptly published or otherwise made available.

Article 7: Each Party shall promote public awareness of its labor law.

NAALC LABOR RIGHTS PRINCIPLES

The NAALC divides its eleven labor rights norms into three tiers, with each successive level allowing for additional action by the parties to address problems with the enforcement of labor law in those eleven subject areas. At all three levels, the parties can engage in government-to-government talks and agree to programs to address the non-enforcement problems under discussion. If such a program does not lead to the resolution of the problem, and the labor rights norm falls into the second or first tier, a state party can call for the creation of an Evaluation Committee of Experts (ECE), made up of outside experts who will issue non-binding recommendations for resolution of the problem. A first-tier labor rights problem, if unresolved based on the ECE recommendations, can lead to the creation of an arbitral panel and sanctions.

First (highest) tier (Evaluation Committee of Experts and arbitral panel, leading to sanctions)

Labor protections for children and young persons
Minimum employment standards, including minimum wage
Prevention of occupational injuries and illnesses

Second tier (Can go to an Evaluation Committee of Experts)

Prohibition of forced labor
Compensation in cases of occupational injuries and illnesses
Protection of migrant labor
Elimination of employment discrimination
Equal pay f