The link between labor rights and trade is already recognized in two free trade agreements negotiated among the United States and its trading partners: the North American Agreement on Labor Cooperation (NAALC), a side agreement to the North American Free Trade Agreement (NAFTA), which entered into force on January 1, 1994, and the U.S.-Jordan Free Trade Agreement (Jordan FTA), which entered into force on December 17, 2001. The Bipartisan Trade Promotion Authority (TPA) or "Fast Track" authority, signed into law by President George W. Bush on August 6, 2002, which establishes negotiating objectives for future free trade agreements, also includes labor rights provisions.
Human Rights Watch urges that the United States follow a clear and consistent approach for including labor rights protections in all future free trade agreements, drawing from the strengths of these prior accords and avoiding their weaknesses. This backgrounder analyzes the link between trade and labor rights and provides proposals for the effective incorporation of labor rights into trade accords to which the United States is party. We believe many of these proposals would be mandatory elements of any trade agreement negotiated in accordance with the objectives set forth in TPA.
I. Incorporation of International Labor Rights Norms
Incorporation of labor rights provisions in free trade agreements is politically sensitive, primarily due to fear that such provisions could be used as a form of protectionism. Some people may also see such requirements as an infringement of national sovereignty or as an unfair imposition of rich country standards on developing countries. Such concerns can be addressed through a two-tiered approach. First, trade agreements should establish strict and absolute requirements to uphold core civil and political labor rights that countries are already obliged to meet. Second, trade agreements should include requirements for the progressive realization of economic and social labor rights that take into account countries' particular socioeconomic circumstances.
All International Labor Organization (ILO) member states, by virtue of their ILO membership have an obligation "to respect, to promote and to realize, in good faith" the principles concerning the four fundamental labor rights identified in the ILO's Declaration on Fundamental Principles and Rights at Work: freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labor; the effective abolition of child labor; and the elimination of discrimination in respect of employment and occupation. These core labor rights are enshrined in eight core ILO conventions: Conventions 138 and 182 on child labor; Conventions 87 and 98 on freedom of association and collective bargaining; Conventions 29 and 105 on forced or compulsory labor; and Conventions 100 and 111 on workplace discrimination. ILO members must ensure that their domestic labor legislation fully protects these core labor standards. Establishing requirements in trade accords negotiated between or among any of the 175 ILO member states that such rights be respected would not impose new commitments but simply reaffirm existing government obligations. All future free trade agreements should mandate that parties' domestic labor legislation effectively protect these core labor rights.
A more flexible approach may be necessary, however, with respect to non-core economic and social labor rights, including occupational health and safety, compensation in cases of occupational injuries and illness, and minimum wage standards. ILO member states are not bound, by mere membership in the ILO, to uphold these standards and many have not ratified the relevant ILO and UN conventions establishing these rights. Furthermore, a country's ability to fulfill these economic and social rights may be dependent on its socio-economic development and the extent of available resources. Human Rights Watch urges that, with respect to such rights, free trade accords take their guidance from the International Covenant on Economic, Social, and Cultural Rights, which requires each state party to "take steps . . . to the maximum of its available resources, with a view to achieving progressively the full realization of [economic and social rights] by all appropriate means, including particularly the adoption of legislative measures." To ensure that this commitment, in practice, leads to legislative reforms that increase protection for these labor rights, trade accords should also require parties to develop a plan to ensure that domestic legal guarantees of these rights meet or exceed international standards and to implement that plan within a reasonable, predetermined time period.
Despite their incorporation of labor rights provisions, neither the Jordan FTA nor the NAALC satisfy this standard: neither requires parties' domestic labor standards to be consistent with internationally recognized labor rights. The Jordan FTA vaguely requires parties to "strive to ensure" harmonization with international standards, while the NAALC requires governments to "ensure that labor laws and regulations provide for high labor standards." The absence of an explicit provision mandating that laws meet or exceed international standards raises the possibility that countries could enforce substandard laws and still comply with these agreements.
Consistent and Comprehensive Definition of International Labor Rights
Human Rights Watch believes that trade accords should address, at a minimum, the eleven labor principles enumerated in the NAALC: freedom of association and protection of the right to organize; the right to bargain collectively; the right to strike; the prohibition of forced labor; labor protections for children and young persons; minimum employment standards; elimination of employment discrimination; equal pay for women and men; prevention of occupational injuries and illnesses; compensation in cases of occupational injuries and illnesses; and protection of migrant workers.
The Jordan FTA falls short of this standard. It does not explicitly include the right to strike, equal pay for women and men, compensation in cases of occupational injuries and illnesses, and protection of migrant workers. It also establishes an inconsistent double standard in which parties are required to strive to ensure that one set of labor rights are protected by domestic laws and to effectively enforce and strive to improve domestic laws governing a different set of rights.
II. Parity of Enforcement
Respect for labor rights is as fundamental to free and fair trade as sound regulatory practices or the protection of intellectual property. We refer to this as the "parity principle."
To respect this principle fully, the same enforcement mechanisms and remedies available when other trade agreement obligations are breached must be available and accessible, under identical terms, for violations of labor rights. Such parity would demonstrate that labor rights are as important as other trade accord provisions and are to be taken seriously. Furthermore, parity of enforcement would ensure the existence of adequate mechanisms to enforce respect for labor rights.
For example, if penalties can be imposed against a party for failure to comply with anti-corruption provisions, the imposition of the same range of penalties must also be available for failure to enforce labor laws. This principle is upheld in the Jordan FTA, which allows all violations of the agreement, including labor rights, to be remedied through "appropriate and commensurate measures." In contrast, NAFTA fails to uphold this principle: all of the provisions in the body of NAFTA, but only a small portion of those in the NAALC, can be enforced with fines or sanctions.
True parity of enforcement would replicate the structure of the Jordan FTA, in which labor rights provisions are located in the body of the accord, rather than that of the NAALC, in which they are relegated to a side agreement. Some may argue that parity of location is largely irrelevant if adequate enforcement mechanisms exist. However, when labor rights are not included in the body of an accord, they are symbolically ghettoized as lesser rights and could be interpreted as non-essential elements that do not require the same level of compliance.
Parity Among Labor Rights Provisions
There should also be parity of treatment for different labor rights provisions. If an accord requires parties to effectively enforce their labor laws, the consequences for failure to do so must be the same regardless of the labor right at issue. For example, the same range of penalties must be available for failure to enforce laws governing freedom of association, child labor, and health and safety. Similarly, a trading partner's failure to effectively enforce its domestic labor laws must carry the same range of penalties as a partner's failure to ensure that those laws meet international labor standards.
The Jordan FTA respects this element of parity of enforcement and allows for any of the labor-related provisions, regardless of the right at issue, to be remedied through "appropriate and commensurate measures." The NAALC does not. Instead, the NAALC establishes a hierarchy among rights and obligations, providing for different enforcement mechanisms and remedies depending on the violation. For example, a party's failure to enforce domestic labor laws governing the right to strike could result solely in ministerial consultations leading to non-binding recommendations; a party's failure to enforce laws governing occupational safety and health, however, could ultimately result in the imposition of trade sanctions. Human Rights Watch believes that this approach reduces the capacity of the NAALC "to improve working conditions and living standards in each Party's territory; promote, to the maximum extent possible, the [NAALC Labor Principles]; . . . [and] promote compliance with, and effective enforcement by each Party of, its labor law."
III. Adequate Enforcement
Labor rights provisions in trade accords can be effectively implemented only when nongovernmental organizations, trade unions, companies, and other interested members of the public, as well as parties to the accord, can submit allegations of non-compliance to an independent, non-political oversight body with authority to levy adequate penalties to ensure compliance.
Adequate Oversight Bodies
The NAALC establishes an unwieldy, three-tiered enforcement structure, with each tier allowing for different and increasingly more punitive enforcement mechanisms to address non-compliance. No complaint alleging violations, however, can proceed past tier one of the dispute settlement process without the consent of at least one government. The NAALC only provides for broad participation in tier one, in which trade unions, non-governmental organizations, business representatives, and other interested parties may submit complaints alleging accord violations to National Administrative Offices (NAOs)-political bodies created in each NAALC signatory country, largely to address allegations of non-compliance. If an NAO accepts a complaint, it is required to evaluate and investigate the allegations and issue a report containing relevant findings and non-binding recommendations. In contrast, tier two-the convening of an Evaluation Committee of Experts (ECE), an independent outside panel-and tier three-the arbitration and penalty phase-can be initiated only by the NAALC signatories. The ECE can issue reports and make non-binding recommendations regarding a country's labor law enforcement. A tier three arbitral panel is to be convened only to address issues not resolved by the ECE. Such panels are charged with drafting additional reports on labor law enforcement with recommendations to remedy any "pattern of non-enforcement." If such recommendations are not implemented, the arbitral panel has the authority to impose fines; nonpayment of such fines may lead to sanctions.
The Jordan FTA allows only states parties to submit allegations of labor rights violations. The role of non-governmental parties is confined to the presentation of views during governmental consultations on the agreement and the submission of amicus curiae briefs to "dispute settlement panels" convened by the parties to address allegations of non-compliance.
Both the NAALC and the Jordan FTA models are flawed. The NAALC experience demonstrates that it is unrealistic to expect governments to police each other with respect to labor rights. Indeed, almost ten years after the NAALC's entry into force, no government has allowed a case to pass to tier two or tier three. Moreover, NAOs have often failed to address allegations made in complaints and, in some cases, have issued reports lacking findings of fact; ministerial consultations, often recommended by NAOs, have resulted in agreements that provide little possibility for resolving problems identified in complaints. The Jordan FTA, for its part, relies exclusively on the trading partners' political will to enforce the accord's labor rights commitments, thereby compromising the implementation of those commitments.
To avoid these pitfalls of the NAALC and the Jordan FTA, complaints, whether submitted by members of the accord or third parties, should immediately fall under the jurisdiction of an independent, non-political body. Such a body should also have the power to initiate complaints, as do the NAOs established by the NAALC. The decision to proceed with an investigation, consultation, or arbitration; assess a penalty; or order the imposition of sanctions should be made by that independent body, not the parties to the accord.
The proposal to set up independent oversight bodies builds on provisions in both the NAALC and the Jordan FTA; such bodies would also be similar to the mechanisms used by the Organization for American States (OAS) and the ILO. As discussed, the NAALC provides for the formation of an independent panel, an Evaluation Committee of Experts, in the second tier of its enforcement process, to be composed of experts outside the NAALC machinery. It also provides for the creation of an arbitral panel in the third tier, also composed of outside experts "chosen strictly on the basis of objectivity, reliability and sound judgment" and independent of the parties. Similarly, the Jordan FTA provides for the creation of a dispute settlement panel, composed of three members, one appointed by each of the parties and a third chosen by those appointees. Furthermore, the ILO and the OAS routinely rely on independent bodies to address members' non-compliance with their international obligations. Since 1926, the ILO has depended on the Committee of Experts on the Application of Conventions and Recommendations, a legal body composed of twenty independent members, to examine states' compliance with ILO Conventions and Recommendations. The OAS' Inter-American Commission on Human Rights, created in 1959 to observe the general human rights situations in member countries, is similarly composed of seven independent members, and since 1965 has been authorized to examine and investigate petitions alleging human rights violations.
Adequate Penalties for Noncompliance
Some might argue that trade agreement violations can only be successfully addressed through sanctions. As long as the parity principle is respected, however, fines, which unlike sanctions can narrowly target offending governments, should be an option for remedying trade accord violations. The fines imposed must be enforceable and severe enough to effectively deter violations. If they are too low, for example, fines could create a perverse incentive for trading partners to ignore an accord's labor rights provisions, as paying the fine could be cheaper than preventing violations.
In cases where non-compliance with labor rights provisions is due, in part, to lack of technical capacity rather than lack of political will, fines should be allocated towards providing assistance to facilitate compliance. For example, fines could be allocated to increase the number of labor inspectors to enforce a country's labor laws or to obtain the technology necessary to assess compliance with certain workplace health and safety standards.
Because fines may prove to be ineffective in some cases, however, sanctions must still be uniformly and universally available as a remedy of last resort. Otherwise, parties may repeatedly engage in systemic or gross violations of an accord and bear the economic burden of fines, however costly, rather than bear the political cost of remedying the violations.
Targeted Sanctions When Fines Fail
A tariff increase for failure to uphold workers' rights can, if thoughtfully implemented, compel trading partners to take positive steps to protect those rights. This goal is most easily achieved when targeted sanctions are available as a remedy, but not the only remedy, for isolated violations of trade agreement provisions. Targeted sanctions can create an incentive for a trading partner to remedy violations by concentrating the economic pain of higher tariffs on the noncompliant sector. For example, if a trading partner fails to uphold intellectual property rights protections with respect to compact disc recordings, sanctions could be imposed solely on that industry. And if a trading partner fails to uphold the right to freedom of association in its agricultural sector, sanctions could be imposed solely on that sector after other means to remedy the violations, such as fines, had failed.
Allowing for the targeted denial of tariff benefits is not unprecedented. Both the U.S. Generalized System of Preferences (GSP), which provides duty-free entry for certain products from designated developing countries that have taken or are taking "steps to afford internationally recognized worker rights," and the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which provides enhanced tariff benefits to any qualifying Andean nation that "provides internationally recognized worker rights," allow for the targeted revocation of tariff benefits. Under the ATPDEA, the President may "withdraw, suspend, or limit the application of preferential treatment . . . to any article of any country," in lieu of total suspension of a country's beneficiary status designation. The GSP similarly allows benefit suspension by sector, as evidenced by the decision of the U.S. government in March 1996 to suspend Pakistan's GSP benefits for surgical instruments, sporting goods, and certain hand-knotted carpets, due to the widespread "exploitation of children" in those sectors.
Targeted sanctions compel a trading partner to focus on the industry or sector in which violations are occurring, while minimizing the adverse impact on those segments of the economy where accord violations are absent or minimal. Such targeting, however, is only appropriate when trade accord violations do not cut across sectors and industries. In cases where violations are widespread, if they cannot successfully be remedied through less punitive measures, such as fines or targeted sanctions, broad-based sanctions are appropriate.
IV. Bipartisan Trade Promotion Authority
On August 6, 2002, President Bush signed the Trade Act of 2002, which includes TPA, granting the president authority to negotiate trade agreements that cannot be amended by the U.S. Congress; Congress' power is limited to approving or rejecting the agreements as negotiated. TPA contains "negotiating objectives" related to workers' rights. On their face, these objectives have shortcomings, and during the extensive and often heated debate surrounding the legislation, Human Rights Watch strongly urged that they be strengthened, clarified, and made more explicit. Nonetheless, Human Rights Watch believes that if these objectives are understood using basic rules of statutory interpretation, which rely both on legislative history and the principle of internal consistency, free trade agreements negotiated under TPA must further the effective protection of workers' rights and meet and, in some cases exceed, the Jordan FTA standard.
An agreement that fulfills TPA objectives must require parties to strive to ensure that labor protections are not weakened or reduced to encourage trade and to ensure that domestic labor laws are effectively enforced; the Jordan FTA contains a similar requirement. Like the Jordan FTA, an agreement negotiated in accordance with the explicit TPA objectives must also fully respect the principle of parity of enforcement, providing for access to equivalent enforcement mechanisms and remedies for all agreement provisions.
In contrast to the Jordan FTA, however, TPA doest not explicitly establish a negotiating objective that parties "strive to ensure" that domestic labor laws meet international standards and "strive to improve" those laws, instead establishing a vague objective to "promote respect for worker rights." Nor does TPA enumerate non-discrimination as one of the labor standards to be "promoted" by trading partners. However, statements by TPA supporters in Congress as well as the February 28, 2002 Senate Finance Committee's report on TPA legislation indicate that the U.S. Congress considered that any future free trade agreement negotiated by the United States according to TPA objectives must include labor rights provisions that at least meet the Jordan FTA standard. For example, Senator Max Baucus (D-Montana), chairman of the Senate Finance Committee and co-sponsor of TPA legislation in the Senate, stated that TPA "fully reflect[s] the standard set forth in the U.S.-Jordan Free Trade Agreement."
One aspect of TPA that caused concern among proponents of labor rights is the "no retaliation clause," which was introduced in the House version of the legislation at the eleventh hour and retained in the final bill. This clause establishes that "no retaliation may be authorized" based on a trading partner's exercise of discretion with respect to enforcement, or the allocation of resources for enforcement of labor laws or the "right to establish domestic labor standards." If interpreted literally, the clause could undercut all other TPA labor rights objectives by prohibiting the imposition of punitive measures for labor rights violations. Such a prohibition would also render moot the principle of parity of enforcement explicitly enshrined in TPA Section 1202(b)(12)(G). In light of TPA's legislative history, however, and the statutory interpretation principle of internal consistency, it is clear that the "no retaliation clause" should not be so interpreted.
As Senator Baucus explained in a February 26, 2002 speech before the Institute for International Economics in Washington, DC, the "no retaliation clause" "in no way undermines the Jordan standard or the direction that labor . . . provisions have equal weight to all other provisions in dispute settlement." Similarly, regarding the "no retaliation" clause, a Senate Finance Committee report regarding TPA released on February 28, 2002 states:
The Committee understands this provision to clarify the language that precedes it in subparagraph (B). . . . Importantly, this phrase does not limit the ability of the United States to negotiate trade agreements incorporating all elements of the "Jordan standard." Nor does it provide an exception to the objective . . . that U.S. negotiators should seek provisions in trade agreements that treat principal negotiating objectives equally with regard to the ability to resort to dispute settlement, the availability of dispute settlement procedures, and the availability of equivalent remedies.
Thus, if basic principles of statutory interpretation are used to understand TPA's labor rights negotiating objectives, all trade agreements negotiated under TPA must both meet the Jordan FTA standard and fulfill additional objectives set forth in TPA. Such an accord would require parties to:
effectively enforce domestic labor laws, including those governing the worst forms of child labor;
strive to ensure that the labor principles of the ILO Declaration on Fundamental Principles and Rights at Work and the internationally recognized worker rights set forth in Sec. 2113 are recognized and protected by domestic law;
strive to ensure that domestic labor laws provide for labor standards consistent with the labor rights set forth in TPA Sec. 2113 and strive to improve those standards;
promote respect for workers' rights, defined to include both the ILO's core labor standards and those labor rights specified in TPA Sec. 2113, and strengthen the capacity of trading partners to do the same;
strive to ensure that trading partners do not lower, waive, or derogate from or offer to lower, waive, or derogate from labor protections to encourage trade;
promote universal ratification and full compliance with the ILO Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labor; and
fully respect the parity principle by including labor rights provisions in the body of the trade accord and treating all negotiating objectives and all elements of those objectives equally with respect to enforcement mechanisms and remedies.
Human Rights Watch believes that this is the only legally sound interpretation of TPA, and we urge that the principles of TPA, in conjunction with the additional proposals set forth herein, be adopted as the baseline for labor rights provisions in all free trade agreements negotiated among the United States and its trading partners. Failure to do so may well lead to the expansion of an international stream of commerce that fails to uphold the human rights of workers, whose labors makes such commerce possible.