<<previous | index | next>>

Background: The 2007 Trade Policy Template and Shortcomings in Prior Trade Accords

The United States has concluded 13 free trade agreements with workers’ rights provisions at this writing. Ten have been ratified, and eight are currently in force.¹ Four agreements—with Peru, Panama, Colombia, and Korea—include labor provisions based on the May 2007 trade policy template, a conceptual agreement that outlines a range of changes to be incorporated into pending and future US free trade accords.²

Shortcomings in Trade Accords Prior to the 2007 Trade Policy Template

The nine free trade agreements with labor rights requirements concluded prior to the May 2007 template suffer from serious shortcomings. These include:

The agreements only require that countries effectively enforce certain existing domestic labor laws, regardless of whether they meet international standards. There are no penalties, such as fines or trade benefit suspension, for parties whose laws fail to uphold workers’ rights.³
The accords lack enforceable provisions requiring parties to implement existing domestic laws governing employment discrimination, including any bans on sexual harassment, mandatory pregnancy testing, and racial bias. And only one, the North American Free Trade Agreement (NAFTA), even encourages parties to do so. The rest are silent on the issue.⁴
The agreements, except the US-Jordan Free Trade Agreement, lack “enforcement parity” for workers’ rights, which would provide the same dispute settlement processes and penalties, including fines and sanctions, for the enforcement of labor and commercial obligations. And the US-Jordan accord’s enforcement parity was effectively eliminated by the Bush administration when it sent a side letter to the government of Jordan in 2001 stating that the United States did not intend to invoke the agreement’s dispute settlement process in labor-related cases.⁵ In all such agreements, save the US-Jordan accord, the mechanisms established for enforcing labor rights provisions are different from and inferior to those in place for commercial requirements. For example, the accords cap the fine amounts that can be imposed for workers’ rights violations and reduce the punitive impact of those fines by channeling them back into, rather than out of, offending countries.⁶ In contrast, fines imposed for commercial violations are calculated based on the financial harm the violations caused, regardless of how great, and unless other arrangements are made, are paid directly to the aggrieved party.⁷ NAFTA underscores this enforcement disparity by including its workers’ rights protections in a side accord, rather than in the main text of the agreement.
With the exception of NAFTA, each accord contains a gaping loophole that allows parties to selectively apply labor laws or slash resources for their enforcement and still be in compliance with the accord’s requirement that parties effectively enforce their labor laws. Specifically, the agreements state that a violation has not occurred as long as “a course of action or inaction” regarding labor law enforcement “reflects a reasonable exercise of ... discretion, or results from a bona fidedecision regarding the allocation of resources.”⁸

Improvements in Trade Accords Under the 2007 Trade Policy Template

The four accords based on the new trade policy template address many of these prior agreements’ shortcomings. For example, these four accords:

Require parties to effectively enforce laws governing all fundamental workers’ rights, including bans on employment discrimination, as well as laws establishing acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health;⁹
Establish enforcement parity for labor and commercial provisions, making the same dispute settlement mechanisms available to enforce all terms of the accords;
Eliminate the language in prior accords that permits parties to cite “a reasonable exercise of ... discretion” or “a bona fidedecision regarding the allocation of resources” as acceptable justification for poor labor law enforcement,¹⁰ providing instead that “[a] decision a Party makes on the distribution of enforcement resources shall not be a reason for not complying with the provisions of this [labor] Chapter”;¹¹ and
Require parties to “adopt and maintain” in domestic law and practice the core workers’ rights “as stated” in the ILO Declaration on Fundamental Principles and Rights at Work,¹² though the requirement is muddied and potentially significantly weakened by a confusing footnote in each agreement, discussed below.

Human Rights Watch believes that these baseline provisions should be included in all future US free trade accords. Every effort should also be made to renegotiate past accords, beginning with NAFTA, to ensure that they, too, incorporate these labor rights protections.¹³

While the May 2007 template-based provisions represent an important step forward, they are still insufficient to guarantee workers’ rights in the context of trade. In what follows, we detail the elements that a new framework for protecting workers’ rights in US free trade accords should include.

¹ These free trade accords are the North American Free Trade Agreement (NAFTA), the US-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), and agreements with Jordan, Chile, Singapore, Australia, Morocco, Bahrain, Oman, and Peru, though the accords with Oman and Peru have not yet entered into force.

² At this writing, only the US-Peru accord, known as the US-Peru Trade Promotion Agreement (TPA), has been ratified by both parties.

³ The US-Jordan Free Trade Agreement (FTA) comes closest but still falls short, demanding that parties “strive to ensure” that the labor principles of the ILO Declaration on Fundamental Principles and Rights at Work and the internationally recognized labor rights defined in the accord are “recognized and protected by domestic law.” US-Jordan FTA, art. 6(1) (emphasis added).

⁴ Instead, all accords since NAFTA demand application of labor laws governing “internationally recognized labor rights,” defined, generally, to include: the right of association; the right to organize and bargain collectively; a prohibition on the use of any form of forced or compulsory labor; a minimum age for the employment of children and the prohibition and elimination of the worst forms of child labor; and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. NAFTA, for its part, articulates 11 key labor rights, including the elimination of employment discrimination, and encourages their protection, but the accord’s enforceable requirement that labor laws be effectively applied only covers three of the 11 rights—occupational safety and health; child labor; and minimum employment standards, such as minimum wages and overtime pay. See, e.g., ibid., art. 6(4), (6); North American Agreement on Labor Cooperation (NAALC), art. 27; DR-CAFTA, arts. 16.2, 16.8.

⁵ The letter stated, “[M]y Government would not expect or intend to apply the Agreement’s dispute settlement procedures to secure its rights under the Agreement in a manner that results in blocking trade.... [M]y Government considers that appropriate measures for resolving any difference that may arise regarding the Agreement would be bilateral consultations and other procedures, particularly alternative mechanisms, that will help to secure compliance without recourse to traditional trade sanctions.” Side Letter on Labor and Environment from Ambassador Robert B. Zoellick, US Trade Representative, to His Excellency Marwan Muasher, Ambassador of the Hashemite Kingdom of Jordan to the United States, July 23, 2001.

⁶ The fines are to be paid into a fund established by a Free Trade Commission, comprised of the disputing parties’ trade ministers, and “expended at the direction of the Commission for appropriate labor ... initiatives” in the violating party. See, e.g., DR-CAFTA, annex 19.1, art. 20.17. See also, NAALC, annex 39. Human Rights Watch recognizes the importance of increased funding to address violations of trade accords’ labor protections. Nonetheless, we also believe that, as is the case when trade agreements’ commercial provisions are violated, any fine imposed for breaching such labor requirements should constitute a net financial loss for the violating party and that accord violations should be remedied using separate and additional government funds. For further discussion, see Human Rights Watch, CAFTA’s Weak Labor Rights Protections: Why the Present Accord Should be Opposed, March 2004, http://hrw.org/english/docs/2004/03/09/usint8099.htm.

⁷ See, e.g., DR-CAFTA, art. 20.16.

⁸ See, e.g., ibid., art. 16.2(b); US-Jordan FTA, art. 4(b). As a result, if a case alleging that a party failed to effectively enforce its domestic labor laws ever came before an arbitral panel under these accords, the accused party could offer as an affirmative defense the reasonable exercise of its discretion or the legitimate allocation of its resources.

⁹ See, e.g., US-Peru TPA, art. 17.3(a). The agreements require that a party “not fail to effectively enforce its labor laws ... through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties.”

¹⁰ See, e.g., US-Jordan FTA, art. 4(b); DR-CAFTA, art. 16.2(b).

¹¹ See, e.g., US-Peru TPA, art. 17.3(1)(b).

¹² See, e.g., ibid., art. 17.2.

¹³ During the 2008 presidential campaign, the Democratic presidential nominee, Senator Barack Obama, has repeatedly called for renegotiating portions of NAFTA to achieve more enforceable “labor standards.” See, e.g., “Debate Transcript,” International Herald Tribune, February 27, 2008, http://www.iht.com/articles/2008/02/27/america/26textdebate.php?

page=7 (accessed September 29, 2008); Michael Crittenden, “Obama Economic Advisor Goes on Offense Against McCain,” The Wall Street Journal: Real Time Economics, September 5, 2008, http://blogs.wsj.com/economics/2008/09/05/obama-economic-advisor-goes-on-offense-against-mccain/ (accessed September 29, 2008); Bob Cusack, “Obama Renews Promise on NAFTA, ‘card check,’” The Hill, September 1, 2008, http://thehill.com/leading-the-news/obama-renews-promise-on-nafta-card-check-2008-09-01.html (accessed September 29, 2008).

October 2008

<<previous | index | next>>