[Excerpt] Since 1993, the Administration has negotiated and Congress has approved 10 Free Trade Agreements (FTAs) that contain labor provisions with different degrees of enforceability. Three more (with Colombia, Peru, and South Korea) await congressional consideration. This report identifies two types of enforcement issues: (1) those that relate to the FTA provisions themselves, including their definitions and their enforceability, and (2) those that relate to executive branch responsibilities, such as resource availability and determining dispute settlement case priorities. This report will be updated as events warrant

Bolle, Mary Jane

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Overview of Labor Enforcement Issues in Free Trade Agreements

This report identifies two types of enforcement issues: (1) those that relate to the Free Trade Agreements (FTA) provisions themselves, including their definitions and their enforceability, and (2) those that relate to executive branch responsibilities, such as resource availability and determining dispute settlement case priorities

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1 Trade promotion authority refers to presidential authority to negotiate trade agreements thatCongress then considers without amendment and under limited debate (most recently in TitleXXI of the Trade Act of 2002, P.L. 107-210).Order Code RS22823February 29, 2008Overview of Labor Enforcement Issues inFree Trade AgreementsMary Jane BolleSpecialist in International Trade and FinanceForeign Affairs, Defense, and Trade DivisionSummarySince 1993, the Administration has negotiated and Congress has approved 10 FreeTrade Agreements (FTAs) that contain labor provisions with different degrees ofenforceability.  Three more (with Colombia, Peru, and South Korea) await congressionalconsideration.  This report identifies two types of enforcement issues: (1) those thatrelate to the FTA provisions themselves, including  their definitions and theirenforceability, and (2) those that relate to executive branch responsibilities, such asresource availability and determining dispute settlement case priorities.  This report willbe updated as events warrant.BackgroundThe inclusion of enforceable labor provisions — that is, those subject to disputeresolution procedures — in various trade promotion authorities and free trade agreementsnegotiated under them, has evolved slowly.1  At first, U.S. trade policy focused onlowering tariffs on goods.  It was later extended to various types of non-tariff barriers.Labor provisions have not been part of multilateral trade agreements because theregulation of labor was generally considered to be a domestic issue and not applicable totrade.  Early on, the responsibility for monitoring labor protections fell to the InternationalLabor Organization (ILO), founded in 1919 and now an arm of the United Nations (UN).For nearly 90 years, the ILO has been working to create, through adoption at its annualInternational Labor Conferences of Member countries, Conventions, which setinternational standards.The ILO has currently adopted at least 183 Conventions.  Eight of these conventionsreflect four key areas or categories that have come to be considered “core laborCRS-22 United Nations World Summit for Social Development, Copenhagen.  March 6-12. 1995.3 ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up: About theDeclaration. From the ILO website, at [http://www.ilo.org]. 4 See [http://www.wto.org/english/theWTO_e/minist_e/min96_e/wtodec_e.htm].standards.” This came about when first, a UN Social Summit in Copenhagen Denmarkin 1995 declared that four categories of principles and rights at work are fundamental: (1)freedom of association and collective bargaining, (2) the elimination of forced labor, (3)the elimination of child labor, and (4) the elimination of discrimination in respect ofemployment and occupation.2  The ILO then responded by pulling these together as theILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up in1998.  The Declaration commits all ILO member States, whether or not they have ratifiedthe specific Conventions, to respect the labor principles in these four key areas.  TheFollow-Up, among other things, calls for reports by developing countries that have notratified one or more of the core Conventions, on the status of implementing the variousrights.3Affirming the efforts of the ILO, the World Trade Organization, at its SingaporeMinisterial meeting in 1996, declared that the ILO would be the “competent body to setand deal with ... internationally recognized core labor standards.”4  The ILO has noenforcement tools, but rather promotes labor standards through consensus, moral suasion,and technical assistance.Meanwhile, the United States unilaterally promoted the development of a list ofstandards similar to those in the ILO Declaration through its trade preference laws fordeveloping countries.  These trade preference laws covered four programs: theGeneralized System of Preferences (GSP), 1975; the Caribbean Basin Initiative (CBI),1983; the Andean Trade Preference Act (ATPA), 1991; and the African Growth andOpportunity Act (AGOA), 2000.  These laws all require that as a condition of obtainingand maintaining program eligibility, beneficiary countries must be taking steps to affordtheir workers “internationally recognized worker rights.”  These rights are listed in TradeAct of 1974 as amended, Sec. 507, as similar to ILO core labor standards listed above,except the U.S. list substitutes for (d) above: labor standards relating to minimum wages,maximum hours, and occupational safety and health.Inclusion of labor (and environment) provisions in trade agreements came aboutincrementally.  The first two U.S. FTAS with Israel, 1985, and Canada, 1988) did notinclude labor provisions, even though such provisions already existed in the GSP and CBIlegislation.  This pattern began to change after 1993 when a number of factors came intoplay.  First, the United States began to undertake FTA negotiations with lesser-developedcountries.  Second, it became increasingly accepted that labor issues were related to tradeand trade policy.  Third, consensus broadened that globalization had both costs andbenefits.  The benefits tend to be broadly dispersed and include relatively higher economicgrowth and productivity and greater access to lower-priced goods.  The costs tend to beconcentrated in import-competing sectors where there may be downward pressure onwages and job displacement.  In developing countries, pressures to become a low-costproducer can lead to diminished working conditions and worker rights.  Fourth, businessgroups have increasingly been willing to make some concessions to labor groups in orderCRS-3to promote trade agreements and pave the way for greater trade with and investment indeveloping countries.Labor Enforcement in U.S. Free Trade AgreementsSince 1993, the United States has negotiated 13 FTAs that include 19 countries.These are, chronologically, the North American Free Trade Agreement (NAFTA) withMexico and Canada; bilateral agreements with Jordan, Chile, Singapore, Australia,Morocco, Bahrain, and Oman; a regional agreement known as CAFTA-DR, with theDominican Republic and the five Central American Countries (Costa Rica, El Salvador,Guatemala, Honduras, and Nicaragua); and bilateral FTAs with Peru, Colombia, Panama,and South Korea.  The last four agreements reflect a bipartisan compromise on laborlanguage as delineated in the New Trade Policy With America.  Jointly agreed to by theleadership in Congress and the Administration on May 10, 2007, this policy calls for,among other things, two key labor provisions in FTAs: The first is a fully enforceablecommitment that FTA countries will adopt, maintain, and enforce in their laws andpractice, the basic international labor standards as stated in the 1998 ILO Declaration.The second is the use of identical enforcement provisions for labor and commercialdisputes.Labor and enforcement provisions in these various trade agreements can becategorized into four different models.Model 1.  For NAFTA, labor provisions are included in the North AmericanAgreement on Labor Cooperation (NAALC), a side agreement, rather than in the mainagreement. Under NAALC, countries agree to enforce their own labor laws and standards.However, under NAALC, the only provision enforceable with sanctions is a Party’s“persistent pattern of failure ... to effectively enforce its occupational safety and health,child labor or minimum wage technical standards,” where that failure is trade-related andcovered by mutually recognized labor laws (Article 29). By comparison, all provisionsrelating to commercial operations are enforceable under the NAFTA.  Furthermore, thelabor side agreement has different enforcement procedures than does the main agreement,and places limits on monetary enforcement assessments, with suspension of benefits fornoncompliance. There are no monetary assessments under the NAFTA.Model 2.  In the U.S.-Jordan Free Trade Agreement, labor provisions andcommercial provisions share the same dispute resolution procedures.  The agreementincorporates a number of labor provisions, including that a Party agrees to “not fail toeffectively enforce its labor laws ... in a manner affecting trade” (Article 6.4). Under theJordan agreement, labor laws are defined as U.S. internationally recognized workerrights.  Technically under the agreement, all labor provisions and commercial provisionsare equally enforceable. If the dispute is not resolved under procedures specified in theagreement, the affected Party shall  be entitled to take “any appropriate and commensuratemeasure” (Article 17.2(b)). However, in an exchange of letters between the USTR RobertZoellick and Jordanian Ambassador Marwan Muasher before Congress considered theCRS-45 Specifically the identical letters stated that they “would not expect or intend to apply theAgreement’s dispute settlement enforcement procedures to secure its rights under the Agreementin a manner that results in blocking trade.”  Jordan Free Trade Agreement Approved by Financeand Ways and Means, Inside U.S. Trade,  July 27, 2001.6 Text: Congress Administration Trade Deal, Inside U.S. Trade, May 11, 2007; and Trade Facts:Bipartisan Trade Deal.  Office of the USTR.  Bipartisan Agreement on Trade Policy, May 2007.implementing legislation in 2001, the governments reportedly agreed to resolve anypotential disputes without resorting to trade sanctions.5Model 3.  Seven trade agreements with 12 different countries (Chile, Singapore,Australia, Morocco, Bahrain, Oman, and the six CAFTA-DR countries) include only oneenforceable labor provision: each country “shall not fail to effectively enforce its laborlaws ... in a manner affecting trade between the Parties.”  The agreements define laborlaws as “a Party’s statutes or regulations ...  that are directly related to” the list of U.S.internationally recognized worker rights.  All provisions in these agreements relating tocommercial operations are enforceable.  The seven trade agreements share many of thesame procedures for labor and commercial disputes.  Procedures for labor disputes placelimits on monetary penalties, whereas those for commercial disputes do not.  Suspensionof benefits is a “last recourse” option for both types of disputes.Model 4.  On May 10, 2007, the Democratic leadership in Congress and theAdministration agreed to a New Trade Policy for America.  It included four enforceablelabor concepts, which pending free trade agreements (with Peru, Colombia, Panama, andSouth Korea) would be amended to include.  These are (1) a fully enforceablecommitment that Parties to free trade agreements would adopt and maintain in their lawsand practices the ILO Declaration; (2) a fully enforceable commitment prohibiting FTAcountries from lowering their labor standards; (3) new limitations on “prosecutorial” and“enforcement” discretion (i.e., countries cannot defend failure to enforce laws related tothe five basic core labor standards on the basis of resource limitations or decisions toprioritize other enforcement issues); and (4) the same dispute settlement mechanisms orpenalties available for other FTA obligations (such as commercial interests.)6The four concepts have been inserted into all four agreements as “template language”— that is, language that was specifically agreed to by the Administration and  leadershipin Congress and was then inserted into all four agreements in virtually identical form.The template language makes an important change from item (1) in the New Trade Policy,described above.  The template language states that each Party shall adopt and maintainin its statutes, regulations, and practices, the rights as stated in the ILO Declaration andits Follow-Up.  However, a footnote in each trade agreement limits obligations of Partiesto those specified in the ILO Declaration (i.e., without also including the Follow-Up,which, as mentioned, calls for annual reports by countries that have not ratified one ormore Conventions, on the status of implementing the core labor standards). Anotherfootnote requires that a party seeking to challenge violations is required to demonstratethat the failure to adopt or maintain ILO core labor standards has been “in a manneraffecting either trade or investment between the two countries,” (Article 17, footnote 1of the FTA with Peru.) In Model 4 agreements, there are no caps on penalties. Only theagreement with Peru has been approved by Congress at this time (P.L. 110-138,December 14, 2007).CRS-57 See [http://www.dol.gov/ilab/programs/nao/submissions.htm]. 8 See CRS Report RL33864, Trade Promotion Authority (TPA) Renewal: Core Labor StandardsIssues, by Mary Jane Bolle.Enforcement IssuesBased on these different provisions, policy issues can be divided into two categories:enforceability issues relating to the FTA provisions (addressed in issues 1-3 below), andissues relating to the agencies charged with enforcement (addressed in issues 4 and 5below).1. Only Some Provisions Are Enforceable.  One issue relating to theenforcement of labor provisions in trade agreements is that only certain labor provisionsin some trade agreements are enforceable, whereas all commercial provisions in tradeagreements are fully enforceable.  More specifically, under Model 1, the model for theNAFTA, the labor side agreement, NAALC, as mentioned, includes only certainenforceable provisions — that a country must enforce its labor standards relating to childlabor, minimum wages, and occupational safety and health. Not enforceable is therequirement that a country enforce its laws relating to the most basic core labor rights: toorganize and bargain collectively.  These two labor standards account for 16 out of the 21labor submissions filed with NAALC.7Under the FTAs described by model 3, as mentioned, only one labor provision isenforceable: Each country must enforce its own labor laws (defined as “a Party’s statutesor regulations directly related to the list of U.S. internationally recognized workerrights”) in a manner affecting trade between the Parties.2. Different Enforcement Procedures for and Caps on Penalties forLabor Provisions.  For labor and commercial disputes, Model 1 has separate anddissimilar enforcement provision procedures from Model 3.  However, both place capson potential maximum monetary penalties for labor disputes, but place no caps onpenalties for commercial disputes.3. Limits Placed on Scope of Definition of a Term in Labor Provisions.Labor provisions in Model 4 agreements are “fully enforceable” through the same disputeresolution procedures as are available for commercial disputes.  As mentioned under thedescription for Model 4, the template language in the trade agreements includes a footnotesaying, “The obligations set out in Article 17.2, as they relate to the ILO, refer only to theILO Declaration.,”  This would suggest that trading Partners could be held to theprinciples of the Declaration, but not the details of the Conventions. The HouseCommittee Report on the U.S.-Peru Trade Promotion Agreement Implementation Act,H.Rept. 110-421, is silent on the issue.  The U.S. Council on International Business(USCIB), the American Affiliate of the International Chamber of Commerce, argues thatif trading partners were held to the details of Conventions supporting the core laborstandards, a number of U.S. labor laws could need to be changed to  comply with the ILOcore labor standards as defined and clarified by the various conventions.8CRS-69 CRS Report RL30828, Trade Agreement Monitoring and Enforcement: Issues for Congress,by Dick K. Nanto and Mary Jane Bolle. See also [http://tcc.export.gov].10  Phone conversation with Skip Jones, Deputy Assistant Secretary for Trade Agreements andCompliance, Department of Commerce, February 15, 2008. 11 Phone conversation with Celeste Helm, Chief, Division of Trade Agreement Administrationand Technical Cooperation, February 15, 2008.4. Differentials in Federal Resources Available for Labor as Comparedwith Commercial Disputes.  In the U.S. government, there is a large differentialbetween support available to enforce labor provisions and support available to enforcecommercial provisions in preparing any petition for enforcement to be submitted to theUSTR.  The U.S. government’s monitoring and enforcement activities for non-agricultural commercial issues are primarily centered in the Office of the USTR and U.S.Department of Commerce (DOC).  The DOC Trade Compliance Center (TCC) Web pagedescribes the TCC as being  “the U.S. Government’s focal point for monitoring foreigncompliance with trade agreements to see that U.S. firms and workers get the maximumbenefits from these agreements”(emphasis added).  None of the related links on the page,however, leads the viewer specifically to labor compliance assistance.9  The DOC receivescomplaints about compliance with trade agreements from the TCC “hotline,”  industrygroups, trade associations, Congress, U.S. Foreign Commercial Service officers, theUSTR National Trade Estimates Report, and other sources.  It uses its many resources toconduct research on a compliance case.  If a case is not resolved short of the disputeresolution process, it may be referred to the Office of the USTR.10The Department of Labor (DOL) is less directly involved in researching issues oflabor noncompliance. Petitions for enforcement of a trade agreement are typicallyresearched and prepared by an outside interested party, such as a labor union.  Thatpetition is then reviewed by the Trade Agreement Administration and TechnicalCooperation Division, within the Department of Labor’s Office of Trade and LaborAffairs at the Department of Labor.115. Priorities for Disputes to be Pursued by the USTR.  To date, no labordispute under any of the free trade agreements has reached the USTR.  Therefore, thisdiscussion is purely hypothetical.  Should a case not be resolved short of disputeresolution, the USTR must decide which cases it will pursue based on priorities.  TheUSTR is a small operation. Entering into the dispute resolution process is a lengthy,involved, expensive process in terms of both personnel and resources.  The USTRtypically chooses cases to pursue based on a number of factors.  These may include casesthat could showcase or clarify particular issues, strengthen support of U.S. positions,and/or be cases the USTR believes it can win.Labor disputes could be more difficult to resolve than commercial disputes.  This isbecause the labor principles in the ILO Declaration against which foreign actions couldbe compared are less detailed and  specific.  Moreover, under model 4, the USTR may notwish to pursue the enforcement of these principles because if Conventions were to enterthe cases as definitions for the principles, this could possibly, as the USCIB argues,subject a number of U.S. labor laws to challenge.

[Excerpt] Since 1993, the Administration has negotiated and Congress has approved 10 Free Trade Agreements (FTAs) that contain labor provisions with different degrees of enforceability. Three more (with Colombia, Peru, and South Korea) await congressional consideration. This report identifies two types of enforcement issues: (1) those that relate to the FTA provisions themselves, including their definitions and their enforceability, and (2) those that relate to executive branch responsibilities, such as resource availability and determining dispute settlement case priorities. This report will be updated as events warrant.RS22823_20080229.pdf: 1288 downloads, before Oct. 1, 2020

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Overview of Labor Enforcement Issues in Free Trade Agreements

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