Updated November 13, 2018August 23, 2019
Labor Enforcement Issues in U.S. FTAs
Background
Labor provisions in free trade agreements (FTAs)—both in
the U.S. and globally—were first included in the North
American Agreement on Labor Cooperation (NAALC), the
side agreement to the 1994 North American Free Trade
Agreement (NAFTA). Since then provisions have evolved
from commitments not just to enforce a country’s own
domestic labor laws, but also to adopt and enforce core
labor principles of the International Labor Organization
(ILO).
As mandated by Congress through trade promotion
authority (TPA), recent U.S. FTAs also subject labor
chapters to the same dispute settlement procedures as all
other obligations. Some Members view strong worker rights
provisions in U.S. FTAs as an important issue and they
have raised concerns over FTA partner compliance with
labor commitments and the U.S. record of enforcement.
These issues were a part of the debate over the TransPacific Trans-Pacific
Partnership (TPP) and in the NAFTA renegotiation,
completed in September signed
in 2018 as the U.S.-Mexico-Canada
Agreement (USMCA).
Labor standards are not part of World Trade Organization
(WTO) rules; in 1996, members reaffirmed the ILO as the
competent body to deal with labor issues, while denouncing
the “use of labor standards for protectionist purposes.”
Limited progress at the WTO led several countries to
include labor commitments in FTAs. The United States and
others also include worker rights as eligibility criteria for
developing countries to receive unilateral trade preferences.
U.S. FTAs have set precedents both in terms of the scope
and enforceability of labor provisions. An ILO report found
as of 2016, 77 out of 267 FTAs globally included labor
provisions, compared to 21 in 2005. Unlike U.S. practice,
the majority of agreements do not subject labor provisions
to dispute settlement. Most provide a framework for
dialogue, capacity building, and monitoring, rather than link
violations to economic consequences, such as trade
sanctions. In cases where dispute settlement is applicable,
such mechanisms have been rarely invoked; countries
largely aim to solve disputes via cooperative consultations.
Enforcement Mechanisms in U.S. FTAs
Complaints over U.S. FTA partners’ compliance with labor
commitments have been brought under five FTAs. Among
these agreements, the provisions subject to dispute
resolution, procedures, and remedies may differ:
NAALC contains 11 “principles” on worker rights,
subject to separate dispute settlement procedures from
the main NAFTA text. NAALC aims to settle
complaints regarding labor enforcement primarily via
dialogue and consultations, through the national
administrative offices and at the ministerial level. If
consultations are unable to resolve a complaint, certain
issues can be referred to other mechanisms. The full
spectrum of dispute procedures, including an arbitral
panel and dispute procedures, including an arbitral panel and
limited monetary penalties, applies to
allegations involving three of the 11 principles: a
allegations
involving: a “persistent pattern of failure” to enforce
“occupational
safety and health, child labor or minimum wage
wage technical labor standards,” where the matter is traderelated
trade-related and covered by mutually recognized labor
laws.
Other issues, such as freedom of association and the
right to organize are limited to ministerial consultations.
Dominican Republic-Central America FTA
(CAFTA-DR) and U.S.-Bahrain FTA labor chapters
include one provision subject to enforcement—a party
“shall not fail to effectively enforce its labor laws,
through a sustained or recurring course of action or
inaction, in a manner affecting trade.” Procedures
related to labor disputes may include limits on monetary
penalties. Creation of a labor cooperation mechanism, in
addition to a capacity building mechanism and labor
affairs council in the case of CAFTA-DR, were intended
to oversee review and implementation of the labor
obligations. CAFTA-DR was the first U.S. FTA to
include measures in support of labor capacity building.
U.S.-Peru, U.S.-Colombia FTA and USMCA labor
chapters reflect provisions required by the “May 10th
Agreement,” a 2007 bipartisan deal between
congressional leadership and the Bush Administration.
The agreement called for: (1) an additional enforceable
commitment that FTA parties adopt and maintain core
labor principles of the 1998 ILO Declaration; and (2) the
same dispute settlement procedures and remedies,
including recourse to trade sanctions, for FTA labor
provisions as applied to other obligations. A party
alleging violation of the provision on ILO commitments
must demonstrate that failure to adopt or maintain ILO
principles has been “in a manner affecting trade or
investment.” The USMCA, which revised the NAALC,
also also
reflects updated negotiating objectives on labor
within TPA-2015 within
TPA-2015 and covers new commitments. For Colombia,
a labor action plan
was also negotiated with commitments that were
required to, requiring that
certain commitments be met prior to FTA ratification.
Summary of U.S. Labor Disputes
Enforcement Mechanisms in U.S. FTAs
Summary of U.S. Labor Disputes
Complaints over U.S. FTA partners’ compliance with labor
commitments have been brought under five FTAs. Among
these agreements, provisions subject to dispute resolution
procedures, and remedies may differ:
NAALC contains 11 “principles” on worker rights,
subject to separate dispute settlement procedures from
the main NAFTA. NAALC aims to settle complaints
regarding labor enforcement primarily via dialogue and
consultations, through the national administrative
offices and at the ministerial level. If consultations are
unable to resolve a complaint, certain issues can be
referred to other mechanisms. The full spectrum of
The Office of Trade and Labor Affairs (OTLA) within the
U.S. Department of Labor (DOL) receives and reviews
complaints complaints
(termed “submissions”) of alleged violations of
FTA labor
commitments. The DOL consults and
coordinates with the
U.S. Trade Representative (USTR) and
State Department
on labor enforcement issues. Per OTLA,
allegations in a labor a submission must “raise
issues relevant
to the labor provisions in the NAALC or
FTA and illustrate
a country’s failure to comply with its
obligations.” If the
submission is accepted, OTLA undertakes a review and
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Labor Enforcement Issues in U.S. FTAs
does a
review and issues a public report on its findings, with recommendations
recommendations to the FTA partner to address concerns. OTLA may also
recommend further actions, including that the U.S. request
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Labor Enforcement Issues in U.S. FTAs
bilateral consultations—if these are unsuccessful, dispute
settlement may be invoked in certain cases.
Under NAALC, OTLA received more than 20 submissions.
It has accepted and issued reviews for 13, with one under
review; all involved Mexico (Table 1). Among U.S. FTAs
with labor chapters, the OTLA has issued seven reviews
involving six countries. The Guatemala dispute involved
the first formal consultations requested by the United
States, although submissions under other U.S. FTAs have
resulted in ministerial or informal consultations. It is also
the only case to have proceeded through dispute settlement.
Table 1. Labor submissions reviewed by OTLA
Country
Mexico
Filed
19942015
Petitions
13
Guatemala
2008
1
Peru
Peru
2008
2010;
2015
2011
1
2
1
Status
* 1 case under review;
* 11 reports issued; 8
ministerial agreements
* Panel decision in 2017
2
1
* Reports issued in 2012
and 2016
* Consultations in 2014
Dominican
Republic
Honduras
2011
1
* Report issued in 2013
2012
1
Colombia
2016
1
* Monitoring and action
plan adopted in 2015
* Report issued and
consultations with contact
points held in 2017
Bahrain
Status
* 1 case under review;
* 11 reports issued; 8
ministerial agreements
* Panel decision in 2017
Source: U.S. Department of Labor.
Guatemala Labor Dispute
In April 2008, the AFL-CIO and six Guatemalan labor
unions filed a complaint alleging that Guatemala failed to
effectively enforce its labor laws with respect to freedom of
association, rights to organize and bargain collectively, and
acceptable conditions of work. The OTLA report in January
2009 raised several concerns and recommendations. The
United States initiated consultations in 2010, amid concerns
Guatemala had “not undertaken effective steps to correct
systemic failures” in labor law enforcement. In August
2011, the United States, and then in late
2011, requested establishment of an
arbitral panel. It was
suspended while the two sides
negotiated an 18-point labor
enforcement plan in April
2013. After Guatemala allegedly
failed to implement the
plan, the panel resumed in 2014 and
issued its decision in
June 2017. It found that, while
Guatemala failed to enforce
certain laws, the evidence did
not prove it was “sustained or
recurring” and “in a manner
affecting trade,” and thus did
not violate FTA provisions.
Issues for Congress
The enforcement of labor provisions has been scrutinized
by some Members of Congress and labor groups as “slow
and cumbersome,” and relying “on the political will of
governments.” They call for greater monitoring and
oversight of labor practices. Other analysts argue that the
debate and scrutiny over labor provisions in FTAs, coupled
with robust consultative mechanisms, have led to greater
cooperation and helped countries to improve standards.
U.S. FTA Partner Compliance
The effectiveness of FTAs in raising labor standards, the
extent to which countries comply with labor provisions, and
the most effective approaches to improve compliance are
widely debated issues. In a 2014 review, the Government
Accountability Office concluded that U.S. FTA partners
had taken several steps to improve worker rights pursuant
to FTA obligations; at the same time, concerns were raised
over gaps in protections, attributed to lack of enforcement
capacity and limited public awareness of petition processes.
Other observers point to the success of FTAs in creating
new avenues for cooperation on trade-related labor issues.
More broadly, some question whether FTAs are appropriate
or the most effective vehicles for addressing the crosscutting issue of worker rights. Most experts agree technical
assistance and capacity building are critical tools. Among
U.S. agencies providing trade capacity building, an
estimated 4020% of funding went to labor issues in FY2016FY2017.
U.S. Track Record of Enforcement
Some U.S. stakeholders contest the outcome of the dispute
with Guatemala and question whether FTA dispute
provisions require reforms. Critics view the number of
petitions accepted for review, review delays, and only one
case processed through dispute settlement, as shortcomings
in U.S. practice. Other experts view the first labor dispute
as an important precedent and evidence that trade-related
labor issues are taken seriously by the U.S. government.
Labor Chapters in U.S. FTAs
TPP: A New Template? TPP was widely viewed as
setting new precedents for U.S. FTA labor chapters.
Notably, to To
address concerns over labor standards and
enforcement,
the United States had negotiated three
bilateral labor
plans, subject to greater monitoring and
dispute dispute
settlement for the first time. While the United
States is
no longer a TPP party, USTR indicated TPP
may serve
as a baseline for proposals in future FTAs,
including the NAFTA renegotiation or USMCA.
USMCA.
USMCA. Strong labor provisions are seen as a key
factor for securing Democratic congressional support for
the proposed USMCA. Some Members called for major
improvements to certain labor practices in Mexico, as
well as stronger enforcement. USMCA incorporates a
labor USMCA incorporates a labor
chapter into the main body of the agreement,
which which
reflects key components of TPP and also covers
new new
areas. The chapter includes footnotes clarifying
some some
FTA language that related to the U.S. loss against
Guatemala. It also has an annex committing Mexico to
take take
legislative actions to protect the right to collective
bargaining. Some Members have called for major
improvements to labor practices in Mexico, as well as
stronger enforcement mechanisms. Some advocate fixes
to USMCA dispute settlement, which effectively allows
a disputing party to block formation of a panel via lack
of consensus over panelist appointments. USTR is
reportedly working on a supplemental “rapid-response”
enforcement plan to address congressional concerns.
U.S.-Colombia FTA up Next? U.S. and Colombian
officials met in 2018 to review FTA implementation,
U.S.-Colombia FTA up Next? U.S. and Colombian
trade officials met recently to review implementation of
the FTA, with a view to potentially “modernize” the
agreement.
Worker rights and unresolved issues from
the OTLA
report were discussed. In August 2019, U.S. officials
met in Colombia to assess labor compliance.
For more
For more info, see CRS In Focus IF10046, Worker Rights
Provisions in Free Trade Agreements (FTAs) and In Focus
IF10645, Dispute Settlement in U.S. Trade Agreements.
Cathleen D. Cimino-Isaacs, Analyst in International Trade
and Finance
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Labor Enforcement Issues in U.S. FTAs
IF10972
Cathleen D. Cimino-Isaacs, Analyst in International Trade
and Finance
Disclaimer
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