Order Code RS22521
Updated January 24, 2007
Peru Trade Promotion Agreement:
Labor Issues
M. Angeles Villarreal and Mary Jane Bolle
Foreign Affairs, Defense, and Trade Division
Summary
On April 12, 2006, U.S. Trade Representative Rob Portman and Peruvian Minister
of Foreign Trade and Tourism Alfredo Ferrero Diez Canseco signed the proposed U.S.-
Peru Trade Promotion Agreement (PTPA). The labor chapter of the PTPA is part of the
core text of the agreement and includes specific obligations on domestic labor law
enforcement and a labor cooperation and capacity building mechanism. Supporters
argue that Peru has ratified all eight International Labor Organization (ILO) core labor
standards and that the PTPA would reinforce Peru’s labor reform measures of recent
years. Critics would like to see the PTPA include enforceable ILO labor standards, and
they argue that Peru has failed to comply with U.S. internationally recognized worker
rights and ILO standards. The 110th Congress may consider implementing legislation
for the agreement. This report will be updated as events warrant.
On April 12, 2006, U.S. Trade Representative Rob Portman and Peruvian Minister
of Foreign Trade and Tourism Alfredo Ferrero Diez Canseco signed the proposed U.S.-
Peru Trade Promotion Agreement (PTPA). The United States and Peru concluded the
agreement on December 7, 2005.1 The labor chapter of the PTPA is in the core text of the
agreement and includes specific obligations on domestic labor law enforcement and a
labor cooperation and capacity building mechanism. Implementing legislation for the
PTPA may be introduced during the 110th Congress.
PTPA Labor Provisions
In the PTPA labor chapter, both parties reaffirm their obligations as members of the
International Labour Organization (ILO) and their commitments under the ILO
Declaration on Fundamental Principles and Rights at Work and its Follow-Up.2 The
1 See CRS Report RS22391, U.S. Peru Trade Promotion Agreement, by M. Angeles Villarreal.
2 The International Labour Organization (ILO), Declaration on Fundamental Principles and
Rights at Work, 86th Session, Geneva, June 1998. The ILO Declaration commits member
countries to respect and promote certain principles and rights, whether or not they have ratified
(continued...)

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agreement’s section on enforcement of labor laws states that both parties would be
required to effectively enforce their own domestic labor laws. This is the only obligation
that would be enforceable through the agreement’s dispute settlement procedures, which
have an enforcement mechanism that would include monetary penalties to enforce labor
obligations.3 Failure to pay a monetary assessment could result in the suspension of trade
benefits. The agreement, however, states that emphasis would be placed on promoting
compliance through consultation and trade-enhancing remedies.
The agreement states that the parties recognize the right of each party to adopt or
modify its labor laws and standards, but that each would strive to provide for labor
standards consistent with internationally recognized labor rights and to improve upon
those standards. The parties agreed that they would strive to ensure that they would not
weaken or reduce adherence to the internationally recognized labor rights as an
encouragement for trade and investment with another party.
The agreement includes procedural guarantees to help ensure that workers and
employers would have fair, equitable, and transparent access to labor tribunals. Both
parties would ensure that 1) workers have appropriate access to tribunals for the
enforcement of each party’s labor laws; 2) the proceedings before such tribunals are fair,
equitable, and transparent; 3) the tribunals’ final decisions are in writing and made
available to the parties of the proceedings and to the public; 4) parties to the proceedings
have the right to seek review and possible correction of final decisions; 5) tribunals
conducting or reviewing the proceedings are impartial and independent; 6) parties to the
proceedings could seek remedies such as penalties or temporary workplace closures to
ensure the enforcement of their rights under their country’s labor laws; and 7) public
awareness of domestic labor laws is promoted through public availability of information
and encouraging public education regarding labor laws.
The agreement would require that the United States and Peru establish a Labor
Affairs Council (Labor Council) comprised of cabinet-level or equivalent representatives
to oversee implementation of the labor obligations, including the activities of the Labor
Cooperation and Capacity Building Mechanism. The Labor Council would meet within
the first year after the date of entry into force of the agreement and as often as necessary
thereafter. Government representatives of the two countries would work together to
establish priorities in specific cooperative and capacity-building activities. The Labor
Council would establish guidelines, prepare reports, provide public communication, and
be responsible for cooperating with the parties’ points of contact. The parties would be
able to convene a new national labor advisory committee that comprises government,
business, or public representatives to provide views on any labor-related issues.
The two parties agreed that cooperation on labor issues plays an important role in
advancing labor commitments, including those embodied in the ILO Declaration and a
1999 ILO convention on child labor. They would establish a Labor Cooperation and
2 (...continued)
the relevant conventions. See [http://www.ilo.org].
3 The domestic labor law enforcement provision is subject to the dispute settlement provisions
of the agreement, which include provisions for openness and transparency by requiring at least
one open public hearing and public release of legal submissions.

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Capacity Building Mechanism to develop and pursue bilateral or regional cooperation
activities on labor-related issues such as fundamental rights at work, worst forms of child
labor, and occupational safety and health. Such initiatives would be aimed at establishing
and strengthening alternative dispute resolution mechanisms for labor disputes.
Labor Market and Worker Rights in Peru
Peruvian President Alan Garcia took office for a five-year term at the end of July
2006, replacing outgoing president, Alejandro Toledo. President Toledo presided over
a period in which Peru was one of the fastest growing economies in Latin America,
largely due to growth in the mining and export sectors. In spite of the recent economic
growth, over half of Peruvians live in poverty and a large portion of the population is
underemployed. Unemployment and underemployment levels total 64.5% nationwide.4
Peru’s labor market is relatively small when compared with the United States. In 2005,
the labor force of Peru comprised nine million workers, compared to 151 million workers
in the United States. Recorded unemployment in Peru was 7.2% and labor cost per hour
was $1.48 in 2005. In comparison, the United States had a recorded unemployment rate
of 4.7% and an hourly labor cost of $24.42.5 The economic sector in Peru with the
highest employment is wholesale/retail trade and repair services, followed by
manufacturing.
During the regime of former President Alberto Fujimori (1990 to 2000), the
government implemented a radical economic reform program to control hyperinflation
and bring economic stability to the country. Part of the program included a wide-ranging
privatization plan and a relaxation of foreign investment restrictions to help increase
foreign investment. Existing labor laws were relaxed significantly during this time. In
recent years, however, Peru has made much progress in strengthening labor protections
by implementing labor law reform and protecting workers’ rights. In 2002, Peru ratified
the two ILO conventions on the abolition of child labor.6 In 2003, the government
reduced the number of workers needed to establish a union, eliminated prohibitions on
workers that kept them from joining unions during their probationary period, and limited
the power of the labor authority to cancel a union’s registration. In July 2004, the
government published regulations to strengthen labor inspections and broaden labor
inspectors’ powers to allow easier access to firms, improved inspectors’ ability to impose
sanctions, and increase the levels of fines.7
Peru has ratified 71 ILO conventions, including all eight core conventions on
workers’ rights. The ILO has noted that Peru has satisfactorily amended its laws to
improve labor standards in certain areas related to freedom of association and protection
4 U.S. Department of State, Bureau of Western Hemisphere Affairs, Background Note: Peru,
June 2006, p. 5.
5 The Economist Intelligence Unit (EIU), Country Report, Peru, July 2006; and EIU, Country
Report, United States of America, June 2006.
6 ILO, Database of International Labour Standards, Ratifications of the Fundamental Human
Rights Conventions by Country in the Americas.
7 United States Trade Representative (USTR), Peru TPA Facts: Real Results on Labor Rights,
Facts About Peru’s Labor Law Protection and Enforcement, December 2005.

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of the right to organize.8 However, some critics argue that Peru has had some problems
in the observance of the ILO core labor standards and that improvements must be made
in Peru’s legislation on collective bargaining.9
Labor Provisions: Proposed PTPA vs. Other FTAs
The proposed PTPA was negotiated under the trade promotion authority in the
Trade Act of 2002 (P.L. 107-210)10 as were seven other trade agreements approved by
Congress. These seven agreements are the U.S.-Dominican Republic-Central America
Free Trade Agreement (CAFTA-DR) plus agreements with Chile, Singapore, Australia,
Morocco, Bahrain, and Oman. Accordingly, provisions of all eight free trade agreements
(FTAs) are similar. Despite their similarities, however, each of the eight agreements also
has some unique provisions stemming from evolutions in labor negotiations or special
circumstances between the Parties. For the PTPA, unique provisions include some new
reporting requirements and cooperative and trade-capacity building activities. Proponents
and opponents typically note the following strengths and weaknesses of the labor
provisions of the PTPA.
Strengths of the PTPA Labor Provisions
PTPA Reinforces Peruvian Labor Reforms and ILO Commitments.
Supporters argue that the PTPA requirement that each country enforce its own labor laws
reinforces Peru’s labor reforms in 2003, 2004, and 2005. These reforms have helped to
rebuild labor protections dismantled by Fujimori. In addition, the PTPA pledge by each
Party to uphold ILO commitments overlays Peru’s long-term ratification of 71 ILO labor
conventions including all eight ILO core labor standards — two in each of the following
categories: (1) the right to organize and bargain collectively (ILO Convention (C) 87 in
1960 and C98 in 1964) ; (2) freedom from forced or compulsory labor (C29 and C105,
both in 1960); (3) prohibitions against child labor (C138 and C182, both in 2002); and (4)
prohibitions against employment discrimination (C100 in 1960 and C111 in 1970.)
Supporters also point out that under the PTPA, the parties reaffirm their obligations
and commitments under the ILO and pledge to strive to ensure that both ILO core labor
standards and U.S. internationally recognized worker rights11 are protected by law. The
USTR argues that this alternative to enforceable ILO standards does two things: First, it
promotes strong laws and thereby serves as a catalyst to raise Peruvians out of poverty and
8 ILO Committee of Experts on the Application of Conventions and Recommendations (CEACR),
Individual Observation Concerning Convention No. 87, Freedom of Association and Protection
of the Right to Organise, 1948 Peru (ratification: 1960), 2005.
9 The Special Incentive Arrangement for Sustainable Development and Good Governance (GSP-
Plus), Reports on Core Labour Standards in the Countries Applying for the GSP-Plus, October
2005.
10 TPA is the authority granted the President by Congress to negotiate trade agreements that
Congress then considers without amendment and with limited debate.
11 Internationally recognized worker rights are similar to ILO standards except that for (4) in the
above paragraph, they substitute: acceptable working conditions relating to maximum hours,
minimum wages, and occupational safety and health.

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thus lessen pressure on children to work to make ends meet. Second, it assures that U.S.
state and federal laws are not subject to vague challenges that might pre-empt them in
cases where ILO standards differ from U.S. laws.
PTPA Provisions Would Go Beyond Labor Protections in U.S. Trade
Preference Laws in Actually Requiring a Country to Enforce Its Labor Laws.
The Andean Trade Preference Drug Enforcement Act (ATPDEA, P.L. 107-210) and the
Generalized System of Preferences (GSP, P.L. 98-573, as amended) require that to be
eligible for trade preferences, developing countries must be providing or taking steps to
provide their workers “internationally recognized worker rights.” The Peru TPA goes
beyond this in mandating that a country actually enforce its labor laws. In addition, under
PTPA countries pledge not to derogate from these laws in order to attract investment.
PTPA also would set forth a system for processing enforcement disputes and cooperative
programs to support continuing development of worker rights.
Weaknesses of the Peru TPA Labor Provisions
Despite Recent Progress, Both Peru’s Labor Laws and Their
Enforcement Are Weak. Critics argue that Peruvian labor reforms carried out in
recent years have not reversed the damage done by Fujimori, and that both ILO reports
and the 2005 State Department’s Country Reports on Human Rights Practices document
the failure of Peru’s labor laws to comply with U.S. internationally recognized worker
rights and ILO core labor standards. Such “failures” include: (1) the lack of basic
protection of the right to organize for: (a) large numbers of workers “casually” employed
as temporary or contract workers (and therefore not permitted to join labor unions of
permanent workers); and (b) the 60% of all Peruvian workers in the largely unregulated
informal sector; (2) reports of forced or compulsory labor practices, particularly involving
indigenous families in remote areas, in violation of Peru’s laws; (3) violations of child
labor laws in that an estimated one-fourth of all children between 6 and 17 years of age
are employed, mostly in the informal sector including some in prostitution and narcotics
production; and (4) non-compliance with minimum wage guidelines, in that roughly half
the workforce earned the minimum wage or below, many of them in the informal sector.
As a result of these “failures,” critics argue, enforceable core labor standards need to be
embedded in the agreement.
Labor Protections in the Agreement Are Also Weak. Labor protections in
the agreement are weak, critics claim, for several reasons. First they would not include
enforceable core labor standards and, thus, are a step back from both the U.S.-Jordan FTA
(implemented by P.L. 107-43) and U.S. trade promotion laws such as ATPDEA and GSP.
Second, they would not fulfill negotiating objectives of the Trade Act of 2002 which
require the President to seek provisions in trade agreements that treat all U.S. principal
negotiating objectives equally in terms of both the availability and equivalency of dispute
settlement procedures and remedies. In contrast to this requirement, critics argue, labor
protections in the PTPA are overshadowed by protections for commercial operations,
since only one labor provision is formally enforceable (that each country enforce its own
labor laws) in contrast to all provisions pertaining to commercial interests, which are
enforceable through the formal dispute resolution procedure. Third, critics argue,
enforceable labor provisions are relegated to a separate enforcement mechanism from
commercial provisions, with lower maximum fines for noncompliance. Fourth, the PTPA
includes no requirement that fines for noncompliance with one’s own labor laws be used

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to strengthen worker rights protections. Fifth, critics argue, nothing in the agreement
prevents a country from any degradation of its laws which results from a “bona fide
decision regarding the allocation of resources.”
Projected Effect of PTPA on U.S. and Peruvian Workers
The proposed PTPA is unlikely to impact the aggregate employment level in the
United States because U.S. trade with Peru accounts for only 0.3% of total U.S.
merchandise trade (2005). However, it could impact jobs in specific industries.
According to a report by the U.S. International Trade Commission (USITC),12 the largest
U.S. employment gain (1%) is projected in wheat production. Declines are projected in
metals (gold, copper, and aluminum), rice production, and miscellaneous crops (cut
flowers, live plants and seeds) which could “lose” up to 0.2% of their employment,
displaced by imports. For Peru, various estimates of job “gains” range from 20,000 to
700,000. On the other hand, some labor groups argue that U.S. exports of basic grains
could adversely affect the livelihoods of subsistence farmers in Peru, where agriculture
is the main source of jobs.
Prospects
On June 28, 2006, the Peruvian Congress voted 79-14 to approve the free trade
agreement with the United States. In the United States, the PTPA would be considered
by Congress on an expedited basis under the Bipartisan Trade Promotion Authority Act
of 2002, which is set to expire on July 1, 2007. Implementing legislation may be
introduced in the U.S. Congress during the 110th Congress. Peruvian President Alan
Garcia has met with President Bush, and with Members of Congress on several occasions,
to discuss the trade agreement. Garcia has emphasized the importance of strengthening
trade relations with the United States. President Bush released a statement after his
meeting with President Garcia in 2006 to reaffirm his commitment to securing
congressional approval of the PTPA.

In considering the agreement, policymakers may look at the labor provisions but may
also take into account Peru’s commitments to labor reforms and alleviating poverty.
President Garcia has stated that a free trade agreement would not be enough to alleviate
poverty in Peru, and that the government also must implement internal reforms so that all
segments of the population may benefit from trade liberalization, especially the poorer
regions. In October 2006, President Garcia announced two internal reform programs to
strengthen legal mechanisms for entrepreneurs who do not have liability protection,
expand credit to small enterprises, and provide technical assistance and financial support
to connect rural regions to the rest of the country.
12 U.S. International Trade Commission. U.S.-Peru Trade Promotion Agreement: Potential
Economy-wide and Selected Sectoral Effects, USITC Publication 3855, June 2006, pp. 2-19.

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