Order Code RS22823
February 29, 2008
Overview of Labor Enforcement Issues in
Free Trade Agreements
Mary Jane Bolle
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
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.
Background
The inclusion of enforceable labor provisions — that is, those subject to dispute
resolution procedures — in various trade promotion authorities and free trade agreements
negotiated under them, has evolved slowly.1 At first, U.S. trade policy focused on
lowering 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 the
regulation of labor was generally considered to be a domestic issue and not applicable to
trade. Early on, the responsibility for monitoring labor protections fell to the International
Labor 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 annual
International Labor Conferences of Member countries, Conventions, which set
international standards.
The ILO has currently adopted at least 183 Conventions. Eight of these conventions
reflect four key areas or categories that have come to be considered “core labor
1 Trade promotion authority refers to presidential authority to negotiate trade agreements that
Congress then considers without amendment and under limited debate (most recently in Title
XXI of the Trade Act of 2002, P.L. 107-210).

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standards.” This came about when first, a UN Social Summit in Copenhagen Denmark
in 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 of
employment and occupation.2 The ILO then responded by pulling these together as the
ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up in
1998. The Declaration commits all ILO member States, whether or not they have ratified
the specific Conventions, to respect the labor principles in these four key areas. The
Follow-Up, among other things, calls for reports by developing countries that have not
ratified one or more of the core Conventions, on the status of implementing the various
rights.3
Affirming the efforts of the ILO, the World Trade Organization, at its Singapore
Ministerial meeting in 1996, declared that the ILO would be the “competent body to set
and deal with ... internationally recognized core labor standards.”4 The ILO has no
enforcement tools, but rather promotes labor standards through consensus, moral suasion,
and technical assistance.
Meanwhile, the United States unilaterally promoted the development of a list of
standards similar to those in the ILO Declaration through its trade preference laws for
developing countries. These trade preference laws covered four programs: the
Generalized System of Preferences (GSP), 1975; the Caribbean Basin Initiative (CBI),
1983; the Andean Trade Preference Act (ATPA), 1991; and the African Growth and
Opportunity Act (AGOA), 2000. These laws all require that as a condition of obtaining
and maintaining program eligibility, beneficiary countries must be taking steps to afford
their workers “internationally recognized worker rights.” These rights are listed in Trade
Act 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 about
incrementally. The first two U.S. FTAS with Israel, 1985, and Canada, 1988) did not
include labor provisions, even though such provisions already existed in the GSP and CBI
legislation. This pattern began to change after 1993 when a number of factors came into
play. First, the United States began to undertake FTA negotiations with lesser-developed
countries. Second, it became increasingly accepted that labor issues were related to trade
and trade policy. Third, consensus broadened that globalization had both costs and
benefits. The benefits tend to be broadly dispersed and include relatively higher economic
growth and productivity and greater access to lower-priced goods. The costs tend to be
concentrated in import-competing sectors where there may be downward pressure on
wages and job displacement. In developing countries, pressures to become a low-cost
producer can lead to diminished working conditions and worker rights. Fourth, business
groups have increasingly been willing to make some concessions to labor groups in order
2 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 the
Declaration. 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].

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to promote trade agreements and pave the way for greater trade with and investment in
developing countries.
Labor Enforcement in U.S. Free Trade Agreements
Since 1993, the United States has negotiated 13 FTAs that include 19 countries.
These are, chronologically, the North American Free Trade Agreement (NAFTA) with
Mexico and Canada; bilateral agreements with Jordan, Chile, Singapore, Australia,
Morocco, Bahrain, and Oman; a regional agreement known as CAFTA-DR, with the
Dominican 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 labor
language as delineated in the New Trade Policy With America. Jointly agreed to by the
leadership 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 enforceable
commitment that FTA countries will adopt, maintain, and enforce in their laws and
practice, the basic international labor standards as stated in the 1998 ILO Declaration.
The second is the use of identical enforcement provisions for labor and commercial
disputes.
Labor and enforcement provisions in these various trade agreements can be
categorized into four different models.
Model 1. For NAFTA, labor provisions are included in the North American
Agreement on Labor Cooperation (NAALC), a side agreement, rather than in the main
agreement. 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 and
covered by mutually recognized labor laws (Article 29). By comparison, all provisions
relating to commercial operations are enforceable under the NAFTA. Furthermore, the
labor side agreement has different enforcement procedures than does the main agreement,
and places limits on monetary enforcement assessments, with suspension of benefits for
noncompliance. There are no monetary assessments under the NAFTA.
Model 2. In the U.S.-Jordan Free Trade Agreement, labor provisions and
commercial provisions share the same dispute resolution procedures. The agreement
incorporates a number of labor provisions, including that a Party agrees to “not fail to
effectively enforce its labor laws ... in a manner affecting trade” (Article 6.4). Under the
Jordan agreement, labor laws are defined as U.S. internationally recognized worker
rights. Technically under the agreement, all labor provisions and commercial provisions
are equally enforceable. If the dispute is not resolved under procedures specified in the
agreement, the affected Party shall be entitled to take “any appropriate and commensurate
measure” (Article 17.2(b)). However, in an exchange of letters between the USTR Robert
Zoellick and Jordanian Ambassador Marwan Muasher before Congress considered the

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implementing legislation in 2001, the governments reportedly agreed to resolve any
potential disputes without resorting to trade sanctions.5
Model 3. Seven trade agreements with 12 different countries (Chile, Singapore,
Australia, Morocco, Bahrain, Oman, and the six CAFTA-DR countries) include only one
enforceable labor provision: each country “shall not fail to effectively enforce its labor
laws ... in a manner affecting trade between the Parties.” The agreements define labor
laws 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 to
commercial operations are enforceable. The seven trade agreements share many of the
same procedures for labor and commercial disputes. Procedures for labor disputes place
limits on monetary penalties, whereas those for commercial disputes do not. Suspension
of benefits is a “last recourse” option for both types of disputes.
Model 4. On May 10, 2007, the Democratic leadership in Congress and the
Administration agreed to a New Trade Policy for America. It included four enforceable
labor concepts, which pending free trade agreements (with Peru, Colombia, Panama, and
South Korea) would be amended to include. These are (1) a fully enforceable
commitment that Parties to free trade agreements would adopt and maintain in their laws
and practices the ILO Declaration; (2) a fully enforceable commitment prohibiting FTA
countries from lowering their labor standards; (3) new limitations on “prosecutorial” and
“enforcement” discretion (i.e., countries cannot defend failure to enforce laws related to
the five basic core labor standards on the basis of resource limitations or decisions to
prioritize other enforcement issues); and (4) the same dispute settlement mechanisms or
penalties available for other FTA obligations (such as commercial interests.)6
The four concepts have been inserted into all four agreements as “template language”
— that is, language that was specifically agreed to by the Administration and leadership
in 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 maintain
in its statutes, regulations, and practices, the rights as stated in the ILO Declaration and
its Follow-Up. However, a footnote in each trade agreement limits obligations of Parties
to 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 or
more Conventions, on the status of implementing the core labor standards). Another
footnote requires that a party seeking to challenge violations is required to demonstrate
that the failure to adopt or maintain ILO core labor standards has been “in a manner
affecting either trade or investment between the two countries,” (Article 17, footnote 1
of the FTA with Peru.) In Model 4 agreements, there are no caps on penalties. Only the
agreement with Peru has been approved by Congress at this time (P.L. 110-138,
December 14, 2007).
5 Specifically the identical letters stated that they “would not expect or intend to apply the
Agreement’s dispute settlement enforcement procedures to secure its rights under the Agreement
in a manner that results in blocking trade.” Jordan Free Trade Agreement Approved by Finance
and 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.

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Enforcement Issues
Based 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), and
issues relating to the agencies charged with enforcement (addressed in issues 4 and 5
below).
1. Only Some Provisions Are Enforceable. One issue relating to the
enforcement of labor provisions in trade agreements is that only certain labor provisions
in some trade agreements are enforceable, whereas all commercial provisions in trade
agreements are fully enforceable. More specifically, under Model 1, the model for the
NAFTA, the labor side agreement, NAALC, as mentioned, includes only certain
enforceable provisions — that a country must enforce its labor standards relating to child
labor, minimum wages, and occupational safety and health. Not enforceable is the
requirement that a country enforce its laws relating to the most basic core labor rights: to
organize and bargain collectively. These two labor standards account for 16 out of the 21
labor submissions filed with NAALC.7
Under the FTAs described by model 3, as mentioned, only one labor provision is
enforceable: Each country must enforce its own labor laws (defined as “a Party’s statutes
or regulations directly related to the list of U.S. internationally recognized worker
rights”) in a manner affecting trade between the Parties.
2. Different Enforcement Procedures for and Caps on Penalties for
Labor Provisions. For labor and commercial disputes, Model 1 has separate and
dissimilar enforcement provision procedures from Model 3. However, both place caps
on potential maximum monetary penalties for labor disputes, but place no caps on
penalties 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 dispute
resolution procedures as are available for commercial disputes. As mentioned under the
description for Model 4, the template language in the trade agreements includes a footnote
saying, “The obligations set out in Article 17.2, as they relate to the ILO, refer only to the
ILO Declaration.,” This would suggest that trading Partners could be held to the
principles of the Declaration, but not the details of the Conventions. The House
Committee 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 that
if trading partners were held to the details of Conventions supporting the core labor
standards, a number of U.S. labor laws could need to be changed to comply with the ILO
core labor standards as defined and clarified by the various conventions.8
7 See [http://www.dol.gov/ilab/programs/nao/submissions.htm].
8 See CRS Report RL33864, Trade Promotion Authority (TPA) Renewal: Core Labor Standards
Issues, by Mary Jane Bolle.

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4. Differentials in Federal Resources Available for Labor as Compared
with Commercial Disputes. In the U.S. government, there is a large differential
between support available to enforce labor provisions and support available to enforce
commercial provisions in preparing any petition for enforcement to be submitted to the
USTR. 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 page
describes the TCC as being “the U.S. Government’s focal point for monitoring foreign
compliance with trade agreements to see that U.S. firms and workers get the maximum
benefits 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 receives
complaints about compliance with trade agreements from the TCC “hotline,” industry
groups, trade associations, Congress, U.S. Foreign Commercial Service officers, the
USTR National Trade Estimates Report, and other sources. It uses its many resources to
conduct research on a compliance case. If a case is not resolved short of the dispute
resolution process, it may be referred to the Office of the USTR.10
The Department of Labor (DOL) is less directly involved in researching issues of
labor noncompliance. Petitions for enforcement of a trade agreement are typically
researched and prepared by an outside interested party, such as a labor union. That
petition is then reviewed by the Trade Agreement Administration and Technical
Cooperation Division, within the Department of Labor’s Office of Trade and Labor
Affairs at the Department of Labor.11
5. Priorities for Disputes to be Pursued by the USTR. To date, no labor
dispute under any of the free trade agreements has reached the USTR. Therefore, this
discussion is purely hypothetical. Should a case not be resolved short of dispute
resolution, the USTR must decide which cases it will pursue based on priorities. The
USTR is a small operation. Entering into the dispute resolution process is a lengthy,
involved, expensive process in terms of both personnel and resources. The USTR
typically chooses cases to pursue based on a number of factors. These may include cases
that 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 is
because the labor principles in the ILO Declaration against which foreign actions could
be compared are less detailed and specific. Moreover, under model 4, the USTR may not
wish to pursue the enforcement of these principles because if Conventions were to enter
the cases as definitions for the principles, this could possibly, as the USCIB argues,
subject a number of U.S. labor laws to challenge.
9 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 and
Compliance, Department of Commerce, February 15, 2008.
11 Phone conversation with Celeste Helm, Chief, Division of Trade Agreement Administration
and Technical Cooperation, February 15, 2008.

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