Updated December 18, 2020
Labor Enforcement Issues in U.S. FTAs
Background
standards,” where the matter is trade-related and
Labor provisions in free trade agreements (FTAs)—both in
covered by mutually recognized labor laws. Other
the U.S. and globally—were first included in the North
issues, such as freedom of association and the right to
American Agreement on Labor Cooperation (NAALC), a
organize, were limited to ministerial consultations.
side agreement to the 1994 North American Free Trade
USMCA procedures supersede NAALC for any future
Agreement (NAFTA). Since then, U.S. provisions have
disputes involving North American partners (see below).
evolved from commitments not just to enforce a country’s
 Dominican Republic-Central America FTA
own domestic labor laws, but also to adopt and enforce core
(CAFTA-DR) and U.S.-Bahrain FTA labor chapters
principles of the International Labor Organization (ILO).
include one provision subject to enforcement—a party
As requested by Congress through trade promotion
“shall not fail to effectively enforce its labor laws,
authority (TPA), recent U.S. FTAs also subject labor
through a sustained or recurring course of action or
chapters to the same dispute settlement (DS) procedures as
inaction, in a manner affecting trade.” Parties may
other obligations, although with minor modifications. Some
impose monetary penalties in limited circumstances.
Members of Congress view strong labor provisions in U.S.
Creation of a labor cooperation mechanism, in addition
FTAs as an important issue and have raised concerns over
to a capacity building mechanism and labor affairs
FTA partner compliance with commitments and the U.S.
council in the case of CAFTA-DR, were intended to
record of enforcement. These issues were part of the debate
oversee review and implementation of the labor
in the renegotiation of NAFTA as the U.S.-Mexico-Canada
obligations. CAFTA-DR was the first U.S. FTA to
Agreement (USMCA), which entered into force in 2020.
include measures in support of labor capacity building.
Labor standards are not part of World Trade Organization
 U.S.-Peru, U.S.-Colombia FTA labor chapters reflect
(WTO) rules; in 1996, members reaffirmed the ILO as the
provisions required by the “May 10th Agreement,” a
competent body to deal with labor issues, while denouncing
2007 bipartisan deal between congressional leadership
the “use of labor standards for protectionist purposes.”
and the George W. Bush Administration. The agreement
Limited progress at the WTO led several countries to
called for: (1) an additional enforceable commitment
include labor commitments in FTAs and in the eligibility
that FTA parties adopt and maintain core labor
criteria of unilateral trade preferences programs.
principles of the 1998 ILO Declaration; and (2) the same
U.S. FTAs have set precedents both in terms of the scope
dispute settlement procedures and remedies, including
and enforceability of labor provisions. An ILO report found
recourse to trade sanctions, for FTA labor provisions, as
as of 2016, 77 out of 267 FTAs globally included labor
applied to other obligations. A party alleging a violation
provisions, compared to 21 in 2005. Unlike U.S. practice,
of the provision on ILO commitments must demonstrate
the majority of agreements do not subject labor provisions
that failure to adopt or maintain ILO principles has been
to dispute settlement. Most provide a framework for
“in a manner affecting trade or investment.” Colombia
dialogue, capacity building, and monitoring, rather than link
agreed in a separate bilateral labor action plan to meet
violations to economic consequences, such as trade
certain commitments prior to FTA ratification.
sanctions. In cases where dispute settlement is applicable,
Many observers expect additional labor complaints under
such mechanisms have been rarely invoked; countries
USMCA. It revised NAFTA to include a dedicated labor
largely aim to solve disputes via cooperative consultations.
chapter and reflects negotiating objectives in the latest
Enforcement Mechanisms in U.S. FTAs
version of TPA (enacted in 2015). USMCA imposed
additional substantive commitments that go beyond the
The U.S. has brought complaints over FTA partners’
Peru and Colombia FTAs and created a new enforcement
compliance with labor commitments under five FTAs
mechanism for labor violations at facilities (see below).
listed below. Among these agreements, provisions subject
to DS procedures and remedies may differ:
Summary of U.S. Labor Disputes
 NAALC provisions were subject to dispute settlement
The Office of Trade and Labor Affairs (OTLA) within the
procedures separate from those applicable to the main
U.S. Department of Labor’s Bureau of International Labor
NAFTA. NAALC aimed to settle labor complaints
Affairs receives and reviews complaints (termed
primarily via dialogue and consultations. If
“submissions”) of alleged violations of FTA labor
consultations were unable to resolve a complaint, certain
commitments. The DOL consults and coordinates with the
issues could be referred to other mechanisms. The full
U.S. Trade Representative (USTR) and State Department
spectrum of dispute procedures, including an arbitral
on labor enforcement. Per OTLA, a submission must “raise
panel and limited monetary penalties, applied to limited
issues relevant to the labor provisions in the NAALC or
set of allegations/obligations involving: a “persistent
FTA and illustrate a country’s failure to comply with its
pattern of failure” to enforce “occupational safety and
obligations.” If the submission is accepted, OTLA does a
health, child labor or minimum wage technical labor
review and issues a public report with its findings and
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link to page 2 Labor Enforcement Issues in U.S. FTAs
recommendations to the FTA partner. OTLA may also
consultative mechanisms, have led to greater cooperation
recommend further actions, including that the U.S. request
and helped countries to improve standards.
bilateral consultations—if these are unsuccessful, dispute
U.S. FTA Partner Compliance
settlement may be invoked in certain cases.
The effectiveness of FTAs in raising labor standards, the
Under NAALC, OTLA received more than 20 submissions.
extent to which countries comply, and the most effective
It accepted and issued reviews for 13 (Table 1). Canada
approaches to improve compliance are widely debated. In a
and Mexico also have processed complaints against the
2014 review, the GAO concluded that U.S. FTA partners
United States. Among U.S. FTAs with labor chapters,
had taken several steps to improve worker rights pursuant
OTLA has issued seven reviews involving six countries.
to FTA obligations; at the same time, concerns were raised
The Guatemala dispute led to the first formal consultations
over gaps in protections, attributed to lack of enforcement
requested by the United States, although submissions under
capacity and limited public awareness of petition processes.
other U.S. FTAs have resulted in ministerial or informal
Other observers point to the success of FTAs in creating
consultations. It is also the only case to have proceeded
new avenues for cooperation on trade-related labor issues.
through dispute settlement.
More broadly, some question whether FTAs are appropriate
Table 1. U.S. Labor Submissions Reviewed by OTLA
or the most effective vehicles for addressing the cross-
cutting issue of worker rights. Most experts agree technical
Country Filed Petitions Status
assistance and capacity building are critical tools. Among
Mexico
1994-
13
* 12 reports issued; 8
U.S. agencies providing trade capacity building, an
2015
ministerial agreements
estimated 9% of funding went to trade-related labor issues
Guatemala 2008
1
* Panel decision in 2017
in FY2018; this compared to a 20% share in FY2017.
Peru
2010;
2
* Reports issued in 2012
2015
and 2016
U.S. Track Record of Enforcement
Bahrain
2011
1
* Consultations in 2014
Some U.S. stakeholders contest the outcome of the dispute
with Guatemala, and some maintain FTA dispute provisions
Dominican 2011
1
* Report issued in 2013
require reform. Broadly, critics view the number of
Republic
petitions accepted for review, review delays, and only one
Honduras
2012
1
* Monitoring and action
case processed through dispute settlement, as shortcomings
plan adopted in 2015
in U.S. practice. Others view the first labor dispute as an
Colombia
2016
1
* Report issued and
important precedent and evidence that trade-related labor
consultations with contact
issues are taken seriously by the U.S. government.
points held in 2017
Source: U.S. Department of Labor.
Evolving Labor Chapters and Enforcement in FTAs
Notes: For Mexico, one DOL report covered two submissions.
Given that USMCA establishes new labor provisions and
Guatemala Labor Dispute
enforcement mechanisms, some question whether it will
In 2008, the AFL-CIO and six Guatemalan labor unions
serve as a new U.S. FTA template. Strong labor provisions
filed a complaint under CAFTA-DR alleging that
were a key factor for securing Democratic congressional
Guatemala failed to effectively enforce its labor laws with
support, amid calls for improvements to Mexican labor
respect to freedom of association, rights to organize and
practices and enforcement. Key features include an annex
bargain collectively, and acceptable conditions of work.
that commits Mexico to enact legislative action in regard to
The OTLA report in January 2009 raised several concerns
its labor laws on collective bargaining. The labor chapter
and recommendations. USTR and DOL initiated
also includes new text clarifying language that related to the
consultations in 2010, amid concerns Guatemala had “not
U.S. loss against Guatemala. Notably, USMCA shifts the
undertaken effective steps to correct systemic failures” in
burden of proof by creating a rebuttable presumption that
labor law enforcement, and then in 2011, requested
an alleged violation of labor commitments affects trade and
establishment of an arbitral panel. Panel proceedings were
investment, unless demonstrated otherwise. Changes to
suspended while the two sides negotiated an 18-point labor
overall USMCA DS provisions also aim to prevent panel
enforcement plan in April 2013. After Guatemala allegedly
blocking in dispute cases. Further, a new “rapid response”
failed to implement the plan, the panel resumed in 2014 and
mechanism provides for an independent panel to investigate
issued its decision in June 2017. It found that, while
alleged denial of certain labor rights at “covered facilities,”
Guatemala failed to enforce certain laws, the evidence did
with the potential to block imports. Some observers expect
not prove it was “sustained or recurring” and “in a manner
these changes to spur new complaints, but questions remain
affecting trade,” and thus did not violate FTA provisions.
on the mechanism’s implementation. DOL has reportedly
received a few petitions filed under the USMCA labor
Issues for Congress
chapter; further action has not occurred to date.
Some Members of Congress and labor groups have
scrutinized enforcement of labor provisions as “slow and
For more information, see CRS In Focus IF10046, Worker
cumbersome,” and relying “on the political will of
Rights Provisions in Free Trade Agreements (FTAs); CRS
governments.” They call for more monitoring and oversight
In Focus IF11308, USMCA: Labor Provisions; and CRS In
of labor practices of U.S. FTA partners. Other countries and
Focus IF10645, Dispute Settlement in the WTO and U.S.
labor groups also have expressed concerns regarding some
Trade Agreements.
U.S. practices and lack of adherence to labor commitments,
Cathleen D. Cimino-Isaacs, Analyst in International Trade
such as Mexican concerns over U.S. protections for migrant
and Finance
workers. Other analysts argue that the debate and scrutiny
over labor provisions in FTAs, coupled with robust
IF10972
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Labor Enforcement Issues in U.S. FTAs


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https://crsreports.congress.gov | IF10972 · VERSION 8 · UPDATED

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