Worker Rights Provisions in Free Trade Agreements (FTAs)

Worker Rights Provisions in Free Trade Agreements (FTAs)

Updated October 25, 2023
Worker Rights Provisions in Free Trade Agreements (FTAs)
Worker rights have generally been a prominent issue in
The United States has endorsed these principles, working
U.S. FTA negotiations. Some stakeholders believe worker
them into recent FTAs as enforceable provisions. It has
rights provisions are key to protect U.S. workers from
ratified two of the core conventions on forced labor and on
perceived unfair competition and to raise labor standards
the worst forms of child labor. As a result, U.S. FTAs do
abroad. Others believe such rights are more appropriately
not include commitments to abide by and enforce the ILO
addressed at the International Labor Organization (ILO) or
conventions themselves. The U.S. Tripartite Advisory Panel
through cooperative efforts and capacity building. Since
on International Labor Standards of the President’s
1988, Congress has included worker rights as a principal
Committee on the ILO has found that U.S. law and
negotiating objective in Trade Promotion Authority (TPA)
practices (e.g., U.S. laws on prison labor) are at least
legislation. The United States has generally been in the
partially inconsistent with five of the core conventions.
forefront of using FTAs to promote core internationally-
Labor Provisions in U.S. FTAs
recognized worker rights and principles. Labor provisions
have evolved significantly since the 1994 North American
Worker rights provisions in U.S. FTAs, first included in
Free Trade Agreement (NAFTA), moving from side
NAFTA, have evolved significantly, from requirements for
agreements to integral chapters within FTA texts, with
parties to enforce their own labor laws, and to strive not to
more provisions subject to enforcement. Most recently, the
waive or derogate from such laws as an encouragement to
renegotiation of NAFTA resulted in the 2020 U.S.-Mexico-
trade, to commitments to adopt, maintain, and enforce laws
Canada Agreement (USMCA), which set new precedents
that incorporate core ILO principles. Other FTA provisions
within its labor chapter and labor enforcement mechanisms.
address labor cooperation, capacity building, and dispute
The Biden Administration’s trade initiatives, while not
settlement (DS). The FTA term “internationally recognized
envisioned as comprehensive FTAs, include labor
worker rights” is based on language in the U.S. Generalized
provisions, which may reflect aspects of past U.S. practice.
System of Preferences (GSP) statute and largely tracks with
International Labor Organization
the ILO Declaration, but also diverges (e.g., referring to
“acceptable conditions” regarding minimum wages, hours
Most U.S. and other FTAs with provisions on worker rights
of work, and occupational safety and health). Recent U.S.
refer to commitments made in the ILO, the primary
FTAs have reflected negotiating objectives on labor under
multilateral organization responsible for promoting labor
TPA statutes. With each reauthorization, TPA objectives
standards through international conventions and principles.
have evolved and generally become more comprehensive.
A specialized agency of the United Nations, the ILO
comprises representatives from government, business and
NAFTA. The former North American Agreement on Labor
labor organizations. It promotes labor rights through
Cooperation (NAALC), a side agreement to NAFTA,
assessment of country standards, monitoring, and technical
contained principles on worker rights in matters affecting
assistance. While the ILO has complaint procedures, it has
trade, technical assistance and capacity building provisions,
limited enforcement authority. World Trade Organization
and a separate DS process, along with a labor cooperation
(WTO) rules do not address trade-related labor standards,
mechanism. Full dispute procedures applied to enforcement
as WTO members were unable to reach consensus on the
of certain labor laws, not including the right to organize.
issue and deferred to the ILO on such matters.
Jordan. The U.S.-Jordan FTA (2001) contains labor
The ILO has adopted more than 190 multilateral
provisions that were incorporated into the agreement itself.
conventions or protocols; eight are deemed “core labor
These provisions became a template for future FTAs and
standards.” The Declaration on the Fundamental Principles
negotiating objectives in the 2002 TPA authorization.
and Rights at Work, adopted in 1998 and amended in 2022,
While the provisions are enforceable, both countries
incorporates core principles from these eight fundamental
committed to resolve disputes outside of dispute settlement.
conventions, to be adhered to by all countries whether or
TPA-2002. Seven U.S. FTAs were negotiated under TPA-
not they are signatories to the underlying conventions.
2002. These agreements went beyond the scope of the
The ILO Declaration Principles and Rights
Jordan FTA, but included one enforceable labor provision:
•
Freedom of association and the effective recognition of
a party shall not fail to effectively enforce its labor laws “in
the right to col ective bargaining;
a manner affecting trade.” “Labor laws” were defined as
•
Elimination of all forms of forced or compulsory labor;
rights similar to the GSP statute. Dispute procedures placed
•
Effective abolition of child labor;
limits on monetary penalties, unlike those for commercial
•
Elimination of discrimination in respect of employment
disputes. The FTAs also included commitments not to
and occupation; and
derogate from labor laws to encourage trade; provisions for
•
Safe and healthy working environment.
cooperation and capacity building to improve labor
standards; and creation of a labor affairs council.
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Worker Rights Provisions in Free Trade Agreements (FTAs)
Figure 1. Evolution of Labor Commitments in FTAs
Labor Disputes under U.S. FTAs
The Department of Labor, in coordination with the U.S.
Trade Representative (USTR), is responsible for reviewing
complaints on alleged violations of enforceable labor
commitments in U.S. FTAs. One state-state FTA labor
dispute, involving Guatemala, proceeded past consultations
through the entire DS procedure. In 2017, an arbitral panel
ruled against the United States. It found while Guatemala
had failed to effectively enforce certain labor laws, the
evidence did not prove it was “sustained or recurring” and
“in a manner affecting trade.” U.S. stakeholders contested
the outcome, which spurred some reforms in USMCA.
Other stakeholder concerns have included procedural delays
in processing labor complaints and compliance issues of
trading partners. See CRS In Focus IF10972, Labor

Enforcement Issues in U.S. FTAs.
Source: CRS.
Biden Administration Trade Initiatives
TPA-2015. TPA-2015, which expired in 2021, enhanced
The Administration is not negotiating comprehensive
the negotiating objectives on labor, with guidance from a
FTAs, and instead is seeking trade deals with targeted
May 2007 bipartisan agreement, which laid out new
agendas, including in the Indo-Pacific and Americas. The
congressional objectives for FTAs. TPA-2015 called for
U.S.-led Indo-Pacific Economic Framework for Prosperity
• including the same dispute settlement mechanisms and
(IPEF), involving 13 partners, includes a “trade pillar” with
penalties for labor as for other FTA chapters;
labor as a core component. USTR framed inclusion of labor
•
issues as helping to “promote inclusive economic
requiring the maintenance in laws and practice of
prosperity” and part of a “broader strategy to make trade a
principles stated in the ILO Declaration;
•
race to the top.” The 2022 IPEF ministerial statement on
prohibiting the diminution of labor standards to attract
trade lays out potential labor provisions that largely reflect
trade and investment; and
•
U.S. FTAs. Separately, the IPEF supply chain agreement,
limiting prosecutorial and enforcement discretion, as
provisionally reached in May 2023, would establish a new
grounds for defending a failure to enforce labor laws.
labor rights advisory board to support promotion of labor
USMCA. The most recent U.S. FTA includes several new
rights in supply chains, and a mechanism to address labor
features on labor in addition to core provisions from TPA.
rights inconsistencies at subject facilities. Key questions
Some observers view USMCA as a possible template for
remain regarding to what extent labor provisions will be
future U.S. FTAs. Provisions include, for example
binding, how any enforcement mechanisms would work in
•
practice, and prospects for outcomes in the trade pillar.
extension of the principle of nonderogation of rights to
export processing zones (EPZs);
Issues for Congress
• prohibiting imports produced by forced labor, and
In considering ongoing and future U.S. trade negotiations,
cooperation over identifying such goods;
as well as objectives in any future TPA legislation,
• commitments on violence against workers, migrant
Congress may wish to examine the application of worker
worker protections, and workplace discrimination; and
rights provisions in U.S. FTAs. This debate could include
•
•
alternatives to formal labor consultations.
the effectiveness of FTAs as a vehicle for improving
worker rights and labor standards in other countries;
Some Members of Congress called for additional USMCA
• the extent to which FTA partners are complying with
obligations for Mexico to address persistent concerns over
labor obligations and whether dispute settlement
worker rights. A labor chapter annex commits Mexico to
provisions have been applied effectively;
enact reforms related to collective bargaining that had been
• whether USMCA labor provisions serve as a new
underway since 2017. In addition, separate from the labor
template for future U.S. trade agreements, or whether
chapter, auto rules of origin have wage requirements for the
new initiatives like IPEF may present a new model;
first time in a U.S. FTA. Strengthening labor enforcement
•
was also a major priority for some Members. USMCA’s
the effectiveness of FTAs in providing technical
new rapid-response mechanism provides for an independent
assistance and trade capacity building; and
panel investigation of covered facilities that are denying
• the role of businesses in promoting U.S. labor practices
worker rights of free association and collective bargaining.
abroad and conducting supply chain due diligence.
Several disputes have been resolved under the mechanism.
Cathleen D. Cimino-Isaacs, Analyst in International Trade
Other changes to overall DS procedures include preventing
and Finance
a party from blocking formation of a dispute panel, and a
presumption that failure to comply with labor commitments
M. Angeles Villarreal, Specialist in International Trade
is “in a manner affecting trade or investment.” For more,
and Finance
see CRS In Focus IF11308, USMCA: Labor Provisions.
IF10046
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Worker Rights Provisions in Free Trade Agreements (FTAs)

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https://crsreports.congress.gov | IF10046 · VERSION 25 · UPDATED