Labor Enforcement Issues in U.S. FTAs

Labor Enforcement Issues in U.S. FTAs

Updated March 23, 2023
Labor Enforcement Issues in U.S. FTAs
Background
recognized labor laws. Other issues, such as freedom of
Labor provisions in free trade agreements (FTAs)—both in
association and the right to organize, were limited to
the United States and globally—were first included in the
ministerial consultations. USMCA DS procedures
North American Agreement on Labor Cooperation
supersede NAALC for labor disputes (see below).
(NAALC), a side agreement to the 1994 North American
 Dominican Republic-Central America FTA
Free Trade Agreement (NAFTA). Since then, U.S.
(CAFTA-DR) and U.S.-Bahrain FTA labor chapters
provisions have evolved from commitments not only to
include one provision subject to enforcement—a party
enforce a country’s own domestic labor laws, but also to
“shall not fail to effectively enforce its labor laws,
adopt and enforce core principles of the International Labor
through a sustained or recurring course of action or
Organization (ILO). As requested by Congress through
inaction, in a manner affecting trade.” Parties may
trade promotion authority (TPA), recent U.S. FTAs also
impose monetary penalties in limited circumstances.
subject labor chapters to the same dispute settlement (DS)
Creation of a labor cooperation mechanism, in addition
procedures as other FTA obligations, with minor
to a capacity building mechanism and labor affairs
modifications. Some Members of Congress view strong
council in the case of CAFTA-DR, aimed to oversee
labor provisions in U.S. FTAs as an important issue and
review and implementation of the labor obligations.
have raised concerns over FTA partner compliance with
CAFTA-DR was the first U.S. FTA to include measures
commitments and the U.S. record of enforcement. Other
in support of labor capacity building.
Members question whether FTAs are appropriate or the
most effective vehicle for addressing the cross-cutting issue
 U.S.-Peru, U.S.-Colombia FTA labor chapters reflect
of worker rights. These issues were part of the debate in the
provisions required by the “May 10th Agreement,” a
renegotiation of NAFTA as the U.S.-Mexico-Canada
2007 bipartisan deal between congressional leadership
Agreement (USMCA), which entered into force in 2020.
and the George W. Bush Administration. It called for:
an additional enforceable commitment that FTA parties
Labor standards are not part of World Trade Organization
adopt and maintain core labor principles of the 1998
(WTO) rules; WTO members deferred to the ILO as the
ILO Declaration; and the same DS procedures and
competent body to deal with such issues, while denouncing
“use of labor standards for protectionist purposes.” Limited
remedies for FTA labor provisions that applied to FTA
other obligations. A party alleging a violation of the
progress at the WTO led to labor provisions within FTAs
provision on ILO commitments must demonstrate that
and in eligibility criteria of trade preferences programs.
failure to adopt or maintain ILO principles has been “in
U.S. FTAs have set precedents in terms of the scope and
a manner affecting trade or investment.” Colombia
enforceability of labor provisions. An ILO report found as
agreed in a separate bilateral labor action plan to meet
of 2019, 90 FTAs, or a third of agreements in force
certain commitments prior to FTA ratification.
globally, have labor provisions. Unlike U.S. practice, the
 USMCA replaced NAFTA and includes a dedicated
majority of these agreements do not subject labor
labor chapter, which largely reflects negotiating
provisions to DS; they provide a framework for dialogue,
objectives in the latest version of TPA (TPA-2015,
capacity building, and monitoring, rather than link
which expired 2021). It also imposed commitments that
violations to economic consequences, such as trade
go beyond the U.S. FTAs with Peru and Colombia, and
sanctions. In cases where DS is applicable, such
created a new facility-specific “rapid-response” labor
mechanisms have been rarely invoked; countries largely
mechanism for addressing certain worker rights
aim to solve disputes via cooperative consultations.
violations. Regarding disputes, USMCA shifts the
Enforcement Mechanisms in U.S. FTAs
burden of proof through a presumption that an alleged
The United States has brought complaints over FTA
violation of labor commitments affects trade and
partners’ compliance with labor commitments under the
investment, unless demonstrated otherwise—this
FTAs listed below. Among these agreements, provisions
clarifying language was motivated by the U.S. dispute
subject to DS procedures and remedies may differ:
loss against Guatemala (see below). Changes to overall

USMCA DS provisions aim to prevent a party from
NAALC provisions were subject to separate dispute
blocking the formation of a dispute panel.
settlement procedures from those applicable to the main
NAFTA. NAALC aimed to settle labor complaints
Summary of U.S. Labor Disputes
primarily via dialogue and consultations. Full dispute
The Office of Trade and Labor Affairs (OTLA) within the
procedures, e.g., arbitral panel and limited monetary
Bureau of International Labor Affairs (ILAB) of the U.S.
penalties, applied to a limited set of obligations or
Department of Labor (DOL) receives and reviews
allegations involving: a “persistent pattern of failure” to
complaints (termed “submissions”) of alleged violations of
enforce “occupational safety and health, child labor or
FTA labor commitments. DOL consults and coordinates
minimum wage technical labor standards,” where the
with the U.S. Trade Representative (USTR) and State
matter is trade-related and covered by mutually
Department on labor enforcement. Per OTLA, a submission
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Labor Enforcement Issues in U.S. FTAs
must “raise issues relevant to the labor provisions...and
practices of U.S. FTA partners. Other countries and labor
illustrate a country’s failure to comply with its obligations.”
groups also have expressed concerns regarding some U.S.
If the submission is accepted, OTLA reviews and issues a
practices and lack of adherence to commitments, such as
public report with its findings and recommendations to the
Mexico’s concerns over protections for migrant workers.
FTA partner. OTLA may recommend further actions, e.g.,
Other Members and observers question whether FTAs are
that the United States request bilateral consultations—if
an appropriate vehicle for addressing worker rights, and do
these are unsuccessful, state-state DS may be invoked.
not fully support the use of trade sanctions as a remedy.
Some analysts argue that the debate over labor provisions in
Under NAALC, OTLA received more than 20 submissions.
FTAs, coupled with robust consultative mechanisms, have
It accepted and issued reviews for 13 (Table 1). Canada
led to greater cooperation and helped improve standards.
and Mexico also processed complaints against the United
States. Among U.S. FTAs with labor chapters, OTLA has
FTA Partner Compliance. FTAs’ effectiveness in raising
issued seven reviews involving six countries. The 2008
labor standards, the extent to which countries comply, and
Guatemala dispute led to the first formal consultations
the most effective approaches to improve compliance are
requested by the United States, although other FTA
debated. Some studies document that U.S. FTA partners
submissions resulted in ministerial (NAALC) or informal
have taken steps to improve worker rights pursuant to FTA
consultations. It is also the only case to undergo full DS.
obligations, yet concerns remain over gaps in protections,
Table 1. U.S. Labor Chapter Submissions Reviewed
attributed to lack of enforcement capacity and limited
public awareness of petition processes. Observers point to
Country Filed Petitions Status
FTAs’ success in creating new avenues for cooperation on
Mexico
1994-
13
* 12 reports issued; 8
trade-related labor issues. Most experts agree technical
2015
ministerial agreements
assistance and capacity building are critical tools. Among
Guatemala 2008
1
* Panel decision in 2017
U.S. agencies providing capacity building, about 20% of
Peru
2010;
2
* Reports issued in 2012
funding went to trade-related labor issues in FY2020.
2015
and 2016
Congress made strengthening trading partner capacity a
Bahrain
2011
1
* Consultations in 2014
priority in TPA and through funding, including in the
Dominican 2011
1
* Report issued in 2013
USMCA Implementation Act (P.L. 116-260).
Republic
U.S. Enforcement Track Record. U.S. labor advocates
Honduras
2012
1
* Monitoring and action
contested the outcome of the Guatemala dispute and called
plan adopted in 2015
for reforms to FTA provisions. Critics broadly view the
Colombia
2016
1
* Report issued; contact
number of petitions accepted for review, delays, and only
point consultations in 2017
one case processed through DS, as shortcomings in U.S.
Source: U.S. Department of Labor, various reports.
practice. Others contest this view, supporting the first labor
Notes: For Mexico, one report covered two submissions. Does not
dispute as a key precedent. Observers view the USMCA
include USMCA labor disputes.
labor mechanism and USTR action to self-initiate cases as
In addition to state-state DS procedures, distinct from other
evidence the U.S. government has elevated enforcement of
U.S. FTAs, the USMCA “rapid response” labor mechanism
trade-related labor issues. ILAB’s head noted that the U.S.
provides for an independent panel to investigate alleged
“wants to be more engaged, more proactive, more strategic
denial of certain labor rights at “covered facilities,” with the
about” monitoring and enforcing FTA labor commitments.
potential to block imports for repeat offenses. Several
Congress may assess future priorities for disputes pursued
complaints have been initiated and resolved. Five U.S.
by USTR, how revised DS mechanisms are implemented,
petitions against facilities in Mexico resulted in some
and whether they effectively resolve labor disputes.
remediation. Two U.S. petitions were filed in early 2023.
Evolving Labor Chapters and Enforcement. Some
Guatemala Labor Dispute
question whether the USMCA’s new labor provisions and
In 2008, the AFL-CIO and Guatemalan labor unions filed a
enforcement mechanisms will serve as a new U.S. FTA
complaint under CAFTA-DR alleging that Guatemala failed to
template. The Biden Administration is not pursuing
effectively enforce labor laws with respect to freedom of
comprehensive FTAs, and instead is negotiating initiatives
association, rights to organize and bargain col ectively, and
with targeted agendas, like the Indo-Pacific Economic
acceptable conditions of work. In 2010, U.S. officials initiated
Framework for Prosperity (IPEF). IPEF includes a “trade
consultations, and in 2011 requested establishment of an
pillar” with labor as a core component, but it is unclear
arbitral panel. The panel was suspended while the two sides
what potential commitments may be binding or enforceable.
negotiated an 18-point labor enforcement plan. After
USTR Katherine Tai has indicated IPEF may consider
Guatemala allegedly failed to implement the plan, the panel
including some mechanism like the USMCA rapid-response
resumed in 2014 and issued its decision in 2017. It found that,
mechanism. As Congress oversees implementation of FTA
Guatemala failed to enforce certain laws, but the evidence did
labor chapters and new executive-led trade initiatives,
not prove it was “sustained or recurring” and “in a manner
Members may consider the effectiveness of enforcement
affecting trade” and thus did not violate FTA provisions.
mechanisms or seek changes to underlying labor
obligations within any future TPA legislation.
Issues for Congress
Some Members of Congress and labor groups have
Cathleen D. Cimino-Isaacs, Analyst in International Trade
scrutinized enforcement of labor provisions as “slow and
and Finance
cumbersome,” and relying on political will of governments.
IF10972
They call for more monitoring and oversight of labor
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Labor Enforcement Issues in U.S. FTAs

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https://crsreports.congress.gov | IF10972 · VERSION 10 · UPDATED