Labor Enforcement Issues in U.S. FTAs



Updated March 2, 2020
Labor Enforcement Issues in U.S. FTAs
Background
pattern of failure” to enforce “occupational safety and
Labor provisions in free trade agreements (FTAs)—both in
health, child labor or minimum wage technical labor
the U.S. and globally—were first included in the North
standards,” where the matter is trade-related and
American Agreement on Labor Cooperation (NAALC), the
covered by mutually recognized labor laws. Other
side agreement to the 1994 North American Free Trade
issues, such as freedom of association and the right to
Agreement (NAFTA). Since then, provisions have evolved
organize, were limited to ministerial consultations.
from commitments not just to enforce a country’s own
Dominican Republic-Central America FTA
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 they have raised concerns
to a capacity building mechanism and labor affairs
over FTA partner compliance with labor commitments and
council in the case of CAFTA-DR, were intended to
the U.S. record of enforcement. These issues were part of
oversee review and implementation of the labor
the debate over the proposed Trans-Pacific Partnership
obligations. CAFTA-DR was the first U.S. FTA to
(TPP) and in the renegotiation of NAFTA as the U.S.-
include measures in support of labor capacity building.
Mexico-Canada Agreement (USMCA), for which Congress
U.S.-Peru, U.S.-Colombia FTA labor chapters reflect
passed implementing legislation in early 2020.
provisions required by the “May 10th Agreement,” a
Labor standards are not part of World Trade Organization
2007 bipartisan deal between congressional leadership
(WTO) rules; in 1996, members reaffirmed the ILO as the
and the Bush Administration. The agreement called for:
competent body to deal with labor issues, while denouncing
(1) an additional enforceable commitment that FTA
the “use of labor standards for protectionist purposes.”
parties adopt and maintain core labor principles of the
Limited progress at the WTO led several countries to
1998 ILO Declaration; and (2) the same dispute
include labor commitments in FTAs and in the eligibility
settlement procedures and remedies, including recourse
criteria of unilateral trade preferences programs.
to trade sanctions, for FTA labor provisions, as applied
to other obligations. A party alleging a violation of the
U.S. FTAs have set precedents both in terms of the scope
provision on ILO commitments must demonstrate that
and enforceability of labor provisions. An ILO report found
failure to adopt or maintain ILO principles has been “in
as of 2016, 77 out of 267 FTAs globally included labor
a manner affecting trade or investment.” Colombia
provisions, compared to 21 in 2005. Unlike U.S. practice,
agreed in a separate bilateral labor action plan to meet
the majority of agreements do not subject labor provisions
certain commitments prior to FTA ratification.
to dispute settlement. Most provide a framework for
dialogue, capacity building, and monitoring, rather than link
Some expect future labor complaints under the USMCA,
violations to economic consequences, such as trade
which revised NAFTA to include a labor chapter in the
sanctions. In cases where dispute settlement is applicable,
main text, and goes further than the Peru and Colombia
such mechanisms have been rarely invoked; countries
FTAs, reflecting updated negotiating objectives within the
largely aim to solve disputes via cooperative consultations.
latest version of TPA (enacted in 2015), by imposing
additional substantive commitments and creating a new
Enforcement Mechanisms in U.S. FTAs
enforcement mechanism for facility-specific violations of
The U.S. has brought complaints over FTA partners’
labor rights (see below). Notably, USMCA shifts the
compliance with labor commitments under five FTAs listed
burden of proof by creating a rebuttable presumption that
below. Among these agreements, provisions subject to
an alleged violation of labor commitments affects trade and
dispute resolution procedures and remedies may differ:
investment, unless demonstrated otherwise.
NAALC provisions were subject to dispute settlement
Summary of U.S. Labor Disputes
procedures separate from those applicable to the main
NAFTA. NAALC aimed to settle labor complaints
The Office of Trade and Labor Affairs (OTLA) within the
U.S. Department of Labor receives and reviews complaints
primarily via dialogue and consultations. If
(termed “submissions”) of alleged violations of FTA labor
consultations were unable to resolve a complaint, certain
issues could be referred to other mechanisms. The full
commitments. The DOL consults and coordinates with the
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
set of allegations/obligations involving: a “persistent
issues relevant to the labor provisions in the NAALC or
FTA and illustrate a country’s failure to comply with its
https://crsreports.congress.gov

link to page 2 Labor Enforcement Issues in U.S. FTAs
obligations.” If the submission is accepted, OTLA does a
U.S. FTA Partner Compliance
review and issues a public report with its findings and
The effectiveness of FTAs in raising labor standards, the
recommendations to the FTA partner. OTLA may also
extent to which countries comply, and the most effective
recommend further actions, including that the U.S. request
approaches to improve compliance are widely debated. In a
bilateral consultations—if these are unsuccessful, dispute
2014 review, the GAO concluded that U.S. FTA partners
settlement may be invoked in certain cases.
had taken several steps to improve worker rights pursuant

to FTA obligations; at the same time, concerns were raised
Under NAALC, OTLA received more than 20 submissions.
over gaps in protections, attributed to lack of enforcement
It has accepted and issued reviews for 13, with one under
capacity and limited public awareness of petition processes.
review; all involved Mexico (Table 1). Among U.S. FTAs
Other observers point to the success of FTAs in creating
with labor chapters, the OTLA has issued seven reviews
new avenues for cooperation on trade-related labor issues.
involving six countries. The Guatemala dispute led to the
More broadly, some question whether FTAs are appropriate
first formal consultations requested by the United States,
or the most effective vehicles for addressing the cross-
although submissions under other U.S. FTAs have resulted
cutting issue of worker rights. Most experts agree technical
in ministerial or informal consultations. It is also the only
assistance and capacity building are critical tools. Among
case to have proceeded through dispute settlement.
U.S. agencies providing trade capacity building, an
Table 1. Labor submissions reviewed by OTLA
estimated 9% of funding went to trade-related labor issues
in FY2018; this compared to a 20% share in FY2017.
Country Filed Petitions Status
Mexico
1994-
13
* 1 case under review;
U.S. Track Record of Enforcement
2015
* 11 reports issued; 8
Some U.S. stakeholders contest the outcome of the dispute
ministerial agreements
with Guatemala and question whether FTA dispute
Guatemala 2008
1
* Panel decision in 2017
provisions require reforms. Critics view the number of
Peru
2010;
2
* Reports issued in 2012
petitions accepted for review, review delays, and only one
2015
and 2016
case processed through dispute settlement, as shortcomings
Bahrain
2011
1
* Consultations in 2014
in U.S. practice. Other experts view the first labor dispute
as an important precedent and evidence that trade-related
Dominican 2011
1
* Report issued in 2013
labor issues are taken seriously by the U.S. government.
Republic
Honduras
2012
1
* Monitoring and action
Labor Chapters in FTAs
plan adopted in 2015
TPP. The proposed TPP was widely viewed as setting
Colombia
2016
1
* Report issued and
precedents for FTA labor chapters, and largely reflected
consultations with contact
U.S. approaches. While the United States is no longer a
points held in 2017
party, USTR indicated TPP was a baseline for USMCA.
Source: U.S. Department of Labor.
USMCA. USMCA goes beyond TPP labor provisions, and
Guatemala Labor Dispute
some question whether it will serve as a new U.S. FTA
In April 2008, the AFL-CIO and six Guatemalan labor
template. Strong labor provisions were a key factor for
unions filed a complaint under CAFTA-DR alleging that
securing Democratic congressional support, amid calls for
Guatemala failed to effectively enforce its labor laws with
improvements to Mexican labor practices and enforcement.
respect to freedom of association, rights to organize and
Several USMCA provisions were motivated by enhancing
bargain collectively, and acceptable conditions of work.
enforcement. An annex commits Mexico to take specific
The OTLA report in January 2009 raised several concerns
legislative actions to protect the right to collective
and recommendations. USTR and DOL initiated
bargaining. The labor chapter includes new text clarifying
consultations in 2010, amid concerns Guatemala had “not
language that related to the U.S. loss against Guatemala.
undertaken effective steps to correct systemic failures” in
Changes to USMCA DS provisions also aim to prevent
labor law enforcement, and then in late 2011, requested
panel blocking in dispute cases. Further, a new “rapid
establishment of an arbitral panel. Panel proceedings were
response” mechanism provides for an independent panel
suspended while the two sides negotiated an 18-point labor
investigation of denial of certain labor rights at “covered
enforcement plan in April 2013. After Guatemala allegedly
facilities,” with the potential to block imports. Some
failed to implement the plan, the panel resumed in 2014 and
observers expect these changes could spur new complaints,
issued its decision in June 2017. It found that, while
but questions remain on the mechanism’s implementation.
Guatemala failed to enforce certain laws, the evidence did
Other FTAs. U.S. and Colombian officials met in 2018 and
not prove it was “sustained or recurring” and “in a manner
2019 to review implementation and potentially “modernize”
affecting trade,” and thus did not violate FTA provisions.
the FTA. Labor compliance was a top issue discussed.
Issues for Congress
 For more, see CRS In Focus IF10046, Worker Rights
Some Members of Congress and labor groups have
Provisions in Free Trade Agreements (FTAs) and CRS
scrutinized enforcement of labor provisions as “slow and
In Focus IF10645, Dispute Settlement in the WTO and
cumbersome,” and relying “on the political will of
U.S. Trade Agreements, by Ian F. Fergusson.
governments.” They call for more monitoring and oversight
of labor practices. Other analysts argue that the debate and
Cathleen D. Cimino-Isaacs, Analyst in International Trade
scrutiny over labor provisions in FTAs, coupled with robust
and Finance
consultative mechanisms, have led to greater cooperation
and helped countries to improve standards.
IF10972
https://crsreports.congress.gov

Labor Enforcement Issues in U.S. FTAs


Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF10972 · VERSION 7 · UPDATED