Bridges Weekly Trade News Digest • Volume 14 • Number 29 • 4th August 2010
Targeting Guatemala, US Launches First-Ever Labour Rights Dispute Under an FTA
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In a landmark move, the US has launched a formal labour rights complaint against trade partner Guatemala under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). US Trade Representative Ron Kirk announced the decision on Friday during a speech in Pennsylvania. It is the first time that any country has filed a formal labour case under a free trade agreement.
In its official request for consultations, the US claims that the Central American country has failed to enforce effectively Guatemalan laws that protect workers’ rights, such as the freedom of association, the right to bargain collectively, and the right to work in acceptable conditions.
This alleged lapse in governance “harms US workers by forcing them to compete against substandard labour practices and tilts the playing field away from American workers and business,” the Office of the USTR said in a statement. Kirk, in his speech, urged the Guatemalan government to take “specific and effective action - including, if appropriate, legislative reforms - to improve the systemic failures in enforcement of Guatemalan labour law.”
Dispute fuelled by labour unions’ concerns
Labour unions in both countries have been publicly seeking action on the subject since 2008. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) - the largest federation of labour unions in the US - joined forces with six Guatemalan unions to file a public submission with the US Department of Labor, in which they denounced the alleged violations.
The US Labor Department issued a follow-up report in early 2009, the results of which prompted the US and Guatemala to begin negotiations on the subject. However, Kirk’s announcement made clear that the US is not satisfied with the results of these discussions and has not been appeased by what the Guatemalan government has done so far to rectify these problems.
According to the formal consultation request that Kirk and US Secretary of Labor Hilda Solis submitted to Guatemala, the US has engaged in a series of investigations over the last 11 months in which it has examined Guatemala’s compliance with Chapter 16 of CAFTA-DR. This provision requires each party to ensure the effective enforcement of its labour laws.
Their letter states that the US has “identified a significant number of failures to enforce, constituting a sustained course of action or inaction.” They accused Guatemala’s Ministry of Labour of failing to investigate alleged labour law violations, failing to take appropriate enforcement actions, and failing to enforce court orders.
Kirk and Solis, in their letter, also cited US concerns over labour-related violence in Guatemala, adding that they were troubled over the Guatemalan government’s response “to the use and threats of violence that appear to be related to the exercise or attempted exercise of labour rights in Guatemala.”
Guatemala suspects political motivation behind US actions
In a statement released yesterday by the Guatemalan Ministry for Foreign Affairs, the Central American country expressed surprise at the complaint, and was even more taken aback by Washington’s decision to announce the dispute in such a public fashion.
The Ministry’s statement also alluded to Guatemala’s concerns that the complaint could be politically motivated. The upcoming consultations should be held in “an environment of seriousness and mutual respect that will guarantee that the labour issue be studied objectively,” the statement said.
Trade experts interviewed by The New York Times also suggested that the complaint might not purely be driven by labour concerns. The administration of US President Barack Obama has been pushing Congress to ratify pending FTAs with Colombia, Korea, and Panama. The three pacts were signed during the Bush Administration but lawmakers have yet to ratify them. In recent weeks, Obama has especially been pushing the Korea-US FTA, despite deep-seated opposition from some members of the US Congress - especially from some of his fellow Democrats.
Much of the opposition to these three pending FTAs comes from their lack of labour provisions. However, if the Obama administration takes a hard line with Guatemala over labour issues, the White House might be able to prove to congressional Democrats that it views the subject as an important aspect of trade policy.
Next steps
The two countries now have 60 days, from the date of the complaint, to come to some sort of agreement in bilateral consultations. After that deadline passes, the mechanisms built into the CAFTA-DR FTA could subject Guatemala to an annual penalty of US$15 million, according to Guatemalan newspaper La Prensa.
Should Guatemala then fail to pay the US$15 million, the US could respond using trade sanctions - including the suspension of CAFTA-DR tariff benefits.
However, only some of the concerns brought up by the US - specifically, those relating to the enforcement of domestic labour laws - can be addressed via CAFTA-DR’s dispute settlement mechanism. Labour-related violence, for instance, cannot be dealt with using this procedure.
The case constitutes the first enforcement case on labour rights that has ever been brought under a free trade agreement. Since the establishment of the North American Free Trade Agreement in 1994, the inclusion of labour law provisions in FTAs has become increasingly common. However, only the most recent agreements provide for strong dispute settlement procedures for such cases, and even fewer allow for trade sanctions in the case of failure to comply.
ICTSD reporting; “AFP: US files labor rights case against Guatemala,” AGENCE FRANCE-PRESSE, 31 July 2010; “EE.UU. señala al país de violar leyes laborales,” PRENSA LIBRE, 31 July 2010; “E.E.U.U. iniciará disputa con Guatemala por violación de leyes laborales,” PRENSA LIBRE, 30 July 2010; “U.S. Plans Trade Complaint Against Guatemala,” THE NEW YORK TIMES, 30 July 2010.
2 responses to “Targeting Guatemala, US Launches First-Ever Labour Rights Dispute Under an FTA”
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It is not correct that the three pending FTAs, with Korea, Colombia, and Panama, lack labor provisions. All contain labor chapter that are similar to but even go beyond the CAFTA agreement, including in having trade sanctions as an option, which CAFTA does not.
Of the three, concerns about labor rights are only really an issue in the case of Colombia, where union organizers and leaders have been targets in the ongoing civil conflict.
Those who want to believe that some provisions of FTAs have ornamental values should rethink.