NAFTA, GATT, and the current free trade system: a dangerous double standard for workers' rights.

• Author: Taylor, Chantell

The single, clearest, most direct result of economic globalization to date is a massive global transfer of economic and political power away from national governments and into the hands of global corporations and the trade bureaucracies they helped create. This transfer of power is producing dire consequences for the environment, human rights, social welfare, agriculture, food safety, workers' rights, national sovereignty, and democracy itself.(1)

1. INTRODUCTION

   1. The 1999 Seattle Round and WTO's Future

   From November 30th through December 3rd 1999, the 135 member States of the World Trade Organization (WTO)(2) were scheduled to convene for a round of negotiations in Seattle, Washington "to review the global trading system and ensure its dynamism and responsiveness in the years ahead."(3) The Seattle Round is ninth in a series of "negotiating rounds," including the Uruguay Round of 1986-94 that resulted in the official birth of the WTO.(4) Each round has built off of the last and each has brought in more member countries to negotiate rules for liberalized trade.(5) The Seattle Round was considered the most significant meeting of the members since the 1994 establishment of the WTO because the members intended to map out the WTO's work agenda for the months and years ahead.(6) It was this part of the agenda that roused controversy between the government bureaucrats and citizen action groups, whose visions for the future of the WTO were in direct conflict.

   To many, and particularly to organized labor, the Seattle Round constituted a rare opportunity to capture the attention of global bureaucrats who for years have been crafting international trade rules without democratic participation, transparency or accountability. As early as November 26, 1999, fair trade(7) activists from all over the world began sprinkling into Seattle homes, hotels and streets -- just the beginning of an ultimate activist monsoon. It was earlier predicted that fair trade demonstrators would outnumber the bureaucrats of the WTO by the thousands, and some international trade bureaucrats and lawyers in Washington, D.C. anticipated "real blood and guts."(8) Their predictions came true ... with a vengeance.

   The controversy between organized labor and the trade bureaucrats of the WTO, while multifaceted, can be plainly stated: the WTO openly declares that labor is not on the agenda and labor thinks it ought to be. According to the WTO, "there is no work on the subject [of labor] in the WTO, and it would be wrong to assume that it is a subject that 'lies ahead.'"(9) Rather than integrate labor standards directly into WTO rules and agreements, WTO members defer the issue to the International Labour Organization (ILO): "The International Labour Organization (ILO) is the competent body to set and deal with these standards and we affirm our support of its work in promoting them."(10) Conversely, the AFL-CIO,(11) America's largest labor union and an avid opponent of the existing WTO,(12) argues:

   WTO failure to enforce minimum labor standards results in ongoing exploitation of workers in the global market ... The WTO enforces intellectual property rights, market access and government regulation of investment -- and there is no reason why it also cannot enforce basic minimum standards for the humane and decent treatment of workers.(13) B. Summary

   This article compares the corporate rights embodied in the North American Free Trade Agreement (NAFTA) and the GATT/WTO with workers' rights embodied in the North American Agreement on Labor Cooperation (NAALC) and the International Labor Organization (ILO), suggesting that corporations enjoy far greater protection in the global marketplace than workers. This article further argues that unless the system is reformed, workers will continue to be exploited at the expense of corporate profits. By contrasting the NAFTA and the GATT/WTO enforcement mechanisms for commercial rights versus labor rights, this article attempts to expose how the current free trade paradigm procedurally and substantively promotes a double standard. These inequities reflect a fundamental flaw perpetuated in international trade policy today -- that international commercial interests can somehow be divorced from the very labor market that fuels globalization.

   Section two of this article presents a general background of the NAFTA and the GATT/WTO, including discussion from both sides of the debate and current efforts to clone the agreements in new trade accords. Section three compares the NAFTA's rights for corporations with the NAALC's rights for labor, noting two specific cases brought by corporations under the NAFTA dispute settlement provisions. Similarly, section four compares the GATT/WTO rules governing corporate rights with the ILO principles addressing labor standards. Section five presents conflicting progress reports in the years since NAFTA and GATT/WTO took effect. Finally, this article concludes with recommendations and alternatives to reshape the current trade policy.

2. NAFTA, GATT/WTO, AND THE WALLS CAME TUMBLING DOWN

   Two major congressional votes in the early 1990's continue to shape the direction of international trade policy today -- the 1993 approval of NAFTA and the 1994 approval of the GATT and the WTO.(14)

   1. NAFTA

      1. Background

         Although Ronald Reagan was the first U.S. President to propose a trilateral free trade pact between Canada, the United States and Mexico, no one took the notion seriously until the Bush Administration picked up the idea in 1991.(15) At the time, Mexican President Carlos Salinas de Gartari had undertaken major steps to revitalize Mexico's economy, including "the pursuit of a free trade pact with Washington."(16) On February 5, 1991, after the Salinas and Bush Administrations privately affirmed mutual interest, President Bush officially announced to Congress his commitment to negotiate a North American Free Trade Agreement, calling NAFTA "the first step toward a hemispheric common market."(17)

         Since its inception, the heart of the NAFTA has been to open up markets between Canada, Mexico and the United States.(18) Some of NAFTA's key provisions include:

         Elimination of tariffs on North American industrial products within 10 years of implementation; Elimination of non-tariff barriers and other trade distorting restrictions, such as import licenses, local content, local production, and export performance requirements; Elimination of investment conditions, such as technology transfers, use of domestic goods or services, set export levels or percentages, and limits on percentage of imports relative to exports; Guarantees that investors be treated the same as domestic investors (national treatment); Guarantees to investors the right to fair compensation in the event of expropriation, the right to dispute settlement and monetary damages (legal standing), and the right to repatriate profits and capital (capital mobility); Expansive protection of intellectual property rights; and Access to government procurement.(19) 2. Proponents of NAFTA and Their Promise to Labor

         Congress had not considered the notion of incorporating core labor standards during NAFTA negotiations with Mexico and Canada, rather, their focus was strictly commercial.(20) Labor issues became a central part of the debate when Bill Clinton made a 1992 campaign pledge to complete the NAFTA negotiations -- but with added protections for labor, the environment and other social issues.(21)

         Initially, Clinton was pushing for a NAFTA virtually identical to the Reagan-Bush proposals already on the table. It was not until massive opposition erupted from organized labor and the environmental community, both important constituents to Clinton's campaign, that he pledged to include side agreements on the issues.(22) This strategy managed to satisfy the business lobby by keeping labor issues out of the body of the agreement, while appeasing labor groups by not wholly ignoring labor standards.(23) Clinton promised that the proposed labor side agreement would include "strong resolution mechanisms and effective remedies,"(24) and a team of Clinton administration economists projected figures of 200,000 new jobs for Americans in the first two years of NAFTA alone.(25)

         Other proponents of NAFTA made dramatic projections that U.S. export increases to Mexico would create thousands of new, high-paying jobs for Americans. In 1993, Robert B. Reich, Secretary of the U.S. Department of Labor, testified before the U.S. Senate:

         In addition to generating more jobs in the United States, NAFTA will lead to better jobs. Jobs created by expanded trade typically are the sorts of higher wage, higher skilled jobs in which the future of the American work force depends. Missing the boat on NAFTA, we will prevent us from reaping these potential gains.(26) Senator Lloyd Bentsen also testified to the U.S. Senate that: Now 700,000 Americans depend on trade with Mexico for their jobs. And things are going to get even better with NAFTA. We calculate that we'll pick up 200,000 more jobs in the next two years alone, and jobs related to trade with Mexico pay about 12 percent better than average ... This agreement is clearly good for America, and it's clearly good for American workers. We're getting a deal here.(27) To ensure that the NAFTA gain much needed approval in the House, the Clinton administration sought assistance from business leaders. In an effort to dispel some of the widespread concern that NAFTA would encourage U.S.-based companies to relocate in Mexico where labor and other standards were lax, Clinton urged major companies to formally pledge that they would not relocate their plants if NAFTA were approved.(28) U.S. companies balked at the idea of being bound to such a pledge and ultimately refused to sign.(29)

         The business leaders did, eventually, come to the rescue because they were committed to one thing: passage of a NAFTA without labor or environmental...