The evolution of labor provisions in U.S. free trade agreements: lessons learned and remaining questions examining the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).

• Author: Albertson, Paula Church

INTRODUCTION

The United States negotiates free trade agreements with other countries that must be approved by Congress before the U.S. can be an official party to the agreement. The debate surrounding the labor chapter of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) created a minefield that almost derailed its passage. (1) Some argued that CAFTA-DR would "bring new investment that means good jobs and higher labor standards for their workers." (2) Others were certain that CAFTA-DR would bring "deteriorating trade balances, lost jobs, and worker rights violations." (3) On June 30, 2005, the Senate passed CAFTA-DR by a vote of 54 to 45. (4) In the House, the measure passed 217 in favor and 215 against. (5) How did CAFTA-DR respond to the concerns regarding labor? Was it sufficient? Is there more that trade agreements can do to improve labor standards around the world? This Article hopes to address these questions by looking at the negotiation of CAFTA-DR's labor language, examining how this language has been implemented thus far, and exploring how CAFTA-DR incorporated labor rights reporting and technical assistance.

First, the Article explores the importance of congressional authorizing language that guides the United States government during its negotiations of free trade agreements. This guiding language has played a critical role in the evolution of labor standards within the context of free trade agreements (FTAs). In part because of the challenging nature of labor issues in trade negotiations, congressional authorizing language establishes a minimum bar for what the free trade agreement language should include regarding labor standards in an FTA. This language has had a serious impact and is reflected in the actual agreement text.

Second, the Article looks at the CAFTA-DR's labor chapter text and how it has been implemented thus far. It notes that while the debate rages regarding FTAs' effect on labor standards, many of the critical issues have yet to be tested. It concludes that it is premature to declare how effective FTA labor chapters have been.

And third, the Article notes that the ideal situation for promoting internationally recognized labor standards goes beyond free trade agreements and incorporates reporting and technical assistance. These elements lead to a better understanding of the challenges to labor law enforcement and help build the technical capacity to do so. Reporting and technical assistance should be included in any analysis of labor and trade, and could be part of congressional authorizing language and the free trade agreement negotiation process.

1. NEGOTIATING AUTHORITY--CRITICAL TO PROGRESS

   This Part will look at the negotiating context for a free trade agreement, specifically CAFTA-DR. First, this Part sets out the constitutional requirement that Congress authorize the executive branch to negotiate trade. It looks at how the congressional authorizing language has incorporated labor standards, and how this exact language, in turn, is reflected in the FTA language itself. Second, it briefly notes counterpart negotiating countries' traditional resistance to linking the two issues, highlighting the critical role congressional language can play.

   1. Congressional Authorizing Language

      The U.S. Constitution gives Congress the power "[t]o regulate Commerce with foreign Nations," and "[t]o lay and collect Taxes, Duties, Imposts, and Excises.' And over the years, Congress has empowered the executive branch, with particular care and specific instruction, to negotiate agreements related to commerce with foreign nations. (7)

      In 2002, Congress passed the bipartisan Trade Promotion Authority Act (TPA) of 2002. (8) This Act sets out the overall trade negotiating objectives, which include the goal of "promot[ing] respect for worker rights and the rights of children consistent with core labor standards of the [International Labor Organization]. (9) In addition, it specifically states that the principal trade negotiating objectives for labor (and environment) are:

   1. to ensure that a party to a trade agreement with the United States does not fail to effectively enforce its environmental or labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the United States and that party after entry into force of a trade agreement between those countries; B) to recognize that parties to a trade agreement retain the right to exercise discretion with respect to investigatory, prosecutorial, regulatory, and compliance matters and to make decisions regarding the allocation of resources to enforcement with respect to other labor or environmental matters ... and to recognize that a country is effectively enforcing its laws if a course of action or inaction reflects a reasonable exercise of such discretion... ; C) to strengthen the capacity of United States trading partners to promote respect for core labor standards (as defined in section 3813(6) of this title). (10)

      The CAFTA-DR text that resulted from negotiations conducted under TPA illustrates the important role of congressional authority in shaping FTA text. CAFTA-DR Article 16.2.1.(a) states, "A Party shall not fail to effectively enforce its labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement." This language should sound familiar. It highlights the link between the congressional authority under which the CAFTA-DR was negotiated and the text in the final agreement, some of which is identical to the negotiating priorities of TPA.

      In fact, this text is included in all the FTAs the U.S. negotiated under TPA, such as the agreements with Australia, Bahrain, Central America and the Dominican Republic, Chile, Morocco, Oman, and Singapore. (11)

      While FTAs with Peru, Colombia, Panama and South Korea were still pending approval, on May 10, 2007, the U.S. Congress, under a Democratic majority, worked with the Bush Administration to develop the "New Trade Policy with America." The new authorizing language included four new principles: (1) that each party should "adopt and maintain in its statutes, regulations, and practices, the rights as stated in the ILO Declaration and its Follow-Up"; (2) that no party can lower its labor standards; (3) that no party can use discretion regarding resources and policy priorities as justification for patterns of action or inaction; and (4) the dispute settlement processes for commercial disputes should be the same as for labor disputes. (12)

      The U.S. returned to renegotiate text in the Peru FTA's labor chapter, and released the new text on June 25, 2007. (13) The new language reflected the principles outlined in the new trade negotiation authority. It stated, "Each Party shall adopt and maintain in its statutes and regulations, and practices thereunder, the following rights, as stated in the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up (1998) (ILO Declaration)." (14) The Peru FTA also specifically stated, "[T]he distribution of enforcement resources shall not be a reason for not complying with the provisions of this Chapter." (15) Congress could hold the latest FTA up to the mirror and again would see much of their authorizing language reflected back in the agreement's text.

   2. Congressional Authorizing Language Is Critical in the Context of Negotiation

      An FTA must be negotiated with another country, and those countries that have come under scrutiny for their labor rights practices have resisted any linking of the labor and trade agendas. At the 1996 World Trade Organization (WTO) Singapore Ministerial, developing countries voted down the U.S. proposal for a committee to study the relationship between worker rights and trade. Many nations viewed such linkage as a threat to their comparative advantage with regard to lower labor costs. (16) In 1999 m Seattle, the developed nations wanted to discuss labor standards, and the developing world viewed this as a protectionist mask, proving labor to be one of the most difficult challenges when dealing with world trade. (17) Even an effort supported by the ILO Director General that proposed linking labor standards and exports as part of a labeling program for countries complying with core labor standards was rejected in large part because of opposition from developing countries. (18) CAFTA-DR was no exception, with the Central American countries anything but eager to incorporate labor rights within the main agreement. (19)

      To illustrate one aspect of the FTA context, it is useful to compare free trade agreements and unilateral trade preference programs. Unilateral trade preference programs are granted from one country to another, and do not require the other country's consent. The U.S. provides trade preferences, such as lower tariffs on imports from designated developing countries. One of the major goals of these types of programs is to promote development in designated developing countries by lowering tariffs on imports from those countries.

      FTAs share much in common with unilateral trade preference programs. (20) Both FTAs and unilateral trade preferences include labor standards requirements, a review process to evaluate if the country is meeting the criteria, and the possibility of linking labor rights to tariffs. FTAs, however, are negotiated between two (or more) countries.

      Although the negotiating countries' attitudes may be evolving as far as their interest and willingness to discuss labor rights in an FTA, (21) traditionally, counterpart countries have commonly resisted attempts to link the two. The stage then, for the actual negotiations of a free trade agreement, is set--the U.S. enters and labor is not on the other side's agenda. How do U.S. government (USG) negotiators approach labor rights within this paradoxical...