U.S.Trade Representative Michael Froman recently announced that the Obama administration is proceeding with a labor enforcement case against Guatemala. The case arises under the Labor Provisions of the U.S.-Dominican Republic-Central America Free Trade Agreement (“CAFTA-DR”) and is the first case to be litigated under any free trade agreement. The CAFTA-DR is a free trade agreement the United States entered into with five Central American Countries; Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua and the Dominican Republic. Since its creation, the treaty has been used to create new economic opportunities by opening markets and promoting transparency in the region.
The thrust of this case rests on Chapter 16 of the CAFTA-DR. Chapter 16 outlines the parties shared commitment under the International Labor Organization to ensure internationally recognized labor norms. More specifically, article 16.2 contains an “enforce your own laws” standard: “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.”
It is apparent the United States has been concerned with the action or inaction of the Guatemala government in implementing its labor laws for a while now. In 2008 AFL-CIO and six Guatemalan labor unions filed a complaint with the U.S. Labor Department alleging that the Guatemalan government was failing to enforce its own labor laws, as required under the trade agreement. Then in 2011, due to Guatemala’s continued and apparent failure to comply with Article 16.2, the United States requested the establishment of an arbitral panel under the CAFTA-DR’s dispute settlement chapter. Soon thereafter, Guatemala and the United States agreed to suspend the arbitral panel in hopes an implementation and enforcement plan would be effective.
Through the Enforcement Plan, Guatemala promised to strength its labor inspections, streamline the process of sanctioning employers, increase labor law compliance by companies, and enforcement by labor court order. Guatemala has since failed to meet the terms of the Enforcement Plan, and therefore, is still in violation of Article 16 of CAFTA-DR. As such, The United States is expected to file a brief for the arbitration panel within four weeks.
This step by the Obama Administration has been applauded by AFL-CIO President Richard Trumka who knows this arbitration could have important implications on the trade agreements currently being negotiated by the United State, such as the Trans-Pacific Partnership (“TPP”) and Transatlantic Trade and Investment Partnership (“TTIP”). Trumka hopes these treaties will include stronger labor protections with mechanisms that are powerful toprotect workers’ rights in a timely manner.
Depending on the outcome of the arbitration, there may be an uptick in arbitral enforcement of treaties, and human rights provisions therein. But is this enough? Trumka’s statements suggest the arbitral panel and provisions of the CAFTA-DR are not strong enough protections for workers under a trade agreement. Is the arbitration a clear enough message to future trade partners that labor rights are fundamental to a trade relationship with the United States? If not, what provisions could be drafted into TPP or TTIP to ensure our future trade partners will meet their obligations and enforce labor rights?