U.S. negotiation objectives for New NAFTA: Labor no longer separate, but still unequal

U.S. negotiation objectives for New NAFTA: Labor no longer separate, but still unequal
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Publicly, American workers are the focus of the much-touted renegotiation of NAFTA announced by USTR in May. The first round of negotiations begins on August 16, 2017. USTR’s NAFTA negotiation objectives, released on July 17th, place the American worker front and center, observing that trade deficits and factory closures created by NAFTA have left American workers economically stranded. Such bold rhetoric might lead observers to believe that the administration’s negotiation objectives for labor provisions in NAFTA will be equally bold. Sadly, this is not the case.

NAFTA’s 1994 labor side agreement – the North American Agreement on Labor Cooperation or NAALC – has been criticized for (1) inadequate dispute resolution mechanisms; (2) not including the core labor standards of Freedom of Association, Right to Collective Bargaining and Right to Strike in NAALC’s full panoply of dispute resolution mechanisms; (3) setting a benchmark for enforcement of existing national laws rather than international labor standards; and (4) failing to result in meaningful change in workers’ lives in North America.

Criticism of the NAALC and imperfect implementation and application by policy makers have obfuscated the agreement’s strengths. NAALC is the only international labor agreement that is fully binding and readily enforceable on the United States. Over 25% of NAALC petitions filed since 1995 have been filed with Mexico about ineffectual enforcement of labor laws in the United States. NAALC’s definition of labor law covers 11 labor principles and is arguably broader than the definition in subsequent U.S. FTAs. In addition to covering minimum wage standards, occupational safety and health and the core labor standards outlined in the 1998 ILO Declaration on Fundamental Rights at Work, NAALC covers compensation for workplace injuries and equal labor protection for migrant workers. Surprisingly, NAALC’s gender protections are stronger than those in CAFTA-DR, which does not extend its dispute resolution provisions to the elimination of workplace discrimination and guarantee of equal pay for women and men in Central America. Finally, NAALC’s public communication process allowing members of civil society to file petitions alleging a member state has failed to effectively enforce labor laws has been duplicated in every subsequent U.S. FTA since.

Labor advocates have criticized NAALC on the “Separate and Unequal” standard, arguing that workers are not afforded the same mechanisms and remedies afforded to businesses and other member states under NAFTA’s business-to-state and state-to-state international arbitration procedures. Instead, NAALC provides for a public petition process (leading to a public report and government discussions); the possibility of the establishment of an Evaluative Committee of Experts (ECE) to issue a neutral report analyzing subjects raised in petitions; and finally, the potential for international arbitration and limited trade sanctions.

Following the pattern of every U.S. FTA negotiated since the 2000 U.S.-Jordan FTA, USTR’s current proposal is that labor provisions will be benchmarked to international labor standards, brought into the core NAFTA text, and subject to the same government-to-government arbitration mechanisms as other NAFTA disputes. This may seem like an advancement intellectually. In practice, realization of the fantasy of using international trade arbitration to address issues raised under FTA labor provisions has left much to be desired. On June 26, 2017, it was announced that the U.S. lost to Guatemala in the very first international trade arbitration resulting from a petition arguing that Guatemala failed to comply with its labor obligations under CAFTA-DR. First filed in April 2008, the Guatemala CAFTA-DR labor petition took over 9 years to wend its way to this ignominious conclusion.

NAALC also suffers from the Separate and Unequal standard when it comes to treatment of different labor principles under its dispute resolution mechanisms. Not all 11 labor principles are subject to the fully panoply of dispute resolution under the NAALC. A NAALC arbitral panel can only be requested in the case of petitions relating to occupational safety and health, child labor or minimum wage standards.

This shortcoming is not addressed in USTR’s 2017 proposal. In its NAFTA renegotiation objectives, USTR vows to “[e]stablish rules that will ensure that NAFTA countries do not fail to effectively enforce their labor laws implementing internationally recognized core labor standards and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health laws.” USTR’s proposal actually narrows the scope of dispute resolution under New NAFTA by not including child labor as one of the listed subjects eligible for international arbitration.

In fact, USTR’s NAFTA re-renegotiation objectives set a tougher standard for proving a violation of labor obligations in international arbitration than that set in the NAALC. Under NAALC, a case may be subject to arbitration if a member state’s failure to effectively enforce labor laws is “trade-related.” The proposed standard in the renegotiation objectives is failure to effectively enforce “through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the parties.” This is similar to the standard set in CAFTA-DR – which turned out to be insurmountable for USTR in the CAFTA-DR Guatemala labor arbitration case - not to mention for trade unions, civil society groups and workers of limited means.

It is not just that USTR’s labor-related NAFTA renegotiation goals fail to address NAALC’s most obvious flaws, eliminate some of NAALC’s positive attributes and duplicate past labor-related trade negotiation objectives. New NAFTA will never address serious labor market policy failures by the U.S. and its North American neighbors to address job loss and economic decline that result not only from free trade but technological and economic change. New NAFTA is just Old NAFTA in new clothes.

Like it or not, the current administration must recognize that Zero Sum We Win-You Lose strategies will not heal what ails the American workforce. Negotiation of a New NAFTA that better serves America’s workers requires a truly bold approach, not regurgitation of the same old approaches. It should improve NAFTA’s labor standards and dispute resolution mechanisms and incorporate measures that empower Mexico, Canada and the U.S. to engage in serious regional employment policy development and human and physical infrastructure investment. It means that the U.S. must cooperate with Canada and Mexico to find ways to improve educational and labor market outcomes on both sides of both borders. It also means looking to bold ideas like those expressed in Stephen Zamora’s 2008 article A Proposed North American Regional Development Fund: The Next Phase of American Integration under NAFTA.

Some concrete proposals to improve the negotiation objectives for the New NAFTA include:

  • Exploration of the idea of incorporating the Evaluative Committee of Experts process in the dispute resolution mechanism as an intermediate step on the way to arbitration in order to provide arbitrators with a common factual and labor standards basis for analyzing the facts in arbitral proceedings;
  • Incorporation of the 2016 Trilateral M.O.U. Promoting Women’s Entrepreneurship and the Growth of Women-Owned Enterprises in North America into NAFTA’s text and expansion of the M.O.U. to promote women’s empowerment in the workplace and society as outlined in the 2012 US-Mexico M.O.U. on Women’s Economic Empowerment;
  • Removal of the insurmountable standard of proving a country has failed to effectively enforce labor law “through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the parties” from the New NAFTA negotiation proposal;
  • Expansion of NAFTA’s dispute resolution and arbitral provisions to cover all labor standards covered by the definition of labor law, including: collective labor rights; the elimination of workplace discrimination and guarantee of equal pay for equal work for women and men; elimination of forced labor; and elimination of child labor;
  • Explicit retention of compensation for workplace injuries in the list of labor laws covered by NAFTA;
  • Strengthening of cooperative mechanisms in NAFTA to allow for the development of a North American Employment Policy and Jobs Strategy similar to the European Employment Strategy – including the participation of large and small employers, trade unions, women’s rights groups and other members of civil society;
  • Retention of the labor principle requiring equal treatment for migrant workers; and
  • Development of a North American Investment Fund to help employers and workers adapt to economic and labor market changes caused by free trade as well as technological and economic change.

Other proposals to consider that are currently outside the U.S. trade policy development framework include:

  • Requirement that the U.S. conduct a Human Rights Impact Assessment (HRIA) and Women’s Rights Impact Assessment (WRIA) of New NAFTA before it is implemented, in addition to the labor and environmental studies already required by Congress; and
  • Incorporation of human rights and rule of law provisions in the New NAFTA.

These proposals do not even capture the kind of bold rethinking that needs to be done with respect to renegotiation of NAFTA. Clearly, the administration and we as a country and region are not “there” yet.

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