[CTC] Peru's Lingering Labor Issues Raise Political Hurdles For TPP's Passage

[Arthur Stamoulis]

INSIDE US TRADE
Peru's Lingering Labor Issues Raise Political Hurdles For TPP's Passage

August 04, 2016 
Peru's lingering compliance issues with labor provisions in its bilateral free trade agreement with the United States would have no effect on the implementation of the Trans-Pacific Partnership, which has similar labor provisions. However, it could create political headaches for the Obama administration as it pursues a lame-duck vote on the TPP deal, sources toldInside U.S. Trade.

Sources said there is no language in TPP legally linking Peru's compliance under its existing bilateral FTA to the passage and implementation of TPP. But a violation of the bilateral agreement means Peru is also violating the same labor provisions included in TPP. Peru would only be found in violation of the existing agreement because that's the mechanism used to file the underlying petition. Another petition would have to be filed under TPP for Peru to be found in violation of that agreement.

Instead, the focus will be on the political ramifications for the Obama administration as it tries to move TPP through Congress, especially if lawmakers raise questions about Peru's compliance with either trade agreement.

The U.S. Labor Department did not have enough time to find actual labor violations <http://insidetrade.com/node/153332> under the existing FTA in a March report, but found enough evidence to raise “serious concerns” and gave the government until Dec. 18 to address recommendations to ensure compliance. The report marked the first time the Department met its 180-day deadline to complete and investigation.

The Labor Department left all enforcement options on the table once the deadline passes, including formal consultations. If formal consultations fail, the U.S. could bring the case before a dispute settlement panel.

The report was prompted by a petition filed in July 2015 by the International Labor Rights Forum (ILRF) and eight Peruvian groups alleging Peru violated the FTA by failing to uphold laws protecting the right to associate with labor unions.

 Alan Wolff, senior counsel at the international trade practice at the law firm Dentons, said both sides of the TPP debate will use Peru's labor compliance as ammunition to sway a future vote.

“I do not recall any provision of TPP that would require compliance with other agreements,” Wolff said. “I would think these two are separate. That does not mean they are not politically linked, and that cuts in two directions. The administration can say it shows they are enforcing existing deals, and opponents of TPP would say they have to see more enforcement.”

Jeff Vogt, legal director for the International Trade Union Confederation, said it's not unprecedented for the U.S. or other countries to pass and certify trade deals when it's clear at least one party is out of compliance from the start. Vogt highlighted the passage of FTAs involving Guatemala, Honduras, Colombia and Peru when each had outstanding labor compliance issues.

A dispute over Guatemala's compliance <http://insidetrade.com/node/154956> with labor provisions under the Central American Free Trade Agreement has been ongoing for nearly eight years; the Labor Department is investigating a petition alleging labor violations under Colombia's <http://insidetrade.com/node/155249> bilateral FTA; and Honduras is currentlyoperating under a labor action plan <http://insidetrade.com/node/151542> to bring it into compliance with CAFTA.

The U.S. president has also held off on certifying FTAs in the past in order to pressure governments into compliance, Vogt said. Congress may be reluctant to pursue that tactic with TPP given labor concerns persisted with Peru, Guatemala, Honduras and Colombia. That's in addition to current concerns with Mexico's labor compliance and the need for labor action plans in Vietnam, Brunei and Malaysia under TPP.

“I think it would be very difficult to [certify TPP] if there is an ongoing dispute process with Peru on labor issues, but that hasn't stopped governments from certifying agreements in the past,” Vogt said. “Colombia was certified, then entered into force when it was clear a number of the provisions in the labor action plan hadn't been complied with.”

Vogt added, “I think that's why the AFL-CIO has always taken the position that not only do we need to see, in the context of these FTAs, legislative reforms, but we also need to see these governments establishing a record of compliance before we move forward, otherwise they will just check the boxes.”

Eric Gottwald, legal and policy director for ILRF, said his group won't seek a duplicate investigation under TPP if it's implemented while labor compliance remains an issue. A new investigation would start from scratch while the investigation under the bilateral FTA would continue from its current point.

Filing a new petition includes a new 60-day period for the Labor Department to consider whether to accept the case, and another 180-day period to conduct the investigation.

Ensuring compliance with the bilateral deal ensures compliance with TPP because both deals adopt elements from the International Labor Organization Declaration on Fundamental Principles and Rights at Work, Gottwald said. These include the freedom of association with unions, recognition of the right to collectively bargain, the elimination of compulsory or forced labor, abolition of child labor, and the elimination of discrimination in respect to employment and occupation.

That identical language ratchets up the political pressure on both nations' administrations to resolve the labor issue before Obama leaves office, since a violation of the bilateral labor provisions at the very least “violates the spirit of TPP,” Gottwald said.

“As you know, the monitoring and enforcement of labor standards has been a big, controversial issue with the major delays already in Guatemala and Honduras,” Gottwald said. “Now if we add on Peru, where nine months and nothing has happened, it looks like it's going down the same road where the government is ignoring the complaint. I don't think that's the sort of message that they want while asking Congress to vote on an FTA.”

Even if the U.S. sought formal consultations with Peru under the bilateral deal or pushed for implementation of a labor action plan, TPP is too important of a deal to hold up on Peru, Wolff said.

“The fact that we have a problem with a country that we are working with to move forward on solving that issue, that's not going to be a show stopper in respect to TPP. That would be my judgment,” Wolff said. “It's just too important. Does it complicate things in terms of other agreements? Of course it does.”

The Peruvian government missed an opportunity last week to move toward compliance when outgoing President Ollanta Humala's administration opted not to release a supreme decree addressing some of the U.S. Labor Department's concerns, Gottwald said. A supreme decree is similar to an executive order.

Sources told Inside U.S. Trade that Humala's administration was unable to reach a compromise <http://insidetrade.com/node/155327> with labor organizations and employers on language requiring preferential hiring for non-traditional export (NTE) employees working under short-term contracts for three or more years with the same employee in exchange for expanding the type of jobs covered in the NTE sector.

NTE employees can be kept on short-term contracts indefinitely under Peruvian law, while other sectors are limited to five years, at which point an employee's position is supposed to become permanent.

NTE sectors include textiles and apparel, certain agricultural products, fishery products, jewelry, wood and paper, and nonmetallic minerals, and the proposed expansion would also include workers within those supply chains.

The U.S. Labor Department raised "serious concerns" that employers in Peru's NTE market did not renew short-term contracts of some employees if they associated with a labor union.

The Peruvian government has already burned through half of the nine-month deadline imposed by the Labor Department to address its issues, which puts pressure on newly elected President Pedro Pablo Kuczynski to address Peru's compliance. Kuczynski took office on July 28.

“It's really disappointing they could not get that decree out. They had months to publish it,” Gottwald said. “What it indicates to me is they may not have felt there were consequences to that decision, that they could just punt it to the next administration. It might be the case they just decided this is a tricky political issue and let's let the next administration deal with it.” --Nate Robson (nrobson at iwpnews.com <mailto:nrobson at iwpnews.com>)

 
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