[CTC] Sources: New U.S. NAFTA labor text clarifies May 10, CAFTA language

Thu Apr 26 09:08:41 PDT 2018

Sources: New U.S. NAFTA labor text clarifies May 10, CAFTA language
April 25, 2018

The Office of the U.S. Trade Representative has submitted to stakeholders and Capitol Hill new labor text to include in a renegotiated North American Free Trade Agreement that would clarify language cited last year in a U.S. loss in a labor dispute against Guatemala, according to sources familiar with it.

Inside U.S. Trade has learned that the new text has been modified from what was originally tabled by USTR in October -- which largely mirrored the labor chapter included in the Trans-Pacific Partnership -- by adding footnotes designed to clarify contentious parts of what is the so-called May 10 deal requires in trade agreements.

That deal -- struck between congressional Democrats and the Bush administration in 2007 -- has been used as a foundation for labor chapters in free trade agreements. It says FTA parties must show that a labor violation occurred through a “sustained or recurring course of action or inaction” and in a “manner affecting trade or investment between the parties.” The May 10 template also requires countries to adopt and maintain in their laws and regulations five fundamental rights contained in the 1998 International Labor Organization Declaration.

The new U.S. NAFTA text does not completely eliminate the May 10 language that led to a U.S. loss in a nine-year labor dispute <https://insidetrade.com/node/159229> brought against Guatemala under the Dominican Republic-Central America Free Trade Agreement, the sources said. A panel set up under the deal said the U.S. had not proven that Guatemala’s failure to enforce its labor laws was affecting trade.

Since then Democratic lawmakers and labor groups have called for NAFTA 2.0 labor text to include reformed May 10 language <https://insidetrade.com/node/161015>. A group of Democratic senators, in a Nov. 15 letter to U.S. Trade Representative Robert Lighthizer, argued the new labor chapter must strike or “narrowly define” the requirement that labor law violations must be attributed to a “sustained or recurring course of action or inaction” to constitute a violation. They also called on USTR to fully eliminate the “manner affecting trade” provision.

One source told Inside U.S. Trade this week that Democrats and labor groups had not given up on their goal of eliminating the “manner affecting trade” language but noted its removal “hasn't happened yet.”

NAFTA negotiators are in the fourth week of talks that could produce an agreement in principle by May 4 <https://insidetrade.com/node/162786>, as Inside U.S. Trade reported last week. NAFTA ministers are holding talks in Washington, DC, this week.

The International Labor Rights Forum, in an April 12 report <https://laborrights.org/wrongturn>, recommended that future trade agreements -- including a retooled NAFTA -- incorporate clearer language to prove that a country has violated its labor obligations and criticized the arbitration panel in the U.S.- Guatemala case for getting tied “in knots trying to parse the meaning” of language in the May 10 template.

ILRF suggested that any labor chapter based on the May 10 deal “simplify the ‘sustained or recurring course’ jumble” by modifying it to “repeated action or inaction” and “let the contending parties argue about how much repetition must be shown.”

The labor forum also suggested that NAFTA negotiators clarify the “manner affecting trade” provision by including language allowing parties to show that a labor violation affected trade by showing it occurred in a trade-related sector.

While the U.S. was able to prove that at eight worksites and with respect to 74 workers Guatemala had not effectively enforced its labor laws by failing to secure compliance with court orders, the arbitration panel's report said that the U.S. could not prove these instances constituted a course of inaction that was in a manner affecting trade.
“Instead, new language should clarify or substitute for ‘in a manner affecting trade’ to make clear that failure to effectively enforce labor laws involving employers and workers in a firm or sector involved in trade (such as the port workers, plantation workers, and apparel factory workers involved in [the U.S.-Guatemala case]) is sufficient to meet the ‘manner affecting trade’ test,” the report states.

ILRF called the arbitration panel’s interpretation of the “manner affecting trade” language the “Achilles Heel” in the U.S.-Guatemala case.

Sources also said the new NAFTA labor text includes a footnote that was incorporated into TPP's labor chapter, which has faced opposition from labor groups. But those sources said it was unlikely the footnote would be struck entirely because such a removal could require changes to U.S. law.

The footnote in TPP and the NAFTA proposal clarifies that the labor obligations "refer only to the ILO Declaration." Labor advocates oppose that language because they believe it prevents the U.S. from fully committing to the eight conventions outline by the ILO, some of which the U.S. is not party to.

The ILO Declaration commits members to “respect and promote” principles in four categories, regardless of whether they have ratified the relevant conventions. Those categories include freedom of association and recognition of the right to collective bargaining, the elimination of forced and child labor, and the elimination of discrimination.

One labor source said the inclusion of the ILO footnote would make the labor obligations the parties would agree to “less clear” and leaves room for an arbitration panel to potentially misinterpret such standards.

“It leaves parties unsure of what they are agreeing to,” the source said, adding, “but the problem is when you when you try to enforce something that lacks clarity -- it makes it more difficult to enforce.”

“It's clearer to us to not include the footnote because it creates an extra trade barrier toward enforcement because some [arbitration] panel might say 'No that's not what it means,'” the source said. “But having it in there leaves it a question of -- and as we learned from Guatemala case -- the more hurdles you have to hop though to show country is violating its labor obligations, the harder it is to get them to comply with those obligations.”

One source said it was “unclear” whether the inclusion of such a footnote would be the labor community's “sword to die on,” or if labor allies would take a broader view and ultimately support what USTR has pitched on labor.

Rep. Bill Pascrell (D-NJ), the top Democrat on the House Ways & Means trade subcommittee, told Inside U.S. Trade earlier this month that his caucus could be asked to support a “conceptually finalized” NAFTA document.

Asked about the new labor text, Pascrell replied: “What I think might happen is we may receive a document that will not be finalized but be conceptually finalized.”
 “We might be asked to support it while it’s going to be worked on for the next month but I think we are getting closer and closer,” he said. “I think that we will have by beginning of May not a finished product but a product that will be conceptually complete -- in terms of everything,” he said, adding, “I really believe that -- we want to make this bipartisan.”

U.S. Trade Representative Robert Lighthizer has said gaining Democratic support on the deal's labor chapter is critical for its overall passage. Lighthizer, at a meeting with Trump and lawmakers in February, said that he believed “20 or 25 Democrats in the Senate and a large number of them in the House” were “very much in reach <https://insidetrade.com/node/161875>.” After that meeting, Sen. Sherrod Brown (D-OH) said he agreed with Lighthizer's assessment that 20 to 25 Democrats could vote for a renegotiated pact as long as it was “good for American workers.” -- Isabelle Hoagland (ihoagland at iwpnews.com <mailto:ihoagland at iwpnews.com>) with Jack Caporal (jcaporal at iwpnews.com <mailto:jcaporal at iwpnews.com>)
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