Labor Rights Enforcement under the NAFTA Labor Clause: What Comes Next under a Potential Renegotiation?

In late March, a draft letter from the acting U.S. Trade Representative meant to notify Congress of the Administration’s intention to renegotiate NAFTA began to circulate. A brief outline of potential U.S. negotiating objectives for labor was included in the proposal. Generally speaking, the few items in the document seem to suggest bringing the NAFTA labor provisions into line with labor conditionality agreements that have been attached to U.S. trade agreements since NAFTA, given the similarities between the language of the leaked draft and the labor chapters of post-NAFTA trade agreements. 

That the three NAFTA partners once found common ground on a labor chapter for the Trans-Pacific Partnership (TPP) foreshadows the inclusion of a modernized NAFTA labor clause without much controversy. The memo suggests important changes, including the decisive step of bringing labor rights into the text of the agreement, equal in importance to commercial and investment claims, and guaranteed through a single dispute resolution panel. These changes would strengthen labor rights enforcement by making violations subject to trade sanctions, which is not currently the case under NAFTA. However, there is also concern that the proposal would narrow the scope of rights covered under the labor clause, with negative consequences for labor protections in North America.

Even though the leaked memo gives little detail about a potential NAFTA clause, by drawing lessons from the patterns of language and institutions included in later U.S. labor clauses, we can speculate on what a modernized NAFTA clause might look like, and how it could improve labor rights enforcement for North American workers.

The labor section of the draft letter:

-Consistent with U.S. priorities and objectives, seek a commitment by the NAFTA countries to adopt and maintain measures implementing internationally recognized labor rights and effectively enforce their respective labor laws concerning those rights.

-Seek to improve mechanisms for consultations and cooperation to strengthen the capacity of the NAFTA parties to promote respect for internationally recognized labor rights, including those embodied in the ILO Declaration of Fundamental Principles and Rights at Work and ILO Convention 182 on the Worst Forms of Child Labor, and to effectively enforce their respective labor laws.

-Seek enforceable labor obligations within the body of the agreement that are subject to the same dispute settlement and remedies as other enforceable obligations.

The first and second items for labor in the negotiating memo serve largely to signal the intention of the USTR to modernize the NAFTA clause, the North American Agreement on Labor Cooperation (NAALC), in terms of the rights covered and their legal sources.  Even this seemingly minor change will have an important impact on the NAALC as it works today. The first item expresses the intention to convince countries to “adopt and maintain measures implementing internationally recognized labor rights and effectively enforce their respective labor laws concerning those rights,” while the second item cites by name the ILO’s 1998 Declaration of Principles and Rights at Work and Convention 182 on the Worst Forms of Child Labour as the legal sources of the international labor rights in question. This is now consistent with all post-NAFTA labor clauses in U.S. trade policy and the TPP.

Formally, there is no issue here, as all three states are members of the ILO and already must uphold the rights enumerated in the 1998 Declaration, whether or not they have signed the relevant conventions, by virtue of that membership. Domestic labor law in all three states already largely follows those principles. However, by shifting to the ILO standards as the legal source, the scope of rights protected under NAFTA would be substantially narrowed from the eleven NAALC labor rights principles to the four ILO fundamental labor rights: freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labor; the effective abolition of child labor and a prohibition on the worst forms of child labor; and elimination of discrimination in respect to employment and occupation.

While there is overlap, other rights included in NAFTA but not the ILO Declaration leave two major NAFTA-specific issues unresolved.  The first is that the rights of migrant workers, which is a central part of the NAALC labor principles and has been a chief complaint at the labor panel over the past 15 years, is not included in the ILO standards. It is not clear as to how labor rights actors will engage any new process to protect migrants, who are especially vulnerable to rights violations when they do not hold citizenship status in the country where they work. Second, a number of additional rights, including minimum standards of employment, equal pay for women and men, and the prevention of occupational injuries and illnesses, are also excluded from the list of fundamental labor rights. Though the argument is typically that these rights could then be attained at the domestic level through union organization, freedom of association rights in and of themselves are not fully guaranteed in North America.  Freedom of association cases make up the bulk of all NAFTA labor complaints for all states, and obstacles to union registration have always been the chief complaint against Mexico inside the NAFTA process. Proposed narrowing of NAFTA-protected labor rights would essentially shift responsibility for the enforcement of some rights back to the domestic level; however, these same rights are presently included at the regional level precisely because domestic compliance remains weak. While the incorporation of labor in the NAFTA agreement itself is a significant step forward, narrowing the scope of labor rights protected by the agreement would amount to a half-step backward.

The second item calls for the improvement of the “…mechanisms for consultations and cooperation to strengthen the capacity of the NAFTA parties to promote respect for international labor rights…”, which, when seen in the light of subsequent trade agreements, may mean a renewed emphasis on cooperative elements of labor dispute settlement rather than adversarial aspects like panel procedures. In all modern U.S. labor clauses, as in NAFTA, labor representatives collectively submit to a series of alternative dispute settlement procedures before ever submitting to a panel that invokes fines or trade sanctions. In fact, though the first step of resolution, Ministerial Consultations—high-level discussions between labor ministers—can be followed by a review by a panel of experts or arbitral panels at the NAALC, these levels of recourse are limited by the class of labor violation, and no case has ever moved beyond the first stage. Only child labor cases, minimum wage disputes, or health and safety violations can lead to trade sanctions under NAFTA. Critics of the NAALC were right to charge that the resolutions were only promises to talk about labor violations and not punish them with trade sanctions. Indeed, the most important violation across North America –freedom of association— is currently subject only to Ministerial Consultations through NAFTA, with no threat of arbitration or penalties. 

Additional emphasis on cooperative mechanisms could be seen as resorting again to talk without action, but this makes sense for states in light of the biggest potential change, expressed in the third memo item: “[to] Seek enforceable labor obligations in the body of the agreement that are subject to the same dispute resolution and remedies as other enforceable obligations.” The memo suggests modernizing NAFTA to be in line with all subsequent labor clauses by forming a single dispute panel, which is legally binding as hard law and can lead to fines and sanctions. If labor rights violations are symbolically as important as commercial and investor rights, and if all labor violations might now be subject to fines or trade sanctions, states would clearly want to engage as many cooperative channels as possible before reaching measures that damage bilateral trade. 

It is not as if cooperative mechanisms do not work; they do. All of the NAFTA-related changes to labor rights practices were either pushed forward domestically by their NAFTA case filings or cemented through Joint Declarations as the result of Ministerial Consultations. In Mexico, these successes have included the transparent publication of union registries, the end of pregnancy testing for female job applicants, and the use of secret ballots in elections.  In the United States, important changes include the separation of migration and labor rights enforcement duties and changes to the H2A and H2B workers visa systems to prevent abuses.

That said, the long road to trade sanctions for most cases, and the inability to get to them at all for freedom of association cases, is the main reason why the protection of labor rights in North America overall has been slow and limited to certain rights. U.S. unions turned away from the process early in light of this perceived ineffectiveness, even as NGOs continued to file cases. The dismissiveness by unions stems in part from their misunderstanding about the nature of NAFTA as an international treaty between states of equal standing, the importance of the norm of sovereignty in preventing the NAALC panels from awarding U.S. unions the types of resolutions they expected—like mandating the rehiring of workers, and the centrality of governments, not companies, as actors. Potential changes to the dispute panel could bring unions back to the table and generate more cases. A single dispute panel that puts labor rights on par with commercial disputes and investors’ rights would remove the tiered system currently in place in the NAALC, and with it, reintroduce the leverage unions always wanted to pressure violating governments to improve domestic labor rights practices or risk measures that potentially damage trade relations. Since states value trade, and are likely to make labor rights concessions to maintain trade relations,  the credible threat of sanctions that NAALC lacks now would be created, and with it, the mechanism for labor rights compliance strengthened. It is this last proposal, and the leverage it introduces through the specter of sanctions, that would promote domestic policy changes in each country, and lead to stronger labor rights enforcement for North American workers.

Kimberly A. Nolan García is Assistant Professor of International Relations at CIDE in Mexico City. The views expressed here are hers alone.

This article was also published on the Mexico Institute's blog on Forbes.com.