Think Free-Trade Deals Can Raise Labor Standards? This Case Suggests Otherwise.

Dan DiMaggio

Workers protested the 2008 closing of the Choi Shin factory, the first Guatemalan maquila to be unionized.

This piece first appeared in Labor Notes.

The first-ever labor case brought under a free-trade agree­ment is almost over — but it’s tak­en years to bring just one case this far, and the poten­tial penal­ty is a mere slap on the wrist. The next time a politi­cian assures you a free-trade deal will raise labor stan­dards over­seas, here’s your counterexample.

In Decem­ber, an arbi­tra­tion pan­el will issue its rul­ing on a com­plaint brought by the Unit­ed States under the Cen­tral Amer­i­can Free Trade Agree­ment (CAF­TA) against the Guatemalan gov­ern­ment for fail­ing to effec­tive­ly enforce its labor laws.

It’s been sev­en years since the AFL-CIO, togeth­er with six Guatemalan unions, first sub­mit­ted a com­plaint to the Depart­ment of Labor. They accused Guatemala of fail­ing to pro­tect work­ers’ legal­ly guar­an­teed rights — to asso­ci­a­tion, col­lec­tive bar­gain­ing, and accept­able con­di­tions — by not con­duct­ing inspec­tions, reg­is­ter­ing unions, or ensur­ing com­pli­ance with court orders.

Only 2 per­cent of Guatemala’s work­ing pop­u­la­tion belongs to a union. It has become one of the most dan­ger­ous coun­tries in the world for union activists. The AFL-CIO report­ed that 72 Guatemalan union­ists had been mur­dered since CAF­TA went into effect, as of August 2014, with near-total impuni­ty for their assassins.

The case should ring a note of cau­tion about the hype for the Trans-Pacif­ic Part­ner­ship (TPP), the free-trade deal the Oba­ma Admin­is­tra­tion is push­ing next.

Snail’s Pace

The slow pace of the CAF­TA case is a huge detri­ment to work­ers in Guatemala,” said Stephen Wishart, Cen­tral Amer­i­ca direc­tor for the AFL-CIO Sol­i­dar­i­ty Cen­ter. Their rights are being vio­lat­ed in the same ways that were pre­sent­ed back in 2008.”

The delays have sim­ply giv­en the Guatemalan gov­ern­ment an oppor­tu­ni­ty to put make-up on the prob­lems,” said Home­ro Fuentes, of a Guatemalan labor stan­dards mon­i­tor­ing orga­ni­za­tion called COVERCO.

After decid­ing to accept the case, the U.S. held con­sul­ta­tions with the Guatemalan gov­ern­ment, but failed to reach an agree­ment. In 2011 the U.S. request­ed the estab­lish­ment of the arbi­tra­tion pan­el, which is sup­posed to pro­tect work­ers’ rights under CAFTA.

The pan­el was final­ly con­sti­tut­ed in 2012 — but was put on hold six months lat­er, when Guatemala signed an Enforce­ment Plan, agree­ing to add more labor inspec­tors and increase the Min­istry of Labor’s bud­get for enforcement.

But Guatemala failed to act on most of the plan. Final­ly last Sep­tem­ber, the U.S. request­ed that the pan­el be recon­sti­tut­ed. The first hear­ing was held in June.

A lot of peo­ple would argue that the tim­ing of that is not coin­ci­den­tal — we’re in the mid­dle of a huge trade debate,” said Cas­san­dra Waters, also of the Sol­i­dar­i­ty Center.

Vio­lence Unaddressed

Anti-union vio­lence isn’t among the complaint’s charges. The U.S. gov­ern­ment argues that’s a prob­lem that falls out­side the scope of free-trade pacts.

The AFL-CIO dis­agrees. There’s noth­ing in these agree­ments that pre­vents them from tak­ing up vio­lence,” said Waters. Guatemala is required to enforce its laws relat­ed to free­dom of asso­ci­a­tion — and that would include inves­ti­gat­ing mur­ders of trade unionists.”

The vio­lence, cou­pled with oth­er fail­ures to enforce labor law, make it extra­or­di­nar­i­ly dif­fi­cult for Guatemalan work­ers to form unions.

For exam­ple, accord­ing to Fuentes, there are unions in only three of the country’s more than 160 gar­ment fac­to­ries. Forty per­cent of total Guatemalan exports go to the Unit­ed States — and 94 per­cent of gar­ment exports — are des­tined for the U.S. market.

Guatemala, the largest econ­o­my in Cen­tral Amer­i­ca, is the U.S.’s largest banana sup­pli­er. It also exports hun­dreds of mil­lions of dol­lars of cof­fee, appar­el, and gold each year.

Don’t Even Bother

The basis for the com­plaint is a CAF­TA pro­vi­sion that the par­ties may not repeat­ed­ly fail to enforce labor laws in a way that affects trade.

It cites palm oil plan­ta­tions where work­ers allege they were paid $5 a day — half the legal min­i­mum — and suf­fered burns when they were forced to fumi­gate fields with­out protection.

It also refers to work­ers in a num­ber of indus­tries who were ille­gal­ly fired for orga­niz­ing on the job, and who have wait­ed years to get their jobs back.

A major stum­bling block to labor law enforce­ment is that the Guatemalan Min­istry of Labor’s can­not legal­ly fine employ­ers. Instead it must go through the courts, which delays sanctions.

And even then, employ­ers often ignore court orders, and the gov­ern­ment stands by.

There’s a large num­ber of cas­es where the Min­istry of Labor hasn’t act­ed,” said Waters, but there’s even more cas­es where the work­ers no longer both­er to con­tact the Min­istry because they have no hope that anything’s going to happen.”

Weak and Skewed

The pan­el has three mem­bers, cho­sen from a ros­ter estab­lished under CAF­TA. Each par­ty choos­es one mem­ber, and the two sides pick a chair togeth­er. Guatemala chose a con­sti­tu­tion­al law schol­ar who, accord­ing to some activists, has close ties to the pri­vate sector.

For us, this is a first neg­a­tive deci­sion of the arbi­tral process, since as we under­stand it the arbi­tra­tors should be suit­able, hon­or­able, and inde­pen­dent pro­fes­sion­als,” said Mir­na Nij of the Union of Work­ers in the Infor­mal Econ­o­my (Sindi­ca­to de Tra­ba­jadores de la Economía Infor­mal). We believe this lawyer does not have these characteristics.”

If the pan­el finds against Guatemala, it will face a fine of up to $15 mil­lion a year. This mon­ey would go into a fund ded­i­cat­ed to strength­en­ing the country’s labor institutions.

The best-case sce­nario is that Guatemala pays a fine to itself — which isn’t a very effec­tive deter­rent,” said Waters.

And as José Pinzón, of the Cen­tral Gen­er­al de Tra­ba­jadores de Guatemala, points out, It won’t be the gov­ern­ment, or the busi­ness sec­tor, who will pay it — it will be the more than 15 mil­lion Guatemalans who have to pay it.”

Still, Waters said, the fact that the U.S. chose to take Guatemala to arbi­tra­tion is good, because we should be tak­ing these com­mit­ments seriously.”

Pro­vi­sions do exist that would allow the U.S. to sus­pend some trade ben­e­fits, but only if Guatemala fails to pay the fine.

Trust Us This Time

Since CAF­TA, U.S. free-trade agree­ments have made some advances, includ­ing an enforce­able oblig­a­tion to adopt and main­tain basic prin­ci­ples rec­og­nized by the Inter­na­tion­al Labor Orga­ni­za­tion: free­dom of asso­ci­a­tion, the right to col­lec­tive bar­gain­ing, the effec­tive abo­li­tion of forced labor and child labor, and the elim­i­na­tion of employ­ment discrimination.

There have been sig­nif­i­cant improve­ments about what rights [new­er trade agree­ments] gov­ern,” said Waters. But the actu­al real­i­ty about whether those laws are enforced hasn’t got­ten any better.”

The Oba­ma admin­is­tra­tion pro­motes the TPP as the most pro­gres­sive trade bill in his­to­ry,” with the high­est labor stan­dards yet.

But as a report from Sen. Eliz­a­beth Warren’s staff point­ed out, sim­i­lar promis­es have been trot­ted out to jus­ti­fy every free-trade agree­ment from NAF­TA on.

For exam­ple, in 2005, U.S. Trade Rep. Rob Port­man said CAF­TA has the strongest labor and envi­ron­men­tal pro­vi­sions of any trade agree­ment ever nego­ti­at­ed by the U.S.”

Wishart argues that in all these agree­ments, the mech­a­nisms are weak­er than what exist­ed under the Gen­er­al­ized Sys­tem of Pref­er­ences,” which pro­vides pref­er­en­tial tar­iff treat­ment to devel­op­ing coun­tries and applied to Guatemala pri­or to CAFTA.

The GSP is still in effect for coun­tries not cov­ered by a trade agree­ment, like Bangladesh, which had its pref­er­en­tial tar­iffs revoked in 2013 after 1,129 fac­to­ry work­ers were killed in the Rana Plaza disaster.

This U.S. action imme­di­ate­ly trig­gered some reforms,” Wishart said — unlike the CAF­TA process that has allowed Guatemala to drag its feet for years.

Enforce­ment Gap

A Gov­ern­ment Account­abil­i­ty Office report last year found that the U.S. is sys­tem­at­i­cal­ly fail­ing to mon­i­tor and enforce com­pli­ance with the labor pro­vi­sions in its free trade agreements.

The agency high­light­ed the same prob­lem in a sim­i­lar report five years earlier.

In all five cas­es where the Depart­ment of Labor has accept­ed sub­mis­sions alleg­ing vio­la­tions of labor pro­vi­sions in free-trade agree­ments, it’s missed its 180-day time­line to review them. The aver­age late­ness: nine months.

Most recent­ly, it took over three years to review a sub­mis­sion from the AFL-CIO and Hon­duran unions alleg­ing a sys­tem­at­ic fail­ure by the gov­ern­ment of Hon­duras to enforce its labor laws.

Depart­ment of Labor offi­cials expect that the TPP — which includes ser­i­al labor-rights vio­la­tor Viet­nam, where it is still ille­gal to form an inde­pen­dent union — will strain their resources even further.

Most of the lever­age on labor rights, Waters feels, comes before an agree­ment is signed. Guatemala’s an excel­lent exam­ple of a coun­try that wasn’t even com­pli­ant with CAF­TA require­ments when it came into force,” she said.

The idea that these agree­ments are going to raise labor stan­dards is com­plete­ly false. There’s been no improve­ment on labor rights in Guatemala — if any­thing things have got­ten worse.”

Some Guatemalan activists think unions should play a stronger role in mon­i­tor­ing com­pli­ance with any oblig­a­tions in free-trade agree­ments. Fuentes said more offi­cial resources could have been allot­ted to Guatemalan labor to doc­u­ment what was hap­pen­ing to work­ers. He said a type of union-run mon­i­tor­ing board could have been set up.

That cer­tain­ly sounds like a more effec­tive approach than rely­ing on the Guatemalan gov­ern­ment, wide­ly regard­ed as one of the most cor­rupt in the hemi­sphere. The coun­try’s pres­i­dent and vice pres­i­dent were both recent­ly forced to resign in a mas­sive cor­rup­tion scan­dal, and are now in prison await­ing trial.

In Novem­ber, the Inter­na­tion­al Labor Orga­ni­za­tion will decide whether to estab­lish a Com­mis­sion of Inquiry — its high­est form of super­vi­sion — to inves­ti­gate Guatemala’s sys­tem­at­ic vio­la­tions of work­ers’ rights.

Dan DiMag­gio is an assis­tant edi­tor at Labor Notes
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