Obama’s Hard Stance on Guatemalan Labor: A Monumental Step for Labor Rights or Mere Political Maneuvering?

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On July 30th, United States Trade Representative Ron Kirk announced that the U.S. would file a formal complaint against the Guatemalan government for violating labor standards under the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). According to the Office of the U.S. Trade Representative, the announcement marks “the first labor case the United States has ever brought against a trade agreement partner.” In Kirk’s speech the same day to Allegheny Technologies Inc., a metal manufacturing company in Washington, Pennsylvania, he declared that the Obama administration intended to “[send] a strong message that our trading partners must protect their own workers…and that we are prepared to enforce the full spectrum of American trade rights from labor to the environment.”

Though this development deserves recognition for improving the protection of labor rights under free trade agreements (FTAs), there is reason to be skeptical of the administration’s intentions. Since Barack Obama’s January State of the Union Address, in which he promised to double exports over the next five years, the President has adopted a decidedly pro-trade approach, voicing support in recent weeks for FTAs with Panama, Colombia and South Korea. The case against Guatemala, brought when Congress is becoming increasingly polarized over ratifying further free trade measures, may be an attempt by the Obama administration to quell democratic labor-related concerns by demonstrating that the labor provisions included in FTAs can and will be enforced.

Regardless of its political motivations, the complaint is unlikely to have a significant impact. Since taking effect in Guatemala on July 1st, 2006, CAFTA-DR has spawned systemic labor abuses, anti-unionist violence, and human rights violations. The agreement is intentionally devoid of rigid labor law enforcement mechanisms and lacks sufficiently formidable penalties for noncompliance with labor provisions, making it unfit to induce lasting reform. In this sense, though a positive step, the case against Guatemala should not be seen as a comprehensive solution. The Obama administration would be wise to take this as an opportunity to help the Guatemalan government combat the exploitation of labor by civic authorities acting on behalf of big business and agricultural interests. For the time being, Washington should use the case of Guatemala to recognize the flaws in the U.S.’ current FTA model and begin improving upon them for future agreements.

A Long-Awaited Response to Endemic Labor Abuses in Guatemala

On April 23rd, 2008 the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), along with six Guatemalan labor unions, filed a public submission to the U.S. Department of Labor’s (DOL) Office of Trade and Labor Affairs (OTLA) claiming that the Guatemalan government had not been fulfilling its labor-related obligations under CAFTA-DR. In the complaint, Thea M. Lee, the AFL-CIO Policy Director, offered five different case studies in which labor laws had been violated repeatedly between CAFTA-DR’s ratification in July 2006 and April 2008. In all of these cases, the Guatemalan government’s inaction, failing to sufficiently respond despite repeated notification, constituted a breach of articles 16.1, 16.2, and 16.3 of the agreement. The comprehensive report also addressed issues that are not dealt with in CAFTA-DR’s labor provisions, such as violence against unionists, unjust dismissal, and the failure of employers to pay into the Social Security System. The submission urged the OTLA to immediately invoke Article 16.6.1 of the agreement to request consultation with the Guatemalan government and pressure its Labor Ministry to rectify the situation.

Although the AFL-CIO submission stressed the urgency of issuing a request for consultation, Washington was slow to respond. It would take over two years before Ms. Lee’s advice would be followed. In January 2009, after investigating the incidents described in the AFL-CIO submission, the OTLA released a report in which it found that many of the cases in the AFL-CIO report did constitute labor rights violations. It emphasized that the Guatemalan government assume a more active role in investigating cases of violence against unionists; however, it did not recommend invoking Article 16.6.1. The OTLA concluded that it would consider the option when it reassessed the situation in Guatemala six months later.

Over the next year and a half, talks continued intermittently between the OTLA and the Guatemalan Ministry of Foreign Affairs, but subsequent DOL reports and briefings indicated that not much progress had been made. On July 30th, 2010 Ron Kirk and Secretary of Labor Hilda Solis finally announced the consultation request in a letter to the Ministers of Economy and Labor, officially beginning a process that could result in trade sanctions. In the request, they stated that over the last eleven months the U.S. had been conducting an “extensive examination of Guatemala’s compliance with its obligations under Chapter Sixteen” and had found that “the Government of Guatemala appears to be failing to meet its obligations under Article 16.2.1 (a).” According to the letter, the many labor abuses discovered in this investigation combined with the government’s failure to enforce its domestic labor laws constituted a “sustained or recurring course of action or inaction” that was adversely affecting trade between the two parties.

In Ron Kirk’s speech the same day, he further contended that Guatemala’s lack of labor protections was disadvantaging the American workforce by creating an unfair international labor market. Striking a political tone, he reassured Pennsylvania workers, exclaiming, “the Obama administration will not tolerate labor violations that place U.S. workers at a disadvantage.” According to Article 16.6.1, the two countries will now have sixty days to conduct talks in an attempt to remedy the situation. If the talks are deemed unsuccessful, Guatemala may be subjected to fines and trade sanctions.

Obama’s Not So Ulterior Motives

Since July 30th, various domestic and international bodies have praised the OTLA’s decision. For the most part, organizations promoting labor rights seem encouraged by the decision, viewing it as a demonstration that labor stipulations in FTAs actually can carry weight and be operational. Richard Trumka, President of the AFL-CIO, used the occasion to draw a sharp contrast between the administrations of Bush and Obama. He applauded the decision for demonstrating “the strong commitment of the Obama administration to enforcing our trade laws, including the obligation to respect workers’ rights.” The Chairman of the House Committee on Education and Labor, George Miller, lauded the decision as a “positive step forward”; however, he lamented that the current predicament was entirely avoidable. “It is unfortunate that we have to go back and correct fundamental problems that were supposed to have been resolved when this treaty was signed,” he explained. “That’s why future agreements must ensure that commitments on labor rights are visible, verifiable and enforceable.”

Though labor organizations have generally reacted positively to the OTLA decision, many believe that it has political motivations behind it. In an interview with The New York Times, I.M. Destler, a public policy professor and trade expert at the University of Maryland, offered insight regarding the possible rationale behind the Obama administration’s push for sanctions against Guatemala: “By emphasizing enforcement of existing agreements, they increase their credibility as a defender of U.S. trade and economic interests, and perhaps also strengthen their future political capacity to negotiate new agreements,” he reasoned. As Professor Destler asserts, the timing of the announcement was no accident: labor abuses have long been endemic in Guatemala, yet the Obama administration waited to select this opportune moment to finally threaten the country with tangible sanctions.

The notion that President Obama is censuring Guatemala in order to promote pending agreements has not been lost on the Guatemalans. In response to the announcement from Kirk and Solis, the Guatemalan Ministry for Foreign Affairs issued a statement in which it indirectly accused the OTLA of issuing the complaint in such a public manner for political reasons. The statement requested that such motivations be put aside so that talks could be held in “an environment of seriousness and mutual respect.” An opinion piece in the Guatemalan daily El Periódico, entitled “Bad Employers: Washington Threatens with the Whip” reflected a similarly skeptical sentiment, asserting unequivocally that the complaint “is not a legal issue: it’s political.”

Reasons for Skepticism

Though the Obama administration’s motivations in rebuking Guatemala have raised eyebrows, of far greater importance is whether the measure will actually be effective. Kirk and Solis’ letter describes the reasons for filing the suit, citing failures by the Ministry of Labor to “investigate alleged labor law violations…and take enforcement action once the Ministry has identified a labor law violation.” Most of these violations, the letter stated, defied those laws that reflected the International Labor Organization’s (ILO) principles of the right of association, the right to organize and bargain collectively, and the right to acceptable working conditions. The letter also emphasized the OTLA’s concern regarding violence affecting unionists, a problem it describes as “serious and apparently deteriorating.” The important question, therefore, is whether or not this complaint will help to alleviate these problems.

Unfortunately, with regard to the breech of ILO standards, there is little reason to believe that this measure will have a substantive impact. CAFTA-DR lacks sufficient enforcement mechanisms to ensure that countries meet these basic levels of compliance. The agreement’s non-derogation principle, which states that a country should not lower its domestic labor standards with the goal of inducing further trade and investment opportunities, is a criterion that countries should merely “strive to [meet].” The only enforceable aspect of the agreement, which has been invoked by the OTLA, is the obligation to enforce one’s own laws, but even this relatively bland provision leads to mild repercussions if disobeyed. If no agreement can be reached between the two countries and if the U.S. pursues further sanctions, CAFTA-DR stipulates that $15 million USD is the maximum fine that could be imposed upon Guatemala. Moreover, all fines would be redirected into Guatemalan governmental funds with the stipulation that the money be used in a direct effort to improve the enforcement of the country’s labor laws.

The complaint is even less likely to decrease violence against unionists, a problem that has been ongoing for decades. The various parties were undoubtedly aware of this longstanding issue in Guatemala and elsewhere when they drafted and signed CAFTA-DR; however, the agreement makes no mention of earnestly combating labor-related violence. A 2008 report issued by The Solidarity Center, an international labor organization developed by the AFL-CIO, shows that such violence has been common in the country since at least the 1980s and has only been exacerbated by the advent of the free trade agreement. Beginning in the late 1980s, the report states, worker rights advocates repeatedly contacted the U.S. DOL and Office of the Trade Representative in hopes of strengthening labor rights provisions in the Generalized System of Preferences, a U.S. trade program with Guatemala and other Latin American nations that has since been superseded by CAFTA-DR. According to the report, however, these attempts had minimal effect and CAFTA-DR seems to have only made matters worse. “With the enactment of CAFTA,” the report asserts, “worker rights advocates lost a significant tool for pressuring Guatemala and other U.S. trade partners to improve respect for core worker rights.” The U.S. must make efforts to decrease violence against unionists in Guatemala, but the labor complaint is unlikely to achieve such a goal.

The 2007 Bipartisan Trade Agreement: A Partial Solution

Although the complaint by itself can have only a limited impact on improving labor rights in Guatemala, it could serve as an opportunity for President Obama to consider what further action needs to be taken, as well as to revisit the structure of the labor provisions in CAFTA-DR and other FTAs. A 2007 Bipartisan Agreement on Trade Policy took significant strides toward making labor provisions in future trade agreements more rigid and enforceable. Under this agreement, which is meant to apply to the pending FTA with Panama, the involved parties are required to adopt, maintain, and enforce the five core ILO standards (freedom of association; the right to collective bargaining; elimination of all forms of forced labor; abolition of child labor; and elimination of discrimination in employment). Derogating from one’s applicable domestic laws may also be a punishable offense. That said, only federal governments, not NGOs, can invoke CAFTA-DR’s penalty phase in bringing a complaint against another. Also, as with past agreements, a government must show that the violation constitutes a “sustained course of action or inaction” that occurred “in a manner affecting trade or investment between the parties” in order to pursue sanctions. Like with prior FTAs, the Agreement fails to treat the issue of violence against the offending country’s trade unionists.

The 2007 trade deal also allows the U.S. to act as a paternalistic and exploitative trade partner if it so desires. It commendably improves upon CAFTA-DR by forcing involved parties to adhere to ILO standards; however, its language selectively ignores the fact that the U.S. has only agreed to the ILO’s “Declaration on Fundamental Principles and Rights at Work,” and has not ratified all of the five core ILO standards. Were another country to file a complaint against the U.S., and a panel found the U.S. guilty of labor violations, Washington officials could use this fact as well as the ambiguous language in the agreement to justify noncompliance with proposed sanctions. Panel decisions in response to labor-related suits are not self-executing and cannot alter U.S. law, meaning that U.S. compliance mandates would be impossible to enforce. Considering that many current trade partners, including Guatemala, have attempted to excuse flawed labor policy by citing U.S. hypocrisy, it is essential that the U.S. practice what it preaches with regard to the enforcement of labor laws.

Obama’s Opportunity

The labor complaint against Guatemala represents a positive step but it is limited in scope. Guatemala deserves reprimand for its deplorable record on labor rights, but the U.S. must demonstrate its commitment to the country by moving beyond punitive measures and actively assisting the Guatemalan government in seeking improvements to its own labor laws. President Obama should take this opportunity to reassess the labor chapter of CAFTA-DR and to recognize that the 2007 Agreement does not remedy many of its problems.

In the coming months, President Obama will attempt to push through pending FTAs with Panama and Colombia. Of utmost importance is that he not follow the path of his predecessor, George W. Bush, who used the euphemistically renamed Trade Promotion Authority (TPA) to force CAFTA-DR through Congress on a fast-track basis. By allowing only yes-no votes, Bush made certain that the proposed reforms of labor advocates and trade policy experts would be excluded from FTA discussions. If Obama similarly attempts to expedite the passage of these agreements, he will confirm that his motivation behind the complaint against Guatemala was purely political and the flaws of past agreements will likely be reproduced.

The respective labor situations in Colombia and Panama pose significant challenges to effective exercise of free trade. Both countries suffer from a deteriorating rule of law, an important prerequisite for economic growth. Conditions have rapidly worsened in Panama where, during the last two months, the Martinelli government has demonstrated its wanton disregard for labor rights, violently suppressing Panamanian trade unionists in the hopes of opening the country up to unrestricted trade and investment. As for Colombia, according to the World Trade Organization, it remains the only country where violence against unionists is worse than in Guatemala. President Obama must sit down with labor and trade policy experts as well as members of Congress to make certain that these agreements are sufficiently protective of labor rights. More accountability on the part of the U.S. in enforcing and improving its own labor laws, stricter regulations regarding domestic labor laws for trade partners, and harsher repercussions for countries that assure impunity for those who commit acts of violence against trade unionists would go a long way toward improving worker rights throughout the U.S.’ free trade network.