DR-CAFTA Prescribes a Poison Pill: Remedying the Inadequacies of Dominican Republic-Central American Free Trade Agreement Labor Provisions

Transcription

1 DR-CAFTA Prescribes a Poison Pill: Remedying the Inadequacies of Dominican Republic-Central American Free Trade Agreement Labor Provisions Marina del Carmen Leiva, a 32-year-old mother, struggles to keep her job earning $152 every month, bent over sewing machines, making clothes for famous American brand-name companies. The pressure to produce garments quickly is so great, she says, that she and her co-workers are regularly refused permission to visit the bathroom or get a drink of water for fear it would slow the line. If they would just treat us like human beings, even without raising the minimum wage, my life would be better, said Mrs. del Carmen Leiva, a slender, dark-eyed woman who is the sole supporter of her three children. 1 I. WILL DR-CAFTA HURT OR HELP WORKERS? Efforts by the United States to liberalize trade across the globe have resulted in numerous international free trade agreements (FTAs). 2 The newly approved United States-Dominican Republic Central American Free Trade Agreement (DR-CAFTA) exemplifies the Bush administration s approach to including workers rights protections in FTAs. 3 The agreement will liberalize trade between the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. 4 Similar to other recently assembled FTAs such as the Chile and Singapore agreements, DR-CAFTA contains only 1. Elizabeth Becker, Amid a Trade Deal, A Debate Over Labor, N.Y. TIMES, Apr. 6, 2004, at C1 (presenting overview of conflict regarding expansion of free trade in Central America). 2. See, e.g., United States-Chile Free Trade Agreement, U.S.-Chile, June 6, 2003, [hereinafter Chile- FTA] (removing trade barriers between United States and Chile), available at United States- Singapore Free Trade Agreement, U.S.-Sing., May 6, 2003, [hereinafter Sing.-FTA] (reducing tariffs and extending other trade benefits between United States and Singapore), available at 36.pdf; Agreement Between the United States of America and the Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area, U.S.-Jordan, Oct. 24, 2000, 41 I.L.M. 63 [hereinafter Jordan-FTA] (relaxing restrictions on trade between United States and Jordan). 3. Dominican Republic-Central America-United States Free Trade Agreement, May 28-Aug. 5, 2004 [hereinafter DR-CAFTA] (imposing obligation to effectively enforce domestic laws), available at _Final_Texts/Section_Index.html; see also Robert B. Zoellick, Editorial, Helping Labor Through Trade, WASH. POST, Apr. 19, 2004, at A19 (summarizing strategy behind treatment of labor standards in several recent FTAs negotiated by United States). 4. See J.F. Hornbeck, The U.S.-Central America Free Trade Agreement (CAFTA): Challenges for Sub- Regional Integration, CONG. RESEARCH SERV. RL 31870, at 1-4 (June 1, 2004) (identifying DR-CAFTA parties and presenting argument favoring trade liberalization), available at

2 512 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 one binding labor provision, which requires countries to enforce existing domestic labor laws. 5 The agreement does not require trade partners to uphold existing, binding obligations to respect core labor standards identified by the International Labour Organization (ILO). 6 The United States Senate and House of Representatives easily approved several earlier FTAs negotiated by the Bush administration. 7 DR-CAFTA, however, faced significant opposition in Congress. 8 Eventually, both the Senate and House narrowly approved the agreement. 9 Much of the pre-vote debate focused on people like Mrs. del Carmen Leiva and issues such as her government s failure to respect her rights in the workplace. 10 Criticism of the agreement s text focused on the inadequacy of its labor provisions. 11 Specifically, DR-CAFTA critics expressed concern regarding the well-documented failures of Central American governments to protect workers 5. DR-CAFTA, supra note 3, art. 16.2(1)(a) (detailing workers rights commitment of DR-CAFTA trading parties); see also Marley S. Weiss, Two Steps Forward, One Step Back-Or Vice Versa: Labor Rights Under Free Trade Agreements from NAFTA, Through Jordan, via Chile, to Latin America, and Beyond, 37 U.S.F.L. REV. 689, (2003) (noting commitment to enforce domestic laws only binding labor provision in Chile and Singapore agreements). Although all three agreements incorporate international labor law norms and contain anti-relaxation clauses, the dispute settlement mechanisms apply only to the domestic law enforcement provision. See DR-CAFTA, supra note 3, art (1); Weiss, supra, at DR-CAFTA, supra note 3, art. 16.1(1), 16.8 (identifying international labor standards nations must strive to ensure ). Notably, the definition of labor law incorporated into the agreement omits one of the core standards identified by the ILO: the elimination of discrimination in the workplace. Compare id. art (listing rights to which labor laws relate), with Thomas J. Manley & Luis Lauredo, International Labor Standards in Free Trade Agreements of the Americas, 18 EMORY INT L L. REV. 85, 85 n.1 (2004) (presenting core international labor standards). Under DR-CAFTA, labor law encompasses a party s statutes and regulations that relate to the following rights: (a) the right of association; (b) the right to organize and bargain collectively; (c) a prohibition on the use of any form of forced or compulsory labor; (d) a minimum age for the employment of children and the prohibition and elimination of the worst forms of child labor; and (e) acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. DR-CAFTA, supra note 3, art See Daniel Griswold & Daniel Ikenson, Cato Institute, The Case for CAFTA: Consolidating Central America s Freedom Revolution, at 2 (Sept. 21, 2004) (noting ease with which Chile, Singapore, Morocco, and Australia FTAs won congressional approval), at 8. See id. (contrasting substantial congressional opposition to DR-CAFTA with token opposition to previous FTAs); Hornbeck, supra note 4, at 1 (recognizing contentious and complex nature of DR-CAFTA). 9. See Edmund L. Andrews, House Approves Free Trade Pact, N.Y. TIMES, July 28, 2005, at C1 (noting House approved DR-CAFTA by narrow vote of 217 to 215) [hereinafter House Approves]; Edmund L. Andrews, Senate Approves Free Trade Pact, N.Y. TIMES, July 1, 2005, at A1 [hereinafter Senate Approves] (reporting Senate approved DR-CAFTA by vote of fifty-four to forty-five). 10. See, e.g., 151 CONG. REC. H6869, (daily ed. July 27, 2005) (statement of Rep. McGovern) (describing workers rights as human rights and arguing DR-CAFTA nations fail to respect such rights); 151 CONG. REC. S7647, (daily ed. June 30, 2005 (statement of Sen. Kennedy) (refusing to support DR- CAFTA because agreement fails to encourage improvement in Central American labor standards); Becker, supra note 1, at C1 (stating congressional battle over trade focused on rights of low-wage workers). 11. See Griswold & Ikenson, supra note 7, at 2 (acknowledging criticisms of DR-CAFTA labor and environmental provisions).

3 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 513 rights. 12 They argued that inconsistent application and inadequate enforcement of weak labor laws lead to significant workers rights violations. 13 Furthermore, critics contend that the dispute settlement provisions of the agreement fail to motivate trade partners to improve laws and enforcement. 14 DR-CAFTA proponents, however, assert that the agreement goes further than any previous FTA to protect workers. 15 Congress s endorsement of DR-CAFTA will have long term implications for workers in the United States, the Dominican Republic, and Central America. 16 Moreover, many commentators viewed DR-CAFTA as a test of the Bush administration s trade policy in Latin America and as a crucial building block of the Free Trade Area of the Americas (FTAA), a hemispheric wide trade pact. 17 Consequently, Congress failed international workers by approving DR- 12. See Rep. Nancy Pelosi, Pelosi Statement in Opposition to CAFTA, CONG. PRESS RELEASES, May 28, 2004 (lamenting Central America s inadequate, poorly enforced labor laws which fall below international standards), available at Manley & Lauredo, supra note 6, at 111 (predicting confrontation over application of enforce domestic law model to admittedly problematic Central American regimes); see also U.S. Dep t of State, 2003 Country Reports on Human Rights Practices (Feb. 25, 2004) (identifying deficiencies in workers rights conditions in all six DR- CAFTA countries), available at See 151 CONG. REC. H6869, (daily ed. July 27, 2005) (statement of Rep. McGovern) (highlighting detrimental impact of judicial systems and elite populations on enforcement of weak labor laws); Zoellick, supra note 3, at A19 (recognizing existence of labor law enforcement problems in Central America). But see generally Int l Labour Org., Fundamental Principles and Rights at Work: A Labour Law Study, at 4-6 (2003) [hereinafter ILO Study] (concluding constitutions and laws of five DR-CAFTA countries give effect to ILO core labor standards), available at Although the ILO concluded that Central American labor laws generally reflect core labor standards, it did not evaluate the enforcement of labor laws. See generally Paxton, Sally P., Foreword to ILO Study, supra at iii. 14. See Hornbeck, supra note 4, at 26 (addressing limited applicability of DR-CAFTA dispute settlement mechanism). 15. Fact Sheet, U.S. Trade Representative, Trade Facts: Adding Dominican Republic to CAFTA, at 2 (Mar. 15, 2004) (arguing DR-CAFTA labor provisions exceed Chile and Singapore protections by employing innovative three-part strategy), at The strategy seeks to ensure effective enforcement of domestic labor laws, encourage improvement of existing laws and enforcement, and build domestic capacity to improve workers rights. Id. 16. SANDRA POLASKI, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE, CENTRAL AMERICA AND THE U.S. FACE CHALLENGE AND CHANCE FOR HISTORIC BREAKTHROUGH ON WORKERS RIGHTS 1 (2003) (highlighting correlation between trade liberalization and production expansion in developing countries), at /TED-CAFTA-and-LABOR.pdf. Polaski suggests that, as production increases, violations of workers rights could increase. Id. 17. See Manley & Lauredo, supra note 6, at 98 (noting DR-CAFTA represents first opportunity to apply FTA model to several countries with diverging laws); Antoine Boessenkool, CAFTA Moves One Step Closer to Law, UNITED PRESS INT L, May 28, 2004 (acknowledging importance of Central America to trade-related goals of Bush administration). DR-CAFTA would liberalize trade between the United States and six other nations. Manley & Lauredo, supra note 6, at 98. The FTAA, however, proposes to expand trade between thirty-four nations, including the DR-CAFTA countries. Id. at 86. FTAA negotiations began more than a decade ago. Id. at 96. Originally, the negotiating nations set a January 2005 completion deadline. Id. at 101. Following a ministerial meeting in late 2003, however, talks stalled foreclosing the possibility of meeting the January 2005 goal. See Mexican Efforts to Revive FTTA Appear to Have Failed, INSIDE US TRADE, Aug. 26, 2005, available at 2005 WLNR While the FTAA negotiations remain shut down, the United States still intends to build a hemispheric trade agreement. See id. With FTAA talks stalled, the United States has pursued bilateral

4 514 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 CAFTA with its weak labor provisions lacking incentives for trading partners to enforce and improve domestic labor laws. 18 This Note will address the tension in the trade-labor link and discuss the effective incorporation of labor provisions into future FTAs. 19 First, this Note will explore the policy debate surrounding the inclusion of workers rights provisions in trade agreements. 20 Next, this Note will draw attention to the evolution of the United States approach to resolving this debate. 21 Subsequently, this Note will examine the final labor provisions of the DR- CAFTA text and address its flaws. 22 Finally, this Note will offer proposals for future FTAs, including the expanded FTAA agreement, that would strengthen unions, protect workers, respect sovereignty, and permit economic and social development. 23 II. FOR BETTER OR WORSE? THE EVOLUTION OF LABOR STANDARDS IN UNITED STATES TRADE AGREEMENTS A. The Policy Debate: Propriety of Labor Standards Within Free Trade Agreements Activists, politicians, and economists agree that trade affects labor and labor affects trade. 24 Consensus does not exist, however, with regard to the propriety of including labor provisions within trade liberalizing pacts. 25 Even as the and sub-regional trade agreements with several of the thirty-four FTAA nations including Columbia, Ecuador, Peru, Bolivia, and the DR-CAFTA countries. See U.S. Trade Representative, Andean FTA, (last visited Jan. 2, 2006). 18. See infra Part III (highlighting opportunity to improve labor laws through inclusion of strong labor provisions in DR-CAFTA). 19. See infra Part II (detailing history of trade-labor linkage debate in United States and evaluating DR- CAFTA text). 20. See infra Part II.A (summarizing arguments for and against inclusion of workers rights protections in free trade agreements). 21. See infra Part II.B (discussing United States s approaches to incorporating labor provisions into trade pacts). 22. See infra Part II.C (arguing DR-CAFTA inadequately protects workers rights in Central American and Dominican Republic). 23. See infra Part III (proposing FTA labor provisions to improve workers rights, promote development, and respect Central American sovereignty). 24. See Robert F. Housman, The Treatment of Labor and Environmental Issues in Future Western Hemisphere Trade Liberalization Efforts, 10 CONN. J. INT L L. 301, (1995) (summarizing reciprocal relationship between labor and environmental issues and trade). Higher costs associated with labor rights enforcement affect a country s competitive position in the global market. Id. at 316. Increased production costs also impact trade by decreasing the competitive position of that country s products. Id. Expansion of trade typically affects labor by causing an employment shift in developing nations. HENRY J. FRUNDT, TRADE CONDITIONS AND LABOR RIGHTS: U.S. INITIATIVES, DOMINICAN AND CENTRAL AMERICA RESPONSES 4 (1998) (recognizing transformation of workers in Caribbean Basin nations from agricultural workers to wage laborers). 25. Compare Terry Collingsworth, An Essential Element of Fair Trade and Sustainable Development in the FTAA is an Enforceable Social Clause, 2 RICH. J. GLOBAL L. & BUS. 197, (2001) (advocating inclusion of enforceable labor standards in FTAA), and Manley & Lauredo, supra note 6, at (addressing

5 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 515 United States negotiates several FTAs with various nations, the policy debate regarding the suitability of FTA labor standards persists. 26 The trade-labor conditionality principle demands respect for workers rights as a condition for access to trade benefits. 27 Two primary schools of thought exist with respect to the trade-labor conditionality debate. 28 Some economists and other free trade proponents argue that conditionality destroys comparative advantage, constitutes protectionism, interferes with national sovereignty, and prevents development-generated labor improvements. 29 Conversely, labor rights advocates contend that the inclusion of labor standards in FTAs encourages respect for fundamental workers rights, lessens wealth disparity in developing nations, and prevents a global race to the bottom Do Labor Standards Destroy the Comparative Advantage of Developing Nations? Opponents of conditionality view higher labor standards as a protectionist device aimed at nullifying the primary comparative advantage of developing nations: productive low-cost labor. 31 A country has a comparative advantage in the production of goods that involve extensive use of resources the country possesses in abundance. 32 The concept of comparative advantage compels a potential benefits of incorporation of international labor standards into trade liberalizing pacts), with Griswold & Ikenson, supra note 7, at 11 (rejecting demands for FTA labor provisions requiring action beyond enforcement of domestic laws), and Housman, supra note 24, at 315 (acknowledging some critics argue social issues, including labor, have no place in trade negotiations). 26. See Becker, supra note 1, at C1 (discussing debate between congressional Democrats and Bush administration over DR-CAFTA labor provisions); Steven Greenhouse, Demonstration Turns Violent at Trade Talks in Miami, N.Y. TIMES, Nov. 21, 2003, at A25 (describing clash between anti-ftaa protestors and police at meeting of trade ministers negotiating FTAA). 27. See United States Generalized System of Preferences, 19 U.S.C (2000) [hereinafter GSP] (mandating withdrawal of trade benefits for failure to respect internationally recognized workers rights); Cambodia Bilateral Textile Agreement, U.S.-Cambodia, art. 10(D), Jan. 1, 1999 [hereinafter Cambodia Agreement] (on file with author) (allowing acceleration of tariff reductions if Cambodia effectively upheld labor standards). The Cambodia Bilateral Textile Agreement (Cambodia Agreement) expired on January 1, See Cambodia Agreement, Memorandum of Understanding Between the Government of the United States of America and the Royal Government of Cambodia (extending agreement beyond original December 31, 2001 termination date). 28. See infra Part II.A (highlighting positions taken by advocates for and against inclusion of labor standards in trade agreements). 29. See infra Part II.A (considering arguments of free trade advocates against labor conditionality). 30. See infra Part II.A (presenting rebuttals to positions asserted by free trade advocates). 31. FRUNDT, supra note 24, at (explaining skepticism of enforceable labor standards expressed by government officials in developing nations). Less-developed countries (LDCs) often express concern that labor standards represent a self-interested tactic of industrialized nations aimed at minimizing competition from lessindustrialized nations. See Thomas I. Palley, The Economic Case for Labor Standards: A Layman s Guide, 2 RICH. J. GLOBAL L. & BUS. 183, 192 (2001) (concluding labor standards do not distort the market by destroying comparative advantage). LDCs also contend that labor standards further minimize competition by imposing unrealistic demands on poorer countries. But see Human Rights Watch, Labor Rights Protections in CAFTA, at 3 (Oct. 2003) [hereinafter Labor Rights in CAFTA] (disputing inclusion of labor provisions in FTAs imposes rich nation standards on LDCs), at Jonathan B. Wight, Does Free Trade Cause Hunger? Hidden Implications of the FTAA, 2 RICH J.

6 516 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 nation to specialize in and export products which it can produce at a lower opportunity cost than its trade partners. 33 Many developing nations, therefore, elect to exploit their supply of cheap and plentiful labor by exporting laborintensive apparel and agricultural products. 34 Proponents of trade-labor linkage maintain that countries should encourage fair treatment of employees, rather than promote the reverse by legitimizing exploitation of workers as a source of comparative advantage. 35 Furthermore, low cost labor represents only one component of a less-industrialized nation s comparative advantage. 36 The costs associated with enhanced workers rights protections, therefore, do not undermine overall comparative advantage, even in labor-intensive activities. 37 Even if protectionist goals motivate some advocates for conditionality, labor conditions still produce benefits while negligibly affecting comparative advantage. 38 Evidence exists showing that higher labor standards positively impact economic efficiency by increasing workers skill and effectiveness. 39 Compliance with labor standards not only minimally impacts comparative advantage, but also promotes development Do Labor Standards Undermine National Sovereignty? Opponents of incorporating workers rights conditions into trade agreements GLOBAL L. & BUS. 167, 171 (2001) (outlining comparative advantage theory). 33. See id. at (concluding comparative advantage dictates United States import unskilled laborintensive goods). The United States possesses skilled and semi-skilled labor resources in large quantities, and therefore likely will export products that require such resources. Id. Specifically, comparative advantage commands that the United States export services and intellectual property. Id. 34. KIMBERLY ANN ELLIOT, INSTITUTE FOR INTERNATIONAL ECONOMICS, LABOR STANDARDS, DEVELOPMENT, AND CAFTA 6 (2004) (noting DR-CAFTA nations predominantly export apparel and agricultural products), available at See FRUNDT, supra note 24, at 66 (highlighting importance of respect for workers rights regardless of socio-economic system or economic development); see also Lance Compa & Jeffrey S. Vogt, Labor Rights in the Generalized System of Preferences: A 20-Year Review, 22 COMP. LAB. L. & POL Y J. 199, (2001) (criticizing comparative advantage argument). Workers rights supporters accept comparative advantage based on minimal labor costs to a certain degree. Id. at 201. Such advocates cease to tolerate labor cost-based advantage, however, when a nation seeks to maintain low labor costs by violently opposing union organizing efforts, condoning workplace discrimination, employing child labor, or disregarding health and safety hazards. Id. 36. Daniel A. Zaheer, Note, Breaking the Deadlock: Why and How Developing Countries Should Accept Labor Standards in the WTO, 9 STAN. J.L. BUS. & FIN. 69, 91 (2003) (identifying stage of economic development and cost of living as factors influencing comparative advantage). 37. Elliot, supra note 34, at 4 (recognizing evidence suggests core labor standards do not destroy comparative advantage). 38. See Palley, supra note 31, at 192 (concluding labor standards benefit developing countries, developed countries, international economy). 39. See Juan Carlos Linares, The Development Dilemma: Reconciling U.S. Foreign Direct Investment in Latin America with Laborers Rights: A Study of Mexico, The Dominican Republic and Costa Rica, 29 N.C. J. INT L L. & COM. REG. 249, (2003) (arguing higher labor standards increase competitiveness and productivity). 40. See id. (explaining respect for labor rights benefits rather than harms developing nations).

7 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 517 contend that principles of national sovereignty demand that each country enact and enforce its own labor standards. 41 Developing countries often argue that conditionality interferes with their domestic social and human rights policies because it forces them to adopt elevated labor standards. 42 Less-industrialized nations are not, however, forced to accept the terms of trade agreements. 43 Inclusion of labor standards in does not contravene the principal of national sovereignty because FTA because willingly negotiate and ratify the terms of trade liberalizing agreements. 44 The negotiation process provides each nation with the opportunity to address concerns of and protect its national sovereignty. 45 Many advocates of conditionality contemplate the inclusion in FTAs of the core labor standards enunciated in the ILO Declaration of Fundamental Principles and Rights at Work (ILO Declaration). 46 All 178 ILO member nations agree to respect freedom of association, to protect the right to collective bargaining, and to work to eliminate forced labor, child labor, and workplace discrimination. 47 Consequently, incorporation of ILO standards into trade agreements involving ILO member states does not violate national sovereignty because it only reinforces pre-existing, voluntarily assumed commitments. 48 Proponents of trade-based labor standards also highlight the transformation 41. See Christopher L. Erickson & Daniel J.B. Mitchell, The American Experience with Labor Standards and Trade Agreements, 3 J. SMALL & EMERGING BUS. L. 41, 86 (1999) (arguing labor standards do not infringe upon nation s domestic law-making authority). 42. FRUNDT, supra note 24, at 58 (noting smaller nations contend imposition of labor standards constitutes interference in domestic affairs). 43. See Hornbeck, supra note 4, at 31 (describing chronology of DR-CAFTA negotiation process); infra note 123 (explaining Costa Rica s initial refusal and subsequent acceptance of DR-CAFTA terms). 44. See Press Release, U.S. Trade Representative, United States and Central American Nations Launch Free Trade Negotiations,(Jan. 8, 2003) (publicizing commencement of FTA negotiations with five Central American nations and describing structure of talks), at ns_launch_free_trade_negotiations.html; Free Trade Deal Signed; Now It s Up To Congress, HOUSTON CHRON., May 29, 2004, at 8 (announcing signing of FTA by United States, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua). 45. See Hornbeck, supra note 4, at 31 (describing Costa Rica s initial unwillingness to accept certain terms of DR-CAFTA). Costa Rica and the United States engaged in additional negotiations to resolve telecommunication, insurance, agriculture, and textile market issues. Id. Upon satisfactory resolution of such issues, Costa Rica signed the DR-CAFTA text. Id. 46. See Collingsworth, supra note 25, at (evaluating International Confederation of Free Trade Union s (ICFTU) proposal for FTAA labor clause). The ICFTU based its proposal on various Conventions of the ILO, which elaborate upon the core labor standards enunciated in the ILO Declaration. Id. The International Trade Secretariats endorse the clause proposed by the ICFTU, and the Organization for Economic Cooperation and Development endorses an almost identical clause. Id. at International Labour Organization Declaration on Fundamental Principles and Rights at Work and Annex, June 19, 1998, 37 I.L.M [hereinafter ILO Declaration] (identifying primary obligations of all members of ILO); see also Int l Labour Org., Alphabetical List of ILO Member Countries (listing 178 ILO member nations), at (last visited Jan. 2, 2006). All seven DR-CAFTA nations have joined the ILO. Alphabetical List of ILO Member Countries, supra. 48. See Constitution of the International Labour Organization, April, 1919, art. 1 (establishing requirements for ILO membership, at

8 518 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 of sovereignty in the modern, global economy. 49 The interdependence born of FTAs requires that countries relinquish some degree national sovereignty. 50 In each trade agreement, trading partners promise to remove tariffs from particular goods those which they have the right to tax. 51 For example, the Chile agreement requires the parties to eliminate a luxury tax on automobiles and to enact a law regulating anti-competitive business by a mutually agreed upon deadline. 52 While requirements similar to those in the Chile agreement may impinge upon national sovereignty to a degree, they are necessary to a global economy Do Labor Provisions Encourage a Race to the Top or a Race to the Bottom? Opponents of conditionality contend that labor advocates erroneously demand improved standards based on an unfounded fear of a global race to the bottom. 54 They argue that free trade actually promotes higher labor standards resulting in a race to the top. 55 Reduced trade barriers allow businesses and governments to prosper. 56 As government and industry flourishes, so too do 49. See Erickson & Mitchell, supra note 41, at 43 (discussing fallacy of absolute sovereignty among trading nations). 50. See Erickson & Mitchell, supra note 41, at 43 (describing absolutist concept of national sovereignty as untenable in global economy). 51. See Chile-FTA, supra note 2, art. 3.3(1) (prohibiting United States and Chile from raising duties on identified goods). The Chile FTA also requires both countries to eliminate existing tariffs on particular products. Id. art. 3.3(2). 52. U.S. Trade Representative, Free Trade with Chile: Summary of the U.S.-Chile Free Trade Agreement (Dec. 11, 2002) [hereinafter Chile Summary] (presenting overview of commercial commitments under Chile agreement), at Chile_Free_Trade_Agreement.html; see also Human Rights Watch, Labor Rights in CAFTA, supra note 31, at 4 (highlighting provisions in Chile and Singapore agreements on amendment of domestic legislation). The Singapore agreement mandates that trading partners liberalize patent agent registration and certification requirements, and that they lift bans on new licenses for full-service banks. See Human Rights Watch, Labor Rights in CAFTA, supra note 31, at See Erickson & Mitchell, supra note 41, at (describing hypocrisy of resisting narrow limitation on sovereignty while seeking expanded integration into global economy). 54. Griswold & Ikenson, supra note 7, at (arguing DR-CAFTA will not lead to exploitation of workers or unfair competition). Race to the bottom refers to the practice by producers and governments of lowering labor standards to compete more effectively for foreign investment. Id. at 11. Griswold and Ikenson predict that DR-CAFTA nations will not lower standards because increased trade will foster economic growth. Id. Additionally, they posit that economic growth will allow for increased spending on labor initiatives. Id. Therefore, [b]y promoting trade, development, and higher incomes, a free-trade agreement with Central American and the Dominican Republic would in reality help to build the capacity of those countries to maintain and raise their domestic [labor] standards. Id. 55. See Richard W. Fisher, The Changing Labor Markets of the Western Hemisphere, 2 RICH. J. GLOBAL L. & BUS. 131, (2001) (describing labor climate in Mexico, United States, and Canada following NAFTA as race to the top ). 56. Collingsworth, supra note 25, at (evaluating grounds on which free traders conclude labor provisions unnecessary).

9 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 519 other sectors of society, including poor laborers. 57 With increased prosperity comes higher income and elevated living standards, both of which promote enhanced labor standards. 58 Free trade, however, has failed to deliver improved labor standards to millions of the world s working poor. 59 Although trade liberalization has produced increased cash flows in developing countries, unskilled laborers continue to work for low wages under harsh conditions. 60 Countless maquiladoras still operate in Mexico despite years of development prompted by the North American Free Trade Agreement (NAFTA). 61 While the per capita income in Mexico has risen since the passage of NAFTA, poverty has increased and wages have dropped. 62 Moreover, economic elites disproportionately enjoy the economic prosperity produced by trade liberalization. 63 Many governments fear that increased production costs associated with improving workers rights will reduce competitive advantage, even if trade liberalization does produce economic development. 64 Corporations have 57. Collingsworth, supra note 25, at 198 (classifying economic argument against trade-labor linkage as rehashing of failed trickle down economics theory). 58. See Griswold & Ikenson, supra note 7, at 11 (contending higher national income promotes enhanced labor standards); F. Amanda DeBusk, Mapping the Landscape: Perspectives on the Implementation of Free Trade Agreements, 2 RICH. J. GLOBAL L. & BUS. 141, (2001) (recognizing link between improved standard of living and increased respect for workers rights). 59. See Marjorie Cohn, The World Trade Organization: Elevating Property Interests Above Human Rights, 29 GA. J. INT L & COMP. L. 427, 428 (2001) (explaining detrimental effect of globalization on lowincome workers, particularly in post-nafta Mexico and United States). 60. See id. (observing widening income gap between rich and poor in Indonesia despite skyrocketing net capital flows); see also Elvia R. Arriola, Comparative and Co-Constituent Construction of Identities, 55 FLA. L. REV. 413, 418 (2003) (analogizing maquiladoras to sweatshops); Collingsworth, supra note 25, at 198 (citing Mexican maquiladoras and Honduran sweatshops as evidence of trade liberalization s failure to protect laborers). A maquiladora is a factory in Mexico owned by multinationals. Arriola, supra, at 418. Child labor, non-living wages, hazardous working conditions, and union resistance characterize the maquiladora industry. Id. 61. See Arriola, supra note 60, at 418 (mentioning proliferation of maquiladoras after NAFTA implementation); see also North American Free Trade Agreement, U.S.-Can.-Mex., Dec. 8-17, 1992, 32 I.L.M. 289 (1992) [hereinafter NAFTA] (liberalizing trade between United States, Canada, and Mexico). 62. Compare Linares, supra note 39, at 259 (presenting evidence of increasing Mexican per capita income between 1980 and 2000), with Cohn, supra note 59, at 428 (discussing failure of trickle down theory in NAFTA context). From 1980 to 2000, the Mexican per capita income rose from $8, to $9, Linares, supra note 39, at 259. Simultaneously, wages declined and poverty intensified in Mexico. Cohn, supra note 59, at 428. During the first six NAFTA years, governments shifted funds from food and social programs to finance an expanded agricultural export industry. Id. The spending cuts resulted in increased poverty in Mexico. Id. In the United States, wages of low-income workers, especially women and people of color, have also decreased as globalization has increased. Id. 63. Linares, supra note 39, at 259 n.64 (conceding increases in income and wages in Mexico disproportionately enjoyed by professional workers). As a result of United States investment in Mexico between 1984 and 1990, average white-collar wages increased by 13.4%. Id. Average wages for blue-collar workers, meanwhile, decreased by 14%. Id. 64. See Zaheer, supra note 36, at 86 (recognizing disincentive for developing nations to increase workers rights protections).

10 520 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 exploited this fear by threatening to relocate to countries with lower production costs. 65 Poorer nations, including those prospering under free trade, therefore curb wages and maintain minimal worker safety standards to continue attracting investors. 66 The principle that trade liberalization affects workers in the United States and overseas has gained support in Congress and with the American public. 67 This principle won a sufficient number of adherents to earn legal recognition as an element of fair trade. 68 United States trade officials, however, still struggle with the question of how to effectively link trade and labor without placing unrealistic burdens on trade. 69 B. Evolution of Labor Conditionality in United States Trade Agreements The United States began its efforts to place labor issues on the international trade agenda over a century ago with the Tariff Act of 1890, which prohibited the importation of goods manufactured by prison labor. 70 Throughout the past twenty years, the United States has adopted a number of approaches to conditioning trade benefits on compliance with workers rights. 71 These varied approaches have one similarity: each seeks to improve recognition of international labor standards Unilateral Trade Preference Legislation: The Generalized System of Preferences and the Caribbean Basin Initiative The Generalized System of Preferences (GSP) aids the economic development of less-industrialized nations by granting them increased access to 65. See Zaheer, supra note 36, at 86 (acknowledging multi-national corporations foster investment flight fears). 66. See Collingsworth, supra note 25, at 198 (noting developing nations compete globally by providing inexpensive labor and relaxed labor law enforcement). 67. See Hornbeck, supra note 4, at 23 (recognizing trade affects labor and highlighting disagreement on approach to accommodating labor concerns). 68. See Zoellick, supra note 3, at A19 (detailing United States s decision to incorporate labor language into FTAs). 69. See supra notes 8-14 and accompanying text (discussing opposition to and specific criticisms of DR- CAFTA final text). 70. See Jorge F. Perez-Lopez, Conditioning Trade on Foreign Labor Law: The U.S. Approach, 9 COMP. LAB. L.J. 253, (1988) (presenting historical overview of early United States statutes linking trade and labor). 71. See, e.g., FRUNDT, supra note 24, at (presenting conclusions regarding success of unilateral approach to linking trade and labor standards); Manley & Lauredo, supra note 6, at (analyzing provisions encouraging respect for international labor standards in various FTAs); Weiss, supra note 5, at (evaluating efficacy of trade pact provisions aimed at increasing labor rights and living standards). 72. See, e.g, Bipartisan Trade Promotion Authority Act (BTPAA) of 2002, 19 U.S.C.A (West Supp. 2005) (establishing labor related FTA negotiating objectives); GSP, 19 U.S.C (2000) (linking United States trade partners preferential treatment to internationally recognized workers rights); DR-CAFTA, supra note 3, art. 16.1(1) (conditioning reciprocal trade benefits on commitment to internationally recognized labor rights).

11 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 521 United States markets. 73 The president possesses the authority to grant dutyfree treatment to eligible products from developing countries and to revoke benefits under the GSP program. 74 In 1984, Congress and President Ronald Reagan amended the GSP to include a labor rights clause. 75 Following the amendment, the president could not grant a nation beneficiary status unless that nation was taking steps to afford internationally recognized worker rights Under GSP legislation, an interested party may petition the United States Trade Representative (USTR) to review labor rights in a particular country. 77 If the USTR accepts the petition, it will conduct an investigation into that country s labor practices. 78 Workers, trade unions, human rights groups, and religious institutions have collaborated to file petitions. 79 Upon completion of its investigation, the USTR may prolong the review of a country or revoke that country s trade benefits See Compa & Vogt, supra note 35, at 201 (explaining purpose of GSP legislation). 74. See GSP, 19 U.S.C (2000) (defining scope of president s authority to extend trade preferences). 75. Generalized System of Preferences Renewal Act of 1984, Pub. L. No , , 98 Stat. 2948, (incorporating labor rights conditions into GSP legislation); see also Compa & Vogt, supra note 35, at (describing political climate in United States that prompted Reagan administration to consider GSP amendment). During the early 1980s, advocates formed a coalition for global labor rights. Compa & Vogt, supra note 35, at 200. The labor coalition expressed concern over the increasing number of United States factories closing and relocating to countries where authoritarian governments systematically ignored workers rights. Id. President Reagan s inconsistent treatment of unions in foreign countries further troubled members of the labor coalition. Id. Finally, the labor coalition proposed the GSP amendment in response to the protectionist stance adopted by some United States labor unions. Id. at GSP, 19 U.S.C. 2462(b)(2)(G) (2000) (establishing labor-related basis for ineligibility for designation as beneficiary country). The GSP definition of internationally recognized workers rights encompasses the following rights: freedom of association, the right to organize and bargain collectively, a prohibition on the use of forced or compulsory labor, a minimum age for the employment of children along with a prohibition on the worst forms of child labor, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. GSP, 19 U.S.C. 2467(4)(A-E) (2000); see also Compa & Vogt, supra note 35, at 202 (acknowledging importance of GSP s definition of workers rights to future United States trade laws). 77. Regulations of the United States Trade Representative Pertaining to Eligibility of Articles and Countries for the Generalized System of Preferences (GSP Regulations), 15 C.F.R (2005) (authorizing petition process); see also FRUNDT, supra note 24, at 66 (noting GSP considered benchmark of trade legislation because of petition process). The USTR also conducts an annual GSP eligibility review of each beneficiary nation. GSP Regulations, 15 C.F.R (dictating timetable for annual reviews). 78. GSP Regulations, 15 C.F.R (a)-(b) (establishing standard for accepting or denying petition for review); see also Compa & Vogt, supra note 35, at 202 (describing GSP petition process). The petition procedure provides various forums, including public hearings, in which a petitioner may present evidence to support suspension or termination of a country s GSP status. Compa & Vogt, supra note 35, at Compa & Vogt, supra note 35, at 202 (identifying some parties eligible to invoke petition process). The most active GSP petitioners include the AFL-CIO, individual unions, and NGOs such as the International Labor Rights Fund, the United States Labor Education in the Americas Project, and Human Rights Watch. Id. at (highlighting use of petition process since implementation). 80. FRUNDT, supra note 24, at (noting GSP authorizes USTR to sanction trade partner for failure to respect workers rights). Between 1986 and 2001, the USTR removed trade benefits from thirteen countries and extended the review of seventeen nations. Compa & Vogt, supra note 35, at 209. Many sanctioned nations

12 522 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXIX:511 The Caribbean Basin Initiative (CBI) program, in place since 1983, grants trade preferences aimed at diversifying production and exports and improving economic opportunities in the Caribbean Basin region. 81 Under the CBI, the United States determines the eligibility of beneficiary countries based on criteria such as whether... such country has taken or is taking steps to afford to workers in that country... internationally recognized worker rights. 82 Importantly, the United States classified all six DR-CAFTA signatories as beneficiary nations under the CBI. 83 The labor rights language in the GSP established both the principle of a labor rights-trade linkage and the practice of applying it. 84 Although the GSP and CBI programs have not ended workers rights abuses in the Caribbean Basin, they have lessened some of the most egregious abuses. 85 Any bilateral or regional trade agreement involving GSP or CBI beneficiary nations, including DR-CAFTA, would replace existing unilateral trade preference legislation. 86 Consequently, DR-CAFTA must include strong labor provisions in order to maintain and advance the improvements made under the GSP and CBI programs North American Agreement on Labor Cooperation: The Enforce Your Own Laws Principle When Canada, Mexico, and the United States finished negotiating NAFTA, the first regional FTA involving the United States, the agreement included no labor provisions. 88 A separately negotiated agreement, the North American Agreement on Labor Cooperation (NAALC), established the labor-related regained GSP benefits after instituting labor reform measures. Id. 81. See FRUNDT, supra note 24, at 6-7 (explaining transformation of Caribbean Basin export industry caused by CBI). Congress twice amended the CBI, most recently by the Caribbean Basin Partnership Act. Caribbean Basin Trade Partnership Act (CBTPA) of 2000, 19 U.S.C (2000) (extending CBI to 2008 and presenting expanded list of eligibility requirements); see also Hornbeck, supra note 4, at 4 n.8 (noting CBTPA relaxed limitations on apparel imports from Central American countries). 82. CBTPA, 19 U.S.C. 2702(c)(8) (2000) (incorporating labor rights language of GSP into CBI). 83. See Sheppard, Hale E., Partial Revocation of the Caribbean Basin Trade Partnership Act: An Analysis of Hemispheric Injuries and Domestic Benefit, 28 N.C. J. INT L L. & COM. REG. 135, 139 (2002) (listing CBTPA beneficiary nations in 2002). 84. Compa & Vogt, supra note 35, at (discussing subsequent laws infusing GSP labor rights conditionality into transnational trade relationships). 85. FRUNDT, supra note 24, at 274 (concluding GSP and CBI enhanced Central American workers rights legislation and enforcement); POLASKI, supra note 16, at 2 (acknowledging gains and failures of unilateral trade preference legislation in Central America). Since the adoption of the GSP labor amendment, workers in beneficiary nations have enjoyed higher wages, increased benefits, and diminished union opposition, among other improvements. FRUNDT, supra note 24, at 274. Overall labor conditions, however, have not significantly improved. Id. at See Hornbeck, supra note 4, at 18 (explaining impact of DR-CAFTA on trade relationship between United States and Central America). 87. Weiss, supra note 5, at (arguing omission of enforceable labor commitments from DR- CAFTA risks regression from unilateral trade legislation). 88. See Weiss, supra note 5, at 701 (describing NAFTA labor side agreement as afterthought ).

13 2006] REMEDYING THE DR-CAFTA LABOR PROVISIONS 523 obligations of the NAFTA parties. 89 This agreement requires each country to effectively enforce only its domestic labor laws and does not incorporate international standards. 90 Additionally, parties retain an unrestricted right to amend domestic laws. 91 Sanctions and fines are available only in limited circumstances. 92 Moreover, the narrow dispute resolution mechanism applies only to trade-related cases involving a government s persistent pattern of failure to respect the rule of law Jordan FTA: Parity of Enforcement The Jordan FTA, implemented in 2001, shares the same basic premise of the NAALC. 94 By ratifying the agreement, with its enforceable labor commitments, Jordan and the United States promised to enforce their own domestic labor laws. 95 The Jordan Agreement, however, defines labor law more narrowly than the NAALC. 96 Still, the Jordan FTA improves upon the 89. North American Agreement on Labor Cooperation, Sept. 14, 1993, Can-Mex.-U.S., 32 I.L.M [hereinafter NAALC] (setting forth NAFTA parties general labor-related commitment); see also Weiss, supra note 5, at 702 (stating NAALC negotiated by Clinton administration after primary trade agreement completed). President George H.W. Bush negotiated NAFTA. When the effect of trade on the labor rights of United States workers became a hot presidential campaign issue, then-candidate Bill Clinton promised to support NAFTA if the parties negotiated a side agreement aimed at preventing a downward spiral in labor protections. Id. Although Canada and Mexico both resisted the side agreements, all three countries eventually reached a compromise and ratified the NAALC. Id. 90. NAALC, supra note 89, art. 2, at 1503 (calling for NAFTA parties to ensure domestic labor laws reflect high labor standards); see also Manley & Lauredo, supra note 6, at 104 (highlighting absence of ILO or other international standards from NAALC). Under the NAALC, labor law encompasses a party s law and regulations that directly relate to the following: (a) freedom of association and protection of the right to organize; (b) the right to bargain collectively; (c) the right to strike; (d) prohibition of forced labor; (e) labor protections for children and young persons; (f) minimum employment standards, such as minimum wages and overtime pay, covering wage earners, including those not covered by collective agreements; (g) elimination of employment discrimination on the basis of grounds such as race, religion, age, sex, or other grounds as determined by each Party s domestic laws; (h) equal pay for men and women; (i) prevention of occupational injuries and illnesses; (j) compensation in cases of occupational illnesses and injuries; [and] (k) protection of migrant workers. NAALC, supra note 89, art. 49, at NAALC, supra note 89, art. 2, at 1503 (reiterating high degree of respect for domestic law); see also Weiss, supra note 5, at 704 (discussing crucial role of sovereignty concerns in NAALC negotiations). All three NAFTA nations demanded that the agreement ensure maximum preservation of national sovereignty. Weiss, supra note 5, at See Weiss, supra note 5, at 706 (noting majority of violations subject only to investigation, reporting, and settlement negotiation). 93. NAALC, supra note 89, art. 21(1)(a), at 1509 (permitting access to arbitral panel only if trade-related dispute). 94. Compare Jordan-FTA, supra note 2, art. 6(4), at 70 (stating each party shall not fail to effectively enforce its labor laws ), with NAALC, supra note 89, art. 2, at 1503 (requiring each nation to ensure labor laws and regulations provide high labor standards). 95. Jordan-FTA, supra note 2, art. 6(4), at 70 (stating labor obligations). 96. Compare Jordan-FTA, supra note 2, art. 6(6), at 71 (clarifying limited scope of statutes and