More on the Linkage Between International Trade and Labor

The U.S. Trade Representative’s Office has released some further details on its agreement with Congress to incorporate international labor standards into future U.S. free-trade agreements. Here are a couple important new institutional innovations.



(1) Violations of international and local labor standards will apparently be subject to the same international dispute resolution mechanisms as the rest of the trade agreement. This is big: Panels will for the first time be empowered to determine violations of international labor standards and countries will be authorized to impose trade sanctions to punish violations.



(2) Like those agreements, only a government can invoke dispute settlement against the other government for a labor violation under an FTA. This means that NGOs like labor unions cannot bring claims on their own.



(3) Panel decisions are not self-executing. As the USTR statement puts it, this means “they would not alter U.S. law.” And therefore no panel decision finding U.S. labor laws in violation of international standards would have immediate domestic effect.



(4) There is appears to be a subject matter requirement for any labor violations to “occur in a manner affecting trade or investment between the parties.” This would appear to further limit the scope of trade-based challenges to a country’s labor practices.



(5) Part of this deal will depend on how broadly the 1998 ILO Declaration is interpreted. The U.S. appears to have adopted a fairly narrow reading, arguing that it is already in full compliance with the 1998 ILO Declaration.



Bottom line: Labor will now join subsidies, antidumping, enforcement of intellectual property rights and investor protection as an integrated part of dispute resolution under U.S. free-trade agreements. This could be a big deal, but we’ll have to see the fine print…