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Why a “Grand Deal” on Labor Could End Trade Talks

by Theodore H. Moran, Georgetown University
and Gary Clyde Hufbauer, Peterson Institute for International Economics

Op-ed in the Financial Times
March 12, 2007

© Financial Times Limited 2007

US congressional Democrats, led by Sandy Levin and Barney Frank, are insisting that core labor standards promoted by the United Nations’ International Labor Organization (ILO) be included in forthcoming trade agreements as part of a “grand bargain.” They want to make ratification of free trade agreements (with Panama, Peru, and Colombia)—and renewal of President George W. Bush’s fast-track trade negotiating authority to conclude the Doha round—conditional on the inclusion of enforceable ILO standards.

An inconvenient truth poses a huge obstacle to the proposed “bargain:” US labor laws are either openly inconsistent with core ILO standards, or they could be challenged by lawyers if ILO standards trumped established statutes and long-standing interpretations. A trade agreement that enthroned ILO standards would not only alter federal labor law, it would also override state laws—triggering a constitutional howl from Sacramento to Albany. The practical effect would be to stop US trade negotiations. Few legislators would want to subordinate huge swaths of labor law to broad principles enunciated in trade agreements.

The four ILO standards are freedom of association and, in effect, recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labor; the abolition, in effect, of child labor; and the elimination of discrimination in respect of employment and occupation.

The devil is in details. For example, under ILO jurisprudence the employment of prisoners contradicts the injunction against forced labor. But 20 US states require all able-bodied prisoners to accept jobs as a condition of parole eligibility. The Bureau of Prisons operates 100 factories where prisoners are not covered by the Fair Labor Standards Act or minimum wage laws.

With regard to freedom of association and right to collective bargaining—in political terms, the most important standard—the ILO forbids governments from punishing workers who threaten to strike or exercise that threat when negotiations fail. But US legislation permits employers to hire permanent replacements for striking workers. The ILO lists the United States with Burkina Faso, Cape Verde, Central African Republic, Djibouti, Madagascar, and Niger as countries that allow the hiring of new permanent workers to replace strikers. The ILO has not so far ruled whether US actions are “extensive” enough to violate ILO conventions. But it is not implausible that the ILO, an arbitration panel or a federal court would declare US practice inconsistent with the ILO standard.

During the 2005 debate over ratification of the US free trade agreement with Central American countries, Democrats on the House Ways and Means Committee criticized partner country laws for not limiting the vote on a strike to union members, for not ensuring accelerated judicial review of cases involving workers dismissed for union activity, and for not awarding them more than double severance pay. They also objected to the absence of legislation in the Central American countries that would permit agricultural workers in general, and migrant agricultural workers in particular, to unionize.

Consider what these criticisms imply for US labor law. Any dispute settlement mechanism in a trade agreement must afford symmetrical scrutiny to all partners, including the United States. In the United States, nonunion workers have a right to vote about going on strike (in right-to-work states); there is no expedited handling of antiunion dismissal cases; and the National Labor Relations Board normally orders no more than reinstatement of the employee with back pay. Moreover, agricultural workers are exempted from the National Labor Relations Act that ensures other workers have the right to organize and bargain collectively.

The ratification of trade agreements that allowed labor complaints crafted under ILO principles to be brought against member countries would mean that ILO standards gradually supplanted US legislation. Congress and state legislatures would find their handiwork undone by trade panels and courts wielding fines and injunctions.

In light of this inconvenient fact, what is being sold as a “grand bargain” allowing trade negotiations to move forward may end up bringing an abrupt halt to the entire trade negotiation process. If so, the losers will be millions of impoverished people in Latin America, Africa, and Asia.


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