NAFTA, GATT, and the Current Free Trade System: A Dangerous Double Standard for Workers' Rights

Taylor, Chantell, Denver Journal of International Law and Policy

The single, clearest, most direct result of economic globalization to date is a massive global transfer of economic and political power away from national governments and into the hands of global corporations and the trade bureaucracies they helped create. This transfer of power is producing dire consequences for the environment, human rights, social welfare, agriculture, food safety, workers' rights, national sovereignty, and democracy itself.(1)

I. INTRODUCTION

A. The 1999 Seattle Round and WTO's Future

From November 30th through December 3rd 1999, the 135 member States of the World Trade Organization (WTO)(2) were scheduled to convene for a round of negotiations in Seattle, Washington "to review the global trading system and ensure its dynamism and responsiveness in the years ahead."(3) The Seattle Round is ninth in a series of "negotiating rounds," including the Uruguay Round of 1986-94 that resulted in the official birth of the WTO.(4) Each round has built off of the last and each has brought in more member countries to negotiate rules for liberalized trade.(5) The Seattle Round was considered the most significant meeting of the members since the 1994 establishment of the WTO because the members intended to map out the WTO's work agenda for the months and years ahead.(6) It was this part of the agenda that roused controversy between the government bureaucrats and citizen action groups, whose visions for the future of the WTO were in direct conflict.

To many, and particularly to organized labor, the Seattle Round constituted a rare opportunity to capture the attention of global bureaucrats who for years have been crafting international trade rules without democratic participation, transparency or accountability. As early as November 26, 1999, fair trade(7) activists from all over the world began sprinkling into Seattle homes, hotels and streets -- just the beginning of an ultimate activist monsoon. It was earlier predicted that fair trade demonstrators would outnumber the bureaucrats of the WTO by the thousands, and some international trade bureaucrats and lawyers in Washington, D.C. anticipated "real blood and guts."(8) Their predictions came true ... with a vengeance.

The controversy between organized labor and the trade bureaucrats of the WTO, while multifaceted, can be plainly stated: the WTO openly declares that labor is not on the agenda and labor thinks it ought to be. According to the WTO, "there is no work on the subject [of labor] in the WTO, and it would be wrong to assume that it is a subject that 'lies ahead.'"(9) Rather than integrate labor standards directly into WTO rules and agreements, WTO members defer the issue to the International Labour Organization (ILO): "The International Labour Organization (ILO) is the competent body to set and deal with these standards and we affirm our support of its work in promoting them."(10) Conversely, the AFL-CIO,(11) America's largest labor union and an avid opponent of the existing WTO,(12) argues:

      WTO failure to enforce minimum labor standards results in ongoing
   exploitation of workers in the global market ... The WTO enforces
   intellectual property rights, market access and government regulation of
   investment -- and there is no reason why it also cannot enforce basic
   minimum standards for the humane and decent treatment of workers.(13)

B. Summary

This article compares the corporate rights embodied in the North American Free Trade Agreement (NAFTA) and the GATT/WTO with workers' rights embodied in the North American Agreement on Labor Cooperation (NAALC) and the International Labor Organization (ILO), suggesting that corporations enjoy far greater protection in the global marketplace than workers. This article further argues that unless the system is reformed, workers will continue to be exploited at the expense of corporate profits. By contrasting the NAFTA and the GATT/WTO enforcement mechanisms for commercial rights versus labor rights, this article attempts to expose how the current free trade paradigm procedurally and substantively promotes a double standard. These inequities reflect a fundamental flaw perpetuated in international trade policy today -- that international commercial interests can somehow be divorced from the very labor market that fuels globalization.

Section two of this article presents a general background of the NAFTA and the GATT/WTO, including discussion from both sides of the debate and current efforts to clone the agreements in new trade accords. Section three compares the NAFTA's rights for corporations with the NAALC's rights for labor, noting two specific cases brought by corporations under the NAFTA dispute settlement provisions. Similarly, section four compares the GATT/WTO rules governing corporate rights with the ILO principles addressing labor standards. Section five presents conflicting progress reports in the years since NAFTA and GATT/WTO took effect. Finally, this article concludes with recommendations and alternatives to reshape the current trade policy.

II. NAFTA, GATT/WTO, AND THE WALLS CAME TUMBLING DOWN

Two major congressional votes in the early 1990's continue to shape the direction of international trade policy today -- the 1993 approval of NAFTA and the 1994 approval of the GATT and the WTO.(14)

A. NAFTA

1. Background

Although Ronald Reagan was the first U.S. President to propose a trilateral free trade pact between Canada, the United States and Mexico, no one took the notion seriously until the Bush Administration picked up the idea in 1991.(15) At the time, Mexican President Carlos Salinas de Gartari had undertaken major steps to revitalize Mexico's economy, including "the pursuit of a free trade pact with Washington."(16) On February 5, 1991, after the Salinas and Bush Administrations privately affirmed mutual interest, President Bush officially announced to Congress his commitment to negotiate a North American Free Trade Agreement, calling NAFTA "the first step toward a hemispheric common market."(17)

Since its inception, the heart of the NAFTA has been to open up markets between Canada, Mexico and the United States.(18) Some of NAFTA's key provisions include:

   Elimination of tariffs on North American industrial products within 10
   years of implementation;

   Elimination of non-tariff barriers and other trade distorting restrictions,
   such as import licenses, local content, local production, and export
   performance requirements;

   Elimination of investment conditions, such as technology transfers, use of
   domestic goods or services, set export levels or percentages, and limits on
   percentage of imports relative to exports;

   Guarantees that investors be treated the same as domestic investors
   (national treatment);

   Guarantees to investors the right to fair compensation in the event of
   expropriation, the right to dispute settlement and monetary damages (legal
   standing), and the right to repatriate profits and capital (capital
   mobility);

   Expansive protection of intellectual property rights; and

   Access to government procurement.(19)

2. Proponents of NAFTA and Their Promise to Labor

Congress had not considered the notion of incorporating core labor standards during NAFTA negotiations with Mexico and Canada, rather, their focus was strictly commercial.(20) Labor issues became a central part of the debate when Bill Clinton made a 1992 campaign pledge to complete the NAFTA negotiations -- but with added protections for labor, the environment and other social issues.(21)

Initially, Clinton was pushing for a NAFTA virtually identical to the Reagan-Bush proposals already on the table. It was not until massive opposition erupted from organized labor and the environmental community, both important constituents to Clinton's campaign, that he pledged to include side agreements on the issues.(22) This strategy managed to satisfy the business lobby by keeping labor issues out of the body of the agreement, while appeasing labor groups by not wholly ignoring labor standards.(23) Clinton promised that the proposed labor side agreement would include "strong resolution mechanisms and effective remedies,"(24) and a team of Clinton administration economists projected figures of 200,000 new jobs for Americans in the first two years of NAFTA alone.(25)

Other proponents of NAFTA made dramatic projections that U.S. export increases to Mexico would create thousands of new, high-paying jobs for Americans. In 1993, Robert B. Reich, Secretary of the U.S. Department of Labor, testified before the U.S. Senate:

   In addition to generating more jobs in the United States, NAFTA will lead
   to better jobs. Jobs created by expanded trade typically are the sorts of
   higher wage, higher skilled jobs in which the future of the American work
   force depends. Missing the boat on NAFTA, we will prevent us from reaping
   these potential gains.(26)

   Senator Lloyd Bentsen also testified to the U.S. Senate that:

   Now 700,000 Americans depend on trade with Mexico for their jobs. And
   things are going to get even better with NAFTA. We calculate that we'll
   pick up 200,000 more jobs in the next two years alone, and jobs related to
   trade with Mexico pay about 12 percent better than average ... This
   agreement is clearly good for America, and it's clearly good for American
   workers. We're getting a deal here.(27)

To ensure that the NAFTA gain much needed approval in the House, the Clinton administration sought assistance from business leaders. In an effort to dispel some of the widespread concern that NAFTA would encourage U.S.-based companies to relocate in Mexico where labor and other standards were lax, Clinton urged major companies to formally pledge that they would not relocate their plants if NAFTA were approved.(28) U.S. companies balked at the idea of being bound to such a pledge and ultimately refused to sign.(29)

The business leaders did, eventually, come to the rescue because they were committed to one thing: passage of a NAFTA without labor or environmental obligations at any cost. To ensure that this goal be met, a coalition of 2,700 companies, including most of the Fortune 500, launched a massive campaign called USA*NAFTA.(30) USA*NAFTA inundated the American public with radio, television, and news paper ads attempting to ease suspicion about NAFTA benefiting special-interests at the expense of American workers.(31)

3. NAFTA's Labor Opponents: Promises Not Enough

Opponents of NAFTA argued that even with the labor side agreement, the pact failed to adequately protect labor rights.(32) They argued that while private corporations are entitled to enforceable rules protecting their assets, workers are denied enforcement rules to protect their livelihoods.(33)

Notwithstanding Clinton's strategy to gain NAFTA approval, the NAALC labor side agreement was not enough to squelch the opposition of organized labor.(34) Labor unions predicted that massive job loss and wage stagnation would result in part from U.S. based companies relocating south of the border to capitalize on cheaper markets and lax labor laws.(35) In addition, labor advocates predicted that Mexico's already poor enforcement of labor laws would worsen and thus further encourage a southbound exodus.(36) A preliminary analysis of the NAFTA by the AFL-CIO stated:

   The AFL-CIO believes that the [NAFTA] ... would be ruinous to the U.S.
   economy, resulting in the loss of hundreds of thousands of American jobs
   and a general decline in wages. One of the agreements' primary -- though
   far from only -- flaws is its complete failure to promote the upward
   harmonization of living standards by linking market access with the
   enforcement of worker rights and labor standards ... the Clinton campaign
   promised to solve the problem by negotiating a side agreement ...
   [u]nfortunately, the final product negotiated by the Clinton administration
   falls far short of its stated purpose.(37)

Additional critics estimated job loss resulting from NAFTA at over 500,000 and anticipated that companies in the U.S. would use the NAFTA as leverage against their workers, thwarting union organizing by threatening to move to Mexico.(38) In his statement at the 1993 Senate hearing on NAFTA, Thomas R. Donahue concluded that, all projections aside:

   The real story is not that NAFTA has the support of five former presidents.
   Rather, it is the fact that NAFTA is understood and opposed by the majority
   of American citizens -- autoworkers in Illinois, truck drivers in
   California, maritime workers on the East Coast. They know that no promise
   of worker retraining, no breakthrough in technology, no government-business
   partnership scheme, can bring back the jobs and investment dollars that
   NAFTA will take from the U.S. under the conditions enshrined by NAFTA.(39)

When labor unions demanded an equal voice at the NAFTA negotiating table to ensure that labor rights were given the same merit as capital mobility and investment protections, they were ignored, and NAFTA negotiators ultimately crafted an unbalanced agreement bolstering commercial interests at the expense of labor rights.(40) After exhaustive debate and massive grassroots opposition, the free-trade champions triumphed and NAFTA was implemented January 1st, 1994.(41)

B. GATT/WTO

1. The Birth of the WTO: From Havana to Uruguay

   NAFTA was the first major trade fight ... A year after NAFTA took effect, a
   whole new trade regime came into being with the birth of the [WTO] in
   January 1995, replacing the much looser set of agreements that had
   regulated world trade since the late forties.(42)

The decades-long process of approving the GATT and WTO in 1994 actually began in 1948 with the Havana Charter. Struggling to recover from the hardships of World War II and the Great Depression, countries sought economic security through international cooperation.(43) To that end, fifty countries convened in 1946 to negotiate expeditious trade liberalization and "to begin to correct the large legacy of protectionist measures which remained in place from the early 1930s."(44) This meeting constituted the first of many future negotiating "rounds." Of the fifty participating countries, twenty-three signed what is now known as the Havana Charter.(45) The Charter had two primary goals: to establish a multilateral set of rules between participating countries and to establish a regulating body of …

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Publication information: Article title: NAFTA, GATT, and the Current Free Trade System: A Dangerous Double Standard for Workers' Rights. Contributors: Taylor, Chantell - Author. Journal title: Denver Journal of International Law and Policy. Volume: 28. Issue: 4 Publication date: Fall 2000. Page number: 401. © 2009 University of Denver. COPYRIGHT 2000 Gale Group.

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