The Labor Side Agreement under the NAFTA: Analysis of Its Failure to Include Strong Enforcement Provisions and Recommendations for Future Labor Agreements Negotiated with Developing Countries

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Following heated debates in the United States, and after more than three years of negotiations between the trade representatives of the United States, Mexico, and Canada, the North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994.1 All three countries passed the supplemental agreements on labor and the environment as part of the NAFTA.2 In the United States the House of Representatives voted to pass the NAFTA and its supplemental labor and environmental agreements by an incredibly close vote of 234 to 200.3 The U.S. Senate passed the NAFTA and its supplemental agreements by a less impressive margin of 61 to 38.4

The final NAFTA represented a break from prior free-trade agreements negotiated by the United States in its emphasis on labor and environmental issues.5 In fact, the North American Agreement on Labor Cooperation (NAALC) was the first labor agreement ever negotiated by the United States to specifically apply to a trade agreement.6

This Note argues that as representatives of the United States continue to negotiate free-trade agreements with developing countries, priority should be placed on negotiating an agreement that addresses and attempts to correct any participating country's failure to enforce its domestic labor standards.7 In other words, to prevent a developing country from obtaining an unfair labor advantage, the United States should ensure that a labor agreement contains mechanisms that provide incentives for the developing country to enforce its domestic labor laws.8 Specifically, this Note suggests that monetary sanctions for all domestic labor-law violations should be included as a part of the enforcement provisions in future labor agreements.9 In making this argument, the Note examines the enforcement provisions contained in the NAALC,10 discusses their weaknesses,11 and provides suggestions for improvements in future labor agreements that the United States negotiates with developing countries.12

The Note first describes the history behind the negotiations of the supplemental labor agreement.13 Specifically, it examines the power of the U.S. Trade Representative (USTR) to negotiate the inclusion of sanctions in the labor side agreement.14 It also discusses the reasoning by the parties involved in the negotiations for including certain enforcement mechanisms in the labor agreement and excluding others.15

Next, the Note examines the labor agreement itself.16 The discussion will focus on the administrative structure and dispute mechanism outlined in the agreement.17 The Note then reviews and analyzes the first claims filed under the labor side agreement and discusses what the decisions mean for U.S. businesses operating in Mexico.18

In addition, the Note discusses the various criticisms of the enforcement provisions included in the NAALC and, using the first claims filed under the agreement as examples, analyzes the potential of the current provisions to encourage the signatory countries to comply with domestic labor standards.19 Moreover, the Note examines and refutes the legal reasons provided by the negotiators and politicians for excluding stronger monetary sanctions in the enforcement provisions.20 Finally, the Note suggests including stronger enforcement provisions in future labor agreements that are acceptable to all parties to the free-trade agreement and that protect U.S. workers' rights by ensuring an equal playing field.21


A. History of the North American Agreement on Labor Cooperation: President Clinton's Position and the Negotiations

1. President Clinton's Position

The NAFTA was negotiated by President Bush during the 1992 U.S. presidential campaign,22 and it became a focal point in the election and as an issue for debate between the candidates.23 It was during a campaign speech that then-Governor Clinton first indicated his intent to negotiate supplemental agreements to the NAFTA on the environment and labor if elected president. …


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