Focus: Failure by design: Did the US choose to lose the Guatemala labour dispute?

Abstract

‘This decision drives home the fact that US trade deals do not protect workers’1. That assessment – from Celeste Drake, Trade Policy Specialist at the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) – is timely indeed. Discussions about the future of labour provisions in free trade agreements (FTAs) are currently intensifying on both sides on the Atlantic. The decision in question is the long awaited Final Report of the arbitral Panel in the dispute concerning Guatemala’s breach of the labour clause in the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR)2. It is the only attempt to date to enforce an FTA labour clause through dispute settlement – the only case to ever proceed to beyond consultation to dispute settlement, and now the only decision ever issued by an arbitral panel. Published in June – more than nine years after Guatemalan unions and the AFL-CIO first submitted their complaint to the US Trade Representative (USTR) – the Report’s 288 pages are likely to prove significant. In short, the Panel found Guatemala’s conduct not to have breached its obligations under Article 16.2.1(a) of CAFTA-DR. Following the experience of this onerous labour provision, it might be fair to assume that the Article will never be invoked again. According to Drake, ‘this failure is by design — labor chapters were not meant to work efficiently or effectively’. Indeed, Article 16.2.1(a) seems drafted to confound application. In order to constitute a breach of the Article, Guatemala’s failure to effectively enforce labour laws must have been (i) through a sustained or recurring course of action or inaction and (ii) in a manner affecting trade between the Parties. Satisfying these qualifying provisions of Article 16.2.1(a) – deemed by the Panel to be ‘cumulative in nature’ – proved insurmountable. However the failure of the case cannot be blamed purely on critical flaws in the architecture of the labour provision. Arguably, a breach of the Article might have been found had the US simply deigned to mention in its complaint the widespread violence perpetrated against trade unionists in Guatemala. Its failure to do so is perplexing. The US complaint In its Initial Written Submission to the Panel in November 2014, the US argued that Guatemala had failed to effectively enforce its labour laws in three main respects. The Panel made short shrift of two of these claims. On the issue of Guatemala’s failure to register unions, the US cited three cases, only one of which had occurred before the US submitted its initial request for the establishment of the arbitral Panel in 2011. Therefore the claim was deemed to be outside the scope of the terms of reference and beyond the Panel’s jurisdiction. The other US claims regarding labour inspections did not fare much better. The Panel found only one case in which Guatemala had failed to effectively enforce its labour laws – and this was deemed a ‘discrete instance’. So the Panel’s decision focuses largely on the US’ claim that Guatemala failed ‘to secure compliance with court orders requiring employers to reinstate and compensate workers wrongfully dismissed for union activities, and to pay a fine for their retaliatory action’. And the Panel did find with respect to 74 workers at eight worksites that Guatemala had indeed neglected the enforcement of its labour laws. But it was unable to find that this failure amounted to a breach of the Article. Four shipping companies, three garment manufacturers and a rubber plantation With reference to ILO principles, the Panel recognised the importance of protecting workers from reprisals for exercising their trade union rights on the basis ‘that retaliatory dismissals are serious violations that can be expected to thwart freedom of association and the rights to organize and bargain collectively’3. The cases at the eight worksites cited were likely sufficient to constitute ‘sustained or recurring course of action or inaction’. The Panel found that the ‘precise, mandatory nature of the actions required to be taken’ (in respect of enforcement) under the Labour Code suggested a ‘pattern of significant shortfall between the labor courts’ mandate and performance’. However the Panel also noted that the number...