Trade Promotion Authority (TPA) Renewal: Core Labor Standards Issues: A Brief Overview

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This report is a brief overview of key issues addressed in CRS Report RL33864, Trade Promotion
Authority (TPA) Renewal: Core Labor Standards Issues, by Mary Jane Bolle. Trade promotion
authority (TPA), formerly known as “fast-track” authority, is scheduled to expire July 1, 2007.
With it will expire the President’s authority to negotiate trade agreements that Congress will then ^th
consider without amendment and with limited debate. For the 110 Congress, a likely issue in this
debate is whether to include enforceable core labor standards as a principal negotiating objective
in trade agreements. Accordingly, this report (1) identifies key labor provisions in the current TPA
law and how they have translated into free trade agreements negotiated under it; (2) presents
some legislative options, and summarizes arguments for and against listing enforceable core labor
standards as a principal negotiating objective; and (3) looks at possible outcomes and
implications of the legislative options. This report will be updated as events warrant.

Introduc tion ..................................................................................................................................... 1
Key Players and Their Positions...............................................................................................1
Major Legislative Options and Arguments......................................................................................2
Should Enforceable Core Labor Standards Be Included as a Principal Negotiating
Objective? .............................................................................................................................. 3
General Arguments.............................................................................................................3
Arguments Related to U.S. Workers...................................................................................4
Arguments Related to Foreign Workers..............................................................................4
Sovereignty Issues..............................................................................................................4
If So, What Should Be The Definition of Core Labor Standards?............................................5
Arguments on the Definition of Core Labor Standards......................................................5
Possible Outcomes and implications...............................................................................................5
Most Recent Developments.............................................................................................................6
Author Contact Information............................................................................................................6

Trade promotion authority (TPA), formerly known as “fast-track” authority, is scheduled to expire
July 1, 2007. With it will expire the authority that Congress grants the President to enter into
certain trade agreements, and the authority for Congress to consider the agreements’
implementing legislation under expedited procedures. Currently, the Administration is negotiating
a number of trade agreements that may not be completed before TPA is set to expire. If these ^th
activities are to continue, TPA renewal may be a central issue in the 110 Congress. Within the
debate, a major issue is expected to be whether to include as a principal negotiating objective in
trade agreements, “enforceable core labor standards.”
The current TPA is contained in the Bipartisan Trade Promotion Authority Act of 2002 (Title XXI
of the Trade Act of 2002, P.L. 107-210). A total of nine free trade agreements (FTAs) have been
negotiated under this authority. They are with Chile, Singapore, Australia, Morocco, Bahrain,
Oman, the Dominican Republic and Central America, Peru and Colombia. The last two await
congressional consideration. The labor issue in these trade agreements is how key provisions in
each reflect two principal negotiating objectives in TPA.
The first TPA principal negotiating objective is: “to ensure that a party does not fail to enforce its
own labor laws through a sustained or recurring course of action or inaction, in a manner
affecting trade between the parties.” All nine FTAs track this principal negotiating objective by
providing: that countries shall “not fail to enforce their own [labor] laws ... in a manner affecting
trade between the Parties”—popularly called the “enforce-your-own” provision.
The second TPA principal negotiating objective is: “to seek dispute settlement and enforcement
provisions that treat U.S. principal negotiating objectives equally with respect to the ability to
resort to dispute settlement, the availability of equivalent dispute settlement procedures, and the
availability of equivalent remedies.” In what labor advocates see as a “departure” from the TPA
provision, procedures for labor disputes differ in several respects from those for commercial
disputes and include a cap on monetary penalties (while those for commercial disputes do not.)
Those calling for expanded or strengthened labor provisions fault labor protections in the nine ²
FTAs, arguing that they (1) lack the enforceability of commercial provisions; (2) fail to meet
some congressional negotiating objectives and barely comply with others; (3) represent a “big
step back” from both the U.S.-Jordan FTA and U.S. unilateral trade preference programs such as ³
the Generalized System of Preferences (GSP); and (4) “completely exclude obligations for

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governments to meet such international standards as worker rights.” These advocates further
argue that in order to strengthen FTA provisions, the blueprint for their negotiation—the TPA
language—needs to be strengthened.
Advocates of strengthened labor provisions, in promoting enforceable core labor standards,
appear to have two objectives. The first objective could be characterized as humanitarian: to
promote the protection of workers around the world, particularly those in developing countries
where protections are weak and/or poorly enforced. The second objective could be interpreted as
economic: to help “level the playing field” between U.S. and foreign workers so that U.S.
workers can compete on a more equitable basis.
Opponents respond in support of the current TPA, noting that labor provisions in the nine FTAs
negotiated under it: (1) are the strongest labor provisions attached to FTAs to date; (2) are the
product of bilateral negotiation; and (3) both depend on and reflect mutual agreement by
negotiating countries; 4) treat U.S. principal negotiating objectives “equally” in that the principal
remedies for labor and commercial disputes are “equivalent;” and (5) are preferable to
enforceable core labor standards because the latter could raise sovereignty issues.
Opponents have, as one key objective, promotion of U.S. investment. They often represent the
viewpoints of businesses and investors, developing country governments, and the current
Administration. Many business groups support the passage of TPA in order to facilitate the
expansion of U.S. multinational corporations abroad—their most important avenue for continued
growth. In fact, both TPA and trade agreements typically include many protections for investors.
Developing countries care about protecting their ability to attract investment, and are concerned
about anything that might jeopardize that ability. In the World Trade Organization (WTO),
developing countries have long resisted U.S. proposals to study the relationship between worker
rights and trade, concerned that such a study could lead to enforceable labor standards that could
undercut their comparative advantage in low-cost labor. However, as with businesses and
investors, their flexibility to compromise on the issue of enforceable core labor standards seems
to be related to the strength of their desire to have an FTA with the United States.

Major legislative options for treatment of labor standards as principal negotiating objectives if
TPA were to be renewed, include the following:
• Option 1: No enforceable labor standards provisions. This option would likely
be viewed as a step back from the expiring TPA;
• Option 2: Renewal of the current “enforce-your-own” provisions aiming: (1) to
ensure that a party does not fail to enforce its own labor laws; and (2) to seek
dispute settlement provisions that treat U.S. principal negotiating objectives
equally; and
• Option 3: “Enforceable core labor standards” as reflected in H.R. 3019,
introduced in 2001 by Representative Charles Rangel which aimed: (1) to ensure
that a party does not fail to enforce core labor standards; and (2) to provide that
violation of these standards would be subject to enforcement under a single set of
dispute settlement procedures that would be applicable to all disputes under an
FTA.

The term core labor standards has been defined in two ways by two different sources: the
International Labor Organization (ILO) which calls them “core labor standards,” and U.S. trade
law which refers to them as “internationally recognized worker rights.” Both definitions are
almost identical and share four standards or rights: (1) the right to organize, (2) the right to
bargain collectively, (3) prohibition of forced labor, and (4) protections for child labor including ⁴
the “worst forms of child labor” They differ on the fifth standard. U.S. law identifies it as: (5)
labor standards pertaining to minimum wages, maximum hours, and occupational safety and ⁵
health. ILO conventions define it as: (5) freedom from employment discrimination.
Those in favor of principal negotiating objectives that call for enforceable core labor standards ⁶
include the AFL-CIO, Human Rights Watch, and the International Labor Rights Fund. Labor
advocates traditionally argue: (1) that enforceable core labor standards help guard against a “race
to the bottom,” as workers all over the world compete against each other for scarce jobs; and (2)
that labor standards do not interfere with natural comparative advantage in developing countries
because labor standards are only one basis for comparative advantage. Others include abundance,
skills, and education of available workforce; infrastructure; level of technological development of
the country; and natural resource base.
Opponents typically argue that (1) the enforce-your-own standards model provides a more direct,
less encumbered path to economic growth; (2) most developing countries have few resources to
devote to labor standards enforcement; (3) once a developing country is more economially
developed and relatively near full employment, labor standards and their enforcement begin to
rise on their own; and (4) imposing core labor standards on developing countries too soon could
interfere with their comparative advantage in abundant and inexpensive labor, and amount to
protectionism.

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Supporters argue that a principal negotiating objective calling for enforceable core labor
standards could help level the playing field for U.S. workers and make them more competitive
internationally.
Some opponents argue that the need or desire to earn a living is often incentive enough to
encourage displaced workers to find new employment. Others argue that there are better ways to
help U.S. workers than trying to level the playing field, which, at best, may only slow the
offshore movement (or technological elimination of) of some U.S. jobs. A better way, some argue,
would be to expand adjustment assistance benefits, educational benefits, or other training and
retraining programs to cover all displaced workers—whether the job loss results from trade or
technology—and help them transition into new careers.
Advocates of strengthened labor standards argue that enforceable core labor standards can help
foreign workers share in the gains of increasing productivity and economic expansion, and
thereby become consumers in their own right.
Opponents argue that real gains in standard of living in developing countries come from rising
productivity, not from artificially imposed labor standards including minimum wages. In addition,
they argue, some workers do not want enforceable core labor standards because these could limit
their ability to maximize their earnings by working overtime.
Those in favor of enforceable core labor standards as a principal negotiating objective could
argue that the ILO already requires that countries comply with ILO core labor standards as a
condition of continued membership in good standing, even if those countries do not formally
approve the ILO conventions. Therefore, incorporating enforceable core labor standards into trade ⁷
agreements does not add much more to this requirement.

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Opponents might respond that enforceable core labor standards interfere with national
sovereignty in a way that ILO membership does not, since enforcement powers of the ILO are
limited to consensus and persuasion.
If “enforceable core labor standards” is adopted as a principal negotiating objective for trade
agreements, the AFL-CIO is strongly in favor of using the ILO definition over the U.S. definition
(see p. 4 for definitions), because it is more current. Human Rights Watch, while not arguing for
either definition specifically, stresses that the definition of core labor standards must include
prohibitions against employment discrimination (which is in the ILO but not the U.S. definition.)
If the ILO definition were adopted, opponents point out, foreign governments could hold existing
U.S. labor laws up to scrutiny, arguing that they don’t totally comply with ILO core labor
standards. This is because the United States has ratified only two conventions (one on forced
labor and one on the worst forms of child labor). Accordingly, the U.S. Council for International
Business (USCIB) argues that many U.S. labor laws would need to be changed to come into
compliance with the ILO definition of core labor standards, especially in such areas as forced ⁸
labor, minimum age for employment, and employment discrimination.

Whether TPA is renewed, and whether the negotiation of enforceable core labor standards is
included in any such renewal, international trade is likely to continue to expand in both volume
and complexity. The economic effects on trade, investment, and labor markets of including
enforceable core labor standards as a principal negotiating objective in TPA renewal could be
relatively limited. They would likely depend on a number of factors including (1) the extent to
which enforceable core labor standards were adopted and implemented in trade agreements; (2)
the number of trade agreements affected; (3) the magnitude of U.S. trade with countries under
such agreements; and (4) the extent of actual enforcement of those standards in trade agreements.
In addition, the effects from any of these four factors could be dwarfed by shifts in the value of
the dollar that might occur relative to other currencies.

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If enforceable core labor standards were adopted as a principal negotiating objective in TPA
legislation, whether or not the United States would need to make changes to its labor laws could
depend on how the legislation defined the term “core labor standards.”
If TPA is not renewed, or if it should be renewed without enforceable core labor standards, a
number of ways might be available to promote labor standards and protect worker rights. These
include enforceable standards currently incorporated into U.S. trade preference laws; continuing
efforts of the ILO to promote core labor standards; the efforts of various labor advocates and
international labor “watchdog” groups; economic development forces in various countries which
eventually lead to rising international demand for protections of the rights of workers; codes of
conduct guiding the actions of corporations in protecting the rights of international workers; and
U.S. government “trade capacity building” grants which help to improve labor standards in
developing countries.

On May 11, Congress and the Administration announced that pending U.S. trade agreements
would be amended to incorporate key Democratic priorities, clearing the way for inclusion of
these concepts in TPA legislation. Key provisions of that agreement include (1) a “fully
enforceable commitment” for both enforceable ILO core labor standards for FTA partners and for
(2) prohibiting FTA countries from lowering labor standards; (3) new limits on FTA partner
discretion to not enforce laws because of resource limitations or other enforcement priorities; and
(4) making labor provisions subject to the same dispute resolution procedures and penalties as ⁹
other provisions.
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