Jordan-U.S. Free Trade Agreement: Labor Issues

CRS Report for Congress
Received through the CRS W eb
Jordan-U.S. F ree T rade Agreement:
Labor Issues
Specialist i n International T r ade
Foreign Affairs, Defense, and T r ade Division
The U.S.-J o rdan Free Trade Agreement (FT A), implemented as P.L. 107-43,
which we n t i nto effect December 17, 2001, breaks n ew ground by including multiple
worker righ ts provisions in the body of a U .S . t rade agreem ent , rat h er t h an as a s i d e
agreem ent, for t he first time. For th i s reason, it adds some controversy t o t he
congressional d ebate over whether worker ri ghts provisions should be i ncluded i n future
t rade agreem ent s . S om e observers eye t hi s configuration o f worker rights p rotections
as a m odel for future trade agreem ents; others view i t as a one-time occurrence j ustified
only b ecause J o rdan has a strong tradition o f l abor protections; s till others oppose t he
inclusion o f l abor provisions in trade agreem ents under any circumstances. This report
will be updated as events warrant.
This report ex amines the l abor provisions of the U.S.-J o rdan Free Trade Agreement
(FTA) and com p ares t h em wi t h t hose o f t he Nort h A m eri can Free Tra d e A gr e e m ent
(NAFTA). It also looks briefly at t he larger issues of including worker righ ts provisions
in trade agreem ents, and summarizes t he positions of major s takeholders in the ongoing
debate on including labor provisions in trade agreements.
The U.S.-J ordan FTA was signed in the presence of t hen-Pres ident Bill Clinton and
King Abdullah II o n October 24, 2000, submitted t o C ongress as H.R. 2603 and S . 643
on J anuary 6, 2001, approved b y t he Government of J o rdan on J u ly 15, implemented as
P . L. 107-43 on S eptember 28, and went i nto effect on December 17, 2001 by presidential
proclamation 7512 (December 7 , 2001). It p rovi des for a 1 0 - year transitional p eriod
during which duties o n almost all goods traded between the countries (ex cept t obacco and
related p roducts) will be totally phased out.1
The t rade effects o f t he U.S.-J ordan FTA are ex p ected to be small, but growing. In

2001, the United S tates im ported $229 million worth of commodities (about 0.02% of all

1 See U.S.-Jordan Free Trade Agreement , by M ary J ane Bolle, CRS Report RL30652.
Congressional Research Service ˜ The Library of Congress

U.S. imports) from J ordan, up more than 200% f r o m 2 000, and ranking it 95th among
countries from which the United S tates i m p o rts goods. In return, the United S tates
ex ported $339 million (less than 0.05% of all U.S. exports) worth of goods to J ordan,
whi ch p l aced i t 74 th among countries to which t he Un ited S tates ex ports goods.
M a j or P r ovi si ons of the Agr eement
Labor issues over t he agreement revolved around two s ets o f p rovisions: l a b o r
provisions and disput e settlement provisions. The labor provisions of the U.S.-Jordan
FTA, located in the body of the agreement, are relatively s traigh tforward, o c cupy one
page of tex t , and require three t hings. First, they require: (a) that each country enforce its
o w n l abor laws in manners affecting t rade; and (b) t hat t hose l aws reflec t b o t h
“internationally recogn iz ed worker righ ts” as d efined by the U.S. T rade Act o f 1974, as
amended, and “core labor standards” as defined b y t he In ternational Labor Organiz ation.
Second, the p rovisions require that the P arties t o t he agreement not “waive” o r “derogate
from ” t h ei r o wn l abor l aws as an encouragem ent for t rade w i t h t h e o t h er P art y. Thi rd,
t h ey provi de t h at each P art y w i l l be consi d ered i n com p l i ance w i t h t h e agreem ent w here
anydeviation from the requirements reflects a “reasonable exerciseof...discretion” or
“results from a bona fide decision regarding t he allocation o f resources.”
The dispute s ettlement procedures , s lightly longer than the l abor provisions, occupy
one and one-half p ages of tex t . T hey p rovide for resolution o f d is p u t e s t h at arise over:
(a) i nterpret ation of t he agreem ent; (b) alleged failure of a P arty to carry out its obligations
under t he agreement; and (c) measures taken b y a Party t hat allegedly s everely d istort the
balance o f t rad e b enefits or substantially undermine t he fundamental objectives of the
P u r s u i ng a d ispute t hrough t he complete resolution p rocedure p rovided for in the
agreement would t ake 270 days , o r about ni ne months. Any dispute would m ove up the
ladder for consideration first through consultations between “contact points.” These
would be followed with consideration by a J oint C ommittee, and further consideration by
a D i s pute S ettlement Panel. The P anel is required t o present a report contai ning its
findings of fact and its determinations, which will be non-binding. If t he dispute i s s till
not resolved within 30 d ays after t he J oint C ommittee presents its report, the affect ed
Party will be entitled t o t ake “any appropriate and commensurate measure.”
I ssues w i th the Labor Pr ovi s i ons
Supporters, i ncluding many Democrats, argu ed t h a t t h e l abor provisions did not
break much new ground. Conceptually, t he U. S.-J ordan p rovisions are s imilar t o t hose
in the NAFTA labor side agreement, in that in both agreements, each country must (a)
enforce its own worker rights l aws; while over t he long term (b) s trive t oward adopting
a complete body of worker righ ts principles ; and (c) not waive o r d erogate from its own
l abor l aws as an encouragem ent for t rade. (P rovi si ons of t h e t w o a g r eem ent s are
com p ared i n Table 1.)
Opponents, including many Republicans, s a w t h e labor provisions as breaking
considerable new ground because they were located in the body of the agreement, where
they would be s ubject to dispute s ettlement procedures and possibly s anctions. M oreover,

the dispute r es o l u t i on procedure entitled either party t o t ake “any appropriate and
commensurat e m eas ure” if the dispu te resolution p rocedure o n t he included l abor
provisions fails – and that would appear to include sanctions.
The Call for a Memora ndum of Understanding. As a compromise m easure,
some observers suggested that the United S tates and J ordan ex change side letters o r
memoranda of understand i n g a gr e e i n g t h a t a n y “ a p p r o p r i a t e a n d c o m m e n s u r a t e m e a s u r e ”
does not mean sanctions, but leaving open what else t he words might mean.2 Such letters
were act ual l y ex changed b y t he am bassador of J o rdan and U . S . T r a d e R epresent at i v e
Robert Zoellick o n J uly 23, 2001. These i dentical letters pledged t o resolve any
differences that might arise b etween the t wo countries under t h e a greement, without
recourse t o form al di s p u t e s e t t l em ent p rocedures. T hey al s o s peci fi ed t h at each
government “would not ex pect or intend to apply t he Agreem ent’s dispu t e settlement
enforcement p roc e d u r e s ... in a m anner t hat results in blocking trade.” In House floor
debate, t he agreement t o not use s anctions was viewed alternat el y as: (1) p art of “a
cooperative s tructure ... to help secure compliance without recourse to ... traditional t rade
sanct i o n s t hat are t h e l et t er o f t he agreem ent ” (Thom as); and (2) “a st ep backwards for
future constructive action o n t rade” (Levin).
The ex change o f l etters paved t he way for House and Senate approval o f t he trade
agreement. The House approved H.R. 2603 by a voice vote o n J uly 31, 2001. The S enate
approved H.R. 2603 by a voice vote o n S eptember 24. The Gove rnment of J o rdan had
al ready approved i t on J uly 15. It b ecam e l aw as P.L. 107-43 on Septem ber 28, 2001.
During the S enate d ebate, Senator P hil G ramm warned that he will oppose any effort to
turn the U.S.-J o rdan FTA i nto a model for how future trade agreements should d eal with
worker righ ts (and environmental p rotection i ssues). He argu ed that they should not be
part of trade d eals. Conversely, Senate Fi nance C ommittee C h a i r m a n M ax Baucus
indicat e d he hoped t he U.S . -J ordan FTA would s et a p recedent for how future trade
agreem ent s woul d address i ssues l i k e l abor and t he envi ronm ent . H e al so refut ed a
statement m ade by Senator Graham that the p rovisions would undermine U.S. s overeignty
or prevent l awm akers from enact i n g and enfo rcing U.S. l abor and environmental l aws.
If Congress had not been able to resolve t he issue of s anctions with the ex change of
memoranda of under s t a n d i n g or similar docum ents, i t would h ave h ad several o ther
options other t han t o approve the agreement as negotiated. It could h ave (a) approved t he
agreem ent wi t h condi t i ons, and i n e f f ect requi red t he P resi d ent t o renegot i at e i t ; (b)
amended any implementing l egislation; or (c) as under t he fast-track procedure, simply
disapproved t he agreem ent and the implementing l egislation contai ning the l anguage of
t h e agreem ent as i nt roduced.
The Lar ger Debate About I ncl udi ng Wor ker Ri ghts P r ovi si ons i n
The l abor provisions of the U.S.-J o rdan FTA and reaction t o t hem can a l so be
viewed in the contex t o f t he larger ongoing debate in Congress about the linkage of
worker righ ts and t rade.

2 J ordan Opposes Reopening FT A, but Would Accept Side Letter, Inside U.S. Trade , April 13,


The m ost recent d ebate h as been ongoing since 1994, when presidential “fast-track”
authority to negotiate new t rade agreem e n t s , contained i n t he Omnibus Trade and
Nego tiating Act (OCTA) of 1988 (P.L. 100-418), ex p ired. The OCTA in c l u d ed as a
princi pal negotiating objective of t he United S tates i n t rade agreem ents “to pro mote
w o rker ri ghts.” Under t hat authority, NAFTA was negotiated with its labor side
agreem ent . The i ssue o f d ebat e i n recent years h as been whi ch o f t hree courses t o fol l o w
– whether to incl ude in new fas t-track authority: (a) more limited presidential authority
to incl ude labor provisions than in the ex pired legi s l at ion; (b) similar authority; or (c)
broader authority.
After fas t-track ren e w a l e f f o rts s panning parts o f n ine years, Congress finally
incl uded l anguage t hat i s arguably m ore limited i n s ome aspect s, but which also i ncludes
more detailed requi r e m e n t s. P.L. 107-210, sign ed Augu st 6, 2002, finally renewed
presi d ent i al fast -t rack aut hori t y (or t rade prom ot i o n aut hori t y – T P A, as i t i s m ore recent l y
being called). The renewed authority to negotiate trade agreem ents on an ex pedited bas is
(without amendment and with limited d ebate) includes numerous labor provisions as both
overall negotiating objectives , and princi pal negotiating objectives :
Overal l negotiating objectives (typically advisory i n n ature) reiterate the t wo
concepts included i n t he ex pired 1988 authority: (1) to promote respect for worker rights
(but specifying t hat i t s hall be done in the i nternational Labor O r ga n i z a tion, which h as
v i rtually no enforcem ent powers – a limitation not incl uded i n t he ex pired l egislation);
and (2) t o ensure t h at dom est i c l abor l aws are not weakened as an encouragem ent for
The principal nego tiati n g objectives on “labor an d t he environment” (typ ically
enforceabl e) i ncl ude t h ree goal s new t o fast -t rack l anguage, but som ewhat refl ect i v e o f
both NAFTA and J ordan t rade agreements, and al so of previous attempts to renew fas t-
t rack aut hori t y. T hese are: (1) t o s t rengt hen t h e c a p aci t y of U.S . t radi n g p art n ers t o
promo t e r e s p e c t f o r worker rights; (2) t o ensure t hat a party does not fail to enforce its
own l abor laws in a m anner affecting t rade; an d ( 3 ) t o e nsure t hat l abor policies d o not
unjustifiably discriminat e against U.S. ex ports or serve as disguised barriers t o t rade.
W i t h the p assage of new t rade promotion authority in August of 2002, the debate
now has s hifted once m ore, and t he new focus is o n m o n i t o r i n g the k inds of labor
provisions that will be negotiated as part of new trade agreem ents currently in negotiation.
Stakeholders. Stakeholders are watching t o s ee how provisions of the n ew trade
promotion authority law will become translated i n t o t rade agreem ent s , t o t he ex t ent t h at
negotiators attempt t o and are able t o i nclude them in future trade agreem ents.
Stakeholders against actually i n cludi ng labor provisions in the body of trade
agreemen t s a r gu e t hat (1) such provisions impede t he flow of free t rade and are not
needed; (2) any l abor and environment p rovisio n s c o u l d put U.S. companies at s erious
disadvantage vis-a-vis thei r competitors in the W orld Trade Organization; (3) t he U.S.-
J o rdan language should b e a “one time” o ccurrence rather t han a precedent; and (4) that
potential v iolations of core labor standard s s hould b e pursued multilaterally through t he
International Labor Organization (ILO) rather than through t rade agreem ents. The ILO,
part of the United Nation s , w a s establis hed i n 1919 to promote worker rights. As

m ent i oned, i t has n o d i rect enforcem ent powers , worki n g i nst ead t h rough t echni cal
assi st ance and m oral suasi on.
Stakeholders in favor of including labor provisions in the body of trade agreements
argu e i n favor of using t he U.S.-J ordan FTA labor provisions as a m odel for other t rade
agreem ent s . T he AFL-C IO assert s t h a t an even m ore el aborat e m echani s m t han i s
included i n t he U.S.-J o r d a n F T A is needed (a) t o ensure t hat foreign labor laws are
brought up to international standards on a cl ear timetable, and (b) to prev en t t h e u se of
t rade and i nvest m ent agreem ent s as busi n ess t ools t o fo r c e down wages and working
conditions in the United S tates and abroad.
The U.S.-J o rdan FT A continues and argu ab ly advances the linkage of worker righ ts
provisions and t rade beyond that contained i n t he NAFTA labor side agreement. It does
this: (a) by including the worker rights provisions in the body of the agreement, and (b)
by raising t he possibility of “sanctions” i n that either country may t ake “any appropriate
a n d commensurate m easure” if the d ispute p rocedures do not lead to resolution – e v e n
though l etters ex changed b y U.S. and J o rdan governments h ave p ledged not to ex ercise
those s anct i o n s with regards t o potential l abor violations. T he J o rdan agreement’s
influence was al so felt in the reauthorization of TPA language which would continue to
permit new t rade agreem ents to incl ude provis i ons similar t o t hose i n t he J ordan
agreement i n t he body of the agreement.
Table 1. C omparison o f K ey Provisions of U.S.-Jordan
Free Trade Agreement and NAFTA
P r ovision U.S.-Jordan F ree TradeAgreement, Article 6 NAF TA (P .L. 103-182)
Where are l abor In body of the a gr eeme nt In labor side agreement
Def i nition of “Internationally Recognized “Internationally Recognized Worker
w orker rights Worker Rights” f r om Trade Act of Rights” f rom Trade Act of 1974 (at

1974: ( P.L. 93-618 as amended by lef t ) plus t he f ollow i ng addi tions:

Sec. 503 of P.L. 98-573): f) the r ight to strike
a) right of association; g ) mi n i mu m e mp l o y me n t s t a n d a r d s
b) right t o organize and bargain relating t o overtime pay;
collectively h) elimination of employment
c) prohibition of f orced or discrimi nation;
compulsory labor; i) equal pay for men and women;
d ) mi n i mu m a g e f o r e mp l o y me n t o f j ) compensation i n cases of
children; occupational i nj uries and illnesses;
e) acceptable conditions re: minimum k) protection of migrant workers.

wage s, hours; and occupational s afety
“Core Labor Standards” f r om the
International Labor Organization
a) freedom of association;

P r ovision U.S.-Jordan F ree TradeAgreement, Article 6 NAF TA (P .L. 103-182)
b) right t o organize and bargain
c) prohibition on t he use of f orced
d) prohibition of exploitative child
e) prohibition of employment
B asic l abor a) All countries must enforce t heir All c ountries must enforce own labor
requi rem e nt s own l abor laws and s tandards i n laws and s tandards i n t rade-r elated
trade-related situations. situations and shall strive toward the
entire list of worker r ights.
b) Each Party shall strive to “not No comparable provision
waive or otherwise derogate f rom” its
laws as an encouragement f or trade.
Which w orker All of t hem. Only three s tandards out of 11 (for c hild
rights are s ubject labor, minimum wages, and
t o di sput e occupational s afety and health) are
resol ut i o n? enforceable through dispute s ettlement
and ultimately sanctions.
No similar provi sion Dispute r esolution may be undertaken
only f or failure to enforce one’s own
worker rights laws and r egulations, a nd
if alleged f ailure to enforce i s t rade-
related and covered by mutually
recognized labor laws .
Enf orcement Each country shall designate an office Trade ministers (the Ministerial
body and di s put e to serve as a contact point on the Council) meet occasionally, s upported
resolution agreement. by a 15-member Secretariat t o r esolve
procedure issues with consultation and persuasion.
Any i ssue not resolved through In each country a National
consultation within 60 days may be Admini strative Of f i ce (NAO ) oversees
referred t o the l aw; T hen a n: Evaluation
a Joint Committee, and, if still not Committee of Experts ( ECE) and
resolved within 90 days, t o a Di s p ut e subsequently an Arbi t r al P a nel ( AP )
Settlement P anel chosen by the are appointed as needed to debate cases.
Ul timate If the i ssue i s still not resolved in 30 T he AP may issue a monetary
penal t i e s days , after the panel reports, t he assessment; and i f t his i s not paid, i ssue
affected party may take any sanctions. Maxi mum penalties:
appropriate and commensurate suspension of NAFT A benefits to the
measure. amount of the monetary penalty (which
may be no greater than NAFT A benefits
from t ariff r eductions) f or one year.