Enforcing the Labor Provisions of CAFTA in Guatemala

For the past several decades, the United States has entered into a virtual alphabet soup of trade agreements. Some are at a global scale such as GATT and its successor WTO, while others include smaller regional groupings, such as NAFTA and CAFTA-DR. Originally, trade agreements promoted trade by reducing or eliminating tariffs, especially high import duties that served to protect domestic production from international competition.

Once tariffs had been substantially eliminated, attention was turned to other policies and practices that could be seen as giving domestic producers an unfair advantage. The agreements sought to create "level playing fields" by eliminating differences in laws that affect the cost of doing business, including health and safety, environmental, and labor laws.

Regional trade agreements began in Europe, first among the small and economically similar countries of Belgium, the Netherlands, and Luxembourg. As European agreements expanded in scope and size, more diverse countries have been included, but the Europeans have worked toward homogeneity among member countries in their various pacts, notably in the European Union. In the Americas, agreements such as NAFTA, CAFTA-DR, and proposed agreements such as the FTAA, would include countries with much wider economic disparities, since income levels in the United States and Canada are much higher than in any other countries in the region.

In that Americas context, then, the health, labor, and environmental provisions are of great potential importance. Agreements that seek a "level playing field" among very disparate partners could set standards that are equal but quite low -- a so-called "race to the bottom." In theory, a level playing field could exist at a high or a low level with respect to health, safety, and the environment, but a "race to the top" has not really ensued.

For this reason, the Obama Administration's decision to sue the government of Guatemala for egregious violations of the labor provisions of CAFTA-DR is potentially quite significant. The United States is essentially charging that the treatment of labor in Guatemala creates an unfair trade advantage for that country. A human-rights case can and should also be made, but using the trade agreement to pursue complaints of worker mistreatment is a signal that the U.S. will resist a race to the bottom. The Council on Hemispheric Affairs examines the case in detail in Alexander Brockwehl's report, Obama's Hard Stance on Guatemalan Labor. He also offers two possible explanations for the policy shift: either the United States really is trying to signal a new commitment to labor fairness, or the Administration is angling for passage of future agreements in Colombia and elsewhere.