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More FTAs Include Labor Provisions, ILO Finds

Tuesday, November 12, 2013
Sandler, Travis & Rosenberg Trade Report

A recent report from the International Labour Organization finds that the number of trade agreements with labor provisions has increased significantly in the last two decades, growing from four in 1995 to 58 as of June 2013. While labor provisions tend to be concentrated in trade agreements between developed and developing countries (North-South), there is a modest but increasing trend to include them in pacts between developing and emerging countries (South-South) as well.

According to the report, about 40% of trade agreements that include labor provisions have a conditional dimension; i.e., compliance with labor standards entails consequences in terms of an economic sanction or benefit. The remaining 60% are exclusively promotional in nature; i.e., they do not link compliance to economic consequences but instead provide a framework for dialogue, cooperation and/or monitoring. Conditional provisions are included in many trade agreements negotiated by the United States and Canada, while promotional provisions are found mainly in European Union, New Zealand and South-South agreements. However, in many trade agreements, in particular the more recent EU agreements, promotional labor provisions are also legally binding, and in some instances compliance problems can be followed up through a comprehensive institutional framework.

Regardless of how labor provisions are incorporated into trade agreements, the report states, doing so has had real benefits. For example, making the improvement of labor standards a condition for ratification of an agreement, as the U.S. has frequently done, has contributed to significant reforms of domestic labor legislation and practice (e.g., workers in Oman being granted the right to form and join trade unions under certain conditions). Labor provisions may have contributed to facilitating labor law reforms and strengthening the enforcement framework (e.g., Panama adopted a number of legislative amendments to improve freedom of association and enhance the legal protection of short-term contracts). There has also been a wide range of cooperative activities among signatory parties (e.g., multinational inspection activities among Mercosur members and projects among DR-CAFTA partners to strengthen enforcement capacity). This may help explain why complaint mechanisms have only been used in four cases (all involving the U.S.) and why no complaint has yet led to sanctions.

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