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U.S. Advances Labor Enforcement Case Against Guatemala

Monday, September 22, 2014
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative announced Sept. 18 that the U.S. has resumed legal action against Guatemala under CAFTA-DR for not adequately implementing an April 2013 plan designed to improve its enforcement of national labor laws. The labor case, the United States’ first ever under a trade agreement, could ultimately result in fines of up to $15 million a year or the suspension of trade benefits. However, USTR Mike Froman said Washington’s primary interest remains “producing concrete improvements for workers on the ground.”

USTR states that under the enforcement plan Guatemala committed to strengthen its labor inspections, expedite and streamline the process of sanctioning employers and ordering remediation of labor violations, increase labor law compliance by companies engaged in exporting, improve the monitoring and enforcement of labor court orders, publish labor law enforcement information, and establish mechanisms to ensure that workers are properly compensated upon closure of a company. On three occasions the U.S. continued the suspension of a CAFTA-DR panel requested in August 2011 to give Guatemala more time to implement the plan.

Guatemala has in fact taken “a number of important steps,” Froman said, including “hiring over one hundred new inspectors and creating a unit to verify employer compliance with court orders.” However, key commitments remain outstanding, such as “passing legislation that enhances the authority of the Ministry of Labor to impose sanctions when it finds a violation of Guatemala’s labor laws and reduces the time it takes to bring labor law violators to justice.” Froman added that “enforcing labor laws is an essential element for spurring economic growth and fostering communities where citizens can thrive,” which in turn could reduce the number of unaccompanied children and other migrants attempting to illegally cross into the U.S.

The U.S. is thus resuming a litigation process that will next see the resumption of an arbitration panel, which is expected to make an initial determination within a few months. However, USTR states that it will “continue to work closely with Guatemala” to make progress on key concerns, including “further steps to demonstrate that the legal reforms Guatemala has undertaken are being effectively implemented.”

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