USCIB Letter on NAFTA Labor Side Agreement
December 17, 1997
Mr. John McKennirey
Executive Director
Commission for Labor Cooperation
One Dallas Center
350 N. St. Paul Suite 2424
Dallas, TX 75201-4240
Ms. Irasema T. Garza
Secretary
National Administrative Office
Bureau of International Labor Affairs
U.S. Department of Labor
200 Constitution Avenue, NW - Room C-4327
Washington, DC 20210
Re: Comments on Operation and Effectiveness of the NAALC
Dear Mr. McKennirey and Ms. Garza:
The U.S. Council for International Business welcomes the opportunity to file comments on the operation and effectiveness of the North American Agreement on Labor Cooperation (NAALC) signed by the United States, Canada and Mexico as a supplemental agreement to the North American Free Trade Agreement (NAFTA).
The U.S. Council for International Business (USCIB) is a business policy making association dedicated to promoting an open system of world trade, finance and investment. As such, it represents American business interests in the major international organizations, including the International Labor Organization (ILO) and the Organization for Economic Cooperation and Development (OECD), and before the Executive and Legislative Branches of the U.S. Government. The U.S. Council is the business association most concerned with international labor policy issues including worker rights and trade in the United States.
These comments have also been endorsed by the international labor affairs group of the National Association of Manufacturers.
The Cooperative Purposes and Functions of the NAALC Should Be Emphasized Over the Review and Dispute Resolution Procedures
The NAFTA is a trade agreement between three neighboring countries on the North American continent made for the purpose of lowering tariffs for the mutual benefit of Canada, Mexico and the United States. Beginning with the two memoranda of understanding between the United States and Mexico on labor matters during the NAFTA negotiations, the very title of the NAFTA labor side agreement—the North American Agreement on Labor Cooperation—and the words found in the Preamble and Articles 1, 11, and 20, the NAALC clearly exhibits an intent to pursue cooperative activities on labor and employment matters. As such, the NAFTA and the NAALC are agreements between friendly, not antagonistic parties.
Each country’s National Administrative Office and the NAALC Executive Secretariat deserve much credit for a wide range of information exchange and cooperative programs on labor and employment issues. Unfortunately, the value of these cooperative activities is undermined by the highly visible emphasis on handling complaints and individual cases. Regrettably many of the complaint submissions focus on specific incidents of alleged improper conduct of individual employers rather than whether a signatory country is effectively enforcing its labor and employment laws. The submissions are filed, and accepted by the NAO, even before domestic administrative and judicial procedures have been exhausted. Thus the NAO often looks at the wrong behavior - individual company behavior in specific instances - rather than the issues addressed by the NAALC - effective enforcement of national laws. And by its conduct the NAO encourages a public misconception about the purpose of the NAALC and feeds unrealistic political expectations.
Overall, the USCIB believes that the implementation of the NAALC has unduly emphasized the compliance and effective enforcement of labor law obligations of the NAALC over positive cooperative activities. As a consequence, it sets the wrong tone and focus. We think that it would be more constructive and in keeping with the positive relationship between the three trading partners, as reflected in the NAFTA and the NAALC, if the primary emphasis were on cooperative labor programs on labor issues such as those listed in Article 11, Cooperative Activities, of the NAALC. Based on the USCIB's business-to-business program on human resources and labor relations best practices with CONCAMIN—the Mexican employers’ federation—the public has much to contribute to facilitate achievement of the purposes of the NAALC.
In sum, the principal function of the Executive Secretariat and the NAOs should be to consult and exchange information, through technical assistance, joint research projects and training programs, on the labor matters covered by the labor side agreement.
Implementation of the Review and Dispute Settlement Procedures Should Occur Only in Exceptional Circumstances in a Problem Solving, Cooperative Environment
As stressed above, implementation of the NAALC is intended to occur on a cooperative basis. Clearly, recourse to the labor side agreements’ consultation, evaluation and dispute settlement procedure is intended to be an exceptional circumstance.
The application of agreed labor principles under the NAALC should be contrasted with the application of worker rights under the Generalized System of Preferences (GSP). Under the GSP, trade preferences are unilaterally granted by the United States under any conditions that it deems appropriate, and are not contractual in nature. Under the GSP, therefore, the United States has wide discretion with respect to the acceptance of cases for review and determinations of whether preferences should be withdrawn.
In contrast, under the NAFTA, the trade benefits are contractual in nature between close trading partners subject to agreed conditions. Unlike the application of worker rights under the GSP, the substance of each country's domestic law is not affected by the agreed labor principles under the NAALC. Only in a "worst case" scenario, i.e., involving a persistent pattern of failure of one of the parties to effectively enforce its domestic labor law, should NAALC’s dispute resolution procedures be invoked. This is significant jurisdictional restraint that is not present under the GSP.
The acceptance of a public submission under the U.S. NAO procedures should be an exceptional act. A party under the NAFTA should not be in a worse position than it would be under a GSP-like procedure. Given the spirit of the NAALC, public submissions should only be accepted after domestic procedures have been exhausted and, when accepted, result primarily in joint studies and in technical cooperation and assistance.
As a threshold matter, there can be no question of the effective enforcement of any of the Parties' labor law until domestic administrative and judicial remedies have been exhausted. To accept for review submissions that have not been so exhausted would make meaningless Articles 3, Government Enforcement Action, and Article 4, Private Action, and Article 5, Procedural Guarantees. On their face, Articles 3 to 5 are intended to assure a right to domestic remedies through fair and effective enforcement procedures.
To accept prematurely submissions for review undercuts the very purpose of the NAALC which is to build cooperation and to ensure that there is compliance and effective enforcement of each Party's labor laws. Under the practice of the U.S. NAO, it appears that there is virtually no written submission that the U.S. NAO will not accept.
Parallel NAO proceedings run the risk of inappropriately influencing or compromising the outcome of domestic proceedings that have not run their course. This is not just an employer concern. At a tri-national seminar in Monterrey, Mexico on union certification practices as a follow-up to ministerial consultations in the third case filed with the U.S. NAO, a U.S. National Labor Relations Board (NLRB) official stated that he was very uncomfortable with Mexican NAO proceedings in a U.S. plant closing case because the administrative law judge decision finding no unfair labor practice on the part of the employer was on appeal before the NLRB. He was concerned about undue international political influence on a domestic proceeding.
Whether there has been effective enforcement of labor and employment law is a highly subjective judgment that cannot turn on the results of one or two factual circumstances. Public submissions should not be accepted if they do not contain evidence of a persistent pattern of non-enforcement involving similar facts and circumstances.
The obligations of the NAALC apply to the three signatory countries, not to companies or their employees. Yet, although companies are not parties to the NAALC, they are targets of the proceedings. The cases are known by company names-GE, Honeywell, Sony, and Sprint-when the issue in all the cases has been the effective enforcement of law in Mexico or the United States. In the OECD and the ILO, it has been the consistent practice to not name companies in disputes because they are not parties. This practice should be followed under the NAALC.
The USCIB believes that public hearings as means of gathering information is too confrontational and not in keeping with the purposes of the NAALC. Instead, more informal means in the spirit of cooperation should be employed. Indeed, neither the ILO nor the OECD permit hearings under the procedures of their supervisory machinery, but seek, instead, to resolve matters through investigation, exchange of information and dialogue.
Finally, in keeping with the cooperative spirit of the NAALC, where a violation is found, emphasis should be placed on cross-border technical assistance to improve enforcement before application of fines or withdrawal of trade benefits.
Conclusion
Implementation of the NAALC should not serve as a barrier to achieving an open and fair trading system between Canada, Mexico and the United States. Given the positive, cooperative nature of the NAALC, neither Mexico nor Canada should be in a worse position under the U.S. NAO's procedures than they would be under other U.S. trade laws.
In view of the cooperative character of the NAALC, the critical litmus test of the operation and effectiveness of the NAALC is whether cooperation has succeeded in meeting the objectives of Article 1 of the NAALC. If tri-national cooperation has led to this result, then it is a testament to the operation and effectiveness of the NAALC.
Sincerely yours,
Abraham Katz
President
cc: Mr. Howard Knicely, Executive Vice President, TRW, Inc.
Chairman, USCIB Industrial Relations Committee
