Hesperian Health Guides

Trade agreements and international law

Trade agreements create the rules by which companies and governments do business across borders. Most trade agreements limit the restrictions governments can place on companies. Laws that protect people and the environment are seen as obstacles to trade, so many companies and governments negotiate agreements that lower labor standards rather than improve them.

Some trade agreements and membership requirements of trade organizations stop governments from making and enforcing policies that protect the environment and public health. The World Trade Organization (WTO) sets the standards for global trading practices and regulates national trade policies. If a country is a member of the WTO, its national laws must follow WTO trade rules.

Workers are not fairly represented in the WTO. International trade unions have requested that the WTO adopt ILO labor standards and promote labor rights by including a worker rights clause within the global trade system. The WTO has so far refused to do this.

Some trade agreements address labor rights. For example, in 1992 the North American Free Trade Agreement (NAFTA) became the first trade agreement to include an agreement on labor, the North America Agreement on Labor Cooperation (NAALC). Unfortunately, it has not been effective. The NAALC did not establish an international court or monitoring system to ensure the implementation of labor standards. It did not require each participating country to improve its labor law. And it has not promoted or protected workers’ rights.

Trade agreements do occasionally improve occupational health in countries where labor and occupational health laws are lacking. In Peru, for example, a trade agreement with the USA promoted a law requiring workplaces to form joint health and safety committees. But the agreement did not include recognition of the most basic labor right — that workers could organize and bargain collectively.

The UN’s Principles on Business and Human Rights were developed to protect workers from the business rules in international trade that put "profits over people." These principles put pressure on companies to respect international human rights and follow the labor laws of the country where the factory is located as well as the labor standards of the international brand’s home country. However, it has been impossible to implement these principles because the Principles on Business and Human Rights have no enforcement mechanism.

Using trade agreements to protect labor rights

After the Dominican Republic-Central America-United States Free Trade Agreement, known as CAFTA-DR, was signed by Guatemala in 2006, the short period of employer good behavior while the treaty was being negotiated came to an abrupt end. Returning to practices of previous decades, workers who tried to assert their rights were harassed, fired, and even murdered. In the years since the signing of the agreement, 68 union members were killed, with little government response and no arrests until 2014.

In 2008, 6 Guatemalan unions and the AFL-CIO, the federation of US unions, filed a complaint with the US Office of Trade against Guatemala’s violation of its own labor laws and international labor standards. In 2009, the US government found that Guatemala was violating its laws by not letting workers organize unions, not paying lawful wages, and not paying workers’ health insurance even though money was deducted from their wages, among other legal violations.

Unions and other organizations launched an international campaign to get the USA to pressure Guatemala to respect workers’ rights. It took 5 years of campaigning in the USA and Guatemala before the governments agreed to sign an enforcement plan which required both governments to respect labor law in their countries. But even after the agreement was signed, employers continued to deny workers their rights.

Conditions worsened in Guatemala. Violence and lack of work forced more men, women, and children to migrate to the USA. Finally, for the first time ever, the US Trade Representative moved for arbitration in September 2014. This increases the pressure on Guatemala (and the USA) to live up to its agreements. While this may not improve workers lives immediately, it is important for workers because it shows that labor rights can have an effect on trade agreements. The lesson of CAFTA-DR is that while these trade agreements are overall bad for workers, their labor provisions can be used to draw international attention to and exert pressure on bad employers and the governments that allow companies to violate labor rights.

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This page was updated:28 Feb 2021