By  on July 30, 2010

WASHINGTON — The Obama administration will file a labor rights complaint against Guatemala, an important apparel supplier to the U.S., under the Central American Free Trade Agreement, U.S. Trade Representative Ron Kirk said Friday.

It is the first time the U.S. has filed a case challenging a country’s labor practices against a partner in a free trade agreement. It also comes amid claims of rising violence against trade unionists in Guatemala.

“With this case, we are sending a strong message that our trading partners must protect their own workers, that the Obama administration will not tolerate labor violations that place U.S. workers at a disadvantage and that we are prepared to enforce the full spectrum of American trade rights from labor to the environment,” Kirk said in a speech at Allegheny Technologies in Pittsburgh.

“What we really want more than anything is to have Guatemala put in place statutory legislative changes to protect their workers,” Kirk said in a call with reporters after his speech.

U.S. companies that produce apparel in Guatemala and receive CAFTA’s duty free benefits now face some uncertainty since one of the available remedies of such a case is suspension of tariff benefits, noted Carol Guthrie, assistant U.S. Trade Representative for public and media affairs. The two countries will have 90 days of consultations to resolve the issues and, if necessary, a dispute settlement panel will be convened to make the final ruling. If the panel finds Guatemala failed to effectively enforce labor laws, it can impose a $15 million fine against the country, which must be used to address the labor issues.

David Spooner, an attorney with Squires, Sanders & Dempsey and a former trade official in the administration of President George W. Bush, said USTR can suspend tariff benefits “only as a last resort and as a way of collecting the $15 million that would go into the labor fund.”

“Theoretically, they could choose an [export] product that is economically or politically sensitive to Guatemala to try to make any tariff suspension bite,” said Spooner.

The government’s case stems for a complaint filed by the AFL-CIO and six Guatemalan unions in 2008 under CAFTA.

“We found a very troubling pattern of failure to enforce labor laws and also a pattern of violence against trade unionists where the Guatemalan government had failed to even investigate many egregious cases of violence,” said Thea Lee, deputy chief of staff at the AFL-CIO.

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