WASHINGTON — U.S. Trade Representative Michael Froman said Thursday that the USTR is proceeding with a labor enforcement case against Guatemala, charging that the country has failed to effectively enforce its own labor laws and fully comply with an 18-point enforcement plan it entered into with the U.S. last year.
“Unfortunately, key commitments under the enforcement plan 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 said at a news conference. “Even despite our close collaboration with Guatemala’s Labor Ministry, the record that Guatemala has presented is insufficient to demonstrate that the changes made have had the desired impact on the ground.”
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The Obama administration filed a labor complaint against Guatemala under the Central America Free Trade Agreement labor chapter in July 2010, marking the first time the U.S. had filed a case challenging a country’s labor practices against a partner in a free-trade agreement. The U.S. case stemmed from a 2008 AFL-CIO petition outlining the alleged failure by the Guatemalan government to effectively enforce labor laws in several industries, including garment manufacturing.
Among the charges leveled at Guatemala by the U.S. were that it was not meeting its obligations under CAFTA because it failed to enforce the right of association and the right of workers to organize and bargain collectively, and to maintain “acceptable” working conditions.
The two sides were unable to resolve the matter through consultations, which led to the U.S. requesting a meeting of the Free Trade Commission in 2011, followed by the establishment of an arbitration panel and eventually a suspension of the case while the two sides continued to negotiate an agreement on an enforcement plan.
Thursday’s action by the U.S. reactivates the dispute settlement process and the arbitration panel, a U.S. trade official said. If the arbitration panel finds Guatemala failed to effectively enforce its labor laws and is in violation of its obligations under CAFTA, it can impose a $15 million fine against the country, which must be used to address the labor issues, according to past USTR statements.
U.S. firms that produce apparel in Guatemala and receive duty-free benefits under CAFTA now face some uncertainty, since one of the available remedies of such a panel if Guatemala refuses to pay the fine is suspension of “concessions” given to Guatemala under CAFTA. Importers shipped $1.3 billion in apparel made in Guatemala to the U.S. for the year ended July 31.