A preliminary assessment of the bipartisan trade agreement announced last Thursday by the Bush administration and congressional Democrats leaves much that is opaque—with the devil, as usual, residing in the details. But one point, at least, comes through loud and clear: that after a decade and a half of dogged infighting, the AFL-CIO (though representing less than 10 percent of American workers) has achieved a major triumph on the issue of labor standards and trade. And Thea Lee, the AFL-CIO’s legislative director, indefatigable and relentless, deserves congratulations (and a big pay raise from President John Sweeney) for the victory. Alas for the administration, however, sensing weakness, by Friday some major unions, including the Teamsters, the services union (SEIU), and the United Steel Workers signaled dissatisfaction and a desire for an additional pound of flesh, with the USW stating that it would be “hard pressed to support the agreement” in its present form.

Bush administration leaders adopted a brave face. US Trade Representative Susan Schwab and Treasury Secretary Hank Paulson hailed the agreement as “an historic opportunity to restore bipartisan consensus on trade.” Similarly, congressional leaders from both parties expressed strong support and congratulated themselves on a rare bipartisan achievement.

Schwab stoutly averred: “We need not be talking about a Republican trade policy or a Democratic trade policy, but rather an American trade policy.” A more accurate statement, at least with regard to the labor provisions, would have been: “We need not be talking about a Republican trade policy, but rather a Democratic trade policy.” 

The administration has assured the business community that the deal does not require compliance with specific ILO conventions.

Leaving aside for the moment the posturing and maneuvering of some union leaders, what are the devils—or at least potential devils—in the details of Thursday’s agreement? Obviously, to all who have followed the negotiations since the Democrats took over Congress, the central area of contention concerned labor standards and trade agreements. Here, the issue was not, as some press accounts have inaccurately asserted, whether there would be labor provisions in future trade agreements. That issue had been settled some time ago—indeed, the entire history of the 1990s is one of the Republican retreat in this area. In NAFTA, Republicans accepted labor provisions as side agreements; later, in the Clinton and both George W. Bush administrations, they agreed to bring the labor provisions inside the agreements. The real fight this time was over new language that mandated that our FTA partners (and by extension the U.S. itself) agree to enforce so-called “core labor” standards as defined by the International Labor Organization.

The spin is already rampant as to just what all this means and how things will change if the current language on labor standards is adopted as a template for all future U.S. trade agreements. First, the details as described in early releases: Each FTA partner must commit to adopt, maintain and enforce five core labor standards as listed in a 1998 ILO Declaration on Fundamental Principles and Rights at Work—freedom of association; the right to collective bargaining; elimination all forms of forced labor; abolition of child labor; and elimination of discrimination in employment. In addition, there is a further (and seemingly undefined and open-ended) obligation to provide “acceptable conditions of work.” Violations of these obligations will potentially subject either country to trade sanctions, a more draconian step than the fines included in earlier Bush administration FTAs. Finally, it is true, as Bush administration officials point out, that a pattern of violations must be found before sanctions are applied.

It is not clear what our promise to abide by the Declaration amounts to—under international law, or in disputes arising from the FTAs.

The Declaration, whose standing in international law is contested (more on this later), is a distillation of eight formal ILO international labor rights conventions passed at various times since 1930. The United States has ratified only two of the eight. The reasons that, under both Democratic and Republication administrations, these key ILO conventions have not been ratified are various but remain significant. Regarding the right to organize/freedom of association conventions, there is the fear (and reality) that some U.S. labor laws—such as state right to work laws and the President’s statutory power to fire striking public employees, as President Reagan did to the air traffic controllers—would come under attack. Regarding antidiscrimination provisions, there was fear that ILO convention might mandate some form of equal pay/equal work laws.

Both the Clinton and the Bush II administrations finessed the issue by including boiler plate language in previous FTAs that generally acknowledged obligations under the Declaration but at the same time established as an enforcement standard the provisions of existing domestic labor laws. What the AFL-CIO and its Democratic supporters demanded last week was that the standards of the Declaration be directly enforceable, despite the fact that the U.S. never signed on to them. What Bush administration officials—and their allies in the business community—held out for was an explicit exemption of U.S. laws from potential obligations incurred under the Declaration. In the end Paulsen and Schwab folded.

As with all Washington stories, of course, the matter won’t end there. Attempting to assuage the legitimate concerns of the business community, the Bush administration is busily trying to undo as much of its commitment as possible through interpretation. The Fact Sheet immediately released by USTR stresses that the FTA compromise refers only to the Declaration, implying that the United States would not be bound by the underlying ILO conventions it summarizes—most specifically those relating to non-discrimination and right to organize. Indeed, from evidence in press releases by major business association, it appears that the Bush administration has assured the business community that this is the case. Thus, the U.S. Chamber of Commerce stated: “we are encouraged by assurances that labor provisions cannot be read to require compliance with ILO conventions.” And the National Association of Manufacturers asserted: “The NAM indicated a willingness, for the first time, to accept core labor standards for foreign countries in trade agreements—as long as U.S. labor laws were not made subject to any dispute settlement process that included ILO interpretations and jurisprudence based on core Conventions...The United States, while obligated to uphold our already strong and longstanding commitment to the ILO Principles listed in the 1998 Declaration, will not be in any way bound by an ILO Core Convention that we have not ratified.”

Attempting to further reassure the U.S. business community, the Fact Sheet also notes that, to be actionable, labor violations must occur in a manner that affects trade or investment between the FTA partners, and that only governments (and not NGOs) can bring suit for a violation. And finally the trump card: panel decisions are not self-executing and cannot alter U.S. law. Thus (unstated but clearly the point): even if we lose we don’t have to comply.

With the agreement in hand, Democrats will argue that it is not only Peru and Panama that are bound by the labor standards in these FTAs, but the United States—so if the U.S. loses a labor dispute, we will need to amend U.S. labor laws to meet the “international obligations” we have created.

Meanwhile, on the other side, the AFL-CIO trumpeted that the new trade pact would result in “a fully enforceable commitment that FTA countries will adopt, maintain and enforce…the five labor standards, as stated in the 1998 (ILO) Declaration…” The federation also pointed out that, in a large intrusion on the domestic sovereignty of FTA partners, the agreement would force the countries to allocate priorities and resources first to the five basic labor standards, no matter what their own assessment of their social or economic priorities in these areas. But after reading the interpretation placed on the legal language by the Chamber and the NAM, AFL-CIO President Sweeney acknowledged worries that the agreement didn’t give enough “ability…to challenge U.S. laws,” and he fretted that the administration would not enforce the new labor rules—thus signaling that the union might push for tighter mandates in upcoming negotiations (It should be noted that the agreement technically applies to just two FTAs, Peru and Panama, with the AFL-CIO and Democrats reserving the right to make further demands on other FTAs and the renewal of trade promotion authority for the president).

We really won’t know how these mutually exclusive characterizations of the deal will shake out until the Bush administration drafts specific language to amend the FTAs. But here is what we can tell already:

There is deep bipartisan hypocrisy and duplicity about labor standards and trade agreements. The administration has agreed to new standards (in the Declaration) on the one hand—and then denied that those standards will or can be enforced on other hand. The Democrats, not to be outdone, are really trying to gain through trade negotiations and “public” international law what they have been unable to achieve in the domestic arena: mandated adherence to key ILO Conventions regarding labor. With the agreement in hand, Democrats will argue that it is not only Peru and Panama that are bound by the labor standards in these FTAs, but the United States—so if the U.S. loses a labor dispute, we will need to amend U.S. labor laws to meet the “international obligations” we have created.

Neither side can be sure how this might play out in later disputes over labor laws. Administration assurances to the business community that it will never pay a price for the compromise are hollow. Neither it nor labor can predict—much less control—the decisions of other nations (FTA partners) to test the rules as they apply to the United States. For instance, given the flux in Latin American politics, it is not inconceivable that a Peruvian or Panamanian populist leader could decide to jerk Uncle Sam’s chain by accusing America of violating these standards (and get plaudits and subsidies from President Chavez of Venezuela).

It is not clear what our promise to abide by the Declaration amounts to—under international law, or in disputes arising from the FTAs. On the one hand, the Declaration was not passed as a binding ILO Convention; on the other hand, in international trade and environmental cases, NGOs and governments have repeatedly—with mixed success—pointed to preambles, hortatory statements and declarations of principles as “soft” law that ultimately becomes binding. Thus, the administration may well have positioned itself on a slippery slope.

The claim that the “sovereignty card” will insulate the U.S. in the future—that in the end only the U.S. Congress can change U.S. law—is disingenuous. This was a big gun hauled out during the Uruguay Round negotiations to assuage fears that foreign law would trump U.S. law. But the dirty little secret that has emerged since then is that strong domestic and international pressure will come down on future U.S. governments if a labor standards dispute occurs and the U.S. loses. Charges of bad faith and callous unilateralism will inevitably tip the political calculus against defenders of noncompliance.

Finally, there is one unfortunate political irony in the timing of the “bipartisan” agreement—it undercuts a powerful warning from the internationalist wing of the Democratic party against a dangerous and self-defeating “phobic reaction to foreign competitive pressures.” On the day before the ACL-CIO’s triumph, two leaders of the Progressive Policy Institute, Will Marshall and Edward Gresser, penned a stinging critique of what they labeled the “neo-populist” and “social democratic” wings of the Democratic party. The neo-populists (aka “Lou Dobbs Democrats”), they contended, “simply offer…complaint” without real policy, except for an “indefinite halt to trade liberalization…along with trade protection.” The social democrats in the party, while more sophisticated, are “determined to hold progress on trade liberalization hostage to highly ambitious and sometimes unattainable goals…a miraculous revival of militant trade unionism; global government mechanisms; and full implementation by low-income countries, enforced by trade sanctions, of labor and environmental standards which took Washington decades to develop.” In contrast, they argued, “progressive” Democrats should insist that “robust economic growth and open trade policies are not bargaining chips but crucial policies for generating the resources and political support for a new social contract with American workers.” They went on the spell out internal domestic reforms that constitute this compact: portable pensions, health insurance, and economic adjustment policies for all dislocated workers, among other things.

The irony here is that the day after this plea for a more competitive, open-market approach to global competition by the Democrats, a weakened Bush administration caved to the neo-populist and social democratic wings of the party and their drive to implement a dictat to “low-income countries” to “enforce labor and environmental standards that”—as the two authors correctly state—“it took Washington decades to develop.”

In a perceptive commentary on the bipartisan trade bargain, Steven Pearlstein of the Washington Post referred to the deal as an “elegant breakthrough on labor standards.” Elegance and fragility are often associated with one another, so it will be fascinating to see if the bargain will hold, given the power and diversity of the contending interests and the instant contest to control the interpretative spin on just what was agreed to. The betting here is that in the end, Thea Lee will still deserve a salary boost.

Claude Barfield is a Resident Scholar at the American Enterprise Institute.

Image credit: Photo by Flickr user takomabibelot