Jordan-U.S. Free Trade Agreement: Labor Issues
Released: 2003-07-15T00:00:00

RS20968 -- Jordan-U.S. Free Trade Agreement: Labor Issues

Updated July 15, 2003

Major Provisions of the Agreement

Labor issues over the agreement revolved around two sets of provisions: labor provisions and dispute settlement provisions. The labor provisions of the U.S.-Jordan FTA, located in the body of the agreement, are relatively straightforward,occupyone page of text, and require three things. First, they require: (a) that each country enforce its own labor laws inmannersaffecting trade; and (b) that those laws reflect both "internationally recognized worker rights" as defined by the U.S.TradeAct of 1974, as amended, and "core labor standards" as defined by the International Labor Organization. Second,theprovisions require that the Parties to the agreement not "waive" or "derogate from" their own labor laws as anencouragement for trade with the other Party. Third, they provide that each Party will be considered in compliancewith theagreement where any deviation from the requirements reflects a "reasonable exercise of . . . discretion" or "resultsfrom abona fide decision regarding the allocation of resources."

The dispute settlement procedures, slightly longer than the labor provisions, occupy one and one-half pages of text. Theyprovide for resolution of disputes that arise over: (a) interpretation of the agreement; (b) alleged failure of a Partyto carryout its obligations under the agreement; and (c) measures taken by a Party that allegedly severely distort the balanceof tradebenefits or substantially undermine the fundamental objectives of the agreement.

Pursuing a dispute through the complete resolution procedure provided for in the agreement would take 270 days, or aboutnine months. Any dispute would move up the ladder for consideration first through consultations between "contactpoints." These would be followed with consideration by a Joint Committee, and further consideration by a DisputeSettlement Panel. The Panel is required to present a report containing its findings of fact and its determinations, which will benon-binding. Ifthe dispute is still not resolved within 30 days after the Joint Committee presents its report, the affected Party willbeentitled to take "any appropriate and commensurate measure ."

Issues with the Labor Provisions

Supporters, including many Democrats, argued that the labor provisions did not break much new ground. Conceptually, theU.S.-Jordan provisions are similar to those in the NAFTA labor side agreement, in that in both agreements, eachcountrymust (a) enforce its own worker rights laws; while over the long term (b) strive toward adopting a complete bodyof workerrights principles; and (c) not waive or derogate from its own labor laws as an encouragement for trade. (Provisionsof thetwo agreements are compared in Table 1 .)

Opponents, including many Republicans, saw the labor provisions as breaking considerable new ground because they werelocated in the body of the agreement, where they would be subject to dispute settlement procedures and possiblysanctions. Moreover, the dispute resolution procedure entitled either party to take "any appropriate and commensuratemeasure" if thedispute resolution procedure on the included labor provisions fails - and that would appear to include sanctions.

The Call for a Memorandum of Understanding. As a compromise measure, some observers suggested that the United States and Jordan exchange side letters or memoranda ofunderstandingagreeing that any "appropriate and commensurate measure" does not mean sanctions, but leaving open what elsethe wordsmight mean. (2) Such letters were actually exchangedby the ambassador of Jordan and U.S. Trade Representative RobertZoellick on July 23, 2001. These identical letters pledged to resolve any differences that might arise between thetwocountries under the agreement, without recourse to formal dispute settlement procedures. They also specified thateachgovernment "would not expect or intend to apply the Agreement's dispute settlement enforcement procedures ... inamanner that results in blocking trade." In House floor debate, the agreement to not use sanctions was viewedalternately as: (1) part of "a cooperative structure ... to help secure compliance without recourse to ... traditional trade sanctionsthat arethe letter of the agreement" (Thomas); and (2) "a step backwards for future constructive action on trade" (Levin).

The exchange of letters paved the way for House and Senate approval of the trade agreement. The House approved H.R. 2603 by a voice vote on July 31, 2001. The Senate approved H.R. 2603 by a voice vote onSeptember 24. The Government of Jordan had already approved it on July 15. It became law as P.L. 107-43 onSeptember28, 2001. During the Senate debate, Senator Phil Gramm warned that he will oppose any effort to turn theU.S.-JordanFTA into a model for how future trade agreements should deal with worker rights (and environmental protectionissues). He argued that they should not be part of trade deals. Conversely, Senate Finance Committee Chairman MaxBaucusindicated he hoped the U.S.-Jordan FTA would set a precedent for how future trade agreements would address issueslikelabor and the environment. He also refuted a statement made by Senator Graham that the provisions wouldundermine U.S.sovereignty or prevent lawmakers from enacting and enforcing U.S. labor and environmental laws.

If Congress had not been able to resolve the issue of sanctions with the exchange of memoranda of understanding or similardocuments, it would have had several other options other than to approve the agreement as negotiated. It could have(a)approved the agreement with conditions, and in effect required the President to renegotiate it; (b) amended anyimplementing legislation; or (c) as under the fast-track procedure, simply disapproved the agreement and theimplementinglegislation containing the language of the agreement as introduced.

The Larger Debate About Including Worker Rights Provisions in Trade Agreements

The labor provisions of the U.S.-Jordan FTA and reaction to them can also be viewed in the context of the larger ongoingdebate in Congress about the linkage of worker rights and trade.

The most recent debate has been ongoing since 1994, when presidential "fast-track" authority to negotiate new tradeagreements, contained in the Omnibus Trade and Negotiating Act (OCTA) of 1988 ( P.L. 100-418 ), expired. TheOCTAincluded as a principal negotiating objective of the United States in trade agreements "to promote workerrights. " Underthat authority, NAFTA was negotiated with its labor side agreement. The issue of debate in recent years has beenwhich ofthree courses to follow - whether to include in new fast-track authority: (a) more limited presidential authority toincludelabor provisions than in the expired legislation; (b) similar authority; or (c) broader authority.

After fast-track renewal efforts spanning parts of nine years, Congress finally included language that is arguably morelimited in some aspects, but which also includes more detailed requirements. P.L. 107-210 , signed August 6, 2002,finallyrenewed presidential fast-track authority (or trade promotion authority - TPA, as it is more recently being called). Therenewed authority to negotiate trade agreements on an expedited basis (without amendment and with limited debate)includes numerous labor provisions as both overall negotiating objectives, and principal negotiating objectives:

Overall negotiating objectives (typically advisory in nature) reiterate the two concepts included in the expired 1988authority: (1) to promote respect for worker rights (but specifying that it shall be done in the international LaborOrganization, which has virtually no enforcement powers - a limitation not included in the expired legislation); and(2) toensure that domestic labor laws are not weakened as an encouragement for trade.

The principal negotiating objectives on "labor and the environment" (typically enforceable) include three goals new tofast-track language, but somewhat reflective of both NAFTA and Jordan trade agreements, and also of previousattempts torenew fast-track authority. These are: (1) to strengthen the capacity of U.S. trading partners to promote respect forworkerrights; (2) to ensure that a party does not fail to enforce its own labor laws in a manner affecting trade; and (3) toensure thatlabor policies do not unjustifiably discriminate against U.S. exports or serve as disguised barriers to trade.

With the passage of new trade promotion authority in August of 2002, the debate now has shifted once more, and the newfocus is on monitoring the kinds of labor provisions that will be negotiated as part of new trade agreements currentlyinnegotiation.

Stakeholders. Stakeholders are watching to see how provisions of the new trade promotion authority law will become translated into trade agreements, to the extent that negotiatorsattempt toand are able to include them in future trade agreements.

Stakeholders against actually including labor provisions in the body of trade agreements argue that (1) such provisionsimpede the flow of free trade and are not needed; (2) any labor and environment provisions could put U.S.companies atserious disadvantage vis-a-vis their competitors in the World Trade Organization; (3) the U.S.-Jordan languageshould be a"one time" occurrence rather than a precedent; and (4) that potential violations of core labor standards should bepursuedmultilaterally through the International Labor Organization (ILO) rather than through trade agreements. The ILO,part of theUnited Nations, was established in 1919 to promote worker rights. As mentioned, it has no direct enforcementpowers,working instead through technical assistance and moral suasion.

Stakeholders in favor of including labor provisions in the body of trade agreements argue in favor of using the U.S.-JordanFTA labor provisions as a model for other trade agreements. The AFL-CIO asserts that an even more elaboratemechanismthan is included in the U.S.-Jordan FTA is needed (a) to ensure that foreign labor laws are brought up tointernationalstandards on a clear timetable, and (b) to prevent the use of trade and investment agreements as business tools toforce downwages and working conditions in the United States and abroad.

Conclusion

The U.S.-Jordan FTA continues and arguably advances the linkage of worker rights provisions and trade beyond thatcontained in the NAFTA labor side agreement. It does this: (a) by including the worker rights provisions in thebody of theagreement, and (b) by raising the possibility of "sanctions" in that either country may take "any appropriate andcommensurate measure" if the dispute procedures do not lead to resolution - even though letters exchanged by U.S.andJordan governments have pledged not to exercise those sanctions with regards to potential labor violations. TheJordanagreement's influence was also felt in the reauthorization of TPA language which would continue to permit newtradeagreements to include provisions similar to those in the Jordan agreement in the body of the agreement.

Table 1. Comparison of Key Provisions of U.S.-Jordan Free Trade Agreement and NAFTA