Recommendations of the IAM regarding the NAFTA Renegotiation
In this document, we provide you with four recommendations which can potentially increase the fairness and the balance of the North American Free Trade Agreement (NAFTA) and ensure it can create a better environment for all citizens living in North America.
Goals of recommendations #1 and #2:
• Establish basic labour standards for the entire territory;
• Improve the defence of workers’ rights;
• Support job protection;
• Ensure the improvement of the living conditions for all citizens working within the NAFTA;
• Ensure that companies making business decisions causing harm to citizens and to the national economy of the affected countries (e.g. outsourcing without reasonable cause) assume their fair share of liability.
Goals of recommendations #2 and #3:
• Make the dispute settlement procedures more consistent, fair and efficient within the Agreement and in each member country;
• Promote dialog, mediation and negotiated arrangements for the settlement of trade disputes;
• Develop a tripartite structure supporting the upgrade and the innovative use of raw materials within the NAFTA;
• Establish a mechanism regarding the awarding of public contracts favoring the businesses that are active in North America.
We want to stress the point that we’re not pretending to be presenting all of the issues raised by the NAFTA. Thus, to remain clear and concise, we made the decision of featuring only the issues affecting our members more directly, whether they originate from the first draft of the Agreement or they’re part of the current negotiations.
Recommendation #1: Give actual power to the North American Agreement on Labour Cooperation (NAALC) and the Commission for Labor Cooperation.
In spite of the wealth created, the increase of trade within the NAFTA area and the low unemployment rate in the three countries, we can’t say that NATFA is a complete success. Actually, if the upcoming negotiations regarding the Agreement fail to improve the living conditions, the rights and the work conditions of all workers and citizens, this exercise will have proven to be pointless. Amongst the potential solutions to achieve these goals, we recommend redefining the role of the Commission for Labor Cooperation.
According to the text of the Agreement, the NAALC pursues seven “goals”:
1- Improve the work conditions and the standard of living;
2- Whenever possible, promote the 11 work principles to protect workers’ rights;
3- Encourage cooperation to foster innovation and increase the levels of quality and productivity;
4- Support information publication and information sharing, the production and coordination of data, and the conduct of joint studies;
5- Develop work cooperation activities based on the reciprocity of benefits;
6- Promote the observation and the effective application of its labour legislation by each of the parties;
7- Foster transparency in the administration of labour legislation.
Principles for workers’ rights advocacy:
1- Freedom of association;
2- Collective bargaining right;
3- Right to strike;
4- Prohibition of forced labour;
5- Prohibition of child labour;
6- Minimum employment standards;
7- Equal pay for men and women;
8- Prevention of accidents at work and of occupational diseases;
9- Workers’ compensation;
10- Compensation for occupational diseases;
11- Protection of migrant worker.
Three principles can be subject to penalties (or even sanctions):
– Child labour;
– Minimum wage;
– Prevention of accidents at work and of occupational diseases.
Even though the NAALC and the resulting structure were able to denounce certain situations and to allow for better communication and collaboration between the players of the labour world, we can say that this approach has been a failure. While some compromises were made within the NAFTA regarding the sovereignty of states to facilitate investors’ and companies’ trade activities, no equivalent was made to protect workers on the potential hazards of a trade liberalization.
The fact that the NAALC was quickly forgotten, that several players got disengaged and that the funding was gradually cut down creates the impression that the will shown early on for the defence of workers’ rights within the NAFTA was only an illusion and that the only priority objectives are to support, increase and protect trade, investments and the companies’ rights. Balance of power must be restored by giving the Commission for Labor Cooperation the required power to reach its goals and improve the situation of workers.
Here’s what we propose to address the situation:
1. Abandoning the doctrine of good intentions and providing the Commission with a real power to apply cooperation and oversight sanctions, and with the resources required, to make it more efficient and able to genuinely support the work conditions based on the seven goals and 11 principles previously mentioned.
2. Introducing labour standards in the main agreement applicable to the entire territory covered by the NAFTA using the conventions and recommendations of the International Labour Organization (ILO) to encourage the elimination of laws such as the American “right-to-work” legislations, preventing workers from efficiently defending their rights and lowering labour standards.
3. Establishing a real social charter for workers that will include a process to reach the targets set within a given period of time.
4. Encouraging the involvement of trade unions or rights advocacy organizations within the Commission.
5. Increasing the dissemination of problematic situations and putting more emphasis on exposing the companies’ anti-union practices and the persecution of workers wishing to organize to negotiate their employment contract.
6. Creating and making available statistics on the world of work in the NAFTA countries.
7. Providing for mechanisms excluding companies that are not complying with the labour standards set out in section 2 of public contracts.
Recommendation #2: Develop mechanisms of corporate accountability for the social and economical impacts they generate by outsourcing or relocating jobs outside of the NAFTA area.
When used to meet specific needs requiring special technical skills or only to react to sudden and temporary increases of production, outsourcing can be considered as an asset. However, when it applies to a simple logic of profit for the employer, it greatly affects the workers’ interests and the development of national economies. The same applies to relocation. Employees have neither the means nor the financial instruments allowing them to insure themselves against the risks of unemployment (psychological and financial impacts). To ensure greater fairness, it is critical to try to hold companies accountable for the social costs of their layoffs.
Therefore, we propose to ensure the introduction within the NAFTA of mechanisms aimed at protecting and maintaining jobs and companies within the free trade area, all of this while maintaining a level of flexibility that will allow businesses to have access to relocation and outsourcing under certain conditions only. Furthermore, a reassessment of the preferential rates based on the rules of origin for the products from outside the NAFTA area should be conducted to fight against job migration.
Here’s what we propose to achieve this recommendation:
• Developing an evaluation system, during the current negotiations, which will set the degree of social and economic responsibilities of a business relocating or outsourcing all or part of its production, or relying on outsourcing outside of the NAFTA area;
• Implementing the evaluation system by a structural committee consisting of representatives from the three countries covered by the Agreement;
• Creating penalties associated with outsourcing and relocation; the penalties could include assuming the costs associated with relocating the laid-off workers, committing to give back its infrastructures to the competent authority (city or state, provincial or federal government), assuming a portion of the costs associated with the emergency assistance (e.g. employment insurance) which will be used to face the situation created by the company;
• Revising the rates based on the rules of origin for the countries outside of the NAFTA area, and when the product is in direct competition with one made by a country inside the NAFTA area.
Recommendation #3: Improve the dispute settlement procedures in the NAFTA.
Four dispute settlement procedures are provided for in the current version of the NAFTA:
1. Chapter 20
– General dispute settlement mechanism for disputes associated with the application and the interpretation of the NAFTA;
– Combines consultation, negotiation and arbitration;
– The side agreements on labour and environment similarly combine consultation, negotiation and arbitration for the settlement of disputes which can arise in these sectors.
2. Chapter 19
– Replaces the usual national judicial procedure which reviews the decisions made in the first instance by the competent national authority in the NAFTA countries;
– Hears the review applications and addresses the dumping and countervailing duties issues;
– Made of five members sitting on a binational panel.
3. Chapter 11
– Involves disputes between a private investor and a member state;
– With regards to investment, if the dispute isn’t settled after consultation and negotiation, the investor may proceed through international commercial arbitration against the state or the state company to claim damages;
– All three member countries having agreed to arbitration for this type of dispute; an arbitration clause isn’t required to use this means.
4. Chapter 14
– Provision for the resolution of conflicts in the financial services area;
– Follows the procedures set out in Chapter 20, except for certain cases relying on financial services experts.
In addition to these procedures, all three NAFTA countries benefit from laws and procedures promoting the use of national and international commercial arbitration. Many arbitration institutions are also established in the three countries. From a normative point of view, the different procedures in place for this purpose allow the parties to settle their trade disputes by ad hoc or institutional arbitration mechanisms. The three countries acknowledge the efficiency of an arbitration agreement and facilitate the recognition and enforcement of the related arbitral award sentences.
However, there are a number of flaws in the management of trade conflicts between the countries of North America that can be erased through the NAFTA. The 23 years of existence of the Agreement have shown us that some of these conflict settlement procedures have been particularly harmful towards female workers and towards the states. We believe that the next version of the Agreement should review the dispute settlement procedures to avoid favouring special interests at the expense of the public interest. Public funds do not have to be used as financial compensation when a legislation, supposed to protect our communities for example, jeopardizes a company’s return on investment. We must reorganize these instruments in such a way that the investors no longer can use them as a weapon in a trade war or to influence the states’ political decisions. A trade conflict cannot be settled fairly and efficiently by trying to crush a competitor or by trying to change or block the decisions made by a democratic parliament through proceedings before a trade court. Moreover, by diverting the different trade conflict settlement procedures from their missions, the multinational corporations expose the key sectors of a national economy to the collateral damages of the struggle between large corporations to gain market shares. These damages can translate into job losses, in the overall impoverishment of society and in social problems, i.e. the exact opposite of the benefits the NAFTA was originally supposed to bring, in a nutshell.
Proposals for improvement of the settlement procedures
1. Removal of Chapter 11 of the NAFTA allowing an investor or a business to sue one of the member countries just because a political decision is an impediment to its freedom of trade and to its business strategy. This arbitration mechanism is unfair and restricts the states’ response capabilities with regards to the development of their national economy; the protection of their citizens, of the environment, as well as the maintenance and funding of their public services. Unfortunately, from what we currently know of American intentions, the United States wants Chapter 11 to remain unchanged. They rather want to abolish Chapter 19, despite the fact it is being considered as a relevant revision tool in the balance of trade relations.
2. Canada, the United States and Mexico could modify their legislation so that no state court can hear an international trade case or a case involving disputes related to the application and interpretation of the NAFTA without a mediation and conciliation operation being conducted beforehand. The management and oversight of these operations could be done under the authority of the Commercial Arbitration and Mediation Centre for the Americas (CAMCA). As already mentioned, the instrumental manipulation of NAFTA’s trade arbitration courts and conflicts resolution procedures by some of the economic players generates a series of negative impacts on the whole of North America. This dispute settlement method would represent an efficient and accepted solution which could be used in all three NAFTA countries. This method would develop a culture of compromise, foster negotiation over confrontation within the free trade area and maintain the quality of trade.
3. Increase of the number of members and the staff of the CAMCA taking into account its new responsibilities (proposal #2), the trade volume between the NAFTA countries, the number of potential disputes and the diversity of dispute areas and types that may occur, which require a diversity of expertise available among the arbitrators and mediators of the CAMCA. The CAMCA was created in 1995 and brings together the largest arbitral institutions of the NAFTA countries. The Centre provides a joint service of private cross-border trade dispute resolutions occurring in the NAFTA area and oversees rules, fees and procedure enforcement.
Recommendation #4: Develop mechanisms to promote the establishment of supply chains and chains of production within the NAFTA.
Since NAFTA’s implementation, a number of companies emerged or established themselves on the North American territory to benefit from its environment and its economic area. However, because of the race for the lowest production cost, combined with an economic culture for short term gains, activities that could be produced within the NAFTA area slip out of our hands. To make the Agreement more dynamic and to improve its efficiency level and its cooperation potential, it would be valuable to address this issue by developing a structure supporting the ‟made in NAFTA” stamp. In order for it to succeed, we propose two measures to support economy integration by involving the various industrial sectors and the research community.
1. Develop a tripartite structure aimed at supporting the upgrade and the innovative use of raw materials within the NAFTA area.
– This structure would be mandated to promote the collaboration of the primary and secondary economic sectors for the entire North American territory;
– It should also ensure the development of partnerships with the education and research communities of Canada, Mexico and the United States, to support the upgrade and the innovative use of raw materials and to develop our comparative advantages;
– It features companies whose core activities and supplies take place within the Agreement area.
2. When possible, establish a mechanism regarding the awarding of public procurement contracts by requiring a minimum of ‟made in NAFTA” content through the bidding process by different departments and agencies of the public sector.
– This mechanism would increase the power of attraction of companies operating on the North American continent;
– It would foster the creation and the maintenance of diversified jobs at all levels of the workforce;
– It would limit the company relocation toward countries outside the free trade area.
We understand that the implementation of these proposals and the smooth negotiation process depend on the goals to achieve, the interests to defend, the political will and visions of the negotiators from Canada, the United States and Mexico. However, we believe that if the issues raised in this document cannot be corrected during the current negotiations, we will not succeed in allowing all the citizens of North America to benefit from the potential gains of the NAFTA. Finally, you must ensure that you reach compromises which will shift the current status of the NAFTA as a great charter of rights for global corporations to a great charter of equity and prosperity for the North American nations.