[Congressional Record Volume 149, Number 96 (Thursday, June 26, 2003)]
[Extensions of Remarks]
[Pages E1363-E1364]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            THE CASE FOR LABOR STANDARDS IN TRADE AGREEMENTS

                                 ______
                                 

                           HON. BARNEY FRANK

                            of massachusetts

                    in the house of representatives

                        Thursday, June 26, 2003

  Mr. FRANK of Massachusetts. Mr. Speaker, I ask that excerpts of a 
recent speech by Mr. Levin of Michigan be printed.

       In recent years the major industrial growth in El Salvador, 
     Nicaragua and Guatemala has been in the maquilas, assembling 
     apparel in free trade zones.
        100,000 to 150,000 people work in the garment maquilas of 
     each nation.
        75-85 percent of the workers on average are women, with an 
     average age of 18-25.
        A majority are the sole source of income for themselves 
     and their children.
        By law, the work week is supposed to be 44 hours, with 
     overtime on a voluntary basis.
        The typical worker receives about 65 to 75 cents per hour. 
     If paid by piece the average could be around $1 per hour.
       Almost every nation in the world has agreed through the 
     International Labor Organization (ILO) to respect five core 
     labor standards: prohibitions on child labor and forced 
     labor, non-discrimination, and the rights to associate and to 
     bargain collectively. In the garment maquilas, the most 
     salient are the rights to associate and organize and to 
     bargain collectively.
       In Central America today, the basic labor-management 
     dynamic is like the United States at the turn of the last 
     century.
        In Nicaragua and El Salvador, an employer can fire any 
     employee whom it believes is sympathetic to an organizing 
     effort simply by paying severance.
        In one plant I visited in Nicaragua workers had quite 
     recently been working 70- to-80 hours (apparently for the 
     same $100 a month); in some cases they were working 24 hour 
     shifts. Protests finally forced new management, but the new 
     management acknowledged that they were still working people 
     longer than permitted in the law.
        In Guatemala, we talked with a worker who had personally 
     witnessed other employees who had been trying to organize 
     being beaten with bats at work.
        In Nicaragua and Guatemala, we heard numerous reports of 
     employers using the criminal process in order to break up 
     unions in maquilas and other sectors.
        In El Salvador, we visited a free trade zone in which a 
     plant was shut down to avoid its workers being able to 
     organize. We heard highly credible evidence that the leaders 
     of the organizing effort were subsequently blacklisted as 
     they sought other employment.
        In Guatemala, it is not legally possible for a union to 
     attempt to organize within an entire industry, like the 
     garment industry, without having in advance 50 percent plus 
     one of the workers signed up and registering with the 
     government.
        Nicaraguan and Guatemalan employees cannot strike without 
     government approval.
  The State Department Human Rights Report, and numerous other reports 
from groups like Human Rights Watch, confirm that the facts and 
incidents are the constant reality.
  In El Salvador, Beatrice Alamanni de Carillo, a veteran judge and 
professor, serves as Prosecutor for the Defense of Human Rights. She 
was appointed by the National Assembly, with a majority from the 
conservative Arena Party. Her comments:
  ``In the private sector an anti-union culture persists in great 
measure and for many years, employers have generated a climate that 
does not contribute to the promotion of worker organization in their 
workplace. . . . The Ministry of Labor and Social Welfare has not 
demonstrated a real will to guarantee in practice the rights of 
workers, either individually or collectively. There is a very loud 
clamor that the authorities of that Ministry do not make their best 
efforts to adequately check working conditions in businesses, and, in 
addition, they tolerate and promote an anti-union culture in the 
country.''
  In each country, the rights to associate and organize and to bargain 
collectively are not realities. The laws themselves are inadequate. 
Even where there are laws on the books, they are not well enforced and 
are often used against workers trying to organize.
  As far as I could determine, there is not a single effective 
collective bargaining agreement in any of the garment maquilas of the 
three countries, though there are almost 400,000 workers.
  In Guatemala, a leader of the union connected with the Christian 
Democrats put it this way: the problem is that employers have 
``impunity;'' ``they make up their own laws.''
  You may jump to the conclusion that I came back discouraged. That is 
not accurate.
  If the issue of core labor standards is addressed in CAFTA by 
including a fully enforceable obligation to adopt these standards, it 
will have an important impact on socio-economic dynamics in these 
countries by helping develop a middle class.
  In the last decade the apparel/textile maquilas have been the major 
source of economic growth and new employment in each of the three 
nations I visited, and in Honduras.
  The realities within the maquilas today are built on a total 
imbalance in relationships between employer and employee. The vast 
majority of workers, young women, are particularly vulnerable, with 
overriding fear that for them losing a job means an end to their 
income.
  It is essential in order to provide opportunities to the CAFTA 
countries to expand trade and strengthen commercial ties with the 
region. It is equally essential that the rules of trade and investment 
be shaped in a way that maximizes the benefits to those countries and 
the U.S.
  For workers to be able to break the cycle of poverty, they need to 
have the ability to join together, to participate, to improve their 
economic status. This is an antecedent to helping those workers use the 
potential of globalization to create, join, or expand the middle class.
  Hernando de Soto recently authored The Mystery Of Capital: Why 
Capitalism Succeeds In The West And Fails Everywhere Else, which posits 
that economies develop where property rights are formalized, are 
clearly and efficiently defined, are enforceable, and may be exercised 
by all; in this way all property can become capital. Labor market 
standards help workers maximize a key property right--property in one's 
own labor.

[[Page E1364]]

  A key reason to seek a minimum floor of respect for the five core, 
internationally-recognized labor standards is to ensure that the CAFTA 
countries will not compete in a race to the bottom in their efforts to 
promote trade and attract investment. Some argue that the race to the 
bottom is a myth, that income levels will rise when trade and 
investment flows increase, and all domestic standards will rise as 
income levels increase. These arguments ignore the fact that, as with 
all other economic factors, investment dollars are scarce and there is 
fierce competition to attract those dollars. When the competition is 
over labor-intensive industries, one of the key points of competition 
is the labor market pool.
  A New York Times article from about two years ago quoted the 
President of El Salvador regarding intra-regional competition, who 
stated, ``The difficulty in this region is that there is labor that is 
more competitively priced than El Salvador.''
  Another article from about one year ago in the Washington Post 
described the interesting changes in patterns in banana trade, with 
Ecuador attracting an increasing share. The explanation, according to 
one major fruit company executive, is that ``the costs in Ecuador are 
so much lower. There are no unions, no labor standards, and the pay is 
as low as two dollars a day.''
  If the promise of expanded trade--increased incomes and lower levels 
of income inequality--is to be realized, it is important that the CAFTA 
countries not compete with each other based upon abuse of core labor 
standards. The best way to do that is to establish over a reasonable 
period of time a floor--adopting the five core labor standards as rules 
of competition in this critical economic area in the FTA itself--just 
as we establish floors through rules of competition in other areas like 
intellectual property, investor rights, and tariff levels.
  The Central American nations do not need to suppress their workers in 
order to compete. There is an opportunity to build an economic 
structure based on implementation of core labor standards so that 
garments from those nations could bear a label reading ``made under 
internationally recognized labor standards,'' which many competing 
goods will not possess.
  The alternative is an increasing effort by consumer groups in the 
U.S. to boycott companies that make garments under conditions that 
violate these standards.
  Efforts by American retailer-purchasers to promulgate and implement 
private business codes will not make up for a lack of a basic 
governmental and societal structure. In the New York Times article 
quoted above, an official from a major American retailer said ``We 
can't be the whole solution. The solution has to be labor laws that are 
adequate, respected, and enforced.''
  By addressing core internationally recognized labor standards in the 
CAFTA negotiations, it is more likely that the domestic coalition 
necessary to tackle the tough market access issues with the United 
States can be assembled.
  Total two-way trade between the United States and the CAFTA countries 
is about $20 billion. Combined, the CAFTA countries constitute the 18th 
largest export market for the U.S. and about half of all foreign direct 
investment in these countries comes from the U.S.
  Beyond the current relationship, the United States is seeking better 
market access for goods and service providers, protection for 
investors, and improved intellectual property protection from the CAFTA 
countries. These countries are seeking more investment and more U.S. 
market access, primarily in the textiles and apparel and agriculture 
sectors. Otherwise, CAFTA will provide no significant benefits to 
Central America beyond those provided by the Caribbean Basin Initiative 
(CBI).
  I joined with several others in helping to shape the enhanced market 
access in textiles and apparel when we expanded the CBI a few years 
ago. The result has been a move toward a more integrated Caribbean-area 
textile and apparel market. I believe that further integration is 
necessary. If not, once quotas are removed in 2005 much more of this 
market will be lost to goods from other areas.
  One of the keys to increased market access will be squarely facing up 
to the core labor standards issue. When we considered the expansion of 
CBI, the core labor standards issue was directly addressed by 
heightening the labor standards criterion in the CBI program. Under 
that criterion, the United States may unilaterally judge whether a 
nation is implementing the core labor standards. With the negotiation 
of CAFTA, and the consequent elimination of the CBI labor standards 
criteria, including a fully enforceable obligation to enforce the five 
core labor standards, is even more important.
  The further integration in apparel and textile, as well as 
agriculture, means some further displacement in the United States. 
Comparative advantage is sound economics, but the distortion of the 
labor market by suppression of workers to create this advantage is 
unsound as an economic and policy matter, is unnecessary, and will only 
deepen opposition from competing workers and businesses in the United 
States.
  Facing the issues surrounding core labor standards is not a vehicle 
for ``protectionism.'' Indeed, it is an opportunity for expanded trade.
  Only a coalition that is far broader and solidly bipartisan, much 
more so than the narrow votes in the U.S. House achieved by last minute 
concessions, can be the basis for working out decisions on the tough 
issues of apparel and textiles and agriculture in CAFTA, and beyond.
  More broadly, CAFTA can and should be a building block towards 
effective negotiation of an FTAA.
  The CAFTA negotiations present the opportunity for the United States 
to negotiate fully enforceable core labor standards, combined with a 
phased-in compliance period, a significant and ongoing commitment of 
U.S. technical assistance to the countries to help them achieve 
compliance before and in the initial years of the agreement, and 
positive market access incentives for countries that improve their laws 
and enforcement record (for instance, by accelerating implementation of 
market access phase-ins or by providing improved access than required 
by the terms of the FTA). The goal of those of us who seek to establish 
rules in this area is to expand trade, not shut it off.
  There are many similarities between Central American nations and 
those in the rest of Latin America. Where there are, what is negotiated 
in CAFTA will matter. That will be true, for example in investment, 
intellectual property, customs obligations, and labor standards.
  Where there are differences, it is a serious mistake to use an 
agreement for one country as a model for another, turning a building 
block into a stumbling block.
  This is what seems to be evolving as to use of the Chile and 
Singapore agreements for negotiations in CAFTA. Last week USTR tabled 
in the CAFTA negotiations a proposal on core labor standards using the 
Chile and Singapore provisions as a model. Use of a standard of 
enforcing one's own laws is viable where a nation's laws embody the 
five ILO core labor standards and there is a record of enforcement of 
those laws. The laws of Chile and Singapore do embody the five core 
labor standards and these are enforced in practice. The opposite is 
true in the Central American nations I visited; the standard of 
``enforce your own laws'' would be a backward step in the CAFTA and 
benefit those with the worst laws.
  This sparked the letter last week to Ambassador Zoellick from the 
Democratic leadership of the House and Mr. Rangel, Mr. Matsui and 
myself. We said ``We write as supporters of negotiations for a U.S.-
Central American free trade agreement. . . That said, we are not 
supportive of the proposed U.S. draft text for the FTA's labor chapter. 
. . The current version of this text does not adequately address the 
economic and individual impact of the egregious conditions for workers 
in the region, and should not be the starting point for consideration 
of these issues.''
  Inclusion of a core labor standards provision in the CAFTA, and in 
future trade agreements, will help answer arguments of those who 
complain that globalization is harmful to the poor and anti- the 
``little guy.''
  I came home from my trip with a positive view of the opportunities 
that can be achieved, but only if we address the significant 
challenges. A key challenge is to place core labor standards in a 
broader perspective, and to understand that it is vital to the future 
of each Central American nation, the Central American region, the 
integration of the hemispheric market and the future of U.S. trade 
policy.

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