[Congressional Record (Bound Edition), Volume 151 (2005), Part 11]
[Extensions of Remarks]
[Pages 14642-14644]
[From the U.S. Government Publishing Office, www.gpo.gov]




  STATEMENT OF HARLEY SHAIKEN BEFORE THE HOUSE COMMITTEE ON WAYS AND 
 MEANS ON THE DOMINICAN REPUBLIC--CENTRAL AMERICA FREE TRADE AGREEMENT 
                              (EXCERPTED)

                                 ______
                                 

                          HON. SANDER M. LEVIN

                              of michigan

                    in the house of representatives

                         Tuesday, June 28, 2005

  Mr. LEVIN. Mr. Speaker, I submit into the Record the following 
statement of Professor Harley Shaiken, excerpted from the statement 
submitted in connection with the House Committee on Ways and Means 
hearing of April 21, 2005 on the Dominican Republic--Central America 
Free Trade Agreement.

      The Dominican Republic--Central America Free Trade Agreement

                          (By Harley Shaiken)


    statement for the house committee on ways and means, april 2005

       The standard by which to judge this agreement is 
     straightforward: does the Dominican Republic-Central America 
     Free Trade Agreement (DR-CAFTA) promote development and 
     democracy, or does it create a small circle of wealthy 
     winners and a far larger group of impoverished losers? 
     Expanded trade has the potential to propel the former, but 
     this agreement delivers the later. The result threatens 
     rather than benefits U.S. workers. It's not that the train is 
     moving too slowly, it's that DR-CAFTA is running in the wrong 
     direction.
       Plaguing the agreement is an unnecessary tradeoff: DR-CAFTA 
     opens trade while locking in the labor status quo or worse. 
     For citizens of Central America and the Dominican Republic, 
     the tradeoff represents a squandered opportunity; for U.S. 
     workers and their communities, it means an assault on wages 
     and working conditions; for firms it may mean easier access 
     to markets tomorrow but diminished markets in the coming 
     years. DR-CAFTA provides strong language and tough penalties 
     in all areas related to investment--at times riding roughshod 
     over the six countries--but abandons labor rights largely to 
     rhetoric and good intentions.
       In some areas tough provisions favor special interests at 
     the expense of the Central American countries and the 
     Dominican Republic. Consider agriculture. The rural 
     population ranges from 34 percent in the Dominican Republic 
     to 60 percent in Guatemala. See Ferranti, D., G. Perry, W. 
     Foster, D. Lederman, A. Valdez, ``Beyond the City: The Rural 
     Contribution to Development,'' (Washinton D.C.: World Bank, 
     2005). How are small farmers supposed to compete with heavily 
     subsidized U.S. exports? Due to subsidies for rice 
     production, the U.S. exported paddy rice to Central America 
     at a price that was 18-20 percent lower than its cost of 
     production. See Oxfarn International, ``A raw deal for rice 
     under DR-CAFTA,'' November 2003, (5), http://
www.oxfam.org.uk/what__we__do/issues/trade/downloads/
bp68__Price. pdf. In pharmaceuticals, Professor Angelina 
     Godoy has found that ``the intellectual-property provisions 
     in CAFTA actually extend the length of time during which the 
     major pharmaceutical companies' products are guaranteed sole 
     access to markets'' which, in her view as well as that of 
     many other observers such as Amnesty International, ``just 
     may be a death sentence for many in the Dominican Republic 
     and Central America.'' See Angelina Godoy, ``What makes free 
     trade free?''  Seattle  Times,  April  14,  2005, http://
seattletimes.nwsource.com/htmllopinion/
2002240604__nocafta14.html; and Amnesty International, 
     ``Guatemala, Memorandum to the Government of Guatemala: 
     Amnesty International's concerns regarding the current human 
     rights situation,'' (Washington D.C.: Amnesty International, 
     April 20, 2005) http://web.amnesty.org/library/lndex/
 ENGAMR340142005. Many Latin Americans are likely to view 
     provisions such as these as indicating that the U.S. is more 
     serious about strong-arming weaker neighbors than sustainable 
     economic integration.
       Let's be clear from the start. This is not a debate about 
     ``free trade'' versus ``protectionism.'' Instead, the 
     challenge is defining free trade for the twenty-first 
     century. The right trade agreement could both encourage 
     growth and move towards a more broadly shared prosperity, 
     defining what one might call ``smart trade.'' To do this, 
     comparative advantage must be defined by innovation rather 
     than repression. Labor standards are vital for protecting 
     workers, but they also can help expand purchasing power, 
     build healthier markets, and lay the basis for more robust 
     trade.
       What then is wrong with the labor provisions in DR-CAFTA? 
     They send a clear message to the governments involved: the 
     current situation on labor rights is acceptable and even 
     fewer rights for workers will do. The agreement lays out 
     lofty labor rights goals and then backs them up with weak, 
     convoluted language and meager resources. Moreover, these 
     inadequate provisions replace language that has had a modest 
     positive impact. Consequently, firms willing to travel the 
     low road will define competitiveness, cutting off those who 
     want to do the right thing.
       In this testimony, I plan to explore three themes: labor 
     laws and their enforcement, the promotion of reform, and 
     finally ``smart trade.''


                    labor laws and their enforcement

       For millions throughout Central America and the Dominican 
     Republic, the issue of labor rights is not an abstraction but 
     an urgent need. Although labor laws differ among these six 
     countries, there is little serious debate among scholars as 
     to the situation on the ground. The issue is not simply 
     selective abuses but a systematic denial of the right to 
     freely join a union or the right to bargain collectively. 
     Numerous reports from the ILO, Human Rights Watch, the United 
     Nations, and the United States Department of State confirm 
     the seriousness of the problems. See U.S. State Department 
     Bureau of Democracy, Human Rights, and Labor, ``Country 
     Reports on Human Rights Practices 2004,'' for Costa Rica, 
     Dominican Republic, El Salvador, Guatemala and Nicaragua, 
     February 29, 2005, http://www.state.gov/g/drl/rls/hrrpt/2004/
cI4138.htm; Human Rights Watch, ``Deliberate Indifference: EI 
     Salvador's Failure to Protect Workers' Rights,'' vol. 15, no. 
     5, December 2003, http://www.hrw.org/reports/2003/
 elsalvador1203/; Human Rights Watch, ``CAFTA's Weak Labor 
     Rights Protections: Why the Present Accord Should be 
     Opposed,'' March 2004, http://hrw.org/englishl/docs/2004/03/
09/cafta90days.pdf; ILO, ``Fundamental Principals and Rights 
     at Work: A Labour Law Study,'' (Geneva, International Labour 
     Office, 2003), http://www.ilo.org/public/english/dialogue/
download/cafta.pdf.
       When it comes to making the choice on whether or not to 
     join a union, workers currently risk dismissal, blacklist, 
     violence, and

[[Page 14643]]

     even death. The results are readily apparent in the low union 
     density. In Guatemala less than 3 percent of the workforce 
     belongs to a union. See U.S. State Department, Bureau of 
     Democracy, Human Rights, and Labor, ``Guatemala Country 
     Report on Human Rights Practices 2004,'' February 29, 2005, 
     http://www.state.gov/g/drl/rls/hrrpt/2004/41762.htm. In El 
     Salvador, no independent trade unions have been formed in the 
     last four years.
       The low trade union density is only the tip of the iceberg. 
     The unions that do exist tend to be fragmented, weak, and 
     isolated. Effective collective bargaining has become a rarity 
     rather than the norm. The percentage of workers covered by 
     collective bargaining agreements in three ofthe six DR-CAFTA 
     countries based on 2003 data ranges from a low end of 1.4 and 
     1.5 percent in Honduras and Nicaragua, respectively, to 4.3 
     percent in El Salvador--not exactly a critical mass for 
     effective collective bargaining. See International Labour 
     Organization Decent Work Indicators Database http://
 www.oit.or.cr/estad/td/indexe.php
       A trade agreement should stimulate positive change, not 
     ratify the status quo or worse. What type of labor standards 
     might be rigorous enough to improve the conditions of work 
     yet flexible enough to recognize different levels of 
     development? One model is the five core labor standards 
     developed by the International Labor Organization (ILO). See 
     International Labor Organization, ``Fundamental ILO 
     Conventions,'' http://www.ilo.org/public/english/standards/
norm/whatare/fundam/index.htm. particularly the right of 
     association (Convention 87) and the right to organize and 
     bargain collectively (Convention 98).
       Although DR-CAFTA pays rhetorical homage to these 
     standards, in practice it throws them overboard. The 
     agreement calls for each country to enforce its existing 
     labor codes, no matter how inadequate or distant from the ILO 
     standards. The agreement recognizes ``the right of each Party 
     to establish its own domestic labor standards, and to adopt 
     or modify accordingly its labor laws.'' It then goes on to 
     state that ``each Party shall strive to ensure that its laws 
     provide for labor standards consistent with the 
     internationally recognized labor rights. . . . and shall 
     strive to improve those standards in that light.'' See United 
     States Trade Representative, ``The Dominican Republic-Central 
     America Free Trade Agreement,'' August, 5, 2004, http://
www.ustr.gov/Trade_Agreements/Bilateral/DR-CAFTA/
DRCAFTA_Final_Texts/Section_Index.html. ``Strive to ensure'' 
     and ``strive to improve''? This is the kind of language many 
     would like to see on April 15 when they have to pay their 
     taxes since it is virtually unenforceable. A standard based 
     on effort is hardly a serious standard. Instead of ``striving 
     to ensure'' international standards are met, the agreement 
     could commit to upholding them and provide clear penalties if 
     they are not upheld.
       The domestic laws often read as if they are designed to 
     thwart the formation of unions, and slipshod enforcement 
     hardly improves the situation. Companies wanting to avoid 
     unions can do just about anything; workers seeking to join 
     unions face threats and intimidation. Protection against 
     anti-union bias is akin to snow in San Francisco; it happens 
     but not frequently. ``In practice, labor laws on the books in 
     Central America are not sufficient to deter employers from 
     violations,'' an International Labor Rights Fund (ILRF) study 
     found. See International Labor Rights Fund, ``An Examination 
     of Six Basic Labor Rights--Executive Summary of Reports on 
     Honduras, Costa Rica, Nicaragua, El Salvador and Guatemala,'' 
     based on a study by Asociacion Servicios de Promocion Laboral 
     (ASEPROLA), April 5, 2005, http://www.laborrights.org/. 
     Byzantine regulations tend to tie unions into knots, laying 
     out registration procedures that are more maze than 
     procedure. In Honduras, for example, the ILRF found 
     ``obstacles and delays in union registration constitute a 
     violation of ILO Convention 87 on the right to associate.'' 
     Ibid. Weak as labor rights are, the track record hardly 
     inspires confidence that they won't be ratcheted downwards in 
     response to globalization.
       Enforcement is squeezed by impunity and corruption, 
     ineptitude and fear. In Guatemala, the U.S. State Department 
     concluded in its 2005 human rights report that ``Workers had 
     little confidence that the responsible executive and judicial 
     institutions would effectively protect or defend their rights 
     if violated.'' The report stated that ``the weakness of labor 
     inspectors, the failures of the judicial system, poverty, the 
     legacy of violent repression of labor activists during the 
     internal conflict, the climate of impunity, and the long-
     standing hostility between the business establishment and 
     independent and self-governing labor associations all 
     constrained the exercise of worker rights.'' See U.S. State 
     Department, Bureau of Democracy, Human Rights, and Labor, 
     ``Guatemala Country Report on Human Rights Practices 2004,'' 
     February 29, 2005, http://www.state.gov/g/drl/rls/hrrpt/2004/
41762.htm.


                        The promotion of reform

       There is little dispute that labor conditions are bad 
     today; the real question is will DR-CAFTA make them better? 
     In fact, it will make them worse. What makes the DR-CAFTA 
     approach particularly problematic is that it replaces the 
     modest existing protections for labor rights embedded in two 
     unilateral trade preference programs: the Generalized System 
     of Preferences (GSP) and the Caribbean Basin Initiative 
     (CBI). Much of the halting, modest reform that has taken 
     place in the region over the last 15 years stems from the 
     pressure brought through these programs. For example, EI 
     Salvador was put on GSP review for abusing worker rights in 
     1992 and labor law reform followed within two years. See AFL-
     CIO, ``The Real Record on Workers' Rights in Central 
     America,'' (Washington D.C.: AFL-CIO, April 2005), http://
www.aflcio.org/issuespolitics/globaleconomy/upload/
CAFTABook.pdf.
       What impetus is supposed to change destructive practices 
     this deeply rooted? The core problem is one of political 
     will, not lack of technical resources. The most powerful 
     incentive for change is conditioning U.S. ratification on 
     domestic labor law reform. Unfortunately, that horse has 
     already left the barn. Some proponents argue expanded trade 
     will result in more democratic rights. Burgeoning trade does 
     not seem to have done much in Mexico--especially in the 
     export sector--in the first decade of NAFTA. Cross border 
     trade between the U.S. and Mexico has tripled yet the number 
     of independent unions remains in single digits.
       Realistically, powerful elites retain a strong hold on the 
     DR-CAFTA economies. If expanded trade simply translates to 
     expanded income for these elites, a small number of wealthy 
     families may become wealthier and happier, but little will be 
     passed along to the majority of the people of these 
     countries. The growth of the middle class will be thwarted 
     and, ironically, the potential market for U.S. goods 
     dampened. By the same token, the pressure will 
     correspondingly increase on the wages and working conditions 
     for U.S. workers. The goal should be to harmonize standards 
     upwards not the other way around.


                              Smart trade

       The entire ratification process has caused severe strains 
     and protests in civil society throughout Central America. 
     Reflecting the gap between the ratification process for 
     DRCAFTA and popular sentiment is the fact that legislatures 
     often had to pass the agreement in the dead of night. The 
     Honduran Congress ratified CAFTA in an early morning surprise 
     vote specifically because protests were expected. The 
     Guatemala Congress approved CAFTA in emergency session and 
     under exceptional circumstances also because of anticipated 
     protests. It passed by a lopsided vote of 126-12 on March 10; 
     a Gallup poll carried out two weeks later (March 14-23) found 
     that 65 percent of those polled felt that the agreement would 
     harm the country. See Matthew Kennis, ``Despite Ratification 
     Anti-CAFTA protests Continue in Guatemala,'' IRC Americas 
     Program, (Silver City, NM: International Relations Center, 
     April 13, 2005), http://www.americaspolicy.org/pdf/
commentary/0504guatcafta.pdf.
       When it came to the issue of labor rights, tough 
     negotiating dissolved into acceptance of the status quo. The 
     danger, according to former President of Costa Rica Rodrigo 
     Carazo Odio, is that ``corporations take advantage of cheap 
     labor, operating in enclaves with limited links to the 
     national economy, trapping the region in a spiral of low 
     salaries, low aggregate value and lack of compliance with 
     basic labor standards, such as the freedom of association and 
     the right to collective negotiation.'' See Rodrigo Carazo 
     Odio, letter to the Members of the United States Congress 
     Washington, DC, May 27, 2004.
       We need to reframe the debate on the issues of labor rights 
     and development. It is not a question of free trade versus 
     protectionism, but rather ``smart trade'' versus ``polarizing 
     trade.'' Smart trade recognizes rights, spurs economic growth 
     with equity, and promotes democracy; polarizing trade might 
     spur trade in the short run but the benefits go to the 
     winners' circle while the number of losers grows far larger. 
     Democracy itself could be a casualty.
       Smart trade requires four provisions:
       1. Upward harmonization of domestic labor law to match the 
     core ILO conventions as the goal of a three-year phase-in 
     period. The granting of trade and investment benefits would 
     follow agreed upon reform in a country's labor law. See Carol 
     Pier, ``The Right Way to Trade,'' Washington Post, August 1, 
     2003.
       2. The ILO five core labor rights embedded in the core 
     agreement, subject to strong enforcement provisions and 
     penalties.
       3. A development fund targeted for infrastructure and 
     education. This fund would reinforce competitiveness in the 
     six countries and place them on the ``high road.''
       4. Expanded adjustment assistance for U.S. workers 
     negatively impacted by trade. This assistance should also be 
     proactive in industries threatened by trade.
       No trade agreement can solve all the problems of 
     development and globalization, but it should point in the 
     right direction. A trade agreement that fosters prosperity 
     and promotes democracy is possible and essential for the 
     region and for the United States. Smart trade lays the basis 
     for growing incomes and markets in Central America and

[[Page 14644]]

     the Dominican Republic and expanded U.S. exports and jobs. It 
     begins to define a better model for integrating into the 
     global economy. Unfortunately, that model is not this 
     DRCAFTA.

                          ____________________