United States Seeks Arbitration with Guatemalan Government over CAFTA Labor Violations

August 12, 2011

On August 9, the United States Trade Representative announced that it was requesting the establishment of an arbitral panel under the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) in order to discuss the Guatemalan government’s failure to enforce its labor laws, including the right to association and collective bargaining.

The request for arbitration comes on the heals of a three-year-long process that began in April 2008 when the AFL-CIO and six Guatemalan trade unions filed the first worker rights complaint under CAFTA. The complaint uses several case studies to document illegal firings, failure to bargain in good faith, health and safety violations, and violence against trade unionists in Guatemala.  The Bush Administration failed to act on the complaint, leaving the Obama Administration to take over in January 2009. The Obama Administration moved slowly, finally asking for formal consultations with the Guatemalan government on July 30, 2010. One year later, with the Guatemalan government having done little to respond to labor concerns after a series of bilateral consultations and a meeting with the Free Trade Commission in May of 2011, the U.S. government announced that it would take the next step and establish an arbitral panel. The Guatemalan government refused to accept a proposed "labor action plan" put forth earlier by the U.S. government as an alternative to arbitration, reportedly because Guatemalan business interests were opposed to elements of the plan as being too far reaching, prompting the U.S. government to move forward on the formal process of arbitration.

The Guatemala CAFTA complaint procedure offers an important test of the effectiveness of CAFTA’s labor protections. To date, the length of the process, limited actions taken by the Guatemalan government and continued labor violations show that CAFTA’s penalties for failing to address labor rights infringements, including the murder of trade unionists, are not feared, particularly by employers. The request for the establishment of an arbitral panel is a welcome development, providing an opportunity to test the effectiveness of the labor complaint process provided under CAFTA.

Update:  On August 12 the Guatemalan government announced that the U.S. violated the labor chapter of the Central American Free Trade Agreement (CAFTA) by calling for arbitration. In a letter to U.S. Trade Representative Ron Kirk, the Guatemalan Minister of Economics Luis Velasquez said that the U.S. did not make a sufficient case that labor violations in Guatemala impacted trade, did not include all CAFTA trade ministers in the Free Trade Commission meeting held in May, and did not hold a meeting with the Labor Affairs Council, as mandated by the CAFTA labor chapter. Velasquez also said that Guatemala had agreed to make 14 out of the 17 changes requested by U.S. officials but that it could not make the additional three due to laws upheld by the Guatemala Constitution, including the request that the Labor Ministry regain its power to sanction employers for violation of labor law. In August 2004 the Constitutional Court of Guatemala granted the Guatemalan Labor Courts the right to place sanctions instead of the Labor Ministry, which are notoriously slow. Following publication of the letter, a USTR spokeswoman said the U.S. had not requested any changes in labor policy that would violate the Guatemalan constitution.

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