The U.S. - Guatemala CAFTA labor case is heating up. I'm going to raise the "in a manner affecting trade" issue once again.
Recall that CAFTA Article 16.2.1(a) says:
A Party shall not fail to effectively enforce its labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement.
This is from the U.S. rebuttal submission:
125. As set out above in section III.D, the United States need not demonstrate actual trade effects to demonstrate that Guatemala’s labor law enforcement failure has occurred in a manner affecting trade. Furthermore, the United States need not show that each individual company’s non-compliance is affecting trade, but rather that Guatemala’s failure to effectively enforce its labor laws has occurred in a manner affecting trade. As described above, this obligation does not require an econometric analysis of actual trade effects on specific products or companies. Rather, it is sufficient to show that the companies or sectors in which Guatemala has failed to effectively enforce its labor laws are engaged in cross-border trade between the CAFTA-DR Parties, through either export or export-related activities or competition with imported goods from these Parties. In this case, all the companies or sectors cited by the United States fall into one of these two categories.
...
132. In sum, as the United States has demonstrated previously, a complaining party need not demonstrate actual trade effects to demonstrate that a responding party’s actions have occurred in a manner affecting trade. Nonetheless, in this case, the United States has amply demonstrated that these companies participate in trade in the CAFTA-DR region, either through exports or export-related activities, or through competition between these companies and imports from other CAFTA-DR Parties. Guatemala’s failure to effectively enforce its labor laws allows these companies to artificially reduce their key production cost of labor, and thereby gain a competitive advantage in the CAFTA-DR market. This unfair advantage thus affects trade between the CAFTA-DR Parties in the relevant products. One company’s impunity incentivizes other companies in the sector to follow suit, which unfairly depresses labor costs for noncompliant companies that compete with exports from other CAFTA-DR Parties.
(See also paras. 56-69)
The U.S. view seems to be the following. If the product sectors where the labor laws are not enforced engage in either exporting or importing with CAFTA-DR parties, then the failure to enforce has occurred in a manner affecting trade.
Here are some questions that occur to me:
- Is it really the case that a failure to enforce labor laws will always occur in a manner affecting trade, just because trade exists in the sectors at issue? Could it possibly occur in a manner not affecting trade?
- What if the trade is not actually occurring, but there is the potential for such trade?
- What if there is no trade with the complaining party, i.e., trade is only with other CAFTA-DR parties?
- And does it matter how the failure to enforce affects trade? For example, what if a labor law made it more difficult for unions to operate, like with a right to work law. If a government failed to enforce a right to work law, and this made imports easier and exports harder, would this be covered?
I'm not sure I have any good answers at this point. I'm just raising annoying questions.
