Labor issues have been an ever-present problem within the North American Free Trade Agreement (NAFTA) even before its formal implementation in 1994. Debates have arisen concerning the subjects of labor migration, job displacement, unionization and the unfair competition resulting from wage differences between Canada, the United States and Mexico. At the outset, NAFTA has made efforts to formulate feasible solutions to these problems. In fact, its primary agenda has been, and remains focused on, the shaping of the institutions designed to monitor the above mentioned challenges. Institutions like labor unions, the International Labor Organization, the National Administration Offices (NAO) formed by the North American Agreement on Labor Cooperation (NAALC) all have received extensive attention, or were formed in response to, a growing concern over workers' rights and 'fair' economic competition. Each of these institutions has the power to give recommendations regarding labor law violations; however, their is neither a system of enforcement or consequences for violators of national or international labor standards. Without a method of acting upon their own recommendations, the institutions intended to guarantee a certain quality of life to workers in all three NAFTA member states, are ineffective and inadequate in dealing with current labor issues as well as future ones.
NAFTA emerged as a result of, as well as an enhancement to, economic interdependency between the nations of North America. Nations with intertwined economies are highly reactive to each other politically, socially, and economically. This situation is especially sensitive due to the inclusion of Mexico - a country with an emerging economy. because of the availability of cheap labor, Mexico can offer lower wages and production costs. If Mexico were allowed to do so freely, it would easily defeat any competition for manufacturing sites from Canada and the U.S.. This puts pressure on U.S. and Canadian firms to lower the wages and benefits to compete more favorably with the prices of goods produced in Mexico. The pressure is especially acute as more and more tariffs are lost. This effect is also known as 'downward harmonization'.
Mexico has and will continue to experience an influx of foreign direct investment (FDI) and, subsequently, a massive boost to its GNP. Despite the growing number of jobs that have resulted, Mexican labor still is underpaid by international standards. In the period from 1995-1997, Mexican inflation remained over 100+%; yet, Mexico's maquila workers' wages rose only 50% in the same period . (1) This imbalance in wages versus cost of living makes it difficult for U.S. labor and, especially, the highly unionized Canadian labor force to compete. A 'race to the bottom', so to speak, is what workers in the U.S. and Canada have dreaded since NAFTA's proposal. U.S. labor unions have taken an uncharacteristically political role in as it has grown and developed over the years. Two pertinent questions emerge from this discussion. Is the competition allowed by Mexico's cheap labor 'fair' competition? How can the NAO's, labor unions, and international standards assure that it is fair?
Interdependency between NAFTA's member states constantly increases with every deleted tariff and each multinational corporation (MNC) that crosses borders. Another with every new economic tie being built come serious responsibilities towards not only each individual nation and its people, but also toward other NAFTA members and their people. It is a lesson in interdependency that nations are learning as they discover extent of their obligations as free trade partners. Underlying these responsibilities, however, is the basic need for countries to guarantee their own economic success. Key to a booming economy is the employment of a highly productive work force; a factor which will guarantee by a decent standard of living for all workers. Unfortunately, this situation is difficult to achieve when a downward pressure on wages and labor standards is exerted by countries or institutions that do not enforce similar labor policies. These pressures are what create unfair competition for producers and manufacturers. The workers ultimately pay the price. A good illustration of this phenomenon accures after the formation of the Canadian-U.S. Free Trade Agreement (CUFTA). Canada experienced downward pressure on its social standards when its market was joined with the less socially-welfare oriented United States. "Since 1989, when the agreement went into effect, Canada has experienced a substantial decrease of foreign capitol, ... This has contributed to the pressure ... to reduce its high standards for health care provision and welfare benefits" . (2) This is prime example of how 'free' international competition puts pressure on nations to bid down their labor and social standards to the level of the lowest-standard country involved. Needless to say, this downward competition has increased since the formation of the NAFTA and its inclusion of Mexico in its membership.
The continuing downward spiral of labor standards of NAFTA members is due to an absence of a guarantee of fair trade practices between these three nations. While strides have been made to determine a set of labor standard goals for Canada, the U.S. and Mexico; no set of consequences exists in the case of their violation. This leaves the NAO offices, ILO standards and labor unions' efforts as purveyors of workers rights null and void. An empowerment of these institutions must occur so that they can achieve the objectives for which they were created. The primary need is the assurance that free and fair competition will occur among the members of the NAFTA. This means putting an end to the downward pressures on wages due to varying labor standards of member nations.
This leads to the second most responsibility of labor-oriented institutions, which is to develop and maintain equal labor standards between Canada, the U.S., and Mexico. Efforts toward this end have been underway for some time. All NAFTA member nations already ascribe to the labor standards of the ILO and, in most instances, have agreed to help meet the goals of the NAALC. However, these standards and goals have remained unmet perhaps because they do not reflect the cultural and economic diversity of NAFTA nations. If that is the case, a new set of goals and standards for labor needs to be negotiated between the U.S., Canada, and Mexico.
It is crucial that the institutions of NAFTA must be able to enforce their labor standards and goals. This is something the NAALC has not addressed due to lack of foresight and the threat of reduced sovereignty for each independent nation. Regardless of any sovereignty issues, however, these various institutions have the ability to react to any infringement of trinational, even international, labor standards. Without this ability, institutions cannot guarantee fair competition or fair trade within NAFTA. Barriers exist, however, that impair the ability of labor institutions to enforce any sort of labor regulations among NAFTA members. The next section of this paper examines of the importance and effectiveness of national and international institutions in setting and regulating labor standards of the NAFTA members.
There are primarily four institutions that have played a role in the formation of labor policies for the NAFTA members. These institutions vary in their level of influence on NAFTA: labor unions impact nations at the grass roots level while the GATT and the ILO have more wide ranging effects. Perhaps the institution with the most far-reaching influence is the trinationally bases NAO offices established by the Labor Side Accord of NAFTA. Each of these very different institutions has had both positive and negative impacts on the North American Free trade Agreement. One negative aspect that these groups have in common is the inability to act or enforce many of the labor standards that they seek to promote. The following evaluation will qualify this argument and point out the weak areas of each institution, thus illustrating its ineffectiveness.
When considering the dominance of international interests over national labor issues in FTA's, it is vital to understand the past and present international institutions and their impact on labor issues. The existence of the General Agreement of Tariffs and Trade (GATT) and the International Labor Organization (ILO) have had indirect effects on the establishment of the labor practices of member nations of NAFTA. It is through the promotion of their various agendas that these institutions have shaped NAFTA as it is today.
The GATT was formed with the intention of "... the substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce ." (3) In the entire body of the GATT there is only one mention of labor issues. In Article XX, there is a clause permitting nations to take action against "products of prison labor." (4) The virtual absence of any effort to create a set of international labor standards or policies for the opening of borders is significant. Nations seeking to develop a free trade alliance have no precedent for establishing regulations. Thus, it is no surprise that trade alliances like NAFTA have not developed a set of labor regulations that promote and direct free trade.
The standards that NAFTA has set for its members through the NAALC correlate directly to the standards that have been set by the ILO. The similarities in these guidelines for labor policies is no coincidence, as each member of NAFTA also ascribes to the doctrine of the ILO. In addition, like ILO, NAFTA has no effective means of internationally enforcing its labor policies. Its intentions are well-founded but there is guarantee of labor rights and fair competition within free trade alliances. Much like the ILO, NAFTA is left with an unachievable task because the means of meeting its goals for labor standards do not exist.
International institutions like the GATT and the ILO directly influence the NAFTA. All three groups lack a meaningful way to regulations address of labor issues and to enforce regulations. GATT and the ILO have served as examples in the development of FTA's and in the formation of national policies, but the issue of developing effective labor policies has been largely ignored . (5) Efforts by these two institutions to help alliances like NAFTA and the EU develop policies and formulate methods of enforcement would promote the standardization of labor policies internationally and boost international cooperation.
The North American Agreement on Labor Cooperation (NAALC) was by the governments of NAFTA members to set labor standards. The U.S., Mexico and Canada agreed to strive toward a set of goals to accomplish this end. This institution has been, however, nothing more than a reference tool for international labor standards NAFTA nations are unable to enforce consequences towards a nation that does not adhere to the guidelines set by the NAALC. The National Administration Offices (NAO) in each respective country will recommend corrective action, but there is no punishment for labor law violations. This makes the regulation of Multinational Corporations virtually impossible. As a result, manufacturers have increased their mobility and there are huge wage, hour and benefit discrepancies between nations. Whether this was done intentionally or not, national inequalities and labor law violations undermine the goals and ultimate success of NAFTA. It must develop a set of consequences for labor law infractions that will strengthen the FTA and promote free trade.
The provides guidelines for NAFTA members to form international labor policies and regulate their labor markets. The basic goals set by the NAALC are:
This set of standards, while addressing labor issues, by no means sets up a system enabling nations to enforce the very concepts that they are promoted. In protecting national sovereignty, NAALC has failed to empower nations to put their goals into actual practice. This fact delegitimizes any efforts that have been made towards establishing trinational standards for the regulation of labor.
While it is easy to point the finger and say that efforts to assure workers' rights at home and abroad have not been adequate, the NAO's of each country provided a legitimate voice for many who felt that labor laws were being violated. Each member of NAFTA has a National Administration Office whose task it is "... to review public communications concerning the other member countries' labor law matters and to consider labor rights issues outside of their own national boundaries." (7) In this sense, it the job of these NAO's to make sure that each country is following its own labor laws. They can conduct reviews and respond to complaints against other governments.
The only action that the NAO can take on labor related complaints, however, is to clarify the labor policy violation and to create a set of recommendations for government that will rectify the situation . (8) Labor issues not be passed on to an Evaluation Committee of Experts (ECE) who can only make reports on problems concerning health and safety, and technical labor standard violations. This is hardly an effective method of guaranteeing fair treatment of labor, fair trade and international cooperation. To make matters worse, the labor laws between Canada, the U.S. and Mexico vary greatly. For example, only one province of Canada has agreed to abide by the standards set by the NAALC.
The general ineffectiveness of the NAALC and the NAO to regulate labor is obvious. They are weak and unable to react to violations of any labor laws. Many cases presented to the NAO were dismissed because they were deemed 'serious' enough to risk trade relations. One case report released by the NAO stated that the NAO "was not in a position to make a finding that the Government of Mexico failed to enforce relevant labor laws" . (9) In the strongest stance taken by the NAO to date, Sony was found guilty of "plausibly discharging workers' for the causes alleged, namely union organizing activities". The U.S. Labor Secretary wrote a letter to the Mexican Labor Minister to request a telephone conversation about the matter. (10) These weak responses to labor code violations are not going to be effective especially in the case of Mexico which gains so much of its foreign investment because of its cheap labor force. The NAALC and its NAO's have been unable to hinder the continuing violations of workers' rights and to lessen the labor and wage discrepancies between all of the members of NAFTA.
If the governments of the U.S., Mexico and Canada wish to see the labor code differences between their nations diminish, they need to empower institutions like the NAO's so that if violations occur, they be dealt with in a timely, consistent manner. To accomplish this would require nations to trade absolute sovereignty for greater international cooperation. This would not only improve the plight of labor unions, but also that of individual workers. It would also improve the problem of the increasing mobility of MNC's and put the people and governments back in control of their economies. In an ever more interdependent region, the countries of North America need to place aside issues of sovereignty and competition, and work to establish an effective method of regulating free trade that is also fair.
Labor unions have long been a resource of workers around the world for guaranteeing their rights as laborers. With global interdependency on the rise and the increasing mobility of MNC's, unions are finding their bargaining power being undermined. Specifically, this has dealt strong blows to workers in NAFTA member nations, especially since the implementation of the NAFTA and the decision to expand the maquiladora program in Mexico. (11) Wage differences, national government involvement, and trinational cooperation are all critical if labor unions are going to succeed in insuring the rights of workers. While the situations vary between Canada, the U.S. and Mexico, the economic links that NAFTA has forged, link also the plights of laborers. To discuss one nations' labor problems ultimately leads to a discussion of all the participants of NAFTA. Molly Scott addresses the problems of this in her chapter at the beginning of this section.
The U.S., itself has a long and strong history of labor unionization which has improved the standard of living and work conditions for laborers. There was a natural antagonism between labor and management in the past, but cooperation and negotiation usually proceeded well. The situation has changed in recent years, however. Employers are increasingly resistant to unionization for very real reasons. Threatened and actual plant closings has become a common response to union organization within a company. This is due, primarily, to two major factors. The first is the increasing power and mobility of corporations. Increasingly, in the world, fewer corporations have come to dominate international exchange. In fact, it is not uncommon to find extensive trades taking place between subsidiaries of the same company. One of every three world transactions that take place are between divisions of the same company . (12) This statistic exemplifies the power and extent of the reach that MNC's have across the world today.
The second factor that makes a lack of unionization a greater threat to job security than it was in recent years is the existence of NAFTA. NAFTA has promoted an international environment that "has both increased the credibility and effectiveness of the plant-closing threat for employers and emboldened increasing numbers of employers to act upon that threat" by making movement across borders a real possibility and by providing a much cheaper and more productive labor force alternative in Mexico. The result has been that plant closing rates in the U.S. due to the threat of unionization have tripled since the implementation of NAFTA . (13) While unions have provided adequate labor support and appropriate consequences for unfair employer behavior for years, the existence of NAFTA has adversely affected labor organizations in the U.S..
This lack of consequences for corporations, the lack of commitment that they have towards world citizens and the economic reality that must live with are exemplified by a situation that occurred within the Sprint corporation. In July of 1994, Sprint shut down La Familiar, its Hispanic marketing division, just one week before workers were scheduled to vote for unionization. The Communications Workers of America had bid to represent them. Charges were filed by the Mexican Telephone Workers Union saying that Sprint had violated the rights of its employees to organize. Over two and a half years elapsed before a verdict was finally reached. Sprint was, in fact, found guilty of "more than 50 different egregious labor law violations, including fabricating evidence, interrogation, bribes, threats, surveillance and closing its facility, transferring operations and firing its workers in direct response to the union campaign". The only consequences that Sprint faced as a result of this infraction of U.S. Labor Law was to offer all workers new jobs at different Sprint facilities, reimburse them all lost pay and benefits and write a detailed order about their commitment never to violate organizers rights again. There was no punishment that suggested the reinstatement of operations at the original plant, nor did the workers of Sprint ever get their union at that site . (14) The seriousness of this case exemplifies the diminishment of labor unions as an effective tool for guaranteeing workers rights within U.S. corporations. As the most powerful economic and political member of NAFTA, the inability or neglect of the U.S. to better monitor and enforce its labor laws has a startling worldwide effect. This situation could be ameliorated. By the creation and enforcement of a more cognitive set of trinational labor laws, the temptation and ease with which MNC's have been able to shift production to lower wage regions would lessen. This would, in turn, provide a fairer alternative to the existing norms which NAFTA represents, but does not enforce.
The increasing challenges that face labor unions in the U.S. are not unique to this nation, however. While obstacles to effective unionization in Mexico are different than in the United States, the end result is similar: unions are finding that their roles as guarantors of workers rights and benefits are increasingly difficult to fill under NAFTA especially in light of increased international interdependency. Mexico has a long tradition of providing fair representation to workers through unionization and strong commitment to fair labor laws. The future of this relationship between the Mexican government and Mexican workers is in question. It has been disintegrating over the years as the efforts to attract Foreign Direct Investment (FDI) have increased. It has been difficult for the Mexican government to continue promoting workers rights and concurrently attract this foreign capital. (15) The debate over the effectiveness of a politically run union yet, nonetheless, the plight of workers has deteriorated even since NAFTA's implementation. Unions have found it increasingly difficult to organize and to be key players in the labor rights movements.
One of the major obstacles that face Mexican workers is the relative monopoly of the Confederación de Trabajadores de Mexico (Confederation of Mexican Workers, or CTM) over the labor market. This monopoly is valued and promoted by the long time dominating Mexican government party, Partido Revolucionario Institucional (PRI). "Mexican unions have ... been mediated by the state in two central respects. First, the state ensures that bargaining is located at the highest political levels... [to] ensure that bargaining agreements conform to the overall terms of the president's labour and development policies. [Secondly],... government institutions actively structure and shape interest representation within the labour movement". (16) This involvement ensures an active role of the government in all labor activities. In fact, the threat of corruption (which many claim to be rampant) is directly increased, and governmental suppression of unwanted unrest is more easily accomplished. As Charles Greer and Gregory Stephens note, this close relationship of CTM to the political power base constitutes a double-edged sword; "union power and influence suffer if the political party's influence wanes or if it withdraws its support for the union, as recent electoral results suggest may be happening today". (17) Thus, historically speaking, the relationship between the CTM and the government of Mexico has produced mixed results. First, the union is only in good standing when it produces votes for the ruling political party. This, in turn, assures workers that their present benefits will either improve or stay the same. Second, while the CTM does enjoy a monopoly over the Mexican labor market, the degree to which it effectively represents the needs and concerns of its members is debatable due to the high level of influence that politics has over its elite leaders and organizers. It is fair to ask if effective union representation is possible when "... State imposed union leadership... is not responsive to the grass roots but [is] dependent upon the state and in league with it to control the working class base." (18) This question is best illustrated by comparing the differences between union efforts by company unions which are branches of the CTM and those by independently run unions.
Company-run unions have increased in Mexican laborers since the establishment of NAFTA. The majority of these unions are merely branches of the CTM, and, many times were established before a companies opening and the hiring of workers. This means that benefits, wages and hours were all determined prior to the workers employment at that firm. In fact, in many cases workers aren't even aware of the unions until a complaint of some sort is registered. ... Unions were set up by the companies rather than [by] the workers, with 'protection contracts' signed before even a single worker was hired ... Workers won't even know about [the union] unless and until they try to organize or have complaints on the job. Then, the union, which is paid to make sure that there is no labor unrest, tries to keep them from organizing". (19) Situations like this are all too common in Mexico and directly reflect the lack of power and influence that workers, even union members, have as a whole. Yet, while representation for CTM union members may not be optimal, independent union efforts have been met with huge opposition from CTM.
Case after case has been studied where workers, in an effort to have their needs better represented, have organized with independent unions. As a result, there has been an undesirable backlash - the unpunished firing of workers by corporations for unwanted union activity. An example of this activity occurred at the Sony Corporation's Mexican subsidiary, Magneticos de Mexico, when workers tried to obtain better representation within the CTM union by electing officers of their own choosing. The company responded with illegal actions including employee intimidation, suspension, demotions, and job terminations. (20) Another example occurred at the General Motors plant in Ciudad Juarez, Chihuahua. When 187 workers attempted to register as an independent union at the labor board, their request was ignored (Mexican labor regulations require only 20 active employees to establish a union). (21) When the workers protested, GM responded by firing 15 labor leaders and 60 more workers. These termination's were justified by the fact that "... under Mexican labor laws, they received a settlement, negotiated to their satisfaction". (22) In each of these cases, one case corporate abuse and devaluation of laborer's status. It is painfully obvious that this situation is a direct result of the establishment of NAFTA and of the increased mobility of multinational corporations. As John Tuman notes in his study of labor unions in the automobile industry in Mexico, "Prior to NAFTA, tariffs and quantitive import restrictions limited the entry of automobile imports; therefore, nearly all firms relied on a single plant to produce several different product lines for the Mexican market. ... Managers had powerful incentives to come to the bargaining table". (23) These incentives, however, have diminished and workers are no longer as valued as they once were in Mexico by their employers or by their government. This phenomenon is well illustrated by the decreasing support for workers'' needs. Unions have lost much of their influence, not only in Mexico, but in the United States as well. In order to regain control over their own lives, workers will be forced to take some big risks and make some extensive compromises because the only way that they can take back their unionizing power is to create a stronger and more unified labor movement, across borders.
Efforts to forge cross-border ties have been increasingly evident in the past year. This is especially true of the Han Young case. Mexican workers in the Han Young maquiladora were supported in their efforts to establish an independent union by a number of powerful figures; including John Sweeney; President of the AFL-CIO, President Clinton and Vice President Gore. While a victory has not yet been attained, a scheduled hearing for February 18, 1998 has left only feelings of optimism . (24) Apart from the win-lose factor, the amount of power and influence that cross-border cooperation can foster has proven to be tremendous and should serve as an example to unions and workers all over North America.
Labor organization across borders is difficult, especially due to the very different economic and social needs that exist between Canada, the United States and Mexico. By forming ties between NAFTA members, however, workers will be in a better position to make the demands necessary to monitor and enforce international standards of labor treatment and wages, and to take back control from corrupt governments and MNC's. In addition, the end goal of every worker is assure a better quality of life, so despite logistical differences, every union member is working towards a similar resolution. Evidence of cross border relations already exists. Unions in the United States have filed numerous complaints in behalf of Mexican workers with the U.S. National Administration Office (NAO); including accusations against both General Electric and Honeywell . (25) Other avenues taken by unions organizing trinationally have been to demand genuine implementation of the labor side accord utilizing the activism of U.S., Canadian, and Mexican workers together. Each of these efforts have resulted in a better relationship between the members of NAFTA. While differences in goals and development exist, unions can only hope that by cooperating on a trinational basis that they can outweigh the influence NAFTA has had in creating incentives for corporations to seek cheaper labor and lower standards of production elsewhere.
The labor institutions of NAFTA are facing a monumental task. In light of increasing interdependency not only within North America, but around the world, institutions like the NAALC, the NAO and labor unions are faced with the task of developing a set of enforceable labor standards for the member nations of NAFTA. Institutions are being asked to do this with virtually no guidance from any previous free trade alliance nor from the frameworks of existing international institutions. With the grandness of this task in mind, labor institutions both big and small must promote the formation of policies that guarantee both fair treatment for all workers and fair competition for trade between all nations. This can only be accomplished through international cooperative efforts. Labor Unions must work trinationally to regain their strength and bargaining power from the increasing influence of MNC's. Cooperation would help unions to initiate the reinstatement standards for labor wages, benefits and hours while they also rebuild their presence in multinational agencies and build international ties. The NAO and NAALC must seek to formulate policies and a set of consequences that are enforceable on an international basis. These needs are imminent and the success of NAFTA as a fair and competitive trading association depends upon the execution of these institutional alterations. These changes will make NAFTA all the more competitive and better prepare Canada, the U.S. and Mexico for further free trade negotiations with Chile and other Latin American countries.