Using free trade agreements to increase labor standards in developing countries has not worked. Although most critics focus on lack of enforcement by the U.S., the real problem is the inherent tension between using free trade to make money, and spending money to improve labor standards. If the U.S. were to enforce labor standards, it would destroy the gains from free trade, which is why there is no incentive for developed countries to enforce the agreements. The Trans-Pacific Partnership is the latest example of a U.S. free trade agreement that does not address the tension between trade and labor. This Note proposes that the only way to simultaneously continue free trade and improve labor rights is through a redistribution of wealth. By redistributing the gains of free trade, developing countries will have the means and the incentive to improve their labor standards. Developing countries will be incentivized to improve working conditions and build new manufacturing locations, because as improvements are made more money will flow in to continue the growth. Rich countries will be incentivized to enter into these agreements, because although they will be giving up portions of the gains of free trade at first, the redistribution will create wealth for all countries. Even though the rich countries will have to swallow a smaller percentage of wealth generation, the total amount of monetary gain will increase when there are more middleclass countries to buy from rich countries. Only through redistribution of wealth can the incentives of free trade be aligned to improve labor standards across the globe.
Contents I. THE TPP DOES NOT SOLVE THE INHERENT TENSION BETWEEN FREE TRADE AND LABOR RIGHTS, AND, THEREFORE, WILL NOT BE SUCCESSFUL IN TRANSFORMING LABOR STANDARDS. II. PAST LABOR AGREEMENTS ARE INADEQUATE BECAUSE THE REQUIREMENTS IN THE AGREEMENTS ARE NOT ENFORCED, AND BECAUSE ENFORCEMENT MAKES IT HARDER TO CREATE WEALTH. III. THE TPP SOLUTION TO LABOR AGREEMENTS IS AN IMPROVEMENT, BUT IS STILL LACKING TEETH A. Vietnam Labor History and Side Agreement. B. Brunei Labor History and Side Agreement C. Malaysia Labor History and Side Agreement. IV. EVALUATION OF TPP SOLUTION: IMPROVEMENTS BUT NOT ENOUGH. A. An Overview of the Shortcomings B. The Current ILO Standards May Not Be Focusing on the Right Standards V. REDISTRIBUTIVE SOLUTIONS THAT CAN FIX THE BROKEN INCENTIVES BETWEEN FREE TRADE AND LABOR STANDARDS A. Create an Inspection Agency to Determine if Manufacturing Facilities Meet Labor Standards B. Redistributive Solutions can be Made on Three Different Levels Governmental, Company, or Consumer C. Governmental Level Redistributive Solution D. Company Level Redistributive Solutions. 1. Solution #1: all companies based in TPP countries can only buy from suppliers that meet ILO standards. 2. Solution #2: all suppliers meeting ILO standards receive a guaranteed level of production from companies 3. Solution #3: companies must provide a list of their suppliers and receive a rating based on how many meet ILO standards. 4. Solution #4: companies receive tax breaks for buying exclusively from suppliers that meet ILO standards. E. Consumer Level Redistributive Solutions 1. Solution #1: tax on goods made under inadequate labor standards. 2. Solution #2: labeling products to show labor conditions where a product was manufactured. F. Other Considerations: Revenue Sharing Example. VI. CONCLUSION "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." (1)
THE TPP DOES NOT SOLVE THE INHERENT TENSION BETWEEN FREE TRADE AND LABOR RIGHTS, AND, THEREFORE, WILL NOT BE SUCCESSFUL IN TRANSFORMING LABOR STANDARDS
The United States of America uses free trade agreements to influence labor standards in developing countries. (2) A free trade agreement is generally an agreement between at least two countries to reduce tariffs and promote unencumbered trade. (3) The goal of free trade agreements is to help open up trade between the countries in an attempt to boost economic growth in each country, creating wealth. (4) Conditioning free trade on increased rights for labor is flawed because there is an inherent tension between free trade and labor rights. (5) What the U.S.'s free trade agreements have done in the past, up to and including the Trans-Pacific Partnership (TPP), is to threaten poorer countries with trade sanctions and ending trading agreements if labor standards are not adhered to. (6) The incentives are aligned against a country enforcing labor rights because prices of trade goods will go up if labor rights are enforced, which decreases the rewards from free trade. (7) If the U.S. continues the strategy of linking market access to http://www.nytimes.com/roomfordebate/2015/05/12/should-prices-at-nail enforceable labor standards, (8) it would only hurt U.S. consumers, and would not have a definite impact on labor rights. Sanctioning countries for not adhering to labor standards is not a feasible threat to countries that do not comply with labor standards, because sanctions would kill free trade. Threatening sanctions has not worked in the past. (9)
Past U.S. free trade agreements have only resulted in marginal if any gains in labor conditions. (10) The problem with these agreements is that they were more of a political charade than actual plausible solutions. Past free trade agreements created dueling incentives that labor conditions simply could never win. (11) Without a redistribution of wealth, there is no way to solve this problem. Not all labor rights are created equal, and there is a problem fine-tuning the laundry list of rights in trade agreements to reflect each country's circumstances. (12) The current list of rights may only reflect the western system's beliefs, and perhaps it is best to start by addressing safety issues. (13)
This Note proposes that redistribution of the wealth created by trade from rich to poor is the key to solving the tension between free trade and labor standards. Part II will discuss the failings of past free trade agreements in their aim to influence labor rights. Part III will outline the TPP's solution to improve labor rights through free trade. Part IV will then evaluate the TPP's solution to improve labor rights through free trade. Part V takes a survey of the pros and costs of a redistributive solution to the problem of using free trade to influence labor rights; including creating an international agency to monitor labor standards, and an evaluation of who would bear the costs of redistribution.
PAST LABOR AGREEMENTS ARE INADEQUATE BECAUSE THE REQUIREMENTS IN THE AGREEMENTS ARE NOT ENFORCED, AND BECAUSE ENFORCEMENT MAKES IT HARDER TO CREATE WEALTH
While the common perception is that the U.S. does not enforce the labor sections of free trade agreements, (14) the real problem is not in enforcement. The U.S. does not have any incentive to enforce labor standards, because it will destroy its access to the cheap goods the trade agreements were intended to create. The U.S. uses free trade agreements to impact labor standards. (15) Historically, the labor sections of these agreements have lacked enforcement. (16) While theoretically important, free trade agreements have not done as much as promised for workers. (17) Free trade agreements have failed, because of the tension between creating wealth through trade and making it costly to create wealth through spending on labor improvements. (18) This tension also explains why the U.S.s' interests are not strongly for enforcing labor sections of trade agreements.
This point can be appreciated by examining the way in which trade agreements have been used to improve labor standards. In 1993, the U.S. entered into the North American Free Trade Agreement (NAFTA), which was the first trade agreement that included a labor cooperation component, albeit in a side agreement. (19) NAFTA has very weak enforcement mechanisms that were never used to enforce the agreed upon labor standards. (20) There has only been one submission of a labor violation in the more than 20 years since the ratifying of NAFTA: the violation was against Mexico and the Department of Labor (DOL) accepted it in 2011, but it has yet to be resolved. (21) Political considerations were not strong enough to lead the U.S. to bring a claim against Mexico for its non-compliance with the agreed upon labor standards. (22)
On May 10, 2007, the U.S. Congress passed a Bipartisan trade deal with the Bush Administration, which incorporated the International Labor Organization (ILO) standards, (23) and made a plan to include these in all future trade agreements. (24) Since the May 10th Bipartisan deal, the U.S. has used these standards in unilateral trade agreements with Peru, Colombia, and South Korea before entering into the TPP. (25) There are still problems with labor standards in these countries even with the new standards as part of the agreement. (26) In the last eight years, the DOL has taken up (27) five claims against countries for possibly violating labor commitments in trade agreements. (28) In 2008, the DOL accepted a claim against Guatemala alleging a violation of the right to freedom of association, violation of rights to organize and bargain collectively, and unacceptable work conditions. (29) It took five years for the U.S. to sign an Enforcement Plan with Guatemala's government. (30) After multiple extensions, Guatemala still did not meet the Enforcement Plan's terms. (31) In September 2014, the U.S. government finally resigned to using the dispute settlement process in the free trade agreement. (32) This case, which is still ongoing, (33) exemplifies the excruciatingly long process that goes into correcting a labor violation.
The perceived problem with the U.S.'s approach to labor components of trade agreements is the lack of enforcement of labor rights that developing...