Maria Lorena Cook

Lance Compa

Enrique de la Garza

Morley Gunderson

Russell Smith

Washburn University

Mark Thompson

Anil Verma

In its 1996 report, the IRRA-NAFTA Committee presented a preliminary analysis of the North American Agreement on Labor Cooperation (NAALC) through its second year. The Committee decided that a second analysis would be useful, especially because the labor side agreement could be affected if NAFTA is extended to Chile and to other Latin American countries in a Free Trade Area of the Americas. The following analysis will evaluate the impact of the NAALC during its first three and one half years.

The 1996 report of the Committee discussed the procedures contained in the NAALC for dealing with alleged violations of the eleven "labor principles" in the Agreement Agreement (Verma et al. 1996). The process begins with a "submission" by an interested party alleging violations of one of the principles in another country in the NAFTA. The organization that is the subject of the submission is invited to reply. The National Administrative Office (NAO) of the country from which the submission originates then must decide to grant a review. If the NAO grants a review, it then gathers information on the legislation, regulations, procedures, policies or practices involved in the submission and issues a report, which may propose changes in procedures, policies or practices related to the substance of the submissions. In addition, any of the three governments in the Agreement may request ministerial consultations on any matter within the scope of the NAALC. The three ministers may agree to exchange information and attempt to settle the dispute raised in the submission. If the issue is not resolved by ministerial consultations, any of the member countries may request the establishment of an Evaluation Committee of Experts. The Committee must report to a council consisting of the three ministers of labor its conclusions on the issue before it and recommendations to assist the three nations in dealing with that issue.

Last year’s report provided information on two of the cases filed under the NAALC: Sony and Sprint. The first two cases filed, that of Honeywell and General Electric, were not mentioned in last year’s report, and the report on the Sprint case was incomplete, as it only considered events through the end of 1995. This section will review the first two cases submitted as well as provide more complete information on the Sprint case. In addition, this section will address two new cases submitted during 1996: the case of the Fisheries Ministry Union in Mexico (SUTSP), and the case of Maxi-Switch, also in Mexico. As of this writing in May 1997, a total of seven cases have been submitted and accepted for review by either the U.S. or the Mexican National Administrative Offices.

The first submission was filed in April 1994 by the International Brotherhood of Teamsters and the United Electrical Workers (UE), alleging violations of the principle of freedom of association by Honeywell and General Electric at separate maquiladoras in northern Mexico. The submissions charged that employees were dismissed for union activity, which is illegal under Mexican labor law. The union involved at both plants was an independent organization, not affiliated with the pro-government CTM (Confederation of Mexican Workers). Honeywell and General Electric denied that the dismissals were due to union activity, but were based on employee misconduct and economic conditions facing the plants. They further pointed out that the former employees had elected to accept severance pay in lieu of pursuing their complaints before Mexican labor authorities.

The US NAO accepted the submissions for review. After consulting with the submitting unions and representatives of the corporations involved in the cases, it commissioned two studies of the treatment of freedom of association and the right to organize in Mexican labor law and administration. It then scheduled a public hearing on September 12, 1994 in Washington, D. C. on the submission and invited "persons wishing to provide information or present their views on matters related to the review" to file statements or testify. Only trade union representatives appeared at the hearing. Honeywell and General Electric did not testify, but did file written statements. Representatives of the Teamsters and the UE described their efforts to prevent the transfer of work from the United States and to collaborate with Mexican unions in the same industry. A former employee from each of the two plants involved in the submission, accompanied by representatives of their union, described their efforts to organize a union there. Four Mexican labor lawyers described tactics used by employers in Mexico to discourage the organization of "independent" unions, i.e., organizations not affiliated with the CTM. Lawyers representing the Teamsters and a staff person from the Ontario Federation of Labour presented recommendations for dealing with the Honeywell dispute and suggested items for ministerial consultations. The two unions reiterated their arguments in post-hearing briefs. Honeywell’s post hearing brief stated that the workers had been laid off because of company efforts to reduce costs. General Electric’s position was that workers were dismissed for violations of work rules. Several were subsequently offered reinstatement, but had elected to accept severance pay instead.

The NAO issued its report in October 1994. The report noted that its purpose was not to determine the veracity of the allegations in the unions’ submissions or the employers’ replies. Rather the purpose of the review was to gather information and publicly report on the Government of Mexico’s enforcement of its labor law. It summarized the substance of the union and employer positions in the two cases and reviewed the application of Mexican law to such disputes. It found that since there is no unemployment insurance program in Mexico, workers discharged from their jobs frequently accept severance pay instead of pursuing other legal remedies. In light of the "dearth of practical knowledge" in the three countries about legislation in the other countries covering freedom of association and the right to organize, the NAO recommended that the countries work together to promote understanding of these matters in their respective labor laws. The report also recommended that greater efforts be made to inform the public about the NAALC and its operation, labor laws in each country and the role of the NAO’s. The report did not recommend ministerial consultations under Article 22 on the grounds that it did not find that the Mexican government had failed to promote compliance with or enforce its legislation covering the two cases. (US Department of Labor, 1994).

The pattern of the first two complaints was varied slightly in the subsequent submission, from the International Labor Rights Fund, the Coalition for Justice in the Maquiladoras, the American Friends Service Committee and the National Association of Democratic Lawyers (from Mexico) against Sony, for alleged violations of freedom of association, also at a maquiladora in northern Mexico. The substance of the submission concerned workers’ efforts to organize a union independent of the dominant CTM. As summarized in the 1996 Committee report, the NAO accepted the submission for review, held a public hearing, gathered information from other sources and issued a report that included a recommendation for ministerial consultations. It also recommended that the three countries in the Agreement work together on union democracy and elections. The NAO also agreed to study cases before the Mexican Federal Conciliation and Arbitration Board involving allegations of unjustified dismissals. In their consultation, the three ministers agreed to conduct examine union registration and certification, and to commission an independent study of labor law on these subjects (Compa 1995).

The first Mexican submission was filed in February 1995 by the Telephone Workers’ Union of the Republic of Mexico, concerning the closing of a telemarketing operation in California owned by the Sprint Corporation. The submission involved a subsidiary of Sprint, La Conexion Familiar (LCF) which marketed Sprint’s long distance services to the Latino community in the United States. The 1996 report discusses the initial stages of this proceeding (Verma et al. 1996). In brief, the Mexican NAO accepted the submission, which involved an effort by the Communications Workers of America (CWA) to organize a group of predominantly Latina workers. One week before an NLRB election in July 1994, Sprint closed the plant, citing business losses. The Mexican NAO reviewed the submission and recommended ministerial consultation on the case in May 1995. US Secretary of Labor Reich agreed to the ministerial consultation, which occurred in July 1995. The result of the consultation was an agreement to address the issues raised in the submission: the US Secretary of Labor would keep the Mexican counterpart informed of legal developments in the case; the Secretariat of the Commission for Labor Cooperation would prepare a study on the effects of sudden plant closing on the principle of freedom of association; and the US Department of Labor would hold a public forum in San Francisco to allow interested parties to express their concerns on the impact of sudden plant closings on the principles of freedom of association and the right of workers to organize.

The format of the public forum, held on February 27, 1996, was similar to the Honeywell/General electric meeting in 1994. Senior representatives of the interested unions and other labour organizations dominated the proceedings. They spoke about the specifics of the organizing campaign and the broader legal principles involved. The only spokesperson for Sprint addressed a technical legal issue. Lawyers and consultants did make presentations on behalf of national employers’ organizations in Canada and Mexico. On the union side, the presidents of the Telephone Workers of the Republic of Mexico and the CWA appeared, as did two former employees from La Conexion Familiar, two officers of the CWA local supporting the organizing campaign there. In addition, an official of the German telecommunications union, the General Secretary of the Postal, Telephone and Telegraph International, the Secretary-Treasurer of the Canadian Labour Congress, and representatives of several community organizations spoke in support of the union submission. Prof. Kate Bronfenbrenner from Cornell University also discussed the results of her research on the impact of plant closures on union organizing in the United States.

Neither the Secretariat’s study on the effect of sudden plant closings nor the US NAO report on the case were available for consideration by the Committee in May 1997. However, we provide a brief summary of the Bronfenbrenner study in a later section.

The CWA had earlier filed unfair labor practice charges against Sprint in July 1994. The union alleged that Sprint violated the NLRA by its tactics prior to the filing of the election petition and that the plant closure was motivated by antiunion animus. In the first stage of the proceeding, an administrative law judge found in August 1995 that Sprint had violated Section 8(a)(1) of the NLRA by interfering with the CWA organizing campaign, but the decision to close La Conexion Familiar was based on economic considerations and did not violate the law. The CWA appealed the initial decision to the NLRB. On December 27, 1996, a three-person panel chaired by Chairman Gould reversed the decision of the administrative law judge.

The Board examined the evidence for an antiunion motive behind Spint’s decision to close La Conexion Familiar. Sprint purchased the operation in January 1994, although it was losing money. The business continued to lose money after Sprint took control. The CWA organizing campaign began in February 1994, and Sprint quickly became aware of the union’s efforts. Management informed supervisors that the parent company would close La Conexion Familiar if a union were certified and asked that the names of union supporters be recorded. Supervisors were told to solicit grievances from employees and to dissuade employees from joining the union. In May 1994, the Sprint board of directors decided to continue the service for another 60 days and then review its performance. Also in May, senior management hired a new president of La Conexion Familiar, effective June 1, 1994. When the CWA filed a petition with the NLRB on June 3, 1994, over 100 of 177 bargaining unit employees wore union T-shirts to work. Senior management was informed that the union would almost surely win representation rights. A vice president for labor relations of Sprint asked an out placement agency in June to provide him with a letter dated the previous April to create a "paper trail" to disguise plans to close La Conexion Familiar. On July 5, the president of the operation learned for the first time that it might close, and the following day the Sprint board of directors voted to close La Conexion Familiar. The directors’ discussion on closing the operation did not mention unionization of its employees.

After reviewing this evidence and the relevant legal principles, the NLRB determined that the decision to close La Conexion Familiar violated Section 8(a)(3) of the NLRA. In addition, it confirmed that the employer had violated Section 8(a)(1) by its other activities. Sprint has appealed the decision to the Court of Appeals, so the litigation is unlikely to end until some time in 1998, at the earliest.

In June 1996 the U.S. NAO received a petition jointly submitted by Human Rights Watch/Americas, the International Labor Rights Fund, and the National Association of Democratic Lawyers (the latter is based in Mexico City). The submission arose from a dispute over the representation of employees of the federal government at the Ministry of the Environment, Natural Resources, and Fisheries (Secretaría de Medio Ambiente, Recursos Naturales y Pesca, SEMARNAP), a new ministry formed in 1994 that merged the former Ministries of Development, Agriculture and Water Resources, and Fisheries. The dispute arose when a new union (SNTSMARNAP) was registered to represent employees of the new ministry. The union representing the 2,300 workers in the Fisheries Ministry, the Single Union of Workers of the Fisheries Ministry (Sindicato Unico de Trabajadores de la Secretaría de Pesca, SUTSP), had applied for a name change to reflect the consolidated ministry. Its request was denied by the Federal Conciliation and Arbitration Tribunal (FCAT) on the grounds that the Fisheries Ministry no longer existed as a legal entity. When the new union was registered in March 1995, the ministry notified the tribunal that two unions were registered to represent employees at the ministry, in violation of the law. The new union then successfully sought de-registration of the SUTSP. Although an appeals court later ordered the tribunal to restore the SUTSP’s registration, the tribunal delayed in notifying the ministry of its decision, precluding the SUTSP from engaging in union representation functions with the ministry. As a result of subsequent appeals of tribunal decisions by the SUTSP, the new union’s registration was withdrawn, and elections were held to determine which union would represent employees of the new ministry. Secret-ballot elections held on October 4, 1996 gave representation rights to the new union, the SNTSMARNAP. Nonetheless, the submission charges that procedural delays and the new ministry’s continued support of the SNTSMARNAP prior to the election gave this union an unfair advantage over the SUTSP.

The submission to the NAO raises issues of freedom of association, procedural guarantees of the NAALC that require the Parties to maintain impartial labor tribunals, and compliance by Mexico with international conventions to which it is a signatory. The petitioners charged that the freedom of association rights of ministry employees were violated by Mexican federal labor law, which stipulates that no more than one union can exist in a government ministry or entity, and which provided that unions in this sector could belong only to one federation, the Federation of Public Service Employees (Federación de Sindicatos de Trabajadores al Servicio del Estado, FSTSE). The submission charges that this law contradicts both the Mexican Constitution, which guarantees freedom of association, and international agreements and conventions on freedom of association to which Mexico is a signatory. Also at issue in the submission was the impartiality of Mexico’s Federal Conciliation and Arbitration Tribunal (FCAT) in the case. Labor representatives on the tribunal were from the FSTSE, a federation formally linked to the ruling Institutional Revolutionary Party (PRI). In contrast, the SUTSP, although affiliated with the FSTSE, had a history of independent action. The submission charges that the labor representatives in this case favored the new union, which was formally backed by the FSTSE.

The petitioners urged the U.S. NAO to move beyond considerations of whether or not Mexico enforced its own legislation to examine the extent to which Mexican law and the composition of the labor tribunals hindered Mexico’s ability to uphold the principles of the NAALC. The submission argued that "the NAALC’s requirement that signatories uphold their labor law cannot be used by Mexico to justify maintaining portions of its labor law that mandate restrictions on freedom of association." In addition, the petitioners argued that the conflict of interest in the FCAT system would continue to limit due process guarantees for federal government workers, placing Mexico in violation of its NAALC obligations. The submission called for the following remedies: 1) public hearings, preferably to be held in Mexico City; 2) that steps be taken to ensure that SUTSP members would enjoy all rights to which they are entitled; 3) that the U.S. NAO engage the Mexican government in a public evaluation of the problems documented in the petition, with the goal of developing an enforceable work plan to end abuses of the registration system; 4) that the Mexican government be engaged in a process designed to eliminate sections in the Law of Federal Employees violating the right to freedom of association, and to abolish limitations on the number of unions and federations allowable in federal government entities; and 5) that Mexico be compelled to meet its treaty obligations under the NAALC to eliminate the conflict of interest inherent in the FCAT system.

The U.S. NAO accepted the submission for review in August 1996. As part of its review the NAO held a public hearing in Washington, D.C., on December 3, 1996. It also commissioned special studies on labor law enforcement in the federal sector in Mexico. In January 1997, the U.S. NAO issued a public report of review. The report describes the facts of the submission and presents additional information provided by the submitters, the Mexican NAO, and legal experts. It also reviews NAALC obligations, relevant Mexican law, government actions, and the composition of the Federal Conciliation and Arbitration Tribunal, as they relate to the case. Additional information considered included a report of the ILO Committee on Freedom of Association on the SUTSP, as well as ILO reports on union registration requirements and trade union monopolies, and decisions taken by the Mexican Supreme Court in the case of public employees in the states of Jalisco and Oaxaca. In the latter two cases, the Supreme Court found state laws restricting the number of unions that could be registered in the public sector to be unconstitutional (the state laws were modeled on federal law).

The U.S. NAO recommended ministerial consultations with the Secretary of Labor of Mexico "for the purpose of examining the relationship between and the effect of international treaties, such as ILO Convention 87, and constitutional provisions on freedom of association on the national labor laws of Mexico." According to the NAO, the recent Mexican Supreme Court decisions, the existence of various legal opinions on the standing of ILO Convention 87 under the Mexican Constitution, together with the ILO’s ongoing review of freedom of association issues and specific provisions of Mexican labor law for federal employees, "raise questions not subject to a clear interpretation by the NAO. Consequently, further consultations could contribute to a better understanding of the legal doctrines at issue." On the petitioners’ charge questioning the impartiality of the government tribunal, the NAO found that, in spite of the appearance of lack of impartiality created by the presence of FSTSE representatives, existing procedures to address allegations of conflict of interest were used in this case. Moreover, the NAO noted that both contending unions were affiliated with the FSTSE, implying that there was not an obvious conflict of interest in this case. Finally, given that the SUTSP received favorable decisions from the appellate courts in three of four appeals, "it does not appear that the final outcome of the union representation case was affected by the composition of the FCAT." The SUTSP did not appeal the election outcome, although it later regained its registration. This marks the only case in the federal sector in which two unions are registered in the same ministry.

In October 1996 the U.S. NAO received a submission from the Communications Workers of America(CWA), the Mexican Telephone Workers’ Union (STRM), and the Federation of Unions of Goods and Services Companies (FESEBS), involving violations of workers' freedom of association in an attempt to form a union at the Maxi-Switch facility in Cananea, Sonora, in northern Mexico. Maxi-Switch, a subsidiary of Taiwan-based Silitek Corporation (its main U.S. office is in Tucson), manufactures keyboards for computers and game sets. In November 1995 workers at the facility tried to register an independent union (affiliated with the FESEBS) with the local arbitration and conciliation board. The union’s registration was denied because the board contended that the company had already signed a contract with a union in the plant.

The case brings up a familiar problem in the Mexican context: the existence of "protection contracts," contract agreements signed between employers and "phantom" unions (often tied to "official" union organizations) in which the workers are frequently unaware that they are represented by a union. Such contracts have been used traditionally in Mexico in order to preempt independent union organizing efforts (although Mexican law does not forbid more than one union at a worksite from obtaining its registration, in practice federal and local boards have often denied registration to independent unions on the grounds that a union already exists at a particular worksite). Protection contracts are common in small and medium businesses and in the maquiladora sector. In this case, the union in place at the Maxi-Switch facility was affiliated with the "official" Confederation of Mexican Workers (CTM). The STRM is a politically independent union that has recently spearheaded a major reform movement among Mexican unions. The FESEBS is an independent labor federation that counts the STRM among its affiliated unions.

The U.S. NAO accepted the submission for review in December 1996. As part of the review, the NAO scheduled a public hearing to be held in Tucson, Arizona on April 18, 1997. Three days before the hearing was to be held, the independent union was granted its registration at the Maxi-Switch plant. (The workers at Maxi-Switch had refiled for registration after the NAALC complaint was submitted). Authorities agreed to hold an election (recuento) to determine which union would gain bargaining rights at the plant. Given this outcome, the three petitioners withdrew their submission with the NAO, and the public hearing was canceled. In the days following these events, Mexican and U.S. unionists stressed the importance of the NAALC complaint in placing pressure on government authorities to register the union. The FESEBS claimed that it would use the leverage provided by this case to expand organization efforts into other parts of the maquiladora sector in an effort to do away with protection contracts in the industry. In the words of Alejandra Barrales, the secretary general of the FESEBS, "We are talking about an important precedent. We have 1 million workers in maquiladora plants along the border, and this could lead to changes as to who has the contracts."

As an outgrowth of the Sprint case, the NAALC was directed by the Labor Ministries of the U.S., Mexico, and Canada to conduct a study "on the effects of the sudden closing of the plant on the principle of freedom of association and the right of workers to organize in the three countries." As part of this study, the Labor Secretariat asked Kate Bronfenbrenner, Director of Labor Education Research at Cornell University’s School of Industrial and Labor Relations, to conduct a study of the effects of plant closing or threat of plant closing on the right of workers to organize in the United States.

Through surveys, personal interviews, documentary evidence, and the use of electronic databases, the Cornell researchers were able to collect detailed data on the extent and nature of plant closings and plant closing threats in more than 500 organizing campaigns and 100 first contract campaigns.

What the study found is that, although Sprint’s behavior at La Conexion Familiar was extreme, it was not an aberration. The majority of private sector employers threaten a full or partial shutdown of their facilities during organizing campaigns, and a significant minority proceed to shut-down the facility after the union wins the election. The findings for the study can be summarized as follows:

• Where employers can credibly threaten to shut down and/or move their operations in response to union activity, they do so in large numbers. Overall, over 50 percent of all employers made threats to close all or part of the plant during the organizing drive. The threat rate is significantly higher, 62 percent, in mobile industries such as manufacturing, transportation, and warehouse/distribution, compared to a 36 percent threat rate in relatively immobile industries such as construction, health care, education, retail, and other services.
• In the 40 percent of the campaigns where the union won the election, 18 percent of employers threatened to close the plant rather than bargain a first contract with the union, and 12 percent of the employers followed through on threats made during the organizing campaign and actually shutdown all or part of the plant before a first contract was reached. Another 3 percent of employers closed down the plant before a second agreement was reached. This 15 percent shutdown rate within two years of the certification election victory is triple the rate found by researchers who examined post-election plant closing rates in the late 1980s, before NAFTA went into effect.

• The study found that not only are threats of plant closing an extremely pervasive part of employer campaigns, they are also very effective. At 33 percent, the election win rate associated with campaigns where the employer made plant closing threats is significantly lower than the 47 percent win rate found in units where no threats occurred.

• Threats of plant closing were found to be unrelated to the financial condition of the company, with threats no less likely to occur in companies in a stable financial condition than those on the edge of bankruptcy. Instead threats seemed to be primarily motivated out of anti-union animus by employers. Over 80 percent of the campaigns where threats occurred also involved aggressive legal and illegal employer behavior such as discharges for union activity, electronic surveillance, illegal unilateral changes in wages or benefits, bribes, promises of improvement, and promotion of union activists out of the unit.

• Not surprising, given that direct unambiguous threats to close the plant in response to union organizing activity are clearly in violation of the law, most of the employers chose to make their threats indirectly and verbally. Still 19 percent of the election campaigns with threats included specific unambiguous written threats ranging from attaching shipping labels to equipment throughout the plant with a Mexican address, to posting maps of North America with an arrow pointing from the current plant site to Mexico, to a letter directly stating the company will have to shut down if the union wins an election. Another 44 percent involved specific and unambiguous verbal threats such as the employer stating clearly in captive audience meetings that, if the employees voted in favor of union representation the plant might shut down, to supervisors telling individual workers that their involvement in the union campaign might mean a loss of jobs for everyone in the workplace.

• In more than 10 percent of the campaigns with threats, the employer directly threatened to move to Mexico if the workers were to organize. In other cases the threat to move to Mexico was less direct, either expressed as "moving South," or that "given NAFTA we may need to reconsider our options."

• The study found that the ripple effect from the plants which actually closed went well beyond the units where the closings occurred. Photographs, newspaper clippings, and video news stories of units which had shutdown during or after an organizing drive were one of the most common means by which other employers expressed a plant closing threat during organizing campaigns in their workplaces.

With Manitoba’s and Quebec’s ratification of the NAALC in January and February 1997, Canada reached the threshold that enables it to participate fully in the NAALC. However, any submissions about Canada may proceed to ministerial consultations or higher levels of treatment only on violations occurring under federal jurisdiction or in the provinces of Alberta, Manitoba, or Quebec, the only three provinces to have ratified the NAALC. Prior to achieving the threshold level of 35 percent coverage of the Canadian labor force, submissions on the U.S. and Mexico could be brought before the Canadian NAO, but these could only proceed to the review stage, and neither the U.S. or Mexico would be obligated to respond or consult with Canada during review. Similarly, before 1997 cases could be brought before the U.S. or Mexican NAOs reagrding alleged violations in Canada, but the Canadian NAO would not be obligated to consult with the US or Mexican NAOs in the event of a review unless it involved a case arising in the federal sector or Alberta. However, no submissions were brought in Canada nor in Mexico and the U.S. alleging violations in Canada during this period.

In 1996 the Alberta Union of Provincial Employees and the Canadian Association of Labor Lawyers announced plans to present a submission under the NAALC to the U.S. NAO protesting the Alberta government’s plans to privatize the oversight and enforcement of its employment standards. Some observers believe that this announcement played a role in the government’s withdrawal of its plans. No case was brought under the NAALC.

In 1996 a bilateral trade agreement was negotiated between the governments of Canada and Chile. Given the delay in admitting Chile to the NAFTA and the debate over fast-track authority in the U.S. Congress, Canada proceeded to negotiate a trade agreement with Chile that would ease Chile’s eventual accession to the NAFTA. With a similar objective Canada and Chile negotiated an Agreement on Labour Cooperation that closely paralleled the NAALC. In fact, the preamble of the agreement explicitly states the desire of the parties "to facilitate the accession of Chile to the North American Agreement on Labor Cooperation." However, there are some differences between the Canada-Chile agreement on labor and the NAALC. The NAALC allows for the possibility of suspension of benefits in the case of a Party’s persistent pattern of failure to enforce domestic legislation concerning child labor, minimum wage, and occupational heath and safety. The Canada-Chile agreement calls only for fines (monetary enforcement assessments) for infractions in these areas. As a final stage in the proceedings the Canada-Chile agreement also calls for national courts to handle disputes. In this case, the Chilean Supreme Court or the court of competent jurisdiction in Canada could order the enforcement of the determination made by the arbitral panel, a mechanism that is missing in the NAALC.

During the 1994 Miami Summit the Clinton administration spoke enthusiastically of extending a free trade area throughout the Americas by the year 2005, beginning with Chile’s accession to NAFTA. Since then, however, the administration has had little success in securing fast-track authority from Congress in order to negotiate trade agreements. One sticking point has been the role that labor and environmental protections will play in future trade negotiations. The Clinton administration has been under pressure from Republicans in Congress to keep trade sanctions from being attached to labor and environmental issues in future agreements. It has also received pressure from the AFL-CIO, which has insisted that labor rights and standards must be part of the core trade agreement and that the provisions must be subject to the same dispute settlement procedures that businesses care about, such as investment and copyright protection. While there have been recent indications that the administration might pursue labor and environmental standards in side agreements, as it did with the NAFTA, the labor movement has indicated that it would not support fast-track under these conditions.

Several options appear to be emerging with regard to the inclusion of labor standards and rights in future trade negotiations in the Hemisphere. One option is the incorporation of labor rights in core trading agreements, with trade sanctions. This "strongest" option is difficult to achieve in the current political climate, however, given the administration’s reliance on moderate Republicans in Congress in order to secure fast-track authority. A second option, which in turn includes a range of possibilities, would be negotiation of side agreements on labor. Among the possible variations on this option are the following: 1) the existing NAALC could be extended to Chile and other countries; 2) the current NAALC could be strengthened in a number of ways, including elimination of the three-tier structure of treatment in favor of enabling all (or more) of the eleven labor principles to receive maximum treatment (fines or suspension of NAFTA benefits); or 3) the Canada-Chile model of the labor agreement could be adopted in lieu of the current NAALC (replacing suspension of benefits with fines and/or resorting to enforcement by domestic courts). A fourth possibility is to negotiate a bilateral trade agreement with Chile in which protection for labor rights and standards are enhanced through a stronger version of the NAALC. This could in turn form the basis for future trade and labor negotiations in the hemisphere and clear the way for a renegotiation and strengthening of the NAALC in North America. Which path the U.S. government will ultimately adopt will depend on the political negotiations between the administration and congress on fast track and the effectiveness of the pressures exerted by other interested parties.

The Agreement on Labor Cooperation emphasizes consultation, training and education to promote high labor standards in the member countries. Although these instruments may seem weak to labor organizations and others concerned with employment standards, none of the three nations in NAFTA was prepared to yield enforcement powers (and part of its national sovereignty) to an international body. Given these constraints, what conclusions are possible about the application of the NAALC in the first three years of its existence?

Since the NAALC went into effect in 1994, a total of seven cases have been submitted. Six of these cases were submitted to the U.S. NAO, one to the Mexican NAO. Two of these cases did not pass beyond the review stage (GE and Honeywell), two were withdrawn after their acceptance by the U.S. NAO (a follow-up to the General Electric case and Maxi-Switch), and three (Sony, Sprint, SUTSP) proceeded to the highest level possible for cases involving freedom of association and protection of the right to organize—ministerial consultations. All of the cases so far have addressed the same principle —freedom of association and protection of the right to organize. No cases have yet been brought that would be eligible to proceed to the level of an evaluation committee of experts or an arbitral panel. The full potential of the NAALC to call attention to labor rights violations in North America therefore remains untested.

The volume of submissions is still relatively low. The lack of submissions may be due to low levels of awareness of the procedures, which are complex in any case. Another explanation is a skepticism in labor circles that the procedures will yield any results. The U.S. labor movement’s wholesale rejection of NAFTA also appears to have affected its willingness to file submissions under the NAALC, with some exceptions. In Mexico, the central labor organizations’ support of NAFTA and of the government’s position made labor there hesitant to support an instrument that would criticize Mexico’s support for labor rights. Nonetheless, independent Mexican labor unions and federations have actively used the NAALC in collaboration with U.S. counterparts. Given important changes underway in Mexico, these independent labor groups are likely to become more prominent within the Mexican labor movement in coming years. This could have important consequences for the way the NAALC is used in the future. Recent shifts in Canada’s New Democratic Party’s position on NAFTA may also increase Canadian unions’ willingness to explore the NAALC’s potential.

In our view, the NAALC has had several positive effects that make it worth exploring further as a mechanism to shed light on labor rights violations in the three countries, to increase understanding of how labor rights and standards are enforced in the continent, and to serve as added leverage for unions and other labor advocacy groups in specific campaigns or reform efforts. First, despite their limited number, the six cases subject to the NAALC procedures have enabled interested parties to examine specific features of Mexican, Canadian and U.S. labor law. A body of materials on these subjects in the three languages of the parties has improved the ability of policy makers to understand labor relations practices and law in the two countries subject to the submissions. In addition to studies generated in the course of the NAO review process, the NAFTA Labor Secretariat’s periodic reports on comparative labor markets and North American labor law provide valuable information for researchers, policy makers, and practitioners in the three countries.

Second, the NAALC procedures have operated quickly compared with the labor tribunals in the U.S. and Mexico. In the Sprint case, for instance, the public forum occurred one year after the CWA submission. This stands in sharp contrast to the 18-month interval between the filing of unfair labor practice charges by the CWA and the "final" decision by the NLRB, a process that will be protracted further by the judicial appeal.

A third significant development is the U.S. NAO’s progressively broader interpretation of its mandate in accepting cases for review and in the terms of the review process itself. Whereas the GE and Honeywell cases involved fairly narrow and technical readings of the NAO’s purview, in subsequent filings (Sony, SUTSP) the NAO acknowledged the need to confer more on the "underlying structure" of aspects of Mexican labor law: particularly the union registration process and the system of labor boards and tribunals. With each submission the review process has tended to broaden from evaluating whether a government effectively enforces its own legislation toward questioning whether the legislation upholds the labor principles in the NAALC. The NAALC’s focus on the effective enforcement of national labor legislation and on persistent patterns of practice rather than on specific company practices, although criticized by labor advocates, forces the parties to examine broader systemic weaknesses of national legislation and enforcement institutions.

Fourth, unions in the U.S. and Mexico which have made submissions have used these procedures to call attention to the difficulties they face in obtaining representation for workers in the two countries. The outcome of the Maxi-Switch case indicates that this form of moral suasion may have had an effect. The SUTSP case called attention to a possible constitutional flaw in Mexican legislation regulating public sector labor relations. International agreements on labor and social matters depend heavily on the judgments of impartial bodies to influence public opinion. The unions who have participated in the public forums have displayed a sense of the value of these proceedings. At the San Francisco forum on Sprint, for instance, senior union officials from the three NAFTA countries, plus Germany and the international union body for telecommunications unions participated, as did a staff person for members of the U.S. House of Representatives. The forums presented platforms for labor officials and former employees to express their concerns about the operation of legislation in the U.S. and Mexico and the impact of employer actions on their lives in a more public way than is normally possible through domestic administrative procedures. The complaint procedures also provided opportunities for unions to collaborate across borders with each other and with advocacy groups outside of the labor movement.

Finally, the positive effects of the publicity generated by NAALC submissions and review processes —the "sunshine" factor— should not be underestimated. In Alberta the threat of filing a NAALC case headed off the provincial government’s proposed reform, while in Mexico the NAALC filing and imminent hearing on the Maxi-Switch case helped secure the registration of an independent union in an important sector. Similarly, the Sprint case helped the CWA to draw international attention to the company’s anti-union activities. The case also led to the first trinational comparative study on the effect of plant closings and the threat of plant closings on workers’ right to organize, a document which could conceivably prove useful in U.S. unions’ efforts to strengthen labor law protections during organizing campaigns. Finally, by raising questions regarding the way freedom of association is upheld by Mexican legislation, the SUTSP case adds to the debate in that country over the shape of future labor law reform. In both the SUTSP and Sprint cases, the NAALC has provided a separate authority and a distinct review process that have resulted in raising similar concerns as such venues as the NLRB, the ILO, and Mexican Supreme Court. The cumulative effect of several independent cases pointing in a similar direction may grant greater legitimacy and leverage to those parties pushing for changes in their domestic labor legislation.

The issue of protection of labor rights in the context of trade liberalization appears to be growing in importance. The debate over the inclusion of core labor protections in the World Trade Organization system is one example. Expansion of NAFTA to include Chile or other

countries would provide an opportunity for strengthening the current NAALC, for example by suspension of benefits to firms or sectors that violate the labor principles. The three signatory countries to the NAFTA agreement strongly support the Agreement, including the government of Canada, which attacked the treaty when it was in opposition. Parties who oppose the side agreements on the grounds that they are too weak face the risk of losing the opportunity to influence protection of labor rights in future trade agreements. While pursuit of a "best" option of labor rights in core trade agreements with sanctions may be important, it is valuable to recall that a "second best" option of labor side agreements is better than no labor protection at all. The NAALC benefits labor, and interested parties should utilize the procedures it contains while seeking opportunities to improve it.

Since the passage of NAFTA, a number of unions including UNITE, have waged a public relations campaign against makers of consumer products such as apparel, shoes and toys. In 1996, UNITE held press conferences in several U.S. and Canadian cities to let workers from sweatshops in low wage countries speak directly to the press. These workers documented cases of long hours, child labor, low pay and unsafe working conditions among other alleged abuses. The reaction from the firms has been to agree to "talk" to set up general guidelines without admitting to any wrongdoing or abusive labor practices. In two instances, firms have also agreed to let an "independent" assessor monitor labor conditions.

In one well publicized case, Nike, the U.S.-based manufacturer of shoes, has hired Andrew Young who has served as Mayor of Atlanta and U.S. ambassador to the U.N., to audit labor practices throughout its international operations. Responding to criticisms by labor and human rights groups, Nike claims to have updated its code governing working conditions at all its plants world-wide. The critics see this as a public relations exercise rather than as a substantive framework for labor protection. Young’s report will be made to Nike which has not agreed to making the report fully public.

In another instance in the apparel industry, the U.S. Department of Labor under the orders of its outgoing chief, Robert Reich, set up a taskforce consisting of leading firms, labor and consumer groups in July 1996, to develop a code that would help firms ensure that their products are not made under abusive or exploitative conditions. The taskforce includes firms such as Nike, Reebok, Liz Claiborne, and L.L. Bean among others. Unions such as UNITE, consumer groups like the National Consumers League and celebrity talk show host Kathie Lee Gifford whose designer-label line of clothes are sold by Wal-mart stores are also members of the taskforce. The taskforce had reportedly reached an agreement by April 1997 on a code after an intense debate. However, there is no agreement yet on how best to implement the accord and monitor compliance, a task that is likely to occupy the taskforce well into the second half of 1997.

Employers swear to abide by the code and it is likely that compliant firms may develop a label such as "No Sweat" to inform the consumer that their product was made under fair labor conditions. While the agreement itself is a "breakthrough", tough hurdles on compliance and monitoring need to be overcome. For example, the employers would like to assign the monitoring task to accounting firms which specialize in audit procedures. Labor groups fear that accounting firms would invariably adopt a pro-business stance. They would like to assign the task to human rights groups. Even if some compromise can be reached on this issue, the parties will also have to deal with the penalties that must be imposed on the non-compliant. Will non-compliance in one factory on one item of the code render the entire firm non-compliant or only products made in that plant? Considering that there was not even a dialogue among the parties on this issue two years ago, it would seem that there is slow but inevitable progress in this case in protecting labor rights under conditions of free trade. Yet, there is no doubt that these are tentative first few steps in a process that is bound to keep unfolding well into the next century. If these efforts are successful, it may point to a model of industry-self-regulation that could complement formal treaties and dispute resolution procedures.

The cover page of a recent edition of the Canadian edition of Time magazine (April 28, 1997) had a picture of a superhero named Captain Export, and the caption read "Canada is the new superhero of global trade." The article then went on to document Canada's recent meteoric rise in the trade arena (p. 36): "In 1987 exports accounted for about 25% of the country's gross domestic product. Today the comparable figure has passed 40% and is still climbing, and the GDP is growing at a rate higher than that of virtually any other major nation. Canada is the most trade intensive country in the G-7 group of industrial nations. Overall exports have doubled since 1989 ... One in 3 Canadian jobs is now devoted to producing goods and services for sale beyond the countries borders ... In the manufacturing sector alone, 60% of output is sold outside Canada, up from just 30% in 1988."

The article then goes on to say (p.37): "[T]he legacy of the 1989 U.S.-Canada Free Trade Agreement (FTA) and of NAFTA is hard to overestimate. The pain that accompanied the lowering of barriers -- as many as 8,000 Canadian factories and other facilities were shut down in the first three years -- has given way to a dramatic intensification of trade with the U.S. and an associated burst of direct foreign investment. A broad spectrum of economists agree that the lower tariff barriers alone are responsible for at least half of the decade's export boom."

The article goes on to describe the restructuring that has been associated with this economic transformation. Former protected sectors like clothing have emerged as "export powerhouses." Declining cities like Winnipeg and its surrounding region have re-oriented from an East-West orientation (where they exported natural resources and agricultural products and imported manufactured goods) to being a manufacturing exporter with a North-South orientation, as part of the "NAFTA inner superhighway" stretching from Winnipeg through Chicago to Mexico. Sectors like autos have restructured with world-product mandates for the global market. Canadian corporations like Northern Telecom and Bombardier have emerged as transnational megacorporations.

These examples are meant to be illustrative of the dramatic restructuring that is occurring as a result of trade liberalization such as NAFTA. Since the demand for labour is derived from the demand for the goods and services produced in product markets, then this product market restructuring is obviously giving rise to pressures for labour market restructuring (Gunderson, 1997a). This is true for both external labor markets (with their associated outcomes of real wages, wage inequality and unemployment), as well as the internal labour markets of firms (with their associated workplace and human resource practices). In the "old economic order" these internal and external labour markets were influenced by each other, but were largely driven by domestic issues including monetary and fiscal policy. In the "new economic order" they are driven by global imperatives -- as Richard Freeman (1995, p. 15) rhetorically asked: "Are your wages set in Beijing?"

In that vein, the debate over the pros and cons of free trade agreements like NAFTA has often centred on whether the long-term benefits of lower consumer product prices and more consumer choice, outweigh the (hopefully) short-term adjustment consequences that often fall on labour in such forms as job loss, unemployment, stagnant real wages and increased wage inequality. The negative aspects of the adjustment consequences falling on labour are highlighted when they are juxtaposed to some of the positive adjustment consequences that are emanating from the restructuring, such as executive salaries and phenomenal stock market returns. It is well-known that the gains from trade liberalization provide the potential to compensate the losers and to leave everyone better off. It is equally well-known, however, that such actual compensation seldom occurs in practice. Hence, there are gainers and losers, resulting in the predictable acrimony when such redistribution occurs from policy changes.

The distributional consequences are compounded by the fact that domestic governments increasingly find their hands tied in using domestic policies to assist the disadvantaged, unless such policies have positive feedback effects on efficiency (Gunderson, 1997b). This is so because governments increasingly have to compete for the business investment and jobs associated with that investment. Capital is now more mobile, and can locate in the countries with low labour costs and labour standards, exporting back into the high-cost countries now that tariffs are reduced. In such circumstances, governments will be under pressure to reduce their costly labour regulations and standards as well as adjustment assistance policies. Under NAFTA, the question may be: "Are your wages, including wages in other parts of Mexico, set in the maquiladoras?"

Such inter-jurisdictional competition -- "open for business" -- need not be all negative. It can dissipate inefficient government programs as well as policies that simply protect the "economic rents" of privileged groups. Regulatory policies and adjustment programs that enhance the efficient operation of markets should survive, and indeed thrive. The problem is that pure equity oriented programs that do not enhance the efficient functioning of markets are at risk under global competition, even if they serve a broad social purpose.

In conventional nation states, those distributional issues were often handled by central governments. Within such nation states, some agreement could usually be arrived at through the democratic political process, especially because the losers from adjustment consequences were also voters (Langille, 1996). Under the new global ordering, international institutions have generally not arisen to supplant those that are rendered powerless by globalization. The NAFTA side-accord is a move in this direction, and the ILO is endeavouring to expand its influence in the area of international core labour standards. Nevertheless, the power base and enforcement mechanisms of such institutions are such that they do not fill the vacuum vacated by the reduced power of governments in the former nation states. Whether this is good or bad depends to a large degree on one's view of the role of governments and institutions versus market forces.

The issue is particularly relevant given the adjustment consequences that are emanating from trade liberalization and other inter-related pressures that are having similar effects. While it is virtually impossible to disentangle the separate and independent effect of NAFTA from the myriad of other inter-related effects, the general effects can be summarized as follows:

• The impact of NAFTA is likely to be small relative to the effect of the myriad of other changes that are occurring, especially technological change.
• While the overall impact is likely to be small, the impact in particular sectors affected by trade liberalization can be more substantial. As expected, wages and employment are reduced in sectors subject to greater import competition and they are increased in sectors experiencing export growth. This highlights the importance of adjustment policies to facilitate the re-allocation of labour from declining (e.g., import impacted) sectors to expanding (e.g., export led) sectors.
• Trade liberalization and international competition have likely contributed to the growing wage inequality that has occurred in Canada and especially the United States, although agreement is emerging that the impact of skill-biased technological change is more important. Displaced workers who lose their jobs for such reasons, tend to experience substantial wage loss, often in the neighbourhood of 20 - 30%. Trade liberalization also has likely reduced the union-nonunion wage differential since employers have a greater threat of locating "offshore" if union premiums are too high.

In the longer run, more positive real wage and employment effects from free trade agreements like NAFTA should emerge after the industrial restructuring has occurred and price levels have been reduced because of the greater competition and exploitation of economies of scale associated with the larger global market.

These conclusions are generally in line with those given in last year's report of the IRRA NAFTA committee; that is, the passage of one more year has not necessitated a revision of those conclusions. The only slight change may be that there may be more agreement that trade is less important than technological change in contributing to the rising wage inequality, and that the longer-run regional restructuring towards a more North-South basis is likely to be more important. As well, the longer run indirect effects on labour laws and regulations are also likely to increase in importance. This later area is the one that merits more of a "NAFTA watch."