Alliance for Responsible Trade

This version of this chapter reflects significant advances in talks held within the Hemispheric Social Alliance, but it is an issue that requires further discussions to deepen and enrich our positions, which will continue to be carried out over the next few months.

Background

The progressive principles proposed in this document present a comprehensive vision for just and sustainable development leading to a society founded on respect for human rights and recognition of the need to live in harmony with the environment. The vision presented stands in stark contrast to the reality of the social conditions created by the neoliberal model of development, with its focus on macroeconomic indicators as a proxy for quality of life.

There are many challenges on the road to implementing the vision we share for a better economic system. The preceding chapters of this document represent the accomplishment of one of the major tasks - reaching agreement on the substantive social standards among the many diverse groups from the many countries and cultures represented. These discussions began formally at the civil-society meetings held in Belo Horizonte, Brazil in 1997 and continued to the present in a process of consensus building to reach agreement on standards. To make these standards meaningful, it is necessary to take the next major step and develop effective mechanisms for enforcement.

We must acknowledge at the outset the particular challenge of developing agreement on an enforcement process. It is relatively easy to reach agreement on a concept of substantive rights. In the abstract, people from widely divergent economic and cultural backgrounds can agree, for example, that all workers should be paid a living wage. But adding the issue of enforcement to the mix raises the important question of "enforcement at whose expense?" During the numerous group discussions that led to the creation of this document, it was the issue of enforcement that brought out sentiments of nationalism, regional factions, and concerns about protectionism. The proposal for a living wage in the context of an enforcement process can variously be interpreted to be a plan to force low-wage countries to lose their comparative advantage of cheap labor, a protectionist ploy by high wage countries to curb job losses to low wage countries, or an unrealistic economic theory that will destroy "natural" wage differentials set by the free market.

To make progress on the enforcement issue required a particularly careful process of consensus building. The proposals herein reflect an emerging consensus, and also the recognition of the need for further work in these areas. Thus, this proposal is not a detailed regulation ready to be implemented. Rather, it creates a framework of general principles that must be refined and adapted to a specific context. The assumption is that the enforcement provisions would be included in a future trade agreement, along with the proposed substantive standards.

Guiding Principles

Four bedrock principles have emerged in the discussion of enforcement provisions.

1. Social standards should not be grafted onto a trade agreement as a parallel or side agreement. To be clear about the conceptual change that we are promoting, whatever social standards that are to be addressed must form the core of any future trade agreements. Improving social standards should be the paramount goal of trade and other commercial exchanges, not an eventual side effect.

2. Affirmative enforcement of the standards should be viewed as an unusual and extreme occurrence. The system should create sufficient incentives to encourage compliance so that outside enforcement can be avoided. The norm should be that national processes will be used to uphold the fundamental rights protected by the social standard.

3. If there is a specific violation of a social standard, the primary emphasis on enforcement should shift from government entities to the companies that are failing to comply with the laws. Governments are implicated if they have failed to adequately enforce their own laws, which is a distinct problem that can be dealt with separately from the question of who is responsible for the active violation of rights.

4. In cases where an enforcement process must be initiated, the process must be public and transparent. This is to ensure that the enforcement process is not misused.

These principles stand in stark contrast to the dispute resolution proposals in the draft FTAA text. Rather than seeking to address the broad range of issues implicit in economic integration, the FTAA would include remedies only for commercial disputes. The process proposed in the new accord, like that in NAFTA, would be undemocratic and secretive. Not only are affected parties from civil society not provided standing in these disputes, the FTAA would not even require that the deliberations or decisions around trade disputes be made public.

Components of the Enforcement Mechanism

A. Preliminary Assessment of Compliance with the Social Standard Guiding Principles

Objective information must be gathered to determine whether a specific country is in compliance with the social standard. The purpose of this assessment is not to assess penalties, but to make an appraisal of what would be needed in the way of resources, law reform and other changes to bring each country into compliance.

Specific Objectives

1. Objective measures for each of the dimensions of the social standard must be developed. For example, with respect to labor rights, International Labor Organization (ILO) Conventions and Recommendations define the basic rights with some precision. Further, national laws enacted to implement the specific labor rights exist in most countries. The more difficult task will be to find objective measures of the other, less developed aspects of the social standard.

2. The information gathering must be transparent and involve the civil society partners who have an interest in a specific aspect of the social standard. For example, a report on environmental compliance should include input from communities that have been adversely affected by pollution.

3. In many cases there will not be a representative group that can speak for a specific community. A positive by-product of this process will be to encourage the development of representational bodies to speak for various sectors of society. The development of these groups will be facilitated by the prospect that their voices are important and will have an impact.

4. Respect for the rule of law and the democratic process will be facilitated by a transparent process that begins to make the existing power structure accountable to those segments of society that have been affected by the status quo. Simply initiating a "truth-telling" process can be a cathartic experience that is the first step to positive change.

5. The report developed as a result of this process must involve neutral experts as well as civilsociety partners from sectors in a specific country that have an interest in the issues to be addressed. In cases involving labor rights, that body would be convened by the International Labor Organization (ILO), as described in the chapter in this document on labor rights. Such international bodies on relevant issues, particularly those linked to the United Nations, should be used as a source for neutral experts whenever possible. In cases where no appropriate UN body exists, the intergovernmental authority that oversees the particular trade agreement would have the authority to convene a panel of experts to conduct the initial assessment with a mandate consistent with the objectives discussed above.

6. The resulting report should serve as an initial assessment, with a specific timetable for commitments for each country involved to cure any failure to comply with the social standards identified in the assessment.

B. Development of a Specific Action Plan to Achieve Compliance with the Social Standard Guiding Principles

As a result of the audit process, a specific action plan will be developed that is designed to bring the subject country into compliance with the social standards within a specific time frame. This approach must emphasize that the goal is to encourage compliance and harmonize upward the social conditions in a given country.

Specific Objectives

1. The fear of being held hostage to an outside standard must be dealt with by a clear demonstration that the goal is to work with a specific country to achieve compliance using a reasonable plan designed to reflect the country's unique situation. There are many precedents for such a report. For example, the Committee on Economic, Social and Cultural Rights solicits reports and hold hearings every five years on compliance by countries that have signed the International Covenant on Economic, Social and Cultural Rights. This committee has solicited parallel reports from civil society within the countries under review. Our approach would be to make preparation of the report a transparent process with wide participation from social sectors to achieve consensus and coordination.

2. The plan should identify specific national laws that need to be better enforced and propose areas where new laws would be necessary. This is a major element in a culture of clear, transparent processes. There will be no mystery of what is needed to comply, which should help to eradicate the fear that the enforcement process will be misused for improper purposes.

3. Most important, the action plan will include projected total costs to bring the country into compliance and propose funding sources, including foreign assistance, debt reduction and tariff incentives to finance the compliance effort.

4. Ongoing, objective monitoring must be provided to assess compliance with the specific timetables set by the action plan. This is crucial to begin the process with a clear understanding that this is a serious effort to bring concrete improvement in compliance with the social standards. It also attempts to preclude the need for specific enforcement actions after the time for compliance has passed by making clear that enforcement is not the goal; compliance is. The monitoring will also assess whether there needs to be changes in the action plan due to any significant change in circumstances. Countries should continue to receive benefits under the relevant trade agreement as long as the compliance effort remains on the schedule provided by the action plan. Monitoring of compliance will be conducted by the same groups that prepared the initial assessments of compliance with heavy reliance on civil society monitors.

C. Integrating Companies into the Compliance Process Guiding Principles:

A significant aspect of the enforcement process is getting private parties, particularly multinational companies, to comply with the social standards. Many of the social standards depend upon private compliance with national laws, but multinational companies often exercise undue influence at a national level based on implicit threats to relocate to avoid regulation. While a key part of achieving compliance at the national level is to have better enforcement of national laws, this process should be supplemented by creating a legal obligation for companies to comply with the social standards within the area of a trade agreement to remove the incentive to play one country off another.

Specific Objectives:

1. As an initial step, social audits should be conducted of companies that are operating in two or more countries within the area of the trade agreement. This will identify key problem areas and also increase public awareness of violations.

2. In order for a company that exports within the area of the trade agreement to obtain the tariff benefits of the trade agreement, the company must make a specific, legally binding commitment to observe the social standards.

Ongoing monitoring must be done to keep information current and to verify whether the companies are honoring their commitment to comply with the social standards. This monitoring should be carried out by independent local organizations that are certified to be qualified to conduct the company audits. The monitors must not have any financial relationship with the companies being audited.

D. Penalties for Failing to Comply with the Social Standards. Guiding Principles

A critical aspect of the process of enforcement and the imposition of penalties for non-compliance is to institute a democratic and open process that yields predictable and consistent results. Use of the enforcement mechanism should be rare if the rest of the steps to facilitate compliance are utilized.

Specific Objectives

1. Initial enforcement should normally utilize national laws and processes, which will be improved through following the assessment and implementation of the action plan. National processes need not be exhausted in those cases where there is no applicable national social standard, there is a demonstration that national processes will result in undue delay and irreparable harm, or there is a record of pervasive non-enforcement of the specific right at issue.

2. The trade agreement must provide for some tribunal to resolve disputes. The tribunals convened to adjudicate disputes relating to enforcement should include a balance of experts in the area of the rights disputes, as well as representatives of the affected sectors. The ILO's tripartite committee, with representatives of government, business and labor, provides one example of how this might be accomplished. There should also be provisions to make enforcement proceedings fully transparent with a written public record of all proceedings and open hearings. There also needs to be a clear appeals process. Also this agreement must give standing to all stakeholders for participation in the process. Governments (including local governments), labor organizations, NGOs and all persons negatively impacted by a rights violation should have standing to bring complaints.

3. The tribunal should be empowered to issue binding orders to achieve compliance with the substantive social standards agreement to by the country and/or private entity that is the subject of the complaint.

4. Penalties for non-compliance should be available to be imposed on governments and/or private entities that caused the violation, as appropriate to the situation. Prior to the imposition of any proceedings to impose a penalty, adequate notice should be given to provide opportunity for response and/or compliance. The penalties should focus on correcting the violation and should be limited to withholding benefits under any trade agreement until compliance is achieved.

Key Issues for Further Discussion

The issues of enforcement and compliance are difficult and controversial, as they involve very real differences in power among the actors involved, both among governments and between corporate actors and people affected by their actions. This chapter, as the others in this document, is a work in progress that will continue to evolve to reflect the contributions and deliberations of civil-society organizations and social movements throughout the Americas.