Guatemala Labor Dispute May Hamstring Apparel Trade, Says Industry Group
The U.S. apparel industry may be forced to cope with a decrease in apparel exports from Guatemala if the Office of the U.S. Trade Representative determines the country is continuing to violate labor provisions in the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR), said Nate Herman, vice president of international trade at the American Apparel and Footwear Association, in an Aug. 27 interview. USTR on Aug. 25 chose to provide Guatemala at least four more weeks before the U.S. will reactivate the dispute settlement process (see 14082602). Once USTR reactivates the settlement process, the U.S. is then able to impose sanctions on Guatemala at any time, said Herman.
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USTR says CAFTA permits a fine of up to $15 million per year, per occurrence for a country’s failure to enforce its labor laws, and the U.S. has sole discretion in how to use the funds to ensure enforcement of the laws (here). If the country does not provide the funds, the U.S. is then able to impose trade sanctions, including revocation of CAFTA preferences equal to the $15 million fine, according to USTR and Herman. Guatemalan exports to the U.S. have increased by one-third since CAFTA took effect, with knit apparel, woven apparel and agricultural products representing the largest U.S. import categories (here). The USTR did not comment.
The apparel industry is concerned that U.S. sanctions on Guatemala would disrupt trade relations with the country, an important apparel partner, said Herman, adding that AAFA is dedicated to ensuring Guatemala brings its labor conditions into CAFTA compliance. “The settlement panel essentially already found Guatemala to be in violation of the labor provisions in CAFTA,” said Herman. “The Guatemalans are balking at some of the things the U.S. is asking for, although the U.S. has not made public its demands. Obviously negotiations are still ongoing, and there’s a belief at USTR that they’ll know in three and a half weeks if they’ll have to pull out of the negotiations or make a new deal with the Guatemalans.” The U.S. could also suspend the process again, although that's unlikely, said Herman, noting that this is uncharted territory considering no labor dispute has progressed this far under CAFTA.
Not all members of the apparel sector, however, are alarmed at the prospect of reactivation in the labor settlement process. The labor grievances are not significant in the Guatemalan apparel sector, and therefore likely would not be subject to sanctions, said Samantha Sault, spokeswoman for the U.S. Fashion Industry Association. “We’re not particularly worried that the sanctions that U.S. could impose would impact our members,” said Sault. “We’ve heard informally from USTR that the concerns don’t impact the apparel trade.”
Meanwhile, the AFL-CIO urged in recent days U.S. and Guatemalan officials to resume dispute settlement in a Guatemala labor case administered through the CAFTA-DR, saying the country has failed to bring its labor standards into compliance with CAFTA principles (here). However, AFL-CIO officials say the Labor Action Plan (LAP), brokered in 2013, has brought minimal and insignificant changes to labor conditions in Guatemala. “Workers continue to be harassed for demanding their rights under the law, fired for joining unions, and murdered for daring to organize a union or demand collective bargaining,” said the statement. “Since the implementation of the LAP, Guatemala has been named the most dangerous country for freedom of association, as well as the deadliest country for trade unionists.”
House Ways and Means ranking member Sandy Levin, D-Mich., echoed that call and concern. “If Guatemala continues to shirk the long overdue implementation of its commitments, I look forward to working with the Administration to pursue arbitration in this case,” said Levin (here). -- Brian Dabbs