Schwab Certifies Peru FTA Despite Labor Complaints From Key Democrats

Artículo publicado en Inside US Trade el 23 de enero de 2009

Former U.S. Trade Representative Susan Schwab on her last day in office (Jan. 16) announced that Peru has met all obligations of its bilateral free trade agreement with the United States and that the FTA would therefore enter into force on Feb. 1, even as top House Democrats said that Peru has fallen short of its labor rights obligations.

In addition, U.S. and Peruvian non-government sources charge that Peru has also failed to live up to all its environmental obligations.

The objections to the implementation of the labor provisions raised by House Ways and Means Committee Chairman Charles Rangel (D-NY) and trade subcommittee Chairman Sander Levin (D-MI) led to a contentious meeting with Schwab before she formally announced on Jan. 16 that the FTA would enter into force, according to sources.

The trade agreement with Peru will be the 14th and final FTA to enter into force under the Bush administration.

Ways and Means Democrats are likely to pursue a dialog with Peru on the labor issue, a dialog which as a practical matter is likely to take place after the Feb. 1 implementation date, according to a congressional aide.

The source said there is “utility in such dialogue” and that nobody is looking to go “immediately” to dispute settlement, particularly since Peru has signaled an openness to such talks. Dispute settlement is not being explored at this time, the source said.

A Jan. 16 statement by Rangel and Levin criticizes Schwab for going forward with the certification but only allude to the possibility of dispute settlement. “We are confident that the Obama Administration will improve enforcement of trade agreements, including the use of the dispute settlement mechanism in the Peru and other FTAs,” they said.

The statement said the Peruvian congress has passed labor laws inconsistent with the labor obligations of the FTA as laid out in a May 10, 2007, agreement between the Bush administration and House Democrats. Rangel and Levin said they had urged Schwab to resolve these issues prior to her implementation certification.

Generally, Article 17.2.1 of the FTA obligates both the U.S. and Peru to maintain laws consistent with the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, including freedom of association, recognition of the right to collective bargaining and the elimination of employment discrimination.

To establish a violation of an obligation under this chapter, the complaining party has to demonstrate that the other party has failed “to adopt or maintain a statute, regulation, or practice in a manner affecting trade or investment between the Parties.”

In a Jan. 15 letter to Schwab, Rangel and Levin wrote that Peru has failed to put in place the laws and regulations necessary to meet those obligations. “This includes the obligation under Article 17.2.1 of the Agreement to adopt in law and practice the fundamental labor rights, including freedom of association and the right to collective bargaining,” the letter said.

Specifically, Rangel and Levin wrote that Peru had not altered its legal framework to ensure that subcontractors, or outsourcing firms, are legitimate employers, not simply companies without material resources created to help firms avoid union organizing.

In her written response on Jan. 15, Schwab said Peru’s law expressly states that use of outsourcing to undermine labor rights is prohibited. “Accordingly, use of outsourcing to harm labor rights would be contrary to, and actionable under, Peruvian law, as well as enforceable under the labor provisions of Chapter 17 once the Agreement enters into force,” Schwab wrote.

Schwab insisted that USTR has “worked closely with the Government of Peru to ensure that the obligations and responsibilities of each party have been met under this Agreement.”

Rangel and Levin also flagged problems over laws adopted in Peru in 2008 which allow companies to avoid union organizing “by creating a vague exception that applies whenever Peru’s labor department deems it ‘reasonable’ to do so,” according to the Jan. 14 letter.

The Labor Department’s Office of Trade and Labor Affairs could, at any time, request consultations on any matter under the labor chapter, including the obligations of 17.2.1. The Obama administration could do this on its own initiative, but the U.S. government in the past has typically acted in response to a petition from non-governmental groups asking redress for an alleged violation, according to a union source.

If the Labor Department accepts a petition, it can recommend consultations. The NGO petitions are sometimes backed by members of Congress, such as the petition by the AFL-CIO and Guatemalan unions to review Guatemalan labor violations under the Central America Free Trade Agreement. Levin supported that petition, a House aide said.

At this point, informed sources said they were not aware of any labor groups or NGOs planning to file petitions challenging Peru’s labor laws.

U.S. unions had unsuccessfully demanded other changes in Peru’s labor laws beyond what Rangel and Levin had requested, including a Peruvian law which allows companies to hire worker under temporary, fixed-term contracts. Such an arrangement makes it difficult for workers to form unions.

Another law opposed by unions makes Peru’s Labor Ministry responsible for declaring the legality of strikes, not an independent body as stipulated under ILO obligations.

A dozen Peruvian civil society groups claimed the legislative decrees used to implement the FTA do not improve environmental and labor standards as agreed in the FTA, according to an informal translation of a Jan. 18 statement.

The groups claim that the Peruvian government has also not moved forward with a proposed “internal agenda” to assist groups in Peru, such as indigenous populations, to adjust to the impacts of the FTA. The groups argue that the legislative decrees should be revisited by the Peruvian government, the internal agenda should be developed and a system should be put in place to monitor the impacts of the FTA.

The biggest concern raised by environmentalists is with changes to Peru’s forestry law that would have removed protections for as much as 60 percent of Peruvian lands now defined as forests. Peru’s congress modified those changes last week, but environmentalists remain concerned that Peruvian forests will still not be adequately protected, sources said.

According to one environmentalist the new law contains “a new loophole for deforestation.” He said that the law allows cutting and clearing of forest lands currently protected under the so-called “National Forest Patrimony” if the Peruvian government declares that doing so would be in the “national interest.”

Already the installation of cane, bamboo, pine and castor bean plantations have been determined to be in the “national interest” as part of an effort to boost biofuel production, according to sources. This means that previously protected forest lands could be cleared for cultivation of these crops, a severe departure from Peru’s previous forestry law.

That law said forests defined under the “National Forest Patrimony” cannot be used for “agricultural or other activities that affect the vegetative cover, sustainable use, or conservation of the forest resource,” according to a translation of the law.

Additionally, environmentalists are concerned over a new law that would delay sanctions for the trafficking of products from Peru’s forests, including logs and wildlife, one source said. The changes to the forestry law also include the elimination of the National Forest Policy Consultative Committee, which environmentalists fear will limit public participation in government decisions regarding the forestry sector.

The changes also eliminate the requirement for “Environment Impact Studies” in forestry management plans. Such plans can now be approved with much less stringent “Declarations of Environmental Impact.”

The environmental source said these changes approved by Peru’s congress “raise serious doubts about whether they fulfill or are contrary to Peru’s commitments with the [FTA], as well as their potential to result in significant environmental harm, including to Peru’s forests.”

“Instead of strengthening the forest sector, this has generated great uncertainty for all those with a stake in it,” the source said.