Treating the Exploitation and Abuse of Workers as an Unfair Trade Practice

News & Insights
Nov 19, 2018

Earlier this month, President Trump issued a letter to Congress expressing the administration’s intent to revoke Mauritania’s beneficiary status for a trade preference program established under the African Growth and Opportunity Act (“AGOA”), due to Mauritania’s failure to make sufficient progress in protecting internationally recognized workers’ rights.

AGOA, first enacted in 2000 and currently in effect until 2025, was designed to stimulate economic growth in sub-Saharan African countries and promote their integration into the global economy. Its structure largely mirrors that of the Generalized System of Preferences (“GSP”), which is a broader trade preference program that covers approximately 120 developing countries. Both programs provide duty-free access to thousands of goods from the beneficiary countries. Eligibility for AGOA and/or GSP is contingent on the country’s compliance with a number of statutory criteria.

Particularly, both programs require beneficiary countries to “make continual progress toward” or “take steps to” afford internationally recognized worker rights, including the prohibition on forced labor and the worst forms of child labor. Enforcement of the labor-related eligibility criteria had traditionally been minimal, sporadic, and inconsistent. Before the Trump administration, Bangladesh was the only country that saw its GSP benefits revoked in the past decade.

Mauritania’s eligibility for these trade preference programs has been in contention for a number of years due to its poor labor rights records. The country lost its beneficiary status under GSP in 1994, and regained it in 1999 after it conducted some labor law reforms. In August 2017, the AFL-CIO filed a petition urging the U.S. government to terminate Mauritania’s AGOA status because of forced labor concerns. During the USTR’s recent review of country eligibility under AGOA, the AFL-CIO submitted both pre-hearing and post-hearing written submissions maintaining its position that AGOA benefits for Mauritania were inappropriate given pervasive labor abuse. In his recent letter to Congress, President Trump explained: “Mauritania has made insufficient progress toward combating forced labor, specifically, the scourge of hereditary slavery. Despite intensive engagement with the United States, the Government of Mauritania has failed to meet critical required benchmarks to address these issues to date.” Mauritania’s AGOA status is set to be terminated on January 1, 2019.

On its own, Mauritania’s loss of AGOA status has minimal impact on the U.S. market as the only significant product imported from the country that benefitted from AGOA was petroleum, of which the United States imported a total of over $400 million between 2010 and 2017. However, no petroleum has been imported from Mauritania in 2018 and the $10.5 million in goods imported into the United States from Mauritania this year would be unaffected by the loss of AGOA status, as these product lines are already exempt from tariffs.

Nevertheless, for importers of Mauritanian goods, the consequences of the country losing its AGOA status may extend beyond the obligation to pay tariffs on Mauritanian products to the United States. In its 2018 List of Goods Produced by Child Labor or Forced Labor, the U.S. Department of Labor lists cattle and goats as goods produced through child labor. In its Trafficking in Persons Report for 2018, the U.S. Department of State categorizes Mauritania as a Tier 3 country and, as such, potentially subject to restrictions on U.S. assistance. Under Section 307 of the Tariff Act of 1930, goods made with forced labor (including slave and child labor) are prohibited from entry into the United States. Since 2015 when Congress closed a legal loophole that had prohibited effective implementation of the provision, U.S. Customs and Border Protection (“CBP”) has been working to increase enforcement of the import ban of goods produced through forced labor. Notably, in May this year, CBP issued a country- and industry-wide detention order (technically called a “Withhold Release Order”) against products made, “in whole or in part,” with cotton from Turkmenistan, which means that CBP can detain imports of any products that contain Turkmen cotton. The revocation of Mauritania’s AGOA status potentially puts CBP on notice and provides the agency political support to further investigate and bar entry to imports from the country based on forced labor concerns.

The revocation of Mauritania’s AGOA status appears to be part of a larger trend of the Trump administration using U.S. trade laws to address labor abuse and exploitation by its trading partners. Previous administrations have not sought to leverage preferential access to the U.S. market to address labor exploitation. However, for this administration, the exploitation of workers is not just a moral or social issue, but an economic one. Specifically, the ability of foreign producers to lower production costs by using forced labor or in violation of local labor laws confers an unfair advantage and distorts true-market based competition, as do other commonly known “unfair trade practices,” such as “government subsidies, theft of intellectual property, currency manipulation, [and] unfair competitive behavior by state-owned enterprises.” To address this, the President’s 2017 Trade Policy Agenda stated that a top priority of the administration was “enforcing labor provisions in existing agreements and enforcing the prohibition against the importation and sale of goods made with forced labor.” The Trump administration has taken a number of actions consistent with this mandate. In June 2017, the Office of U.S. Trade Representative (“USTR”) launched a self-initiated review of Bolivia’s compliance with the GSP eligibility criterion related to child labor. This was the first ever self-initiated labor-based review in decades, diverging from past practices that relied solely on third-party petitions. In October 2017, the USTR further announced a triennial assessment process to review all 120 GSP beneficiary countries’ compliance with the GSP eligibility criteria. The first tranche of country reviews placed a number of beneficiary countries on probation. Specifically, Kazakhstan is under further review for labor rights concerns, while India, Indonesia, and Thailand are under review for compliance with other, non-labor GSP eligibility criteria.

Also in October 2017, the USTR invoked a provision under the United States – Peru Trade Promotion Agreement (“PTPA”) to deny imports from Inversiones Oroza, a Peruvian exporter, for three years because of “illegally harvested timber found in its supply chain.” Ambassador Lighthizer stated, “illegal logging destroys the environment and undermines U.S. timber companies and American workers who are following the rules.” Although the underlying legal provision focuses primarily on environmental issues, the use of forced labor to sustain the Amazonian logging industry in Peru has been the subject of great concern for many years. The invocation of free trade agreement provisions to address issues relating to environmental and/or labor concerns is unusual. Requests were made to the Obama administration to address illegal logging in Peru using the PTPA, but that Administration declined to take action.

Strengthening the legal structure and enforcement of labor provisions was also reportedly a priority for the administration during the renegotiation of the North American Free Trade Agreement (“NAFTA”). Although issues with enforceability continue to exist in the final text of the United States-Mexico-Canada Agreement (“USMCA”), Article 23.6 of the USMCA obligates each country to prohibit the import of goods produced through forced or compulsory labor.

Recently, there have been reports that the USTR is considering opening an investigation into China’s labor practices pursuant to Section 301 of the Trade Act of 1974. Section 301(d)(B)(iii) specifically defines “unreasonable” trade practices that warrant U.S. government action to include a broad range of labor violations, covering not just forced labor, but also the denial of workers’ rights of association and collective bargaining, as well as the failure to provide standards for minimum wages, hours of work, and occupational safety and health of workers. This subsection has never been invoked by the U.S. government. However, given the wide-spread labor abuses in China, which have been well-documented by both official and unofficial sources, the USTR’s action can have considerable impact on Chinese importers and U.S. industries that rely on Chinese inputs, and help level the playing field for other U.S. producers. As Section 301 is not country-specific, the USTR’s investigations on China might also have broad implications for other foreign countries that rely on exploiting workers to produce cheap merchandise for export.

Whether these actions taken by the Trump administration signify meaningful, systematic policy shifts on approach to labor issues in international trade remains to be seen. In the meantime, the administration has demonstrated that there are a number of mechanisms available for the U.S. government and U.S. industries to utilize in addressing the unfair advantage foreign producers enjoy by exploiting workers.

Tags: Labor