US ratchets up pressure on Guatemala over labour rights – a bit

The US has responded cautiously to what it sees as Guatemala’s footdragging over labour rights.

In a statement on October 28, United States Trade Representative Michael Froman threatened to reactivate an arbitration panel “if Guatemala fails to comply with the provisions of the Enforcement  Plan” Guatemala had signed with the US in April of this year, and his statement listed a number of ways Guatemala was significantly failing.

Froman’s statement, issued after Guatemala’s compliance had been strongly criticised by US unions, listed three particular areas of concern:

• The Guatemalan government’s failure to pass legislation providing for an expedited process to sanction employers that violate labour laws
• Its failure to implement a contingency mechanism to address payment to workers in cases where export enterprises have closed.
• The need for serious efforts to ensure that the instruments and procedures issued under the April Enforcement Plan are effectively implemented and enforced.

Froman recognized there had been  “important steps taken by Guatemala under the plan” but stressed that “the United States expects solid progress in fully implementing the commitments over the next six months.”

The threat does not significantly threaten trade. If Guatemala fails to comply with the provisions of the Enforcement  Plan, the US might convene a panel, and if the US was unhappy with the panel’s findings and Guatemala’s reaction, the panel could fine Guatemala up to $15 mn, with the money raised going to fund Guatemalan labour rights.

Though the panel would be convened under a process called “fast track”, any eventual levying of fines would not happen until at least eight months after the panel was summoned – that is, at least 14 months from Froman’s statement.

There is probably a greater risk to traders from the resultant publicity encouraging activists to picket  brands or store chains connected with Guatemala, and in particular targeting buyers known to be connected with concrete examples of the abuses concerned. But the US reaction moves Guatemalan-manufactured merchandise closer to the Outrage Danger Zone