In 2012, Verité, a non-profit focused on labor conditions in developing countries, received State Department funding to conduct a study on forced labor in the Malaysian electronic industry. The final report makes for depressing reading: Twenty-eight percent of the workers interviewed by Verité (and 32 percent of foreign workers) were in “forced labor” situations.
The International Labor Organization defines “forced labor” as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.” In practice, forced labor often looks like indentured servitude. Workers, particularly foreign migrant workers, agree to pay a broker in their home country a recruitment fee (often out of their future earnings) for an international job placement—the hours and living conditions of which are frequently falsely advertised. Once migrant workers arrive, they’re expected to work long hours, seven days a week, and live in shabby employer-provided housing. Their paychecks are depleted by automatic deductions—for the initial recruitment fee, for housing, and sometimes for charges the government levies on employers for using foreign workers (Malaysia allows companies to pass the fee on to workers). Migrant workers are stuck in their jobs until they’ve paid back their “debts,” which can take years. Their movements are severely restricted; 71 percent of the foreign workers interviewed had no access to their passports; 62 percent said they needed “a pass or permit to go beyond a certain distance from their [employer-provided] housing.” They are, for all intent and purposes, virtual prisoners.
The TPP has the potential to dramatically improve working conditions in its less-developed member countries.
All of that may be about to change. Last month, after years of negotiations, the United States and 11 other countries finalized the terms of the Trans-Pacific Partnership (the full text of the agreement was released online last week). The economies of the 12 countries involved—Canada, the U.S., Mexico, Peru, Chile, Japan, Vietnam, Brunei, Malaysia, Brunei, Singapore, Australia, and New Zealand—represent 40 percent of the global economy. Under the terms of the TPP and a Malaysia-specific side agreement targeting forced labor in the country, the Malaysian government must “adopt and maintain in their laws and practices the fundamental labor rights as recognized by the ILO”; implement laws concerning minimum wages, overtime, and safe working conditions; and take specific steps to address its forced labor problem and protect migrant workers in the country.
If the agreement is ratified by all member countries—and the labor provisions contained within it are actually enforced—the TPP has the potential to dramatically improve working conditions in its less-developed member countries. But Labor advocates fear the TPP’s protections won’t be enforced in less-developed member countries, and that the agreement will cost American workers their jobs.
On December 17, 1993, President Bill Clinton signed the North American Free Trade Agreement. The accord, which reduced tariffs and barriers to trade between the three countries, passed only after a nasty political battle, and remains a contentious issue to this day. Its critics argue that the agreement resulted in the mass re-location of American manufacturing jobs to Mexico, where labor is cheaper and labor standards and protections are lower, setting off a so-called “race to the bottom”; it’s supporters counter that the agreement benefited more Americans than it hurt, and point out that the years immediately after NAFTA represent the one exception to the stagnation that’s plagued real wages in the U.S. over the past 30 years.
Inspired by these criticisms of NAFTA, subsequent U.S. free trade agreements have contained stronger labor protections aimed at both protecting workers in less developed countries and leveling the playing field for American workers. These protections—commonly known as the “May 10 Agreement” provisions—were hammered out in a 2007 deal between the Bush administration and the Democratically controlled Congress and have been present in all recent FTAs in the U.S. The provisions require member countries to adopt, maintain, and enforce the ILO’s five basic labor principles: “freedom of association”; “the effective recognition of the right to collective bargaining”; “the elimination of all forms of forced or compulsory labor”; “the abolition of child labor”; and “the elimination of discrimination in respect of employment and occupation.”
The labor standards included in the TPP, which the Obama administration describes as “the strongest protections for workers in any trade agreement in history,” go a few steps further. All member countries must adopt laws on minimum wages, work hours, and occupational safety, maintain labor protections in export processing zones, and “discourage trade in goods produced by forced labor.” In addition to the main agreement, the administration negotiated bilateral side agreements with Vietnam, Malaysia, and Brunei—all countries known to have poor records on various labor issues.
But labor and human rights groups are not convinced. Most came out quickly against the TPP once the full language was released, arguing that the protections don’t go far enough, and that enforcement will be non-existent. John Sifton, the head of Asia advocacy for Human Rights Watch, told Bloomberg BNA that “Our concern is that Vietnam may make legal reforms on paper to allow the agreement to come into force, but then Vietnam will turn around and not actually allow unions to be created.”
Sifton’s concerns are not without merit, at least if history is anything to go by. Last year, as TPP negotiations dragged on, the U.S. Government Accountability Office examined labor standards in a variety of FTA member countries. The GAO concluded that, while member countries were taking steps to comply, “limitations in partner countries’ capacity to enforce labor laws cause gaps in labor protections to persist.” Even more damning, the report concluded that the Department of Labor has been painfully slow in investigating violations of existing agreements. Of the five formal FTA complaints submitted, the Department of Labor has resolved only one of them, and has dramatically exceeded its allocated six-month time frame for investigating of the other complaints. The delays, according to the GAO, “may have contributed to the persistence of conditions that affect workers and are allegedly inconsistent with the FTAs.”
As flawed as enforcement may be, trade agreements are currently the only international labor agreements that include any enforcement mechanisms, which is precisely why labor organizations have pushed to include labor standards in trade agreements. “There’s no other legal mechanism,” says Simon Lester, a trade policy analyst at the Cato Institute. “You have the International Labor Organization, but there’s no litigation, no way to enforce it. In terms of binding enforcement of international law, trade agreements are the only way.”
Of the five formal FTA complaints submitted, the Department of Labor has resolved only one of them and has dramatically exceeded its allocated six-month time frame for investigation of the others.
And like it or not, the TPP is the trade agreement on the table at the moment. Jeffrey Frankel, a Harvard economist who served on President Clinton’s Council of Economic Advisors, argues that, for workers in less developed member countries, an imperfect agreement is better than no agreement. “There’s no alternative,” he says. “It’s not like there’s some movement under way to have a version of the International Labor Organization agreements that’s going to be really seriously enforced or backed up. This is it, and it seems like a huge step in the right direction.”
Robert Lawrence, a professor at the Harvard Kennedy School, adds that the labor provisions in the TPP agreement may have significant positive spillover effects on workers in other countries in the region. “A number of these countries are engaged in another big Asian agreement, the Regional Comprehensive Economic Partnership, which includes China and India,” Lawrence says. “Those countries have now agreed to a lot more than they had previously, and it’s going to be very interesting to see. I think they’re going to say, ‘Well, we need to put some of these [provisions] into that agreement.'”
For workers in the U.S., who already have relatively strong labor protections, the main effects of the TPP will be economic, and the debate on the size and nature of those effects still rages.
The TPP will almost certainly lower prices on imported consumer goods, a change that lower- and middle-income Americans will disproportionately benefit from. “Poorer people spend much more of their money on goods that are traded,” Lawrence explains. “Rich people spend a much higher share of their money on services. So the result of more open trade is to help poorer workers and improve income inequality. It’s quite remarkable how disproportionate the gains are at the bottom of the income distribution.”
The American Federation of Labor and Congress of Industrial Organization, however, argues that the TPP will encourage the further outsourcing of American manufacturing jobs to lower-income countries like Malaysia and Vietnam. The consensus among most economists is that the overall effects of the TPP will be relatively small but that some American jobs will, as labor groups fear, be lost. Widely cited estimates from the Peterson Institute for International Economics on the economic effects of the TPP suggest that, by 2025, the agreement will increase U.S. incomes by approximately 0.4 percent (or $77 billion) per year, a relatively minor change. Moreover, job losses in import-competing industries should be offset by gains in export industries, although economists have pointed out that “some transitions will be difficult and costly—for example, those involving older workers and cities with a narrow industrial base.”
All this is to say that, essentially, the TPP, like all international trade agreements (and globalization in general), will have some winners and some losers, but may not be as transformative as either side makes it out to be. “Both sides pretend it’s going to change the world,” Frankel says. “The effects are usually smaller then you think, and that’s probably true of the TPP as well.”
But for those electronics workers in Malaysia, the TPP does have the potential to be truly transformative—if, that is, the U.S. and other developed member countries manage to enforce those historic labor protections.
