Will Labor Rights Be Included In U.S.-China Bilateral Investment Treaty Negotiations? 中美双边投资协定谈判将包括劳动者权利吗?
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Recent U.S. free trade agreements (“FTAs”) and comments from U.S. government officials suggest that obligations to respect and enforce internationally recognized labor standards could become part of the text offered by the United States for the negotiation of a bilateral investment treaty (“BIT”) with China. The trend of making labor rights more prominent in U.S. FTAs and BITs is likely to continue for agreements currently being negotiated under President Obama and a Congress controlled by the Democratic Party, including the U.S.-China BIT.
The United States approaches its negotiations of BITs by working from a model text that has evolved from prior BITs and free trade agreements. In 2004, the United States developed a Model BIT that it has used as the basis for negotiating BITs and investment chapters in FTAs. The 2004 Model BIT contains a brief chapter on Investment and Labor providing that the parties may not weaken their domestic labor laws in violation of internationally recognized labor standards to encourage investment in their respective territories.
Revisions to the 2004 Model BIT were being made last year, and reportedly will conclude with a new Model BIT text to be released by the government sometime during the next three months. The 2010 Model BIT is likely to serve as the foundation for U.S. negotiations of a BIT with China. Administration officials have not stated publicly the extent to which the 2010 U.S. Model BIT will include provisions protecting labor rights, and in some respects it would be logical to reserve agreement on labor rights for FTAs. FTAs cover a much wider range of policy issues than BITs, and application of international labor standards is more comprehensible in the context of agreements specifically addressing trade.
Despite the logic, there are indications that the revised 2010 U.S. Model BIT is likely to include enhanced obligations to protect labor rights and to address breaches of those obligations. On May 10, 2007, Congressional Democrats and leading officials in the Bush Administration reached agreement on a set of labor rights provisions that were inserted in U.S. FTAs with Peru, Colombia, Panama and South Korea. The Democratic Senator from Montana, Max Baucus, who is also Chairman of the Senate Finance Committee and known to be an influential force on international trade issues, reportedly would like to see the labor rights provisions from what is now known as the “May 10 agreement” carried forward in future U.S. BITs, including the 2010 Model BIT. A July 2009 report to Senator Baucus from the U.S. Government Accountability Office criticized the inadequate efforts, primarily of prior U.S. administrations, to ensure that governments with whom the U.S. had negotiated FTAs (specifically, Jordan, Morocco, Singapore and Chile) were making significant progress toward adoption and enforcement of fair labor laws. Thus, the interagency review of the 2010 Model BIT provides an opportunity to raise standards and expectations.
Labor interests have exerted their influence inside the Office of the U.S. Trade Representative as the Administration has been developing its trade policy. Although the President’s promotion of exports in his State of the Union Address indicated a desire to expand trade, there remains in the Democratic Party suspicion of trade as a vehicle to export jobs as well as goods and services. Inclusion of apparently enforceable labor standards in international agreements would provide some cover against allegations that, were jobs exported, at least they would not be exported to foreigners working under substandard conditions.
The Obama Administration has filled its ranks – in the White House and in several agencies – with officials who have strong views on protections for workers. Given the President’s and Democratic Party’s dependence on labor interests for their political base (a political reality China already has experienced in the application of the Section 421 safeguard over commercial tires), labor rights are likely to play an important role in the negotiation of a BIT with China, as well as any other BITs or FTAs negotiated during the Obama Administration.
The “May 10 agreement” labor provisions that could be included in the 2010 Model BIT adopt the rights expressed in the 1998 ILO Declaration on Fundamental Principles and Rights at Work:
(a) freedom of association and the effective recognition of the right to collective bargaining;
(b) the elimination of all forms of forced or compulsory labor;
(c) the effective abolition of child labor; and
(d) the elimination of discrimination in respect of employment and occupation.
Recent U.S.-FTAs incorporate these rights as mutual, reciprocal obligations undertaken by the FTA partners. Parties must agree not to waive or otherwise derogate from statutes implementing these international standards in a manner affecting trade or investment between the parties, and they must commit to effectively enforce their labor laws. They must ensure access to tribunals to enforce labor laws and procedural guarantees of transparency and due process.
The agreements provide dispute resolution procedures in the event that these rights are not believed to be respected and enforced by the FTA partner. The process, however, is fashioned to blunt attacks on foreign labor practices. In the Korea-U.S. FTA, for example, the dispute process over labor rights is potentially lengthy, with multiple stages of consultation between the governments before an arbitral panel eventually is formed to adjudicate and the awards are not self-executing. Although the dispute settlement process does allow for compensation and sanctions as potential remedies for a party’s failure to implement an award, there are abundant opportunities for international diplomacy and negotiation to avoid an outcome requiring strict enforcement. The dispute settlement framework seems designed to cushion the effects of a violation of the labor obligations, and to allow governments opportunities to save face in the event of an alleged breach.
Were the 2010 Model BIT to go beyond the text of recent FTAs by establishing well-defined labor standards with strict and efficient dispute settlement mechanisms, accession to such a BIT with the U.S. could be problematic for China. The All-China Federation of Trade Unions is the only legally authorized union in China, and critics claim that it is more interested in preserving stability for the government than it is in protecting workers’ rights. U.S. labor organizations have argued that even where China has the appropriate labor laws on its books, enforcement of those laws consistent with international standards remains unreliable. The Obama Administration has heard from some in the United States that China never will agree to the adoption and enforcement of international labor standards and reportedly is weighing those views carefully.
A dispute-settlement model based on the Korea-U.S. FTA, however, might be palatable if China were to see in it sufficient flexibility for negotiation, diplomacy, and the ability to preserve a public face of sovereignty with respect to its labor laws. The United States currently appears to be making serious progress on BIT negotiations with China’s competitors, India and Vietnam. Were these countries to move more rapidly to agreement on the inclusion of meaningful protections for labor rights, competition and comparative advantage may create additional incentives for China to accept such provisions in a BIT with the United States. China might then hope to mitigate their impact, whether through the kind of consultation processes suggested in the Korea-U.S. FTA, or by maintaining the appearances of a commitment to enforcement as circumstances may require.
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eculative and ultimately unknowable. However, Chinese companies should not view the CFIUS result in this case as based on an objection focused on China, but rather as based on the serious national security concerns it definitely presented regardless of the foreign country. FINSA requires CFIUS to consider whether the acquiring company is state-owned. However, given the serious national security concerns raised by the location of Firstgold’s facilities, the result likely would have been the same even had the acquirer been a private company.