Making the dispute resolution process more effective

The dispute resolution process

Since the North American Agreement on Labour Cooperation (NAALC) signed in 1994, the United States and Canada have established a dispute resolution process linked to labour obligations in their trade agreements. If a member of the public considers that the partner country of a trade agreement that incorporates a social clause fails to meet its commitments in terms of labour standards, he may submit a communication to his ministry of labour with the aim of initiating a process to resolve the dispute in question. This process is established in five successive stages: from public communications to the possibility of sanctions. 

According to the Canadian approach, a penalty mechanism is more effective than a mechanism focusing exclusively on public information and moral condemnation.

The objective is to put pressure on countries to respect workers’ rights. A monetary compensation is the most common «sanction» mentioned in social clauses, Canada is committed to deposit the sums of money generated by sanctions into a fund created to improve workers’ rights in the concerned country.

At the same time, Canada’s current position is that the labour chapter should also be subject to the dispute settlement mechanism applicable in the trade agreement (including the possibility of trade sanctions).

This system has been often criticized for its inefficiency, since no action has been implemented for the imposition of remedies.


How to improve the dispute resolution process 

Provide trainings to civil society organizations interested in submitting communications.

Provide financial resources to fund independent expertise assisting organizations in filing communications.

Strengthen States capacity to bring a case to arbitration.

Create a government independent institution destined to receive and review complaints, instead of the ministry of  labour.

Adopt a compliance agreement defining the problems, determining the results and providing for penalties. If the targeted State does not attain the expected results, then it can proceed to the panel of experts stage.

Impose trade sanctions. If the non-compliance with the commitments is recurrent, the commercial benefits arising from the agreement should be suspended in part (eg. a specific industry sector) or in total depending on the degree of harm suffered, as provided for in several agreements signed by Canada since 1994.

Arguments in favour

  • Strengthen the implementation of ILO conventions.
  • Simplify the filing of complaints, which would make the social clauses in trade agreements more effective, useful and legitimate.
  • Persuade States to change their practices through a combination of persuasive (cooperation, compliance agreement) and dissuasive (sanctions) instruments.
  • Rebalance workers rights and investors rights.

Arguments against

  • The dispute resolution mechanism undermines ILO action by duplicating the resources linked to international labour cooperation.
  • Dispute resolution mechanisms are slow and ineffective, nothing can improve them.
  • The implementation of trade sanctions amounts to disguised protectionism and encourages a logic of retaliation.
  • Today’s global value chains make it impossible to ensure that labour standards are respected during the process.

What they said:

«One key factor [of labor complaints underutilization], is the complexity of the US complaint submission process and the significant level of trade law expertise, resources, and basic technical capacity required to draft complaints that satisfy the submission requirements.»

Human Rights Watch. «A Way Forward for Workers’ Rights in US Free Trade Accords», 2008


«[…] some countries stress the importance of monitoring by existing international compliance mechanisms, such as the ILO supervisory mechanism.»

Rotman School of Management. «Workers’ Rights in a Globalizing World : The Role of Labour Provisions in FTAs». Summary of Conference, Toronto, May 8, 2014


«[A]n arbitration panel will issue its ruling on a complaint brought by the U.S. under the Central American Free Trade Agreement (CAFTA) against the Guatemalan government for failing to effectively enforce its labor laws. It’s taken [seven] years [since AFL-CIO’s complaint submission] to bring just one case this far, and the potential penalty is a mere slap on the wrist. […] The delays have simply given the Guatemalan government an opportunity to put make-up on the problems…»

Dan DiMaggio. «As TPP Deal Inked, Guatemala Labor Case Unmasks Free Trade’s Empty Promises». Labor Notes, October 6, 2015



«[W]e suggest establishing an entity […] to receive allegations of labor-rights-related trade accord violations […] to follow up with much-needed assistance in transforming those allegations into complaints that fulfill [the] submission criteria. […] To help ensure that the new organization is not politicized, Human Rights Watch recommends that it be private and government funded.»

Human Rights Watch, «A Way Forward for Workers’ Rights in US Free Trade Accords», 2008


«[T]he underutilization of Canadian FTA labour provisions by trade unions and civil society [is] having an adverse impact on the improvement in the formulation and inclusion of these provisions.»

Rotman School of Management. «Workers’ Rights in a Globalizing World : The Role of Labour Provisions in FTAs». Summary of Conference, Toronto, May 8, 2014


«The objective of improved labor standards worldwide espoused by morally and ethically driven groups is laudable and one with which reasonable individuals can sympathize.  But trade sanctions are the wrong instrument to achieve this objective.»

Arvind Panagariya, «Labor Standards and Trade Sanctions: Right End Wrong Means». Conference “Towards An Agenda for Research on International Economic Integration and Labor Markets”, East-West Center, Hawaii, January 15-16, 2001


«In order to give the social clause a certain reality and effectiveness, most organizations support the urge for sanctions such as banning access to markets to implicated products and conditioning the aid.» (free translation)

Michel Egger et Catherine Schümperli Younossian, Enquête sur la clause sociale auprès des ONG et syndicats du Sud, Annuaire suisse de politique de développement (ASPD), n° 15, 1996


«Workers’ rights should be embodied in trade agreements and  be subject to the same dispute resolution mechanisms contemplated for other issues, including those for its enforcement.»

EU-Canada Comprehensive Economic and Trade Agreement Joint ETUC/CLC Statement, 2016


«The challenge today for the international community is to come up with an effective and enforceable way of getting the ILO’s core labour standards respected by all the world’s trading partners.»

ICFTU. «Enough Exploitation is Enough: A Response to the Third World Intellectuals and NGO’s Statement Against Linkage». TWIN-SAL, 29 September 1999


«An additional important question is the effectiveness of these mechanisms considering the level of control by the respective governments in the selection of the complaints to bring forward.»

Rotman School of Management. «Workers’ Rights in a Globalizing World : The Role of Labour Provisions in FTAs». Summary of Conference, Toronto, May 8, 2014


«Officials from these countries say that workplace conditions will improve through economic growth and development, which would be hindered should rich countries apply trade sanctions to their exports for reasons relating to labour standards. Application of such sanctions, they say, would perpetuate poverty and delay developmental efforts including those aimed at improving conditions in the workplace.»

WTO. «A Difficult Issue for Many WTO Member Governments». Doha WTO Ministerial 2001: Briefing Note on Trade and Labour Standards, n° 16, 2001