Sanctions and penalties

Objectives

Under the conditional model, the right to enter a market freely is linked to an obligation: to respect workers’ rights. In order to do so, it is agreed that a penalization mechanism is more effective than a discussion mechanism based on information to the public and moral condemnation. The objective is to persuade countries to respect workers’ rights. Generally, monetary or economic sanctions are associated with dispute resolution mechanisms for this purpose.

Means

  • Economic sanctions. Some social clauses suggest the implementation of punitive trade measures for countries that do not comply with their labour rights commitments. For example, the Free Trade Agreement between the United States and Peru and all US agreements signed after 2008 include the possibility of suspending all benefits arising from the agreement in the event that a party contravenes provisions of the Labour Chapter. The Government of Canada is now seeking to include the labour chapter in the general dispute resolution mechanism associated with the trade agreement. As a result, failure to comply with the labour chapter  may be punishable by trade sanctions.
  • Monetary penalties. The most common “sanction” in the clauses is a type of monetary penalty. In a number of agreements, parties commit to deposit the sums raised in a fund designed to address the labour issues at hand and improve respect for workers’ rights in the offending country.

Arguments in favour

  • The asymmetry between the enforcement of workers’ rights and companies’ rights should be eliminated. If the threat of sanctions is necessary to enforce commitments in the areas of ​​trade and investment, the same should also apply for workers’ rights.

Arguments against

  • The implementation of trade sanctions leaves the door open to protectionism that will affect the weakest countries.

What they said:

«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

 

«Labour rights must be enshrined in the body of the agreement and be subject to equivalent dispute settlement mechanisms as other issues covered by it, including enforcement»

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

 

«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