On the Nexus between Economic Law and International Development: How FTAs can Contribute to Promoting Human Rights

Brian Chen

J.D. Candidate, Georgetown University Law Center; M.A., King’s College London

Fellow, Institute of International Economic Law

International trade and investment law are at a crossroad. The World Trade Organization (“WTO”) Dispute Settlement Body (“DSB”) remains paralyzed by its lack of appellate body members, and influential actors including the United States and European Union have moved away from the heavily criticized investor-state dispute settlement model in their recently concluded international investment agreements. Further, any reforms must now be administered against the backdrop of an international pandemic that is challenging market rules. Importantly, several free trade agreements (“FTAs”) concluded at the regional level (“RTAs”) are emerging as promising instruments for introducing innovative solutions for re-writing the rules of international economic law at a time when multilateral negotiations have halted. 

This essay looks briefly at two particular models that have recently emerged, the frameworks they prescribe, and their contributions to promoting international development and human rights: (1) the United States-Mexico-Canada Agreement (“USMCA”) and its increased protection for Mexican workers, and (2) the African Continental Free Trade Area’s (“AfCFTA”) “framework agreement” model that affords increased flexibilities to its members’ varying development conditions and its customized iteration of special and differential treatment (“S&D”). Both models represent immense potential not only for development but also fresh, normative approaches for reforming trade and investment law in a more inclusive and equitable way that can deliver globalization’s economic benefits to developing and least-developed countries.


I. The United States-Mexico-Canada Agreement & Labor Reform in Mexico

Under the USMCA, which entered into force July 1, 2020, Mexico must integrate into its domestic law principles enshrined in the International Labor Organization’s (“ILO”) Core Conventions including standards on freedom of association and collective bargaining, forced labor, child labor, and non-discrimination.[1] As a result, Mexico established new institutions for registering and overseeing trade unions, thereby recognizing and guaranteeing Mexican workers’ rights to organize and collectively bargain. Once they are successfully implemented, trade union representation of local workers should gradually increase the wages of Mexican workers, reduce income inequality, and in turn promote domestic demand.[2] Additionally, labor disputes now fall within the jurisdiction of Mexican courts and the judicial branch and are no longer subject to arbitration and conciliation procedures governed by the executive branch, which generally rendered decisions in favor of corporations.[3] The chapter also contains detailed provisions that afford protections for migrant workers and against violence in the workplace and discrimination on the basis of sex and gender.[4]

The labor chapter also creates enforcement mechanisms to ensure the protection of rights granted to Mexican workers by the USMCA. Most notably, the USMCA establishes the Rapid Response Mechanism for Complainants to bring Denial of Rights claims against employers who are allegedly encroaching on their workers’ rights to organize and collectively bargain.[5] Under the Rapid Response Mechanism, an ad hoc international dispute settlement panel can make binding determinations on whether specific employers are in compliance with Mexico’s labor reforms.[6] After a Complainant submits its request, a Respondent may conduct its own review and is allowed an opportunity to address any violations, if found. Should a Respondent fail to comply with the review procedure, the Complainant may request establishing a panel that makes an independent determination.[7] The panel must afford both parties the opportunity to present their cases; the burden of proof lies with Mexican employers who must demonstrate that their workers’ rights are being effectively protected.[8] The United States and Canada may enforce a panel’s decision by suspending preferential tariff treatment or blocking entry of goods from any non-compliant facilities.[9]

Moving forward, countries should seek to integrate labor and related human rights into their international economic law instruments and allow for disputes to be brought before institutions such as the WTO DSB or investment arbitral tribunals that can make binding decisions. Doing so compels countries, such as Mexico, who have signed onto the ILO Conventions to enforce violations and meet their treaty obligations. Being held accountable by international legal bodies incentivizes both developing country governments to reform local enforcement mechanisms and employers to bring their practices into compliance with international labor standards so as to avoid costly international litigation.

II. The African Continental Free Trade Area as a Model for Trade & Sustainable Development

Signed in March 2018 and entered into force in May 2019, the AfCFTA joins together 54 African states and 1.2 billion people in a single market worth between $2.5 trillion and $4 trillion (USD).[10] The agreement aims not only to remove tariffs on 90 percent of goods to promote inter-continental trading[11] but also explicitly references sustainable development in the areas socio-economic inclusion, gender equality and food security.[12] While the AfCFTA has not yet been fully implemented, it will likely have a profound impact for Africa and on international law and economics generally provided its size, scope and approaches.[13]

The AfCFTA represents a “framework agreement” model – a core agreement serves as a foundation to be built out over several negotiation phases. Phase I negotiations established Protocols on Trade in Goods and Services, Dispute Settlement, Rules of Origin, and schedules detailing members’ concessions.[14] Although Phase I was originally scheduled to be fully operational this July, the Covid-19 pandemic has delayed its implementation until early 2021.[15] Phase II negotiations will create the Protocols on Intellectual Property Rights, Competition Policy, and Investment.[16] Phase III negotiations will create the Protocol on E-Commerce.[17] The framework agreement model is quite distinct from existing RTAs as it allows for “progressive” or “incremental” negotiation of trading terms that are purposefully drawn out and organized into negotiation phases based on members’ priorities and capacities to administer domestic legal reform. The AfCFTA’s framework further provides for periodic review of the agreement’s substance every five years and the flexibility to negotiate additional chapters to be incorporated into its foundation should new international trade, investment, and development opportunities or challenges arise.[18]

The AfCFTA further adopts a revised, rules-based approach to S&D that represents the interests of diverse African states and serves as a framework for revising international economic law generally to better harness the potential for international trade in promoting development. Under WTO law, S&D affords developing and least-developed countries preferential trading arrangements,[19] longer transition periods to implement legal requirements,[20] capacity building and aid for trade.[21] Traditional S&D has been subject to much criticism, however, largely surrounding its ineffectiveness in promoting development by allowing members to self-designate as “developing.”[22] Conversely, the AfCFTA’s customized iteration of S&D recognizes the nuances in members’ varying stages and conditions of development by granting flexibilities “on a case by case basis, to accommodate special economic situations and development, trade and financial needs of the state parties.”[23] Further, according to Article 6 of the Trade in Goods, “State Parties shall [ ] provide flexibilities to other State Parties at different levels of economic development or that have individual specificities as recognized by other State Parties.”[24] This allows for not only a more tailored and differentiated approach based on factors including members’ level of industrialization, the size of their agricultural sectors, resource endowments, proximity to ports and conflict statuses,[25] but also resolves the issue of self-designation. Ultimately, the AfCFTA’s more proactive[26] and differentiated approach that considers the economic and welfare justifications for S&D on a case-by-case basis will hopefully result in a more comprehensive and strategic approach for facilitating development than existing initiatives under current WTO law.

III. Conclusions

In an age where globalization continues to face back-lash and multilateral consensus seem increasingly difficult to achieve, RTAs have emerged as promising tools for fostering cooperation especially in the context of international development. At the regional level, both the USMCA and AfCFTA introduce innovative approaches to reforming trade and investment processes that may serve as the basis for re-writing international law at multilateral forums in the near future. International economic law must abandon its top-down approach to rulemaking and consider the alternative models prescribed by these instruments to better represent the interests of all actors in the international political area if it is to overcome unique challenges of the twenty-first century.

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[1] Alvaro Santos, Reimagining Trade Agreements for Workers: Lessons from the USMCA, 113 Am. J. Int’l L. 407, 407 (2019), https://www.cambridge.org/core/services/aop-cambridge-core/content/view/AF9056844AEAF8085CA7F594AFB32B3C/S2398772319000746a.pdf/reimagining_trade_agreements_for_workers_lessons_from_the_usmca.pdf.
[2] Id. at 409.
[3] Id.
[4] Office of the U.S. Trade Rep., Exec. Office of the President, Agreement between the United States of America, the United Mexican States, and Canada 05/30/19 Text, Arts. 23.7, 23.8, and 23.9 (2018).
[5] Stephen S. Kho et. al., The USMCA’s Facility-Specific Rapid Response Labor Mechanism: Are You Ready for It?, Akin Gump Strauss Hauer & Feld LLP (June 17, 2020), https://www.akingump.com/en/news-insights/the-usmcas-facility-specific-rapid-response-labor-mechanism-are-you-ready-for-it.html.
[6] Id.
[7] Warren H. Maruyama, USMCA’S Rapid-Response Labor Mechanism, Hogan Lovells 1 (Feb. 7, 2020), https://www.hoganlovells.com/~/media/hogan-lovells/pdf/2020-pdfs/2020_02_07_usmca_rapid_response_labor_mechanism.pdf.
[8] Kho, supra note 6.
[9] Maruyama, supra note 7, at 3.
[10] Katrin Kuhlmann & Akinyi Lisa Agutu, The African Continental Free Trade Area: Toward a New Legal Model for Trade and Development, 51 Geo. J. Int’l L. 1, 4 (2020).
[11] Kigali and Abuja, Fourty-four African countries sign a free-trade deal, The Economist (Mar. 22, 2018), https://www.economist.com/middle-east-and-africa/2018/03/22/forty-four-african-countries-sign-a-free-trade-deal.
[12] Agreement Establishing the African Continental Free Trade Area art. 3, Mar. 21, 2018, 58 I.L.M. 1028, Art. 3(e), (g).
[13] Kuhlmann & Agutu, supra note 10, at 60.
[14] Operational Phase of The African Continental Free Trade Area Launched, African Union, (last visited Dec. 22, 2020), https://au.int/en/articles/operational-phase-african-continental-free-trade-area-launched.
[15] Kuhlmann & Agutu, supra note 10, at 5.
[16] AfCFTA enters into force; Phase II on investment, competition, IPRs to last through 2020-2021, International Institute for Sustainable Development (June 27, 2019), https://www.iisd.org/itn/en/2019/06/27/afcfta-enters-into-force-phase-ii-on-investment-competition-iprs-to-last-through-2020-2021/.
[17] Gerhard Erasmus, Will there Be a Phase III for the AfCFTA?, Tralac (Mar. 27, 2020), https://www.tralac.org/blog/article/14464-will-there-be-a-phase-iii-for-the-afcfta.html.
[18] Kuhlmann & Agutu, supra note 10, at 6-7.
[19] The General Agreement on Tariffs and Trade’s enabling clause permits developed countries to provide preferential treatment to poorer countries such as in the form of lower tariff rates for their imports on a non-reciprocal basis in violation of Article I’s Most Favored Nation rule,
[20] For instance, least-developed countries need not implement the Agreement on Trade-Related Aspects of Intellectual Property Rights until 2021.
[21] Kuhlmann & Agutu, supra note 10, at 13-14.
[22] Id. at 19-20.
[23] AfCFTA, Protocol on Trade in Services, Mar. 21, 2018, 58 I.L.M. 1028, 1053, art. 7.
[24] AfCFTA, Protocol on Trade in Goods, Mar. 21, 2018, 58 I.L.M. 1028, 1043, art. 6 [emphasis added].
[25] Kuhlmann & Agutu, supra note 10, at 22.
[26] Kuhlmann & Agutu, supra note 10, at 20, 24.