Is there a Deal on the Supply Chain Element of Biden’s Proposed Big Asian IPEF Pact?
With the Text Kept Secret, Whether and What Remains Unknowable…
by Lori Wallach, Director of Rethink Trade
Commerce Secretary Gina Raimondo just announced the “substantial conclusion” of the part of the Indo-Pacific Economic Framework (IPEF) that covers supply chain resilience.
IPEF would impose binding rules covering 40% of the world economy. So, it’s not great that few people are even aware of the massive 14-nation Pacific Rim trade negotiation. In part, this is because IPEF, to say nothing of the status of its ostensibly completed Supply Chain “pillar,” remain largely unknowable to those who would live with its results.
Improbably, the Biden administration decided to keep the developing text of the IPEF agreement from the public and press, continuing the bad practice of past presidents.
That is a problem on its own merits, but worse, 400-plus official U.S trade advisors representing corporate interests have been granted security clearance, and anytime access to the secret texts. Members of Congress must make appointments to trudge over to a “Sensitive Compartmented Information Facility” or SCIF in the Capitol to see text when it is eventually sent over.
The idea to launch IPEF talks came from the National Security Council, which wants closer relationships with Pacific Rim nations that are not China. While the pact’s ostensible purpose is geopolitical, it is slated to include four “pillars” or subject areas: Pillar 1 is Trade, 2 is Supply Chains, 3 is Infrastructure and Decarbonization, and 4 is Good Governance.
An extra round of Pillar 2 talks last week had not landed a hoped-for deal as of the Friday before a May 27 ministerial-level confab hosted by the United States in Detroit. A major obstacle was some IPEF countries’ objections to labor standards being included.
Sadly, this is no surprise. Countries on the U.S. State Department’s worst-in-the-world list of human traffickers and forced labor violators were invited to participate — Vietnam, Brunei and Malaysia.
Plus, there’s the Philippines, where the ILO has launched a special investigation of the scores of government-sanctioned unionist assassinations in recent years. Even in the middle of IPEF negotiations and heightened scrutiny, in late April a call-center union organizer by the name of Alex Dolorosa was killed. The young ally of the U.S. Communications Workers of America was found dead, with dozens of stab wounds and other signs of torture after government officials falsely labeled him a communist insurgent and enemy of the state. Union organizers, journalists, civil society leaders and other individuals who the government “red-tags” with such accusations are often killed.
Despite this, the extreme secrecy surrounding IPEF means we cannot know if the part of the deal that’s been finished, includes the labor and environmental protections the administration promised. And, if so, whether they are enforceable, or just words on a page.
Two unnamed senior Biden administration officials briefed reporters over last weekend that the new Pillar 2 deal would have “facility specific” labor rights mechanisms. A Commerce Department press release notes: “The proposed Agreement would also create a mechanism to cooperate with partners to address facility-specific allegations of labor rights inconsistencies.”
Until, and unless a text is released that shows otherwise, we must take U.S. officials at their word. In the past they have said that IPEF labor standards will not be enforceable. According to the Commerce Department’s summary of the deal, there are no environmental rules for the Supply Chain chapter at all.
This makes the use of the term “facility-specific” misleading. It appears to refer only to notifying a new IPEF Supply Chain commission about the location of bad conduct, rather than being an enforcement mechanism to target a company (a facility) that is violating labor rules to make them stop.
Notifications of specific violations but no penalties, was also a feature in the entirely ineffective North American Free Trade Agreement (NAFTA) labor and environmental side agreements. Check out this NAFTA Commission for Environmental Cooperation side agreement “case” about the hazardous waste problems at the Metales y Derivados plant in Tijuana, for example.
Many in Congress and civil society have demanded enforceable labor and environmental standards apply to all four IPEF pillars.
The submission to the U.S. government of the Labor Advisory Committee, which represents the views of U.S. unions, sums it up well: “Given the dismal labor rights records of several potential IPEF participants, it is critical that strong and enforceable labor and environmental standards, supported by corporate accountability measures, apply across the agreement’s proposed pillars to ensure that countries cannot obtain the benefits of the agreement without respecting fundamental workers’ rights.”
This makes good sense. If the Supply Chain pillar facilitates more trade in goods and inputs between the countries, enforceable labor and environmental standards should be part of the deal. Given the Commerce Department does not plan to release the Supply Chain text any time soon, whether it has such terms remains a mystery.
And given the Infrastructure and Decarbonization pillar will be something like a U.S. version of China’s Belt and Road Initiative, with funding for projects in other countries, enforceable standards also make sense.
Without question, the trade pillar of the IPEF must have enforceable labor and environmental standards. Creating a common floor of labor and environmental conduct among countries integrating their economies, is not just good policy.
Politically, a Democratic president’s trade deal cannot have worker protections inferior to what was included in USMCA, much less roll backwards to the NAFTA side agreements’ entirely ineffective name-and-shame approach.
Indeed, numerous congressional Democrats had never supported a trade deal before they voted for the U.S.-Mexico-Canada Agreement (USMCA), a 2019 redo of the NAFTA. That only happened after they won inclusion of a “Rapid Response Mechanism” (RRM) for labor rights enforcement that includes real penalties for facilities violating workers’ rights. And the “yes” votes came with the admonition that every future U.S. deal had to build on the revised NAFTA’s labor enforcement and had to create the same for environmental standards.
The USMCA’s RRM for the first time in trade-pact history established penalties imposed on the specific employers violating workers rights. That is what “facility-specific” labor rights enforcement means. The design creates a reason for the boss to stop abusing workers by hitting the actual firm with sanctions.
The USMCA included three types of sanctions against companies violating the rules — fines, penalty tariffs and eventually banning a product from a market altogether.
Like with the IPEF, the USMCA talks did not include tariff cuts. NAFTA already had zeroed out tariffs between the countries by 2010. The USMCA’s tariff sanctions against firms violating workers’ rights are penalty tariffs, not “snapbacks” of tariff cuts made in the agreement.
The USMCA included fines so that the penalties could be imposed on service sector companies, like the Filipino call centers that Alex Dolorosa was organizing. (Tariffs only apply to goods.)
This is also how IPEF’s trade pillar could have enforceable labor and environmental standards. Whether or not it does is a political decision, not a legal or technical one.
Prior to the USMCA breakthrough, trade deals that had enforceable rules on labor or the environment used penalties imposed against a country, not a company. Countries could just pay a fine and consider it a cost of attracting foreign investment and manufacturing facilities while guaranteeing no real unions and low wages. To add further insult to injury, NAFTA’s side deals had weak standards and a process that made it nigh impossible even to get limited-amount fines imposed.
Congressional Democrats, unions and some American businesses united around what is now a conventional wisdom solidified by a series of USMCA RRM cases that have delivered real unions, real contracts and better wages for workers in Mexico: The only way to make sure international commercial agreements do not push down wages and working and environmental conditions, is to include strong standards in the pacts and ensure that those terms are enforced with penalties against specific companies that violate the rules.
It seems inconceivable that a Biden administration trade agreement would not have enforceable labor and environmental standards. Not only because of Biden’s pledge to create a new “worker-centered” trade policy. But also because it was congressional Democrats that forced Donald Trump to reopen and redo his renegotiated NAFTA to add facility-specific enforcement of labor standards.
If the Biden administration would just release the draft IPEF texts of both the ostensibly complete Pillar 2 on Supply Chains but also the other elements of the deal, we can all know that congratulations and thanks are due. Or, alternatively, that more work is needed to get the USCMA-plus enforceable labor and environmental terms that are needed to create the new worker-centered trade agreement model.
