On August 5, the United States Trade Representative tweeted that public comments on its “first-ever anti-forced labor business strategy” were expected. I know it’s a few weeks late, but I can quickly cut to the chase: To help fight worker rights abuses overseas, the United States needs more trade with countries in development, no less.
Labor standards have been part of American trade policy since the McKinley Tariff Act of 1890. Back then, the concern was to ensure that American manufacturers would not have to compete with “condemned labor” cheap abroad. The Tariff Act of 1930 went even further, calling on the government to prohibit “All goods, commodities, articles and commodities extracted, produced or manufactured in whole or in part by convict labor or/and forced labor or/and contract work…”.
These bans, known as “suspension of release orders” (WROs), were rare until 2016. In fact, only 10 were issued from 1930 and none from 2000 to 2016. Conventional wisdom is that this was due to a provision on “consumer demand”, which waived those imports which could not otherwise be obtained.
Section 307 received a facelift in the mid-1980s. The consumer demand provision was removed. WROs have started targeting entire countries, not just specific vendors. Then, in 2017, a WRO was applied to all North Korean imports, based on a “rebuttable presumption” that forced labor is the norm in that country. This reversed the burden of proof, so companies sourcing “in whole or in part” from North Korea had to refute the charges. The 2020 Uyghur Forced Labor Disclosure Act assumes the same for the Xinjiang region of China.
In 2012, the US International Trade Commission reviewed the empirical evidence on whether enforcing labor standards through trade works. He found that Section 307-style measures can help. More importantly, he found that developing countries are not lowering their labor standards to gain trade advantage. On the contrary, those who are more fully engaged in the global economy generally seek higher labor standards.
Congress obviously didn’t get the memo. He started talking about the need to revamp Section 307 as if the International Trade Commission had found the opposite of what it actually reported.
It is not surprising that developing countries are skeptical about the link between trade and labor standards. In 2001, for example, India declared to the World Trade Organization that this link was a Trojan horse of protectionism.
One of the concerns is that labor standards turn into another trade remedy, like an anti-dumping or countervailing duty. Rival US companies, for example, may request WROs for harassing each other’s supply chain in different countries, or if they buy from different suppliers in the same country.
Another concern is that labor standards are more about increasing audit costs than guaranteeing workers’ rights. Like other standards, the extensive auditing and record-keeping requirements are daunting at the best of times, let alone where there is a rebuttal presumption of forced labor.
Suppliers from developing countries and the US companies that source from them need a clear, empirical methodology to prove their compliance with labor standards. Otherwise, Section 307 will increasingly be used as a Trojan horse of protectionism.
Marc L. Busch is the Karl F. Landegger Professor of International Commercial Diplomacy at Georgetown University’s Walsh School of Foreign Service. Follow him on Twitter @marclbusch.