Enforcement of labor standards in trade agreements: the case of Guatemala

In June 2017, an arbitral panel handed down the first decision interpreting labor provisions in a free trade agreement in a case brought by the US against Guatemala. To the surprise of many labor and human rights advocates, the panel decided that, while the US showed that Guatemala failed to effectively enforce its labor laws in several instances, the US did not prove that Guatemala did so in a manner affecting trade between the parties. The chapter identifies and compares four emerging schools of thought on what the case means for the trade-labor debate, then provides a brief update on fundamental labor rights reform efforts in Guatemala in the aftermath of the panel decision. While the four schools differ on the significance of the case to academic and policy debates on the application of FTA dispute resolution mechanisms to labor standards and the efficacy of FTA dispute resolution mechanisms in general, there is consensus that it was problematic to exclude petitioners and other labor and human rights organizations from the formal arbitration proceedings.