Confusion but not cancellations so far as Guatemala leaders make plans to meet with U.S. labor officials

After the Obama administration notified authorities it would file a complaint alleging labor violations in Guatemala, that country’s government has been doing damage control to alleviate concern among apparel-sourcing customers.

Guatemalan officials said they are taking the situation seriously and will be sitting down with U.S. officials next month to discuss the situation.

The July 30 notification, citing labor regulations under the Central American Free-Trade Agreement, is the first in free-trade history. The United States has never pursued a labor complaint against a free-trade partner. But action has been building.

In April 2008, the AFL-CIO, which opposed the free-trade agreement, and six Guatemalan labor groups accused Guatemala of violating labor standards in the accord. They cited the killings of two union leaders, the firing of workers involved in union activity and the failure to enforce collective bargaining rights.

The complaint has led to confusion among U.S. customers who produce apparel in Guatemala. Vestex, the apparel and textile trade group in Guatemala, is assuring sourcing partners that production timetables haven’t been altered.

Carlos Arias, president of Vestex as well as president of the Denimatrix blue-jeans factory in Guatemala City, sent a letter to various contacts noting that local apparel executives have met with Guatemalan authorities to discuss this matter.

“First, the textile and apparel producers in Guatemala take very seriously our commitment to corporate social responsibility and to maintain the highest levels of compliance in all production facilities,” Arias wrote in the letter. “Second, the CAFTA labor case does not jeopardize the CAFTA duty-free benefits for Guatemalan production. ... In the worst case that a dispute goes forward, the penalty that would be assessed against the Guatemalan government is a monetary one. It will not affect trade.”

Liggia Barrios, the marketing director for Vestex, said no factory orders have been canceled, but there was confusion among clients.

Guatemala is a major producer of T-shirts and knitwear to the U.S. market. Wal-Mart, Target and Kohl’s are frequent users of the Central American country’s apparel factories. Many U.S. apparel makers produce in Guatemala because of its proximity to the United States and duty-free status on garments. In 2009, Guatemala exported $11 billion in apparel to the United States, down from $13.9 billion in 2008.

Solving the problem

Guatemalan officials said they would be meeting with U.S. Secretary of Labor Hilda Solis and U.S. Secretary of Commerce Gary Locke on Sept. 15 to discuss the matter, which could eventually result in a fine of up to $15 million if it were determined that Guatemala had violated CAFTA labor regulations.

In a communiqueacute;, the Guatemalan Ministry of Foreign Affairs said that the government reiterated its firm commitment to protecting labor rights in Guatemala while recognizing the legal and institutional difficulties that still exist for ensuring a system of full protection of these rights.

“Guatemala proposed a broad examination of the enforcement of the treaty several months ago but has not received a response from the Office of the United States Trade Representative. For this reason, the receipt of this communication and, in particular, the way in which it was made public are cause for concern,” the communiqueacute; said.

The office of U.S. Trade Representative Ron Kirk said the U.S. Labor Department in early January issued a report that substantiated many of the labor complaints. The report cited efforts by Guatemalan President Aacute;lvaro Colom to address the problem. But Kirk’s office said that negotiations since then have had limited results.

AFL-CIO President Richard Trumka applauded the Obama administration’s actions to improve labor relations in Guatemala. “Over two years ago, the AFL-CIO and six Guatemalan unions filed a submission with the U.S. Department of Labor depicting the systemic failure of the government of Guatemala to enforce its own labor laws or to take reasonable action to prevent violence against trade unionists,” Trumka said in a statement. “Guatemalan workers have paid a high price for their government’s negligence—numerous workers have been denied their right to unionize or bargain collectively, while others have unfairly lost their jobs and their income. Still, others have tragically lost their lives in their quest to exercise their human rights as workers, while their government refused to act.

“We sincerely hope that these consultations will signal meaningful and lasting change for Guatemalan workers. If consultations fail, however, we call upon our government to prosecute this case vigorously through the dispute-settlement process.”

The Obama administration takes labor violations among free-trade partners seriously. Alleged labor violations in Colombia, where several labor-union leaders have been killed, have held up ratification of the U.S.-Colombian free-trade agreement.