VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES PHAM THI THU LAN MEXICO’S IMPLEMENTATION OF NAFTA LABOUR COMMITMENT AND LESSONS LEARNT FOR VIETNAM Major : International economy Code : 31 01 06 SUMMARY OF DOCTORAL DISSERTATION HANOI - 2019 The Disertation was completed at GRADUATE ACADEMY OF SOCIAL SCIENCES Academic supervisors: Assoc Prof., Dr Nguyen An Ha Assoc Prof., Dr Dang Minh Duc Commentator 1: Prof., Dr Do Duc Binh Commentator 2: Assoc Prof., Dr An Như Hải Commentator 3: Assoc Prof., Dr Trần Thị Lan Hương The Dissertation is to be defended in the presence of the Board of Examiners at the Graduate Academy of Social Sciences on date month year 2019 The Dissertation can be found: National Library Library of Graduate Academy of Social Sciences LIST OF SCIENTIFIC RESEARCH WORKS Pham Thi Thu Lan (2017), "Why wildcats and will always wildcats strikes in Vietnam?”, Global Labour Column, No 290 Pham Thi Thu Lan (2017), "A few thoughts on renovation of the method of union operation in the new context ", Labour and Trade Union Review, No 623 and 624, pp.18-19,24 Pham Thi Thu Lan (2017), "Bringing labour standards into FTAs: Economic opportunities and challenges for developing countries", Labour and Trade Union Review, No 632 pp.10-11 Pham Thi Thu Lan (2017), " Some typical cases on complaints of Mexico's implementation of labour standards and lessons learnt for Vietnam", Labour and Trade Union Review, No 634, pp.10-11 Pham Thi Thu Lan (2017), “Role of trade unions in socio-ecological transformation in Vietnam””, Quỹ Rosa Luxemburg Bullentin – South East Asia, No - 2017 Pham Thi Thu Lan (2018), "Research of labour standards in economic development and the Mexico case ", Socio-economic Information and Forcast Review, No 147, pp.33-36 Pham Thi Thu Lan (2019), “Labour regulations in the North American Free Trade Agreement and the implementation by Mexico”, Vietnam Social Science Magazin, No 3/2019 Pham Thi Thu Lan (2019), “The consequences of low wages – a look at garment enterprises”, Labour and Trade Union Review, No 650, March 2019 Pham Thi Thu Lan (2019), “Employment in the fourth industrial revolution and challenges for Vietnamese human resources”, Labour and Trade Union Review, No 651, April 2019 INTRODUCTION The necessity of the Dissertation The increase of free trade agreements (FTAs) with labour commitment affirms the fact that in the current development trend, the economic aspect and the labour aspect cannot be separated Vietnam, with its entry in new-aged FTAs, is required to attach more attention to the implementation of labour standards so as to make use of the advantages of it for economic development and, at the same time, not affected by trade sanctions, anti-dumping or trade protection laws of other countries, as well as leaving no social consequences Vietnam has never had experience in implementing labour commitment, while this fact has been in the world for 25 years and Mexico was the first developing country with NAFTA in 1994 Therefore, it is necessary to study the experience of developing countries The research questions include: What are the comparative advantages that labour standards bring about for countries in today's global economy? How does Mexico implement its labour commitment in NAFTA and does it make use of such comparative advantages of labour standards? What are the current development viewpoints and how can countries to take advantage of high labour standards for economic development? Why countries still compete with low labour standards? These are important research questions to help Vietnam envision the process of implementing the labour commitment in a developing country, the problems encountered and how to deal with them so as to make use of opportunities and limit challenges The research questions show the urgency of the research topic for Vietnam, especially when the National Assembly of Vietnam has agreed to ratify the Trans-Pacific Comprehensive and Progressive Partnership Agreement (CPTPP) in November 2018 and the European Commission approved the Vietnam - European Union Free Trade Agreement (EVFTAs) in October 2018 In addition to complying with commitment in the FTAs, the implementation of labour standards also derives from the internal requirements of Vietnam Despite exceeding the threshold of low-income countries, Vietnam is still a low-middle income country Although many households escape poverty, their income level is still near the poverty line, so the number of near-poor households is still very high The poverty rate is still high Moreover, poverty also means being denied basic rights, social marginalized, unsecured rights such as the right to appropriate living standards, especially food and clothes, housing, social security rights, access to basic services on health, education, clean water, information, the rights to dialogue, negotiation and participation in decisionmaking on issues related to employment, salary, working conditions Implementing labour standards will help Vietnam achieve its goals of sustainable development and contribute to comprehensive, balanced and inclusive development With requirements of both international integration and domestic development needs, the Dissertation helps Vietnam envision and choose the appropriate way to go in the coming integration period The purpose and research tasks Purpose: The Dissertation studies the experience of the first developing country in the world participating in FTAs with labour commitment to draw lessons for Vietnam in implementing its commitment in CPTPP and EVFTA Research tasks: (i) systematizing the theoretical basis of the implementation of labour commitment in FTA, clarifying labour standards and comparative advantages in the framework of FTA commitment, opportunities and challenges for developing countries; (ii) analyzing and evaluating the implementation of the NAFTA labour commitment in Mexico, clarifying the successes and limitations of implementation and pointing out the cause of this situation; (iii) comparing the similarities and differences between Vietnam and Mexico, thereby drawing lessons and recommendations for Vietnam to effectively implement its labour commitment in CPTPP and EVFTA effectively Research hypothesis: The implementation of labour commitment in NAFTA has helped Mexico develop both economically and socially during the last 25 years and Mexico continues to benefit from NAFTA in the future The object and scope of research Object of research: The Dissertation examines the content related to the implementation of Mexico's labour commitmens in NAFTA Scope of research: In the field of international economy, the Dissertation focuses on researching socio-economic aspects of labour, analyzing and assessing the impact of the implementation of labour commitment on the socio-economic aspects of Mexico, and not going in-depth into the political and other aspects Political aspect, if mentioned, is only to clarify points of arguments Content limit: The implementation of labour commitment in FTAs (object of research) is different from the implementation of labour standards stipulated in FTAs inside the country The Dissertation still presents the implementation of labour standards of Mexico inside the country just to understand the situation of labour standards of Mexico but does not deeply analyze this area (which belongs to the internal aspect of the country), as each labour standard is a very broad topic, covering all aspects of implementation related to the implementation viewpoint, the debate and struggle for implementation among parties and labour relations actors, the change of political institutions, the process of building domestic laws and the process of implementing labour standards related to mediation, arbitration, court, labour inspection, handling dispute cases and complaints, domestic lawsuits, , let alone mentioning corruption and unfair trial, so if in-depth analysis is done, it may go beyond the scope of the Dissertation (i.e beyond the framework of NAFTA) The method and approach Research methods: The Dissertation uses a combination of research methods: (i) Studying economics with the theories of free trade and the theories of macroeconomics, micro economics, so on, economic rules of supply and demand, competition, distribution of income by labour, opportunity costs and efficiency, specialization, so on; (ii) Retrospective materials, analysis and synthesis of secondary documents, using reliable sources of prestigious scholars; inheriting existing studies; comparing, evaluating, systematizing arguments and problems, analyzing Mexican cases, drawing facts and drawing scientific conclusions; (iii) Analysis and comparison with assessing Mexican practices, comparing and analyzing development trends, forecasting issues and drawing lessons for Vietnam in choosing the path of development and implementing labour commitment in FTAs; (iv) Survey and expert interviews to assess practices of Vietnam in implementation of labour standards, combining retrospective documents with practical surveys, interviewing labour experts and officials of Department of Labour, industry and trade bureaus, enterprise managers, trade unionists and workers Approaches: The Dissertation uses the following approaches: (i) Historical approach: considering the origin, the rule and the trend of significance to understand the issues of labour standards and its link to trade and economic development; (ii) Systematic approach: analyzing and assessing the issues of inter-sectoral interaction, finding a link of labour standards with trade liberalization and economic development, between aspects of economics and international economy and sociology; (iii) Interdisciplinary approach: The Dissertation uses a combination of methods of social sciences such as economics, international economy, sociology and others to clarify the intertwined issues between labour and economy, and labour - economy - development New scientific contributions of the Dissertation The Dissertation systematized theoretical basis about implementation of labour commitment in FTAs and comparative advantages of labour standards in the global economy; indicating the downside of economic development with low labour standards; clarifying opportunities challenges to developing countries joining new-aged FTAs in case of not converting to applying high labour standards The Dissertation analyzed and demonstrated the status of Mexico's implementation of NAFTA labour commitments; assessing good points and bad points; finding the reasons why Mexico (and some other countries) still compete with low labour standards Grom the reality of Mexico’s implementation, based on the viewpoint of Vietnam implementing labour commitments in new-aged FTAs for inclusive development, the Dissertation analyzed labour practices in Vietnam, compared similarities and differences between Vietnam and Mexico, drew lessons learnt for Vietnam to well implement labour commitments in order to create comparative advantages for the national economy in the context of new-aged FTAs international economic integration with changed competitive factors, not only competing on prices but also competing on labour standards For bringing into full play the advantages of labour standards for economic development, the Dissertation makes some recommendations on immediate, practical and feasible solutions for Vietnam to transition to high labour standards in a sustainable way The theoretical and practical significance of the Dissertation The Dissertation is of theoretical significance, clarifying the relationship between labour standards and economic efficiency, the relationship between labour standards and competitive advantages, the importance of labour standards in the global economy through FTAs integration, the importance of choosing viewspoints and models of development in the current period and the need to move from competition using low labour standards to competition using high labour standards The Dissertation is of practical significance, as a reference for state agencies in the process of policy-making in the field of labour and economy, and choosing a development model for more effective integration in the global economy The Dissertation helps the parties visualize the opportunities and challenges posed by participating in FTAs with labour commitment, selecting ways to implement labour commitment to make the most of the benefits of labour standards and limiting challenges The results of the Dissertation are also documents in teaching and research To a certain extent, the Dissertation contributes the theoretical and practical significance related to political and security aspects Structure of the Dissertation In addition to the introduction, conclusions and appendices, the Dissertation is structured in chapters Chapter 1: Overview of research works related to the Dissertation topic; Chapter 2: Some basic theoretical and practical issues for implementing labour commitment in FTAs; Chapter 3: Mexico's implementation of labour commitment in NAFTA; Chapter 4: Implications and lessons for Vietnam in implementing labour commitment of new-aged FTAs Chapter 1: OVERVIEW OF RESEARCH WORKS RELATED TO THE TOPIC OF THE DISSERTATION 1.1 Research works outside the country 1.2 Reseach works inside the country 1.3 A few comments on the research situation Overview of reseach works inside and outside the country shows that the research on labour standards is very rich, covering various aspects related to the dissertation topic Firstly, all research works affirmed the importance of labour standards in the current global economy, asserted that trade liberalization was bringing many benefits to the nation but also posing many social problems, and affirmed that high labour standards created comparative advantages for countries and contributed to economic development Secondly, studies confirmed that linking labour to trade through FTAs have become a trend even though there have been protests from some countries, especially developing countries Many problems of employment, wages, informalization, inequality, etc were discovered in the process of trade liberalization, and the inclusion of labour standards in FTAs with conditions imposed for implementation, showed the importance of labour standards in the current global economy Thirdly, Mexico is the first developing country to implement labour commitment in the FTAs with both opportunities and challenges created in the process, while Vietnam has no experience of implementing the FTA labour commitment, and there has been no specific research on this area in Vietnam Studies both at home and abroad are numerous, but they have not yet made the reader understand the nature of labour standards as committed in FTAs, resulting in fears of implementation and the assumption that when high labour standards is implemented, it will reduce the competitiveness of businesses They not clarify the relationship between labour standards and development perspectives and the importance of labour standards in global competition (or, in other words, they does not clarify the changed competitive factors in the current global economy) They not synthesize and evaluate the implementation of the NAFTA labour commitment in Mexico (or implementation of labour commitment in FTAs by developing countries) They also not analyze the causes why Mexico (and some other countries) still compete on low labour standards The available studies have also not yet summarized the experience of any country in the world to draw lessons for developing countries in implementing labour commitment effectively without leaving behind any consequences These gaps can be understood in practice of some countries, but has not been clearly written in the research works These are the areas that the Dissertation is focused on Chapter 2: THEORETICAL BASIS ABOUT IMPLEMENTATION OF LABOUR COMMITMENT IN FREE TRADE AGREEMENTS 2.1 Labour commitment and characteristics of labour standards as committed in free trade agreements 2.1.1 Concepts 2.1.2 Content of labour commitment in FTAs The core labour standards are the labour standards on four clusters of rights defined in the eight core ILO conventions and are the main labour commitment in FTAs, namely: (1) Convention No 87 and 98 on the rights to organize, freedom of association and collective bargaining; (2) Conventions No 29 and 105 on forced labour; (3) Convention No 138 and 182 on minimum working age and elimination of child labour; (4) Conventions No 100 and 111 on nondiscrimination on employment and occupation and ensuring equal pay between men and women In addition to the core labour standards, the labour commitments in FTAs also includes the implementation of a number of other specific labour standards of wages, occupational safety and health and working hours at "acceptable" levels 2.1.3 Characteristics of labour standards as FTAs commitment Labour standards promoted through FTAs are ILO's core labour standards These labour standards only stipulate fundamental rights, including no child labour and no forced labour, equality at work, ensuring that the industrial relations parties have the rights to establish their own organizations to engage in dialogue, collective bargaining and make decision on workplace issues, thereby creating an enabling environment for making decisions based on negotiations of specific terms and regulations in various enterprises In the case of an enterprise facing difficulties, or at risk of bankruptcy, workers need to understand and share with enterprises to overcome difficulties so as to maintain the survival of the business, and therefore, also maintain the job of workers In case of growth, enterprises need to make a fair and equitable share for employees, compensating for workers for their contributions to business development Core labour standards not mean that labour costs are too high that the enterprise cannot survive The objective of the dialogue and negotiation mechanism is to find a suitable, win win solution, to satisfy both parties, and thereby helping create a work environment stable, harmonious and progressive Labour standards are promoted through a variety of mechanisms: social clauses in the World Trade Organization (WTO), labour commitment in the FTAs, labour standards requirements of export markets, buyers’ requirements for the implementation of corporate social responsibility, discussion in bilateral relations, etc Unilateral measures could be applied by developed countries in its relationship with developing countries, for example, trade protection and dumping lawsuits if countries apply low labour standards to specific items In addition, civil society organizations and consumer associations could exert pressure at various forums or call for boycott of products of a country, thereby affecting its national interests In fact, there has been a country that was "boycotted" for bad practices of labour standards (Burma's case in 2000), showing the importance of labour standards in the global economy today 2.2 Labour standards as comparative advantages The economic theories of Adam Smith, Ricardo and Heckscher-Ohlin all affirm that labour standards create competitive advantages for countries 2.2.1 The relationship between labour standards and economic efficiency Economic theories and practice of application of labour standards affirm that labour standards bring about economic efficiency Labour standards on wages, working conditions, working hours give employees work motivation and job satisfaction, thereby increasing individual labour productivity Occupational safety and health standards help production reduce the risk of occupational accidents and diseases, thereby saving compensation and remedial costs for employers and reducing the burden on society and the medical system Vocational training helps workers improve their skills, change careers and helps the labour force adapt to changing nature of work, especially during the fourth industrial revolution (I 4.0) that is taking place Unemployment benefits and job protection help workers to accept the risk of losing their jobs for creativity Active labour market policies help create flexibility in labour supply and demand, thereby creating opportunities for workers to work in their professional area to maximize their capability of labour creativity Freedom of association and collective bargaining help reduce labour conflicts and increase coordination between the two sides in production, work together to solve difficulties and share achievements together, helping the economy to adjust faster to economic shocks, increasing the competitiveness of the economy, building trust among parties in labour relations and working together towards a common goal 2.2.2 Advantages and disadvantages of low labour standards Theoretical base and practice show that low labour standards mean that the rights of workers are not guaranteed, thus resulting in low wages, poor working conditions; labour inspections are ineffective, leading to violations of labour standards; then many problems have arisen in the field of labour Low labour standard creates an only competitive advantage of low labour costs Countries often apply low labour standards to attract FDI and the competition by using low labour standards takes place at the global level over the past two decades, leading to "a race to the bottom" (cutting labour costs for competition) Except for the unique advantage as mentioned above, low labour standards have many disadvantages for the country, including: social consequences of high rates of poverty when workers come out of their working age, leaving a burden for the medical and social security system; restraining the development of human 2.2.4 Enforcement mechanism of labour commitment The labour commitment in FTAs in the world are divided into two groups with two different enforcement mechanisms: conditional or promotional Conditional mechanism is often applied in FTAs with the US involvement with measures of fines or preferential trade cuts, while promotional mechanism is adopted by the European Union using incentives and development aids to encourage implementation of labour standards 2.3.5 Contents of implemention of labour commitment Implementing entity: the main actor is the government with building appropriate laws and ensuring compliance of enterprises Implementation process: The process of implementing labour commitment depends on the specific provisions of the FTAs for each country regarding the roadmap to revise the law and implement the recommendations of the FTAs parties for each labour standard The content, level and practice of implementing labour standards commitment of different countries are different, so the requirements, recommendations and roadmap for implementation of labour commitment of different countries is also different Specific measures: points: - Amending and supplementing the national labour law to conform to the core labour standards (labour standards on rights) as committed in the FTAs; - Ratifying international labour conventions according to the committed roadmap; - Establishing appropriate labour mechanisms and institutions to implement labour standards; - Ensuring labour standards are fully and effectively implemented in practice 2.3.6 Evaluation mechanism for implementation of labour standards and labour commitment Evaluation on implementation of labour standards There are many mechanisms to evaluate the labour standards implementation of a country whether it is good or bad: through a consultative mechanism between FTAs member governments, through ILO monitoring mechanisms, through ratings by International Trade Union Confederation (ITUC) on the implementation of labour standards in countries, through the opinions of non-governmental organizations and civil society, so on Evaluation criteria of implementation of labour commitment includes: - Technical criteria: Assess whether the above specific measures are fully complied with and implemented, for example: regular meetings, situation reports, cooperation, information exchange, resource allocation .; amending the law in accordance with international law; law enforcement of guaranteeing no violations; or promptly remedy and solve effectively if there is any complaints 10 - Content criterion: Assessing the situation of labour violations, the number of complaints and the nature of complaints, ie case of violation or systematic violation, the process of resolving complaints if it is positive and timely and efficiently or not, and then, whether countries in question repeat the same violation or not - Result criteria: whether or not the implementation of labour commitment affects the commercial relations of the parties; the parties are satisfied or dissatisfied with each other; and labour issues become factors affecting the future of the relationship or not The evaluation of labour standards implementation is the foundation to evaluate the results of implementing labour commitment in FTA If labour standards as committed is complied well within the country, there will usually be no complaints made to the FTA parties on the non-fulfillment of commitments and vice versa At the same time, if countries perform well over the years, they will often be upgraded in the annual assessment of ILO and ITUC 2.3.7 Factors affecting the implementation of labour commitment The process of implementing labour commitment in the FTAs will be affected by the following factors: national political institutions, lobbying activities and influence of interest groups during the revision of labour laws, the level of economic development and the viewpoint of prioritizing economic development, awareness and culture of "circumventing the law" by employers, ineffective labour inspections and sanctions system, and corruption which impedes strict law enforcement 2.4 Opportunities and challenges of labour commitment implementation 2.4.1 Some opportunities: Labour commitment in FTAs provide opportunities for reform of domestic labour laws and institutions, development of trade relations with developed countries, attraction of foreign investment and expansion of exports 2.4.2 Some challenges: If labour commitment is not complied with, countries may face the following challenges: labour standards may be used for the purpose of trade protection or sued for dumping; possible sanctions; risk of facing international complaints; the challenge of transnational pressure when violating committed labour standards Chapter 3: ANALYSIS AND ASSESSMENT OF MEXICO'S IMPLEMENTATION OF NAFTA LABOUR COMMITMENT 3.1 Mexico's socio-economic context at time of NAFTA signature and at present Mexico in 1994 faced many problems such as foreign debt, peso devaluation, unprecedented inflation and many seriously industries affected Economic problems entail political-social issues: Chiapas rebellions, assassination 11 of presidential candidate of the ruling party, assassination of the Party's general secretary, causing social instability Mexico's important decision to revive the economy is to join the North American Free Trade Agreement (NAFTA) As a result, Mexico moved from a most protected economy into the most open economy in the world by eliminating many trade barriers and bringing about positive economic impacts, being one in the world's largest economies today However, at present, Mexico faces many social problems, income inequality, disparities between rich and poor, strikes, violence, 3.2 North American Free Trade Agreement (NAFTA) NAFTA signed in 1994 is the first FTAs between North-South countries, and also the first FTAs with labour commitmens, signed in a side agreement, ie the North American Agreement on Labour Cooperation (NAALC) NAALC has opened an opportunity of collaboration to address labour issues among the three NAFTA member states to improve labour situation, especially for Mexico as a developing country The idea of bringing labour commitment into NAFTA comes from the US trade unions, environmental groups and a number of other civil society organizations to address their concerns that low labour and environmental standards in Mexico will attract American businesses to move to Mexico, causing job loss for American workers To alleviate this objection, the US government proposed Mexico to pledge guarantee of labour (and environmental) standards, thus bringing labour commitment into NAFTA through NAALC At the same time, the US government promised a plan to train and help American workers who lose their jobs Although the promises did not satisfy the opposing groups, on the 12 August 1992, the Agreement was signed and approved on January 1, 1994 On the Mexican side, the Mexican Government affirmed that improving labour standards was Mexico's desire to meet the demands of the economy, and at the same time, Mexico had no other choice when facing the pressure of the civil society from the American side and it must accept NAFTA with labour provisions, for "exchange of" trade relations with the US and Canada to revive the economy 3.2.1 Substance of labour commitment in NAFTA NAFTA's labour commitment not require contracting parties to harmonize labour laws between member countries, nor impose laws or regulations of one country on the another but require countries to implement the following labour standards in accordance with national laws, including: freedom of association, collective bargaining, right to strike; strictly prohibiting forced labour; prohibiting the use of child labour; eliminating all employment and occupational discrimination; equal pay between men and women; ensuring minimum wage, working time, overtime wages according to the national law; prevention of occupational accidents and occupational diseases; appropriate 12 compensation for workers when labour accidents and occupational diseases occur; protecting migrant workers working abroad 3.2.2 Mechanism for implementing labour commitment in NAFTA The institutions are established under NAFTA to enforce labour commitment, including: (a) Establishing the Labour Cooperation Committee composing of the Ministerial Council and the Secretariat, which oversees the implementation of labour standards, conducts cooperation and technical assistance, consultations and answers questions and disagreements that arise, (b) The National Administration Office (NAO) is the focal point to contact with the parties and provide required reports, receive and process complaints and information about situation and progress of complaints (c) National committees, including the National Advisory Committee and the Government Committee: play the role of advising the parties in the implementation of labour commitment Grievance handling mechanism: Complaints about violating labour standards lodged by an individual or organization will often be the beginning of the case regarding the impementation of labour committments The process for resolving complaints will follow the following five steps: Figure: NAFTA grievance handling process (source: Dissertation author) 3.3 Mexico’s implementation of labour commitment 3.3.1 Measures and institutions for implementation a) Amending labour legislation in accordance with committed labour standards Among eight core ILO conventions, Mexico has ratified conventions Particularly for Convention 98 on collective bargaining, Mexico has not ratified until September 20, 2018 However, before that, the national legislation of Mexico on collective bargaining is not contrary to the principles of Convention 98 Therefore, among NAFTA's committed labour standards, Mexico must implement eight labour standards in accordance with the ratified conventions Other labour standards on employment, minimum wage, occupational safety, vocational training, etc are guaranteed under the national law Higher labour standards will be based on dialogues, negotiations and collective bargaining between labour relations parties b) Establishing institutions to enforce the labour commitment 13 After NAALC came into effect, Mexico formed institutions as commited in NAALC, including the Labour Cooperation Committee, the National Administration Office (NAO) and advisory committees for the government It is noted that many institutions are created on the basis of recommendations after the complaints, specifically: (i) offices specializing in specific issues of the Secretariat to investigate labour issues such as: child labour, female workers, people with disabilities, gender equality ; (ii) improving the labour inspection system, increasing the inspection budget, training inspectors, improving the quality of inspection, significantly increasing the number of inspectors and the number of enterprises inspected by labour inspections; (iii) establishing many Arbitral Committees to resolve labour disputes; (iv) applying a secret ballot in all labour issues Most recently, in 2016, in response to regulatory and institutional pressures, Mexico decided to revise the law with specific revisions: (i) abolishing existing reconciliation and arbitration committees and move the legal functions of these committees to the judiciary, establishing a new "specialized and unbiased" state and federal mediation center to conduct mediation before taken to court; (ii) the administrative functions of the old reconciliation and arbitration committees, for example, union registration, are assigned to a new, unbiased and professional federal agency The chairman of this agency is elected by the National Assembly The renegotiated NAFTA in 2018, named USCMA (also called NAFTA 2018) required Mexico to: (i) establish an "unbiased" labour court system to resolve labour disputes; (ii) establishing an independent body in charge of registration of collective agreements; (iii) ensuring that all workers have the right to access collective bargaining and all agreements must prove to be agreed by workers by secret ballots These requirements of institutional and legislative improvement show that the mode of dialogues, negotiations and collective bargaining in establishing labour standards is taken with interest 3.3.2 The implementation of labour standards in Mexico Although the Mexican legal system regulates labour standards committed in NAFTA as relatively good, there are many concerns about the implementation of labour standards in Mexico in practice Freedom of association and collective bargaining has always been attacked with serious cases such as union officials and workers are threatened or killed for exercising union rights Forced labour and child labour are still quite common, especially on farms of vegetables and crops, with working conditions like slavery such as human trafficking, debt repayment labour, forced marriage to housework, exploitation of sex work, Discrimination of employment and occupation between male and female workers is not resolved; average income of male workers is still 29.3% higher than that of female workers Female workers face barriers in recruitment, advancement, etc., such as the requirement for pregnancy testing in recruitment, denying job opportunities to 14 indigenous people and African people, losing jobs for victims of sexual harassment and abuse Informal employments increase Labour accidents and occupational diseases still account for 34% of the total number of workers Migrant workers working in America are not protected, have lower wages than those from other countries and still live in poverty 3.3.3 NAFTA's impact on Mexican economy and society The economic impact is the most positive effect that NAFTA brings to Mexico In 1994, Mexico suffered an economic crisis but in the next five or ten years, Mexico's economic growth reached 6.6% (2000), 4.1% (2004) and 5.1% (2006) In 2016, Mexico GDP reached 1.047 trillion US dollars So far, Mexico has reduced public debt, balanced the budget, stabilized inflation and increased foreign exchange reserves and become the second largest economy in Latin America FDI investment in Mexico increased significantly During 1999-2016, more than 50% of foreign investment poured into Mexico from the two partner countries in NAFTA If comparing the two periods 1970-1993 and 1994-2016, the ratio of FDI to GDP increased from 0.8% to 3.2% The proportion of exports by GDP increased sharply, from 13.33% to 38.16% in 2016 The proportion of industrial products in total exports accounted for 75% The United States and Canada have always been Mexico's main export markets In 1993, the total trade volume between Mexico and two NAFTA partners was 30.9% By 2016, this number had increased to 51%, exceeding the threshold of USD 1,000 billion in 2015 and 2016 However, besides positive impact, Mexican agriculture suffered from US protectionism Cheap farm produced from the United States pour into Mexico, causing many farmers into bankruptcy At the same time, many domestic industries also suffer from decrease or bankruptcy The social impact contrasts with the economic impact Although the employment rate in Mexico increased, especially in manufacturing, but overall, the unemployment rate in Mexico in 2012 (after 18 years NAFTA) was 5.0%, and now (after 25 years) ) is 3.2%, compared with the unemployment rate of the 19901994 period of 3.1% There are years when unemployment rate is up to 7.2% (2000) To a certain extent, NAFTA contributes to wage increases for workers, but wage increases not match the increase in labour productivity (economic share is not fair) Nominal wages increased, but real wages were almost unchanged from 1994 to now, only about a 2.3% increase, and only marginally higher than those of 1980 Although, many jobs were created, but informal employments increase in most industries Half of the population is still stuck in poverty and a quarter is in danger of returning to poverty According to Sierra Club, 75% of Mexicans live in poverty in 2001 compared to 49% in 1981 According to Unicef, 40 million Mexican children live in poverty and 4.7 million are in extreme poverty Mexico is ranked among the world's largest rich and poor countries According to the ranking of happiness in the period 2014-2016, Mexico ranked 25th compared to the level of happiness of American ranked the 14th and 15 Canada ranked the 7th Despite economic development achievements, President Enrique Nieto admitted that that the number of poor people in Mexico still lives "backward and poor" is high and rising inequality NAFTA helps Mexico to develop the economy but does not help Mexico a balanced development and not reduce the social development gap between Mexico and the two partners, i.e the US and Canada as expected when NAFTA was negotiated 3.4 Assessment of Mexico's implementation of labour commitment The implementation of Mexico's labour commitment shows that Mexico has well implemented technical criteria, but has not yet implemented the content criteria and result criteria, shown in the following points: 3.4.1 Mexico implements labour commitment in a passive way and reacts to the situation Before NAFTA, domestic labour standards violations were handled within the country After NAFTA, some unresolved violations were addressed at the international level Mexico did not proactively address violations that lead to many international submissions Initially, Mexico refused or denied, so these cases were often resolved only when the hearing was brought up, or discussions were held at international seminars and conferences The process of resolving cases of submissions was lengthy, putting pressure on the government of Mexico which made it unable to continue "ignoring" criticism and forced it to accept "give or take" Enterprises themselves, when often named at international forums, also found it necessary to modify their behavior Mexico's practice showed that Mexico did not actively handle violations and only acted when submissions were sent to NAOs and under international pressure 3.4.2 Mexico still utilizes the comparative advantage of low labour standards but not high labour standards The passive and reactive implementation of labour standards shows that Mexico has not recognized the benefits of high labour standards for economic development, and therefore, has not taken appropriate steps to improve labour standards for the benefits of high labour standards to be promoted After 25 years with spectacular economic development, Mexico still faces a widening gap between the rich and the poor, increasing informal employment, almost unincreased wages, and unimproved quality of jobs People not feel happier and the country is still in a state of "backward and poor" 3.4.3 Facing many international submissions: challenging national interests Since NAFTA, Mexico has been continuously facing international complaints about labour standards violations, including cases of corporate-level violations and systematic violations, requiring amendments and supplements of laws and institutions, demanding specific government measures to effectively enforce the law and prevent continued violations Mexico faced double submissions than the US and 16 times more than Canada These cases cost a lot of time, finance and resources to resolve The not-so-good implementation of 16 Mexico's labour commitment is one of the main causes leading to NAFTA renegotiation which then poses challenges to Mexico's national interests 3.4.4 Faced with transnational pressure on labour standards: damaging Mexico’s prestige and image on the international arena NAFTA creates a "stage" for cooperation between labour groups and NGOs in NAFTA participating countries to jointly appeal There are cases of up to 65 interested groups in both the US, Canada and Mexico joining hands and signing on the submission, and the result of improvement of labour standards is mainly due to pressure of this international linkage for joint submissions 3.4.5 Not good implementation of labour standards: the risk of social and political instability Low wages, unsecured working conditions, poverty, etc are the causes of many strikes and collective work stoppages in Mexico and often lead to violence and police intervention with dead and injured people, act of fire, smashing, etc., causing social disturbance Poverty is associated with increased crime, drug trafficking, murder, kidnapping, etc According to a referendum, about 72% of Mexican people not believe in the Government and 82% not believe in political parties This shows the risk of social and political instability in Mexico 3.4.6 NAFTA re-negotiation: affecting Mexico's future development The re-negotiated version of NAFTA 1994 (NAFTA 2018) puts the content of labour at the heart of the negotiation and labour commitment are treated equal with trade and investment commitment, that is sharing the same enforcement and punishment mechanisms for violations Therefore, if Mexico continues to implement labour standards in a passive way and continue to let violations occur and repreat as well as delay in addressing the complaints and cases of submission, delay in revising the law and enforcing the law effectively, labour standards can become a detrimental factor for Mexico's trade and investment in the coming period 3.4 Some reasons why Mexico still competes by using low labour standards (a) Still focus on "economic priority" The economic race is not making countries reconsider their path of development and neither does Mexico (b) The defects of the development model have not been clearly seen Governments have not yet acknowledged the fact that the sharing of the "economy" for "society" and "environment" is not commensurate with the economic benefits gained from the policy "prioritizing economic development" (c) The benefits of high labour standards have not been clearly acknowledged Many governments and employers only look at the immediate benefits of low labour standards Nowadays, labour standards are directly linked to export and the export market's requirements are anti-dumping and anti - “race to the bottom”, but this has not been clearly recognized by the government and employers 17 (d) No want of having decision-making power reduced at both the corporate and national levels High labour standards require labour relations actors to engage in dialogues, negotiations, collective bargaining and jointly make decisions on related issues at workplaces and at the national level as well This would lessens the decision-making power of those who have the right to make decisions and they don't want it (e) Loss of immediate profits from low labour costs if high labour standards are implemented Employers and governments only see high labour standards in that they increase costs of production and affect cost advantages but not see that this can be fully offset by government support measures and tax reduction roadmap from joining FTAs (f) Lack of consumer role Consumers in developing countries not pay much attention to the humanity of products regarding the labour aspect of products and they are still attracted by cheap products Therefore, they have not jumped on the band wagon to improve labour standards in their countries (h) Political barriers Although this is not the research area of the dissertation, in fact, the big concern that some countries, especially unitary countries fail to implement labour standards is the political reason, especially regarding the labour standards on freedom of association and right to strike Governments is worried that these rights may be used for political purposes, which may affect the leadership of the party or political instability In this regard, according to international standards, labour standards used for political purposes are contrary to the spirit of labour standards committed in the FTAs, meaning that countries and governments have absolutely the right to build institutions and take necessary measures to prevent them Chapter 4: IMPLICATIONS AND LESSONS FOR VIETNAM IN IMPLEMENTING LABOUR COMMITMENT OF THE NEW-AGED FTAs 4.1 The Vietnamese context in comparion with Mexico 4.1.1 Current socio-economic context of Vietnam Vietnam started a "renovation" policy in 1986 Ten years later, the country had moved out of the economic and social crisis In 2009, the country escaped from the situation of a poor and underdeveloped country and was classified as a middle-income country in the world Over the past 20 years, the economy has grown rapidly with an average growth rate of 7.2% GDP per capita reached 1,168 USD in 2010, 1,900 USD in 2014 and was estimated at 2,540 USD in 2018 4.1.2 Labour commitment in new-aged FTAs The FTAs Vietnam has entered into include multilateral FTAs with ASEAN countries, Korea, Japan, China and some other countries, but these FTAs not have labour commitment The first two FTAs with labour commitment that Vietnam is a member are CPTPP and EVFTAs 18 The content of labour commitment in EVFTAs: Member States commit to respect, promote and effectively implement the four ILO core labour standards, stated in the 1998 ILO Declaration; make continuous and sustained efforts to ratify unapproved fundamental conventions; continue to consider approving other ILO valid conventions; effectively implement the ILO's ratified conventions in laws and practices; does not violate fundamental labour standards for competitive advantage; not use fundamental labour standards for trade protection purposes The content of labour commitment in CPTPP: Member countries must adopt and maintain four core labour standard in the ILO's 1998 Declaration "Adopt" means incoporating labour commitment into each country's legal system; "Maintain" means to implement effectively and fruitfully the commitment in practice Thus, labour commitment in the new-aged FTAs is often to require countries to ensure ILO's core labour standards through the enforcement mechanism of the FTAs 4.1.3 Reality of Vietnam’s implementation of labour commitment The viewpoint of Vietnam is to improve the domestic labour standards on par with international labour standards, which is expressed in the documents: Resolution No.22-NQ/TW dated 10 April 2013 of the Politburo, Decision No.2528/QD-TTg dated December 31, 2015 of the Prime Minister, Decision No.145/QD-TTg dated January 20, 2016 of the Prime Minister, Resolution No.06/NQ-TW dated November 5, 2016 of the Party Central Committee, Action program to implement Resolution No.06/NQ-TW dated November 5, 2016 of the Central Executive Committee Like many other developing countries, since the ”renovation” policy, Vietnam has prioritized economic development To achieve this goal, Vietnam wishes to build harmonious labour relations (Resolution 97/NQ-CP 2014 of the Government) to create a stable environment for economic development However, the way to implement harmonious labour relations taken by Vietnam is not sustainable, leading to many violations of labour laws, discrimination, manipulation, interference and lack of goodwill by employers, causing many labour problems shown by the reality of nearly 7000 strikes from 1995 up to now and this is a challenge for social development 4.1.4 Challenges of Vietnam's implementation of labour commitment Regarding amendments of the law: According to the commitment, Vietnam needs to amend the law to ensure compliance with core labour standards, but this process will face with difficulties, due to: (i) limited awareness of core labour standards by labour relations actors, law makers and related agencies involved in the revision of the law, in particular, and limited awareness by the society, in general; (ii) Vietnamese law applies the civil law system while labour issues are diverse and abundant, so the law revision not keep up with changes in the labour market; (iii) Vietnam has not ratified out of core conventions, so there 19 is no basis of reference for the development of a “standard” labour law system, due to the possibility of lobby by labour relations actors and interest groups, which may make the law revision deviated Regarding implementation in practice: Vietnam is a developing country in a transition to a market economy, so the labour law is not completed and violations of the labour law are quite common Wages in Vietnam compared to other countries in the region is considered low and not ensuring the lives of workers In labour-intensive industries such as textiles, footwear, electronics, workers have to work overtime a lot to supplement their daily expenses Labour safety is unsecured and the number of occupational accidents is high In 2017 alone, across the country, 8,956 occupational accidents occurred and 9,173 victims Working environment is still polluted The quality of vocational training is still low, not meeting the practical needs of enterprises and labour market requirements Social insurance debt makes many workers fall into the situation of losing their jobs without social security Discrimination, child labour and forced labour exist, and are not been handled promptly 4.1.5 The similarities and differences between Vietnam and Mexico related to the implementation of labour commitment Although both are developing countries, Vietnam has a one-party, oneunion political system, unlike Mexico which is a multi-party and multi-union nation Mexico has 25 years of experience in implementing NAFTA labour commitment while Vietnam has not experienced any Current NAFTA have more stringent enforcement and sanctions than NAFTA 1994 Vietnam's ratification of Convention 98 on collective bargaining 15 days just before the EVFTA was signed on June 30, 2019 compared to Mexico has only ratified Convention 98 on September 20, 2018 after 24 years of NAFTA’s effect and right at the time of renegotiation of NAFTA shows the importance of labour standards in the current period Mexico's legal system is basically compatible with NAFTA's labour regulations while Vietnam's legal system has many incompatible points, requiring fundamental amendments For Mexico, the issue is much related to law enforcement, and if necessary, institutional reforms are needed to effectively enforce the law while for Vietnam, it requires both amendments to the law and enforcement, including reforms of institutions This will make Vietnam face a much more radical change, more fundamental and profound than Mexico, which poses much more difficulties and bigger challenges for Vietnam In addition, Mexico now has an open and well-developed economy, so it is more favourable than Vietnam However, Vietnam is more favorable than Mexico in social consensus because inequality in Vietnamese society is not as profound and violent as Mexico Vietnam’s gini coefficient is 35.3 ranking the average while Mexico is 48.2 raking the high inequalilty in the world Implementing labour commitment in FTAs well from the beginning is an opportunity for 20 Vietnam to develop comprehensively and inclusively so as not to face a further increase in inequality 4.2 Some lessons from Mexican experience 4.2.1 Lessons on implementing labour commitment The study of Mexico’s experience concludes that the development model based on low labour standards is not a sustainable development model With a balanced and inclusive development perspective, the Dissertation draws the following lessons for Vietnam: First is the lesson about changing the thinking of development model and labour standards Thinking determines action Vietnam needs to recognize the advantages of high labour standards and this is an opportunity for a balanced and inclusive development instead of just implementing labour standards to meet the requirements of international trade Changing thinking will help Vietnam take a step in the right direction, carry out a development model based on high labour standards instead of low labour standards, shifting from prioritizing economic development to economic-social-environmental balance, considering labour standards as a prerequisite in economic policy planning as well as in approving economic programs and investment projects Second is the lesson on proactive action in implementing labour commitment Mexican experience shows that being passive and reactive to resolve problems when facing complaints and submissions will cost money and, at the same time, damange the image, prestage and benefits of participating in the global economy It would be better if Vietnam choose to take an active approach to improve and enforce labour standards so as to take advantage of high labour standards for economic development and create a balanced development towards long-term benefits and join the global economy in a sustainable way and contribute to the implementation of sustainable development goals Third is the lesson about systematic approach in problem solving In dealing with complaints/grievances of labour standards violations, Vietnam needs a positive and systematic approach rather than resolving the individual case, and through the process, it is necessary to adjust or change labour procedures and institutions in the direction of preventing repeated violations Resolving violations of labour standards in a systematic way will help Vietnam avoid the risk of trade sanctions, loss of trade preferences or fines as these are provided for in the current generation of FTAs 4.2.2 Implications and suggestions for Vietnam from the case of Mexico (a) The pressure is not as great as when there is US participation 21 The pressure from the US is expressed by that Mexico's labour violations is more concerned by the United States than Canada; and therefore, more complaints and submissions about violations in Mexico were sent to the United States At the same time, the United States also forced Mexico to implement recommendations after violations related to institutional and regulatory reforms Most recently, in 2016, Mexico was forced to revise the legal inadequacies (although the labour commitment in NAFTA 1994 does not require Mexico to amend labour laws) Thus, with CPTPP of no US participation, the implementation of labour commitment for Vietnam will be not as "strict" as Mexico with NAFTA However, if for this advantage, Vietnam does not improve labour standards, Vietnam will face the same consequences as Mexico, even more serious in the context of I 4.0 (b) Actively solve problems at the enterprise level instead of facing problems at the national level, affecting international economic relations Any individuals or organizations has the right to file a submission Mexican experience shows that failure to handle violations at the enterprise level will lead to submissions against the government for the reason of not enforcing labour standards as committed, leading it to face transnational pressure Slow and passive government action does not solve the problem but only makes the problem more serious (c) Change the development perspective for sustainable development The priority for economic development is no longer appropriate, because it leaves many negative consequences on the society, which takes a lot of time, efforts and resources to solve Vietnam has passed 30 years of renovation and now becomes a middle-income country, Vietnam needs to shift from an economic priority perspective to a comprehensive, balanced and inclusive perspective in development decisions (d) High labour standards rather than low labour standards are competitive factors in the current global economy NAFTA 2018 prevents using low wages to attract investment, which means that even if countries want, they can not continue to compete by using low labour standards NAFTA 2018 treats labour standards violations the same as trade and investment violations, and applies a single mechanism to address all violations This shows the importance of labour standards in the international economy and implies a lot for Vietnam (e) Low minimum wages does not encourage technological innovation Low minimum wage is the driving force for employers to continue using the labour force instead of investing in technological upgrading If the policy of gradually increasing the minimum wage is applied, the conditions of the worker will be improved and they can reduce the overtime to have time for learning and improving their qualifications, thereby helping them adapt to changing jobs for I 4.0, and at the same time, it encourages employers to step by step invest in 22 technology upgrading to replace labour gradually,which in turn, does not lead to mass loss of jobs in the future (f) Change thinking on competition for a better and fairer world Mexican experience shows that countries should really change their thinking about labour standards as a factor of competition so that to really think about improving labour standards as committed in FTAs in order to participate in trade in a “fair play" way (g) Ensuring the neutral and impartial role of state agencies towards employees and employers The case study of labour standards violations at Maxi Switch Company in Mexico shows that state agencies need to be very neutral, objective and impartial and not disclose information leading to employees being revenged and discriminated by the employer, thus making the case more serious (h) The importance of freedom of association and collective bargaining Mexico faces more complaints related to freedom of association and collective bargaining than others These are the two key ILO labour standards, more important specifically for countries that only allow one union in the public sector like Mexico Vietnam is also a country with a particular political regime with one party and one national trade union, so Vietnam will have to pay more attention to these two labour standards when implementing new-aged FTAs 4.3 Some recommendations In order to well implement the FTAs labour commitment, the Dissertation recommends some immediate and feasible solutions as follows: Firstly, Vietnam needs to study and apply lessons of implementation of labour commitment in FTA drawn from the experience of Mexico to take advantage of international integration and minimize challenges in joining the global economy Secondly, it is necessary to negotiate with FTAs partners on the roadmap of implementation of labour commitment in line with the national socio-economic conditions as well as the business situation so as not to cause so big disturbances resulting in social instabilities Thirdly, it is necessary to develop a specific plan on the implementation of labour standards, gradually shifting from low labour standards to high labour standards, and enlisting the international suppot and resources for implementation so as to overcome the initial stage of difficulty Fourth, the attitude leads behaviors Vietnam needs to raise awareness for the employer about competitive advantages of high labour standards in the global economy Practices show that employers which attach great importance to employees would all develop and grow as employees will share with the employer and help them overcome difficulties, which is also for the employment of employees themselves 23 Fifthly, there should be measures to ensure strict compliance by employers with labour laws, thus creating a fair and healthy competitive environment among compliant and non-compliant enterprises Sixth, state agencies need to ensure a neutral and unbiased role in dealing with the relationship between employers and workers, ensuring that all parties are equal before the law so as to build harmonious and stable labour relations Seventh, in the first phase of implementing high labour standards, employers may face difficulties for the immediate period of time, the government needs take measures to support and help enterprises to adjust and adapt, and together with export taxe reduction to zero as committed in FTAs, enterprises can overcome the initial difficulty Eighth, Vietnam needs to strengthen its management to prevent abuse of freedom of association and collective bargaining for establishing organizations that operate for political purposes This is in breach of the principle of labour commitment in FTAs CONCLUSION The Dissertation confirms that the implementation of high labour standards will bring more benefits for countries than low labour standards, both economic and social benefits, contributing to the achievement of sustainable development goals The increase of FTAs with labour provisions and a strict enforcement mechanism of labour commitment shows that the competitive factors in the global economy today has changed Labour and environmental standards are becoming the main concern, being tied to trade and economic activities for guarantee of implementation Countries that perform well on labour standards will have opportunities and countries that not perform well, or deliberately not promote labour standards, will face challenges when joining the global economy Many countries around the world have passed the poverty line for a long time, become a middle-income country and have a well-developed economy Therefore, they need to change their development model from economic priority to comprehensive development The Dissertation hypothesis is that implementation of NAFTA's labour commitment helps Mexico to develop both economically and socially during the last 25 years and Mexico continues to benefit from NAFTA However, the reality of Mexico shows that Mexico has not taken advantages of high labour standards for economic development and still applies low labour standards, and as a result, it creates a gap between economic and social development and is the cause leading to renegotiation of NAFTA The Dissertation draws lessons for Vietnam to implement labour commitment in the best way towards economic development associated with social development The Dissertation draws implications and recommendations for immediate and feasible solutions for Vietnam to consider so as to make appropriate decisions for a sustainable integration in the global economy 24 ... commitment for Vietnam will be not as "strict" as Mexico with NAFTA However, if for this advantage, Vietnam does not improve labour standards, Vietnam will face the same consequences as Mexico, even... of social and political instability in Mexico 3.4.6 NAFTA re-negotiation: affecting Mexico' s future development The re-negotiated version of NAFTA 1994 (NAFTA 2018) puts the content of labour... LESSONS FOR VIETNAM IN IMPLEMENTING LABOUR COMMITMENT OF THE NEW-AGED FTAs 4.1 The Vietnamese context in comparion with Mexico 4.1.1 Current socio-economic context of Vietnam Vietnam started a