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Currently, the Leadership of the House of Representatives is trying to decide whether to bring the Central American Free Tr
Will CAFTA Affect Immigration to the United States
from Central America?
There are a variety of reasons for opposing or supporting free trade agreements
(FTAs) like CAFTA. NumbersUSA, of course, is only focused on how they impact
immigration levels. When the Singapore and Chile FTAs were submitted to Congress
for approval and it was discovered that the United States Trade Representative
(USTR) had included significant, explicit immigration provisions in them, many
Members of Congress were furious -- especially those with jurisdiction over
immigration policy. House Judiciary Committee Chairman Sensenbrenner (R-WI)
extracted a promise from the USTR that no immigration provisions would be
negotiated on any other bilateral or multilateral agreement, including the Doha
Round of GATS.
In light of all this, we scoured carefully through CAFTA, when it became
available, to ensure that it did not include any provisions dealing with immigration.
In fact, the agreement does NOT include any explicit language about visas. It does,
however, include language in chapters 10 and 11 that is virtually identical to the
language in other FTAs that creates the expectation of a right of immigration.
CAFTA, like other recent FTAs, covers four "modes" of delivery of services
between countries. The WTO defines them (and provides examples) as follows:
Mode 1. Cross border: the service itself crosses the border rather than the
provider of the service (examples include internet services, e-learning
programs, and remote management or marketing consulting);
Mode 2. Consumption abroad: the consumer travels across the border
(examples include tourism and travel services, education of foreign
students, and study tours);
Mode 3. Commercial presence: establishment of a subsidiary or branch office
in the other country (examples include construction engineering to
manage local infrastructure projects and distribution centers to ship
or warehouse products to local markets; and
Mode 4. Movement of natural persons: the services supplier travels across the
border (examples include actors, construction trade workers, coaches,
and environmental consultants)
Chapter 10--Mode 3 Delivery of Services
Chapter 10 of CAFTA covers Mode 3 delivery. It is one of the only parts of the
agreement that gives a right of action to an individual (the foreign investor) instead of
to a government signatory to the FTA. Article 10.3 requires each party to "accord to
investors of another party treatment no less favorable than that it accords, in like
circumstances, to its own investors with respect to the establishment, acquisition,
expansion, management, conduct, operation, and sale or other disposition of
investments in its territory." The agreement goes on, in Article10.5, to say, "Each
Party shall accord to covered investments treatment in accordance with customary
international law, including fair and equitable treatment and full protection and
security" (emphasis added).
Article 10.7 says that, "no Party may expropriate or nationalize a covered
investment either directly or indirectly through measures equivalent to expropriation
or nationalization." The USTR acknowledges that this language refers to regulatory
takings. The problem is that regulatory takings are to be judged under international
law, not U.S. law. Similar language in NAFTA has been interpreted, under
international law, to mean that an investor can challenge any government action or
inaction that undermines "expected future profits." This interpretation has resulted
in the U.S. government compensating Mexican investors for the costs of compliance
with standard government regulations with which all domestic companies must
comply. It would appear, then, that such an interpretation would allow a foreign
investor under CAFTA to challenge U.S. immigration laws, for example, that limited
the number of foreign workers he could import to work in his company, if such laws
reduced his "expected future profits" by forcing him to pay higher wages to American
workers. Under the terms of CAFTA, any such challenge would be decided either by
a World Bank (under the ICSID Convention) or a United Nations (UNCITRAL)
tribunal. If the investor won the challenge, he would be entitled to cash
compensation, to be paid by U.S. taxpayers, which would put significant pressure on
Congress to loosen our immigration laws in order to avoid future judgments.
Chapter 11--Mode 4 Delivery of Services
Chapter 11 of the agreement explicitly includes Mode 4 delivery, in which a
national of one country provides services in the territory of another country. In
Article 11.14, CAFTA defines "cross-border trade in services" or "cross-border supply
of services" as "the supply of a service:
(a) from the territory of one Party into the territory of another Party [Mode 1];
(b) in the territory of one Party by a person of that Party to a person of another
Party [Mode 2]; or
(c) by a national of a Party in the territory of another Party [Mode 4 (Mode 3 is
left out here because it is covered in Chapter 10)]."
Article 11.14 defines a "service supplier" as "a person of a Party that seeks to
supply or supplies a service." The footnote attached to this definition states that "for
purposes of Articles 11.2 and 11.3, ‘service suppliers' has the same meaning as
‘services and service suppliers' in the GATS." Ways and Means Committee Chairman
Bill Thomas stated clearly on the floor of the House of Representatives on June 16,
2005, that the "so-called GATS Mode 4" part of the services agreement being
negotiated in the Doha Round involves "the temporary movement of business
personnel" across borders. Rep. Clay Shaw, Chairman of the Trade Subcommittee of
Ways and Means said during the same floor debate that, "the U.S. Trade
Representative, as we have already heard, has long recognized that trade agreements
are not the appropriate forum to negotiate provisions regarding permanent
immigration" (emphasis added--permanent immigration has never been an issue in
FTAs). Only three sentences later, Shaw warned, "let us not tie the hands of those
negotiating for the United States" by prohibiting them from negotiating immigration
provisions. Even Ways and Means Ranking Member Mollohan made a clear reference
to immigration being part of a standard FTA: "There are skills that we need in this
country, and we have to be very careful about how we might impact our ability to
access those skills" if the USTR is prohibited from negotiating Mode 4 movement of
So, if the Mode 4 language in CAFTA has the same meaning as the Mode 4
language in GATS, according to the note in CAFTA, and the movement of workers
across international borders is central to negotiations in GATS, it would seem that it
would play some role in CAFTA, as well. At the very least, inclusion of this language
would, as noted above, create an expectation such movement of workers. The one
thing that is absolutely clear, though, is that CAFTA does not include any special
visas to accommodate such movement, which creates a potential conflict.
The language in Paragraph 5 of Article 11.1 of CAFTA regarding access to
domestic employment markets does not protect the United States from challenges of
our immigration laws, either. It says: "This Chapter does not impose any obligation
on a Party with respect to a national of another Party seeking access to its
employment market, or employed on a permanent basis in its territory, and does not
confer any right on that national with respect to that access or employment." While
it may appear to be relevant to Mode 4 movement of workers, in fact, it is standard
language found in past FTAs, including Singapore and Chile, which clearly include
Mode 4 rights. 1 It clarifies that the agreement does not create any individual right of
action. With a couple of limited and explicit exceptions (the foreign investor in
Chapter 10 being one), the provisions of a free trade agreement are enforceable
against a Party State only by another Party State. Thus, an individual denied a visa
cannot challenge that denial under CAFTA.
Under the terms of CAFTA, this question of whether the United States would be
violating the Mode 4 provisions if our immigration laws restricted the number of visas
available to Mode 4 service suppliers from Central America would be resolved by a
CAFTA international tribunal on which there would always be two ‘judges' from other
CAFTA nations and only one American. The USTR has assured Members of Congress
that the August 5, 2004, "Understanding on Immigration Measures" would prevent
any such challenge from succeeding. The fact that this side letter is signed by all
Parties to CAFTA, however, does not necessarily mean that it is legally binding, if
past experience is any indicator. And remember, once a Party decides to challenge
U.S. immigration law, the majority-Central American tribunal would be the body
deciding whether the letter was binding or not. It clearly is not within the four
corners of the CAFTA agreement and so almost certainly would not have the same
force as provisions in the agreement, including the Mode 4 provisions.
1 The relevant language in the Singapore and Chile Free Trade Agreements is: "This Chapter does not
impose any obligation on a Party with respect to a national of the other Party seeking access to its
employment market, or employed on a permanent basis in its territory, and does not confer any right
on that national with respect to that access or employment." The language is identical in both
agreements, and is found in Article 8.2.4 in the Singapore Free Trade Agreement and in Article 11.1.5
in the Chile Free Trade Agreement.
In fact, the very existence of the side letter would seem to indicate that the
USTR had reason to fear that Congress would balk at CAFTA's potential impact on
immigration. All but one of the Central American Parties to CAFTA are among the
top 10 sending nations of illegal aliens to the United States, with El Salvador and
Guatemala representing the second and third largest sending nations, respectively,
and Honduras, Dominican Republic, and Nicaragua taking the seventh, eighth and
ninth spots. Immigration clearly is an important issue to these countries. If the
USTR was worried about immigration and the Central American governments were
willing to give it up in exchange for the larger agreement, why not include the
language from the side letter in the text of the agreement itself?
Indeed, the U.S. sugar industry and a bloc of House Members learned the hard
way that side letters may not be binding. The side letter amending the rules of origin
determining how many tons of sugar were allowed to be imported into the United
States under NAFTA, though signed by all three countries, was not even included in
the package sent to Mexico's Congress for approval. Mexico still insists it is not
bound by the provisions in the letter and the United States has spent a decade in
unsuccessful litigation.
Finally, in legal terminology, an "immigrant" is an alien lawfully admitted for
permanent residence, so "immigration" refers to aliens coming to the country to
remain permanently. Temporary workers, on the other hand are "nonimmigrants." It
is not hard to imagine a Central American majority on one of the international CAFTA
tribunals, or a member of the World Bank or UN tribunals from Chapter 10 parsing
the side letter until it has no meaning at all.
There is one issue in CAFTA on which everyone agrees--there is nothing in the
text of the agreement that would provide a single extra visa to the United States.
However, by using language on Mode 3 and Mode 4 delivery of services that is
identical or virtually identical to that in all recent FTAs, the USTR has allowed for the
creation of an expectation of immigration. In other words, the foreign investors and
service providers who read the agreement may easily believe that it will give them the
right to enter the United States either to invest in a service providing company here
or to go to work for a subsidiary from the home country.
The key question is: What will happen when these investors and service
providers find that there are no visas (or limited visas) available for them? The
investors will be able to challenge U.S. immigration law if they can convince a panel
in either the World Bank or the UN that U.S. visa restrictions are reducing their
"expected future profits," as defined under international law. The remedy, should the
investor succeed, is U.S. taxpayer-funded cash compensation for lost/reduced
The worker, on the other hand, would have to convince the government of one
of the Parties to CAFTA to challenge U.S. visa law, since workers do not have
individual rights under the agreement. If a Party government were willing to claim
that U.S. visa law restricted Mode 4 movement of workers significantly, the challenge
would go before a three-member international tribunal comprised of two Central
Americans and one American. This panel would determine whether the side letter on
immigration was binding, and if not, whether the United States had a duty to permit
Mode 4 movement under CAFTA. If the tribunal found for the other government, the
United States would face trade sanctions.
The current USTR has assured Members of Congress that CAFTA does not
impose "any obligation whatsoever on the United States regarding immigration." He
and his entire staff may honestly believe that. The only thing that really matters
under the terms of CAFTA, though, is if a majority of the members of the
international tribunals who have final say believe that CAFTA imposes no
immigration obligations. If we do not answer that question correctly, we could easily
find ourselves with a new visa category for CAFTA nonimmigrants, created to head off
the surge in challenges that undoubtedly would follow the first successful one.