Oh! Canada?!

Canada made world trade history. Did anyone notice?

After my FLT Spring News Roundup last week, a loyal reader and friend of FLT reached out to ask why Canada’s recent legal development — the enactment of a new forced and child labor supply chain law — hadn’t made the cut.

My answer was that while the Canada law was on my radar, when I went to read up on it, I didn’t find a whole lot that was pulse-quickening. It was primarily billed as imposing new “modern slavery reporting requirements”, and well . . . .

In a world where forced labor is known to proliferate, primarily as a consequence of the sprawling nature and general opacity of supply chains, a law that mandates speech leaves me unmoved. More specifically, a law that requires the largest, most sophisticated and most successful human organizations in history—organizations literally masterful in the art of compelling storytelling—to explain why they are unaffiliated with a grievous moral harm . . . it leaves me underwhelmed.

Some less-jaded commentators cheered the Canadian development. Every little bit helps! Other commentators critiqued the law for diverging from the new(er) trend toward mandatory human rights due diligence (MHRDD) legislation in Europe. While I find less to be cynical about in MHRDD, here too, I am dubious about the power and potential of such laws to create visibility into the deepest recesses of the supply chain. I am trying to maintain an open mind.

But what I had missed entirely was that Canada tweaked its forced labor import ban—a law enacted in the wake of the USMCA renegotiation, and modeled after the U.S. forced labor import ban, Section 307 of the Tariff Act of 1930—and broke new legal ground. Specifically, Canada became the first country in the world to establish a trade law prohibiting cross-border trade in goods made with child labor.

That gets a Drudge siren. Now in fairness, I just overlooked this development. But apparently, I’m not the only one. As far as I can tell, major U.S. press outlets have not noted the the significance of this evolution. A Canadian law firm, BLG, put together a very helpful client advisory on the child labor import ban piece of the Canada legislation (which you should definitely read), that they titled: “Overlooked?” Yes, indeed.

Someone should please check my math on this one. I have not conducted a full search of the trade policy reviews of the 164 members of the WTO. Nevertheless, it has been my understanding that until the U.S. started promoting adoption of the forced labor import ban with its key trading partners, the U.S. forced labor import ban (Section 307) was the only law of its kind globally.

The U.S. law prohibits the importation of goods made wholly or in part with forced labor, and (somewhat redundantly) defines forced labor to include forced child labor. That redundancy in the U.S. law simply serves to underscore that, confronted with an allegation of slave labor in the supply chain, you can’t mount a defense of: “this isn’t slave labor because these are just child slaves, lacking the full status of their adult counterparts!” For reasons likely lost to congressional deliberations in the wake of the Great Depression, Section 307 does not prohibit the importation of goods made with child labor. But now, Canada does.

According to BLG, under the new Canadian forced and child labor import ban, it will now be illegal to import goods into Canada that were produced by the labor or services of persons under the age of 18 that “would be contrary to Canadian law; interfere with their schooling; or otherwise be mentally, physically, or morally dangerous to them.” This is an enormously significant development in global trade law. If enforced, it could prove to be a landmark in the history of global trade.

One wonders where Canada might look first, if it’s endeavoring to put this law to work and protect Canadian consumers from providing unwitting economic demand for child labor around the globe.

Last week, I highlighted some of the more disturbing provisions of a new Iowa law designed to increase child labor within the state. Iowa has some competition in The Race To The Bottom. In March of this year, the governor of Arkansas signed legislation to help ensure that child labor within the state is both expanded, and obscured from public view. Specifically, the Arkansas law “[d]ispense[s] with the state's requirement that children under sixteen (16) years of age have to obtain permission from the Division of Labor in order to be employed” and “[s]treamline[s] the hiring process for children under sixteen (16) years of age.”

It may surprise elected officials in Iowa and Arkansas to know that the exports of their respective states to Canada are extremely well known by Canadian trade authorities. Apparently, Iowa exports $4.1 B, and Arkansas exports $2.3 B to Canada every year. If I were a Canadian trade official tasked with enforcing the new law, or just a concerned citizen appalled by the abdication of moral authority by these state officials, I’d be taking a very close look at Arkansas exports of cereal, Iowa exports of animal feed and animal meats, and the exports of plastics & plastic articles, and meat, fish & seafood preparations from each state. Because now, forced child labor isn’t the only risk. Child labor that would be contrary to Canadian law is the new standard. Buckle up.

A lot will depend on how (and whether) the Canadian import ban comes to be enforced. It’s one thing to enact a bold new import ban. It’s quite another to decide how to enforce it. Canada’s begun to accrue some notoriety in human rights circles for having enacted its forced labor import ban three years ago, and having only managed to block a single import shipment in that span. But in fairness, the current U.S. approach to enforcement, which loosely follows a Fire! Ready! Aim! sequence, doesn’t have much to commend it.

The key question in my mind is whether Canada will adopt the “rebuttable presumption” model from U.S. enforcement. Suppose you’re a Canadian trade official, with knowledge that some foreign jurisdiction with significant exports to Canada has taken affirmative legal steps both to encourage and obscure visibility into the practice of child labor, which would be contrary to Canadian law. There probably remains some fact finding to be done around whether child labor is in fact proliferating in export industries in that foreign jurisdiction. But at some point, the question becomes: whose responsibility is it to know, and whose responsibility is it to prove? The rebuttable presumption is one powerful approach to answer such questions.

There are others. The Mexico Ministry of Economy just published a new administrative regulation defining how Mexico will go about enforcing its own forced labor import ban. Here’s a good write-up. Perhaps soon enough the European Union, the UK, or other jurisdictions will enact their own forced and/or child labor trade prohibitions, resulting in new and different approaches to the challenge. Come what may, FLT will be here to keep you up to speed. Especially if you help make sure I don’t miss the big ones!

Thanks for reading, sharing, and passing along your insights.