New NAFTA may even scales with prison factory reform

The administration’s specific negotiating objectives for the modernization of the North American Free Trade Agreement (NAFTA), released last Monday at the start of “Made in America” week, gave many in the trade policy world fresh clues on the future of that 25-year old trade agreement.  

It also casts a fresh light on one U.S government parastatal enterprise that is increasingly out of sync with Trump administration manufacturing and job-creation priorities — the vast U.S. federal prison factory system run by Federal Prison Industries (FPI).  

{mosads}Known by its trade name, Unicor, and housed under the Department of Justice, FPI operates a network of factories across the country that makes lots of products — from garments to furniture to electronics. Each factory sits inside a prison and employs only inmates as factory workers. Although it dates back to the 1930s as a simple program to keep prisoners busy by providing them rudimentary vocational training, FPI has evolved into a sophisticated multi-million dollar operation that fiercely competes for U.S. federal government contracts. 

FPI has long been a thorn in the side of U.S. manufacturers. It is exempt from most federal workplace laws and can “pay” its inmate workers as little as 23 cents an hour. It’s factory facilities are partly subsidized by the federal government. A special “Mandatory Source” provision gives FPI “super preferential access” — a right of first refusal — for all U.S. federal contracts.

From just about any perspective, competing against FPI is extremely hard, if not downright impossible. For the domestic apparel industry, FPI’s damaging presence has been particularly acute, and FPI now enjoys a “significant market share” in most apparel procurement categories. 

Efforts to rein in FPI’s aggressive expansion have been met with limited success during the past two dozen years. But these efforts may have been given an important boost as the Trump administration outlined its objectives for NAFTA. Although intended to show how we hope to improve our commercial relationships with our Mexican and Canadian trade partners, these objectives also provide a roadmap for how we can reform FPI too. 

In its detailed labor section, the objectives call for the elimination of compulsory labor and a requirement that NAFTA countries respect minimum wages, hours of work and occupational safety and health. FPI falls woefully short in these areas, especially considering that all inmates are “required” to work. The objectives further call on NAFTA countries to prohibit trade in goods made with forced labor to echo an existing U.S. law that seems blind to the government procurement preference granted to domestically-made goods that use forced labor. 

The NAFTA objectives lay out a series of ambitious disciplines on state-owned enterprises (SOEs). These include non-discriminatory treatment, strong subsidy rules, rules to prevent harm and a requirement that commercial considerations apply. Here again, FPI comes up lacking.

Through its government procurement preferences and implicit and explicit federal subsidies, FPI represents the kind of thumb-on-the-scale SOE that our country would seek to restrain were it located in a foreign country. Perhaps as we hold up the mirror on FPI and gaze at it through the NAFTA filter, we will take action here too. 

In the area of government procurement, the NAFTA objectives call for preservation of preference programs, such as those for small business, women and minority businesses, service-disabled veterans and distressed areas. This is a worthy goal and one that preserves a set of popular, bedrock principles long enshrined in U.S. government procurement rules.

Unfortunately, FPIs super preference allows it to skip over ALL these presences. What’s worse, when FPI’s mandatory source does get curtailed when it grows too big on any one category, it gets to compete as a small business, service-disabled veteran, women-owned business, or a distressed-area enterprise. 

It is true that the NAFTA objectives identify a priority to broadly maintain exceptions for procurement related to “public morals, order, or safety.” That’s usually the kind of language that allows entities like FPI to exist. But that language — if it does apply to FPI — stands in sharp contrast to the first bullet in the government procurement objectives, namely to “increase opportunities for U.S firms to sell U.S. products and services into the NAFTA countries.” 

Indeed, the entire NAFTA modernization exercise is premised on the idea of giving U.S. companies — and their workers — more opportunities in North America. If that concept is true for a 25-year-old trade agreement that is beginning to show signs of age, imagine how true it is for a prison works program that is more than three-times as old.  

You won’t find the word “prison” anywhere in the NAFTA objectives, and perhaps that’s the biggest clue that change is coming, since “prison labor” is specifically protected in the underlying NAFTA agreement itself.

What most folks don’t realize, is that the single biggest obstacle to creating more domestic manufacturing jobs is the unfair competition coming from U.S. prison factories. If we can ensure that these NAFTA objectives apply to the U.S. prisons too, we can put a lot of Americans back to work.  

During the Great Recession, we talked about the “shovel-ready” jobs that only needed adequate funding to get people working again. In the domestic apparel industry, we look forward to meaningful FPI reform to get those U.S. “needle-ready” jobs up and sewing again as soon as possible.  

Steve Lamar is executive vice president at the American Apparel & Footwear Association (AAFA). He is responsible for the design and execution of AAFA lobbying strategies on a series of issues covering trade, supply chains and brand protection. Lamar is also president of the Washington International Trade Association (WITA), an organization dedicated to providing a neutral forum for discussion of international trade policy and related issues.

The views expressed by contributors are their own and not the views of The Hill.