CL-USER> (defun x () (flet ((y (x) (1+ x))) (y 41)))
WARNING: redefining COMMON-LISP-USER::X in DEFUN
X
CL-USER> (trace (labels y :in x) :encapsulate nil)
((LABELS Y :IN X))
CL-USER> (x)
  0: (X) [external]
  0: (LABELS Y :IN X) returned 42
42