House Approves New U.S.-Mexico-Canada Trade Agreement

Allen Smith, J.D. By Allen Smith, J.D. December 19, 2019
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Canadian, U.S. and Mexican flags

​The U.S. House of Representatives approved on Dec. 19 the United States-Mexico-Canada Trade Agreement (USMCA), which will modernize the 25-year-old North American Free Trade Agreement (NAFTA), by a vote of 385-41. 

The USMCA is intended to create more jobs in all three countries by increasing trade between them while ensuring companies conducting business in each country aren't engaging in substandard labor practices. By calling for more stringent labor relations requirements in Mexico in particular, fewer manufacturing jobs might be siphoned off from the U.S. while Mexican citizens enjoy more prosperity.

"The choice was between no NAFTA, NAFTA or an improved NAFTA. It wasn't a hard-multiple-choice [test]," said Rep. Warren Davidson, R-Ohio.

Rep. Lizzie Fletcher, D-Texas, said that the USMCA strengthens NAFTA's labor provisions and is "a true bipartisan accomplishment that sets the standard for future trade agreements."

Rep. Kevin Brady, R-Texas, also rose in support of the USMCA, noting that Mexico and Canada are among the United States' largest trading partners and that countless jobs depend on free and fair trade.

However, Rep. Andy Levin, D-Mich., opposed the USMCA, saying it doesn't require Mexico to meaningfully reform its labor system. He expects the USMCA will "perpetuate harms for Mexican and U.S. workers alike."

The agreement, which the three countries approved Dec. 10, now moves to the Senate. We've gathered articles on USMCA and its labor provisions from trusted outlets.

11th-Hour Objection Resolved

Jesús Seade, Mexico's foreign affairs undersecretary, objected over last weekend to provisions in the USMCA language before Congress that would name up to five U.S. additional Department of Labor (DOL) officials to the U.S. Embassy in Mexico City as consulates. He was concerned the officials would act as labor inspectors. The USMCA calls for resolving labor disputes with three-member panels that could result in facility visits. U.S. Trade representative Robert Lighthizer smoothed over the objection, assuring Mexico that the DOL officials would not be labor inspectors and would follow Mexican laws.

(The Wall Street Journal; subscription required)

Tighter Labor Standards

The USMCA has tighter labor standards than NAFTA. "The USMCA is far from perfect … but there is no denying that the trade rules in America will now be fairer because of our hard work and perseverance," said Richard Trumka, the AFL-CIO's president. "This agreement would provide certainty for farmers and producers by ending the threat of back and forth retaliatory tariffs," said Rep. Cindy Axne, D-Iowa, in a statement.

(Financial Times; subscription required)

Agreed-Upon Labor Provisions

Mexico agreed to commit to legislative actions to ensure the effective recognition of the right to collective bargaining. The USMCA also includes provisions requiring the effective enforcement of labor laws and prohibiting the importation of goods produced by forced labor. A United States-Mexico rapid-response mechanism will provide for expedited enforcement of labor rights to ensure effective implementation of Mexico's labor reform while respecting Mexico's sovereignty and due process. The deal also includes a requirement that 40 percent to 45 percent of auto content be made by workers earning at least US$16 per hour.

(Office of the U.S. Trade Representative)

Dispute System

The rapid-response mechanism will enable a country that thinks a facility has denied worker rights to request that the other country review the matter. The other country must fix any issue that it identifies within 45 days of the request. If a rapid-response labor panel finds that workers' right to organize have been violated, the U.S. Trade Representative may order the treasury Department to forbid the entry of goods from the facility. In addition, a committee will monitor Mexico's collective bargaining for 10 years.

(Bloomberg; subscription required)

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

Mexico Is Raising Its Minimum Wage

As of Jan. 1, Mexico will raise its minimum wage 20 percent to 123.22 pesos per day, or US$6.50. In the northern territories bordering the U.S., the minimum wage will increase 5 percent to US$9.75 a day. The increase is seven times faster than the rate of inflation and follows a 16 percent increase this year. The rise in the minimum wage is "the biggest increase in real terms since 1988," said Gustavo de Hoyos, head of Coparmex, a Mexican business chamber. Nonetheless, the new minimum wage comes to less than US$1 an hour.

(Los Angeles Times)

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