USMCA Agreement: Towards a New Economic Relationship in North America?


By Saul Escobar Toledo
MEXICO CITY, Jul 5 2021 (IPS)

The visit of the Vice President of the United States to Mexico on June 8 served to address various issues on the bilateral agenda . The media gave importance especially to the migration issue, but Mrs. Harris gave a prominent place , also , to the labor question. Her appointments deserve some comments.

USMCA Agreement: Towards a New Economic Relationship in North America? 2

Saul Escobar Toledo

In the meeting she held with labor leaders, activists, and experts as well as in her press conference, the vice president argued that Biden´s government is “one of the most pro worker, pro unions in the US history ” . She publicly pledged to support the organization of unions and collective bargaining in the US and Mexico. She insisted that there is a coincidence with the administration of President López Obrador and that this common vision will bring greater economic prosperity and improve the standard of living of workers in both nations. She argued , to some extent , the benefits of union and collective bargaining since, she said, this leads to ” fair ” results for both parties, employees and employers. Our goal , she added, is that the new approach, settled in the USMCA (United States, Canada and Mexico Trade Agreement that replaced NAFTA) will ” translate into decent jobs on both sides of the border” . Later, a budget addition of 130 million dollars was announced to support technical assistance and programs for the implementation of the Mexican labor reform, and the eradication of child and adolescent labor. This expansion is linked to 610 million dollars that had already been contemplated for those same purposes. Of these, 100 million will be invested in the next six months.

Canada, the third partner of the T-MEC had announced through its ambassador in Mexico, on June 2, that its government will allocate 27 million dollars for programs that allow changes in the labor practices , promote reform and its implementation. That is, he said, to support Mexican workers and the promotion of democratic unions.

US policy has not consisted only in words and money. For now, there are already two complaints for labor reasons that have been formally taken up by the Biden government at the highest level under the mechanism proposed by the T-MEC (USMCA). As the commercial representative, Katherine Tai , in charge of presenting the complaint said, now it is about “defending the workers at home and abroad.”

One of the complaints refers to a conflict in a company called “Tridomex”, an auto parts factory located in Matamoros (a city of the northern border), where, they claim , collective bargaining and free association were seriously affected . The investigation is ongoing and if it were found , indeed, there were these faults , it would have to be repaired or, where appropriate, apply sanctions on the company including additional tariffs or bans on its exports. It must be said that this company is a subsidiary of Cardone Industries , based in Philadelphia , dedicated to the manufacture of auto parts . This is a good example of a maquiladora, the type of sweatshop where for many years there have been systematic violations of labor rights and the absence of representative unions and legitimate collective contracts (supported by the workers) .

This was the second complaint in a month formally filed by US authorities . The first was against a General Motors plant , where more than six thousand people work, located in Silao, Guanajuato. They found, also, serious irregularities committed during a voting process arranged to find out if workers were supporting a contract negotiated by an old and corrupt union. The scandal even reached US Congress; a special commission demanded that the company should not meddle in union affairs.

The new trade policy of the US represents a major shift. During many decades Washington has defended its companies and investors at all costs, supporting repressive measures against workers, direct intervention of the CIA (Central of Intelligence Agency) , and even violence against governments that have tried to be, as Ms. Harris said, favorable to workers and their organizations . The US administration had never shown solidarity for unions and the defense of labor, more so, when workers struggle against the arbitrariness committed by the subsidiaries of the large manufacturing consortiums located outside its territory.

This major change is due to several reasons, including strong pressure from the unions. The vice president clearly alluded to this situation when she spoke with the Mexican labor activists . Apparently, a political gap has opened in that nation, in which either a government with a progressive and pro-labor line is imposed; or there is only the ultra – conservative option of the Republican right whose central figure continues to be Trump. An Obama- or Clinton-style centrism does not seem a good alternative right now.

However, it is not clear how far the new direction of the Biden administration will go. Within his own party there is resistance to some of the president’s proposed changes , such as tax reform. In the case of Mexico , we don´t know yet what the reaction of the companies will be, which, for now, have denied their responsibility in the violation of labor rights. Will the top managers of the companies accept to change their labor schemes and open negotiations with the workers on fair terms, as the vice president said , or will they continue to keep “business as usual” with various legal maneuvers? If sanctions were applied, would they rather decide to leave Mexico and go back to the US? Maybe this last option would be welcome and supported by the US government.

Despite these uncertainties, and the damage caused by the pandemic including a slow recovery of the Mexican economy, the new US trade policy opens an opportunity for Mexico to change its relations with its commercial partners. The so – called “comparative advantage”, based in very low wages and poor working conditions in Mexico, has played up to now an important factor to attract foreign investments. To change this scheme the government of Lopez Obrador must not only carry out enhanced surveillance of labor laws as their commercial partners are claiming and is part of USMCA. In the medium term, it would have to propose a new industrial policy that would make it possible to attract foreign investment, while increasing wages and contractual benefits. For this to happen, so foreign companies would not be tempted to withdraw from Mexican territory, the government would need to offer incentives based on a more modern infrastructure; a better qualification of the workforce ; and more resources for research and development of science and technology.

In the medium and long term, sustained improvement in wages of the Mexican working class would imply a new agreement with the United States and Canada. Much more ambitious than what was already agreed in the T-MEC or USMCA: a new scheme of development cooperation is needed. A new kind of relationship between companies of foreign capital and Mexican workers, based on better jobs, with the support of the governments of the three nations would be viable only if it rests on a sustained increase of productivity . And the latter would require a relevant hike in investment based on modern technologies and production processes .

A change of this magnitude would need time and a favorable political environment in the North American region. New winds are blowing , but it is not clear if they will go far enough.

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