[CTC] Labor rules remain elusive in NAFTA talks

[Dolan, Mike]

>From Politico

Labor rules still remain elusive in NAFTA talks
By Adam Behsudi

08/09/2018 05:00 AM EDT

Labor unions and their supporters have reason to hope for a better NAFTA.

The election of a new populist government in Mexico coupled with the Trump administration's push for better wages seemed to signal a glimmer of hope for better terms for a free trade agreement that many in the labor movement roundly blame for years of job losses and depressed wages.

But as the U.S. and Mexico rapidly work to wrap up a new deal by the end of August, U.S. negotiators are still struggling over how to make the agreement's new labor rules enforceable in way that will overcome the Trump administration's aversion to being bound to trade rules, according to labor and congressional sources briefed on the talks.

"While I think we're making progress, we're not near where we need to be on enforcement of labor rights," AFL-CIO president Richard Trumka said recently during a briefing with reporters.

Labor could likely come up in discussions between U.S. Trade Representative Robert Lighthizer and Mexican Economy Secretary Ildefonso Guajardo, who arrived in Washington on Wednesday to continue negotiations. The two top trade officials are expected to meet again Thursday.

Unions in the U.S. and Mexico argue that wage suppression south of the border is largely a product of workers being threatened or stymied when they try to organize. The labor component of the new agreement will also be crucial for gaining support from Democrats.

The challenge in crafting a new labor component has not been Mexican or even U.S. opposition. Rather, it has been how to satisfy one of the demands by Lighthizer for the overall agreement, sources briefed on the talks said. Lighthizer has insisted that under the new NAFTA, the U.S. government shouldn't be bound by a dispute-resolution panel, arguing that it challenges U.S. sovereignty.

"They're trying to figure out this clever way of basically how all the different parts of the agreement can be enforceable while still preserving the emergency brake of being able to stop a really egregious decision against the U.S.," said one source close to Lighthizer. "I don't know how they are going to round that square."

The U.S. has proposed adding a waiver to government-to-government disputes that would allow the U.S. to escape decisions made by a dispute panel that it disagrees with. Trade experts question whether such a clause would further undermine any ability for rulings to be binding.

Already, NAFTA countries can block a dispute panel from even being formed. The U.S. did so in 2000 in a dispute Mexico initiated over the U.S. sugar program and there have been no cases filed since.

The current NAFTA deal offers no enforcement mechanism for any breach to labor rules. The original negotiators included the pact's labor provisions in a nonbinding side letter. Mexico has already agreed to accept an enforceable labor standard, similar to what it agreed to in the Trans-Pacific Partnership.

But it is unclear if USTR can subject Mexico to a "swift and sure" enforcement process that involves significant sanctions without a dispute mechanism. That is "the big open question for the labor movement" in terms of its support for a final deal, said one U.S. labor source.

Beyond the question of enforcement, unions have supported Lighthizer's initial move<http://go.politicoemail.com/?qs=b92248326d861aab51e1fba6b72ddf7833e3e94a633d175dc87c5f39d5c4dc0c189426f6c801a94f73209adaced84e21> to tweak any language derived from earlier U.S. agreements that is blamed for a crushing defeat the U.S. suffered in a trade dispute over Guatemala's labor laws under the rules of the Central American Free Trade Agreement.

Lighthizer has pledged to reach a final NAFTA deal that will win wide support, even among labor unions and Democrats.

Still, congressional Democrats and their union backers have made clear that labor rules in a new NAFTA deal must go even further and force Mexico to undertake major changes to its labor system.

At the beginning of the year, House Democrats mounted a major push<http://go.politicoemail.com/?qs=b92248326d861aab9ea80a3c6675d0cb8c6db69bf9b2e3c3854c698ad0fa42ba9e4241eebe0901e4934a80ce41b957b5> demanding that the Trump administration press Mexico to adhere to tougher labor standards. A group of 183 of the 193 Democrats in the House sent a letter<http://go.politicoemail.com/?qs=b92248326d861aabb9c0304dd506ed2255cd9ea9eeb7e6de2bf0791740def829d360afc7137dca7fafa9b38cbb5cd2ec> to Lighthizer criticizing the initial U.S. labor proposal, based largely off what was negotiated in the Trans-Pacific Partnership, as just a starting point.

The election of leftist Andrés Manuel López Obrador to Mexico's presidential palace has given U.S labor groups optimism for a better labor outcome from the talks.

"AMLO's representatives had been having some impact on the discussions and had made clear they were keen to have a NAFTA that supported AMLO's views of improved labor rights," said one source close to the discussions.

For some months, U.S. and Mexican trade officials have been negotiating a new special annex containing improvements Mexico will commit to make to its labor rights.

The annex could contain procedures aimed at preventing the formation of so-called protection labor contracts that favor employers and rules that allow secret ballot voting when workers organize, sources close to the negotiation said.

But one congressional aide said it's still unclear if the annex would force Mexico to re-examine the thousands of existing labor contracts that are skewed in favor of employers. The protection contracts are seen as a major impediment to giving Mexican workers the ability to negotiate better wages and working conditions.

In a major concession, however, Mexico has also agreed to include a wage standard in content rules for automobiles. The provision, which would be in the agreement's rules of origin and not directly linked to NAFTA's labor rules, would force vehicle manufacturers in Mexico to ensure that a certain percentage of a car built in that country contain a prescribed amount of content built by workers - most likely located in the U.S. or Canada - making at least $16 an hour.

Until now, Mexican government officials, including Guajardo, had pushed back<http://go.politicoemail.com/?qs=b92248326d861aab0724c0ff48a660530478472cda6ce79d9dee5d250cbe8022e1ab515e89a6abe7ea53f76db1aa1ddc> against demands that Mexico be pressured to make changes to its labor system as the result of NAFTA commitments. He has defended a domestically driven process to improve labor rights that started in 2014 and involved a constitutional reform adopted by the government in 2017.

But with López Obrador and his leftist MORENA party now holding majorities in both chambers Mexico's Congress, there is some hope that the country would agree to more explicit changes to its labor system that would be enshrined in the trade deal.

One vehicle for achieving that could be long-awaited legislation necessary to implement the 2017 constitutional reforms, which already set the country on a path toward reining in the practice of protection contracts by overhauling the country's labor arbitration system. Mexico's new Congress, which takes office in September, could pass legislation that reflects the changes labor unions and congressional Democrats want to see in a final deal.

"We think that AMLO's election is auspicious for a successful conclusion to the labor issues," said one U.S. labor source. "The NAFTA talks have been leveraging the debate in the Mexican government."

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