[CTC] AFL-CIO Opposes Extension of USMCA (NAFTA 2.0) Without Critical Changes

[Arthur Stamoulis]

AFL-CIO Opposes Extension of USMCA (NAFTA 2.0) Without Critical Changes

Background

In 1994 the North American Free Trade Agreement (NAFTA) came into effect
despite tremendous opposition from organized labor and civil society. The
negative outcomes surpassed the labor movement’s most dire predictions.
NAFTA led to the outsourcing of over a million good manufacturing jobs,
cost workers billions in wages, undermined worker power at the bargaining
table, and hollowed out entire communities.

In 2019, the AFL-CIO endorsed the United States-Canada-Mexico Agreement
(USMCA) after working with Congressional allies to secure significant
improvements over the deeply flawed NAFTA. Chief among these was a
commitment by the Government of Mexico to fully implement fundamental labor
law reforms to address a decades-old system of corruption and violence
designed to keep Mexican workers’ wages artificially low, encouraging
offshoring of jobs from the United States and dragging down wages and labor
standards across North America. The agreement also contains an innovative
“sunset clause,” which stipulates that the agreement will expire in 2036
unless the parties agree to extend it for another 16 years.

The last five years have shown that the USMCA is not delivering on its
promise to address systemic labor exploitation in Mexico and end the
corporate offshoring of good, union jobs. Since 2019, the last year before
the USMCA came into force, the bilateral trade deficit in goods with Mexico
has ballooned by 74 percent to $171 billion. Major multinationals like
Stellantis, John Deere, Nabisco and Case New Holland have continued to
offshore production to Mexico where manufacturing workers’ wages remain
just a tenth of their American counterparts. At the same time, the Mexican
government has failed to implement key pieces of its labor reforms while
slashing the budget of institutions charged with enforcing its labor laws.

As we approach the July 2026 joint review, the AFL-CIO firmly opposes a 16
year USMCA extension without fundamental changes (outlined below) to ensure
the agreement delivers for workers across North America.

Key Issues
Continued Offshoring of Good Jobs

Since the USMCA entered into force, the US has lost tens of thousands of
good union jobs to corporate offshoring to Mexico. The US manufacturing
sector has been hit particularly hard with the closure of union
manufacturing plants that make everything from Oreos to automobiles to high
tech aerospace components. At the bargaining table, management continues to
use the threat of offshoring to Mexico to beat back workers’ legitimate
demands to claim a greater share of the value of the goods they produce.
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No Progress on Wage Gap

Despite the agreement’s upgraded labor provisions, the wage gap between
Mexican workers and their American (and Canadian) counterparts remains
stubbornly high and continues to incentivize corporate offshoring. The
average wage of workers in Mexico’s manufacturing sector remains just a
tenth of what their American counterparts earn. This massive disparity
requires both an immediate response to deter offshoring and a long-term
commitment to policies to raise wages and standards in Mexico.

Mexican Government’s Failure to Implement Labor Law Reform

As part of USMCA, the Mexican government agreed to fully implement a
package of labor law reforms designed to uproot the corrupt “protection
contract” system that kept wages low by denying workers their right to
organize independent trade unions and bargain for fair compensation.
Despite some progress, there is now significant backsliding:

   -

   ●  The government’s latest budget contains a 33% cut in funding to the
   already understaffed Federal Center for Conciliation and Labor Registration
   (CFCRL), which plays the lead role in implementing Mexico’s labor law
   reform;
   -

   ●  In a flagrant violation of USMCA’s Labor Chapter (Annex 23-A), the
   CFCRL has not issued a single fine on firms that violate Mexico’s labor
   laws and reportedly lacks the legal authority to do so. Mexico’s failure
   to issue and collect fines is emblematic of its broader failure to
   effectively enforce its labor laws – a clear violation of Article 23.5;
   -

   ●  The Mexican government is failing to investigate and prosecute cases
   of threats and violence against workers who support independent trade
   unions – a clear violation of USMCA Article 23.7;
   -

   ●  The Mexican government is failing to address discrimination against
   workers who support independent trade unions, including by “blacklisting”
   them so they are unable to find employment at other facilities in the area.

   Rapid Response Labor Mechanism

   The USMCA’s rapid response labor mechanism (RRM) has proven to be an
   effective enforcement tool for advancing worker rights at select facilities
   in Mexico. To date, 39 cases have been initiated by the US Department of
   Labor under the RRM with many of these resulting in tangible wins for
   workers, including wage increases, reinstatements after illegal dismissal,
   back pay, and new collective bargaining agreements. Despite these wins, in
   too many cases the mechanism has struggled to deliver timely and meaningful
   remediation measures. We therefore urge the Parties to strengthen the RRM
   by adopting a package of reforms designed to improve the transparency,
   accessibility, and effectiveness of the mechanism.

   Technical Assistance Funding

   The USMCA’s implementation legislation contained a robust package of
   technical assistance funding to help Mexico stand up new labor justice
   institutions and support the growth of independent unions capable of
   representing workers’ interests and engaging in real collective bargaining
   with employers. While important progress has been made, workers attempting
   to organize still face enormous pushback from the deeply entrenched
   protection contract system. It is vital that Congress provides additional
   funds to the Department of Labor's International Labor Affairs Bureau to
   build the capacity of independent unions to assert their right to organize
   and bargain collectively with employers in Mexico.

Forced Labor Import Ban

The USCMA required all three parties to adopt and implement a ban on the
importation of goods made, in whole or in part, with forced labor. While
all three countries have adopted some form of an import ban, the Canadian
and Mexican governments have done little to enforce it in practice.
Canadian authorities have reportedly stopped just one shipment of goods
that they later released, while Mexico appears to have detained nothing.

Chinese Investment in Mexico

Since the USMCA came into effect, Chinese investment into Mexico has more
than doubled as companies look to sidestep US tariffs imposed to address
pervasive state subsidies, dumping, intellectual property theft, and other
unfair trade practices. Changes in US trade policy have led to reductions
in direct Chinese exports to the US, while boosting China’s exports to
Mexico – between 2020 and 2024, Chinese exports to Mexico more than doubled
from $44.8 billion to $90.2 billion. The parties must address the economic
and security threats posed by China, including by adopting common border
measures to address unfairly traded electric vehicles, steel, and aluminum.
The USMCA cannot be a backdoor for the circumvention of our trade remedy
laws.

Rules of Origin

In an effort to boost North American manufacturing, the USMCA included
stronger rules of origin (ROO) in key sectors like automobiles. The joint
review process should review their effectiveness and seek to develop
enhanced ROO for other priority sectors, including aerospace, large
appliances, and other industries. It should also crack down on corporate
non-compliance when companies decide that it is more cost effective to pay
the existing Most Favored Nation tariff rather than demonstrate compliance
with the agreement’s ROO.

Digital Trade

The USMCA’s digital trade chapter grants broad digital corporate rights to
collect, process, and move citizens’ personal data across borders. At the
same time, it imposes rigid restrictions on the measures governments may
adopt to protect data privacy, ensure emerging technologies comply with
domestic labor laws, promote competition, and more. Taken together, these
provisions threaten to “preempt” the right of our Congress and other
democratic governments to regulate a host of challenges presented by the
digital economy. We encourage Congress and the Administration to revisit
the USMCA digital trade chapter to ensure it strikes the right balance
between promoting open data flows and protecting governments’ legitimate
right to regulate the digital economy.

Country of Origin Labeling

The USMCA failed to include provisions to clarify that mandatory
country-of-origin labeling (COOL) for meat products is consistent with the
agreement and cannot be subject to trade challenges under the USMCA or WTO
rules. US food production supports hundreds of thousands of good union jobs
and consumers have a right to know where their food comes from. COOL
empowers consumers, supports workers, and strengthens critical food supply
chains and should be included in a renegotiated USMCA.

Weak Environmental Standards

Despite containing some improvements over NAFTA, the USMCA’s environmental
chapter failed to set strong and enforceable environmental rules capable of
avoiding a race to the bottom. In particular, the agreement failed to
address the challenges presented by climate change and does not contain
meaningful enforcement tools. Under USMCA, Mexico’s relatively weak
environmental regulation and lax enforcement creates a dramatic incentive
to offshore production. As we fight to strengthen our own environmental
standards, we must ensure that the USMCA addresses these hidden subsidies
to both safeguard US competitiveness and protect the environment.
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