<html><head><meta http-equiv="Content-Type" content="text/html charset=utf-8"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space;" class=""><div style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;" class="">INSIDE US TRADE</div><h1 style="margin-right: 0in; margin-left: 0in; font-size: 24pt; font-family: 'Times New Roman', serif;" class="">Labor discussions fall short of Democrats' expectations at seventh NAFTA round<o:p class=""></o:p></h1><div style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;" class="">March 04, 2018 <o:p class=""></o:p></div><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">MEXICO CITY – Negotiations on the labor chapter of a retooled North American Free Trade Agreement have not progressed as Democratic lawmakers here have hoped, leading to calls for the U.S. to propose a new text and for Canada to clarify its negotiating position.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">House Ways & Means ranking member Bill Pascrell (D-NJ) and former chairman and ranking member Sander Levin (D-MI) said they were disappointed with an update they received from negotiators. Pascrell and Levin are part of a bipartisan congressional delegation attending the seventh round of talks.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“The negotiators who were here on the labor chapter left before we even arrived,” Levin told reporters. “So we had a briefing by phone and the briefing by USTR labor people was totally inadequate. It did not touch the key issues involved in this central point and that is Mexico is a democracy with an authoritarian-type labor structure.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Pascrell said the labor talks must be a priority for the U.S. “We make sure we get the point across in terms of labor standards and how it is a priority with us,” Pascrell said. “When everything is a priority, nothing is a priority. And to us, the central core of the issue is what your labor standards are in any trade deal.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Last September the U.S. tabled a labor proposal that closely aligned with the text of the Trans-Pacific Partnership. The TPP labor chapter was cited by many Democrats as a reason to oppose the Asia-Pacific pact.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Accordingly, the NAFTA 2.0 proposal does not hold muster with congressional Democrats, 183 of whom sent a letter to U.S. Trade Representative Robert Lighthizer in January saying the TPP text should “only be a starting point.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“USTR needs to put forth new text and it has to address the basic issues of Mexico with an industrial policy that was built for keeping wages drastically low and making sure workers have no rights whatsoever. Mexico has a unique structure for democracy,” Levin told <em class="">Inside U.S. Trade</em> on the sidelines of the NAFTA talks.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Levin said Lighthizer has acknowledged a need to address Mexican labor issues in NAFTA. But Lighthizer’s assurances aren’t enough, according to Levin, who said he needed to see the issues reflected in a tabled proposal.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“The proof will be in the pudding,” he said.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">USTR is expected to table a new labor chapter at the next negotiating round, which is expected to take place in early April in Washington, DC. That chapter is expected to include language aimed at rectifying the U.S. loss to Guatemala last year in the first labor case brought via a trade agreement. A key component of the U.S. loss was that in the eyes of the panel, the U.S. failed to prove Guatemala’s labor violations occurred in a manner affecting trade.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class=""><strong class="">The new U.S. proposal is expected to contain a footnote defining what it means for a violation to occur in a manner affecting trade, but stakeholders disagree on how broad or narrow that definition should be. </strong>Labor stakeholders are hoping the definition is broadly applicable, while some in the business sector are hoping USTR will take a narrow approach to defining the term.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">The new text also is expected to address other elements of the Guatemala decision, multiple sources said. It will provide a definition for a “sustained or recurring course of action or inaction” as well as language on workplace violence, they added. Whether the language on workplace violence will be binding is unclear.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Levin said that while the Guatemala case must be addressed, it should not be the focus of the new text. “It’s a mistake to spend a lot of time on that. It was an erroneous decision,” Levin told<em class=""> Inside U.S. Trade</em>. “They interpreted language that I wrote incorrectly. I wrote some of the language. And so, when NAFTA’s renegotiated there will have to be some review of that language, but that isn’t the basic issue.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Mexico must institute domestic reforms that show it intends to do away with so-called “protection contracts” if NAFTA is to receive Democratic support, Levin said. Protection contracts, according to the Labor Department, are used to “protect against collective bargaining by independent, democratic workers’ organizations.” Such reforms, according to Levin, must be instituted before a renegotiated deal is presented to Congress if the administration is to receive Democratic support. Lighthizer has said he hopes to have significant Democratic backing for a renegotiated pact.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“They have to make changes before,” Levin said of Mexico. “It has to be laid out in a labor chapter, but they have to carry out dramatic changes before there would be presentation of a renegotiated NAFTA.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">On Sunday, Levin and Pascrell participated in a discussion with Mexican lawmakers on the progress of labor reform legislation in Mexico's legislature. The discussion followed meetings the two Democrats held with Mexican auto parts workers.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">One labor stakeholder who attended the Sunday morning exchange said it was the “best meeting of the week” – citing “reciprocal leverage” the labor movement might garner from concurrent debates on labor reform in the Mexican legislature and in the NAFTA talks.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Domestic labor reforms in Mexico are needed not only for Democratic support, but public backing as well, Levin said.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class=""><strong class="">Levin called on Canada to clarify how its “progressive” trade agenda will address labor standards.</strong> Levin was set to meet with Canadian Foreign Affairs Minister Chrystia Freeland on Sunday afternoon, where he said he would raise the issue.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“I’m also hoping that she’ll make clear on where they are on their progressive agenda,” he told reporters. “So far I don’t think the Canadians have made very clear the leg of their progressive agenda that relates to labor standards and working conditions and how that has impacted workers here and workers in the U.S. and Canada.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“They need to emphasize at this point the third leg of their progressive agenda and that is labor conditions and standards in Mexico because it affects jobs and wages in Canada,” he said in a separate interview with <em class="">Inside U.S. Trade</em>. “When we were in Ottawa, there was a GM strike and the GM strike was over the shipping of production of one of the SUVs to Mexico. So Canada needs to really sharpen its focus and I’ve discussed that with the Canadians.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Canada has tabled a labor proposal that would require the ratification of all eight of the International Labor Organization’s core conventions. The U.S. has ratified only two.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Some stakeholders have tied the concept of a strong labor chapter to the inclusion of an investor-state dispute settlement mechanism, suggesting the business community would be more amenable to a pro-labor-oriented chapter if ISDS were included, sources said. Other business-sector stakeholders denied any such link at this stage in the negotiations, believing the ISDS issue will have to be addressed separately.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">On Sunday, House Ways & Means Committee Chairman Kevin Brady (R-TX) reiterated his demand that ISDS remain in NAFTA.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">“I’m convinced that the U.S. trade team will negotiate a good, modern, pro-growth NAFTA and we will need to hold our trading partners accountable to enforce those new rules and provisions,” Brady said here when asked about Canada and Mexico’s bilateral discussions on ISDS. “So I’m convinced that Congress will require accountability and enforcement with an improved investor-state provision and improved dispute resolution provision. I think it’s a high priority, this accountability, for Congress, and we can continue to work with USTR and the president in finding common ground.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">But one source suggested that Lighthizer would be unlikely to back down in this area and would continue to insist that the U.S. remain outside the scope of an ISDS mechanism. The source called Lighthizer’s issue with ISDS “personal” and pointed to other negotiating areas in which the U.S. has not budged as an indication that movement on ISDS is unlikely.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Congress’ demands for an ISDS mechanism could also be ineffective, this source said, pointing to Republicans’ attempt last week to convince the administration not to go through with the imposition of tariffs on steel and aluminum imports as a barometer of Congress’ influence with the administration.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Brady told reporters here that in discussions with U.S. trading partners and the business community he has emphasized “the need for a modern NAFTA” as well as the importance of ensuring the “agreement is enforceable and can be held accountable in the U.S. and in Mexico and in Canada as well.”<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Brady led the congressional delegation to Mexico City. In addition to Pascrell and Levin, he was joined by Reps. Will Hurd (R-TX), Adrian Smith (R-NE), Roger Marshall (R-KS) and Tom Rice (R-SC). – <em class="">Brett Fortnam</em> (<a href="mailto:bfortnam@iwpnews.com" style="color: rgb(149, 79, 114);" class="">bfortnam@iwpnews.com</a>)</p></body></html>