Labor, Enforcement Continue to Bedevil NAFTA Rewrite
Although the labor witness at the Senate Finance Committee hearing on the new NAFTA said labor leaders "remain optimistic about the ability to resolve the issues" with the rewrite, Michael Wessel also said they "will not hesitate to oppose" ratification if they are not satisfied. Wessel, who is the staff chairman to the Labor Advisory Committee for Trade Negotiations and Trade Policy, said the current rewrite, known as the U.S.-Mexico-Canada Agreement, "is not good enough."
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He said interpretation of some of Mexico's new labor law "is still in question," and labor advocates have not seen how Mexico will monitor and fund the new system. While Wessel did not say ratification should be conditioned on waiting for the four-year implementation schedule in Mexico, he suggested that the timing of when the ratified agreement comes into force should wait until the revised labor system is well under way.
Wessel said that the current problem of panel blocking in state-to-state disputes "would disable the ability to resolve critical issues and must be fixed." But he said that's not enough to improve enforcement, and said the Brown-Wyden legislative proposal is a necessary provision (see 1906180046).
Sen. Sherrod Brown, D-Ohio, the Brown of the proposed legislation, questioned Wessel during the July 30 hearing, and asked him if the way the rewrite stands now, whether outsourcing to Mexico would continue. "Yes," Wessel said, and he agreed with Brown's statement that U.S. companies open factories there because of Mexico's lower wages.
Brown argued that Goodyear refused to allow access to a new plant in Mexico when the House working group visited because "they wouldn't want elected officials to see their labor violations." He said that Goodyear fired dozens of workers after about 700 workers went on strike in 2018. The Goodyear case has drawn repeated complaints from Democrats as an example of where NAFTA went wrong (see 1907260059).
Brown said his concept of joint Mexican-U.S. inspections of Mexican factories accused of labor violations would lead to not just denial of duty-free benefits, but that goods from factories where violations were confirmed would be blocked from entry into the United States.
A summary of the framework released back in April said that the goods would still enter, but would not get duty-free benefits, and that only goods that come from forced labor would be blocked.
In a hallway interview with International Trade Today after the hearing, Brown said blocking goods "has been our vision all along. [U.S. Trade Representative Robert] Lighthizer will tell you that we moved the goalposts and we haven't, it's been our vision for months and months and months and months, over a year, that denying NAFTA benefits is not enough, that it needs to be denying goods at the border."
Brown said, "I think you will see Mexico agree with this," because their government is pro-labor.
The tone of several senators' comments suggested that they will vote no on an implementing bill for the NAFTA rewrite. Sen. Sheldon Whitehouse, D-R.I., said enforcement for environmental standards "looks pretty bleak," and he said that the original NAFTA hurt Rhode Island manufacturing badly. "I don’t see this is a very significant change," he said.
Sen. Patrick Toomey, R-Pa., said that USMCA would constrict trade, not expand it, and that it's a choice between the current NAFTA and the rewrite, because he says the president does not have the ability to leave NAFTA without congressional consent.
But Sen. Rob Portman, R-Ohio, a former USTR, asked his Democratic colleagues how they could oppose USMCA, when it makes changes that they have been seeking for years. He said some of them asked him when he was USTR for stronger labor standards similar to these. He said they've finally gotten what they've been asking for, so he's surprised they aren't declaring victory. He noted the $16 wage standard in the auto rules of origin, and said it was surprising to him that a Republican administration would negotiate that. "For Democrats to look at that and say, 'That’s not good enough'? Give me a break!" He said if someone who cares about labor standards is objective about the differences between NAFTA and its replacement, "I think it’s a pretty easy decision."
Wessel did not agree to Portman's leading questions that the labor standards are more enforceable in this deal than in NAFTA, or that the new steel rules of origin are good for steelworkers. Wessel said Mexico could import Chinese steel, make it into auto panels and send them to the U.S. duty free. Portman told him that if we want Mexico to hire thousands of judges and labor rights professionals to create a labor court system, "we need to make good on our end of the bargain. Otherwise none of that happens."