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USMCA Forces Mexico to Make Labor Modifications

October 31, 2018

By Ana Gomez Salcido

There are certain chapters in the United States-Mexico-Canada Agreement (USMCA) that force Mexico to improve its labor and union conditions. If the conditions don’t improve in time, the U.S. and Canada can both pressure Mexico with not approving the pending free trade agreement.

Mexico is obliged to change its Federal Labor Law to promote freedom and union democracy, which will motivate companies to take care of not having simulated unions, said Alejandro Gomez Tamez, general director of the Group of Advisers in Economy and Public Administration.

The simulation of a union will cause sanctions, and if the partner countries in the USMCA consider it, they would generate panels for breach of freedom of association.

“The U.S. will no approve the USMCA until there are changes in the Mexican Federal Labor Law,” Gomez Tamez said. “It can be taken by the U.S. or Canada as a flag to hit Mexico on products of Mexican origin that they don’t want. If they bombard the product, then review it by labor, then can put a panel and remove the possibility to continue exporting that product.”

Mexico stopped generating an internal industrial policy as a result of the North American Free Trade Agreement (NAFTA), assuming that the development would come via international trade, which didn’t happen, reaching growth rates of 2.5 percentage per year, a percentage that doesn’t help reduce poverty levels and increases the informal economy.
In the USMCA, besides the labor issue, there are sensitive contents for Mexico such as automotive, agriculture, dispute resolution mechanisms, review clause, and transportation topics.

Gomez Tamez mentioned the USMCA modernizes in issues of trade facilitation, cooperation for the application of the agreement in customs, new rules of origin, inspection, sanitary and pesticide measures, digital commerce, sectorial annexes, among others.

With the new treaty, the U.S. will limit the freight transport of cargo in its territory, but it opens the Mexican territory for theirs.

“The U.S. left out the transport, it already does with NAFTA, but now it will be included in the USMCA, they legalized it. The Mexican National Chamber of Freight Transport will have competition of American freight transport, while Mexican freight transport would be without a job in the U.S.,” he said.

Additionally, with the USMCA it’s required that 40 percent of a vehicle be manufactured where the pay is at least $16 per hour, which could be the case of Guanajuato in Mexico, where several automotive manufacturers are located. However, if a logistics chain obtains one part of the car assembly made in the U.S. and another in Canada, getting the 40 percent required, then they could be fulfilling the requirements without increasing the minimum wage in the Mexican automotive sector.

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