In shift, U.S. focuses on labour standards in NAFTA talks

by Sara Schaefer Munoz, Anthony Harrup & Robbie Whelan (feat. Eric Miller)

Wall Street Journal
April 3, 2018

The U.S. is pushing for higher labor standards in a new North American Free Trade Agreement as ministerial-level talks with Mexico and Canada get under way this week, in a shift that aims in part to gain congressional Democrats’ support for a revamped deal.

Focusing on broadly higher labor standards in a new pact could also help resolve thorny differences between the nations over the content of autos manufactured in the trade bloc, according to officials and people familiar with the talks.

Following opposition from Canada and Mexico to an initial U.S. proposal that would require light vehicles to contain 50% U.S. content to cross U.S. borders duty-free, the U.S. has changed its proposal on autos to one that would require certain parts of vehicles to be made in zones with high wages averaging $15 an hour, said the people familiar with the talks.

In the new proposal, auto makers would receive credit toward duty-free content if worker pay meets that threshold. The idea is to both lure more auto jobs back to the U.S. and also create an incentive for higher wages in Mexico to address complaints from auto unions that jobs have drifted south for cheaper labor, these people said.

The negotiators will look at ways to tighten language more broadly on labor protections and specifically look to ensure that labor reforms, passed last year in Mexico to strengthen the rights of unions, are upheld, people close to the talks said.

The new approach suggests that the parties could reach an agreement in principle on a new Nafta deal in the coming weeks, possibly to be announced at the Summit of the Americas in Lima, Peru, later this month, according to the people familiar with the talks.

Mexico’s top negotiator, Economy Minister Ildefonso Guajardo, will meet U.S. Trade Representative Robert Lighthizer in Washington early Wednesday and a ministerial meeting with Mexico, the U.S. and Canada is planned for Friday.

The optimism over the possibility of a preliminary accord comes even as U.S. President Donald Trump lashed out at the Nafta agreement on Twitter Tuesday, suggesting he might use the pact as leverage to stop a protest march of asylum seekers traveling from Central America through Mexico in hopes of crossing into the U.S.

These labor proposals “show that the U.S. is pivoting toward a mode in which it is starting to think about winning congressional votes for any new Nafta deal,” said Eric Miller, head of Rideau Potomac Strategy Group, a Washington-based trade-consulting firm. “It’s also an easy and obvious political win in places like the upper Midwest, where you have much of Trump’s base.”

He added that progress on the auto content and labor issues would justify continuing exemptions on aluminum and steel tariffs for Canada and Mexico.

Tighter labor standards in the pact would be a win for U.S. unions, which have long pushed for higher labor standards in Mexico.

“Renegotiating Nafta must lead to workers securing the right to bargain for and be paid decent wages and to work in safe conditions,” the United Steelworkers said in a statement released Tuesday. “The renegotiated Nafta should ensure that labor rights are implemented, monitored and enforced.”

On Monday night, Minister Guajardo said in a radio interview that Mexico needs to analyze with the auto industry the impact of the U.S proposal. He said the parties are not yet there on an overall agreement in principle.

“The proposal has very detailed specifications on the most-important auto parts, steel and aluminum content in the sector,” he said. “We have to make sure that the straitjackets don’t strangle the productivity and competitiveness of North America.”

Luis de la Calle, one of the original negotiators of Nafta for the Mexican government, was highly critical of the proposals.

“By insisting on a $15 minimum wage, the U.S. is saying, we don’t want to trade with a developing country,” he said.”If North America goes down that route, we’ll end up importing all our cars from Asia. The North American auto industry is competitive because of Mexico.”

Mr. Guajardo met Monday in Mexico City with members of the main Mexican private-sector board that advises Mexico’s government on the negotiations, according to Moisés Kalach, one of the group’s directors. In the meeting, private-sector representatives made it clear that “any plan that imposes prices controls on labor or salaries is unacceptable, and the private sector will not accept that kind of measure under any circumstances,” said Mr. Kalach, who attended the meeting.

Mexico’s private sector will also not accept any type of sunset clause in a revised Nafta agreement, he added, calling such a clause “a red line that the private sector absolutely rejects.”