September 12, 2019
USMCA: Labor Provisions
Overview
USMCA
The proposed U.S.-Mexico-Canada Agreement (USMCA),
The proposed USMCA includes components of more recent
signed in late 2018, requires implementing legislation that
U.S. FTAs that strengthen labor provisions and provide
must be approved by both Houses of Congress before it can
recourse to the same dispute settlement mechanism as other
enter into force. Labor issues are one of the major policy
parts of the agreement. Unlike NAFTA, it requires parties
issues of interest for some Members of Congress as they
not only to enforce their own laws, but also adopt and
consider the final agreement.
maintain specific laws on core worker rights related to the
International Labor Organization (ILO) Declaration on
The USMCA would revise and strengthen labor provisions
Fundamental Principles and Rights at Work. The USMCA
of the 1994 North American Free Trade Agreement
also commits parties to:
(NAFTA), and require Mexico to enact certain changes to
not waive or otherwise derogate from labor statutes or
its domestic labor laws. Scrutiny over Mexico’s labor
regulations to promote trade and investment;
practices during the negotiations put increased pressure on
not fail to effectively enforce labor laws through a
Mexico to advance ongoing reform efforts. After several
“sustained [consistent or ongoing] or recurring
years of domestic debate and constitutional reforms in
[periodically or repeatedly] course of action or inaction”
2017, on May 1, 2019, Mexican President Andrés Manuel
in a manner affecting trade or investment between
López Obrador signed into law a labor reform bill aimed at
parties; and
enhancing Mexican worker rights by ensuring that workers
promote compliance with labor laws through
can vote for union representatives by secret ballot,
appropriate government action, such as appointing and
establishing the right to join unions of choice, and creating
training inspectors or monitoring compliance and
an independent labor court to resolve disputes between
investigating suspected violations.
union workers and employers and register contracts, among
other measures. Similar issues are addressed in an annex of
USMCA also builds on U.S. FTA practice by prohibiting
the USMCA.
imports of goods made by forced labor, and adding new
commitments related to violence against workers, migrant
Historically, U.S. labor advocates have expressed concern
worker protections, and workplace discrimination. It
over free trade agreements (FTAs) with developing
maintains standard U.S. FTA language that each party
countries, due to those countries’ relatively lower wages
would retain the right to “exercise reasonable enforcement
and labor standards, and have sought stronger labor
discretion and to make bona fide decisions” on the
provisions in U.S. FTAs. In the view of some observers,
allocation of enforcement resources. Additionally, it
U.S. FTAs can help improve standards, build capacity to
specifies that the labor chapter shall not be construed to
support worker rights in developing countries, and enhance
empower another party to undertake labor law enforcement
economic development and growth. At the same time, trade
in the territory of another party.
liberalization can adversely impact domestic labor markets
in certain industries and regions of the country. In the long
NAFTA and USMCA labor provisions are often discussed
run, FTAs help reallocate resources to more efficient
in the context of Mexico’s record on worker rights. Some
industries, support higher-paying U.S. jobs, and, according
stakeholders and Members of Congress advocated that the
to most economists, have a net positive effect on the U.S.
United States negotiate a labor plan with Mexico, both
economy. The U.S. International Trade Commission
during past Trans-Pacific Partnership (TPP) talks and again
estimates that if implemented, the collective bargaining
during the negotiations to revise NAFTA. In the proposed
commitments made by Mexico in USMCA, would increase
TPP, for example, the United States had negotiated separate
Mexican union wages and help reduce wage disparity.
bilateral labor consistency plans with Vietnam, Malaysia,
and Brunei, which included commitments for specific legal
NAFTA
reforms and other measures. Mexico resisted such a plan.
NAFTA’s labor provisions are in a side agreement
Instead, USMCA includes a separate annex addressing
containing 11 “guiding principles” pertaining to worker
labor practices of most concern.
rights. Other provisions involve technical assistance,
capacity building, and separate dispute procedures, along
Mexican Labor Reforms
with a labor cooperation mechanism. Full dispute resolution
In the USMCA, Mexico agreed to develop and implement
procedures apply only to a country’s “persistent pattern of
reforms to strengthen its labor laws to protect collective
failure” in trade-related cases to enforce its own laws
bargaining and to reform its system for administering labor
regarding child labor, minimum wage, and occupational
justice. Annex 23-A in USMCA’s labor chapter (Chapter
safety and health. Issues such as freedom of association and
23) commits Mexico to enact specific legislative action in
the right to organize are limited to ministerial consultations.
regard to its labor laws; specifying that absent such action a
delay in USMCA’s entry into force could be possible. The
https://crsreports.congress.gov
USMCA: Labor Provisions
annex states that it is the “expectation” of the parties that
agencies. Based on last year’s budget of $291 billion, less
Mexico adopt such legislation before January 1, 2019.
than 1% went to labor issues. Critics question whether the
2020 budget and plan will be sufficient, and seek greater
Specifically, Annex-23A would commit Mexico to:
explanation from the Mexican government on whether it
Eliminate all forms of forced or compulsory labor;
has the fiscal ability to carry out the reforms.
Protect the right of workers to organize, form, and join
the union of their choice;
This skepticism has been echoed by some Members of
Prohibit employer interference in union activities,
Congress, who have proposed adding a labor inspection
discrimination, or coercion against workers;
system within USMCA to ensure stronger enforcement by
Mexico. One proposal calls for inspections of factories
Provide for the exercise of a personal, free, and secret
suspected of labor violations and potential punitive action
vote of workers for union elections and agreements;
through denial of tariff benefits for shipments from
Establish and maintain independent and impartial bodies
facilities. The proposal also would boost Mexico’s
to register union elections and resolve disputes relating
enforcement capabilities with U.S. assistance. Mexico has
to collective bargaining agreements; and
rejected such a system, and opposes reopening negotiations
Establish independent labor courts.
on the labor chapter. Both countries have emphasized that
long-term concerns about labor enforcement could be
While Mexico has recently enacted labor law reforms and
addressed through USMCA’s sunset review clause, which
undertook constitutional reforms in the past, the concern
requires a six-year review of the deal. In August, Mexico
shared by several Members of Congress has been Mexico’s
took additional steps, establishing a working group with
ability to implement and enforce its laws. Features of
Mexico’s
Canada to meet quarterly to help ensure implementation of
recent reforms aim to address these concerns.
USMCA labor commitments.
Mexico’s Federal Labor Law: Key Articles
Issues for Congress
Article 47.2: Protects workers from any form of violence
The current debate over USMCA labor provisions revisits
or forced labor.
similar issues raised during NAFTA negotiations and its
Article 133: Prohibits any form of retaliation or
implementation. Some lawmakers have stated that Mexican
harassment by the government, union leadership, or
labor reform and more enforceable labor provisions in
companies of workers exercising their rights.
USMCA are key factors in deciding whether to support the
Article 386: Protects workers’ rights to vote for
agreement and approve implementing legislation. Congress
independent unions through a secret ballot process,
has held a number of hearings on these topics. A group of
allowing workers to form their own unions and pick their
House Members is currently in consultations with USTR on
own representatives.
possible ways to enhance labor enforcement to address
Article 387: Imposes legal obligations on firms to
some congressional concerns. With this debate as a
recognize workers’ right to strike.
backdrop, Congress may face several issues, such as:
Article 604: Replaces existing Conciliation and
Mexico’s enforcement ability and labor reform:
Arbitration Labor Boards that currently deal with
Reforms in Mexico have potential to be transformative
employment law altercations with independent labor
but face challenges. Do Mexico’s recent actions
courts to resolve disputes and register contracts to ensure
demonstrate new political will to address concerns?
worker representation in unions.
Resources: Some stakeholders point to limited state
capacity in Mexico, especially at the subnational level,
U.S. Trade Representative (USTR) Robert Lighthizer
described Mexico’s
as an issue. Should the United States assist Mexico with
reforms as a win for labor advocates,
resources to implement the new labor standards?
claiming that the new laws “will greatly improve Mexico’s
Dispute settlement: Some stakeholders advocate fixes
system of labor justice and are exactly what labor leaders in
to dispute settlement procedures, which, currently in
the United States and Mexico have sought for decades.”
effect, allow a disputing party to block formation of a
Labor experts and advocates view the reforms as a major
panel via lack of consensus over panelist appointments.
improvement and are hopeful of a renewed commitment to
Could USMCA’s dispute settlement provisions be made
transform labor rights and justice in Mexico, but many
more effective to resolve labor disputes?
remain concerned about implementation challenges. Other
stakeholders and Members of Congress view Mexico’s
Proposed inspection system: A proposed labor
reform efforts as a positive step forward and note that the
compliance mechanism emulates features of an annex of
USMCA labor chapter goes further than other U.S. FTAs.
the U.S.-Peru FTA to combat illegal logging. Mexico
has rejected such a system. How might such a system be
Mexico’s Implementation Plan
operationalized and gain approval of both sides, and
Mexico has outlined an ambitious roadmap with annual
would related issues be subject to dispute settlement?
benchmarks to implement its labor reforms over four years.
Sunset clause: Could USMCA’s six-year review serve
Mexican officials contend that replacing the conciliation
as a dedicated outlet to resolve labor issues?
and arbitration board with independent labor tribunals and
M. Angeles Villarreal, Specialist in International Trade
courts run by the judicial branch over the next three years
will ensure effective enforcement. Mexico’s president
and Finance
submitted his budget proposals to Mexico’s Congress on
Cathleen D. Cimino-Isaacs, Analyst in International Trade
September 1. The budget request includes $523 million for
and Finance
the first stage of the labor reforms, with approximately
Katarina De la Rosa, Research Assistant
$267 million in additional funding from other government
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USMCA: Labor Provisions
IF11308
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