USMCA: Labor Provisions



Updated January 10, 2020
USMCA: Labor Provisions
Overview
recourse to the same dispute settlement mechanism as other
The proposed U.S.-Mexico-Canada Agreement (USMCA),
parts of the agreement. Unlike NAFTA, it requires parties
signed in late 2018, requires implementing legislation that
not only to enforce their own laws, but also to adopt and
must be approved by Congress before it can enter into
maintain laws on core worker rights related to the
force. Implementing legislation for USMCA was
International Labor Organization (ILO) 1998 Declaration
introduced in the House of Representatives (H.R. 5430) on
on Fundamental Principles and Rights at Work. The
December 13, 2019, and in the Senate on December 16,
USMCA also commits parties to:
2019 (S. 3052). The House approved the bill on December
 not waive or otherwise derogate from labor statutes or
19, 2019. The Senate Finance Committee reported the bill
regulations to promote trade and investment;
out of committee on January 7, 2020. Upon ratification, the
 not fail to effectively enforce labor laws through a
USMCA would replace the 1994 North American Free
“sustained or recurring course of action or inaction”
Trade Agreement (NAFTA).
(with the exception of worker violence) in a manner
affecting trade or investment between parties; and
Labor issues were a major congressional concern
 promote compliance with labor laws through
throughout the USMCA negotiations and remained an issue
appropriate government action, such as appointing and
after the three countries concluded the agreement in
training inspectors or monitoring compliance and
September 2018. In response, the U.S. Trade
investigating suspected violations.
Representative (USTR) and some Members of the House of
Representatives negotiated changes to the USMCA; most of
The USMCA also prohibits imports of goods made by
the changes were dedicated to labor modifications. USTR
forced labor, and adds new commitments related to
then negotiated the amendments with Canada and Mexico.
violence against workers, migrant worker protections, and
workplace discrimination. It maintains standard U.S. FTA
Historically, U.S. labor advocates have expressed concern
language that each party would retain the right to “exercise
over free trade agreements (FTAs) with developing
reasonable enforcement discretion and to make bona fide
countries, due to those countries’ relatively lower wages
decisions” on the allocation of enforcement resources.
and labor standards, and have sought stronger labor
Additionally, it specifies that the labor chapter shall not be
provisions in U.S. FTAs. Proponents of FTAs such as
construed to empower another party to undertake labor law
NAFTA argue that they help improve standards, build
enforcement in the territory of another party.
capacity to support worker rights in developing countries,
and enhance economic development and growth. In the
USMCA Protocol of Amendment: Key Labor Changes
long run, FTAs help reallocate resources to more efficient
Some Members of Congress criticized the original text of the
industries, support higher-paying U.S. jobs, and, according
USMCA chapters on labor and dispute settlement (DS) and
to most economists, have a net positive effect on the U.S.
negotiated with the Administration to amend the agreement.
economy. At the same time, trade liberalization can have
Key changes include the fol owing:
adjustment costs in certain industries and regions of the

Prevention of panel blocking in dispute settlement.
country. The U.S. International Trade Commission
Ensures the formation of a panel in dispute cases where a
estimates that, if implemented, the collective bargaining
party refuses to participate in the selection of panelists.
commitments made by Mexico in USMCA would increase

Mexican union wages and help reduce wage disparity.

“In a Manner Affecting Trade and Investment.” Shifts the
burden of proof by stating that an alleged violation affects
NAFTA
trade and investment, unless otherwise demonstrated.
NAFTA’s labor provisions are in a side agreement

Rapid Response Mechanism. Adds a new rapid response
containing 11 “guiding principles” pertaining to worker
mechanism to provide for an independent panel
rights. Other provisions involve technical assistance,
investigation of denial of certain labor rights at “covered
capacity building, and separate dispute procedures, along
facilities,” as opposed to a government inspection.
with a labor cooperation mechanism. Full dispute resolution

Mexico’s Labor Reform Monitoring. USMCA
procedures apply only to a country’s “persistent pattern of
implementing legislation creates a new interagency
failure” in trade-related cases to enforce its own laws
committee, labor attachés, and reporting requirements to
regarding child labor, minimum wage, and occupational
Congress on Mexico’s implementation of labor reforms.
safety and health. Issues such as freedom of association and

New or amended provisions on Rules of Procedure for
the right to organize are limited to ministerial consultations.
DS, forced labor, and violence against workers.
USMCA
The proposed USMCA includes components of more recent
Mexican Labor Reforms
U.S. FTAs that strengthen labor provisions and provide
After several years of domestic debate and constitutional
reforms in 2017, on May 1, 2019, Mexican President
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USMCA: Labor Provisions
Andrés Manuel López Obrador signed into law a labor
courts run by the judicial branch over the next three years
reform bill aimed at enhancing Mexican worker rights by
will ensure effective enforcement. Mexico’s president
ensuring that workers can vote for union representatives by
submitted his budget proposals to Mexico’s Congress on
secret ballot, establishing the right to join unions of choice,
September 1. The budget request includes $523 million for
and creating an independent labor court to resolve disputes
the first stage of the labor reforms, with approximately
between union workers and employers and register
$267 million in additional funding from other government
contracts, among other measures.
agencies. Critics question whether the 2020 budget and plan
will be sufficient to carry out the reforms.
USMCA Annex 23-A in the labor chapter commits Mexico
to enact legislative action in regard to its labor laws, similar
This skepticism was echoed by some Members of Congress
to the May 2019 reforms, specifying that absent such action
who proposed adding a labor inspection system within
a delay in USMCA’s entry into force could be possible.
USMCA to ensure stronger enforcement by Mexico. The
Specifically, Annex-23A commits Mexico to:
rapid response mechanism in the amended USMCA
provides for an independent panel investigation at “covered
 eliminate all forms of forced or compulsory labor;
facilities” for the suspected denial of the right of free
 protect the right of workers to organize, form, and join
association and collective bargaining. For the United States,
the union of their choice;
covered facilities would be limited to those that have
 prohibit employer interference in union activities,
previously been proven to have violated U.S. law. For
discrimination, or coercion against workers;
Mexico, a claim can be brought only with respect to an

alleged violation under Mexico’s USMCA labor reform
provide for the exercise of a personal, free, and secret
commitments in Annex 23-A.
vote of workers for union elections and agreements;


establish and maintain independent and impartial bodies
Issues for Congress
to register union elections and resolve disputes relating
to collective bargaining agreements; and
The debate over USMCA labor provisions revisited similar

issues raised during NAFTA negotiations and its
establish independent labor courts.
implementation. Some policymakers contend that FTAs
While Mexico has enacted these labor law reforms, and
help raise labor standards and wages in lower income
undertook constitutional reforms in the past, several
countries; others are concerned about worker rights
Members of Congress remain concerned about Mexico’s
protection. Numerous Members welcomed the amended
ability to fully implement and enforce its laws.
agreement, which, they argue, includes stronger and more
enforceable labor provisions. While major U.S. labor
Mexico’s Federal Labor Law: Key Articles
unions endorsed the revised agreement, other stakeholders
Article 47.2: Protects workers from any form of violence
question how the untested rapid response enforcement
or forced labor.
mechanism will operate in practice. Some Members are
Article 133: Prohibits any form of retaliation or
concerned about Mexico’s ability to carry out its labor
harassment by the government, union leadership, or
obligations and view U.S. commitment to capacity building
companies of workers exercising their rights.
as key to strengthening enforcement in Mexico. In moving
Article 386: Protects workers’ rights to vote for
forward, Congress may consider:
independent unions through a secret ballot process,
Mexico’s enforcement ability and labor reform:
allowing workers to form their own unions and pick their
Reforms in Mexico have potential to be transformative
own representatives.
but face challenges. Do Mexico’s recent actions
Article 387: Imposes legal obligations on firms to
demonstrate new political will to address concerns?
recognize workers’ right to strike.


Resources: Some stakeholders point to limited capacity
Article 604: Replaces existing Conciliation and
in Mexico, especially at the subnational level, as an
Arbitration Labor Boards that currently deal with
issue. USMCA implementing legislation designates
employment law altercations with independent labor
funding for the Department of Labor to support reform
courts to resolve disputes and register contracts to ensure
efforts in Mexico and worker-focused capacity building.
worker representation in unions.
Should the United States assist Mexico with resources to
U.S. Trade Representative (USTR) Robert Lighthizer
implement the new labor standards?
described Mexico’s

reforms as a win for labor advocates,
Dispute settlement: Amendments to the USMCA’s
claiming that the new laws “will greatly improve Mexico’s
original DS procedures prevent a disputing party from
system of labor justice and are exactly what labor leaders in
blocking formation of a panel via lack of consensus over
the United States and Mexico have sought for decades.”
panelist appointments. How effective will USMCA’s
Labor experts and advocates view the reforms as a major
DS provisions be in resolving labor disputes?
improvement and are hopeful of a renewed commitment to
Rapid Response Mechanism: USMCA’s new rapid
transform labor rights and justice in Mexico, but many
response mechanism provides for an independent panel
remain concerned about implementation challenges.
investigations at covered facilities, with the potential for
penalties and blocking of imports from the entities. How
Mexico’s Implementation Plan
can USMCA parties ensure the system’s effectiveness?
Mexico has outlined an ambitious roadmap with annual
benchmarks to implement reforms over four years. Mexican
M. Angeles Villarreal, Specialist in International Trade
officials contend that replacing the conciliation and
and Finance
arbitration board with independent labor tribunals and
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USMCA: Labor Provisions

IF11308
Cathleen D. Cimino-Isaacs, Analyst in International Trade
and Finance


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