USMCA Treaty adds to Mexico’s Complexity

6/26/20

As if it couldn’t get more complex, Mexican employee relations will get even more challenging from 1st July when the USMCA Treaty comes into effect.

Let’s list the challenges:
  1. Faced with the COVID pandemic, the government aggressively closed all but the most essential operations and introduced a rigid system of audits and the trade unions and lawyer Susana Prieto mobilized at factory gates on worker safety issues. 

  2. Companies were obliged to maintain pay for those not working—so the most essential of workers were working for nothing.

  3. The heroine of the Matamoros 20/32 strikes, Prieto, was arrested and jailed for incitement to protest.

  4. As infections accelerated, economics took over and the government embraced a return to work and Mexico today sits at the epicentre of virus escalation—along with Brazil.

  5. The Mexican minimum wage has been hiked by almost 40% in 2019 and 2020, provoking the Matamoros 90,000 employee strikes in the Spring of 2019.

  6. The country is still in the phased implementation of new laws to give employees the choice whether to be represented by a trade union and which union that would be.  Al collective bargaining agreements are to be subject to an employee vote.  The institutions and regulations to support the law will not be fully implemented until May 2023.

  7. The so-called protection agreements held by more than 90% of companies are becoming progressively illegal and all will become so by May 2023.
Both companies and trade unions are playing a complex game without clear rules or enforcement mechanisms and the COVID issue has provided ammunition for a “phony war.” 

As if that wasn’t enough, the U.S. and Mexico will step in July 1st when the USMCA comes into force.    Of course, the USMCA is a comprehensive Trade Treaty that goes far beyond issues of labour only.  That said, the USMCA is quite different with reference to labour issues than previous U.S. Treaties—indeed the Treaty has a specific Annex dealing trade union laws in Mexico.

Mexican law may be unclear on some aspects of trade union law and equal opportunities, and on the phased introduction of laws over four years, but the USMCA is very clear.  Irrespective of what the Mexican government has done to comply with the USMCA terms, from next week pretty well anyone in Mexico, the U.S., and Canada will be able to complain about the non-compliance with the Treaty of COMPANIES.  Let’s be clear, they are not complaining about non-compliance with Mexican law nor are they complaining about whether the Mexican government has implemented the provisions properly.   These complaints will not be judged in Mexican labour courts but by the treaty’s  own compliance processes involving a “rapid response labour mechanism” with the power to analyse complaints, conduct verification visits and propose sanctions against the company.  There will be an electronic platform for complaints. These sanctions are not “labour” sanctions but are “trade” sanctions that could involve tariffs on a company products or restrictions on the company ability to export to the U.S. or Canada.   

Frustrated with progress South of the border—how active will U.S. and Canadian trade unions be in targeting particular companies and industries.  Over a number of years, the U.S. and Canadian autoworkers and Machinists have been supporting trade union organizing campaigns—and they now find themselves with another untried and unproven machinery.

Look, it is not at all clear whether the rapid response teams will use the current state of Mexican law as being complaints with USMCA.  They would therefore accept the phased introduction of laws against the current Mexican timescales.  But some things should already have been done even under Mexican law and many companies have not yet complied.  The most interesting is the requirement to publish current collective bargaining agreements (secret or not) to all employees and to admit existing practices. 

Attorneys Morgan Lovell say of the labour aspects of the Treaty:

“The USMCA contains the most robust labor and environment provisions of any trade agreement ever negotiated – which contributed to its strong bipartisan support. With respect to labor, specifically, USMCA also establishes a novel" rapid response labor mechanism. "The mechanism permits the United States or Mexico to request that an independent panel conduct an expedited review of an alleged denial of free association and collective bargaining at specific facilities in both countries. Penalties for denying these rights include the suspension of preferential tariff treatment or complete denial of entry for goods manufactured at that facility. As part of the process, the panel can request to inspect the factory in question. Previous U.S. free trade agreements have only focused on broader countrywide or industry wide labor practices, not labor disputes at specific workplaces. This mechanism, which was a last-minute addition at the request of House Democrats, will likely be invoked by both countries soon after USMCA's entry into force. Targeted sectors may include, but are not limited to, mining, steel, and automobiles.”