Trump Negotiates Deal with Allies, Ditches NAFTA

Source: CNN

Recently, President Trump and his Administration successfully negotiated the United States-Mexico-Canada Agreement, or USMCA, which is the new regional trade agreement that will if passed through the Senate will effectively replace NAFTA, which is the original regional trade agreement for the US, Canada, and Mexico.  

This deal has found some unusual support from labor, especially from the Mexican labor force due to the proposed hike in wages. This is due to a clause that states that at minimum 40% of an automobile must be manufactured in a factory that workers make at least $16 an hour in order to circumvent any potential U.S. import tariffs. Likewise, this would essentially equal out to be five times increase of the average Mexican auto manufacturer worker’s wage of 3.14 per hour. However, many experts are skeptical that this clause will come anytime soon. Mexican Economist Luis de la Calle voiced his opinion by stating, “carmakers in North America already largely conform to the 40 percent rule. The companies that don’t can opt to pay a 2.5 percent tariff to export the car to the U.S… My bet is that, in the short term, some will just choose to pay the 2.5 percent. For the others, we will have to see what happens”. Furthermore, the USMCA has a period of transition for the activation of this clause, therefore, it would not be automatically applied. Additionally, the mechanism for the monitoring of automobile worker’s  wages has not  been fully worked out either therefore is the optimism coming to early on this clause. Moreover, both Luis de la Calle and others have voiced that this clause is meant to protect the cars of yesteryear and not the future, which will likely be electric and have the global software.  

However, there is some hope for the Mexican autoworker as there are other clauses in the USMCA that will hopefully reform Mexico’s aging labor laws and shady labor union practices. The reason being is that the Trump Administration pushed several provisions, which make the signatories of the agreement to enact strict labor legislation (laws). Some of these provisions are the safeties for independent unions and the enforcement mechanisms for these labor laws, and if a country doesn’t comply then the United States will impose sanctions on the country for the failure to do so. Moreover, the deal also includes clauses on topics such as transparency and anti-corruption guidelines.  

One of the major reasons for the increase in Mexican autoworkers salaries is because of the known wage gap between the auto manufacturers of the United States and their colleagues in Mexico has significantly widened when NAFTA was supposed to decrease the gap between the two. Furthermore, many Mexican labor lawyers have expressed confidence in the USMCA’s labor provisions due to the fact that for several years Unions have been tied to pro-industry “protection contracts” and thus not truly protectors and advocators for the worker, but rather an industry puppet to get the laborers on board with the company and what not.  

Yet, all three of the negotiation parties need to get the agreement approved by their respected legislatures. Yet Mexico’s new Congress with the incoming of new left-winged National Regeneration Movement party has already begun passing many of the mandated labor provisions set in the USMCA, and constitutional reforms ordered by other trade pacts that Mexico has entered into. Mexico’s President-Elect Andrés Manuel López Obrador who takes office in December ran on a pro-labor campaign campaigning for aiding in the increase in the Mexican workers’ standard of living and has also selected pro-union leader Luisa Maria Alcalde to be the new  labor secretary thus it’s being predicted that the USMCA will find comfort with the new Mexican leadership.