Monthly Archives: February 2019

New NAFTA” would worsen the family farm crisis and keep consumers in the dark about their food

The economic state of U.S. agriculture is dire. The Federal Reserve Banks of Kansas City, Minneapolis and Chicago report that a growing percentage of U.S. farmers cannot pay the interest on their loans.



Five years of falling cash receipts for agricultural commodities is eroding equity for operations that are not forced out of farming. Maximizing production to “export to prosperity” relies on agricultural practices that expose U.S. consumers to fertilizer nitrates in water, to pesticide and chemical residues in produce, and to contaminated foods. Consumer information about food, including country of origin and information on additives and genetically engineered ingredients, is non-existent or difficult to understand.

The New NAFTA proposes to remedy this situation by increasing agribusiness exports and further limiting regulation of food safety and the environmental impacts of industrial agriculture—policies that will worsen both farmers’ economic straits and the safety of our food.

“Business as usual” fixes fail to address farmers’ needs and undermine sustainable agriculture:

  • Measures in the New NAFTA to open Canada’s dairy market to increased exports from the U.S. would not significantly reduce the vast oversupply of U.S. raw milk, or increase prices paid to U.S. dairy farmers. The Canadian market is simply too small. But, that opening would greatly weaken Canada’s successful supply management program, which has achieved market-based prosperity for its farmers.
  • The New NAFTA’s prohibition on use of WTO agricultural safeguards (temporary tariff protections) against surges of cheap imports, often priced at below the cost-of-production, would eliminate a policy tool used by all three countries to defend against unfair and unstable markets.
  • Restrictions on agricultural support programs to make them trade compliant would expose programs to strengthen local markets—including Mexico’s bold new initiative for food security—to potential trade challenges.

Limits on scientific data used to set food safety and agricultural biotechnology standards would increase risks to human health and the environment:

  • The New NAFTA allows agribusinesses to maintain testing data and studies for agricultural chemicals as Confidential Business Information, despite peer-reviewed evidence of damage to public and environmental health and to commerce. This includes, for example, data pertaining to the Environmental Protection Agency’s commercial authorization of Dicamba™, a pesticide so volatile that it cannot be applied without damage, except to crops engineered to resist it.
  • New language on Sanitary and Phytosanitary Standards “streamlines” administrative determinations that foreign food safety, plant and animal health, and animal welfare measures are “equivalent” to U.S. measures, despite evidence that they are not.
  • Provisions on “Low Level Presence Occurrence” of genetically engineered or edited agriculture products unauthorized in the importing country fail to establish quantitative thresholds or agreed sampling and testing methods for GE products, potentially opening markets to unauthorized new agricultural products with no risk assessment.

New rules on labeling and regulatory processes would create roadblocks to improvements in food, health and public safety:

  • New food labeling restrictions would allow companies to hide food additives and ingredients in processed foods as “proprietary” trade secrets.
  • A new chapter on so-called “Good Regulatory Practices” would increase burdens on regulators by requiring cross-border consultation and harmonization, trade impact studies, and voluntary measures resulting in delaying and impeding the development, enactment and enforcement of protections for consumers, workers and the environment.

The new NAFTA is a huge missed opportunity to reform our trade, food and farm system. Instead of worsening the current situation, trade rules to improve outcomes for family farmers and consumers would:

  1. Favor domestic markets and rural livelihoods through provisions that explicitly provide for temporary import safeguards, agricultural support programs and anti-dumping measures.
  2. Increase transparency in developing and implementing food safety and labeling rules by limiting claims of Confidential Business Information for studies, data and documents used in regulatory activities that pertain to human, plant, animal and environmental health.
  3. Enhance consumers’ information about the food they eat by insisting that Canada and Mexico drop their WTO complaints against U.S. Country of Origin labeling for meat products, thus allowing Congress to reestablish this popular program.
  4. Ensure that governments are free to develop and implement public protection standards without imposing additional limitations on programs considered trade distorting, and that any programs on regulatory cooperation or equivalence are voluntary and not enforceable through dispute settlement.
  5. Require that any equivalency agreements for food safety and plant and animal health include rigorous inspection and audits of facilities in the export supply chain.
  6. Explicitly permit governments to reject imports of unauthorized products of agricultural biotechnology.

For more detailed analysis and updates on NAFTA and agriculture, visit

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Agribusiness’s secretive plans to unravel food safety and worker protections

Little-known Regulatory Cooperation Council Subverts Public Safety to Trade Promotion Goals


As Congress and the public debate the pros and cons of the United States-Mexico-Canada Agreement (USMCA), or New NAFTA, behind the scenes and in the shadows transnational corporations are doubling down on their plans to weaken and eliminate public protections through a related entity, the secretive Regulatory Cooperation Council (RCC). This little-known council has the mission of promoting trade by “reducing, eliminating or preventing unnecessary regulatory differences” between Canada and the United States. Since the RCC’s inception, agribusiness—including factory-farmed livestock producers, the feed industry, and chemical and pesticide manufacturers and linked transportation businesses—has had a seat at the regulatory cooperation table. Their focus, without exception, has been advocating the scaling back and even elimination of important safety protections in both countries. In the U.S., recommendations made by the RCC feed directly into regulations enacted (or eliminated) by the Department of Agriculture, Food and Drug Administration and Environmental Protection Agency, among others.

Cross-border regulatory cooperation activities aimed at eliminating so-called “non-tariff barriers” to trade—standards that can increase the cost of importing products that don’t meet another country’s health and safety protections, or prevent the import altogether—began following the signing of the original NAFTA. Initially, informal working groups were established to harmonize pesticide and other regulations. The RCC was formally created in 2011 by an Executive Order from President Obama, and proceeded to establish work plans to harmonize U.S. and Canadian regulations in 23 policy areas, including meat and plant inspections, food safety, workplace chemicals, chemicals management, rail safety and transport of dangerous goods. The RCC was revitalized in June 2018 by the Trump and Trudeau administrations with a new Memorandum of Understanding.

The Trump administration recently sought comment from “stakeholders” on what the RCC’s activities and focus should be going forward. It is very clear that the administration’s RCC initiative is part of its broader deregulatory plan. The U.S. request for comment specifically states that international regulatory cooperation initiatives “may serve deregulatory functions and help agencies achieve the objectives of Executive Order 13771.” This executive order “requires that, for each fiscal year, agencies must identify in their Regulatory Plans offsetting regulations for each regulation that increases incremental cost” and at a minimum, must repeal two regulations for every one that is adopted. The Trump government intends for the RCC process to promote these regulatory rollbacks.

Predictably, the RCC stakeholder submissions were mostly from transnational corporations and industry associations. Most of the public, as well as many food, consumer and environmental groups, have never heard of the RCC. (IATP’s comments were among very few from civil society.) The corporate commenters have a consistent message, which mirrors that of the Trump administration: Use the RCC to get rid of regulations. Many also see the RCC as a mechanism for implementing new restrictions on public protections that are part of the New NAFTA. Here are some of the most egregious industry asks:

  • All inspections of imported meat at the border should be eliminated. In their joint comments on the RCC, the North American Meat Institute (NAMI) and Canadian Meat Council (CMC) said that “microbial and residue testing of meat products at the border should be eliminated” in order to facilitate trade, and opined that “Free Trade Agreements between the US and Canada provide the legal basis” for this action. As Food & Water Watch has pointed out, the no-inspection demand is one these meat industry lobbyists have been making since the RCC was established in 2011. Border inspections are important for protecting public health because U.S. and Canadian food standards and practices are not the same. It also protects the public as government is privatizing meat inspection and shifting to self-reporting while slaughtering line speeds increase. Food & Water Watch gives the example of USDA’s zero tolerance policy for the pathogen Listeria monocytogenes on all products it regulates. Canada does not have this ban. Without checking at the border, there is no way to know if Canadian products that violate U.S. policy on this pathogen are being imported into the U.S. While the industry’s earlier demands to end border inspections were upended by a major recall of contaminated Canadian beef in 2012, the industry is trying again under the Trump administration. This time, they may succeed.
  • If all border inspections aren’t eliminated, then food safety inspectors should reduce tested sample size. If you test less of a product, you will undoubtedly find fewer violations. Of course, this isn’t the reason meat industry lobbyists NAMI and CMC give for their request that the RCC focus on reducing sampling lot size—instead they say their goal is to prevent food waste! When it comes to food safety, what you don’t know can hurt you.
  • Prevent Canada’s new mandatory Front of Package health and nutrition labels from going into effect. The U.S. Meat Export Federation wants the RCC to harmonize front-of-package labeling between the U.S. and Canada. What does this mean? The industry’s goal is to use the RCC process to stop Canada from implementing new health warnings on packaged foods. In their regulatory cooperation comments, NAMI and CMC assert that food nutrition labels proposed by Health Canada were promulgated in a manner inconsistent with “good regulatory practice as outlined in the text” of New NAFTA, and that the proposed rule “creates a non-tariff trade barrier for U.S. companies.” The groups falsely claim that the Canadian measures are not evidence-based and “will be unique in the world and set a dangerous precedent,” mentioning particularly their objection to linking the labeling provisions to restrictions on marketing to children. In fact, health warnings on junk food packaging has been effectively implemented in several countries to combat obesity, diabetes and other diet-related diseases. As we reported previously, U.S. negotiators, egged on by agribusiness, sought to prevent Canada (as well as Mexico and the U.S.) from implementing effective front-of-package junk food warning labels. The proposed anti-labeling negotiating text was leaked, and the ensuing public outcry killed the proposal. It appears that the meat industry wants to use this secretive regulatory cooperation process to achieve through the back door what it was unable to accomplish directly in New NAFTA.
  • Allow Canadian-grown meat to be sold with chemical treatments and in packaging that currently isn’t allowed. Canada doesn’t allow some “food safety interventions and packaging” that the U.S. does, according to meat industry lobbyists CMC and NAMI. The industry suggests that since some U.S. meat products exported to Canada are allowed to be sold even when chemically treated or in packaging that Canada does not allow domestically, “there is a compelling rationale to converge these approval processes.” In their view, Canada should simply adopt the U.S. standard, and the RCC can help achieve this outcome.
  • Reduce safety testing of containers used to transport pesticides and other hazardous chemicals. The Industrial Packaging Alliance of North America (IPANA) wants to use the RCC to limit required safety inspections of containers used to transport hazardous goods. Currently, under U.S. Pipeline and Hazardous Materials Administration rules, these containers must be retested every 12 months. Right now, Transport Canada does not require any periodic safety retesting, but it has proposed testing every five years. The industry group says the U.S. standard “represents a competitive cost disadvantage for U.S. manufacturers” and that changing to the Canadian proposal “would eliminate a significant and unnecessary regulatory burden.” How would workers and others exposed to leaking pesticides or exploding hazardous materials be affected if these containers fail because of inadequate testing? IPANA doesn’t say.
  • Use obscure words instead of plain language to hide information from consumers. The Chamber of Commerce thinks the RCC should help get rid of a U.S. rule that requires English words instead of obscure Latin terms for 57 ingredients on some consumer product labels. Since Canada allows the Latin terms, harmonizing the two countries’ regulations to the Canadian standard presents a unique opportunity to further confuse consumers trying to decipher what’s really in these household products—and whether they are safe.
  • Exempt U.S. exporters from some Canadian safety standards for explosive grain dust in animal feed and non-food grain. This is one of many joint requests from the National Grain and Feed Association and North American Export Grain Association. Canada requires hazard labeling and safety data sheets for workers handling animal feed and non-food grain, whereas the U.S. does not. The feed associations want the RCC to harmonize regulations intended to prevent dangerous grain dust explosions by allowing the less protective U.S. standard to apply. The industry solution? Of course, harmonize downward.
  • Roll back controls on climate-harming hydrofluorocarbon gases. The Chemistry Society of Canada and the American Chemistry Association want Canada to piggy-back on a Trump administration attempt to roll back rules meant to prevent the leaking and venting of organic compounds called hydrofluorocarbons (HFCs) from large refrigerating and air-conditioning units. HFCs contribute to global warming and ozone depletion. The chemical industry lobbyists state the RCC should be used to “encourage collaboration between Canada and the U.S., which could reduce burden, enhance compliance, and promote a North American market.” It would also further accelerate climate change, not to mention contribute to more cases of skin cancer, facts the chemical industry fails to mention.

It is very clear that the Regulatory Cooperation Council, and related language in the new NAFTA, is part of a broader deregulatory plan. New NAFTA hasn’t yet been sent to Congress for ratification and isn’t in effect, but that hasn’t stopped industry lobbying groups from trying to use it to deregulate. Several comments submitted by industry groups made the case that provisions in New NAFTA should be implemented through the RCC, or that a domestic regulation they object to violates provisions in the deal. As we discuss above, in their objections to Canada’s new junk food labeling rule, the meat industry claims the rule is inconsistent with New NAFTA’s “Good Regulatory Practices” (GRP) chapter. The GRP chapter includes provisions defining what information and studies may be used to develop domestic regulations, how other countries should be involved in the rule-making process, and procedures for adopting, reviewing and repealing regulations. It also includes many provisions promoting regulatory cooperation and harmonization. Other New NAFTA chapters, including provisions on technical rules including labeling, also encourage or require regulatory cooperation prior to adoption of new mandatory public protections.

While different regulations in the two countries could be harmonized to the most protective of the divergent standards, that approach is not reflected in any of these recent industry demands. Nor is it what actually happened during the decade since the RCC was established. Perhaps there is no more devastating and obvious proof of this than U.S. and Canadian regulators’ actions both before and after the 2013 Lac Mégantic train disaster.

From the early days of the RCC, it was a forum for regulators to seek to harmonize regulations governing rail safety and the transport of dangerous goods, including policies regulating the rail transport of volatile crude from North Dakota’s Bakken formation and Alberta’s oil sands through Canada and the U.S. We know now that these regulatory cooperation initiatives did nothing to improve rail safety, either before or after a 72-car runaway oil train crashed and exploded like a bomb in the Quebec village of Lac Mégantic, directly killing 47, destroying the community’s historic center, and spilling thousands of gallons of crude oil on the edge of what had been a pristine lake and tourist destination.

As a recent forum on the disaster detailed, it was caused by reckless industry cost-cutting, abetted by massive regulatory failure as the Canadian government pursued a single-minded focus on deregulation. This deregulatory agenda has many parallels with what’s going on now under the Trump administration, including the arbitrary and foolish 2-for-1 policy that requires repealing two existing regulations for every new rule. Transport of dangerous goods and rail safety continue to be part of the RCC’s mission. It’s hard to see how secretive discussions aimed at eliminating regulatory differences that impede free trade will improve safety, especially with the Trump administration busy rolling back many measures intended to address some of the biggest safety gaps that led to the Lac Megantic disaster. As Bruce Campbell’s book on Lac Mégantic details, these rollbacks include delaying or completely stopping (1) measures to require more than one crew member on dangerous goods transporting trains; (2) positive train control, the remote control satellite-based protection system that helps prevent derailments; (3) a rule requiring certain trains carrying high-hazard liquids to be operated with an electronically controlled pneumatic braking system by 2021; (4) prospective regulations to address track deterioration; and (5) proposals to require engineers to be screened for sleep apnea.

The current RCC agenda, added to New NAFTA’s “Good Regulatory Practices,” points to a concerted effort by corporations and their allies in government to lower standards in North America and beyond. Neither the Canadian nor U.S. government seems likely to use the RCC to harmonize rules upwards. Obviously, when at least one of the two countries seeking to harmonize regulations across the border is hell-bent on rescinding public protections, harmonization will lead to lower standards. Protective standards and oversight are already deficient in both countries—from meat inspection and food safety, to protecting workers and the public from exploding grain elevators and exploding oil trains. Without the will to hold industry accountable and adopt strict protections, regulatory cooperation in and of itself does nothing to improve those standards. In fact, as the rail safety example illustrates, the RCC experience even under the more regulation-friendly Obama administration failed the public interest. Indeed, just this month there was another major derailment which killed the crew as a freight train plunged 60 meters off a bridge near the British Columbia-Alberta border.

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Dairy farmers were counting on China milk buyers before the trade war. “The problem is both nations have stubborn leaders,” an industry analyst said.


Hard times for farmers got tougher with President Donald Trump’s trade war.Now Midwestern farmers are filing the highest number of bankruptcies in a decade, according to a Wall Street Journal analysis of federal data.And farmers aren’t hopeful about this year.

Twice as many farmers in Illinois, Indiana and Wisconsin declared bankruptcy last year compared to 2008, according to statistics from the 7th Circuit Court of Appeals, the Journal reported. Bankruptcies in states from North Dakota to Arkansas leaped 96 percent, according to figures from the 8th Circuit Court of Appeals.

Farmers are being battered by sinking commodity prices — and stiff tariffs from China and Mexico in retaliation for Trump’s tariffs on imports.

The new 11-nation Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) treaty last year slashed tariffs — but not for U.S. farmers since the Trump administration pulled out of negotiations. That drove customers to farmers and ranchers in competitive countries, like Australia, serving another dunning blow to American operations.

Farmers fear it will take years to rebuild those trading relationships.

According to figures from the U.S. Agriculture Department, farm income last year was about 50 percent of what it was in 2013, the Wisconsin State Farmer reported.

The dairy industry was hopeful about meeting growing demand in China, but now trade is a major stumbling block. “The problem is that both nations have stubborn leaders,” Mark Stephenson, director of dairy policy analysis at the University of Wisconsin at Madison, said at an agricultural forum last week in Madison.

Soybeans were also a major victim. “Agriculture prices live and die by exports. In all commodities, we’re heavily dependent on China, especially for soybeans,” Kevin Bernhardt, agribusiness professor at the University of Wisconsin in Platteville, told the Milwaukee Independent.

Government subsidies to farmers were up 18 percent last year over the previous year, due to the $4.7 billion in tariff aid and $1.6 billion in disaster payments for farmers impacted by hurricanes, floods and other disasters. But it wasn’t enough to stave off the end for some.

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Inside Wisconsin’s Disastrous $4.5 Billion Deal With Foxconn

A huge tax break was supposed to create a manufacturing paradise, but interviews with 49 people familiar with the project depict a chaotic operation unlikely to ever employ 13,000 workers.

architecture building empty factory

Photo by Pixabay on

“This is the Eighth Wonder of the World.”

So declared President Donald Trump onstage last June at a press event at Foxconn’s new factory in Mount Pleasant, Wis. He was there to herald the potential of the Taiwanese manufacturing giant’s expansion into cheesehead country. He’d joined Foxconn Chairman Terry Gou and then-Wisconsin Governor Scott Walker to celebrate a partnership he’d helped broker—“one of the great deals ever,” Trump said. In exchange for more than $4.5 billion in government incentives, Foxconn had agreed to build a high-tech manufacturing hub on 3,000 acres of farmland south of Milwaukee and create as many as 13,000 good-paying jobs for “amazing Wisconsin workers” as early as 2022.

In front of national media and an audience of several hundred, Trump talked up the larger meaning. For too long, he said, bad trade deals sent factory jobs to places like China, and that era was over. Yes, this Foxconn deal represented the largest public subsidy package to a foreign company in U.S. history, but it also marked a turning point for “restoring America’s industrial might.” Blue-collar jobs were coming home, starting with the Mount Pleasant facility and its LCD TV production. And what better bellwether for the success of his trade war than Foxconn Technology Group, a leading iPhone maker in China long synonymous with overseas manufacturing? “As Foxconn has discovered, there is no better place to build, hire, and grow than right here in the U.S.,” Trump said. “Made in the USA. It’s all happening.”

For some Foxconn workers watching who’d labored at the LCD TV factory for months, the president’s rhetoric didn’t match reality. The LCD components weren’t made in the USA, according to sources familiar with the operation. They were shipped from a Foxconn factory in Tijuana. The Wisconsin plant was only handling the last steps of assembly, and some TV displays were still labeled “Made in Mexico.” Pay at the factory started at about $14 an hour with no benefits, much less than the $23 average Foxconn promised. Many people weren’t hired full time—the company filled positions with temps and interns from a local technical college. And five workers present for Trump’s speech say some colleagues from Asia were conspicuously absent from the press event. (Foxconn says it encouraged all employees to attend, and the Mexican TV parts were for testing, not indicative of future production.)

Shortly after Trump’s visit, things got worse. A Foxconn manager at the factory, which then had only about 60 people working there, abruptly called about 15 of them—all interns —into a room to say they should seek other jobs because there wasn’t enough work to hire them full time, according to multiple people present. Two sources recall the manager telling the group, cryptically, that there were forces outside the company’s control affecting the Wisconsin project. A number of the interns, who’d received praise from Trump and shaken Gou’s hand just weeks earlier, were stunned. “It was upsetting for people,” says James Pitman, one of the former interns. “They had hyped a lot of shit up. We were used as a publicity stunt.” Foxconn says that’s insulting and that the internships ended as scheduled.

Time seems to be bearing out the doubters. In a Jan. 30 interview with Reuters, Gou’s special assistant, Louis Woo, said the company was reconsidering its plans for an LCD factory in Mount Pleasant. It will use its campus in Wisconsin to house research and development teams, he suggested, with a much smaller emphasis on manufacturing.

Interviews with 49 people familiar with Foxconn’s Wisconsin project, including more than a dozen current and former employees close to its efforts there, show how hollow the boosters’ assurances have been all along. While Foxconn for months declined requests to interview executives, insiders describe a chaotic environment with ever-changing goals far different from what Trump and others promised. Walker and the White House declined to comment for this story, although a Trump administration official says the White House would be “disappointed” by any reduced investment. The only consistency, many of these people say, lay in how obvious it was that Wisconsin struck a weak deal. Under the terms Walker negotiated, each job at the Mount Pleasant factory is projected to cost the state at least $219,000 in tax breaks and other incentives. The good or extra-bad news, depending on your perspective, is that there probably won’t be 13,000 of them.

From the outset, Foxconn’s plans for U.S. expansion have been nakedly political. The first call to the Wisconsin Economic Development Corp., the state jobs agency that oversaw the deal, came in April 2017 from Jared Kushner’s Office of American Innovation at the White House. “It was from a blocked caller, and the lady on the other end mentioned a $10 billion investment,” says Coleman Peiffer, former WEDC director of business attraction. “It sounded like a wild goose chase.”

Still, when the White House dangles $10 billion, you take the meeting. Days later, Walker talked with Gou in the office of Reince Priebus, then Trump’s chief of staff. Foxconn had told the White House it wanted to create thousands of jobs somewhere in North America, and based on a recent trip he’d taken with Priebus, who’d grown up in the state, Trump suggested Wisconsin.

Gou’s interests are self-evident. “The biggest challenge facing Foxconn is a U.S.-China trade war,” he later said at an annual shareholders’ meeting. Although Foxconn is based in Taiwan, the bulk of its factory operations are in mainland China, and the company remains a powerful symbol of China’s manufacturing might. (Critics say the infamous suicide-prevention nets strung around some Foxconn facilities are a powerful symbol of its labor standards.) Generating goodwill with Trump and top Republican leaders such as Priebus and then-Speaker of the House Paul Ryan, whose district included Mount Pleasant, seemed like a hedge that might insulate Foxconn from tariffs or other unpleasantness between Trump and Beijing.

A hasty courtship followed. Along with the LCD plant, Foxconn pitched Walker’s team on a Bay Area-style tech campus that it later tried to brand “Wisconn Valley.” (The company isn’t known for its consumer marketing.) Walker, who was heading into a tough reelection year, flew to Japan to present Gou with a Milwaukee Bucks jersey and to take a factory tour. Likewise, Gou made a trip to Wisconsin, visiting rural factory sites and joining Walker at the governor’s mansion for a barbecue.

Gou, a demanding leader notorious for punishing underperforming managers by making them stand for long periods during meetings, is an aggressive negotiator who in an interview once described Genghis Khan as a personal hero. Over four decades, he transformed Foxconn into the world’s largest contract manufacturer of electronics partly by scrupulously securing tax breaks and subsidies. “In meetings, it’s Terry’s way or no way,” says a former company executive who, like many sources for this story, spoke on condition of anonymity out of fear of retribution from Foxconn. “If you get local officials in a room with him, I can tell you Terry is going to win.”

Foxconn has a history of overpromising and underdelivering on major deals. In Brazil in 2011 and India in 2015, it pledged to invest billions of dollars and create tens of thousands of jobs after Gou courted each country’s leaders, but each project fell far short. In 2013, Foxconn said it would invest $30 million and employ as many as 500 people at a Pennsylvania factory that also never fully materialized. Multiple former executives say Gou makes big promises to secure favorable terms and is unsentimental about reneging on or abandoning them as costs dictate.

Wisconsin officials apparently didn’t consider Gou’s track record problematic. Instead, they describe the billionaire, who charmed them with stories of his early days selling TV parts in the Midwest, as almost philanthropic. “My impression of him was, what a nice person,” says Scott Neitzel, who led negotiations for the Walker administration. “An extremely genuine, down-to-earth tycoon.” When asked if the state looked at Foxconn’s history, WEDC Chief Executive Officer Mark Hogan says, “We didn’t spend a lot of time on that because, in the end, we got to know these people so well.

Gou deputized his special assistant, Woo, and another lieutenant, Alan Yeung, Foxconn’s director of U.S. strategic initiatives, to handle the details. They aggressively pursued cash subsidies, calling and texting at all hours. At one point, according to state records released to the public, Woo texted Neitzel at 1:17 a.m., “Give us 200m upfront then it is a done deal.” (Neitzel declined.)

As a bidding war heated up among a handful of states, including Michigan and Ohio, Wisconsin upped its offer. Foxconn demanded subsidies that would make U.S. operations as cheap as in China, and Hogan says Foxconn estimated a 30 percent cost difference. He acknowledges the subsidy numbers grew “staggering” but says Foxconn won’t get those incentives without delivering the promised numbers of jobs.

Wisconsin’s final bid, written on a single piece of paper, offered as much as $150 million in sales tax exemptions and $2.9 billion in refundable tax credits on the condition that Foxconn meet certain hiring and capital investment thresholds. Other public costs, including $764 million in local incentives from Mount Pleasant and its home county of Racine, made up the other third of the package. When the team slid the paper to Woo in July, Hogan recalls, he folded it up and said, “Terry wants to do business with Governor Walker.”

Even before Foxconn signed the contract in November 2017, Walker’s win began to morph into a political liability. As details of the mostly closed-door negotiations came to light, the narrative soured. At a time when Trump was stoking economic nationalism and ripping on companies that shipped jobs to China, many saw the subsidies as a desperate giveaway to a foreign company with close ties to Beijing.

A report from the Wisconsin Legislative Fiscal Bureau, a nonpartisan government agency, estimated the state would be in the red on the deal until at least 2042, and even that projection didn’t account for the kinds of increased public-services costs associated with population growth. It also based income tax revenue projections on the implausible assumption that every employee would live in Wisconsin, whereas some would almost certainly commute from nearby Illinois. “There’s no way this will ever pay itself off,” says Tim Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research. He says Foxconn’s incentives are more than 10 times greater than typical government aid packages of its stripe.

By May 2018, when Priebus was long gone from the White House and Ryan had announced his retirement from Congress, reports surfaced that Foxconn was already considering scaling down its factory plans. The company had originally agreed to build a Generation 10.5 plant capable of producing large glass displays. Instead, as it later confirmed, it would build only a Generation 6 factory, a significantly reduced operation that would make smaller panels. Foxconn said this was necessary to compete with manufacturers in China.

hen, in an August interview with Racine County’s Journal Times, Woo said that because of strides in automation, the makeup of the 13,000 employees would involve dramatically less factory labor than promised. Rather than a 75-25 split between factory and engineering jobs, “now it looks like about 10 percent assembly line workers, 90 percent knowledge workers,” he said. Noah Williams, an economics professor from the University of Wisconsin at Madison whose fiscal analysis supported the Walker administration’s case for the project, says the state ought to redo the math.

Foxconn’s changes surprised public officials tasked with monitoring the project, whose contact with the company had become strained, according to a source close to the WEDC. This source says agency head Hogan has at times seemed out of the loop on the company’s plans, that “Foxconn doesn’t tell us anything” has become a refrain within the office, and that state staffers informally discussed whether the switch to a Gen 6 plant constituted a breach of contract, because the agreement specifically required a Gen 10.5. “What was originally proposed and signed into contract is a project that no longer exists by Foxconn’s own admission,” says state representative Gordon Hintz, the Democratic minority leader and a vocal critic of the deal. The WEDC says its communication with Foxconn has been excellent.

As Wisconsin’s gubernatorial election neared, Walker remained resolute in his defense of the project while his opponent, the state schools superintendent, Tony Evers, called the Foxconn investment “horrible” and vowed to disband the WEDC for its oversight failures. On the eve of the election, the Wall Street Journal reported that Foxconn was considering bringing engineers to Wisconsin from China instead of hiring locals. Foxconn denied the story, but state officials realized there was nothing in the contract to stop that.

On Nov. 6, Evers narrowly defeated Walker in the governor’s race, partly because of the unpopularity of the Foxconn deal. According to internal messages viewed by Bloomberg Businessweek, Foxconn managers in Wisconsin stayed up late into the night rooting for Walker to catch up. When Evers won, they joked to each other that they’d have to find new jobs.

Three weeks after Election Day, Yeung, Gou’s lieutenant, took the stage at the Future Wisconsin Summit in a packed Madison convention center. He got his chemical engineering degree from the University of Wisconsin decades ago and often talks up his Badger bona fides. Holding a mini traffic cone to symbolize construction on I-94 near Foxconn’s planned campus, plus a TV remote as a nod to the LCDs, he told the audience of local business leaders he’d break from the company’s “quite quiet” tendencies to discuss its goals more plainly.

What followed were 39 minutes of buzzwords. Among the projects he said Foxconn might pursue in Wisconsin were 8K video streaming, cloud computing, 3D printing, 5G wireless networks, smart cities, the sharing economy, artificial intelligence, facial recognition, the internet of things, renewable energy, autonomous vehicles, and digital microsurgery. The audience could have been forgiven for thinking they’d somehow stumbled into a dozen TED Talks at once.

Foxconn’s plans, code-named Flying Eagle, haven’t been much clearer to people within the company. Soon after signing its contract with the state, Foxconn brought in local staff and began testing initial manufacturing in the leased, 155,000-square-foot building Trump would later visit, slightly north of the campus. The Experimental Training Center, as it’s called, was designed to prep workers and pilot LCD assembly.

Insiders say Foxconn moved fast—it set up machinery at the empty building immediately and had production going by early 2018—but the day-to-day operations and WeChat communication felt slapdash. Although Foxconn is one of the largest makers of laptops and smartphones, some full-time technical employees had to use their personal computers and phones. Multiple sources say Foxconn higher-ups kept to themselves, production goals were in constant flux, and equipment seemed dated. Foxconn says its facilities are state-of-the-art and production changes occur because of the experimental nature of the center.

The test facility assembles displays for Sharp, the TV brand Foxconn acquired in 2016. During 2018 the company tried and failed to produce its own LCD materials at scale in Wisconsin so it wouldn’t have to import them from Mexico, according to several sources. These sources say Foxconn has been seeking new contract customers for its Wisconsin operations, including Google and Vizio Inc. It’s unclear whether any deals have come from these discussions. (Vizio didn’t dispute having discussed a deal. Foxconn and Google declined to comment.)

On the test floor, a few dozen people work at various stations to deliver about 60 TVs an hour. Current and former Foxconn workers say they’ve found it exhilarating to interact with the company’s robots and other technology, but several felt the pay was too low and the environment had insufficient training protocols. In one case, a worker almost got his finger sliced off on the production line, splattering blood on equipment. Foxconn confirms the incident but says it’s confident in its safety standards.

Foxconn and Sharp engineers regularly tweaked the assembly line and faced malfunctions that derailed production. The robots the company kept adding made many production positions seem likely to become obsolete. Former workers say they felt expendable, and that Foxconn lured in temps with the vague promise of future full-time positions that often didn’t materialize.

Following a similar playbook as it did in India and Brazil, the company in August announced a $100 million joint venture fund and said it’s building R&D centers around Wisconsin, including in Eau Claire and Green Bay. Nobody has cogently explained what these centers will do. One person familiar with the plans calls them glorified think tanks. Foxconn says they’ll “cultivate a new class of vertical solution providers.”

Last fall, the company’s hiring targets began dropping internally, three sources say, and executives could offer little guidance as to their long-term needs in Wisconsin. Even at Foxconn’s downtown Milwaukee office, its U.S. headquarters, recruiters were slow to extend formal offers, rarely offered competitive pay, and requested that some candidates train in Taiwan for as long as a year. The company also appeared to be bringing in foreign staff to fill certain roles. While Foxconn says it’s only used workers with H-1B visas in Wisconsin on a short-term basis, a Foxconn H-1B filing viewed by Bloomberg Businessweek lists a manufacturing engineer hired to work at the Wisconsin facility through September 2021.

Given slowing iPhone growth, Foxconn, which depends on Apple Inc. for roughly half its revenue, is purportedly seeking to cut $2.9 billion in worldwide costs this year. In late 2018 the Nikkei Asian Review reported the company was considering slashing as many as 100,000 jobs. As market conditions worsened at the end of the year, a Foxconn executive said in an interview at the time that some company leaders were losing faith in Flying Eagle, which they saw as an expensive drain on resources needed elsewhere. “There was initially a good plan, although lots of us were still questioning it,” this source said. “Then as things changed, a lot of the internal perception became, ‘This is a nightmare. This is going to be horrible for Foxconn’s brand.’ ”

On Jan. 18, Foxconn announced that at the end of 2018 it had 178 full-time employees in Wisconsin, missing its maximum first-year hiring target by 82 percent and costing it that year’s tax credits. Less than two weeks later came the Reuters interview in which Woo said Foxconn was reconsidering building an LCD factory there because (brace for surprise) its costs in the U.S. were higher than in China and Mexico. “In terms of TV, we have no place in the U.S.,” Woo said. “We can’t compete.” On Feb. 1, after Trump called Gou, Foxconn flip-flopped again and said its LCD factory plans were back on and that it also planned to build a series of other production and R&D facilities in the next 18 months.

Foxconn has dismissed a number of Wisconsin employees in the past several months, and managers there have discussed significant budget cuts, says a source familiar with the situation. Foxconn acknowledges turnover, but says its retention rate since November for full-time employees is 95 percent.

Even with Walker gone, Wisconsin is unlikely to get better terms. Shortly before Evers was sworn in, the Republican-controlled legislature passed a series of rules that make it difficult for the new governor to tear up the Foxconn deal. Mount Pleasant and surrounding Racine County have invested at least $130 million in Foxconn-related expenses such as land acquisition, and the state has committed an estimated $120 million to related road improvements. In an interview, Evers says he’ll push for more transparency and to hold the company to its word, but admits his powers are “significantly constrained.” To some extent, Gou is trapped, too. Tying the Wisconsin factory so closely to Trump means he can’t just ditch the project and risk hampering Foxconn’s U.S. business.

Almost every current and former Foxconn employee interviewed for this story predicted there will never be anywhere near 13,000 workers in Wisconn Valley. As of press time, there were only 122 job listings on the company’s website, many at least five months old. Still, in some ways, Foxconn is keeping up appearances. On a recent visit to the Mount Pleasant plot, an array of trucks, cranes, and construction workers were digging up dirt on an expanse of snow-blanketed farmland.

Gou toured the site when Foxconn was first devising its plans for Wisconsin, recalls Jim Paetsch, a vice president at the Milwaukee 7, a regional economic development group that assisted Walker’s team with early negotiations. Gou had ostensibly wanted to see what the future of his U.S. operations looked like. Unfortunately, days of rain had left the area sodden. “He was walking through the field, out on this farm, and I could see him sinking, the mud just coming up all around him,” Paetsch says. “But he’s a visionary.”

Taken From:


Trump’s Trade Deal and the Road Not Taken

How to Evaluate the Renegotiated NAFTA


Introduction and summary

American workers’ real wages have been stagnant for decades. While a wide range of domestic forces have led to that outcome—from a decline in union coverage to the slow and uneven recovery from the Great Recession1—trade has also played an important role in generating economic stress. Capital is increasingly mobile across country borders, yet workers are not. Business, in effect, can level an ultimatum to workers: Accept what we offer, or we will outsource or move to another country where wages are lower. Millions of working families have personally experienced this threat in recent decades, and the resulting economic stress on many American workers—especially in the Midwest—has been significant.

The North American Free Trade Agreement (NAFTA), negotiated under President George H.W. Bush in 1992, has long been a flashpoint in the debate around whether trade rules are helping or harming workers and the economy. Over the years, progressives and their allies, including labor unions, environmental groups, and consumer groups have been consistent critics of NAFTA and its successor deals.

Wrapping itself in trade war rhetoric, the Trump administration has prioritized a rewrite of NAFTA, renegotiating terms and signing a rebranded U.S.-Mexico-Canada Agreement (USMCA) on November 30, 2018. The agreement will likely be considered in the new Congress.2

There is every reason to closely examine the result. The Trump administration is known for talking a populist game while serving the interests of the wealthy and powerful. The administration’s attempted destruction of the Affordable Care Act (ACA), for example, would have ended health care coverage for millions of people. Its large tax cuts for corporations and high-income households are already being used to justify reductions in social investment.3 The administration consistently undermines common-sense protections for clean air, clean water, and public health in order to benefit fossil fuel interests. And it is engaged in a persistent assault on labor rights, financial reforms, antitrust protections, and other regulations that protect workers, farmers, and consumers.

The key question, then, is does President Donald Trump’s agreement make trade work for ordinary workers? The short answer, at least to date, is that it does not.

President Trump’s USMCA largely fails to deliver the strong labor and environment standards and enforcement that workers need. The complete omission of climate change as a priority to be addressed in trade is a significant failure in the agreement. The USMCA includes expanded monopoly protections for pharmaceutical companies that would help keep U.S. drug prices high, and it also exports these policies to Mexico and Canada. Moreover, large swaths of text—covering areas such as antitrust, regulatory coherence, and more—contain a strong deregulatory thrust that can chill needed changes in domestic policy. While the USMCA significantly limits NAFTA’s investor-state dispute settlement (ISDS) mechanism—which gives foreign corporations the special right to challenge government actions in private forums instead of domestic courts—for most sectors, it nonetheless retains it for the oil and gas firms with governmental contracts in Mexico.

The shortcomings in the USMCA are highly significant. Globalization has enabled a freer flow of ideas, people, and products than ever before, which has brought benefits to Americans and people around the world. But it has also brought significant economic pain to large segments of working populations both in America and abroad. The social and political backlash to this pain is contributing to the rise of authoritarian trends around the world that trample on fundamental democratic freedoms and rights.4 Those who support an open orientation toward the world, both economically and socially, must take seriously the need to place the economic well-being of working households more squarely at the center of how globalization delivers its benefits and thus at the center of the rules around trade.

What follows is an attempt to describe what a meaningful alternative to NAFTA requires. This report first outlines the economic pressures on the American working class. It then discusses the accumulating empirical evidence of NAFTA’s economic effects on U.S. workers. Finally, the report advances recommendations that could be used to rewrite NAFTA in a manner that supports an economically competitive, high-road environment in which all three signatory countries can have a thriving middle class, climate-sustainable growth, and cooperative relationships.

Economic context

American workers’ real wages have been stagnant for decades. Despite continued productivity growth, the real average income of the bottom 50 percent of adults has been essentially stagnant since 1980. The bottom 90 percent of adults—the vast majority of the adult population—saw modest wage growth until 2000, but its income has been essentially stagnant since then.5

Many factors have constrained workers’ ability to garner a meaningful share of the growing productivity of the U.S. economy:

  • Worker bargaining power has been dramatically constrained by continuing attacks on unions and labor market protections.6
  • Increases in corporate market power—in both product markets and labor markets—have constrained real wages and employment rates.7
  • Continuing technical change has contributed to reduced employment in relatively high-wage manufacturing industries.8
  • Fiscal and monetary policy have not been used in a consistent, coordinated manner to pursue meaningful full employment.

However, the rules currently structuring global competition also play an important role in generating economic stress. The fact that capital is increasingly mobile across country borders has given multinational corporations more bargaining power than domestic workers.

This is a credible threat—one that millions of working families have personally experienced in recent decades, as multinational corporations have increasingly oriented themselves to a world market. As a result, their ties to the United States, especially in whether they need to site operations here, are weaker than ever before.9 A substantial number of skilled and unskilled U.S. workers, exposed to the effects of increased labor market and import competition, have experienced measurable economic loss in the past two decades: They have been displaced from jobs and experienced negative impacts on their wages.10

President Trump exploits workers’ long-developing economic difficulties in an opportunistic—and deeply troubling—fashion. According to President Trump, workers’ wage and employment problems are primarily the result of foreigners, who, he claims, take advantage of American markets and American workers—and that it is those other people, whether through trade or immigration, who are to blame.11 President Trump’s solutions have ranged from slapping tariffs on allies to outright xenophobia, racism, and cruelty, including separating children from their parents.12

Of course, this blame game is little more than a distraction. The de facto domestic economic policy of the Trump administration has consisted of efforts to turn America into a low-wage, low-road economy. Whether by gutting overtime pay; undermining quality standards for workforce training; providing massive corporate tax giveaways; neglecting infrastructure investment while claiming to increase it; or engaging in wide-ranging environmental and financial deregulation, the administration’s economic policy will intensify the economic pressure on workers, allow corporations to ignore the negative impacts they generate, and reduce corporations’ contribution to the public investments that support them.13

Economic reality requires a coherent policy response directed toward building a high-wage, high-productivity economy that benefits working households. From a domestic standpoint, this includes:

  • Adopting fiscal and monetary policies to maintain high employment rates14
  • Supporting America’s position on the frontier of technical advance and productivity growth15
  • Raising labor, environmental, and consumer protection standards16
  • Restraining the market power of corporations17
  • Strengthening institutions such as unions that provide workers necessary bargaining power.18
  • Investing in workers, infrastructure, housing, families, and communities19
  • Addressing barriers to equal opportunity20

Progressives have advanced in detail many of the necessary changes to domestic policy, and there is more to be learned from the experiences of other open market economies as well.21

Yet there is also a need to make the rules that govern the global economic system—in which corporations are able to organize production across borders to minimize costs, and domestic labor is put into competition with workers across the world—more symmetrical and supportive of working households and their participation in a thriving middle class. The following sections discuss the impacts and implications of NAFTA, the USMCA, and the ways in which the NAFTA rewrite could be restructured to help achieve these goals.

Economic impact of NAFTA

In 1992, former President George H.W. Bush signed NAFTA, which came into effect on January 1, 1994, under former President Bill Clinton. The agreement between the United States, Canada, and Mexico was a groundbreaking change in trade policy, which had previously been dominated by a series of multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization (WTO). Begun after the devastation of World War II, GATT negotiations generally focused on lowering tariffs on a multilateral basis. By the 1980s, though, policymakers expanded their focus to changing domestic regulatory standards and policies that were characterized as nontariff barriers to trade. These new areas of focus were part of bilateral or regional free trade agreements, such as NAFTA, and the series of agreements supplementing the GATT that form the WTO suite of agreements, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).22

NAFTA removed almost all tariffs on goods traded within Canada, the United States, and Mexico. It also introduced major new provisions including the liberalization of services trade, expanded intellectual property rights protection, limits on domestic preferences in government procurement, and mandatory arbitration for antidumping and countervailing duties, to name just a few. In a departure from the principle that only governments, not private entities, can enforce trade agreements, NAFTA includes investor-state dispute settlement (ISDS), which provides special rights for investors to bring arbitration cases against governments for alleged violations of certain NAFTA rules.

Labor and environmental provisions were not included in the original NAFTA negotiated by first President George H.W. Bush. President Clinton forced a renegotiation that resulted in side agreements, which created labor and environmental commissions to facilitate cooperation in the enforcement of labor and environmental standards, with monetary fines for noncompliance. Mexico and the United States also entered into a bilateral side agreement on border environmental cooperation and development.23 The addition of these provisions made NAFTA the first free trade agreement to include labor and environmental provisions, albeit in modest fashion. However, the side agreements proved utterly ineffectual as enforcement mechanisms, as the mechanisms never resulted in meaningful sanctions.24

Evidence suggests that the net benefits from NAFTA have been small

The accumulated empirical evidence on the economic outcomes of NAFTA suggests that while the agreement may have led to some overall efficiency gains, those have been minimal, and job dislocation and wage effects have been significant for some workers and industries.

Overall U.S. economic gains from NAFTA have been quite small. Researchers Peter B. Dixon and Maureen T. Rimmer, for example, estimate that of the 24.4 percent cumulative growth in U.S. gross domestic product (GDP) that occurred from 1992 to 1998, NAFTA accounted for only 0.2 percent.25 Other empirical work, which takes into account sectoral linkages and the construction of cross-border supply chains, concludes that the effect of tariff reductions on U.S. economic welfare, including benefits to consumers from lower prices, was also negligible.26

Furthermore, the competitive environment that NAFTA fostered produced significant negative effects for some U.S. workers. While studies of the aggregate effect of NAFTA on employment conclude that this impact has been small, there is evidence of job displacement.27 For example, Robert E. Scott of the Economic Policy Institute estimated that, on net, approximately 800,000 workers were displaced from manufacturing jobs from 1993 to 2013 due to trade with Mexico. He arrived at this estimate by using input-output data to calculate the effects of trade deficits on employment levels.28Displaced workers are often forced to accept lower-wage jobs, which negatively affects their households and communities.29

Recent research on the wage effects of NAFTA concludes that while “the effect of NAFTA on most workers and on the average worker is likely modest,” industries and localities that experienced a loss of protection because of associated tariff reduction were hit harder:

NAFTA-vulnerable locations that lost their protection quickly experienced significantly slower wage growth compared to locations that had no protection against Mexico in the first place, particularly for blue-collar workers. For the most heavily NAFTA-vulnerable locations, a high-school dropout would have up to 8 percentage points slower wage growth from 1990 to 2000 compared to the same worker in a location with no initial protection. There is, however, an even larger industry effect, with wage growth in the most protected industries that lose their protection quickly falling 17 percentage points relative to industries that were unprotected to begin with.30

The authors conclude that college-educated workers did not experience similar effects and that effects on blue-collar workers were not confined to those employed directly in affected industries. Service-sector workers also experienced negative wage impacts in areas that saw measurable trade effects. In contrast, most work on the aggregate effect on real wages from NAFTA’s tariff reductions concludes that there was a small positive effect on the U.S. economy.31

Some have argued that NAFTA’s benefits for particular industries, such as the automobile industry, have been quite large,32and that by extending supply chains to Mexico, firms have been able to lower costs; this, in turn, has made them more competitive. However, while a corporation’s decision to site production in Mexico benefits that individual corporation, those gains have not been large enough to register at an aggregate level, as the economic studies cited above illustrate.

Furthermore, the assumption that production supply chains will remain integrated across North America is itself subject to question. Susan Helper, former chief economist of the U.S. Department of Commerce, notes that there is some evidence—though it is not yet conclusive—that once corporations site a part of their supply chain in a low-wage, low-standard environment and learn how to operate within it, the rest of the supply chain follows over time.33

This is not to say that the United States can or should avoid the realities of globalization. The United States obtains genuine benefits from trade and international investment, including greater competition and choice in the United States and poverty reduction in developing countries.34 But one must remain clear-eyed about the potential results and develop strategies both to mitigate and respond to globalization’s predictable negative effects.

Recommendations to promote a high-road approach to North American trade

NAFTA’s current structure makes it easier for corporations to operate across North America in ways that serve their interests, but it fails to account for and effectively mitigate the negative effects on workers’ wages or the pressure that cross-border business mobility puts on public interest regulatory standards and other domestic social and economic norms.35 A sensible rewrite of NAFTA should aim to correct this asymmetry and place economic competition on a more level playing field for all economic actors—particularly working households. But Trump’s USMCA, by not putting working families at the center of its priorities, fails to hit the mark.

An overview of the USMCA—a representative sample of Trump’s priorities in trade

What does the USMCA get right?

  • Reduces and reforms investor-state dispute resolution for most sectors
  • Mexican commitments to eliminate company-controlled unions and implement free and independent unions
  • Removes the mandate to export certain natural resources

What does the USMCA get wrong?

  • Problematic intellectual property protections, including locked-in exclusivity periods for biologic drugs and the potential for patent extensions or evergreening, that chill the United States’ ability to bring down high prescription drug prices
  • Special access principally for the U.S. oil and gas sectors to unreformed ISDS in Mexico
  • Deregulatory impacts, including threats to stronger antitrust enforcement

What is missing from the USMCA?

  • Stronger, detailed standards and meaningful enforcement for labor and the environment.
  • Trade-related tools to address the threat of climate change.
  • Greater ability for U.S. businesses and farmers to distinguish their products, whether for consumer right-to-know, climate-labeling, or other purposes.

This list is illustrative, and omission of particular provisions in this list or report should not be read as endorsements thereof.

For the USMCA to come into effect, congressional approval will be needed. The agreement is expected to come before Congress under the fast-track rules of trade promotion authority passed in 2015.36 Despite recent enhancements to the process of congressional consultation, Congress’ power to directly amend the agreement or the associated implementing legislation is limited, and if brought up, it can be passed by majority vote.37 But with Democratic control of the House of Representatives in particular, Congress has new leverage to seek changes to the USMCA to correct its flaws.

Many progressives and progressive organizations, including the Center for American Progress, have offered a range of suggestions for how to create a progressive high-standards trade agreement that approaches globalization more equitably.38 The following sections offer suggestions on how the USMCA could be improved. These suggestions, of course, are not meant to identify all that ought to be done, as the agreement covers a range of important matters. However, the following suggestions are intended to illustrate the direction of change that would help the North American economies deliver better outcomes for the people who work in them.

What should be included in a renegotiated NAFTA?

Raising wages, improving labor standards, and protecting the environment are principally the province of domestic economic policy, but trade policy plays a role in ensuring that international competition does not undercut domestic policymaking.39 Therefore, one of the most important goals of a NAFTA rewrite should be to limit the ability of global competition to bring downward pressure on wages in the United States.

Unfortunately, President Trump’s USMCA fails to include the labor and environmental standards and enforcement mechanisms needed to improve conditions in Mexico and put upward pressure on wages in the United States and Canada. Without that, the benefits of trade globalization will flow to the largest corporations and their shareholders—not to working households.

Raise labor standards in North America

The Trump administration has adopted domestic policies that undermine labor standards and worker bargaining power—including gutting overtime standards, undermining standards for workforce training, attacking unions representing federal workers, supporting “right to work” laws that gut collective bargaining, and failing to raise the minimum wage.40 The USMCA, by failing to put forward strong and enforceable labor standards, reinforces this hostility to workers’ interests. The lack of swift and certain enforcement means that even the most significant pro-worker commitments put on paper, such as Mexico’s commitment to replace its system of fake “protection” unions with new ones approved by workers within four years, may not translate into meaningful action.41 The problem with this failure is that business will still get the benefits of access to a low-standards labor for its supply chains.

As a starting point to countering unfair trade competition, the United States, Canada, and Mexico should have agreed to maintain in law and enforce in practice the essential labor rights provided in the eight International Labour Organization (ILO) core conventions.42 These conventions include the protection of the right to organize and bargain collectively, abolition of forced labor and child labor, and elimination of employment discrimination, among other principles.

The USMCA, however, simply continues to reference the ILO Declaration on Fundamental Principles and Rights at Work, which is far more vague.43 Canada and Mexico have adopted all eight of the fundamental conventions domestically regardless of NAFTA and the U.S. should too. However, the United States maintains a significant number of their substantive protections already in law.44 Placing the real, detailed labor protections of the ILO core conventions in a renewed NAFTA could counter companies’ ability to site their operations in the noncompliant country and export to the other countries.45

As the U.S. Department of State has recognized, the right to organize and bargain collectively is severely constrained in Mexico.46 In practice, the bargaining rights of Mexican workers can be overridden by so-called protection contracts between an employer and an employer-dominated union. These contracts can be signed without the participation or knowledge of workers to whom they apply, and workers’ attempts to challenge these contracts have been met with retaliation, including threats, dismissal, and violence.

Restrictions on bargaining rights help explain the fact that the real hourly compensation of Mexican production workers has been stagnant since 1994, even though manufacturing exports have grown.47 The good news in the USMCA is that the Mexican government has committed to enacting legislation that would secure workers’ right to union representation as well as expand labor protections for workers. The bad news is that the USMCA does essentially nothing to guarantee U.S.-Mexico trade will only occur if that commitment is kept.48 (We discuss enforcement mechanisms for both labor and the environment below.)

Furthermore, because NAFTA has made it substantially easier for firms to operate across borders, workers should have the right to organize and bargain across those same borders. The United States, Mexico, and Canada, as part of their trade agreement, should allow the formation of cross-national unions that have the right to bargain with firms that operate in more than one NAFTA country.49

The agreement should also have a mechanism for determining a country-specific minimum wage that would guarantee workers are paid at least a living wage.50 The USMCA’s attempt to put a wage floor in through certain rules of origin provisions acknowledges the issue but fails to adopt a standard that is broad enough or able to evolve. Absent a true minimum wage, it is possible that some trade would be based on exploitation.

While the USMCA includes some significant improvements—largely at the insistence of labor unions—such as new language to stop violence against workers and gender discrimination, labor standards under the USMCA are only enforceable if a breach occurs in a manner affecting trade or investment. Other parts of the agreement, such as those dealing with intellectual property, do not limit enforcement in this way. 51

Raise environmental and sustainability standards in North America

The Trump administration has pursued a damaging environmental policy agenda, including through its withdrawal from the Paris agreement, expansion of offshore drilling, and has proposed significant defunding of vital climate and energy research programs.52 The USMCA is consistent with the administration’s approach to environmental policy. While it pays lip service to the importance of environmental standards, it fails to incorporate the meaningful standards and tools necessary to ensure signatory compliance with domestic environmental laws and international agreements to which they are parties.53 Notably, it steps backwards on requirements to comply with international environmental agreements, and omits the necessary standards needed to address the global threat of climate change.54 As with the labor chapter, enforcement, discussed below, is also sorely lacking.

Given what scientists know about the immediate threats to the planet and their consequences for economies and societies, no trade agreement should fail to incorporate new, high-road approaches to environmental standards that recognize the costs of pollution and climate change.55 Not only should countries be discouraged from lowering their environmental standards and enforcement to attract trade and investment, but trade agreements should also be structured to enable and indeed incentivize countries to raise their standards. It should also sanction those who allow firms to seek to outsource pollution to trading partner countries, which harms both their workers and American workers. The shift in car battery recycling from the U.S. to Mexico is an example of just this type of dual harm.56

The agreement should also explicitly exempt from trade-related challenges those domestic policies that are intended to reduce or adapt to environmental harm, such as measures to reduce greenhouse gas emissions or regulate practices such as fracking or offshore drilling.57 This would prevent challenges to domestic policies that otherwise would be considered violations of NAFTA rules. One positive provision in the USMCA is that it does remove a requirement that the United States and Canada continue to export natural resources, including fossil fuels, based on previous years’ trade, even if a country sought to enact conservation policies. This rule in the original NAFTA impacted Canada’s ability to reduce oil sand production to meet its international environmental commitments.58 The rule also impacts the United States’ ability in the future to dial back resource exports from any public lands that the Trump administration opens up.

The United States trades more energy with Canada and Mexico than with the rest of the world combined,59 and a successful NAFTA renegotiation should seize opportunities to promote higher standards and incentives for clean energy and efficiency among all three North American countries, such as the appliance efficiency standards that the United States and Canada typically harmonize on a bilateral basis.60 In addition, although none of the NAFTA countries currently has a formal economy-wide carbon price, a rewritten NAFTA should seek to foreclose the possibility of carbon leakage across borders in the event one of the countries adopts such a measure.61

It is also important to safeguard countries’ other tools to take action to address the climate crisis. Whether it’s securing climate-friendly labeling on products traded across borders in North America or boosting climate-friendly procurement, trade agreements should enhance a country’s efforts to tackle climate change— not potentially limit them.62

Lastly, it is no small matter that Trump’s agreement contains a loophole to the reformed ISDS provisions that is principally a special giveaway to the oil and gas sectors, which have contracts with the government in Mexico.63 That’s representative of a deeply unfortunate failure to make the threat of climate change—as it impacts workers, communities, and the planet—central to a new vision for North American economic cooperation.

Enforce labor and environmental standards

Not only is it important to have stronger labor and environmental standards, but any renegotiated agreement should have effective enforcement mechanisms, ensuring that all countries meet these standards. While the USMCA proposes to enforce labor and environmental standards through the general dispute settlement procedures, that is likely to be inadequate.

State-to-state enforcement has a poor history of effectiveness.64 In part, this is because of a loophole in the original NAFTA that enabled countries to avoid participating in a dispute settlement panel—a problem that remains in the USMCA. More broadly, labor and the environment often get pushed aside by governmental priorities in state-to-state relationships. Lastly, cases that require evaluating the compliance of an entire economy can be difficult to prove and force meaningful, timely change.

Given the complexity of the issues surrounding labor and environmental matters, as well as the limited resources of the individuals and organizations they affect, an independent authority is needed to enable investigations to be conducted when violations are reported. It ought to be independent, well-staffed, and with sufficient authority to investigate or monitor compliance when remedies are agreed on for violations.65

The need for an effective approach to enforcement has been recognized by progressive policy makers for some time. One important idea that some have floated is an inspection, compliance, and exclusion system modeled on the U.S.-Peru Free Trade Agreement’s timber annex.66 The annex gave the United States the power to verify that Peruvian lumber had been produced legally, including provisions permitting on-site inspections in Peru. It also empowers customs officers to block illegal products at the border and to prohibit future shipments. Illegal logging of Peruvian timber remains a serious problem that the U.S. has only begun to address, but were the authorities and inspections strengthened and the enforcement made more automatic, this could be a potential pathway towards enforcing standards that are important to workers in the United States, Canada, and Mexico.67

In addition, private parties ought to be able to supplement governmental actions and directly challenge violations of labor and environmental provisions of trade agreements. Strong private rights of action, which are present in U.S. trade remedy law (antidumping and countervailing duty cases), could be deployed to help ensure that labor and environmental protections and rights are authentic. One way to accomplish this is to insert labor and environmental standards into the way the U.S. Department of Commerce (or relevant trade ministry) calculates the normal value for a particular import.68

However, it is important to remember that private actions, including trade remedy cases, cannot replace swift and certain state enforcement. Private cases can be expensive and difficult to bring because of barriers to needed information. They also are limited in their ability to produce systemic changes throughout an economy, such as securing union organizing rights. But they and similar mechanisms offer a useful way to pressure improved behavior in trading partners and could signal to the United States Trade Representative that broader action is needed.

What should be excluded or reformed?

The above sections discuss several areas where trade agreements need to do more to counter the negative economic pressures on workers and other public policy priorities in all three NAFTA countries. This section considers items that are already part of NAFTA or included in the USMCA that should be removed or significantly modified to achieve a high-road approach to trade—rebalancing the rules to prevent inappropriate protection of corporate power at the expense of workers, consumers, or the environment. Given the scope and detail of the agreement, the list of items is by necessity illustrative rather than exhaustive.

Many of these provisions arose out of a shift in trade policy that occurred under Presidents Ronald Reagan and George H.W. Bush, from focusing on lower tariffs to tackling domestic regulations that were perceived as barriers to market access, even if they were not explicitly discriminatory.69 NAFTA was the first trade agreement that took this new, aggressive approach to perceived nontariff barriers. But this approach reached much deeper into domestic policy, including matters far beyond the cross-border movement of goods or services, in ways that constrain governmental action in the public interest. Economist Dani Rodrik has labeled this “hyperglobalization.”70 Any effort to rebalance trade priorities and focus more on the economic outcomes of working households must grapple with the need to reduce this level of hyperglobalization and ensure greater policy space for domestic democratic decision-makers.

Exclude the ability to use investor-state dispute settlement

One of the more far-reaching and troubling innovations in the NAFTA model of hyperglobalization was its investor-state dispute settlement (ISDS) system, which gives corporations the right to challenge government actions affecting their investments in private arbitration. ISDS has since become a standard feature in U.S. trade agreements.

ISDS ostensibly aims to address the concerns of investors from developed countries that their investments in developing economies are insufficiently protected from expropriation or otherwise subject to discrimination under national legal systems. There are private means to mitigate some of these risks, such as securing political risk insurance.71 But ISDS provides a stronger set of protections for foreign investors, underwritten directly by national taxpayers. While some of the largest recipients of foreign direct investment in recent decades do not have ISDS agreements—namely China—it was believed that ISDS would make investment in less developed economies more attractive. But even as a development tool, ISDS has significant flaws. Not only does it expose developing countries that seek to change domestic policies, including domestic health, environmental, safety, or other public interest standards to challenge under vague minimum standards of treatment for foreign investors, but it also does not encourage those countries to compete to improve their legal systems.72 It also increases downward pressure on wages in high-standard economies.73

The risks to U.S. public interest decision-making are real and growing in number.74 Under NAFTA, for example, the energy company TransCanada challenged President Obama’s decision to reject the construction of the Keystone XL pipeline and demanded $15 billion in compensation.75 This case was suspended after President Trump reinstated the construction of the Keystone XL pipeline, but it demonstrates the potential for foreign investors to challenge U.S. domestic policy.76

This is not to downplay the bias that foreign investors can face in many court systems or otherwise in ensuring legitimate returns based on the terms of their investments. But other solutions, such as private risk insurance, building judicial capacity in developing countries, and supporting the rule of law broadly, are available that are less harmful to domestic democratic decision-making.77

Notably, one of the USMCA’s bright spots is that it restricts ISDS principally to expropriation and discrimination, with requirements to exhaust domestic remedies. It also eliminates the vague, expansive minimum standards of treatment that had fueled much of the ISDS litigation that chilled domestic public interest regulation. However, as mentioned above, the USMCA retains certain special rights principally for the oil and gas sectors that have contracts in Mexico with the government.78

Limit the inclusion of standards that overly benefit business and constrain democratic action

ISDS is not the only item that should be excluded—or significantly limited compared with recent practice—from a renegotiated NAFTA. Unfair foreign practices undoubtedly make it more difficult for American businesses to operate abroad. Yet utilizing trade-agreement-based restraints on governments can in some circumstances negatively affect public interest-oriented policymaking both in America and abroad.

Take, for example, rules governing intellectual property protections. American businesses do face theft of intellectual property abroad. Still, care needs to be taken lest trade agreements limit the ability of governments, including the United States, to promote access to affordable medicines, affordable seeds for farmers, and more.79 For example, the USMCA includes a special exclusivity period of 10 years for biologic drugs. This would grant large pharmaceutical companies market and regulatory protection from others, including generic drug companies, for a specific period of time—in this case, a decade—separate and apart from their rights under patents they may hold, allowing them to more readily increase name-brand drug prices.80 This raises the exclusivity period for Mexico and Canada while simultaneously preventing the United States from reducing its exclusivity period. The USMCA’s intellectual property chapter also has raised concerns regarding evergreening (or extending, without sufficient novelty) patents and other provisions that benefit patent holders.81 Grants of monopoly power to pharmaceutical and biotech manufacturers are prime drivers of the high cost of medicines in the United States, and a lock-in of the exclusivity period forecloses an obvious way to lower the price of biologics.82

The USMCA also includes a new section on regulation generally.83 This “good regulatory practices” chapter emerged from concerns that many countries’ regulatory processes are opaque and, in some cases, even result in regulations being adopted in secret and then applied to companies with little to no warning.84 Rather than just focus on transparency and the rule of law, which could be more easily justified, the chapter could also lock in, and export, problematic aspects of U.S. law and practice. Namely, it subjects regulations to impact assessments, also known as cost-benefit or economic analyses, and retrospective reviews. The agreement also guarantees a range of special consultation opportunities, including the publication of cost-benefit analyses during the proposal stage.

When implemented in a reasonable manner—and with a recognition that measurement of social costs and benefits can be imprecise or impossible—economic analyses can sometimes provide useful information about the possible consequences of regulation.85 Too frequently, however, those hostile to regulation use cost-benefit analysis, special consultation opportunities, and retrospectives as weapons, exaggerating measures of cost, dismissing measures of benefits, and using the tools to slow down or stymie public interest protections in the bureaucracy and the courts.86 These impacts can be particularly burdensome on government agencies squeezed for funding, particularly those in developing countries or localities. Trade rules should not be used to frustrate domestic rules that serve in the public interest, in the U.S. or elsewhere. 87

Against the backdrop of a growing range of evidence that the U.S. faces a competition problem, the USMCA’s antitrust obligations also present an increasingly concerning set of trade limitations.88 The agreement’s provisions aim to counter the efforts of some countries to use competition policy to achieve discriminatory industrial policy ends.89 To that end, some of the efforts to boost transparency and procedural fairness can be positive steps.

Similarly, the USMCA endorses the requirement that governments maintain national competition laws to proscribe anticompetitive conduct and promote competition—itself a recognition of the importance of antitrust. Yet, the agreement only references “economic efficiency and consumer welfare” as the purposes of antitrust.90 The consumer welfare standard is a court-adopted standard that is nowhere in the U.S. competition statutes and is the subject of current criticism and debate. Endorsing it in a trade agreement, even in a hortatory chapter, as the purpose of antitrust policy could potentially constrain the evolution of U.S. competition policy to address the clear accumulation of market power in many segments of the American economy.91


There is little question that NAFTA could be improved in ways that would benefit working families in the United States, Canada, and Mexico over the longer term, maintain an open orientation to business and the world, and strengthen relationships with essential allies. Pressure on workers’ wages and erosion of the democratically chosen norms that govern market behavior in the U.S. economy help push the nation toward a low-road path. Along this path, those most vulnerable to the negative effects of corporate competitive strategy are left to fend for themselves, and the rules and institutions that make the economy a good place in which to work and thrive are less effective.

Because there is no reason to believe that a low-road economic environment is necessary to promote economic innovation and rapid productivity growth, there is no good reason to settle for it.92 A progressive rewrite of NAFTA should be part of a much bigger project—one that develops a comprehensive set of domestic economic policies to support wages, employment, and inclusive economic growth for workers both in the United States and abroad.

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