Monthly Archives: April 2019

Mexican Lawmakers Approve Pro-Labor Changes

New bill clears obstacle to ratifying U.S.-Mexico-Canada Agreement

headlineImage.adapt.1460.high.mexico_strawberries_fields.1434980678435Mexico’s lower house passed a landmark labor reform on Thursday that empowers unions to bargain more effectively on behalf of workers and clears one of the last obstacles to ratifying a deal signed last year to replace the North American Free Trade Agreement.

Lawmakers approved 417-1 the enabling legislation of a 2017 constitutional change giving workers the right to elect union leaders in direct elections with secret ballots, among other pro-labor changes. Lawmakers from President Andrés Manuel López Obrador’s ruling Morena party and Mexico’s main opposition parties voted in favor.

The bill now goes to the Senate, which plans to approve it by the end of April, said Ricardo Monreal, the majority leader in Mexico’s Senate. Mr. López Obrador’s Morena party and its allies have an outright majority in both houses of congress, all but guaranteeing passage.

The overhaul is meant to comply with labor requirements laid out in the U.S.-Mexico-Canada Agreement, or USMCA, a trade deal signed by all three countries last November after more than a year of negotiations and a signature achievement of the Trump administration.

The new law is aimed at ending the practice of “protection unions,” in which labor leaders close to management ratify contracts without consent from the workers. The AFL-CIO and others say this practice has depressed wages in Mexico, costing American workers millions of jobs and hurting their competitiveness.

The bill comes after intense pressure from trade unions in the U.S. and Canada, which vowed to block the ratification of the USMCA unless Mexico began implementing its promised legal changes. Mexico had agreed to pass the legislation by the end of 2018, but it didn’t happen, leading some labor activists to question whether Mexico’s new government was getting cold feet about the changes.

Mario Delgado, the head of Mr. López Obrador’s party at the lower house, said the labor bill fulfills all the requirements demanded by the U.S. government. “Mexico is honoring its commitment. This paves the way for the ratification of the trade deal,” he said.

The bill includes a table comparing the commitments made by Mexico in the agreement and the specific articles of the bill to meet those commitments.

Earlier this month, Richard Trumka, president of the AFL-CIO, the largest federation of labor unions in the U.S., made it clear the group wouldn’t support the Nafta replacement deal until Mexico enacted the overhaul.

Last week, House Speaker Nancy Pelosi also threatened to hold up a vote on the new trade deal unless Mexico showed it would implement the changes.

The USMCA seeks to curb Mexico’s labor advantage by strengthening worker protections and bringing Mexican wages more in line with the rest of North America.

“We lost a million jobs to Nafta, and the wage gap…we’re never going to change that unless Mexican workers have the right to organize actual unions that do actual bargaining,” said Benjamin Davis, director of international affairs for the United Steelworkers, an AFL-CIO member.

The new government of Mr. López Obrador, which took office in December, had already signaled that it wanted to strengthen worker protections. But U.S. labor groups objected to earlier versions of the legislation primarily because a draft submitted in January didn’t mandate direct, free elections of union leadership.

They also wanted to streamline the process of organizing union elections in Mexico and put dispute resolution fully under a newly created autonomous agency rather than having employers, workers and government representatives on dispute-resolution panels. The agency will also register all labor contracts in a transparent platform.

Existing labor contracts will have to be “legitimized” in secret union votes, according to the bill.

Some in the Mexican government worry the changes might increase labor conflict, a top government official said. The recent strikes in Matamoros, a border city where some 90 assembly plants accepted higher wages after a wave of strikes, were seen by some government officials as a warning.

But last week, Mr. López Obrador said his government was committed to implement in full the trade deal agreed between Mexico, the U.S. and Canada last November.

Mexico’s ratification of the USMCA would likely happen in the second half of the year, said Mr. Monreal, the senator, in parallel to U.S. and Canada’s congresses.

Both Canada and Mexico are demanding the U.S. to lift tariffs on steel and aluminium. The deal in Mexico only faces an up-or-down vote in the Senate.

Trump promised a new trade policy. But his new NAFTA might be worse than the old one.

Donald Trump disrupted the 2016 election and won many “forgotten Americans” in part by promising to fight for lower prescription drug prices and to tear up or renegotiate the North American Free Trade Agreement (NAFTA), the Trans-Pacific Partnership agreement (TPP) and any other trade agreement that disadvantaged American workers.

23357ME5VII6RKGYTNGBGKDNNMHis rival for the presidency, former secretary of state Hillary Clinton was hamstrung by her inability to attack these deals: Her husband signed the first into law, while her former boss, President Barack Obama, campaigned to win ratification for the TPP. This restriction left room for candidate Trump to attack the secrecy and special interests that rigged U.S. trade deals to make it easier to outsource American jobs and to make trade a voting issue in the industrial battleground states.

But, ironically, the intensifying debate over the renegotiated NAFTA that President Trump is seeking to rebrand as the United States-Mexico-Canada Agreement (USMCA) suggests that the president’s trade policy is not so different from those of his predecessors. Certainly, the new coalition of 200 corporations and business lobby groups, including Citibank, the American Petroleum Institute and the American Farm Bureau Federation, that just launched a campaign to push Trump’s renegotiated North American trade deal through Congress doesn’t seem to think that there’s anything new in the deal that threatens business-as-usual.

And when told more about what is in “NAFTA 2.0,” voters in surveys and focus groups I’ve conducted this year for Public Citizen have second thoughts about the supposedly new and improved trade deal.

In the president’s 2019 State of the Union address, he unwittingly spotlighted the biggest vulnerability for his revised NAFTA 2.0. He called on Congress to pass it, “so we can bring back our manufacturing jobs in even greater numbers, expanding American agriculture, protecting intellectual property.”

He failed to mention what is really in the renegotiated agreement. Consider what “protecting intellectual property” means. Industry lobbyists were fully at work in shaping America’s negotiating priorities. So, pharmaceutical companies locked in policies that guarantee pharmaceutical companies 10 years of special monopoly rights on a special class of drugs and other special protections that block competition and mean higher drug prices in all three countries.

Three-quarters of registered voters in my national phone survey at the outset of 2019 said that raised serious doubts for them, almost half “very serious.” That was true, too, for the white working-class voters who put Trump in the White House and even more so, for Democratic voters.

The president also failed to mention that the new deal preserves special corporate rights for some U.S. oil and gas corporations that allow the companies to challenge Mexican environmental regulations before tribunals of three corporate lawyers. These investor protections could block Mexico from taking new steps to address climate change. That gets the attention of 70 percent of those for whom it raises serious doubts. But it is particularly important for those voting Democratic in 2020: More than 60 percent said that factor raised “very serious” doubts.

The president also did not mention how his new deal might affect food safety. Members of the public are actually most upset when they hear that the renegotiated NAFTA does not fix the rules in the original NAFTA that require the United States to accept imports of meat and poultry imported from Mexico and Canada that do not meet U.S. safety standards. That raises serious doubts for three-quarters of Americans, half “very serious.”

It was the inclusion of the pharmaceutical provision that led people in my focus groups in both Macomb County, Mich., and Seattle to connect the dots on how corporate special interests shape the laws that are enacted: Focus-group participants volunteered that provisions favoring pharmaceutical companies shouldn’t be in a trade agreement. The other participants agreed and steered the conversation to how corporate lobbyists must have used their influence to stick it in there.

More important, public awareness about what really is in the renegotiated North American trade agreement generates demand to alter the text of the deal; half of the white working class would demand major changes or have Congress vote against it. Overall, 42 percent of registered voters and almost 60 percent of Democrats say Congress should demand major changes before the trade agreement is sent to Congress.

This should not be a surprise. That a coalition of corporate interests is demanding Congress move quickly to ratify the agreement only confirms how little Trump has really disrupted. If the administration and Democrats remember the mandate of 2016, they will strip away the corporate special deals that comprise “NAFTA 2.0” and deliver the change the president promised on the campaign trail.

From The Washington Post

TIME IS RUNNING OUT FOR OLD AND NEW NAFTA DEAL

Even though a deal was reached in 2018, the USMCA has not been ratified by any of the three countries, which means the trade framework is still at risk.

imagesBack in December 2018, U.S. President Donald Trump gave Congress a six-month ultimatum to approve the newly signed “United States-Mexico-Canada Agreement” (USMCA), yet as elections loom closer and tariffs disputes continue the chance of the countries ratifying the pact this year are receding.

Even though a deal was reached in 2018, the USMCA has not been ratified by any of the three countries, which means the trade framework is still at risk. “The USMCA is in trouble,” assured former Mexican deputy foreign minister for North America, Andres Rozental.

Speaking to reporters on Dec. 2, 2018, Trump said he “will be formally terminate NAFTA shortly,” adding that the U.S. Congress can choose between the United States-Mexico-Canada Agreement or “pre-NAFTA, which works very well.” If Trump did dump NAFTA, the nations would revert to trade rules in place from 1994.

As tensions continue in North America, the delay and Trump’s threat could lead the “new Nafta” to become hostage to electoral politics, as the renewal of the trade agreement was one of Trump’s main campaign promises. The U.S. has its next presidential race in 2020, and Canada holds a federal election in October 2019.

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President Trump: “I’ll tell you one thing, it’s a great deal. If they don’t pass it it’s purely political. The USMCA — everybody wants to see it passed.”

The uncertain path lies in the hands of the Democratic-majority House of Representatives, who do not favor the deal. “We have a president who’s much less pro-trade than the Republican consensus has been historically, and Democrats do not appear as enthusiastic about working with this president,” said Senator Pat Toomey (R-Pa.), a member of the Senate Finance Committee, which has jurisdiction over trade agreements.

Canada’s Parliament is also roadblock, as current legislators only have a few weeks work left before the start of the summer recess in June, and members of the new Parliament would have little chance to address ratification until 2020.

This has been exacerbated by unresolved labor terms and tariffs, which are the main issues at hand. U.S. Democrats have threatened to block the USMCA unless Mexico passes legislation to improve workers’ rights, a demand shared by the Canadian government. A bill already in Mexico’s Congress to strengthen trade unions should be approved this month, the government said.

Yet the dispute on international tariffs on commodities and goods might be the decisive factor. Canada and Mexico are seeking exemption from U.S. tariffs on global metal imports imposed last year, as these were not included in the agreement.

However, Trump threatened to slap tariffs on Mexican auto exports unless Mexico does more to stop drug traffickers and illegal immigration. While Mexico’s government announced that soon it will present a new list of potential U.S. imports to be targeted.

Mexican deputy economy minister, Luz Maria de la Mora, added that “all options are on the table,” in regard to her government deciding to not ratify the deal if metal tariffs are not addressed. While Canadian officials say they fear that if one part of the treaty was reopened, it could spark clamor for other sections to be renegotiated as well.

From Popular Resistance

Thousands of workers at US factories in Mexico are striking for higher wages

Hundreds of Coca-Cola workers are camping out at a major bottling plant until they get a raise. More than 8,000 Walmart employees were prepared to walk off the job, until management met some of their demands. And 30,000 striking factory workers have finally returned to work after a month-long strike.

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Workers are organizing at unprecedented rates along the border — in Mexico.

Since January, thousands of factory workers have been striking for higher wages in Mexican border cities, which are home to hundreds of factories run by US companies and subcontractors. Factory workers, who generally earn about $2.50 an hour, make car parts, washing machines, appliances, and even soda for American consumers across the border.

Workers are angry with their employers for paying them poverty wages, but they’re also upset with their labor unions, which are often controlled by businesses and government officials. So far, union officials have been unable to stop the strikes, which began in January in Matamoros, an industrial border city that sits across the Rio Grande from Brownsville, Texas.

The strikes have been so successful that they’ve sparked what is now called the 20/32 Movement, based on the 20 percent pay raise and 32,000 peso annual bonus (about $1,600) that striking factory workers in the city initially demanded, and eventually won.

The movement is now spreading beyond factories in the border region, with cashiers at US-owned supermarkets and fast-food chains demanding raises too. That includes Sam’s Club stores and Walmart stores.

The weeks-long strikes have caught business groups and employers off guard. The Mexican government and labor unions have long controlled the workforce with an iron grip, immediately quashing labor unrest by jailing workers who go on strike. It’s just one of the reasons why wages in Mexico remain among the lowest in the developed world — a setup that US companies have encouraged.

But that’s all starting to change because of two people: Mexico’s new populist president, Andrés Manuel López Obrador, and US President Donald Trump. Despite their significantly different stances on policy, both presidents share the view that Mexican labor laws need a major overhaul to make free trade between both nations work.

And, somewhat ironically, it was López Obrador’s recent decision to hike the minimum wage that triggered massive strikes.

Raising the minimum wage was unprecedented

In December, López Obrador fulfilled one of his campaign promises: he raised the national minimum wage. The 16 percent increase, which went into effect in January, raised the wage floor to about 0.60 cents an hour. To be clear, that’s still a pretty bad rate. AMLO simply raised the minimum to keep up with the cost of feeding a family of four. The new minimum wage just ensures that people don’t starve to death, and it’s certainly not enough for families to pay rent or buy anything else, really.

But it was still seen as a major win for workers in Mexico, who on average earn about $12.50 a day.

As part of this new policy, AMLO created a separate minimum pay rate for workers in the border region, where about 2 million people work in factories, or maquilas, owned by multinational corporations. The new minimum wage in border states is about $1.1 an hour —double what it was before. To help offset the cost to employers, AMLO included a tax cut for businesses along the border.

Javier Zarracina/Vox

But here’s the thing: Factory workers in cities like Matamoros were already earning about $2.50 an hour, so the change didn’t benefit them at all. They, too, insisted on getting a raise along with minimum-wage earners, and many of their labor contracts actually stipulated that they would get raises and bonuses based on changes to the minimum wage. Which meant that their salaries should have doubled to about $5 an hour because the minimum wage had doubled.

But the maquiladora industry in Matamoros, and the Day Laborers, Industrial Workers, and Maquila Industries Union, which represents most factory workers in the city, said such a wage hike was too much. So two weeks after the new wage laws went into effect, on January 1, about 30,000 workers went on strike. Their demand: a 20 percent raise and a 32,000-peso (about $1,600) bonus.

Business groups were outraged. The Mexican Employers Federation called it a “crisis.” The local chamber of commerce said the city would lose 20,000 jobs. Factories threatened to close. Workers blocked access to their work sites, essentially shutting down 45 factories for several weeks.

By February 9, something unexpected had happened: Managers at 45 factories agreed to employees’ demands, and their 30,000 employees got the raises and bonuses they asked for. At least two factories, including a Chinese automaker, decided to move elsewhere, and fired 1,500 people.

That didn’t discourage workers. In fact, strikes have started to spread to other Mexican border states, including Coahuila; Reynosa, Tamaulipas; Agua Prieta, and Sonora.

Coca-Cola workers are still striking. Walmart barely avoided a work stoppage.

Hundreds of workers at one of Coca-Cola’s largest bottling and distribution plants have refused to go to work for almost two months, demanding the same 20 percent increase with a $32,000 peso bonus. Many have been camped outside the facility in Matamoros, blocking strikebreakers from entering and bringing production nearly to a halt.

The Coca-Cola bottling plant, Arca Continental, is one of the few employers in the state of Tamaulipas that have not agreed to workers’ demands.

On Tuesday, employees put on their uniforms and gathered outside the sprawling facility to continue the strike. Some had slept on mattresses on the sidewalk, according to video posted online by Susana Prieto Terrazas, a labor lawyer who is helping organize the strikes.

“We’re going to stay here as long as we need to,” said one of the workers standing outside.

Their homemade signs accused the company of taking advantage of them. “If they punch one of us, they punch all of us,” read one of the signs.

A spokesperson for Coca-Cola in Mexico told me that the company agrees with the way the Arca Continental, which runs the bottling plant, is handling the strike, but didn’t say whether or not Coca-Cola supports the workers’ demands.

“We are closely following the evolution of the situation, and we trust that it will be solved as soon as possible, always seeking for the welfare of our collaborators,” Lorena Villarreal Clausell, communications director for Coca-Cola Mexico, wrote in a statement to Vox.

While factory workers have been at the forefront of the labor unrest, frustration has started to spread. In February, a labor union representing 8,000 Walmart and Sam’s Club employees said they would go on strike unless the company agreed to the 20/32 demands.

Workers complained that Walmart made them work long hours and didn’t pay them overtime as required by law. They also accused managers of discriminating against pregnant women, and not enrolling some workers in their health insurance and retirement programs, according to the Revolutionary Confederation of Laborers and Farmworkers union, which represents employees at about 180 Walmart and Sams Club stores in 10 states in Mexico.

“We, the workers of Walmart, have started a movement to reclaim our rights,” the union stated in a video announcing the strike earlier this month. “We’re fighting for better salaries, a percentage of sales, to prevent layoffs and for the respect of human rights.”

That includes janitors, cashiers, pharmacy clerks, and warehouse workers. Last year, workers at Walmart stores across Mexico earned between $4.81 and $8.83 a day, according to Reuters.

The strike was set to begin last week, but the company reached an agreement with the union at the last minute. They would give employees a 5.5 percent raise and a productivity bonus — far less than they asked for, but enough to avoid a strike.

The relative success of these strikes has a lot to do with politics.

López Obrador’s administration is not cracking down on workers

Mexico’s new president and other members of his populist Morena party have political control in Mexico right now, after taking both chambers of Mexico’s Congress for the first time this year. In the past, employers could count on the federal and state government to intervene in labor strikes, which often led to brutal crackdowns on workers. Unions rarely sided with the workers they are supposed to represent.

But López Obrador and his allies in Congress are making it a point to remain neutral. They have been encouraging negotiations, but so far have refused to take punitive action against workers.

Mexican President Andrés Manuel López Obrador leaves a Spanish-language church in New York City when he was campaigning for the presidency on March 13, 2017. Andres Kudacki/AP

“The businesses class also needs to take direct responsibility for this, they need to be more socially responsible toward workers, with the communities where they operate and with the environment,” said Sen. Napoleón Gómez Urrutia, during a press conference last week, according to El Milenio newspaper. “This is part of our national politics and the new union movement we are promoting, there has to be economic justice for there to be a peaceful labor environment.”

The administration’s pro-labor policies will inadvertently help an unlikely ally: President Donald Trump.

Mexico must pass new labor laws for the trade deal to go into effect

In November, President Donald Trump announced that he had accomplished one of his campaign promises: he had reached a deal with Canada and Mexico to replace the North American Free Trade Agreement, or NAFTA.

Under the new deal, known as the USMCA, Mexico has promised to pass laws that will guarantee workers the right to form unions and negotiate their own labor contracts.

Right now, workers in Mexico have the right to unionize, but they are often left out of the negotiating process. US manufacturers — and most other companies — end up dictating the terms of the contract with labor unions to their own benefit, without any input or approval from employees. Workers have also reported retaliation from employers when they try to create a labor union.

Trump still needs Congress to ratify the pact, which will likely face some resistance from House Democrats. Mexico and Canada will also need to get their lawmakers on board.

President Trump shake hands with Mexico’s Foreign Minister Luis Videgaray Caso as he arrives to speak on trade in the Oval Office on August 27, 2018. Mandel Ngan/AFP/Getty Images

Trump had repeatedly railed against NAFTA for decimating the US manufacturing industry.

When the trade pact was enacted in 1994, labor unions worried at the time that allowing goods to cross the border untaxed would give US manufacturers too much incentive to move factories and jobs to Mexico, where wages were very low and environmental standards more relaxed.

Proponents of NAFTA pushed back against that idea, saying that boosting trade would raise wages for low-skilled Mexican workers, pulling millions out of poverty and making it less attractive for companies to move factories to Mexico.

But that definitely didn’t happen. Competition from US farms was largely responsible for putting more than 1 million farmworkers in Mexico out of work, and the unemployment rate in Mexico is higher today than it was back then.

On top of that, wages for workers in Mexico have hardly budged.

The labor reforms in the new deal are supposed to increase wages for Mexican workers, to give US companies less of an incentive to move manufacturing jobs south of the border.

Aside from giving workers a voice in collective bargaining, the USMCA would also require Mexico to pass a law extending labor protections to migrant workers, many of whom come from Central America and are vulnerable to exploitation.

The “new NAFTA” would allow the United States, for example, to file labor complaints through the regular dispute resolution system, but only if it involves labor violations that are harming US trade. They can bring the complaint before a commission of government labor ministers from each country, but only after exhausting all efforts to mediate the issue and resolve it separately.

It seems like a long, painful process that could take months to complete. But it’s better than the nonexistent process to deal with labor violations under NAFTA. And it would require each country to take an aggressive, hands-on enforcement approach.

The most challenging part will be enforcing a specific provision in USMCA that mandates that 40 to 45 percent of a car’s parts must be made by workers who earn at least $16 an hour to avoid tariffs. That means that many Mexican factories that make parts for US car manufacturers would have to pay eight times what they currently pay the average factory worker. Or auto manufacturers would simply need to buy more car parts made in the United States, where wages for factory workers are much higher.

The trade deal does not mention how the US government would even know what companies across the border are paying their workers. It’s not clear how the Mexican government would know, either. But López Obrador is making some changes that align with USMCA, and lawmakers are expected to introduce the rest of the required proposals this spring.

As a populist president whose political party now controls both chambers of Mexico’s Congress, it shouldn’t be hard for López Obrador to pass those reforms. Until then, the current labor unrest in Mexico will likely continue to spread.

 

In Vox Magazine

Proposed NAFTA Revision Fails Rural New York

NAFTA 2.0 Would Lock In High Medicine Prices for Big Pharma — While Allowing Outsourcing to Continue Unabated 

static.politicoUTICA, N.Y. — As a corporate-funded “Motorcade for Trade” RV tour prepares to make stops in Utica and Buffalo to hype the proposed North American Free Trade Agreement (NAFTA) revision (also called the US- Mexico-Canada Agreement), the New York Director of Citizens Trade Campaign, George Kimball, issued the following statement:

“There’s a reason why hundreds of corporate lobby groups have come together to push the revised NAFTA deal.  As written, NAFTA 2.0 would expand the privileges and profits of Wall Street executives and other corporate CEOs, while failing to take the steps needed to protect the livelihoods of hard-working families in rural New York and beyond.

“The proposed NAFTA deal fails to make the changes needed to protect jobs and raise wages for American workers and family farmers.  There’s nothing in the current proposal that would prevent the outsourcing of jobs or that would reverse our high agricultural trade deficit.  In fact, a recent International Monetary Fund study concluded NAFTA 2.0 would have a negative effect on both overall U.S. welfare and in agriculture specifically.

“While hundreds of corporate lobbyists had inside access to NAFTA negotiators, the voices of rural America were largely ignored throughout the NAFTA renegotiation process.  For instance, American consumers are increasingly interested in knowing where and how their food is produced — and America’s farmers and ranchers want to tell them.  But the repeated calls of family farmers and ranchers for a NAFTA deal to restore country-of-origin-labeling for meat products were ignored by trade negotiators.

“One call trade negotiators was sure to answer was that of the pharmaceutical lobby.  At a time when many New Yorkers struggle to afford the medicine prescribed to them by their doctors, the new NAFTA text sneaks in language that would lock in lengthy monopoly periods for pharmaceutical companies, blocking competition from lower-cost generic medicines and keeping medicines prices outrageously high.

“Instead of rubber-stamping this business-as-usual trade deal, New York’s Members of Congress should continue insisting on the substantive changes necessary for a NAFTA replacement to truly benefit working families.  We’re counting on our elected officials to demand stronger labor and environmental standards with swift and certain enforcement; restoration of our country-of-original-lableing program; and the removal of language that locks in high medicine prices.”

 

Dealing with China, Trump goes it alone

The United States and China continue to circle around a deadline that could mark a turning point in their commercial and diplomatic relations.

U.S. President Donald Trump and China's President Xi Jinping make joint statements at the Great Hall of the People in BeijingOn March 1, the Trump administration had planned to levy 25 percent tariffs on more than $200 billion of Chinese exports, unless China agreed to all U.S. demands, including ceasing its retaliatory tariffs against U.S. exports. But on February 24, President Donald Trump tweeted he would indefinitely postpone the date for applying those tariffs, pending the signing of an agreement by President Xi Jinping at President Trump’s country club in Mar-a-Lago, Florida, sometime in the future.

While praising the “progress” claimed to have been made in the negotiations, President Trump rebuked U.S. Trade Representative Robert Lighthizer, in front of reporters and Chinese negotiators, for formulating any eventual agreements as Memoranda of Understanding (MoU), because President Trump doesn’t trust MoUs. Trump insisted that any documents he and President Xi might sign be called a “trade agreement.” The U.S. draft list of demands for the negotiations is prefaced by a claim that whatever is negotiated is not an “international trade agreement,” regardless of the impacts of the MoUs on members of the World Trade Organization.

A May 2018 four-page draft of U.S. demands, first reported in January in the Financial Times, would require China to purchase, in enforceable phases, U.S. goods and services “such that the U.S. trade deficit with China will have decreased compared to 2018 by at least $200 billion by the end of 2020.” The U.S. requires that “China immediately will cease providing [U.S. determined] market-distorting subsidies and other types of government support” for its Made in China 2025 industrial policy. It must strengthen protections of U.S. patented, trademarked and copyrighted products and U.S. investments in China. China must withdraw dispute settlement cases against the United States it has begun in the World Trade Organization and terminate all retaliatory actions, including tariffs against U.S. agricultural exports to China.

The list goes on.

In a January 16 article, IATP cited the FT’s Martin Wolf: “The idea that the U.S. will be judge, jury and executioner, while China will be deprived of the rights to retaliate or seek recourse to the WTO is crazy.” China has not given up its WTO rights but is negotiating to avoid the threatened U.S. tariffs, to buy U.S. goods, and to change Chinese law and enforcement practices to protect U.S. investments and intellectual property.

The Department of Commerce released reports in January 2018 to justify the current tariffs on steel and aluminum imports  imposed for national security reasons. It is likely that the U.S. will propose to enforce the bilateral agreement outside of the WTO dispute settlement system by including U.S. unilateral tariffs and anti-subsidy measures as a formal compliance mechanism. If China were to agree to that compliance mechanism, the steel and aluminum studies, which include redacted commercial information submitted by U.S. steel and aluminum producers, might not be subject to review and possible dispute challenge by other WTO members.

On December 17, U.S. Secretary of Agriculture Sonny Perdue announced “the second and final round of trade mitigation payments aimed at assisting farmers suffering from damage due to unjustified trade retaliation by foreign nations.” Also in December, the Congressional Research Service informed its employer that net farm income was estimated to be down 46 percent from its record high in 2013 and that $4.6 billion in trade mitigation payments contributed to the highest level of U.S. government payments to farmers since 2006. In other words, while the clock has stopped ticking—for the moment—on dropping Trump’s tariff bomb, the U.S. taxpayer trade-related safety net for farmers will be reduced. According to Bloomberg, as part of the overall deal, “China is proposing that it could buy an additional $30 billion a year of U.S. agricultural products” above the pre-trade dispute export sales level during the period that the MoU/trade agreement is in force. The purchases would reduce the huge stocks of grains and soybeans held in U.S. elevators and lying on the ground covered by tarps.

Gordon Sondland, the United States ambassador to the European Union, has proposed that the EU make common cause with the U.S. against China. But how? The Office of the U.S. Trade Representative’s “2018 Report to Congress on China’s WTO Compliance” concluded that EU-proposed reforms of the WTO dispute settlement system and of the WTO system for reporting changes to its members’ trade-related laws are wholly inadequate to achieve U.S. aims. The procedural reforms do not force China to change its economic development model to become a “market economy” open to U.S. investment without conditions. (“Market economy” status imposes fewer and less burdensome requirements than those for “non-market” WTO members.)

At the WTO’s biannual review of U.S. trade policies, EU ambassador to the WTO Mark Vanheukelen said, “The multilateral trading system is in a deep crisis and the United States is at its epicenter.” In July 2018, President Trump described the EU as a greater threat to the United States than Russia or China, because of the EU’s trade practices and under-spending on military defense. The EU cannot ignore U.S. attacks on its institutions and policies, even while, along with the U.S., the EU is denying China’s effort to be considered a “market economy” by WTO members.

Ambassador Sondland, formerly a hotel magnate, criticized a speech by Secretary of State Mike Pompeo in December in Brussels as not tough enough on the EU.  Secretary Pompeo, according to Politico, “bashed a wide array of international organizations, including the EU, the United Nations, the Organization of American States, the African Union, the World Bank, the International Monetary Fund and the International Criminal Court.” Having disparaged international organizations, very soon thereafter Secretary Pompeo was praising “our true allies,” such as Poland and Hungary, willing to follow U.S. foreign policy and split EU foreign policy cohesion.

Secretary Pompeo, echoing President Trump, insists that national sovereignty claims overrule international governance. Consequently, the U.S. has threatened the EU with sanctions for not complying with U.S. sanctions against trade with Iran. In response to a February 13 speech by Vice President Mike Pence criticizing the trade of Germany, France and the United Kingdom with Iran, an EU official stated, “the EU does not recognize the extra-territorial application of U.S. sanctions.”

The consequences of the trade and foreign policy disputes among the major powers reach beyond their own borders. In February, a report of the United Nations Conference on Trade and Development (UNCTAD) stated, “the trade confrontations between the United States and China have already weighed on currency markets by increasing the volatility and downward pressure for many currencies, especially in the riskier emerging markets. For many developing countries, one important concern is whether trade tensions will affect currency markets in ways that will make their dollar-denominated debt more difficult to service.” The UNCTAD report noted that trade related currency re-pricing was just one of several spillover effects thus far of the retaliatory tariff battles.

Rather than work with or through international organizations, the Trump administration views every trade dispute as a nail to be hit with a tariff or threat of a tariff. President Trump dangles the threat of tariffs on U.S. imports of European and Japanese automobiles, to force open those markets to U.S. agricultural goods.

The European Parliament’s response to these and other U.S. threats may be weakening support for a mandate for the European Commission to negotiate even a phased in and “lite” version of the proposed Transatlantic Trade and Investment Partnership. On January 30, Bernd Lange, chair of the Parliament’s committee on international trade, proposed a non-binding resolution to reject “the opening of negotiations of an agreement with the US on the elimination of tariffs for industrial goods and on [regulatory cooperation] conformity assessment in their current form.” The committee rejected Lange’s proposal and endorsed by a 21 to 17 vote a resolution to open trade negotiations with the U.S. subject to “articulated red lines”, including the exclusion of agriculture—a U.S. priority (subscription required). The full Parliament will vote on the resolution in mid-March. Its narrow margin of victory indicates a large minority of support for not negotiating with the Trump administration under any conditions.

In response to the U.S.’s unilateral application of tariffs and hostility towards international organizations, China’s strategy has been to find allies through international organizations. SUNS reports (subscription required) that China and India have responded to U.S. demands for an end to self-designation of developing countries (subscription required) which allows them to receive, non-binding Special and Differential Treatment in WTO agreements (e.g. longer compliance timelines). The China/India paper contends that international organization definitions of developing countries are based on per capita measures of human welfare and not macro-economic measurements, such as growth in the Gross Domestic Product and trade balances.

Chad Freeman, a China expert formerly in the State Department, described U.S. diplomacy towards China: “Some Americans nostalgic for the simplicities of the Cold War suffer from enemy deprivation syndrome. They are in earnest search of a hostile ideology against which to orient themselves and see China as the answer to their distress.” There is ample evidence that China, under current Communist Party management, is hostile to U.S. national security interests, with increased Chinese (and Iranian) cyber warfare against U.S. corporations as one response to the current trade war. However, there is also ample evidence of a Cold War mentality in the U.S. trade policy and diplomacy that seeks to contain China’s economic development and geo-political influence by making demands that likely would require regime change in China (and Iran, Venezuela, Cuba and Nicaragua) to fulfill.

It does not appear that the Trump administration will abandon its unilateral diplomacy and attacks on international institutions, regardless of the economic harm to farmers and other collateral damage. Waiting out the Trump administration, as the European Union appears to be doing with proposals unacceptable to the Trump administration, may be the best alternative to more trade dispute-related damage.

From IATP.

 

International Trade Court Upholds Constitutionality of Trump Steel Tariffs

3q0sl1u-e1491846409929-640x479A federal court in New York has rejected a constitutional challenge to President Donald Trump’s executive order imposing tariffs on steel and aluminum imports, ruling that the move was premised on a lawful delegation of legislative authority.

The U.S. Court of International Trade, which has nationwide jurisdiction over civil actions arising out of the customs and international trade laws, said Monday that the law the administration used to impose the tariffs had already passed constitutional muster under a 1976 U.S. Supreme Court decision.

A group of steel importers had challenged the March 2018 tariffs, arguing that Section 232 of the Trade Expansion Act of 1962 violated the constitutional doctrine of the separation of powers by delegating congressional powers to the president without an “intelligible principle” for doing so.

The American Institute for International Steel Inc. and two member companies, Sim-Tex and Kurt Orban Partners, said that Section 232 gave the president a “limitless grant” of power to determine when executive actions are necessary for national security purposes, without any significant mechanism for review.

A three-judge panel of the court, however, said that the Supreme Court’s 1976 decision in Federal Energy Administration v. Algonquin SNG had already decided that Section 232 met the “intelligible principle” standard because the scope of the law was limited to issues of national security.

In the court’s ruling, Judge Claire P. Kelly noted that the line between regulation of trade in the name of national security and improper encroachment into the role of Congress “could be elusive in some cases.” However, Kelly said those concerns fell beyond the court’s purview, given the high court’s ruling in Algonquin.

The plaintiffs argued that they should not be bound by the 1976 decision because Algonquin challenged a specific remedy, and not the constitutionality of the underlying statute itself. The legal landscape for review of presidential actions had also shifted drastically since the previous case had been decided.

In a concurring opinion, Judge Gary S. Katzmann agreed that he and his colleagues were bound by the Supreme Court’s earlier ruling, but said the constitutionality of the statute may need to be revisited.

“I respectfully suggest, however, that the fullness of time can inform understanding that may not have been available more than forty years ago. We deal now with real recent actions, not hypothetical ones,” he wrote.

“If the delegation permitted by section 232, as now revealed, does not constitute excessive delegation in violation of the Constitution, what would?”

The plaintiffs were represented by Alan B. Morrison of George Washington University Law School; Donald Bertrand Cameron and Rudi Will Planert of Morris, Manning & Martin and Gary N. Horlick of the Law Offices of Gary N. Horlick in Washington, D.C.

The administration was represented by Jeanne E. Davidson, director of the U.S. Department of Justice’s Commercial Litigation Branch, and Tara Kathleen Hogan, who serves as assistant director.

From the NY Law Journal

Mexico Beefs Up Labor Bill Amid Speaker Pelosi’s Nafta Threat

After Democrats in the U.S. threatened to hold up a renegotiated Nafta, Mexico’s ruling party beefed up a labor bill to meet requirements laid out in the trade deal and plans to vote it through this month.

1800x-1The bill now satisfies “diverse obligations” required by the United States-Mexico-Canada Agreement, or USMCA, as the new Nafta deal is known, said Mario Delgado, the majority leader for Mexico’s lower house. The lower house could vote on it in a week’s time, he told reporters Thursday.

Mexico is racing to amend laws to comply with new USMCA rules that explicitly require that workers vote for their unions and labor contracts, both of which rarely happen in Mexico, where employees often lack basic representation. The original draft of the bill by leftist President Andres Manuel Lopez Obrador’s party didn’t go far enough, according to U.S. labor leaders and Democrats in Congress.

“It’s a reform for labor justice and will democratize unions,” Delgado said. “One of its main objectives is to transform the labor justice system.”

AMLO, Pelosi Push

The new draft comes the same day Lopez Obrador demanded the bill comply with the USMCA and get passed quickly, in order to eliminate any “pretext” to reopen trade negotiations. It also follows comments by U.S. House Speaker Nancy Pelosi that there are outstanding USMCA issues including treatment of workers in Mexico. Democrats hold a majority in the House of Representatives and have raised issues with the trade deal the Trump administration clinched last year with Mexico and Canada.

The latest draft of the labor bill, which is expected to be discussed in committee and voted in the full plenum as soon as Thursday, requires secret votes for workers to choose unions and their delegates and to approve their labor contracts, Delgado said. It also creates new labor courts to resolve disputes.

While requiring votes to choose unions and delegates, the original draft didn’t do enough to ensure they’d vote on the contracts themselves, or that they’d even see copies of the contracts, said Ben Davis, director of international affairs at United Steelworkers, an AFL-CIO affiliate. The AFL-CIO is America’s biggest federation of labor unions.

‘Right Track’

The new labor bill might require a review of that position, a representative of the group said.

“The lengthy text needs full review but a first read indicates key improvements,” Gladys Cisneros, director of AFL CIO’s labor advocacy group in Mexico, the Solidarity Center, said in a statement. “It’s on the right track to correcting egregious violations, but workers will also need to see aggressive, systematic enforcement to guarantee true freedom of association.”

Democrats circulated a letter saying Mexico’s labor bill was deficient in several critical areas, Bloomberg Law reported. The letter was based on the original draft presented in February and was to be sent to U.S. Trade Representative Robert Lighthizer.

It wasn’t immediately clear if Mexico’s new draft would satisfy all of the Democrats’ demands and USMCA requirements as set out in its labor annex. Even if it does, Pelosi may seek changes to the USMCA on trilateral issues to ensure enforcement. “I think we are only chatting unless we are enforcing,” Pelosi said Thursday. “I want to see stronger enforcement language.”

From Bloomberg Law

Interview with Celeste Drake of the AFL-CIO on U.S. trade

Interview with Celeste Drake of the AFL-CIO. Celeste is the trade and globalization policy specialist at the AFL-CIO, where she advocates for reforms to U.S. trade policy to create shared gains from trade on behalf of working families.

Why NAFTA’s 2.0 current labor provisions fall short

One year ago, we were hopeful that renegotiating NAFTA represented the first real opportunity in 25 years to finally rewrite the labor template currently relied on for trade agreements.

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After all, since NAFTA was implemented, hundreds of thousands of U.S. jobs have been outsourced to Mexico by companies taking advantage of workers who do not enjoy the fundamental human rights to form their own free and independent unions, engage in meaningful collective bargaining, be free from discrimination and forced labor, and work in safe and healthy workplaces.

In anticipation of the renegotiations, numerous recommendations for improving and enforcing labor standards were submitted—all of which are instrumental in removing corporate incentives to transfer work to Mexico. Specific recommendations for improving the labor template of current U.S. agreements included these five general suggestions:

  1. Incorporate explicit references to labor standards and interpretation of those standards through various cases and reports reflecting specific rules adopted by the UN’s International Labour Organization (ILO), including those concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health.
  2. Remove the footnote explicitly limiting the terms of the chapter to the ILO Declaration on Fundamental Principles and Rights at Work.
  3. Eliminate the requirement that labor violations under the agreement must be in a manner affecting trade or investment between the parties.
  4. Eliminate the requirement that labor violations must be sustained or recurring.
  5. Verify that labor standards in the agreement are being honored and enforced by the signatories prior to the agreement going into effect.

Unfortunately, none of these essential changes were made to NAFTA 2.0. As noted by the AFL-CIO’s recent Executive Council Statement, “[T]he NAFTA renegotiation requires strong labor rights provisions and strong enforcement provisions that as of today are not yet in the agreement.” Without incorporating the recommendations mentioned above, NAFTA 2.0’s labor standards and enforcement remain weak and Mexico’s workers will still struggle to enjoy fundamental human rights. As a result, wage suppression will continue to provide incentives to for corporations to outsource work to Mexico.

Despite much discussion over modest improvements to the labor chapter, complaints must still overcome obstacles posed by four significant questions regarding NAFTA 2.0’s labor obligations:

Are signatories obligated to honor labor rights or principles?

Under NAFTA 2.0 as currently drafted, any signatory could argue that if it meets the principles of labor rights, as opposed to the rights themselves, it satisfies its obligations under the agreement. This is why recommendations include that the signatories’ obligations must be explicitly linked to specific ILO’s rules along with ILO’s cases and reports, which furnish precise interpretations of these rights.

Not only was this recommendation rejected, but negotiators also retained a footnote first incorporated in the Peru Trade Agreement that makes it even easier for signatories to argue that they are only obligated to meet certain principles, as opposed to the rights themselves. NAFTA 2.0 retains this flaw, making it even more difficult for parties to argue that ILO Conventions and accompanying cases and reports can at least give guidance to interpreting the principle-based obligations.

As stated in the Labor Advisory Committee for Trade Policy and Trade Negotiations (“LAC”) Report on NAFTA 2.0:

Instead of referring to the ILO’s core conventions, the Parties chose to include language [in footnote 3 of NAFTA 2.0] that serves to obfuscate, rather than clarify, the rights and principles in the ILO Declaration. We have offered numerous ideas about this matter including simply eliminating the footnote, all of which have been rejected to date.

Few companies would be satisfied with such vague obligations when it comes to matters of special relevance to their interests. This is why they have demanded, and in many instances succeeded in, including specific language in the agreement addressing their concerns. Can you imagine the comments from businesses if NAFTA 2.0 only obligated Mexico to honor the principles of protecting intellectual property rights? Why should labor provisions, which are directly related to Mexico’s suppressed labor rights and resulting low labor costs, be viewed any differently?

NAFTA 2.0’s Article 23.9 reinforces the LAC’s concerns over the lack of commitment to honor specific rights. While it addresses discrimination for a number of things including sexual orientation and gender identity, when it references the signatories obligations, it adopts the wording, “that it considers appropriate” undermining any enforceability. Furthermore, footnote 13 declares that “existing [U.S.] federal agency policies regarding the hiring of federal workers are sufficient to fulfill the obligations of this Article”—raising additional questions over interpretation and enforcement.

Are sectors of workers excluded from NAFTA 2.0’s labor obligations?

Even if a labor violation is deemed to violate the principles referenced in the labor chapter, in order to proceed, the violations must be “in a manner affecting trade or investment between the parties.” This provision makes it clear that large sectors of employment may not be covered by the agreement’s labor obligations. This means that thousands of teachers, government workers, fire fighters, police, medical workers, and others could arguably left out of NAFTA 2.0.

As explained by the LAC:

[The provision] therefore risks leaving loopholes for wage suppression, particularly by public sector employers that refuse to accord fundamental labor rights to their employees. Mexico has denied workplace rights and freedoms to its teachers, which not only suppresses the wages, benefits, and conditions of those teachers, but also applies downward pressure on wages, benefits, and conditions of similarly skilled working people in Mexico’s private sector, many of whom produce goods or provide services that compete with goods and services of U.S. workers… The failure of one significant set of workers to be able to enjoy their rights can undermine the proper functioning of a market, suppressing demand, both for the goods produced in that country and for the goods produced by other trading partners.

Would murder of a trade union activist constitute a violation of NAFTA 2.0?

Even if a labor violation meets the burden of showing that there has been a violation and meets the burden of affecting investment or trade, the violation still must meet the sustained or recurring burden.

Single egregious acts can and do crush workers’ desires to exercise their fundamental human rights to form unions and engage in meaningful collective bargaining. The murder of a union activist sends a powerful message to all other workers that they face the same fate, should they wish to form a union. Language in Footnotes 8 and 11 even represents a step backward by emphasizing that “an isolated instance or case” is not covered, removing any possible ambiguity. The new standard sets a very high bar requiring that not only do the actions (or inactions) have to occur “periodically and repeatedly,” but the “occurrences” must be “related or the same in nature.”

What good are labor standards if they are not effectively enforced?

Even if NAFTA 2.0 adopted stronger standards, violations of the labor chapter’s provisions must be effectively enforced. To date, an effective enforcement mechanism in the proposed agreement is lacking. Although several recommendations have been made, none have been adopted.

Without a strong and swift enforcement mechanism, none of the labor obligations—even strengthened labor obligations—in the agreement will be effective. One of the faults of NAFTA is that it does not provide enforcement for obligations like the freedom to form a union. Subsequent labor agreements also fail to provide for effective enforcement. Workers know that without a true commitment to enforcement, through proper funding, accessible and equitable procedures, education on what basic human rights are (like the freedom to form a union and engage in meaningful collective bargaining), as well as other essential items, enforcement will not be effective.

As noted by the LAC:

NAFTA 2018’s dispute settlement and enforcement provisions are neither “effective” nor “equitable,”… by failing to include additional provisions to ensure that the labor rules are adequately and promptly monitored, remedied, and sanctioned if not remedied, the dispute settlement provisions will be neither effective nor equitable as regards labor. A quarter century of experience has proved that labor rules must receive special attention to ensure swift and certain enforcement. Workers simply do not have the power and influence that global companies seeking to vindicate their trade rights have.

Without question, NAFTA 2.0’s labor provision contains some improvements. Language regarding the right to strike, recognition of violence against workers and efforts to improve Mexico’s labor laws with respect to protection contracts are welcome. Nonetheless, as stated, NAFTA 2.0 maintains the fundamental flaws carried over from past trade agreements. Until the recommendations mentioned above are adopted, NAFTA 2.0 will continue to fall short in significantly improving labor standards and, wage suppression for Mexico’s workers will continue.