As Simon mentioned in an earlier post, various labor-related complaints and requests under USMCA are “heating up.” This activity reinforces the Biden Administration’s new “worker-centered trade policy” that, according to USTR Ambassador Katherine Tai, “will foster broad-based, equitable growth, increase innovation, and give workers a seat at the table.” Specifically, she promised that “Our farmers, ranchers, fishers and food processors will benefit from our new approach and they are essential to meeting our climate and sustainability goals.”

On May 17, the USMCA Free Trade Commission is launching its inaugural meeting. It seems all the more appropriate for us to turn our thoughts to the Biden Administration’s new worker-centered trade policy. At the outset, there is cause for caution. The Biden Administration has inherited an agreement negotiated by the economic-centered Trump Administration. The new Administration also seems to believe that a trade policy protecting “farmers” and “ranchers” is the same thing as a policy that would protect the workers on those farms and ranches.

Without delving into the procedural details in depth (for those details, see this recent report), this post looks specifically at the recent activity that has arisen under USMCA’s Labor Chapter and Facility-Specific Rapid Response Mechanism (“Rapid Response Mechanism”). Examining the implications of the text and those activities, I explain how USMCA fails to give American workers a seat at the table.

USMCA Labor Chapter (Chapter 23)

USMCA’s labor provisions are contained in Chapter 23, which commits the Parties to “adopt and maintain in its statutes and regulations, and practices thereunder, the [fundamental labor] rights, as stated in the ILO Declaration on Rights at Work.” Those rights concern:

(a) freedom of association and collective bargaining;

(b) elimination of forced labor;

(c) abolition of child labor and the prohibition of the worst forms of child labor; and

(d) the elimination of discrimination in respect of employment and occupation.

USMCA adds an additional right concerning “acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.”

Disputes under the Labor Chapter fall under the general state-to-state dispute mechanism in Chapter 31.

USMCA Rapid Response Mechanism

One of USMCA’s most significant innovations is the “Faculty-Specific Rapid Response Labor Mechanism” (Rapid Response Mechanism), a new form of dispute settlement contained in Chapter 31 (Dispute Settlement) under Annex 31-A, and further described in the USMCA Implementation Act.

Importantly, the Rapid Response Mechanism is not the same thing as the state-to-state dispute settlement mechanism under Chapter 31. Whereas the state-to-state dispute settlement mechanism involves State failures to uphold USMCA obligations, the Rapid Response Mechanism applies to individual facilities within a country that are allegedly infringing upon workers’ freedom of association or collective bargaining rights.

Under the Rapid Response Mechanism, members of the public can file a petition or use a confidential hotline to report information regarding labor issues at those facilities. The Interagency Labor Committee may invoke the Mechanism:

“whenever a Party (the “complainant Party”) has a good faith basis belief that workers at a Covered Facility are being denied the right of free association and collective bargaining under laws necessary to fulfill the obligations of the other Party (the “respondent Party”) under this Agreement (a “Denial of Rights”).”

Finally, the Rapid Response Mechanism may impose financial penalties onto private facilities, such as “suspension of preferential tariff treatment for such goods; the imposition of penalties on such goods or services; or the denial of entry of such goods.”

The Limited Scope of the Rapid Response Mechanism in the United States

The Rapid Response Mechanism does not apply to all facilities in the State Party territories. Indeed, its scope of application, particularly in the United States, is extremely limited.

First, the facilities must satisfy the conditions of the “Covered Facilities,” which are facilities “in the territory of a Party” that involve a “priority sector,” currently defined as “a sector that produces manufactured goods, supplies services, or involves mining”; and that produce goods or supplies services traded between the parties or that compete in the territory of the other party.

Second, under footnote 2 of Annex 31-A, the Trump Administration further limited the Rapid Response Mechanism’s scope of application as follows:

“With respect to the United States, a claim can be brought only with respect to an alleged Denial of Rights owed to workers at a covered facility under an enforced order of the National Labor Relations Board.”

On its face, this footnote makes sense. The Administration wanted to limit the application of the Rapid Response Mechanism to U.S. facilities (cynics might say full stop) only after domestic legal processes had been exhausted. However, by adding the term “enforced order,” which is not defined in national legislation, the Trump Administration effectively shielded U.S. facilities from the scope of the Rapid Response Mechanism.

In the United States, the National Labor Relations Board (NLRB) adjudicates complaints against employers (and unions) for violating the National Labor Relations Act (NLRA). The Board’s decisions are not automatically enforceable. Rather, either the Board or an aggrieved party must appeal the Board’s decision to an appropriate U.S. Court of Appeals.

In practice, footnote 2 shields nearly all U.S. factories from the application of the Rapid Response Mechanism. According to the NLRB, only around 65 cases per year are appealed to Circuit Courts. Of those 65 cases, the Court enforces only 80 percent, or 52 orders. Those statistics do not indicate whether the 52 enforced orders were directed against employers or unions. They also do not mention whether those enforced orders dealt with repeat offenders.

A glance at the Board’s public registry of appellate court briefs and motions shows that these numbers, however dismal, are significantly higher than recent practice. In Fiscal Year 2020, the Board only brought 24 of its cases to the Circuit Courts. Out of those 24 cases, 21 cases were brought against employers (three were brought against unions). Accounting for repeat offenders, only 16 different employers faced a potential enforced order. If the Board’s 80 percent track record holds up, we are looking at about 12-13 facilities facing enforced orders, of which only a minority will satisfy the definition of “Covered Facilities” described above. Consequently, in 2020, less than 12-13 employers in the United States became vulnerable to enforcement action under the Rapid Response Mechanism.

By contrast, the scope of application for Mexico is incredibly broad. It specifies that “a claim can be brought only with respect to an alleged Denial of Rights under legislation that complies with Annex 23-A (Worker Representation in Collective Bargaining in Mexico).” In other words, it applies to all employers and factories subject to applicable labor legislation.

Recent Labor-Related Activity under USMCA Labor Chapter

On March 23, 2021, migrant women from Mexico filed a petition under the USMCA Labor Chapter. They alleged that the United States violated Article 23.3 (elimination of discrimination in respect of employment) and Article 23.8 (ensuring migrant workers are protected under labor laws) by allowing sex-based discrimination in recruitment and hiring practices of migrant workers, and consequently also failing to enforce Title VII and U.S. labor laws.

Their complaint is not new. Mexican women attempting to secure and work under H-2A visas repeatedly submitted similar complaints under the NAFTA labor side agreement. Those attempts were all unsuccessful. According to the most recent complaint, despite years of drawing attention to these labor-rights abuses, migrant women continue to suffer from sex discrimination during the recruitment process and are “excluded from H-2 visa programs as a matter of course.” Those who make it into the program in the United States are assigned to “less favorable and lower-paid positions than their male counterparts, despite having equal qualifications as men.”

Only State Parties to USMCA may bring a dispute under the Labor Chapter. Consequently, the migrant workers’ petition is directed to the Mexican government in hopes that Mexico will “encourage the United States to make [certain recommended] policy and regulatory changes.”

Mexico has not fully taken up the baton. Instead, on May 12, the Mexican Ambassador to the United States, Esteban Moctezuma, sent a letter to Secretary of Labor Marty Walsh, complaining of certain violations under the Labor Chapter. Note that this is a letter, not a formal complaint under the Agreement. Furthermore, while the letter details alleged violations of the rights of Mexican workers in the United States, it fails to reiterate the specific allegations of sex discrimination. It instead details violations of occupational health and safety standards for agricultural workers, interference with the workers’ rights to collectively bargain, and obstacles that prevent undocumented workers from recouping unpaid wages, to name a few.

Migrant women who are working in the United States, meanwhile, continue to wait for an answer or protective action.

Recent Labor-Related Activity under the Rapid Response Mechanism

On May 10, the AFL-CIO and other groups filed a petition with the Biden Administration alleging labor violations at a group of auto parts factories in Mexico across the border from Brownsville, Texas. Specifically, they allege that Tridonex auto parts factories harassed and fired workers for attempting to organize an independent union in violation of their freedom of association rights.

According to the USMCA Implementation Act, after receiving a petition such as this, the Interagency Labor Committee has 30 days to decide whether a petition contains sufficient, credible evidence of a Denial of Rights enabling the good-faith invocation of enforcement mechanisms. If it accepts the petition, USTR will request Mexico to conduct a review. Assuming Mexico agrees to conduct a review, Mexico will have 45 days to remediate.

Although folks are excited about the prospect of seeing the Rapid Response Mechanism put into action, it is unlikely that this petition will mature to a panel. The odds are that the Interagency Labor Committee will either not accept the petition or, if it does, that Mexico will agree to mutually-acceptable remedial action.

Far more interesting, in my opinion, is the activity that took place two days later under Art. 31-A.4(2) of the Rapid Response Mechanism. On May 12, 2021, responding to a tip on the hotline, USTR self-initiated a request that Mexico conduct a review of the General Motors de México facility in Silao, State of Guanajuato (“GM”). In its request, USTR noted its concerns that workers at the facility were denied their right to free association and collective bargaining. In support, USTR points to an April 2021 contract-ratification vote where workers were asked to reaffirm the bargaining authorities of a company-controlled union. The company had allegedly destroyed ballots and threatened workers to control their votes.

Here’s the rub. According to its request, USTR acknowledges the efforts of the Secretaría de Trabajo y Previsión Social (STPS), the Mexican federal department in charge of labor policies, in suspending the election and taking follow up action. In other words, Mexico had initiated its domestic processes to protect the voting conditions and to follow up with the employer. Despite that ongoing process, USTR instigated its own action under the Rapid Response Mechanism.

One potential interpretation of this parallel action is that USTR believes remedial action will be stronger under the Rapid Response Mechanism than it would be under Mexico’s domestic labor laws. As a worker rights advocate, I salute efforts to strengthen protections for workers and sanctions for disobedient employers.

Nevertheless, there are at least two issues here, one specific and one more general. Specifically, USTR is invoking the Rapid Response Mechanism process before Mexico’s domestic processes have been exhausted, leading to potential fragmentation. More generally, the disparate scope of the Rapid Response Mechanism makes it possible for facilities like GM to be held accountable when they are located across from Brownsville, Texas but shields those facilities when they are located in Brownsville, Texas. I explain those concerns below.

Early concerns with the Rapid Response Mechanism

The first issue raised by the May 12 request for review is that, based on its terms, the Rapid Response Mechanism requires respect for U.S. domestic processes (i.e., after an enforced order) but allows the U.S. to interfere with ongoing domestic processes in other countries. Double standards aside (welcome to trade negotiations), the implications could be significant and harmful if the conclusions of the domestic and international bodies differ.

The second issue is the disparate scope of the Rapid Response Mechanism, which imposes greater penalties on Mexican employers than on American employers. If Mexican labor laws fail to enforce international labor standards, Mexican employers face financial penalties under the Rapid Response Mechanism. If U.S. labor laws fail to enforce international labor standards (which they sometimes do), American employers and workers at their facilities will likely fall outside the application of the Rapid Response Mechanism.

Some might be tempted to argue that workers in the U.S. do not need a mechanism like the Rapid Response Mechanism because they are already protected by federal labor laws. Granted, the NLRA prohibits things like company-controlled unions and election interference. However, the NLRA lacks financial penalties for disobedient employers. USTR and Congress had the opportunity to supplement the NLRA’s weak enforcement scheme by exposing U.S. employers to possible financial penalties under the Rapid Response Mechanism. Instead, they limited the scope of the Mechanism’s application. Now, Mexican employers have a greater incentive to respect international labor rights than their American counterparts.

As an aside, it will be interesting to see whether this development impacts the frequency in which the NLRB brings cases to the Courts of Appeals (I could see arguments cutting both ways). I imagine it will deter employers from doing so.

Conclusion

The Biden Administration is advancing a worker-centric trade policy but it has inherited a trade agreement designed for other purposes. To strengthen protections for American workers, Congress will need to make difficult decisions and compromises that it has thus far been unwilling to make. Meanwhile, if Ambassador Tai is sincere in her pledge to give all workers a seat at the trade table, she must work with Congress to broaden the scope of application to provide the same protections for workers in the United States as in the other USMCA countries.

Desiree LeClercq is Director for Labor Affairs at the Office of the United States Trade Representative (USTR), an agency under the Executive Office of the President. In that capacity, she negotiates and monitors the effective implementation of the labor chapters in United States trade agreements, most notably in Asia.

To read the original commentary from World Trade Law, please visit here.