NAFTA Runs into Labor − Again

On the last day of negotiations between the three teams from Mexico, Canada and the United States, it happened that the last of the three arrived with a proposal that turned what was discussed during the third round of negotiations in Ottawa on its head.

It was, once again, the issue of labor. And now, U.S. Trade Representative Robert Lighthizer, submitted a draft on jobs.

The U.S. Revives the Trans-Pacific Partnership When It Rejected It

The issue of labor emerged in the second round of negotiations in Mexico. The autoworker unions of Canada slipped it in.

And the accusation was the same: Low salaries in Mexico and the pliancy of its labor laws could help companies set up in our country obtain extraordinarily high earnings in contrast to the labor costs of Canada and the U.S. (See the information Reuters is reporting from Ottawa.)

Yet the Canadian proposal is not the same as the one the United States has just submitted. The U.S. is accustomed to implicitly including in its labor proposals the issue of milk and curtailing the amount that Canada exports to the U.S.

Automobiles: For Canada, the Issue Is Labor; For the U.S., It Is the Regional Provisions

The fact is that Canada accuses the U.S. of seeking the advantages of the TPP, the Trans-Pacific Treaty that Donald Trump has already rejected, by bringing what in TPP is in its own interest to the negotiations over NAFTA. Canada has instead said that the problem of the automobile manufacturing sector has to do with labor: low salaries and few rights for workers in Mexico. The United States has said that the problem in the automobile manufacturing sector could be related to labor, but, above all, has to do with rules of origin.

The U.S. Insisted on a ‘National’ Rule on Automobile Manufacturing

And here is where there is another chapter not yet resolved, the one regarding rules of origin. In the portions that have to do with regional content value requirements, the automobile manufacturing sector already has a rule with a high threshold which requires that at least 62.5 percent of a vehicle be made of parts manufactured in the three countries. Now the United States wants not only regional content value requirements but also national ones, meaning a guarantee that the vehicles will have United States-made parts.

In Mexico, the secretary of commerce, Ildefonso Guajardo, and Eduardo Soils, president of the Mexican Association of the Automobile Industry, have said that to look for greater regional or even national content will increase prices for automobile production and will take them out of the market.

Mexico is the country that has gained the most from NAFTA in the automobile manufacturing sector. In Mexico, the great automobile factories have largely settled in, and from here the exports to other countries are strong, including to the United States.

In sum, today the negotiating chiefs of the three countries, Lighthizer (U.S.), Guajardo (Mexico) and Chrystia Freeland (Canada) will give a press conference. Progress is expected, but on these two points, labor and regional content value requirements, there is friction.