There's a new trade agreement in town. It looks to improve on NAFTA but hurdles remain

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For more than 25 years, the North American Free Trade Agreement, commonly known as NAFTA, had its share of critics on both the left and the right — sometimes for different and, at other times, for overlapping reasons.

But last week, NAFTA’s replacement went into effect. Called the U.S.-Mexico-Canada Agreement, or USMCA, it looks to build on the prior agreement and while points of contention remain, a retired Ivy League professor says the new pact’s labor chapter is better than the old one.

“I think it’s an improvement; just how significant remains to be seen,” said Lance Compa, a long-time lecturer at Cornell’s School of Industrial and Labor Relations. “But I’m optimistic that there are opportunities created by this new agreement that can generate progress and fairness for workers and unions in all three countries.”

And Compa may have a role in making sure the hoped-for improvements are enforced.

Last week, the Department Labor named him as one of six experts eligible to make up the U.S. version of rapid response teams that will be formed when disputes arise between the U.S. and Mexico. Establishing the teams was part of an “bilateral annex” to the USCMA signed by both countries allowing for quick action against factories in Mexico accused of quashing attempts by workers to form legitimate, rather than corrupt, unions.

“The rapid response panel goes in to verify whether or not there was such a violation and if there was, then that particular company would lose the tariff benefits of the trade agreement,” said Compa. “They would have tariffs slapped onto their products, services or whatever they’re doing cross-border until they remedy the violation. It’s sort of the hard edge, the teeth, in the enforcement system.”

There’s also a clause in the USMCA that says violence against workers involved in trade union activity will be considered a violation of the agreement. No such protection existed under NAFTA because violent acts were considered matters of criminal law, not labor law.

“So many instances of physical violence against workers in Mexico who tried to organize could not be subject to a complaint under the NAFTA labor agreement,” Compa said. “It can be the subject of a complaint under the new labor chapter of the USMCA.”

Though barely a week old, the USMCA may face a threat to its existence by way of a potential high court challenge in Mexico.

As a prerequisite to the USMCA, Mexico’s government adopted far-reaching reforms in labor laws. Large numbers of businesses in the country, however, have challenged the rules with lawsuits and the Mexican Supreme Court may take the case within a matter of weeks to determine whether the reforms stand up.

If the court rules against the labor reform package, “that would be a real crisis for the USMCA because it would almost throw the labor chapter of the agreement into chaos because it was presumed that Mexico would be implementing these reforms,” Compa said.

On July 1, the same day the USMCA went into effect, Mexican labor lawyer and activist Susana Prieto was released from jail. She still faces charges of inciting riots, something she and her defenders say are phony and have been used to discourage workers from using the USMCA to help organize.

Another of the agreement’s prominent details centers on the auto industry.

In order to receive tariff relief, the USMCA requires 40% to 45% of a vehicle’s contents be handled by workers making at least $16 an hour — a figure much higher than the $2.50 an hour it’s been estimated that assembly line workers in Mexico receive. The rules are still being finalized.

It remains to be seen if the requirement will lead to a return of more auto manufacturing jobs to the U.S., an increase in the average price of new cars or whether companies will find clever ways to skirt or reduce the rule’s financial impact.

“It’s important,” Compa said of the $16 per hour requirement, “but it’s not a magic bullet. They’re not going to suddenly close plants in Mexico and move them back to the United States. It would relieve some of the wage pressure … And it gets very complicated when you try to figure our the 40% content rule — how do you define content and where different things were produced. It’s tricky.”

The USMCA also includes chapters dealing with energy and its environmental chapter includes $300 million in infrastructure projects to combat sewage pollution in the Tijuana River Valley that seeps in to the San Diego area.

Trade among the U.S., Mexico and Canada in 2017 accounted for $1.1 trillion in merchandise and the financial impact is especially notable in San Diego, where $51 billion of goods are exchanged through the ports of entry in the San Diego-Tijuana region each year, according to the Smart Border Coalition.

“In North America, there’s a whole network of trade, investment and production chains that’s not going to go away, it’s not going to unravel,” said Compa, who is also an international labor consultant. “So the challenge is improve the conditions for workers who are part of this international trade system and that’s the goal of the USMCA labor chapter.”

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