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It’s time to learn if the new Nafta’s worker protections have any teeth

Quartz | 2 June 2021

It’s time to learn if the new Nafta’s worker protections have any teeth

By Tim Fernholz

Susana Prieto Terrazas is not a woman to trifle with. In recent years, the attorney became the most well-known labor organizer in Mexico, a burr in the saddle of factory owners, the local governments they’ve coopted, and many of Mexico’s unions.

Yes, the unions. In Mexico, most worker organizations that make contracts with employers are seen as “protection” unions : Rather than representing workers through a democratic process, these unions are typically in cahoots with employers and work to keep wages down. “Buying your union leader is a time honored practice in Mexico,” says Ben Davis, who has worked closely with Mexican labor groups as the head of international affairs for the US Steelworkers. Such organizations are illegal in the US and many developed economies, but they are a fixture of the maquiladora system—the export-focused factories of northern Mexico, often foreign-owned, that are central to the trade relationship between the US and Mexico.

Prieto Terrazas’ biggest victory came in 2019. She helped workers in Matamoros, across the border from Brownsville, Texas, win major wage increases, in the process launching an independent union, known by the acronym Snitis.

But she paid a price : As the pandemic increased concerns about worker treatment, Prieto Terrazas was thrown in jail in June 2020 on trumped-up charges of inciting violence at a demonstration. She was released upon agreeing to exile from the state, but still faces charges. Her day in court has been delayed by the pandemic as well, leaving her in limbo. She told one Mexican news outlet that she lives in fear that someone will put “a fucking bullet in her head.” (The governor whose administration put her in jail is now the target of a corruption investigation.)

Prieto Terrazas may not be allowed back in Tamaulipas, but she has not been silenced on Facebook. She agitates, educates and jokes with 143,000 followers. In her videos, she explains how workers can calculate their wages or seek safer working conditions, rails against the “mafia” controlling the maquiladoras, and, lately, promotes her campaign to become a federal deputy, which would give her legal immunity to return to the states from which she is currently barred. As they say in Mexico, she doesn’t have hair on her tongue.

Now, Prieto Terrazas’ fight for workplace democracy is at the center of a new case that will test the US-Mexico-Canada Agreement (Usmca), a renegotiated and revised North American Free Trade Agreement (Nafta) that came into force in 2020.

The deal forced Mexico to adopt a new labor laws, and also created the Rapid Response Labor Mechanism, which aims to impose quick punishments directly on multinational companies that violate labor rules. US unions, which believe better treatment of workers abroad will mean less outsourcing from the US, call it a sea change in how corporations are held accountable under trade deals.

In May, US labor unions joined with Snitis to make the first petition to use that new mechanism, alleging that a US-owned factory in Matamoros refused to recognize the independent union and fired more than 600 workers who supported it. Days later, US trade representative Katherine Tai filed a separate challenge against a General Motors plant where a protection union was caught destroying ballots in a union election.

But for these challenges to create meaningful change for workers, the Biden administration, and its top trade negotiator, Tai, will have to see them through.

Welcome to Mexico’s maquiladora country

At the US-Mexico border, more than 2.3 million trucks rumble back and forth between Laredo, Texas, and Nuevo Laredo, Tamaulipas each year ; more than 4,000 trains go back and forth between the two communities annually as well. And this is just one port. Components might cross over from the US, be assembled into intermediate parts in Mexico, and then returned for finishing or distribution in American facilities. The North American Free Trade Agreement, struck in 1994, governed and encouraged the entanglement of cross-border supply chains. Mexico is the second largest US trading partner, behind China, with goods from the maquila sector making up more than half of Mexico’s exports.

What Nafta did not do is improve the lot of most Mexican workers. Like many agreements that reduce tariffs and other obstacles to trade, Nafta was intended to boost the rights of workers in Mexico. Multinationals seeking cheaper labor in Mexico can do so, and factory owners looking for foreign investment can do that, too. But trade advocates sought to reassure their citizens that the deal was not intended to exploit disparities but instead resolve them, because that foreign investment could benefit regular people and allow Mexican living standards to catch up to the US.

For a variety of reasons, this has not happened. Mexican wages have grown slowly in ensuing years, and the gap between comparably skilled American and Mexican workers has widened.

“Most unionized workers are not yet able to democratically elect their leaders or ratify their collective bargaining agreements,” a panel of labor experts appointed by Congress wrote in 2020. “Covid-19 has caused thousands of deaths and millions of job losses. Workers who attempt to challenge these conditions by demanding union democracy, higher wages, or even protective equipment have been fired, jailed and—in too many cases—murdered.”

This is a human tragedy, and also a problem for globalization : If trade liberalization does not share its benefits widely, it will become politically untenable—a situation seen in the US under the presidency of Donald Trump, which blamed free trade for many American ills and imposed tariffs that hurt the US economy and its standing in the world. Trump reached a deal to reform Nafta, one that notably gained the backing of US labor unions for the first time. Desperate for a trade accomplishment in the face of his failure to squeeze concessions out of China and sympathetic with complaints about jobs going overseas, Trump gave in to Democratic speaker of the House Nancy Pelosi’s demands for the trade agreement. After the deal came into effect in 2020—the same day Prieto Terrazas was released from jail—it was hailed as a major victory for workers.

Trade agreements typically include nebulous promises that states will act to improve the situation of workers, and meet international labor standards. But there is little effort to ensure governments follow through on these promises. Enforcement is slow-moving—Cathy Feingold, the director of international affairs at the AFL-CIO, the largest US labor federation, recalls one attempt to challenge unfair labor practices in Guatemala under the Central American Free Trade Agreement (Cafta) that dragged on for nine years. “This brings no justice to anybody,” she says.

With new leverage in Trump’s renegotiation, labor advocates demanded faster ways to push trading partners to protect the rights of workers. Tai, then an attorney working for the House Ways and Means committee, which dominates trade policymaking, helped amend the trade agreement to create the new tools to support Mexican workers.

“The top priority for Usmca is to use those tools,” Tai told senators during her confirmation hearing in February. “The key to using the Usmca and making it successful is to exercise the tools that were so hard-fought in being incorporated into the agreement.”

How the Usmca Rapid Response Mechanism works

The Usmca’s approach to labor rights is to focus on who’s actually in charge. Traditionally, bilateral agreements have put the onus of redressing worker complaints on the governments that can lack resources compared to the multinational companies that they are trying to regulate. What’s novel about the Usmca is that its labor enforcement tool kit directly targets private firms that are implicated in labor abuses.

It works like this : If labor violations are alleged at a specific factory, either by outside petitioners or the US government itself, a US interagency labor rights group reviews what’s going on there. That starts a ticking clock and something of a bureaucratic ping-pong game. Mexican officials can review the alleged violations and offer a plan to remedy them, but if they ignore the allegations, disagree about how to fix them, or take more than 45 days in doing so, an independent panel made up of nominees from both countries is created to make a final, written report on what’s going on and what must be done.

These mechanisms are designed to find a resolution within a relatively speedy 125 days. The real secret sauce is in the penalties that can be imposed if the allegations are ignored : The US Customs and Border Patrol can stop the import of goods, raise tariffs, or impose other penalties, all targeted at the specific company violating workers rights. Backers of the new mechanism say that aiming the punishment squarely at the corporate interests involved is both a novel development in US trade law, and more likely to create real change for workers.

In the waning days of the Trump presidency, US trade representative Robert Lighthizer sought to find a test case for the new mechanism, but was unable to bring one. Part of the delay is the reality of the pandemic : An investigation requires accessing documents at Mexican labor agencies that are often closed due to coronavirus fears. Gathering sworn testimony from workers about labor rights violations, never easy, is more difficult at a time when even crossing the border can be a challenge. Backers of the mechanism also feel pressured to deliver a successful first case, which means that the evidence must be unusually ironclad.

“By their nature, labor issues are pretty fact-intensive and evidence heavy,” a US trade official told Quartz. “When you are trying to figure out what is going on, that is going to be a challenge. We are not stopping because that challenge exists.”

At the same time, the politics of deploying the new tools aren’t simple. For one, it could entail punishing an American company and its US workforce. Making a public stink about the conditions facing Mexican workers could worsen relations with president Andrés Manuel López Obrador (popularly known as AMLO), whose government responded to the RRM petition with a challenge highlighting the poor conditions faced by Mexican migrant workers in the US.

Beyond trade, the US government needs AMLO’s cooperation to address migrants seeking to enter the US across its southern border, and is worried that he is backsliding on his promises to allow international energy companies to compete in Mexico, among a dozen other issues that may be seen as more important than the conditions faced by Mexican factory workers. US officials could blunt the rapid response mechanism by agreeing to a toothless or slow-walked remediation plan. At the same time, observers of Mexican politics believe that AMLO will want to make at least a symbolic push on behalf of workers to boost his party ahead of federal legislative elections in June.

The fight at the Tridonex plant in Matamoros

The first rapid response challenge is centered on 3,800 workers employed by Tridonex, the subsidiary of an American company called Cardone. Cardone was founded in 1934 to manufacture and refurbish auto parts ; in 2005, it opened its first subsidiary plant in Mexico. In 2016, it moved its brake division to Mexico, laying off or furloughing nearly 2,000 American workers in the following three years. In 2019, the family-owned business was purchased by the Canadian private equity firm Brookfield, which emphasizes its commitment to “environmental, social, and governance” (ESG) practices. Its website notes that its portfolio companies should “meet or exceed all applicable labor laws and standards in jurisdictions where we operate.”

The current story began in 2018, when AMLO was elected the president of Mexico at the head of a coalition of left-wing parties. One of his first actions was to raise the minimum wage in Mexico by 20%, to 123.22 pesos daily. That’s about $6 a day, compared to a federal minimum wage in the US of $7.50 an hour.

Workers in maquiladoras make more than minimum wage, but the change in national policy still had major ramifications thanks to another larger-than-life union leader, Agapito González Cavazos. Born in 1916, he became the top union official in Matamoros, the city where Tridonex is based, in 1936. He was still in charge in 1990—a time period that spanned from the Mexican Revolution through the long single-party rule of the Institutional Revolution Party. While “Don Agapito” was not exactly a democratic leader, he was known as a critic of US-owned factories and for using the leverage of the 60,000 workers he led to win wage increases and better contracts.

Among the provisions tucked into his contracts was an escalator clause : If Mexico raised its minimum wage, union workers would get a proportional increase. Today’s workers weren’t aware of this clause—“historically, the workers don’t even get a copy of the contract,” Davis says. Prieto Terrazas had a copy of the contract, though. And she told the workers that they were entitled to a 20% raise of their own. Soon, strikes began—and spread beyond the specific factories with the escalator clauses to include most of the 50,000 workers in Matamoros.

Ultimately, the factories caved and raised wages. But local officials retaliated against Prieto Terrazas, driving her from the state. And Tridonex retaliated against workers who organized with the independent union, Snitis, as an alternative to the official “protection” union that collects 4% of their salaries as dues. According to labor organizers, more than 600 workers have been fired for demanding a change in representation. Faustino Efrén Ruiz Hernández told the Tampico Sun newspaper he had been dismissed without cause after working with Snitis, and said he felt that workers like him were being blacklisted because they were unable to obtain work at other factories.

“There is no union freedom,” Prieto Terrazas said recently. “Even if the law states it, it’s not abided by. And the government has not implemented tough enough mechanisms so that all the country’s workers can have that safety, of belonging to a union that is independent and represents workers.”

On May 10, the AFL-CIO, Snitis, and Public Citizen, a US NGO, filed the first petition to use the Rapid Response Mechanism to investigate labor conditions at the Tridonex plant. If investigators can prove that nothing is being done to enforce true workplace democracy there, the US could block its products from crossing over into the US, striking directly at Cardone’s business model.

“We thank Public Citizen in the US, and the AFL-CIO,” Prieto Terrazas said in a Facebook live video for her supporters about the challenge. US labor groups have long backed Mexican worker advocates out of solidarity, and a pragmatic belief that higher wages for workers across the border will shrink the incentive for American businesses to send jobs abroad. “Thanks to all for fighting, for listening to our complaints, the hundreds of interviews that have been done with Tridonex workers. We’re also going after the companies and the corrupt business leaders from Matamoros who thought that by denying me my freedom through their governor they were going to finish me off. Of course not. We’re continuing the fight.”

“We are committed to leading labor practices, fostering constructive relationships with employees, and respecting the universal principle of freedom of association and the right to collective bargaining,” Cardone said in a statement shared by its spokesperson. “We do not believe that the allegations in the complaint are accurate and welcome a full inquiry so that the facts can be disclosed. We fully support our Tridonex workers being represented by a union and are committed to compliance with all applicable labor laws and regulations.”

Brookfield did not respond to a request for comment about the labor violations at the company’s factory. For now, the Tridonex challenge is in a 30-day period, ending June 9th, after which US officials must make an initial determination that labor rules have been broken.

A strategy of delay for Usmca’s labor provisions

The rapid response mechanism is likely to drive labor enforcement under the new agreement. To comply with Usmca, Mexico’s government passed a law in 2019 to create new protections for worker democracy, and the bureaucracy to deliver them. To speed this process, the US has authorized $180 million over the next three years to give as grants to organizations working to publicize the new law and train workers, managers, and labor inspectors in how to follow it.

Yazmín Martínez Mezquita, a senior associate at the Mexican law firm Dorantes Advisors, whose clients include foreign companies that do business in Mexico, says companies there are working to prepare for new requirements, but reviews and inspections are taxing both the private sector and government officials. “This is kind of weird for Mexican companies,” she told Quartz, “They will change if they are dedicated to exportation. We try let them know that the decision of this kind of mechanism will impact directly to the company, not to the state.”

Researchers at Public Citizen’s Global Trade Watch have analyzed Mexico’s plan (pdf) for implementing its new labor laws, and argue that the government is delaying reforms in the states where they are needed most. A three-phase approach designed by the Mexican government has prioritized enforcing the laws first in states without significant labor strife or manufacturing employment. Meanwhile, border states where maquiladora workers are demanding workplace democracy, like Tamaulipas, Chihuahua, and Nuevo León, will not adopt the new statute until 2022.

The Usmca’s labor provisions went fully into effect in 2020, but if Mexican labor agents don’t enforce them for another two years, it creates an opening for RRM actions to be the primary way the deal’s labor protections are enforced in the places where they will matter most.

Tai began her tenure as the US Trade Representative after being confirmed by a Senate vote of 96-0, a rare sign of national consensus around an issue as divisive as trade. It reflects the changes in how both parties think about international commerce after Trump made it a wedge issue in 2016, capitalizing on years of pent up concern about the impact of globalization. Lighthizer, Trump’s trade negotiator, was perhaps the first person to fill that position as a critic of unfettered trade. Tai, too, may fit that description. Asked by a senator if the ideal relationship between two developed economies is totally free trade, she demurred.

“My dilemma is that maybe if you’d asked me this question five or 10 years ago, I would have been inclined to say yes,” Tai said. “But sitting here before you today in 2021, having gone through four years of Trump administration trade policies, the previous years of efforts to negotiate the TPP, and last year of living in a pandemic world, I think that our trade policies need to be nuanced and need to take into account all of the lessons that we have learned.”

For US labor activists, one of those lessons is that the stricter labor enforcement must be part of any new trade deal. “This is going to create the floor for the Biden administration,” Feingold, the AFL-CIO’s international affairs director, says. ”There is a whole new conversation happening in the trade world that is based on the rapid response model.”

For that model to succeed, it has to be shown to work—and that is why this challenge is so important, Prieto Terrazas says, “to know if this treaty is functioning or not. Is there freedom and democracy for the ability to organize in Mexico ?”

 source: Quartz