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US irks Mexico with a labor detail in trade implementing bill

US oversight of Mexican factories is a sensitive issue

Jesus Seade, Mexico’s top trade negotiator, said he was surprised to find a provision in legislation to implement the USMCA that would post U.S. Labor Department officials in Mexico to ensure his country was complying with the agreement. (Saul Loeb/AFP via Getty Images file photo)
Jesus Seade, Mexico’s top trade negotiator, said he was surprised to find a provision in legislation to implement the USMCA that would post U.S. Labor Department officials in Mexico to ensure his country was complying with the agreement. (Saul Loeb/AFP via Getty Images file photo)

A seemingly small detail in the 239-page implementing legislation for a revised U.S.-Mexico-Canada trade agreement has stirred objections from Mexico as the House prepares to vote this week on the pact. The legislation proposes more than $2 billion in U.S. money to enforce the agreement and to deal with its consequences.

Jesus Seade, Mexico’s undersecretary of foreign affairs for North America, said over the weekend he was surprised to find that the bill calls for posting up to five Labor Department personnel to the U.S. Embassy in Mexico to oversee his country’s compliance with labor provisions. Seade said a separate packet of revisions to the proposed USMCA signed by the three countries on Dec. 10 doesn’t note that number.

The Mexican Senate approved the changes Thursday by a vote of 107-1.

The Office of the U.S. Trade Representative sent the bill and a 46-page Statement of Administrative Action to Congress on Friday.

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U.S. oversight of factories in Mexico is a politically sensitive issue for the government of Mexican President Andrés Manuel López Obrador because of his country’s long-standing concerns about its much larger and more powerful neighbor intruding on its sovereignty.

In tweets Sunday, Seade said he understands each country uses its version of implementing legislation to lay out regulatory, legal and budgetary changes that will be needed to meet the USMCA obligations. However, Seade said Mexico should have been warned about this detail since it “expresses distrust.”

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Seade said he returned to Washington on Sunday to talk with U.S. Trade Representative Robert Lighthizer.

It is unclear if Mexico’s concerns will affect the timing for House action. The Ways and Means Committee is scheduled to conduct a mock markup to review the implementing bill. The full House is expected to vote on the bill by Thursday. If passed, Senate Majority Leader Mitch McConnell, R-Ky., has said his chamber won’t take up the bill until after the Senate finishes the anticipated impeachment trial of President Donald Trump.

A working group appointed by Speaker Nancy Pelosi, D-Calif., spent several months negotiating for changes to the USMCA, with final bargaining done by Pelosi and Ways and Means Chairman Richard E. Neal, D-Mass., with Lighthizer. The changes have won the endorsement of several labor unions, including the influential AFL-CIO. The labor groups say U.S. companies will find it more expensive and less beneficial to shift auto manufacturing jobs to Mexico because of new requirements.

Under the USMCA, autos and vehicle parts manufactured in one or all three countries must have at least 75 percent of their materials be from North America. And more than 40 percent of cars, trucks and parts must come from plants where line workers are paid at least $16 an hour.

Steel provisions

Mexico has agreed that seven years after the USMCA takes effect, it will meet a requirement that a greater percentage of its steel is melted and poured in Mexico and not sourced from China or other countries. Labor groups say the provision would keep cheaper imported steel slabs out of North America and protect higher-paying steel jobs in the U.S.

The legislation outlines a network of interagency groups to monitor the workings of the trade pact, a renegotiated and updated version of the North American Free Trade Agreement. The USMCA will replace that agreement if approved by the national legislatures of the three countries. The bill lays out several funding requests for steps the administration says are necessary to ensure strong enforcement of labor and environmental standards.

The funding requests include:

  • $20 million across fiscal 2020-23 to post one person each from the U.S. Fish and Wildlife Service, the EPA and the National Atmospheric and Oceanic Administration to the U.S. embassy in Mexico as part of U.S. oversight of compliance by companies in Mexico with environmental rules in the trade agreement.
  • $2 million per year after fiscal 2020 for a new office to oversee an interagency effort to rapidly respond to claims of labor violations.
  • $1.5 billion from the Treasury Department to the North American Development Bank, a financial institution based in San Antonio, Texas, that is funded and run by the U.S. and Mexico to finance environmental infrastructure projects certified by the Border Environment Cooperation Commission. U.S. representatives to the bank would urge funding for wastewater treatment, water conservation, municipal solid waste, stormwater drainage and related projects.
  • $16 million for the Commerce Department through fiscal 2023 to work with the Mexican government in fighting illegal, unregulated and unreported fishing and dealing with marine debris.
  • $50 million for the U.S. Trade Representative’s Office through 2023, with $30 million to pay for additional personnel to monitor labor violations. Funding also would be used to cover the expenses of personnel participating in the Interagency Environment Committee for Monitoring and Enforcement.
  • $40 million for a Trade Enforcement Trust Fund to fund government-to-government dispute settlement actions through fiscal 2023.
  • $300 million in assistance grants for qualifying state and tribal governments to design, plan and build high-priority wastewater plants along the U.S.-Mexico border.
  • $210 million for the Bureau of International Labor Affairs, with $180 million to remain available through 2023. The implementing bill says the bureau would be responsible for grants or other types of funding for projects that support changes in the labor justice system in Mexico, such as efforts to reduce workplace discrimination, child labor, forced labor, human trafficking and child exploitation.
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