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Analysis

Labor Complaints Under USMCA

By Alejandro Enríquez | Fri, 10/01/2021 - 11:27

USMCA did not only introduce challenges in terms of tougher rules of origin for automotive goods, it also resulted in cohesive labor standards validated by Mexican reforms. Part of the process includes the new USMCA Rapid Response Labor Mechanism, which changes how employment issues are viewed and addressed in Mexico.

“The changes in the new treaty focus on a concept that for most companies in Mexico is difficult. However, for those that have already experienced a trade union environment, it is easier: the democratization of labor relations,” says Luis Monsalvo. "We have handled these changes gradually. During the pandemic, we have reacted in different ways and we are not the only ones who have faced this. Unions have helped us to think of ourselves as a team," adds Marcela Barreiro, CEO and President at Daimler Mexico, a company with around 8,000 employees across the country.

Not even a full year after the UMSCA came into effect, the mechanism was already being tested. The treaty outlines standards related to union rights, and the resulting compliance prompted the first labor complaints between the US and Mexico.

In May 2021, US Trade Representative (USTR) Katherine Tai formally asked Mexico to review whether workers at a GM facility in Silao, Guanajuato, were being denied their labor rights, particularly those related to freedom of association and collective bargaining.

USTR’s petition became the first USMCA labor complaint to be solved under the rapid-response mechanism. The claim came after Mexican authorities ordered the General Motors union in Silao to repeat a worker vote. The request from Mexico’s authorities came after US lawmakers pressured their counterparts south of the border, Reuters reported. Later, Mexico’s Ministry of Labor found "serious irregularities" during the voting that did not comply with Mexican labor law.

“Using USMCA to help protect freedom of association and collective bargaining rights in Mexico helps workers both at home and in Mexico, by stopping a race to the bottom. It also supports Mexico’s efforts to implement its recent labor law reforms. I commend the Mexican government for stepping in to suspend the vote when it became aware of voting irregularities. Today’s action will complement Mexico’s efforts to ensure that these workers can fully exercise their collective bargaining rights," said Tai during the announcement.

The day after the USTR made its announcement, Mexican President Andrés Manuel López Obrador welcomed the claim during his morning press briefing. “We have already responded to the complaint from the US because, in effect, a recount (of the vote) was carried out at the plant to resolve the ownership of the contract and there were many irregularities in the election.” López Obrador also said that the US “is right” regarding this matter and added that “we have to restore the election process and accept the recommendation of the US.”

The formal complaint delivered by the US outlines the irregularities during a workers' vote on April 5, 2021, highlighting the fact that "it appears that events in question involved violations of Mexican laws." The US government requested Mexico’s authorities review the case. "If Mexico were to determine that there is a Denial of Rights to workers at the General Motors de México facility in Silao, Guanajuato, the US further requests, pursuant to USMCA Article 31-A.4.2, that Mexico attempt to remediate within 45 days of this request," reads the document.

US unions later presented to the USTR another complaint addressing an alleged denial of free association rights, this time of workers at Tridonex’s facilities in Matomoros, Tamaulipas. In this case, the American Federation of Labor and Congress of Industrial Organizations, the Service Employees International Union (SEIU), the National Industry and Service Workers’ Independent Union Chapter 20/32 (SNITIS) and Public Citizen filed the complaint under the USMCA mechanism.

"The case will test whether Mexico’s labor reforms and USMCA’s Rapid Response Mechanism can work for Mexican workers who have been denied their fundamental right to organize and bargain for better wages and working conditions," said the organizations in a joint statement.

The action taken does not come out of the blue. Tridonex has been called out on human rights issues by the Business & Human Rights Resource Centre following "massive layoffs" of workers with more than 10 years in the company. On top of that, workers at Tridonex, and many more in the Matamoros area, according to Reuters, aimed to leave their current union SITPME and join SNITIS with no success, which goes against recent Mexican labor reforms and USMCA guidelines that protect workers’ free union rights.

Tridonex – with three plants in Matamoros – is a subsidiary of Philadelphia-based Cardone Industries. Union leaders also argued that Tridonex' actions have cost "hundreds of good manufacturing jobs in the US and now the company is doing the same to workers in Matamoros," said SEIU International President Mary Kay Henry.

The Facility-Specific Rapid Response Labor Mechanism Between the US and Mexico, as it is officially named, aims to solve labor disputes brought by any of the member parties regarding labor rights at specific facilities. The mechanism was introduced in an amendment protocol in 2020 brought by the Democrats in the US Congress.

Luis Monsalvo, who was appointed as one of the panelists of the mechanism, says that the challenge of the labor reform for companies was "to move on to effective and true union representation." "The law says that in a four-year-period, the collective relations between companies and unions should be legitimized through an election within the union. To agree a collective bargaining agreement, a majority of the union members must support it. The reform also establishes that in order to request the execution of a collective bargaining agreement, the union will previously need to gather the support of at least 30 percent of the union workers, which is similar to the US labor system."

The rapid response labor mechanism ensures disputes can be settled in a matter of up to five months, unlike most general dispute settlement processes that can take more than a year. According to Monsalvo, the mechanism was specifically designed to address freedom of unionization and freedom of collective negotiation. "The mechanism is designed to address breaches at specific facilities. I genuinely believe that this scheme intends to ensure companies respect workers’ rights since this will ultimately benefit the people and the region," he says.

On Sept. 24, the US announced the conclusion of the labor complaint at the General Motors facility in Silao. "The action taken by the US and Mexico reflects our growing commitment to make trade work for workers.  We will continue to collaborate closely with Mexico to strengthen the legitimization vote process and ensure workers in Mexico can access their rights to freedom of association and collective bargaining," noted the USTR.

As for the Tridonex case, labor organizations expect the outcome will set a precedent for labor complaints under the new standards set for manufacturing facilities under the new Mexican labor law and the era of USMCA labor standards. The sanctions to which Tridonex may be subject to are included in Annex 31-A, Art. 10 of USMCA. These “may include suspension of preferential tariff treatment for goods manufactured at the Covered Facility or the imposition of penalties on goods manufactured at or services provided by the Covered Facility.” Although the word “penalties” is not defined clearly, the labor panel will be instrumental in solving the dispute.

The data used in this article was sourced from:  
USTR, Centro de Información de Empresas y Derechos Humanos, Reuters
Photo by:   Paul Einerhand, Unsplash
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst