Mario Armas/AP Photo
A worker at the General Motors assembly plant in Silao, Mexico, February 2008
Last week, something revolutionary happened in the history of U.S. trade policy. The government used trade law to help labor, not to help capital.
Government switching sides gives a whole new political meaning to globalization. Global trade, with the right politics and policies, doesn’t have to produce a race to the bottom. It can even start a race to the top. Who knew?
The specific case involved an auto parts company called Tridonex, located in the border town of Matamoros, Mexico. Tridonex is owned by a Philadelphia outfit called Cardone Industries—which in turn is owned by a Canadian hedge fund! Tridonex makes things like reconditioned used brakes. It sends most of its products to the U.S., and is a classic case of offshoring jobs to Mexico, as enabled by NAFTA.
But in 2019, the Democrats in Congress and Trump trade chief Robert Lighthizer rewrote NAFTA. The successor agreement, called USMCA, includes tough, enforceable labor rights provisions, guaranteeing workers in the U.S., Mexico, and Canada the right to organize and join unions free from harassment.
Under an ingenious Rapid Response mechanism, the brainchild of Sen. Sherrod Brown (D-OH), if worker rights at a plant in Mexico are denied, the U.S. can slap tariffs on the factory’s exports and U.S. Customs can block them from entering the U.S. entirely.
Here’s how Rapid Response was used in the Tridonex case. Mexico’s laws guarantee workers the right to join unions, but that right is effectively denied through the use of corrupt company unions known as “protection unions.” If a company has a protection union, that nominally satisfies Mexican law, and workers are out of luck—until USMCA changed the game.
At Tridonex, workers had been trying for two years to affiliate with one of Mexico’s genuine unions, the Sindicato Nacional Independiente de Trabajadores de Industrias y de Servicios (SNITIS), roughly the counterpart of SEIU. More than 600 workers were fired. The company used the excuse of a COVID downsizing to get rid of workers thought to favor the independent union.
The U.S.-Mexico-Canada trade agreement includes tough, enforceable labor rights provisions.
In May, the AFL-CIO, SEIU, and Public Citizen filed a complaint under the USMCA’s Rapid Response provision. The U.S. trade representative confirmed the validity of the complaint, threatened retaliation, and in less than three months they and the company devised a settlement.
Under the agreement, 154 workers will get a total of $600,000 in back pay (about $4,000 each), and the Mexican government commits to supervising an honest election. This was a less-than-ideal case, since the COVID layoffs made it hard to demand reinstatement of the terminated workers. Back pay was a lesser remedy. Susana Prieto, the renowned Mexican labor lawyer who has been jailed for representing independent unions and workers, called the settlement only a first step.
These settlements are also tricky because Mexican state governments along the U.S. border tend to be in bed with the corrupt fake unions. The Mexican national government, led by progressive president Andrés Manuel López Obrador, is responsible for Mexico living up to its USMCA commitments, but in practice it shares jurisdiction with the states.
In another, more clear-cut case, the Biden administration did not wait for a union complaint, but initiated action directly. (Previously, complaints that alleged violations of worker rights had typically been filed by unions.) That case, also filed in May, involved a General Motors factory in the town of Silao that makes light trucks for export to the U.S.
In the GM case, in which workers had managed to get an election to vote on whether to affiliate with a real union, the incumbent fake union was caught literally stuffing ballot boxes. In that case, where USTR investigators had a stronger hand, the remedy agreed to by GM and the Mexican government is a do-over election with international monitors from the International Labour Organization.
The new election must be held by August 20. GM must be scrupulously neutral. If the election is not deemed fair, the Silao GM plant faces tariffs or customs denial of entry of its trucks.
Connoisseurs of trade policy may recognize the Rapid Response mechanism as the old investor-state provision turned on its head. Under investor-state, which was part of NAFTA but explicitly removed from USMCA, investors or corporations could sue in special NAFTA courts if they contended that domestic regulations violated their trade rights. That was always a preposterous contention, and good riddance. But outsourcing to Mexico has truly been used to undercut worker rights—and now it is workers who have real remedies.
This 180-degree shift shows what might have been done—but wasn’t done—over the past several decades, a period when presidents of both parties used trade deals to undercut the regulation of capital and the protection of workers at home. And here again, personnel is policy.
For those of us who care about the use of trade law and policy to advance rather than retard worker rights, the government is at last in friendly hands.
USTR works closely with the Labor Department, which in turn is in close contact with American and Mexican unions to identify abuses. The Labor Department’s top liaison with USTR is the deputy undersecretary for international affairs, Thea Lee.
Prospect readers may recognize the name. Thea Lee was president of the Economic Policy Institute, and for 20 years before that was a senior staffer at the AFL-CIO.
Over at USTR, the head of that agency, Katherine Tai, is an enthusiastic backer of the Rapid Response program, as is Labor Secretary Marty Walsh. Tai’s own chief of staff is Nora Todd. Previously, as Sherrod Brown’s chief economic and trade policy adviser, it was Todd who worked out the details of the Rapid Response mechanism. And the assistant USTR for labor is Josh Kagan, who previously had senior jobs at the Labor Department’s Office of Trade and Labor Affairs.
Does it get any better? For those of us who care about the use of trade law and policy to advance rather than retard worker rights, the government is at last in friendly hands. Some of these international labor rights could even spill over domestically, where worker rights to choose unions are honored in the breach.
Note to my grumpy lefty friends: This kind of thing is why some of us are genuinely enthusiastic about the Biden administration, not because we are captured pushovers. The U.S. Chamber of Commerce has been following all this very closely, and is mightily upset, having long been accustomed to USTR as a lapdog.
Granted, two cases do not a revolution make. The details of the Tridonex settlement were inadequate. But the battleship of U.S. trade policy has been turned in a different direction, and there will be many more cases. The government is at last playing trade hardball on the right side.
At a June 4 roundtable on trade sponsored by Sherrod Brown, U.S. Trade Rep Tai, referring to the GM case, said: “This was the first time that the new rapid response tool in the USMCA was used. And it was also the first time in history that the United States proactively enforced the labor provision of a free trade agreement. Strong labor enforcement is good for Mexican workers. But it’s also good for American workers because it helps to stop the race to the bottom.”
Actually, it’s not quite the first time, but previous efforts were few and far between. In the late 1990s, the U.S. came up with a labor provision in a trade deal to help unions gain a foothold in Cambodia. In those years, exports of textiles and apparel were allocated to developing countries under something called the Multifiber Arrangement (MFA).
Under the U.S.-Cambodia trade agreement, Cambodia would get an increase in its quota of exports to the U.S. if it verifiably was complying with a commitment to allow unions to organize, as monitored by the ILO. This worked well—until the MFA itself was scrapped as part of the creation of the World Trade Organization. It was an instructive contrast with most labor “side agreements” in other trade deals, including NAFTA, which were largely unenforced window dressing.
But look back at that quote from Katherine Tai. Can you imagine any of her Democratic predecessors as U.S. trade rep saying anything remotely like that? Obama’s trade chief, Mike Froman, was a pure Wall Street guy. Labor in that era did relentless battle with USTR. Today, USTR is an ally.
Going back even further, it’s worth recalling that the original conception of an International Trade Organization, envisioned at the Bretton Woods conference of 1944, when progressives ran the U.S. government, proposed linking trade rights to labor rights. An ITO charter was actually negotiated and drafted in 1948 but never ratified by the U.S.
So there is more than one brand of globalization. It just takes government being in friendly hands.
