USMCA Rapid Response Mechanism Makes its Debut

History

In 2019, Mexico passed a labor reform bill intended to meet the requirements of the labor provisions agreed to in the United States-Mexico-Canada Agreement, which came into force July 1, 2020. By passing the bill and ratifying the USMCA, Mexico agreed to implement and enforce workers’ rights, including freedom of association and the right to collective bargaining.

Before the USMCA was passed, unions in Mexico could be recognized without employee approval and were often established before employees were hired. These “protection unions” were criticized for bargaining for the bare minimum benefits on behalf of the facility’s workers and protecting the interest of the facility and political party in power rather than the workers. Attempts to dismantle protection unions have been met with swift retaliation and even the imprisonment of a prominent labor lawyer, Susana Prieto. Under Mexico’s new labor law, unions must garner at least 30% approval to be formally recognized. The USMCA goes further in requiring that Mexico’s legislation includes secret ballot elections. (It’s a bit ironic that in the union-backed PRO Act, organized labor seeks to undermine secret ballot elections in the U.S.) Mexico set a four-year deadline from 2019 to implement the labor reforms. Specifically, Mexico has three years to transfer all Collective Bargaining Agreements to the Federal Center of Conciliation and Labor Registry (Federal Center) and four years for the Federal Center to begin conciliation operations (SHRM). The Federal Center is responsible for union registration. Despite this grace period, the nation is facing complaints for alleged violations that occurred, in part, before the USMCA entered into force.

Under the USMCA, new labor complaints can now be filed by one nation against another and adjudicated using the Rapid Response Labor Mechanism (RRLM). The complainant party must believe, on a good faith basis, that workers in a Covered Facility have been denied the right of free association and collective bargaining. The RRLM, in theory, allows the two nations to solve the complaint by either a mutually agreed to remediation or a remediation assigned by a jointly appointed panel. Currently, this agreement exists between the United States and Mexico and Mexico and Canada, but not between the U.S. and Canada.

The first two complaints using the RRLM were filed May of this year. The AFL-CIO filed a complaint against Tridonex on May 10 and the United States Trade Representative filed a complaint against GM on May 12.

Covered Facility

A Covered Facility is a priority sector facility in the party’s territory that produces a good or supplies a service that is either traded between both parties or competes in the territory of the other party. Every Mexican facility that is a priority sector facility is subject to complaints and the RRLM. On the other hand, the USMCA provides that only U.S. priority sector facilities that are “under an enforced order of the by the National Labor Relations Board” (NLRB) are subject to complaints. The limited number of vulnerable U.S. facilities makes filing a complaint against a facility in Mexico far more likely than filing a complaint against a facility in the U.S.

Tridonex Case

The AFL-CIO, SEIU, Sindicato Nacional Independiente de Trabajadores de Industrias y de Servicios Movimiento 20/32 (SNITIS), and Public Citizen filed a case under the USMCA RRLM against Tridonex. The auto parts factory is located in Tamaulipas, Mexico, and its parent company, Cardone Industries, is based in Philadelphia. The complaint alleges that Tridonex violated workers’ right to organize and collectively bargain. These rights are protected under the USMCA labor provisions. Specifically, the complaint states that workers were harassed and more than 600 were terminated for attempting to organize with SNITIS rather than with The Matamoros Assembly and Maquiladora Workers Industrial Union (SITPME), the union that is currently in place.

According to Reuters, Cardone Industries denied the allegations and has invited a full inquiry to take place. SITPME’s president, Jesus Mendoza has also denied the allegations, ensuring that SITMPE has the full support of Tridonex’s employees.

The AFL-CIO sent its complaint to the Interagency Labor Committee for Monitoring and Enforcement (ILC)—co-chaired by United States Trade Representative (USTR), Katherine Tai and Department of Labor Secretary Marty Walsh. The ILC determined on June 10 that the complaint was credible. In turn, the USTR submitted the case to the Mexican Government and requested Mexico review the complaint. On June 19, Mexican officials notified the U.S. that the country will review the case. Mexico must report the results of the review to the U.S. by July 24, 2021.  If the Mexican Government determines the workers did, in fact, suffer a Denial of Rights, the two nations will consult with each other to develop a mutually agreed upon resolution that does not interrupt trade.  If remediations are not agreed to, USTR may request the formation of the panel. Likewise, if the Mexican Government’s review concludes without the finding of a Denial of Rights, USTR may request the formation of the panel.

In the case a Panel is formed (detailed information about Panel formation and confirmation can be found here), the Panel has 30 days to determine if there was a Denial of Rights and, if requested by Mexico, provide remediation recommendations. Remedies must be equal to the severity of the infraction and can include penalties or the suspension of preferential tariff treatments on the goods or services provided by the facility in question – in this case, Tridonex. In severe cases, remedies can include the denial of entry of goods.

GM Case

On May 12, 2021, Ms. Tai announced that the United States utilized the RRLM by requesting that Mexico review a Denial of Rights at a General Motors (GM) facility in Guanajuato, Mexico. The request alleges that workers at the GM facility have been denied the right of free association and collective bargaining. The request specifically asks Mexico to review the case and attempt remediation within 45 days if the facility was determined to have denied workers’ rights. Mexico agreed to the request and GM condemned any violation of labor rights and denied that any such violations took place at the facility. As of June 28, Mexico formally notified the U.S. that in their view a Denial of Rights did occur at the GM facility, triggering the two nations to enter into a 10-day consultation period to agree on a course of remediation. Mexico also instructed the GM facility to hold a new union contract vote by August 20, 2021, or terminate the contract. At this point, courses of remediation are speculative. It is possible that GM holding a new vote will satisfy the U.S.’s complaint and the RRLM ends. Alternatively, tariffs can be imposed on GM trucks imported into the U.S. Either way, the process and conclusion of both the GM and Tridonex cases should be watched carefully.

Mexico’s Response

Mexico has  made allegations about U.S. labor practices as well. First, Esteban Moctezuma Barragan, Mexico’s ambassador to the U.S., wrote a letter to Labor Secretary Marty Walsh accusing the U.S. of neglecting migrant workers’ rights in the agricultural and food processing industries. In his letter to Walsh, Moctezuma alleged that the U.S. denies Mexican migrant workers overtime pay, minimum wages, the right to organize and collectively bargain, that U.S. facilities fail to comply with health and safety mandates, and that incidences of sexual harassment and violence are not appropriately handled. Moctezuma requests that the U.S. guarantee the labor rights provided in the USMCA to migrant workers and work with Mexico to address its concerns.

Second, a group of Mexican women filed a complaint against the U.S. alleging failure to enforce gender discrimination laws. Like the Tridonex case, the Mexican Government must review the women’s claims and formally bring the case to the U.S. under USMCA. It must be noted that Mexico would need to provide specific examples of a Denial of Rights occurring at a Covered Facility for the RRLM to utilized.  

Deputy Undersecretary for International Labor Affairs Thea Lee responded to Mexico’s complaints during the first USMCA Labor Council meeting which was held on June 29.  During the meeting, Lee stated that the U.S. takes Mexico’s allegations “very seriously” and described harassment experienced by migrant workers as “absolutely unacceptable.” Migrant labor rights went on to be one of the main topics discussed at the meeting, along with forced labor, the implementation of Mexico’s labor laws, and the nations’ future cooperation in USMCA. The next meeting must be held within two years.

While the Chamber is and was an advocate for the broad USMCA, these first usages of the USMCA RRLM raise concerns about the lack of due process protections found in the Agreement’s labor and dispute settlement chapters. By acting on the AFL-CIO's petition, the Labor Committee is making it possible for remedies to be imposed upon a facility for an alleged denial of rights that occurred before the USMCA was entered into force. Furthermore, the current interim procedural guidelines do not allow for the facility to be included in the consultation or remediation efforts resulting from a review, nor do the guidelines provide an opportunity for the facility to submit evidence or attempt to remediate the problem itself. In short, the RRLM in current form is an exclusionary, unharnessed tool that carries the ability to violate due right protections and set dangerous precedent. Before moving forward on subsequent petitions, final procedural guidance that establishes a transparent and inclusive process must be published.

The outcomes of these cases are yet unknown. What we do know is that Lee’s goal is for the RRLM to prompt businesses to question if their labor practices comply with the USMCA. Read the Chamber’s comments on the USMCA Labor Meeting here, and dive deeper into the USMCA RRLM process here.

About the authors

Stephanie Ferguson

Stephanie Ferguson is the Director of Global Employment Policy & Special Initiatives. Her work on the labor shortage has been cited in the Wall Street Journal, Washington Post, and Associated Press.

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