“Labor provisions weren’t even in NAFTA; they were a sidecar agreement,” Rep. Jodey Arrington (pictured above), R-Texas, said during a hearing of the House Ways and Means Trade Subcommittee. “These provisions that we’re discussing, that have been enhanced significantly, are in the main body of the deal, as they should be.”
Testifying before the committee, Owen Herrnstadt, chief of staff to the international president of the International Association of Machinists and Aerospace Workers, said USMCA’s labor provisions are primarily the same as NAFTA’s, adding that “the effect on U.S. workers and Mexican workers and Canadian workers will be almost identical. In fact, it won’t stop outsourcing, it won’t raise standards.”
Arrington said he was “a little miffed” that Herrnstadt said USMCA’s labor provisions are largely the same as NAFTA’s.
“That just can’t be right,” Arrington said. “I’ve read these provisions.” He asked Herrnstadt, “Are you aware that the labor provisions in NAFTA were not part of the corpus and were a sidecar agreement, but in this new NAFTA 2.0 … they’re in the main body of the agreement? Are you aware of that?”
Herrnstadt answered that labor provisions have been included in the main body of several post-NAFTA trade agreements, including USMCA.
He added that USMCA’s definition of labor violations should be broadened to include matters beyond instances affecting trade or investment between USMCA parties.
But Dery Boughner Vorwerk, Cargill corporate vice president for global corporate affairs, raised the question: If this Congress doesn’t pass USMCA, when will lawmakers pass a trade agreement with significant labor reforms akin to those in the updated NAFTA?
“Enforcement is critical,” Vorwerk said. “In USMCA, the enforcement chapter is better than the NAFTA. It has succeeded in including labor and environment into the agreement, and that’s important, because if not this, then what else? If not USMCA on labor and environment, then what else?”
State-to-State Dispute Settlement
USMCA retains NAFTA’s state-to-state dispute settlement mechanism, which essentially provides for member states to block the formation of panels once their panel rosters expire.
In 2000, Mexico initiated a proceeding under NAFTA’s state-to-state dispute settlement provisions against the United States’ supply management program for domestic sugar, but the U.S. essentially blocked establishment of a panel. The United States’ roster of potential arbitration panelists had already expired by that time, and the U.S. refused to appoint new members.
Subcommittee Chairman Earl Blumenauer, D-Ore., earlier this month said it’s worth exploring whether improvements to the mechanism could be addressed in a side letter between USMCA member governments.
Sandra Polaski, an independent expert and former deputy director-general for policy at the International Labor Organization, said one key problem is that state-to-state panels include members of the private sector, muddying the ability to fairly adjudicate labor cases.
Polaski touted a proposal by Democrat Sens. Sherrod Brown of Ohio and Ron Wyden of Oregon that would allow U.S. and Mexican officials to inspect Mexican factories accused of violating labor standards. It also would allow the U.S. to deny tariff benefits for goods from those factories upon confirmation of a violation and to deny entry into U.S. commerce of products from those factories if forced labor is found.
“I think that’s a much more effective way [to deal] with labor rights, as opposed to commercial disputes,” she said.
On the environmental side, Alexander von Bismarck, executive director of the Environmental Investigation Agency, an international NGO, said if USMCA is ratified, it will be the first multilateral trade agreement that includes the principle of forbidding trade in illegally taken natural resources.
But von Bismarck noted USMCA stops short of committing to prohibit such trade, the possession and transport of such products and including mandatory commitments related to transshipments of the products.
Slow-Walking? Rep. Jason Smith, R-Mo., championed USMCA’s labor provisions and criticized House Democrats for slow-walking USMCA.
“Democrats have used many excuses to prevent a vote on the president’s trade agreement,” Smith said. “First, they started with Mexico’s labor reforms. Well, Speaker Pelosi, I have good news. On May 1, the Mexican president signed those reforms into law.”
Smith also said Democrats said they had to wait for the International Trade Commission report to finish its report on the likely economic impacts of USMCA and for metal tariffs on Mexico and Canada to be removed before considering USMCA, noting that both of those actions have been completed.
“When it comes to President Trump, Democrats are always moving the goal posts to fulfill their political ambitions,” Smith said.
“The report was released and it showed no collusion,” Smith said. “Even then they couldn’t accept the outcome. Now they want Attorney General [William] Barr to release the full unredacted report in violation of U.S. law, and they’ll hold him in contempt if he doesn’t. Even after this Democrats won’t drop their collusion narrative. They still want to impeach. Different day, same old story [with USMCA].”
Direct congressional consideration of USMCA cannot start until implementing legislation is submitted to Congress.
Responding to Smith, Blumenauer said he took exception to the comments and noted later in the hearing that his panel plans to advance USMCA as expeditiously as possible amid other issues the subcommittee is considering.
“The fact that we’re holding this hearing, I think, is a demonstration of interest on the part of Democrats on this committee to be able to engage with the issues, to be able to move forward,” Blumenauer said.
In addition to Arrington and Smith, Republican Reps. Darin LaHood of Illinois and Tom Rice of South Carolina called into question whether common demands to update USMCA are reasonable, given the agreement’s several upgraded labor and environmental standards.
“If you put politics aside, this should pass overwhelmingly,” LaHood said. “I look at what the ask is here by a number of those witnesses, and it appears to me, in some ways, we’re moving the goalposts on what we want to do here, and I guess that’s a bit frustrating for me when I look at the economic opportunities that we have before us.”
LaHood noted that USMCA’s labor and environmental standards are stronger than provisions in the U.S.-Colombia and Korea-U.S. trade agreements, which were both finished during the Obama administration.
But Rep. Don Beyer, D-Va., said Democrats’ concerns with USMCA are the exact same types of concerns they had with the original NAFTA and with the Trans-Pacific Partnership, which were negotiated by Democratic administrations.
Rice noted that the Trump administration pushed for passage of Mexico’s labor reform law to assuage concerns of U.S. labor unions.
If the U.S. made an effort to extensively pursue requested improvements to USMCA labor and environmental provisions, “I don’t know that … we’ll ever get to the point that it’ll be enough. If we get to this line, you’ll want something else,” Rice said to hearing witnesses critical of the deal.
Can Republicans and Democrats Come Together? Dan Ujczo, an attorney for Dickinson Wright law firm, said he believes there’s a nucleus of Democrats and Republicans who want to agree on some type of enforcement proposal to move USMCA forward.
“I think if we could get that through, that could be a workable solution,” he said.
Ujczo, who regularly engages with Mexican officials, said that Mexico is willing to have conversations around proposals like the one put forth by Brown and Wyden, but noted some difficulty around the fact that the envisioned mechanism would be essentially a “one-way street” that wouldn’t involve U.S. worksites.
“It’s about labor issues in Mexico,” Ujczo said. “So the Mexicans are saying, ‘Well, wait a minute. What if we have issues with agricultural facilities in the U.S. that are harming Mexicans?’”
Ujczo also underscored the significance of the Mexican labor reform law, noting that it could give Mexican unionized workers stronger protections than the U.S. provides for American unionized workers.
Ujczo sees a lane for USMCA approval, but said there may not be enough time to do it in this Congress, especially as fresh tension exists between top congressional Democrats and President Donald Trump.
A planned infrastructure meeting between Trump, Pelosi and Senate Minority Leader Chuck Schumer, D-N.Y., abruptly ended on Wednesday after Pelosi accused Trump of being involved in a cover-up in the face of congressional investigations, which riled Trump.
This was after Trump on Tuesday sent a letter to Pelosi and Schumer stating Congress should pass USMCA before considering major infrastructure legislation.
Blumenauer said his subcommittee has been working to “achieve clarity” so lawmakers can move forward in a way that people feel comfortable voting for it.
Peter Friedmann, principal for lobbying firm FBB Federal Relations, said pushback to USMCA is totally political in nature and noted similarities with the NAFTA congressional consideration process.
“On that, people forget it just squeaked through with Bill Clinton twisting Democratic arms to squeak out enough votes to go with the Republican majority who voted for NAFTA,” Friedmann said.
Further, organized labor is opposed to USMCA, as it was to NAFTA, Friedmann said. AFL-CIO also hasn't expressed exactly what they would require in order to support USMCA, he said.
“There is no question that if one had environmental concerns, intellectual property concerns, labor standard concerns, wage rate concerns, with the current NAFTA, then this USMCA is better on all counts,” Friedmann said. “Now, is it perfect? That’s the question, because ‘perfect’ has not been defined by those who are expressing opposition now, as they expressed opposition back then, to the original NAFTA.”
Wiley Rein attorney Stephen Claeys said Wednesday’s hearing was an important and necessary step of the USMCA consideration process, and shows that Ways and Means leadership is working through and discussing issues in the agreement.
In the context of House consideration of USMCA, it’s a question of whether Democrats can reasonably explain their concerns with sufficient detail and outline practical steps for the Trump administration to address those concerns, but if Democrats really wanted to stonewall, the hearing wouldn't have even taken place, said Claeys, who worked as Republican trade counsel on Ways and Means from 2011 to 2017.
The hearing “shows at least, at a relative working level, engagement on the issues and on finding a way forward,” he said. “So I think it’s a good sign.”
Arrington called on Democrats and Republicans to move ahead with the trade deal.