In one of the first tests of the power of the trade agreement that replaced NAFTA, the U.S. has filed a labor complaint with Mexico regarding alleged labor violations reported at a General Motors Co.
According to U.S. Trade Representative Katherine Tai, penalizing labor violations is meant to "prevent a race to the bottom" for workers in both countries.
In regards to GM's Silao factory in central Mexico, Tai said her office has received "information appearing to indicate serious violations" in a union contract vote in April. Mexico's Labor Department declared the vote invalid due to "serious irregularities" on Tuesday, May 11.
The allegations include claims that ballots were destroyed in order to allow the union in place to remain in power. In Mexico, it is reportedly common for corrupt unions to create "protection contracts" behind the backs of workers while disregarding or simply not holding votes on the matter. These contracts are sometimes created before the factory has even opened.
The U.S.-Mexico-Canada Agreement (USMCA) was created in part in order to strengthen labor organizing in Mexico and to slow the movement of U.S. auto production into southern countries. As a part of the agreement, union votes in Mexico are to be held by secret ballot, and all workers are to be allowed to vote on whether or not to keep their union.
Mexico's Leftist President, Andres Manuel Lopez Obrador, said that this labor complaint represents an improvement in the signatories' ability to address worker's rights issues.
"It's a good thing. Before, the trade deal did not look at the labor situation," President Obrador said in a press conference.
Currently, GM enjoys tariff-free access to the U.S. with their goods produced in Mexico. However, the USMCA could revoke that access, applying a 25% tariff on Silao-made trucks. These tariffs could raise individual vehicle costs by thousands of dollars.
This is the first time that the mechanism of the USMCA allowing countries to review labor rights violations in specific factories has been used. Under this Rapid Response Mechanism, a panel is convened to judge whether or not Mexico is enforcing its labor laws to protect workers' rights.
While GM was able to impose changes on the USMCA that allowed them to continue building trucks in Mexico for cheap before importing them to the U.S. for a tidy profit, they're still vulnerable to labor violation penalties.
"We do not believe there was any GM involvement in the alleged violations or that any government-approved inspectors were denied access to the facility, and have retained a third-party firm to conduct an independent and thorough review," GM said in a statement.
GM's Silao plant is an essential part of their North American truck supply strategy with nearly a third of the companies 906,000 Chevrolet Silverado and GMC Sierra full-size pickup truck being built in the factory in 2019.
Of course, this decision is good news for workers in Mexico where the minimum wage is less than $1 per hour, the lowest rate in all OECD industrial economies. Under NAFTA, worker organization was limited and difficult, but there is hope that the USMCA could change that atmosphere, in part by showing other auto manufacturers that violations will not go unpunished.
However, even with those changes, workers in Mexico are still expected to earn far less than their American counterparts for years to come. Currently, Mexican workers make roughly one-eighth as much as their U.S. peers.
