Despite USMCA Spotlight, Significant Shortfall in Mexican Budget for Labor Reform Continues, Mexican Labor Rights Deteriorating

Latest Mexican Budget Proposal Doesn’t Provide Needed Funding; Mexican Courts Issue Injunctions Against New Labor Law; Fired Mexican Goodyear and Other Union Organizers Not Reinstated; Recent Mexican Union Leader’s Disappearance Not Investigated

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North American Free Trade Agreement (NAFTA) renegotiations offer a once-in-a-generation opportunity to make lasting improvements to the lives of millions. The U.S. government has certified almost one million jobs as lost to NAFTA, and corporations outsource more jobs to Mexico every week to pay workers less. Real wages in Mexico are down since NAFTA, with manufacturing wages now 40% lower than in China. As Democratic congressional leaders specified a year ago when Donald Trump announced a revised NAFTA, artificially low Mexican wages will incentivize more job outsourcing unless labor standards in Trump’s deal are strengthened and made subject to swift and certain enforcement, and Mexico implements labor reforms to root out fake “protection” union contracts. Absent these improvements, middle-class jobs will continue to be transformed into sweatshops jobs in a race to the bottom that hurts workers throughout North America.

Mexican Labor Funding Proposal Remains Woefully Inadequate – the October AMLO Letter

The resources Mexico has proposed to implement labor reform fall far short of what is required. The revised NAFTA’s Mexican Labor Annex requires that within four years, Mexico must review hundreds of thousands of fake “protection” contracts, oversee voting on new contracts approved by workers, and ensure contracts are implemented. Yet, the 2020 labor budget submitted by Mexico’s executive branch this summer cut, not expanded, funding. Much of this reflected a cut in the national youth employment program. However, funding for core functions was also reduced by almost 9%. And, the significant increases needed to stand up and staff new oversight bodies – new labor courts, conciliation centers, and the labor inspectorate – was missing. Several U.S. congressional delegations visited Mexico to express concerns, as did labor leaders.

In mid-October, Mexican President Andrés Manuel López Obrador (AMLO) wrote House Ways & Means Chair Richard Neal a letter aimed at addressing concerns. The letter was not reassuring. As the only written explanation of Mexico’s labor reform implementation plans, it is very vague. With respect to funding:

  • There is no certainty that the necessary funding will be forthcoming. The letter notes that the Mexican Congress, “should it so decide,” could appropriate more funds, and the executive branch would “ask” the Mexican Congress and local legislatures (many controlled by opposition parties) to increase funding.
  • The gap between aspirations and actual funding is spotlighted by the figures in AMLO’s letter. The total four year (FY 2020-2023) estimated budget for the implementation of the labor reforms is $899,196,204. While the topline figure appears significant, in fact the letter reveals seriously problematic gaps:
    • The funding is heavily back loaded: Less than 8% is proposed for FY 2020, the critical first year of the reform plan when the new institutions to review and re-vote protection contracts must be established and staffed. To stand up the new system, the 2020 budget would likely need to be the highest of the four-year period.
    • The total figure assumes that Mexican states – many of which are controlled by political parties hostile to AMLO and labor reform – will provide nearly half (46%) of the proposed budget. This means AMLO has no control over whether the money needed to fund the local labor courts and conciliation centers will ever be appropriated. (The equivalent would be President Trump assuming California’s and New Mexico’s Democratic governors would provide state funds for half the cost of a border wall they passionately oppose between those states and Mexico.)
    • Moreover, the overall budget that the Mexican president hopes the Mexican Congress and state legislatures will appropriate in the out years assumes an enormous, improbable expansion over the 2020 proposed figure of $69 million. The 2021 budget of $176,302,164 assumes a 154% increase over the 2020 budget, while the 2021-2023 amounts ($324,832,546) assumes an improbable 386% expansion.
  • As well, the AMLO letter reveals a woeful lack of labor inspectors relative to the staffing needed to make a difference. The proposed increase of federal and state inspectors is from 901 to 1,129 – less than a quarter of the 5,600 advised by the International Labor Organization for a country of Mexico’s size. And, the budget and reform plan continue to rely on notaries – instead of labor inspectors or other government officials – to conduct roughly 20% of verification votes on existing union contracts.

Mexican Protection Unions and Employers Have Won Injunctions Against the Mexican Labor Law Reforms That Are Vital to Implementation of a Revised NAFTA

Mexico passed a new labor law in May 2019 to establish institutions and processes to review and replace the hundreds of thousands of fake “protection” union contracts that have suppressed wages in Mexico for decades. The revised NAFTA’s Labor Annex requires that workers have the right to review and vote on union contracts and that existing protection contracts be replaced within four years.

The forces arrayed against improvements in workers’ rights are powerful. Those opposing change have taken to the courts to try to gut the new law, similar to the attack in the United States against Obamacare. Employers that have benefitted from suppressed wages have worked with protection unions to file 425 lawsuits, including challenges to the constitutionality of the new labor law and related regulations. To date, 224 cases have been dismissed. But a Mexican federal appeals court has granted an injunction against the law. And CTM, the labor federation associated with many of the protection contracts, has won at least one additional injunction. The Mexican Labor Ministry has appealed and is trying to get the cases consolidated. In his October letter, AMLO sought to assuage concerns about the lawsuits by noting that “amparo” rulings against the new labor law would only protect specific fake union contracts named in each case. This is not reassuring: Successful lawsuits will encourage more cases to be filed to protect more bogus contracts.

If the new law does not go into effect, Mexico would be in violation of its new NAFTA labor obligations, and workers there would remain without basic rights to fight for fair wages. This would continue the powerful pull to outsource more American jobs. The fierce pushback against Mexican labor reform reveals why the labor terms and critically their enforcement terms in the revised NAFTA must be significantly strengthened.

Even With NAFTA Spotlight on, Labor Conditions in Mexico Not Improving

Since NAFTA renegotiations started in 2017, three activists trying to organize a union at the Media Luna gold mine in southwestern Mexico have been murdered by anti-union vigilantes. Brothers Víctor and Marcelino Sahuanitla Peña were dragged from a union protest and shot as NAFTA talks were occurring 385 miles away in Mexico City. A year later union leader Quintin Salgado was killed. Now their colleague, labor and environmental activist Oscar Hernández Romero, has been missing since September 23, 2019. Mexican authorities have refused to investigate Oscar’s disappearance. Law enforcement authorities in Mexico seldom investigate, much less prosecute, violence against labor organizers.

Goodyear Mexico fired 50 workers last year when they tried to organize an independent union at a new $500 million plant in San Luis Potosí. There, workers are paid $1.58 per hour as Goodyear lays off U.S. workers who make the same tires for middle-class wages. A year later, the workers haven’t been reinstated, as required by Mexico’s existing labor laws. A congressional delegation seeking to visit the plant in mid-2019 was denied access, reinforcing concerns about the prospect of real labor reforms in Mexico.

GM Mexico recently fired five Mexican autoworkers at their Silao plant for organizing in support of the United Auto Workers strike. Shortly after NAFTA renegotiations ended in late 2018, GM announced it would shutter five plants and lay off more than 5,000 U.S. workers, even as it is increasing production in Mexico.

The forces arrayed against workers in Mexico having basic rights are underscored by the continuation of flagrant labor rights violations even as the new Mexican president support reform and the spotlight is on related to NAFTA renegotiations. Mexico won’t correct its pervasive labor problems anytime soon – and that’s why strong labor standards and effective enforcement must be baked into the new NAFTA. That means independent inspection of workplaces  and the right to block goods at the border made in plants that do not follow the rules.