Description
The United States-Mexico-Canada Agreement (USMCA) contains unprecedented labour provisions, including a factory-specific rapid-response labour dispute settlement mechanism, the overhaul of the century-old Mexican trade union system, and the rule of origin that 40-45 percent of the value of autos be produced by workers earning at least $16 per hour. Drawing on over 80 interviews with negotiators, policymakers, labour union and business representatives in NAFTA countries, this paper revisits the debate on the protectionist vs developmental role of labour standards in free trade agreements. Although US Democrats and the Trump administration both pursued protectionist objectives, the left-wing Mexican President López-Obrador used USMCA to lock-in his labour reforms in light of domestic opposition. USMCA labour rules are likely to have developmental rather than protectionist effects for three reasons: they are not the most effective protectionist tool at the US’s disposal, they tend to promote social and economic upgrading, and they reduce opposition to USMCA in the US. Without a US-sponsored North American industrial policy, however, the promise that USMCA labour rules will result in US-Mexico wage convergence is unlikely to be fulfilled.
