Introduction

In 2019, Congressional Democrats announced the creation of a new tool—the facility-specific Rapid Response Labor Mechanism (RRM)—in the revised North American Free Trade Agreement (NAFTA), known in the United States as the US-Mexico-Canada Agreement (USMCA). The tool allows a government to take action against a worksite in the territory of another if it believes that workers are being denied their right to organize and bargain collectively. Proponents saw its inclusion as the primary reason for the broad bipartisan support the USMCA garnered. They proclaimed the commencement of a new era for trade and an important step forward for progressives—who had been increasingly critical of US trade agreements—as even organized labor in the United States supported the USMCA.

This paper investigates the RRM and is organized as follows. Section 2 begins with the perfect storm of political-economic events in the United States and Mexico that allowed the countries to agree to this unique tool. It describes the importance of the North American automotive supply chain, a sector that largely drove the Trump administration’s renegotiation of the NAFTA—over the sector’s protests—and that became the target for almost all early uses of the RRM.

Section 3 reviews the underlying problem the RRM is purportedly designed to tackle: the inability of Mexican workers to unionize and bargain collectively to overcome monopsony power. It explains the importance of Mexico’s labor reform to the renegotiation of the NAFTA and to the first few years of the USMCA, a reform process that policymakers could ultimately use the RRM to support.

Section 4 describes how the RRM works and analyzes the penalties the RRM sets out that may incentivize actors in Mexico that otherwise may be reluctant to go along with the labor reforms. It also documents the considerable financial and human resources the US and Mexican governments have deployed to operationalize the RRM and complement the Mexican government’s own efforts on labor reform. To the extent that the RRM improves political support for open trade between the two countries, the tool and these expenditures share some similarities with policies of trade facilitation.

Section 5 presents some stylized facts on the RRM during its first three years. The RRM started slowly, with the US government investigating situations at just 10 different facilities in Mexico in this period. Unsurprisingly, most of these investigations were of the automotive sector. Nevertheless, there were some interesting and important differences across the situations.

The last two sections look to the future. Section 6 turns to the political-economic literature on trade agreements and issue linkages and proposes additional research needed to understand the implications of the RRM, including the need to assess its impact on workers and Mexican suppliers at facilities affected and unaffected by RRM situations. Section 7 draws lessons learned so far and examines the potential for transposing facility-specific RRM– like structures for labor or other areas, such as the environment, into future economic agreements.

Chad P. Bown is Reginald Jones Senior Fellow at the Peterson Institute for International Economics.

Kathleen Claussen is Professor of Law at Georgetown University Law Center.

To read the full summary as it was published by the Peterson Institute for International Economics, click here.

To read the full paper, click here. 

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Despite decades of attention and lobbying efforts within the labor community, government parties to trade agreements fail to protect vulnerable workers from carrying the burden of globalized trade. Women and young children continue to be forced into labor, trafficked, sold across borders, worders. Union participation continues to decline globally, and union leaders are arrested or disappeared. Throughout supply chains, factories continue to enslave and torture with impunity. Millions of workers still lose their lives in workplace accidents.

Since the turn of the century, U.S. trade policy has reacted to such labor exploitation by requiring trade partners to commit to the ILO’s four “fundamental” labor rights, namely (1) collective bargaining and freedom of association; (2) prohibitions against child labor; (3) prohibitions against forced labor; ander (4) non-discrimination in employment. Yet, prior U.S. administrations have proved hesitant, if not unwilling, to enforce those commitments, mainly when doing so threatened more pressing foreign policy and geopolitical objectives.

To read the full summary as it was published by the Social Science Research Network, click here.

To read the full paper, please click here.

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Free trade agreements improve trade freedom for American families, individuals, and businesses when the agreements focus on eliminating tariff and non-tariff barriers. Trade Promotion Authority (TPA), which is set to expire on July 1, 2021, is an important tool for advancing trade agreements that Congress should seek to renew. However, Congress must also make some crucial changes to ensure that future trade agreements focus on advancing trade freedom through the elimination of barriers at home and abroad. Congress should seek to strengthen its ability to influence the contents of a trade agreement by authorizing TPA for individual agreements, requiring a vote for all tariff changes, and mandating mock markups. In addition, the next TPA should make it clear that only Congress has the authority to withdraw from trade agreements.

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Tori K. Smith is the Jay Van Andel Trade Economist in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom, at The Heritage Foundation.

To view the original report from The Heritage Foundation, please click here.

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Worker rights are a prominent issue in U.S. FTA negotiations. Some stakeholders believe worker rights provisions are necessary to protect U.S. workers from perceived unfair competition and to raise labor standards abroad. Others believe these rights are more appropriately addressed at the International Labor Organization (ILO) or through cooperative efforts and capacity building. Since 1988, Congress has included worker rights as a principal negotiating objective in Trade Promotion Authority (TPA) legislation. The United States has been in the forefront of using FTAs to promote core internationally recognized worker rights. Labor provisions have evolved significantly since the North American Free Trade Agreement (NAFTA), moving from side agreements to integral chapters within FTA texts, with more provisions subject to enforcement. The conclusion of NAFTA renegotiations resulted in the U.S.-Mexico-Canada Agreement (USMCA), which replaces NAFTA and has a new labor chapter and enforcement mechanism. USMCA entered into force in July 2020.

Issues for Congress

In considering future TPA legislation (the current reauthorization expires in July 2021) or trade negotiations, Congress may wish to examine the application of worker rights provisions in FTAs. This debate could include

• The effectiveness of FTAs as a vehicle for improving worker rights and labor standards in other countries;
• The extent to which FTA partners are complying with labor obligations and whether dispute settlement provisions have been applied effectively;
• Whether USMCA labor provisions serve as a new template for future U.S. FTAs;
• The effectiveness of FTAs in providing technical assistance and trade capacity building; and
• The role of businesses in promoting U.S. labor practices abroad and conducting supply chain due diligence.

Cathleen Cimino-Isaacs is an Analyst in International Trade and Finance at Congressional Research Service

M. Angeles Villarreal is a Specialist in International Trade and Finance at Congressional Research Service.

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U.S. customs law has contained prohibitions against importing goods produced by certain categories of labor since the end of the nineteenth century. Beginning in 1890, the United States prohibited imports of goods manufactured with convict labor. In 1930, Congress expanded this prohibition in Section 307 of the Tariff Act to include any (not just manufactured) products of forced labor. Although a few Members of Congress brought up humanitarian concerns during debate, the central legislative concern was with protecting domestic producers from competing with products made with forced labor. As such, Section 307 allowed the admission of products of forced labor if it could be shown that no comparable product was made in the United States or the level of domestic production did not meet domestic demand (“consumptive demand” clause).

Over the decades, lawmakers and civil society became increasingly concerned about forced labor in the context of human trafficking. The Victims of Trafficking and Violence Prevention Act of 2000 (P.L. 106-386), for example, included forced labor in its definition of human trafficking. In 2015, Congress removed the “consumptive demand” clause, as part of the Trade Facilitation and Trade Enforcement Act (reflecting this interest in addressing human rights abuses in the context of forced labor).

Issues for Congress

Trade Policy and Forced Labor Provisions

The treatment of forced labor in U.S. trade policy and free trade agreements (FTAs) has been of long-standing congressional interest and has evolved in recent years. Consistent with negotiating objectives set by Congress in Trade Promotion Authority, recent U.S. FTAs commit countries to maintain laws on core labor rights/principles of the International Labor Organization (ILO). This includes the elimination of forced or compulsory labor.

For the first time in a U.S. FTA, the U.S.-Mexico-Canada Agreement (USMCA) also commits parties to prohibit imports of goods produced by forced labor through “measures it considers appropriate,” and to establish cooperation for identifying such goods. The 116th Congress passed USMCA implementing legislation in early 2020. It created a Forced Labor Enforcement Task Force, chaired by the Secretary of Homeland Security, to monitor enforcement of Section 307, and reporting requirements.

In addition, eligibility criteria for U.S. trade preference programs, such as the Generalized System of Preferences (GSP), includes taking steps to maintain internationally recognized worker rights. Some eligibility reviews by the U.S. Trade Representative have involved concerns over labor practices. Recently, the Administration withdrew GSP benefits for Thailand over forced labor in the fishing sector.

Trade agreements and programs have expanded coverage of trade and labor issues in part because the World Trade Organization (WTO) does not cover such rules. However, Article XX(e) of General Agreement on Tariffs and Trade (GATT), provides exceptions to a country’s obligations for measures related to imports of products of prison labor.

Christopher A. Casey is an Analyst in International Trade and Finance for the Congressional Research Service.

Cathleen D. Cimino-Isaacs is an Analyst in International Trade and Finance  for the Congressional Research Service.

Katarina C. O’Regan is an Analyst in Foreign Policy for the Congressional Research Service.

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