New legislation proposed by two senators could cause jobs to shift from the United States to Mexico and affect NAFTA renegotiation talks, the largest union federation in the U.S. has warned.
The AFL-CIO said that a labor bill backed by Tereso Medina and Isaías González of the ruling Institutional Revolutionary Party (PRI) would undermine the negotiating position of labor unions and cause already low wages in Mexico to drop even lower.
The draft legislation, first presented to the Senate on December 7, proposes the elimination of restrictions on subcontracting, effectively meaning that Mexican companies could indirectly hire all their staff from outsourcing firms.
The bill states that it would encourage job creation, protect workers’ rights and penalize companies for misleading subcontractors.
But in a December 12 letter to the U.S. Trade Representative and chief NAFTA negotiator Robert Lighthizer, the AFL-CIO president expressed his concern about the proposed legislation.
The bill “would limit freedom of association and promote precarious work, likely driving Mexican wages even lower and encouraging further outsourcing of American and Canadian jobs,” Richard Trumka wrote, adding that it would ultimately prevent unions in Mexico from fighting for better wages.
According to a report by Bloomberg, the trade union group’s criticism of the proposed legislation could find a supporter in U.S. President Donald Trump, who has argued that better conditions for Mexican workers is one requirement to reaching a new trilateral trade agreement.
Trump has also fought ardently to keep U.S. companies and jobs on home soil and in a twitter tirade this week labeled Mexico’s trade surplus with the U.S. as “ridiculous.”
In a visit to Mexico in October, Canadian Prime Minister Justin Trudeau also highlighted the need to improve salaries and working conditions in Mexico as part of the modernization of the North American Free Trade Agreement (NAFTA).
Mexican assembly line workers only earn about one-tenth of workers doing the same job north of the border and wage growth in Mexico hasn’t come close to that in China, a competitor in the U.S. market.
Salaries in the latter increased by 157% from 2006 to 2016 compared to just 20% in Mexican plants that make transportation equipment, according to figures from the Boston Consulting Group.
The second-to-last round of NAFTA renegotiation talks will start in Montreal, Canada, tomorrow, two days earlier than originally planned and will last for nine days.
Trump has repeatedly threatened that if the 24-year-old agreement is not reworked in a way that is more favorable to the U.S., his administration will move to terminate it. The proposed labor legislation, that is scheduled for debate after Mexico’s Congress resumes sitting on February 1, could give him one more reason to act.
An anonymous source familiar with the talks told Bloomberg that the U.S. withdrawal threat is serious. Canadian government sources also said earlier this month that they were convinced that Trump would soon announce that the United States intends to pull out of NAFTA and Foreign Affairs Minister Chrystia Freeland said that “Canada is prepared for every eventuality.”
The director of international affairs for the United Steelworks union told Bloomberg that the proposed Mexican legislation and the ALF-CIO’s position on it would certainly influence this week’s talks even though unions are not directly involved in the renegotiation process.
“This will come up in Montreal in a big way,” Ben Davis said.