(Bloomberg) -- On paper, Mexican workers should be big winners from the new Nafta. They’re not holding their breath.
Stronger unions and higher pay south of the U.S. border are a key part of the revamped trade deal, which the U.S. House of Representatives approved in a vote on Thursday. The measures are supposed to bring knock-on benefits for the U.S. and Canada too -- by eating into a wage gap that’s lured factories and jobs away.
The worry is that any new rules in Mexico will largely remain on paper. Mexican workers themselves, who watched their pay fall even further behind during a quarter-century of the North American Free Trade Agreement, say there’s reason to doubt if its successor will be much different.
“I don’t think there will be any change,” said Ludwing, a security guard at a General Motors plant in the industrial center of Toluca who asked to be identified only by his first name. “I’ve seen my friends fired as plants close down.”
GM Mexico spokeswoman Teresa Cid said the company will honor the changes to Mexico’s labor rules as they are implemented.
The USMCA, as the trade deal is known, requires that 40%-45% of auto content be made by those earning at least $16 an hour -- a move aimed at reducing Mexico’s low-wage advantage in the region. It also guarantees the right of Mexicans to choose their labor unions and contracts.
The problem is that Mexico’s unions have a history of cozying up to bosses, rather than fighting for the workers they’re supposed to represent -- and new labor rules can’t change that culture overnight. Unions are vigorously fighting the new rules on several fronts, including filing hundreds of lawsuits, which is fanning fears that the pace of reforms could stagnate.
That concern triggered a last-minute row on the weekend, when Mexico accused the U.S. of infringing on its sovereignty by dispatching inspectors to enforce Mexican labor reforms.
The issue was chalked up to a misunderstanding and resolved quickly. But Mexico’s labor practices were a key hurdle in the final negotiations last week for the White House to get Democrats -- and allied U.S. unions worried about job losses -- behind the deal. The U.S. Senate is now expected to ratify the pact early next year.
Vazquez, a shelf stacker at a Walmart in Mexico City for 16 years who asked to be identified by his last name for fear of retribution, said he’s skeptical the deal will benefit him.
“I don’t think we’ll see any pay raise,” said Vazquez, who earns $300 a month. “It’s been so long and nothing has changed.”
At home, Mexican President Andres Manuel Lopez has promised to increase funding for labor reforms and he’s boosting the minimum wage. In May, the government enshrined the rights of workers to decide on union leaders and contracts by secret ballot.
While the changes would appear to be a basic function of unions the world over, they rarely occur in Mexico. The system remains rife with complaints about contract misrepresentation.
At the first such vote over a labor contract negotiated at a factory owned by cement giant Cemex, some workers didn’t know what they were being asked; others said their union made false claims that they would lose their benefits if they rejected the contract.
While Lopez Obrador has also made rooting out graft a key priority since he took office a year ago, it will be a difficult task to take on the powerful unions, said Rogelio Aguilar Mendoza, a worker at another Walmart in Mexico City.
“There’s a lot of corruption in unions,” he said, while also voicing hope that the USMCA, if implemented well, could be a positive step for the economy.
The new trade pact will allow the U.S. to take a stricter view of compliance over Mexico’s labor reforms. Labor-related disputes will be resolved by a newly created U.S.-Mexico Rapid Response Mechanism, a panel made up of representatives appointed by Mexico and the U.S.
Mexico’s economic reliance may also give the U.S. some leverage. The U.S accounts for about half of Mexico’s foreign-direct investment and buys 80% of all Mexican exports.
More broadly, workers have reason to be wary of USMCA delivering on its advertised benefits.
In 1994, Nafta was billed as a way to pull up Mexico’s economy through deeper integration. But since then, incomes in Mexico -- which as an emerging market is supposed to grow faster -- have fallen, to about a fifth of those in the U.S.
“Look, if it happens and wages rise, it would be good obviously. But I don’t know,” said a subcontractor at the GM factory in Toluca -- about 50 miles west of Mexico City -- who asked to be identified only by his first name, Luis. “We haven’t had any discussions in the plant about what could happen.”
(Updates that House passes USMCA in second paragraph)
--With assistance from Andrea Navarro.
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