Mexico has not failed to comply

Interview with Ricardo Martínez, a lawyer and Founding partner of De la Vega y Martínez Rojas

Richard Trumka, president of the American Federation of Labor and Congress of Industrial Organizations recently informed that he plans to file labor complaints against Mexico, given that he has “grave concerns” that the Mexican Government doesn’t have the capability to comply with the labor laws it committed to upon the signature of the United States-Mexico-Canada Agreement (USMCA).

The union representative has warned that he has the intention of “inaugurating” the USMCA’s Rapid Response Labor Mechanism through which he seeks, among other things, to stop exports of products that are manufactured under violation of workers’ labor rights.

One of the most innovative instruments of the USMCA is the Rapid Response Labor Mechanism, whose purpose is to determine whether a plant or work center complies with the labor legislation that was agreed upon.

Just to cite an example, the USMCA establishes that if a US company initiates a dispute against a Mexican plant, Mexican authorities will have up to 45 days to determine whether there is any violation or non-compliance with labor rights and, afterward, they have up to ten days to reach an agreement. If the problem cannot be solved, the United States can activate the option of creating a panel.

This weekly publication interviewed lawyer Ricardo Martínez Rojas, a graduate of the Escuela Libre de Derecho, on this topic and he stated that there have been many complaints from the United States, particularly from the Democratic Party, that we have been conducting labor dumping for years, that we have low salaries and that the right to unionization and Effective Collective Bargaining have not been freely allowed. This is why the labor reform of 2019 was made and it was agreed in Annex 23 “A” of the USMCA that Effective Collective Bargaining and Freedom of Association would be complied with.

The primary obligation, he stated, is to legitimize all collective bargaining agreements, completing this obligation by the first of May, 2023. Therefore, I believe that the United States cannot complain of a lack of compliance at this time, since Mexico is working on the Reform; in fact, the Department of Labor has done its job and, on November 18, at least seven states begin working under the Reform and operations also start at the Federal Conciliation and Registration Center. Thus, we cannot speak of non-compliance at this time. What we do see is that there will be a great deal of pressure from the United States to force us to comply with this Reform.

The jurist, holder of a Master’s Degree from the University of San Diego and of a Doctorate by the Universidad Panamericana, says that a rapid problem solving system was established in Annexes 31 “A” and 31 “B” of the USMCA involving arbitration panels, but the United States is already looking for ways for filing some complaints against Mexico even though there are no clear violations yet. Thus, there will be a great deal of pressure, the United States created three authorities for the review of compliance; one is an interdepartmental agency comprised by the United States Treasury, the Department of Economy and the Department of Labor; we believe that once the Democrats take it over, pressure will greatly increase, because we need to remember that unions in the United States are part of the Democratic Party.

Ricardo Martínez Rojas further explained that, apart from the above, a group of experts, of which a minimum of three were appointed by legislator Nancy Pelosi, from the most powerful unions in the United States, was created. Therefore, Mexico will be under close observation; in fact, the United States International Trade Commission has offices in Mexico, and they have been applying pressure on Mexico on the topic of compliance with effective collective bargaining and freedom of association.

During the course of the interview, the lawyer said that, additionally, there are labor attachés, who will come to Mexico and be located at Embassies and Consulates once the Democratic Party is in control; the truth is that we believe that pressure will be much greater with the arrival of Biden to the presidency with the Democratic Party, we can see that there will be much greater pressure than with Trump, since the Republican party has no relationship with the Unions and we are also aware that Ms. Pelosi has been saying, since before these elections in the United States, that they will seek that Mexico definitively complies with this reform, particularly since both Trump and Biden had the idea of repatriating heavy industry, part of the automotive industry, into the United States.

Martínez Rojas said that “since we will be seeing a lot of pressure, we believe that, in Mexico, the private sector should be the first to comply with the Reform, seeking to legitimize collective bargaining agreements and no longer engaging in union interference.” And on the other hand, he said, we see that the Mexican government, the Department of Economy and the Department of Labor are very well led and they are seeking a dialogue with the United States to avoid complaints and, in second place, we believe that there is a good team in place in the event that there is any complaint, to defend, because the complaint goes against the Mexican government but, the most interesting thing is that it is the first time that a trade treaty will affect companies: “If a company receives a penalization from an arbitration panel, its tariff and customs duties rights may be limited; let’s imagine that an automotive company, which exports so much into the United States, is told that automobiles with zero tariffs can no longer cross the border, then pressure will be enormous; in these complaints, the United States secured for itself a very powerful weapon in trade matters, which they will use, if not as an excuse, they will use labor matters to attempt to stop some of the exportations sent into the United States by Mexico”.

He reiterated that there will be a great deal of pressure, “and the truth of things is that the arrival of the Democratic Party will place a much greater pressure on Mexico.”

AMLO’s failure to congratulate Biden will have a cost…

Asked about what the trade and economic relationship could be upon the arrival of Joe Biden into the presidency, Ricardo Martinez said that the government has very good information, very good communication; however, the United States created a law that is called The Implementing Law, through which they will apply a great deal of pressure on us in regard to compliance on environmental and labor matters. I believe that the fact that the Mexican President went to visit Trump and then failed to congratulate Biden will create some friction, that a very good job on diplomacy will have to be done in order to be able to have a smooth trade relationship. Particularly since we are seeing that many American companies are having complaints in regard to energy matters; they are complaining about the absence of the Rule of Law, that obligations are not being complied with; it should be noted that the USMCA does not include obligations in energy matters, but it does include obligations in regard to investment matters. The truth of things is that it will be a bit of a struggle, in face of the complaints made by the United States to the Mexican President, complying with the Rule of Law, complying with the Energy Reform and if to this we add, in my opinion, the lack of prudence in not having congratulated Biden and, on the other hand, having gone to visit Trump, well, yes, the beginning of the relationship will be tense and this could hurt us all, because the United States, I repeat, has that powerful weapon that allows filing complaints against Mexico under the rapid resolution system which, in 60 days, could cause a company to have the limitation of losing Tariff and customs duties rights into the United States; therefore, we must tread very carefully; I believe that there has to be a good response from Mexican businessmen, to preventively comply, but this does not prevent the United States, which is very eager to start using this rapid dispute resolution system, from starting to use it, which I believe will happen very soon.

On the other hand, he pointed out that Mexico is a member of a series of international organizations, where we have obviously committed to the use of clean energies and now, with the arrival of Biden, that turns the policy on clean energy around, this is another topic on which we will have to react. I believe that the Democratic Party will be inflexible in regard to energy topics and labor matters. There won’t be much leeway and, unfortunately, we agreed to this rapid dispute system, which allows our being led before a panel without much trouble. They can file a complaint based on the simple suspicion that there are violations to collective rights. In contrast, Mexico needs to wait for a resolution from the American authorities in order to present a complaint; we are at a great disadvantage in these Annexes 31 “A” and 31 “B” entered into, respectively, with the United States and Canada.

The jurist said that Article 23 of the USMCA and the Trans-Pacific Partnership, TPP re-address a labor issue and, of course, child labor, under-age labor, but, above all, we must put emphasis on forced labor, which can encompass both: “And there we find another very powerful weapon, because the USMCA specifies that in the event that any article, any service comes from forced labor, a panel is not even required and the United States has the right to a trade embargo and not allowing the entrance of goods or services that include forced labor and this could be the work of minors, the work of women and even working hours that go beyond those established by Law, if we go above the working hours allowed by Law, this could be interpreted a forced labor and the United States could say that it does not permit the entrance of these goods without even needing a panel. Thus, Article 23 gathered the principles of the International Labour Organization, but with great emphasis, in regard to child labor, women’s labor and in discrimination and forced labor.

Finally, he said that the first penalization is the reduction or suspension of tariff rights, the second can be proceeding against the entire corporate group, not just the establishment or company in which the product was made and the third, and most serious one, the United States decides on a total embargo, which does not allow the export of the goods into the United States.

He alerted the private sector that it is necessary to conduct extensive preventive actions in order to avoid complaints from the United States, we must work very hard on non-interference with unions, in allowing workers to decide whether they want a union or not since, in accordance with the new Law they can choose not to have a union and also, above all, in energy matters, I believe that the Mexican government will have to respond to the agreements we are part of.