Fixing trade with Mexico requires raising labor standards

Dec 6, 2016 Issues: Trade

Last week, the president-elect traveled to a Carrier furnace plant in Indiana to announce that he had made good on his promise to bring 1,400 Carrier jobs back to the United States. In fact, however, 600 jobs at that factory will still move to Mexico, and another factory of that company still intends to close. A factory around the corner from Carrier, Rexnord, still intends to move its jobs to Mexico. All of this shows the need for effective trade policies.  Occasional phone calls or negotiating monetary inducements or threats to a company are no substitute for real policies.

Why did Carrier initially decide to ship jobs from Indiana to Mexico? “Cheap labor, basically. In Mexico, they can pay workers $24 per day plus benefits. In Indiana, they’re paying $30 per hour,” according to Greg Ip, an economics reporter for the Wall Street Journal. In other words, a Mexican worker makes just 10 cents for every dollar made by a U.S. worker. Others estimate that Carrier workers in Mexico make even less, just $2 per hour, including benefits. So this isn’t about U.S. workers losing their jobs to robots, as we are so often told.

After phone calls with the incoming Donald Trump administration, Carrier has now agreed to keep some of those jobs in Indiana. But Ip pointed out that “we don’t see much evidence in the long run that those kinds of tactics make much of a difference when the economics of production are pushing in the other direction.”
The economics of production in Mexico are built on labor conditions that fall far short of even the most basic internationally recognized minimum labor standards. It is nearly impossible for workers there to organize and bargain collectively. Almost all of the few unions in Mexico are shams, focused on protecting employers from their workers, not the other way around. That’s why Carrier can pay a Mexican worker 10 cents for every dollar it pays an American worker.

It is not clear how the president-elect would address this yawning gap in wages. On the one hand, he has promised to renegotiate the North American Free Trade Agreement (NAFTA) to “end sweatshops in Mexico that undercut U.S. workers.” But he also argued during the Republican primaries that wages in the United States are “too high” to compete against the rest of the world.

Mexico’s poor labor standards are one of the reasons I voted against NAFTA in the first place. I, and many of my Democratic colleagues, have been working since NAFTA to insist that strong and enforceable labor obligations be included in all of our trade agreements, and that they be fully implemented and enforced. More generally, we have been insisting on crafting a new American trade policy — one that focuses on what is good for our workers and our middle class. We have faced considerable resistance, even hostility, from past administrations and from many of our Republican colleagues in Congress.

Perhaps things will be different with the president-elect. But phone calls are no substitute for a coherent, thoughtful, assertive and smarter trade policy. 

Rep. Levin is the ranking member of the House Ways and Means Committee.

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