Levin Remarks at Council on Foreign Relations Discussion on NAFTA

Sep 25, 2017 Issues: Trade

WASHINGTON, D.C. – Rep. Sander Levin (MI-09) today gave the following remarks at the Council on Foreign Relations. A video of the remarks and following discussion can be viewed here.

(Remarks as Prepared)

“It is a pleasure to be back before the Council on Foreign Relations. 

“I just returned from the NAFTA negotiations in Ottawa.  Before that I spent a week in Mexico where I talked with a wide variety of interests. I was able to meet chief negotiators for Mexico, the U.S., and Canada.  A wide of variety of issues was discussed, including procurement, dispute settlement mechanisms, and rules of origin.  

“On this last issue, which was a significant topic in my conversations with negotiators from both Mexico and Canada, concepts included whether coverage under the rules of origin needs to be updated, including limiting the extent to which content is increasing from China and elsewhere outside of the three NAFTA countries, and whether there should be content rules among the three.  It was clear there are significant differences. 

“The major focus of my discussion in both nations was on the issue that was most central and divisive in U.S. debate on NAFTA 25 years ago -- the lack of enforceable labor standards, as well as environmental. 

“NAFTA was the first U.S. negotiated b i-lateral- or trilateral- free trade agreement with a large developing nation with a very different economic structure, especially in terms of its labor market.

“It reflected the rapid spread of globalization where there was a general failure of traditional trade policy to respond.  And that failure became increasingly evident as NAFTA unfolded. 

“Mexico’s industrial policy of suppressed low wages, combined with increased security of investment, became a magnet for its industrial growth. A key factor has been the maintenance of very low labor costs, ingrained in a structure that suppresses any voice to workers in the workplace. 

“Pervasive are so called “protection agreements” covering workers without a voice as to a contract, or even of their existence, often signed before there are any employees.  The designated employee representative has almost always been the Confederation of Mexican Workers (CTM), allied with the political party PRI, almost always in control of the government.

“It is no wonder that while Mexican manufacturing productivity increased 80%, real compensation --wage and benefits -- slid 20% between 1994-2011.  In May, BMW signed a contract with CTM that set a starting hourly wage of $1.10 that phases in at $2.53 for assembly line workers, long before the plant was fully open. 

“In the one instance in the Mexican automotive industry where there is a union selected by the workers and where there is collective bargaining on behalf of the workers, wages are 30% to 40% higher than elsewhere in the industry.

“The Mexican industrial policy of suppressing wages completely distorts any notion of comparative advantage -- that if each country concentrates on what it does best, every country and its people will benefit.  Mexico’s so called “comparative advantage” not only condemns numerous Mexican workers to working in or near poverty, but it lowers wages and rips away jobs from workers in the United States, especially in the auto industry.

“Mexico is a democratic nation with an authoritarian type labor structure.

“Mexico has recently undertaken some constitutional democratic labor reforms. They include replacement of federal and state tripartite boards (usually with a representative of PRI, CTM, and the employer).  It is a system that has suppressed employee rights.

“But the reform process has just started.  There are thousands and thousands of protection agreements, both in Macquiladora areas on the border and throughout Mexico.  When asked about this at my meeting with the Mexican Labor Department -- how to reform dramatically a system based on this proliferation of protection agreements --  the answer was “they had to be respected during their duration.”  When asked what happens if the parties simply renewed these thousands of contracts, there was no answer.  This is wholly unsatisfactory.

“Without dramatic change occurring before voting on a revised NAFTA, I believe there will be virtually no Democratic support in Congress.

“Mexico now produces 3.5 million cars every year -- with expectations that it will produce 5 million by 2020.  The movement to Mexico of auto suppliers has been pronounced, with many of the largest having shifted huge numbers of blue collar jobs to Mexico.

“Carrier became recently a symbol of job loss to Mexico.  Whether or not it was just the tip of the iceberg, it is clear that traditional trade policy has been sitting on a powder keg. 

“Unexpectedly the renegotiation of NAFTA has become an opportunity to embrace a trade policy less associated by concept of “comparative advantage” and more by what can be called “mutual benefit.”

“Ensuring labor rights in Mexico will help workers there climb out of poverty, while protecting American jobs and wages from a race to the bottom. 

“This will create more consumers for the very products these workers are producing, not to mention providing them with greater economic opportunity.  This effort to harmonize upwards -- to the mutual benefit of the US, Canada and Mexico -- should not only be our focus for renegotiating NAFTA, but should more generally guide our trade policy as we seek to navigate globalization. 

“Globalization increasingly requires that effort, especially in view of those whose answers to globalization are either hyper-nationalism or reliance on notions of sovereignty.”