NAFTA’s successor could hurt autoworkers on both sides of the border
Co-authored with Sander Levin, a former Democratic Congressman from Michigan.
Despite financial gains won by the United Auto Workers in a new contract that ended a nearly six-week-long strike against General Motors, the longest in a half-century, the deal will not rectify the major problem that has hurt American autoworkers and will continue to do so.
The problem has been the longstanding lack of workers’ rights in Mexico. Wages there are roughly one-tenth of what American workers earn and the unions are often tools of the employer. This has warped the playing field and resulted in the transfer of American manufacturing jobs to south of the border. American autoworkers have been hit particularly hard.
This situation can be blamed in part on a flawed 1993 North American Free Trade Agreement and addendum that, though it included provisions to protect workers, failed to ensure adequate monitoring and enforcement. Transgressions of workers’ rights were not subject to trade sanctions.
The glaring failures in that trade deal, which locked in an exploitative labor system in Mexico for a quarter of a century, have not been adequately resolved in what President Trump proposes as NAFTA’s successor, the United States-Mexico-Canada Agreement.
Recent labor reforms in Mexico provide a foundation for a turnaround. But it is far from clear that Mexico can actually make it happen. That’s why Congress must insist that Mexico first demonstrate that workers there can form independent unions and bargain collectively before agreeing to any new trade deal.
As a test case to determine if Mexico’s new reforms are more than just window dressing, Mexico should focus on worker rights in the auto industry, which accounts for 37 percent of the country’s exports to the United States.
Wages for autoworkers in Mexico average about $2.80 an hour, less than 10 percent what a senior U.A.W. worker earns. Predictably, there has been an exodus of American auto jobs to Mexico, where productivity and quality are comparable to that of the United States. This movement has contributed to painful American job loss, depressed wages, separated families and lacerated communities. Real average hourly wages in the United States auto industry have slid 24 percent from 2002 to 2019 when adjusted for inflation.
The prelude to the G.M. strike began on the Monday after Thanksgiving in 2018. The company announced that it was closing four major American operations — including huge assembly plants in Lordstown, Ohio, and Hamtramck, Mich.— displacing thousands of workers.
Two of these plants will remain closed under the new agreement, and Lordstown has been sold to a small startup that has plans to make electric pickup trucks. G.M. has substantial excess capacity in the United States, according to auto analysts. A key reason is the large-scale transfer of production and jobs to Mexico.
G.M. committed $5 billion to expand its Mexican operations in 2014 and last year was the largest vehicle producer in Mexico — making 834,000 vehicles, almost all high-profit pickups and S.U.V.s. Through the end of September, the automaker had exported 92 percent of them to the United States, according to our calculations.
On Sunday, Ford Motor Company unveiled an all-electric version of the Mustang. As Ford put it in announcing the new vehicle, “Ever since the original Mustang took the world by storm in 1964, it quickly came to represent the best of the American spirit.” But the Mustang Mach-E will be assembled at a plant in Cuautitlán, Mexico.
G.M. and Ford are hardly the only automakers to take advantage of Mexico’s low wages. The Mexican auto and auto supply industry now employs 866,000 hourly workers — compared with 778,000 in the United States. The German automaker BMW recently opened a $1 billion assembly plant for its 3 Series in San Luis Potosí. For workers building this luxury sports sedan, the starting wage is under $2 an hour.
It’s true that Mexico has promised major labor reforms for workers under the last president and legislation to put those reforms into effect under the new progressive president, Andrés Manuel López Obrador.
But these reforms seem to largely exist today on paper, not on the ground.
Powerful forces are vigorously fighting raising the industry’s rock-bottom wages. Among these forces are corrupt, compliant unions that have signed innumerable so-called protection agreements with little or no employee involvement that protect employers, not workers. Transnational corporations, enjoying great profits because of suppressed wages, are also fighting reform. And, if these hostile forces weren’t enough, Mexican state institutions are notoriously weak in this area. Promises alone won’t transform this entrenched, corroded labor system.
President Trump has talked about the harmful impact of NAFTA on workers. But he has not included effective steps in the successor pact to make sure worker rights actually become a reality in Mexico. Instead, his administration has focused on measures that would purportedly dampen outsourcing and future American investment in the country, but that will most likely have little impact.
One proposal, for example, would change the rules that determine how much American content must be in Mexican exports to be exempt from tariffs. But, as the Mexican Automotive Industry Association has pointed out, about 70 percent of vehicles already qualify under the proposed change. So this would accomplish little.
What will accomplish something is this: Before Congress votes on a new trade deal, the Mexican government must demonstrate that autoworkers can form independent unions if they choose and bargain collectively with their employers. Success in the highly visible automotive sector would create a critical mass of independent unions to expand labor reform throughout the economy. Competitiveness would be based on productivity, quality and innovation, not on suppressed wages and neutered unions, and workers across North America would have a say in their economic future.
What NAFTA has shown is that once a trade agreement is ratified by the Congress, support evaporates for further reform. The choice today is between requiring a breakthrough of meaningful labor reform in Mexico, or locking in the damaging status quo, which will be disastrous for Mexican and American workers for many more decades.