USMCA labor case building: Former official

A likely legal action against a facility in Mexico for alleged labor violations of the US-Mexico-Canada Agreement (USMCA) would test the strength of the free trade deal that the US energy industry hopes to use to advance complaints against Mexico City.

Private parties such as US labor unions are likely to bring a case to the US trade representative that would allege violations in Mexico of the agreement's workers' rights provisions, said Jamieson Greer, who was chief of staff to former President Donald Trump's US trade representative, Robert Lighthizer.

"There is a great desire to have one of these cases," Greer, who is now a partner at King & Spalding's international trade practice in Washington, told Argus. "My guess is we will see one within the next few months."

Although the particular Mexican company was not identified, the case could have implications for energy investment that has underpinned US-Mexican commercial ties for years.

The USMCA, which replaced the North American Free Trade Agreement (Nafta) last year, requires Mexico to make its unions more democratic by giving workers greater ability to organize and bargain. The country also must set up independent bodies such as labor courts to resolve disputes.

Yet an independent board evaluating USMCA labor provisions said in December it found "serious concerns" with the implementation of labor laws in Mexico.

Many unionized workers are still unable to democratically elect their leaders, the board said, adding that many collective bargaining agreements in Mexico fall under an old system of "protection contracts" that keep bad working conditions and low wages in place.

Greer said a case would likely not be brought until after the US Senate confirms Katherine Tai, President Joe Biden's nominee for trade representative.

Greer did not say what company or industry might be targeted, but said both Mexican and foreign companies with operations in the country could be named.

US Senate finance committee chair Ron Wyden (D-Oregon) "is consulting closely with the new administration and stakeholders to make sure Mexico lives up to its obligations under USMCA," said Wyden's spokesman Keith Chu. "He is confident the Biden-Harris administration will act quickly to protect the rights of workers if Mexico does not keep up its side of the bargain."

The USMCA has more robust labor provisions and more powerful enforcement mechanisms than most trade agreements and the previous Nafta, including allowing private parties such as labor unions or companies to petition the US government to take action.

By Jens Erik Gould