From NAFTA to USMCA: what has changed and how does affect the Mexican automotive industry and its workers

In 2020, after 18 years of NAFTA, the new United States–Mexico–Canada Agreement (USMCA) took effect. USMCA comes with new rules of origin that raise the regional value content requirement for vehicle and autoparts from 62,6% to 75% and requires that 40-45 percent of auto content must be made by workers earning at least $16 per hour. It also has a much more ambitious labor chapter that requires Mexico to adopt and maintain specific measures “necessary for the effective recognition of the right to collective bargaining” and includes a novel “rapid response mechanism” that allows a review by a panel of independent labor experts of labor violations by specific firms (Polaski 2022). 

NAFTA has been very much criticized for its very negative impacts on work and employment in the automotive sector. In the United States and in Canada it has resulted in distruction of employment via the relocation of automotive production towards Mexico as well as in reduction of wages and labor standards. In Mexico, while it has contributed to the rapid growth of employment in the automotive sector, it has trapped the Mexican automotive industry in the most labour intense and lowest value-added links of the automotive value chain, ultimately contributing to worsening work and employment conditions (Crossa 2021). 

USMCA is part of a new generation of free trade agreements that are expected to address some of these negative effects on employment and work (Polaski 2022a). Two years after its introduction what can we say about these expectations? What has happened so far in the Mexican, US and Canadian automotive industries that can be linked to the application of USMCA? What do these developments tell us about the conditions under which USMCA can / could fullfill these expectations? What are their implications in terms of value creation and value capture by these different national industries? What do these implications tell us about the power relations between the core and the semi-periphery of regional automotive value chains and the future of work in these particular contexts? 

Sandra Polaski (Global Economic Governance Initiative, Boston University/ former Deputy DG ILO) and Mateo Niell Crossa (Istituto Mora) will discuss these very important questions from two different angles. 

Mateo Niell Crossa will question the consensus that has been recently built around the benefits of the USMCA's automotive rules of origin, advocating that they will enhance industrial agglomerations and auto related nearshoring. Critically dialoguing with this argument, his presentation will offer an alternative historical excavation of the causes leading to the creation and promotion of the USMCA. In doing so, it will highlight the subordinate and dependent role Mexico has had, and will continue to have, in the process of deepening unequal regional protectionism underpinned by a series of trade agreements. Through an analysis of the new rules of origin shaping auto content produced in Mexico, Mateo Crossa will argue that this new trade agreement will serve to deepen the US corporate dominance of Mexico's automotive production apparatus, to the detriment of non-US firms operating in the country and Mexican national productive development. The implications of such a development for work and employment will be also discussed. 

Sandra Polaski will discuss why labor issues were so salient in the original NAFTA, situating it in the agreement’s model of a continent-wide production platform, with deep integration of manufacturing but without any social acquis or fiscal transfers.  She will briefly sketch the actual labor market experience in the three countries under NAFTA to explain why a stronger labor chapter became essential to concluding the USMCA, reflecting the power relations between the countries.  Her presentation will then highlight the key changes and main innovations of USMCA’s labor clause compared to NAFTA, particularly with respect to the fundamental changes required of Mexico.  She will describe how they are being implemented by Mexico and enforced by the US and assess whether the USCMA is likely to serve as a template for future labor and social clauses. She will conclude with a reflection on whether these innovations will contribute to a social upgrading of the automotive industry in Mexico. 

Mateo Niell Crossa is research professor at the Instituto Mora in Mexico and has recently published a series of articles on the impact of NAFTA and UMSCA on the Mexican automotive industry.

Sandra Polaski has been a policymaker, negotiator and analyst on labor and social impacts of globalization.  She was formerly the Deputy Director General for Policy of the ILO and is now a senior research scholar with the Global Economic Governance Initiative, Boston University.  She has published widely on trade and labor topics.

The seminar will take place online at: https://us02web.zoom.us/j/84636222109?pwd=SXIrZWszUWNFRHZCMDBPK2JScG0rZz09