Mexican Trade Team: Regardless of Canada The Deal Between the U.S. and Mexico Still Stands…


So much good news: WASHINGTON (Reuters) – The trade deal between the United States and Mexico will stand even if Canada does not come to an agreement with the Trump administration in the renegotiation of the North American Free Trade Agreement (NAFTA), Mexico’s foreign minister said on Monday.

“If for any reason the government of Canada and the United States do not reach an agreement, we already know that there will still be a deal between Mexico and the United States.”

~ Mexican Foreign Minister Luis Videgaray (link)

Remember those “private meetings” between Jesus Seade and Robert Lighthizer?

It is said: a picture is worth a thousand words.  Cue the audio visual:

The incoming Mexican President, Andrés Manuel López Obrador,(AMLO)’s representative is Jesus Seade. The outgoing Mexican President Pena Nieto’s representative is Mexican Secretary of Economy Idelfonso Guajardo.

Why the joy in Seade and the defeated Guajardo?  The answer is in the details:

One of President Trump’s principal objectives in the renegotiation is to ensure the agreement benefits American workers.  The United States and Mexico have agreed to a Labor chapter that brings labor obligations into the core of the agreement, makes them fully enforceable, and represents the strongest provisions of any trade agreement.

Key Achievement: Worker Representation in Collective Bargaining

The Labor chapter includes an Annex on Worker Representation in Collective Bargaining in Mexico, under which Mexico commits to specific legislative actions to provide for the effective recognition of the right to collective bargaining.

BOOM !!

Key Achievement: Labor Rights Recognized by the International Labor Organization

The Labor chapter requires the Parties to adopt and maintain in law and practice labor rights as recognized by the International Labor Organization, to effectively enforce their labor laws, and not to waive or derogate from their labor laws.

Additionally, the chapter includes new provisions to take measures to prohibit the importation of goods produced by forced labor, to address violence against workers exercising their labor rights, and to ensure that migrant workers are protected under labor laws.

Key Achievement: New Labor Value Content Rule

To support North American jobs, the deal requires new trade rules of origin to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 USD per hour.

Why is this important?

Massive consequences.

♦First, this is the part where AMLO gets a key win for his new Mexican economic agenda; the right of workers to form collective bargaining agreements, ie. unions.  Mexico’s President-elect Andrés Manuel López Obrado is not only coming into office with a mandate, he is also bringing with him a majority parliament on his agenda.

By putting the rights of Mexican workers in the forefront two win/win objectives are accomplished for both AMLO and Trump.  (1) The reason U.S. corporations moved to Mexico was party to exploit cheaper labor.  Now that those corporations have invested themselves in Mexico they will have to agree to collective bargaining; thereby raising the standard of living for Mexican workers (an AMLO goal).  (2) For future investment considerations the low-wage incentive of U.S. manufacturing is now eliminated (a Trump goal).

Multinational vulture corporations can no longer bribe local Mexican officials for low-wage regional labor.  The Mexican worker, with AMLO legislation, will have the ability to fight off exploitation.

Manufacturing corporations will need to raise wages (AMLO win), and corporations will be less likely to move out of the U.S. based on the wage analysis portion of the total cost equation (Trump win).  I have no doubt this was part of the ‘closed-door’ private discussions between Seade and Lighthizer. No doubt.

♦Secondly, how is the left-wing political opposition in Canada and the U.S. going to fight against this deal which includes protections for collective bargains and union representation?   Trump fractures the Democrats/Liberals by supporting a policy that they claim is at the heart of their support base.   Do you really think Senator Patrick Leahy, or Senator Bernie Sanders are going to go on record against organized labor?

How can Justin or Chrystia from Canada going to argue against higher Mexican wages?

The U.S./Mexico 75% auto rule of origin for manufacturing parts works in synergy with the demand that 45% of those manufacturing components must come from assembly and manufacturing wages of $16/hr or higher.   In essence AMLO and Trump are controlling the calculations within the Total Cost of Manufacturing.

Watch the Canadian Leftists try to reconcile today’s events while not yet absorbing how the projected Mexican wage increases are factored into the total agreement. (first six minutes):

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Here’s the Mexican trade team press conference.  Use the ‘closed caption’ for the English sub-titles:

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Within this agreement President-elect Lopez-Obrador  and President Trump have fractured Wall Street’s exploitative multinational Big Club.  No doubt, despite his hundreds of millions spent, U.S. Chamber of Commerce Tom Donohue is finally seeing significant defeat on the horizon.

The first White House visit by AMLO is going to be epic!

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