USMCA labour provisions to define North America trade

Significance

US President Joe Biden’s trade representative Katherine Tai was central to creating the USMCA’s labour provisions, and Biden has made enforcing them a priority in his trade agenda. Labour disputes over workers’ rights to unionise could lead to goods from targeted firms being blocked at the border.

Impacts

• Once a first labour dispute sets a precedent, the number of cases against Mexico is likely to rise.
• Firms in Mexico will have a growing incentive to respect freedom of association, facilitating the Mexican government’s current reforms.
• USMCA wage requirements will force firms to reorganise their supply chains or pay tariffs.
• Restrictions on Mexico launching RRM action may prompt it to tackle disputes through the lengthier ‘state-to-state’ dispute mechanism.