Sharp differences over labour surface at NAFTA trade talks

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Mexico City | Reuters — Tensions over sharp differences in pay between Mexican workers and their Canadian and U.S. counterparts surfaced on Sunday as negotiators discussed labour market rules in talks to overhaul the North American Free Trade Agreement.

Canada’s biggest private-sector union said NAFTA should be scrapped if Mexico cannot agree to better labour standards, clashing with Mexican business leaders who argued that workers rights were a matter for each country to resolve internally.

Mexican political and corporate leaders firmly resist demands to bring wages into line with U.S. and Canadian levels, arguing the big cost advantage the country enjoys over richer peers should decrease as economic development advances.

Labour union leaders in the two wealthier nations say laxer labour standards and lower pay in Mexico have swelled corporate profits at the expense of Canadian and U.S. workers, making resolution of the issue a major battleground of the NAFTA talks.

Jerry Dias, national president of Canadian union Unifor, said NAFTA had been a “lousy trade agreement for working-class people” and that the union was pushing his government to walk away from the talks if it could not secure them a better deal.

“If labour standards aren’t a part of a trade deal, then there shouldn’t be a trade deal,” Dias told reporters in Mexico City on the sidelines of a second round of negotiations to update the 1994 trade agreement among the three countries.

Worker pay is a sensitive issue in Mexico, a country riven by sharp inequality and which has struggled for years to alleviate poverty, which affects well over 40 per cent of the population.

Bosco de la Vega, head of Mexican farm lobby group the National Agricultural Council, said more trade, not intervention in labour markets, was the best way for the region to grow economically.

“Mexico can’t interfere in the labour market issue in the United States and Canada. We ask the same: that they don’t interfere in these matters,” he told reporters at the talks.

Mexican business leaders argue that integrating Mexico into North American supply chains has made the entire region more competitive. Recent studies have shown, however, that wages in Mexico have experienced significant downward pressure.

Deal breaker?

Given Mexico’s higher inflation rates, wages in that country are lower now in real terms than when NAFTA took effect, according to a report published last month by credit rating agency Moody’s.

From 2001 to 2015, Mexican hourly wages in U.S. dollars grew only nine per cent, less than in the U.S. and far below the 120 per cent increase in Brazil, said the Moody’s report.

Some Mexican private-sector negotiators have described the labour market as a potential deal breaker in the talks, although there is a growing consensus on the need to improve pay.

Most formally employed workers earn significantly more, but the statutory minimum wage is a mere 80 pesos a day (C$5.57).

Federico Serrano, head of Mexican exporters’ lobby Index, said a recent survey showed average pay in the manufacturing sector was three to four times higher than the minimum wage.

But workers in Mexico’s auto industry, the main source of the country’s US$64 billion goods trade surplus with the U.S. — a key irritant to U.S. President Donald Trump — earn far less than their U.S. counterparts.

According to the Center for Automotive Research in Ann Arbor, Michigan, Mexican auto workers earn average hourly wages of less than US$6 excluding benefits, compared with about US$28 in the U.S.

Steve Verheul, Canada’s chief NAFTA negotiator, told reporters his country would defend its interests at the talks, and when asked about the need for tougher labour standards, said: “It’s an important issue.”

Reporting for Reuters by Dave Graham and Sharay Angulo; additional reporting by David Lawder and Michael O’Boyle in Mexico City.

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