Mexican Official: Law to Change Protection Unions Will Pass Before 2018 Ends

The changes to Mexican labor law that would end captive unions are definitely going to happen before the Jan. 1 deadline described in an annex to the labor chapter of the new NAFTA agreement, according to Jesus Seade, who served as chief negotiator for the incoming Mexican president. "That chapter, more than any, was extensively discussed with the legislature," he said. "Mexico has what we call 'cowboy trade unions,' which are basically bogus trade unions, corrupt, in cahoots with the local authorities. Now all of that is going out the window."

It's exactly that kind of change that trade-skeptic Democrats insist is critical for them to have a chance to vote yes to approve the U.S.-Mexico-Canada Agreement. They need to believe the labor chapter will have an effect on stagnant wages in Mexican manufacturing (see 1809280038). Sen. Elizabeth Warren, in a hallway interview with International Trade Today on Oct. 10, said: "It's clear there are some parts [of the new NAFTA] that are better, but a lot of problems that are not resolved." She pointed to the captive union issue in Mexico. Seade, who was speaking at the Wilson Center's Mexico Institute Oct. 10, said his boss, Andres Manuel Lopez Obrador, gave him carte blanche at the table, with the exception of language regarding the energy sector. "You will intervene only when you can help," is how Seade described AMLO's instructions.

Seade has known U.S. Trade Representative Robert Lighthizer for more than 25 years, since they were on opposite sides of a dispute over antidumping duties on Mexican cement. "Bob Lighthizer is very demanding, he's really a tough guy to deal with," Seade said. But he said he believes both Mexico and the U.S. are happy with how the treaty ended up. Seade quipped: "Every free trade agreement pertains of two parts. A sentence: 'Hereby we create free trade,' and another 1,000 pages, 'Well, not quite.'" In the case of the tighter rules of origin for autos, Seade said, "If you look at it superficially, particularly if you're an economist and you have certain concerns about efficiency and so on, the treaty seems to be a step in the wrong direction, in the sense that it is somewhat protectionist."

Seade is an economist, and agrees broadly with the view that protectionism is bad. But, in this case, he said, he thinks the changes may benefit both Mexico, as the low-cost country in the triad, and the U.S., if foreign automakers accelerate investments within its borders. To say that North American automakers will become less productive because they will be protected from competition, he said, "that's a very static view of the world."

Seade is proud of the changes to the sunset clause, which Mexico now calls "a sunrise clause." He said that if it had existed in NAFTA 25 years ago, the agreement to open trucking across the countries might have been changed, since "trucking became an absolute political nightmare for our friends to the North."

With the six-year review and 16-year lifetime, "NAFTA is not going to be killed lightly or on a whim," he said. That's because if a country wants a clause renegotiated at the six-year mark, the next year, it can say it's satisfied, and then it will be extended 16 years. But if it's not satisfied, it has to declare that in each of the next 10 years.

But Seade did point to some changes to NAFTA that will be costly for Mexico. Tighter rules of origin for textiles around yarn-forward standards is a loss, he said. The patent protection for biologics of 10 years will result in gains of "billions and billions" for pharmaceutical firms, he said, and developing generics for standard drugs will also become more difficult.

Warren called this "a plain old sellout to big industry. Now Canadians and Mexicans are going to pay more for their drugs and that's somehow going to help anyone but Big Pharma? Make consumers worse off in all three countries so the giant corporations can make more in profits?"

Seade was asked what happened when he met President Donald Trump. He called him "amazingly impressive. He's a big man. With a big volume but not a soft belly. A strong cylindrical man, very dashing with his fantastic mane. He seems to come out from something of the future, from outer space. You cannot ignore him. he's a very engaging man by any standard."