GM USMCA Labor Case First of Many, Mexican Private Sector Expects

While the timing of the announcement of the first rapid response mechanism complaint was clearly political, according to the CEO of the Business Coordinating Council of Mexico, that doesn't mean that businesses shouldn't expect a stream of complaints to follow. Sergio Gómez Lora, who was speaking on a Thompson Hine webinar May 12, said that's challenging for companies, because it is the union, not their own actions, that could be the problem, even though it is the company that could face the penalty of a tariff on its exports to the U.S.

"I know that this was a big surprise for GM," Lora said. "Companies have the challenge to make sure everything is right but at the same time not interfere in the process."

Lora said USMCA is off to a rocky start, with the U.S. concerned about Mexican food labeling regulations, digital services changes and a ban on the importation of genetically modified corn and glyphosate. But he said the rewritten NAFTA does bring opportunities for companies, particularly in the wake of the COVID-19 pandemic and the China-U.S. trade war. He said the pandemic highlighted the fact that "having a supply chain that is far away could pose risks." And he said there is an opportunity for companies to invest in Mexico to do assembly, packaging and testing of semiconductors, all currently concentrated in Asia.

Mora said that companies are thinking about reducing risk in their supply chains, and the U.S. government is consulting with companies in its "very ambitious effort to look at this in detail." He said he expects supply chain issues to be a central discussion in North America over the coming months.

Fellow panelist Andrea van Vugt, global director at Harper & Associates in Canada, said companies she talks with are concerned that if they invest in making masks, for instance, they are going to lose money when the memory of what happened during the pandemic fades. They are very worried that the "lowest cost driver is going to be back … in three to four years," she said.

Lora noted that it's not just changes to NAFTA, and a heightened focus on labor rights at Mexican factories, that are complicating business in Mexico. An outsourcing law that passed last month bans outsourcing unless the contracts cover tasks that are not part of the corporate purpose. Companies are required to bring jobs back in house by September 2021 if the outsourcing they were doing does not follow the law. "What is going on in Mexico is quite controversial," he said.

Both van Vugt and fellow Canadian Nadia Theodore believe that the U.S. and Canada will make significant progress on a united approach to carbon border adjustment taxes in the next year or so. Theodore, the top government relations executive at meat and faux meat company Maple Leaf Foods, said, "Our goal is to be the most sustainable protein company on Earth," but said it's equally important that the 13,000-person company has to remain competitive.

She said talk of a carbon border adjustment tax is building because "there is a recognition that … we do need to urgently deal with issues around tackling climate change."