The hang-up over the new NAFTA comes down to labor enforcement. This should be of no surprise to anyone who’s been paying attention. The United States has, for years, expressed concern over the historical alliance between Mexican government officials and business – including U.S. business – to frustrate labor rights.
To be clear, suppressing labor rights constitutes a false comparative advantage. If you are a fan of David Ricardo, you should want competition based on natural comparative advantage, not a false one based on thwarting the ability to organize and bargain collectively.
As I testified before the House Ways and Means Trade Subcommittee in May, it is precisely because labor is a condition of competition, subject to exploitation, that the founders of the global trading system sought to include enforceable labor rights in the original GATT regime. It was, of course, American industrialists, wanting the freedom to engage in labor arbitrage all over the world, who ensured that those rules never became part of the system.
In that light, it is not surprising that Mexican business interests have balked at the efforts Democrats are making to ensure that the labor rules in the new NAFTA are enforceable in a meaningful way. Again, as I testified in May, there isn’t a basis for trusting the traditional dispute settlement process to produce real enforcement of labor provisions, at least in part because — assuming you can get the government to bring a case in the first place — there is a prevailing structural bias against considering labor issues to be true trade issues. It may take a generation for that to change.
Both the Mexican government and these business interests contend that conducting labor inspections of facilities on Mexican soil constitutes an intrusion upon Mexico’s sovereignty. What’s interesting about that, though, is that the labor provisions are modeled on a set of textile enforcement provisions dating back to the agreement the United States reached with the Central Americans more than a decade ago.
Those textile provisions are in the new NAFTA, which Mexico happily signed a year ago.
We did not hear a peep about how those provisions constitute a breach of anyone’s sovereignty.
It starts to look, then, as though the issue isn’t about sovereignty at all. Instead, it’s about labor, and whether there is a serious commitment to treating labor issues as what they are – a factor of production. Suppression of labor rights is, simply put, an unfair form of competition.
Amid growing income inequality and the backlash against globalization, are we, as North Americans, serious about rejecting these false comparative advantages — especially when those advantages are derived from the exploitation of human beings?