Trump Warned New Bill in Mexico Would Lure More Jobs South

(Bloomberg) -- The largest labor federation in the U.S. said new legislation in Mexico would encourage more jobs to flee south of the border and could throw a spanner into the works of North American trade talks next week.

The AFL-CIO said the legislation would undermine the negotiating position of labor unions, driving down already low wages. It was proposed by two senators from Mexico’s ruling PRI party and is scheduled for debate after congress reconvenes Feb. 1.

Trump Warned New Bill in Mexico Would Lure More Jobs South

The criticism may strike a chord with President Donald Trump, who has made better conditions for Mexican workers one of his requirements for revising the North American Free Trade Agreement as he seeks to stop U.S. companies from moving to Mexico. The U.S. is already running out of patience with Canadian and Mexican resistance to key American proposals ahead of talks in Montreal, two people familiar with the matter said.

The bill "would limit freedom of association and promote precarious work, likely driving Mexican wages even lower and encouraging further outsourcing of American and Canadian jobs," Richard Trumka, AFL-CIO’s president, wrote in the letter addressed to U.S. Trade Representative Robert Lighthizer and dated Dec. 12.

The talks will start on Jan. 21, two days earlier than planned and last for nine days as officials push to deliver results for a cabinet ministers’ meeting on the final day, according to two other people familiar with the plans.

Living Wage

Among other changes, the Mexican bill eliminates all restrictions on subcontracting, including those that require “common-sense” compliance with health and safety laws, according to Trumka’s letter. Its overall impact would be to prevent unions fighting for a living wage, the letter said.

"This will come up in Montreal in a big way,” Ben Davis, director of international affairs for the United Steelworkers union, a member of the AFL-CIO, said in an interview. While unions may not be directly re-negotiating Nafta, their input on the sidelines could influence the talks.

The U.S. is serious about its threat to withdraw from Nafta if there’s no breakthrough on proposals the Trump administration has made that are intended to rebalance trade, said one of the people cited earlier, who spoke on condition of anonymity because the negotiations aren’t public. One area they want progress is Mexican labor conditions, they said.

Mexican assembly-line workers earn about one-tenth of what their U.S. counterparts make. Adjusted for productivity, base wages for workers in plants that make transportation equipment rose 20 percent in Mexico between 2006 and 2016, according to calculations by Boston Consulting Group Inc.. In China, wages climbed 157 percent over the same period.

Mexico’s Labor Ministry directed requests for comment to the two senators sponsoring the bill, who didn’t respond to questions sent by phone and email. The bill, which is subject to change during congressional debates, states that it would encourage job creation, protect worker rights and would fine those who mislead subcontractors.

Unions on both sides of the border say the bill would erode recent gains to improve workers’ bargaining power in Mexico.

"There’s no way you can get rising wages in Mexico as long as there’s no worker capacity to organize," Brian Finnegan, AFL-CIO’s global worker rights coordinator, said in an interview. He said unions have been meeting with U.S. government officials on the matter.

In Montreal, unions will make "some firm statements that Mexico isn’t moving in the right direction," Finnegan said.

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