New NAFTA’s Labor Playbook Hinges on Agency Trump Tried to Gut

A small diplomatic agency President Donald Trump has repeatedly tried to defund will soon be on the front lines of implementing the new North American trade deal and tasked with helping Mexico meet its labor commitments—a key part of the pact.

The bill to implement the newly revised U.S.-Mexico-Canada Agreement, passed in the House on Dec. 19, would give $210 million in coming years to the Labor Department’s Bureau of International Labor Affairs, known as ILAB, which promotes workers’ rights overseas.

The funding can be used to station up to five labor attaches in Mexico, who would serve as the Labor Department’s eyes and ears in the country. The attaches, once in place, would coordinate with the Mexican government, unions, and American employers; issue quarterly reports on Mexico’s efforts to improve workplace conditions; and essentially backstop the U.S. government’s quest to ensure Mexico fulfills labor commitments that were crucial to getting unions and Democrats to back the NAFTA replacement.

ILAB will need to staff up, both in Washington and in Mexico, to meet its expanded mission, but the bureau’s ability to fulfill its role in Mexico is largely untested. The DOL is working with the U.S. Embassy in Mexico to establish attache positions and select candidates for the posts because the department does not have any officials in the country who focus exclusively on labor issues, a department spokeswoman said.

Yet the Trump administration’s prior approach to ILAB funding also calls into question how the bureau will handle an assignment full of political and economic landmines. Just nine months ago, the Trump administration had called for a 79 percent spending reduction for ILAB, which had about 113 total staffers at the end of last year. The White House requested those cuts in each of the last three fiscal years, but Congress ignored the proposals.

The proposed cuts would have eliminated the bureau’s overseas grant programs. The White House’s budget proposal for fiscal 2018 called the grants “largely noncompetitive and unproven,” and said ILAB should focus instead on making trade deals fair for American workers.

Now, with the trade deal speeding toward ratification, ILAB will soon be confronting longstanding labor concerns in Mexico under strict reporting requirements. The bureau’s mission stems from one of the main reasons Trump pushed for a rewrite of NAFTA: Mexico is working to implement a landmark labor reform bill and other USMCA commitments, with the goal of eradicating decades of labor abuses that allowed companies to save on workforce costs by manufacturing goods in Mexico and shipping them tariff-free throughout North America—in effect, undercutting the U.S. labor market.

“ILAB has always played a key role in the enforcement of labor provisions of U.S. Free Trade Agreements and trade preference programs to create a level playing field for U.S. workers and companies,” said Martha Newton, the department’s ILAB director, in a statement.

“ILAB also helps many countries, including Mexico, with capacity-building technical assistance to enforce and improve labor protections. We look forward to continuing those efforts under USMCA and supporting Mexico’s commitment to address labor law reform.”

ILAB and labor department leadership will have to determine how to effectively allocate its newfound resources and direct the work of the labor attaches without pushing Mexico’s government and businesses too hard. The attaches would be responsible for issuing quarterly reports to a newly created interagency committee, which will be required to submit a report to Congress every 180 days for 10 years.

Labor Secretary Eugene Scalia will co-chair the interagency committee and be tasked with reviewing information from the attaches and making recommendations for enforcement actions if Mexico runs afoul of its commitments.

Political Will

The implementing legislation would give ILAB $30 million through 2027. The remaining $180 million would be allocated to ILAB through 2023 to support Mexico’s overhaul of its labor justice system. The money would be used for grants to support groups working to reduce employment discrimination, child labor, forced labor, and human trafficking.

That money will supplement an additional $67 million Congress agreed to make available for ILAB next year, in a federal spending package Trump is expected to sign by Dec. 20.

“Obviously, I think it’s good to have the funds dedicated. Then, you want to see how the funds are expended,” said Thea Lee, president of the Economic Policy Institute, a progressive think tank. She was previously deputy chief of staff at the AFL-CIO and spearheaded the union umbrella organization’s work on trade.

“I think all of this will require a lot of monitoring going forward,” Lee added.

The Mexican government is in the early stages of implementing sweeping labor law changes, including granting workers the right to freely organize unions, bargain collectively with their employers, and vote on labor contracts. The ILAB grants could be used to train Mexican workers and trade unions to take advantage of the new legal system, to assist the government as it sets up labor courts, and to coach employers on their new responsibilities.

But eliminating Mexican unions’ traditional practice of cozying up to management and hammering out contracts without workers’ approval is no simple task even with the bureau’s funding boost, multiple former ILAB officials told Bloomberg Law.

Political considerations will also loom large. Previous infusions of funding have not come with the political will needed to affect efforts on the ground, said Andrew Samet, who ran ILAB for nearly all eight years of the Clinton administration.

“If ILAB and the Department of Labor is to be effective in the use of those resources, it also implies an overall political-level commitment in the administration, and it needs the engagement of other agencies and the White House at senior levels to want to make sure that the policy objectives behind those resources are actually being met,” said Samet, who oversaw the Clinton administration’s implementation of labor provisions in the original NAFTA.

There also must be “accountability within the administration and back to Congress,” he said, given the long timeline of implementation.

Samet, now an international trade lobbyist, cautioned, however, that Mexico will have the ultimate responsibility to fulfill its labor commitments.

Attache Conflict

The ILAB labor attache program was the source of a brief dispute between U.S. and Mexican trade officials shortly after the two countries and Canada agreed earlier this month on revisions to the USMCA that bolstered its labor provisions—and helped win the backing of AFL-CIO President Richard Trumka.

The conflict arose when Mexican officials accused United States negotiators of breaking their word by introducing an implementing bill that allows the U.S. government to send inspectors—referring to the ILAB attaches—into Mexican workplaces. The Mexican government said it was satisfied after U.S. Trade Representative Robert Lighthizer provided assurance that the attaches will not be inspecting Mexican factories.

But that begs the question: How will the labor attaches actually monitor conditions in Mexico?

ILAB’s labor attache program previously stationed diplomats at U.S. embassies across the globe, where they served as neutral experts on labor conditions in their assigned countries. They often partnered with business groups to help them root out inhumane conditions in their supply chains.

Labor and employment issues handled by the U.S. Embassy in Mexico are currently the responsibility of a State Department foreign service officer who has the title of labor counselor, the DOL spokeswoman said.

“The difference between DOL Labor Attaches and the State Department officials in labor-reporting positions is that the DOL attaches will be focused full-time on labor issues and will work primarily on carrying out and supporting the international responsibilities of the U.S. Labor Department in Mexico,” the spokeswoman said in a statement.

Former ILAB officials and individuals at private sector groups who partnered with the agency said the attaches facilitate information gathering and ongoing engagement with labor stakeholders, but don’t investigate specific businesses.

The attaches are “a great resource for American business and for our industry, not only in terms of helping us on the ground but also giving us the information that we wouldn’t otherwise have,” said Nate Herman, senior vice president of supply chain at the American Apparel & Footwear Association.

Herman recalled positive in-person and email interactions with the labor attache to Vietnam amid negotiations on the Trans-Pacific Partnership. The attache’s briefings on the Vietnamese labor situation gave the AAFA valuable intel that could’ve been used to apply pressure on Vietnam’s government had Trump not withdrawn the U.S. from the deal, Herman said.

The AAFA previously joined other business groups and the AFL-CIO in lobbying Congress to spare ILAB from the budget cuts the White House had requested.

“We’re hoping that the tide has now turned, and we won’t have to be fighting on the Hill every year for this,” Herman said, referring to adequate funding for ILAB.