Bloomberg is reporting this week that President Biden's administration is setting up its trade policy to prioritize enforcement of existing commitments by the U.S. partners over negotiating more deals to open new export markets.
This likely strategy for supporting American producers focuses on going after violations via dialogue, work with allies and use of dispute-resolution mechanisms in existing trade agreements rather than following the Trump administration's more blunt, unilateral tool of national-security tariffs, Bloomberg said. That could leave existing free-trade talks with the UK and Kenya in limbo for the foreseeable future.
Biden has signaled he won't immediately remove duties inherited from Trump, who enthusiastically dubbed himself “Tariff Man” for levying duties to pressure China, the European Union and even Mexico and Canada to address perceived injustices affecting American workers. Whether and how soon the President might remove the tariffs, and what he would seek in return, are open questions. But his approach to enforcement is likely to focus on negotiation, mediation and multilateral action rather than unilateral moves – more of a surgical than sledgehammer strategy, the report said.
The administration's starting point may be the U.S.-Mexico-Canada Agreement that went into force in July, replacing the North American Free Trade Agreement (NAFTA). Katherine Tai, Biden's nominee for U.S. Trade Representative, was instrumental in negotiating that deal's labor provisions. The AFL-CIO, the largest U.S. labor union and a traditional Democratic ally, has been promising since September to bring the first complaint over conditions in Mexico.
“We should expect action under the labor provisions of the USMCA pretty quickly,” said Jamieson Greer, a partner in the international trade practice at King & Spalding in Washington, who served as chief of staff to Trump USTR Robert Lighthizer. The new administration “is going to want to bring a case that's really targeted to a specific facility in Mexico that's as close to a slam-dunk case as you can get.”
The AFL-CIO and Democrats made strong labor rules and enforcement mechanisms for Mexico a key demand to win their support for the USMCA in 2019, reflecting concerns that the pact it was replacing lacked both. Cathy Feingold, the AFL-CIO's international department director, said she hopes the union will be a petitioner in a labor complaint under the USMCA within the first 100 days of President Biden's administration after COVID-19 and other factors complicated the process of documenting ongoing labor violations in Mexico last year.
U.S. labor unions have long complained that Mexican factories under NAFTA denied workers' rights in order to keep down salaries and unfairly undercut America on cost. The AFL-CIO has highlighted cases of alleged harassment, like the example of Susana Prieto Terrazas, an independent trade-union lawyer in Mexico who was jailed in the northern state of Tamaulipas last June after working to organize employees at an auto-parts plant.
The USMCA went into effect in mid-2020. In November, Rep. Richard Neal, D., Mass., and Chairman of the House Ways & Means Committee, criticized the Trump administration for a lack of enforcement action. He cited union leaders and labor lawyers in Mexico facing violence, saying workers were being denied their basic rights on a daily basis.
Under USMCA provisions, any member of the U.S. public can submit a petition alleging denial of rights at a facility in Mexico. An inter-agency U.S. committee then reviews to see if there's sufficient, credible evidence. If there is, the committee then requests that Mexico conducts its own probe. While there are a number of steps focused on remedying any violation, the U.S. ultimately can rescind duty-free treatment on products from a particular facility or even block imports altogether for repeated violations.
Tai is awaiting a hearing from the Senate Finance Committee as part of her confirmation process. In a speech last month, she mentioned the USMCA's “groundbreaking labor and environment provisions” and promised to work to make sure the deal “lives up to its potential.” Both Treasury Secretary Janet Yellen and Commerce Secretary nominee Gina Raimondo in their hearings discussed enforcement with regard to another top U.S. trade partner – China.
Tai was the chief lawyer for House Democrats seeking to strengthen the USMCA's labor provisions after President Trump's deal was initially reached with Mexico and Canada in 2018.
Tai has also learned from the examples of past U.S. failures, Feingold said. That includes Guatemala, where the first-ever labor complaint filed under a free-trade deal was brought by the AFL-CIO and local unions in 2008 over the nation's failure to ensure the right to organize and acceptable working conditions. The case dragged out for almost a decade, ending with an arbitration panel deciding that the evidence failed to prove Guatemala's behavior was “sustained or recurring” and “in a manner affecting trade.”
In the USMCA, Democrats negotiated to ensure that violations in Mexico would be assumed to affect investment unless proven otherwise, and the need to show “sustained or recurring” violation doesn't apply to workplace violence.
Tai “has a vision for what went wrong in the past,” Feingold said. “She was key to building that model of swift and effective enforcement.”
So, we will see. The Biden administration clearly has a more conventional trade policy orientation than the previous administration did, but it likely will be tested early and often by high stakes cases involving the EU, China and others. These are fights producers should watch closely as they proceed, Washington Insider believes.