State-to-state dispute settlement issue potentially could be solved through an exchange of letters, says executive of Mexican business association.
Mexican Ambassador to the U.S. Martha Barcena on Thursday said she is encouraged with the U.S.-Mexico-Canada Agreement’s progress on Capitol Hill, after the Mexican Senate approved the pact by a vote of 114-4 on Wednesday.
“With the trust that we have built over the last 25 years, NAFTA has been fundamental, and USMCA will be fundamental,” Barcena (pictured above) said during an event at the Wilson Center. “So it is my impression that many congressmen and congresswomen and senators understand this. Just as Speaker [Nancy] Pelosi has been saying, we need to find a path to the yes.”
NAFTA has been active since Jan. 1, 1994.
Mexican labor reform legislation passed earlier this year provides for secret worker votes for union representation and establishment of labor courts, which satisfies requests that Democrats have made since the original negotiation of NAFTA, Barcena said.
Labor courts will replace the current Mexican system of conciliation and arbitration boards and will be the main tool for implementation of labor reform in Mexico, she said.
Barcena said she believes USMCA’s state-to-state dispute settlement mechanism, a carryover from NAFTA, provides for adequate enforcement of the new agreement if each country keeps active its roster of eligible panelists to adjudicate cases and agrees to immediately engage with the mechanism in case of any dispute.
House Democrats have raised concern about a flaw in the mechanism, in which a member government can block the formation of a panel once its roster of people to serve on the panels expire.
Barcena said the Mexican government is already in close contact with members of a House working group tasked with ensuring the USMCA implementation package reflects Democrat demands on issues including labor, the environment, enforcement and pharmaceutical pricing.
Barcena hopes the working group will work with Mexico, Canada and the executive branch to allay Democrats’ enforcement concerns, and she said the “best scenario” would be for the House to approve USMCA before the August recess.
Speaking later during the Wilson Center event, Linda Dempsey, vice president of international economic affairs policy for the National Association of Manufacturers, also pointed to Pelosi’s establishment of the working group as a positive sign for USMCA’s U.S. approval prospects.
“We are bullish on this,” Dempsey said. “We believe this can, and absolutely will, get done this year. We’d like it as soon as possible, but we also want this process to work between the House Democrats and the administration, to produce a deal that will garner wide and broad bipartisan support.”
USMCA implementing legislation has been introduced in Canada’s parliament, but decisive movement on the bill could be put off until U.S. Congress shows more signs of forward action.
Canadian Foreign Minister Chrystia Freeland last week told reporters that her country is planning to move forward on USMCA approval “in tandem” with the U.S.
One issue casting a cloud over USMCA is U.S. tariff threats, Sergio Gomez Lora, head of the Mexican Business Coordinating Council’s U.S. operation, said during the Wilson Center event.
“I believe we should move forward as soon as possible putting into force the USMCA,” Lora said. “But it is very clear … at some point this issue of the tariff threats has to be addressed, because if not, we will not be able to reap the full benefits of the USMCA.”
President Donald Trump tweeted on May 31 that he intended to impose tariffs on Mexico starting at 5%, to gradually increase until Mexico stops the flow of illegal migration into the U.S., before the U.S. and Mexico reached a deal June 7 that provided for the suspension of threatened tariffs.
In making any tweaks to USMCA, it is important to not “unravel” the text of the agreement by reopening it, Lora said.
He said that the flaws in the state-to-state dispute settlement mechanism potentially could be corrected through a trilateral exchange of letters.
“It’s very simple. We have to select 30 arbitrators,” Lora said, referring to the state-to-state dispute settlement roster requirement. “And … we have to agree that once a party complains, the system is established automatically. If we agree to that and we bring those letters to Congress and to the Mexican Senate, then we have a very efficient tool to address this enforcement concern.”
