MEXICO CITY (Reuters) – Mexican businesses are concerned that a tweak to dispute resolution mechanisms under a new North American trade deal could be used to stifle exports, top industry associations say.
Revised terms were agreed this month for the U.S.-Mexico-Canada Agreement (USMCA), a deal replacing the 1994 North American Free Trade Agreement (NAFTA), after months of wrangling to ensure tougher labor standards in Mexico.
The United States had proposed sending inspectors to monitor Mexican labor practices in an effort to ensure its southern neighbor is not unfairly undercutting U.S. competitors.
Mexico resisted this proposal, and the two sides finally agreed on an addendum that would create panels to oversee Mexico’s compliance with its own labor laws.
But businesses fear the details of how disputes are settled through the panels could hinder export activity.
The USMCA addendum says the panels are not to restrict trade but also states that “upon delivering the (complaint) to the respondent party, the complainant party may delay final settlement of customs accounts related to entries of goods.”
“We’re waiting for what the interpretation will be, since the plaintiff can block the defendant’s exports,” said Lorenzo Roel, head of the labor commission at Mexican employers’ confederation Coparmex. “That’s one of the concerns.”
Roel said disputes had been used to hold up Mexican exports in the past and called for a monitoring commission to be set up.
Mexico’s economy ministry said it would work with the United States and Canada to ensure firms are not subject to abuses.
“We will have a monitoring system with the labor ministry along with the private sector,” the ministry told Reuters.
Kenneth Smith, Mexico’s lead USMCA negotiator from 2017-18, flagged his concern about the new language, saying on Twitter that it risked “imposing border measures against companies accused of labor violations BEFORE the panel’s decision.”
Smith said the amendment should be corrected in the first periodic revision of the USMCA, which is still awaiting final ratification in the United States and Canada.
Mexican industry association Concamin said more care could have gone into setting out the dispute panel rules.
“Many (USMCA) chapters were rushed … their interpretation isn’t 100% clear,” said Concamin president Francisco Cervantes.
Reporting by Sharay Angulo; writing by Drazen Jorgic; editing by Nick Macfie