President Donald Trump has gone after Mexicans for stealing U.S. jobs. Now he’s trying to get workers south of the border a pay raise.
It would be in America’s self-interest. Trump wants to stop U.S. companies from moving to Mexico, where workers earn a quarter of what U.S. counterparts make. Closing that gap might convince American firms to stay, which is why U.S. negotiators will push for higher wages and better conditions for Mexican workers when negotiations on revising the North American Free Trade Agreement get underway next week.
With Mexican wages the lowest among the world’s more developed nations, labor reform is a juicy target to meet Trump’s demand to get a better deal for U.S. workers or walk away from the 1994 pact. While Mexican officials are willing to make some changes, jobs and wages will become a sticking point if Trump goes too far and uses the issue as a blunt tool to curb last year’s $64 billion trade deficit in goods. Mexico argues that its lower cost of production has competitive benefits for all of North America.
The Trump administration “will push hard, and I think rightly so, on labor standards,” said Gerardo Otero, a professor at Canada’s Simon Fraser University who has published more than 100 articles or books on Mexico and Latin America. “If Mexican prices increase due to wage increases, there might be a chance of closing the gap.”
While tough labor rules and talk of cutting the trade deficit could be a short-term political win for Trump, the real boost to the U.S. would be deeper changes that make all three nations more competitive, he said.
The three governments have signaled a desire to finish talks before elections next year in Mexico and the U.S, when it’ll become more tricky politically. That’s a tough deadline to raise standards and strengthen overall trade, said Christopher Wilson, deputy director of the Mexico Institute at the Woodrow Wilson International Center for Scholars. He’s written a paper describing existing labor and environment side deals as “essentially toothless.”
“They are really talking about imposing on Mexico tougher regulations on labor and the environment so that U.S. companies don’t go to Mexico,” he said from Washington. “Market access is the red line for Mexico.”
Mexican President Enrique Pena Nieto may struggle to deliver bigger changes in a nation with weak legal protections for workers and a large informal economy dominated by low-paying jobs. Mexico can accept an updated NAFAT labor chapter in line with the rules agreed in the TPP, which only requires nations to enforce their own domestic laws, Economy Minister Ildefonso Guajardo said last month.
Francisco de Rosenzweig, Mexico’s lead TPP negotiator who now works for the law firm White & Case, said the country would refuse any U.S. attempt to legislate wage levels. Many workers in advanced manufacturing can earn many times the national minimum wage of 80 pesos a day, or $4.50, he said, while lower wages elsewhere often reflect local conditions in the less-developed southern parts of the country.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.