Rapid Response Mechanism under USMCA protects workers’ rights
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By: Krypt Team - August 20th, 2021

Authored by: Vijendra Kargudri

Brewing Labor Challenge

There has been a revolution of sorts in the history of the USMCA Trade Policy last week! This happened because the government utilized the trade law to help the labor instead of the capital!

Globalization gets a new political meaning when the government switches sides. With the right politics and policies, global trade can race upwards and not necessarily race downwards.

Tridonex – a certain auto part company, owned by a Philadelphia outfit called Cardone Industries—which in turn is owned by a Canadian hedge fund, had an ongoing labor issue. Based in the border town of Matamoros, Mexico, this company primarily reconditions used brakes and supplies most of it to the US, a classic offshoring job enabled by NAFTA.

USMCA – the successor agreement to NAFTA, includes tough & enforceable labor rights provisions. It guarantees laborers across the US, Mexico, and Canada the right to organize and join unions free from harassment!

How did USMCA change the game?

Under USMCA, an ingenious Rapid Response mechanism exists. It offers worker rights to laborers across the US, Mexico, and Canada. Thus, if a company worker’s rights are denied in Mexico, the US can slap tariffs on its exports, and the US Customs can block them from entering the US entirely.

Here’s how Rapid Response came to the rescue of Tridonex laborers. Even though Mexico’s laws guarantee workers the right to join unions, the right was effectively denied through the use of corrupt company unions known as “protection unions.” Such companies with a protection union can easily satisfy Mexican law and run the labor out of luck. The USMCA changed the game through Rapid Response Mechanism that had the hunter getting hunted down.

For over two years, the laborers at Tridonex had been trying to affiliate with one of Mexico’s genuine unions, the Sindicato Nacional Independiente de Trabajadores de Industrias y de Servicios (SNITIS), a counterpart of SEIU. Even though the U.S.-Mexico-Canada trade agreement includes tough, enforceable labor rights provisions, more than 600 laborers were laid off due to this act. Using the excuse of pandemic-related downsizing, the company got rid of the laborers to favor the independent union.

Under the USMCA’s Rapid Response provision, in May 2021, the AFL-CIO, SEIU, and Public Citizen filed a complaint. Without delay, the US trade representative established the validity of the complaint, threatened retaliation, and worked out a settlement along with the company in less than three months!

The settlement offered to pay 154 workers a total of $600 thousand (about $4000 each in back pay) along with an honest election supervised by the Mexican Government. Being a less-than-ideal case due to COVID layoff, the reinstatement of the laid-off workers was difficult, and the back pay was the easier option.

Thankfully the Rapid Response mechanism in the new USMCA trade agreement was used as leverage to protect workers’ rights.

Settlements in such cases for companies into global trade is always tricky and requires knowledge of USMCA regulations and their regular updates.

How can Krypt help you?

Krypt is a ‘one-stop shop’ and SAP partner for global trade & supply chain solutions, with a global footprint. Our in-house innovative products/solutions for SAP GTS  SAP TM, SAP IBP and, SAP EWM are an outcome of our long-term innovation, technology know-how, and sustained customer engagement across 35 countries.

We offer various deployment options that are time-tested & tailored to a company’s specific process and/or business needs. Krypt global trade experts can help your business with streamlined workflow, operational visibility, and compliance with global trade regulations.

If you wish to know more about our cutting-edge products/services, please request a demo or contact us.

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