Modernizing NAFTA for 21st Century Workers



Susan Ariel Aaronson and Kimberly Ann Elliott | George Washington University

After years of praise and protests, Canadian, Mexican, and American diplomats met at a fancy hotel in Washington in August to launch a renegotiation of the 1993 North American Free Trade Agreement (NAFTA). Although President Trump promised that the revised agreement will yield more and better jobs, there is little evidence that policymakers are thinking creatively about how to use NAFTA to create such opportunities. And if the negotiations don’t succeed, Trump has threatened to withdraw from NAFTA, which could cause job loss for thousands of workers in all three countries. In recent years, workers in all three countries have been buffeted by job losses, underemployment, technological change, and economic insecurity. Despite rising productivity, many workers—especially those with fewer skills—earn less in real terms than they did 20 years ago. Many of those who voted for President Trump blame agreements such as NAFTA for societal problems such as worker displacement, income inequality, drug abuse, and poverty. Many of those who didn’t vote for President Trump have also expressed concerns about these agreements, arguing these agreements empower companies but not workers. We believe that trade has contributed to these problems to some extent, but the role of trade, and especially trade agreements, is often exaggerated. Nonetheless, we believe trade agreements can be rethought to truly help more workers more of the time. NAFTA 2.0 is a good place to start. While NAFTA was the first US trade agreement to substantively address worker rights, the provisions were relatively weak and tacked on as a side agreement. In the years since NAFTA was ratified by Congress in 1993, labor chapters in US trade agreements have come a long way. Policymakers worked to address political pressures and concerns about the impact of imports on jobs and wages Based on recent agreements, we can expect that NAFTA 2.0 will include the labor chapter in the body of the agreement; it will promote all the core labor standards, not just the least controversial; and it will make the provisions binding and enforceable. Thus, when it comes to worker protections, NAFTA 2.0 will be a major improvement on the relatively weak original version embodied in the side agreements. But simply updating NAFTA’s labor provisions will not be enough to empower the workers of today. Over the two-plus decades since NAFTA was negotiated, technology and the spread of global value chains have changed what trade, trade agreements, and labor markets look like. For NAFTA 2.0 to be effective, it must both reflect these changes and address the real needs of the modern workforce. As example, many of those who toil today in all three countries are contingent workers who are not covered by contracts or represented by unions. Those workers who hold contingent jobs (for example, free lancers), often receive few benefits and have few job protections. Many of the fastest growing sectors on the continent rely on a contingent workforce, and the rights of those workers also need protection. In addition, many workers are increasingly concerned that the regulatory coherence and investment chapters could undermine labor rights. The regulatory coherence chapters in recent trade agreements aim to reduce costs arising from differences in regulations across the three NAFTA jurisdictions. Some union, environmental, and consumer groups argue that these efforts could go too far and lead to lower health and safety standards for them. Meanwhile, they are even more concerned about the investor state dispute settlement mechanism; unions have argued that these provisions are inconsistent with the labor rights chapters. Critics acknowledge that it is reasonable to protect investors from direct or indirect expropriation and that some form of dispute settlement between investors and states is helpful. However, these critics also believe that foreign firms should not use investor state dispute settlement mechanisms to challenge domestic regulations such as OSHA workplace safety regulations as regulatory takings, simply because they may raise costs to foreign investors. Although the United States and Canada have stated that government regulatory policies cannot be challenged as regulatory takings, advocates of labor rights want more explicit language. The most up to date trade agreement—the Trans-Pacific Partnership—is a step forward, but it does not sufficiently address the needs of 21 st century workers. Trade diplomats should not simply think they can tack on the TPP language and be done. The renegotiation of NAFTA provides an opportunity to think differently about how policymakers can create jobs for the future, protect labor rights, and empower workers in the 21 st century. Hence, we believe trade negotiators should:
  • Ensure that core labor standards are enforced for part-time and temporary workers and create a mechanism to explore how each country can reform its labor laws to ensure that all contingent workers receive basic labor rights, just like those workers with contracts.
  • Encourage unions to offer cross border services such as collective representation, benefits, training, and other workplace services. In so doing, unions would become stronger and more competitive.
  • Consider each chapter as part of a coherent whole and review each chapter for consistency with labour and employment objectives, including ensuring that regulatory coherence provisions or the investor-state dispute settlement mechanism do not impede the ability to regulate to protect workers’ rights.
  • Jointly explore how each country can ensure that its workers have the education and training to take advantage of 21 st Century job opportunities, and have access to health insurance and pensions that are not at risk if they lose a job.
  • Recent trade agreements allow highly skilled workers to work temporarily on projects in other countries. But less skilled workers deserve similar provisions. We believe policymakers should create a mechanism either within the agreement or as a side agreement that allows for temporary movement of low skilled workers in areas outside agriculture and hospitality such as barbers, masseuses, and home health aides. These individuals should be allowed to offer services across borders.
The famous economist Adam Smith taught us that people are the wealth of nations. Yet many people believe that trade agreements empower corporations and not people. If trade diplomats want NAFTA 2.0 to succeed and build worker trust in trade agreements, they must place people more explicitly at its center.  

Susan Ariel Aaronson is Research Professor of International Affairs at George Washington University.

Kimberly Ann Elliott is a Senior Fellow with the Center for Global Development and the author or co-author of numerous books and articles on trade policy and globalization, economic sanctions, and food security.  Previously, she was with the Peterson Institute for International Economics.

The views expressed here are the authors’ own. 


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