Hearing of the House Ways and Means Committee - Rep. Blumenauer Opening Statement at Hearing on Mexico's Labor Reform: Opportunities and Challenges For an Improved NAFTA

Hearing

Good morning. Today the Trade Subcommittee is holding a hearing on Mexico's labor law reform. We've invited witnesses from the United States and Mexico with deep expertise in the area of Mexico's labor laws, practices, and the interaction between the U.S. and Mexican labor markets. I look forward to hearing from them today regarding their views on: (1) the reform itself, (2) how to build into the new NAFTA effective monitoring and enforcement tools to ensure that Mexico continues to move forward with its reform in the years to come, and (3) what success will mean for Mexico, Mexico's workers, the United States, and American workers.

Mexican labor issues have been the crux of the debate around NAFTA for nearly three decades. The controversy around the original NAFTA focused in large part on the impact of increasing trade with a neighboring country that has significantly lower labor standards than the United States. While many supporters argued that NAFTA would lead to wage increases and a growing middle class in Mexico, unfortunately, those predictions have not come to pass.

Instead, as Prof. Shaiken's research has shown, Mexican wages for manufacturing workers have fallen in real terms, even though their productivity has continued to increase. At the same time, studies also have shown that American workers' wages have fallen in real terms while productivity has increased. Twenty-five years of NAFTA have shown that Mexico's disappointments translate into American disappointments. Hopefully, Mexico's successes will also lead to American successes.

What is the key reason behind the lack of wage growth over the past 25 years? Simply put, the voice of Mexican workers hasn't been heard because of a compromised labor justice system. Instead of negotiating collective bargaining agreements that could improve their working conditions and wages, workers in Mexico are often subject to so-called "protection contracts" before they ever enter their workplace.

The renegotiation of NAFTA presented a crucial opportunity to address Mexico's labor system, something I highlighted along with my Democratic colleagues throughout the negotiations.

The positive news on that front is that we have made some progress. I applaud Ambassador Ligthizer for negotiating a Mexico-specific labor annex that lays out the changes that Mexico needs to make to its labor justice system and achieve compliance with the labor chapter's standards.

I also applaud the Mexican government for passing labor reform legislation that appears, at the moment and on paper, to be consistent with that annex.

All of these actions are positive steps, but we're only part of the way there. We've seen our negotiating partners pass new labor laws and make promises about seriously implementing those reforms after the agreement takes effect. But I've been seriously disappointed with the results in Colombia, Honduras, and Guatemala, to name a few. At the end of the day, in each of those countries, despite the fact that we have entered into a trade agreement that requires the countries to meet a higher standard for protecting worker rights, workers still struggle to exercise basic labor rights at the workplace.

In those instances, we have not built effective monitoring and enforcement tools into the agreements to ensure that the country lives up to its labor commitment. We're in the same position today with the renegotiated NAFTA.

Mexico has passed a historic labor reform law. The testimony from our witnesses today highlights how significant these changes are and how difficult it will be to fully implement them.

If we were to pass the NAFTA agreement in its current form, we would basically have to take Mexico at its word or rely on a broken state-to-state dispute settlement mechanism that hasn't been effective where the U.S. government has used it, and that has never been used to enforce labor obligations. The challenges presented by Mexico's labor reform demonstrate the new NAFTA does not contain adequate tools to ensure that Mexico's labor reform stays on track.

Failure is not an option, nor is giving up. We are committed to replacing NAFTA with a substantially improved NAFTA. House Democrats are now engaged in making these improvements to fix the fundamental flaws of the original NAFTA. We need new and creative monitoring and enforcement tools to provide the certainty that labor standards will be respected in Mexico.

The renegotiated NAFTA presents a rare and valuable opportunity for the United States, one that is too important to rush. We have a chance to raise living standards across our continent rather than leading to a race to the bottom on who can make goods with the lowest labor costs. We have called today's hearing as part of Democrats' good faith effort to engage with the issues presented by this agreement and I look forward to continuing that engagement with stakeholders and the Administration.

And with that I will recognize the Ranking Member, Mr. Buchanan for an opening statement.

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